Knowledge that Transforms

The degree of export fluctuations and its impact on income have been subject to a number of investigations. A major bone of contention has been whether developing countries experience a greater degree of fluctuation in exports than developed countries, and whether such fluctuations affect the growth-rate of developing countries. This study examines this contention y constructing comparable econometric models for 11 countries, including both developing and developed countries. From these models it seeks to derive the export-income multiplier which can throw light on the question as to which countries are affected more than others by export fluctuations. The study shows that the long-run multiplier relating to both income and investment are generally larger for developing countries than for developed countries. In addition, for each country the dynamic multipliers have been used to derive the income path which is attributable to changes in exports as they actually occurred. The income path has been derived on the assumption that “real” exports grow at a constant rate every year. A comparison of these two simulated income series definitely shows that an increase in the instability of exports leads to an increase in the instability of income in every country. However, the impact of instability in exports on income growth rate is not in the same degree in all counties. In the case of only five countries, there is a decline in growth rate when there is an increase in instability of exports, even though a cross country regression shows that in general countries with higher instability in exports have on the average a lower growth rate.

G. O. Gaudet, J. D. May, D. G. McFetridge, Optimal Capital Accumulation: The Neoclassical Framework in a Canadian Context, The Review of Economics and Statistics, Vol. 58, No. 3 (Aug., 1976), pp. 269-273

Roger H. Bezdek, Constance R. Dunham, On the Relationship between Changes in Input-Output Coefficients and Changes in Product Mix, The Review of Economics and Statistics, Vol. 58, No. 3 (Aug., 1976), pp. 375-379

I is often argued that foreign firms operating in less developed countries have greater X-efficiency than their local counterparts. However, little empirical evidence has been presented to substantiate this claim. This paper attempts to fill part of this gap, first, by presenting data on the level of capital utilisation in Malaysian and foreign firms in Malaysian manufacturing and, second, by testing the importance of X-efficiency in determining differences in the utilisation levels of the two categories of firms. The extent to which capital is utilised is an important part of economic efficiency, for an increase in capital utilisation can result, ceteris paribus, in lower unit costs of production and a higher rate of economic growth.

T HE inferiority of southern black schools (especially rural schools) alleged by the Coleman Report (1966), coupled with the mass migration historically of southern blacks to northern cities, provides one potential explanation of the generally low returns to black education and of urban poverty in the nonSouth. Evidence from the 1960 Census suggests, however, that black migrants to the metropolitan North had higher incomes and less unemployment than blacks born there, even after controlling for differences in age, years of school completed, and a number of other variables (Masters, 1972). More recent evidence, confirming this pattern, from the 1967 Survey of Economic Opportunity (Weiss and Williamson, 1972) and the 1970 Census (Long and Heltman, 1974) also discounts the inferiority of southern black schools as an explanation of urban poverty in the non-South. In fact, the overall effect of a northern or even a large southern ghetto environment may be more harmful to black economic progress than a rural southern origin (Weiss and Williamson, 1972). In this paper we present results, using data from the National Longitudinal Surveys, that support the economic disadvantage of a nonsouthern ghetto environment for young black males. Controlling for differences in age, years of school completed, region and character of current residence, we find the mean earnings of young black males educated in the metropolitan non-South are substantially less than those of their peers educated in the rural South. We are unable to confirm this disadvantage for older black males, however. Several attitudinal and labor force characteristics of young blacks were examined to account for this pattern. The results suggest that a major problem in reducing black poverty lies in improving the environment of the nonsouthern ghetto. We also extend the analysis to whites in order to examine the rural-urban dimensions of environment and migration and their effect upon racial earnings differentials. The National Longitudinal Surveys, which provide the primary data for this paper, constitute a five-year longitudinal study of the labor market experiences of four subsets of the U.S. population: men 45 to 59 years of age, women 30 to 44 years of age, young men 14 to 24 years, and young women 14 to 24 years of age.1 For each of these cohorts a national probability sample of the noninstitutionalized civilian population was drawn by the Bureau of the Census. The present study is based upon data collected in the first round of interviews in 1966 with the two cohorts of men. Analysis is restricted to men whose current or last job reported in the survey week of 1966 was as a wage or salary earner. The self-employed are excluded to overcome the difficulty of separating income received as returns to physical capital from that received as returns to human capital. An additional universe restriction is included for the younger men's cohort to ensure they had been out of school for a minimum of 12 months. In section I we build upon earlier earningsfunctions studies by introducing variables which identify geographic origin of schooling. Section II explores the implications of our findReceived for publication January 28, 1974. Revision accepted for publication July 9, 1975. *This paper was prepared under a contract with the Manpower Administration, U.S. Department of Labor. We are indebted to Bennett Harrison, Ray Marshall, Herbert S. Parnes, and a helpful referee for comments on an earlier version of this manuscript. We especially thank Clarice Conger-Thompson, Gary Schoch, and Keith Stober for research and computational assistance. As is customary, the views expressed in this article are our own. I For a description of these surveys see Parnes (1972).

The most prevalent arguments for increased state and federal aid to education are concerned with equity criteria. Relatively little has been written or discussed concerning the efficiency aspects of aid to education. This paper uses a median voter decision model and certain assumptions about the functional form of demand functions to obtain an estimate of the efficient level of expenditure for each of 104 school districts in New York State. The analysis highlights the price effects of state matching grants and of nonresidential property in a district.

LMOST all discussions concerning the imA portance of money in affecting economic activity make reference to the liquidity-trap hypothesis. This important hypothesis states that the elasticity of the demand for money with respect to the rate of becomes infinite at low rates. As J. M. Keynes himself expresses it, after the rate of has fallen to a certain level, liquidity preference may become virtually absolute in the sense that almost anyone prefers cash to holding a debt which yields so low a rate of interest (1936, p. 207). Studies by Bronfenbrenner and Mayer (1960), Konstas and Khouja (1969), Laidler (1966), Meltzer (1963) and White (1972), among others, have attempted to confirm or disconfirm this hypothesis by testing whether the elasticity of the demand for money increases as the rate of falls, on the basis that this is the only way it can pass from a finite to an infinite value. Thus far, the evidence mainly disconfirms the liquidity-trap hypothesis. This evidence, however, has generally been obtained by employing ordinary least squares regression methods. Yet, as David Laidler points out, it is not possible to fit directly by regression analysis a function which has a negative slope over part of its range and no slope at all over another part . (1969, p. 97). Past studies, therefore, have not been directly able to determine whether the elasticity becomes infinite at low rates. The purpose of this paper is to test the liquidity-trap hypothesis by employing spline functions. Briefly, these functions represent a special class of approximating functions which allow the dependent variable in a regression to take on different functional relationships with respect to the independent variable in various subintervals of the domain of the independent variable in a continuous fashion. In this way, the problem inherent in previous studies using ordinary least squares techniques can be avoided, permitting a more direct test of the liquidity-trap hypothesis. In short, this paper will provide new and more direct evidence bearing on the issue of an infinitely elastic demand for money function as well as the way in which the important but relatively unknown spline functions may be used to capture various empirical economic relationships. The plan of the remainder of the paper is as follows. The next section contains a discussion of spline theory, followed by a section containing the empirical results obtained by using spline functions. The summary and conclusions are then reported in the last section.

provide a valuable stimulus to competition beca'use of their insensitivity both to the overall level of entry barriers and to several of the entry barriers taken separately.16 Such a stimulus might be decreed of significant benefit to Canada by the Foreign Policy Review Agency, whlich screens all new foreign direct investment in Canada. However, should this stimulus be givep relatively little weight by the agency, then the composition of entrants into Canadian manufacturing industries is likely to change such that the overall level of entry barriers will be raised substantially.17