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Showing papers by "National Bureau of Economic Research published in 1976"


Posted Content
TL;DR: This article showed that the costs of using the political process limit not only the size of the dominant group but also their gains, which is at one level, a detail which is the way Stigler treated it, but a detail with some important implications for entry into regulation and for the price-output structure that emerges from regulation.
Abstract: In previous literature, George Stigler asserts a law of diminishing returns to group size in politics: Beyond some point it becomes counterproductive to dilute the per capita transfer. Since the total transfer is endogenous, there is a corollary that dirninishing returns apply to the transfer as well, due both to the opposition provoked by the transfer and to the demand this opposition exerts on resources to quiet it. Stigler does not himself formalize this model, and my first task will be to do just this. My simplified formal version of his model produces a result to which Stigler gave only passing recognition, namely that the costs of using the political process limit not only the size of the dominant group but also their gains. This is at one level, a detail, which is the way Stigler treated it, but a detail with some important implications -- for entry into regulation, and for the price-output structure that emerges from regulation. The main task of the paper is to derive these implications from a generalization of Stigler's model.

745 citations


Posted Content
TL;DR: In this paper, an econometric methodology was proposed to deal with life cycle earnings and mobility among discrete earnings classes. But the methodology is not suitable for the case of single individuals.
Abstract: This paper proposes an econometric methodology to deal with life cycle earnings and mobility among discrete earnings classes. First, we use panel data on male log earnings to estimate an earnings function with permanent and serially correlated transitory components due to both measured and unmeasured variables. Assuming that the error components are normally distributed, we develop statements for the probability that an individual's earnings will fall into a particular but arbitrary time sequence of poverty states. Using these statements, we illustrate the implications of our earnings model for poverty dynamics and compare our approach to Markov chain models of income mobility.

379 citations


Posted Content
TL;DR: In this paper, the authors show that the justification for aggregating leisure and work at home into one entity, "non-market time" (or "home time") can rest on two assumptions: (a) the two elements react similarly to changes in the socio-economic environment and, hence, nothing is gained by studying them separately, and (b) they satisfy the conditions of a composite input, i.e., their relative price is constant.
Abstract: From the theoretical point of view, the justification for aggregating leisure and work at home into one entity, "non-market time" (or "home time") can rest on two assumptions: (a.) the two elements react similarly to changes in the socio-economic environment and, hence, nothing is gained by studying them separately, and (b.) the two elements satisfy the conditions of a composite input, i.e., their relative price is constant, and there is no interest in investigating the composition of this aggregate since it has no bearing on production and the price of the output. This study sets out to show that none of these assumptions holds. Recent time budget findings have established that work at home is affected differently by changes in socioeconomic variables than is leisure, and this paper shows that the aggregation is also suspect from the analytical point of view.

120 citations


Posted Content
TL;DR: In this paper, a variety of functional forms, estimation methods and definitions of the real after-tax rate of return invariably lead to the conclusion of a substantial interest elasticity of saving.
Abstract: After exploring both the crucial role of the interest elasticity of the saving rate in the analysis of a wide variety of issues in economic - particularly tax - policy and reasons why previous studies of the effect of interest rates on consumption and saving have biased the estimated elasticity toward zero, this study presents new estimates of consumption functions based on aggregate U.S. time series data. The results are striking: a variety of functional forms, estimation methods and definitions of the real after-tax rate of return invariably lead to the conclusion of a substantial interest elasticity of saving.

117 citations


Posted Content
TL;DR: This article showed that the observed quality income elasticity would be relatively high and the quantity elasticity relatively low and sometimes negative, even if the true "unobserved" income elasticities for quantity and quality were equal and of average value.
Abstract: This paper brings together and integrates social interactions and the special relation between quantity and quality. We are able to show that the observed quality income elasticity would be relatively high and the quantity elasticity relatively low and sometimes negative, even if the true "unobserved� income elasticities for quantity and quality were equal and of average value. Moreover, the observed quality elasticity would fall, and the observed quantity elasticity would rise, as parental income rose.

89 citations


Journal ArticleDOI
TL;DR: In this paper, a model of charitable bequests is estimated on data from the 1957-1959 Treasury Special Study and the 1969 Estate Tax returns and a variety of alternative policies are simulated.

68 citations


Book
01 Jan 1976
TL;DR: This paper used a semiparametric decomposition technique to assess the influence of changes in productive and personal characteristics, in workers' distribution across occupations and locations, and in the wage structure on both black women's absolute wage gains and those relative to white women's.
Abstract: The 1940s marked a turning point in the labor market outcomes of African-American women. They experienced large wage gains relative to white women, sharp declines in agricultural and domestic service work, and significant increases in formal sector employment. Using a semiparametric decomposition technique, we assess the influence of changes in productive and personal characteristics, in workers' distribution across occupations and locations, and in the wage structure on both black women's absolute wage gains and those relative to white women's. We argue that the pattern of changes is most consistent with increasing demand for their labor in the formal sector.

35 citations


Posted Content
TL;DR: In this article, an algorithm is presented which provides a complete solution to the optimal estimation problem for time-varying parameters when no proper prior distribution is specified, and the key ideas involve a combination of the information-form Kalman filter with the two-filter interpretation of the optimal smoother.
Abstract: An algorithm is presented which provides a complete solution to the optimal estimation problem for time-varying parameters when no proper prior distribution is specified. The key ideas involve a combination of the information-form Kalman filter with the two-filter interpretation of the optimal smoother. The algorithm produces efficient estimates of the parameter trajectories over the entire sample, arid is equally applicable when a proper prior distribution has been specified.

29 citations


ReportDOI
TL;DR: In this article, a theoretical analysis of marital dissolution incorporating uncertainty about the outcomes of marital decisions into a framework of utilitymaximization and the marriage market is presented, and implica-tions of the theoretical analysis with cross-sectional data,primarily the 1967 Survey of Economic Opportunity and the Terman sample are discussed.
Abstract: This paper focuses on the causes of divorce. Section I developsa theoretical analysis of marital dissolution incorporating uncertaintyabout the outcomes of marital decisions into a framework of utilitymaximization and the marriage market. Section II explores the implica-tions of the theoretical analysis with cross-sectional data,primarilythe 1967 Survey of Economic Opportunity and the Terman sample. Therelevance of both the theoretical and empirical analyses in explainingthe recent acceleration in the U.S. divorce rate is discussed.

26 citations


Posted Content
TL;DR: In the last few years, there has developed a large literature, sometimes referred to as the new "public finance," providing a quantitative analysis of a number of traditional problems within the field.
Abstract: In the last few years, there has developed a large literature, sometimes referred to as the new "public finance," providing a quantitative analysis of a number of traditional problems within the field. This paper is concerned with surveying, or interpreting, what can be learned from this literature; and our belief is that it has taught us a great deal. We concern ourselves here not so much with the derivation of precise formulae, e.g. for optimal tax rates, but with the more general lessons which have emerged.

21 citations


Journal ArticleDOI
TL;DR: Examining differences in earnings by occupations, and within occupations by sex and by race, on the basis of the 1/100 Public Use Samples of the 1960 and 1970 U.S. Population Censuses found earnings differences between males and females within occupation had a greater impact on the overall male‐female earnings ratio than did differences in occupational distribution by sex.
Abstract: This paper examines differences in earnings by occupations, and within occupations by sex and by race, on the basis of the 1/100 Public Use Samples of the 1960 and 1970 U.S. Population Censuses. It employs interval analysis to establish 32 categories of occupations with similar characteristics. Little relation was found between mean earnings of occupational groups and the degree of earnings inequality within them. When the figures are examined by sex, it was found that men, on average, earned over twice as much as women in both years, but women's earnings were more unequally distributed (as measured by the Gini coefficient). Women are concentrated in the traditional “female” occupations, which tend to be those at the bottom of the earnings scale, and men have a monopoly of the higher paid occupations. But mean earnings for men exceeded those for women in all occupational groups except one, even in the primarily female occupations. Standardizing first for occupational distribution and then for earnings by occupation, it was found that earnings differences between males and females within occupation had a greater impact on the overall male-female earnings ratio than did differences in occupational distribution by sex. In contrast, when the figures are examined by race, the change in occupational distribution (primarily the movement of blacks out of farming and of blacks and Spanish speakers out of personal services) was the major factor. There was also a considerable degree of earnings inequality within demographic groups. The degree of inequality was in the main reduced when the demographic groups were subdivided into occupations, but it was still substantial. Additional factors like time worked, schooling, and experience must be taken into consideration in understanding this phenomenon.

ReportDOI
TL;DR: A straightforward diagnostic test procedure that provides numerical indexes whose magnitudes signify the presence of one or more near dependencies among columns of a data matrix X that provides a means for determining, within the linear regression model, the extent to which each such near dependency is degrading the least- squares estimation of each regression coefficient.
Abstract: This paper suggests and examines a straightforward diagnostic test procedure that 1) provides numerical indexes whose magnitudes signify the presence of one or more near dependencies among columns of a data matrix X, and 2) provides a means for determining, within the linear regression model, the extent to which each such near dependency is degrading the least- squares estimation of each regression coefficient. In most instances this latter information also enables the investigator to determine specifically which columns of the data matrix are involved in each near dependency. The diagnostic test is based on an interrelation between two analytic devices, the singular-value decomposition (closely related to eigensystems) and a matching regression-variance decomposition. Both these devices are developed in full. The test is successfully given empirical content through a set of experiments that examine its behavior when applied to several different series of data matrices having one or more known near dependencies that are weak to begin with and are made to became systematically more nearly perfectly collinear. The general diagnostic properties of the test that result from these experiments and the steps required to carry out the test are summarized, and then exemplified by application to real economic data.

ReportDOI
TL;DR: In this article, individual variation in the parameters of individual earnings functions is explored, and the extent to which the estimated variation in individual parameters helps in explaining the cross-sectional variation in earnings is investigated.
Abstract: We take advantage of our longitudinal data to explore individual variation in the parameters of individual earnings functions. (1) For this purpose we fit an earnings function to each of the individual histories in the sample.(2) We then try to ascertain the extent to which the estimated variation in individual parameters helps in explaining the cross-sectional variation in earnings.(3) we further inquire into the relation between the individual parameters and a vector of personal characteristics, as well as(4) into indirect (via variables and parameters) and direct effects of these characteristics on earnings.

Journal ArticleDOI
TL;DR: A system called CLOUDS is described which is designed to make available on inexpensive storage tube terminals a wide range of graphics tools related to data analysis, economics, and management science.

Posted Content
TL;DR: In this paper, the authors propose that individuals' time performs a productive role in generating non-wage income through the management of nonhuman capital assets, and they use the asset management hypothesis to develop a life cycle model of consumptive and productive decisions.
Abstract: The paper entertains the proposition that individuals' time performs a productive role in generating nonwage income through the management of nonhuman capital assets. The asset management hypothesis is used to develop a life cycle model of consumptive and productive decisions. The model allows for variations in gross rates of return both across persons at a point in time and for any one person over his life cycle. The behavioral implications developed show that differences across consumption units in their time allocations and in their borrowing, saving, and asset holding decisions may be the result of differences in opportunities rather than "tastes."

ReportDOI
TL;DR: This paper examined the relationship between direct investment by U.S. firms and the export trade of the United States and found that changes over time in trade flows and trade balances are influenced by trends in productivity and monetary and fiscal policy, all of which ate reflected in price and income changes, the effects of which probably swamp any that might stem from changes in the level of direct investment.
Abstract: One of the main purposes of our studies of U.S.-based multinational firms has been to examine the relationship between direct investment by U.S. firms and the export trade of the United States, a subject of bitter controversy for at least the last fifteen years. Changes over time in trade flows and trade balances are influenced by trends in productivity in the United States and elsewhere and by shifts in monetary and fiscal policy, all of which ate reflected in price and income changes, the effects of which on trade probably swamp any that might stem from changes in the level of direct investment, One way to disentangle some of these influences might be to disaggregate by country, industry, and even better, by firm. However, we have not yet developed enough disaggregated time series data for this purpose and have therefore chosen to work with cross-sections by country and industry and, in some eases, by firm.

Journal ArticleDOI
TL;DR: In this article, the authors propose that individuals' time performs a productive role in generating non-wage income through the management of nonhuman capital assets, and they use the asset management hypothesis to develop a life cycle model of consumptive and productive decisions.
Abstract: The paper entertains the proposition that individuals' time performs a productive role in generating nonwage income through the management of nonhuman capital assets. The asset management hypothesis is used to develop a life cycle model of consumptive and productive decisions. The model allows for variations in gross rates of return both across persons at a point in time and for any one person over his life cycle. The behavioral implications developed show that differences across consumption units in their time allocations and in their borrowing, saving, and asset holding decisions may be the result of differences in opportunities rather than “tastes.”

Posted Content
TL;DR: In this paper, the authors address the question as to whether a tax-induced "clientele" effect seems present in the equities marketplace, and provide evidence which bears on the potential role of one of the key such imperfections commonly cited: differences in the rates of tax paid by different investors on their dividend receipts.
Abstract: dividends-irrelevance proposition of Miller and Modigliani [28], and the more recent empirical investigations by Friend and Puckett [14], Diamond [7], and Black and Scholes [1], the dispute as to a dividend effect has continued. Although the issue would appear even yet not to be fully resolved, the character of the debate was modified substantially by the Miller-Modigliani demonstration that, in a perfect capital market, dividend policy cannot matter-given an established investment policy. Since then, the emphasis of conjectures that dividends nonetheless may still matter in practice has shifted to a concern primarily with market imperfections as an underlying cause. We offer here some evidence which bears on the potential role of one of the key such imperfections commonly cited: differences in the rates of tax paid by different investors on their dividend receipts. In particular, we shall address the question as to whether a tax-induced "'clientele" effect seems present in fact in the equities marketplace. Since treatments of the other side of the dividend coin-the acceptability criteria for investment projects financed by retained earnings-have also generally contended that investor tax rates bear on the problem [3][12][23], there are a number of ramifications for managerial decisions if a clientele array can be discerned.

Posted Content
TL;DR: In this article, the use of precedents to create rules of legal obligation has, to the best of our knowledge, received little theoretical or empirical analysis; however, the authors present and test empirically an economic approach to legal precedent, derived mainly from the analysis of capital formation and investment.
Abstract: The use of precedents to create rules of legal obligation has, to our knowledge, received little theoretical or empirical analysis. This paper presents and tests empirically an economic approach to legal precedent that is derived mainly from the analysis of capital formation and investment. We treat the body of legal precedents created by judicial decisions in prior periods as a capital stock that yields a flow of information services which depreciates over time as new conditions arise that were not foreseen by the framers of the existing precedents. New (and replacement) capital is created by investment in the production of precedents.

ReportDOI
TL;DR: The authors found that simple cross section estimates grossly underestimate cohort profiles during the period 1960-70 and that the growth in earnings is not uniform across experience groups and more recent vintages tend to have steeper profiles in most fields.
Abstract: The major findings of this study are as follows: (1) Simple cross section estimates grossly underestimate cohort profiles during the period 1960-70. Furthermore the growth in earnings is not uniform across experience groups and more recent vintages tend to have steeper profiles in most fields. Consequently the rate of return or present value comparisons based on cross sections are likely to be misleading even if the standard adjustment for growth is made. (2) For purposes of estimating mean profiles and mean effects of variables estimates based on pooled independent cross sections are quite close to those based on the more expensive longitudinal data. (3) There are important persistent unmeasured individual effects on both the level and growth of earnings. Consequently, individuals with the same observed characteristics will still have a wide variance in their permanent income.

ReportDOI
TL;DR: In this paper, the authors identify factors contributing to the rate and character of technical transfer and assess host-country research and development effort in response to foreign competition, and examine the impact of technically-advanced companies, particularly American, on British industries.
Abstract: This paper, which seeks to identify factors contributing to the rate and character of technical transfer and to assess host-country research and development effort in response to foreign competition, is one of three examining the impact of technically-advanced companies, particularly American, on British industries. Beginning first with an analysis of imitation cycles in pharmaceuticals and making use of a model of these, the study proceeds to examine the transnational operations of American and other foreign companies, showing the connection between company size, sales and new product introductions.

ReportDOI
TL;DR: The Terman sample as discussed by the authors consists of some 671 women selected in 1921 by psychologist Lewis N. Terman from children enrolled in California schools in urban areas, whose measured IQ was 135 or above.
Abstract: Within the past few years, renewed interest in understanding marital behavior has resulted in a number of studies which focus on an equation estimating the probability of divorce or remarriage. This paper reports on one such effort. It offers a brief rationale for and an estimation of probability functions for divorce rates at specific lengths of marriage duration for a very unrepresentative sample of American women -- a group of geniuses. The data are from the "Terman sample" of some 671 women selected in 1921 (together with a comparable group of men) by psychologist Lewis N. Terman. The sample was chosen from children enrolled in California schools in urban areas. It included children, preselected by their teachers, whose measured IQ was 135 or above. The sample thus represented students in the highest one percent of the school population in general intelligence. In another report I have compared the marital behavior of these Terman subjects to the relevant California population, controlling for the very high level of schooling and the somewhat constricted distribution of age at first marriage among the Terman subjects (Michael 1976). The Terman subjects generally exhibited the same qualitative relationships between marital patterns and such variables as age at marriage and schooling as the California population. However, one should keep in mind the very special nature of this sample when comparing results with other studies.

ReportDOI
TL;DR: In this article, the authors examined the factors that affect the pattern of introduction of semiconductor innovations into the United Kingdom, studying both differences among products and differences among firms, and developed a model for estimating product life cycles in a way that gives information suitable for assessing induced changes in the host country industry.
Abstract: This paper has examined the factors that affect the pattern of introduction of semiconductor innovations into the United Kingdom, studying both differences among products and differences among firms. The pattern of product innovations is based on the concept of a lifecycle process. A model is developed for estimating product life cycles in a way that gives information suitable for assessing induced changes in the host country industry. The analysis that follows is broken into two parts. Firstly, factors determining the rate of diffusion of the innovations in the host country are examined; secondly, factors determining the positions of individual firms within the life cycle are considered.

ReportDOI
TL;DR: In this paper, the effects of changes in exogenous parameters such as the interest rate, the length of the working period and initial endowments on the shape of the observed earnings profile are analyzed.
Abstract: The purpose of this paper is to analyze the effects of changes in exogenous parameters such as the interest rate, the length of the working period and initial endowments on the shape of the observed earnings profile. Though this problem can be treated in general, we shall restrict ourselves to the following "inverse optimal" problem: find a form of the trade-off function between current and future earnings which leads to a logarithmic earnings function. In the paper we demonstrate that logarithmic earning functions can be derived from optimal behavior. Specifically, the simple case which we analyze leads to piece wise linear log earnings functions. Such a derivation has the advantage that the effects on earnings of exogenous factors can be consistently analyzed. The model is sufficiently simple to allow a clear exposition of the basic elements which govern earnings in a static world. The same elements appear in the more complicated derivations currently available in the literature but it is more difficult to trace their impact. The multiplicative model provides additional information on the robustness of the results previously derived from the Ben-Porath specification. This is particularly important since the "production function" for human capital is not directly observable and alternative specification can only be compared in terms of their implications with respect to observed earnings.

ReportDOI
TL;DR: In this paper, the identification of time-varying coefficient regression models is investigated using an analysis of the classical information matrix, where variable coefficients are characterized by autoregressive stochastic processes, allowing the entire model to be case in state space form.
Abstract: The identification of time-varying coefficient regression models is investigated using an analysis of the classical information matrix. The variable coefficients are characterized by autoregressive stochastic processes, allowing the entire model to be case in state space form. Thus the unknown stochastic specification parameters and priors can be interpreted in terms of the coefficient matrices and initial state vector. Concentration of the likelihood function on these quantities allows the identification of each to be considered separately. Suitable restriction of the form of the state space model, coupled with the concept of controllability, lead to sufficient conditions for the identification of the coefficient transition parameters. Partial identification of the variance-covariance matrix for the random disturbances on the coefficients is established in a like manner. Introducing the additional concept of observability then provides for necessary and sufficient conditions for identification of the unknown priors. The results so obtained are completely analogous to those already established in the econometric literature, namely, that the coefficients of the reduced form are always identified subject to the absence of multicollinearity. Some consistency results are also presented which derive from the above approach.

ReportDOI
TL;DR: This working paper provides some preliminary results on the computational feasibility of nonlinear full information maximum likelihood (NECML) estimation, and NLFIML appears competitive in cost and superior in statistical properties to NL3SLS.
Abstract: This working paper provides some preliminary results on the computational feasibility of nonlinear full information maximum likelihood (NECML) estimation. Severa1 of the test cases presented were also subjected to nonlinear three stage least square (NLBSLS) estimation in order to illustrate the relative performance of the two estimation techniques. In addition, certain other aspects central to practical implementation are highlighted. These include the effect of various computers on the efficiency of the code, as well as the relative merits of numerical and analytical generation of gradient information. Broadly speaking, NLFIML appears competitive in cost and superior in statistical properties to NL3SLS.

ReportDOI
TL;DR: In this paper, the authors investigated the effect of six factors on occupational earnings inequality across all occupations in their sample and across occupations in five major Census subgroups Those six factors are: differences in tasks, different levels of efficiency, institutional factors, time worked, the demand for labor and discrimination.
Abstract: In this paper, we will investigate the effect of six factors on occupational earnings inequality across all occupations in our sample and across occupations in five major Census subgroups Those six factors are: differences in tasks, different levels of efficiency, institutional factors, time worked, the demand for labor and discrimination Age and schooling will receive primary attention in our work and it will be shown that they are important determinants of earnings inequality among professional and clerical occupations but not among skilled, semi-skilled or unskilled occupations Ability is also hypothesized as an important factor, but no measure of ability is provided in our sample Differences in time worked and labor demand conditions, as measured by industrial and urban-rural mix, will also be analyzed, and their effect on earnings inequality is strong in most of the occupational subsamples Differences in the race and sex composition of occupations do not appear to be significant factors in occupational earnings inequality, and the explanation offered is that discrimination takes the form of occupational segregation rather than differences in pay for similar work In the conclusion a sketch of a "structural" theory of income distribution is proposed to account for our results

Posted Content
TL;DR: This survey of recent research in health economics focuses on studies that have appeared since 1971 or are in progress and four topics pertaining to the supply side of the medical care market are covered.
Abstract: In this survey of recent research in health economics, I concentrate on studies that have appeared since 1971 or are in progress. The survey reflects in part my own research interests and biases and is not meant to be comprehensive. Four topics are covered: (1) demand for adults' health and medical care; (2) effects of health on labor supply and wage rates; (3) demand for children's health and medical care and (4) selected topics pertaining to the supply side of the medical care market.

ReportDOI
TL;DR: In this paper, the authors explore the structure of optimal income taxation/redistribution in an economy where the welfare of individuals depends in part on relative after-tax consumption, i.e., they specify individual welfare as a function of absolute and relative after tax consumption, with diminishing marginal utility to each.
Abstract: The purpose of the present note is to explore the structure of optimal income taxation/redistribution in an economy where the welfare of individuals depends in part on relative after-tax consumption, i.e., we specify individual welfare as a function of absolute and relative after-tax consumption, with diminishing marginal utility to each. With such a specification, of course, an additional incentive for income redistribution from wealthy to poor citizens is created and the logical impossibility of increasing tax rates to the point where disincentive effects actually reduce tax revenues is potentially removed. The analysis highlights the importance of the marginal valuation placed on upward social mobility in various ranges of the income distribution and its interaction with the elasticity of the marginal utility of consumption; of course, "labor supply" elasticities, the form of the social welfare function, and the skill distribution continue to play an important role.

Posted Content
TL;DR: In this paper, the authors explore some of the special or general benefits that might explain the widespread pursuit of national health insurance in the world and present an exploration of some of these benefits.
Abstract: This paper contains an exploration of some of the special or general benefits that might explain the widespread pursuit of national health insurance follows. The primary purpose of this inquiry has been to attempt to explain the popularity of national health insurance around the world.