WHY DID ECONOMIC MODELS FALSELY PREDICT A BUSH LANDSLIDE IN 1992?

Most economic models falsely predicted a landslide victory for former President Bush in 1992. Rather than winning by the predicted margin of eight to 12 percentage points, Bush lost by a margin of about four. Exit polls tend to eliminate the unique candidacy of Ross Perot as an explanation for the turnabout. This paper examines three factors: (i) changes in the proportion of the population in the military (a proxy for national security concerns), (ii) the number of consecutive terms of incumbency, and (iii) nonlinear interactions between the military variable and standard economic variables. Including these factors in an economic model of the 1992 presidential race avoids predictions of a landslide victory for Bush and also improves the model's overall power and stability.     

Discrimination Against Prounion Job Applicants

This study analyzes 95 unfair labor practices involving pre-employment discrimination against union adherents. The cases were heard either by the National Labor Relations Board or U.S. Court of Appeals between 1976 and 1986. Nonsupervisory, unskilled applicants who suffer preemployment discrimination by employers that display antiunion sentiments during union organizing campaigns have a lower probability of winning their cases than to skilled applicants. Pre-employment screening of job applications with prounion backgrounds or attitudes is often part of a larger pattern of unfair labor practices by management. The Dotson administration also supported management's rejection of prounion applicants at a significantly higher rate than did other NLRB administrations.     

book reviews

WOMEN FOR HIRE, A STUDY OF THE FEMALE OFFICE WORKER London School of Economics and Political Science A HANDBOOK OF INDUSTRIAL RELATIONS PRACTICE Personnel Director British Aluminium VOTES, VIRTUES AND VICES: TRADE UNION POWER THE TROJAN HORSE: UNION POWER IN BRITISH POLITICS School of Industrial & Business Studies University of Warwick WHITE COLLAR UNIONISM: THE REBELLIOUS SALARIAT Manchester Business School THE INTERNATIONAL YEARBOOK OF ORGANIZATION STUDIES Centre for European Industrial Studies University of Bath     

JOB DISPLACEMENT AND THE INTER‐TEMPORAL MOVEMENT OF WORKERS THROUGH THE EARNINGS AND INCOME DISTRIBUTIONS

This paper uses the Panel Study of Income Dynamics to examine how job displacement influences intragenerational earnings and income mobility. Job displacement increases the probability of downward labor earnings mobility for several years after separation occurs. Furthermore, the probability of being in the bottom half of the earnings distribution increases significantly, not only in the year of displacement, but also for several years afterwards. However, after considering additional measures of financial well‐being (income from other family members and government transfer payments), the short‐ and long‐term impact of displacement on movements throughout the distribution is reduced. (JEL J63, J65)     

Learning and the Effectiveness of Central Bank Forward Guidance

This paper examines the link between expectations formation and the effectiveness of central bank forward guidance. A standard New Keynesian model is extended to include forward guidance shocks in the monetary policy rule. Agents form expectations about future macro‐economic variables via either the standard rational expectations hypothesis or an adaptive learning model. The results show that the assumption of rational expectations overstates the effects of forward guidance relative to adaptive learning during an economic crisis. Thus, if monetary policy is based on a model with rational expectations, the results of forward guidance could be potentially  misleading.     

Responding to a Shadow Banking Crisis: The Lessons of 1763

In August 1763, northern Europe experienced a financial crisis with numerous parallels to the 2008 Lehman episode. The crisis affected merchant banks that were funded by short‐term credit instead of deposits. We use archival data to show that these “shadow” banks suffered a sudden loss of funding after the failure of a major bank. The central bank at the hub of the crisis, the Bank of Amsterdam, responded by broadening the range of collateral it accepted. The data also show how this emergency liquidity helped to contain the crisis, by preventing the collapse of at least two other major banks.     

SOUTH AFRICA'S POST‐LIBERALISED CAPITAL FLOWS AND BUSINESS CYCLE FLUCTUATIONS

This study used Christiano and Fitzgerald filtered correlation analysis to investigate the cyclical relationships between South Africa's post‐liberalised capital flows and domestic business cycle fluctuations. The results show that foreign direct investment inflows are counter‐cyclical and proactive, while the “hot” inflows are acyclical. Thus, South Africa's post‐liberalisation “hot” inflows have not been significantly associated with domestic business cycle fluctuations. In contrast, the capital outflows are found to be consistently procyclical and proactive, suggesting that the outflows are more significantly associated with domestic business cycle fluctuations than the capital inflows. In addition, it is found that the cyclical relationships between the capital inflows and the business cycle components of exports, household consumption and gross fixed investment are generally procyclical, except for portfolio inflows, which have a counter‐cyclical relationship with fixed investment. In contrast, the capital outflows are counter‐cyclically associated with exports and household consumption, and procyclically associated with fixed investment.