book review feature public policy in an uncertain world by charles f manski cambridge ma harvard university press 2013 pp 224 39 95 isbn 978 0674066892

empirically driven hierarchical classification of stock keeping units this paper proposes a hierarchical multi criteria classification method developed for inventory management purposes and applied in a case study of the spare parts business of a household appliance manufacturer the classification method is built on the basis of six dimensions resulting in 12 different classes of spare parts for which differentiated forecasting and inventory policies are proposed and tested the results of our simulation study demonstrate the reduction of the total logistics costs by about 20 whilst still achieving the specified target service level for each class even more importantly the proposed approach is simple enough to be understood and applied by company managers thus increasing the probability of its adoption in the same or similar fashion in other real world settings

fairness spillovers the case of taxation abstract it is standardly assumed that individuals react to perceived unfairness or norm violations in precisely the same area or relationship where the original offense has occurred however grievances over being exposed to injustice may have even broader consequences and also spill over to other contexts causing non compliant behavior there we present evidence that such fairness spillovers can incur large economic costs a belief that there is unfairness in taxation in the sense that the rich do not pay enough taxes is associated with a twenty percent higher level of paid absenteeism from work

the rise of europe atlantic trade institutional change and economic growth the rise of western europe after 1500 is due largely to growth in countries with access to the atlantic ocean and with substantial trade with the new world africa and asia via the atlantic this trade and the associatedcolonialism affected europe not only directly but also indirectly by inducing institutional change where initial political institutions those established before 1500 placed significant checks on the monarchy the growth of atlantic trade strengthened merchant groups by constraining the power of the monarchy and helped merchants obtain changes in institutions to protect property rights these changes were central to subsequent economic growth

political institutions and sorting in a tiebout model we construct a computational model of tiebout competition and show that political institutions differ in their ability to sort citizens effectively in particular we find that certain types of institutions those that become more politically unstable as citizen heterogeneity increases perform relatively poorly given a single jurisdiction yet these same institutions perform relatively well when there are multiple jurisdictions we provide an explanation for this phenomenon which draws upon simulated annealing a discrete nonlinear search algorithm jel

agglomeration and clusters tools and insights from coagglomeration patterns geographic clusters have received first order policy attention despite our limited academic knowledge about them i explain how coagglomeration patterns of industries can inform the analysis of clusters by allowing us to better delineate them to explore the causal mechanisms underlying them and to more finely assess their impact on various economic outcomes

investment crowding out firm level evidence from northern germany michalek j ciaian p and kancs d a investment crowding out firm level evidence from northern germany regional studies the main objective of this paper is to estimate the extent to which firm investment is substituted crowded out by investment support policies granted under the european union rural development programme rdp the empirical analyses employed the difference in difference propensity score matching approach which allows several important sources of bias to be addressed such as selection bias simultaneity bias and functional form misspecification from which many previous studies suffer using panel data of 1333 firms from the schleswig holstein region in germany it is found that the crowding out effect of the rdp is close to 100 implying that firms use public support to substitute for private investments furthermore no evidence was found that due to the rdp programme support firms would have brought forward their investments planned originally for a later period rejecting t

the administrative foundations of self enforcing constitutions current theories of the rule of law argue that public officials respect rights if the citizens are coordinated on an equilibrium in which they collectively resist abuse constitutional rules are means to coordinate on this equilibrium in past and present states however constitutional rules often have no effect on the rule of law this paper suggests an alternative view of the origin and development of the rule of law instead of considering constitutional rules as coordination devices for citizens at large history suggests considering them as manifestations of equilibria with rulers constrained by administrators required to implement policy analysis of the administrative foundations of self enforcing constitutions may be the key to a theory and policy that would foster the rule of law in developing countries and those in transition in particular constitutional reforms might benefit from focusing on altering the equilibrium distribution of administrative capacity and power providing incentives to the administratively powerful to check predation by each other and the central authorities and to align administrators interests with social welfare

why chains beget chains an ecological model of firm entry and exit and the evolution of market similarity abstract we construct and analyze a dynamic model of chain growth across multiple markets from an ecological perspective using computational and mathematical techniques our model consists of firms that possess intrinsic qualities and hedonic spatial attributes consumers purchase from firms based upon quality and hedonic distance we find that the existence of chains creates an environment favorable to additional chains in other words chains beget chains we also find that even though creating successful new firms becomes harder over time chaining successful new firms becomes easier both phenomena result from the creation of common niches across markets

computers skills and wages computer technology is most prominently used by skilled high wage workers this suggests that computer use requires skills to take full advantage of the possibilities which are particularly present among relatively skilled workers this article develops a simple technology adoption model showing that the decision to adopt computer technology depends on i the tasks to be performed ii the level of skill or education and iii the level of wages applying this model to british data it is shown that the effect of wages and particular tasks on computer adoption is larger than the effect of skills on adoption the estimates suggest that in britain computer use is likely to be a matter of cost efficiency and not so much of workers skills

forecasting and stock control a study in a wholesaling context wholesalers add value to the products they deal with by essentially bringing them closer to the end consumers in that respect the effective control of stock levels becomes an important measure of operational performance especially in the context of achieving high customer service levels in this paper we address issues pertinent to forecasting and inventory management in a wholesaling environment and discuss the recommendations proposed in such a context in a case study organization our findings demonstrate the considerable scope that exists for improving current practices and offers insights into possible managerial issues

reconciling conflicting evidence on the performance of propensity score matching methods there is a long standing debate in the literature over whether social programs can be reliably evaluated without a randomized experiment this paper summarizes results from a larger paper smith and todd 2001 that uses experimental data combined with nonexperimental data to evaluate the performance of alternative nonexperimental estimators the impact estimates based on experimental data provide a benchmark against which to judge the performance of nonexperimental estimators our experimental data come from the national supported work nsw demonstration and the nonexperimental data from the current population survey cps and the panel study of income dynamics psid these same data were used in influential papers by robert lalonde 1986 james heckman and joseph hotz 1989 and rajeev dehejia and sadek wahba 1998 1999 we focus on a class of estimators called propensity score matching estimators which were introduced in the statistics literature by paul rosenbaum and donald rubin 1983 traditional propensity score matching methods pair each program participant with a single nonparticipant where pairs are chosen based on the degree of similarity in the estimated probabilities of participating in the program the propensity scores more recently developed nonparametric matching estimators described in heckman et al 1997 1998a b use weighted averages over multiple observations to construct matches we apply both kinds of estimators in this paper heckman et al 1997 1998a b evaluate the performance of matching estimators using experimental data from the u s national job training partnership act jtpa study combined with comparison group samples drawn from three sources they show that data quality is a crucial ingredient to any reliable estimation strategy specifically the estimators they examine are only found to perform well in replicating the results of the experiment when they are applied to comparison group data satisfying the following criteria i the same data sources i e the same surveys or the same type of administrative data or both are used for participants and nonparticipants so that earnings and other characteristics are measured in an analogous way ii participants and nonparticipants reside in the same local labor markets and iii the data contain a rich set of variables relevant to modeling the program participation decision if the comparison group data fails to satisfy these criteria the performance of the estimators diminishes greatly more recently dehejia and wahba 1998 1999 have used the nsw data also used by lalonde to evaluate the performance of propensity score matching methods including pairwise matching and caliper matching they find that these simple matching estimators succeed in closely replicating the experimental nsw results even though the comparison group data do not satisfy any of the criteria found to be important in heckman et al 1997 1998a from this evidence they conclude that matching approaches are generally more reliable than traditional econometric estimators in this paper we reanalyze the nsw data in an attempt to reconcile the conflicting findings smith department of economics university of western ontario social science centre london on n6a 5c2 canada and nber todd department of economics university of pennsylvania 3718 locust walk philadelphia pa 19104 and nber versions of the paper that is the source for this paper have been presented at a 2000 meeting of the institute for research on poverty in madison wisconsin at the western research network on employment and training summer workshop august 2000 at the canadian international labour network meetings september 2000 and at the university of north carolina we thank james heckman for comments on this paper and we thank robert lalonde for comments and for providing us with the data from his 1986 study we thank rajeev dehejia for providing us with information helpful in reconstructing the samples used in the dehejia and wahba 1998 1999 studies jingjing hsee and miana plesca provided excellent research assistance

the wto trade effect this paper reexamines the gatt wto membership efiect on bilateral trade ows using nonparametric methods including pair matching permutation tests and a rosenbaum 2002 sensitivity analysis together these methods provide an estimation framework that is robust to misspeciflcation biases allows general forms of heterogeneous treatment efiects and addresses potential hidden selection biases this is in contrast to most conventional parametric studies on this issue our results suggest large gatt wto trade promoting efiects robust to various restricted matching criteria alternative indicators for gatt wto involvement different matching methodologies non random incidence of positive trade ows and inclusion of multilateral resistance terms

evaluating the econometric evaluations of training programs with experimental data this paper takes the results of an employment and training program thatwas run as a field experiment in which the participants were randomlyassigned into a treatment or a control group and compares these results to the estimates that might have been produced by an econometrician who evaluated the program using the same econometric procedures that have been used in the program evaluation literature this comparison shows that many of these econometric procedures fail toreplicate the experimentally determined results and suggests that researchers should be aware of the potential for specification errorsin other nonexperimental evaluations copyright 1986 by american economic association

franchising versus corporate ownership abstract this paper uses data on the prices charged at fast food restaurants in the metropolitan pittsburgh and detroit areas to assess the effect of franchising on price dispersion within chains in fairly narrowly defined geographical areas a review of reasons why firms may face more price dispersion under franchising guides the empirical analyses results indicate that 1 franchisors do not aim for fully uniform prices even on the corporate side of their chains 2 the degree of price dispersion is highest for firms with both franchised and company owned units as predicted by models implying a systematic price differential between units operated under these different contracting mechanisms and 3 price dispersion for fully franchised chains is greater than for fully corporate chains these last two results combined with evidence from court cases that franchisors sometimes try to control franchisee prices directly suggest that franchisors indeed lose some amount of control over prices charged to customers when they use franchising as opposed to corporate ownership finally i find a positive effect of the royalty rate on price dispersion this suggests that double marginalization is behind at least some of the higher prices found in franchised units in the existing literature

new firm survival new results using a hazard function a limitation of audretsch s 1991 study of new firm survival was the level of aggregation to industries this precluded linking establishment specific characteristics such as organizational structure and size to post entry performance the purpose of this paper is to relate the post entry performance of individual establishments not only to their technological and market structure environments but also to establishment specific characteristics we do this by estimating a hazard duration function for more than 12 000 individual establishments in u s manufacturing started in 1976 by tracking their subsequent performance over a ten year period we conclude that establishment specific characteristics which audretsch was not able to capture in his earlier study play an important role in shaping the exposure to risk confronting new establishments copyright 1995 by mit press

the countervailing effects of competition on public goods provision when bargaining inefficiencies lead to bad outcomes political competition is widely recognized as a mediator of public goods provision through its salutary effect on incumbents electoral incentives we argue that political competition additionally mediates public goods provision by reducing the efficiency of legislative bargaining these countervailing forces may produce a net negative effect in places with weak parties and low transparency typical of many young democracies we provide evidence of a robust negative relationship between political competition and local public goods using panel data from mali tests of mechanisms corroborate our interpretation of this relationship as evidence of legislative bargaining inefficiencies to explore the generalizability of these findings we analyze cross country panel data and show that political competition leads to better worse public goods provision under high low levels of party system institutionalization the paper sheds light on why political competition is only selectively beneficial and underscores the importance of considering both the electoral and legislative arenas

sensitivity to exogeneity assumptions in program evaluation in many empirical studies of the effect of social programs researchers assume that conditional on a set of observed covariates assignment to the treatment is exogenous or unconfounded aka selection on observables often this assumption is not realistic and researchers are concerned about the robustness of their results to departures from it one approach e g charles manski 1990 is to entirely drop the exogeneity assumption and investigate what can be learned about treatment effects without it with unbounded outcomes and in the absence of alternative identifying assumptions there are no restrictions on the set of possible values for average treatment effects this does not mean however that all evaluations are equally sensitive to departures from the exogeneity assumption in this paper i explore an alternative approach developed by paul rosenbaum and donald rubin 1983 where the assumption of exogeneity is explicitly relaxed by allowing for a limited amount of correlation between treatment and unobserved components of the outcomes the starting point of the sensitivity analysis is the assumption that the exogeneity assumption is satisfied only conditional on an additional unobserved covariate making assumptions about the effect of the unobserved covariate on the outcome and its correlation with the treatment i trace out the set of possible values for the treatment effect of interest by considering a sufficiently large set of possible correlations with outcomes and treatment one can recover the bounds on the treatment effect derived by manski 1990 the approach here in the spirit of rosenbaum and rubin 1983 and rosenbaum 1995 is to allow only a limited amount of correlation and to judge the sensitivity of average treatment effect estimates to such correlations there are two novel features of the proposed analysis first rather than formulate the sensitivity in terms of coefficients on the unobserved covariate the sensitivity results are presented in terms of partial r values which may be easier to interpret second the partial r values of the unobserved covariates are compared to those for the observed covariates in order to facilitate judgments regarding the plausibility of values necessary to substantially change results obtained under exogeneity the proposed sensitivity analysis is conceptually related to the practice of assessing sensitivity of estimates by comparisons with results obtained by discarding one or more observed covariates james heckman and v joseph hotz 1989 rajeev dehejia and sadek wahba 1999 jeffrey smith and petra todd 2001 the attraction of the sensitivity analysis is that it is more directly relevant one is not interested in what would have happened in the absence of covariates actually observed but in biases that are the result from not observing all relevant covariates

franchising growth and franchisor entry and exit in the u s market myth and reality abstract franchising has been and continues to be a very popular way to do business for a number of retailers and service businesses however the type of franchising that has been growing the most namely business format franchising has not grown at the kind of phenomenal rates that the trade press often suggests since the department of commerce doc canceled its publication franchising in the economy we no longer have access to census type data on franchising in the u s however looking at the period during which the doc did publish these data one finds that the number of business format franchisors is highly correlated with the number of units in these chains thus we use data from recent issues of various franchisor directories to assess the number of franchisors in the u s and infer from this how business format franchising has grown in the u s we find that business format franchising has been growing over the last decade at a rate that is at best commensurate with the growth of the economy as a whole we believe that the confusion about the extent of growth in franchising arises in part from the fact that many new firms enter into franchising each year leading to the notion that this way of doing business is growing tremendously however we show that many firms also exit from franchising each year for a net growth rate much below the entry rate this paper shows that franchising is not a panacea for entrepreneurs whether franchisor or franchisee from the franchisor s viewpoint the high rate of exits suggests that many firms fail despite franchising and many others choose to stop franchising after trying it for a few years clearly these firms have found that franchising is not right for them furthermore the results show that the characteristics of the chain at the time it becomes involved in franchising as described in the main franchisor directories such as the royalty rate the advertising fee the franchise fee the amount of capital required and the sector of operation have little capacity to explain survival the main variable that affects survival among those that are typically reported in franchisor listings is the number of years that the franchisor has been in business before starting to franchise hence our results suggest this is one dimension in which franchisors can make decisions that affect the probability that they will be successful in franchising although we are unable to explain most of the variance in outcome the results mostly imply that other less easily observed or quantified characteristics of the chain and the franchisor such as maybe the innovativeness of the product the amount of support provided to franchisees the financial backing of the franchisor etc likely influence success the most and thus are worth investigating further from the perspective of franchisees the amount of exit found here suggests that in the majority of systems franchisees cannot expect that their franchisor will be around for the whole duration of their contract which averages about 15 years according to the department of commerce this does not mean that the majority of franchised businesses will find themselves in an exiting system a small minority of very well established franchisors accounts for the majority of franchised businesses and these are likely to remain successful for years to come but entrepreneurs buying franchises from less established systems are likely to face franchisor exit either failure or departure this paper confirms that franchisees should thoroughly investigate the franchise system they want to invest in going beyond the information about royalty rates advertising rates rankings etc found in franchisor directories and toward more product market and other less easily accessible information about the chain

war and conflict in economics theories applications and recent trends we review the main economic models of war and conflict these models vary in details but their implications are qualitatively consistent highlighting key commonalities across a variety of conflict settings recent empirical literature employing both laboratory and field data in many cases confirms the basic implications of conflict theory however this literature also presents important challenges to the way economists traditionally model conflict we finish our review by suggesting ways to address these challenges

financial asset holdings and political attitudes evidence from revolutionary england the english parliament s struggle for supremacy against monarchical dictatorship during the civil war 1642 1648 was crucial for the establishment of representative government yet its lessons continue to be debated i exploit novel data on individual mps drawn from 1 842 biographies to show that the conflict was over overseas interests and other factors over which the executive enjoyed broad constitutional discretion rather than over domestic property rights i further exploit the coincidence of individual mps ability to sign legally binding share contracts with novel share offerings by overseas companies to measure the effect of overseas share investment on their political attitudes i show that overseas shareholding pushed moderates lacking prior mercantile interests to support reform i interpret the effect of financial assetholding as allowing new investors to exploit emerging economic opportunities overseas aligning their interests with traders by consolidating a broad parliamentary majority that favored reform the introduction of financial assets also broadened support for the institutionalization of parliamentary supremacy over dictatorial rule jel codes o10 g11 f10 k00 n23 p10

the accuracy of a modified croston procedure a modified croston procedure to forecast intermittent demand is reviewed the modified procedure published in this journal in 2004 consists of a new method for estimating the mean demand and a smoothing method for estimating the variance of the forecasted demand rate it is found that the smoothed variance estimate is based on an invalid measure of forecast accuracy moreover it is shown that the method of forecasting mean demand produces biased forecasts the accuracy of this method is assessed using simulated data and the mean square error measure and compared with croston s method and single exponential smoothing it is found that croston s method is generally more accurate than its modification particularly for strongly intermittent series

can risk averse households make risky investments the role of trust in others in this paper using data from the survey on health ageing and retirement in europe share 2006 and 2013 waves we illustrate the link between individuals attitudes to financial risk combined with their willingness to trust others and their investments in risky assets individuals who display either risk tolerance alone or to a lesser extent risk aversion and trust more frequently decide to buy risky assets the comparison between scandinavian and mediterranean countries indicates that trust plays qualitatively different roles depending on the prevailing combination of risk attitude and trust in the area being studied

the effects of integrating management judgement into intermittent demand forecasts empirical research suggests that quantitatively derived forecasts are very frequently judgementally adjusted nevertheless little work has been conducted to evaluate the performance of these judgemental adjustments in a practical demand sales context in addition the relevant analysis does not distinguish between slow and fast moving items currently there are neither conceptual developments nor empirical evidence on the issue of integrating judgements and statistical forecasts for slow intermittent demand items moreover no results have ever been reported on the stock control implications of these human judgements our work analyses monthly intermittent demand forecasts for the uk branch of a major international pharmaceutical company the company relies upon a commercially available statistical forecasting system to produce forecasts that are subsequently judgementally adjusted based on marketing intelligence gathered by the company forecasters the benefits of the intervention are evaluated by comparing the actual sales to system and final forecasts using both forecast accuracy and inventory control accuracy implication metrics our study allows insights to be gained on potential improvements to intermittent demand forecasting processes and subsequently the design effectiveness of forecasting support systems

nonparametric bounds on treatment effects assume that each member of a population is characterized by values for the variables ya yb z x here x is a vector describing a person and z is a binary variable indicating which of two treatments this person receives the treatments are labelled a and b the variables ya and yb are scalar measures of the outcomes of the two treatments for example a cancer patient might be treated by a drug therapy or b surgery the relevant outcome y might be life span following treatment an unemployed worker might be given a vocational training or b job search assistance here the relevant outcome might be labor force status following treatment assume that a random sample is drawn and that one observes the realizations of z x and of the outcome under the treatment received thus ya is observed if treatment a is received but is a latent variable if treatment b is received similarly yb is either observed or latent suppose that one wants to learn the difference in expected outcome if all persons with attributes x were assigned to treatment a or b this treatment effect is

a comparison of job creation and job destruction in canada and the united states in recent years a growing number of countries have constructed data series on job creation and job destruction using establishment level data sets this paper provides a description and detailed comparison of these new data series for the united states and canada first the canadian and u s industry level job creation and destruction data are remarkably similar industries with high low job creation in the united states are evidenced by high low job creation in canada the same is true for job destruction in addition the overall magnitudes of gross job flows in the two countries are comparable second the time series patterns of creation and destruction are qualitatively similar but do differ in a number of important respects in both countries job destruction is much more cyclically volatile than job creation this cyclical asymmetry is however more pronounced in the united states in addition the pace of job reallocation exhibits a pronounced upward trend in canada but is essentially trendl

on the empirical performance of t s s heuristics the periodic t s s policies have received considerable attention from the academic literature determination of the optimal parameters is computationally prohibitive and a number of heuristic procedures have been put forward however these heuristics have never been compared in an extensive empirical study such an investigation on 3055 skus is carried out in this paper our study provides insights into the performance of t s s heuristics also in relation to demand forecasting the results show that naddor s heuristic is best able to minimize the total cost however the normal and power approximations achieve more efficient solutions in that backorder volumes are smaller at the same inventory levels indicating the potentially superior performance of these methods if the balancing of holding and backorder costs can be improved the results also show that for all heuristics the sba variant of the croston forecasting method significantly outperforms croston as well as single exponential smoothing ses

the political economy of financial regulation evidence from u s state usury laws in the 19th century financial regulation was as hotly debated a political issue in the 19th century as it is today we study the political economy of state usury laws in 19th century america exploiting the wide variation in regulation enforcement and economic conditions across states and time we find that usury laws when binding reduce credit and economic activity especially for smaller firms we examine the motives of regulation and find that usury laws coincide with other economic and political policies favoring wealthy political incumbents particularly when they have more voting power the evidence suggests financial regulation is driven by private interests capturing rents from others rather than public interests protecting the underserved we examine the motives and consequences of financial regulation to better understand the implications of regulation for financial development and economic growth while the current global financial crisis has reinvigorated the debate on financial regulation s effects and motives there is a long history of financial regulation and development we can examine to shed light on these issues specifically we study the political economy of financial regulation and its consequences through the lens of usury laws in 19th century america usury laws are arguably the oldest form of financial regulation mentioned in both the bible and the koran and dating back to ancient rome having long been

using experiments to evaluate performance standards what do welfare to work demonstrations reveal to welfare reformers this paper examines how experimental demonstrations can be used to inform planners about the efficacy of social programs in light of a performance standard the problem is illustrated by considering the situation faced by state governments attempting to design programs to meet the new federal welfare to work standards data from experimental evaluations alone allow only limited inferences about the labor market outcomes of welfare recipients combined with prior information on the selection process however these data are informative suggesting either that the long run federal requirements cannot be met or that these standards will only be met under special circumstances

private or public school advantage evidence from 40 countries using pisa 2012 mathematics abstractit is known that in most countries private school students outperform students in public schools in international assessments however the empirical literature recognizes that assessing the true effect of private school attendance requires addressing selection and sorting issues on both observabland unobservables the existing empirical evidence on the private school effect mostly covers oecd and latin american countries with little evidence on other parts of the world there is recent emerging country specific evidence doubting the existence of a private school advantage i use pisa 2012 data for mathematics and two different methodologies to derive baseline and bias corrected estimates of the private dependent and independent school effect for 40 countries a robust private school advantage is found only in a handful of countries public schools generally perform as well as private subsidized schools and outperform independent schools accounting for both peer effects and selection is necessa