Knowledge that Transforms

On the assumption that the natural root of dynamics lies in the intertemporal dimension of the optimization process and that an operational and meaningful solution has to be found by appropriately placing restrictions on preferences, this paper develops and tests on U.K. 1952-81 data a dynamic demand system exploiting W. M. Gorman's concept of quasi separability. Comparison with a static (intertempora lly weakly separable) alternative provides further evidence for the i dea that dynamic modeling can overcome the usual rejection of theoret ical constraints in demand analysis. Copyright 1987 by MIT Press.

The standard neoclassical theory is rejected as an explanation for the observed reluctance of most holders of whole life insurance to borrow against the cash value of their policies at favorable rates of interest. Even when the neoclassical theory is augmented with transactions costs and short awareness lags, several empirical tests using survey and time-series data reject the standard theory in favor of an explanation invoking self-imposed rules against borrowing or the "debt ethic." This evidence lends support to the psychology-based theories of Thaler and Shefrin (1981). Copyright 1987 by MIT Press.

Ralph M. Bradburd, Richard E. Caves, Transaction-Cost Influences on the Adjustment of Industries' Prices and Outputs, The Review of Economics and Statistics, Vol. 69, No. 4 (Nov., 1987), pp. 575-583

High labor costs in large Midwestern metropolitan areas have significantly reduced their manufacturing capital stock. For the period 1974 to 1978, the authors estimate that sixteen metropolitan areas in the Midwest, taken together, had approximately $2.8 billion less capital stock than they would have had if their labor costs had been at the national average. This difference is equal to 4 percent of the capital stock in these areas. The results are simulated from the estimation of a labor demand equation that is derived from a generalized Leontief cost function. Copyright 1987 by MIT Press.

In this paper the author examines the demand for a hypothetical input, electric over-the-road vehicles, in the commercial sector using data from a survey experiment. This experiment is designed to allow the estimation of theoretically plausible, derived demand functions from either the Translog or the CES production functions. A heteroscedasticity-corrected, two-limit Tobit model is developed and estimated. The results provide evidence of considerable adaptability to new technologies and price structures on the part of firms. They evidently would be willing to cope with the limited traveling range of electric vehicles if these vehicles were able to provide a less costly means of doing business. Copyright 1987 by MIT Press.

The simulation model of this study indicates that a decline in above n ormal profits associated with concentration will cause a redistribution of incom e from the highest of six income classes to low and middle income classes. The m agnitude of gains and losses range from 0.2 to 0.9 percent of income for reducti ons in four-firm concentration ratios to 50 percent in all manufacturing industr ies. The methodology uses consumer expenditure data and input-output information to estimate the impact on payments made to capital, and uses income tax data on income sources by income class to estimate the impact on income received from c apital ownership. Estimates of the change in profits resulting from a change in concentration are based on a published concentration-profits regression. Copyright 1987 by MIT Press.