Showing papers by "London School of Economics and Political Science published in 1982"

Relaxing price competition through product differentiation

Abstract: Central to the problem of providing adequate foundations for the analysis of monopolistic competition, is the problem of describing market equilibria in which firms choose both the specification of their respective products, and their prices. The present paper is concerned with a-very particular-model of such a market equilibrium. In this equilibrium, exactly two potential entrants will choose to enter the industry; they will choose to produce differentiated products; and both will make positive profits.

The Comparison of Multi-Dimensioned Distributions of Economic Status

Abstract: The literature on inequality measurement has been largely concerned with single-dimensioned indicators. This paper explores some of the issues which arise when there are several dimensions to inequality, and these are not readily reduced to a single index, concentrating particularly on the two-dimensioned case. We make use of results on multi-variate stochastic dominance in portfolio theory, extending these and applying them to the measurement of inequality. The use of the dominance conditions is illustrated by an application to the international distribution of income and life expectancy.

Serial Correlation and the Fixed Effects Model

Abstract: This paper generalizes the Durbin-Watson type statistics to test the OLS residuals from the fixed effects model for serial independence. Also generalized are the tests proposed by Sargan and Bhargava for the hypothesis that the residuals form a random walk. A method for efficient estimation of the parameters is also developed. Finally, an earnings function is estimated using the Michigan Survey of Income Dynamics in order to illustrate the uses of the tests and the estimation procedures developed in this paper.

Age, period, and cohort effects in demography: a review.

Abstract: Narrowly defined, demography deals with the measurement of vital events (birth, death, and marriage) and migration, studies the factors that influence the rate at which those events occur, and, to a lesser extent, investigates the consequences of the patterns of these events. In this paper, we adopt this narrow definition of the field and consider only the first three events so that by limiting the scope of our review, we can examine these selected topics in detail.

The Determinants of Occupational Success in Britain

Abstract: This paper is concerned with measuring the true impact of certain human capital variables on an individual's occupational position. The particular variables which are analysed are training, qualifications and spells of sickness and unemployment. The longitudinal nature of the data enables us to control for all relevant individual attributes which remain fixed over the period of the sample. This is vitally important because these attributes are strongly correlated with the variables of interest and would seriously corrupt estimates derived from a single cross-section. A method of generating consistent estimates (as N -, oo, T fixed) for a dynamic model with fixed effects is also illustrated.

Falsifikation und die Methodologie wissenschaftlicher Forschungsprogramme

Abstract: Jahrhundertelang verstand man unter Wissen bewiesenes Wissen — bewiesen entweder durch die Kraft der Vernunft oder durch die Evidenz der Sinne. Es galt als ein Gebot der Weisheit und der intellektuellen Redlichkeit, sich unbewiesener Behauptungen zu enthalten und die Kluft zwischen bloser Spekulation und begrundetem Wissen, sogar im Denken, auf ein Mindestmas zu beschranken. Wohl wurde die beweisende Kraft des Verstandes und der Sinne schon vor mehr als zwei Jahrtausenden von den Skeptikern in Frage gestellt, aber sie wurden durch den Triumphzug der Newtonschen Physik mit Verwirrung geschlagen. Einsteins Ergebnisse haben die Situation dann wieder auf den Kopf gestellt, und heute gibt es nur noch wenig Philosophen und Wissenschaftler, die der Ansicht waren, wissenschaftliche Erkenntnis sei oder konnte bewiesenes Wissen sein. Aber fast niemand sieht ein, das damit auch das ganze klassische Gebaude intellektueller Werte zusammenbricht und durch etwas Neues ersetzt werden mus: Man kann das Ideal bewiesener Wahrheit nicht einfach verdunnen — etwa zum Ideal ‚wahrscheinlicher Wahrheit‘2), wie es einige logische Empiristen tun, oder zur ‚Wahrheit aufgrund [wechselnder] Ubereinstimmung‘3), die wir bei einigen Wissenssoziologen finden.

Local Trend Estimation and Seasonal Adjustment of Economic and Social Time Series

Abstract: The first main purpose of this paper is to compare the performance of a number of methods of estimating local trends levels in a sample of 23 monthly economic and social time series. This is done for cases where data are available up to 0,1,2,...,6 months respectively beyond the time point for which the trend estimate is required. The paper's second main purpose is to investigate methods of improving the performance of the X-11 seasonal adjustment procedure. The treatment given to these problems is pragmatic and empirical rather than theoretical. The paper concludes by recommending the following simple unified procedure for both trend estimation and seasonal adjustment. Each time a new observation becomes available, forecast the next 12 monthly values of the series concerned by stepwise autoregression or some other appropriate method. Apply standard X-11 seasonal adjustment to the observed series augmented by the 12 forecast values. The trend and seasonally adjusted values given by the X-11 printout for the present and previous time points are the values required. It is shown that this simple procedure has a very satisfactory overall performance.

Growing up in the inner city.

Abstract: unique chance to benefit from the help of the middleclass volunteer. The availability of middle-class ’refugees’ is a clear feature of much rural life and, often, their cumulative experience can be considerable. Frequently, the administrative, educational and pastoral expertise clustering in villages is very great. Unfortunately, middle-class activity in villages tends to be very sex-segregated there is no man’s equivalent of the Women’s Institute and often the men grow the flowers for their wives to arrange. While this is effective at organising flower shows, hunts and fetes and can assist groups such as the elderly with hospital visits, this considerable potential rarely seems to be applied to help the young. It would also be a way of integrating middle-class arrivals more adequately into village life and diminish something of the understandable hostility they engender because of their affluence, aggravation of house prices and obsession with visual amenities. If

The Determinants of Equilibrium Unemployment in Britain

Abstract: A lot of energy is currently being expended in trying to understand what has been happening to unemployment in Britain and the rest of the developed world.' In this paper, we look at this question in the British context by trying to confront some possible explanations with the data. Since the data we use are quarterly over rather a short period we are setting the explanations a very hard test. Most explanations tend to be rather casual and the theories underpinning them ill developed. Thus, for example, the so called 'real wage' argument is based on the idea that real wages affect labour demand and that the equilibrium real wage bears some relatively stable relationship to output per head. But how stable is not clear. Thus whether or not we can expect a well defined, stable ceteris paribus dynamic relationship between real product wages as a proportion of output per head and unemployment is equally unclear. So if such a relationship does not show up in a quarterly regression model this may not be that serious for the theory. Nevertheless we must look for the relationship, for how else are we ever to discriminate between a plethora of conflicting views? The primary emphasis in this paper is on the secular factors affecting unemployment rather than the cyclical variables. Consequently we shall not be concerned with developing a coherent theory of cyclical fluctuations and in the empirical work we shall control for the cycle simply by making use of those exogenous or predetermined variables which other work in this field suggests are important.2 The remainder of the paper is set out as follows. The next section is concerned with specifying a model which generates a definition of equilibrium unemployment. The outline of this model is a pair of equations determining the flows into and out of unemployment and these are specified in Section II which looks closely at the possible variables involved. Section III then deals with the results and presents some general conclusions.

The estimation and interpolation of inequality measures

Abstract: Alternative methods of computing estimates of inequality measures from grouped data are critically examined in terms of their theoretical and empirical properties. The use of a simple "split-histogram" technique of interpolation is explained and supported. Theoretical and empirical support is also provided for the "3/3- rule"-a simple computational procedure for a point estimate of an inequality measure derived from its standard grouping bounds.

Invention and Innovation Under Alternative Market Structures: The Case of Natural Resources

Abstract: This paper examines the interactions between market structure and resource allocation over time when there is endogenous technical progress. The structures considered are a planned economy, pure monopoly, and competition with patent rights. In an efficient allocation the date of invention coincides with the date of innovation (the date at which technology is used). This is also true with a pure monopoly, but monopoly retards technical progress relative to the efficient level. Competition for patents rights to a new technology results in excessively rapid technical progress if the resource endowment of the economy is sufficiently large. Also, competition may lead to "sleeping patents" where invention strictly precedes the date of innovation.

Causes of the Current Stagflation

Abstract: Since 1975 labour slack has been unusually high in the OECD countries, and yet inflation has not diminished. The less favourable mix of unemployment and rate of change of inflation (which we call stagflation) is explained by a fall in the feasible rate of growth of real wages unmatched by a reduction in the constant term in Phillips curve. To investigate this mechanism, conventional wage and price equations are estimated for 19 countries and then used for simulation. Stagflation has been caused in roughly equal amounts by rising relative import prices and by the fall in the rate of productivity growth. In the basic model the Phillips curve is assumed not to adapt to falls in feasible real wage growth, but in a final section an adaptive wage equation is estimated, which confirms that the process of adaptation is slow.

When is disguise justified? Alternatives to covert participant observation

Abstract: The ethical and practical merits of disguised, secret, or covert participant observation continue to be debated. This article suggests the need to recognize a wider variety of observational research strategies than are captured by this “either/or” debate. Such strategies include retrospective participant observation, “experience recollected in academic tranquility” the native as stranger, in which participants observe milieux with which they have long familiarity; adoption of the role of “covert outsider,” occupying a nonresearch position in an organization in order to do research; and the “overt insider,” deliberately adopting a particular occupational role, and undergoing training in it, to gain research access to otherwise closed research settings. Such alternative possibilities suggest that the need for covert observational strategies may be exaggerated.

A Materialist Analysis of Operational Research

Abstract: Accounts of the development and practice of operational research have commonly stressed its timeless universality as a method for rational decision-making. In this paper operational research is seen as one element in the managerial response to problems of complexity and uncertainty within an economic system characterised by institutionalised conflict. Both the material and ideological functions of ‘management science’ in private and public enterprise are analysed, and characteristics are identified of an emergent ‘workers science’.

From School to University: The Demand for Post-Compulsory Education in Britain

Abstract: * The work reported here was done at the Centre for Labour Economics, LSE, and it is a revision of earlier work done at the National Bureau of Economic Research. This revision owes much to the comments and suggestions of Richard Layard and to the technical expertise of George Alogoskoufis. Thanks are also due to the Department of Education and Science for their comments and help with the data, and to the Manpower Services Commission, the Department of Employment, and the Ford Foundation for finance.

Imperfect capital markets and the monetarist black box: liquidity constraints, inflation and the asymmetric effects of interest rate policy

Abstract: In this paper we examine the effects of unanticipated changes in interest rates on consumers' expenditure in a model in which capital markets are imperfect. We show that, where constraints exist on the amounts individuals can borrow, individuals may rationally choose to borrow up to the limits of such constraints over part of their lifetimes. Such liquidity-constrained individuals in general have a higher marginal propensity to consume out of changes in current income than is the case with liquidity unconstrained individuals. Changes in interest rates, which have the effect of redistributing income between (liquidity-constrained) monetary debtors and (liquidity-unconstrained) creditors will thus have a net effect on aggregate consumption. We further show that this effect operates asymmetrically, in the sense that an increase in interest rates will have a larger net impact than a fall. Formally, we examine the impact of a change in the interest rate, which we assume exogenous, on the behaviour of an individual consumer. The analysis is thus independent of the source of the interest rate shock,2 but we believe an important application of the model concerns the transmission mechanism through which monetary policy operates. In this paper we do not consider the relationship between the supply of money and interest rates, but simnply follow standard economic theory in assuming that monetary policy operates through the impact of interest rates on expenditure. It is the mechanism linking interest rate changes to expenditure that has proved hard to identify and it is in this respect that our analysis may be relevant. In suggesting a process through which interest rates can affect expenditure which appears to have been neglected hitherto, the model provides a possible channel of transmission of monetary policy different from those usually considered.3 In so doing the model may offer some insight into the transmission processes within the monetarist 'black box' and indeed suggests that the efficacy of monetary policy may in part depend on the existence of capital market imperfections.

The Estimation of Regression Models with Time-Varying Parameters

Abstract: In analysing time series data, the assumption that the coefficients in a regression model are constant over time may not always be reasonable. One way of handling this problem is to allow the parameters to vary over time according to a particular stochastic process. The parameters in models of this type are said to be dynamic, and they represent a generalization of models in which the parameters are random, in that they are independent of each other in different time periods; see, for example, Theil [1971, 622–627].

Economic loss in tort

Abstract: The law of torts severely restricts recovery by a plaintiff for financial losses suffered in consequence of the negligent conduct of the defendant.' In American law this is usually, and perhaps misleadingly, summarized by saying that there is no recovery for negligent interference with a contract. It is misleading because the restriction extends beyond contracts to other expected or normal financial gains that, but for the tort, would have been realized. In the other common law jurisdictions, this is referred to, perhaps again misleadingly, as the problem of economic loss. Here the term may mislead because many financial losses may not be losses at all in an economic sense, that is from the point of view of net social welfare.

Ideogram reading and right hemisphere language

Abstract: Two experiments on the identification of ideographs are reported. In Expt 1 subjects showed a right visual field advantage when reporting Arabic numerals. A right visual field advantage was also obtained in Expt 2 when Chinese and Japanese subjects reported numbers presented in Arabic and Kanji formats. The results are discussed in the context of the literature which shows a left visual field advantage for the identification of single ideographs in Chinese and Japanese, and a right visual field advantage for items in alphabetic and syllabic scripts. It is suggested that it is not the direct mapping between ideographs and the morphemes of a language which yields a left visual field advantage, but associated incidental stimulus characteristics which make demands upon preprocessing operations that are carried out more efficiently in the right hemisphere. It is argued, therefore, that this literature does not address the question of whether, subsequent to preprocessing, alphabetic, syllabic and ideographic scripts are processed by dissociable mechanisms.

Job Search and the Duration of Layoff Unemployment

Abstract: This paper derives an optimal job-searching strategy for workers on layoff, and an optimal recall policy for firms, when each side anticipates the other side's actions correctly. It shows that workers search for an alternative job only if the probability of recall falls below a critical level, and that firms may recall before the recovery of demand, depending on the costs of laying off and hiring workers, and the probability of losing workers on layoff. Through the use of optimal job searching and recall policies, the paper derives expressions for the duration of layoff unemployment and discusses briefly their comparative-static properties.