NEW ESTIMATES OF THE U.S. ECONOMY'S POTENTIAL GROWTH RATE

Using an Okun's law framework, the analysis here estimates potential growth for the 1990s as measured by both fixed- and chain-weighted GDP. It then decomposes estimated potential growth rates into labor productivity growth (LPG) and labor input growth (LIG) using a regression analysis to separate secular from cyclical changes. It compares estimates of potential output and trend productivity growth for the 1990s with estimates from earlier periods. Results indicate that eliminating the substitution bias associated with fixed-weight measures of real GDP raises estimated potential GDP growth in the 1980s but lowers it in the 1990s. A slowdown in labor force growth, with little or no change in long-term productivity growth, largely accounts for the implied slowdown in potential growth.     

TRADE UNIONS, EFFICIENCY WAGES, AND SHIRKING

Efficiency wage models typically study the determination ofwages and effort levels in the context of a labour market wherethe supply side is competitive. In this paper we examine theeffects of unionisation on wages and effort. In addition tothe monitoring technology where a noisy signal of each workersperformance is received, we propose and investigate a spot-checkmonitoring technology where the effort of a fraction of workersis measured exactly. We examine models where the union can bargainover wages alone, and over wages and effort. In all cases weshow that the popular wisdom that unions reduce effort is generallyfalse.     

State Used Motor Vehicle Disclosure Laws: Do They Make a Difference to the Consumer?

Because of recurring unfavorable consumer experiences, there have been a number of market and nonmarket responses to the quality uncertainty encountered in the used vehicle market. Several states have enacted used vehicle disclosure laws. This paper examines whether certain state used vehicle disclosure laws provide consumers with enough additional information so as to impact the quality mix of traded vehicles. The reported repair records of recently transacted vehicles in three states were examined: Wisconsin, Iowa, and Minnesota. Using Census data from the TIU Survey, pairwise tests of the equality of the mean maintenance expenditures of recently transacted vehicles from these three states were performed. Results were verified with a regression analysis. We were unable to find evidence that the currently mandated disclosure requirements in Wisconsin and Iowa were effective in increasing the number of good quality vehicles traded in the market. Our conclusions are drawn exclusive of any secondary benefits or costs that might accrue to the consumer and to society.     

BANK CAPITAL FORBEARANCE AND PUBLIC POLICY

Recently, the bank regulatory agencies have adopted capital forbearance programs to permit some troubled agriculture and energy banks to operate temporarily with capital levels below the regulatory minimum requirement. In a world with federal deposit insurance and a lender of last resort, bank capital is no longer viewed by all depositors as the primary protector of their funds. Thus, they reduce their market discipline. Bank owners/ managers are likely to respond by increasing their risk exposure in an attempt to regain profitability. If they win, they keep all the gains; if they lose, the losses are passed on to the Federal Deposit Insurance Corporation (FDIC). A preferred policy is to require these banks to raise additional capital at this time or to be sold. Capital forbearance is forbearance of incumbent bank management/owners, not of bank customers.     

In-home videotex shopping: potential adopters and non-adopters

This study was designed to identify potential adopters and non-adopters of videotex shopping. Data (n =205) were collected with a questionnaire following demonstration of a typical use of actual videotex shopping. As compared to non-adopters, potential adopters of videotex shopping were more likely to be social shoppers, price conscious, and were less likely to enjoy catalogue shopping. Potential adopters were also more likely to have prior awareness of videotex, a positive attitude towards merchants/service of videotex shopping and overall videotex services. However, they felt that current or demonstrated videotex shopping information was inadequate. In addition, differences existed between potential adopters and non-adopters in some demographics, videotex service needs and almost all videotex shopping merchandise needs.