pricing frills and customer ratings this paper explores whether and how a firm should adapt its strategy in view of consumer use of prior customer ratings specifically we consider optimal pricing and whether the firm should offer an unexpected frill to early customers to enhance their product experiences we show that if price history is unobserved by consumers a forward looking firm should always modify its strategy from single period optimal one but it may be optimal to do so by lowering price by lowering price and offering frills or by raising price and offering frills depending on the market growth rate specifically the last strategy becomes optimal when market growth rate is high enough the results are similar when the price history is observed by consumers except that no deviation from single period profit maximization choices is optimal when market growth is low enough we also analyze whether the firm should prefer that the price information be stated in or left out of consumer reviews in addition in considering the effects of consumer heterogeneity we conclude that the optimal firm s effort to affect ratings is higher when the idiosyncratic part of consumer uncertainty is larger

specialization of labor and the distribution of income abstract we analyze a model in which workers must be allocated to tasks to produce there are differences among the workers in absolute ability that are independent of the activity they perform we demonstrate a unique competitive equilibrium that determines both wages and the allocation of workers to tasks the equilibrium wage has the property that workers assigned to the lowest value added tasks will receive a premium above their identifiable contribution to value simply for filling these least valuable positions we examine how the equilibrium wage function changes as the production process becomes more specialized and the division of labor increases journal of economic literature classification numbers d31 d33 j31

raising awareness and signaling quality to uninformed consumers a price advertising model the objective of this paper is to investigate the firm s optimal advertising and pricing strategies when introducing a new product we extend the existing signaling literature on advertising spending and price by constructing a model in which advertising is used both to raise awareness about the product and to signal its quality by comparing the complete information game and the incomplete information game we find that the high quality firm will reduce advertising spending and increase price from their respective complete information levels in the separating equilibrium the high quality firm will actually spend less on advertising than the low quality firm resulting in a negative correlation between product quality and advertising spending what sets our analysis apart from previous studies is that we consider advertising spending not only as a signaling device but also as an informational device when advertising spending is just a signaling device it is purely a dissipative expense it can be an effective signal of quality because only the high quality firm can afford it thus consumers can infer the product s quality by its advertising spending in this case advertising spending and product quality are positively correlated however when advertising also serves the purpose of raising awareness it endogenizes the size of the market for the firm so it is not just a dissipative expense any more consider the low quality firm s mimicking strategy in this case when the low quality firm is believed to be a highquality one it can charge a much higher price than if its true quality were known given that its marginal cost is lower than the high quality firm s its profit margin will be much larger in mimicry than in revealing its true quality indeed its profit margin will be even greater than the high quality firm s therefore the low quality firm in mimicry has a strong incentive to increase its advertising spending from its optimal level when its true quality is known to deter the low quality firm s mimicking tendency the high quality firm should decrease its advertising spending so that mimicry is not as appealing to the low quality firm as revealing its true quality indeed the high quality firm should reduce its advertising spending so much that it advertises less than the low quality firm in equilibriummany have interpreted signaling as burning money or throwing money down the drain in the case of advertising the claim is that its purpose is simply to show consumers that the firm can afford to squander money on advertising to signal its quality hence the advertising content need not be informative however our results show that simply burning money is not enough to signal quality how the money is burned is also important when advertising raises awareness as well as signals quality saving money rather than burning money is the correct signaling approach although ultimately the high quality firm will sacrifice some profit by reducing its market size the intuition behind this result is that when information is incomplete the high quality firm cannot fully exploit its advantages whenever its advantages in quality and or marginal costs are lessened a firm will want to spend less on advertising

unequal organizations or unequal attainments an empirical comparison of sectoral and individualistic explanations for aggregate inequality explanations derived from the sectoral perspective in sociology and the humancapital screening perspectives in economics are used to predict income inequality in the american states the sectoral perspective is represented by an indicator of the dispersion of concentration in product markets across manufacturing establishments within each state and by the dispersion of employment across enterprises in eight size categories individualistic explanations favored by neoclassical economists are operationalized with the dispersion in educational attainments and by the dispersion in the age experience of the labor force with the percentage of blacks and three additional variables in the equations four hypotheses receive consistent support the strongest determinant of income inequality is the dispersion in educational attainments but the indicator of concentration is significant in all equations states with more blacks and greater variance in establishment size also were likely to be comparatively unequal these results are consistent with both the individualistic emphasis in the neoclassical perspective and the emphasis on economic power in the sectoral perspective they also indicate that studies of income inequality by human capital economists may have been biased by a failure to control for the institutional variables that are emphasized in sectoral theories

on the function of sales assistance the paper provides a formal rationale for the common practice of using sales assistance the argument is made in a model where a consumer s situation determines his needs the products are differentiated and the map identifying the best match between a consumer s situation and a product is known only to the sales assistant i look at procedure which involves the consumer revealing his needs and the sales assistant identifying the best matching product this is compared to several other procedures and found to be best when the number of possible consumer situations is large it is shown that reputational considerations may keep the sales assistant honest i look at the impact of guarantees and other modifications to the model and discuss normative implications

distribution and redistribution in postindustrial democracies this paper analyzes the processes of distribution and redistribution in post industrial democracies we combine a pooled time series data base on welfare state effort and its determinants assembled by huber ragin and stephens 1997 with data on income distribution assembled in the luxembourg income survey lis archive in the case of the lis data we re calculate the micro data in order to remove the distorting influence of pensioners on pre tax pre transfer income distribution we examine the determinants of three dependent variables pre tax pre transfer income inequality post tax post transfer income inequality and the proportional reduction in inequality from pre to post tax and transfer inequality we hypothesized that pre tax pre transfer income inequality would be determined by labor market institutions union density bargaining centralization labor market conditions unemployment and economic structures post industrialism third world imports we hypothesized that the reduction in inequality would be determined by political configurations directly by left government and indirectly via their effect on welfare state generosity by left government and christian democratic government post tax and transfer income inequality was hypothesized to be a product of the combination of labor market variables and political variables the results broadly confirms our hypotheses and the overall fit is very good

service escape profiting from customer cancellations this paper explores the benefits of letting customers escape from prepurchased service contracts by offering refunds for cancellations we show that such a policy creates opportunities for multiple selling in a capacity constrained service i e collecting cancellation fees from advance buyers who cancel and then reselling the freed slots the better the alternative that motivates a cancellation the more profitable is a refund for cancellations policy compared with a no refund policy that locks in customers in contrast to previous research on money back guarantees for durable goods we show that offering refunds for service cancellations can be profitable 1 without charging a higher price compared with a no refund policy and 2 even when advance buyers would be willing to abandon the service for no refund also service providers should decrease rather than increase the customer hassle cost of cancellations our research also suggests a new profit advantage of advance selling i e capturing some of the consumer added surplus created when customers find new alternatives and are therefore willing to pay a fee to terminate the prepurchased contract finally yield management research typically assumes exogenous no shows by advance buyers we suggest that offering refunds for cancellation reduces the need to reserve capacity for high paying customers and improves capacity utilization

optimal referral bonuses with asymmetric information firm offered and interpersonal incentives referral bonuses in which an existing customer gets an in kind or cash reward for referring a new customer are a popular way to stimulate word of mouth in this paper we examine key firm decisions about such bonuses others have studied referral bonus programs a key difference is that we study the role of recommendations not just in spreading awareness as they do but also in providing assessments we start with the idea that people have a variety of reasons for making product recommendations including placing a value on a friend s outcome with a product they recommend we apply that idea in a context of asymmetric information a customer combines his knowledge about the product and his familiarity with friends tastes making him more informed than the friends thus the recommendation is a signal about the value of the product to the friend in this setting we consistently find that the greater the concern for others outcomes the higher the referral bonus should be as long as the firm cannot more efficiently motivate recommendations with a lower price moreover if price is the more efficient lever the optimal bonus is zero and the optimal price is low we also show that greater concern tends to reduce firm profit and in some cases actually reduces consumer welfare as well

quality price advertising and published quality ratings economic literature contains several sometimes contradictory hypotheses concerning the relationships among quality price and advertising we investigate the impact of published quality ratings on these relationships and find that quality and advertising are much more likely to be positively related in the presence of quality ratings

informative advertising and product match abstract this paper studies informative advertising in a variety of market structures for which some consumers are informed about two differentiated products while other consumers are uninformed we characterize a unique symmetric subgame perfect nash equilibrium in advertising and pricing and analyze the welfare properties of the equilibrium remarkably total surplus is non monotonic in advertising in a duopoly market the equilibrium level of advertising may be more or less than socially optimal we also study the effect of a trade association and compare these results with the first best solution and a multiproduct monopolist

empirics of world income inequality this article employs a common general formula for inequality indexes to answer several basic questions about intercountry income inequality in recent decades has inequality across nations increased or declined and why have earlier studies yielded mixed results have different rates of population growth played a significant role in the trend have large nations dominated the trend are the results robust over different inequality measures and different income series two findings stand out first different rates of population growth in rich and poor nations played the predominant role in determining change in the distribution of per capita income across nations second the centuries old trend of rising inequality leveled off from 1960 to 1989 the dependency theory thesis of a polarizing world system receives no support

the environmental kuznets curve under a new framework the role of social capital in water pollution we advance a case for including social capital in an environmental kuznets curve analysis using highly disaggregated data of water pollution in louisiana we create a social capital index and employ parametric and spatial panel regression models to explain water pollution dynamics

voluntary quality disclosure and market interaction marketers disclose quality information directly to potential consumers using a variety of communication channels this study investigates how competition may influence duopoly firms incentive to voluntarily reveal quality information we show that firms in competitive markets reveal less information than a monopoly firm in addition sequential disclosure leads to asymmetric equilibrium disclosure behavior the disclosure leader reveals unambiguously less information than in the simultaneous disclosure case whereas the follower ex ante reveals less more private information than that released by the leader or by the firms in the simultaneous case when the disclosure cost is sufficiently low high we also examine the equilibrium firm profits and social welfare we demonstrate that there may be a u shaped relationship between equilibrium monopoly profits or social welfare under both monopoly and duopoly and the disclosure cost moreover in comparison to the simultaneous disclosure case sequential disclosure can lead to increasingly softened competition improving both firm profitability and social welfare

third party product review and firm marketing strategy product reviews by third parties are growing in popularity this paper examines when and how a manufacturing firm should adapt its marketing strategies to such reviews for example should a firm receiving an unfavorable review reduce its price or adjust its advertising should a winning product of a product review e g editor s choice boost its advertising expenditure to spread the good news how should firms strategic responses to product reviews differ across different types of product reviews description vs recommendation and different advertising media the reviewer s publication vs other media we develop a theory to address these issues and derive firms optimal responses to product reviews under different product market review media conditions we show that firms should chooseadvertising rather thanprice as a strategic variable in response to product reviews when enough consumers value horizontal product attributes surprisingly we find that using a review endorsedadvertising format i e advertisements containing third party award logos to broadcast its victory can hurt the winning product of a product review also it is not necessarily wise for the winning products to boostadvertising expenditures to spread the good news data from two industries printers and running shoes are used to illustrate some of our findings

demand for differentiated durable products the case of the u s computer printer market i introduction this paper aims to provide a theoretical and empirical description of consumer behavior in a dynamic market for differentiated durable goods the computer hardware industry serves as an example of the type of market we consider markets for computer systems and components as well as for many other high technology products exhibit some striking similarities that are of particular concern for an empirical economist as follows products are differentiated in multiple dimensions in addition to price products are durable yielding consumption services over multiple periods product quality rapidly improves over time empirical work on estimating differentiated product demand systems has been dominated by static discrete choice models with random utility see berry levinsohn and pakes 1995 goldberg 1995 and nevo 2001 among others however markets for durable goods exhibit several features at odds with their assumption of myopic consumer behavior first traditional static discrete choice models implicitly assume that consumers participate in the market every period choosing one of the available products or an outside option thus the fraction of consumers who do not buy any product in a given period could only be explained by the high value they assign to the outside alternative for durable goods however purchases are made infrequently and result in a consumer s exiting the market for a significant period of time hence the model needs to account for consumers outflow from the market arising from their purchase decisions second a static framework may give a misleading picture of the aggregate sales time pattern in a dynamic industry in many markets for durable products it is not uncommon to see rapidly improving product quality and falling prices given any reasonable set of consumer preferences over the product characteristics space static discrete choice models for such an industry will tend to predict an upward trend in aggregate sales this fails to account for a variety of patterns commonly seen in the data third the evolution of product quality leads to the possibility of intertemporal demand substitution by forgoing a current purchase the consumer retains the option to buy a potentially better product in the future hence the decision of when to buy may be just as important for consumers as the decision of what to buy this trade off cannot be accounted for in the static framework the purpose of this paper is to remedy these shortcomings of static discrete choice models in durable goods markets with particular attention paid to technological change and the dynamics of new products adoption the paper presents a dynamic model of consumer demand for differentiated durable products that explicitly accounts for consumers expectations of future product quality and consumers outflow from the market that arises endogenously from their purchase decisions in this model the consumer faces a sequence of static discrete choice problems over a non stationary choice set we show that for a subclass of random utility models which include the multinomial logit and the mcfadden 1978 generalized extreme value gev model there exists a scalar valued sufficient statistic that determines the value of the option to postpone the purchase this allows us to model industry evolution over a vastly reduced state space and to formalize the consumer s decision of when to buy as an optimal stopping problem a solution to that problem defines the hazard rate of product adoptions while the nested discrete choice model determines the alternative specific purchase probabilities integrating individual decisions over the population distribution generates rich dynamics of aggregate and product level sales the paper proceeds to present monte carlo evidence that ignoring the time dimension of consumer choice will induce a downward bias in the estimates of consumer preferences over quality sometimes reversing the sign of the coefficients

the impact of public transport on us metropolitan wage inequality this article presents a wage inequality analysis for 158 large us metropolitan statistical areas msas the analysis is concerned with whether public transport has a detectable influence on 1990 levels of wage equality because public transport systems are generally designed to link residences with employment locations higher levels of service provision all other factors being equal should be associated with higher employment rates and more uniform distributions of earnings few analyses however have attempted to evaluate public policies that affect wage distributions the results of this research provide a macroscopic view of the effectiveness of urban transport investments with respect to urban wage inequality

income inequality and income segregation this article investigates how the growth in income inequality from 1970 to 2000 affected patterns of income segregation along three dimensions the spatial segregation of poverty and affluence race specific patterns of income segregation and the geographic scale of income segregation the evidence reveals a robust relationship between income inequality and income segregation an effect that is larger for black families than for white families in addition income inequality affects income segregation primarily through its effect on the large scale spatial segregation of affluence rather than by affecting the spatial segregation of poverty or by altering small scale patterns of income segregation

firm strategies in the mid tail of platform based retailing while millions of products are sold on its retail platform amazon com itself stocks and sells only a very small fraction of them most of these products are sold by third party sellers who pay amazon a fee for each unit sold empirical evidence clearly suggests that amazon tends to sell high demand products and leave long tail products for independent sellers to offer we investigate how a platform owner such as amazon facing ex ante demand uncertainty may strategically learn from these sellers early sales which of the mid tail products are worthwhile for its direct selling and which are best left for others to sell the platform owner s cherry picking of the successful products however gives an independent seller the incentive to mask any high demand by lowering his sales with a reduced service level unobserved by the platform owner we analyze this strategic interaction between a platform owner and an independent seller using a game theoretic model with two types of sellers one with high demand and one with low demand we show that it may not always be optimal for the platform owner to identify the seller s demand interestingly the platform owner may be worse off by retaining its option to sell the independent seller s product whereas both types of sellers may benefit from the platform owner s threat of entry the platform owner s entry option may reduce consumer surplus in the early period although it increases consumer surplus in the later period we also investigate how consumer reviews influence the market outcome

the strategic impact of references in business markets we investigate a business to business context and ask when and why a firm should announce a reference program that commits the firm to facilitating the flow of information about the efficacy of its products from early adopters to potential late adopters we model a monopolist manufacturer with a new innovation that can be sold to two potential customers we demonstrate here two benefits of a reference program that relate not to an increase in later adopters willingness to pay but to an increase in the willingness to pay of the early adopters themselves the impact on the early adopters willingness to pay arises in two ways as a result of their observation of the firm s commitment to information transmission first in a model of symmetric uncertainty we show that the announcement of a reference program facilitates dynamic pricing by the manufacturer in the sense that it allows the firm to provide temporary exclusive use of the technology to one of the customers this creates more value which the manufacturer can extract via a higher price in this way a reference program can serve as a partial substitute for an exclusive use contract in a model with asymmetric information we demonstrate that under certain conditions the firm is able to use the reference program as a signal again to the early adopting customer that its technology is of high quality however such a signal requires significant discounts to early adopters to ensure separation as a result a pooling equilibrium dominates in which the manufacturer fosters references regardless of its quality finally by allowing the firms private information to be stochastic we show that separation may be a dominant outcome

social learning in networks of friends versus strangers networks and the embedded relationships are critical determinants of how people communicate and form beliefs the explosion of social media has significantly increased the scope and impact of social learning among consumers this paper studies observational learning in networks of friends versus strangers a consumer decides whether to adopt a product after receiving a private signal about product quality and observing the actions of others the preference for the product has greater heterogeneity in the stranger network than in the friend network we show that when the network is small observing friends actions helps the consumer make more accurate inferences about quality as the network grows however the stranger network becomes more effective underlying these results are two competing effects of network heterogeneity on social learning these are the individual preference effect which allows one to make a better quality judgment when the preference element of past actions is more certain and the social conforming effect wherein private signals are underused in quality judgment as people follow others actions we find cascading is more likely to occur in the friend network than in the stranger network for a high quality firm the stranger network generates greater sales than the friend network when the network size is sufficiently large or the private signal is sufficiently accurate we also examine the existence of experts and firms using advertising to influence consumers finally we show how networks that are highly homogeneous or heterogeneous could impede observational learning

income distribution in the united states political action has affected postwar income distribution in the united states mainly through policy induced variations in macroeconomic activity and government transfer benefits in proportion to total income we present a small dynamic model of the connections among the partisan balance of power macroeconomic fluctuations transfer spending trends and income distribution outcomes the model is based on the premise that the parties have different distributional goals and it is designed to identify how shifts in party control of the presidency and the strength of the parties in congress have affected the distribution of after tax after transfer income by influencing cyclical economic performance and the flow of resources to transfer programs we therefore extend the partisan theory of macroeconomic policy to the domain of income distribution outcomes

quality disclosure formats in a distribution channel firms normally disclose quality information to consumers using two alternative formats either directly to consumers or indirectly through downstream retailers this study investigates optimal disclosure strategies formats in a channel setting with bilateral monopolies it shows that retail disclosure leads to more equilibrium information revelation this is because the manufacturer can through wholesale price cuts partially absorb the retailer s effective disclosure cost and thus increase the retailer s incentive for disclosure the conditions under which a particular disclosure format arises as the manufacturer s optimal choice are also examined even though direct disclosure is the ex post dominated option the manufacturer may benefit from committing ex ante to the direct disclosure format when the cost of disclosure is sufficiently high

when good news about your rival is good for you the effect of third party information on the division of channel profits the internet has led to a large number of third party sources that offer high quality information about firms s products at little or no cost to consumers as a result many of these sources have grown in popularity extending well beyond the usual reach of traditional third parties such asconsumer reports andkelly s blue book for example the online version ofedmunds offers at no cost to consumers information about new products existing products long term tests and buyers guides all relating to the automotive industry avweb com delivers weekly aviation news and new product reviews to its readers and a large number of websites follow developments on computer platforms such as the apple macintosh in this paper we analyze how the provision of third party information affects the division of profits in a multiproduct distribution channel to illustrate consider the competition between microsoft and apple in the operating systems os market and their channel relationship to compusa a retailer that sells both macs and windows based pcs consider two pieces of thirdparty information first suppose that cnet an internet technology site reviews the newest upgrade of the macos and writes that the new user interface is even easier to use than previously second suppose that an article in the technology section of thewall street journal notes that changes in apple s networking support now enable macs to be better integrated into pc networks these two pieces of information are similar in the sense that they both express good news about the macos and thus they both can be expected to benefit apple by increasing consumer demand for macs one might also expect that in both cases compusa will capture some of the gains that come from the increased demand for macs and that microsoft will lose because the good news about the macos will induce some consumers to choose macs over windows based pcs however we will show that this intuition is incorrect the two reviews can have surprisingly different implications for the profits of microsoft and compusa the reason is that the two reviews differ on one crucial dimension the group of customers for whom they are primarily relevant the cnet review talks about improvements in the customer interface precisely what apple score consumers care about thewall street journal review talks about compatibility with prevailing pc standards important to consumers who care relatively more about compatibility and who are thus more likely to prefer windows apple snoncore consumers we show that good news about the macos that is more relevant to apple s core consumers the cnet review benefits microsoft but harms compusa while good news about the macos that is more relevant to apple s noncore consumers thewall street journal review has the opposite effect it harms microsoft but benefits compusa stated more generally our main result is that when third party information affects consumers product valuations the type of information that induces the change is critical to understanding which firms gain and which firms lose in particular depending on the type of third party information we find that 1 a retailer can be harmed by good news about a product that it carries 2 a manufacturer can gain from good news about a rival s product and 3 good news about a product category need not benefit all the manufacturers in that category there are three novel features of the analysis first we derive the equilibrium division of profit among firms when a retailer sells the products of competing manufacturers and we have done so while placing few restrictions on the feasible set of contracts second we show how this equilibrium division of profit lends itself to a simple graphical interpretation that depicts which firms gain and which firms lose from third party information third we provide a taxonomy of information types and identify the key features of each type that cause profit incentives to vary in particular we conceptualize information as having three components namely 1 the products to which the information pertains 2 whether the information is positive or negative and 3 the consumers to whom the information is relevant we show that all three information components play a role in determining the change in each firm s profit our framework can also be used to analyze a variety of other settings of interest for example it can be used to analyze profit incentives when the retailer has bargaining power when there is downstream competition and when there are non information based changes in consumers valuations in addition our framework may be used both to analyze the effects on profits of persuasive advertising and to predict advertising content

is having more channels really better a model of competition among commercial television broadcasters competitive behavior in commercial television broadcasting is modeled to examine program choice and the effects of more channels being available on firm strategy specifically broadcasters compete by selecting both the type and quality level of a program to offer but do not compete on price we obtain five major results first a comparison of monopoly and duopoly markets indicates that broadcasters in an industry with a larger number of competitors may provide programs of lower quality compared to broadcasters in an industry with a smaller number second in terms of viewer welfare having more channels available is not necessarily better third broadcasters tend to choose an intermediate level of differentiation in terms of the types of programs they provide resulting in a counterprogramming strategy in other words avoidance of price competition is not required for competitors to differentiate themselves from each other fourth if one broadcaster starts the evening with a higher quality higher rated program than its competitor its second program should also be of higher quality finally a broadcaster s first program should be of equal or higher quality than its second program put another way it always behooves a broadcaster to lead with its best

exogenous learning seller induced learning and marketing of durable goods when learning of product characteristics takes some time a firm introducing a new durable faces the trade off between releasing early to an uninformed market and deferring release to a better informed market in a two period monopoly we examine the strategic interaction between exogenous learning el and seller induced learning sil and the firm s product release and pricing strategies the familiar direct effect of strong learning is to facilitate a higher price for informed customers we point out its indirect effect of inducing a higher period 1 price for uninformed customers by lowering their expected utility from learning these two effects underlie three major results first a strong learning intensity does not always imply deferred release surprisingly for medium unit costs the firm releases late early when learning intensity is weak strong second sil facilitates different product release strategies depending on the unit cost level potential sil investment facilitates early release for low or medium unit costs but may facilitate deferred release for high unit costs lastly when customers have heterogeneous prior valuation the high end customers may buy early at a lower price and the low end customers may buy later at a higher price contrary to the usual skim pricing with informed customers this paper was accepted by preyas desai marketing

book reviewinequality poverty and history jeffrey g williamson basil blackwell cambridge ma 1991 isbn 1 55786 118 8 pp vii 151 19 50

exploring the impact of trade and investment on income inequality a cross national sectoral analysis of the developed countries this article explores the relationship between international integration and domestic inequality in the developed countries in the mid 1980s and early 1990s the analysis examines two major modes of integration trade and direct investment disaggregating each by economic sector and distinguishing between imports and exports and inbound and outbound flows and stocks in measuring income inequality extensive use is made of micro data sets that have recently become available through the luxembourg income study lis which provides much more detailed and comparable data on income inequality than has heretofore been the case in particular lis data can be aggregated at the level of economic sector and permit the comparison of pre and post government income the study finds few significant relationships between either trade or investment and sectoral income distribution the overall conclusion is that economic globalization is not a critically important factor in explaining recent trends in income inequa

fly by night firms and the market for product reviews this paper presents a model that permits third party information provision in a market characterized by information asymmetries and reputation formation the model is used to examine how the market for information provision affects prices and supply in the primary market they find that decreasing the cost of providing and using information 1 increases rather than decreases the margins received by reputable service firms 2 decreases the price of new untested service firms so reputation is more costly to build and 3 leads to more high quality firms and less fly by night firms copyright 1989 by blackwell publishing ltd

economic inequality new methods for new trends two positions dominate the debate over the recent increases in economic inequality in the united states the job skill mismatch thesis attributes rising inequality to growth in the number of high skill high wage jobs that leaves less skilled workers behind the polarization thesis in contrast argues that the service shift generates growth in the number of both high wage and low wage jobs and declines in the middle standard summary measures of distributional inequality cannot discriminate between these depictions of where job growth is occurring we propose new methods for measurement that provide both summary and detailed information about the distributional shifts in earnings and aframework for statistical inference using data from the curent population survey cps on yearly earnings from 1967 to 1987 we show that the trends in distributional inequality vary considerably by race gender and time while the evidence provides more support for the polarization argument this thesis needs refinement if it is to account for the variations in changing inequality observed here

income distribution and development some stylized facts in recent years the relationship between income distribution and the process of development has come under increasing scrutiny much of the debate has focused on the hypothesis originally advanced by simon kuznets that the secular behavior of inequality follows an inverted u shaped pattern with inequality first increasing and then decreasing with development this hypothesis has become so much a part of the conventional wisdom on this subject that it has generated considerable skepticism about the welfare implications of the development process indeed on some interpretations developing countries face the grim prospect not just of increasing relative inequality but also of declining absolute incomes for the lower income groups

the kuznets curve and the great u turn income inequality in u s counties 1970 to 1990 the authors examine the determinants of inequality in the distribution of family income in approximately 3 100 counties of the united states in 1970 1980 and 1990 such a study provides a window on global trends in social inequality during the period which spans the tail end of the kuznets curve and the more recent upswing in income inequality results from random effects regression models that control for unmeasured heterogeneity among states reveal the continued importance of the kuznetsian pattern of declining inequality with economic development a positive effect of urbanization on inequality a declining positive impact of sector dualism an increasing positive effect of educational heterogeneity and a persistent effect of racial dualism several variables associated with the recent upswing in inequality have significant effects female labor force participation negative female headed households positive percent of the population over age 65 changes from positive to negative over the period manufacturing employment negative and unemployment ambiguous they also discuss methods of estimating the gini coefficient for income inequality at the county level and measures of sector farm nonfarm dualism racial black white dualism and educational heterogeneity

unintended nutrition consequences firm responses to the nutrition labeling and education act this paper investigates how firms responded to standardized nutrition labels on food products required by the nutrition labeling and education act nlea using a longitudinal quasi experimental design we test our predictions using two large scale samples that span 30 product categories results indicate that the nlea reduced brand nutritional quality relative to a control group of products not regulated by the nlea at the same time among regulated products brand taste increased although this reduction in nutrition represents an unintended consequence of regulation there were a set of category firm and brand conditions under which the nlea produced a positive effect on brand nutritional quality we find that firms were more likely to improve brand nutrition when firm risk or firm power is low lower risk occurs when the firm is introducing a new brand rather than changing an existing brand and weaker power in a category is reflected by lower market share in a category furthermore firms competing in low health categories e g potato chips or small portion categories e g peanut butter improved nutrition more than firms competing in high health categories e g bread or large portion categories e g frozen dinners recommendations for firm strategy and the design of consumer information policy are examined in light of these surprising firm responses

political rights and income inequality a cross national test among contemporary nations the relationship between income equality and national wealth exhibits an inverted u shape low among the richest and poorest nations and high for nations with intermediate wealth to examine the reasons for this relationship i hypothesize that both political democracy and educational enrollment are related in a similar way to income inequality two data sets are used in this analysis modified version of muller s set of 62 nations circa 1965 1975 and hoover s data set multiple regression reveals that measures of political democracy and the educational enrollment levels have an inverted u relationship with income inequality national wealth gnp had no consistent direct effect on income inequality a satisfactory specification of national levels of income inequality must include the polynomial functions of political democracy and education

political choice public policy and distributional outcomes i address the functioning of the u s governing system by analyzing distributional outcomes from 1947 to 2000 the key question is whether public policy influences distributional outcomes the macropolitics model and power resource theory suggest that left policies should equalize the distribution of income i utilize single equation error correction models to assess the impact of policy on income inequality through two mechanisms market conditioning and redistribution since nearly every government action influences markets in some way i examine policy in the aggregate rather than focusing only on policies explicitly designed to redistribute income the analysis indicates that policy influences inequality through both mechanisms with left policy producing more equality the results are consistent with power resource theory and strongly support the macropolitics model furthermore i find that market conditioning is as important as and works in tandem with explicit redistribution