"The Covariance Transformation And the Instrumental Variables Estimator of the Fixed Effects Model"

The covariance transformation is a useful and often necessary procedure to estimate the fixed effects model. When some explanatory variables are contemporaneously correlated with the disturbance term, the covariance transformation can be used in conjunction with an instrumental variables procedure to obtain a consistent estimator. This paper describes how to correctly compute the IV estimator as a two stage least squares estimator. In addition, I show that if the IV estimator is incorrectly computed using a two stage least squares approach where the covariance transformation is not applied until the second stage, the resulting estimator is not in general consistent.

"The Effects of Worker Participation, Employee Ownership and Profit Sharing on Economics Performance: A Partial Review"

For alternative sharing arrangements we review theory on the economic effects on employment, productivity, investment, income and wealth distribution, and life cycle and survival. We find that predictions are often ambiguous and that sometimes the nature and size of the specific effect is determined in part by the particular institutional arrangements. Next recent econometric work is studied. We review studies using aggregate and industry level time series data for Japan as well as studies that use enterprise and establishment level data for firms in North America and Western Europe. Worker participation, employee share ownership and profit sharing schemes are often found to affect that studies obtained conflicting results. However, available evidence is strongly suggestive that for employee ownership schemes to have a strong positive impact they need to be accompanied by provision for worker participation in decision making.

Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects

The slowdown in productivity growth since the 1970s has led to increased interest in alternative compensation schemes—such as profit sharing and gainsharing—that might raise worker productivity and reduce turnover. In this working paper, Jones, Kato, and Pliskin summarize the rise in popularity of profit sharing (PS) and gainsharing (GS) plans; review existing theoretical and empirical work on PS and GS; and highlight findings that relate the effectiveness of such programs at raising productivity and enhancing employment stability. They also note that some existing studies contain some econometric problems relating to plan and model variables; there are measurement problems as well. Their paper primarily focuses on PS plans.

Two Essays on International Capital Flows (Ridge Regression, Prediction, Biased Estimation, Voluntary Foreign Credit Restraint Program, Disequilibrium Econometrics).

This thesis consists of two empirical studies of international capital flows. In the first study, I compared the accuracy of the least squares predictor and selected ridge regression predictors in forecasting U.S. long-term capital outflows. In the second study, I estimated the effect of the Voluntary Foreign Credit Restraint program on U.S. banks' short-term claims on foreigners. In the first essay, I investigated three questions. Are there ridge regression predictors that forecast more accurately than the least squares predictor? Will shrinking the least squares estimates to a point other than the origin improve the accuracy of the ridge regression predictor? Which rule for selecting the value of the biasing parameter results in the most accurate predictor? Six specifications of U.S. long-term capital outflows were used to compare the forecast accuracy of the predictors. Each specification was estimated by ordinary least squares and by seven ridge regression methods. The estimated models were used to forecast capital outflows over eight quarters. Three conclusions were obtained. In most cases, the least squares predictor was less accurate than the ridge regression predictors. Generally, forecast accuracy did not improve by shrinking the least squares estimates toward a prior mean rather than toward the zero vector. None of the rules for shrinking a value of the biasing parameter dominated the other rules. In the second essay, I investigated three methods of estimating U.S. banks' dem and for short-term claims on foreigners when these claims were regulated by the Voluntary Foreign Credit Restraint program's capital controls for part of the sample period. The estimated dem and functions were used to estimate the effect of the program. The three estimation methods are (1) the conventional approach that uses dummy variables to represent the excess dem and caused by the capital controls, (2) a disequilibrium econometric approach, and (3) ordinary least squares using only observations when the program did not exist. The main conclusion is that the latter two methods yielded larger estimates of the program's effect on holdings of foreign claims than were obtained by the conventional approach and by four published studies.Ph.D.EconomicsUniversity of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/160859/1/8600531.pd