Earnings inequality and the business cycle

Economists have long viewed recessions as contributing to increasing inequality. However, this conclusion is largely based on data from a period in which inequality was increasing over time. This paper examines the connection between long-run trends and cyclical variation in earnings inequality. We develop a model in which cyclical and trend inequality are related, and find that in our model, recessions tend to amplify long-run trends, i.e. they involve more rapidly increasing inequality when long-run inequality is increasing, and more rapidly decreasing inequality when long-run inequality is decreasing. In support of this prediction, we present evidence that during the first half of the 20th century, when earnings inequality was generally declining, earnings disparities indeed appeared to fall more rapidly in downturns, at least among workers at the top of the earnings distribution.     

The Democratic Efficiency Debate and Definitions of Political Equilibrium

An ongoing debate has been occurring within public choice for over a decade concerning the efficiency of democracy. Virginia Political Economy holds that political markets perform very differently from traditional markets. Chicago Political Economy, exemplified by the work of Becker and Wittman, maintains that political equilibrium, properly defined, is relatively efficient. I argue that the debate can be understood at least partially in methodological terms: Chicago views politics exclusively within the equilibrium framework of traditional economics, while Virginia draws at least implicitly on Austrian economics' view of the economy as a disequilibrium process. I contend that the factors which public choice scholarship has identified as distinguishing politics from markets—rational ignorance, majority rule, collective outcomes—affect the performance of politics as a process even if political equilibrium is relatively efficient.     

The riegle-neal act and local banking market concentration

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 greatly transformed the American banking system by allowing the widespread establishment of interstate bank branching networks. This paper examines possible effects on local banking market concentration that resulted from the provision in the Riegle-Neal Act that allowed states to opt-in to the establishment of de novo interstate branches. Regression analysis using data from more than seven hundred cities does not provide any evidence that allowing the establishment of de novo interstate branches caused increases in local banking market concentration. These results may help alleviate some concerns that passage of the Financial Services Regulatory Relief Act currently pending in Congress will result in lessened competition in local banking markets. The author would like to thank discussant Janice Breuer and other participants of the International Atlantic Economic Conference, held in Quebec City from October 16–19, 2003 for helpful comments and suggestions. The author would also like to thank Trevor Lyon for his valuable research assistance.     

The unification of Ronald W. Shephard's duality theory

Ronald W. Shephard developed four fundamental duality theorems. They relate the following four pairs of representations of the technology: cost function-input distance function, revenue function-output distance function, indirect cost function-indirect input distance function, and indirect revenue function-indirect output distance function. In this paper we show that all eight of these representations are equivalent. The implication of this equivalence is that there are twenty-four duality theorems and four inverse relationships involving Shephard's eight representations of technology.     

Revealed stochastic preference: a synthesis

Summary. The problem of revealed stochastic preference is whether probability distributions of observed choices in a population for various choice situations are consistent with a hypothesis of maximization of preference preorders by members of the population. This is a population analog of the classical revealed preference problem in economic consumer theory. This paper synthesizes the solutions to this problem that have been obtained by Marcel K. Richter and the author, and by J. C. Falmagne, in the case of finite sets of alternatives, and utilizes unpublished research of Richter and the author to give results for the non-finite choice sets encountered in economic consumer theory.Received: 13 March 2003, Revised: 11 February 2004, JEL Classification Numbers: D1, C6.The preparation of this paper was supported by the E. Morris Cox endowment at the University of California, Berkeley. I am indebted to Robert Anderson, Salvador Barbara, Werner Hildenbrand, Rosa L. Matzkin, and Aviv Nevo for useful suggestions and comments. I am especially indebted to Marcel K. Richter, who was the source of many of the ideas and arguments contained in this paper.     

Democracy and the Variability of Economic Performance

Sah (1991) conjectured that more centralized societies should have more volatile economic performances than less centralized ones. We show in this paper that this is true both for cross–country and within–country variability in growth rates. It is also true for some measures of policies. Finally, we show that both the best and worst performers in terms of growth rates are more likely to be autocracies. We argue that the evidence in the paper is consistent with the theoretical implications in Sah and Stiglitz (1991) and Rodrik (1999a).     

Results of a cross-national structured cognitive interviewing protocol to test measures of disability

This paper describes the Washington Group project to test a short battery of disability questions developed for national censuses. The study used an unusually structured cognitive test protocol and was administered to a total of 1,290 respondents selected from convenience samples in fifteen countries in Central and South America, Asia and Africa. The test protocol consisted of the six core disability questions followed by questions designed to illustrate: (1) whether core questions were administered with relative ease; (2) how core questions were interpreted by respondents; (3) the factors considered by respondents when forming answers to core questions; and (4) the degree of consistency between responses to core questions and a set of more detailed functioning questions. Additionally, demographic and general health sections allowed for an examination of comparability, specifically, whether test questions performed consistently across all respondents, or if nationality, education, gender or socio-economic status impacted the ways in which respondents interpreted or considered each core question.     

Re-exploring the relationship between flexibility and the external environment

The organizational structure literature has long posited that increases in uncertainty should lead to organic (adaptable) structures [T. Burnes, G.M. Stalker, The Management of Innovation, Tavistock Publications, London, 1961]. Similarly, the operations management literature has focused on the importance of flexibility as a competitive weapon [e.g., [De Meyer et al., 1989] Strategic Manage. J. 10 (1989) 135], and as a response to environmental uncertainty [Manage. Sci. 33 (1987) 509; Manage. Sci. 39 (1993) 395]. However, our recent attempts to empirically validate a relationship between environmental uncertainty and operational flexibility in manufacturing plants have failed to show a significant relationship [J. Operations Manage. 3 (1999) 307]. The present research attempts to rectify these contradictory findings by replicating and extending the works of [Manage. Sci. 33 (1987) 509] as well as [J. Operations Manage. 3 (1999) 307]. The results find no support for the proposition that firms that respond to increased uncertainty with increased flexibility will experience increased performance.     

Disentangling regulatory policy: The effects of state regulations on trucking rates

This paper combines state-level data on trucking rates with information on state-level regulations to estimate the independent effect on rates from three different types of motor carrier regulations: rate regulation; entry regulation; and the provision of antitrust immunity for decisions made jointly by motor carrier rate bureaus. The empirical results indicate that state-level motor carrier regulations generally increase trucking rates, with entry regulation having the largest effect in the LTL (less-than-truckload) sector and rate regulation having the largest effect in the TL (truckload) sector. The study also examines interaction effects among the three types of regulations and concludes that the combination of strict entry requirements and antitrust immunity leads to significant increases in trucking rates.This project was begun when both authors were in the Bureau of Economics of the Federal Trade Commission. The views expressed are those of the authors and do not necessarily reflect the views of the Commission or any individual Commissioner. We are grateful to Ed Rastatter of the Department of Transportation for granting us access to the data analyzed in this report, and to Bruce Allen of Wharton who provided them to us in machine readable form. We thank James MacDonald, Paul Pautler and Ed Rastatter for comments on an earlier draft. We also are grateful to Lynn Carpenter, Karen Condor, Effie Georges, Dolly Howarth, Andrew Kim, Georges Pascoe, and Carolyn Samuels for their research and programming assistance.