Inflation and aggregate demand shocks

This paper derives and estimates a small general equilibrium model under the assumptions of imperfect competition and translog technology to simulate the impact of shifts in aggregate demand on prices. The simulations suggest that demand expansions are deflationary. This result challenges the common perception that the dynamic aggregate supply schedule is upward sloping.     

Using the 'Looking After Children' dimensions to collect aggregate data on well-being

The Department of Health has funded the development of a set of schedules for collating information on and monitoring the progress of children looked after by local authorities. An additional aspiration underlying official encouragement of the use of these ‘Looking After Children’ (LAC) materials was that they would provide aggregate data to feed into national and local policy and planning. Progress on this aim has been slow, in part because instruments designed to aid practice in individual cases have not adapted easily to the hoped for dual role, and in part because completion rates have been patchy and often poor. This paper describes an action research project designed to use the children's reviewing system to collect aggregate data on the LAC dimensions of well‐being. It comments on the viability of this method of aggregate data collection as well as locating the information on a cohort of 96 children in the context of other studies, and debates about whether the state can be a ‘good parent’.     

Income inequality,welfare regimes and aggregate health: Review of reviews

Wide income inequality in a society has been associated with worse aggregate health. Regarding the relationship, often termed as ‘the Wilkinson Hypothesis’, a number of empirical findings and related systematic reviews have reached inconsistent conclusions. In addition, the Scandinavian welfare regime is expected to have better aggregate health indicators in comparison with the other welfare regimes. The expectation is largely based on the Wilkinson Hypothesis because the regime has relatively narrow income inequalities. Again, related empirical findings and systematic reviews have produced inconsistent conclusions. This article reports on two rounds of ‘review of reviews’ (RR) over six previous (systematic) review articles. The first round of RR found that the review articles reached divergent conclusions. The second round of RR over another set of three review articles also demonstrated that their conclusions did not reach a consensus. Neither the hypothesised Scandinavia's good health nor the Wilkinson Hypothesis was given solid empirical backing.     

Reevaluating evidence on myopic loss aversion: aggregate patterns versus individual choices

Investors who are more willing to accept risks when evaluating their investments less frequently are said to exhibit myopic loss aversion (MLA). Several recent experimental studies found that, on average, subjects bet significantly higher amounts on a risky lottery when they observe only a cumulative outcome of several realizations of the lottery (long evaluation period). In this article, we reexamine these empirical findings by analyzing individual rather than aggregate choice patterns. The behavior of the majority of subjects is inconsistent with the hypothesis of MLA: they bet an intermediate fraction of their initial endowment and these bets, on average, are not significantly different across two treatments with short and long evaluation period. We discuss several alternative explanations of this finding, including the Fechner model of random errors and the financial asset pricing model.     

New technology and unemployment: A simulation of macroeconomic impacts and responses in Canada

This paper addresses macroeconomic issues of the debate over high technology and unemployment. A macroeconometric simulation model with a number of special features is used to examine alternative scenarios of enhanced productivity performance in Canada over the next decade. Responses of wages, prices, and the monetary authorities are shown to be quantitatively important in determining the impact on employment. The type of productivity change and aggregate fiscal-policy response are shown to be less importance.     

The effect of incentive regulation on productive efficiency in telecommunications

Incentive regulation is now an important regulatory tool in the telecommunications industry in the United States. The issue explored here is whether incentive regulation has resulted in an increase in productive efficiency. After providing an overview of the nature of incentive regulation, one methodology for measuring the effects of incentive regulation on productive efficiency is reviewed. This methodology is data envelopment analysis (DEA) and allows for the measurement of both scale efficiency and technical efficiency of individual local exchange carriers (LECs). The results indicate that most LECs were technically efficient over the 1988–1998 period. Four LECs, however, consistently demonstrate scale inefficiency. In the aggregate, however, based on the DEA results there was no identifiable improvement in aggregate LECs' technical efficiency between 1988 and 1998. Subsequently, an alternative methodology, a stochastic frontier production function approach, is considered. The results from this methodology confirm that there was no change in technical efficiency over the period of study, something that incentive regulation was specifically designed to enhance.     

U.S. growth and income inequality: evidence of racial differences

Numerous studies have assessed the relationship between income inequality and per capita income (i.e., the Kuznets curve) using various data and empirical techniques. In this study, we employ a gradual switching regression model to uncover structural change in the Kuznets curves for the U.S. aggregate, Black American, and White American segments of the population. Similar to prior studies, we find that the Kuznets curves have switched to a U-shape. Our results further show that structural change of the Kuznets curve has been gradual, generally beginning in the 1950s, and that the adjustment process has varied across race.     

Alternative specifications of the demand for money and their implications for forecasting and policy analysis with large macroeconomic models

The demand for money is an important function in large macroeconomic models because of its central role in monetary policy. The interest rate responsiveness of money demand determines the interest rate changes consistent with the initial change in monetary policy and the subsequent changes on aggregate demand and the price level. This paper uses the DRI macroeconometric model to investigate these issues, finding that the model's predictive power and its estimates of the relative potency of monetary and fiscal policy are dependent upon the specification of the money demand function.     

Costs and distortion of U.S. regulation policy in intercoastal lumber shipping

This article quantitatively analyzes the various impacts of current U.S. coastal restrictions on the Northwest lumber industry. The history of U.S. maritime regulation is briefly reviewed and a simulation model is developed to measure its affect on lumber shipments and transport costs. The results of the model indicate that aggregate cost redutions obtained through deregulation are likely to be small. The pattern of intercoastal shipments could change a great deal, however, with U.S. producers picking up a large share of the Northeast market.     

An evaluation of the Tokyo Round trade agreement using general equilibrium computational methods

An empirically based general equilibrium model involving the United States, Japan, the (nine-member) EEC, and a residual rest of the world is used to evaluate the Tokyo Round trade agreement negotiated under the GATT. Equilibria for post-Agreement policy regimes are computed and compared to a pre-Agreement equilibrium. Results indicate small aggregate welfare impacts but more significant terms of trade effects. Losses seem likely for Third World countries due to an adverse terms of trade change. Under some assumptions the changes in NTB codes produce more significant effects than the tariff cuts in the Agreement.     

Some employment,income, and occupational effects of microelectronic-based technical change: A multisectoral simulation for Canada

This paper computes some potential employment and income effects of microelectronic-based technical change (MTC) in Canada. The probable upper and lower bounds of the predicted outcomes are determined by simulating alternative scenarios, and by computing the range of feasible post technical change transition paths for each scenario. The occupational shifts required to accommodate the technical change are decomposed into those originating from the supply side (labor productivity and materail input changes) versus those induced by final demand changes. These results are presented for an historical period, for the reference or counterfactual (no MTC) path to 1990, and for a 1990 post-technical-change solution. The aggregate results for a plausible scenario indicate that the microelectronic-based technical change modelled in this paper initiates a one-half percent average yearly increase in labor productivity and consequently results in a cumulative displacement of 5 to 6 percent of the (1990) required labor force from 1981 to 1990. Of course, when/if the appropriate structural adjustments take place, those workers will be re-employed and national income will improve correspondingly. An increase in Canada's rate of diffusion (especially vis-à-vis our trading partners) implies more initial displacement, but again the even higher productivity gains (plus the potential for export gains) should ultimately improve national welfare. This conclusion highlights the importance of facilitating the required structural adjustments.     

Political culture and ideology in the Mountain West: regionalism in the state of Idaho

Analysis of conflict in state politics based on intrastate regionalism is an important, yet neglected, perspective in current scholarship. We demonstrate regionalism’s analytic power by illustrating the case of Idaho. Understanding how regionalism interacts with political culture and political ideology in Idaho should aid the understanding of how the Mountain West (containing the five fastest growing states in the United States in the 1990s) is going to evolve in the coming century. Our research is based on analysis of aggregate data collected at the county level, including a survey conducted in the autumn of 2000 of county-elected officials. We find that regionalism as commonly understood in Idaho needs revision. The north region is really two sub-regions, one extremely conservative, the other the least conservative in the state. We suggest this change in Idaho regionalism affects attitudes toward important policies.     

Financial journeys of Australian parents after separation – transitions into and out of poverty

It is well established that relationship separation has greater negative economic consequences for mothers than for fathers in Australia and other developed countries. While research has shown that, at an aggregate level, such negative impacts tend to diminish with time, the rate of change is generally slower for mothers than fathers, and a higher proportion of mothers than fathers continue to experience entrenched financial difficulties. Less is known about the variability of economic journeys experienced by women and men, taken separately, and factors influencing diverse economic trajectories. Drawing on data from the Longitudinal Study of Separated Families (LSSF), which followed up a large sample parents at three post‐separation points, this article examines poverty rates across a 4‐year period, transitions into and out of poverty and factors affecting these pathways.     

An Ethnography of Social Assistance to Ethiopian Children by Non‐governmental Organizations: Types,Adequacy and Predictability

Although in Africa social assistance is provided by both state and non‐state actors, systematic research has paid little attention to the aggregate services provided by the latter. This is so despite the significance of the aggregate size, diversity, investment and coverage of the services provided by non‐state actors in the continent. This article reports on an ethnographic assessment of the nature of aggregate social assistance services provided to Ethiopian children by non‐governmental organizations (NGOs) in Africa, taking the cases of services provided by 38 NGOs that run 52 social protection interventions in Ethiopia's capital, Addis Ababa. Data collection employed semi‐structured interviews with officers of the 38 NGOs and exploratory interviews with 25 key informants. Analysis of the ethnographic data revealed that social assistance by NGOs was insufficient, unpredictable, erratic and of inferior quality and, hence, failed to meet the conditions that could make social assistance an effective instrument for breaking the intergenerational transmission of poverty. The analysis also revealed that the same social assistance was not large enough to undermine recipients' commitment to work. The article concludes by recommending the establishment of a social welfare system in Ethiopia that can effectively regulate social assistance in order to ensure the quality of design and implementation, and the integration of discreet social assistance projects.     

The microeconomics of distribution: A simulation of the farm economy

A simulation model that incorporates both production and consumption behavior of farm households in Taiwan is presented. The model is used to analyze the effects of policy instruments (price supports, minimum wages, taxes, subsidies, demographic policies, and land and capital redistribution) on the aggregate values of the endogenous variables of the system—the supplies of output and labor, the demands of factors and consumption, income and expenditure—and their distribution among households. The model differs from other simulation models in that it is based on microsimulation, in which the joint distribution of individual household characteristics such as farm-specific prices, initial endowments of land and capital, and numbers of workers and dependents, is explicitly taken into account. As a result, the model is capable of capturing the distributional as well as aggregate impacts of policy changes.     

Structured Partisan Competition: A Vote Shares Model of Party Alignments and Realignments*

Objective. This study develops and tests an aggregate “vote shares” model of party alignments and realignments, building a theoretical framework around “structured political composition” (Rabinowitz, Gurian, and Macdonald, 1984, p. 6). The vote shares model conceptualizes party alignments as latent class constructs, or factors, and changes in these latent class constructs as party realignments. Methods. Confirmatory factor analysis (CFA) model with bias corrected bootstrap estimates and standard errors is used where the cases are counties and the variables are aggregate election outcomes. The data come from Kansas from 1900 to 2010. Results. Comparing the findings of the vote‐shares approach to those of Nardulli (2005) and Sundquist (1983) suggests that the vote shares model provides a greater depth of understanding and a more accurate portrait of the timing of realignments and the partisan bias of new alignments in Kansas. The vote shares model also overcomes the major problem of false positives associated with landslide elections, a problem that plagued most previous aggregate voting models. Conclusion. The vote‐shares model of party alignments and realignments provides a viable alternative for analyzing historic and current election returns where the votes are aggregated by a geographically defined government jurisdiction (parish, county, city, or district).     

Framing Effects on Public Opinion During Prewar and Major Combat Phases of the U.S. Wars with Iraq*

Objectives. Our purpose was to develop and test several hypotheses concerning the impact of poll‐question wording on aggregate public support for war. We drew on general insights from framing theory and specific insights from various theories of public support for war. Methods. Our database consisted of two collections of aggregate poll results drawn from the prewar and major combat phases of the Gulf War (1990–1991) and the Second War with Iraq (2002–2003). For each data set, we used multivariate OLS regression to gauge the impact of specific question‐wording variations on the percentage of respondents expressing support for war, controlling for systematic time and pollster effects. Results. Most of the hypothesized wording effects were significant in the expected direction. Mentioning WMDs, terrorism, Saddam, hostages, and international support for war boosted aggregate war support in one or both wars; mentioning the president, oil or gasoline, international opposition to war, and U.S. or Iraqi casualties depressed support. Conclusions. Various theories emphasizing different “rational” aspects of public attitudes toward war are supported. However, the significance of mentioning Saddam by name in the Second War with Iraq, and mentioning the president in both wars, would seem to imply framing effects based more on emotion and/or symbolism.     

Latinos and School Vouchers: Testing the “Minority Support” Hypothesis*

Objectives. Voucher proponents, as well as some researchers, argue that minorities and individuals of relatively low socioeconomic status (SES) particularly favor school vouchers. Little work has specifically explored Latino attitudes, with the focus typically on African‐American opinions. This article will therefore examine whether Latinos hold unique attitudes toward vouchers. Methods. Ordinal probit regression analysis of a recent national survey of Latinos, African Americans, and Anglos (non‐Latino whites). Results. In the aggregate, Latinos and African Americans are more likely than Anglos to support vouchers. The Latino population variable is statistically insignificant, however, while the African‐American measure is significant and positive. When the aggregate Latino variable is disaggregated into four major Latino national‐origin groups, Puerto Ricans are shown to hold uniquely favorable opinions about vouchers. In addition, there are no opinion differences by income and education. Conclusions. When Catholicism is taken into account, the voucher opinions of Latinos and Anglos are generally indistinct. This suggests that aggregate Latino support for vouchers may drop if Catholic affiliation further declines.     

Stability of risk preferences and the reflection effect of prospect theory

Are risk preferences stable over time? To address this question we elicit risk preferences from the same pool of subjects at two different moments in time. To interpret the results, we use a Fechner stochastic choice model in which the revealed preference of individuals is governed by some underlying preference, together with a random error. We take cumulative prospect theory as the underlying preference model (Kahneman and Tversky, Econometrica 47:263–292, 1979; Tversky and Kahneman, Journal of Risk and Uncertainty 5:297–323, 1992). We observe that the aggregate pattern of preferences is very similar in both sessions, and it matches the results reported in the literature. Most subjects are risk averse for gains, and risk seeking for losses. However, the subjects that jointly agree with the reflection effect of prospect theory are around 50%. The percentage of individuals that change their responses across sessions is quite high, 63%. Estimating the stochastic choice model we find that 72% of the subjects have an underlying preference which agrees with the reflection effect of prospect theory. The remaining 28% are mainly classified as risk averse for both gains and losses. The results reinforce the empirical validity of the reflection effect. Deviations from the reflection effect can be attributed to noise, as well as to the existence of a fraction of risk averse subjects.     

Towards Understanding Variations in Social Care for Older People in England

Indicators of the public provision of old age social care are routinely recorded in England and have been used for diverse purposes including performance monitoring. Despite long‐term policy guidance promoting more homogeneous service provision, large variations can still be observed between local authorities (the providers of state‐funded social care). Our aim is to better understand such variations in a small selection of key aggregate indicators. Drawing on multiple data sources and pursuing a two‐step strategy, we first assess the explanatory power of a set of structural predictors and then add to the models a set of specific care management ‘process’ predictors. We find that structural factors beyond the control of local authorities explain a considerable share of the observable variation. The additional explanatory power of care management characteristics is small in comparison. Therefore, our findings suggest that caution must be taken when aggregate indicators of service provision are used for performance monitoring purposes, as a degree of autonomy over outcomes may be implied which in light of the empirical evidence is unrealistic. Past attempts to influence the aggregate pattern of service provision – apparently seeking greater ‘territorial justice’– are likely to have had adverse implications for service users and the uniformity of service delivery across England. Questions are raised about the adequate role of central government in a policy environment characterized by longstanding local government responsibility.