THE ECONOMETRICS OF THE HOLY GRAIL — A REVIEW OF ECONOMETRICS: ALCHEMY OR SCIENCE? ESSAYS IN ECONOMETRIC METHODOLOGY

Books reviewed in this article: David F. Hendry (1993) Econometrics: Alchemy or Science? Essays in Econometric Methodology     

Multiple regimes and cross-country growth behaviour

This paper provides some new evidence on the behaviour of cross-country growth rates. We reject the linear model commonly used to study cross-country growth behaviour in favour of a multiple regime alternative in which different economies obey different linear models when grouped according to initial conditions. Further, the marginal product of capital is shown to vary with the level of economic development. These results are consistent with growth models which exhibit multiple steady states. Our results call into question inferences that have been made in favour of the convergence hypothesis and further suggest that the explanatory power of the Solow growth model may be enhanced with a theory of aggregate production function differences.     

Employment,schooling and productivity growth

Summary This paper presents an empirical analysis of labour demand and labour productivity growth in The Netherlands. Assuming an aggregate production function with as factors capital and 3 types of labour, distinguished by educational attainment, cost minimization leads to a set of 3 labour demand relations to be estimated on time series data. Using the estimates and the implied elasticities, aggregate labour productivity growth is decomposed into factor substitution, autonomous factors, labour time shortening, economies of scale, utilization rates and the increased educational level of the working population. The contributions of substitution, utilization rates and education appear to be substantial, notably in the seventies.

List of symbols

Variables a _i Efficiency index of skill leveli - C production - h _i working-time index for skill leveli - g _i steady-state growth rate of skill leveli - K capital stock - L _i employment volume of skill leveli - L _i ^* desired level of labour skill leveli - p output price - p ^* desired output price - s _i ^* long-run static labour shares in the production value - p _k rental price of capital - P index of total factor productivity - P _l index of labour productivity - u _i utilization rate of skill leveli - u _k utilization rate of capital - w _i wage rate for skill leveli - y production volume - y _yij Hicks partial elasticities of complementarity - _i steady-state cost share of skill leveli - _k Bk steady-state cost share of capital - _f lf highest level price index in cost function nesting - _g 4 intermediate level price index in cost function nesting - _h 4 lowest level price index in cost function nesting - _i steady-state relative wage share of skill leveli - _ij Allen partial elasticities of substitution Parameters d _i l adjustment speed of skill leveli - d _p price adjustment speed - M mark-up on marginal costs - scale elasticity of production - _i distribution parameter in cost function,i = 3, g - _i distribution parameter in cost function,i = k, h - _i distribution parameter in cost function,i =1, 2 - _i autonomous labour productivity growth for skill leveli - _i cost share of skill level in base year - _f production cost index in base year - _i hours elasticity in labour efficiency index - group elasticity of substitution betweenL ₃ and (K, (L ₁,L ₂)) - _g Og group elasticity of substitution betweenK and (L ₁,L ₂) - _h 6h group elasticity of substitution betweenL ₁ andL ₂ We would like to thank B. Downey, G.M.M. Gelauff, A. Nieuwenhuis, J.M.M. Ritzen, J.C. Siebrand and an unknown referee for helpful comments on earlier drafts.     

Boundedly complete families which are not complete

Summary Completeness of a family of probability distributions implies its bounded completeness but not conversely. An example of a family which is boundedly complete but not complete was presented by Lehmann and Scheffe [5]. This appears to be the only such example quoted in the statistical literature. The purpose of this note is to provide further examples of this type. It is shown that any given family of power series distributions can be used to construct a class containing infinitely many boundedly complete, but not complete, families. Furthermore, it is shown that the family of continuous distributions , is boundedly complete, but not complete, whereU denotes the uniform distribution on [a, b] and {P _ϑ,ϑ ∈ IR}, is a translation family generated by a distributionP ₀ with mean value zero, which is continuous with respect to the Lebesgue measure.     

Urban development patterns in Indonesia

The author examines recent urban development in Indonesia. "Analysis of urban developments in Indonesia has been hampered in the past by weak data. Recently, the National Urban Development Strategy (NUDS) project has generated a set of improved data. This paper aims at elaborating and supplementing the NUDS study. After a discussion of definitional problems, an analysis is carried out of urban growth rates at the provincial level. Private investment is shown to be a principal determinant of urban growth rates. Other significant determinants are rural immigration and the present level of urbanisation. Private investment is shown to be strongly biased towards provinces with large urban areas. In addition, polarisation is studied at the level of individual cities. It is found that a period of rapidly increasing polarisation has come to an end during the last decade."     

Purchasing practices in a hospital environment: an ethical analysis

The critical state of the hospital industry, as previously described, generates a difficult decision environment for the materiel manager and those in the purchasing function. The unique life- and death circumstances of hospitals impose a further onus on those who manage them. In the name of saving lives, they can find a convenient excuse to disregard all moral principles, forgetting the Socratic dictum "it is not enough that one lives, but that one lives well." Without the moral "right stuff," they can easily give in to the seductions of momentary gains and glory through ethical short-cuts. There is wisdom and consolation in the words that "nice guys may appear to finish last, but usually they're running in a different race." Studies have established a direct relationship between corporate excellence and ethical values. The reality of competition in the hospital industry dictates that the integration of ethics into the life of the organization should happen by design and not by accident. This is what is meant by strategy. If hospitals would strive for excellence to survive and grow, they should have a strategy with a mission statement that also embodies its moral values and moral agenda. Such an approach does not guarantee that an organization will become immune to moral contamination, but it does provide an antidote.     

Maximizing purchase decision factors other than price

Assessing and acquiring technology does not have to be chaotic, driven solely by price, clinical preference, and emotion. With the tools available, it can be distilled to a process of organized common sense, which results in maximum flexibility for the user and allows materiel managers to procure the best, most cost-effective equipment for the hospital.     

Couple's literacy level and acceptance of family planning methods: Lorenz curve analysis

The authors study the acceptance of family planning methods according to the level of couple's literacy in 14 states in India during 1986-87, using the Lorenz curve. The Gini Concentration Ratio and Index of Dissimilarity were calculated by level of couple's literacy for vasectomy, tubectomy, IUD, and all method combined. Firstly, analysis found literates to have accepted vasectomy and IUD more than tubectomy. Secondly, among the 3 methods, a high Gini Concentration Ratio was found for vasectomy when the wife was literate. Moreover, when the wife was literate, the Gini Concentration Ratio of IUD acceptance was higher than the acceptance of IUD by the wife whose husband was literate. Thirdly, the same trend was observed when the husband was illiterate. It is therefore clear that the level of a woman's literacy is a key factor in securing the acceptance of male or female methods of family planning. Planners should therefore concentrate on literacy programs for females independently of their age. Increasing the level of female literacy may ultimately help improve the understanding of family planning methods, while these women may also motivate their husbands to undergo vasectomy which will ultimately foster the success of the family planning program.