booms busts and babies health we study the relationship between the unemployment rate at the time of a baby s conception and parental characteristics parental behaviors and babies health babies conceived in times of high unemployment have a reduced incidence of low and very low birth weight fewer congenital malformations and lower post neonatal mortality these health improvements are attributable both to selection changes in the type of mothers that conceive during recessions and to improvements in health behavior during recessions black mothers tend to be higher socio economic status as measured by education and marital status in times of high unemployment whereas white mothers are less educated

fertility risk in the life cycle in this paper i study fertility decisions of women in the u s economy with special emphasis on the timing of births and abortions over the life cycle given the policy debate regarding abortion availability along with empirical evidence on its positive impact on women outcomes understanding the fertility process in a broad sense should help guide the discussion in this paper i present a life cycle model of consumption savings and fertility decisions in an environment with uninsurable income shocks and imperfect fertility control my model presents a unified framework in which opportunity costs of child rearing as well as technological restrictions in the form of contraception effectiveness have roles to understand lifetime fertility the model extends important earlier work on contraceptive decisions by women in the sense that it allows for stochastic fertility outcomes and is able to account for the interplay between asset accumulation and fertility decisions observed in the data

hedging and coordinated risk management evidence from thrift conversions we provide an explanation for hedging as a means of allocating rather than reducing risk we argue that when increases in total risk are costly firms optimally allocate risk by reducing increasing exposure to risks that provide zero positive economic rents our evidence shows that mutual thrifts that convert to stock institutions increase total risk following conversion consistent with their increased abilities and incentives for risk taking they achieve this increase by hedging interest rate risk and increasing credit risk we provide some evidence that risk management activities are related to growth capacity and management compensation structure attained at conversion

teen motherhood and abortion access it is argued that the net effect of any restriction of abortion access on birth rates is an empirical question this study examines the impact of access to abortion on county teenage birth rates birth rates are expected to decrease by 1 among white adolescents aged 15 19 years for a 25 mile increase in the distance to the nearest abortion provider particularly among in wedlock births data are obtained from 1973 88 national natality local area summary files for counties in the us and four other national sources data did not provide useful information on the empirical relationship between access and birth rate for densely populated urban areas cross sectional findings that had omitted variable bias indicate that an increase of 25 miles in distance to a provider was associated with an additional 1 4 births per 1000 white teenage women or a 3 increase in the average teen birth rate of 45 1000 white teenagers the findings from a county fixed effects model that controlled for omitted variable bias indicate that an increase of 25 miles was associated with a reduction in teen births of 0 5 1000 or about 1 of the mean birth rate both medicaid restrictions and parental consent laws were negative and significant and more negative in poor and more isolated counties the state year effects models did not change findings on distance and medicaid restriction effects the effects of changes in timing of laws suggests that laws followed preexisting trends changes in distance to provider were primarily in the first 2 years following the change out of wedlock births were unaffected by changes in distance to providers the out of wedlock teen birth rate increased with a complete ban on abortions fewer wanted births were associated with small restrictions findings imply that closing of clinics during 1977 88 had an impact on teen birth rates of under one tenth of 1 the 20 increase in teen births was unexplained

family planning in a life cycle model with income risk several us states have recently restricted the access to abortions we study fertility intentions and how family planning and abortions are used as mechanisms to control fertility among couples facing income risk we formulate and estimate a life cycle consumption saving model with uninsurable income risk and imperfect contraceptive control that matches fertility behavior in the british household panel survey bhps well we use the estimated model to investigate how family planning and abortions are used to control fertility in our model our simulations suggest that income risk affects family planning and that abortion is used to control fertility due to the presence of income risk this indicates that the availability of abortions might play a role as an insurance mechanism

using maimonides rule to estimate the effect of class size on scholastic achievement the twelfth century rabbinic scholar maimonides proposed a maximum class size of 40 this same maximum induces a nonlinear and nonmonotonic relationship between grade enrollment and class size in israeli public schools today maimonides rule of 40 is used here to construct instrumental variables estimates of effects of class size on test scores the resulting identiecation strategy can be viewed as an application of donald campbell s regression discontinuity design to the class size question the estimates show that reducing class size induces a signiecant and substantial increase in test scores for fourth and efth graders although not for third graders when asked about their views on class size in surveys parents and teachers generally report that they prefer smaller classes this may be because those involved with teaching believe that smaller classes promote student learning or simply because smaller classes offer a more pleasant environment for the pupils and teachers who are in them mueller chase and walden 1988 social scientists and school administrators also have a longstanding interest in the class size question class size is often thought to be easier to manipulate than other school inputs and it is a variable at the heart of policy debates on school quality and the allocation of school resources in many countries see e g robinson 1990 for the united states ofsted 1995 for the united kingdom and moshel ravid 1995 for israel this broad interest in the consequences of changing class size

evidence on corporate hedging policy this paper provides empirical evidence on the determinants of corporate hedging decisions the paper examines the evidence in light of currently mandated financial reporting require ments and in particular the constraints placed on anticipatory hedging data on hedging are obtained from 1992 annual reports for a sample of 3 022 firms out of the 771 firms classified as hedgers 543 firms disclose information in their annual reports on their hedging activities the remaining 228 firms report use of derivatives but no information on hedging activities based on the evidence i draw the following conclusions with respect to the models of hedging evidence is inconsistent with financial distress cost models evidence is mixed with respect to contracting cost capital market imperfections and tax based models and evidence uniformly supports the hypothesis that hedging activities exhibit economies of scale

empirical evidence on the relation between stock option compensation and risk taking abstract we examine whether executive stock options esos provide managers with incentives to invest in risky projects for a sample of oil and gas producers we examine whether the coefficient of variation of future cash flows from exploration activity our proxy for exploration risk increases with the sensitivity of the value of the ceo s options to stock return volatility eso risk incentives both eso risk incentives and exploration risk are treated as endogenous variables by adopting a simultaneous equations approach we find evidence that eso risk incentives has a positive relation with future exploration risk taking additional tests indicate that eso risk incentives exhibits a negative relation with oil price hedging in a system of equations where eso risk incentives and hedging are allowed to be endogenously determined overall our results are consistent with esos providing managers with incentives to mitigate risk related incentive problems

hedging and liquidity this article develops a model for evaluating alternative hedging strategies for financially constrained firms a key advantage of the model is the ability to capture the intertemporal effects of hedging on the firm s financial situation we characterize the optimal hedge a wide range of alternative hedging strategies can be specified and the model allows us to determine in each case if the hedging strategy raises or lowers firm value and by how much we show that hedging firm value hedging cash flow from operations and hedging sales revenue are not optimal the article highlights the fact that every hedging strategy comes packaged with a borrowing strategy which requires careful consideration futures markets often provide the most liquid and convenient instruments for managing risk however because futures contracts are marked to market it is often impossible to simultaneously hedge cash flows and values for example a futures contract that locked in the value of gold that a corporation planned to extract in one year would generate an uncertain cash flow pattern over the year this article examines how liquidity and cash flow timing problems associated with different hedging strategies can affect a firm s value in our model the objective for hedging is to increase the firm s financial flexibility an optimal hedge maximizes the firm s liquidityslack in the form of excess cash or unused debt capacitywhen liquidity is most valuable this lowers the danger of costly financial distress reduces the effective cost of external financial constraints and makes value maximizing investments affordable a firm with no financial constraints does not gain from hedging and the higher the firm s financial constraints the greater the potential value of hedging the value of hedging depends critically on the design of the hedging strategy we show that the optimal hedge minimizes the variability in the marginal value of the firm s cash balances such a hedge efficiently redistributes cash balances across different states and periods taking cash from those states for which the marginal cost of the financial constraint is low and giving cash to those states for which the marginal

auctions aftermarket competition and risk attitudes with the experience of the sequence of umts auctions held worldwide in mind we consider a situation where firms participate in license auctions to compete in an aftermarket it is known that when a monopoly right is auctioned auctions select the bidder that is least risk averse this firm will choose a higher value of the aftermarket strategic variable than any other firm will do thereby implying a higher market price under price setting behavior and a lower price due to higher quantity under quantity setting behavior this paper extends the analysis to oligopoly aftermarkets and analyzes whether the monopoly result carries over to oligopoly settings we argue that with multiple licenses and demand uncertainty auctions actually perform even worse from a welfare point of view than the monopoly case would suggest a strategic effect strengthens the monopoly result with respect to prices but weakens the result with respect to quantities

the effects of derivatives on firm risk and value using a large sample of nonfinancial firms from 47 countries we examine the effect of derivative use on firm risk and value we control for endogeneity by matching users and nonusers on the basis of their propensity to use derivatives we also use a new technique to estimate the effect of omitted variable bias on our inferences we find strong evidence that the use of financial derivatives reduces both total risk and systematic risk the effect of derivative use on firm value is positive but more sensitive to endogeneity and omitted variable concerns however using derivatives is associated with significantly higher value abnormal returns and larger profits during the economic downturn in 2001 2002 suggesting that firms are hedging downside risk

how are derivatives used evidence from the mutual fund industry we investigate investment managers use of derivatives by comparing return distributions for equity mutual funds that use and do not use derivatives in contrast to public perception derivative users have risk exposure and return performance that are similar to nonusers we also analyze changes in fund risk in response to prior fund performance changes in risk are substantially less severe for funds using derivatives consistent with the explanation that managers use derivatives to reduce the impact of performance on risk we provide new evidence regarding the implications of cash flows and managerial gaming for the relation between performance and risk

how firms should hedge substantial academic research explains why firms should hedge but little work has addressed how firms should hedge we assume that firms can experience costly states of nature and derive optimal hedging strategies using vanilla derivatives e g forwards and options and custom exotic derivative contracts for a value maximizing firm facing both hedgable price and unhedgable quantity risks customized exotic derivatives are typically better than vanilla contracts when correlations between prices and quantities are large in magnitude and when quantity risks are substantially greater than price risks finally we discuss how our model may be applied in practice copyright 2002 oxford university press

abortion and crime unwanted children and out of wedlock births legalizing abortion can either increase or decrease investments in children s human capital this article finds that abortion increases the number of out of wedlock births using data that more directly links the criminal with age when the crime was committed not age when arrested and fixing the assumption in previous research that no abortions took place prior to the roe v wade decision in the 45 states affected by that decision we find consistent significant evidence that legalizing abortions increased murders by over 7 linear estimates indicate that legalization increased total annual victimization costs by at least 3 2 billion jel k42 k14 j24

hedging financing and investment decisions theory and empirical tests abstract in this paper we theoretically and empirically examine the interaction between hedging financing and investment decisions a simple equilibrium model with costly financial distress suggests that as firms become more efficient at risky investments vis a vis low risk investments they will borrow less invest more in risky assets and hedge more the model also predicts a positive relationship between hedging and leverage a result consistent with debt capacity arguments we test the model empirically using a simultaneous equations framework to investigate the determinants of firm level hedging financing and investing decisions the results strongly support the hypothesis that the hedging financing and investment decisions are jointly determined in addition we find strong support for the central hypothesis that firms more efficient investing in risky technologies more aggressively hedge and use less debt financing in order to maximize their comparative advantage

steven d levitt 2003 john bates clark medalist steve s clark medal citation mentions his path breaking contributions to the economics of crime and to the political economy of campaign finance this paper describes steve s research in each of these areas as well as his contributions on a range of other topics it identifies the substantive themes as well as the methodological patterns that run through steve s research and it describes the economic issues that have been informed by his analysis

access to abortion investments in neonatal health and sex selection evidence from nepal the impact of abortion reforms on the human capital of subsequent generations including health has been documented in several developed countries however i evidence relative to the impact on health in early life is not unanimous ii there is no evidence for a developing country where health human capital is low and iii existing econometric studies have been unable to disentangle the effect of abortion reform on individual behavior from that on the composition of mothers in this paper i exploit variation in the timing and location of newly introduced legal abortion centers in nepal to estimate the effect of reducing the psychological and nancial cost of abortion on fertility investments in prenatal care neonatal mortality and sex selection consistent with the prediction that the opening of a legal abortion center nearby reduces the cost of abortion i find that the probability of a live birth conditional on conception decreases by 8 3 percentage points 9 percent of the mean for a given mother similarly the unconditional monthly probability of a live birth decreases by 0 4 percentage points 21 percent of the mean however there is no evidence that improved access to abortion increases observed investments in antenatal care and little evidence that it increases unobserved investments in neonatal health contrary to ndings in lin et al 2008 for taiwan abortion reform in nepal does not appear to have led to sex selective terminations on the contrary there is some evidence that it may have led to a decrease in sex selective abortion which could be due to the substitution of first trimester legal abortions to illegal abortions at a later gestational stage

a dynamic analysis of exchange rate exposure the impact of china s renminbi this study examines the impacts of unexpected exchange rate movements of chinese renminbi cny usd on stock returns of standard poor s 500 corporations to gain better insight into the long standing exposure puzzle concerning the divergence between theoretical and empirical investigation and the critical issue regarding the determinants of exposure the time variation and asymmetry property associated with foreign exchange exposure are further taking into account we also broaden the scope of analysis to investigate unexpected risk exposure at 10 economic sectors in compliance with global industry classification standard unlike those from the static analysis or dynamic ones with the ordinary least squares model the empirical findings provide additional concrete evidence that unexpected exchange rate exposure varies substantially across time and market circumstances when using the quantile regression with a rolling method furthermore our dynamic analysis not only supports the existence of industrial effects across different economic sectors but also provides strong evidence that financial factors such as size debt ratio and book to market ratio have a significant impact on exposure

crime fertility and economic growth theory and evidence abstract this paper studies the link between crime and fertility and the way by which they jointly impact on economic growth in a three period overlapping generations model where health status in adulthood depends on health in childhood adult agents allocate their time to work leisure child rearing and criminal activities an autonomous increase in the probability offenders face in escaping apprehension increases both crime and fertility non monotonically giving rise to an ambiguous effect on growth a cross country empirical examination based on data that span four decades supports the non linear effects on both crime and fertility at the same time it reveals a negative effect on output growth

abortion legalization and child living circumstances who is the marginal child weexaminethe impact ofincreased abortion availabilityon the averageliving standards of children through a selection effect would the marginal child whowas not born have grown up in different circumstances than the average child we use variation in the timing of abortion legalization across states to answer this question cohorts born after legalized abortion experienced a signiecant reduction in a number of adverse outcomes we end that the marginal child would have been 40 60 percent more likely to live in a single parent family to live in poverty to receive welfare and to die as an infant access to abortion is one of the most contentious public policy issues facing the united states today the period since the legalization of abortion under the roe v wade decision of 1973 has been marked by incessant debate over the appropriate government enancing and legal status of abortions meanwhile pregnancy resolution through abortion is a very common outcome in the united states roughly 25 percent of all pregnancies are aborted ventura et al 1995 as a result major changes in abortion access could have substantial effects on the birthrate indeed levine staiger kane and zimmerman end that the legalization of abortion in the early 1970s led to an 8 percent reduction in the birthrate 1

the agency problems embedded in firm s equity investment we find that agency problems are embedded in firm s excess and abnormal equity investments that are mainly dictated by controlling shareholder s motives and ethical choices manifested in ownership and board structure the excess equity investment is gauged with respect to industry average the abnormal equity investment is specifically referred to the number of nominal investment companies that are fully controlled by the controlling owners while subject to little governance our empirical evidences of 345 taiwanese non financial listed firms show that firm s excess and abnormal equity investments are negatively correlated with controlling shareholder s cash flow rights while are positively correlated with the control cash flow deviation and board affiliation the results are supportive of the positive incentive hypothesis and the negative entrenchment hypothesis put forth by la porta et al 2002 journal of finance57 1147 1171 and claessen et al 2002 journal of finance57 2741 2742 the negative relation between equity investment and firm s value further supports the agency postulation that corporate excess and abnormal equity investments represent a leeway for controlling shareholder to exploit wealth of minority shareholders this study potentially contributes to the literature of business ethics by portraying an empirically testable linkage from controlling owner s ethical choices to his actions and therefore firm s value

take up and targeting experimental evidence from snap this paper develops a framework for evaluating the welfare impact of various interventions designed to increase take up of social safety net programs in the presence of potential behavioral biases we calibrate the key parameters using a randomized field experiment in which 30 000 elderly individuals not enrolled in but likely eligible for the supplemental nutrition assistance program snap are either provided with information that they are likely eligible provided with this information and also offered assistance in applying or are in a status quo control group only 6 percent of the control group enrolls in snap over the next 9 months compared to 11 percent of the information only group and 18 percent of the information plus assistance group the individuals who apply or enroll in response to either intervention receive lower benefits and are less sick than the average enrollee in the control group the results are consistent with the existence of optimization frictions that are greater for needier individuals suggesting that the poor targeting properties of the interventions reduce their welfare gains

how the other half lived marriage and emancipation in the age of the pill abstract the contraceptive pill was fda approved in 1960 however it would be another decade before young unmarried women had full access in the meantime marriage constituted a way to the pill the later 1960s early 1970s also saw a convergence on 18 as the minimum age of marriage many states lowering it from 21 exploiting these law changes we find that a lowered minimum age precipitated marriage delayed marital fertility and improved women s educational and occupational outcomes marriage easing credit constraints combined with the contraceptive properties of the pill form the hypothesized pathway

the economists and the problem of monopoly for much too long a time students of the history of the american antitrust policy have been at least mildly perplexed by the coolness with which american economists greeted the sherman act was not the nineteenth century the period in which the benevolent effects of competition were most widely extolled should not a profession praise a congress which seeks to legislate its textbook assumptions into universal practice and with even modest foresight should not the economists have seen that the sherman act would put more into economists purses than perhaps any other law ever passed of course there were partial explanations the coolness of the economists sometimes rested more on disbelief in the efficacy of the sherman act than on hostility to its purpose the route of regulation was preferred although this preference hardly restores the reputations of those economists as prophets one might even point out that there were not many good american economists at the time although an undeniable giant such as irving fisher shared the common view i intend on this occasion to review the attitudes of economists toward monopoly as a problem in public policy my subject however is a good deal broader than the sherman act and its reception the last two centuries of the economic writings on monopoly policy particularly in england and the united states will be surveyed thereafter i shall examine the reciprocal effects of economics and antitrust policy

aiding contraception hiv and recent trends in abortion using a difference in differences estimation framework and state level data we investigate the potential role of hiv aids in contributing to declining abortion utilization in the united states our results suggest that the perceived risk of hiv contraction negatively affected unwanted pregnancies specifically a 10 increase in hiv incidence is associated with 0 34 1 1 fewer abortions per live births an effect that can account for at least one tenth of the sharp decline in abortions observed from the early 1980s to mid 1990s

do analysts understand the economic and reporting complexities of derivatives we investigate whether and how the complexity of derivatives influences analysts earnings forecast properties using a difference in differences design we find that relative to a matched control sample of non users analysts earnings forecasts for new derivatives users are less accurate and more dispersed after derivatives initiation these results do not appear to be driven by the economic complexity of derivatives but rather the financial reporting of such economic complexity overall despite their financial expertise analysts routinely misjudge the earnings implications of firms derivatives activity however we find evidence that a series of derivatives accounting standards has helped analysts improve their forecasts over time

the impact of legalized abortion on crime we offer evidence that legalized abortion has contributed significantly to recent crime reductions crime began to fall roughly eighteen years after abortion legalization the five states that allowed abortion in 1970 experienced declines earlier than the rest of the nation which legalized in 1973 with roe v wade states with high abortion rates in the 1970s and 1980s experienced greater crime reductions in the 1990s in high abortion states only arrests of those born after abortion legalization fall relative to low abortion states legalized abortion appears to account for as much as 50 percent of the recent drop in crime

contraception as development new evidence from family planning in colombia there has been considerable debate in the last decade about whether or not family planning programmes in developing countries reduce fertility or improve socio economic outcomes this article provides new evidence by studying the expansion of one of the worlds oldest and largest family planning organisations profamilia of colombia it finds that family planning explains less than 10 of colombias fertility decline during its demographic transition as in wealthy countries however lowering the costs of first birth postponement produced important socio economic gains enabling young women to obtain more education and to work more and live independently later in life

state abortion rates the impact of policies providers politics demographics and economic environment abstract this paper uses data on abortion rates by state from 1974 1988 to estimate two stage least squares models with fixed state and year effects restrictions on medicaid funding for abortion are correlated with lower abortion rates in state and higher rates among nearby states a maximal estimate suggests that 19 25 of the abortions among low income women that are publicly funded do not take place after funding is eliminated parental notification laws for teen abortions do not significantly affect aggregate abortion rates a larger number of abortion providers in a state increases the abortion rate primarily through inducing cross state travel

risk aversion and technology mix in an electricity market this article analyzes the eff ect of risk and risk aversion on the long term equilibrium technology mix in an electricity market it develops a model where fi rms can invest in baseload plants with a fi xed variable cost and peak plants with a random variable cost and demand for electricity varies over time but is perfectly predictable at equilibrium the electricity price is partly determined by the random variable cost and the returns from the two kinds of plants are negatively correlated when the variable cost of the peak technology is high the return of peak plants is low but the return to baseload plants is high risk averse fi rms reduce the capacity of the riskiest technology and develop the capacity of the other compared to risk neutral fi rms in the particular case where a risk neutral fi rm invests heavily in baseload technology and only sparely in peak capacity a risk averse fi rm would invest less in baseload increase peak capacity and increase total installed capacity

financial constraints competition and hedging in industry equilibrium we analyze the hedging decisions of firms within an equilibrium setting that allows us to examine how a firm s hedging choice depends on the hedging choices of its competitors within this equilibrium some firms hedge while others do not even though all firms are ex ante identical the fraction of firms that hedge depends on industry characteristics such as the number of firms in the industry the elasticity of demand and the convexity of production costs consistent with prior empirical findings the model predicts that there is more heterogeneity in the decision to hedge in the most competitive industries

trade and exposure are firms that engage in trade more vulnerable to exchange rate risk in this paper we examine the relationship between exchange rate movements firm value and trade our empirical work tests whether exchange rate exposure can be explained by variables that proxy for the level of international activity firm size industry affiliation and country affiliation the results suggest that while a significant fraction of firms in these countries is exposed to exchange rate movements there is little evidence of a systematic link between exposure and trade indeed what little evidence there is of a link suggests that firms that engage in greater trade exhibit lower degrees of exposure this may reflect the fact that those firms most engaged in trade are also the most aware of exchange rate risk and therefore are the most likely to hedge their exposure

scale economies and inefficiency of u s dairy farms this study employs data drawn from the 2000 agricultural resource management survey a u s department of agriculture sponsored farmers survey the article estimates returns to scale relationships across dairy farms of different sizes and across different regions incorporating variables hypothesized to influence farm performance results point to significant scale economies in u s dairy farms and underscore the importance of taking account of inefficiency when estimating scale economies contrary to previous research the preferred cost function specification does not show a region of decreasing returns to scale this finding helps explain why the average size of dairy farms has been increasing

bank income taxes and interest rate risk management a note banks and other financial institutions are concerned with the management of their interest rate risk in the frictionless markets of most finance theory however one interest rate risk management policy is just as good as another hence the finance literature does not provide convincing reasons for managers to want to control interest rate risk consequently the literature has provided little guidance on what to control how far to go with this control or on how to explain differences in interest rate risk exposure among banks given frictionless markets shareholder indifference to the bank s interest rate risk policy plus management s preference to reduce risk could lead to policies that reduce or eliminate exposure to interest rate risk i e to immunization strategies however if part of the reason for the existence of banks is the provision of maturity intermediation services managers who avoid exposure to interest rate risk are likely to come out second best to managers who choose asset and liability portfolios that do expose the bank s shareholders to this risk in this note we develop and analyze a model of bank decisions in which tax considerations induce banks to control interest rate risk in the u s banks have many opportunities to shield current income against federal and state taxation foreign tax credits investment tax credits and investment in tax exempt securities are three examples the tax position of a bank can be thought of as a stock of nonsaleable tax shields usable in the current or in future years the tax shields are an asset and if the bank s income falls below some level then the value of that asset will be reduced either by the loss of tax shielding opportunities or by the postponement of their realization 2 this note treats the bank tax position similarly to the models discussed by brennan and schwartz 2 miller 8 deangelo and masulis 4 and kim 6 however our interest is in the effect of tax shields on risk taking by financial institutions rather than a concern with capital structure decisions 3

the impact of derivatives on firm risk an empirical examination of new derivative users abstract the appropriateness of financial reporting rules for derivative securities depends on corporations reasons for using the instruments empirically little is documented about how the instruments affect firms risk exposures this study examines derivatives roles in firms initiating derivatives use the results are consistent with firms using derivatives to hedge and not to increase entity risk firm risk measured several ways declines following derivatives use realized risk reductions and decisions to initiate derivatives programs vary across firms with the expected benefits from hedging the findings emphasize the importance of hedge accounting rules that incorporate the impact of derivatives and hedged items simultaneously

children and their parents a review of fertility and causality childbearing decisions are not made in isolation they are taken in concert with decisions regarding work marriage health investments and stocks as well as many other observable and non observable considerations drawing causal inferences regarding the effect of additional children on family outcomes is complicated by these endogenous factors this paper lays out the issues involved in estimating the effect of additional child births on family outcomes and the assumptions underlying the range of estimators and methodologies proposed in the economic literature the common pitfalls of these estimators are discussed as well as their potential to bias our interpretation of the effect additional births have on children and parents both in the existing literature and in future work in the face of changing patterns of childbearing and child rearing

do investors value smooth performance abstract this paper presents empirical evidence that cash flow volatility is negatively valued by investors the magnitude of the effect is substantial with a 1 increase in cash flow volatility resulting in approximately a 0 15 decrease in firm value we show that this increase however is not associated with earnings smoothing resulting from managers accrual estimates our results are consistent with a preference by the market for less volatile cash flows and suggest that managers efforts to produce smooth financial statements add value but only via the cash component of earnings

the impact of medical liability standards on regional variations in physician behavior evidence from the adoption of national standard rules i explore the association between regional variations in physician behavior and the geographical scope of malpractice standards of care i estimate a 30 50 percent reduction in the gap between state and national utilization rates of various treatments and diagnostic procedures following the adoption of a rule requiring physicians to follow national as opposed to local standards these findings suggest that standardization in malpractice law may lead to greater standardization in practices and more generally that physicians may indeed adhere to specific liability standards in connection with the estimated convergence in practices i observe no associated changes in patient health jel i11 i18 j44 k13 a large literature in health economics and medicine has explored the regional practice patterns of physicians and other medical providers and has endeavored to understand i why some regions spend so much in the care of patients relative to other regions and ii whether high spending regions generate superior health outcomes in this paper i explore a potential contribution to the observed disparities in care that has been suggested by leading theoretical scholars in the area variations literature phelps 1992 but that has yet to be explored empirically laws respecting the geographical nature of the standards of care employed in medical malpractice actions in addition to shedding potentially valuable light on each of the above puzzles this investigation may at the same time offer novel insight into the fundamental question of whether physicians are responsive to the specific standards expected of them under the law a common thread that emerges throughout those studies that have endeavored to explore the causes behind the regional variations phenomenon is the inability

selective hedging in hydro based electricity companies abstract we analyze risk management trends in electricity commodity markets using the production and transaction data and written hedging policies of 12 norwegian hydropower companies the scope of our analysis is the hedging of physical electricity production using the power derivatives available at nasdaq omx commodities in their hedging policy these companies either use a cashflow at risk c far approach or a hedge ratio approach or follow no explicitly stated approach we find that the derivative cashflows constitute substantial profits for these companies furthermore hedging contributes to reducing the c far for 10 of the companies these findings are surprising considering that we expect hedging to yield zero expected profit and to smooth the earnings overall our findings reveal that a practice of incorporating market views in hedging decisions is widespread in the sample companies as both sanctioned in their written hedging policy and as indicated by the substantial hedging profits

antitrust in the reagan administration a report from the belly of the beast abstract this paper is a report on selected aspects of antitrust policy in the reagan administration it was written while the author was director of the bureau of economics at the federal trade commission the topics covered include merger guidelines the general drift of antitrust policy deregulatory initiatives consumer protection policy and the stronger emphasis on economic analysis in the conduct of antitrust policy the conclusions drawn are not very sanguine in a normative sense perhaps our solace lies in the positive study of why the antitrust bureaucracies behave as they do

taxes and firm size abstract firm size has been used as a proxy for the firm s political costs and hence managers proclivity to choose income reducing accounting procedures this study provides additional evidence on this topic by examining the association between firm size and effective corporate tax rates the latter are one component of a firm s political costs the roughly fifty largest u s exchange listed firms in particular oil and gas companies and manufacturing firms have significantly higher worldwide tax rates than other firms these higher tax rates are observed primarily after the implementation of the u s 1969 tax reform act and after the opec countries raised their tax rates on u s oil producers the findings which are insensitive to alternative sources of data alternative measures of firm size and alternative measures of effective tax rates are consistent with the use in previous studies of firm size as a proxy for the firm s political costs

how does risk selection respond to risk adjustment new evidence from the medicare advantage program to combat adverse selection governments increasingly base payments to health plans and providers on enrollees scores from risk adjustment formulae in 2004 medicare began to risk adjust capitation payments to private medicare advantage ma plans to reduce selection driven overpayments but because the variance of medical costs increases with the predicted mean incentivizing enrollment of individuals with higher scores can increase the scope for enrolling overpriced individuals with costs significantly below the formula s prediction indeed after risk adjustment ma plans enrolled individuals with higher scores but lower costs conditional on their score we find no evidence that overpayments were on net reduced

the effect of medicaid abortion funding restrictions on abortions pregnancies and births this paper considers whether state medicaid abortion funding restrictions affect the likelihood of getting pregnant having an abortion and bearing a child we exploit a natural experiment afforded by supreme court decisions and employ more traditional multivariate models with alternative fixed effect specifications an analysis of 12 years of state level data indicate that restrictions are associated with a reduction in abortions and either no change or a reduction in births implying fewer pregnancies subsequent analysis of the national longitudinal survey of youth nlsy is consistent with these findings and show the response is concentrated among the low income population

is hedging successful at reducing financial risk exposure abstractthis article analyses whether firms use risk management instruments for hedging or speculative purposes first by analysing the relationship between the firm s stock returns and financial risks in 567 euronext firms we measure the firm s exposure to risk next we investigate the effect of hedging in such exposures addressing simultaneously the endogeneity of hedging decision through a treatment effect methodology we have found that firms in our sample display higher percentages of exposure when weighed against preceding studies and confirmed that hedging reduces the level of the underlying financial exposure concluding that firms use risk management instruments with hedging purposes

managerial optimism and earnings smoothing abstract this paper empirically examines how ceo optimism affects earnings smoothing and earnings surprises the main finding is that optimistic managers smooth earnings more than rational managers and are associated with smaller in absolute value earnings surprises a possible theoretical explanation is offered for these results based on a combination of the torpedo effect the innate behavior of optimists and the risk of litigation prosecution for over reporting earnings

public choice theory and antitrust policy we survey the pioneering contributions of robert tollison to the theory and practice of antitrust law enforcement inspired by his period of service during ronald reagan s first administration as director of the federal trade commission s bureau of economics tollison was the first scholar to apply public choice reasoning to the question why antitrust frequently fails to achieve its stated goal of protecting consumers against unwarranted exercises of market power in supplying evidence that the outcomes of antitrust processes are shaped more by special interests than by the public s interest he was instrumental in launching a wholly new research program

the impact of cash flow volatility on discretionary investment and the costs of debt and equity financing abstract we show that higher cash flow volatility is associated with lower average levels of investment in capital expenditures r d and advertising this association suggests that firms do not use external capital markets to fully cover cash flow shortfalls but rather permanently forgo investment cash flow volatility also is associated with higher costs of accessing external capital moreover these higher costs as measured by some proxies imply a greater sensitivity of investment to cash flow volatility thus cash flow volatility not only increases the likelihood that a firm will need to access capital markets it also increases the costs of doing so

on the determinants of corporate hedging finance theory indicates that hedging increases firm value by reducing expected taxes expected costs of financial distress or other agency costs this paper provides evidence on these hypotheses using survey data on firm s use of forwards futures swaps and options combined with computstat data on firm characteristics of 169 firms in the sample 104 firms use hedging instruments in 1986 the data suggest that firms which hedge face more convex tax functions have less coverage of fixed claims are larger have more growth options in their investment opportunity set and employ fewer hedging substitutes