ALBERT

Notes: In markets, in which exchange requires costly search for trading partners, intermediaries can help to reduce the trading frictions. This intuition is modeled in a framework with heterogeneous agents, who have the choice between intermediated exchange and search accompanied by some bargaining procedure. The equilibria of such a game are characterized. In the case of a monopolistic intermediary, the tradeoff between the bid-ask spread and the costs of delay during private search determine the intermediary's clientele. In equilibrium the monopolist charges a positive spread. Traders with large gains from trade prefer to deal with him, whereas traders with relatively low gains from trade engage in search. In case of competition among intermediaries, the classical Bertrand result obtains, and bid and ask prices converge to the (unique) Walrasian equilibrium price. Thus, in the confines of the model, the Walrasian auctioneer of the market under consideration can be replaced by competing intermediaries. In addition a multiplicity of subgame perfect Nash equilibria emphasizes the coordination problems inherent in models of intermediation.

Notes: A number of recent Canadian and U.S. antitrust cases have involved allegations that manufacturers of durable products have refused to supply parts to independent service organizations, apparently to monopolize the market for repairs of their products. This paper provides a theory of these strategies and considers the welfare implications of judicial orders to supply. The refusals here are seen as necessary to protect manufacturers' program of price discrimination: Expensive repairs represent a way to select high-intensity, high-value users and charge them more. In addition to the usual ambiguity associated with the welfare effects of prohibitions of price discrimination, forcing competition in repairs can have the further damaging effect of reducing social welfare by inducing manufacturers to lower product quality.

Notes: The litigation crisis in this country is a subject of great importance to the chief executive officers of public uccounting firms. 1 will first address the problem's magnitude and its source and then speculate on the developments we might expect in the future. Like all forecasts, mine will certainly be wrung. I hope that my degree of error on the pessimistic side will be considerable.

Notes: Research and development (R&D) competition among firms has recently been extended to R&D competition involving research joint ventures. It was previously shown that in an industry conducting cost-reducing R&D followed by competition in the product market, if all firms both fully share R&D information and coordinate investments to maximize pint profits, final products prices are lower, and firms' profits are higher than with information shriving alone, joint profit maximization alone, or no cooperation. In this paper we question whether a single research joint venture (RJV) cartel is the best form of industry R&D coordination. We show that there are circumstances in which splitting a single RJV cartel into several competing ones yields lower product prices. Moreover, we show that in these circumstances, splitting the industry into exactly two competing RJV cartels would be best.

Notes: This paper studies the order of adoption of a process innovation, thin-slab casting, by U.S. steel makers. A game-theoretic model of technology adoption with capacity constraints indicates that incumbents are likely to trail entrants in adopting process technologies that reduce the minimal scale required to compete. Evidence from the case study also indicates, however, that the sorts of interactive effects emphasized by game-theoretic models may be dominated by the effects of competitors' heterogeneous precommitments.

Notes: Bidders in hostile takeovers have colluded in five separate instances. It is found that these collusive agreements did not affect the target's price significantly. A model is developed to explain this observation. A welfare analysis indicates that a positive probability of cartel formation can be socially beneficial and may or may not be beneficial to the target's shareholders, depending on the process generating takeover attempts. This sheds light on the existing policy debate concerning regulations of collusive agreements. An analysis of the existing case law is provided, which indicates that such collusive arrangements are legal at present.

Notes: 〈blockFixed type="quotation"〉The Directors of … Companies … being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in private copartnery frequently watch over their own.—Adam Smith, 1776, Wealth of Nations

Notes: Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life, by Avinash Dixit and Barry Nalebuff

Notes: In this comment on James Emshoff's (1993) paper,/〉 I will begin by briefly summarizing the paper. Then I will give my reaction to the issues raised in the paper from the perspective of an economist and professor of business strategy. As I discuss later, it is the work of Alfred Chandler, Jr., rather than work of economists, that is most relevant to the issues raised by Emshoff. In my view economists must understand the limitations of standard economic approaches to organizational issues in order to begin to make progress on issues raised by Chandler and Emshoff.

Notes: The paper analyzes a regulatory game between a public and a private payer to finance hospital joint costs (mainly capital and technology expenses). The public payer (inspired by the federal Medicare program) may both directly reimburse for joint costs (“pass-through” payments) and add a margin over variable costs paid per discharge, while the private payer can only use a margin policy. The hospital chooses joint costs in response to payers' overall payment incentives. Without pass-through payments, under provision of joint costs results front free-riding behavior of payers and the first-mover advantage of the public payer. Using pass-through policy in its self-interest, the public payer actually may moderate the under provision of joint costs; under some conditions, the equilibrium allocation may be socially efficient. Our results bear directly on directly Medicare policy, which is phasing out pass-through payments.

Notes: We consider communication of quality via cheap talk and dissipative advertising expenditures, when consumers have heterogeneous tastes for quality, and price information must be acquired through costly search. For search pods, cheap talk communicates quality when fixed costs are roughly constant across quality levels, while if fixed costs vary greatly with quality, then firms having the higher fixed-cost quality level use dissipative advertising. For experience goods, quality can be communicated by cheap talk in a range where low-quality firms have greater fixed costs, and low-quality firms use dissipative advertising if their fixed costs are greater still.

Notes: We show that asymmetric information may prevent firms with pure discount bonds from renegotiating their capital structure prior to the maturity of the debt, although this would increase the value of the firm when its prospects are poor. This inefficiency can be reduced if the firm issues debt with a risky intermediate debt payment, such as a coupon or a sinking fund payment. We also demonstrate that bankruptcy institutions leading to deviations from absolute priority can improve the timing of recapitalizations by financially distressed firms. Finally, we show that, under certain conditions, the optimal capital structure adjustment during financial distress consists of a convertible debt-for-straight debt swap.

Notes: In the audit literature, it was postulated that audit firms are differentiated due to their quality and, thus, the fees charged are a function of quality. We hypothesize that this may lead to audit firm specialization in different amounts of auditing, leading to a differential audit fee structure. This hypothesis is empirically tested by using a very large sample of audit fees paid to then Big Eight auditors. The results are consistent with the hypothesis in that three Big Eight auditors are observed to charge significantly different fees when compared with the other firms.

Notes: This paper develops a simple model of sequential innovations with a diversity of research lines. Competitive strategies of firms for R&D are analyzed at each stage in a sequence of innovations. We compare two alternative regimes of enforcing patent law, as a mechanism to provide adequate incentives for R&D at each stage. The regime that protects the research line gives monopoly rights to an entire line of research, hence limiting the utilization of the previous knowledge and retarding subsequent innovations. The other regime protects the product, which facilitates the use of previous knowledge at the expense of providing inadequate protection to the ideas embodied in the product, and results in underinvestment in the first stage.

Notes: This article examines the role that multimarket operations play in a firm's ability to preempt entry into new markets when presence in a market does not commit the firm to remain there. Success in one market affects a firm's incentives and, in turn, strategic power, to fight a rival fur survival in a related market. This is modeled as a way of attrition, and the risk-dominant equilibrium is derived. The model supports brand proliferation as a credible preemptive strategy for an established firm and also has implications regarding the strategic role of economies of scope and “deep pockets.”

Notes: Economic transition in Eastern Europe should generate market growth. In addition, current discussions on economic integration and the development of a free-trade area in Eastern Europe will improve market accessibility. These two forces will significantly affect the strategies by which external firms will choose to supply markets in Eastern Europe. This paper examines the ways in which supply strategy is likely to change. We show that both market growth and improved market accessibility will lead the external firms to switch from exporting to foreign direct investment. However, market growth is likely to lead to dispersed investment in the growing economies, whereas increased market accessibility, by establishing an integrated regional bloc in Eastern Europe, is more likely to lead to concentrated investment plus infra-regional exports to the remainder of the regional bloc. The switch from exporting to local production through foreign direct investment will favor consumers through lowered prices but will harm national producers by depressing profit margins.

Notes: This paper demonstrates that, when the manager of a poorly performing firm generates firm-specific rents, strategic considerations associated with anticipated future restructuring may lead to the adoption of risky operating policies. Furthermore, this bias toward risky policies may be exacerbated by increases in managerial entrenchment. This is the case even when the manager does not have an ownership stake in the firm. On the other hand, a manager of a firm that is performing well will prefer safer policies. These results are driven by endogenously determined management-borne costs of financial distress, and obtain under both restructuring regimes that enforce the priority of creditor claims as well as restructuring regimes that induce deviations from absolute priority.

Notes: This paper considers an agency model in which a principal delegates an agent authority to choose investment projects. The performance of the project depends stochastically on the agent's evaluation and operating efforts. The paper examines the conditions under which the principal prefers to assign production to a second agent. It is shown that the tasks will be assigned to two agents of the agent chooses an unobservable operating effort. The tasks will be assigned to one agent if the agent's evaluation and operating efforts are both unobservable and if disutilities of efforts are large relative to the profit from the risky project.

Notes: It is well documented that a firm may choose to offer underpriced securities in an initial public offer. An open question is why investment banks do not retain underpriced offers in their portfolio. We argue that the distribution of underpriced securities allows banks of high qualify to signal their value to their customers, promoting in this way their other product lines. We show that the total dollar value of underpriced securities distributed (rather than the percentage value) acts as the signal. We also find that, all else equal, larger customers and those with more elastic demand functions receive n larger total dollar value of underpricing.

Notes: This paper develops a theory to explain the frequently observed resistance offered by the management of target firms to high-premium takeover bids. Contrary to the popular perception of managerial entrenchment at the expense of the shareholders' interests, such resistance may be strategically designed to increase shareholder wealth by threatening to initiate an informal auction process fur the target involving other potential bidders. Remarkably, this strategy can be effective even when it is common knowledge that the other bidders do not have a higher reservation price for the target. The analysis also offers insights into division of takeover gains and several other takeover-related issues.

Notes: I study how profit-maximizing organizations make decisions. Members of organizations tend to have incompatible preferences over decisions, but willingness to pay for decisions plays a very limited role in actual decision making. A sizable empirical literature documents that people who provide critical services, are hard to replace, or deal effectively with external shocks are powerful; they have disproportionate influence over decisions. This can be profit maximizing because the right to shape the firm through its decisions renders the firm more attractive as an employer. Thus, the relative costliness of employees' departures should affect their relative power.

Notes: After defining households' productive time in non-SNA activities, the paper discusses the most lie quently used wage-based methods for imputing a value to this time. It argues that because the relation between market wages and household output is, at best, unknown, such valuations are not fruitful for economic analysis purposes. The paper then proceeds to show that it is possible to establish an output-related valuation of productive time which per se is relevant for economic analysis. Combined with time-use data, it can be used as a transitional measure for valuing household production at factors cost in a satellite account.

Notes: We use OECD data to examine inter-industry wage differentials (relative wages among industries) for 14 OECD countries over the period 1970–85. We find, first, that the industrial wage structures have shown remarkable stability over time in terms of rank order for all the countries in the sample. Second, despite their rank order stability, wage structures show a tendency to expand or contract. While the U.S. has shown increasing industry wage dispersion between 1970 and 1985, the pattern is very mixed for other countries. Unionization is a significant factor in explaining cross-country differences. Third, industry wage rankings show some evidence of becoming increasingly similar across nations over time, and this movement is associated with a convergence of per capita incomes. Fourth, industry wage differentials are positively related to an industry's productivity growth, output growth, capital intensity, and export orientation.

Notes: This paper describes the experiences of the Bureau of Economic Analysis (BEA) in the electronic dissemination of its statistical products. Section I describes the institutional setting. Section 11, the heart of the paper, is based on a review BEA recently undertook with a view to improving its procedures and policies for disseminating its information to the public. Section III draws conclusions from the review and raises some questions as a basis for comparisons among agencies.

Notes: This paper documents the changes in earnings capacity poverty that occurred between 1973 and 1088. Families are “Earnings Capacity Poor” if they are unable to generate enough income to lift them out of poverty, even if all working-age adults in the family work full-time, year-round. Data from the March 1974 and March 1989 Current Population Surveys indicate that earnings capacity poverty increased more rapidly than official poverty. Much of this increase can be attributed to the rise in earnings capacity poverty among whites, intact families, and family heads with more than a high school diploma. Most alarming, the percentage of children in earnings capacity poor families is considerably higher than it is among persons over eighteen; in 1988, nearly 15 percent of children under six lived in families that could not have escaped poverty even if the adults in their family were working and earning at their full capacity levels.

Notes: We derive criteria for ranking income distributions where households differ in equity-relevant non-income characteristics (‘needs’). using methods which do not require cardinal specifications of equivalence scales. We consider comparisons for situations where the distributions of needs differ (eg. Cross nationally or intertemporally), building on the results of Atkinson and Bourguignon (1987) and Atkinson (1992). The modifications required when the individual rather than the household is the income-receiving unit are also discussed. We illustrate the methods with an analysis of changes in social welfare and poverty in the U.K. between 1981 and 1986.

Notes: Estimates of capital stock normally equate different models of capital goods by their production costs at a base date (a concept known as method 1 or K), not by their current marginal products (method 3, or J). Some economists advocate that, instead, different models be equated by the base-date costs of providing characteristics of the goods, not of the goods themselves. The characteristics selected have, however, excluded the amounts of other inputs used in the production to which the good is devoted. Hence the method does not equate capital goods by their marginal products but instead by the gross products of the capital goods together with various amounts of associated inputs. Gordon recognizes this defect and believes he has remedied it empirically, but the steps he takes are too slight to support this view. It remains impractical to construct estimates that equate goods by their marginal products.

Notes: The formidable expansion in the scope of the United Nations International Comparison Project has brought into evidence limitations of the methodology used in the first three phases. The author considers that there are two indispensable conditions needed to give renewed impetus to the ICP: (a) the objectives must be redefined, and (b) the methodology must be built on an entirely new basis. He considers the broad lines of such an evolution to be the following.(a) The objective of volume comparison must be kept distinct from that of purchasing power comparison, given that both the basic material and the formulae to be used at the aggregate level differ in the two cases.(b) At the basic heading level, it is proposed, for both volume and purchasing power comparisons, to replace the multilateral approach by a “minimum scale” binary and unilateral approach, and to use the EKS method. This will make possible an improvement in the accuracy of the estimates, a reduction in the overall costs, and a drastic reduction in execution time. What is more, it would be possible to regionalize the worldwide comparison, in the sense that the results of the basic heading comparisons already obtained at the regional level for regional purposes can be used as an input in the framework of the worldwide comparison. At the aggregate level, in the framework of volume comparison, it is proposed that a constant price procedure in the spatial sense should continue to be used. It is, however, proposed that the prices of the set of countries (GK) be replaced by a structure of common “equi-distant” prices (G). This would permit the elimination of the significant systematic distortions observed in the comparison between rich and poor countries in the first three phases of ICP. What is more, this gives maximum stability to results obtained for the same countries at different geographical levels. By using a set of common “equi-distant” quantities, the same advantage can be obtained in the purchasing power comparison.

Notes: This paper explores the choices and potential biases involved in valuing one type of government expenditure, medical transfers, and in estimating its antipoverty impact. Three methodological approaches–(a measure of) government costs, (a measure of) cash-equivalent values and (a measure of) funds released–are contrasted both in concept and in practice. We assign benefits to individuals after assuming that Medicare and Medicaid provide insurance to all those who are eligible. The resulting estimates for 1968 and 1974 illustrate the efficacy of these medical transfers in reducing the number of persons in poverty. Two recent studies, one by the Congressional Budget Office, and the other by Morton Paglin, further highlight the importance of medical transfers for estimating poverty, despite the fact that we do not wholly agree with the methodologies which they employ. Our results indicate that in the aggregate, while medical care transfers have a substantial impact on poverty, the choice of a specific estimation approach has little effect on poverty estimates. However, for the elderly and possibly also for other groups (e.g. the rural poor), choice of estimation technique is quite crucial for estimating the extent of poverty.

Notes: In studies of income distribution household income is the common measure of household welfare, although household per capita income is better since it automatically “corrects” for household size. Perhaps the continued use of the former is a consequence of the belief that in practice the two give very similar results. This paper shows that in many cases those results differ substantially. Policy prescription based on household income rather than household per capita income can be very defective. The paper compares results according to the two income concepts for Malaysian data. U.S. data are then used in a comparison over time.The disparity between the two Malaysian distributions is illustrated by their cross tabulation. A quarter of the households in the lowest forty percent of the household income distribution is in the upper three quintiles of household per capita income; and 10 percent of the same lowest forty are in the highest two quintiles of the second distribution. The paper also shows that the distribution of benefits from public education-measured as the public costs of school years—is very inegalitarian if household income is used. The reverse occurs if household per capita income is used. Similar reversals occur in comparisons involving partitions by occupation and sex of head of household. Women-headed households, for example, have sub-mean household incomes but their household income per capita equals the mean. The paper also examines the differences in the age-income profiles of the two distributions. It then considers whether the much discussed secular stagnation in U.S. measures of inequality is changed if household income per capita is used rather than the usual household income measure. Use of the per capita concept results in a slight decrease in U.S. inequality between 1947 and 1972. Appendix 2 explores how long term growth in per capita incomes and the associated changes in the size composition of households may affect measurements of inequality.

Notes: Provision of “market goods” follows the decision rules of traditional microeconomics; pricing and resource allocation for such goods tend towards Pareto optimality. The provision of “collective goods,” by contrast, depends on political (or quasi-political) collective decision processes; beneficiaries often receive a share of collective goods free of charge or well below average or marginal (private or social) costs. No inherent tendency towards optimality may be presumed and separate analysis of collective goods becomes an essential part of national goals accounting.The national-income-accounts (NIA) distinction between personal consumption expenditures (PCE) and government purchases of goods and services corresponds roughly to a division between market goods bought by the consumer and a major category of “collective goods” (i.e. “public goods” provided by government). However, a significant proportion of PCE represents “collective goods” paid for by government, business, or nonprofit organizations and provided on behalf of the consumer, whereas a part of NIA government purchases represents services paid for by the consumer (i.e. “market goods”).This article develops operationally meaningful distinctions among “market goods,”“collective goods,” and “tied aid” (a mixed category with market-good and collective-good characteristics). These distinctions are determined by the nature of the decision processes–rather than by the characteristics of the beneficiary or the supplier. This classification is related to the national income accounts and major discrepancies are pinpointed. The blurring of the distinction among market goods, collective goods and tied aid is found to be most consequential in the NIA treatment of “education” and “medical care” services. NIA data for these two services are restructured for national goals accounting purposes in order to illustrate both the quantitative importance and the empirical feasibility of classifying benefits by their respective decision processes.

Notes: Recently there has been discussion concerning the renewal of the volume measurements of public sector services. This renewal has been proposed e.g. in the recent United Nations Draft Manual on Public Sector Statistics. In the present paper we discuss some theoretical and practical problems connected with this renewal. According to some preliminary calculations concerning the Finnish educational sector, the new methodology might lead to a considerable revision of figures of output and labour productivity in the public sector. The revisions are of such a quantity that they might cause significant changes in the measurement of the volume of the total gross domestic product. This is a fact which may still require reflection before the new methodology is generally introduced, even though the revisions as such may be highly desirable from several aspects.

Notes: Structural relationships estimated from data obtained in a benchmark study of the expenditures and prices of 16 countries are used to develop a table of real gross domestic product and shares of gross domestic product devoted to private and public consumption and investment for each of over 100 countries in the years 1950 and 1960 through 1977. Price level estimates for total product and the three components are also provided.

Notes: Taxes as well as government expenditures tend to transform income distribution; the higher they are in relation to GDP, the higher their potential influence appears. It is easier to trace the incidence of taxes than that of expenditures and studies of effects of expenditures on income distribution are not frequent. Changes of fiscal legislation and deficiencies in reporting systems and statistics frequently found in developing countries complicate the task still further.An investigation of this type in a developing country has to face a poorly developed data base and take advantage of different and dispersed sources of information.This paper presents the methodology used for estimating the influence of government expenditures a n income distribution in the case of Venezuela. Although the incidence of fiscal activities on income distribution in Venezuela might not necessarily be the same as in other countries, Venezuelan sources of information are not very different from those existing in other countries of similar level of economic and statistical development and procedures used could appropriately be adapted to other countries.

Notes: A number of rather traditional problems relating to the estimation of the national accounts have been raised in the recent literature. This paper examines five of these problems from the point of view of a government statistician working within certain time and resource constraints. Credibility, comprehensibility, theoretical validity, cost and analytical usefulness are the criteria which should aid in deciding how to treat such matters as the extension of the boundaries of economic production, proposed changes in the categorization of both final and intermediate expenses, the treatment of “total” welfare and estimation relating to the so-called underground economy.

Notes: The question addressed in this paper is: Why can't we have a good measuring rod of the economic and social performance of our society? The answers are basically positive but lie mostly in the direction of (1) avoiding simplistic solutions such as turning the national income accounts into a measure of social welfare and (2) providing the elements of an information strategy to obtain such a measure or more accurately such a set of measures.The proposed information strategy highlights five activities: (1) the presentation and analysis of welfare outcomes, an activity which is analogous to but broader than “social indicators”; (2) social accounting which includes economic accounting, demographic accounting, and time-use accounting; (3) model building and operation which, unlike accounting, are concerned with behavioral or causal relationships used to explain and project welfare outcomes; (4) hypothesis testing to develop new insights into economic and social behavior; and finally (5) the building and maintenance of a data base required for carrying on the aforementioned four activities.

Notes: The importance of non-personal shareholders in Malaysian corporations is widely acknowledged. However, up till now, very little has been known about the nature of these shareowners, their manner of equity ownership (especially their size of holdings hence degree of share concentration), their country of incorporation and how they themselves are controlled i.e. whether Malaysian or foreign. This paper attempts to fill this gap with data compiled from official shareholders' lists of the largest ninety-eight Malaysian incorporated companies engaged in manufacturing, for a point in time 1975–75, which is towards the end of the Second Malaysia Plan period. Some of the empirical findings are then compared with those of a few selected countries.

Notes: Book review in this article:JAMES MEADE: Stagflation Vol 1: Wage Fixing. George Allen & Unwin LA.

Notes: This paper provides a disaggregated productivity comparison between Japan and the U.S. for the period 1885–1990. It combines two detailed productivity comparisons for 1939 and 1975 with time series to provide a long-term sectoral perspective. There is much diversity in the Japanese experience. The agricultural sector has shown relative stagnation since 1885. The service sector showed considerable growth before the Second World War and reached high productivity levels in the post-war period. Within services there is great diversity in productivity levels. Japan's manufacturing sector has shown the fastest catch-up and its productivity level is currently close to that of the U.S.

Notes: This paper focuses on three questions: (1) Was mobility within the income distribution in the 1980s different from the 1970s? (2) Is there as much mobility when some measure of permanent income is used? and (3) Does movement within the income distribution imply real income changes'? Income mobility between 1969 and 1976, and between 1979 and 1986 is examined using real family income from the Panel Study of Income Dynamics. The results show that there is considerable movement within the income distribution when both annual and permanent income is used. This movement, however is generally not very great in either direction.

Notes: This paper makes a comparative analysis of the micro-data, the Family Income and Expenditure Survey (FIES) and the National Survey of Family Income and Expenditure (NSFIE) data, with the macro-data, the System of National Accounts (SNA), figures for the Japanese household sector. The overall FIES/SNA ratio is about 80 percent. In comparing the results to those of other countries, the figure seems to be not bad. However, the treatment of categories such as Gross Rent, Fuel and Power, and Medical Care and Health Expenses, require further consideration. In this regard we consider imputed rent for owner-occupied dwellings for the SNA and a sampling scheme for the FIES.

Notes: Income-only and income-net worth measures of elderly economic well-being are derived from a single public welfare function-optimizing model of household production and intertemporal resource allocation. These measures are estimated with data on United States elderly in 1984 from the Survey of Income and Program Participation. The income-net worth measure also incorporates independently estimated work-life expectancies and earnings replacement rates. Under both measures, minority, moderately disabled, and unmarried female elderly are the poorest sub-populations. Increasing poverty with age is found under the income-only measure, but not the income-net worth measure.

Notes: This paper demonstrates the proper use of the disaggregation of the Gini coefficient by factor components by deriving a formula of the elasticity of the Gini coefficient with respect to specific income components. The method is then applied to Australian household expenditure survey data to find the effects of various components of income on overall income inequality. The results are important in examining the effects of growth in specific components on the overall inequality and hence in policy decisions with respect to redistribution of income.

Notes: This paper uses register data on tax assessed income from 1951 to 1989 for a representative sample of Swedish men in order to compare the distributions of annual income and “lifetime” income. It is found that the dispersion of lifetime income is around 35 to 40 percent lower than typical cross-sections of annual income. It is income up to around 30 years of age that mainly explains this discrepancy in the magnitude of dispersions. From the age of 30 until 65 years the correlations between annual and lifetime income are quite high and the dispersion of annual income is not very much higher than the dispersion of lifetime income. An analysis of the evolution of income mobility shows that there is a slight tendency to rising mobility over time. This finding implies that the common approach to study the development of income distribution by using only annual income can be misleading.

Notes: The redistributive impact of the U.K. state pension scheme is examined. Benefit-cost ratios are calculated using individual lifetime earnings profiles constructed for a cohort of men drawn from cross-section data. The scheme is investigated at maturity and revenue neutrality is imposed in order to isolate the intra-generationally redisiributive effects of the pension scheme.The results suggest that differences in returns to the pension scheme are driven by differential mortality, which outweigh the redistributive effect of the two-tier benefit structure. Various reforms of the pension scheme are then simulated, and solved for revenue neutrality. The results suggest that a great deal of care is needed in formulating reforms if redistributive objectives are to be achieved.

Notes: The work on the introduction of the elements of the SNA into the official statistical practice of the former U.S.S.R. began in 1988 when estimates of the GDP using conversion keys were prepared. In 1991 the decision was made to implement the entire SNA gradually on the basis of the international standards. The methodology of compilation of the main accounts was formulated by the Statistical Committcc of the C.I.S. with the assistance of the OECD. It originally drew on the ESA with introduction of elements of the revised SNA and adaption to specific economic processes in the country. It required solution of a number of conceptual and statistical problems referring to the treatment, allocation and valuation of selected activities. The estimates of the main accounts were made for the former U.S.S.R. by sectors and by industries for 1988–90. This project has provided the basis for further work on implementation of the SNA in C.I.S. countries.

Notes: This paper explores the relation between economic growth and poverty, and develops the methodology to measure separately the impact of changes in average income and income inequality on poverty. The paper also provides a link between the growth rates in various sectors of the economy and the total poverty. The methodology proposed is applied to the data taken from the Côte d'lvoire Living Standards Survey conducted in 1985.

Notes: This microanalysis of the shadow economy is on informal family income achieving strategies. In particular we analyze both sexes' paid illicit work as well as unpaid work in household production based on the representative West German Sfb3–Secondary Occupation Survey 1984. We estimate the influence of various socioeconomic variables including a legal occupation. As a result, illicit work and household production “Do-It-Yourself” activities are important informal family income achieving strategies. The respective regional state of the formal economy or one's own activities in social networks is of greater importance for informal economic activities than an individual income from formal economic activities.

Notes: The growth of the public sector in the post-war period and the consequences of this development for economic growth is a strongly disputed subject of economic theory and policy. In this paper the development trends of state activities in the case of the Federal Republic of Germany are presented. The structure of public expenditures as well as the tax structure are taken into consideration and possible impacts on real economic growth are analysed. The negative correlations between some kinds of public expenditures (or taxes) and the growth rate of real GNP should not be taken in proof of the growth-retarding effects which might ensue from increasing state activities. It seems to be more likely that state activities have induced shifts of resources from the formal into the informal economy. Politicians should be aware that some measures of economic policy conventionally proposed will strengthen the movement into the informal economy, thus intensifying the current problems within the public budgets as well as in the social security system.

Notes: This paper uses five valuation methods to derive aggregate and per person estimates of the value of household work in the United States. Two general questions are posed: (1) what is the relationship between the aggregate estimates and the valuation method used, and (2) how do per person estimates vary by sex and earnings?The main observations of the paper are as follows: First, the aggregate value of household work is sizable regardless of the valuation method used. Second, aggregate estimates are extremely sensitive to the method of valuation. For example, the highest estimate is $475 billion greater than the lowest estimate. Third, contrary to earlier findings, opportunity cost valuation methods generally produce significantly higher estimates than market cost valuation methods. Fourth, per person estimates vary significantly by sex and level of earnings across valuation methods. Generally, market cost estimates.

Notes: Income generating functions are statistical tools used to explain income inequality and other economic outcomes and behavior. These functions are often associated with a strict human capital framework, but they need not be. Instead, they may be viewed as a reduced form equation summarizing the relationship between income and various personal and locational characteristics. Following this latter interpretation, we develop the regression and analysis of variance approaches to income generating functions and estimate them empirically using micro-economic data from one low income country, Colombia. Proceeding to increasingly parsimonious specifications of income generating functions, insights are gained into the structure of incomes in Colombia.

Notes: This paper deals with the influence of differing methods of deflation on the international terms of trade of the Federal Republic of Germany. The question to be discussed is what indices seem best suited for the deflation of exports and imports in national accounts. It will be shown that the use of alternative price indices for deflating exports and imports leads to considerable differences of the results at constant prices and so in terms of trade. In addition, terms of trade are presented by groups of countries.

Notes: In this paper a definition of poverty in terms of welfare is given. A method is developed to derive poverty lines from an individual welfare function of income. The model is extended to analyse the effect of several socio-economic characteristics on the level of the poverty line. An empirical application of the method is given based on data from a survey in eight European countries in 1979. Differences in the poverty lines both between countries and between socio-economic groups within each country are considered. Finally the number of people below these poverty lines is estimated for all countries in the group.

Notes: The Kingdom of Nepal is one of the least developed and least known countries. In order to understand the sometimes non-conventional estimating procedure used, a background section is included, describing the physical, socio-economic and institutional framework. In the second part of the paper some illustrative examples of the approaches used are given, the full description being published in four volumes, National Accounts of Nepal, National Planning Commission, Kathmandu. The last part of the paper considers the usefulness of national accounts based upon the market economy, and in general, the problem of applicability of international concepts to a developing country. What is the significance of international concepts to a developing country? What is the significance of national value aggregates in a country in which the unit of national currency does not serve as a nation-wide standard of value? Can a common denominator be found if the scale of values and the whole outlook of different groups are so different? What do people value, and does the rural population in localized economies put a monetary price on the value? Has the concept of labour force or employment, as used in industrial societies, any meaning in a society where all those capable, including small children, of contributing to daily survival do so? The conceptual problems have not yet been solved. National accounts are a useful first step in providing planners with symbols for telling a complex story in simple terms and as a kind of statistical reconnaissance, but as development planning is moving more and more in the direction of planning from below and into regional and rural development projects, household surveys are becoming essential planning and evaluation tools. Based upon twenty-five years of field experience, the author reflects upon problems and possible solutions, discussing managerial, training, substantive and statistical aspects.

Notes: This paper describes the composition of the public sector in the United Kingdom and traces the development and contribution to the economy of the three main sub-sectors-central government, local government and public corporations—over the past thirty years. Relevant data for output, employment, fixed capital formation and national wealth set the public sector into perspective with the economy as a whole and illustrate how its share of human and other resources has changed over the years. While all four measures show the public sector share of the total to have been around 30 percent in 1980, historically the changes have moved very differently. The slow, but fairly steady, increase in the share of employment and output contrasts with very marked changes in the other two measures. Although public sector fixed investment nearly doubled in real terms between 1950 and 1980 its share of total investment declined from 48 to 31 percent, a much smaller share being taken by dwellings, electricity supply and the railways. In terms of the share of national wealth the public sector moved from a state of indebtedness to the rest of the economy in the fifties and sixties to a position of holding nearly one third of the value of tangible and financial assets in the late seventies.A small part of the paper considers the international dimension, but because few other countries use the concept of a public sector, this section examines only the relationship between total tax revenue and GDP in a number of countries and employment in general government.The problems of determining the boundary of the public and private sectors occurs most frequently at the interface between public corporations and private enterprises; the rules for deciding classification are set out in so far as they can be specified.The last sections of the paper put the statistics into their policy context and consider the value of public sector aggregates. The conclusion is that a general case cannot be made to justify assembling public sector aggregates for all countries; the need will be determined by the economic policies being pursued in a particular country. Although the United Kingdom gives considerable prominence to a public sector financial aggregate, the Public Sector Borrowing Requirement, the functions of the public corporations and the rest of the public sector are so disparate that consolidated accounts for the public sector are no longer prepared.

Notes: Has the underground economy caused the increase in United States GNP in recent years to be understated relative to earlier periods? The ratio of employment to population provides powerful evidence that it has not. This ratio’ was as high in the middle 1970s as in previous periods and in 1978–80 rose to its highest level of the postwar era, suggesting that employment growth has not been understated. Employment series based on both establishment reports and household surveys yield exceptionally high ratios in recent years. This article provides a step-by-step explanation of why employment data are pertinent to the question raised about GNP.This explanation may be summarized as follows. GNP measured as the sum of final products is not understated unless GNP measured as the sum of national income and other charges against GNP is also understated. Appreciable understatement of the growth of charges against GNP as a result of growth of the underground economy is highly unlikely in the absence of understatement of the growth of wages and salaries, because of the way the estimates are made. Understatement of the growth of wages and salaries without understatement of the growth of employment based on establishment reports is highly unlikely because of the way data are collected.The article explains briefly the relationship between income tax evasion and errors in measuring the various components of charges against GNP. It also explains how illegal activities are meant to be handled in GNP measurement.

Notes: The United Nations' newly completed study of purchasing power parities covering 34 countries varied in region, income level, and form of economic organization shows the systematic differences between the usual view of the structure of the world economy arising out of international comparisons based upon foreign exchange rate conversions and the structure one sees when actual prices are available.The real per capita GDP of developing countries is understated relative to developed countries when exchange rates are used in converting countries' national income accounts to a common currency, with the degree of understatement for any two countries being inversely related to the per capita income difference between them. The reason for this is that relative prices in the non-traded goods sector are lower relative to traded goods prices in low income countries. The systematic pattern observed in the 1975 data of the 34 countries has been extrapolated over time and space to get estimates of GDP for other years and countries.In the absence of detailed price data, the real shares of final expenditures devoted to particular components of the total can only be estimated as the proportion of own currency total expenditure devoted to the components. The observed differences in the pattern of prices of poor countries relative to rich for different components makes this clearly wrong for international comparisons, and in systematic ways. For example, (i) the relative price of services compared with commodities in poor countries is lower than in rich; so the apparent tendency of the share of services to rise as a country's income rises disappears when real quantities are considered; similarly, (ii) the relative price of capital goods is greater in poor countries compared with rich ones, so the difference in investment ratios out of GDP between rich and poor countries is understated.

Notes: The change in goods and services available in a national economy brought about by the shifting of external price relationships is referred to as the terms of trade effects. This paper reviews the various methods which have been devised since the war to define and quantify such effects on the Gross National Product. The statistical annex shows that, as far as OECD countries are concerned, the differences between the various measures are not significant. Whereas the effects from terms of trade represented, on average, less than one half of one percent of the GNP of OECD countries during the 1960's the percentage has increased substantially since 1973, due most importantly to the increase in the oil price; by 1977 (on a 1970 price basis), it had reached 5 percent of GNP in Japan and up to 6 percent in Italy. On the other hand, the extreme case of Saudi Arabia where various formulas generate effects amounting to between one half and the whole of GNP, indicates that the measurement of terms of trade effects by various methods may give different results.

Notes: The concern with income distribution has always mainly existed because of a concern with individuals' economic welfare. In recent years, the question has arisen whether the distribution of annual income—the distribution most often studied—is the best proxy for the distribution of economic welfare. Other measures, such as lifetime income, have been proposed instead.The paper starts with a discussion of how to define and measure the distribution of lifetime income. By using a simulation model, which partly consists of estimated functions and partly of tax functions taken directly from tax laws, distributions of lifetime income, variously defined, are then constructed. These distributions are compared with each other, and with distributions of annual income. The simulations indicate that the distribution of lifetime income is considerably less unequal than the distribution of annual income. Whether inheritances are included or not seems to be of no importance for the inequality of lifetime income. If, on the other hand, we include the value of leisure time in lifetime income, inequality increases by about 10–15 percent. Distributions of income after tax have Gini coefficients which are approximately 25 percent less than the Ginis for the before-tax distributions. We thus find that the picture of inequality we get is very much dependent on which income concept we use.