On the costs and benefits of anti-inflation policies

Inflation (Finance)

Kolmogorov-Smirnov Tests For Distribution Function Similarity With Applications To Portfolios of Common Stock

If the elements of the choice set in a decision model involving randomness are not arbitrary, but restricted appropriately, an expected utility ordering of them can be represented by a mean standard deviation ranking function. These restrictions can apply to the form of, or can specify relationships among, the distribution functions. A particularly useful restriction is one which requires that elements in the choice set, when normalized to have a zero mean and unit variance, be identically distributed. No restriction is placed on the form of any individual distribution function. This research empirically tests for this and other useful restrictions on the relationships among the elements of a set of random variables. Observations from the random variables are used to test whether or not they have distribution functions which are appropriately related to one another. The tests are applied to rate of return data for portfolios of common stock. The tests indicate that one cannot reject the hypothesis that the distribution functions of these portfolios are sufficiently similar to imply that the efficient set of portfolios for any risk averse expected utility maximizer is contained in the mean-standard deviation efficient set.

The Effects of the Minimum Wage on the Employment and Earnings of Youth

The employment and earnings effects of the minimum wage are estimated by parameterizing an hypothesized relationship between underlying market employment and wage relationships versus observed wage and employment distributions in the presence of a legislated minimum. If there had been no minimum during the 1973-78 period, we estimate that employment among out- of-school men 16 to 24 would have been approximately 4 percent higher than it in fact was. Among young men 16 to 19 employment would have been about 7 percent higher and among those 20 to 24, 2 percent higher. Employment among black youth 16 to 24 would have been almost 6 percent higher than it was, as compared with somewhat less than 4 percent for white youth. Although it is sometimes argued that the adverse employment effects of the minimum are offset by increased earnings, we find virtually no earnings effect. Had the minimum not been raised over the 1973-78 period, inflation would have greatly moderated the adverse employment effects of the minimum, with approximately two-thirds of the potential employment gains from elimination of the minimum attained. The weight of our evidence is inconsistent with a general increase in youth wage rates with increases in the real minimum. Our findings support the hypothesis that the effects of the minimum are concentrated on youth with sub-minimum market wage rates.

The Transition from School to Work: The Experiences of Blacks and Whites

Because much of the concern about youth unemployment is motivated by the large differences between the rates for blacks and whites, we have pursued our earlier work by analyzing separately for black and white youth the relationship between high school preparation and early labor force experience. We find no striking differences between the determinants of weeks worked by whites and non-whites upon graduation from high school. Although vocational training in high school bears little relationship to weeks worked upon graduation, hours worked while in high school bear a strong relationship to later employment for students and non-students, white and non-white. Academic performanceas measured by standardized test scores and high school class rank isalso positively related to later weeks worked by non-students, both white and non-white. Young persons find jobs in large part through friends and relatives or through direct application to employers orpossibly a combination of the two. Persons who are not looking forwork--and would then be classified as out of the labor force, according to standard definitions--are apparently quite distinct from personswho are looking for work. Those out of the labor force seem not tobe "discouraged workers" for the most part. Controlling for other individual attributes, non-whites are much more likely than whites to be in a post-secondary school full-time (although without controlling for these attributes the reverse is true). A large proportion of young men in school are also working part-time and a significant number are working full-time. A sizeable proportion of persons in post-secondary schools would be classified as unemployed based on official definitions. Indeed the unemployment rate among these full-time students is generally more than twice the rate among young men not inschool. Few high school graduates are chronically unemployed.

Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth

The effects of minimum wage legislation on the employment and wage rates of youth are estimated using a new statistical approach. We find that without the minimum, not only would the percent of out-of-school youth who are employed be 4 to 6 percent higher than it is, but also that these youth would earn more. In particular, the expected hourly earnings of youth with market wage rates below the 1978 minimum are 10 percent lower with the minimum than they would be without it. Thus, an effect of the minimum is to increase the concentration of non-employment among low-wage workers and to reduce their earnings relative to higher wage workers as well. The minimum wage accounts for possibly a third of the difference between the employment rates of black and white youth, according to our results. Our methodology is based on parameterization of the effect of the minimum on the distribution of "market" employment outcomes and market wage rates that would exist in the absence of the minimum. A concomitant of the estimation procedure is joint estimation of market wage and employment functions that would pertain if there were no minimum.

High School Preparation and Early Labor Force Experience

The relationship between high school training and work experience on the one hand and early labor force experience on the other are analyzed in the paper. In addition, the extent and nature of the persistence of early labor force experience is evaluated. The study is based on data for male youths from the National Longitudinal Study of the High School Class of 1972. While there appears to be no relationship between job-related training in high school and post-graduation weeks worked or wage rates, there is a strong relationship between hours worked while in high school and both weeks worked and wage rates in the first four years after graduation. High school class rank and test scores also are positively related to early weeks worked and wage rates in the labor force. It is also found that after controlling for individual specific characteristics of youth, there is little relationship between weeks worked in the first year after high school graduation and weeks worked four years later. And there is almost no relationship between initial wage rates and wage rates four years later, other than those attributable to measured and unmeasured individual specific characteristics. There is little persistence of early experience that cannot be attributed to heterogeneity among youth. There is, however, an effect of early work experience on later wage rates, although it is of modest magnitude in this sample of high school graduates.

Measuring Integration and Efficiency in Maize Grain Markets: The Case of South Africa and Mozambique

Price transmission between the South African market and other regional markets is not as straightforward, despite South Africa’s role of a surplus producer for the region. There appears to be a host of local factors that must be taken into account in order to anticipate the likely level of regional food prices. This article assesses the degree of market integration and the speed of price adjustment to spatial price differentials between the SAFEX maize price in South Africa and maize grain and maize meal prices in Maputo, Mozambique. The findings of this study indicate that under certain trading regimes, there is no evidence of a long-run relationship between Mozambican and South African maize grain prices. This implies that any large deviations, within these regimes, which exceed transaction costs, could continue to grow with no tendency towards equilibrium. However, the trade volume data indicates maize grain exports from South Africa into Mozambique in every month except for three within the sample set. Hence, the empirical findings of this paper are unexpected given a simple arbitrage argument. Possible reasons for these findings are highlighted in the article. It is interesting to note that when the same empirical analysis is undertaken for the SAFEX maize prices and maize meal prices in Maputo then there is in fact evidence of a long-run relationship between these prices in a high import regime. These findings are not surprising and are what we would expect since two of the largest milling companies, located in Maputo are responsible for the majority of the volume of maize grain imported into the country from South Africa.price transmission, market integration, cointegration, trade regimes, Crop Production/Industries,