Estimating the autocorrelated error model with trended data

A Monte Carlo study of the small sample properties of various estimators of the linear regression model with first-order autocorrelated errors. When independent variables are trended, estimators using Ttransformed observations (Prais-Winsten) are much more efficient than those using T–1 (Cochrane–Orcutt). The best of the feasible estimators isiterated Prais-Winsten using a sum-of-squared-error minimizing estimate of the autocorrelation coefficient ?. None of the feasible estimators performs well in hypothesis testing; all seriously underestimate standard errors, making estimated coefficients appear to be much more significant than they actually are.     

Macro effects of interest-sensitive aggregate supply

This paper investigates the implications of the negative effect of the real interest rate on aggregate supply. The micro foundations of this effect are first explained. The effect is then incorporated into a dynamic macro model with inflation and rational expectations. If the wealth effect on consumption is large, an increased interest sensitivity of aggregate supply enhances stability. If the wealth effect is small, increased interest sensitivity of supply is stabilizing up to a point, and destabilizing beyond that. Furthermore, an increased interest sensitivity of aggregate supply enhances the positive effect of the monetary growth rate upon steady-state output, and it enhances the negative effect of government spending upon steady-state output.     

Mauritania: The cost-effectiveness of EEC food aid

The value of EEC food aid to Mauritania is assessed. Given such factors as poor record keeping, political instability as a unique import/export situation, the authors conclude that only one of the three commodities supplied under the 1978 EEC programme could be considered cost effective.     

Measurement of Compensation: Union and Nonunion

For many purposes, the economic impact of unions is better measured by the proportion of union wages in total payrolls rather than by the proportion of unionized employees in the overall workforce. We use recently available Current Population Survey data to generate estimates of the former. We also show that published data from the Survey on median union and nonunion wages produce substantially larger estimates of the union 1 nonunion wage differential than figures based on mean wages. Finally, we note that the Bureau of Labor Statistics' Employment Cost Index gives undue weight to the union sector because of its Laspeyres methodology.