Using Micro Data to Test the Divergence between Prices and Labour Values

An extremely robust finding in Marxian empirical economics is the 'Shaikh result' that estimates of labour values are closely correlated with prices. This result is established using input-output data together with a standard procedure in which variations in money wages are assumed to reflect labour quality. Two problems with this standard procedure can be identified. First, there is no translation between money units of wages and labour value units of output produced by different types of heterogeneous labour. Second, the standard procedure assumes perfectly competitive labour markets. In this paper, a new micro procedure for estimating labour values is developed in which both of these problems are addressed. To translate between money wage rates and the labour value of outputs a practical starting point for empirical analysis is suggested using some of the readily available tools of neoclassical economics. The assumption of perfect competition is accordingly relaxed by estimating a microeconometric wage equation using data from the UK Family Expenditure Survey. Conjoining this micro data with input-output data, estimates of labour values are used to test the Shaikh result, which is found not to hold in this particular exercise; with labour values diverging substantially from money prices.     

Portfolio Capital Flows: Hot or Cold?

A distinction is often made between short-term and long-termcapital flows: the former are deemed unstable hot money andthe latter are deemed stable cold money. Using time-series analysisof balance of payments data for five industrial and five developingcountries, we find that in most cases the labels "short-term"and "long-term" do not provide any information about the time-seriesproperties of the flow. In particular, long-term flows are oftenas volatile as short-term flows, and the time it takes for anunexpected shock to a flow to die out is similar across flows.long-term flows are also at least as unpredictable as short-termflows, and knowledge of the type of flow does not improve theability to forecast the aggregate capital account.     

Book Reviews

M. Arsjad Anwar, Thee Kian Wie, Iwan Jaya Azis, Pemikiran, Pdaksanaan, dan Perintisan Pembangunan Ekonomi[Concepts, Implementation, and Pioneering in Economic Development], Fakultas Ekonomi Universitas Indonesia and PT Gramedia Pustaka Utama, Jakarta, 1992, pp. xx + 700.

Adam Schwarz, A Nation in Waiting: Indonesia in the 1990s, Allen and Unwin, Sydney, and Westview, Boulder, 1994, pp. 370. Paper: A$24.95.

East Asia Analytical Unit, Expanding Horizons: Australia and Indonesia into the 22st Century,Department of Foreign Affairs and Trade, Canberra, 1994, pp. xviii + 346. A$34.95.

Sjahrir, Pikiran Politik[Political Ideas], LP3ES, Jakarta, 1994, pp. xiv + 191.

Sjahrir, Persoalan Ekonomi Indonesia: Moneter, Perkreditan dan Nenca Pembayaran[Problems of the Indonesian Economy: Money, Credit and the Balance of Payments], Pustaka Sinar Harapan, Jakarta, 1995, pp. xv + 205.

Sjahrir, Analisis Bursa Efek[Analysis of the Stock Exchange], PT Gramedia Pustaka Utama, Jakarta, 1995, pp. xiv + 169.

Sjahrir, Ekonomi Indonesia dalam Perspektif Bisnis[The Indonesian Economy in a Business Perspective], PT Jurnalindo Aksara Grafika, Jakarta, 1994, pp. xvi + 239.

Sjahrir, Kebijakan Negara Mengantisipasi Masa Depan[National Policy: Anticipating the Future], Yayasan Obor Indonesia, Jakarta, 1994, pp. xv + 251.

Sjahrir, Formasi Mikro-Makro Ekonomi Indonesia[Indonesia's Macro and Micro Economy], Penerbit Universitas Indonesia, Jakarta, 1995, pp. xii + 313

F.B.A. Bouman and Otto Hospes, Financial Landscapes Reconstructed: The Fine Art of Mapping Development,Westview, Boulder, 1994, pp. xi + 416. US$45.00

Robert Cribb (ed.), The Late Colonial State in Indonesia: Political and Economic foundations of the Netherlands Indies 1880–1942,Verhandelmgen van het Koninklijk Instituut voor Taal-, Land- en Volkenkunde 163, KITLV Press, Leiden, 1994, pp. xiii + 295.

Shinya Sugiyama and Milagros C. Guerrero (eds), International Commercial Rivalry in Southeast Asia in the Inierwar Period,Yale Southeast Asia Studies Monograph 39, Yale Center for International and Area Studies, New Haven, 1994, pp. ix + 222.

W.L. Korthals Altes, Changing Economy in Indonesia. Volume 15: Prices (Non-Rice) 1814–1940,Royal Tropical Institute, Amsterdam, 1994, pp. 175. Paper: Dfl. 48.00.     

An analysis of repressed inflation in two transition economies

We construct a simple model that tests for repressed inflation by estimating a true rate of inflation that explains behavior of observed money demand. We estimate the model using quarterly data for Czechoslovakia and Poland. Although our results should be viewed as preliminary, given the imperfect nature of our data, we do have strong evidence that, prior to 1991, there was considerable repressed inflation in Poland, while there was essentially no repressed inflation in Czechoslovakia.This paper was funded by a World Bank project on formerly planned economies. We would like to thank Jong-goo Park for suggesting the topic, and Fabrizio Coricelli and Adnan Mazarei for helpful discussions. The views expressed here are our own and do not necessarily reflect the opinions of the World Bank.