Abstracts of Working Papers in Economics

1999 Abstracts of Working Papers in Economics  
Universite de Lausanne, BFSH1 -Dorigny, CH-1015 Lausanne, Switzerland. PG 28. PR no charge. JE C31, D31, D90, 130, OI2. KW Permanent Income. Prediction. Determination. Living Standards. China. AB This paper is about the determination and prediction of permanent income in household data. Standard static welfare indicators (e.g. per capita expenditure and income) are imperfect in this respect as they typically contain a high transitory component. The framework the authors employ is consistent
more » ... the permanent income hypothesis but is supplemented with a causes equation where unobservablc permanent income is explicitly modeled as a function of causal variables which play a key part in its determination. Simultaneous estimation of the model allows Tor a comparison of how well different standard static welfare indicators identify permanent income but more importantly enables the authors to predict permanent income using information contained both in the causal variables and in the standard static welfare indicators. The paper is closed by an application of the methodology to household data from the rural sectors of two Chinese provinces. Lausanne, BFSH1 --Dorigny, CH-1015 Lausanne, Switzerland. PG 32. PR no charge. JE D31, 131, 132, J62. KW Inequality. Poverty. Intcrgcnerational Mobility. Hcteroskedaslicity. Least Squares. AB Using a U.S. sample of parents and children the authors examine income distribution in two generations. They find that the mean of the children's distribution is higher than that of parents', but incomes were more equally distributed in the lower deciles of the latter distribution. Groups of children raised in richer families have higher average incomes and lower risks of being poor, but they also exhibit higher income variances than children of poorer origins. This latter result is used to investigate the performance of weighted least squares estimators of income transmission equations. Adjusting the data for heteroskedasticity, income inheritance is found to be more intense, and the goodness of fit of the estimated model is substantially improved over the results of the constant variance framework. Acemoglu, Daron AB In market economics, identical workers appear to receive very different wages, violating the 'law of one price' of Walrasian markets. We argue in this paper that in the absence of a Walrasian auctioneer to coordinate trade: (i) wage dispersion among identical workers is very often an equilibrium phenomenon; (ii) such dispersion is necessary for a market economy to function. We analyze an environment in which firms post wages and workers may at a small cost observe one or more of the posted wages, i.e. search, before deciding where to apply. Both with homogeneous and heterogeneous firms, equilibrium wage dispersion is necessary for the economy to approximate efficiency. Without wage dispersion, workers do not search, and wages arc depressed. As a result: (a) there is excessive entry of firms: (b) because in the absence of search, high productivity firms cannot attract workers faster than low productivity firms, their relative profitability is reduced, and technology choices arc distorted.
doi:10.1017/s095100790000454x fatcat:aqrflp22hvgpnmcxuc5wqkvgai