Becker’s utility approach to discrimination: A review of the issues

Conclusion In general, most studies have been unable to confirm the predictions of the Becker utility approach to discrimination by employers and employees. This lack of verification would seem to indicate that the observed wage differentials are generated by a different or more complex process. However, such a strong statement is premature in view of the measurement problem that has been present in most studies. Becker’s model is a characterization of how individual employers and employees behave in the market. Empirical testing of Becker’s model requires detailed information about the degree and level of contact between the races, the wage rates paid to each race, skills of each worker, and the manner of employment and placement of each race. Invariably the lack of such detailed firm data, particularly wage rates, forces researchers to use aggregative data of income or earnings averages and occupation of workers employed within a state or broadly defined industry in order to generalize how firms behave in the market. The necessity of using such data, however, results in a dichotomy between the original parameters in Becker’s model and the data utilized. Clearly the lack of a significant association between the data utilized and the parameters specified in Becker’s model undermines the credibility of such empirical testing. The empirical analysis on the implications of Becker’s theory of discrimination has left a wide variety of unsettled questions and much remains to be done.     

LOCAL VERSUS PRODUCER CURRENCY PRICING: EVIDENCE FROM DISAGGREGATED DATA*

The pricing behavior of firms is a central issue in international macroeconomics. Using the introduction of the euro as a natural experiment I find that year‐to‐year volatility in import prices among Eurozone members diminished by 4% on average after the introduction of the euro. Additionally, I show that the magnitude of the drop was commensurate with the drop in exchange rate volatility. On the other hand, when looking at exports, I find that the introduction of the euro had no impact on export price volatility. The results support the hypothesis of producer currency pricing.     

European integration or world integration?

Zusammenfassung Europ?ische oder weltweite Integration? -In dem Aufsatz wird untersucht, ob die europ?ische Integration seit Mitte der 70er Jahre auf Kosten der weltweiten Integration betrieben wurde oder ob die Europ?ische Gemeinschaft zunehmend in die Weltwirtschaft integriert wurde. Eng damit verbunden ist die Frage, ob-wie einige neuere Studien anzudeuten scheinen-der Au?enhandel innerhalb der Gemeinschaft einiges von seinem Schwung verloren hat. Es zeigt sich, da? nicht nur immer mehr Binnenm?rkte durch ausl?ndische Lieferanten versorgt wurden, sondern da? auch die Einfuhren aus Drittl?ndern st?rker gestiegen sind als die Einfuhren aus Partnerstaaten der Gemeinschaft. Im übrigen scheint der relative Rückgang st?rker auf sektorspezifischen Umst?nden als auf nationalen Besonderheiten zu beruhen.

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Résumé Intégration européenne ou intégration mondiale? -Dans cet article les auteurs analysent si l’intégration européenne fut poursuivie depuis le milieu des années soixante-dix aux dépens de l’intégration mondiale ou si la Communauté s’est intégrée de plus en plus dans l’économie mondiale. Etroitement lié à cette question est l’aspect si, comme des études récentes semblent l’indiquer, le commerce intra-communautaire a perdu un peu de son élan. Les auteurs démontrent que les producteurs étrangers ont gagné une part accroissante des marchés locaux et que, en même temps, les importations extra-communautaires ont accru plus rapidement que les importations des pays membres. De plus, les auteurs indiquent que la réduction relative est associée plus aux facteurs sectoriels qu’aux caractéristiques spécifiques des économies nationales.

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Resumen ?Integración europea o integración en la economia mundial? -Este trabajo analiza si la integraci?n europea desde la mitad de los a?os setenta ha sido perseguida a expensas de la integración en la economía mundial o si la Comunidad se ha integrado paulativamente a la economía mundial. Este aspecto esta vinculado con la pérdida de ímpetu en el comercio intraregional, como parecieran indicar algunos estudios recientes. Se muestra que no sólo una parte creciente de los mercados nacionales están siendo servidos por proveedores extranjeros, sino que las importaciones de países terceros también han aumentado más rápidamente que las importaciones de los pafses miembros. Además, la disminución relativa parece estar asociada más con factures sectoriales que con características nacionales específicas.

     

Financial frictions and real implications of macroprudential policies

I model a number of imperfections in financial intermediation that have implications for real economic activity in a production economy with technological risk. Partially opaque firms are financed by both debt and insider equity. Banks have market power over borrowers. There can be a prior bias in public beliefs about aggregate productivity (business sentiment). I investigate the dependence of equilibrium on the biased business sentiment and a prudential policy instrument (a convex dependence of bank capital requirements on the quantity of uncollateralized credit). Loss given default can be reduced by both a monetary restriction and a macroprudential restriction. Real implications of both are very similar in the aggregate, but macroprudential policies are more advantageous for bank earnings. On the other hand, the policies considered here are unable to reduce the number of defaulting firms (default frequency). Economic activity is highly sensitive to ??leaning against the wind?? actions on both fronts, so that using a macroprudential instrument to intervene against an asset price bubble has tangible welfare costs comparable to those of a monetary restriction. The costs can be offset by fine tuning capital charges as a function of corporate governance on the borrower side (specifically, by discouraging limited liability of borrowing firm managers).     

A Note Regarding the Condition Number: The Case of Spurious and Latent Multicollinearity

The detection of multicollinearity in econometric models is usualy based on the so-called condition number (CN) of the data matrix X. However, the computation of the CN, which is the greater condition index, gives misleading results in particular cases and many commercial computer packages produce an inflated CN, even in cases of spurious multicollinearity, i.e. even if no collinearity exists when the explanatory variables are considered. And this is due to the very low total variation of some columns of the transformed data matrix, which is used to compute CN. On the other hand, we may have the problem of latent multocollinearity which can be revealed by additionally computing a revised CN. With all these in mind, we figure out the ill-conditioned situations, suggesting some practical rules of thumb to face such problems using a single diagnostic in a fairly simple procedure. It is noted that this procedure is not mentioned in the relevant literature.     

Capitalism,competition, cooperation

Summary As the pace of globalization quickens, firms are up against a proliferation of actual and potential competitors. Meanwhile, competition between nations and regional groupings is heating up, and there is a whole strand of thought that looks at the struggle between different types of capitalism and socio-economic systems. Such a rivalry may lead to beneficial effects, but in many cases interdependence does not automatically produce order. In the search for the public iinterest, there is a need for cooperation to generate a degree of trust and consensus that is superior to what can be expected from the various forms of capitalism.Inaugural Francqui Lecture, 8/2/1994. Université Libre de Bruxelles     

Robert Browne and the Caucus of Black Economics

Robert S. Browne the founder of the Black Economic Research Center (BERC) and the Review of Black Political Economy was a charter founder of the Caucus of Black Economists. He played an important role in the leadership of the Caucus and its efforts to increase the supply of black economists, to expand research efforts on issues of relevance to black constituencies in urban and rural America. His entrepreneurial efforts have left an indelible record of achievements which continue to influence research by black economists and practical results for economic development institutions in black communities.