AEAweb: JEL: Contents: June 1998

Journal of Economic Literature
Vol. 36, No. 2, June 1998

Contents

Nonparametric Regression Techniques in Economics
Adonis Yatchew      669

Operations of "Unfettered" Labor Markets: Exit and Voice in American Labor Markets at the Turn of the Century
Price V. Fishback      722

Health, Nutrition, and Economic Development
John Strauss and Duncan Thomas      766

Tax Compliance
James Andreoni, Brian Erard and Jonathan Feinstein      818

Does Egalitarianism Have a Future?
Louis Putterman, John E. Roemer and Joaquim Silvestre      861

A Reconsideration of Import Substitution
Henry J. Bruton      903

This introduction to nonparametric regression emphasizes techniques that might be most accessible and useful to the applied economist. The paper begins with a brief overview of the class of models under study and central theoretical issues such as the curse of dimensionality, the bias-variance trade-off and rates of convergence. The paper then focuses on kernel and nonparametric least squares estimation of the nonparametric regression model, and optimal differencing estimation of the partial linear model. Constrained estimation and hypothesis testing is also discussed. Empirical examples include returns to scale in electricity distribution and hedonic pricing of housing attributes.

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The American economy at the turn of the century offers an excellent opportunity to study relatively unregulated labor markets. This essay discusses the operation of labor markets in the early 1900s. After examining the mobility of workers, the integration of geographically dispersed labor markets, and a case study of the extent of employer monopsony, we examine the extent to which workers received compensating differentials for workplace disamenities and the extent to which competition among employers reduced discrimination. During this period, institutions like the company town, company union, and share cropping developed. These institutions are reexamined to determine the extent to which they were exploitative or helped resolve problems with transactions costs. Finally, reformers pressed for workers' compensation and laws regulating women's hours, child labor, and workplace safety. We examine the impact of progressive legislation and discuss the political economy of its passage.

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The relationship between economic development and health has received far less attention than the relationship between development and schooling. However, recent studies indicate that better health is associated with improved labor market outcomes, particularly in low-income settings. Difficulties in disentangling the causal mechanisms underlying these associations are discussed, highlighting the role of behaviors and measurement of health. The empirical literature is reviewed, and implications of results for the functioning of markets are drawn out. The discussion includes an evaluation of the empirical evidence in support of the nutrition (health) efficiency wage hypothesis: we conclude that it is thin.

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This paper provides a review of the major findings in the economics literature on tax compliance. It focuses exclusively on the personal income tax, examining both the theory and the empirical work on enforcement and compliance with the tax laws.

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The fall of Communism, the reassessment of Nordic social democracy, belt-tightening in other advanced welfare states, and the worldwide privatization wave have led many to conclude that egalitarianism is a merely utopian ideal, the possibility of whose realization is laid to rest by the failure of a series of twentieth-century social experiments. We survey the evidence, both empirical and theoretical, and conclude that obituaries are premature. Key theoretical errors in the design of egalitarian experiments, and in some critiques of pro-egalitarian policies, concern the role of information asymmetries, and we argue that their proper understanding re-opens possibilities for increasing equality without unacceptable sacrifices in efficiency.

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This paper studies the origins of an import substitution strategy of development, summarizes the consequences of that strategy, and reviews the problems that led to its failure. The fundamental difficulty was its discouragement of the indigenous social learning necessary for sustained, independent development. The emergence of an outward-oriented, minimal-government strategy is due to the success of Korea and Taiwan. This strategy fails to recognize that social learning requires a strong role for national agents and that this role can be penalized by undue openness. An effective strategy must protect and induce domestic learning without penalizing exporting.

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