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This paper tests if variations in the treatment of expenditures by state and local governments are an explanation for the inconsistent results of previous tax studies. Estimates for net investment and employment in manufacturing for 1962-82 support this conjecture, indicating that state and local taxes have a negative effect when the revenues are devoted to transfer-payment programs and that (with taxes held constant) increases in expenditures on health, education, consistent with the "vicious circle" phenomenon, do not appear simply to reflect common cyclical movements, and provide evidence of structural linkages implicit in previous results for growth in state personal income. Copyright 1990 by MIT Press.

SINCE 1962, the Federal government has been implementing a policy designed to assist economically depressed or lagging areas through loans or grants for various kinds of developmental projects. The Area Redevelopment Act (1962) and the Public Works and Economic Development Act (1965) provide the legislative framework for this effort and as of June 30, 1975, over $2.2 billion had been obligated by the Economic Development Administration (EDA).1 The majority of these funds have been for two main purposes: (1) financial aid (loans and grants) to help communities develop the public facilities needed to attract business and (2) longterm loans at low rates of interest to provide the capital to attract new business to depressed areas and to help established firms expand.2 The purpose of this paper is to provide some empirical evidence relating to the impact of these programs on the aggregate economic growth of recipient areas. Changes in total personal income constitute the measure of economic growth used, and counties form the geographic areas studied. The first part of the paper (section II) compares changes in personal income growth rates of aided counties to those of non-aided counties. Comparisons are also made for a subgroup of counties that received aid during the 1960s but that have not received any assistance in recent years. These comparisons provide some initial observations on the relative growth performance of EDA-assisted areas with no attempt to establish a cause and effect relationship between changes in growth rates and EDA assistance. Section III presents a model designed to measure quantitatively the impact of EDA assistance on county income growth. Economic base theory serves as the analytical base for this model and specific attention is focused on the role of EDA assistance in the growth process. Section IV presents an empirically testable specification of the model from section III. It generates the estimated effects of the amount, type and timing of EDA assistance on changes in county income growth rates. Finally, section V summarizes the results and outlines the implications of these findings.

T WO economic problems which would be on many people's list of crucial and interesting contemporary economic issues would be food costs and a recent slowing in the growth of labor productivity. These issues are interrelated. For years we had the phenomenon of a growing demand for food exceeded by an even faster growing supply of food. In recent years, there have been some changes. Labor productivity is still growing faster in the farm sector than in the nonfarm sector but the share of personal income spent for food has stabilized in the 16%-17% range. Food prices have risen and have been an important contributor to inflation. At the same time the farmers' share of the food dollar has dropped and the amount of embodied services in food purchased by consumers has risen. The well-being of an economy can be enhanced by the growth in available resources, or a more effective use of these resources. Thus, one way of lowering consumer food cost is increasing labor productivity. Obviously there are a variety of forces in operation in this situation and any attempt at partial analysis may be found wanting. Confronted with this problem, Howe, Schluter and Handy (1976) chose to use an input/output model to study changes in labor productivity in the food system. In this paper we will review the Howe, Schluter and Handy (HSH) technique and results. We will then introduce a factoring technique that allows us to solve for the contribution to total productivity of each variable in the HSH technique. Finally, we will present and discuss our results.

AT least since Mandeville's "Fable of the Bees" (I728), there have been underconsumptionists who have ascribed trade depressions to deficiency in consumption expenditures.' Underconsumptionist thought may further be subdivided into two schools. Monetary underconsumptionism, which does not concern us here, blames underconsumption upon flaws in the processes of creation and circulation of money and credit. The Social Credit movement in Great Britain and the Greenback movement in the United States may serve as illustrations. Since Marx and Rodbertus, however, the deficiency of consumption expenditures (and purchasing power) has been ascribed more commonly to maldistribution of real income. This we shall call maldistributionist or real underconsumption. During prosperity, income is concentrated in the higher brackets, where a large fraction is saved. If the savings are hoarded, there arises an immediate deficiency in consumption. If the savings are invested, the deficiency is only postponed until the day when additional consumption goods are produced because of the new investment, and come on to market without additional purchasing power to absorb them. Such, in briefest outline, is the position of the late John A. Hobson, the leading English-language representative of real underconsumptionism in the twentieth century.2 In this view, the principal means to prevent and to remedy depressions is substantial redistribution of income in the direction of greater eaualitv. In addition to Rodbertus, Marx, Hobson, and other leaders of the economic underworld, Keynes has given this position an indirect accolade in the General Theory,3 and it has been adopted by a substantial fraction of the neo-Keynesian school. Virtually all of the discussion, however, has been carried on in a quantitative semi-vacuum, which is to say, without any precise ideas as to the quantitative importance of possible income redistributions. It was of course recognized from the outset that personal savings rise faster than personal income, or in current jargon, that individuals' average propensities to save rise with their incomes. What was not recognized, however, was that for redistribution problems the relative marginal propensities to save of different income classes were likewise important, since redistribution involves shifts between income classes at the margin. To cite an extreme case, if all individuals' marginal propensities to save were identical, equalization of incomes would have no effect whatever on aggregate consumption and saving, however great might be the disparities in average propensities between rich and poor.4 Keynes himself, it would appear, was guilty of some inconsistency on this subject. He considered his consumption function relatively stable (which presumably means stable with respect to changes in income distribution), and at the same time he advocated income equalization in the interest of increased aggregate consumption. One of the first studies to apply modern aggregative analysis in estimating the quantitative effect of income redistribution on aggregate consumption was carried out by Harold Lubell at the Board of Governors of the Federal Reserve System.5 His study, which has been un* This study was financed by a grant from the Social Science Research Committee of the University of Wisconsin. 1 Harry G. Johnson cites the French Physiocrat Boisguillebert a century earlier as maintaining that trade would be more active if taxation fell on the rich than if it fell on the poor, which comes closer than Mandeville to a maldistributionist position. "The Macro-Economics of Income Redistribution," in Alan T. Peacock (ed.), Income Redistribution and Social Policy (London, I954), p. I9. 2 For a full presentation of Hobson's views, see Erwin E. Nemmers, Hobson and Underconsumption (unpublished Ph.D. dissertation, Wisconsin, I953). We have called Hobson a twentieth-century writer, :but the initial presentations of his views appeared before the turn of the century. 'Keynes, General Theory, pp. 369-74. ' The average propensities are important in this case only if ioo per cent of one individual's income is being taken away, or in a case where income is being given to individuals who had none before. 5 Harold Lubell, "Effects of Income Redistribution on Consumers' Expenditures," American Economic Review, xxxvii (March 1947), 157-70, corrected in part, ibid., xxxvii (December 1947), 930. The Lubell results appear to have furnished statistical

T HE inflation associated with the Vietnam War has had a strikingly differential impact on the rates of economic expansion in different regions of the country and on the distribution of income among major groups in the economy. This experience undoubtedly is of interest to economists concerned with the welfare implications of gains and losses in the relative position of principal groups of income recipients. In addition, these differential effects have enlivened the debate over the appropriate stance of public policies with respect to inflation. Consequently, a comprehensive quantitative examination of the impact of inflation on income distribution during the last decade appears to be a worthwhile undertaking. This paper presents the results of such an inquiry. In section II, the origins of the current inflation (in the Vietnam War) and its subsequent progression are traced. The regional impact of inflation is examined in section III. Broad trends in the distribution of personal income and the main factors affecting this distribution are analyzed in sections IV and V, respectively. The experiences of particular groups of income recipients are assessed in sections VI through IX. Finally, some implications of the findings for public policy are discussed in section X. II The Progression of Inflation

THIS paper is concerned with a problem that is of considerable importance in the analysis of personal income size distributions, namely: for any given type of unit selected for analysis (family, spending unit, or any other useful recipient unit classification), how would ranking the units by aggregate income per unit versus ranking them by per capita income per unit affect the relative income shares received by various income groups. The problem may also be interpreted as a comparison of the effect on income shares of using a unit or a person basis of classification. Of the two path-breaking studiesrecently published in this field that of the United States Department of Commerce 1 yields estimates of relative income shares received by consumer units when ranking is by aggregate income per unit, while that of Professor Kuznets 2 yields estimates of shares received by individuals when ranking is by a procedure that attempts to approximate per capita income per unit. This variation in method is used by Dr. Selma Goldsmith and her associates 3 to explain, in part, some of the difference in results obtained in the two investigations. Though this paper considers the problem primarily in the context of Delaware data, first a brief digression is undertaken to comment upon a small portion of the analysis made by the Commerce Group (Dr. Goldsmith and her associates). This digression serves three purposes. It provides some insight into the question posed. It emphasizes, by contrast, the value of having access to a sample of individual tax returns as is the case for the analysis of Delaware data. And finally, it permits the writer to correct some of the confusion of interpretation and inference that has arisen. After the digression, a comparison of aggregate and per capita variants using Delaware data is presented and an analysis is attempted showing why the income shares received by the different income groups are affected in the particular directions noted. The paper then concludes with a few observations about the per capita approximation method employed by Professor Kuznets in constructing his income size distributions.

(e) Net interest paid by government. The national income net interest total comprises total interest accruing to United States persons and governments less the total interest paid by United States governments to persons, governments, and businesses. The personal income interest total is obtained by adding to the national figure the excess of interest payments by governments over their interest receipts. Thus it measures total interest paid to United States persons.3 The share of the national total attributable to any one state is extremely difficult, if not impossible, to estimate by direct means, if this were desired. But allocation can be made more easily, although the method rests upon the same sort of fundamental and hazardous assumptions as in the case of allocating corporate income. Figures are availalble from the Department of Commerce of private interest received by residents of Texas and the United States. The Texas state income component of United States net interest paid by governments was obtained by applying the ratio obtained from the private interest figures to the United States net government interest total. The assumption here, of course, is that Texas residents' entitlement to a share of the national total of net government interest was the same as their entitlement to a share of the national total of private interest, as reflected in the payments actually made or imputed. The method also, as in the corporate income case, has the merit of conforming to the conceptual framework which emphasizes the "wherereceived" measure. TABLE 4.-GOVERNMENT AND BUSINESS TRANSFER PAYMENTS, TEXAS, I950-58 ($ million)

W HILE we can as yet do little to change the weather, we can nevertheless use weather variations to explain an occasional economic phenomenon. Considerable work has already been done on the connection between weather and the use of specific fuels in specific areas.' Recently, J. R. N. Stone and D. A. Rowe have related quarterly averages of temperature, rainfall, and sunshine to English consumption of fuel and light, entertainment, and beer.2 The present paper describes how year-to-year variations in winter temperatures seem to affect United States demand for all space-heating fuel combined. These temperature changes, it turns out, are of less importance than personal income in explaining the long-run trend in space-heat demand, though they are of considerable significance in explaining year-to-year variations. In general the demand equation obtained from I935-40, I946-Si data fits actual consumption well; the difference between actual and calculated consumption for I942-45 gives some notion of the relative unimportance of wartime fuel scarcity in the United States; and the predicted values for the years I952-59 differ from the actual values by an average of only i.6 per cent.

They indicate that purchases of durable goods (DUR) are the third most volatile component behind inventory investment (INV I) and federal government expenditures (F GOV). The correlation coefficients between GNP and its components listed in the second row of table 1 show that durable goods purchases have the third hiighest covariance with GNP after inventory investment and nonresidential investment (NRI). Theoretically, these purchases represent either changes in the size of the household portfolio through changes in the flow of savings, or a reallocation of accumulated wealth among assets in response to changes in rates of return. Empirically, some effort has been given to examining the separate influences of rates of return and income. Hamburger (1967) found that interest rates, the price of durable goods relative to other prices faced by the consumer, and disposable personal income all have a significant impact on purchases of durable goods. portance of these variables as sources of fluctuation in purchases. Motley (1970) included a user cost of real assets variable in addition to the rate on savings deposits and expected income, and found in sharp contrast to Hamburger that none of them had a significant influence on the demand for the sum of durables and housing. The analysis of fluctuations in durable good purchases presented here differs from its prede

The paper shall be concerned with short run (cyclical) functional relationships as well as long run (secular) relationships between the variables. In fact, the fundamental difference between the cyclical and secular character of these relationships will be stressed. In general, though with some exceptions, which will be explained presently, these variables are related in constant proportions secularly, i.e., a graphic representation of the secular functional relationship would go through the origin. On the other hand, the cyclical relationship is not one of constant proportions, so that the cyclical function does not go through the origin; it would have a positive intercept. The main conclusions of this paper are as follows: i) Personal consumption expenditures are primarily a function of disposable personal income. Consumption is roughly the same proportion of deflated per capita disposable personal income in peak years.4 This is the secular relationship of consumption and income. Thus in Chart i, which presents the actual deflated per capita data, the line joining the origin with I929 comes much closer to the actual observations of I948-50 than the regression line calculated for the cyclical period I929-40. Presumably, if a serious depression were to develop from the secular peaks of 1948-50, the line of relationship would be the indicated broken line in Chart i, parallel to the interwar cyclical line relating consumption to income, but at a higher level. In other words, while the secular relationship is primarily characterized by constant proportions between consumption and disposable income, in the short run the ratio of consumption expenditures to income varies with the cycle, falling as income rises and rising with declining incomes. Thus, the fact that actual postwar personal consumption expenditures are in excess of those expected from prewar cyclical relationships with disposable income is primarily due to the upward secular drift of the consumption function. 2) This functional relationship between personal consumption expenditures and disposable personal income does not hold for periods of unprecedented disturbances in the economy associated with total war and the postwar transition to a peacetime market. Thus in Chart i, the years I946 and I947 are still considerably off the secular line of relationship. However, by 1948, the function appears to have resumed a mnore "normal" shape. The relative speed with which the functional relationship of consumption to income reasserted itself after the great shocks assoCiated with World WVar II is indeed ' This article represents part of a larger project on the consumption function which will examine in greater detail its short run aspects as well as the component parts of the aggregates. Appreciation is expressed for the aid of Professors Alvin H1. Hansen, G. H. Orcutt, and J. S. Duesenberry, of Harvard, none of whom, of course, is responsible for any errors that remain. The author is currently on leave from the U. S. Department of Commerce; the views expressed are his own. 2 The sources of the data used in this article are explained in a note at the end of the article. This article was written before the i95T National Income Supplement to the Survey of Current BEusiness was available. 8 J. R. Hicks, A Contribution to the Theory of the Trade Cycle (London, 1950), p. 33. 'For an early statement of the relative constancy of the ratio of consumption to income in peak years see A. H Hansen, Fiscal Policy and Business Cycles (New York, I941), p. 237.

ONE of the standard problems in distribution theory has been to explain the skewness of the personal income distribution. In particular much has been written to explain the apparent contradiction between the allegedly normal distribution of abilities and the skewed distribution of income.' While this attempt to relate the distribution of earnings to the underlying distribution of ability is still with us,2 another approach has become popular in recent years.3 This new approach is not concerned with the distribution of abilities; instead it shows how "chance" elements can generate a lognormal, a Pareto, or a similar income distribution.4 This "chance" approach has provided a new way of looking at the income distribution, but its proponents have paid too little attention to the economic meaning of the proportional shock mechanism.5 The present paper tries to combine parts of both of these approaches. It starts with the assumption of a normal distribution of ability and then shows how this leads to a lognormal distribution of earnings. This assumption of a normal ability distribution is only an expository device; as is shown in the Appendix there is little reason to assume that ability is in fact normally distributed. The theory to be developed here deals only with earnings, i.e., wages and salaries. For property income the economic rationale of the multiplicative assumption used by the "chance" theories presents no problem. If a man's income increases so will his savings, at least in dollar terms, and hence, next year he will have a greater stock of income-bearing property.

CLASSIC studies by Kuznets have found that in more developed countries the size distribution of income among persons and among families has become less unequal during the twentieth century [15, 16]. The significance and magniture of this secular equalization of personal incomes can be estimated from time series only when cyclical behavior of the distribution of income is statistically separated from secular trend.' A purpose of this investigation is to propose an aggregate model that incorporates cyclical factors that are hypothesized to displace the distribution of income from its secular or equilibrium trend. Annual personal income data for the Netherlands are used to estimate the model and test the hypotheses implicit in it. The following conclusions emerge: (1) income inequality has decreased markedly in the Netherlands during the last fifty years; (2) secular equalization of incomes stems from the inseparable effects of the increased labor share of income and its more equal distribution; (3) the secular trend is stronger when variation in income associated with age and sex characteristics of the population are eliminated; (4) aggregate disequilibrium in factor markets that induce cyclical change in price and employment levels appears to account for much of the behavior of income inequality; (5) the distributional effect of changes in the price level has reversed and the effect of change in labor productivity has increased in the period since the Second World War.

T a given rate of growth in the general A level of personal income, which kind of expenditure will increase its share and which will decrease and, further, what will be the extent of these changes? The requirement for this kind of knowledge has increased in recent years in relation to the theory of economic development as well as for purposes of short-run projection. Prior to the latter half of the 1940's, it had been thought that the above questions might be readily answered by the straightforword application of the generalized Engel's Law. Professors Allen and Bowley I gave the theoretical explanation with a specified form of preference function which was found to be consistent with the empirical cross-section regressions. Thus, it was suggested that if we could assume the invariability of the consumers' preferences both among income groups and over time, it would be possible to predict the consumption of various categories of goods and services and future savings, given income and prices and with the knowledge of the numerical values of the preference parameters. This line of approach had been tried from the time of Professors I. Fisher and R. Frisch.2 It is well known, however, that the validity of the analogy between the cross-section and the time series came to be doubted with the discovery of the long-run stability of the savings ratio in the aggregate time series by Professor Kuznets. Several new theories of consumption appeared with the common target of explaining with a unified theory all of these three kinds of empirical observations: the long-run time series, the short-run time series, and the cross-sectional relations. About ten years ago, the present authors began to try to estimate the consumers' preference functions in a numerical form, making use of continuous time series of the family budget data which were available, at that time, for interwar years in Japan. We undertook this task partly because of pure curiosity and partly because of the practical desire to improve the analysis of index-number problems,3 as well as to make predictions on the simultaneous determination of family expenditures. Starting from the classical model of Professors Allen, Bowley, and A. Wald,4 and after making some tentative computations, we came to see the necessity of introducing some shift elements into the structural equations which were used. First, we tried to adopt Professor Tobin's 5 liquid asset hypothesis in a generalized form which took not only the liquid assets, but also the asset holdings for every individual category of family expenditure into account. The results of the empirical tests, however, did not show a logical consistency with our interpretation of Tobin's hypothesis. This forced us to examine the applicability of Professor Duesenberry's theory of interdependent preferences.6 * The work on this paper was done as part of the Keio Economic Research Project financially supported by the Institute of Industry & Labor Studies, Keio University. The final, considerably revised, version was prepared at Professor W. W. Leontief's Research Seminar during Tsujimura's stay at Harvard as a Fulbright Research Scholar, 1961 to 1962. We are also heavily indebted to Professors J. S. Duesenberry and H. S. Houthakker for valuable suggestions. They, of course, are not responsible for any remaining errors. 'R. G. D. Allen and A. L. Bowley, Family Expenditure: A Study of Its Variation (London, 1935), especially appendix. 2 Ragnar Frisch, New Methods of Measuring Marginal Utility (Tubingen, 1932). It is interesting to see that Frisch's analogy of the spring balance on the dynamic feature of consumer's taste appears to be very close to our present specification of Duesenberry's theory of habit formation. 'H. S. Houthakker, "The Influence of Prices and Incomes on Household Expenditures," Bulletin of the International Statistical Institute (Bruxelles, 1960); W. W. Leontief, "Composite Commodities and the Problem of Index Numbers," Econometrica, iv (1936); and P. A. Samuelson, The Foundations of Economic Analysis (Harvard, 1945). 'A. Wald, "The Approximate Determination of Indifference Surfaces by Means of Engel Curves," Econometrica, viii (April 1940). 'James Tobin, "Relative Income, Absolute Income, and Saving," in, Money Trade, and Economic Growth (Macmillan: New York, 1951). 6 J. S. Duesenberry, Income, Saving, and the Theory of Consumer Behavior (Harvard, 1949).

THE decade of the I940'S brought a phenomenal increase in the standard of living of the American people. Common observation bears this out; available data permit its quantification. When per capita disposable personal income adjusted for price changes is used as the best measurement of the "standard of living," it would appear that the lot of the "average American" was about 30 per cent better in I949 than in I940 2 A series showing per capita real incomes is published periodically by the Council of Eco

W HILE students of the American economy IV, I are blessed with some excellent data for measuring the functional distribution of personal income for individual states, there are virtually no statistics on the size distribution of income for these areas. (Stigler's state-by-state estimates of the income shares of the upper one per cent of the population are the best effort yet made to get at the latter kind of information.)' Nor does the present paper give income size distributions for states. My purpose here is the much more modest one of reporting the results of a try at deriving indicators of income inequality that can be used as a basis for comparing each state with the others. The first part of this report describes how Gini indexes of income were constructed for states and the District of Columbia for the year 1959. The bulk of the remainder is occupied with assaying the credibility of these indexes. This evaluation may be thought of as a test of the hypothesis that the Gini indexes of income possess merit as a basis upon which to compare these 51 areas. The test consists of correlations of the indexes with corresponding Gini indexes for housing and education, created especially for this purpose, as well as a few other characteristics for these areas. Alternatively, were one disposed to simply accept the Gini indexes of income as being adequate for their professed role, it might be interesting to regard the following exercise as a test of the hypothesis that there is a demonstrable interrelationship among various sorts of measurable inequality.

THE present paper is an initial attempt to determine the secular trend in the proportions of each of the major functional types of income to the national income in the United States during as long a period of time as available data permit. It relies on the classical studies in this field, supplemented by important new data. The well known studies of King1 and Martin 2 covering the early periods were concerned with the distribution of what has come to be called "income payments to individuals" or "personal income." The lack of adequate estimates of business savings, estimates which exclude capital gains and losses, has limited severely the use of these studies for the purpose at hand. This deficiency is now being overcome by the efforts of such researchers as Simon Kuznets 3 and Raymond Goldsmith.4 For the period since Ii9, the studies of Kuznets and the U.S. Department of Commerce Office of Business Economics (hereinafter abbreviated as O.B.E.) are well known.5 A point has been reached where it may be worthwhile to combine the data of some of these studies in an effort to cast new light on the secular changes in income shares during the past eighty years, recognizing from the outset that the reliability of the data diminishes progressively as the inquiry delves backward in time, that the effort to combine independent statistical studies must ride roughshod over numerous discrepancies in concepts and methods which cannot be eliminated without reworking the data to an extent impossible here, and that the well known differences between the statistical and theoretical categories in the field of income distribution seriously limit the usefulness of the empirical findings in answering the important problems raised by distribution theory. The ultimate objective motivating the present investigation is to seek new light on the "market power" or "bargaining power" of quasifunctional classes of income-recipients, although the conceptual problems raised by this approach are too complex to be given more than an occasional mention in the present article. The method of procedure followed was to begin with each of the more or less comprehensive and self-consistent sets of time series, each covering a period of about twenty years and overlapping with another set at ten-year intervals, to introduce some slight changes for comparability with the other sets, and to add business savings, thereby arriving at estimates of national income more or less compatible with the estimates of the income shares. Annual ratios of major income shares to the composite national income were then computed, and from these ratios ten-year arithmetic means were drawn. The percentage point changes in arithmetic means of annual ratios in each of the overlapping sets of series were then added together to provide an admittedly rough and preliminary estimate of the secular trend in each series. The procedure was applied first to the series covering all industries and then, in order to reduce the gap between the empirical and theoretical areas of distribution analysis, to the private nonagricultural sector. Certain modifications in the above basic data are here pubI Willford I. King, The Wealth and Income of the People of the United States (New York, I9I5); The National Income and Its Purchasing Power (National Bureau of Economic Research, New York, I930). 2Robert F. Martin, National Income in the United States 1799-1938 (New York, I939); Conference Board Studies in Enterprise and Social Progress (New York, I939). 'Simon Kuznets, National Product since 1869 (National Bureau of Economic Research, New York, I936), and Capital Requirements Study (in process of completion, same organization and publisher). 'Raymond W. Goldsmith, Saving and Capital Market Study (in process of completion, National Bureau of Economic Research, New York); especially Summary of Annual Estimates of Saving, I897 to 1949, Advisory Committee Memorandum No. 4I, same publisher, February I5, I95I, mimeographed, "not for publication or quotation." Preliminary published quadrennial data may be found in same author, "A Perpetual Inventory of National Wealth," in Conference on Research in Income and Wealth, Studies in Income and Wealth, Vol. I4 (National Bureau of Economic Research, New York, I95I), pp. 5-73. 'Simon Kuznets, National Income and Its Composition, 2 vols. (National Bureau of Economic Research, New York, I94I); reprinted in one vol., I947. U.S. Office of Business Economics, Department of Commerce, National Income: 1951 Edition. Supplement to the Survey of Current Business (Washington, D. C., I95I).

OR many years there has been deep concern as to whether a shortage of doctors exists either nationally or in particular localities. This study investigates how well the distribution of the national stocks of medics (the generic term used here to refer to physicians and dentists) among areas corresponds to the distribution of population, and what influence is exerted by other variables such as effective demand for medical service, barriers to migration, and the locational preferences of medics. The "unit" of area in this study is the state; this is mainly because of availability of data. However, differences of size among the states, as well as in the relative populations of rural and urban areas and in the distribution of the urban population among large and small cities, seriously affect the observations. To remedy the resulting distortions as fully as possible, one of the authors is now analyzing the determinants of physician location among counties with results to be presented in a subsequent paper. However, many more variables for longer periods of time can be analyzed for states as a whole than for smaller sub-divisions.' The substance of our findings is contained in the regressions presented in the various tables. In considering them, the reader should bear in mind the following points: (1) We have analyzed a number of distinct types of medics: All Physicians, Self-employed Physicians and Dentists. Where our findings apply to all types we make generic statements. (2) To avoid discursiveness we discuss only those coefficients believed indicative of pervasive long-run forces affecting the allocation of medics. (3) In section I, the discussion is purely descriptive, i.e., the regression coefficients reflect observed associations but are not estimates of the structural parameters of a particular model. They do, however, have theoretical relevance. Some estimates of demand and supply functions are discussed in section II. (4) The years studied are 1930, 1940, 1950 and 1960 or, for some variables, years close to them. Lack of data for a sufficient number of years makes satisfactory time series analysis impossible. Section III summarizes our findings, and comments briefly upon their empirical implications. Our dictionary of variables is as follows: X (i)-Number of medics in the ith state. X2 -) Population of the ith state. X3()(Total) personal income of the ith state. X4-Volume of training facilities (number of places in medical classes) in ith state. X5-i Barriers to entry (percentage of applicants for licensure who fail examinations) in ith state. X6Population in ith state living in urban areas of more than 2,500 persons. X7-) Average income of medics in ith state.

rrHE economic evaluation of public policy 1 must be based to a considerable extent upon the way it influences the distribution of income. This is especially true for such matters as labor legislation, agricultural subsidy payments, the tax structure, the tariff structure, and public works programs. Accordingly, a systematic examination of the effects of changing income distribution seems greatly to be desired. One aspect of this problem is considered in the following analysis: the effects of the equality of income distribution upon consumption expenditures. More specifically, our concern is with the effects of income distribution upon (a) the percentage of disposable personal income spent, and (b) the allocation of the expenditures which are made. Review of theories. Thus far two theories have been advanced regarding the effects of equality of income distribution upon consumption expenditures: the comparative propensity to consume theory and the emulation theory. The comparative propensity to consume theory holds that the effect of a change in equality of income distribution may be analyzed by comparing the relative marginal propensities to consume of those incurring the income decrease and of those receiving the corresponding income increase. Thus, a reasonably symmetrical equalizing of income distribution presumably would tend to raise the aggregate consumption function for the economy as a whole, since the nch are believed to have a lower marginal propensity to consume than the poor -and vice versa.' Furthermore, it should cause the allocation of what expenditures are made to change as follows: food to increase. clothing and transportation to decrease, and shelter to remain nearly constantand vice versa.2 Veblen's emulation theory holds that people in any given socio-economic class tend to have as their material standard of living the goods and services actually consumed by the next higher socio-economic class.3 For this reason, it is argued, the spread between the standard and plane4 of living for consumers in the aggregate (hence, the pressure on them to spend) is a function of the income differences between the various socio-economic classes in the economy. From this it follows that a reasonably symmetrical equalizing of income distribution should tend to reduce the income disparity between the various socio-economic classes, thus reducing the spread between their standards and planes of living (reduce the pressure on them to spend), and consequently cause the consumption function for the economy as a whole to fall.5 The opposite reaction logically should occur as incomes become less equally distributed, but only for moderate decreases in income equality. Too great an income disparity between the various socio-economic classes presumably would cause them to lose

THE purpose of the present article is to clarify and suggest improvements in national income and product concepts as used particularly by the Department of Commerce. In developing the proposals, major problems of definition, duplication, and conceptual difficulty will be presented, together with a brief survey of the development of ideas, including some of the recent debates which focus attention on unsettled questions. Broad relations between the national income and product series developed by the Department of Commerce are indicated in Chart i, the various bars being drawn approximately to scale, as of I952.1 In national income accounting the emphasis on net value added by, or income accruing to, the various economic factors, as a result of productive services currently rendered, is well understood. On the whole this represents current money income (with some imputations), but it omits three important money income items: realized capital gains (losses), unproductive transfer payments, and government interest. It also omits one imputation of major significance: the value of housewives' services. Of the two main subdivisions of what are regarded as nonproductive government outlays, transfers and government interest, the latter was shifted from productive income in the official revisions of July I947. These conventions and changes, though generally recognized, are by no means universally accepted by specialists in the field. In fact, some of them are receiving renewed discussion in recent debates.2 All the factor shares on productive account are now entered in the Commerce national income totals before direct taxes are deducted. The addition of indirect taxes and depreciation or capital-consumption allowances raises these net totals to the Commerce gross national product totals, but this development has created confusion over the meaning of net product and the extent to which double-counting is involved in the gross totals.3 The Commerce Department also takes the national income as a base for developing its personal income series. By subtracting corporate profits (before direct taxes are deducted but after dividend allocations) and adding transfers and government interest (in the main), the Department secures a mixture of productive and nonproductive items of personal income and savings. Realized capital gains and losses are still omitted however.4