Showing papers in "The Review of Economics and Statistics in 1991"
TL;DR: In this article, the authors analyzed three interrelated aspects of U.S. multinational corporation activity: the ability to shift profits from high-tax countries to low tax countries, the impact of host country taxes and tariffs on the distribution of real capital, and the influence of these policies on international trade patterns of the United States and host countries.
Abstract: Three interrelated aspects of U.S. multinational corporation activity are analyzed here: the ability to shift profits from high-tax countries to low-tax countries; the impact of host country taxes and tariffs on the distribution of real capital; and the influence of these policies on international trade patterns of the United States and host countries. The cross-sectional empirical analysis indicates that the observed pattern of reported profits in high and low-tax countries is consistent with income shifting behavior and that real investment responds to host country effective tax rates and tariffs. The United States appears both to import more from and export more to low-tax countries where MNC investment is greater, but this bilateral focus must be amplified to consider multilateral effects if trade benefits are to be projected. Copyright 1991 by MIT Press.
880 citations
TL;DR: In this article, the survival rates of over 11,000 firms established in 1976 are compared across manufacturing industries, and the variation in ten-year survival rates across industries is hypothesized to be the result of differences in the underlying technological regime and industry-specific characteristics, especially the extent of scale economies and capital intensity.
Abstract: The survival rates of over 11,000 firms established in 1976 are compared across manufacturing industries. The variation in ten-year survival rates across industries is hypothesized to be the result of differences in the underlying technological regime and industry-specific characteristics, especially the extent of scale economies and capital intensity. Based on 295 four-digit standard industrial classification industries, new-firm survival is found to be promoted by the extent of small-firm innovative activity. The existence of substantial scale economies and a high capital-labor ratio tends to lower the likelihood of firm survival. However, these results apparently vary considerably with the time interval considered. Market concentration is found to promote short-run survival, while it has no impact on long-run survival. Copyright 1991 by MIT Press.
860 citations
TL;DR: In this article, the authors examined the effect of relative technological capabilities on Japanese direct investment into the United States by looking simultaneously at industry conditions in the two markets and proposed a negative binomial regression model to estimate the effects of R&D capability and industry structure on Japanese entries across 297 industries.
Abstract: This article examines the effect of relative technological capabilities on Japanese direct investment into the United States by looking simultaneously at industry conditions in the two markets. A negative binomial regression model is specified to estimate the effects of R & D capability and industry structure on a count measure of Japanese entries across 297 industries. The results indicate that Japanese direct investment in the United States is drawn to industries intensive in R & D expenditures summed across both countries; voluntary restraints on Japanese exports encourage direct investment. When the entries are disaggregated by mode (e.g., new plant or acquisition), there is a significant indication that joint ventures are used for the sourcing and sharing of U.S. technological capabilities. Copyright 1991 by MIT Press.
828 citations
TL;DR: In this paper, a conditional logit model of the location decision of foreign firms investing in manufacturing facilities in the United States is developed and estimated, and the results for 1981-83 indicate that states with higher per capita incomes and higher densities of manufacturing activity attracted relatively more foreign direct investment.
Abstract: A conditional logit model of the location decision of foreign firms investing in manufacturing facilities in the United States is developed and estimated. The authors results for 1981-83 indicate that states with higher per capita incomes and higher densities of manufacturing activity attracted relatively more foreign direct investment. In addition, higher wages deterred foreign direct investment, while higher unemployment rates attracted it. Surprisingly, higher unionization rates were associated with increased foreign direct investment. Overall, higher taxes deterred foreign direct investment; however, more extensive transportation infrastructures and larger promotional expenditures were associated with increased foreign direct investment. Copyright 1991 by MIT Press.
614 citations
TL;DR: Quigley et al. as mentioned in this paper presented a preliminary analysis of the dynamics of real-estate prices and the BRADFORD case, which they called the "DYNAMICS OF REAL ESTATE PRICES".
Abstract: Institute of University of I Business and V California at I Economic Research Berkeley FISHER CENTER FOR REAL ESTATE AND URBAN ECONOMICS p WORKING PAPER SERIES WORKING PAPER NO. 88-151 THE DYNAMICS OF REAL ESTATE PRICES” BY These papers are preliminary in nature: their purpose is to i?,E$Z‘£i.d?§2f§iZ?e”£ey BRADFORD CASE are nottobccited ortluotedin JOHN Mq QUIGLEY any publication without the ex- press permission of the author. WALTER A. HAAS SCHOOL OF BUSINESS
380 citations
TL;DR: In this paper, the authors estimate translog variable cost functions for 147 American doctorate granting universities, accounting for three major products of these institutions: undergraduate and graduate instruction, and research.
Abstract: This study estimates translog variable cost functions for 147 American doctorate granting universities, accounting for three major products of these institutions: undergraduate and graduate instruction, and research. Explicit measures of research output and quality are employed. Evidence is found for considerable economies of scale for the average institution, as well as economies of scope related to the joint production of undergraduate and graduate instruction. The public or private ownership of an institution is not significant for the explanation of variable costs. The intensity of state regulation in the public sector does not have a significant impact on production efficiency. Copyright 1991 by MIT Press.
269 citations
TL;DR: This paper found that training time is inversely related to overqualification and that overqualified workers are less satisfied with their jobs and are more likely to quit, which may explain why such seeming mismatches occur and may in fact be optimal.
Abstract: Using a new data set, this paper gives evidence in support of the intuitive notion that overqualified workers are less satisfied with their jobs and are more likely to quit. However, training time is inversely related to overqualification, which suggests why such seeming mismatches occur and may in fact be optimal. Copyright 1991 by MIT Press.
266 citations
TL;DR: The results of a numerical survey of smoking risks and behavior are analyzed in this article, showing that risk perceptions are greater as one moves to younger age cohorts where overall lung cancer risks are substantially overestimated.
Abstract: The results of a numerical survey of smoking risks and behavior are analyzed. Smoking risk perceptions follow the expected patterns given age differences in risk information acquired and differences in information associated with smoking status. Risk perceptions are greater as one moves to younger age cohorts where overall lung cancer risks are substantially overestimated. These risk perceptions in turn have a negative effect on smoking decisions, where younger individuals behave no differently in terms of the manner in which they incorporate risk perceptions into their smoking decisions. Copyright 1991 by MIT Press.
195 citations
TL;DR: This article reported evidence of sheepskin effects among women and minority males, and demonstrate that they are somewhat smaller for lower diploma years, but larger for higher diploma years than those of white males.
Abstract: Recent confirmation of sheepskin effects in the returns to education for prime age white males has been taken as evidence of screening or signaling in the labor market The authors report evidence of sheepskin effects among women and minority males, and demonstrate that they are somewhat smaller for lower diploma years, but larger for higher diploma years, than those of white males These are among the first broad-based results confirming the frequent contention derived from signaling models that minorities have smaller returns to low productivity signals, but larger returns to high productivity signals Copyright 1991 by MIT Press
195 citations
TL;DR: In this article, the elasticity of record sales to voice quality was found to be significantly greater than zero but less than one, which counters two opposing but frequently expressed views concerning the market for popular music: the consumers of popular music have no recognition of or appreciation for "quality" or "ability" in singing.
Abstract: This paper offers empirical evidence which counters two opposing but frequently expressed views concerning the market for popular music. The first view is that the consumers of popular music have no recognition of or appreciation for "quality" or "ability" in singing. The second is that the market is an example of the "Superstar Phenomenon," in the Marshall-Rosen sense, wherein small differences in ability are magnified into disproportional levels of success. Using an external measure of "voice quality," provided by the literature on voice, the estimated elasticity of record sales to voice quality is found to be significantly greater than zero but less than one. Copyright 1991 by MIT Press.
194 citations
TL;DR: In this article, the authors estimate the probability that a price fixing conspiracy will be indicated by federal authorities to be at most between 0.13 and 0.17 in a given year.
Abstract: The authors estimate the probability that a price fixing conspiracy will be indicated by federal authorities to be at most between 0.13 and 0.17 in a given year. The authors' estimate is based on conspiracy durations calculated from data reported for a large sample of Department of Justice cases, and a statistical birth and death process model describing the onset and duration of conspiracies. Copyright 1991 by MIT Press.
TL;DR: This article found that males who participated in intercollegiate athletics are estimated to receive 4 percent higher annual incomes than similar nonathletes and no such income premium associated with college athletics is revealed among females.
Abstract: Males who participated in intercollegiate athletics are estimated to receive 4 percent higher annual incomes than similar nonathletes. No such income premium associated with college athletics is revealed among females. Both male and female athletes who attended colleges and universities in the early 1970s had higher graduation rates than other students. Since the models used to estimate income and graduation differentials included many measurable determinants of labor market and academic outcomes, these findings suggest that athletic participation may enhance the development of discipline, confidence, motivation, a competitive spirit, or other subjective traits that encourage success. Copyright 1991 by MIT Press.
TL;DR: In this article, an index of diversification suitable for manufacturing plants and firms is defined as a function of product number, distribution, and dissimilarity, and a novel feature of the index is its continuous treatment of product heterogeneity.
Abstract: An index of diversification suitable for manufacturing plants and firms is defined as a function of product number, distribution, and dissimilarity. A novel feature of the index is its continuous treatment of product heterogeneity. Using "Census of Manufactures" data files, the index is constructed for each establishment and each enterprise surveyed in the 1963-1982 censuses. Results are reported at the 2-digit SIC level. While quantifying the upward trend in enterprise diversification, the index reveals an ubiquitous and persistent decline in establishment diversification. Over time, enterprises are shifting toward a more diverse portfolio of increasingly homogeneous plants. Technical economies of scope appear to play little role in explaining the measured increase in enterprise diversification. Copyright 1991 by MIT Press.
TL;DR: In this paper, the authors distinguish firm size from other unobserved determinants such as job satisfaction, monitoring costs, more complex technologies and worker participation in monopoly profits, and demonstrate the persistence of the size premium.
Abstract: A positive wage-firm size relationship is well documented in the empirical literature in industrial organization and labor economics. Firm size seems to proxy various unobserved determinants such as job satisfaction, monitoring costs, more complex technologies and worker participation in monopoly profits. It is generally argued that, the greater the possibility of controlling for these latent factors, the less likely that a significant size effect will appear. This paper attempts to distinguish firm size from other wage determinants for a rich data source for West Germany and demonstrates the persistence of the size premium.
TL;DR: In this paper, the stability of interest and income elasticities of money demand in the United States was examined using non-stationary data, and a stable relationship between M1 velocity and various measures of interest rates that proxy the opportunity cost of holding money balances.
Abstract: Econometric techniques designed to accommodate nonstationary data are used to reexamine the stability of interest and income elasticities of money demand in the United States. Estimates based on postwar monthly data reveal a stable relationship between M1 velocity and various measures of interest rates that proxy the opportunity cost of holding money balances. Tests for the existence of cointegration and methods used to estimate the income and interest elasticities are based on procedures prescribed by Soren Johansen (1988). Corresponding error correction estimates offer insight as to the dynamics of the process that maintains the equilibrium relation between velocity and interest rates. Copyright 1991 by MIT Press.
TL;DR: In this paper, the authors used survey data on labor union coverage at the firm level to examine union effects on the profitability of 705 U.S. companies during the 1970s.
Abstract: This paper utilizes unique survey data on labor union coverage at the firm level to examine union effects on the profitability of 705 U.S. companies during the 1970s. Market value and earnings are estimated to be about 10-15 percent lower in an average unionized company than in a nonunion company, following extensive control for firm and industry characteristics. Deleterious union effects on firm profitability are sizable throughout the 1972-80 period, but vary considerably across industries. The relatively poor profit performance of unionized companies may help explain the recent decline in U.S. union membership. The author thanks the W.E. Upjohn Institute for Employment Research for financial support; Elizabeth Gregory for assistance with the union coverage survey; Zvi Griliches for providing access to the RD Donald Deere, Terry Seaks, and anonymous referees for helpful suggestions; and seminar participants at Connecticut, Florida State, Harvard, Texas A&M, and William and Mary for comments on earlier versions of this research.
TL;DR: In this article, two types of moral hazard have been determined: self-prevention activities affecting probabilities of accidents and the agent's activities whenever the accident occurs, and the authors' objective consists of presenting an empirical measure of the significance of this second type in the workers' compensation market.
Abstract: Two types of moral hazard have been determined The first type is related to self-prevention activities affecting probabilities of accidents The second type relates to the agent's activities whenever the accident occurs The authors' objective consists of presenting an empirical measure of the significance of this second type of moral hazard in the workers' compensation market The main challenge in isolating moral hazard consists of dividing into two parts the total variation in recovery time with respect to changes in insurance coverage: (1) the variation of consumption corresponding to a given level of information; and (2) the variation of consumption due to greater asymmetrical information The methodology used in this study separates these two variations Copyright 1991 by MIT Press
TL;DR: In this article, the authors reexamine duration dependence in U.S. business cycles using parametric hazard models and provide statistically significant evidence of positive duration dependence for expansions before World War II and contractions after World War 42.
Abstract: This paper reexamines duration dependence in U.S. business cycles using parametric hazard models. Positive duration dependence would indicate that expansions or contractions are more likely to end as they become "older." This paper provides statistically significant evidence of positive duration dependence for expansions before World War II and contractions after World War II. The evidence is stronger than in earlier research utilizing nonparametric techniques, because certain nonparametric techniques have low statistical power against the type of duration dependence found in this paper. Evidence is also presented suggesting that expansions became longer, on average, after World War II, while contractions became shorter. Copyright 1991 by MIT Press.
TL;DR: In this paper, an econometric technique is developed to estimate utility functions based on survey data on risk-dollar trade-offs for minor health effects, and empirical tests indicate that for all but one of the temporary health effects considered, consumers treat injuries as tantamount to a drop in income, implying that the health impact does not alter the structure of the utility function in a fundamental way.
Abstract: Surveys of individual's risk-dollar trade-offs illuminate not only the local trade-off rates, but also can be used to address more fundamental questions about the structure of utility functions. This largely unexplored empirical area is investigated by developing an econometric technique to estimate utility functions based on survey data on risk-dollar trade-offs for minor health effects. The empirical tests indicate that for all but one of the temporary health effects considered, consumers treat injuries as tantamount to a drop in income, implying that the health impact does not alter the structure of the utility function in a fundamental way. Copyright 1991 by MIT Press.
TL;DR: The relationship between Japanese exports to the United States and distributional activities of Japanese affiliates in the U.S. wholesale trade sector was examined by using a sample of forty-four three-digit Japanese exporting industries matched to U. S. industries as mentioned in this paper.
Abstract: The relationship between Japanese exports to the United States and distributional activities of Japanese affiliates in the U.S. wholesale trade sector is examined by using a sample of forty-four three-digit Japanese exporting industries matched to U.S. industries. The statistical analysis provides evidence supporting the hypothesis that Japanese direct investment in distribution has strongly promoted Japanese exports to the U.S. markets. Copyright 1991 by MIT Press.
TL;DR: In this paper, the authors investigated the structure/conduct/performance relationship in retail deposit markets and found that strategic conduct is the norm in MMDA and in three-and six-month CD markets.
Abstract: This study investigates the structure/conduct/performance relationship in retail deposit markets. The study explicitly incorporates conduct as the link between structure and performance in local deposit markets. It attempts to determine whether banks typically behave competitively or strategically, and whether their conduct is influenced by market concentration. The empirical investigation is guided by an equilibrium model of a retail deposit market. The model is applied to regression equations for local (MSA) MMDA and three- and six-month CD rates. The empirical results indicate that strategic conduct is the norm in MMDA and in three- and six-month CD markets. Copyright 1991 by MIT Press.
TL;DR: The authors used household level BLS Interview Panel data to test the habit hypothesis and found that the habit component is significantly different between the two data sets and much smaller in the cross-section data.
Abstract: Numerous studies have confirmed the importance of habit formation, as represented by a lagged dependent variable, in demand analysis. Although all work to date has been based on aggregate time series data, this study uses household level BLS Interview Panel data to test the habit hypothesis. An interrelated demand system for seventeen goods is estimated from cross-section data and compared with a similar system based on time series data. The results show that the habit component is significantly different between the two data sets and much smaller in the cross-section data. Habit effects, while not as large in cross-section data as time series, are still highly significant. Several explanations are offered concerning why the two sets of estimates differ. Copyright 1991 by MIT Press.
TL;DR: The authors found that using actual hours causes labor-supply estimates to be biased upwards, and that many workers are not free to vary the hours within a job, which may result in a biased labor supply model.
Abstract: Almost all labor-supply models are estimated under the assumption that workers are free to choose their hours. However, theory, casual empiricism, and survey data suggest that many workers are not free to vary the hours within a job. Consequently, labor-supply estimates based on actual hours of work may be biased. Using Canadian data on desired hours of work, the authors find that using actual hours causes labor-supply estimates to be biased upwards. Copyright 1991 by MIT Press.
TL;DR: In this article, the authors estimate the profitability of price fixing by examining the stock price reaction to federal indictments for 127 firms during 1962-1980, and hypothesize that the reaction is composed of expected legal costs, lost monopoly profits, and/or various negative "market signal" effects.
Abstract: The authors estimate the profitability of price fixing by examining the stock price reaction to federal indictments for 127 firms during 1962-1980. They hypothesize that the reaction is composed of expected legal costs, lost monopoly profits, and/or various negative "market signal" effects. The mean abnormal return over the WSJ indictment announcement date and the day before is a statistically significant --1.08%. This corresponds to a total value loss of $2.18 billion ($1982), of which only about 13% can be attributed to various legal costs (e.g., fines and damages). The $1.89 billion residual might be, in all or part, the present value of monopoly profits lost because of conspiracy dissolution. They test this and other possible explanations, and on balance find support for the lost monopoly profit interpretation. Copyright 1991 by MIT Press.
TL;DR: This paper examined income inequality in the United States over the period 1967-86 using recently developed tests for differences in Lorenz curves and found that the Lorenz dominance principle is more empirically relevant than previously thought.
Abstract: This paper examines income inequality in the Untied States over the period 1967-86 using recently developed tests for differences in Lorenz curves The authors are able to rank eighteen of nineteen annual comparisons In contrast, standard techniques are able to rank only twelve These results suggest that the Lorenz dominance principle is more empirically relevant than previously thought The tests reveal a sharp rise in US inequality between 1978 and 1982, as well as a shift toward greater inequality over the entire period The authors also examine changes in economic welfare using the joint mean-Lorenz dominance principle Copyright 1991 by MIT Press
TL;DR: This article investigated whether a systematic monetary policy response to contemporaneous commodity price shocks would have helped stabilize the postwar U.S. economy and found that responding to unexpected commodity price movements would have lowered the average rate of inflation and reduced its variability, while the path of real growth would be relatively unchanged.
Abstract: Commodity prices often provide signals about the future direction of the economy, especially inflation. It has been argued, therefore, that the information in commodity prices should be used in formulating monetary policy. This paper investigates whether a systematic monetary policy response to contemporaneous commodity price shocks would have helped stabilize the postwar U.S. economy. The authors' findings suggest that responding to unexpected commodity price movements would have lowered the average rate of inflation and reduced its variability, while the path of real growth would be relatively unchanged. Copyright 1991 by MIT Press.
TL;DR: In this article, marginal safety values are obtained from direct measurement of workers' perceived job-related accidental death rates, and wage-risk relationships are explored for several categories of workers using the hedonic price method.
Abstract: Two contributions are made toward understanding variation in marginal value of safety estimates from labor-market studies. First, marginal safety values are obtained from direct measurement of workers' perceived job-related accidental death rates. Second, wage-risk relationships are explored for several categories of workers using the hedonic price method. Statistically significant relationships found for unionized, blue collar, and blue collar-unionized workers imply marginal safety values of 1.5, 1.18, and 2.10 million dollars, respectively. Further results in this paper suggest that alternative methods are needed to measure marginal safety values for workers in other categories. Copyright 1991 by MIT Press.
TL;DR: In this article, the authors examined whether the apparent excess smoothness of consumption is the result of the ARIMA representation's implicit restrictions on low-frequency dynamics, and they constructed confidence intervals for the long-run impulse response of income in the absence of such lowfrequency restrictions.
Abstract: Under common ARIMA representations of income, the permanent-income hypothesis predicts that the volatility of consumption should be larger than the volatility of unanticipated shocks to income; this prediction is not supported by the data. The authors examine whether this apparent excess smoothness of consumption is the result of the ARIMA representation's implicit restrictions on low-frequency dynamics. By using a generalized long-memory stochastic representation, the authors construct confidence intervals for the long-run impulse response of income in the absence of such low-frequency restrictions. These intervals are quite wide and include regions in which excess smoothness vanishes. Copyright 1991 by MIT Press.
TL;DR: In this paper, the authors apply the methodology to breakfast cereals, a non-durable good, and employ maximum likelihood to estimate the hedonic price functions using data from three large supermarkets.
Abstract: Numerous studies have estimated hedonic price functions for durable goods. In this paper, the authors apply the methodology to breakfast cereals, a nondurable good. They employ maximum likelihood to estimate the hedonic price functions using data from three large supermarkets. The price function depends on characteristics that provide taste, nutrition, and convenience to consumers, and the estimates yield insights into pricing policies, consumer preferences, and consumer use of information. Copyright 1991 by MIT Press.
TL;DR: In this paper, it is argued that profit rates do not differ dramatically when capital stocks are correctly calculated to include intangible R&D and advertising capital, and the adjustments do not eliminate the wide dispersion in profit rates.
Abstract: A central question in industrial organization is why profit rates differ so dramatically across firms and industries. One of the many explanations offered for this phenomenon is the failure of conventional accounting methods to adjust for intangible capital stocks, i.e., it is argued that profit rates do not differ dramatically when capital stocks are correctly calculated to include intangible R&D and advertising capital. To test this hypothesis individual advertising capital stocks are calculated for firms in the toys, distilled beverages, cosmetics, and pharmaceuticals industries, and R&D stocks are calculated for the pharmaceuticals firms. The adjustments do not eliminate the wide dispersion in profit rates. Copyright 1991 by MIT Press.