Knowledge that Transforms

Jeffrey C. Fuhrer, Kenneth J. Weiller, A Multivariate Posterior Odds Approach to Assessing Competing Exchange Rate Models, The Review of Economics and Statistics, Vol. 73, No. 1 (Feb., 1991), pp. 113-124

David J. Smyth, Stephen H. Karlson, The Effect of Fringe Benefits on Employment Fluctuations in U.S. Automobile Manufacturing, The Review of Economics and Statistics, Vol. 73, No. 1 (Feb., 1991), pp. 40-49

The Box-Cox difference transformation is used to determine the appropriate specification for estimation of hedge ratios and a new double length regression form of the Lagrange multiplier test is presented for the difference transformation. The Box-Cox difference transformation allows the testing of the first difference model and the returns model as special cases of the Box-Cox difference transformation. Copyright 1991 by MIT Press.

This note investigates the determinants of Japan's manufacturing trade structure in 1980. They include variables derived from an information economy perspective as well as traditional trade variables. Estimates for variables approximating organizational inefficiency indicate that even in Japan, which is reported to often have smaller private bureaucracies than the United States, relatively large bureaucracies have a negative effect on trade performance. Human capital intensity is found to have a positive effect on Japan's comparative advantage and exports. The importance of R&D expenditure is confirmed. Copyright 1991 by MIT Press.

The authors investigate the consequences of a permanent unphased increase in the U.S. gross saving rate. They find that "the sacrifice time"--the time that elapses until consumption surpasses the value it would have had under the initial saving rate--is roughly six years and is insensitive to the percentage increase in the saving rate ([Delta sub s]). The percentage gain in output at the end of decade--" the decade gain"--is roughly 26% of [Delta sub s], while the percentage gain in consumption is roughly 8% of [Delta sub s]. The "saving rate return"--the internal rate of return on a permanent increase in the saving rate--is roughly 16% and is insensitive to [Delta sub s]. Copyright 1991 by MIT Press.

Lack of explicit markets and associated data have impeded measurement of nonpecuniary rewards in the workplace. Most of the published literature employs hedonic models that permit estimation of market-clearing prices, but do not allow for identification of demand schedules. In an alternative approach, used successfully by environmental economists, the author develops quasi-market data and uses it to estimate demand for the nonpecuniary rewards associated with leadership. In addition to price responsiveness, individuals exhibit tastes for the amenities of leadership that differ substantially, and in expected directions, with their personal and professional characteristics. Copyright 1991 by MIT Press.

The authors extend the Q theory of investment to allow for adjustment costs for labor, under the additional assumption that the firm is a monopolistic competitor in the output market. The issue of nonconstant returns to scale is also discussed. The authors show that the standard Q model is a special case of a more general model involving testable parameter restrictions. Estimates for the U.S. manufacturing sector suggest that the departure from the assumption of perfect competition and lack of adjustment costs for labor receive empirical support in the data. Copyright 1991 by MIT Press.

This paper discusses a method of deriving the univariate ARIMA process followed by a time series of rational forecasts y(superscript "e") of a series y, given the ARIMA process followed by y. The method suggests examination of the empirical ARIMA process followed by y(superscript "e") as a test of the hypothesis that y(superscript "e") is a rational forecast of y in a strong sense. The method is applied to a measure of expected inflation: the survey data conducted by Money Market Service, Inc., of money market participants. Copyright 1991 by MIT Press.

firm size-wage differentials, earnings functions, compulsory wage differentials, work characteristics