Market Created Risk

We develop a multiperiod rational expectations model of securities market equilibrium in which equilibrium prices may move between periods even though it is common knowledge that no new information has arrived about ultimate security payoffs. This happens because investors know they have imperfect information about the endowments of other investors and this knowledge affects their probability beliefs about the prices that will prevail at the intermediate trading date. These beliefs are reflected in the equilibrium at the initial trading date when investors focus on the probabilities of intermediate capital gains and losses, rather than ultimate payoffs.     

The Fall and Rise of Keynesian Economics*

Keynesian economics came under much criticism in the 1970s This paper argues that the decline in Keynesian economics and the rise in, notably, new classical economics in this period related to their respective theoretical appeal rather than their ability to explain developments in the macroeconomy. As this has become increasingly recognized, and with the development of sound microeconomic foundations, Keynesian economics has again been on the rise.     

Spinoff/Terminations and the Value of Pension Insurance

This paper derives the value of Pension Benefit Guarantee Corporation (PBGC) pension insurance under two scenarios of interest. The first allows for voluntary plan termination, which appears to be legal under current statutes. In the second scenario, termination is prohibited unless the firm is bankrupt. Empirical estimates of PBGC liabilities are calculated. These show that prospective PBGC liabilities greatly exceed current reserves for plan terminations, that even under a bankruptcy-only termination rule, PBGC liabilities still would be quite sensitive to discretionary funding policy, and that the increasingly common practice of pension spinoff/terminations, substantially increases the present value of the PBGC's contingent liabilities.     

The Relative Effects of Unionism on the Earnings Distributions of Women and Men

This study examines the differential effects of union density on the degree of earnings inequality among women and among men. Our results suggest an equalizing impact of union density for all men and for both men and women who work year-round and full time. Union density does not appear to equalize and may even contribute to a disequalization of the earnings distribution for all women.     

Identifying the poor in the 1870s and 1880s1

Poverty lines devised throughout England and Wales in the 1870s and 1880s defined ‘the poor’, a new class not recognized by the poor law. This article provides an account of the poverty lines adopted, mainly by school boards, in about 40 different places; the context in which they were developed; and what has been retrieved of the reasons determining the adoption of specific poverty lines. In particular, it examines the principal controversies surrounding them, and the challenge they posed to the poor law; and, incidentally, compares them to the poverty lines proposed, many years later, by Booth and Rowntree.