inequality in the working class the unanticipated consequences of union organization and strikes this paper explores one possible explanation for the uniquely apolitical character of the u s labor movement compared to the labor movements of other western capitalist democracies employing a neo marxist class perspective the author examines the relationship of union density union members as a percentage of the nonagricultural work force and of strike frequency to the distribution of earned income in the united states from 1949 to 1976 time series regression analysis of the quintile distribution of earned income and the gini index of the inequality of earned income shows that union density has had mixed effects on inequality with higher union density tending to redistribute income from middle income workers to both the least prosperous and most prosperous workers whereas higher strike frequency has tended to reduce income inequality generally the author suggests that union organization may be a source of divisiveness within the working class in the postwar era

the positional power of american labor 1963 1977 this paper extends perrone s conceptualization of positional power of labor and investigates its impact on three labor outcomes we conceptualize positional power as embedded in the structural relations among interconnected spheres of production in the economy we maintain that positional power is a threedimensional construct it entails 1 the ability of workers in a given industry to disrupt operations of other industries upstream in the production process 2 the ability to disrupt operations downstream in the production process and 3 the ability to disrupt production locally within their own industry after developing new measures of these three dimensions from interindustry input output flow matrices we estimate the impact of positional power on three labor outcomes a labor s organizational capacity b labor militancy and c labor s economic standing our findings suggest that positional power positively influences all three of these dimensions we discuss the significance of these results for future research

scale economy or scale entropy country size and rate of economic growth 1950 1977 poor s manual of industrials annew york h v poor nually rand mcnally bankers directory and list of bank attorneys anchicago rand mcnally nually roy william g 1982 collecting data on american business officials in the late nineteenth and early twentieth centuries historical methods forthcoming soref michael 1980 the finance capitalists pp 62 82 in maurice zeitlin ed classes class conflict and the state cambridge ma winthrop u s bureau of corporations 1906 report of the commissioner of corporations on the transportation of petroleum washington d c u s government printing office u s department of commerce 1975 historical statistics of the united states washington d c u s government printing office

the public economy and economic growth in western market economies this essay analyzes the impact of two welfare states one for households and the other forfirms on economic growth in twelve advanced market economies between 1962 and 1983 we find that both welfare states contain stimulative and depressing forms of spending transfers in support of household income stimulate growth while public production of goods and services largely consumed by households depresses growth transfers to firms may have a predominantly negative impact on growth while military spending has a stimulative impact on the economy we also find that increasing household tax burdens a correlate of postwar welfare state expansion slows economic growth national debates about economic growth have increasingly been structured as zero sum choices between the welfare state for households and economic growth this reasoning neglects the potentially stimulative components of the welfare state for households and ignores the potentially negative impact of the welfare state forfirms

tax structure and growth are some taxes better than others using pooled cross sectional data from 23 oecd countries between1965 and 1990 i find evidence that the tax structure affectseconomic growth specifically the proportion of tax revenueraised by taxing personal income has a negative correlation witheconomic growth this result is robust to a rigorous sensitivityanalysis where i control for other plausible growth determinantsin a systematic manner also there is some empirical evidencethat tax progressivity measured in terms of the long run incomeelasticity of tax revenue is associated with low economicgrowth

rational inattention dynamics inertia and delay in decision making we solve a general class of dynamic rational inattention problems in which an agent repeatedly acquires costly information about an evolving state and selects actions the solution resembles the choice rule in a dynamic logit model but it is biased towards an optimal default rule that does not depend on the realized state we apply the general solution to the study of i the sunk cost fallacy ii inertia in actions leading to lagged adjustments to shocks and iii the tradeoff between accuracy and delay in decision making

political business cycles 40 years after nordhaus the aim of this article is to survey the huge literature that has emerged in the last four decades following nordhaus s rev econ stud 42 2 169 190 1975 publication on political business cycles pbcs i first propose some developments in history of thought to examine the context in which this ground breaking contribution saw the light of the day i also present a simplified version of nordhaus s model to highlight his key results i detail some early critiques of this model and the fields of investigations to which they gave birth i then focus on the institutional context and examine its influence on pbcs the actual research agenda finally i derive some paths for future research

quantifying information and uncertainty we examine ways to measure the amount of information generated by a piece of news and the amount of uncertainty implicit in a given belief say a measure of information is valid if it corresponds to the value of news in some decision problem say a measure of uncertainty is valid if it corresponds to expected utility loss from not knowing the state in some decision problem we axiomatically characterize all valid measures of information and uncertainty we show that if measures of information and uncertainty arise from the same decision problem then they are coupled in that the expected reduction in uncertainty always equals the expected amount of information generated we provide explicit formulas for the measure of information that is coupled with any given measure of uncertainty and vice versa finally we show that valid measures of information are the only payment schemes that never provide incentives to delay information revelation

state and state expenditure determinants of social investment and social consumption spending in the postwar united states the conventional logic of industrialization thesis holds that escalations in public expenditures are a response to industrial maturation and attendant sociocultural and demographic transformations with a neutral state arbitrating differing needs via the electoral aggregation of citizen preferences to promote the general welfare the present research develops an alternative conception of the liberal capitalist state and state expenditure policy fiscal policy is portrayed as a highly politicized vehicle by which the state attempts to insure private accumulation placate and encourage competing classes and factions and acquiesce to or rebuff demands by mass insurgents all within the context of a tenuously legitimate electoral system and a fragile social order a time series regression analysis of the determinants of social investment and social consumption spending is undertaken for the u s over the 1949 77 period results suggest that the development perspective is seriously flawed as fluctuations in these expenditures reflect an inherently politicized budgetary process whereby the complex interplay of a variety of structural economic and partisan political forces are determinant

trickle down or transfers postwar determinants of family income inequality the expansion of social welfare has been promoted as one means of equalizing the distribution of economic well being macroeconomic expansion has been touted as an alternative strategy for improving the lot of the poor focusing on the postwar era this paper provides an empirical assessment of these two competing theories of income redistribution for female headed families and unrelated men and women the growth of public transfers is seen to be the major force behind a reduction in income disparities only husband wife families and men living apart from kin seem to have experienced any distributional impact of business cycles

elections keynes bureaucracy and class explaining u s budget deficits 1961 1978 the determination of u s federal budget deficits and surpluses during a period of keynesian fiscal activism is modeled in light of relevant social science literatures rational choice emphases upon electoral manipulation of the economy and keynesian stabilization marxian emphases upon monopolization andfiscal control of labor militancy organizational decision theory emphases upon budgeting inertia and a number of additional thrusts from other literatures are supported by time series regression analyses of 1961 1978 surpluses deficits the final model is statistically well behaved analysis of so called high employment measures of discretionary surpluses deficits supports all interpretations requiring discretionary policy making but an indication of automatic stabilization emerges as well a focus upon executive policy making roles is suggested as one means to further theoretical integration of explanations of state macroeconomic policy

competitive pricing behavior in the auto market a structural analysis in a competitive marketplace the effectiveness of any element of the marketing mix is determined not only by its absolute value but also by its relative value with respect to the competition for example the effectiveness of a price cut in increasing demand is critically related to competitors reaction to the price change managers therefore need to know the nature of competitive interactions among firms in this paper we take a theory driven empirical approach to gain a deeper understanding of the competitive pricing behavior in the u s auto market the ability motivation paradigm posits that a firm needs both the ability and the motivation to succeed in implementing a strategy boulding and staelin 1995 we use arguments from the game theoretic literature to understand firm motivation and abilities in different segments of the auto market we then combine these insights from the game theoretic literature and the ability motivation paradigm to develop hypotheses about competition in different segments of the u s auto market to test our hypotheses of competitive behavior we estimate a structural model that disentangles the competition effect from the demand and cost effects on prices the theory of repeated games predicts that firms with a long run profitability objective will try to sustain cooperative pricing behavior as a stable equilibrium when conditions permit for example markets with high concentration and stable market environments are favorable for sustaining cooperative behavior and therefore provide firms with the ability to cooperate the theory of switching costs suggests that in markets in which a firm s current customers tend to be loyal firms have a motivation to compete very aggressively for new customers recognizing the positive benefits of loyalty from the customer base in the long run as consumer loyalty in the market increases the gains from increasing market share by means of aggressive competitive behavior are more than offset by losses in profit margins firms therefore have the motivation to price cooperatively empirically we find aggressive behavior in the minicom pact and subcompact segments cooperative behavior in the compact and midsize segments and bertrand behavior in the full size segment these findings are consistent with our theory based hypotheses about competition in different segments in estimating a structural model of the auto market we address several methodological issues a particular difficulty is the large number of car models in the u s auto market existing studies have inferred competitive behavior only in markets with two to four products they also use relatively simple functional forms of demand to facilitate easy estimation functional forms of demand however impose structure on cross elasticities between products such structure when inappropriate can bias the estimates of competitive interaction we therefore use the random coefficients logit demand model to allow flexibility in cross elasticities we also use recent advances in new empirical industrial organization neio to extend structural estimation of competitive behavior to markets with a large number of products we use the simulation based estimation approach developed by berry et al 1995 to estimate our model a frequent criticism of the neio approach is that its focus on industry specific studies limits the generalizability of its findings in this study we retain the advantages of neio methods but partially address the issue of generalizability by analyzing competitive behavior in multiple segments within the auto industry to see whether there is a consistent pattern that can be explained by theory theoretical modelers can use our results to judge the appropriateness of their models in predicting competitive outcomes for the markets that they analyze a by product of our analysis is that we also get estimates of demand and cost apart from competitive interactions for the market managers can use these estimates to perform what if analysis they can answer questions about what prices to charge when a new product is introduced or when an existing product s characteristics are changed

state revenue extraction from different income groups variations in tax progressivity in the united states 1916 to 1986 we examine the conditions that affected the progressivity of the individual income tax in the united states between 1916 and 1986 a multivariate time series analysis shows how macroeconomic conditions state imperatives the organizational capacities of social classes and political conditions have affected the progressivity and the symbolic component of the income tax progressivity is measured by the difference between the effective tax rates paid by moderate income and very high income families the symbolic component of this tax is measured by the difference between the nominal tax rate and effective income tax rate paid by very high income families the results reveal that changes in tax progressivity are due largely to macroeconomic and state fiscal conditions such as unemployment economic development and budget deficits although the organizational capacities of social classes and political conditions such as labor organization and political participation also have effects changes in progressivity are due primarily to adjustments in the rates paid by very high income families however the impacts of these conditions on tax progressivity changed somewhat when the federal income tax was transformed into a mass tax during world war il finally political conditions have a relatively greater effect on the symbolic component of the income tax than on progressivity overall this analysis supports a structural theory of the state in which the influences of politics and social classes on revenue extraction are circumscribed by macroeconomic and state fiscal conditions

on asymptotic properties of the parameters of differentiated product demand and supply systems when demographically categorized purchasing pattern data are available we derive asymptotic properties of an estimator for supply and demand models extended with additional moments relating consumer demographics to the characteristics of purchased products we clarify the structure of a practical sampling scheme in which the extended estimator is consistent asymptotically normal and more efficient than the original estimator we provide conditions guaranteeing the asymptotic theorems hold for the random coefficient logit model of demand with oligopolistic suppliers extensive simulation studies demonstrate significant benefits of the additional moments in estimating the random coefficient logit model

on the political economy of welfare expansion a comparative analysis of 18 advanced capitalist democracies 1960 1971 this article elaborates the thesis that economic growth and various types of collective action by class linked actors determine the expansion and decline of welfare spending in rich capitalist democracies our multivariate model of this thesis specified to 1960 1971 growth rates in direct cash transfer payments as proportions of gross domestic product is supported strongly by regression analyses these indicate that economic growth notably facilitates transfer payment growth they also suggest that rightist party participation in government notably dampens welfare expansion while leftist centrist and christian democratic party participation in government are conducive to welfare expansion and they suggest that the political influences of both unions and large industrial corporations are conducive to growth in transfers payments as well in addition state authorities appear to augment welfare spending in response to working class protests strike activity and capital investment disinvestment activ

identification in differentiated products markets using market level data we present new identification results for nonparametric models of differentiated products markets using only market level observables we specify a nonparametric random utility discrete choice model of demand allowing rich preference heterogeneity product market unobservables and endogenous prices our supply model posits nonparametric cost functions allows latent cost shocks and nests a range of standard oligopoly models we consider identification of demand identification of changes in aggregate consumer welfare identification of marginal costs identification of firms marginal cost functions and discrimination between alternative models of firm conduct we explore two complementary approaches the first demonstrates identification under the same nonparametric instrumental variables conditions required for identification of regression models the second treats demand and supply in a system of nonparametric simultaneous equations leading to constructive proofs exploiting exogenous variation in demand shifters and cost shifters we also derive testable restrictions that provide the first general formalization of bresnahan s 1982 intuition for empirically distinguishing between alternative models of oligopoly competition from a practical perspective our results clarify the types of instrumental variables needed with market level data including tradeoffs between functional form and exclusion restrictions

the impact of taxes on growth and distribution in developed capitalist countries a cross national study has the scope of public planning in contemporary capitalist economies promoted or hindered economic growth and income distribution we explore this question by assessing the impact of various mechanisms for raising government revenues on investment growth and income distribution in 22 developed market economy countries the article considers whether growth and distribution are affected differently by governments relative reliance on personal and corporate income taxes social security contributions property taxes and sales and value added taxes or by the relative progressivity of tax mechanisms our findings lend support to the assertion that fiscal instruments especially personal income taxes can be used successfully to achieve greater income equality on the other hand these findings run counter to the conventional notion that an automatic trade off exists between an active public sector and a dynamic expanding economy although there is surely some tension between the economic goals of growth and equality it is not at all clear that they are necessarily incompatible or that government can contribute only to the latter

the political economy of military spending in israel irior scholarly analysis of israeli military spending has focused on national security questions we present a mathematical model incorporating security threats as well as electoral cycles and corporate profits the parameters are estimated empirically the results support the idea that in israel the military budget at the margins is also employed as a political economic instrument to help manage the economy and to provide a favorable election climate for incumbents it is suggested that the political economic dynamic widely attributed to western industrialized societies may be of increasing importance in other societies throughout the world

corporatism in decline an empirical analysis of the impact of corporatism on macroeconomic performance and industrial disputes in 18 industrialized democracies during the 1970s and early 1980s most studies on corporatism indicated that corporatist policies led to lower unemployment and inflation and higher economic growth rates in the mid and late 1980s however voices claiming that corporatism is in decline became more and more frequent although hardly any empirical examinations were undertaken the purpose of this study is to estimate empirically the influence of corporatist arrangements on macroeconomic performance and industrial disputes in the 1980s as compared with the 1970s and 1960s this pooled time series cross sectional analysis provides evidence that corporatist policies have not lost their capacity to achieve the desired macroeconomic goals in the 1980s in addition corporatism significantly reduces the number of working days lost however no evidence was found that corporatism leads to increased economic growth there is evidence that economic growth is adversely affected by government outlays

combining micro and macro data in microeconometric models or panel samples to improve accuracy of estimation in this paper we show how to do this efficiently we show that the gains from use of marginal information can be substantial we also discuss how to test the compatibility of sample and marginal information

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

consensus versus majoritarian democracy political institutions and their impact on macroeconomic performance and industrial disputes this article argues that consensual political institutions as operationalized by lijphart and crepaz 1991 have significantly favorable effects on unemployment inflation and the number of working days lost whereas economic growth remains unaffected although this finding is consistent with olson s theoretical concept of encompassing organizations this study shows that olson s empirical operationalization is flawed strong two party westminster systems based on single member district electoral rules and single party bare majority cabinets do not perform as well as weak multiparty coalition governments with proportional representation as an electoral rule an empirical measure of encompassing organizations is introduced termed popular cabinet support a cross sectional time series panel study of 162 elections 18 countries and 9 elections per country n 162 provides strong evidence that governments with consensual inclusive and accommodative constitutional structures and wider popu

limit theorems for estimating the parameters of differentiated product demand systems we provide an asymptotic distribution theory for a class of generalized method of moments estimators that arise in the study of dierentiated product markets when the number of observations is associated with the number of products within a given market we allow for three sources of error sampling error in estimating market shares simulation error in approximating the shares predicted by the model and the underlying model error it is shown that the estimators are can provided the size of the consumer sample and the number of simulation draws grow at a large enough rate relative to the number of products we consider the implications of the results for berry levinsohn and pakes 1995 random coecient logit model and the pure characteristic model analyzed in berry and pakes 2002 the required rates dier for these two frequently used demand models a small monte carlo study shows that the dierence in asymptotic properties of the two models are reflected in quite a striking way in the models small sample properties moreover the limit distributions provide a good approximation to the actual monte carlo distribution of the parameter estimates the results have important implications for the computational burden of the two models

government special interest groups and economic growth in descending order of robustness and strength the four major conclusions are i the experience of industrial countries in the postwar period indicates that a large welfare state has been associated with a high rate of economic growth ii the olson thesis that powerful special interest groups impede growth receives empirical support iii the relation between growth and the welfare state is non linear with increases in the size of the welfare state beyond some critical level one sixth of gdp according to our estimates resulting in reductions rather than increases in the growth rates and iv the strength of the growth promoting properties of the welfare state is positively related to the strength of special interest groups as proxied by the proportion of the work force unionized one possible interpretation of these results runs as follows a large welfare state may retard economic growth by reducing the incentives to work to save to move and to change on the other hand in a situation where special interest groups have aquired significant power to block change if they so desire the welfare state which offers assistance to those who are the victims of change may play a growth enhancing role in reducing the incentive to block change the fourth conclusion just stated supports this view the welfare state may also foster economic growth through favourable effects on social consensus political stability and labour management relations the results suggest that the growth promoting forces predominate as long as the welfare state is not too large but beyond a certain point which corresponds more or less to the median situation among developed countries today the growth retarding elements come to the fore

entropy and the value of information for investors consider any investor who fears ruin when facing any set of investments that satisfy no arbitrage before investing he can purchase information about the state of nature in the form of an information structure given his prior information structure alpha is more informative than information structure beta if whenever he is willing to buy beta at some price he is also willing to buy alpha at that price we show that this informativeness ordering is complete and is represented by the decrease in entropy of his beliefs regardless of his preferences initial wealth or investment problem we also show that no prior independent informativeness ordering based on similar premises exists

income distribution within nations problems of cross national comparison in recent years a large number of cross national studies have examined the causes and consequences of income inequality within nations unfortunately few of these studies have attended very carefully to problems of measurement and definitional consistency that can seriously undermine the comparative use of currently available data on income shares this article offers a discussion of the major theoretical and practical problems that can arise in measuring and comparing patterns of income distribution across nations focusing on the completeness of income coverage the unit of analysis the time period over which income is measured the scope of population coverage the underreporting of income and the effect of public sector fiscal policies it then assesses major published sources of cross national data on the size distribution of income in light of these problems finally the article offers several suggestions for minimizing the negative consequences of measurement problems that remain in even the be

military keynesianism in the united states 1949 1976 disaggregating military expenditures and their determination this paper examines military expenditures in the united states 1949 1976 at a less aggregate level than was done by griffin devine and wallace assuming that distinctive and independent causal processes generate each of four subcategories that include nearly all military spending griffin devine and wallace s model can be transposed with little modification to the two most generously financed subcategories equipment and personnel however their model casts little light on the determination of spending for operations and maintenance and research and development still the level of industrial concentration emerges as an important source of spending on military research development and this fact is consistent with suggestions in galbraith s discussion of the planning sector preelection increases in military spending appear to be efficiently earmarked for increases in the pay of military personnel

inflation drag or taxation in drag responsible for the rising share of government in australian gdp i am sure that these results will be by no means the last word possible many other influences have been neglected nonetheless they are quite striking and appear to indicate that price level effects inflation have been a major if not the major influence in terms of raising the shares of government revenue and expenditure in gdp over the period 1949 50 to 1987 88 in australia this inflation drag which is really taxation in drag has only been able to operate because of a combination of a highly progressive personal taxation system and the absence for most of this period of any inflation indexation of the tax system i postulate that the primary cause is a high demand from certain segments of the community and special interest groups for greater government outlays and transfer payments however these demands may not in themselves be enough to achieve the objectives of these groups unless combined with rational voter ignorance about the real price to be paid for these activities in terms of higher taxes and future taxes to pay the accumulated deficits a high inflation rate makes it possible for real government expenditures to rise greatly while at the same time the government announces notional tax cuts which may be incorrectly perceived by voters as real tax cuts particularly since the early to middle 1970s australian governments have not had to rely on announcing tax increases to finance rapidly growing real levels of expenditure this has lowered the perceived cost of these programs and facilitated the rapidly rising share of government revenue and expenditure in gdp a sign of some voter disenchantment with ever rising expenditure shares has come in the last year or two as the hawke keating government has been successful in actually slightly lowering the expenditure share one obvious reform which would force governments to be more honest with voters is complete inflation indexation of tax brackets and capital income however as the experimentation with inflation indexation by the fraser government showed no government is likely to voluntarily persist with even partial let alone complete tax indexation to introduce and maintain such a measure some sort of tax constitution as explored by brennan and buchanan 1980 1985 may be desirable since the likelihood of achieving such reform via a constitutional referendum seems remote a promising alternative is the various flat tax proposals such as the hall and rabushka 1985 scheme any scheme which brings average and marginal tax rates into greater equality not only forces politicians to be more honest and open about the consequences of expenditure increases but it also unequivocally improves the efficiency of the tax system via the lowering of work disincentive effects swan 1982 1984 and the excess burden of taxation for a given overall government tax take there cannot be any aggregate income effect offsetting the favourable substitution effect from lowering marginal tax rates when the average level of taxes is raised there is a potential role for income effects since individuals who have been made worse off by tax increases may be motivated to work more to maintain their income higher government expenditure does not necessarily provide higher benefits from public goods to offset lower personal after tax income it is interesting that supporters of big government such as wilenski 1986 30 should use the income effect argument to claim that the effect of taxes on work incentives is an empirical matter since he is in effect conceding that the higher government expenditure which results from higher taxes does not necessarily compensate taxpayers for the burden of these higher taxes i e that the income effect exists and is unfavourable a more fundamental line of attack on the rational ignorance of voters which may be the root cause of many weaknesses displayed by so called democratic governments has only been hinted at here such fundamental reforms may involve the institution of well informed middle persons between voters and governments fostered by revolutionary proposals such as markets in votes and payments for votes instead of the present penalties for failing to vote

modeling u s budgetary and fiscal policy outcomes a disaggregated systemwide perspective this paper develops and estimates a model of u s federal budgetary outcomes that allows for considerable disaggregation across spending categories while providing through cross equation coefficient restrictions substantially more statistical power than traditional approaches we identify significant top down fiscal policy effects on budgetary allocations primarily within the defense budget budgetary responses to macroeconomic conditions are generally countercyclical although middle class entitlements appear to react procyclically to inflation political control of congress influences budgetary outcomes with democrats giving higher priority to domestic spending programs the relative rate of public sector inflation affects spending growth consistent with baumol s disease public opinion affects defense and low income entitlement spending defense spending has also been influenced by perceived soviet threat as well as the level of armed conflict there appear to be small election year effects although not of the sort predicted by political business cycle models with a few exceptions administration specific impacts are relatively small and not systematically related to the party of the president

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

dual factor price equalization elements of a theory abstract the article hypothesizes that despite wide differences in wages and incomes between the developed and the developing countries world wide factor price equalization is taking place once the factors of production are correctly identified in particular the developed country s counterparts to the informal sector workers in a developing country are its low skilled service sector workers and unemployed factor price equalization is largely taking place by the creation of dual economies in the developed countries rather than by their eradication in the developing countries while institutional forces are slowing down this equilibrating process strong economic and political forces such as so called thatcherism and reaganomics are threatening these same institutions some preliminary evidence is given in favor of the theory