Peter Schmidt: Econometrician and consummate professional

Peter Schmidt has been one of its best-known and most respected econometricians in the profession for four decades. He has brought his talents to many scholarly outlets and societies, and has played a foundational and constructive role in the development of the field of econometrics. Peter Schmidt has also served and led the development of Econometric Reviews since its inception in 1982. His judgment has always been fair, informed, clear, decisive, and constructive. Respect for ideas and scholarship of others, young and old, is second nature to him. This is the best of traits, and Peter serves as an uncommon example to us all. The seventeen articles that make up this Econometric Reviews Special Issue in Honor of Peter Schmidt represent the work of fifty of the very best econometricians in our profession. They honor Professor Schmidt's lifelong accomplishments by providing fundamental research work that reflects many of the broad research themes that have distinguished his long and productive career. These include time series econometrics, panel data econometrics, and stochastic frontier production analysis.     

Multivariate Measures of Well-Being and an Analysis of Inequality in the Michigan Data

We demonstrate a multidimensional approach for combining several indicators of well-being, including the traditional money-income indicators. This methodology avoids the difficult and much criticized task of computing imputed incomes for such indicators as net worth and schooling. Inequality in the proposed composite measures is computed using relative inequality indexes that permit simple analysis of both the contribution of each welfare indicator (and its factor components) and within and between components of total inequality when the population is grouped by income levels, age, gender, or any other criteria. The analysis is performed on U.S. data using the Michigan Survey of Income Dynamics.     

Stochastic dominance amongst swedish income distributions

:Sweden's income distribution for the whole population and for subgroups, including its immigants, has been extensively studied. The interest in this area has grown with increasing availability of data, including panels. The previous studies are based on indices of inequality or mobility. While indices are useful for complete ordering and have an air of "decisiveness" about them, they lack universal acceptance of the value judgements inherent to the welfare functions that underlay any index. In contrast, uniformpartial order relations are studied in this paper which rank welfare situations over very wide classes of welfare functions. We conduct bootstrap tests for the existence of first and second order stochastic dominance amongst Sweden's income distributions over time and for several subgroups of immigrants. Analysis of immigrant's income is motivated by the fact that the development of income for immigrants has been different and strongly affected by their length of residence and countries of origin. We consider several non-consecutive waves of a panel of incomes in Sweden. Two income definitions are developed. One is pre-transfers and taxes, gross income, the other is a post-transfers and taxes, disposable income. The comparison of the distribution of these two variables affords a partial view of Sweden's welfare system. We have focused on the incomes of Swede's and immigrant groups of single individuals identified by country of origin, length of residence, age, education, gender, marital status and other relevant characteristics. We find that first order dominance is rare, but second order relations hold in several cases, especially amongst disposable income distributions. Sweden's incomes and welfare policies favor the elderly, females, larger families, and longer periods of residency. We find, in general, the higher the educational credentials, the higher is the burden of this equalization policy.     

Class Size and Educational Policy: Who Benefits from Smaller Classes?

ABSTRACT

The impact of class size on student achievement remains an open question despite hundreds of empirical studies and the perception among parents, teachers, and policymakers that larger classes are a significant detriment to student development. This study sheds new light on this ambiguity by utilizing nonparametric tests for stochastic dominance to analyze unconditional and conditional test score distributions across students facing different class sizes. Analyzing the conditional distributions of test scores (purged of observables using class-size specific returns), we find that there is little causal effect of marginal reductions in class size on test scores within the range of 20 or more students. However, reductions in class size from above 20 students to below 20 students, as well as marginal reductions in classes with fewer than 20 students, increase test scores for students below the median, but decrease test scores above the median. This nonuniform impact of class size suggests that compensatory school policies, whereby lower-performing students are placed in smaller classes and higher-performing students are placed in larger classes, improves the academic achievement of not just the lower-performing students but also the higher-performing students.     

Dynamics of Market Power and Concentration Profiles

This paper examines some of the economic and econometric issues that arise in attempting to measure the degree of concentration in an industry and its dynamic evolution. A general axiomatic basis is developed. We offer new measures of concentration over aggregated periods of time and provide a sound statistical basis for inferences. Concentration is one aspect of the problem of measuring “market power” within an industry. Modern economic analysis of antitrust issues does not focus only on the level of concentration, but still must examine the issue carefully. We contrast concentration at a point in time with a dynamic profile of change in the distribution of shares in a given market. Our methods are demonstrated with an application to the US steel industry.