Southern Economic Journal

Published by Southern Economic Association
Online ISSN: 2325-8012
Publications
Article
The authors attempt to determine the net effect of city size on quality of life by developing a welfare measure of urbanization. "The estimation procedure suggested in the theoretical part of the paper (section II) is implemented in the empirical part (section III) using 1980 census data from the [U.S.] PUMS (Public Use Micro Data Sample). The results indicate there is no single optimal city size, but rather a worst city size, and about 90 percent of the U.S. population reside in cities smaller than worst city size. If quality of life is related to the degree of urbanization, then long-term trends in the locational distribution of the population should be accounted for in any welfare-oriented measure of national income. One application of our results is, as indicated, the derivation of a GNP welfare deflator reflecting changes in the degree of urbanization (section IV). The findings suggest an urban deflator on the order of six to seven percentage points, which is steadily increasing at a rate of about half a percentage point per decade."
 
Marginal Impact Effects on Family Income Inequality, 19  
Article
"The U.S. economy experienced significant increases in the degree of income inequality over the past two decades.... In this paper we consider the effects of race, age, female headship, and college education on the distribution of family income by developing a multivariate methodology that allows us to gauge the influence of one factor while holding other determinants of family incomes constant. Over the period studied we find that race had only a minor effect on the overall size distribution of income. Age had a somewhat greater effect than race. In contrast, the impact of female heads and college education were quite substantial. The multivariate estimates reveal that the effects of female heads and college education both increase the Gini to a much greater extent than the progressivity of federal income taxes decreases it. The effects of college education and female headed families on inequality have grown larger across time, while the influence of age has declined. We find that the effects of race on inequality have changed little over the 1976 to 1989 period."
 
Article
In a recent issue of this journal Anthony M. J. Yezer and Lawrence Thurston extend the human capital model of human migration to include an analytical framework for subsequent migration. Subsequent migration is migration following an initial move and includes both return migration and migration to a third location. Yezer and Thurstons extension of the human capital model is accurate and useful. It allows analysis of the subsequent migration decision to be brought into formal economic theory; concomitantly it increases the explanatory power of the theory. And it yields a number of testable hypotheses several of which were tested by the authors. This note extends the analysis corrects a mistake and provides some additional evidence. (excerpt)
 
Article
With a particular focus upon long-term supply effects the authors explored the implications of different population age distributions for the productive capacity of an economy. A multilevel aggregate production process was specified plausible values assigned to its parameters and steady-state solutions obtained under a range of alternative fertility assumptions. The theoretical model was calibrated to conform with Canadian data and published estimates of age-sex substitution elasticities. The study found productive capacity to be related to age distribution although the output effects exceed 8% regardless of the structure of the economy only when total fertility rate is less than 1.6 or well above 3.0; within the range of variation productive capacity and output per capita are lower for both younger and older populations; altering the elasticity of substitution between different tasks has negligible effects upon the sensitivity of the economy to changes in age distribution; altering the elasticity of substitution between different age-sex groups for a given task has a markedly greater effect; introducing either increasing or decreasing returns to scale has only a minor effect upon the sensitivity of the economy to changes in age distribution; and marginal products are quite sensitive to changes in age distribution for both younger and older workers but far less sensitive for middle-aged workers.
 
Lagged Dependent Illegitimacy Rates Included for White and Black Teens 
Article
This paper develops a classical model of the teen fertility decision in the presence of public income transfers. The theoretical model predicts that welfare payments will encourage fertility, holding constant other economic opportunities, and that better economic opportunities will discourage fertility. Considering the possible simultaneity of illegitimacy rates and benefit levels, due to the collective choice process, the authors confirm the theoretical model's predictions with state-level data from 1980 through 1990. The authors find that including fixed effects in the regression to control for unobserved differences between states does not sufficiently control for endogeneity. After controlling for endogeneity, real welfare benefits are strongly and robustly related to teen illegitimacy. The point estimates of the elasticity with respect to changes in the illegitimacy rate are around +1.3 for White teens and +2.1 for Black teens. Real wages for women with a high school education or less are negatively related to teen illegitimacy for White teens, with an elasticity of around -0.4. Finally, male wages appear to have little effect on the illegitimacy rate for White teens but appear negatively correlated with the illegitimacy rate for Black teens in some model specifications.
 
Article
Several authors have addressed themselves to the question of which type of city provides the best employment opportunities for blacks [6; 7; 9; 2]. John Kains study analyzed the two large northern cities of Chicago and Detroit and found that suburbanization aggravated the problem of black employment. Kain has argued convincingly that since jobs are moving to the suburbs blacks must suburbanize in order to follow the employment opportunities. Lurie and Rayack used a survey of black females in Middletown Connecticut to conclude that the best alternative for employment of black families lay in encouraging them to move to satellite cities. The authors believe that the occupational structure of smaller cities offers greater employment opportunities to black families-females in particular. This study analyzes this question of optimal employment location choice for blacks for the southern U. S. Using data compiled from the one percent Continuous Work History Sample maintained by the Social Security Administration migration patterns the associated income changes and employment opportunities were examined for all southern SMSAs for 1965-70. The main hypothesis tested is that city size is an important determinant of opportunity for blacks in the South. (excerpt)
 
Article
This study uses data constructed from 1980 US census microdata files and other sources to estimate a structural model of native/foreign-born labor demand and labor supply that distinguishes the effects on real wages of each type of labor and on employment of natives. What especially sets the model apart from others is that it specifies, econometrically estimates, and simulates a structural model that incorporates not only a production structure channel through which immigrants influence area real wages and employment, but also demand and native labor supply channels. These are not the only channels through which immigrants might affect native workers. Among other potentially important channels are technological change, agglomeration economies, inflation, balance of payments, remittances, tax and transfer payments, use of public sevices, and externalities. -from Authors
 
Article
In the April 1976 issue of this journal Yezer and Thurston (Y-T) [10] propose a job search model to explain why rates of return to migration may have been overestimated in previous studies. They suggest that estimates of the income differential received by migrants that compare the postmigration wages of migrants with those of nonmigrants either at origin or at destination may be biased because they do not incorporate the experience of migrants who did not remain at the destination under consideration. They use this hypothesis to explain why estimated returns to lifetime migration from the South to the North are larger than those found within the first five years after moving. However longitudinal data show that most return and repeat moves occur within a few years of the initial move they follow [3: 7]. Hence it is likely that persons who move again because they did not accurately perceive destination conditions do so within a few years of their initial move; many of them will not even be detected as movers in Census data which compare residences five years apart [3]. The differences between estimated returns to lifetime migration and recent migration are therefore more likely to be due to unmeasured differences in the characteristics of "lifetime" and "recent" migrants or to adjustments the migrants undergo after moving than to a selectivity bias caused by the subsequent migration of disappointed migrants. (excerpt)
 
Article
"The purpose of this paper is to analyze migration as an investment in human capital using panel data. [The authors] focus on two issues. The first is the economic motivation for migration and the reasons some movers receive high returns relative to other migrants. The second issue, and the major focus of the paper, is a test of the human capital model explaining wage profiles of nonmovers, first-time, and repeat migrants." The data are from the National Longitudinal Survey of Young Males, 1966-1971 cross-section, and concern the United States.
 
Article
In regional economics the relationship between migration and changes in employment or employment growth is of fundamental interest. This relationship is essentially a question of causality as to whether "people follow jobs" or "jobs follow people" which will be answered in this paper using time series statistical methodology. Before proceeding to the specifics of this statistical test of causality it is necessary to review briefly previous migration and employment growth models and studies and note their position with respect to the causality question and how if at all this position was arrived at statistically or theoretically. Most models which have considered migration and employment growth can be divided into three groups with respect to their conclusions regarding causality: (1) unidirectional causality running from employment growth to migration or those which believe "people follow jobs" (2) unidirectional causality running from migration to employment growth or those which believe "jobs follow people" and (3) the recent bidirectional studies which consider jobs and people interrelated or simultaneous. The essence of this paper is to present and employ a specific statistical test which can distinguish between these three positions regarding causality and the results will support "jobs follow people" causality. (excerpt)
 
Article
This paper presents new evidence on the economic determinants of the timing and spacing of births, and new results on the effects of shifts of a woman's wage profile and of shifts of her husband's earnings profile on timing and spacing. -from Author
 
Article
A model of the relationship between age and migration is developed and applied to data concerning migrants from other Scandinavian countries who settled in Sweden between 1968 and 1985. The author shows "how changes in Sweden's domestic economic conditions and distance determine the probability for settlement in any of its 24 provinces for migrants of different ages. The results show that in the integrated Nordic labor market, wages at destination do not explain differences in migrants' settlement behavior across ages. Instead they suggest that the major factors to explain the differences are the labor market situation for the different age groups and distance."
 
Article
The present paper tries to measure the effects of paid maternity-leave on three demographic variables: infant mortality, labor-force participation of women in the prime childbearing ages, and fertility rates. A simultaneous-equations model is constructed, using the individual fixed-effects method and a data set comprising 17 OECD countries and four time periods. The structural estimates provide substantial evidence in support of predictions that lengthening the allowed duration of paid leave reduces infant mortality, while increasing both the labor-force participation of young women and the general fertility rate. However, the reduced-form analysis casts doubt on the long-run fertility effect. Maternal-leave policies in industrial countries are surveyed Section III deals with the data and estimation methods. -from Authors
 
Article
"Based on micro data from the Immigration and Naturalization Service (INS) on legal immigrants as well as on legalization applications that followed the passage of IRCA [the Immigration Reform and Control Act of 1986], this study exploits the variation in legal and illegal immigration flows across seventy source countries to examine the sensitivity of immigration flows to underlying source country characteristics. The study finds that earnings in the source country and the distance from the United States form significant deterrents of both legal and illegal immigration flows. We also find that illegal immigration is more sensitive to such factors than is legal immigration." The impact of the North American Free Trade Agreement on U.S. immigration from Mexico is also assessed.
 
Article
It is widely known that linear restrictions involve bias. What is not known is that some linear restrictions are especially dangerous for hypothesis testing. For some, the expected value of the restricted coefficient does not lie between (among) the true unconstrained coefficients, which implies that the estimate is not a simple average of these coefficients. In this paper, the danger is examined regarding the additive linear restriction almost universally imposed in statistical research--the restriction of symmetry. Symmetry implies that the response of the dependent variable to a unit decrease in an expanatory variable is identical, but of opposite sign, to the response to a unit increase. The 1st section of the paper demonstrates theoretically that a coefficient restricted by symmetry (unlike coefficients embodying other additive restrictions) is not a simple average of the unconstrained coefficients because the relevant interacted variables are inversly correlated by definition. The next section shows that, under the restriction of symmetry, fertility in Finland from 1885-1925 appears to respond in a prolonged manner to infant mortality (significant and positive with a lag of 4-6 years), suggesting a response to expected deaths. However, unscontrained estimates indicate that this finding is spurious. When the restriction is relaxed, the dominant response is rapid (significant and positive with a lag of 1-2 years) and stronger for declines in mortality, supporting an aymmetric response to actual deaths. For 2 reasons, the danger of the symmetry restriction may be especially pervasive. 1st, unlike most other linear constraints, symmetry is passively imposed merely by ignoring the possibility of asymmetry. 2nd, modles in a wide range of fields--including macroeconomics (e.g., demand for money, consumption, and investment models, and the Phillips curve), international economics (e.g., intervention models of central banks), and labor economics (e.g., sticky wage models)--predict asymmetry. The conclusion of the study is that, to avoid spurious hypothesis testing, empirical research should systematically test for asymmetry, especially when predicted by theory. author's modified
 
Article
"The aim of this paper is to analyze empirically the causal relationship, if any, between infant mortality and fertility in thirty-five developing countries." The focus is on possible relationships between the infant mortality rate and the fertility rate. "The hypothesis that infant mortality causes fertility is tested. The possibility of a 'reverse causation' is also analyzed. A one-sided distributed lag test as proposed by Granger...is employed." The results are analyzed in light of several versions of the mortality-fertility proposition, including demographic transition theory, choice theory, Ricardian theory, and the modern economic theory of population.
 
Article
"Labor force migration poses two important questions for the economist. The first concerns the nature, magnitude and direction of labor force response to perceived earnings differentials over space. The latter and more complex question concerns the effectiveness, or efficiency, of this response--namely migration--and other market mechanisms in reducing these earnings differentials over time." Both questions are addressed in this paper "by examining relationships among: (1) quality of information obtained prior to a move, (2) search duration at the migration destination, and (3) the likelihood of subsequent (perhaps corrective) remigration." These relationships are analyzed using the human capital model of migration-remigration and data from the 1970 U.S. census.
 
Article
This study concerns the relationship between the decision to migrate again and the success or failure of a previous move. The data concern approximately 5,000 individuals who made their initial move in 1968-1969 from one of the 44 regions of Canada to another. Consideration is also given to the role that distance of the prior move plays in influencing the remigration decision. The authors conclude that "a disappointing income experience during a previous move can be an important determinant in causing individuals to move again immediately after an initial move."
 
Article
"Many Japanese firms have engaged in the practice of compulsory retirement upon a female employee's marriage. In 1966, this practice was ruled as being contrary to provisions in Japan's Civil Code. [The authors] have specified and estimated a model of the economic determinants of age at marriage in order to analyze the effect that this discrimination has had on nuptiality in Japan. [The] results indicate that on average, after accounting for an upward trend, women who married after the 1966 court decision married about one year younger than women who married before 1966." It is also found that age at marriage is influenced by several socioeconomic variables, including wife's wage and educational level, husband's income and educational level, and wife's family background. Data are from a 1975 survey of women aged 20-59 who were living in the Tokyo metropolitan area.
 
Article
A simultaneous-equation model of labor supply, fertility, and earnings is developed and estimated for an important subset of the female population, married registered nurses (RNs). Measures of variables specific to married nurses age 21-64 are developed by aggregating observations on individual nurses or their families into Standard Metropolitan Statistical Area (SMSA) averages, from the 1-in-100 Public Use Sample of the 1970 Census of Population in the U.S. The sample was restricted in certain ways: the grouped observations apply only to white RNs who are married with husband present and live in SMSAs of over 250,000 population in 1970 (except Honolulu). The sample is further restricted so that each included observation (representing an SMSA average) is based upon an underlying pool of at least 15 individual nurses. This last restriction reduces the sample of SMSAs to 88 from 124. The coefficient on the nurse wage variable is positive and statistically significant with an implied wage elasticity of .40 at the means. These estimates are consistent with those observed using the analogous microcensus data on RNs. RN fertility has the predicted negative effect on nurse labor supply but is statistically insignificant, but the magnitude of the fertility coefficient is plausible. A 10% increase in nurse fertility within an SMSA (number of children ever born/1000 nurses ever married within an SMSA) is associated with a reduction in the SMSA nurse labor supply. The estimated coefficients of the husband-earnings and nonlabor-income variables are negative but only the former is statistically significant at the 90% level or above. The estimated effect of the nurse's earnings opportunities on her fertility are statistically insignificant, but the wage coefficient is negative as expected and implies an elasticity of nurse fertility with respect to the nurse wage rate of approximately -.2. The coefficient on the labor supply variable is negative and statistically significant, confirming the hypothesis that increased labor market activity increases the opportunity costs of children. Husband's earnings are not a significant determinant of RN fertility. The estimates suggest that nurse labor supply and fertility decisions are relatively unimportant factors in determining the nurse's market earnings.
 
Article
The authors attempt to reanalyze the Harris-Todaro migration model in the presence of economies of scale in the manufacturing sector, focusing on economies of scale that are external to a given firm but internal to the industry.
 
Article
The use of simultaneous equations techniques to examine the relationship between migration and employment is considered. Specifically, the author presents an explicit model that suggests that the common interpretation given existing results is in need of modification. "Migration and employment growth certainly interact, but the implicit assumption that the processes of this interaction are properly captured by allowing for direct effects between these measures cannot be maintained. The effects of predetermined variables obtained in such models are likely to be underestimated, providing the false impression that employment growth and migration are tied to one another but only weakly to those factors we expect to be behaviorally important."
 
Article
The relationship between the relative factor endowments of heterogeneous labor in the North and South of the United States and interregional labor migration is examined. "The purpose of the present paper is to make explicit a sufficient set of conditions that will support a factor endowment based migration model and to evaluate the advantages and weaknesses of that model." The model's predictions are tested using data from the 1970 census.
 
Article
Female-headed households are at greater risk of slipping into poverty than male-headed households. Indeed sex and marital status of the head of household are the most important determinants of a familys poverty status in the US. Divorce separation death of a husband and out-of-wedlock births can lead to female headship. Transfer payments especially the Aid to Families with Dependent Children program are blamed for contributing to increased marital instability and out-of-wedlock births. The authors examined the role of welfare benefits in influencing female headship. Preliminary results using standard estimation procedures indicate that transfers do not significantly influence female headship. Standard estimation procedures are however erroneous because they ignore differences in propensities to establish mother-only households. Therefore adjusting for differences in propensities to establish female-headed households the level of welfare benefits is indeed an important factor in explaining the variation in the changes in the birth rates to unmarried women. The use of a weighted measure suggests that welfare benefits by increasing female headship of women who otherwise have low propensities to be female heads have played a significant role in the feminization of poverty.
 
Article
This study is concerned with four main themes that have been combined to describe U.S. fertility trends since 1920. These themes are identified as a time adjustment mechanism, income, the wife's labor force activities, and some intergenerational factor. "In order to obtain an unambiguous picture each theme will be represented by only one variable. After selecting the variables and estimating a model, an examination of the changing role these variables have had in explaining changes in fertility (the total fertility rate) throughout much of this century will be made. Finally, the implications these themes have for future fertility will be examined." The authors conclude that "in interpreting historical U.S. fertility rates, the results seem to indicate that much of the early decline in U.S. fertility was due to falling infant mortality. After the Second World War, fertility rose sharply as the age-structure variable declined and income rose. Eventually both women's labor force participation rates and the age-structure variable rose and, consequently, fertility fell." They also suggest that the age structure variable may cause a temporary upward swing in fertility in the near future.
 
Article
In this paper, the authors develop "a simple two-country, single-period model to study the effect of quota restrictions on the composition of migrating labor. [They] have divided the migrant population in two general categories called high skilled and low skilled and have shown that free migration of any category of labor occurs if and only if the country's share of world resources is different from its share of the world labor endowment in that category." Two possible outcomes, given differing labor endowments and income differentials, are considered. The potential effect of illegal immigration is also noted. The authors conclude that their model "is applicable not only to 'brain drain' problems, but also to guest worker programs and/or the mass migration of low skilled workers from poor countries to rich countries."
 
Article
Describes and estimates a model of returns to migration which explicitly accounts for self-selection of migrants from the working population. The essence of the problem as it pertains to migration is summarized.- from Authors
 
Article
An analysis of factors affecting migration is presented. The authors "extend the investigation of the roles of information, intervening opportunities, and psychic costs by focussing on differences in migrant destinations with respect to the deterring effect of distance. [They develop] a reservation-wage model of migration which implies that the distance effect is weaker for high-wage destinations and stronger for low-wage destinations." The model is tested using data for Brazil, Japan, Mexico, the United States, and Venezuela.
 
Article
The brain drain of professionals to the US and other developed nations has long been criticised by the developing nations and has been the focus of a substantial amount of research. The present study investigates both total and indirect professional immigration to the US and focuses on the constraints to professional immigration and adjustment of status imposed by immigration policies. -from Authors
 
Article
"This paper presents a new method of using wage data in a model of U.S. interregional migration. This method makes better use of human capital theory than has been done in previous studies. By restricting the variability of real predicted individual regional wages, more satisfactory estimates of a migration model are obtained using microdata than when no restrictions are imposed. A multiple choice conditional logit model is applied to migration as a choice among the four U.S. census regions. Two U.S. microdata sets are used to estimate the model."
 
Article
The main criticism of the comment was that the dependent variable was misspecified in our original paper and that the population at risk should have been used in determining the migration rate. There has been considerable debate in the literature concerning the choice of the dependent variable for migration studies. The correct choice of the dependent variable is indeed far from being resolved. In this reply we shall present some further results using the alternative definition of the dependent variable. The other comments can be dismissed rather quickly: (1) It is no problem dealing with someone who moves from a division to a state within that division since our data takes account of such moves; (2) Degrees of freedom are smaller for Blacks since in some instances there was no black migration for certain pairs of origins and destinations; (3) Weighted least squares was not used; and (4) The unemployment rates refer to the end of the period. This use of postmigration variables is a well-known problem associated with the use of census data for migration. (excerpt)
 
Article
"This paper uses a general overlapping generations model to analyze social security. Rather than focusing on intertemporal price and income considerations, however, the paper focuses on the effect of contemporaneous (same period) prices and income. The analysis shows that the old-age dependency ratio acts as a shadow price for old-age benefits. With this new shadow price, the equilibrium price and quantity of social security benefits and the level of the payroll tax rate are determined in a demand-supply framework with individual utility maximization. Three explicit demand functions (intergenerational contracts) are analyzed. The model is tested using [U.S.] time series data for the social security Old-Age and Survivors (OASI) program."
 
Article
Since the September 11, 2001, terrorist attacks, repeated airport closures due to security breaches have imposed substantial costs on travelers, airlines, and government agencies in terms of flight delays and cancellations. Using data from the year following September 11, this study examines how airlines recover flight schedules upon reopening of airports that have been closed for security reasons. As such, this is the first study to empirically examine service quality during irregular airport operations. Our results indicate that economic considerations, particularly the potential revenue per flight, have predictable effects on service quality following airport closures. Airport concentration, hub destination, and various logistical factors also significantly influence flight outcomes.
 
Book
This book examines why certain countries have achieved, at some period in their history, economic superiority over all other countries. The author is particularly interested not only in the factors that lead to this primacy, but also the factors that cause the primacy to end. The study begins in 1350 with Italian city-states, and continues through Portugal, Spain, the Low Countries, Great Britain, and the United States. Additional chapters treat France as a perennial challenger, Germany which twice waged war to attain primacy, and Japan.
 
Article
The United States transformed itself from a rural to an urban society over the last three centuries. After a century of unremarkable growth, the pace of urbanization was historically unprecedented between the nineteenth and the early twentieth centuries. In the twentieth century, the urban population continued to increase but in a much more dispersed manner as the suburban population increased. Throughout these developments, cities also exhibited considerable variation in their population sizes. This paper finds that the pace and pattern of U.S. urban development are explained by changes in regional comparative advantage and in economies in transportation and local public goods, which in turn were determined by the changes in the economic structures of cities. This paper also finds that cities varied considerably in size because the larger cities reduced market transaction costs associated with coordinating greater geographic division of labor.
 
Article
This article examines the relationship between output volatility and long-run growth for 18 developed countries between 1880 and 1990. The analysis builds on the existing literature by decomposing output growth volatility into expected and unexpected components and then examining whether the types of volatility have different effects on long-run growth. The results are consistent with the view that unexpected volatility reduces long-run growth and that expected volatility increases long-run growth. The results also suggest that the combined effect of expected and unexpected volatility is to reduce long-run growth for most countries and most time periods.
 
Book
Writing in the June 1965 issue of theEconomic Journal, Harry G. Johnson begins with a sentence seemingly calibrated to the scale of the book he set himself to review: "The long-awaited monetary history of the United States by Friedman and Schwartz is in every sense of the term a monumental scholarly achievement--monumental in its sheer bulk, monumental in the definitiveness of its treatment of innumerable issues, large and small... monumental, above all, in the theoretical and statistical effort and ingenuity that have been brought to bear on the solution of complex and subtle economic issues." Friedman and Schwartz marshaled massive historical data and sharp analytics to support the claim that monetary policy--steady control of the money supply--matters profoundly in the management of the nation's economy, especially in navigating serious economic fluctuations. In their influential chapter 7, The Great Contraction--which Princeton published in 1965 as a separate paperback--they address the central economic event of the century, the Depression. According to Hugh Rockoff, writing in January 1965: "If Great Depressions could be prevented through timely actions by the monetary authority (or by a monetary rule), as Friedman and Schwartz had contended, then the case for market economies was measurably stronger." Milton Friedman won the Nobel Prize in Economics in 2000 for work related to A Monetary History as well as to his other Princeton University Press book, A Theory of the Consumption Function (1957). © 1963, by National Bureau-of Economic Research. All Rights Reserved.
 
Article
During the debate that led up to the implementation of a bilateral free-trade agreement between Canada and the United States on January 1, 1989, much was made of economists' claims that both nations could expect significant welfare improvements as a result of the removal of tariffs on traded goods. The welfare gains were expected to flow from average cost savings associated with the exploitation of scale economies. In this article, I show that it was overly optimistic to predict substantive, permanent average cost convergence as a result of adjustments in the scale of production among Canadian or American manufacturing firms. I conclude that the formation of reasonable expectations regarding the effects of trade-induced output adjustments should consider global- and local scale economies and should employ data that are not dominated by a single cycle of macroeconomic volatility.
 
Article
During the debate that led up to the implementation of a bilateral free-trade agreement between Canada and the United States on January 1, 1989, much was made of economists' claims that both nations could expect significant welfare improvements as a result of the removal of tariffs on traded goods. The welfare gains were expected to flow from average cost savings associated with the exploitation of scale economies. In this article, I show that it was overly optimistic to predict substantive, permanent average cost convergence as a result of adjustments in the scale of production among Canadian or American manufacturing firms. I conclude that the formation of reasonable expectations regarding the effects of trade-induced output adjustments should consider global- and local scale economies and should employ data that are not dominated by a single cycle of macroeconomic volatility.
 
Article
This article examines the racial gap in infant mortality rates from 1920 to 1970. Using state-level panel data with information on income, urbanization, women's education, and physicians per capita, we can account for a large portion of the racial gap in infant mortality rates between 1920 and 1945. The educational gap between white and nonwhite women was especially important in this regard. In the postwar period, socioeconomic characteristics account for a declining portion of the racial infant mortality gap. We discuss the postwar experience in light of trends in birth weight, maternal characteristics, smoking and breast-feeding behavior, air pollution, and insurance coverage.
 
Article
Around March 1933, commercial banks began accumulating unprecedented amounts of cash. Uncertainty over deposits and loans, low interest rates relative to brokerage fees, and costly de novo capital have been used to explain this behavior. This paper employs aggregate call-date data for country member banks in the 12 Federal Reserve districts to formally investigate the role of these factors in the accumulation. The results indicate a minimal, if any, role for these factors. The findings suggest that it was the unintended consequence of unprecedented deposit growth in the face of large scale-related adjustment costs.
 
Article
In this paper we present an investigation of the pressures on the United States to devalue the dollar against the franc and gold in the early 1930s. We calculate monthly time-series of realignment expectations and find that these are well explained by a set of fundamental economic variables. The implication is drawn that macroeconomic events were at least in part responsible for jolting the U.S. off the gold standard and that the Federal Reserve was constrained in its response to the Depression by the United States’ commitment to gold
 
Article
The banking crisis of 1933, which forced a national holiday closing the entire U.S. financial system, is often blamed on either publication of the names of banks borrowing from the Reconstruction Finance Corporation, a speculative run on the gold-backed dollar due to fears that president-elect Roosevelt would devalue the currency, or both. Evidence presented here indicates that neither factor started the final banking crisis of the depression. The Michigan bank holiday ignited the panic, resulting in a series of bank holidays and a run on the dollar. This chain of events toppled the United States financial system.
 
Article
We reexamine the behavior of money growth, inflation, and real money balances in post–World War II Taiwan. Our results suggest that the importance of the June 1949 reform package has been overstated. The empirical work reveals an extended period of instability that begins several months prior to the June 1949 announcements and continues until early 1950. This implies that stabilization was achieved only gradually. We also point to the importance of two high-interest deposit programs—introduced in May 1949 and March 1950—in helping account for the Taiwanese authorities' ability to end the inflationary spiral.
 
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