The complete incremental cost test for cross-subsidies with a sub-modular cost function

The complete Incremental Cost Test for cross-subsidies can be difficult to apply to a multi-product enterprise because every possible subset of products must be tested. However, this combinatorial problem can be avoided when the enterprise’s cost function is sub-modular by identifying the smallest subset of products causing the maximum cross-subsidy. This subset contains all of the products, and only those products, that are responsible for the cross-subsidies left by a stipulated set of prices. In addition, the subset can often be identified with a simple and efficient Myopic Algorithm. The algorithm should be particularly useful as a method for detecting cross-subsidies in regulated enterprises and networks because the cost functions for these industries are typically sub-modular.     

Using disaster planning to optimize expenditures on financial safety nets

Using a multiperiod model, this paper offers a benchmark standard for efficient safety net management. This standard embodies a market-mimicking strategy for identifying, preventing, and resolving bank insolvencies. Around the world, governmental reluctance to acknowledge weaknesses in their crisis prevention efforts supports an underinvestment in contingent plans for handling financial disaster. The model features the hypothesis that this underinvestment misserves taxpayers by increasing the ability of stakeholders in insolvent banks to extract implicit and explicit subsidies when and as the threat of an actual crisis intensifies.The William S. Vickrey Distinguished Address presented at the Fiftieth International Atlantic Economic Conference, October 15–18, 2000, Charleston, SC.     

Are computers driving real wages down?

The annual growth in mean employee compensation plummeted from 2.6% in 1947–73 to 0.4% in 1973–2003. Using both time-series regression and pooled, cross-section, time-series regression analysis for 44 industries over the period 1953–2000, we find that earnings growth is positively related to overall productivity growth, capital investment excluding computers, and the unionization rate. We find also that computerization has a significant negative effect on earnings growth, but no evidence that the growth of skills or educational attainment has any statistically significant effect on earnings growth. The dominant factors explaining the slowdown in wage growth are decline in the unionization rate, slowdown in both TFP growth and overall capital investment, and acceleration in computer investment.     

THE WEALTH EFFECTS OF INCOME INSURANCE

Precautionary savings models suggest that wealth should rise with income risk. Risk is reduced by means-tested transfers, however, which implies that transfer programs should discourage private wealth accumulation. We offer a comprehensive empirical assessment based on variation across states in the generosity of a number of programs, specifically unemployment insurance and means-tested transfers (Aid to Families with Dependent Children and Food Stamps). We use monthly data on married couples from the Survey of Income and Program Participation (SIPP) to regress wealth on income, income risk, and various measures of transfer generosity. The results support the precaution-ary savings model and reveal moderate negative wealth effects of both unemployment insurance and means-tested transfers, with an elasticity of about −0.18.     

The leontief question: A Cobb-Douglas approach to simulating the U.S. income distribution in Autarky

Zusammenfassung Leontiefs Frage: Ein Cobb-Douglas Verfahren zur Simulierung der U.S.-Einkommensverteilung bei Autarkie. - Die Frage, die Leontief 1956 in seinem klassischen Artikel über die komparativen Vorteile der USA stellte, war, wie sich die Einkommensverteilung bei Autarkie von derjenigen bei internationalem Handel unterscheide. Normalerweise ist es notwendig, ein Modell des allgemeinen Gleichgewichts mit prohibitiven Z?llen zu simulieren, um zur Einkommensverteilung bei Autarkie zu gelangen. In diesem Artikel wird jedoch gezeigt, da\ in einer Volkswirtschaft, die dadurch charakterisiert ist, da\ die Konsumentenpr?ferenzen und die sektoralen Produktionsfunktionen vom Cobb-Douglas-Typ sind, der Zustand der Autarkie durch eine einfache Matrix-Multiplikation simuliert werden kann. Die Faktoranteile bei Autarkie werden als unabh?ngig vom Faktorangebot abgeleitet. Das Paradoxon wird best?tigt, wenn Kapital und Arbeit homogen sind, w?hrend eine Disaggregation die Ergebnisse erheblich beeintr?chtigt.

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Résumé La question de Leontief: Une approche Cobb-Douglas à simuler la distribution de revenu des Etats Unis en autarcie. - La question posée par Leontief dans son article classique en 1956 sur l’avantage comparatif est, comment la distribution de revenu sous l’autarcie se compare avec celle d’une économie ouverte. Généralement, il est nécessaire de simuler un modèle d’équilibre général avec des droits de douane prohibitifs pour obtenir une distribution de revenu autarcique. Cependant, les auteurs démontrent que, dans une économie caractérisée par des préférences des consommateurs et par des fonctions de production sectorales de type Cobb-Douglas, l’autarcie peut être simulée par une simple multiplication de matrice. Les portions des facteurs autarciques sont dérivées comme être indépendantes de l’offre des facteurs. Le paradoxe se confirme si le capital et la main d’oeuvre sont homogènes, mais une désagrégation affecte le résultat gravement.

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Resumen La pregunta de Leontief: un modelo Cobb-Douglas para simulaciones de la distribución del ingreso en los EEUU bajo autarquía. - La pregunta que Leontief formuló en su artículo clásico (1956) sobre las ventajas comparativas de los EEU fué, en que se diferencia la distribución del ingreso bajo autarqufa de la que prevalece bajo comercio internacional. En general es necesario simular un modelo de equilibrio general con aranceles prohibitivos para obtener la distribución del ingreso bajo autarqufa. Nosotros, empero, demostramos que en una economfa caracterizada por preferencias de los consumidores y funciones de producción sectoriales del tipo Cobb-Douglas la situación bajo autarqufa puede ser simulada através de una simple multiplicación de matrices. Las cuotas correspondientes a los factores bajo autarquía se derivan como si hieran ofertas independientes de factures. La paradoja se confirma para capital y trabajo homogéneos, pero los resultados son muy sensibles al nivel de desagregación.

     

Consumer's attitudes toward lawyers with regard to advertising professional services

The results of this study indicated that consumers had a favorable attitude toward advertising by lawyers, though some specific differences were found between users and nonusers of legal services. The importance of consumer demographic characteristics and the appropriateness of advertising media were also examined. The major implication is that the traditional void in advertising activity by lawyers should now be reexamined.