EXIT FROM THE HOSPITAL INDUSTRY

We study the exit of hospitals from the market for inpatient services. More generous hospital reimbursement significantly reduces the probability of exit throughout the 1990s. Conditional on reimbursement levels, hospital efficiency was not a significant determinant in the early 1990s but in the mid‐ to late 1990s, less efficient hospitals were significantly more likely to exit. Throughout the period, high‐tech services increased the probability of survival, and for‐profit hospitals were more likely to exit. The role of Medicare as a determinant of exit became less important in the latter half of the 1990s. (JEL I11, L11)     

MODELING INFORMALITY FORMALLY: HOUSEHOLDS AND FIRMS

Informality is widespread in most developing countries. In Latin America, 50% of salaried employees work informally. Three stylized facts characterize informality: (1) small firms tend to operate informally while large firms tend to operate formally; (2) unskilled workers tend to be informal while skilled ones have formal jobs; (3) ceteris paribus, secondary workers (a worker other than the household head) are less likely to operate formally than primary workers. We develop a model that accounts for all these facts. In our model, both heterogeneous firms and workers have preferences over the sector they operate and choose optimally whether to function formally or informally. There are two labor markets, one formal and the other informal, and both firms and workers act unconstrained in them. By contrast, a prominent feature of the preexisting literature is that workers' decisions play no role in determining the equilibrium of the economy. In our model, policies that reduce the supply of workers in the informal labor market at given wages will increase the level of formality in the economy. This has noteworthy implications for the design of social programs in developing countries. We also show that an increase in the participation of secondary workers would tend to raise the level of informality in the economy. (JEL J24, J33)     

Sophistication and the Antecedents of Whites' Racial Policy Attitudes: Racism, Ideology, and Affirmative Action in America

A number of researchers have argued that the effects of prejudiceon the racial policy attitudes and general political beliefsof white Americans may be restricted to the poorly educatedand politically unsophisticated. In contrast, rather than beingmotivated by prejudice, the racial policy attitudes and ideologicalvalues of the politically sophisticated white Americans shouldbe more firmly informed and motivated by the tolerant valuesat the heart of American political culture. These values includesuch things as individualism, notions of fair play, and devotionto the principle of equality of opportunity. We tested thishypothesis using white respondents from the 1986 and 1992 NationalElection Studies. Our evidence generally indicated that racialpolicy attitudes and political ideology were more powerfullyassociated with ideologies of racial dominance and superiorityamong politically sophisticated white Americans than among politicalunsophisticated white Americans. Moreover, even among the sophisticated,we found that various forms of egalitarianism predicted supportfor—affirmative action and that support for equal opportunityis not uniformly distributed across the political spectrum.