Knowledge that Transforms

Two hypotheses are tested in this paper. The first is whether the appropriate geographic market for certain banking services is national, instead of local. The second is whether the definition of banking "product" as all banking services is too broad. Copyright 1992 by MIT Press.

This paper compares the industry characteristics that determine U.S. export competitiveness with those that affect the export competitiveness of U.S. multinationals. Higher R&D and human capital intensities are associated with high U.S. shares in exports and, more strongly with high U.S. multinationals' shares, and higher labor content with low shares. Within the multinationals, high R&D intensity leads to a larger share of the firms' exports being supplied from the U.S. parent. The higher the labor intensity and the level of advertising expenditures in an industry, the larger the proportion of the firms' exports supplied by the foreign affiliates. Copyright 1992 by MIT Press.

This paper introduces survey-based measures of expectations and uncertainties about income and real interest rates into an otherwise conventional consumption function. The survey dat a contribute more than conventional variables to the explanation of changes in consumption. The hypothesis that consumption follows a random walk is rejected in favor of a model in which consumption responds with a lag to changes in expected income growth. The significance of inflation in earlier estimates of the U.S. consumpti on function is shown to be spurious and due to a strong negative correlation between expected inflation and expected income growth. Copyright 1992 by MIT Press.

This paper investigates interstate variation in income inequality. By avoiding inequality indices and focusing directly on the Lorenz curve, the authors provide a more general explanation of the differences in inequality. They find that mean family income, the standard deviation of years of schooling, per capita educational expenditure, and property income are robust predictors of inequality. Of particular interest is their finding that, ceteris paribus, higher per capita education expenditures tend to be associated with states that have income inequality which is greater than the U.S. average. Copyright 1992 by MIT Press.

In the absence of futures markets, cobweb cycles and other behavior inconsistent with Muth rational expectations persist for long periods of time. When futures markets are introduced in commodities, these markets behave in a manner much more consistent with Muth rational expectations. By contrast, despite the existence of active forward and futures markets, the Muth rational expectations hypothesis is rejected in the financial and foreign exchange markets. The aim of this paper is to suggest an explanation of how futures markets change the structure of the supply response. Copyright 1992 by MIT Press.

Sharon G. Levin, Stanford L. Levin, John B. Meisel, Market Structure, Uncertainty, and Intrafirm Diffusion: The Case of Optical Scanners in Grocery Stores, The Review of Economics and Statistics, Vol. 74, No. 2 (May, 1992), pp. 345-350

If labor supply curves are not perfectly inelastic, wage discrimination induces some minority workers to leave the labor force. Studies of discrimination that focus only on wage differentials overlook these disincentive effects on minority employment. This article introduces a method of estimating the employment effects of wage discrimination and applies it to data on men and women from the 1984 Survey of Income and Program Participation. The authors find that wage discrimination against women caused a net loss of over four million jobs, supporting Gary Becker's contention that discriminatory employers use labor inefficiently. Copyright 1992 by MIT Press.

The opportunity cost of holding international reserves plays a central role in all models of optimal demand for foreign exchange. This cost is conventionally defined as the difference between the yield on reserves and the marginal productivity forgone from an alternative investment in fixed capital. Most empirical studies have failed to find a significant opportunity-cost effect, since none of them measure it in accordance with its theoretical definition. The results for Israel show that, when this cost is measured properly, it turns out to be a crucial determinant of reserve demand. Copyright 1992 by MIT Press.

This paper presents an alternative approach to measuring the impact of affirmative action on firms. Affirmative action is modeled as a series of hiring quotas. If the quotas are binding, then a firm subject to affirmative action will operate with greater costs of production, have less elastic demand for inputs, and be less able to substitute between most inputs. The results are consistent with the hypothesis that affirmative-action regulations significantly constrain firms' behavior. Own-wage elasticities are less elastic and most inputs are less substitutable for constrained firms. Further, affirmative action raises costs by 6.5 percent for firms subject to the program. Copyright 1992 by MIT Press.

This paper investigates the relation between substitution possibilities in manufacturing production between capital and two labor inputs, blue collar and white collar workers. Griliches found in 1969 that unskilled.labor was more easily substituted for by capital than skilled labor. Griliches called this capital-skill complementarity. The capital-skill complementarity hypothesis has implications for the aggregation of labor inputs as well as for employment of labor categories and income distribution between factors. This paper investigates the robustness of the capital-skill complementarity hypothesis on Swedish data by varying model assumptions concerning economies of scale and technological growth. Copyright 1992 by MIT Press.