Testing price equations

How inflation and unemployment are related in both the short run and long run is perhaps the key question in macroeconomics. This paper tests various price equations using quarterly U.S. data from 1952 to the present. Issues treated are the following. (1) Estimating price and wage equations in which wages affect prices and vice versa versus estimating “reduced-form” price equations with no wage explanatory variables. (2) Estimating price equations in (log) level terms, first difference (i.e., inflation) terms, and second difference (i.e., change in inflation) terms. (3) The treatment of expectations. (4) The choice and functional form of the demand variable. (5) The choice of the cost-shock variable. The results suggest that the best specification is a price equation in level terms imbedded in a price-wage model, where the wage equation is also in level terms. The best cost-shock variable is the import price deflator, and the best demand variable is the unemployment rate. There is some evidence of a nonlinear effect of the unemployment rate on the price level at low values of the unemployment rate. Many of the results in this paper are contrary to common views in the literature, but the empirical support for them is strong.     

Individual values and business ethics

The necessity for considering individual values when attempting to institutionalize ethics is discussed. Techniques for individual values examination are outlined in the context of their organizational application. Suggestions are made concerning possible mechanisms through which organizations can encourage individual values awareness and concluding remarks emphasize the importance of managerial commitment to the overall effort.Dr. Coye is a Visiting Assistant Professor of Management at DePaul University. He holds a Ph.D. from the University of Oregon, an MBA from the State University of New York at Buffalo, and a B.Sc. from the U.S. Coast Guard Academy. He teaches and conducts research in Organizational Behavior and Human Resource Management.     

Full-information estimates of a nonlinear macroeconometric model

Results of estimating a large-scale, nonlinear macroeconometric model by full-information maximum-likelihood, nonlinear three-stage least squares, and nonlinear two-stage least squares are reported in this paper. The computation of the estimates is first discussed, and then the differences among the estimates are examined.     

Estimating leisure goods models on time series of cross sections

This paper analyses the joint modelling of labour supply and consumer expenditure in a utility maximizing framework. A recent demand system (AIDS) is augmented to include labour supply and incorporate time series/cross section wage rate variation and, then, estimated on pooled F.E.S. data [Family Expenditure Surveys]. A method of non linear FIML is applied. The paper questions the near unanimous ‘evidence’ on backward bending labour supply in previous studies and, using counter evidence, argues that such a bend could have been partly due to the restrictive utility forms usually employed. In addition, hypotheses relating to effects of price/wage movements on composition of ‘full income’ are tested, and the welfare implications of the estimated parameter estimates worked out.     

Optimal taxation and top incomes

In many high-income countries over the past three decades there has been both large growth in inequality of wages and income and a shift in the burden of taxation from the top to the middle of the income distribution. A literature has developed which focuses on optimal tax rates for the top 1 % of the income distribution. In contrast, this paper considers the effect of inequality growth on the structure of a piecewise linear tax system defined over the entire income distribution. Our results suggest that the appropriate response to the increases in inequality would have been a shift towards a tax system with a lower tax rate in the lower half of the distribution together with a highly marginal rate progressive structure in the upper half, a clear differentiation between the top 10 % and the top 1 % and a higher top tax rate. Further inequality growth strengthens these characteristics of the optimal tax structure.     

An information-based model for the differential treatment of gains and losses

This study defines reporting conservatism as a higher verification standard for probable gains compared to losses and builds a model that endogenously generates optimal behavior resembling an asymmetric preference for gains versus losses. Our model considers the setting where one party produces a resource and another tries to expropriate it. The key factor determining the extent of the gain-loss asymmetry is the level of information asymmetry or trust between the two parties. The information asymmetry-based results of our model provide a simpler explanation for the vast empirical literature on conservatism, where the bulk of the economic relationships among the parties appear to be information-based with little direct relation to explicit debt contracts, a factor that has been the focus of theoretical arguments. We also suggest new empirical analyzes.     

Just-in-time purchasing: a case study

This article presents a case study on how Hutchinson Technology Incorporated (HTI) organized and implemented just-in-time (JIT) purchasing.     

International Trade,Migration and Unemployment – The Role of Informal Sector

This paper provides an elaborate general equilibrium framework by including informal economic activities in a model of trade, migration and unemployment. Existence of informal activities is critical in generating positive employment effects of liberal trade policies. Following a tariff cut informal wage increases and rate of unemployment goes down under reasonable conditions. Next we generalize the benchmark model to capture the phenomenon of sequential migration: from agriculture to urban informal sector, and then to urban formal sector. Positive employment effect of reformatory trade policy partly owes to the fact that the presence of informal sector directly reduces the cost of migration and, hence, further induces the process of outmigration from agricultural sector. The paper also extends the benchmark model to include both informal intermediate and final good.