Showing papers in "The Review of Economics and Statistics in 1995"
TL;DR: In this article, a hazard duration function for more than 12,000 individual establishments in U.S. manufacturing started in 1976 by tracking their subsequent performance over a ten-year period.
Abstract: A limitation of Audretsch's 1991 study of new-firm survival was the level of aggregation to industries. This precluded linking establishment-specific characteristics, such as organizational structure and size, to post-entry performance. The purpose of this paper is to relate the post-entry performance of individual establishments not only to their technological and market structure environments, but also to establishment-specific characteristics. We do this by estimating a hazard duration function for more than 12,000 individual establishments in U.S. manufacturing started in 1976 by tracking their subsequent performance over a ten-year period. We conclude that establishment-specific characteristics, which Audretsch was not able to capture in his earlier study, play an important role in shaping the exposure to risk confronting new establishments. Copyright 1995 by MIT Press.
972 citations
TL;DR: The authors conducted a systematic study of the characteristics of the universities and academic researchers that seem to have contributed most to industrial innovation and how such academic research has been funded, based on data obtained from 66 firms in seven major manufacturing industries and from over 200 academic researchers.
Abstract: There has been no systematic study of the characteristics of the universities and academic researchers that seem to have contributed most to industrial innovation. Nor do we know how such academic research has been funded. This paper, based on data obtained from 66 firms in seven major manufacturing industries and from over 200 academic researchers, sheds new light on the sources, characteristics, and financing of academic research underlying industrial innovation. The findings should be of interest to economists concerned with technological change and to policy makers attempting to increase the economic payoff from the nation's academic research.
912 citations
TL;DR: Using data from two longitudinal surveys of American high school seniors, the authors show that basic cognitive skills had a larger impact on wages for twenty-four-year-old men and women in 1986 than in 1978.
Abstract: Using data from two longitudinal surveys of American high school seniors, the authors show that basic cognitive skills had a larger impact on wages for twenty-four-year-old men and women in 1986 than in 1978. For women, the increase in the return to cognitive skills between 1978 and 1986 accounts for all of the increase in the wage premium associated with postsecondary education. The authors also show that high school seniors' mastery of basic cognitive skills had a much smaller impact on wages two years after graduation than on wages six years after graduation. Copyright 1995 by MIT Press.
900 citations
TL;DR: In this paper, the authors identify the characteristics that make individual U.S. banks more likely to fail or be acquired and use bank-specific information to estimate competing-risks hazard models with time-varying covariates.
Abstract: This paper seeks to identify the characteristics that make individual U.S. banks more likely to fail or be acquired. We use bank-specific information to estimate competing-risks hazard models with time-varying covariates. We use alternative measures of productive efficiency to proxy management quality, and find that inefficiency increases the risk of failure while reducing the probability of a bank's being acquired. Finally, we show that the closer to insolvency a bank is (as reflected by a low equity-to-assets ratio) the more likely is its acquisition.
703 citations
TL;DR: The authors developed a negative binomial model of recreation demand that corrects for both truncation and endogenous stratification to recover the demand associated with the general population, not just the users of the site.
Abstract: This paper develops a negative binomial model of recreation demand that corrects for both truncation and endogenous stratification. This approach recovers the demand associated with the general population, not just the users of the site. This model demonstrates the importance of the joint nature of the population's latent demand for trips and the consumer surplus associated with those trips. The empirical results provide an estimate of the willingness-to-pay by Washington state residents for hiking opportunities in the Cascade Mountain Range. These results are used to forecast total trips and willingness-to-pay over the next forty years. Copyright 1995 by MIT Press.
403 citations
TL;DR: This article examined the determinants of remittances from international migration using household data from El Salvador and Nicaragua and found that the difference in the behavioral coefficients and the self-selection bias of those who remit out of the pool of emigrants between the two countries was explained by differences in the selfselection bias.
Abstract: I use household data from El Salvador and Nicaragua to examine the determinants of remittances from international migration. Nearly twice as many households in San Salvador the capital of El Salvador receive remittances from relatives abroad than do households in Managua the capital of Nicaragua and of those who receive remittances the average remittances received in San Salvador is over double that in Managua--$119/month to $45/month....The difference is explained by differences in the behavioral coefficients and by differences in the self-selection bias of those who remit out of the pool of emigrants between the two countries. (EXCERPT)
386 citations
TL;DR: In this paper, the authors investigate why children in low-income countries often delay primary school enrollment, despite the prediction of human capital theory that schooling will begin at the earliest possible age.
Abstract: This paper investigates why children in low income countries often delay primary school enrollment, despite the prediction of human capital theory that schooling will begin at the earliest possible age. We explore several explanations for delayed enrollment, but focus on the hypothesis that delays are rational responses to early childhood malnutrition. We test these alternative hypotheses using recent data from Ghana. Our estimates, which address a number of previously ignored econometric issues, firmly support the hypothesis that early childhood malnutrition causes delayed enrollment. We find little or no support for alternative explanations based on borrowing constraints and the rationing of places in school. Copyright 1995 by MIT Press.
376 citations
TL;DR: In this article, the authors search for links between school quaity and subsequent earnings of students using data for white males from the National Longitudinal Survey of Youth (NLSSY).
Abstract: The paper searches for links between school quaity and subsequent earnings of students. Using data for white males from the National Longitudinal Survey of Youth, the paper rejects the hypothesis that workers' earnings are independent of which high school they attended. However, traditional measures of school 'quality' such as class size, teachers' salaries and teachers' level of education fail to capture these differences. This result is robust to changes in specification and subsample. The paper contrasts the results with those of D. Card and A. B. Krueger (1992) and speculates that structural changes may have weakened the link between traditional measures of school quality and student outcomes. Copyright 1995 by MIT Press.
376 citations
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TL;DR: In this paper, the characteristics of the universities and academic researchers that seem to have contributed most to industrial innovation have been studied based on data obtained from sixty-six firms in seven major manufacturing industries and from over two hundred academic researchers.
Abstract: There has been no systematic study of the characteristics of the universities and academic researchers that seem to have contributed most to industrial innovation. Nor do we know how such academic research has been funded. This paper, based on data obtained from sixty-six firms in seven major manufacturing industries and from over two hundred academic researchers, sheds new light on the sources, characteristics, and financing of academic research underlying industrial innovation. The findings should be of interest to economists concerned with technological change and to policymakers attempting to increase the economic payoff from the nation's academic research. Copyright 1995 by MIT Press.
353 citations
TL;DR: The results are that only the LOTUS file compatibility standard is significant in explaining price variations and it issignificant in both the spreadsheet and database management system markets.
Abstract: This paper is an empirical study of the value of four file compatibility standards for transferring data in the personal computer software market. The results are that only the LOTUS file compatibility standard is significant in explaining price variations and it is significant in both the spreadsheet and database management system markets. This supports the hypothesis that the personal computer software market exhibits complementary network externalities. Copyright 1995 by MIT Press.
196 citations
TL;DR: In this article, the cumulative effect of campaign contributions over two time periods was analyzed and the importance of the timing of contributions for legislative voting behavior was analyzed for roll call votes on price supports and quotas for various farm commodities in 1981 and 1985.
Abstract: Theoretical and empirical studies do not address whether campaign contributions from more than one election cycle are important for congressional voting behavior Further, they do not address whether campaign contributions from different periods have different effects on legislative voting behavior This paper analyzes the cumulative effect of campaign contributions over two time periods Moreover, this paper studies the importance of the timing of contributions for legislative voting behavior Ten roll call votes on price supports and quotas for various farm commodities in 1981 and 1985 are analyzed Most of the estimated contribution coefficients are statistically significant The results show that without campaign contributions farm interest would have lost in five of the seven votes that were won Moreover, contributions that were given at approximately the same time as the vote have a larger impact on voting behavior than contributions that the legislator received one or two years prior to the vote Copyright 1995 by MIT Press
TL;DR: This article examined evidence on bias in OLS estimates of the economic return to schooling and found an upward bias of roughly 40 percent in the OLS estimate ignoring ability, which is consistent with evidence from other recent research using different statistical experiments.
Abstract: The authors examine evidence on bias in OLS estimates of the economic return to schooling. To study omitted-ability bias, they use test scores available in the National Longitudinal Survey of Youth as proxies for ability allowing for measurement error in these test scores. The authors also explore biases from the endogeneity of schooling or experience, or measurement error in these variables. In their data, OLS estimation including test scores appears to be appropriate and indicates an upward bias of roughly 40 percent in the OLS estimate ignoring ability. This contrasts with evidence from other recent research using different statistical experiments to purge schooling of its correlation with the wage equation error. Copyright 1995 by MIT Press.
TL;DR: The authors calculated the Morishima elasticity of substitution between capital and labor and found no excessive variability, nor any evidence of the time-series/cross-section dichotomy between cross-sectional and time series studies.
Abstract: Over the last twenty years, many studies have been made of the elasticity of substitution between capital and labor. The reported estimates are highly variable, and reveal an apparent dichotomy between cross-sectional and time-series studies. The former suggest that capital and energy are substitutes while the latter suggest the converse. All these studies reported Allen partial elasticities of substitution. We suggest that the Morishima elasticity may be a more useful measure for the issues of concern to capital energy substitution. We calculate the Morishima elasticities from parameters estimated in a selection of earlier studies and find no excessive variability, nor any evidence of the time-series/cross-section dichotomy. Capital and energy are Morishima substitutes. Copyright 1995 by MIT Press.
TL;DR: The authors analyzes model entry and exit decisions in the case of the personal computer market and finds that differences in new model spatial location between incumbents and entrants are significant in the probability of model's exit.
Abstract: Entry and exit literature focuses almost exclusively on firm-level decisions, leaving out an important aspect of firm behavior: whether to introduce new models while the firm produces similar goods, and where to locate them in the existing product space, taking into account own models and the possibility of new entry. This paper analyzes model entry and exit decisions in the case of the personal computer market. Differences in new model spatial location between incumbents and entrants are found, while both model over- pricing and firm reputation are found to be significant in the probability of model's exit estimation.
TL;DR: It is shown that schooling has a relatively substantial positive effect on the odds that men and women ages twenty-five and older quit smoking.
Abstract: The effect of schooling on the odds that smokers quit smoking is estimated. Particular attention is given to the possible importance of unobservables in measuring the schooling effect. It is shown that schooling has a relatively substantial positive effect on the odds that men and women ages twenty-five and older quit smoking. Copyright 1995 by MIT Press.
TL;DR: In this article, the marginal value of characteristics was used to construct bounds on the exact hedonic price index, and the authors showed that when prices are above marginal costs, then their bounds still apply but the value of the characteristics cannot be measured so easily from a hedonistic regression.
Abstract: Using the marginal value of characteristics, the author shows how to construct bounds on the exact hedonic price index. When prices are above marginal costs, then his bounds still apply but the value of characteristics cannot be measured so easily from a hedonic regression. Since the price-cost markups are an omitted variable, they will bias the coefficients obtained. For a special class of utility functions, the author argues that a linear regression will still provide a measure of the marginal value of characteristics but a log-linear regression will overstate these values. Copyright 1995 by MIT Press.
TL;DR: The authors generalize the standard multinomial logit model to allow for spurious events that result from classification error and show that correcting for classification error strengthens the apparent effect of unemployment insurance on spell durations.
Abstract: This paper utilizes validation data on survey response error in the Current Population Survey to generalize the standard multinomial logit model to allow for spurious events that result from classification error. The authors' basic approach could be used with other stochastic models of discrete events as well. They illustrate their algorithm by studying the effect of unemployment insurance on transitions from unemployment to employment and on labor-force withdrawal. Their results confirm earlier work suggesting that unemployment insurance lengthens unemployment spells and show that correcting for classification error strengthens the apparent effect of unemployment insurance on spell durations. Copyright 1995 by MIT Press.
TL;DR: In this paper, mean and variance measures of health information about cholesterol and saturated fat are included in a demand system for fats and oils, and a Bayesian model of health risk belief and consumer awareness surveys are the basis for computing these measures.
Abstract: Mean and variance measures of health information about cholesterol and saturated fat are included in a demand system for fats and oils. A Bayesian model of health risk belief and consumer awareness surveys are the basis for computing these measures. The empirical demand model shows that health information has resulted in significant increases in consumption for corn, cottonseed, and soybean oils and decreased consumption for butter and lard. The predicted demand effects based on the Bayesian information model are more reasonable than predictions from using either a time trend or a simple cumulative cholesterol information index. Copyright 1995 by MIT Press.
TL;DR: In this paper, the authors propose a maximum likelihood method for estimating the first and second moments of the fixed and temporal components of real estate returns that relies upon relatively small samples, and find a consistent bias in the index resulting from repeat sales regressions which may be eliminated through simple methods.
Abstract: This paper separates the components of capital appreciation returns in an asset market into fixed and stochastic portions. It proposes a control for the problem of fixed components in the capital appreciation return used in transactions-based return estimates. We find a consistent bias in the index resulting from repeat sales regressions which may be eliminated through simple methods. The sign and magnitude of the bias, as well as its systematic variation across property, suggest that it is caused by incremental home improvements, as well as by price risk. We propose a maximum likelihood method for estimating the first and second moments of the fixed and temporal components of real estate returns that relies upon relatively small samples. Copyright 1995 by MIT Press.
TL;DR: In this article, the tax price elasticity of demand for welfare has been analyzed for the United States for a panel from 1982-88 using new models for the determination of the recipiency ratio (the tax price) and composite neighbors.
Abstract: Fiscal federalism theory predicts that states will behave strategically in welfare programs because voter demand for welfare is sensitive to tax price, while the tax price itself changes because of welfare-induced migration. This paper tests these propositions on AFDC in the United States for a panel from 1982-88 using new models for the determination of the recipiency ratio (the tax price) and composite neighbors. The data do not support any substantial tax price elasticity of demand for welfare. Estimates of migration effects on tax price are found to be sensitive to specification. Copyright 1995 by MIT Press.
TL;DR: The authors developed a simple time series model of emigration and applied it to data for emigration from the United Kingdom, 1870-1913, and found that both wage rates and employment rates in the sending and in the receiving countries influenced fluctuations in emigration.
Abstract: This paper develops a simple time series model of emigration and applies it to data for emigration from the United Kingdom, 1870-1913. The model is derived from a macroeconomic analysis of the migration decision and provides a specific functional form and dynamic structure. It encompasses and explains many of the empirical findings of earlier research on the determinants of emigration over this historical period. The results support the model strongly in most respects. Both wage rates and employment rates in the sending and in the receiving countries influenced fluctuations in emigration. The short-run fluctuations were driven largely by variations in employment rates while the long-run level of emigration was determined largely by the relative wage.
TL;DR: This paper showed that while high income elasticities of export demand are detected using a conventional simultaneous model, this may conceal the presence of important product differentiation and product innovation effects on export demand.
Abstract: A central question in studies of the Asian newly industrialised economies has been whether the extremely rapid export growth of these countries can be viewed as primarily a phenomenon of income-elastic export demand or of fast-expanding export supply in the face of highly price-elastic demand. This paper provides evidence to show that, while high income elasticities of export demand are detected using a conventional simultaneous model, this may conceal the presence of important product differentiation and product innovation effects on export demand. These are then captured using a measure of the total resource base. Copyright 1995 by MIT Press.
TL;DR: In this paper, the authors develop nonparametric tests of orthogonality based on signs and signed ranks which are proved to reject at their nominal levels over a wide class of models admitting feedback.
Abstract: The hypothesis that a variable is independent of past information, such as its own past and past realizations of other observable variables, is a frequent implication of economic theory. Yet standard regression-based tests of orthogonality may not have the correct level if there is feedback from innovations to future values of the regressors. In this paper we develop nonparametric tests of orthogonality based on signs and signed ranks which are proved to reject at their nominal levels over a wide class of models admitting feedback. The tests are robust to problems of non-normality and heteroskedasticity. Further, in simulation studies of two specifications of feedback-a rational expectations model considered by Mankiw and Shapiro, and the random walk model-we find that the nonparametric tests display remarkable power. The paper concludes with an application which assesses the efficiency of survey data on interest rate expectations previously studied by Friedman. Copyright 1995 by MIT Press.
TL;DR: In this article, a nonparametric test of demand theory, determining the consistency of price-expenditure data with the generalized axiom of revealed preference, is applied to household macroeconomic data for the first time.
Abstract: A nonparametric test of demand theory, determining the consistency of price-expenditure data with the generalized axiom of revealed preference, is applied to household macroeconomic data for the first time. The fraction of consumption bundle comparisons that violate the generalized axiom of revealed preference is proposed as a summary statistic to indicate the consistency of a data set with revealed preference axioms. This violation rate is calculated among consumption pairs with similar expenditures to increase the power of the test. The results suggest that similar households' consumption choices and budget constraints are generally consistent with the joint hypotheses of optimizing behavior and common preferences. Copyright 1995 by MIT Press.
TL;DR: In this paper, a structural equation system was used to quantify the degree of oligopsony power for sawlog and pulpwood inputs respectively, and showed that pulpwood markets are more oligophsonistic than sawlog markets, though both perform closer to perfect competition than monopsony.
Abstract: Empirical estimation of input market power hindered by problems in measuring an input's value of marginal product (VMP). By estimating a variable profit function system, however, one can infer a factor's VMP through its shadow price. This technique is used here to specify a structural equation system, which is estimated using time series data for the U.S. sawmilling and paper industries, to empirically measure the degree of oligopsony power for sawlog and pulpwood inputs respectively. Results evaluated at sample means indicate that pulpwood markets are more oligopsonistic than sawlog markets, though both perform closer to perfect competition than monopsony. Time trends for market power differ for each product and perfect competition cannot be rejected for sawlogs in later years. Copyright 1995 by MIT Press.
TL;DR: In this article, a dynamic demand model for liquor in the United States using panel data from 43 states is presented, showing that the long-run price elasticity is in the -0.7 range.
Abstract: This paper estimates a dynamic demand model for liquor in the United States using panel data from 43 states. Because of taste changes over time and between states in liquor consumption, purely time series or cross sectional studies do not elicit reliable price elasticity estimates. This study makes the case for pooling and shows how one can control for individual state effects and endogeneity of the regressors using estimators suited for a dynamic demand model. Our results indicate that the long-run price elasticity is in the -0.7 range. The findings also support strong habit persistence, a small positive income elasticity, and very weak evidence of bootlegging from adjoining states. The magnitude of the long-run price effect suggests that sin taxes can serve not only as an important income source but also as a significant deterrent effect. Copyright 1995 by MIT Press.
TL;DR: In this article, the authors apply the VAR methodology developed by John Y. Campbell and Robert J. Shiller (1987) to examine the predictive power of the spread between the long-term or multi-period, interest rate and the one-period inflation rate and test the Fisher hypothesis under rational expectations and constant ex ante real rates.
Abstract: According to the Fisher hypothesis, an increase (decrease) in the spread between the long-term, or multiperiod, interest rate and the one-period inflation rate signals an increase (decrease) in future one-period inflation. This implication is tested on data from thirteen OECD countries for the period 1962-93. Integration and cointegration techniques are applied to examine the time-series properties of interest rates and inflation rates, and the VAR methodology developed by John Y. Campbell and Robert J. Shiller (1987) is applied to examine the predictive power of the spread as well as in testing the Fisher hypothesis under rational expectations and constant ex ante real rates. Copyright 1995 by MIT Press.
TL;DR: The authors showed that hostile takeovers result in reductions of extramarginal wage payments to more-tenured workers, mostly through cutbacks in senior positions at firms with relatively steep wage profiles.
Abstract: Hostile takeovers may have significant implications for long-term
employment contracts if they facilitate the opportunistic expropriation of
extramarginal wage payments. We test the expropriation hypothesis by studying
the relationship between proxies for extramarginal wage payments and
subsequent hostile takeover activity. This paper improves on existing
research by using firm- and establishment-level data from a salary survey of
employers. In addition, we observe characteristics of wage and employment
structures both before and after the occurrence of a hostile takeover and
hence can see whether the data are consistent with reductions in extramarginal
wage payments following such takeovers. Results from this ex post experiment
provide evidence consistent with the hypothesis that hostile takeovers result
in reductions of extramarginal wage payments to more-tenured workers, mostly
through cutbacks in senior positions at firms with relatively steep wage
profiles.
TL;DR: In this paper, a metric based on an estimate of the fraction of expenditure wasted in maximizing utility if all consumers in the sample share the same utility function is proposed, which increases in size with increases in the proportion of observations having different tastes and with increasing differences in tastes.
Abstract: The author develops a method of hypothesis testing for revealed preference tests. This method is particularly well suited to tests of commonality of tastes or tests of preference stability. He devises a metric based on an estimate of the fraction of expenditure wasted in maximizing utility if all consumers in the sample share the same utility function. This metric increases in size with increases in the proportion of observations having different tastes and with increasing differences in tastes. The author proposes bootstrap methods for estimating the distribution of the test statistic. Copyright 1995 by MIT Press.
TL;DR: In this paper, the authors used the short run generalized Leontief cost function to estimate the total factor productivities for 28 Korean manufacturing sectors jointly with markups, scale economies, and the capacity utilization rate.
Abstract: Total factor productivities for 28 Korean manufacturing sectors were estimated jointly with markups, scale economies, and the capacity utilization rate using the short-run generalized Leontief cost function. Concavity conditions necessary for the cost function to be well-behaved and consistent with a firm's optimizing behavior were imposed on the estimation by way of Bayesian inference. The study finds: (1) the superiority of the short-run equilibrium model over the long-run model and of the short-run generalized Leontief cost function over the translog cost function; (2) market imperfection; (3) the existence of scale economies; and (4) biases in the traditional TFP measures. The study also suggests that a rapid growth of output is possible with negative TFP growth. Copyright 1995 by MIT Press.