Template-Type: ReDIF-Paper 1.0 Author-Name: Harry T. Oshima Author-Name-First: Harry Author-Name-Last: Oshima Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: The Role of Institutional Changes in the Growth of Postwar Japan Abstract: The usual explanation for the rapid growth of Japan in the postwar decades relies on the dualistic mechanism -- the cheap labor supplied by the low-wage sector to the more modernized sector which importing new technologies from the West is able to supply cheap industrial products in the international markets. While recognizing that dualistic theory maybe part of the explanation for the postwar growth of Japan (which was four times more rapid in terms of per capita GNP and total factor productivity that in the prewar decades), there is much more to said. This paper argues that the demilitarization and democratization policies initiated by the Allied Occupation Powers, modified, extended and implemented by the Japanese cannot be ignored by economists in attempting to explain the faster pace of growth of postwar over prewar Japan. Accordingly, the major portions of the paper describe the institutional changes brought about by the destruction of the authoritarian structure in agriculture and the rural sector, in industrial organization and industrial relations, in social and political structure and speculate about how these institutional changes affected the growth of postwar GNP. Creation-Date: 1979-01 Publication-Status: Published as UPSE Discussion Paper No. DP 1979-01, January 1979 Number: 197901 Handle: RePEc:phs:dpaper:197901 Template-Type: ReDIF-Paper 1.0 Author-Name: Harry T. Oshima Author-Name-First: Harry Author-Name-Last: Oshima Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: The Role of Manpower Development in Postwar Asian Differential Growth Abstract: In trying to understand the differentials in the growth rates of GNP per capita during the postwar decades in the three regions of Asia (East, South-east, and South Asia), this paper singles out manpower development as one of the major forces responsible for the growth differentials. Manpower development is defined very broadly to include not only the levels of skills and education but also attitudes toward work and learning or work ethics and work motivation. The paper concentrates on the latter aspects rather than skill levels since very little attention has been given to them. A framework for analyzing these aspects is explored taking the formulation of work ethics to be mainly in the home, schools, mass media, in enterprises and in religious institutions. This framework is applied to the formation of Japanese work ethics with some comparisons of sources of U.S. and Southeast Asian work ethics. The paper concludes that there is a need for policies to develop work ethics of LDC's in a systematic way. Creation-Date: 1979-02 Publication-Status: Published as UPSE Discussion Paper No. 1979-02, February 1979 Number: 197902 Handle: RePEc:phs:dpaper:197902 Template-Type: ReDIF-Paper 1.0 Author-Name: Jovito G. Inoferio Author-Name-First: Jovito Author-Name-Last: Inoferio Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Impact of Public Agricultural Land Distribution on Farm Size Inequality in Palawan, 1951-1975 Abstract: The impact of public agricultural land distribution in the Philippines can be examined through an ex post facto analysis of the distribution of the resource. As differentiated from the redistribution of lands (e.g. land reform), the distribution confers benefits to certain social groups though the costs are not discernible on any particular set. Redistribution realizes thereafter the existence of an imbalance and therefore requires a direct loss to a certain group in order to make the other better off. Public agricultural lands are disposable under the following types of grant: (a) homestead, (b) sales (individual and corporate), (c) free-patent, (d) cadastral, (e) lease (individual and corporate), and (f) free title. Each has its own manner of acquisition as well as its maximum hectarage. Except for the free-patent, cadastral, and free-title concessions at least one-fifth of the agricultural land area must be cultivated prior to the release of the patents. Hence, farm-size inequality can be viewed either from two aspects: (a) inequality across public agricultural land grants due to differentials in the maximum hectarage, and (b) inequality in each type of concession due to differences in the levels of farm budget necessary to develop the stipulated land area. Where the public sector exercises minimal prerogative in the disposition of the resource, farm-size inequality is expected to be serious. As expected, the Gini ratio is high in the free-patent, cadastral, and sales (both individual and corporate) distributions. Relatively less inequality is seen in the other kinds of concessions. In the original paper, the total Gini ratio is decomposed into within-set and between-set components to determine sources of variation through size group comparisons. Except in some few cases, however, less significance can be attributed to the decomposition analyses by demographic and non-demographic factors. Much as this researcher desires to incorporate such few significant constraints, results imposed by the methodology of the original paper do not permit such. Creation-Date: 1979-03 Publication-Status: Published as UPSE Discussion Paper No. 1979-03, March 1979 Number: 197903 Handle: RePEc:phs:dpaper:197903 Template-Type: ReDIF-Paper 1.0 Author-Name: Rene Encarnacion Author-Name-First: Rene Author-Name-Last: Encarnacion Title: Will High Interest Rates Lead to Increased Real Savings? A Comment on the Interest Rate Reform in South Korea Creation-Date: 1979-04 Publication-Status: Published as UPSE Discussion Paper No. 1979-04, April 1979 Number: 197904 Handle: RePEc:phs:dpaper:197904 Template-Type: ReDIF-Paper 1.0 Author-Name: Mahar K. Mangahas Author-Name-First: Mahar Author-Name-Last: Mangahas Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: On How to Measure Poverty Abstract: The meaningfulness of a poverty measure depends on both the social acceptability of the poverty line and the accuracy of the measured distribution of purchasing power to which the line is applied. In particular, the use of linear programming to construct a minimum food budget and the uncritical use of the 1975 Family Income and Expenditures Survey of the National Census and Statistics Office has led Tan and Holazo(1978) to some very questionable conclusions. As early as 1975, the Social Indicators Project, making the first effort to construct poverty thresholds for application to a national cross-section of purchasing power (namely the FIES series of the NCSO), showed that absolute and relative poverty worsened during 1961-1971. In 1977 the PREPF project found that the 1975 FIES had very serious defects, and rejected using it to update the poverty trend; on the basis of independent PREPF surveys, adjusted for consistency with the National Income Accounts, it felt that about three-fifths of all households in 1975 should be rated as poor (below P10,000 annual income per households, somewhat more generous than the average SIP Total Thresholds), but could not draw any conclusion about the 1971-1975 trend. Creation-Date: 1979-04 Publication-Status: Published as UPSE Discussion Paper No. 1979-05, April 1979 Number: 197905 Handle: RePEc:phs:dpaper:197905 Template-Type: ReDIF-Paper 1.0 Author-Name: James Roumasset Author-Name-First: James Author-Name-Last: Roumasset Title: Sharecropping, Production Externalities and the Theory of Contracts Abstract: A corollary of the Bebreu-Scarf theorem is that, under ideal conditions, contracts serve as perfect substitutes for markets. Applying these propositions to sharecropping provides a rigorous foundation for the competitive theory of share tenancy. In addition, it is shown that the competitive theory serves as a good approximation even for a small number of landowners. Applying the proposition to production externalities provides a precise and non-trivial version of the Coase theorem, i.e., the contracting equilibrium is equivalent to a Walrasian equilibrium with universal markets, including a market for the "externality". Thus under ideal conditions the contract solution, the market solution, and the government intervention solution (e.g. Pigouvian taxes) are identical. Their relative efficiency cannot be assessed without incorporating transactions costs into the analysis. Even without such complication, however, the abstract model developed here appears to be useful for positive purposes, such as explaining certain patterns in agricultural contracts. Creation-Date: 1979-05 Publication-Status: Published as UPSE Discussion Paper No. 1979-06, May 1979 Number: 197906 Handle: RePEc:phs:dpaper:197906 Template-Type: ReDIF-Paper 1.0 Author-Name: Mahar K. Mangahas Author-Name-First: Mahar Author-Name-Last: Mangahas Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Why Are We Reluctant to Set Numerical Equity Targets? (Comments on the 1978-1982 Five-Year Development Plan) Abstract: The new 1978-1982 Development Plan asserts the 'the conquest of mass poverty' is the immediate and fundamental goal. Yet, although construction of numerical targets is a basic element of development planning, the 1978-1982 Plan continues the tradition of technical overconcentration on economic growth, and is very deficient in the area of equity. It does have targets for the reduction of open unemployment, visible underemployment, under- nutrition, and infant mortality, and for the increase of life expectancy, literacy, schooling participation, housing and social services. But the targets cannot be regarded as very aggressive (with the notable exception of the nutrition plan). What is keeping NEDA from going to the heart of the matter, and from making numerical targets for reduction in the incidence of poverty and in income inequality, and for increases in real wages? There are no serious technical obstacles to this. Naturally, it would have to officially adopt a poverty line and an index of inequality -- at this point, it is more important to decide on some mode of measurements than to argue on what the best mode should be. Given that targets are set, to be met within a 5-year planning period, and subjected to a mid-term review, it also follows that there should be an annual monitoring system for poverty and other equity-variables, just as there is for the GNP. Technicians should be conscious that neglect of numerical targeting and frequent monitoring is a subtle way of supporting the status quo. Creation-Date: 1979-06 Publication-Status: Published as UPSE Discussion Paper No. 1979-07, June 1979 Number: 197907 Handle: RePEc:phs:dpaper:197907 Template-Type: ReDIF-Paper 1.0 Author-Name: Jose Encarnacion, Jr. Author-Name-First: Jose Author-Name-Last: Encarnacion, Jr. Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Fertility Behavior and Labor Force Participation : A Model of Lexicographic Choice Abstract: This paper sketches a model of choice that is consistent with the observation that a smaller family size is usually associated with female employment and the increasing amount of evidence that fertility rises with family income and the wife's education at relatively low levels of income and education. The model implies that the fertility effects of a decline in child mortality depends on the proportions of families below and above certain income and education threshold values, and the model allows for a fertility decline even before mortality reductions. In effect, it was as if couple's decisions were based on a lexicographic preference function. Creation-Date: 1979-07 Publication-Status: Published as UPSE Discussion Paper No. 1979-08, July 1979 Number: 197908 Handle: RePEc:phs:dpaper:197908 Template-Type: ReDIF-Paper 1.0 Author-Name: Gil R. Rodriguez, Jr. Author-Name-First: Gil Author-Name-Last: Rodriguez, Jr. Author-Name: David E. Kunkel Author-Name-First: David Author-Name-Last: Kunkel Title: The Validation of Programming Models : The Philippine Experience Abstract: The purpose of this paper is to demonstrate the need and procedure for testing sectoral programming models. The main approach pursued in investigating the consistency of the programming model is to compare the former's estimates of endogenous variables to carefully selected based period parameters. The actual framework used to achieve this objective is an operational, static, deterministic, and highly aggregate programming model of Philippine agriculture. Alternative formulations of the Philippine model were undertaken to detect possible data errors in the consumption, production, and objective function sets of the former. Creation-Date: 1979-08 Publication-Status: Published as UPSE Discussion Paper No. 1979-09, August 1979 Number: 197909 Handle: RePEc:phs:dpaper:197909 Template-Type: ReDIF-Paper 1.0 Author-Name: Dante B. Canlas Author-Name-First: Dante Author-Name-Last: Canlas Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Mohd Razak Author-Name-First: Mohd Author-Name-Last: Razak Title: Education and the Labor Force Participation of Married Women : West Malaysia 1970 Abstract: With West Malaysia as the empirical setting, this paper examines the effect of wife's education on her labor force participation holding husband's income, age, race, and location of residence constant. Using cross-sectional data drawn from the 1970 Post Enumeration Survey, the results are not unlike those found in the Philippines where below some income and education thresholds, the marginal effect of education is negative and is positive beyond. These observed results suggest that the conventional analysis of wife's labor force participation requires modification in a setting where income are below subsistence levels. Creation-Date: 1979-09 Publication-Status: Published as UPSE Discussion Paper No. 1979-10, September 1979 Number: 197910 Handle: RePEc:phs:dpaper:197910 Template-Type: ReDIF-Paper 1.0 Author-Name: Ernesto M. Pernia Author-Name-First: Ernesto Author-Name-Last: Pernia Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: The Economic Costs of Children in the Philippines : A Survey Abstract: This paper attempts to survey the state of the art on the economic costs of children. Relevant studies suggest rough orders of magnitude for the direct, indirect and social costs of children. The pattern of these costs seems consistent with the persistence of high fertility especially in rural areas. Direct cost appears sufficiently onerous but indirect (opportunity) costs do not seem to be a major consideration in the rural setting. These private costs, in any case, appear to be more than offset by the stream of economic benefits, not to mention non-economic satisfaction from children. By contrast, the social costs of high fertility seems considerable but are not material to the extent that fertility decisions are made within the household framework. Persistently high fertility may be further explained in the context of the threshold model. If a household is poor and/or rural (i.e., below the threshold), the graduation of a child from net consumer to net producer would, by definition, push the household up toward the threshold (and down the mother's labor force participation curve), helping to foster natural fertility. This graduation seems faster the poorer the household. The implication for policy, other than the obvious one of uplifting the masses from poverty, would seem to be to bring social cost considerations to bear on household fertility decisions through information and education. Creation-Date: 1979-09 Publication-Status: Published as UPSE Discussion Paper No. 1979-11, September 1979 Number: 197911 Handle: RePEc:phs:dpaper:197911 Template-Type: ReDIF-Paper 1.0 Author-Name: Theodoro M. Santos Author-Name-First: Theodoro Author-Name-Last: Santos Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Limits to the Price of Oil Abstract: Are there natural limits to the seemingly incessant rise in oil price? The problem requires knowledge of whether the so-called energy "crisis" results from the exhaustion of oil or energy resources or from the exercise of monopoly power by the oil producer. Investigation of price, production and discovery of new oil deposits before 1973 that the world is far from exhausting oil resources. On the contrary, the growth of supply had been outpacing demand. The energy crisis, therefore, is not caused by natural scarcity. It is contrived. Contrived scarcity is subject to the laws of demand and supply. Analysis suggests as much as 40 percent concentration in demand in five years and about 300 percent in 20 or more years, if the 400 percent increase in price remains. Similarly, oil supply is expected to increase four times in 20 or more years. These figures, however, cannot be realized if political and social environment will substantially change. Among the natural forces exerting downward pressure on price are the supply increases in the world market. This is brought about by the (1) new oil reserves in the Organization of Petroleum Exporting Countries (OPEC) and the non-OPEC countries; (2) entry of China and Russia; (3) development of alternative sources economical at prevailing prices; and (4) development of breeder nuclear reactors, fusion reactors and solar energy. This paper shows there are natural limits to monopoly pricing. If allowed to freely operate, the energy market will determine prices according to demand and supply. Such prices are expected to be much lower than the prevailing. Creation-Date: 1979-09 Publication-Status: Published as UPSE Discussion Paper No. 1979-12, September 1979 Number: 197912 Handle: RePEc:phs:dpaper:197912 Template-Type: ReDIF-Paper 1.0 Author-Name: Vicente B. Paqueo Author-Name-First: Vicente Author-Name-Last: Paqueo Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Edna Angeles Author-Name-First: Edna Author-Name-Last: Angeles Title: An Analysis of Wife's Labor Force Participation in the Philippines and the Threshold Hypothesis Abstract: This paper analyzes and estimates the effects of income, education, unemployment level, fertility, location of residence and migration on the wife's probability of being employed. The study examines the research problem in relation to a neoclassical model of "new home economics" variety as well as to the idea that among poor families wife's labor supply is governed primarily by the need to attain or maintain s subsistence standard of living. Using logit analysis, the authors confirm earlier findings that below some threshold education the effect of additional schooling is negative, while above it the marginal effect is positive. It is also observed that below some critical level family income (FY*) the coefficients of regional unemployment rate and duration of marriage are positive and the coefficient of urban location, net of the generally negative effect of migration status, is negative. In contrast, beyond FY*, the effects of these variables are insignificant except for urban location. An explanation suggested for these results is that in making labor supply decisions the constraint of keeping income from falling below subsistence is operative among households with husband's income less than FY* but not among those with higher incomes. Creation-Date: 1979-09 Publication-Status: Published as UPSE Discussion Paper No. 1979-13, September 1979 Number: 197913 Handle: RePEc:phs:dpaper:197913 Template-Type: ReDIF-Paper 1.0 Author-Name: Vicente B. Paqueo Author-Name-First: Vicente Author-Name-Last: Paqueo Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Joseph Fernandez Author-Name-First: Joseph Author-Name-Last: Fernandez Title: An Empirical Analysis of a Disequilibrium Model of Fertility Behavior and the Threshold Hypothesis : 1973 Philippines Abstract: This paper examines a model of fertility behavior in which some women have excess capacity to bear children, while others have excess demand. This idea, which has not received adequate attention in econometric analyses of fertility behavior with the exception of Encarnacion's studies, underlies current explanation of certain demographic phenomena including the persistence of high birth rates in LDCs that have achieved low mortality rates. In this study, the implications of the model regarding the fertility effect of life expectancy are examined and tested. In conformity with the model's prediction, life expectancy appears to have an insignificant effect on the fertility of wives with educational attainment below elemantary grade and family income below P2,500 in 1973. Among higher income and more educated women, however, the effect of life expectancy at birth is significantly negative and the estimated elasticities appear to be in the order of - .72 and -1.15. The model was also tested by examining age at marriage. The hypothesis is that individuals marry later the larger the expected excess capacity to bear children to minimize unwanted births. If the model under consideration is correct, the conjectures, which are confirmed by the empirical results, are: (1) education above elementary should have a significantly positively influence on the age at marriage inasmuch as excess capacity is expected to be larger the more educated the women is; (2) below elementary grade, however, it should have no effect since women in this situation are expected to have excess demand for births. Creation-Date: 1979-09 Publication-Status: Published as UPSE Discussion Paper No. 1979-14, September 1979 Number: 197914 Handle: RePEc:phs:dpaper:197914 Template-Type: ReDIF-Paper 1.0 Author-Name: Ricardo D. Ferrer Author-Name-First: Ricardo Author-Name-Last: Ferrer Title: A Short Note on Economies of Scale in Transactions Demand for Money Abstract: This note points to a possible error in Baumol's, and later Brunner's and Meltzer's formulation of the transactions demand for cash. The argument of the paper is rather simple. After showing that the optimum lot size of cash withdrawals, C, is independent of deposits I, one can no longer assume as if I can vary continuously. In other words, differentiation of a cost function with respect to I is illegitimate if I can only vary in multiples of C. On the basis of this argument the transactions demand for cash is reformulated, and the basic result is that the demand function is discontinuous. A method to test the hypothesis is indicated which suggests that Meltzer's cross section test of the Baumol hypothesis is wrong. Creation-Date: 1979-10 Publication-Status: Published as UPSE Discussion Paper No. 1979-15, October 1979 Number: 197915 Handle: RePEc:phs:dpaper:197915 Template-Type: ReDIF-Paper 1.0 Author-Name: Mahar K. Mangahas Author-Name-First: Mahar Author-Name-Last: Mangahas Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Bruno Barros Author-Name-First: Bruno Author-Name-Last: Barros Title: The Distribution of Income and Wealth : A Survey of Philippine Research Abstract: Recent economic growth has not been accompanied by social stability; thus equity-oriented research is of high social priority. A more just distribution of material well-being is not only a valid objective in itself but also a means of attaining more economic growth. The alleged trade-off between equality and growth is quantitatively minor. Many inequalities are not necessarily socially harmful, and it is important to distinguish between inequities and inequalities. Unfortunately, the empirical research on inequality (a) has succeeded in explaining only 1/5 of aggregate inequality, and (b) has focus on income determinants most of which are unlikely to create the resentments which foster social instability. This problem is due to deficiencies in the distributional data. The data should balance the present preoccupation with human assets with detailed information on property; should be oriented towards comparisons of social groups; and should include some variables designed for frequent and prompt monitoring. Improvements in the data are the key to placing the status of the war on inequity high in the social consciousness. There is a wide range of possible policies for improving equity, some of which the state has attempted to implement more than others. On the basis of overall results, we must conclude that past policies and programs have not been widen enough in scope and/or not intense enough in degree. One problem is that these policies have not been formulated and evolved on an integrated basis. The development plans, for instance, use a production or growth orientation to unify the various sectoral and regional programs; but it should be technically possible to use an equity or anti-poverty orientation as an integrating factor as well. Researchers should now shift from analysis of economic differentials to evaluation of past equity-pertinent policies and to design of new equity-oriented ones. Creation-Date: 1979-10 Publication-Status: Published as UPSE Discussion Paper No. 1979-16, October 1979 Number: 197916 Handle: RePEc:phs:dpaper:197916 Template-Type: ReDIF-Paper 1.0 Author-Name: William Sander Author-Name-First: William Author-Name-Last: Sander Title: The Impact of Two Communal Irrigation Projects in the Philippines Abstract: The economic impact of two communal irrigation projects in the Philippines is assessed. One of the projects is a small-scale communal gravity system while the other is a communal pump system. It is shown that the benefits of both projects appear to substantially outweigh the projects' cost. In addition, both projects mobilize low opportunity cost resources (primarily labor) so that small rice farmers are able to grow two crops of rice per year instead of one. Although both of the projects appear to be profitable from a societal benefit-cost viewpoint, some of the project farmers do not necessarily gain that much. Institutional factors such as land tenure and credit affect the returns to individual farmers in both systems. Creation-Date: 1979-10 Publication-Status: Published as UPSE Discussion Paper No. 1979-17, October 1979 Number: 197917 Handle: RePEc:phs:dpaper:197917 Template-Type: ReDIF-Paper 1.0 Author-Name: William Sander Author-Name-First: William Author-Name-Last: Sander Title: The Upper Pampanga River Project s Impact on Nonfarm Employment and Regional Growth Abstract: The impact of the Upper Pampanga River Project, a large-scale irrigation project in the Philippines, on agricultural production and income and nonfarm employment is estimated. It is shown that the project contributes significantly to agricultural development in the Nueva Ecija region as well as to nonfarm employment in the region. The project s primary contribution to nonfarm employment in the region is brought about by Additional spending by farmers on consumer goods and services. It also contributes to nonfarm jobs in the agriculturally related industries -- industries which supply inputs to the farmer or industries which process or distribute agricultural products. The impact in the agricultural industries is less significant than the impact in the consumer goods and services industries. Creation-Date: 1979-11 Publication-Status: Published as UPSE Discussion Paper No. 1979-18, November 1979 Number: 197918 Handle: RePEc:phs:dpaper:197918 Template-Type: ReDIF-Paper 1.0 Author-Name: Rolando A. Danao Author-Name-First: Rolando Author-Name-Last: Danao Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Optimal Resource Allocation : An Application to the Philippine Family Planning Program Abstract: A dynamic linear programming model has been devised for a family planning program offering five contraceptive methods. It can be used to test the consistency of family planning program plans and to select future goals consistent with projected resources together with the optimal strategy for accomplishing those goals. Applied to the Philippine family planning program, it shows that a reduction in proposed budget estimates for the years 1978-1982 is possible while achieving crude birth rates lower than the targets. This is accomplished by stressing the use of IUDs together with a limited number of sterilization. Creation-Date: 1979-11 Publication-Status: Published as UPSE Discussion Paper No. 1979-19, November 1979 Number: 197919 Handle: RePEc:phs:dpaper:197919 Template-Type: ReDIF-Paper 1.0 Author-Name: Eli M. Remolona Author-Name-First: Eli Author-Name-Last: Remolona Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: A Simple Model of Squatters Abstract: The object of the model is to determine the number of squatters in a city. In the model, households with incomes below a certain threshold level of income choose to squat and households with incomes above that threshold choose not to squat. This threshold depends on the amount of land available to each squatter household, which itself depends on the number of households choosing to be squatters. The equilibrium established consists of value for the threshold and the amount of land per squatter household that are both consistent with utility-maximizing choices, given such factors as the rate of eviction and the distribution of income. An increase in the rate of eviction will reduce the equilibrium number of squatters in a city even if the total amount of squatter land remains fixed. Fewer households choose to squat because of this higher risk of evition. A numerical example is presented to show how plausible the model is. Creation-Date: 1979-11 Publication-Status: Published as UPSE Discussion Paper No. 1979-20, November 1979 Number: 197920 Handle: RePEc:phs:dpaper:197920 Template-Type: ReDIF-Paper 1.0 Author-Name: Robert S. Mariano Author-Name-First: Robert Author-Name-Last: Mariano Author-Name: James B. McDonald Author-Name-First: James Author-Name-Last: McDonald Author-Name: Asher Tisher Author-Name-First: Asher Author-Name-Last: Tisher Title: On the Effect of Multicollinearity Upon the Properties of Structural Coefficient Estimators Abstract: This paper considers as analytical investigation of multicollinearity in a simultaneous-equation model and focuses on coefficients of endogenous variables. Previous Monte Carlo studies tend to support the notion that higher multicollinearity among exogenous variables causes estimator precision to deteriorate. It is shown in this paper, however, that in the case of simple, partial and multiple correlations, higher multicollinearity can increase or decrease the mean squared error of estimators, depending upon the true model parameter values and the observations on the exogenous variables. Some special cases are identified where a higher degree of multicollinearity brings about less precise estimators. The analysis leading to this indeterminacy of multicollinearity effects starts from the result that multicollinearity among the exogenous variables will affect the probability distributions of the LIML and k-class estimators (k non-stochastic and 0 ¡Ü k ¡Ü 1) only through the so-called concentration parameter. Through numerical calculations of concentration parameter values in two simulation studies, we reconcile the apparent conflict between the conclusion from Monte Carlo experiments and the analytical result presented here. The paper also contains some comments on an approach to making a choice among competing data sets for the exogenous variables. It also suggests a way of choosing additional observation vectors to increase estimator precision in simultaneous system. Creation-Date: 1979-12 Publication-Status: Published as UPSE Discussion Paper No. 1979-21, December 1979 Number: 197921 Handle: RePEc:phs:dpaper:197921 Template-Type: ReDIF-Paper 1.0 Author-Name: Susan S. Navarro Author-Name-First: Susan Author-Name-Last: Navarro Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: On the Maximum Likelihood Method of Factor Analysis Abstract: Rao's solution of the estimation equations in the maximum likelihood method of factor analysis is derived in this paper in a model wherein Morrison's specific-factor variate ei is replaced by ¦Ä1U1 and the covariance structure, by the correlation pattern. The correlation pattern is used, at times, in classifying variables according to the criteria, which are specified in section 1 of this paper. The following innovations are recommended in this paper: 1. The use of ¦Ä12 as an indicator of dependence or independence of the ith variable and the other variables in the given set. 2. The application of simultaneous tests of independence among variables having a multivariate normal distribution (see page 3) as part of the factor analysis technique (maximum likelihood method) to determine the validity of the classification of the variables and thereby solve the following problems: (a) indeterminacy due to the non-uniqueness of solutions of the estimation equations (b) subjectivity of analysis done with or without the common practice of rotating the factor loading matrix, as observed by Scott. These test may by used independently of factor analysis in classifying variables into independent groups. This implies the exclusion of variables which are correlated with independent variables. Creation-Date: 1979-12 Publication-Status: Published as UPSE Discussion Paper No. 1979-22, December 1979 Number: 197922 Handle: RePEc:phs:dpaper:197922 Template-Type: ReDIF-Paper 1.0 Author-Name: Roberto S. Mariano Author-Name-First: Roberto Author-Name-Last: Mariano Author-Name: John G. Ramage Author-Name-First: John Author-Name-Last: Ramage Title: Large Sample Asymptotic Expansions for General Linear Simultaneous Systems Under Misspecification Abstract: Based on large-sample stochastic approximations, we obtain asymptotic bias and mean squared error for the k-class estimators of an identified but misspecified equation with an arbitrary number of endogenous variables in linear simultaneous-equations model. The specification error considered here is the omission of appropriate exogenous variables from the equation being estimated. This paper extends existing results in various respects. It treats not only consistent estimators but also inconsistent ones, like ordinary least squares, and it provides conditions under which ordinary least squares will be preferred among those estimators under study. It covers cases where the estimated equation contains three or more endogenous variables. It includes the limited-information maximum likelihood as one of the estimators under analysis. It also contains a rigorous argument for the propriety of the stochastic approximations from which asymptotic moments of estimators are calculated. Creation-Date: 1979-12 Publication-Status: Published as UPSE Discussion Paper No. 1979-23, December 1979 Number: 197923 Handle: RePEc:phs:dpaper:197923