Summary of the Papers – Microeconomics 1993 No 1

Martin Neil Baily

Martin Neil Baily Senior Fellow Emeritus - Economic Studies, Center on Regulation and Markets

THE SIXTH meeting of the Brookings Panel on Microeconomics was
held in Washington in December 1992. Paul Joskow, Andrea Shepard,
and Nancy Rose looked at the compensation of top executives in regulated
companies and found that on average it is less than compensation
in unregulated companies. They explore alternative explanations for
this compensation gap. Henry Farber examined layoffs in the 1990-91
recession and how they compared with the layoffs in the early 1980s.
He found that in the recent recession, older and more educated workers
faced greater risk of job loss than was the case in the prior recession.
Jack Calfee and Cliff Winston use the results of a survey to make
inferences about the value to consumers of pain and suffering awards.
These are often added to liability settlements. They find that when
consumers buy goods and services they may be paying, implicitly, for
insurance that they do not want. Boyan Jovanovic argues that R&D in
one product area can provide spillover benefits to R&D in another area
within the same company. He develops a theoretical model that uses
this assumption to explain why companies diversify, and he finds that
his model fits pretty well to observed industry trends. Ken Flamm
provides a short history of U.S.-Japan semiconductor trade and discusses
the various trade problems that have emerged and policies that
have been used. He then develops a model that simulates the possible
costs to the United States of a foreign cartel in memory chips. He finds
that a successful foreign cartel could be costly for U.S. consumers, but
he notes that past U.S. policies may have actually facilitated such a
cartel, not discouraged it.