Knowledge that Transforms

ONE important question arises out of current attempts to provide a foundation for aggregate wage rigidity and unemployment. How mobile are unemployed workers? Recent theoretical models of unemployment can be divided into two basic categories: the new microeconomic search theories attribute unemployment to the job search and job changing behavior of workers who become permanently separated from their jobs. The newer contract theories attribute unemployment to the periodic employment reductions (via temporary layoffs) that are necessary to accommodate demand fluctuations when workers remain indefinitely attached to specific firms. The relative importance of these two approaches in explaining cyclical unemployment hinges on the share of unemployment over the business cycles that is associated with real labor turnover. Unfortunately no data are currently collected on the fraction of unemployment with or without job change. This paper derives estimates of temporary layoff unemployment for U.S. manufacturing from Bureau of Labor Statistics (BLS) establishment turnover data. After a brief discussion of current unemployment data, a time dependent distributed lag model of manufacturing rehires is developed. The model allows estimation of both the percentage of each month's layoffs that end in rehire and the average duration of unemployment before rehire. Together with the layoff rate, these two statistics determine an estimate of manufacturing unemployment without job change.

ECONOMETRIC studies of household expenditure occupy an important place in government policy formulation with estimates of expenditure and price elasticity proving useful in several planning models. Although the empirical literature is large, relatively few studies have considered the simultaneous impact of total expenditure, price and family size on household demand using time series of budget data and within a framework that is consistent with economic theory. Weisskoff (1971) and, more recently, Sener (1977) have tested and rejected the hypothesis of negligible price effects and established the need to incorporate price and size variables in any meaningful study of expenditure patterns in developing countries. The limited literature on estimation of demand systems from budget data includes Tsujimura and Sato (1964) on Japan, Bhattacharya (1967) and Joseph (1968) on India and, recently, Muellbauer (1977) and Pollak and Wales (1978) on British data. The present exercise differs from the above in investigating the impact on budget share, rather than quantities, and in using a variant of a recent model (AIDS)' that is consistent with economic theory without requiring additive separability of the utility function. The model is introduced by Deaton and Muellbauer (1978). The principal objectives of our exercise include (a) extension of the AIDS model by including family size and applying it to Indian budget data to estimate expenditure, price and size elasticities, (b) testing the hypotheses of (i) no price effects, (ii) no economies of household size, (iii) no money illusion, and (c) comparison of the Indian expenditure pattern with those of other developing economies. The AIDS in its micro version and its adaptation for use on the published data is discussed in section II, and the data are described in section III. Section IV presents the results and we end with the concluding note of section V.

Abstract Currently Unavailable.

A probabilistic discovery model modified after Kaufman's earlier model is simplified to reduce computational demands and to reduce the sensitivity of the resulting estimates. The model is applied to the North Sea to estimate remaining oil reserves and forecast future discoveries. The simplification jeopardizes some informational detail, but the errors and approximations inherent in historical data sometimes overvalue the available information. A broader categorization scheme helps to control errors in this case. The model uses a stochastic production function based on a timing relationship between exploratory efforts and reservoir discovery and on a dynamic relationship of productivity and resource depletion. 21 references, 4 tables. (DCK)

A N extensive literature has developed on the impact of intergovernmental transfers on the budgetary decisions of state and local governments. In the more recent studies, models of fiscal response based on consumer utility maximization models are derived and tested, usually on a cross-section data base.1 The model in this paper, along the lines of previous work, analyzes the budgetary response of local governments in Ontario, Canada to provincial transfers, using pooled cross-section data for upper-tier municipalities in 1973 and 1974.2 This study differs in a number of important respects from most other studies on the expenditure response to grants. Firstly, it analyzes the impact of provincial grants on local government expenditures in both price and income terms. Grants are divided into two categories depending on whether they are anticipated to have only an income effect (as in the case of unconditional non-matching grants) or both price and income effects (as with conditional matching grants).3 In the model derived in this paper, grants are treated as endogenous and the estimation procedure takes account of the interrelationship between grants and expenditures. Both a Stone-Geary utility function and a translog indirect utility function are used to derive expenditure demand equations. Finally, this study attempts to incorporate specific institutional features of the provincialmunicipal fiscal system into the theoretical model. The model is derived in the next section, the discussion of data and estimation and the empirical results are presented in the following section and some conclusions are drawn in the final section of the paper.

T HE purpose of this paper is to ascertain the extent to which deterrence, environment, and culture can be considered responsible for the observed variance in the propensity for criminal behavior across countries. It is based on time-series observations on robberies from 1955 to 1971 for three countries: England, Japan and the United States as represented by California.1 The differential impacts on the per-capita robbery rate of the certainty and severity of punishment and of economic and demographic characteristics are estimated. Culture is defined to be the set of unmeasured crime determinants that permanently differ across countries and its effect is captured by country-specific dummy variables. The character of this unobservable is inferred from the interrelationship of country-specific effects on crime to those on punishments. The choice of the three countries is based upon the availability of fairly comparable data. We examine robbery because it is defined similarly across countries and because it combines features of both property crimes and personal crimes of violence.2 Indeed, it seems that much of the variation in crime between the United States and England is due to differences in the level of crimes with personal confrontation.3 In discussing the results, I interpret the findings as a consequence of individual maximizing behavior. There has, however, been much debate over the deterrence interpretation, a debate which cannot be resolved by any single empirical effort.4 Given the extent of the controversy, a short digression on the nature of the debate should be valuable at least in placing the present study in the appropriate context. A single equation approach, as pursued in this paper, can provide unambiguous evidence on the deterrence issue only if the level of deterrence is unaffected by variations in the level of crime. Two arguments for this feedback from crime to enforcement have been suggested in the literature, one technical and the other behavioral. The former, the congestion argument, is due to the likelihood that increased crime with fixed law enforcement resources leads to declining rates of capture, conviction, and punishment. This phenomenon is mitigated by the second mechanism which is based upon the societal response to increased crime of expanding law enforcement activity. The extent to which the technical feedback is relevant depends upon the degree to which society anticipates variations in crime and the rapidity with which adjustments in law enforcement inputs can optimally be made, i.e., on costs of adjustment. A priori, it is impossible to tell which one of these will dominate in any set of observations and, thus, impossible to ascertain the direction of the bias in deterrence estimates. Indeed, each of the several law enforcement stages (arrest, conviction, sentencing) may, through these two avenues, be differentially responsive to the crime level. Two strategies can be followed given this problem, each of which may potentially contribute to our ultimate understanding. Which one is chosen depends essentially on the availability of data. One method involves estimating the supply of crime equation within the setting of a multiple equation framework using a suitable estimation technique. Much of the debate over deterrence has been concerned, therefore, with the identification issue, and it has been argued that results which employ simultaneous equation estimaReceived for publication August 15, 1978. Revision accepted for publication November 26, 1979. * Yale University. This paper was prepared under Grant Number 75N1-99-027 from the National Institute of Law Enforcement and Criminal Justice, Law Enforcement Assistance Administration, U.S. Department of Justice. Points of view or opinions stated in this document are my own and do not necessarily represent the official position or policies of the U.S. Department of Justice. I am indebted to John Treat for performing the translations of the Japanese criminal statistics. I The data for the United States as a whole are not as complete as for California alone. 2 Robbery is basically defined as a theft with violence or the threat of violence. 3 See Wolpin (1978) for a comparison of U.S. and English property crime rates. 4 See the collection of papers in Blumstein, Cohen, and Nagin (1978) for a critical view of the deterrence framework and a lengthy discussion of alternative interpretations. [ 417 1

The following sections are included:INTRODUCTIONSPECIFICATION OF THE IMPORT EQUATIONRESULTSCONCLUSIONSREFERENCESAPPENDIX (This abstract was borrowed from another version of this item.)

THIS paper explores empirically the hypothesis that product market imperfections affect the earnings of labor in U.S. manufacturing industries. To the extent that labor shares in the excess return due to product market power, any policies designed to reduce this power may restrain or reduce wages in the affected industry. Thus workers may oppose antitrust action aimed at their own industry. Workers may oppose increased import competition that restrains market power not only because of potential unemployment but also because this increased competition indirectly reduces future wages. In addition, measures of the social loss due to product market power are understated if some portion of costs are actually return to market power. The transfer from consumers to producers, including labor as a factor of production, is also understated. Past results attempting to isolate empirically the relation between product market power, usually represented by product market concentration, and labor earnings have been mixed. This paper argues and demonstrates that economic profitability is a superior measure to concentration in summarizing the relative extent of product market power across industries. After developing a model of the division of the total excess return available to an industry between labor and capital, the paper presents empirical results that support the hypothesis that excess return or economic profitability is superior to product market concentration in explaining the interindustry variation in wages. The results indicate that labor receives 7% to 14% of the total excess return. For empirical analysis other determinants of interindustry wage variation must be controlled. The first section of the paper briefly discusses certain relevant labor force characteristics. The second section examines the relationship between wages and product market power. The third section discusses the data and presents empirical results. If possible, variables are measured as four-year averages over 1967-1970, to avoid single-year disturbances in the data and to approach long-run equilibrium observations. The final section presents concluding comments.

Andrea H. Beller, The Effect of Economic Conditions on the Success of Equal Employment Opportunity Laws: An Application to the Sex Differential in Earnings, The Review of Economics and Statistics, Vol. 62, No. 3 (Aug., 1980), pp. 379-387