Knowledge that Transforms

Anna Alberini, Winston Harrington, Virginia McConnell, Estimating an Emissions Supply Function from Accelerated Vehicle Retirement Programs, The Review of Economics and Statistics, Vol. 78, No. 2 (May, 1996), pp. 251-265

Data on New Zealand manufacturing plants are used to examine the impact of trade liberalization on plant exit. Recent theories suggest that the prospect of a declining market might cause firms to adopt strategic behavior that causes low cost plants to exit first. This hypothesis is generally unsupported. Surviving plants were larger, lower cost, and were owned by specialized firms with few plants. Plant costs were more important than firm size for explaining the plant-closing behavior of single-plant firms. Diversified, multiplant firms were more likely to close plants and were influenced by plant size but not plant costs. Copyright 1996 by MIT Press.

This paper discusses how randomized social experiments operate as an instrumental variable. For two types of randomization schemes, the fundamental experimental estimation equations are derived from the principle that experiments equate bias in control and experimental samples. Using conventional econometric representations, we derive the orthogonality conditions for the fundamental estimation equations. Randomization is a multiple instrumental variable in the sense that one randomization defines the parameter of interest expressed as a function of multiple endogenous variables in the conventional usage of that term. It orthogonalizes the treatment variable simultaneously with respect to the other regressors in the model and the disturbance term for the conditional population. However, conventional `structural' parameters are not in general identified by the two types of randomization schemes widely used in practice.

Theoretical consideration of technical efficiency has existed since Tjalling C. Koopmans (1951), which defined technical efficiency for production possibilities for which it is impossible to increase any output without simultaneously increasing any input. The nonparametric approach to efficiency estimation is based not on this definition but rather on Michael J. Farrell's (1957) index. Even after Farrell efficiency is achieved, there may exist additional slack in individual inputs, implying that Farrell efficiency doesn't measure inefficiency. To solve this problem, this paper suggests incorporating programming results into a second-stage multivariate regression analysis. For illustrative purposes, this technique is applied to analyze New York State school districts. Copyright 1996 by MIT Press.

Individual food consumption data are used to examine three issues. First, is food consumption linked intertemporally at the individual level? Second, does the association between current and past consumption reflect habit or heterogeneity? Third, what do the estimates imply about the intertemporal elasticity of substitution? The authors find that habit matters, that controlling for heterogeneity reduces estimated habit effects, and that the product of the estimated intertemporal elasticity of substitution and the risk aversion parameter is less than one. These results all lead to rejection of time separable specifications of intertemporal consumption behavior. Copyright 1996 by MIT Press.

In this paper we use the variance across siblings in school characteristics to estimate the effects of school inputs on wages. The analysis uses sibling pairs from the National Longitudinal Surveys of Labor Market Experience of Young Men and Young Women. We find that teacher's salary, expenditures per pupil, and a composite index of school quality indicators have a substantial positive effect on the wages of high school graduates.

Recent evidence from aggregate models of automobile demand indicates that, when not corrected for quality differences, market price elasticity of demand is substantially biased downwards. This note presents new information on market price and income elasticities derived from a disaggregate demand model that controls for cost, household income, vehicle attributes and perceived quality, consumer search, and manufacturer. Based on an extensive household survey of new vehicle purchasers in 1989, market price and income elasticities are estimated to be -0.87 and 1.70, respectively. Moreover, excluding vehicle quality from a well-specified model is found to have little effect upon the estimated market elasticities. Copyright 1996 by MIT Press.

Narayana R. Kocherlakota, Kei-Mu Yi, A Simple Time Series Test of Endogenous vs. Exogenous Growth Models: An Application to the United States, The Review of Economics and Statistics, Vol. 78, No. 1 (Feb., 1996), pp. 126-134

Thomas J. Hoerger, Gabriel A. Picone, Frank A. Sloan, Public Subsidies, Private Provision of Care and Living Arrangements of the Elderly, The Review of Economics and Statistics, Vol. 78, No. 3 (Aug., 1996), pp. 428-440

The determinants of the decision by Japanese firms to set up manufacturing plants in Southeast Asia, Europe and North America are analyzed using micro-data on the behavior of firms in the electronics industry. While firm-specific intangible assets based on R&D and marketing efforts are positively related to the decision to invest in Europe and North America, investment in Southeast Asia is mainly related to human resources and driven by interfirm ties within horizontal and vertical business groups. The empirical results suggest that membership of horizontal 'keiretsu' relaxes liquidity constraints, while the manufacturing networks of horizontal and vertical 'keiretsu' in Southeast Asia facilitate the establishment of manufacturing plants by member firms. Copyright 1996 by MIT Press.