Moving-Average Transformations in Classical Linear Models

Economists are frequently compelled to use data which take inappropriate forms. One particular deficiency is discussed in the paper below; namely, the prior adjustment of economic time-series by moving average transformations. This discussion is restricted to regression analyses and data which satisfy the conditions for the classical linear model.

Temporal Spillover and Autocorrelation in Some Aggregate Models of Wage-Determination

In a recent paper, we discussed the possible availability of prior information with respect to the source of the moving-average components of mixed moving-average autoregressive processes in the context of empirical investigations of wage-determination. The earlier discussion of this generalization of the Yule-Slutsky effect ignores the possible presence of lagged endogenous variables, which may be due to explicit temporal spillovers between different wage-bargains in the labour market. This omission is remedied in this paper, and several final equations for models with temporal spillovers are given below. These can be contrasted with the final equation for a simple model in which the spillover feedback is restricted to autoregressive processes for the stochastic errors of theoretical relations. Also, in this paper the different specifications can be associated with a collection of linear hypotheses for which conventional least-squares statistics provide suitable test statistics if samples of data are sufficiently large. Knowledge of the weights for the moving-average components is an essential framework for the procedures which are outlined.

Known Moving-Average Transformations and Autoregressive Processes

The errors in the linear models which are used so widely by economists may be generated by mixed moving-average autoregressive processes. If errors on an aggregative equation are generated by a mixed moving-average autoregressive process and the weights of the moving-average component of this process are known, then the least-squares procedure can yield consistent estimators of both signal and autoregressive parameters if two adjustments are made to the equation. The autoregressive transformation is combined with pre-multiplication by a Moore-Penrose inverse based on the known weights of the moving-average component.

Investment Functions: Which Production Function?

In this paper, an approximation is suggested whereby the alternative C.E.S. form can be fitted as a number of additional corrections to the final expression associated with the Cobb-Douglas form. Some numerical results are tabulated, and these indicate that, for the British Economy at least, the specification of a Cobb-Douglas form for the production function is inappropriate.

Corporate Taxation in the United States: The Post-War Experience

The area of corporate taxation has stimulated a great deal of debate in both academic and political circles. On the political side, there have been those who argue that a corporation is only a legalistic creation and should not be regarded as a 'flesh-and-blood' person. This paper shall be concerned only with Federal taxes on corporations, although it is recognized that the system of dual sovereignity has raised questions of constitutionality in taxation areas between the Federal and state governments. A result of this has been the developing importance of the judicial branch of government in the taxation field, along with the legislative branch, as an interpretive body of no small significance.

Prior Adjustment: An Extension of the Frisch-Waugh Theorem to the Method of Two-Stage Least Squares

The problems of seasonal adjustment and other forms of prior adjustment have seldom been integrated into a general framework of estimation. A well-known result, due to Frisch and Waugh, has been used to demonstrate how linear seasonal influences might be treated in the context of the general linear statistical model. In this paper, the author establishes a proposition that one form of prior adjustment is consistent with two different estimating techniques that are in common use.

Time-Series for the British Post-War Economy

One product of the author's recent investigation into the determinants of real fixed capital formation in the post-war british Economy was the following set of time-series. In this paper, the author tells us how the extension of the series beyond the range of the other series resulted in the inclusion of a period during which the rates of the two principal taxes could not be aggregated in a simple linear manner, and the expression for the aggregate tax-rate had to be modified. This break is indicated in the text.

Fixed Capital Formation in the British Economy, 1956-1965

Few econometric analyses dealing with aspects of the British post-war economy were available. In 1968, a study sponsored by the Brookings Institution was compelled to acknowledge the absence of any econometric investigation of the British system of investment incentives. In the following sections of this paper, this omission is remedied, and some empirical reults are tabulated for a group of models applied to data derived for one decade of the post-war British economy.

A Second Look at the Roles of Quit Rates and Exceptional Variables in the Determination of Money Wages

In his recent discussion of wage-determination in the U.S. manufacturing industry and its durable and non-durable components, Arthur Donner attempts to explore the short-run interaction of labour turnover and inflationary expectations by incorporating this interaction into a "a two-equation model suitable for econometric testing". His tentative conclusions concern both the direct roles of these variables and the speeds of adjustment of wage changes to prior expectational changes. Since theoretical analyses cannot establish the quantitative significance of biases and false inferences, our numerical results provide important results with respect to the robustness of Donner's estimates. They appear to confirm a significant role for excess demand, but the effect of inflationary price expectations remains uncertain in the absence of prior information with respect to the speeds of adjustment to such expectations. In his list of tentative conclusions, Donner cites one particular result which he had not anticipated. "The implication that the wholesale price index fits into the estimating equation slightly better than the consumer prices is somewhat startling at first, but may present some support for the hypothesis that prices and wages are raised when labour supply tightens--and particularly when vacancies rise above their steady-state values. There appears to be some tentative support in these findings for the hypothesis that the money illusion exists in the short-run." Our results suggest that the use of the wholesale price index (WPI) leads to substantially better fits than the use of the consumer price index (CPI) for both total manufacturing and its separate components. Finally, a model which contains the unusual specification of wage expectations as an explanatory variable for money wage changes is conclusively rejected by our results.

The Specification of Institutional Features in the Determination of Wages in Canadian Manufacturing Industries

As demonstrated in a recent paper, quarterly models of wage determination are highly sensitive, both with respect to parametric estimates and statistical inferences, to the specification of institutional features in the labour market. In the context of these sensitivities, this paper attempts to eliminate a severe deficiency in relevant data by the provision, in tabular form, of time-series which summarize evidence for critical institutional features of the Canadian labour market. The first section contains a brief overview of the data set and examines certain issues such as the coverage of the sample, seasonal patterns in bargaining, and the average lengths of contracts. This overview is followed in the second section by an account of a particular analytical model which incorporates these institutional features in a form appropriate for estimation of behavioural parameters. Finally, some statistics for the institutional characteristics of the labour market (by reference to the analytical model) are provided in the form of a collection of variable weights. These weights will be employed in a subsequent paper for which the behavioural parameters of the market will be estimated.