a review of the recent empirical literature on displaced workers this article reviews the empirical literature on job displacement job displacement is widespread and strongly countercyclical tending to peak during economic downturns but concentrated in indus

a simple estimator for simultaneous models with censored endogenous reggressors this paper presents a simple two step estimator for models with censored endogenous regressors and sample selection bias the approach unifies the literature on censored endogenous regressors and sample selection bias and provides extensions the procedure employs generalized residuals to adjust for the inconsistency caused by the endogeneity of the censored regressors the paper also provides two new tests of weak exogeneity an empirical example examining the trade off between fringe benefits and wages indicates that the estimation procedure works well a monte carlo experiment suggests that the proposed tests have good power properties copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

using generalized method of moments to test mean variance efficiency this paper develops tests of unconditional mean variance efflciency under weak distributional assumptions using a generalized method of moments framework these tests are potentially more robust than commonly employed tests which rely on the assumption that asset returns are normally distributed and temporarily i i d using returns for size based portfolios from 1926 to 1988 we show that the conclusion concerning the mean variance effilciency of market indexes can be sensitive to the test considered the application of multivariate statistical techniques in financial economics has become common practice in recent years much of the development has been in the area of testing asset pricing models the assumption that asset returns follow a time invariant multivariate normal distribution permits tests of restrictions on model parameters in a pooled time series cross section framework these tests can be interpreted as tests of the mean variance efficiency of a portfolio or combination of portfolios gibbons 1982 jobson and korkie 1982 stambaugh 1982 shanken 1985 1987 kandel and stambaugh 1987 mackinlay 1987 and gibbons ross and shanken 1989 are examples of work presenting multivariate tests of the capital asset pricing model connor and korajczyk 1988 and lehmann and modest 1988 present multivariate tests of the arbitrage pricing model breeden gibbons and litzenberger 1989 present multivariate tests of the consumption based capm although these papers assume the normality of asset returns little analysis has been conducted to understand the sensitivity of the inferences to violations of this assumption 2 3

the effect of physician advice on alcohol consumption count regression with an endogenous treatment effect although there are encouraging trends alcohol abuse continues to be a significant public health problem econometric studies of alcohol demand have yielded a great deal of information for alcohol abuse prevention policy these studies suggest that higher alcohol taxes and stricter drunk driving policies can reduce heavy drinking and drunk driving in this paper we explore the role physician advice plays in the campaign to prevent alcohol related problems compared to alcohol taxation physician advice is a more precisely targeted intervention that does not impose extra costs on responsible drinkers compared to the resource costs of arresting processing and punishing drunk drivers physician advice may be a lower cost intervention to provide a basis for alcohol policy analysis we use an alcohol demand framework to test whether physician provided information about the adverse consequences of alcohol abuse shifts demand to more moderate levels there are three aspects of our alcohol demand model that complicate the estimation 1 the dependent variable is non negative it is a count variable number of drinks consumed 2 a non trivial number of sample observations have zero values for the dependent variable and 3 because the data we use is non experimental the treatment variable indicating receipt of advice from a physician may be endogenous we implement an estimation method that is specifically designed to deal with these three complicating factors our results show that advice has a substantial and significant impact on alcohol consumption by males with hypertension and that failing to account for the endogeneity of advice masks this result copyright 2001 john wiley sons ltd

the effect of advance notification of plant closings on unemployment using data from the 1984 displaced worker survey the authors model the determinants of time without work following job displacement for a large sample of workers laid off because of plant shutdowns between 1979 and 1984 the major focus of the paper is on the role of advance notification in mitigating unemployment the estimating procedure accommodates right censored observations stemming from continuing or open ended spells of unemployment advance notification is found to have significantly reduced the duration of unemployment of those notified workers who did not draw unemployment insurance benefits and in particular of those who left the plant prior to termination advance notice had much less effect on the time without work of notified workers whose spell length of unemployment was long enough for them to collect unemployment insurance benefits

time series distributional properties of financial ratios empirical evidence from finnish listed firms abstract the distributional properties of time series accounting numbers are studied first the distributional characteristics of raw financial ratio distributions are investigated second the normality of the accounting index model residuals is researched by doing this one aims to consider the firm specific and economy wide effects on the observed nonnormalities in financial ratio distributions empirical evidence indicates that a substantial part of the nonnormalities in financial ratio distributions is caused by economy wide effects

multivariate tests of the zero beta capm abstract a cross sectional regression test csrt of the capm is developed and its connection to the hotelling t2 test of multivariate statistical analysis is explored algebraic relations between the csrt the likehood ratio test and the langrange multiplier test are derived and a useful small sample bound on the distribution function of the csrt is obtained an application of the csrt suggests that the crsp equally weighted index is inefficient but that the inefficiency is not explained by a firm size effect from february to december

asset pricing tests under alternative distributions given the normality assumption we reject the mean variance efficiency of the center for research in security prices value weighted stock index for three of the six consecutive ten year subperiods from 1926 to 1986 however the normality assumption is strongly rejected by the data under plausible alternative distributional assumptions of the elliptical class the efficiency can no longer be rejected when the normality assumption is violated but the ellipticity assumption is maintained many tests tend to be biased toward overrejection and both the accuracy of estimated beta and r2 are usually overstated many asset pricing models predict a linear relationship between the expected return on an asset and the covariance between the asset s return and one or more factors it is this mean variance framework that plays a central role in modern theories of asset pricing however chamberlain 1983 showed that the mean variance analysis is consistent with investor s portfolio decision making if and only if the returns are elliptically distributed moreover in the case of elliptical returns the capital asset pricing model capm of sharpe 1964 and lintner 1965 and multibeta models will remain valid theoretically 1 therefore it is important to test asset pricing models for the case where the returns are elliptically distributed and yet gibbons ross and shanken 1989 among others provide tests that are valid only under the normality assumption a special case of the elliptical distributions affleck graves and mcdonald 1989 and mackinlay and richardson 1991 examine tests without the normality assumption but their approaches are difficult to apply to obtain exact tests in the elliptical case complementing the existing studies we propose exact tests for both the case where the returns are elliptically distributed and the case where the residuals are elliptically distributed when the normality assumption is violated but the ellipticity assumption is maintained our results show that the usual tests can be biased and the widely used beta and r2 estimated

health behavior health knowledge and schooling the positive correlation between schooling and good health is well documented one explanation is that schooling helps people choose healthier life styles by improving their knowledge of the relationship between health behaviors and health outcomes that is schooling improves the household s allocative efficiency in producing health this empirical study uses direct measures of health knowledge to test this explanation part of the relationship between schooling and the consumption of cigarettes alcohol and exercise is explained by differences in health knowledge however most of schooling s effects on health behavior remain after differences in knowledge are controlled for

measuring the effect of subsidized training programs on movements in and out of employment despite over two decades of u s experience in operating large scale subsidized training programs for low income and unemployed workers the effects of these programs are still highly controversial the controversy arises from the difficulty of specifying the model of participant outcomes in the absence of training that is necessary in any nonexperimental program evaluation in this paper we suggest that some of these difficulties may be overcome by focusing on a very simple measure of outcomes namely the probability of employment we present a variety of estimates of the effect of training on the probability of employment for the 1976 cohort of adult male participants in the comprehensive employment and training act ceta program our methods range from a simple comparison of pre and post training employment probabilities between trainees and nonparticipants to a fully specified first order markov model of employment probabilities with individual heterogeneity there is consistent evidence across methods that ceta participation increased the probability of employment in the three years after training by from 2 to 5 percentage points classroom training programs appear to have had significantly larger effects than on the job programs although the estimated effects of both kinds of programs are positive we also find that movements in and out of employment for trainees and nonparticipants are reasonably well described by a first order process conditional on individual heterogeneity in the context of this model ceta participation appears to have increased both the probability of moving into employment and the probability of continuing employment

a microeconometric model of the demand for health care and health insurance in australia this paper develops a model for interdependent demand for health insurance and health care under uncertainty to throw light on the issue of insurance induced distortions in the demand for health care services the model is used to empirically analyse the determinants of the choice of health insurance type and seven types of health care services using micro level data from the 1977 78 australian health survey econometric implementation of the model involves simultaneously issues of discreteness of choice selectivity and stochastic dependence between health insurance and utilization health status appears to be more important in determining health care service use than health insurance choice while income appears to be more important in determining health insurance choice than in determining health care service use for a broad range of health care services both moral hazard and self selection are found to be important determinants of utilization of health care services

on multivariate tests of the capm abstract this paper evaluates the power of multivariate tests of the capital asset pricing model the results indicate that when employing an unspecified alternative hypothesis the ability of the tests to distinguish between the capm and other pricing models is poor an upper bound is derived for the distance the alternative distribution of the test statistic can be from the null distribution when the deviations from the capm are due to missing factors this upper bound explains the low power of the tests

estimating a health production function for the us some new evidence this study reports some new evidence on the impact of medical care socioeconomic lifestyle and environmental factors on the health status of the population of the usa the results show that additional medical care utilization is relatively ineffective in lowering mortality and increasing life expectancy the most important factors that influence death rates are related to socioeconomic status and lifestyle the results suggest that health care policy which focuses primarily on the provision of medical care services and ignores larger economic and social considerations may do little to benefit the nation s health

the u s health care expenditure evidence from 2001 to 2009 abstractthis study utilizes state level data from 2001 to 2009 to estimate the impact of the 2007 financial crisis upon health care expenditures higher death rates are consistently found to have a positive and statistically significant impact on health expenditures while mental health and copd are not generally found to impact expenditures increases in the percentage of the population diagnosed with cholesterol and obesity tend to increase health expenditures increases in health expenditures slowed considerably after the financial crisis even though recessions high unemployment rates are generally found to have a positive impact on health expenditures the post financial crisis time period is estimated to have much lower health expenditures than in other time periods our results can be used to give insight into the conditions under which the slower rate of increase in health expenditures can be expected to increase more research will be needed to be able to more completely explore not only the re

nonnormalities and tests of asset pricing theories the robustness of the multivariate test of gibbons ross and shanken 1986 to nonnormalities in the residual covariance matrix is examined after considering the relative performance of various tests of normality simulation techniques are used to determine the effects of nonnormalities on the multivariate test it is found that where the sample nonnormalities are severe the size and or power of the test can be seriously misstated however it is also shown that these extreme sample values may overestimate the population parameters hence we conclude that the multivariate test is reasonably robust with respect to typical levels of nonnormality in traditional hypothesis testing a nonrandom test maps the values of a random variable into a sample space dichotomized into regions where a hypothesis is either accepted or rejected there are three possible outcomes from this process 1 a correct decision 2 a false rejection type i error or 3 failure to reject the hypothesis when it is false type ii error of the latter two types of error an error of the first kind is usually considered less desirable so typically a level of significance is selected with low probability of type i error e g 0 05 or 0 01 and a test is chosen so as to maximize power minimize probability of type ii error for the specified level of type i error knowledge of the relative level of these two errors is critical in assimilating the results of an experiment for example if the power of a test is equal to its significance level i e a weak test rejection of the null contains zero information 2 additionally in constructing parametric tests of hypotheses it is necessary to assume some distribution for the underlying data consequently when using parametric tests rejection of the null is only equivalent to rejection of at least one of the underlying hypotheses i e the null hypothesis or the distributional assumption interestingly the size significance level and power of procedures used to test

costly employment contract renegotiation and the labor mobility of young men the distinction of quits and permanent layoffs remains a contentious issue in the labor economics literature basically there appear two contrasting views of such turnover while both interpretations of turnover are derived from job matching models that assume wealth maximizing behavior of workers and firms each involves different assumptions about the feasibility of individual labor contract negotiations following hire on the one hand application of the coase theorem to employment contracts implies that turnover will occur only when the value of the worker s product in some alternative employment exceeds current job productivity since the actual division of the job match rent is assumed costlessly renegotiable only the presence of a truly more productive job assignment would prevent the renegotiation of the current rent sharing contract to the mutual benefit of both worker and firm the likelihood of a job change is thus directly related to the level of total match productivity irregardless of whether the worker in response to some later survey question characterizes the separation as a quit or permanent layoff according to this formulation of worker and firm attachments quits and permanent layoffs are at least in any sense relevant to actual resource allocation indistinguishable an implication of this model is of course that mobility enhances productivity see gary becker elisabeth landes and robert michael 1977 counter to this view stand models of job matching that suggest that the presence of transactions costs in the form of costly contract renegotiations preclude any easy application of the coase theorem to employment contracts most forcefully advocated by masanori hashimoto 1981 these models of job matching imply that quits and permanent layoffs are different the difference results from the fact that with costly contract renegotiation mobility is to a large extent determined by the actual rent sharing agreement formulated at the beginning of employment according to this view then the total value of the match does not exclusively determine job change and thus not all mobility is productivity augmenting this paper offers a model of job matching with costly post hire negotiations in some aspects similar to that of hashimoto but with particular relevance to the population of young workers only beginning their labor force participation while hashimoto s discussion concentrates on longer term firmspecific training decisions the current model focuses on the period immediately following hire when worker productivity is to a large extent governed by endowed capabilities rather than determined by learning on the job the theoretical focus on inexperienced workers as well as the corresponding youthful composition of the empirical sample are motivated to control for unobserved factors such as firm specific human capital stocks as much as possible in further contrast to hashimoto s emphasis the model yields empirical implications concerning the role of wages in the determination of mobility that contrast to the implications of an otherwise similar zero negotiations cost model of job matching derivation of the empirical implications concerning the relationship of wages to quits and layoffs represents the primary contribution of this paper finally empirical results are presented that at least for a sample of very young men over a short period of time department of economics university of houston houston tx 77004 i thank finis welch dan mitchell and the referee for comments on an earlier version of this paper

subperiod aggregation and the power of multivariate tests of portfolio efficiency abstract when testing portfolio efficiency empiricists usually perform tests using subperiods and aggregate the results in some manner although the power of individual subperiod tests has been studied previously little is known about the power of the aggregate test power is evaluated here through simulations using two different aggregation techniques aggregate power is substantially higher than that for a single subperiod for example in one scenario the aggregate power is 0 77 over a sixty year period but only 0 17 for each five year subperiod in addition the level of power depends on the method of aggregation

displacement induced joblessness previous research examining the nonemployment of displaced workers suffers from methodological flaws which reinforce widely held but substantially incorrect views about the pattern of postseparation joblessness in particular adjustment difficulties have been overstated for nonwhites long tenure workers and those terminated during periods of high unemployment and underestimated for persons in manufacturing industries or white collar occupations

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

how destructive is creative destruction effects of job loss on job mobility withdrawal and income we analyze short and long term effects of worker displacement our sample consists of male workers displaced from norwegian manufacturing plants we find that displacement increases the probability of leaving the labor force by 31 the drop out rate from the labor force is particularly high in the first years following displacement the average earnings effects for those who remain in the labor force are moderate a 3 loss relative to non displaced workers after seven years splitting displaced workers on within and between firm movers we find that the estimated earnings loss is entirely driven by between firm movers who experience a 3 6 loss transfers to other plants within multi plant firms upon displacement are quite common our results support the view that human capital is partly firm specific and partly industry specific we find no evidence suggesting that human capital is plant specific

the impact of health maintenance organizaitons on health and health care costs it is found that health maintenance organizations hmos initially increase but will eventually significantly decrease a population s health care costs thus hmos appear to require a significant amount of time to control effectively physician and patient behaviour and achieve reductions in costs unlike health care costs hmos are found to have no significant impact on a population s aggregate health in either the short or the long run thus hmos are found to achieve savings in health care costs in the long fun and they apparently do so with no resultant decline in health the paper also has important implications for the national health service nhs in great britain given the similarities that exist between hmo physician reimbursement and nhs funding of its general practitioners

the health and earnings of rejected disability insurance applicants applicants for social security disability benefits who fail to pass the medical screening form a natural control group for beneficiaries data drawn from the 1972 and 1978 surveys of the disabled done for the social security administration show that fewer than 50 percent of rejected male applicants work typical earnings of those that do are less than 59 percent of median earnings for other men their age these data cast doubt on recent econometric work that suggests that the disincentive effects of the social security disability program have been substantial copyright 1989 by american economic association

multivariate proxies and asset pricing relations abstract a framework is developed in which inferences can be made about the validity of an equilibrium asset pricing relation even though the central aggregate in this relation is unobservable a multivariate proxy for the true market portfolio consisting of an equal weighted stock index and a long term government bond index is employed in an investigation of the sharpe lintner capm the empirical evidence suggests that we can reject the joint hypothesis that a capm is valid and b multiple correlation between the true market portfolio and proxy assets exceeds 0 7 connections to the equilibrium factor pricing literature are also explored

why are recessions good for your health a series of influential papers by christopher j ruhm 2000 2003 2005 2008 documents that recessions are good for your health or more specifically that state level mortality rates are strongly procyclical the magnitude of the correlation is economically meaningful a typical estimate from the literature suggests that a 1 percentage point increase in a state s unemployment rate is associated with a 0 54 percent reduction in that state s mortality rates if this reflects a causal relationship that is also valid at the national level then a 1 percentage point increase in the unemployment rate would translate based on 2004 mortality rates into about 12 000 fewer deaths per year these findings are frequently interpreted as resulting from the rising opportunity cost of time that accompanies better labor market opportunities and some empirical support exists for this interpretation for example ruhm 2000 shows that obesity and smoking also exhibit a procyclical pattern the economy and health

currency hedging for international portfolios this paper examines the benefits from currency hedging both for speculative and risk minimization motives in international bond and equity portfolios the riskreturn performances of globally diversified portfolios are compared with and without forward contracts over the period 1974 to 1990 inclusion of forward contracts results in statistically significant improvements in the performance of unconditional portfolios containing bonds conditional strategies are also implemented both in sample and out of sample and are shown to both significantly improve the risk return tradeoff of global portfolios and to outperform unconditional hedging strategies whether international portfolios should be hedged against currency risks is the subject of an active debate the theoretical side of the debate has been closely associated with two strands in the academic literature international asset pricing and optimal hedging in the futures markets in the international asset pricing model iapm of solnik 1974 optimal portfolios contain positions in forward contracts or equivalently foreign currency denominated bills these positions which can differ from the positions in foreign stocks have since been termed hedges black 1990 shows that under additional assumptions the hedge ratios should be identical for all investors regardless of their nationality universality and that investors should never fully hedge their foreign currency exposures similarly theoretical models from the futures literature produce demands for hedging instruments that contain both speculative and hedging components the empirical issue unanswered so far is whether adding forward contracts to international portfolios significantly improves the risk return profile of global investments empirical research has barely begun to respond to the challenges of theoretical models there exists little empirical evidence on either the relevance of black s universal hedge ratios or the optimality of hedge ratios less than one instead researchers have concentrated on the benefits of fully hedging exchange risk for example eun and resnick 1988 indicate that stock portfolios perform better when fully hedged but offer no statistical tests

a general distribution for describing security price returns this paper introduces a generalized distribution called the gb2 distribution for describing security returns the distribution is extremely flexible containing a large number of well known distributions such as the lognormal log t and log cauchy distribu tions as special or limiting cases and allowing large even infinite higher moments this flexibility allows a direct representation of different degrees of fat tails in the distribution the properties of the gb2 make it useful in empirical estimation of security returns and in facilitating the development of option pricing models and other models that depend on the specification and mathematical manipulation of distributions copyright 1987 by the university of chicago

estimates of the demand for medical care under different functional forms we estimate price and income elasticities from a linear log linear and the almost ideal demand model with and without an adjustment for selectivity bias in an effort to show that special attention should be paid to the underlying assumptions of consumer behaviour when estimating a medical care demand model the literature on medical care utilization is extended by incorporating two major components of spending as separate demands in a system of medical care spending we find that estimates of elasticities vary depending on the functional form of the estimating equation thus questioning the usefulness for policy purposes of single estimates of elasticities

does more medical care improve population health new evidence for an old controversy this article investigates the aggregate relationship between medical care and health for the us population i use annual state level panel data for the period 1983 to 2000 to estimate static and dynamic health production function models i find no compelling evidence that greater aggregate utilization of medical care from application of existing technology improves population health by lowering mortality in the short run or long run my results suggest that development of new medical technologies that diffuse rapidly throughout the nation and at different rates across states may well explain much of the decline in the age adjusted death rate over the past several decades as well as persistent differences in mortality across geographic regions overall my findings suggest that the us may be experiencing flat of the curve medicine with future improvements in mortality from medical care coming from new and better technologies rather than greater intensity of services

on correlations and inferences about mean variance efficiency a framework is presented for investigating the mean variance efficiency of an unobservable portfolio based on its correlation with a proxy portfolio a sensitivity analysis derives the highest correlation between the proxy and a portfolio that reverses the inference of a test of sharpe lintner tangency for example the maximum correlation between the value weighted nyse amex portfolio and a portfolio inferred tangent ranges from 0 76 to 0 48 we also test whether the correlation between the proxy and the tangent portfolio exceeds a given level this hypothesis is often rejected for the nyse amex proxy at a correlation of 0 7

multivariate tests of asset pricing the comparative power of alternative statistics this paper examines estimation issues associated with multivariate tests of asset pricing two issues are considered 1 the constraint that the sample size n must be less than the time series t and 2 the relative effect on power of using the multivariate statistic versus a univariate counterpart we find that an alternative statistic that allows for large n does not dominate the usual portfolio tests more notably we find that the power of a simple diagonal statistic usually dominates the multivariate statistic for cases considered inthis study

health plan choice and the utilization of health care services the effect of health plan membership on the utilization of health care services is of interest to both consumers and policymakers often estimation of that effect is difficult because data are nonexperimental and the dependent variable exhibits a high proportion of zeros the authors propose a model of utilization that addresses both problems after controlling for chronic illness and other observed variables they find no evidence of further selectivity bias in equations for physician contacts and inpatient days the authors estimates of the effect of health plan membership on utilization of services are similar to those from experimental data coauthors are roger feldman steven cassou and michael finch copyright 1991 by mit press

international trade and the labor market experience of displaced workers using data from the displaced workers survey and the national bureau of economic research trade and immigration dataset the author of this study finds that among manufacturing workers displaced in 1979 83 the average duration of joblessness varied directly with the rise in their industry s import share since 1972 74 this relationship appears to be due in large part to the fact that the work force in industries with rising import shares tends to have demographic characteristics associated with labor market adjustment difficulties such as higher proportions of women and blue collar workers than are found in other industries

hmo plans self selection and utilization of health care services this study examines the effect of health maintenance organizations hmos on the use of health care services among the privately insured nonelderly population to consider jointly the possible self selection bias and high frequency of zero observations in the applied utilization measures we accommodate the endogeneity of health plan choice decisions in the censored regression model using data from the 2000 medical expenditure panel survey we find strong evidence for favourable self selection into hmo plans health maintenance organization enrollment is found to encourage greater use of office based and hospital outpatient services overall satisfaction with the quality of care among hmo members is relatively low compared to that among nonhmo members these findings suggest that more effort is needed to develop management strategies in hmos in order to contain the moral hazard in utilization and assure the quality of service provided within the network of hmo providers

are workers permanently scarred by job displacements this paper investigates whether workers suffer lasting scars following job displacements using david t ellwood s 1982 terminology scars represent persistent effects whereas blemishes are transitory adjustments which dissipate over time more precisely dislocated individuals are defined as scarred if they continue to earn less or to be unemployed more than their nondisplaced counterparts even after the conclusion of a several year adjustment period