Knowledge that Transforms

Steven H. Lustgarten (1975) and others have presented evidence that concentrated buyers lower the price-cost margins of sellers, but theory predicts that buyer concentration is positively correlated with administrative control of transactions. This paper shows that administrative control is responsible for the observed effect of buyer concentration. When a proxy for administrative control is included in Lustgarten's model, buyer concentration becomes insignificant. Copyright 1989 by MIT Press.

Timothy A. Deyak, W. Charles Sawyer, Richard L. Sprinkle, An Empirical Examination of the Structural Stability of Disaggregated U.S. Import Demand, The Review of Economics and Statistics, Vol. 71, No. 2 (May, 1989), pp. 337-341

The life cycle/permanent income hypothesis suggests that optimization by consumers should cause marginal utility to approximate a random walk. As a consequence, purchases of nondurable goods should also approximately follow a random walk and purchases of durable goods should approximately follow a white noise process. The univariate processes for nondurables and durables both appear to be random walks, which would confirm the LC/PIH for nondurables and reject it for durables. Adjustment costs and nonseparability between durables and nondurables are then added to the specification of utility. The resulting more general stochastic process is estimated and the data tend to support the existence of nonseparabilty, but not adjustment costs. While forecasts of durables are not fully informationally efficient, they do about as well as do forecasts of nondurables. The behavior of durable consumption purchases is shown to be consistent with the life cycle/permanent income hypothesis. Copyright 1989 by MIT Press.

Extreme bounds analysis attempts to measure the effects of the uncertainty in the specification of the explanatory variables in a regression model on the estimated coefficients of interest. Standard errors for the stochastic extreme bounds are computed using the bootstrap technique. State-by-state cross section data are used to study the deterrent effect of capital punishment in the United States in 1950. The bootstrap standard errors are sufficiently large for some bounds to suggest caution in the interpretation of the empirical results regarding the fragility of inferences for the deterrent effect of capital punishment. Copyright 1989 by MIT Press.

J. S. Butler, Kathryn H. Anderson, Richard V. Burkhauser, Work and Health after Retirement: A Competing Risks Model with Semiparametric Unobserved Heterogeneity, The Review of Economics and Statistics, Vol. 71, No. 1 (Feb., 1989), pp. 46-53

This paper investigates the statistical properties of a set of Canadian and U.S. economic time series and uses the data to address the question of the importance of monetary variables in Canadian business cycle fluctuations. The individual time series are found to contain unit roots, but the data reveal the existence of several economically meaningful cointegrating vectors. A multivariate vector error correction model is estimated, and Canadian velocity, which appears as an error correction term, is significant in the Canadian output equation. This supports the contention that monetary variables have predictive content for real output. Copyright 1989 by MIT Press.

Scott E. Atkinson, Joe Kerkvliet, Dual Measures of Monopoly and Monopsony Power: An Application to Regulated Electric Utilities, The Review of Economics and Statistics, Vol. 71, No. 2 (May, 1989), pp. 250-257

An alternative approach to the measurement of horizontal inequality is developed. This measure of inequality is based on an explicit social welfare function which is formulated so as to be consistent with the basic principles of social choice. The arguments of the social welfare function are welfare functions that depend on prices, total expenditure and the demographic composition of the household. The level of horizontal inequality is defined to be the difference between the level of social welfare attained at a perfect horizontally egalitarian distribution of welfare and the level of social welfare attained at the existing distribution of individual welfare. The level of horizontal inequality induced by the introduction of commodity taxes is evaluated for the United States over the period 1947-85. Copyright 1989 by MIT Press.

Two important issues in econometric freight transportation demand analysis are addressed: (1) the simultaneity between quantity shipped and mode/destination choices, and (2) the effect of spatial price competition on the demand for the transportation factor. In the theoretical model, spatial price competition determines the firm's market area and, thus, determines its sales and shipment sizes. The model is estimated using switching regression techniques, since shipment size and mode/destination choice are derived from the same optimization problem. The empirical model provides consistent estimates of unconditional freight demand. These estimates are needed to forecast transportation flows and derive elasticities for policy analysis. Copyright 1989 by MIT Press.

A number of analytical contributions have given sufficient conditions under which Leontief multiplier estimates are biased. This paper uses empirical data and a Monte Carlo framework to evaluate the problem of bias and obtains the opposite conclusions. For practical purposes, it appears that linear multiplier estimates are unbiased. The variance properties of these estimates are also evaluated. Copyright 1989 by MIT Press.