Alan S. Blinder

Wage Discrimination: Reduced Form and Structural Estimates

Regressions explaining the wage rates of white males, black males, and white females are used to analyze the white-black wage differential among men and the male-female wage differential among whites. A distinction is drawn between reduced form and structural wage equations, and both are estimated. They are shown to have very different implications for analyzing the white-black and male-female wage differentials. When the two sets of estimates are synthesized, they jointly imply that 70 percent of the overall race differential and 100 percent of the overall sex differential are ultimately attributable to discrimination of various sorts.

Can the Production Smoothing Model of Inventory Behavior be Saved

The production smoothing model of inventory behavior has a long and venerable history, and theoretical foundations which seem very strong. Yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework, but actually to argue that the basic idea of production smoothing is all wrong. Most prominent wnong these is the fact that the variance of detrended production exceeds the variance of detrended sales.This paper first documents the stylized facts. Then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts. Next, estimates of stock adjustment equations derived from the theory are presented and evaluated. Finally, it reviews the theoretical and empirical evidence and tries to drawsome tentative conclusions.

Are Two Heads Better Than One? Monetary Policy by Committee

Two experiments were conducted to test the common hypothesis that groups make decisions more slowly than individuals. One of these experiments imitates real-life monetary policy decisions. In both cases, the hypothesis is found wanting: groups are not slower than individuals. In both experiments, we also find that group decisions are on average better than individual decisions. This holds regardless of whether the groups make decisions by unanimity or majority rule. Simple mechanical theories of group decisionmaking— that the group follows its average player, median player, or best player—do not explain the results. Group interactions seem to matter.

Money, Credit Constraints, and Economic Activity

When government expenditures exceed current tax revenues, the resulting deficit must be financed either by issuing bonds, which imply obligations to levy future taxes, or by creating high-powered money. The choice between money and bonds is often thought to be of great moment for both real and nominal variables; that is, monetary policy matters.There is by now a wide empirical consensus that monetary policy has effects on real variables like output and employment. But there is far less agreement about why this is so. The purpose of this paper is to take issue with some currently fashionable views of why money has real effects,and to suggest a new theory, or rather resurrect an old one--the loanable funds theory--and give it new, improved microfoundations.

Alternative Measures of Offshorability: A Survey Approach

This article reports on household survey measurements of the “offshorability” of jobs, defined as the ability to perform the work from abroad. We develop multiple measures of offshorability, using both self-reporting and professional coders. All measures find that roughly 25% of US jobs are offshorable. Our three preferred measures agree between 70% and 80% of the time. Professional coders appear to provide the most accurate assessments. Empirically, more educated workers appear to hold somewhat more offshorable jobs, and offshorability does not have systematic effects on either wages or the probability of layoff.

A Model of Inherited Wealth

I. Introduction, 608. — II. Elements of a model of inheritance, 610. — III. Primogeniture, 612. — IV. The mating function, 614. — V. Random mating, 616. — VI. Class mating, 620. — VII. Assortative mating, 623. Every generation regards as natural the institutions to which it is accustomed. — R. H. Tawney

On Dogmatism in Human Capital Theory

Every scholar in the fields of human capital or income distribution is indebted to Jacob Mincer [14, 15] for his pioneering work in integrating these two branches of economic theory. His contributions have been so forceful and original that there is now a danger that he may have succeeded too well, that the lessons he has taught us are hardening into dogma. In particular Rosenzweig and Morgan [17] seem to accept without question a specific functional form developed by Mincer wherein the logarithm of earnings is a linear function of years of schooling (S) and a quadratic function of a variable j defined as:

Some Implications of Endogenous Stabilization Policy

JUST AS EVERYBODY TALKS ABOUT the weather, every economist talks about endogenous stabilization policy, but nobody ever does anything about it. In recent years, the authors of numerous econometric studies of fiscal and monetary policy have warned that the policy variables that they treat as exogenous should perhaps be treated as endogenous if the stabilization authorities were pursuing an active countercyclical policy during the period in question. Typically, the warning is the last word on the subject; and so far as we know, no efforts have been made to investigate the kinds of difficulties this omission may cause. The idea that the typical stabilization policy variables-federal government purchases of goods and services, income tax rates, the monetary base (or unborrowed reserves), the Federal Reserves discount rate, and so onshould perhaps be treated as endogenous in econometric studies raises a host of issues for the estimation and use of macro models. In this paper we hope to say something to three groups who are interested in the econometric approach to monetary and fiscal policies.

Consumer Durables: Evidence on the Optimality of Usually Doing Nothing

The authors argue that lumpy, nonconvex transaction costs are the norm for a wide range of economic decisions, which are thus characterized by inertial behavior. Application of this idea to the consumption of durable goods yields an (S,s) decision rule, which, when aggregated, highlights the different expected behavior of average expenditure per purchase versus the number of purchases. The empirical implications of this rule are presented and compared to other theories. A battery of empirical tests generally supports the predictions of the model; in particular, it does a good job of explaining the time pattern of response of spending on durables to a change in income. Copyright 1992 by Ohio State University Press.

Aggregation and Stabilization Policy in a Multi-Contract Economy

This paper presents a model of a multi-sector economy in which each sector is characterized by a different type of wage or price stickiness. The various sectors experience the same exogenous shocks and have the same money supply. The analysis shows demand shocks pose no serious problems for stabilization policy. In contrast, supply shocks force the policymaker to choose between stability in one sector and stability in another. The analysis also shows the economy cannot be usefully aggregated into a single sector model. Such an aggregation misleads the economist as to the economys underlying structure and obscures the tradeoffs the policymaker must confront. In particular, a feedback rule chosen on the basis of an aggregate model could be better or worse than a passive policy.