Knowledge that Transforms

M ANY individuals derive satisfaction through hunting waterfowl. The utility of the birds as a consumption good implies that some scarce resources, primarily ponds and breeding birds, should be devoted to game production. The migratory nature of the wildfowl precludes a conventional system of property rights and prevents market determination of optimal resource quantities to be devoted to production. In general, the production of waterfowl requires the use of Canadian natural resources but more than two-thirds of the birds are consumed by United States hunters, thereby creating an externality of international scope. Precise hunting regulations are established by each state under the general supervision of the federal government. Since no evidence indicates trade in this commodity among the states, an additional jurisdictional externality is created. In the model to be developed, we identify the transient and steady-state management conditions necessary to achieve a social optimum. Subsequent applied analysis pertains only to the steady-state situation. We can anticipate conclusions from the applied analysis, to be developed in due course. Because farmers obtain revenue from agricultural crops grown on drained wetlands but do not receive revenue from the crop of waterfowl raised on ponds left in their natural state, North American wetlands are being drained more rapidly than the economically optimum rate. Indeed, we believe the optimum situation requires creating, not draining, wetlands. Expansion of the absolute number of breeders is also required, although optimal input proportions are obtained through a lesser relative increase in this factor.

A NNUAL data on the labor force were not collected by the United States government before 1940. The decennial censuses prior to 1940 did include labor force enumerations, although the definitional basis of these figures was the concept rather than the labor force concept which underlies census data beginning in 1940.' Stanley Lebergott (1964) has undertaken the most careful and exhaustive adjustments of the gainful worker figures to make them consistent with the labor force concept and with the sampling procedures used by the Census Bureau in its Current Population Surveys which began in 1940. He has also constructed an annual labor force series for the 1900-1939 period which is consistent with his adjusted decennial census figures. One shortcoming of these annual labor force estimates is that they do not fully reflect the influence of economic variables on labor force participation. His procedure was basically to (1) obtain detailed labor force participation rates by age, sex, and in some cases, nativity, for decennial census years, (2 ) interpolate these rates linearly between census years, and (3) apply the interpolated rates to population data for the intercensoral years. As one might expect, the resulting labor force series displays virtually no cyclical variation, since annual changes in labor market conditions are not taken into account. Thus, Lebergott's annual estimates are not of the same character as the annual (or monthly) estimates prepared by the Census Bureau after 1940,2 and unemployment rates derived from them are not truly comparable with the official series for the post1940 years. Empirical studies of post-World War II data indicate that the size of the labor force in the short run depends in part on the degree of tightness in the job market.3 The search for

RECENT research on employment discrimination against blacks and women suggests that no single determinant education, location, growth, or others is primary. Yet the belief persists (see Alchian and Kessel, 1962; Arrow, 1971; Ashenfeiter, 1969; Becker, 1957; Bergmann, 1971; Comanor, 1971; Shepherd, 1969; Thurow, 1969) that the employers' power to choose may be important, via their managerial preferences and discretionary resources. These influences would be visible in large industrial firms which possess market power. In this paper we test whether the industrial structure and performance of large firms have in fact been related to their employment of blacks and women. The analysis covers about 200 of the largest United States industrial enterprises, using employment data for 1966 and 1970. The focus is on white-collar employment patterns. Being more directly subject to upper management control than is blue-collar employment, the white-collar patterns may provide a sensitive test of whatever role is played by enterprise policy under varying conditions and constraints. First we discuss the basic hypotheses to be tested in section I. Section II explains the variables and the basic models which are to be analyzed. Section III presents the empirical results. And finally, the findings are summarized in section IV.

A NY econometric equation representing a complex behavioral or technical relationship is, of necessity, an approximation of reality. As such, it is subject to errors in specification and structural change over time. This problem is well recognized by econometricians. Duesenberry and Klein (1965) point out that *'. . . as technology, institutional arrangements, tastes and managerial techniques change over time, the relationships represented by our equations inevitably change. Furthermore, when statistical tests are applied to econometric relationships, the hypothesis of structural stability is frequently rejected.' Some methods for dealing with structural change have evolved. Quandt (1957) has developed a maximum likelihood technique for estimating a point of structural change within a sample.2 Klein and Evans (1967) adjust the intercepts of the Wharton Model to account for structural change.3 The purpose of this paper is to test the robustness of Adaptive Regression (1973) to specification errors causing structural change over time, relative to ordinary least squares analysis with and without the autoregressive correction.4 Since econometricians are inevitably faced with structural change and errors in specification, they should use a technique which is robust rela-tive to such problems. The device most commonly used is to assume that the disturbances are subject to an autoregressive process. The autoregressive correction may frequently ameliorate the effects of misspecification and structural change, but it is doubtful whether such processes, except in rare instances, describe the true distribution of the disturbances. The economics literature seldom gives any justification for this scheme except that omitted variables may be subject to an autoregressive process or the structure of the model may be changing.5 We suspect the reasons for the widespread use of the autoregressive correction are that it is a simple hypothesis, explains serial correlation in the disturbances, and can be dealt with efficiently. The adaptive regression model considered in this paper is equally simple but more general, explains serial correlation, and can also be dealt with efficiently.6 In the next section the adaptive regression model is presented and the Bayesian estimators are developed. In section II the results of a Monte Carlo Study are presented. Two models are considered for which data are generated by eleven different schemes. The estimation and forecasting efficiency of adaptive regression, and ordinary least squares with and without the autoregressive correction are compared. Section III contains an analysis of the role of time trends in econometric relationships. In section IV the relative forecasting ability of the three estimation techniques is tested on real data. The three models suggested by Received for publication February 10, 1972. Revision accepted for publication November 30, 1972. *The authors acknowledge helpful comments of Professors F. G. Adams, R. Roll and R. Summers and the participants of the NBER conference on Bayesian Statistical Inference in Economics. Computations were executed on the University of Pennsylvania computer. 'Examples of such tests include Brown (1966), Goldfield (1969) and Howrey (19-70). One of the most extensive studies was done by Duffy (1969). 'The Quandt technique is limited by the fact that it is mainly useful for finding stable subsamples. If structural change occurs often, it is not very useful. Rosenberg (1968) has used stepwise composition to develop the computationally efficient Aitken estimates of a model subject to structural change over time. His procedure, however, requires that the true covariance matrix of the disturbances be known up to a constant scale factor. 'Adjusting the intercepts is an ad hoc method for keeping the model on track for ex ante forecasting. The intercepts are not assumed to change over the sample period which is always much longer than the forecasting period. 'The autoregressive correction assumes the error is subject to a first or second order autoregressive scheme. See Dhrymes (1969) for the maximum likelihood approach and Zellner and Tiao (1965) for the Bayesian development. The latter approach is used in this paper. 'In fact, if omitted variables are subject to an autoregressive process, the disturbances will, in general, be subject to a more complicated process. 6 A test with sufficient power to differentiate betweer these two models (or others which result in serial correlation) using sample sizes generally available to econometricians does not appear to exist. Further, if one did, its usefulness would be limited as neither structure is likely to be an exact representation of reality. That one structure is more likely on the basis of the data does not imply thai it will forecast better if, in fact, a third structure is generating the data.

T HE effects of schooling (as measured both by years attained and by one or more dimensions of quality), and socio-economic background in determining individuals' earnings, have long been controversial issues. In the past decade, with the advent of large scale empirical studies, a number of widely held but not well documented hypotheses about these issues have failed to find broad support in the data. Namely (a) several recent studies, most notably that by Coleman and his associates (1966), have found only a most tenuous relationship between conventional measures of the quality of school inputs and various achievement test scores and (b) the notion that socio-economic background is important in determining an individual's income has been played down in the literature concurrent with the rise in popularity of the human capital explanation of earnings differences (for example, Mincer (1970)). The purpose of this paper is to re-examine the relationship among income, socio-economic background, years of schooling and quality of school inputs. Several models are postulated which permit the examination of both the direct and the indirect effects of the various factors, separately for blacks and for whites. The primary data source is the 1968 Urban Problems Survey conducted by the Survey Research Center. The principal conclusions of this paper are: (a) school quality has a small direct effect on the wage rates of blacks but no apparent effect at all on the wages of whites; (b) for both races school quality has strong indirect effects as it influences the number of years of schooling attained; (c) socio-economic background, as variously measured, appears to have significant direct effects on earnings and, like school quality, indirect effects as it also influences the number of years of education attained; and (d) years of schooling appears to exert a strong influence on earnings independent of other measured variables, especially for whites.

H EALTH professionals have complained of a of Registered Nurses for the past twenty-five years. High vacancy rates have been reported for nursing positions throughout the entire post-World War II period. From 1951 to 1966 an average of 14 per cent of budgeted hospital nursing positions were unfilled.1 Donald Yett and other economists have noted that this state of chronically high vacancy rates might result from an oligopsonistic market structure. This explanation of the shortage of nurses is developed fully below. First, a model of hospital input utilization is presented, viewing hospitals as maximizers of a welfare function representing the goals of hospital management. With the aid of this model it is demonstrated that under a wide range of behavioral assumptions monopsony hospital employers will report vacancies in equilibrium. Second, the monopsony question is put to an empirical tes-t in a multiple regression setting. A significant negative relationship is demonstrated between the wages of nurses and concentration in the hospital sector. This result indicates that where monopsony power is present in the market for nurses, that power will be exploited. The conclusion follows that the high vacancy rates for nursing positions result in part from an oligopsonistic market structure.

T HE importance of the dynamic structure of agricultural supply functions has been recognised for a long time. The seminal work of Nerlove 1 has offered an elegant solution to this problem which has been so widely adopted that at present it might even be regarded as the standard approach. The impact of Nerlove's work on dynamic models has been felt far beyond agricultural economics and in the course of this diffusion, a number of modifications have been proposed. Two of the main criticisms concern the ad hoc nature of the model and the fact that the dynamic has been added to a static optimising model.2 A more satisfactory formulation would be to specify an objective function in which adjustment and other dynamic costs are included and to optimise this, perhaps over a planning horizon. Developments along these lines are occurring in several fields: for example, investment and labour theory.3 Surprisingly, perhaps, they have not happened in agricultural economics, the area where some of the early advances in dynamics were made. The supply of tree crops is particularly suited to this treatment as there are long lags of gestation between planting and cropping. The investment decision of planting trees is a classical problem in capital theory. The harvesting decision and the decision to supply final markets, especially where they are foreign markets, introduces further lags. Moreover, many of the intractable problems of capital theory are simplified where the main source of capital is trees. One explanation for the absence of parallel development in the field of agricultural economics is that Nerlove's model was originally applied to field crops in which long lags are absent. The success of this model for field crops is, however, not a sufficient justification for its use for tree crops where long lags may be expected. In this paper an attempt is made to fill this gap by constructing a structural model of tree crop supply. The model is developed with reference to the supply of coffee in Brazil, for the sake of concreteness and ease of interpretation and because coffee is a crop possessing most of the characteristics outlined above.

Mildred B. Levy, Walter J. Wadycki, The Influence of Family and Friends on Geographic Labor Mobility: An International Comparison, The Review of Economics and Statistics, Vol. 55, No. 2 (May, 1973), pp. 198-203