technology and transaction cost economics a reply abstract i argue here as i have previously that technology is neither fully determinative of nor irrelevant to economic organization transaction cost economizing occupies a prominent position in any effort to assess the efficacy of alternative forms of economic organization

an experimental validation of hypothetical wtp for a recyclable product using a within subject experiment we compare hypothetical andreal willingness to pay wtp for an improvement in therecyclability of a product subjects are faced with a real paymentscenario after they have responded to a hypothetical question contrary to most of the results obtained in similar studies at apopulation level there are no significant median differencesbetween actual and hypothetical stated values of wtp however within subject comparisons between hypothetical and actual valuesindicate that subjects stating a low high hypothetical wtp tendto underestimate overestimate the value of their actualcontributions

does money matter in canada evidence from a vector error correction model this paper investigates the statistical properties of a set of canadian and u s economic time series and uses the data to address the question of the importance of monetary variables in canadian business cycle fluctuations the individual time series are found to contain unit roots but the data reveal the existence of several economically meaningful cointegrating vectors a multivariate vector error correction model is estimated and canadian velocity which appears as an error correction term is significant in the canadian output equation this supports the contention that monetary variables have predictive content for real output copyright 1989 by mit press

a new test of money income causality this paper investigates the prima facie causal relationship between money and income employing a methodology the multiple rank f test the results of which are invariant to monotonic transformations of all variables and robust over alternative distributions of the errors in contrast to prior functional form dependent parametric analyses evidence of prima facie causality between money and income is found for the 1970 88 time period this evidence is consistent with an elementary theoretical framework in which the direction and strength of causality is dependent upon the definition of money copyright 1992 by ohio state university press

forecasting wheat exports do exchange rates matter a vector autoregression is fit to recent u s data on wheat prices wheat export sales wheat export shipments and exchange rates forecast error decompositions and out of sample forecasts indicate that exchange rates have little influence on wheat sales and shipments

on the casual relationship between government expenditures and national income a research strategy is suggested that separates the issue of inference from the problems of prediction or of quantitative policy analysis of an empirical parametric model and illustrates a new methodology that enables this in a test for prima facie causality unlike the conventional parametric test the more powerful multiple rank f test is invariant to monotonic transformations of the variables and independent of the error distribution employing this test the wagnerian hypothesis supported by conventional parametric analysis is rejected and the conventional keynesian theory is accepted copyright 1990 by mit press

the canadian u s exchange rate evidence from a vector autoregression a vector autoregression is used to elicit the empirical facts co ncerning exchange rate movements the author finds 1 the exchange rate relati ve price levels and trade balances are closely related 2 most other lagged v ariables have no perceptible influence in theexchange rate equation 3 exchan ge rate innovations are negativelycorrelated with innovations in output and pri ces positively with innovations in the balance of trade and almost not at all with innovations in money and 4 impulses in money trade balances and govern ment spending are followed by opposing future movements in theexchange rate and the price level taken as a whole the evidence suggests that exchange rate cha nges may be associated with real rather than monetary shocks copyright 1986 by mit press

complementarity coordination and compatibility the role of fixed costs in the economics of systems abstract we analyze industry equilibrium and incentive to compatibility when goods produced by different producers generate utility only when consumed as component parts of a system we assume the presence of two systems each composed of some basic component and a set of differentiated complementary products the combination of complementarity between the two components of the system and of fixed costs in the production of the complementary product results in a form of network effect we focus on the role played by the size of the fixed costs in the production of the complementary products in determining the size of this system effect and by this means the structure and types of equilibria that may be observed monopolistic or duopolistic symmetric or asymmetric we also highlight the consequence of the same fixed costs for the private and social incentives to render the systems compatible

a new technique for postsample model selection and validation abstract the model selection and granger causality literatures have focused on insample rather than postsample hypothesis testing this is because postsample model validation periods are usually short whereas the correlations in typical postsample forecast errors require large sample methods a resampling based postsample inference procedure is described which explicitly estimates the uncertainty which its large sample approximation induces in the inference significance levels it produces the procedure is applied to postsample forecasting errors from the ashley et al 1980 study examining granger causation between us consumption and advertising expenditures postsample model validation is apparently feasible but requires longer postsample periods than past studies have allocated

on the granger causality between median inflation and price dispersion the granger causal relationship between the size and dispersion of fluctuations in sub components of the us consumer price index cpi is examined using both in sample and out of sample tests and data from january 1968 to december 2008 strong in sample evidence is found for feedback between median inflation and price dispersion the evidence for granger causation from median inflation to price dispersion remains strong in out of sample testing but is less strong for granger causation in the opposite direction the implications of these results for the variety of price level determination models in the literature are discussed

the relationship between relative prices and the general price level it is very nearly a truismi amaong neoclassical economists that the public is wont to confuse changes in the general price level with relative price changes correspondingl y one might speak of the independence between the two as one of the central postulates of the neoclassical tradition william stanley jevons was aml ong the first to identify this basic dichotomin economic life as well as to attempt to explain the ordinary citizen s seenming incapacity to understand it

discontinuous adoption paths with dynamic scale economies this paper examines the equilibrium adoption patch for two innovations when there are network externalities we show that the existence of significant increasing returns in system scale can give the result that one variant will drive out the other one and so emerges as the unique standard for the industry moreover if network externalities are sufficiently strong then the equilibrium adoption path is discontinuous that is it includes a catastrophe point

special issue on network economics business conduct and market structure this special issue of iji0 on network economics focuses on issues of competition business conduct and market structure in network industries as well as industries where standardization is important despite the abundance of such industries a systematic framework for their analysis was lacking until the middle 1980s a survey and critical evaluation of the extensive literature on this subject that has arisen since is given in the economics of networks by nicholas economides in this issue an important feature of networks and of services provided over networks is that they are typically composed of various complementary components that are combined to create composite goods or systems that are substitutes to each other thus traditional approaches that dealt exclusively with substitutes or complements fail and new theoretical and empirical analysis are required the articles of this special issue accomplish this with remarkable success a crucial feature of network goods is the fact that their value increases in the expected size of the network i e they exhibit network externalities this feature is also present in virtual networks comprised of products that conform to the same technical standard and are therefore compatible three papers in this special issue by encaoua et al mcandrews and rob and desruelle et al discuss how network externalities arise in specific industries and analyze the resulting effects on conduct and market structure l in compatibility and competition in airlines demand side network effect david encaoua michel moreaux and anne perrot analyse the design of departure and pricing schedules in hub and spoke airline networks the results of the traditional mix and match model do not directly apply since in transportation networks each leg of a trip is a final good for some consumers while it is a

sources of fluctuations in relative prices evidence from high inflation countries casual analysis of six high inflation episodes indicates a strong positive relationship between movements in the relative price ratio measured by wpi cpi and the inflation rate the authors estimate a vector autoregression model in which relative price movements are driven by several fundamental disturbances fiscal monetary output and exchange rate identified using only long run restrictions based on a general equilibrium optimizing model analysis of the endogenous response of relative price changes to these disturbances suggests that output and monetary shocks are the most important driving forces although fiscal and exchange rate shocks are also influential in explaining relative price movements in some countries copyright 1993 by mit press

evaluating the integration of contiguous discontinuous markets this paper applies the concepts of structural models of markets market integration and market discontinuity to show that discontinuous markets alter the integration characteristics of continuous markets when analyzing systems of contiguous markets some of which are discontinuous it appears that the continuous markets are less well integrated when the discontinuous markets are operating than when they are not operating

the dynamics of fertility family planning and female education in a developing economy unlike most empirical works on fertility analysis this study is the first attempt to analyse the dynamics of fertility and its determinants with a particular focus on the role played by female education and family planning programmes in the context of a traditional society the analysis is based on the application of the following dynamic time series techniques in a multivariate context cointegration vector error correction modelling and variance decompositions these dynamic tools are recently developed and hitherto untried in fertility analysis in the context of a poor developing economy such as india the results based on the above most recently developed methodology broadly indicate that in the complex dynamic interactions the importance of conventional structural hypothesis as a granger causal factor in bringing fertility down in the longer term cannot be denied however overall in the short to long term the findings appear to be more consistent with the recent ideational hypothesis

consumer preferences for fresh food items with multiple quality attributes evidence from an experimental auction of pork chops this study illustrates an application of experimental auction methods using both experimental economics and experimental design to evaluate consumer perceptions and willingness to pay wtp for fresh pork chops we test and reject hypotheses that a market prices and consumers wtp are unaffected by the level of attributes embodied in the pork chops b appearance based on photographs or actual product and actual taste are equally good sources of consumer information and c consumers are consistent in their preferences for fresh pork attributes a major conclusion is that predicting consumer demand for fresh pork or any fresh food based on appearance without tasting is unproductive

a note on the variability of inflation and the dispersion of relative price changes abstract the relationship between the variance of inflation and the variability of relative price changes is analyzed empirically a strong positive association is found for 1948 1969 and 1948 1975 application of chow s test indicates structural instability and granger s test suggests a feedback effect between these variables

atheoretical macroeconometrics a critique abstract the spurious nature of the restrictions used to identify many macroeconometric models has led some researchers to advocate a style of econometric inquiry that is less dependent on prior theoretical restrictions of the sort that were central to the approach of the cowles commission this development which we call atheoretical macroeconometrics is summarized and evaluated in the current paper it is contrasted with an updated version of the cowles commission approach we conclude that while some of the exercises of atheoretical macroeconometrics are valid those that have attracted the most attention and appear the most innovative exogeneity testing impulse response analysis and policy analysis using estimated vector autoregressions are based on incorrect analysis

granger causality and the time series analysis of political relationships political scientists have employed causal modeling techniques for quite some time in most cases however they have relied on methods of a static cross sectional variety time series methods have been disseminated and applied but these have not been expressly causal the problem of assessing the causal character or direction of political relationships over time has not been addressed granger 1969 has suggested a notion of causality that is applicable in longitudinal analysis the study and application of granger s idea of causation now is widespread in economics and business this discussion evaluates the usefulness of applying granger causality in the study of political relationships granger s definition of causality is introduced several popular procedures for assessing granger causality are reviewed and certain problems surrounding interpretation of those empirical tests are elucidated the virtues and pitfalls of granger causal analysis then are illustrated in an analysis of an important topic in international political economy and also in a reanalysis of a recent granger causal investigation of arms races

robustness of the relationship between price variability and inflation for us manufacturing we study the relationship between relative price variability and inflation in two different ways we first look at product class census unit values for five time periods between 1958 and 1982 and find evidence of a positive relationship between variability and inflation then we directly update the vining and elwertowski 1976 study for the period 1974 91 using individual commodity series from the bureau of labor statistics we conclude by discussing differences across industries in price stickiness

universal health insurance in the clinton plan coverage as a tax financed public good the financing arrangements embodied in the clinton health reform plan involve some important differences in the way in which public goods are usually financed the subsidies to small low wage firms mandated to provide benefits distort markets in both labor and products and offer incentives for the creation of small firms in addition the financing scheme implicitly envisions a head tax on families at modest income levels but offers a possible rationale for it nevertheless the main reason for many of the financing features appears to be an attempt to hold down the apparent budgetary cost of universal coverage

fertility choice and economic growth theory and evidence this proposed theoretical model is based on new models of barro and becker and becker murphy and tamura and explains the interaction of family decisions about fertility and the macroeconomy in a growth situation the proposed model captures a dynamic interaction between labor leisure and fertility choice and a structural fertility preference shock endogenous factor are consumption labor leisure and fertility while exogenous factors are production and utility parameters the aim was to develop a general equilibrium model which expresses short and long term dynamics to test the impact of economic disturbances on fertility and to explain the us baby boom and subsequent fertility patterns savings in capital accumulation and in labor supply were expected to have ambiguous effects while improved productivity was expected to increase steady state consumption the methodology a structural vector auto regression var model was developed by blanchard and quah and ihmed ickes wang and yoo structural impacts include disturbances in employment fertility theoretical preference shift and output long term restrictions are based on theory rather than on ad hoc causal orderings sims method or current responses bernanke method the structural var model is estimated using the logged differences of labor fertility rate and output the empirical results are based on analysis of us data 1949 88 on fertility weekly hours worked and real gross national product the model revealed that fertility choice should not be considered exogenous to the labor market or to economic growth variance of the forecast error for the fertility rate was significantly explained by employment shocks the effect was reduced fertility and increased labor force effort output responses to fertility and technology shocks were similar to those reported by shapiro and watson in the variance decomposition analysis output shocks explained about 33 of output variance fertility shocks explained about 33 of labor growth and 25 of output growth after the first year with a lag of one year about 37 of fertility variance was explained by employment shocks concluding remarks underscore the importance of knowing which shock initiated the motion and causal ordering

employment unemployment and the minimum wage a causality model some empirical work concerning the minimum wage tends to confirm the negative impacts of the law on employment but much of that work leaves the existence and size of the fiat s effects uncertain furthermore many of the theoretical and statistical advances of the past 1 decades have yet to be incorporated into the analysis of the law s effects we apply time series and causality testing analysis developed from the transfer function to the minimum wage employment unemployment series we find some evidence that the minimum wage has lowered the employment of white male teenagers age 16 19 and nonwhite males over the age of 20 however these impacts are small no other significant employment impacts are discovered and no significant unemployment impacts are found additional study of the law s impacts using advanced statistical methods is required

inflation and the distribution of price changes across markets a causal analysis recent advances in time series methodology are applied to the investigation of causal relationships between monthly changes in the consumer price index and changes in its dispersion across different consumption categories this dispersion is associated with the degree to which relative prices are changing past inflation rates seem useful in forecasting changes in relative prices but not vice versa there is also a significant contemporaneous correlation between these series hence it is concluded that fluctuations in the inflation rate help cause fluctuations in relative prices but not vice versa unless the entire effect occurs within a month the analysis also serves to illustrate a new way to implement the granger causality concept

cointegration how short is the long run abstract when testing for cointegration and faced with short sample periods it is common for researchers to turn to more frequently sampled observations that is to move from annual to quarterly or monthly data in order to increase the number of observations we argue that such a gain in the degrees of freedom is more apparent than real essentially cointegration is a long run concept and hence requires long spans of data to give tests for cointegration much power rather than merely large numbers of observations using monte carlo simulations we demonstrate this for four popular tests for cointegration

laboratory testbeds and non market valuation the case of bidding behavior in a second price auction with an outside option researchers now use the lab to examine the behavioral underpinnings of valuation before the field application which some argue has less experimental control but lab valuation work raises its own set of concerns when it uses private goods to explore non market valuation behavior because private goods have substitutes often unaccounted for in the lab therefore the lab as a tool to testbed field valuation work may be limited herein we design an induced valuation experiment to explore bidding behavior in a second price auction with an outside option that is a perfect substitute for the auction commodity theory predicts that rational bidders will consider the prices of outside options when formulating bidding strategies and will reduce their bids whenever their resale value exceeds the price of the outside option our results suggest that bidders account for outside options when formulating bids with behavior following comparative static predictions in addition we provide evidence concerning hypothetical versus actual behavior with induced values the data suggesting a hypothetical bias in the level of bids but not in bid shaving

returns to scale generated from uncertainty and complementarity abstract a choice theoretic model of capital production which generates u shaped long run average cost curves is presented increasing returns to scale are not caused by indivisibilities and decreasing returns to scale by a fixed factor uncertainty and complementarity lead to increasing returns in durability which leads to the decline in long run average costs production generates an integrated capital system comprising capital components each component is complementarity with the others and uncertainty with respect to component durability exists diminishing returns occur because capital services must be extracted through time and the time cost of deferred consumption eventually dominates the increasing returns

on inflation and real price variability this paper studies the consequences of costly price adjustments for the variability of real prices accompanying inflation for constant elasticity demand and cost of production it is shown that a higher demand a lower cost of production or a lower cost of price adjustment leads to less intertemporal variability of real prices if the marginal cost of production does not increase too fast then the average real price is less than the real price that would prevail in the absence of inflation additionally a higher demand a lower cost of production or a lower cost of price adjustment leads to a higher level of real prices

variability of inflation and the dispersion of relative prices evidence from the chinese hyperinflation of 1946 1949 abstract this paper uses data from the chinese hyperinflation of 1946 1949 to focus on the relationship between the variability in the general price level and the dispersion in relative prices the issue is important because it bears on the natural rate hypothesis which supports the postulate that these two monetary variables are independent our results reinforce the bulk of previous evidence which suggests a positive correlation between the variation in inflation rate and the dispersion in relative prices during inflationary episodes

macroeconometric modelling and pakistan s economy a vector autoregression approach abstract recent applications of the vector autoregression var technique pioneered by sims litterman and doan has become popular in macroeconomic modelling particularly when knowledge about true structural relations is absent this study represents the first attempt to apply such a technique to pakistani data for ten key macroeconomic variables unlike some of the earlier studies on pakistan s economy our empirical results are intuitive and consistent with the predictions of the standard new neoclassical model more importantly based on these results perhaps one may also shed light on some of the dominant recurring macroeconomic issues of pakistan s economy

investigating the causal relationship between quits and wages an exercise in comparative dynamics this paper examines the causal relationship between wages and quits in u s manufacturing industries logit and regression models then relate causality test results to industrial characteristics once these relationships are identified they can be used to predict the causality classification for each industry based on the characteristics of that industry this technique can help the researcher choose the appropriate theoretical model for analysis one finding is that quits respond to wages in most industries but not in industries with highly skilled workforces

effects of cheap talk on consumer willingness to pay for golden rice a large body of literature suggests willingness to pay is overstated in hypothetical valuation questions as compared to when actual payment is required recently cheap talk has been proposed to eliminate the potential bias in hypothetical valuation questions cheap talk refers to process of explaining hypothetical bias to individuals prior to asking a valuation question this study explores the effect of cheap talk in a mass mail survey using a conventional value elicitation technique results indicate that cheap talk was effective at reducing willingness to pay for most survey participants however consistent with previous research cheap talk did not reduce willingness to pay for knowledgeable consumers

on the normality of relative price changes abstract the purpose of this paper is to present evidence on the non normality of relative price changes in west germany based on annual data for forty industries krengel et al n d the question of normality is examined only for germany

technology and oliver williamson s transaction cost economics abstract oliver williamson has greatly contributed to refining neoclassical economics by incorporating transaction costs and internal organization yet his new institutional economics too easily dismisses the role of technology in doing so he has replaced the determinism of technological production efficiencies with the determinism of transaction cost efficiencies a review shows that williamson s new institutionalism has evolved through three stages in terms of the focus of his analysis and his views of transactions throughout this evolution however his proposed solutions to organizational failures have actually continued to rely heavily upon technology

profits investment and causality an examination of alternative paradigms determinants of the level of profits and the share of these profits in national income in the short run have received only limited attention from economists most paradigms such as the neo classical neo keynesian and neo marxian theories have in general attempted to explain distributive shares in long run equilibrium disequilibrium or steady state growth frameworks further there is little discussion of the behavioral relationships of various economic agents who affect and are affected by changes in distributive shares kalecki 19 argued for determination of profits and wages by the expenditure behavior of capitalists and by the distribution factors such as the degree of monopoly in output and input markets particularly the labor market 2 capitalists expenditure together with the distribution factors determine workers consumption and consequently national output and employment the national output will be pushed to the point where profits carved out of it in accordance with the distribution factors are equal to the sum of capitalists consumption and investment 19 81 further kalecki argued at length that given the distribution factors in the short run it is their capitalists consumption and investment that determine profits and not vice versa 19 79 similar behavioral roles of different economic classes are emphasized in the works of keynes 20 kaldor 18 and pasinetti 25 keynesians neo keynesians also ascribe a leading role to investment however there are differences in detail between the popular keynesian paradigm and that of keynes s own work 10 23 neo classical theory on the other hand seems to reverse this direction of causation between investment and profits due to the absence of an independent investment function

relative prices and money a vector autoregression on brazilian data recent data on brazilian agricultural prices industrial prices and money supply are analyzed in a vector autoregression the empirical findings show strong one way granger type causality from money supply to agricultural prices while feedback is observed between industrial prices and money supply under the usual monetarist ordering of contemporaneous innovation covariance agricultural prices do not adjust faster than industrial prices to a shock in the money supply

hypothetical actual bid calibration of a multigood auction abstract evidence suggests the calibration of hypothetical and actual behavior is good specific we examine whether clustering commodities into mutual categories can reduce the burden while we reject a common calibration across sets of commodities a sport specific calibration function cannot be rejected

a new look at forecasting annual corporate earnings in the u s a abstract in this study composite earnings per share models are estimated for 35 chemical food and utility firms during the 1981 1982 period although it is generally held that financial analysts produce superior earnings forecasts when compared to time series model forecasts the results of this study indicate that analysts fared very poorly in 1982 and the average mean square forecasting error of analyst forecasts may be reduced by 74 2 percent by combining analyst and univariate time series model forecasts this reduction is very interesting when one finds that the univariate time series model forecasts do not substantially deviate from those produced by random walk drift models the arima 0 1 1 process moreover despite the high degree of correlation existing among analyst and time series forecasts the ordinary least squares estimation of the composite earnings model is a better forecasting model than the composite earnings models estimated with ridge regression and latent root regression techniques

are causal relationships sensitive to causality tests 1987 are causal relationships sensitive to causality tests applied economics vol 19 no 4 pp 459 465

dynamic linkages among real interest rates in international capital markets abstract short run and long run dynamic linkages among weekly real interest rates for g 10 countries are examined using a variety of time series tests these tests give special attention to the time series properties of nominal interest rates ex ante expected rates of inflation and real interest rates term structure information is used to recover a theoretically consistent measure of ex ante expected inflation in sample and out of sample granger causality tests are also examined to evaluate lead lag relationships among real interest rates the results provide strong support for well integrated markets particularly in the long run the results imply leadership roles for the us in international asset markets