interpreting economic time series this paper explores some of the implications for econometric practice of the principle that people s observed behavior will change when their constraints change in dynamic contexts a proper definition of people s constraints includes among them laws of motion that describe the evolution of the taxes they must pay and the prices of the goods that they buy and sell changes in agents perceptions of these laws of motion or constraints will in general produce changes in the schedules that describe the choices they make as a function of the information that they possess until very recently received dynamic econometric practice ignored this principle the practice of dynamic econometrics should be changed so that it is consistent with the principle that people s rules of choice are influenced by their constraints this is a substantial undertaking and involves major adjustments in the ways that we formulate estimate and simulate econometric models

cultural conflict and merger failure an experimental approach we use laboratory experiments to explore merger failure due to conflicting organizational cultures we introduce a laboratory paradigm for studying organizational culture that captures several key elements of the phenomenon in our experiments we allow subjects in firms to develop a culture and then merge two firms as expected performance decreases following the merging of two laboratory firms in addition subjects overestimate the performance of the merged firm and attribute the decrease in performance to members of the other firm rather than to situational difficulties created by conflicting culture

improvement of technical efficiency of firm groups abstract cooperation between firms can never improve the technical efficiency of any firm coalition the directional distance function by virtue of its additive nature is a useful tool that outlines this impossibility in this paper the additive aggregation scheme of input output vectors is generalized according to an aggregator accordingly cooperation between firms may increase the technical efficiency of the firm group this improvement is shown to be compatible with nonjoint semilattice technologies that bring out either output or input weak complementarity firm games are investigated to show that firms may merge on the basis of their inputs due to constraints imposed on outputs conversely they may merge with respect to the outputs they can produce because of limitations imposed on inputs

do cigarette producers price discriminate by state an empirical analysis of local cigarette pricing and taxation abstract this study analyzes the interactive effects of oligopoly pricing state taxation and anti smoking regulations on retail cigarette prices by state using panel data for the 50 us states between 1960 and 1990 the results indicate that cigarette producers do price discriminate by state though the effect is not large relative to the final retail price there are two further results 1 state taxes are more than passed on a 1 cent state tax increase results in a price increase of 1 11 cents and 2 sellers offset state and local anti smoking laws with lower prices thereby blunting effects of the regulations

testing for superexogeneity of wage equations the superexogeneity of wage equations is tested in four major european countries this is an important issue because while only weak exogeneity is needed for estimation purposes and for testing and strong exogeneity for forecasting superexogeneity is required for policy analysis the procedure suggested by engle and hendry 1993 is adopted to carry out the empirical analysis in all cases the conditional model is not affected by the first and second moments of the residuals from the marginal models this invariance result implies that the estimated linear regression models are not subject to the lucas critique over the period examined differences in wage determination between the various countries can be plausibly interpreted as resulting from the bargaining environment

estimating dynamic demand for cigarettes using panel data the effects of bootlegging taxation and advertising reconsidered abstracct a dynamic demand for cigarette consumption is estimated using pooled data of 46 states over the period 1963 to 1980 a price elasticity of 0 2 and an insignificant income elasticity is found using pooled estimation techniques the bootlegging effect is modeled explicitly using neighboring price the effect is found to be significant two major policy issues are analyzed in light of these new estimates 1 cigarette taxation is found to be an effective tool for generating revenues even though there may be spillover effects to neighboring states where bootlegging is significant 2 the effects of the fairness doctrine act and the advertising ban on cigarette consumption are re examined we find mild support for the effectiveness of subsidized anti smoking messages in reducing cigarette consumption and no support for the thesis that the ban on advertising helps to increase per capita consumption

the quantitative significance of the lucas critique doan litterman and sims dls have suggested using conditional forecasts to do policy analysis with bayesian vector autoregression bvar models their method seems to violate the lucas critique which implies that coefficients of a bvar model will change when there is a change in policy rules in this article we attempt to determine whether the lucas critique is important quantitatively in a bvar macro model that we construct we find evidence following two candidate policy rule changes of significant coefficient instability and of a deterioration in the performance of the dls method

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

computable general equilibrium models and monetary policy advice this paper argues that variations of extant general equilibrium monetary models are capable of generating real time economic forecasts comparable in accuracy to those generated under the standard federal reserve board staff methodology specifically we argue that over the 1984 1990 period forecasts generated by versions of the limited participation models developed by fuerst 1992 and christian0 and eichenbaum 1992a 1992b compare favorably with those contained in the board staff s greenbook briefing documents we conclude that further development of these models holds promise for fully integrating the forecasting and policy analysis elements of the federal reserve s monetary policy advice process

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

imperfectly credible disinflation under endogenous time dependent pricing the real effects of an imperfectly credible disinfl ation depend critically on the extent of price rigidity therefore the study of how policymakers credibility affects the outcome of an announced disinflation should not be dissociated from the analysis of the determinants of the frequency of price adjustments in this paper we examine how the policymaker s credibility affects the outcome of an announced disinflation in a model with endogenous time dependent pricing rules both the initial degree of price ridigity calculated optimally and more notably the changes in contract length during disinflation play an important role in the explanation of the effects of imperfect credibility we initially evalute the costs of disinfl ation in as etup where credibility is exogenous and then allow agents to update beliefs about the type of monetary authority that they face we show that in both cases the interaction between the endogeneity of time dependent rules and imperfect credibility increases the output costs of disinflation

testing hypotheses about firm behavior in the cigarette industry data on the effects of excise taxes are used to investigate the level of competition in the cigarette industry a lower bound on the numbers equivalent of firms in the context of the conjectural variations model is derived and estimated results point to at least a moderately high level of competition and in particular allow for the rejection of the perfect cartel model this paper relies on comparative statics results and hence circumvents recent criticisms of a study of monopoly behavior in the cigarette industry

measurement of monopoly behavior an application to the cigarette industry a simple scheme is proposed to measure monopoly pricing behavior the coefficient of the tax rate term in a price equation identifies the ratio of price to marginal cost no direct measurement of costs is required so a major problem for other empirical studies of monopoly is avoided empirical results for cross section time series data support rejection of atomistic competition but also provide evidence against the operation of an effective cartel in the cigarette industry the model represents an alternative interpretation of related results in a recent paper by barzel application of the methodology to other markets is feasible

cost constrained industry inefficiency in this paper a definition of industry inefficiency in cost constrained production environments is introduced this definition uses the indirect directional distance function and quantifies the inefficiency of the industry in terms of the overall output loss given the industry cost budget the industry inefficiency indicator is then decomposed into sources components reallocation inefficiency arising from sub optimal configuration of the industry firm inefficiency arising from a failure to select optimal input quantities given the prevalent inputs prices firm inefficiency due to lack of best practices the method is illustrated using data on ontario electricity distributors these data show that lack of best practices is only a minor component of the overall inefficiency of the industry less than 10 percent with reallocation inefficiency accounting for more than 75 percent of the overall inefficiency of the system an analysis based on counter factual input prices is conducted in order to illustrate how the model can be used to estimate the effects of a change in the regulation regime

impatience incentives and obesity this paper explores the relationship between time preferences economic incentives and body mass index bmi using data from the 2006 national longitudinal survey of youth we rst show that greater impatience increases bmi and the likelihood of obesity even after controlling for demographic human capital occupational and nancial characteristics as well as risk preference next we provide evidence of an interaction

atheoretical macroeconometrics a critique abstract the spurious nature of the restrictions used to identify many macroeconometric models has led some researchers to advocate a style of econometric inquiry that is less dependent on prior theoretical restrictions of the sort that were central to the approach of the cowles commission this development which we call atheoretical macroeconometrics is summarized and evaluated in the current paper it is contrasted with an updated version of the cowles commission approach we conclude that while some of the exercises of atheoretical macroeconometrics are valid those that have attracted the most attention and appear the most innovative exogeneity testing impulse response analysis and policy analysis using estimated vector autoregressions are based on incorrect analysis

cigarette tax avoidance and evasion variation in state cigarette taxes provides incentives for tax avoidance through smuggling legal border crossing to low tax jurisdictions or internet purchasing when taxes rise tax paid sales of cigarettes will decline both because consumption will decrease and because tax avoidance will increase the key innovation of this paper is to compare cigarette sales data to cigarette consumption data from the behavioral risk factor surveillance system brfss i show that after subtracting percent changes in consumption residual percent changes in sales are associated with state cigarette tax changes implying the existence of tax avoidance i estimate that the tax avoidance response to tax changes is at least twice the consumption response and that tax avoidance accounted for up to 9 6 of sales between 1985 and 2001 because of the increase in tax avoidance tax paid sales data understate the level of smoking and overstate the drop in smoking i also find that the level of legal border crossing was very low relative to other forms of tax avoidance if states have strong preferences for smoking control they must pair high cigarette taxes with effective policies to curb smuggling and other forms of tax avoidance or employ alternative policies such as counter advertising and smoking restrictions

scale characterizations in a dea directional technology distance function framework abstract the present study extends prior research on data envelopment analysis dea based returns to scale in view of the fact that the standard methods are very restrictive the extension is made in the context of the directional technology distance function that generalizes the shephard input and output distance functions the two main results in this extended setting are as follows first we show how banker s most productive scale size mpss concept is characterized second we obtain scale elasticity measures and examine the properties and the relationships with standard scale elasticity measures

the relationship between smoking quitting smoking and obesity in australia a seemingly unrelated probit approach smoking and obesity are two leading causes of preventable death further understanding of the relationship between these two risk factors can assist in reducing avoidable morbidity and mortality this study investigates the empirical association between obesity and the propensity to smoke and to quit smoking using a seemingly unrelated sur probit approach that takes into consideration the potential for reverse causality and unobserved heterogeneity using australian health survey data this article demonstrates the usefulness of the sur probit approach in generating information on the relationship between unobserved factors influencing both smoking behaviour and obesity and in providing estimates of the conditional probabilities of each risk factor results suggest the two risk factors are not independent the presence size and direction of correlation between the unobserved factors are found to vary by smoking behaviour and by gender estimates of conditional probabilities demonstrate smokers have a

do minimum wage increases influence worker health this study investigates whether minimum wage increases impact worker health in the united states we consider self reported measures of general mental and physical health we use data on lesser skilled workers from the 1993 to 2014 behavioral risk factor surveillance survey among men we find no evidence that minimum wage increases improve health instead we find that such increases lead to worse health outcomes particularly among unemployed men we find both worsening general health and improved mental health following minimum wage increases among women these findings broaden our understanding of the full impacts of minimum wage increases on lesser skill workers jel i1 i11 i18

productivity change technical progress and relative efficiency change in the public accounting industry we present evidence on components of productivity change in the public accounting industry toward the end of the 20th century using revenue and human resource data from 64 of the 100 largest public accounting firms in the united states for the 1995 1999 period we analyze productivity change technical progress and relative efficiency change over time the average public accounting firm experienced a productivity growth of 9 5 between 1995 and 1999 we find support for the hypothesis that technical progress rather than an improvement in relative efficiency was the reason for this productivity growth firms that were early movers into management advisory services mas and those that emphasized growth in mas over growth in the traditional audit and tax services enjoyed significantly higher productivity growth than their peers these firms also contributed significantly more to the industry s technical progress

estimating the effects of forward guidance in rational expectations models abstract simulations of forward guidance in rational expectations models should be assessed using the modest policy interventions framework introduced by eric leeper and tao zha that is the estimated effects of a policy intervention should be considered reliable only if that intervention is unlikely to trigger a revision in private sector beliefs about the way that monetary policy will be conducted i show how to constrain simulations of forward guidance to ensure that they are regarded as modest policy interventions and illustrate the technique using a medium scale dsge model estimated on us data i find that many experiments that generate the large responses of macroeconomic variables deemed implausible by many economists the so called forward guidance puzzle are not modest policy interventions those experiments should therefore be treated with caution since they may prompt agents to believe that there has been a change in the monetary policy regime that is not accounted for within the model more reliable results can be obtained by constraining the experiment to be a modest policy intervention in the cases i study the quantitative effects on macroeconomic variables are more plausible when this constraint is imposed

asset markets tariffs and political risk abstract this paper examines a simple model in which exogenous political risk creates uncertainty about tariffs the model predicts a relation between consumption and tariffs that differs radically from that implied by models without asset markets or political risk given the probability distribution of tariffs domestic consumption and utility ex post are lower in states of the world with a domestic tariff and no foreign tariff than with a foreign tariff and no domestic tariff this conclusion emerges despite the fact that the opposite would be obtained in the absence of asset markets so economists should not be surprised if observed relations between consumption and tariffs differ from the predictions of static theory in either time series or cross sections

rising cigarette prices and rising obesity coincidence or unintended consequence economists have begun to debate if the rise in cigarette prices in the u s in recent decades has contributed to the nation s rise in obesity reaching conclusions that are surprisingly sensitive to specification i show that allowing for the effect to occur gradually over several years leads to the conclusion that a rise in cigarette prices is actually associated with a long run reduction in body mass index and obesity this result is robust to the different methodologies used in the literature i also provide evidence that indirect effects on exercise and food consumption may explain the counterintuitive result

do mergers improve efficiency evidence from restructuring the us electric power sector abstract this paper analyses the performance impact of the merger wave which took place in the us electricity industry during the period 1994 2003 it does so by analyzing the impact on operating and total cost in electricity distribution while there are past studies of efficiency and productivity effects as well as of prices profits and other outcomes this study differs in several ways first the database consists of many merging and non merging firms rather than only a few on which to base inferences second all of these mergers arise in a single industry greatly facilitating controlled comparison third we have data on the several years of pre merger and post merger efficiency of the specific merging units unlike virtually all past studies finally we employ a powerful nonparametric technique data envelopment analysis to measure the efficiency of each operating unit the results indicate that electricity mergers are not consistent with improved cost performance

monetary and fiscal policy switching a growing body of evidence finds that policy reaction functions vary substantially over different periods in the united states this paper explores how moving to an environment in which monetary and fiscal regimes evolve according to a markov process can change the impacts of policy shocks in one regime monetary policy follows the taylor principle and taxes rise strongly with debt in another regime the taylor principle fails to hold and taxes are exogenous an example shows that a unique bounded non ricardian equilibrium exists in this environment a computational model illustrates that because agents decision rules embed the probability that policies will change in the future monetary and tax shocks always produce wealth effects when it is possible that fiscal policy will be unresponsive to debt at times active monetary policy like a taylor rule in one regime is not sufficient to insulate the economy against tax shocks in that regime and it can have the unintended consequence of amplifying and propagating the aggregate demand effects of tax shocks the paper also considers the implications of policy switching for two empirical issues

can changing economic factors explain the rise in obesity a growing literature examines the effects of economic variables on obesity typically focusing on only one or a few factors at a time we build a more comprehensive economic model of body weight combining the 1990 2010 behavioral risk factor surveillance system with 27 state level variables related to general economic conditions labor supply and the monetary or time costs of calorie intake physical activity and cigarette smoking controlling for demographic characteristics and state and year fixed effects changes in these economic variables collectively explain 37 of the rise in body mass index bmi 43 of the rise in obesity and 59 of the rise in class ii iii obesity quantile regressions also point to large effects among the heaviest individuals with half the rise in the 90th percentile of bmi explained by economic factors variables related to calorie intake particularly restaurant and supercenter warehouse club densities are the primary drivers of the results

threshold based forward guidance abstract when the monetary policy rate is at the zero bound threshold based forward guidance tbfg is a state contingent promise to delay liftoff from the zero bound until macroeconomic variables breach particular thresholds we study tbfg within a stochastic version of the workhorse new keynesian model we show that tbfg can be used to provide temporary stimulus while also limiting the time inconsistency of policy promises existence of a unique equilibrium requires the policymaker to specify how the thresholds should be interpreted as well as their values with an appropriate choice of thresholds tbfg outperforms forward guidance based purely on calendar time and substantially reduces welfare losses compared to the optimal time consistent policy

unanticipated monetary policy and real economic activity some cross regime evidence abstract classical equilibrium models of business cycles predict several consequences of policy regime shift this paper examines these predictions using evidence from the post 1979 period and by comparing several pre war monetary regimes the policy invariance proposition and the lucas hypothesis receive some support from the evidence although some discrepancies remain

the effects of excise taxes and regulations on cigarette smoking abstract we estimate a generalized linear model to examine adult and teenage cigarette demand our analysis focuses on the extent to which exice taxes and regulations restricting smoking in public places affect cigarette consumption the adult results indicate that the price elasticity of demand is unstable over time ranging from 0 06 in 1970 to 0 23 in 1985 these estimates are lower than most found in previous studies the teenage price elasticity does not differ statistically from the estimates for adults additionally regulations restricting smoking in public places have a significant effect on both adult and teenage cigarette demand

reply to jonathan gruber and michael frakes we address gruber and frakes s criticisms that 1 the state excise tax on a package of cigarettes is a more exogenous measure of the cost of cigarettes than the state specific price of a package of cigarettes and 2 that it is preferable to control for the effects of unmeasured variables that vary over time with the use of time dummies instead of with a quadratic time trend we also point out that our specification of the cost effect differs from theirs because we allow it to be nonlinear while they force it to be linear

the quality and efficiency of public service delivery in the uk and china abstractthe quality and efficiency of public service delivery in the uk and china regional studies this paper examines the efficiency of public service delivery at a regional level in both the uk and china using a method based on data envelopment analysis dea that measures aggregate country level inefficiency this country level inefficiency is then decomposed into three components 1 lack of best practices at a regional level 2 quality of the public service delivery and 3 potential efficiency gains realizable via reallocation of expenditure across regions the empirical results indicate that most uk inefficiency comes from the reallocation effect while most chinese inefficiency is attributable to lack of best practices quality explains more of the expenditure variations in the uk relative to china the paper speculates about fiscal de centralization as a possible explanation for such differences

monetary policy regime shifts and inflation persistence abstract using bayesian methods we estimate a markov switching new keynesian msnk model that allows shifts in the monetary policy reaction coefficients and shock volatilities with u s data we find that a more aggressive monetary policy regime was in place after the volcker disinflation and before 1970 than during the great inflation of the 1970s our estimates also indicate that a low volatility regime has been in place during most of the sample period after 1984 we connect the timing of the different regimes to a measure of inflation persistence

an empirical analysis of dynamic nonprice competition in an oligopolistic industry this article develops a dynamic model of nonprice competition in an oligopolistic industry and uses it to analyze advertising competition in the u s cigarette industry the model generalizes existing studies by allowing advertising to affect both firm market shares and the total size of the market the model also allows dynamic conjectural variations to arise from the intertemporal links created by the durability of advertising we use these dynamic conjectural variations to distinguish alternative models of competitive interaction we estimate the complete model of firm production demand and advertising choice by using data for u s cigarette producers the results indicate that firm advertising primarily affects the level of market demand with a firm s effect on rival firms market shares arising through variations in the number of brands sold empirical results on firm behavior suggest that firms act as if their advertising choices will alter the future advertising choices of rival firms in both the high tar and low tar cigarette markets

econometric policy evaluation note for successive values of the endogenous variables y with the x treated as deterministic forcing variables here 0 is a parameter vector and the et are random shocks lucas correctly observed that such a formulation is inconsistent with a view of agents as optimizers except in special cases in which the future is irrelevant to present decisions it makes no sense to think of agents as optimizing if they know that their budget constraints are liable to shift arbitrarily i e in a way which is not characterized probabilistically as government policy changes lucas was led to augment the foregoing equation by adding to the system a government policy function

trade off between obesity and tobacco consumption recent evidence suggests that obesity and tobacco prevalence rates are moving in the opposite direction this study examines the causal relationship between these variables in argentina the effects of tobacco consumption on body weight are estimated by using instrumental variables to address endogeneity problems to this end the entry into force of provincial laws on tobacco control at different times are exploited our results show that smoking has a negative impact on three weight measures bmi weight in kilograms obesity rate this nding suggests that anti smoking measures should be complemented with nutritional controls and the promotion of physical exercise

aggregation of malmquist productivity indexes in this paper we extend the work of fare and zelenyuk 2003 on aggregate farrell efficiency scores european journal of operational research 146 3 615 620 to find a theoretically justified method of aggregating malmquist productivity indexes over individual decision making units firms countries etc into a group malmquist productivity index we also consider the aggregation of decomposed parts of the malmquist productivity index to obtain a decomposition of the malmquist productivity index for a particular group c 2005 elsevier b v all rights reserved

specification of merger gains in the norwegian electricity distribution industry electricity distribution often exhibits economies of scale in norway a number of smaller distribution system operators exist and thus there is potential to restructure the industry possibly through mergers however the revenue cap regulatory model in norway does not incentivize firms to merge as merging leads to a stricter revenue cap for the merged company thus the regulator compensates the firms in order to create such incentives the amount of compensation is based on the potential gains of the merger estimated using a data envelopment analysis dea based frontier approach introduced by bogetoft and wang journal of productivity analysis 23 145 171 2005 dea is however only one of many possible frontier estimators that can be used in estimation furthermore the returns to scale assumption the operating environment of firms and the presence of stochastic noise and outlier observations are all known to affect to the estimation of production technology in this paper we explore how varying assumption under two alternate frontier estimators shape the distribution of merger gains within the norwegian distribution industry our results reveal that the restructuring policies of the industry may be significantly altered depending how potential gains from the mergers are estimated

evaluating monetary policy options we present a procedure for evaluating ex ante the effects of alternative paths of a monetary policy tool the federal funds rate in our illustrations on output and the price level within a variant of a widely used vector autoregressive model of the u s economy this exercise is a supplement to or even an alternative to analysis that relies on a particular structural model illustrations of the method are provided by evaluating the effects of changes in the funds rate target additionally the taylor rule is used to generate target funds rates for different target inflation rates and the effects of these are evaluated one of the critical elements in the formulation of monetary policy is the evaluation of the effects of alternative paths of the policy instrument on the macroeconomy for example in federal open market committee fomc meetings estimates of the effects of alternative paths of the federal funds rate are presented to policymakers as an input into the policy process for a discussion see meulendyke 1998 the effects of the alternative paths are evaluated within the context of a structural model of the economy the latest version of the structural model used at the board of governors is described in brayton et al 1997 in this article we present a procedure for evaluating ex ante the effects of alternative paths of a monetary policy tool the federal funds rate in our illustrations on output and the price level we demonstrate this procedure employing a variant of a widely used vector autoregressive var model of the u s economy this exercise can be viewed as a supplement to or even an alternative to analysis that relies on a particular structural model given the lack of general agreement on the appropriate structural model evaluation of the effects of changes in the policy instrument within a variety of different types of models is appropriate the discussion of the proposed procedure is in the spirit of recent work by leeper and sims 1994 who following earlier work by sims 1982 1987 distinguish between normal policymaking and regime changes for purposes of illustration we employ a var model comprised of the same variables used by christiano eichenbaum and evans hereafter cee 1994 1996 and bernanke and mihov hereafter bm 1998 we show how to evaluate and compare the current policy path with normal policy alternatives such as typically sized changes in the federal funds target we stress that this model is used only for illustrative purposes our methodology applies to any generic structural model and thus can easily

non separable time preferences novelty consumption and body weight theory and evidence from the east german transition to capitalism abstract this paper develops a dynamic model to illustrate how diet and body weight change when novel food products become available to consumers we propose a microfounded test to empirically discriminate between habit and taste formation in intertemporal preferences moreover we show that novelty consumption and endogenous preferences can explain the persistent correlation between economic development and obesity by empirically studying the german reunification we find that east germans consumed more novel western food and gained more weight than west germans when a larger variety of food products became readily accessible after the fall of the wall the observed consumption patterns suggest that food consumption features habit formation

supersizing supercenters the impact of walmart supercenters on body mass index and obesity abstract researchers have linked the rise in obesity to technological progress reducing the opportunity cost of food consumption and increasing the opportunity cost of physical activity we examine this hypothesis in the context of walmart supercenters whose advancements in retail logistics have translated to substantial reductions in the prices of food and other consumer goods using data from the behavioral risk factor surveillance system matched with walmart supercenter entry dates and locations we examine the effects of supercenters on body mass index bmi and obesity we account for the endogeneity of walmart supercenter locations with an instrumental variables approach that exploits the unique geographical pattern of supercenter expansion around walmart s headquarters in bentonville arkansas an additional supercenter per 100 000 residents increases average bmi by 0 24 units and the obesity rate by 2 3 points these results imply that the proliferation of walmart supercenters explains 10 5 of the rise in obesity since the late 1980s but the resulting increase in medical expenditures offsets only a small portion of consumers savings from shopping at supercenters

were there regime switches in u s monetary policy working paper 2004 14 june 2004 abstract a multivariate model identifying monetary policy and allowing for simultaneity and regime switching in coefficients and variances is confronted with u s data since 1959 the best fit is with a model that allows time variation in structural disturbance variances only among models that also allow for changes in equation coefficients the best fit is for a model that allows coefficients to change only in the monetary policy rule that model allows switching among three main regimes and one rarely and briefly occurring regime the three main regimes correspond roughly to periods when most observers believe that monetary policy actually differed and the differences in policy behavior are substantively interesting though statistically ill determined the estimates imply monetary targeting was central in the early 80s but was also important sporadically in the 70s the changes in regime were essential neither to the rise in inflation in the 70s nor to its decline in the 80s jel classification e52 e47 c53 key words counterfactuals lucas critique policy rule monetary targeting simultaneity volatility model comparison i the debate over monetary policy change in an influential paper clarida gali and gertler 2000 cgg presented evidence that us monetary policy changed between the 1970 s and the 1980 s indeed that in the 70 s it was drastically worse they found that the policy rule apparently followed in the 70 s was one that when embedded in most stochastic general equilibrium models would imply non uniqueness of the equilibrium and hence vulnerability of the economy to sunspot fluctuations of arbitrarily large size their estimated policy rule for the later period on the other hand eliminated this indeterminacy these results are a possible explanation of the volatile and rising inflation of the 70 s and of its subsequent decline the cgg analysis has two important weaknesses one is that it fails to account for stochastic volatility us macroeconomic variables and particularly the federal funds rate have gone through periods of tranquility and of agitation with forecast error variances varying greatly from period to period ignoring such variation does not lead to inconsistent estimates of model parameters when the forecasting equations themselves are constant but it strongly biases toward a finding of changed parameters tests of the stability of the forecasting equations the other weakness is that the cgg analysis rests on powerful and implausible identifying assumptions they require that we accept that the response of the monetary authority to expected future inflation and output does not depend on the recent history of inflation money growth or output it is hard to understand why this should be so especially in the 70 s when monetarism was a prominent theme in policy debates congress was requiring reports from the fed of projected time paths of monetary aggregates and financial markets were reacting sensitively to weekly money supply numbers the requirement for existence and uniqueness of equilibrium in dynamic models is that the monetary policy rule show a more than unit response of interest rates to the sum of the logs of all nominal variables that appear on the right hand side of the reaction function if we force a particular measure of expected future inflation to proxy for all the nominal variables that actually appear independently in the reaction function we are bound to get distorted conclusions on the one hand because expected future inflation will be a noisy measure of the full set of nominal influences on policy we might get downward bias in our estimates from the usual errorsin variables effect on the other hand to the extent that expected future inflation like most expected future values shows less variation than current nominal variables we could find a mistaken scaling up of coefficients

communication about future policy rates in theory and practice a survey we discuss the theoretical rationale for central bank communication about future policy rates either as part of inflation targeting or in the form of forward guidance we also summarize both actual central bank communication about future policy rates and empirical evidence on the effectiveness of these types of communication we argue that there is a disconnect between the theory and practice of forward guidance as theory assumes commitment on the part of the central bank while in practice central banks generally do not commit future theoretical research on forward guidance should therefore take the absence of commitment by central banks into account

the effects of soft drink taxes on child and adolescent consumption and weight outcomes abstract childhood and adolescent obesity is associated with serious adverse lifetime health consequences and its prevalence has increased rapidly soft drink consumption has also expanded rapidly so much so that soft drinks are currently the largest single contributors to energy intake in this paper we investigate the potential for soft drink taxes to combat rising levels of child and adolescent obesity through a reduction in consumption our results based on state soft drink sales and excise tax information between 1989 and 2006 and the national health examination and nutrition survey suggest that soft drink taxation as currently practiced in the united states leads to a moderate reduction in soft drink consumption by children and adolescents however we show that this reduction in soda consumption is completely offset by increases in consumption of other high calorie drinks

health scare excise taxes and advertising ban in the cigarette demand and supply the cigarette industry is a fascinating laboratory for industrial economists because of its concentrated market structure and history of conflicts over health and tax issues the industry has been the focal point of many economic studies most of the recent studies have concentrated on the demand side of the market for example bass schmalensee hamilton and fujii deal with the impact of advertising and the health scare on cigarette demand 4 15 10 8 barzel johnson and sumner ward assessed the importance of the excise tax or ad valorem tax on consumers cigarette demand 3 12 16 on the supply side vernon rives naylor developed an econometric model of the tobacco industry 20 which however is more concerned with the agricultural aspects of the product than the industry s market organization a careful review of the above studies suggests serious shortcomings which appear to limit their application to policy formulation or market analysis first the variables are introduced in an ad hoc fashion without reference to existing demand or supply theories second none of the above studies recognizes explicitly the interactions among the variables in the demand and the supply equations in the context of the determination of market equilibrium this paper has three objectives 1 to apply the standard neoclassical market theory to the cigarette industry 2 to identify the interactions between cigarette demand and supply using a simultaneous equations approach the first such attempt in a cigarette industry study and 3 to evaluate the effects of cigarette taxes advertising and health scare issues on the industry s output based on the empirical results obtained from the simultaneous equations analysis the judicious selection of explanatory variables careful data

oligopoly structure and the incidence of cigarette excise taxes abstract a model of oligopoly price behavior and tax incidence for the u s cigarette industry for the period 1955 1990 is presented a cost function is estimated and shows manufacture to be subject to increasing returns to scale the mean price elasticity of demand is 0 71 the model indicates that competition among manufacturers has been decreasing since 1980 a simulation shows that an increase in the federal excise tax causes a greater increase in price and a greater decrease in consumption than does the same increase in the average of state and local tax rates

tax incidence with strategic firms in the soft drink market abstract because soft drink sd consumption is considered to be a contributor to the epidemic of obesity there is a growing interest in evaluating the impact on sd consumption of alternative tax policies in this paper we propose a methodology to evaluate the impact of taxation of a food market taking into account the strategic price response of both manufacturers and retailers we apply this methodology to the french sd market and simulate the impacts of ad valorem and excise taxes we find that firms behave differently when facing an ad valorem tax or an excise tax an excise tax is overshifted to consumer prices while an ad valorem tax is undershifted to consumer prices we find that an excise tax based on the sugar content of sd is the most effective at reducing sd consumption our results also indicate that ignoring strategic pricing by firms leads to misestimations of the impact of taxation by between 15 and 40 depending on the products and the tax implemented in the short term that is ignoring positive long term health effects a 9 cents l excise tax has a small negative welfare effect about 1 person year

industry structural inefficiency and potential gains from mergers and break ups a comprehensive approach an efficiency indicator of industry configuration allowing for entry exit of firms is presented which accounts for four sources components 1 size inefficiencies arising from firms which can be conveniently split into smaller units 2 efficiency gains realized through merger of firms 3 re allocation of inputs and outputs among firms 4 technical inefficiencies the indicator and its components are computed using linear and mixed integer programming data envelopment analysis models a method to monitor the evolution of these components in time is introduced data on hospitals in australia show that technical inefficiency of hospitals accounts for less than 15 of total industry inefficiency with 40 attributable to size inefficiencies and the rest to potential mergers and re allocation effects

understanding overeating and obesity abstract the combination of economic and biological factors is likely to result in overeating in the current environment of cheap and readily available food this propensity is shown using a dual decision approach where choices reflect the interaction of a deliberative system operating as in standard economic models and an affective system that responds rapidly to stimuli without considering long term consequences this framework is characterized by excess food consumption and body weight in that individuals prefer both ex ante and ex post to eat and weigh less than they actually do with weight loss attempts being common but often unsuccessful or only partially successful as in the standard model weight is related to prices however another potentially important reason for rising obesity is that food producers have incentives to engineer products to stimulate the affective system so as to encourage overeating data from several sources are used to investigate predictions of the dual decision model with the evidence providing broad support for at least some irrationality in food consumption most importantly there is little indication that the large secular increases in body mass index have been accompanied by corresponding growth in utility maximizing weight one result is that efforts to reduce weight have become more common as obesity has increased

taxation regulation and addiction a demand function for cigarettes based on time series evidence this work analyzes the effects of prices taxes income and anti smoking regulations on the consumption of cigarettes in california a 25 cent per pack state tax increase in 1989 enhances the usefulness of this exercise analysis is based on monthly time series data for 1980 through 1990 results show a price elasticity of demand for cigarettes in the short run of 0 3 to 0 5 at mean data values and 0 5 to 0 6 in the long run we find at least some support for two further hypotheses that antismoking regulations reduce cigarette consumption and that consumers behave consistently with the model of rational addiction