Knowledge that Transforms

The purpose of this paper is to empirically estimate the effect of alcohol advertising on motor vehicle fatalities. The concept of an industry level advertising response function is developed and other empirical issues in estimating the effects of advertising are reviewed. The data set consists of quarterly observations, from 1986 to 1989, for 75 advertising markets in the United States and includes 1200 observations. Since motor vehicle fatalities and alcohol advertising are jointly determined, Two Stage Least Squares is used in the estimation. Reduced form fatality models and advertising models are also estimated to predict the effect of changes in the price of advertising. The regression results show that alcohol advertising has a significant and positive effect on motor vehicle fatalities. The data and regression results are used to estimate the effects of two policy options. The first option is to ban all broadcast alcohol advertising. The data indicate that if a ban on broadcast alcohol advertising did not also include bans on other types of alcohol marketing, the effect on motor vehicle fatalities might be in the range of 2000 to 3000 lives saved per year. The second policy is the elimination of the tax deductibility of alcohol advertising. This policy could reduce alcohol advertising by about 27 percent, reduce motor vehicle fatalities by about 2300 deaths per year and raise about $336 million a year in new tax revenue.

This paper examines the impact on the money-output correla-tion of a univariate specification that allows time series to be characterized as stationary around a broken trend function. Though pretesting suggests that U.S. real output (industrial production) can be described as broken-trend stationary, this result has only limited impact on the money-output correlation. Before 1985 there is a strong Granger causal relationship between money and broken-detrended output (but not first-differenced output), even when different short-term interest rates are used as regres-sors. However, after 1985 this relationship weakens significantly, whether or not one determines that output has a unit root.

This paper attempts to cast light on the debate about the existence and size of a monetary overhang in household money balances in command economies. Four measures of shortage or price deformation are constructed for the Polish economy and used to test for the existence of “shortage” money balances in Poland 1965–1989. The approach involves estimating relationships for household money balances 1965–1993, a period that spans both central planning and the post-1990 period of liberalised prices. The principal finding is that the evolution of household money balances in Poland cannot be explained without invoking measures of shortage and an overhang during the planning period. The estimates suggest an overhang with a maximum of just over 40% of money balances.

This paper utilizes a new data set to test for utility maximizing behavior and weakly separable subutility functions in the context of a utility function comprising durables, nondurables, services, leisure, and monetary asset holdings for the U.K. personal sector. All the data sets analyzed demonstrated consistency with respect to utility maximizing behavior. The weak separability results prove to be relatively invariant to the degree of aggregation over goods but highly sensitive to the assump-tion made regarding the representative consumer. Per-household scaling of the data produced a utility function that is weakly separable in goods, services and leisure, and in monetary assets.

This study evaluates the impact of variations in regulation, ownership, and market structure in the U.S. electric utility industry during the period surrounding the New Deal, when considerable institutional variation provided a natural experiment for analysis. A simultaneous-equations model of electricity supply and demand is developed and estimated for the years 1930 and 1942 with firm- and market-level data collected on utilities serving cities of population 50,000 or more. The paper offers evidence that regulation, public ownership, and competition served to reduce electricity prices and enhance allocative efficiency during the period under examination.

The paper considers the estimation of welfare measures when the functional form of demand is unknown. An adaptation of an argument of Gallant (1987) is used to show that welfare estimators based on a Fourier functional form for demand will be consistent under weak assumptions. Simulation evidence is presented for equivalent variation. True demand is a generalized Box–Cox function, estimated demand is a Fourier form, and equivalent variation is estimated by applying Vartia's (1983) algorithm to the estimated demand function. The estimator of equivalent variation has small asymptotic bias in the case of the assumed family of data generating processes.

This paper uses real estate investment data for major groups of U.S. financial institutions—commercial banks, thrifts, and life insurance companies—to evaluate their investment timing performance over the 1970–1989 period. Our major finding is that real estate investments by commercial banks and thrifts have largely been driven by past real estate and market returns rather than by future expected returns. This apparent “trend-chasing” investment strategy—of buying high and selling low—offers an explanation for the poor performance of their real estate investments. We argue that imposing market value accounting on such institutions may actually reinforce their “trend-chasing” behavior.

This paper presents a model to estimate the rate of capacity utilization (CU) in the manufacturing sector by state. Consistent measures of state-level CU rates have been unavailable since 1982. The lack of a capacity measure has hindered regional studies of capital formation, long-run output growth, and productivity growth. Our model employs a neoclassical approach to estimate CU. We estimate a model to determine the optimal level of production and compare it with the actual level in order to define our CU index. Our results show that states in the West North Central, South Atlantic, and Pacific census divisions tend to have a CU index consistently above the nation's average. On the other hand, states in the East North Central and West South Central census divisions tend to have a CU index below the nation's average.

Official poverty lines do not exist for the United States for years prior to 1959. In this paper a poverty line comparable to the seminal line is constructed for 1939 using the Orshansky method. Poverty rates are then calculated using the earnings data of the 1940 Public Use Microdata Sample of the U.S. Census. A comparison with similar work by Ross et al. (1987) demonstrates the degree to which continual price indexing of the poverty line results in inappropriate estimates. A trend of increasing incidence of poverty among female-headed households prior to 1960 is also revealed.

Abstract As nontariff forms of trade protection proliferate it has become more difficult to analyze the impact of trade policy on trade flows. In a number of well-known papers researchers have attempted to infer the impact of trade policy indirectly by ascribing to trade policy the differences between actual and predicted trade flows. Much of the work has been applied to analysis of Japanese trade policy, and the conclusions of these studies have differed widely. Some previous research has also ascribed a role to the keiretsu, or networks of affiliated firms, in explaining Japan's apparently distinctive trade performance. This paper presents a model that integrates data on factor endowments, observable protection in traditional and nontraditional forms, and the keiretsu. It extends existing research in two principal ways. First, alternative cross-national models of comparative advantage are nested to permit the identification of critical modeling assumptions underlying the divergent conclusions of the previous studies. Second, the results of the indirect method are externally validated by confronting these inferences with data on trade policy and the keiretsu. The results indicate that trade policy and the keiretsu have an important impact on Japanese trade performance.