Extracts from this document...

Introduction

In light of the criticism's leveled at Benjamin and Kochin's 1979 article in the 1982 Journal of Political Economy, assess how successfully Benjamin and Kochin defended their statistical approach in their 1982 rejoinder. The extent of criticism in the 1982 Journal of Political Economy aimed at Benjamin and Kochin's 1979 article undermines the accuracy of their statistical approach and therefore undermines the theory that unemployment was high in the interwar period because of the operations and existence of the insurance system. Benjamin and Kochin's attempts to defend their statistical approach are successful to a limited extent. Nonetheless, Benjamin and Kochin are extremely confident that they successfully defended their statistical approach against Cross as they state that, 'indeed, we have found nothing in Cross' comment to suggest that our "bold claim" (as he puts it) is anything other than correct.'1 Benjamin and Kochin's 'bold claim' was that high unemployment in interwar Britain 'was due to the operation of an unemployment insurance scheme that paid benefits which were high relative to wages and available subject to few restrictions.'2 Cross however, states that their 'bold claim' is flawed.3 Cross believes Benjamin and Kochin's argument 'is flawed by their almost complete failure to take account of the "genuinely seeking work" and "means test clauses which were actively used in much of the 1921-38 period to ...read more.

Middle

the period 1920-38.'14 Ormerod and Worswick 'examine the statistical validity of the equation' as 'the estimated coefficient of B/W is very sensitive to small changes in the sample period'15 and due to the lack of 'the robustness of the results when a time trend is added.'16 In summary they refer to 'the spurious nature of the results obtained by Benjamin and Kochin over the 1920-1938 period'.17 Benjamin and Kochin seem to criticise Ormerod and Worswick rather than directly defending their own statistical model but by nullifying Ormerod and Worswick's alterations, they can attempt to defend their own model. Benjamin and Kochin believe that 'none of the time periods listed by Ormerod and Kochin in table 3 is significantly different for the whole period.' Also, they comment that 'the chief effect of adding the time trend is to increase the standard error of the coefficients of all the other independent variables - the classic result of introducing an irrelevant variable into a regression equation.'18 Furthermore Benjamin and Kochin defend their statistical model as despite making alterations due to observations from Ormerod and Worswick, they explain that the changes actually 'imply a somewhat higher estimate of the effect of the interwar insurance system.'19 Thus, they manage to defend the overall conclusions of their statistical approach but only to a limited extent do they successfully defend their statistical approach against Ormerod and Worswick. ...read more.

Conclusion

Benjamin and Kochin however highlight that their theory is based on evidence that 'during the twentieth century, unemployment has been low in Britain when unemployment benefits have been unattractive, and unemployment has been high when benefits have been attractive.'33 A substantial defence indeed but this does not address the issue of Post-War unemployment. Benjamin and Kochin however, still feel confident that their defence is successful as they conclude simply, 'that our study is correct.'34 Benjamin and Kochin criticise Metcalf et al. for missing the 'striking difference between the immediate and postwar period35 and so highlight that unemployment was not necessarily low for the whole 'post war' period. Benjamin and Kochin also state that 'their series are biased by their failure to account for the high wages of the postwar entrants to the insurance system.'36 Importantly however Benjamin and Kochin discredit Metcalf et al. by explaining that since OXO systems were the single most important way in which the insurance system was exploited in the interwar period, we conclude that the interwar system was indeed unique and that its administrative features were generous.'37 Benjamin and Kochin have had to respond to an unprecedented amount of criticism, which seriously calls their theory into question. In their 1982 rejoinder, Benjamin and Kochin are confident in their ability to successfully defend their statistical approach, but in reality this success is limited. ...read more.

This student written piece of work is one of many that can be found in our AS and A Level Macroeconomics section.