Knowledge that Transforms

Increasing returns to scale (RTS) is frequently po stulated as affecting productivity in surface coal mining. However, it is not cl ear whether increased capital intensity or increased output is the relevant phen omenon. A ray-homothetic production function that incorporates the capital labor mix and fixed site geology into the scale elasticity is presented and estimated with a micro (mine level)dataset. The results indicate that higher capital int ensity contributes to higher RTS for some types of capital equipment, but not al l. On the average, increasing RTS was found, with few mines approaching optimal scale. Copyright 1987 by MIT Press.

Solomon W. Polachek, Phanindra V. Wunnava, Michael T. Hutchins, Panel Estimates of Union Effects on Wages and Wage Growth, The Review of Economics and Statistics, Vol. 69, No. 3 (Aug., 1987), pp. 527-531

Using data on male heads of households from the Michigan Panel Study of Income Dynamics, this paper finds that although short tenure workers accounted for a disproportionate share of total unemployment, during the early seventies, cyclical fluctuations in joblessness were concentrated among persons currently holding or recently having held longer-lasting employment. Greater unemployment durations were a more important source of rising joblessness than increased separation probabilities and cyclical changes in both variables were larger for recent leavers of medium or long tenure employment than for persons with similar seniority in their current job.

Arnold Zellner and Franz Palm (1974) show that comparing the actual with the implied stochastic process es generating the endogenous variables in a system of dynamic structu ral equations provides important information about the system's corre ct specification. The authors apply their methodology to structural e xchange-rate models. They find that the log of the bilateral exchange rate is generally well approximated by a random-walk model. Thus, th e stochastic processes generating the exogenous variables should also be random-walk models, which in not borne out by our empirical resul ts. They suggest a reconciliation of their results based on a decompo sition technique developed by Stephen Beveridge and Charles R. Nelson (1981). Copyright 1987 by MIT Press.

In conducting an investigation into the specification of partial static equilibrium factor demand models, this paper isolates: (1) the endogeneity of output and quasi-fixed factor levels; (2) the choice of omitted share equation; and (3 ) the presence of serial correlation (when using time series data) as the specification issues that most affect the existing empirical literature. The impact of specification changes are studied via a series of experiments conducted on an illustrative data set and are found to have significant effects on: parameter estimates and model diagnostics; departures between observed and full equilibrium levels of quasi- fixed factors; and price elasticities. As a consequence, caveats must be attached to several previous studies and care must be taken by future researchers in addressing using such models. Copyright 1987 by MIT Press.

Occupational safety levels in nonunion firms are empirically shown to reflect only the preferences of workers with zero to three years job tenure. Therefore, ex post, the market is inefficient even if workers were optimizing at the time of hire since there are trades possible among workers that would make all workers better off. The workers who are ignored in the safety-setting process, those workers with more than three years job tenure, prefer less, not more, safety. Copyright 1987 by MIT Press.

Early tests of the embodiment hypothesis, which suggests that new capital is more productive than old, may have been biased due to the incorrect use of age, rather than utilized age of capital. This study, which attempts to correct for the potential mismeasurement bias by using the utilized age of capital in the analysis, finds evidence that the embodiment hypothesis is valid.

Recently, Watson and Engle (1985) considered the problem of testing for a constant regression coefficient against the alternative hypothesis that the coefficient follows a stationary first-order autoregressive process. This alternative is the return to normalcy model proposed by Rosenberg (1973). Watson and Engle observe that the unknown autoregressive parameter is not identified under their null hypothesis and they suggest the use of the test procedure proposed by Davies (1977) for such situations. Davies' approach involves applying Roy's Union-Intersection Principle to the class of test statistics one gets by assuming the non-identified parameter takes a known value. Unfortunately, Watson and Engle's test statistic has no closed form and is approximated by maximisation using a grid search. Furthermore, both its finite sample and asymptotic distributions are unknown under the null hypothesis although they do provide a method of calculating a critical value whose asymptotic size can be bounded from above. In this note we suggest a different approach that helps overcome these problems. Rather than testing for zero variance in the autoregressive process as Watson and Engle suggest, we propose testing for lack of variation in the regression coefficient over time. This allows the construction of a locally best invariant (LBI) test using the results of King and Hillier (1985). Because the resultant test statistic is a ratio of quadratic forms in normal variables, standard computational techniques can be used to calculate exact and approximate critical values. A further advantage of this alternative test is that it is also LBI against the hypothesis that the coefficient follows a random walk process.

The paper first reconciles a variety of specification tests for partial adjustment money demand models and points out a fundamental identification problem which makes it impossible to distinguish between the real and nominal partial adjustment models if inflation has an independent effect on the long-run demand for money. The paper also finds that empirical estimates of simple partial adjustment models have some undesirable properties and then considers the shortand long-run effects of inflation in a more general distributed lag model.

Using an accelerated failure time model, the extended generalized gamma distribution is deployed to discriminate among various special cases of that distribution. Displaced worker data from the January 1984 Current Population Survey are analyzed within a regression framework that accommodates the stochastic nature of the point of censoring associated with incomplete spells of unemployment. Not only are the regression parameters sensitive to distributional assumption but also there is evidence of different distributional shapes and hence duration dependencies in subsets of the data.