ALBERT

Notes: I present an integrated survey of management strategy, which examines organizational design, competitive strategy, and public policy considerations. In addition, 1 offer suggestions on how economic analysis can be applied in unifying and developing management strategy as a field of study.

Notes: Under prospective pricing, payers for health care essentially use price regulation of hospitals as a way of indirectly regulating the provision of treatment intensity. This paper presents a theory of how a nonprofit hospital selects treatment intensities for its products given the payer's choice of prices and then determines how the payer should select prices in light of this theory. The main result is that, in equilibrium, the ratio of price to marginal cost will vary across products inversely with the elasticity of demand with respect to treatment intensity. This means that, generally, the hospital will earn positive (negative) accounting profit on products with low-(high-) intensity elasticities of demand.

Notes: Legislation to create optional no-fault insurance (ONFL) programs has recently been enacted in Florida and Virginia. ONFI programs provide compensation to patients when certain medical complications arise, provided the patient agrees not to sue the doctor for additional damages. The optimal design of ONFI programs is explored in this paper, focusing on the incentive effects of ONFI programs. The question of whether ONFI programs should be funded entirely by participating doctors, or whether social subsidies are optimal, is examined.

Notes: When it was legal, resale price maintenance (RPM) was commonly observed on items such as aspirin, pens, pencils, toothpaste, soap, shaving cream, and milk. In providing a theory that is based on compensating retailers for their opportunity cost of shelf space, and that does not hinge on the existence of externalities in nonprice competition, this article explains why a manufacturer might impose RPM on these and many other products. By contrast, the use of RPM on food, grocery, and drug store items is not easily explained by standard theories such as free riding on presale services and quality certification by high-priced retailers.〈blockFixed type="quotation"〉The typical supermarket has room for fewer than 25,000 products. Yet there are some 100,000 available, and between 10,000 and 25,000 items aye introduced each year./〉

Notes: Why does the cost of organizing particular activities differ across competitors? This article explores in detail the organization of Nucor, a steel minimill that has sustained a significant cost advantage over its competitors. Nucor's past success highlights the complementarities among organizational policies and competitive advantage as well as barriers to the imitation of apparently superior organizational arrangements. The case study also suggests avenues for additional empirical and theoretical research.

Notes: What accounts for the diversity and limited concentration that has long characterized the organization of the advertising agency industry? This question is addressed by treating an advertising agency as a multiproduct firm. The firm's product line or service mix is defined in terms of the set of different media categories where an agency places the advertising messages that it creates on behalf of its clients. Evidence is presented indicating that the structure of demand and costs in the advertising agency industry conforms to the conditions that MacDonald and Slivinski showed were required for an industry to sustain an equilibrium with diversified firms.Building on this framework, we formulate a set of three hypotheses relating to the realization of product-specific scale and scope economies. The first two hypotheses posit that given low fixed costs and minimal entry barriers, both media-specific scale and scope economies are available and can be exploited by relatively small-size agencies. The third hypothesis suggests that large agencies may experience diseconomies of scope as a consequence of excessive diversification induced by two pervasive industry institutional phenomena: (1) “bundling” of agency services to match client demand for a mix of media advertising, and (2) “conflict policy,” which prohibits an agency from serving competing accounts and operates as a mobility constraint.Utilizing a multiproduct cost function, we estimate media-specific scale and scope economies for a cross section of 401 U.S. agencies in 1987. The results obtained support the set of three hypotheses outlined above. The paper concludes with a discussion of the implications of these findings for the restructuring currently underway in this industry.

Notes: Recent advances in the theoretical literature have greatly expanded our understanding of the forces that shape the competitive dynamics of research and development, but a paucity of sufficiently detailed empirical data has left these insights relatively untested. We draw on unusually detailed qualitative and quantitative infernal data provided at the research program level by 10 major pharmaceutical firms to explore the usefulness of the modern literature as a source of insight into the dynamics of competition in ethical drug discovery.Our analysis focuses on one particularly compelling aspect of the literature: the suggestion that in “winner take all situations,” competition in R&D becomes a Prisoner's Dilemma, leading to overinvestment in research. Without adequate measures of the social return to innovation, we can say nothing about whether there is “too much” or “too little” research undertaken by the industry, but our results do not support the suggestion that R&D investment in drug discovery is driven by the “tit-for-tat” or simple reaction function models hinted at by the institutional literature. First, R&D investment is only weakly correlated across firms once common responses to exogenous shocks are accounted far, and second, rivals' R&D results are positively correlated with own research productivity, which we interpret as evidence for extensive R&D spillovers rather than the depletion externality implied by “winner take all” models.These results are not, of themselves, sufficient to reject the hypothesis that investment behavior in the industry is driven by strategic considerations since there is theoretical support for a wide variety of observable behavior as equilibrium outcomes of strategic interaction. Nonetheless, they suggest that the more extreme forms of rent dissipation identified in the literature are probably poor characterizations of the reality of competition in pharmaceuticals. Our results point both to the need to develop theories that incorporate richer models of possible payoff structures, adjustment costs, and firm heterogeneity and to the need to collect empirical data that is comprehensive enough to enable one to test them.

Notes: Empirical work has failed to keep pace with recent advances in transaction cost theory and the theory of contract. The first econometric analysis of its kind is reported by using a new data set of small subcuntractors making specific inputs for customers in the engineering industry. The use of formal contracts is found to be strongly associated with specific investment and other variables measuring technological complexity and vulnerability to potential opportunism by customers. Furthermore, despite typically long-term relationships, over half of subcontractors avoid making efficient, specific investments. Overall, we find strong support for the transaction cost theory of contracts.

Notes: We examine the relationship between chief executive officer (CEO) compensation and acquisition activity subsequent to corporate restructurings in a sample of 152 firms created by a voluntary corporate spin-off. We also investigate the linkage between these relationships and the stock market reaction to the initial restructuring announcements. Surprisingly, CEO wealth in the form of stock and options is strongly related to friendly and hostile acquisition activity, respectively. Moreover, the stock market appears to anticipate this subsequent acquisition activity. These results ask us to rethink our understanding of the motivational properties of equity ownership and the stock market's reaction to voluntary corporate spin-off announcements.

Notes: This paper studies the firm's choice between implicit and explicit contracts as alternative methods of assuring product quality. The relationship between these two contractual forms is studied using a dynamic model with imperfect monitoring and team moral hazard where both the firm and the consumer take unobservable actions that affect product performance. The firm chooses the contractual arrangement that maximizes expected profit. Identified are conditions on the primitive attributes of the transactions and on the firm's environment that can help explain why firms might decide to use explicit contracting, implicit contracting, or a combination of the two. I also show that there are conditions under which the introduction of reputation causes explicit contracts to be more uniform and less sensitive to the details of the transaction than implied by static models.

Notes: We study the firm's incentives to engage in research for pollution-control technologies and to adopt new technologies that if discovers or that are discovered by other firms. Licensing of discoveries is assumed possible. We also study the regulator's problem in designing optimal environmental regulations that both control pollution and provide incentives for research. Technology adoption standards are part of the optimal regulation. Another finding is that making the adoption standard stricter reduces research.

Notes: We investigate the role of price advertising in a market where consumers are imperfectly informed about prices. We consider a monopolist whose demand depends on price and advertising expenditure. This demand function is derived from optimizing behavior of consumers. Uninformed consumers may pay a cost to visit the seller and obtain price information. Advertising enables the monopolist to increase the number of informed consumers. In equilibrium the uninformed consumers form rational price expectations, and the seller necessarily adopts a random pricing and advertising strategy.

Notes: A model of advertising is presented in which consumption experience is an imperfect indicator of product quality. In equilibrium, neither price nor advertising signal the quality of newly introduced goods. Advertising of established products can be a signal of quality, but if it is, it must be an imperfect signal leaving residual uncertainty that influences consumers’ repurchase decision. A set of observable implications follow.

Notes: A model of procedural decision making in firms is combined with an oligopoly model to study the effect of limited managerial cognition on firm flexibility. It is argued that a firm may vary its flexibility, and, hence, that there exists a trade-off between decision-making costs and costs due to imperfect adjustment to the environment. The main conclusions are the following: (1) The level of flexibility chosen by firms tends to be too low, from a social welfare point of view. (2) Entry reduces firm flexibility. Aggregated flexibility in the market may, however, increase in which case consumers are unambiguously better off. (3) Integration of isolated markets increases firm flexibility and consumer welfare.

Notes: This paper studies a model in which two payers contract with one hospital. True costs per patient are not a possible basis for payment, and contracts can only be written on the basis of allocated cost. Payers choose a contract that is fully prospective or fully based on cost allocation, or a payment scheme that would give some weight to each of these two. We characterize the payers'equilibrium contracts arid show how in equilibrium hospital input decisions are distorted by the payers’ incentives to engage in cost shifting. Two cost-shifting incentives work in opposite directions, and equilibrium can be characterized by too little or too much care relative to the socially efficient level.

Notes: This paper compares the cost and quality incentive effects of cost reimbursement and prospective payment systems in the health industry. When a provider cannot refuse patients who require high treatment costs or discriminate patients by qualities, optimally designed prospective payments can implement the efficient quality and cost reduction efforts, but cost reimbursement cannot induce any cost incentive. When the provider can refuse expensive patients, implementation of the first best requires a piecewise linear reimbursement rule that can be interpreted as a mixture of pure prospective payment and pure cost reimbursement, Under appropriate conditions, prospective payment can implement the first best even when the provider can use qualities to discriminate patients.

Notes: While the economic approach to the politics of regulation emphasizes the importance of organized economic interests in shaping policies, political institutions in which regulatory agencies are embedded may also have significant effects. By including both economic influences and characteristics of political institutions in a model of price setting by state regulators, this paper demonstrates that both shape regulatory behavior in the telecommunications industry. Whether commissioners are elected or appointed, whether they face confirmation by a legislature, and whether a single party controls both executive and legislative branches of state governments influence the level of prices charged for basic services.

Notes: We investigate the choice of compensation scheme by firms. Our basic model shows that the unique equilibrium choice for profit maximizing duopsonists in a labor market is for one firm to offer a wage rate and for the other to offer a piece rate. This result arises because the firms recognize that, by offering different compensation schemes, they induce self-selection among workers, which thereby decreases the intensity of competition in the labor market. We find this asymmetry to be robust to allowing for firing, free entry, and a class of more general compensation schemes. When we broaden our model to permit firms to be differentiated in the eyes of workers (either geographically or by “other working conditions,” e.g.), we find that our results are preserved when differentiation is low, but that both firms choose to offer a piece rate when differentiation is high.

Notes: In the present study I identify an inherent characteristic of health care markets that may lead to excessive investment by hospitals even when compensated according to a prospective reimbursement rule. It is demonstrated that the stochastic nature of the demand for medical services combined with the lumpiness of investment decisions may give rise to excessive investment when multiple hospitals select independently their levels of capacities. The source for the excessive incentives to invest is the difficulty of one hospital to internalize properly the externality generated by its investment decisions. Such an externality arises because when one hospital expands its capacity, it is more likely to be able to serve not only patients residing in its region but patients residing in neighboring regions as well.

Notes: What is the nature of the industrial organization of the market for physician services? Is the market “competitive?” Are there pareto-relevant market failures, such that there is room for welfare-improving policies? Economists have devoted a great deal of attention to this market, but it remains relatively poorly understood. The key features of this market are that the product being sold is a professional service, and the pervasive presence of insurance for consumers. A professional service is inherently heterogeneous, nonretradable, and subject to an asymmetry of information between buyers and sellers. These characteristics are what bestow market power on sellers, further strengthened by the fact that consumers face only a small fraction of the price of any service due to insurance. This paper considers the implications of these characteristics for agency relationships between patients and physicians, and insurers (both private and public) and physicians. Agency relationships within physician firms are also considered. Both theoretical and empirical modeling of contracting between insurers and physicians and of the joint agency problems between patient and physician and insurer and physician are recommended as areas for future research. Because failures in this market are seen to derive largely from the structure of information, the potential gains from government intervention may be sharply circumscribed. Nonetheless, careful consideration of the competitive implications of contracting between physicians, insurers, and other health care providers is an important area for antitrust policy.

Notes: Books reviewed in this article: Economics, Organization and Management, by Paul Milgrom and John Roberts

Notes: The publication of the passive learning model of Jovanovic and subsequently the active exploration model of Ericson and Pakes led to a resurgence in research on firm growth and survival. Empirical work measuring the relationship of growth and survival relative to size and age uncovered a number of strong regularities, consistent with the new theoretical models and also with a rather broad class of models of which the above represent special cases. But recent theoretical work has shown that when the learning models are applied to the special case of the labor managed firm, most of the sharp empirical predictions derived for profit maximization are rendered indeterminate. Given the impact of ownership structure on the theoretical results of the learning models, we use a dataset of French producer cooperatives to determine whether firms of different ownership structures actually have substantially different growth and survival patterns. We find that French cooperatives survive and grow in very much the same way as has been found for U.S. firms, suggesting that the empirical regularities previously uncovered hold for a much broader class of firms. We are left to conclude that the underlying empirical growth and survival relationships continue to hold for firms with sharply differing ownership structures, and the theoretical models are attempting to explain these broad-based relationships by means of overly specific modeling.

Notes: This paper uses origin-destination data to define geographic local hospital markets in large metropolitan statistical areas (MSAs). Results support past findings of service rather than price competition, with negative-cost Herfandahl-Hirschman indexes relationships at the market level (and sub-MSA level) and with profit margins negatively related to hospital market competition. The effects of total (direct plus indirect) market competition are unchanged between 1983 and 1988, precisely estimated, robust to estimation techniques, and unaffected by whether the number of direct competitors is included as an explanatory variable.

Notes: Review of Smeeding, T., O'Higgins, M., and Rainwater, L. (Ed.), Poverty, Inequality and Income Distribution in Comparative PerspectiveBorooah, V. K., McGregor, P. P. L., and McKee, P. M., Regional Income Inequality und Poverty in the United Kingdom

Notes: This paper is concerned with the growing earnings dispersion among British men. The study is based on unit record data drawn from the New Earnings Survey. It is found that increases in inequality within age groups account for most of the rise in earnings inequality overall. Occupation too is a significant explanation of growing inequality among workers, but the major part of increased inequality within age groups remains unexplained.

Notes: We construct quarterly aggregate gross and net capital stock series for the post-war U.S. economy using annual capital stock, capital depreciation, and capital discard figures along with quarterly investment series. We construct nominal and real measures of all three categories in the aggregate capital stock: consumer durable goods, producer durable goods, and business structures. In constructing the nominal series we take into account the changes in capital goods' prices. The series are constructed using four different methods. Using time- and frequency-domain techniques, we compare the constructed series and characterize their short-run, business cycle, and long-run cyclical properties. We find that the constructed series exhibit very different cyclical and shock persistence dynamics. Practial implications are discussed.

Notes: This article presents an historical Social Accounting Matrix (1938) for the Netherlands, including related, non-monetary tables on demographic characteristics, employment, etc.

Notes: Zakat is an important form of religiously-mandated charity under Islam. This paper examines its impact on income inequality in Pakistan. Data from 1987–88 are used to construct two income distributions-one that would have obtained if zakat had not been given, and one that did obtain when such giving took place. Atkinson-Kolm-Sen relative indices of income inequality are computed which show that zakat does reduce measured income inequality in Pakistan. Both intra-province and inter-province components of over-all inequality decline, though the amount of change is small.〈blockFixed type="quotation"〉So give to the kinsman his due, and to the needy, and to the wayfarer. That b best for those who seek Allah's countenance.The Koran

Notes: In order to improve on the income growth rate as an indicator of changes in well-being, four composite indices of growth and income distribution are introduced and compared. When applied to the United

Notes: This article proposes a new method to compute the real value-added of industries which would substitute for the traditional double deflation method. The new method consists of deflating industries' direct and indirect contributions to final demand deliveries (their value-added by commodity) by the respective final demand commodity prices. The article shows that the new industry real value-added measures have better statistical and analytical properties than those obtained by the double deflation method.

Notes: Using the 1983 and 1989 Surveys of Consumer Finances, I find evidence of sharply increasing house-hold wealth inequality over this period. Whereas mean wealth increased by 23 percent in real terms, median wealth grew by only 8 percent. The share of the top one-half percentile rose by five percentage points, while the wealth of the bottom two quintiles showed an absolute decline. The Gini coefficient increased from 0.80 to 0.84. Almost all the growth in real wealth accrued to the top 20 percent of wealthholders. In contrast, the degree of wealth inequality was almost identical in 1983 as in 1962, and real wealth growth was more evenly distributed across the wealth distribution. There is also evidence that the sharp increase in wealth inequality from 1983 to 1989 was due to a correspondingly sharp rise in income inequality, the increase of stock prices relative to housing prices, and relatively slow inflation.

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: Using 1989 household survey data, we investigate large differences in poverty measured with a conventional all-Union per capita income line between Uzbekistan, the largest Central Asian republic of the former U.S.S.R., and Ukraine as an example of a European republic. We show that (i) differences between the two countries in the distribution of household size is not the main explanation, (ii) undervaluation of agricultural income in kind understates the welfare of rural households, something of particular importance in Uzbekistan, and (iii) indicators of food consumption provide important additional information. Lessons are drawn for the measurement of poverty in post-Union Uzbekistan.

Notes: Review of Zoltan Kenessey (Ed.), The Accounts of Nations

Notes: A household production function is developed which allows for persons to be engaged in more than one activity at a point in time. Labour inputs are scaled back when two activities are being undertaken. Data from the 1987 Australian Time Use Survey is used to estimate equations explaining input hours into home production by adult members of the household. One implication of the empirical results is that when two activities are being undertaken simultaneously input hours on the activity coded as “primary” and the input hours on the activity coded as “secondary” should each have a weight of one-half.

Notes: A Review of O. Blanchard, R. Dornbusch, P. Krugman, R. Layard and L. Summers, Reform in Eastern EuropeG. Sinn and H.-W. Sinn, Jumpstart: The Economic UniJication of GermanyJ. M. Kovács and M. Tardos (Ed.), Reform and Transformation in Eastern Europe: Soviet-type Economics on the Threshold of ChangeR. Layard, 0. Blanchard, R. Dornbusch and P. Krugman, East-West Migration: The Alternatives

Notes: This paper uses unit record survey data to implement a 1977 United Nations recommendation that imputed rent from owner-occupied housing be included in household income in statistics collected for income distribution purposes. The conceptual difficulties associated with employing the recommended National Accounts approach are highlighted by a comparison of the methodologies used to impute housing income for National Accounts purposes, for use in income distribution analyses and for income taxation purposes. The empirical difficulties associated with implementing the preferred approach are also discussed. The results reinforce the significant impact owner-occupation has on the well-being of many households and point to the importance of a disaggregate analysis of its distributional impact.

Notes: Two hundred sixty-three of the largest Australian fortunes are classified by date and industry of origination. More began in property development, sheep ranching and clothing manufacturing than in other industries. First generation immigrants own more than twice the number of fortunes as would be expected on the basis of their proportion of the population. A panel of experts judged that three-quarters of the fortunes originated in competitive industries. One explanation for large fortunes accumulating in competitive industries is extraordinary returns to disequilibrium (innovation and product differentiation). Other explanations include the assumption of risk and the return to scarce entrepreneurial and managerial skills. Progress in communication and transport technology have made it possible to leverage modest Ricardian rents into large profits via chain operations.

Notes: Economic growth had less impact on poverty rates in the 1980s than in the 1960s. Could this be explained by Locke Anderson's observation that the higher median income, the greater the amount of growth needed to achieve a percentage point fall in the poverty rate? No, higher poverty rates are due instead to the rise in income inequality. With higher inequality, however, trickle down could be as effective in the 1990s as it was in the late 1960s. More generally, assessments of anti-poverty policy must recognize that inequality is as vital to changes in the poverty rate as growth in mean income.

Notes: This research uses microdata from the 1986 Statistics Canada Family Expenditure Survey and from the 1986–88 U.S. Consumer Expenditure Survey to estimate equivalence scales using a methodology which is very similar to that employed by Statistics Canada for the estimation of Low-Income Cutoffs. Employing identical sample selection criteria and identically specified models, we find that equivalence scales for the two countries are not, in general, statistically different when estimated in the same way. The larger issue is then whether the two countries should choose the same methodology for the estimation of equivalence scales.

Notes: This paper studies immobility in the distribution of income using Swedish data. Tax data shows immobility in personal income to be a decreasing function of the length of the period over which it is studied and an increasing function of initial age. The results show immobility to be larger among males than among females. Based on a household income survey it is found that when the time period expands from one to two years, the Gini-coefficient of equivalent income per person decreases by five percent. A sample of males indicates that income immobility between generations in Sweden is low.

Notes: National accounts aggregates are not only abused as welfare indicators, there is also a considerable misuse in economic analysis and in modeling. Characteristics of national accounts-such as consistency, homogeneity and comprehensiveness-may turn into major disadvantages in the case of improper use. The main sources of misuse are the confusion of concepts, inadequate statistical units, the role of aggregation and what might be called “modeling on the basis of the results of modeling.” A plea is made for different data sets for different analytical purposes, for separate treatment of descriptive data, analytical data and modeling results, correct labeling and for a more open information strategy.

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.

Notes: In this paper we deal with the question of which measures of economic well-being are adequate to identify those groups of households in the U.S. whose economic conditions justify public concern and assistance. We derive a utility based measure of economic well-being from the estimation of a complete set of consumer demand equations. The demand system is Lluch's Extended Linear Expenditure System (Lluch, 1973). Household characteristics are incorporated using the scaling method proposed by Barten (1966). Using the welfare indicator derived, we study the composition of the poorest part of the population, using data from the 1972–73 Consumer Expenditure Survey. We compare our results with those obtained using various other welfare indicators, including the official U.S. poverty line. We show that using different family composition adjustments significantly and systematically affects just who are considered to be at the bottom of the welfare distribution. We finally suggest that program designers therefore can improve their target efficiency by carefully selecting from among the acceptable indices of welfare when defining program eligibility.