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In discussing the adequacy of different international monetary mechanisms under varying circumstances, it seems desirable to begin with some analysis of the logical extremes. The extremes are fixed exchanges maintained by transfer of means of payment between the national monetary systems and flexible exchanges without international transfer of money. The gold standard would be an example of the first type of mechanism and the paper standard of the second, provided that both were entirely automatic. In these extreme cases there would be no money management, externally or internally. The object of both systems is to achieve and maintain equilibrium of external-internal trade. For this purpose both systems provide a balancing or compensatory mechanism by which economic change sets in motion forces of correction which restore equilibrium of external-internal trade. The gold standard system works through variation of internal prices and incomes relative to export-import prices, and the paper standard system through variation of the prices of exports and imports.

Dahl and Lochner (2012) provides some of the first causal evidence of the effects of family income on child achievement using changes in the Earned Income Tax Credit. Unfortunately, a coding error in the creation of total family income affects the first stage estimates and inflates the instrumental variable (IV) estimates. Importantly, it does not affect the reduced-form estimates or alter statistical significance of the IV estimates. This response shows that correcting this error does not alter the core findings or main message of the paper. (JEL H24, H31, I21, I38, J13) [ABSTRACT FROM AUTHOR]

This paper documents a large association between individuals' time discounting in incentivized experiments and their positions in the real-life wealth distribution derived from Danish high-quality administrative data for a large sample of middle-aged individuals. The association is stable over time, exists through the wealth distribution and remains large after controlling for education, income profile, school grades, initial wealth, parental wealth, credit constraints, demographics, risk preferences, and additional behavioral parameters. Our results suggest that savings behavior is a driver of the observed association between patience and wealth inequality as predicted by standard savings theory. (JEL C91, D15, D31, E21) [ABSTRACT FROM AUTHOR]

This paper contributes to the debate regarding trends in consumption inequality in the United States. We present a new measure of consumption inequality based on the redesigned 1999-2011 PSID. We impute consumption to the families observed before 1999 using the more comprehensive consumption data available from 1999 onward. One advantage of this procedure is in sample verification of the quality of the imputation procedure; another is that it yields a long time series (1967-2010). Consumption inequality was stable in the 1970s, as was income inequality. It increased significantly after 1980. The Great Recession was associated with a decline in consumption inequality. [ABSTRACT FROM AUTHOR]

The article presents titles of new books related economics. Books related to general economics include — "USA and Its Economic Future--A Twentieth Century Survey," by A.B. Barach and R. Mooley, "The Hidden Face of Free Enterprise--The Strange Economics of the American Businessman," by J.R. Bunting, "The Nation's Economic Objectives," edited by E.O. Edwards, "Economic Growth--An American Problem," edited by P.M. Gutmann and "The Economic System" by J.M. Kuhlman and G.S. Skinner. Books on price, income and employment include — "A Macroeconomic Theory of Workable Competition," by C.E.A. Ferguson, "Aggregation in Economic Analysis--An Introductory Survey," by H.A.J. Green, "The Demand for Physical Capital: An Application of a Wealth Model," by F.S. Hammer, "Outline of Price Theory," by A.M. Levenson and B.S. Solon "Economic Thought of Mahatma Gandhi," edited by A.S. Mathur and J.S. Mathur, "Income: Analysis and Policy," by M.H. Rose and Economic Trends and Indications," by B. Kapasi.

This paper challenges the notion that on-the-job training investments are quantitatively important for workers' welfare and argues that on-the-job training may not increase lifetime income by more than 1 percent. I argue that it is very difficult to reconcile the slowdown in wage growth late in a worker's career with optimizing behavior unless the technology for learning on the job is such that it generates very low gains from training. The analysis is based on a nonparametric methodology for estimating the learning technology from wage profiles; the results are arrived at by comparing the lifetime income when the worker optimally invests in his human capital to the one where he does not make any investments. (JEL: E24, J24, J31). [ABSTRACT FROM AUTHOR]

Mazzocco and Saini (2012) propose and implement a test of efficient risk sharing that allows for preference heterogeneity. They motivate their approach as yielding different results from those of a standard efficiency test with homogeneous preferences. We show that the standard efficiency test results are misreported in their paper and that the correctly reported results do not present as compelling a case for the importance of accounting for heterogeneous preferences. (JEL D12, D81, G22, O12, O18, R23, Z13) [ABSTRACT FROM AUTHOR]

The paper studies how high household leverage and crises can be caused by changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of high-income households, a large increase in debt leverage of low- and middle-income households, and an eventual financial and real crisis. The paper presents a theoretical model where higher leverage and crises are the endogenous result of a growing income share of high-income households. The model matches the profiles of the income distribution, the debt-to-income ratio and crisis risk for the three decades preceding the Great Recession. (JEL D14, D31, D33, E32, E44, G01, N22) [ABSTRACT FROM AUTHOR]

Including data from the 1980's sharply weakens the postwar time-series evidence indicating significant relationships between money (however defined) and nominal income or between money and either real income or prices separately. Focusing on data from 1970 onward destroys this evidence altogether. Evidence indicating cointegration of real income and real money balances, with due allowance for the effect of interest rates, also deteriorates when the sample extends through the 1980's. A positive finding is that the spread between the commercial paper rate and the Treasury bill rate consistently contains highly significant information about future movements in real income. [ABSTRACT FROM AUTHOR]

The article presents critical discussion of two papers by George Garvy and Edward F. Denison on the distribution of national income. According to the author Garvy has expressed some doubt as to the existence of a long-term trend of diminishing income inequality. Both manners have also stressed the very crucial choice of income definitions and the basic family unit used in measuring inequality statistically. Garvy has also suggested an interesting change in the income unit used to measure inequality. The usual per capita income measure may be useful from a welfare standpoint or in relation to consumer demand. Commenting on the paper by Denison, the author says that he has identified the ordinary business sector and then, within that division, distinguished several farm and non-farm ownership forms and property income sources. At the end of his paper, Denison introduced the government as tax collector and payer of transfer incomes. The author applaud his remarks on the effect of taxes and transfers and regret that the scope of his paper could not have been somehow extended to include more discussion of income redistribution.

Investment goods in the sense used in this article includes private producers' durable equipment, private producers' plant construction, and new private residential construction. Each of these three subdivisions has been considered separately and a demand function for new investment goods worked out for each. The total demand for new investment goods is thus the sum of these three separate demands. In the present paper, however only the study of the demand for producers' durable equipment and for private producers' plant construction will be presented. The purpose of the present paper is to give a theoretical-quantitative analysis of the demand for investment goods which has proven to be satisfactory for forecasting the demand for producers' durable equipment, in general, and for industrial construction. Finally, in closing, the author wishes to emphasize that the formulation presented is based on factors or conditions in hand six months before the development of the actual expenditures for producers' durable equipment. Thus it provides a basis for scientific forecasting of this highly variable portion of the gross national product.

Current forecasts suggest that the vast majority of growth in energy demand will come from the developing world, and that China will play a major part in that growth. This paper presents evidence suggesting that the shape of the income distribution, which is typically omitted from forecasting models, plays a major role in driving household acquisition of energy-using durable goods in rural China. We use province-level data for rural households to show that the share of the population living above the poverty line is an important determinant of household appliance holdings even controlling for average household income. [ABSTRACT FROM AUTHOR]

We investigate wealth returns on an administrative panel containing the disaggregated balance sheets of Swedish residents. The expected return on household net wealth is strongly persistent, determined primarily by systematic risk, and increasing in net worth, exceeding the risk-free rate by the size of the equity premium for households in the top 0.01 percent. Idiosyncratic risk is transitory but generates substantial long-term dispersion in returns in top brackets. Systematic and idiosyncratic risk both drive the cross-sectional distribution of the geometric average return over a generation. Furthermore, wealth returns explain most of the historical increase in top wealth shares. (JEL D31, G11, G51) [ABSTRACT FROM AUTHOR]

That the employment rate appears to respond to changes in trend growth is an enduring macroeconomic puzzle. This paper shows that, in the presence of a return to experience, a slowdown in productivity growth raises reservation wages, thereby lowering aggregate employment. The paper develops new evidence that shows this mechanism is important for explaining the growth-employment puzzle. The combined effects of changes in aggregate wage growth and returns to experience account for all the increase from 1968 to 2006 in nonemployment among low-skilled men and for approximately half the increase in nonemployment among all men. (JEL E24, J24, J31) [ABSTRACT FROM AUTHOR]

This paper shows that an income effect can drive expenditure switching between domestic and imported goods. We use a unique Latvian scanner-level dataset, covering the 2008-2009 crisis, to document several empirical findings. First, expenditure switching accounted for one-third of the fall in imports, and took place within narrowly defined product groups. Second, there was no corresponding within-group change in relative prices. Third, consumers substituted from expensive imports to cheaper domestic alternatives. These findings motivate us to estimate a model of nonhomothetic consumer demand, which explains two-thirds of the observed expenditure switching. Estimated switching is driven by income, not changes in relative prices. (JEL E21, F14, F31, F32, I11, L81) [ABSTRACT FROM AUTHOR]

GDP per capita is usually used to proxy for the quality of life of individuals living in different countries. Welfare is also affected by quantity of life, however, as represented by longevity. This paper incorporates longevity into an overall assessment of the evolution of cross-country inequality and shows that it is quantitatively important. The absence of reduction in cross-country inequality up to the 1990s documented in previous work is in stark contrast to the reduction in inequality after incorporating gains in longevity. Throughout the post-World War II period, health contributed to reduce significantly welfare inequality across countries. This paper derives valuation formulas for infra-marginal changes in longevity and computes a "full" growth rate that incorporates the gains in health experienced by 96 countries for the period between 1960 and 2000. Incorporating longevity gains changes traditional results; countries starting with lower income tended to grow faster than countries starting with higher income. We estimate an average yearly growth in "full income" of 4.1 percent for the poorest 50 percent of countries in 1960, of which 1.7 percentage points are due to health, as opposed to a growth of 2.6 percent for the richest 50 percent of countries, of which only 0.4 percentage points are due to health. Additionally, we decompose changes in life expectancy into changes attributable to 13 broad groups of causes of death and three age groups. We show that mortality from infectious, respiratory, and digestive diseases, congenital, perinatal, and "ill-defined" conditions, mostly concentrated before age 20 and between ages 20 and 50, is responsible for most of the reduction in life expectancy inequality. At the same time, the recent effect of AIDS, together with reductions in mortality after age 50--due to nervous system, senses organs, heart and circulatory diseases--contributed to increase health inequality across countries. [ABSTRACT FROM AUTHOR]

Low liquidity and a high marginal propensity to consume are tightly linked. This paper analyzes this link in the context of income tax withholding and refunds. A theory of rational cash management with income uncertainty endogenizes the relationship between illiquidity and the marginal propensity to consume, and can explain the finding that households tend to spend tax refunds as if they valued liquidity, yet do not act to increase liquidity by reducing their withholding. The theory is supported by individual-level evidence based on financial account records, including a positive correlation between the size of tax refunds and the marginal propensity to consume out of those refunds. (JEL E21, G51, H24, H31) [ABSTRACT FROM AUTHOR]

This paper provides estimates of the correlation in lifetime earnings between fathers and sons. Intergenerational data from the National Longitudinal Survey are used. Earlier studies, conducted for the United States, report elasticities of children's earnings with respect to parents earnings of 0.2 or less, suggesting extensive integenerational mobility. These estimates, however, are biased downward by error-contaminated measures of lifetime economic status. Estimates presented in this paper correct for the problem of measurement error and find the intergenerational correlation in income to be on the order of 0.4. This suggests considerably less intergenerational mobility than previously believed. [ABSTRACT FROM AUTHOR]

This article presents the author's response to comments about his paper on the application of the Barro-Grossman disequilibrium model to the Soviet Union. In the empirical work reported in my 1976 article, I found that the disequilibrium model performed well in that the Soviet data were consistent with the model's predictions. Comparison of the growth in the stock of savings with the growth in the flow of income or consumption is misleading and uninteresting. For example, a constant marginal propensity to save and a constant income imply an increase in the stock of savings and, of course, no change in income or consumption. Joyce Pickersgill has examined data on average and marginal propensities to save in the Soviet Union during 1955 to 1971. She concludes that her results do not support the view that Soviet households are saving larger and larger proportions of their increased incomes. However, the course of variables such as the average propensity to save is irrelevant to the question at hand since examination of such variables omits the influence of other factors. The disequilibrium model involves several factors and options operating on and open to the household when faced with a quantity constraint and proper evaluation of the model involves examination of all of them. At the outset I should state that my paper assumes the existence of repressed inflation in the sense that the controlled prices of at least some consumer goods are below market-clearing levels. Therefore my tests are of a joint hypothesis of the presence of this particular kind of repressed inflation and the disequilibrium model. My results do not contradict this joint hypothesis, but they do not constitute a direct test of the existence of repressed inflation in the Soviet Union.

This article presents the author's comments on a paper by John Pencavel about real wages. Pencavel interprets each of his indices as an index of the individual's welfare. His two series of real wages are derived from an estimated indirect Stone-Geary utility function which incorporates nonlabor income of the wage earners and an endogenous work-leisure choice. In one series the increase in real wages over the period 1934 to 1967 was substantially less than the index of money wages deflated by the Consumer Price Index or the U.S. Bureau of Labor Statistics series of real spendable weekly earnings of production workers, whereas in the second series the increase was substantially greater than in these other series over the same period. He has also constructed an index of real nonlabor income. My contention is that none of these indices is a true quantity index, but a genuine true quantity index can be obtained from the indirect utility function by using a slightly different definition of income. Moreover, this can be done for any regular utility function. For a family of functions which includes the Stone-Geary, this index is equal to an index of deflated incomes and is the canonical dual of the true price index.

This article presents a commentary on the issue of optimum lifetime distribution of consumption expenditures. This paper has sought to show that there are serious errors in Lester C. Thurow's paper which nullify his empirical results. His assertion that zero-savers are likely to be behaving optimally has been shown to be false. His "scaling up" technique has been shown to depend on a critical and probably false assumption. Finally the authors have developed a simple model which can be used to predict optimal consumption and in which the patterns of the zero-saving income level and of optimal consumption are necessarily different. Preliminary results suggest that the divergence between actual and optimal consumption, at least in the aggregate, is not particularly large.

The article presents discussions by economists on some papers that are published in the May 1, 1970 issue of the journal "American Economic Review." The author states that economist Robert J. Lampman's paper first presents an accounting framework for analyzing the processes of extra market redistribution in the U.S. and then goes on to discuss some current income maintenance reform proposals. The author discusses each of those quite distinct parts of the paper in turn. According to the author, the accounting framework Lampman outlines represents an attempt to classify and measure the processes of redistribution of incomes in much the same way the national income accounts treat processes of production and the market generation of incomes. In any pioneering effort of this sort, difficult conceptual issues arise which require hard decisions and inevitably invite some disagreement as well. Among several such issues that could be raised with Lampman's approach, the author has selected two that especially interest him for discussion.

The article presents a list of books related to subjects like general economics, methodology, price and allocation theory, income and employment theory, related empirical studies, history of economic thought, economic history, economic development and national economies. Some books are "Economics-Principles, Problems and Perspectives," by H.S. Dye, J.R. Moore and J.F. Holly; "Principles of Economics," by C.E. Ferguson and J.M. Keeps; "The American Economy-Principles, Practices and Polices," 4th ed., C.L. Harries; "Man, Economy and State-A Treatise on Economic Principles," by M.N. Rothbard; "Economics-Principles and Issues," by D.A. Snider; "National Income and the Price Level-A Study in Macrotheory," by M.J. Bailey; "Intermediate Price and Income Theory," by M.M. Bober; "Money, Saving and Investment in English Economics 1800-1850," by B.A. Corry; "The Investment, Financing and Valuation of the corporation," by M.J. Gordon; "The Accounting Concept of Profit-An Analysis and Evaluation in the light of the Economic Theory of Income and Capital," by P. Hansen and "Selected Readings in Economics," 2nd ed., by C.L. Harriss.

This article presents a discussion on the research paper "An Empirical Measurement of the Built-In Flexibility of the Individual Income Tax," in the U.S., by Leo Cohen, a professor at the Kansas State College, Kansas. Economists have long believed that the built-in flexibility of the individual income tax is substantial. But this expectation has not been confirmed by the data. The built-in flexibility of any tax can be regarded as the product of the built-in flexibility of the tax base and the marginal rate of tax on the change in the tax base. The built-in flexibility of the individual income tax turns out to be low for two reasons, the proportion of a rise in personal incomes that appears in the tax base is surprisingly low, on the order of 55 percent, and the marginal rate applying to a change in the tax base has never exceeded 31 percent at 1953 rates and 28 percent at present rates, and most of the time it has been substantially lower. As a consequence, the maximum observed built-in flexibility of the individual income tax has been no higher than about 17 percent at 1953 rates and 15.5 percent at present rates in the U.S.

This article presents a discussion on a research paper "Commercial Policy in the Underdeveloped Countries," published in the May 1959 issue of the journal "American Economic Review," by Raul Prebisch from the United Nations Economic Commission for Latin America. In dealing with mechanisms that are supposedly "inherent" in elasticities or terms of trade, one cannot help feeling uneasy about the degree of generalization and the inference from historical statistics that the material of the research paper permits. General methods of determining elasticities, especially over the long term, are far less than perfect, and the difficulties of terms-of-trade analysis are also great enough to warrant caution. The numerical examples used by Prebisch are based on the usual assumption of an income elasticity of less than unity for primary products. On the demand side this assumption seems reasonable enough, but long-term supply elasticities within the industrial countries have been shifting significantly in developing countries. However, the domestic output of certain minerals has not kept up with demand, so that the import requirements are rising relative to income growth in the industrial world, notwithstanding some protectionist interference.

The article presents a critical discussion of the paper by Clark Kerr, Martin Bronfenbrenner and Harold M. Levinson about the effect of collective bargaining on national income. According to the author all the three papers shows that the data on national income show surprisingly little influence on the part of collective bargaining, in so far as the distributive shares are concerned. Levinson finds a tendency for labor's share to rise slightly in the industry groups which are rather well unionized, while no such rise in labor's share seems to have occurred, on the average, in certain parts of the economy wherein unionism is weak. Bronfenbrenner gives hesitant support to Levinson's conclusion that the shifts toward labor's share maybe attributed to the strength of unionism. Kerr can find no significant relationship between degree of unionization and labor's share, when industry-by-industry comparisons are made. The consistency of the employee compensation share of national income is noteworthy, considering the several influences which might be expected to alter it over the years.

This paper examines the relationship between income, pollution, and mortality in China from 1991-2012. Using first-difference models, we document a robust positive association between city-level GDP and life expectancy. We also find a negative association between city-level particulate air pollution exposure and life expectancy that is driven by elevated cardiorespiratory mortality rates. The results suggest that while China's unprecedented economic growth over the last two decades is associated with health improvements, pollution has served as a countervailing force. [ABSTRACT FROM AUTHOR]

This paper reconsiders the traditional approach to human capital measurement in the study of cross-country income differences. Within a broader class of neoclassical human capital aggregators, traditional accounting is found to be a theoretical lower bound on human capital differences across economies. Implementing a generalized accounting empirically illustrates the possibility that capital variation may now account (even fully) for the large income variation between rich and poor countries. These findings reject the constraints on human capital variation that traditional accounting has imposed. (JEL E24, J24) [ABSTRACT FROM AUTHOR]

This paper introduces a new IV strategy based on IVF (in vitro fertilization) induced fertility variation among childless women to estimate the causal effect of having children on their career. For this purpose, we use administrative data on IVF treated women in Denmark. Because observed chances of IVF success do not depend on labor market histories, IVF treatment success provides a plausible instrument for childbearing. Our IV estimates indicate that fertility effects on earnings are: (i) negative, large, and long-lasting; (ii) driven by fertility effects on hourly earnings and not so much on labor supply; and (iii) much stronger at the extensive margin than at the intensive margin.

This paper studies alcohol consumption among low-income workers in India. In a 3-week field experiment, the majority of 229 cycle-rickshaw drivers were willing to forgo substantial monetary payments in order to set incentives for themselves to remain sober, thus exhibiting demand for commitment to sobriety. Randomly receiving sobriety incentives significantly reduced daytime drinking while leaving overall drinking unchanged. I find no evidence of higher daytime sobriety significantly changing labor supply, productivity, or earnings. In contrast, increasing sobriety raised savings by 50 percent, an effect that does not appear to be solely explained by changes in income net of alcohol expenditures. (JEL C93, D14, I12, J22, J24, J31, O12) [ABSTRACT FROM AUTHOR]

We present new evidence on trends in intergenerational mobility in the United States using administrative earnings records. We find that percentile rank-based measures of intergenerational mobility have remained extremely stable for the 1971-1993 birth cohorts. For children born between 1971 and 1986, we measure intergenerational mobility based on the correlation between parent and child income percentile ranks. For more recent cohorts, we measure mobility as the correlation between a child's probability of attending college and her parents' income rank. We also calculate transition probabilities, such as a child's chances of reaching the top quintile of the income distribution starting from the bottom quintile. Based on all of these measures, we find that children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s. However, because inequality has risen, the consequences of the 'birth lottery' - the parents to whom a child is born - are larger today than in the past. [ABSTRACT FROM AUTHOR]

This paper provides a simple, yet robust framework to evaluate the time profile of benefits paid during an unemployment spell. We derive sufficient-statistics formulae capturing the marginal insurance value and incentive costs of unemployment benefits paid at different times during a spell. Our approach allows us to revisit separate arguments for inclining or declining profiles put forward in the theoretical literature and to identify welfare-improving changes in the benefit profile that account for all relevant arguments jointly. For the empirical implementation, we use administrative data on unemployment, linked to data on consumption, income, and wealth in Sweden. First, we exploit duration-dependent kinks in the replacement rate and find that, if anything, the moral hazard cost of benefits is larger when paid earlier in the spell. Second, we find that the drop in consumption affecting the insurance value of benefits is large from the start of the spell, but further increases throughout the spell. In trading off insurance and incentives, our analysis suggests that the flat benefit profile in Sweden has been too generous overall. However, both from the insurance and the incentives side, we find no evidence to support the introduction of a declining tilt in the profile. (JEL D82, E21, E24, J64, J65) [ABSTRACT FROM AUTHOR]

This paper builds a new internationally comparable database of hours worked to measure how hours vary with income across and within countries. We document that average hours worked per adult are substantially higher in low-income countries than in high-income countries. The pattern of decreasing hours with aggregate income holds for both men and women, for adults of all ages and education levels, and along both the extensive and intensive margin. Within countries, hours worked per worker are also decreasing in the individual wage for most countries, though in the richest countries, hours worked are flat or increasing in the wage. One implication of our findings is that aggregate productivity and welfare differences across countries are larger than currently thought. (JEL E23, E24, J22, J31, O11, O15) [ABSTRACT FROM AUTHOR]

This short paper examines the effect of exporting on within-plant wage distributions in employer-employee data on Mexican manufacturing plants. Using the late-1994 peso devaluation interacted with initial plant size as a source of exogenous variation in exporting and focusing on wages at the 10th, 25th, 50th, 75th and 90th percentiles within each plant, we document three patterns: (1) there is no evidence of an effect of exporting on wages at the 10th percentile; (2) the wage effects of exporting are larger at higher percentiles, up to the 75th; and (3) there is no evidence of an increase in dispersion within the top quartile. [ABSTRACT FROM AUTHOR]

Purchasing power-adjusted incomes applied in cross-country comparisons are measured with bias. This paper estimates the purchasing power parity (PPP) bias in Penn World Table incomes and provides corrected incomes. The bias is substantial and systematic: the poorer a country, the more its income tends to be overestimated. Consequently, international income inequality is substantially underestimated. The methodological contribution is to exploit the analogies between PPP bias and the bias in consumer price index (CPI) numbers. The PPP bias and subsequent corrected incomes are measured by estimating Engel curves for food, an established method of measuring CPI bias. JEL: C43, D31, E31, O11, O12 [ABSTRACT FROM AUTHOR]

The current literature offers two views on the nature of the labor income process. According to the first view, individuals are subject to very persistent income shocks while facing similar life-cycle income profiles (the RIP process, Thomas MaCurdy 1982). According to the alternative, individuals are subject to shocks with modest persistence while facing individual-specific profiles (the HIP process, Lee A. Lillard and Yoram A. Weiss 1979). In this paper we study the restrictions imposed by these two processes on consumption data—in the context of a life-cycle model—to distinguish between the two views. We find that the life-cycle model with a HIP process, which has not been studied in the previous literature, is consistent with several features of consumption data, whereas the model with a RIP process is consistent with some, but not with others. We conclude that the HIP model could be a credible contender to—and along some dimensions, a more coherent alternative than—the RIP model. (JEL D83, D91, E21, J31) [ABSTRACT FROM AUTHOR]

Real incomes are routinely compared internationally using methods that "correct" for deviations from purchasing power parity. The most widely used of these is the Geary method which, though theoretically suspect, underlies the Penn World Table. This paper provides a theoretical foundation for the Geary method which I call the GAIA ("Geary-Allen International Accounts") system. I show that the Geary method is exact when preferences are non-homothetic Leontief and, more generally, gives a (possibly poor) approximation to the GAIA benchmark. An empirical application suggests that both it and other widely used methods underestimate the degree of international inequality. [ABSTRACT FROM AUTHOR]

This paper introduces various sources of consumer heterogeneity in one-sector representative consumer (RC) growth models and develops tools to study the evolution of the distribution of consumptions, assets, and incomes. These tools are applied to the Ramsey-Cass-Koopmans model of optimal savings and the Arrow-Romer model of productive spillovers. The RC property per se places very few restrictions on the nature of observed distributions, and a wide range of distributive dynamics and income mobility patterns can arise as the equilibrium outcome. An example illustrates how to use these tools to generate quantitative predictions and compare them to the data. (JEL E13, O41) [ABSTRACT FROM AUTHOR]

Examining the correlation between trade and income cannot identify the direction of causation between the two. Countries' geographic characteristics, however, have important effects on trade, and are plausibly uncorrelated with other determinants of income. This paper therefore constructs measures of the geographic component of countries' trade, and uses those measures to obtain instrumental variables estimates of the effect of trade on income. The results provide no evidence that ordinary least-squares estimates overstate the effects of trade. Further, they suggest that trade has a quantitatively large and robust, though only moderately statistically significant, positive effect on income. [ABSTRACT FROM AUTHOR]

This article presents the authors' comments on different essays on the developmental problems faced by most underdeveloped countries. According to Simon Kuznet, the pre-industrial per capita income level of developed countries was several times that of most underdeveloped countries today. It is generally concluded that today's less-developed countries face a much more difficult development problem than faced nineteenth-century industrializers. The main problem is their poverty which is measured by per capita income. Some recent essays have directly challenged this view. Alan Heston and Robert Summers also point in a similar direction. One important conclusion in their paper is that a development plan in South Asia will require many fewer resources than calculations on official exchange rate suggest. According to them, per capita income is not the way to a satisfactory understanding of the development process. The economic historians are now recognizing the widely diverse patterns of development through which even the already developed countries have moved. In another paper, Albert Fishlow presents a discussion on the extent to which the links between Brazil and the international economy generated or held back new development.

This article attempts to test the Keynesian, consumption hypothesis and the permanent income hypothesis (PIH) of Milton Friedman by investigating the consumption and income in rural India. The article extended Friedman's permanent income model by explicitly allowing for the distinction between pure measurement errors and transitory terms in the observed variables. Incorporation of this distinction in the theoretical framework is necessary for valid, and direct, tests of the permanent income hypothesis. These tests do not need the measurement error associated with each individual's income per se; rather, only the variance of these errors is necessary. This extended model not only allows for proper tests of the PIH but also makes possible a correct comparison between the traditional and permanent income theory of consumer behavior. Neither hypothesis is supported entirely. The contention of the PIH that measured consumption elasticities are downwardly biased estimates of the true permanent elasticities is supported by the data--the difference between the two is large and in a direction predicted by the PIH. However, a major and controversial aspect of the PIH is strongly rejected by the data--the elasticity between permanent components is less than unity.

The longitudinal earnings data reviewed in this paper unambiguously demonstrate that individuals are highly mobile across relative positions in the earnings distribution: 70 percent of the male workers in our sample are mobile and move on average a distance of one-fifth across the earnings distribution of their age cohort. Moreover, high mobility is a phenomenon that continues throughout one's working life. It was also noted that an element of directional stability exists in this mobility, implying that these observations reflect something more than purely random fluctuations. Models of labor market behavior that imply high rates of individual mobility will naturally find the greatest support in our observations. Of the models reviewed, the OJT variant of human capital models stands out in this regard, explaining more than half of the observed mobility. However, because other models (particularly those that distribute relative positions on the basis on some stochastic process) could generate equally good predictions, this support must be severely qualified. Essentially, what we have demonstrated is that those labor market models implying high rates of relative earnings mobility have more ex post plausability than various models of stratification. The OJT model is not uniquely verified by such observations; rather it stands out as one of the few models that formally accounts for mobility. Our conclusions must be further qualified by the pockets of immobility observed. Although, for example, it is clear that models of pervasive stratification (on whatever basis) are not likely candidates for general descriptions of the labor market, they may still play important roles. The lower mobility of black workers, for example, is obviously consistent with such models, as is the tendency toward lower mobility in the highest and lowest ventiles. The evidence on blacks is particularly disturbing as it not only suggests differential constraints on mobility but also that black workers already assimilated into the labor market by 1957 failed to receive any relative benefits over the subsequent fourteen years, a period which encompassed extensive civil rights and equal opportunity activity. The concept of relative earnings mobility provides a new perspective for assessing labor market models and behavior, as well as for interpreting the microeconomic substance of the (static) distribution of income. It cannot yet answer all the questions one might like to ask, however. To distinguish still more reliably among alternative earnings models, one must answer additional research questions. In particular, the relationship between earnings mobility and job experience must be examined. A most compelling implication of these findings is that more attention should be focused on the process of mobility, that is, on the mechanisms that facilitate or obstruct status improvement. The OJT model is but one example of such a focus, and has come to dominate this perspective, largely by default. Alternative explanations could easily be formulated, either on the basis of other supply characteristics, demand-side variables, or institutional factors which alter the character of both supply and demand. Presumably, the failure to recognize the pervasiveness of relative earnings mobility has inhibited the development of such alternatives. [ABSTRACT FROM AUTHOR]

The article presents a discussion on international commodity stabilization, export problems of developing countries and domestic consequences of export instability. Much of the motivation of recent proposals for international commodity arrangements has been to provide for international transfer of income from industrial countries to low-income, primary producing countries. Such transfers raise inevitable problems of allocation of income, not only between extending and receiving countries, but also among the various receiving countries. One of the central policy issues is whether to make these transfers through commodity arrangements or by alternative means. The authors of the several papers stress some of the difficulties inherent in some of these proposed commodity arrangements. Professor Raymond F. Mikesell has given an impressive list of technical difficulties that might be encountered in their operation. Professor Clark W. Reynolds has suggested that it may be very difficult to stabilize both export proceeds and foreign exchange receipts at the same time and professor Boris C. Swerling has indicated that the historical experience does not suggest that the agreements in the past have alleviated the underlying problems.

The article presents fifty-eighth list of doctoral dissertation in political economy in American universities and college. The list specifies doctoral degrees conferred during the academic year terminating June 1961 and these undertaken in the same period. Papers on general economics include — "The Contributions of Richard Jones to Economic Methodology and Theory," by Blaise F. Reinhardt, "The Economics of Communication and the Modern Pluralistic Society," by William White and "Criteria of Meaning in Economic Theory," by Murray Wolfson. Papers on price, income and employment include — "Uncertainty and the Redistribution of Wealth By Inflation; An Empirical Test With United Kingdom data," by Louis De Alessi, "Resource Allocation Implications and Measurement of Sectoral Productivity Parameters in a Multi-Sectoral Economy," by Phoebus Dhrymes, "A Critical Evaluation of the Wage Theories and Wage Policies of the Chicago School," by Louis A. Dow and "Prices, Profits and Productivity," by Gray Formm.

A good deal of the literature on the international distribution of poverty says that people do not move among employments in accordance with the principle of equal advantage, so that advantage is not equal at the margin in all employments. There are too many in some industries and too few in others and stable equilibrium is achieved at less than maximum output for given resources. In the paper on incentives in underdeveloped countries the author examines the assertion that in those countries people do not respond to income incentives. He shows that the statement is only partly true, but to the extent that it is true it clearly bears upon economic growth. For if people do not strive to maximize income, clearly there can be no maximization of welfare. The author proposes to restore order in phenomena by reformulating the behavioral postulate thus, they maximize a basket of incentives, only one of which is income. Authors document the increasing Intrusion of government into economic life.

This article presents a discussion on the research paper "Economics by Admonition," by Ben W. Lewis, a professor at Oberlin College, Ohio, published in the May 1959 issue of the journal "American Public Review." Lewis maintains that bigness which now characterizes U.S. industry, together with corresponding changes which have taken place in other economic institutions, represents a fundamental change in the character of the American economic system. It is difficult to survey the process of industry-wide wage and price determination in the steel industry, for example, during the last couple of decades and find any close approximation to the old-style competitive model. At the same time, the older forms of competition have persisted with the emergence of new forms of competition. The term competition is, however, so broad that quite opposite elements and developments can be brought under it. Some of the manifestations of competition are precisely those which reflect bigness and a change in the character of the system.

A regional development program will suggest different things to different individuals, and to all it is likely to suggest not a single program but a number of related programs focusing on a common objective. To a staff member of a development agency, a regional development program implies literally scores of individual programs ranging from those involving engineering projects to those basically educational in nature carried out co-operatively with educational and other regional institutions. Since these programs are neither comparable nor amenable to uniform methods of analysis, a complete discussion of criteria for their evaluation cannot be attempted in a paper such as this. Regional development purposes will be defined as a process resulting in a secular growth of regional output or real income. This, of course, is less than a comprehensive definition of regional development as many intangible aspects of development are not susceptible of measurement by a monetary yardstick. This growth can occur autonomously. It may be influenced also by the impact of national economic expansion imparted through the private sector of the economy. A regional development program, therefore, must be distinguished as an influence exogenous to the normal functioning of the private economy. For the purpose of this discussion, a regional development program will be defined as a public undertaking, most likely a governmental undertaking, one of whose primary objectives is to influence the underlying factors affecting regional output.

The article focuses on the author's views on the proportion of net capital formation which includes net additions to construction, producers' durable equipment, inventories and claims against foreign countries to national income or net national product, for totals in current prices, about 13 percent for 1869-1928. If one includes the following decades of depression, war and the few postwar years through 1948, the average drops to about 12 percent. For totals in 1929 prices, percentages are 14 for 1869-1928 and 12 for 1869-1948. In groping for an answer to the question for the economy in peacetime, my first attempt was to link it with the technologically determined ratio of capital to output and with the rate of growth in the latter. Conclusions of the discussion in the paper should be viewed as fortified suggestions rather than fully tested inferences, largely because questions raised and particularly answers advanced ramify into wide realms of the economic and social system of the country. In its growth since the 1870's. In a sense, therefore, this paper is an interim report and its conclusions are necessarily subject to amplification and partial revision.

The article presents discussions on the economic effects of war worldwide. Professor John U. Nef presented papers on the effects of war on technology. According to him, the years of peace in the late fifteenth century were especially rich in technological achievements in Italy, the Low Countries and above all in the Rhineland, Germany, and Central Europe. This was a barren period for technological improvement in England, where the bitterly fought Wars of the Roses lasted from 1455 to 1485. The late sixteenth and the seventeenth centuries were a time of bitter and almost continuous warfare on the continent, a time of virtually complete domestic peace in Great Britain. Professor Wesley C. Mitchell discussed the effects of the Civil War on prices, wages, and the distribution of income. According to him, the American dollar lost two-thirds of its value in gold within two and a half years under the greenback standard and then climbed unsteadily back to gold parity over a period of fourteen and a half years. The Civil War gave Americans for seventeen years a dollar exceedingly unstable in relation to gold.

We estimate the magnitudes of reduced earnings, work hours, and wage rates of workers displaced during the Great Recession using linked employer- employee panel data from Washington state. Displaced workers' earnings losses occurred mainly because hourly wage rates dropped at the time of displacement and recovered sluggishly. Lost employer- specific premiums explain only 17 percent of these losses. Fully 70 percent of displaced workers moved to employers paying the same or higher wage premiums than the displacing employers, but these workers nevertheless suffered substantial wage rate losses. Loss of valuable specific worker- employer matches explains more than one-half of the wage losses. [ABSTRACT FROM AUTHOR]