bluuebunny/crossref_metadata_2025 huggingface dataset:
Wages in Rail Markets: Deregulation, Mergers, and Changing Networks Characteristics
Authors: Davis David E. , Wilson Wesley W.
Published: July 2021

The Staggers Act of 1980 largely deregulated the Class 1 Railroad industry and has had profound effects on labor. Between 1978 and 1994, employment in the industry decreased by about 60%, while real wages (average compensation) increased by over 40%. Earlier research examined employment effects; in this article, we develop and estimate compensation effects using firm‐level data. By using firm‐level data, we are able to identify the effects of partial deregulation, an accompanying and massive consolidation movement, as well as changes in firm operating and network characteristics. Our estimates suggest that mergers contributed 5‐15%, partial deregulation contributed about 20%, and changes in firm operating and network characteristics contributed 4‐5% to the overall increase in wages.
Adjustment Costs, Uncertainty, and the Level of Activity
Authors: Eeckhoudt Louis , Treich Nicolas
Published: July 2021

What is the effect of adjustment costs on economic activity? This is an important question that is still debated either at the political or the academic level. We consider a simple model where basically two effects come into play: Adjustment costs decrease current activity but may help maintain future activity. We examine their relative strength, first in a model with uncertain prices and then in a model with demand uncertainty (newsboy problem).
Network Externalities and Standardization: A Classroom Demonstration
Authors: Ruebeck Christopher , Stafford Sarah , Tynan Nicola , Alpert William , Ball Gwendolyn , Butkevich Bridget
Published: July 2021

This paper presents a classroom game that can be used to demonstrate network externalities, standardization, and switching costs. In the basic game, students independently choose a technology whose value depends on the total number of students choosing that technology. In the next round, sequential decision making is allowed that quickly leads to standardization. Introducing imperfect information and switching costs into subsequent rounds can lead to the real‐world phenomenon of an inferior technology becoming the standard. This exercise can be used in principles of economics classes to teach these important concepts without requiring mathematical models. In more advanced classes, construction of the mathematical model behind the game may be assigned.
Unprotective Tariffs, Ineffective Liberalization, and Other Mysteries: An Investigation of the Endogenous Dimensions of Trade Policy Formation in Australia
Authors: Tombazos Christis G.
Published: July 2021

At the forefront of research on Australia's trade policies two items have attracted considerable interest: (1) the endogeneity of tariff concessions and (2) the impact of liberalization on imports. Studies that investigate the former examine the impact of import penetration on tariffs, and studies that explore the latter consider the effect of tariffs on import penetration. Despite the simultaneity of these variables, research lines (1) and (2) followed separate paths by only considering unidirectional causal relationships. And yet, these paths do converge. The meeting point: perplexing results! Tariffs are found to protect those industries that have the least use for protection, and liberalization is often determined to be entirely ineffectual in stimulating imports. The present article explains that the source of such puzzling results is found in the misspecification of the employed frameworks of analysis, which ignore relevant feedback effects. When reciprocal causation is addressed in the analysis, the estimated impact of import penetration on the tariff level increases by almost fivefold and that of tariffs on import penetration more than doubles.
A Single Welfare Benefit Level for Europe? Efficiency Implications of Policy Harmonization in a Federal System
Authors: Saving Jason L.
Published: July 2021

Within the European Union, it has been suggested that greater economic integration will help European economies regardless of the kind of integration Europe chooses to pursue. In this paper, I examine economic integration in the context of redistributive policy and lind that the effects of such integration are crucially dependent upon the level of redistribution to be adopted as a common policy, with higher welfare benefit levels associated with lower levels of federation output. This suggests that the case for policy harmonization at a generous level must rest on equity rather than efficiency considerations.
Does Bank Affiliation Mitigate Liquidity Constraints? Evidence from Germany's Universal Banks in the Pre‐World War I Period
Authors: Becht Marco , Ramírez Carlos D.
Published: July 2021

This paper compares two similar samples of mining and steel corporations in pre‐World War I Germany: one sample consists of corporations that were affiliated to one or more of the German “Universal Banks”, and the second sample consists of companies that had to rely on other sources of finance. Statistical analysis conducted in the framework of a linear fixed effects model indicates that the non‐affiliated companies were liquidity constrained. The paper also sets out the corporate control structure as laid down in the trade law reform of 1884 and traces the origins of the current German dual board system, as well as the origins of several other aspects of the institutions that tied the German banking system to industrial concerns.
Trickling Down the Rising Tide: New Estimates of the Link between Poverty and the Macroeconomy
Authors: Freeman Donald G.
Published: July 2021

This paper uses pooled time‐series regressions of regional data to reexamine the link between poverty and the macroeconomy. The use of disaggregated data provides additional degrees of freedom and permits the inclusion of controls for demographic changes and increased income inequality. The results indicate a stronger relationship between poverty rates and the macroeconomy in the 1980s than that found in prior research and confirm that the dramatic reduction in unemployment during the late 1990s was instrumental in reducing poverty rates. The estimated results for the 1990s imply a 0.4‐0.9% increase in the poverty rate for each 1% increase in the unemployment rate.
Cyclical Quality Adjustment in the Labor Market
Authors: Devereux Paul J.
Published: July 2021

Various reasons have been put forward to explain the stylized fact that the wages of job starters are more procyclical than the wages of workers who don't change jobs. I explore the theoretical and empirical basis for one such reason: firms adjust the quality of workers assigned to jobs over the business cycle. I show that there is evidence that quality adjustment is an important feature of cyclical adjustment in labor markets. New hires of any particular ability level get lower quality jobs in recessions than in booms. The results indicate that about half of the wage procyclicality of new hires can be ascribed to variation in the matches between firms and workers over the business cycle. These systematic changes in assignment imply that government policy aimed at high‐skill sectors can have positive effects on low‐skill individuals by increasing the probability that they upgrade occupation and industry.
An Experimental Study of Statistical Discrimination by Employers
Authors: Feltovich Nick , Papageorgiou Chris
Published: July 2021

This article reports findings of an experiment motivated by a dynamic labor market model that considers the problem faced by employers in making hiring decisions between workers of different types. The question examined here is how quickly employers learn about the ability of a group of workers through observing representatives of that group. If prior opinions are weak, the employer will use Information from the workplace to quickly update any incorrect group‐based stereotypes it may have. On the other hand, if priors are heavily weighted, incorrect initial perceptions will result in persistent wage differences. Our experimental findings are twofold. First, subjects' (employers') behavior moves quickly toward optimal choices. Second, strong priors are hard to establish. These results suggest that it would take a long time for employers to form group‐based stereotypes and that such stereotypes should go away quickly in response to signals that contradict these stereotypes.
Complements Integration and Foreclosure: The Case of Joint Consumption
Authors: Garmon Christopher
Published: July 2021

In some cases, complementary products are sold to different sets of agents to aid in transactions between them. In the context of a simplified model, this article shows that a monopolist has an incentive to integrate into and foreclose other sellers of a complementary product used in fixed proportions with the monopolized product, but which is sold to different consumers. While these latter consumers are made worse off by integration and leverage, output is expanded and the monopolist's original consumers are made better off. The effect of integration and leverage on overall welfare is uncertain. I illustrate this model with an example involving trucking fleet cards (sold to trucking companies) and fuel desk point‐of‐sale systems (sold to truck stops) that are used in conjunction when diesel fuel is purchased.
Public Infrastructure and the Productive Performance of Canadian Manufacturing Industries
Authors: Paul Satya , Sahni Balbir S. , Biswal Bagala P.
Published: July 2021

This article examines the effects of public infrastructure on the productive performance of 12 two‐digit Canadian manufacturing industries. A flexible cost function incorporating public capital infrastructure is estimated for each industry separately using annual time series data for 1961‐1995. The effects of public infrastructure on productivity are measured in terms of both cost‐saving (dual) and output‐augmenting (primal) measures. We also investigate how public capital influences the input demand and cost structure in each industry and calculate the rate of return to public capital. The empirical results provide strong evidence of the important role public infrastructure plays in the productivity of manufacturing industries. The public capital serves as a substitute for both private capital and labor in most industries. The rates of return to public capital are significant and vary over the years.
Employment‐Based Health Insurance and the Effectiveness of Intrafirm Competition between Insurance Providers
Authors: Bradford W. David , Mobley Lee Rivers
Published: July 2021

This paper examines the effects of competition between insurers for the patronage of a firm's employees. Since for employment‐based health insurance the employee choice of health insurance plans is often limited, the availability of competing plans in the market does not necessarily reflect competition within the firm. We utilize data from the 1987 National Medical Expenditures Survey (NMES) to examine the effect of intra firm competition in the employment‐based health insurance market. Using switching regression models, we explore the process that sets premiums and the process that sets the net premium/medical cost margins. We find that greater choice results in higher margins and lower premiums. We also find significantly negative health maintenance organization choice effects on both premiums and margins.
Vertical Integration and Exclusivity Contracts when Consumers Have Switching Costs
Authors: Valletti Tommaso M.
Published: July 2021

This article extends the literature on switching costs by considering what happens when retailers and manufacturers are separate entities and some customers are locked in with retailers. This separation introduces a dynamic inconsistency problem as manufacturers face the problem of extracting too much surplus from the retailer in which case the retailer has no incentive to build a subscriber base. It is shown that different trading relationships arise according to the nature and magnitude of switching costs. When switching costs are high, then integrated structures are always predicted (or exclusive dealerships in case vertical integration is banned). Vertical integration should be allowed as it provides high‐powered incentives to acquire market shares.
Safety at the Racetrack: Results of Restrictor Plates in Superspeedway Competition
Authors: O'Roark J. Brian , Wood William C.
Published: July 2021

In 1988, in an effort to reduce risks at auto races, the National Association for Stock Car Auto Racing (NASCAR) implemented a provision requiring the installation of carburetor restrictor plates at its higher speed events. Restrictor plates make a car's engine less effective, thereby slowing the field. Many NASCAR drivers and fans alike question whether the reduction in speed has led to increased safety. This article investigates the empirical determinants of racetrack safety, paying particular attention to the results of restrictor‐plate racing on driver safety. We conclude that whereas restrictor‐plate races are characterized by more cars being wrecked, there is no systematic evidence that they have led to more driver injuries.
Erring on the Margin of Error
Authors: Thornton Robert J. , Thornton Jennifer A.
Published: July 2021

The term “margin of error” is often erroneously explained in news articles reporting the results of public‐opinion polls. We present here a number of representative examples of such misinterpretations drawn from the popular news media as well as from a number of authoritative Web sites (including that of the Gallup Organization) that explain the margin of error incorrectly. We suggest that encouraging students to search for, recognize, and correct misinterpretations of the margin of error can be a useful way of enhancing their understanding of sampling error, and we describe a number of classroom exercises that can help in this regard.
When Will the Gender Gap in Retirement Income Narrow?
Authors: Even William E. , Macpherson David A.
Published: July 2021

Among recent retirees, women receive substantially less retirement income from Social Security and private pensions than men. Increases in women's labor market attachment and earnings relative to men over the past 50 years provide some optimism for an improvement in female retirement income, particularly for married women. This study shows that women's income from Social Security and private pensions has improved only slightly relative to men over the past 25 years. Using data on people approaching retirement age over the next 20 years, prospects for future improvement are investigated. One of the main conclusions is that pension income among women (particularly married women) will rise sharply relative to men's over the next few decades, but a substantial gap could remain even if women close the gap in experience and salaries.
Unintended Consequence of Centralized Public School Funding in Michigan Education
Authors: Zimmer Ron , Jones John T.
Published: July 2021

As part of the movement to create greater spending equity among school districts, states have centralized funding for public education and instituted funding formulas where high‐spending districts are often constrained in their operational expenditures. However, these school districts often maintain local discretion over capital expenditures financed by the sale of bonds. In this study, we find that Michigan's high‐spending school districts have a greater probability of issuing bonds after centralizing public school funding, indicating that debt financing of capital expenditures may have become a mechanism to allow these school districts to circumvent the policy's intent for greater spending equity.
On the Impact of Transportation Costs on Trade in a Multilateral World
Authors: Egger Peter
Published: July 2021

This article proposes to account for the differences in the importance of transport costs, depending on characteristics of trading partners. In a multiregion model of trade in differentiated goods we expect a smaller impact of transport costs on a country's exports as a share of importer gross domestic product (GDP) the more (less) relatively capital‐abundant the exporter (importer) is and the lower (higher) production costs are as captured by GDP at given factor endowments and diversity, all else equal. Empirically, this requires four interaction terms in addition to the direct impact of transport costs when estimating log‐linear gravity models: one with the exporter GDP per capita or capital‐labor ratio, a second one with the importer GDP per capita or capital‐labor ratio, and a third and fourth with exporter and importer GDP, respectively. The hypotheses are strongly supported by the evidence from a large panel of bilateral trade between 1970 and 2000.
The Determinants of Life Expectancy: An Analysis of the OECD Health Data
Authors: Shaw James W. , Horrace William C. , Vogel Ronald J.
Published: July 2021

This study considers an aggregate life expectancy production function for a sample of developed countries. We find that pharmaceutical consumption has a positive effect on life expectancy at middle and advanced ages but is sensitive to the age distribution of a given country. Thus, ignoring age distribution in a regression of life expectancy on pharmaceutical consumption creates an omitted‐variable bias in the pharmaceutical coefficient. We find that doubling annual pharmaceutical expenditures adds about one year of life expectancy for males at age 40 and slightly less than a year of life expectancy for females at age 65. We also present results for lifestyle inputs into the production of life expectancy. For example, decreasing tobacco consumption by about two cigarettes per day or increasing fruit and vegetable consumption by 30% (one‐third pound per day) increases life expectancy approximately one year for 40‐year‐old females.
Does the Beige Book Move Financial Markets?
Authors: Zavodny Madeline , Ginther Donna K.
Published: July 2021

About two weeks prior to each Federal Open Market Committee (FOMC) meeting, the Federal Reserve releases a description of economic activity in a document called the Beige Book. By creating a quantitative index of these qualitative reports, we examine whether the content of the Beige Book affects asset prices. The results indicate that more positive Beige Book reports on economic growth are associated with increases in interest rates, particularly intermediate‐ and long‐term rates, but not after controlling for several other macroeconomic indicators. The results are consistent with markets viewing the report as a summary indicator of economic growth but not of monetary policy moves in the near term.
Polluters and Collective Action: Theory and Evidence
Authors: Damania Richard , Fredriksson Per G. , Osang Thomas
Published: July 2021

We suggest a new perspective on firms' ability to organize collective action. We argue that industries that face a greater number of regulations have an easier time forming a lobby group and sustaining joint lobbying efforts. In particular, firms in industries that arepollution intensive, and therefore incur abatement costs, face anextrapolicy issue compared with other industries. The prediction that emerges from the theory is that more polluting industries should have greater levels of lobbying contributions. Using U.S. manufacturing sector data, we find empirical support for this hypothesis.
The Impact of Passenger Mix on Reported “Hub Premiums” in the U.S. Airline Industry
Authors: Lee Darin , Luengo‐Prado Maria José
Published: July 2021

This paper analyzes U.S. airline price and passenger data disaggregated at the fare class level for the year 2000. We find that although average prices to and from most airlines' hubs tend to be higher than those throughout the remainder of their systems, much of the difference can be explained by passenger mix (i.e., the proportion of leisure versus business passengers). Our results suggest, therefore, that many of the reported “hub premiums” in the previous literature may be overstated.
Proxies for Economic Freedom: A Critique of the Hanson Critique
Authors: Heckelman Jac C.
Published: July 2021

Economic freedom indicators have become quite popular recently as a useful tool to quantify the relationship between a country's institutions and its prosperity. In a recent article, Hanson (2003) criticizes these types of studies for: (i) failing to adequately distinguish between different proxies for economic freedom, (ii) not considering the potential for endogeneity, and (iii) accepting significance of economic freedom's ability to promote prosperity even though regression analysis generates “nonsensical” results. Closer inspection reveals that most of his arguments are questionable, do not apply to much of the literature, or are not original, and that he is guilty of misinterpreting his own econometric evidence relating freedom to the level of GDP.
Exchange Rate Sensitivity of U.S. Trade Flows: Evidence from Industry Data
Authors: Bahmani‐Oskooee Mohsen , Ardalani Zohre
Published: July 2021

Previous research that investigated the relation between U.S. trade flows and the value of the dollar either employed trade data between the United States and the rest of the world or between the United States and her major trading partners. In this paper we use monthly import and export data from 66 industries in the United States SITC Commodity Groupings over the January 1991‐August 2002 period as well as cointegration analysis and show that in the long run real depreciation of the dollar stimulates export earnings of many U.S. industries, whereas it has no significant impact on most importing industries.
Can Consumer Confidence Forecast Household Spending? Evidence from the European Commission Business and Consumer Surveys
Authors: Cotsomitis John A. , Kwan Andy C. C.
Published: July 2021

This paper represents a first formal attempt to examine the ability of consumer confidence to forecast household spending within a multicountry framework. To this end, we use two confidence indices, namely the Consumer Confidence Indicator and the Economic Sentiment Indicator, both of which are derived from the European Commission Business and Consumer Survey. As in previous single‐country investigations, we find that there is much variability in the in‐sample incremental forecasting performance of the confidence indices for the countries canvassed. Further, the results of our out‐of‐sample tests indicate that the confidence indices considered provide limited information about the future path of household spending.
Export Promotion through Exchange Rate Changes: Exchange Rate Depreciation or Stabilization?
Authors: Fang WenShwo , Lai YiHao , Miller Stephen M.
Published: July 2021

Exchange rate movements affect exports in two ways—rate depreciation and rate variability (risk). A depreciation raises exports, but the associated exchange rate risk could offset that positive effect. The present paper investigates the net effect for eight Asian countries using a dynamic conditional correlation bivariate GARCH‐M model that simultaneously estimates time‐varying correlation and exchange rate risk. Depreciation encourages exports, as expected, for most countries, but its contribution to export growth is weak. Exchange rate risk contributes to export growth in Malaysia and the Philippines, leading to positive net effects. Exchange rate risk generates a negative effect for six of the countries, resulting in a negative net effect in Indonesia, Japan, Singapore, and Taiwan and a zero net effect in Korea and Thailand.
Rational Beliefs or Distorted Beliefs: The Equity Premium Puzzle and Micro Survey Data
Authors: Park Cheolbeom
Published: July 2021

This paper examines whether the expected equity premium constructed from survey forecasts is consistent with the implications of the rational belief approach or the distorted belief approach to explaining the equity premium puzzle. To address this question, a panel data model with a fixed individual effect and a business cycle effect is analyzed. The results appear more favorable to the distorted belief approach. The average expected equity premium is lower than the average realized equity premium during the sample period. The average bias across economists is significant and varies over the business cycle, which is consistent with distorted beliefs that are excessively pessimist.c over expansions and excessively optimistic over contractions.
Capacity Choice and Duopoly Incentives for Information Sharing
Authors: Novshek William , Thoman Lynda
Published: July 2021

We examine a three‐stage game in which duopolists face a random‐demand intercept. Firms first choose capacities, then decide whether to commit to share the private information they will receive about the intercept. After the private information is observed, firms choose output levels. The costless capacity‐limiting case of our model is equivalent to standard models. We show that even small capacity costs may reverse the incentives to share information and lead to equilibria in which information sharing occurs. At some capacity‐cost levels, sharing is an equilibrium for conventional reasons (equal expected outputs but higher variance with sharing), while at other cost levels, it is an equilibrium because expected outputs are lower (and, hence, expected prices are higher) with sharing.
NCAA Enforcement and Competitive Balance in College Football
Authors: Depken Craig A. , Wilson Dennis P.
Published: July 2021

This article investigates the effects of National Collegiate Athletic Association (NCAA) enforcement on the competitive balance of major college football conferences in the context of the standard empirical crime model. Using an unbalanced panel describing 11 major Division IA football conferences from 1953 through 2003, NCAA enforcement efforts, in the form of investigations and probations, and the severity of punishment, measured as the average length of probations imposed, are found to have opposite but not necessarily offsetting effects on competitive balance. Greater levels of enforcement in a conference improve competitive balance. On the other hand, greater severity of punishment reduces competitive balance. The empirical evidence indicates that these changes take approximately five years to be fully dissipated. Overall, the empirical results indicate that, on average, the net effect of NCAA enforcement is an improvement in competitive balance.
Financial Risk Taking by Age and Birth Cohort
Authors: Jianakoplos Nancy Ammon , Bernasek Alexandra
Published: July 2021

This study decomposes the effects of chronological age, birth cohort, and calendar year on the age profile of household financial risk taking. Using two measures of risk taking, one based on observed portfolio allocations of wealth and another based on survey respondents' stated willingness to take risk, the results support the conventional wisdom that risk taking decreases with age. The results also reveal a cohort effect that shifts the age‐risk profile down from older to younger cohorts. This finding is consistent with households taking less risk in response to decreasing financial security over time. The results have implications for the impact of an aging population on stock prices and for the impact on household well‐being of the trend toward individual responsibility for asset management in vehicles such as defined‐contribution pensions and the proposed Social Security personal accounts.
Substitutability and Accumulation of Information Technology Capital in U.S. Industries
Authors: Chun Hyunbae , Mun Sung‐Bae
Published: July 2021

The substitution toward information technology (IT) capital fueled by the rapid decline in IT prices is regarded as an important source of U.S. economic growth. Using data on 41 U.S. industries for the period from 1984 to 1999, this article examines the degree of substitutability between IT capital and other inputs and quantifies the contribution of IT substitution to the accumulation of IT capital per hour worked. Estimates of various elasticities of substitution indicate that IT capital and other factors of production are substitutes. In particular, the substitution of IT capital for other inputs is salient in the industries with less IT capital. Among the sources of IT capital deepening, IT substitution accounts for about 60% of growth in IT capital per hour worked.
Inefficiency in Cadaveric Organ Procurement
Authors: Beard T. Randolph , Kaserman David L. , Saba Richard P.
Published: July 2021

The shortage of cadaveric human organs made available for transplantation has reached critical proportions and is now causing over 6000 deaths each year in the United States alone. Economically, this shortage appears to stem from at least two principal underlying causes, both of which are attributable to the 1984 National Organ Transplant Act: (i) a legal prohibition on payments to organ donors and/or their surviving family members; and (ii) the legislatively mandated structure of the organ procurement industry, which specifies a group of nonprofit regional monopsonists as collection agents.

Here, we focus' on some consequences of the latter restriction. Using a frontier methodology, we estimate the magnitude of the inefficiencies exhibited by the individual procurement agencies (relative to the most efficient) after controlling for exogenous factors. Our findings show that, even if these inefficiencies could (somehow) be completely eliminated, the organ shortage would still persist.
Taking Corporate Culture Seriously: Group Effects in the Trust Game
Authors: Arce Daniel G.
Published: July 2021

The Trust Game is regarded as an important model of corporate culture in that social learning to promote trust creates organizational efficiencies consistent with the existence of firms. We examine the Trust Game from an evolutionary perspective in which player types are defined in terms of their commitment to trustworthy behavior. In so doing, a condition for multilevel selection (group effects) is identified. When group effects exist—implying that the matching process is not independent of players' commitment—a corporate culture emerges that promotes trust. This results in an evolutionary theory of business ethics.
Incorporating Policymaker Costs and Political Competition into Rent‐Seeking Games
Authors: Godwin R. Kenneth , López Edward J. , Seldon Barry J.
Published: July 2021

We incorporate policymaker costs of supplying rents and variable intensities of competition among rent seekers into the standard rent‐seeking game. By incorporating these aspects, the game has greater verisimilitude to the lobbying process. The first aspect captures the fact that in rent‐seeking contests there is a positive probability that neither firm will obtain the rent. The second aspect captures the fact that firms seeking different rents still must compete for policymakers' resources. We find that lobbying expenditures, rent‐seeking profits, and rent dissipation depend on the intensity of competition and the value of the rent relative to policymaker costs. For example, if the value of the rent is sufficiently high relative to policymakers' costs, an increase in the intensity of political competition will increase lobbying expenditures; otherwise, expenditures fall as competitive intensity increases. In addition, the model establishes pure‐strategy equilibria with underdissipation where only mixed‐strategy equilibria exist in the standard model.
What Drives Stock Prices? Identifying the Determinants of Stock Price Movements
Authors: Balke Nathan S. , Wohar Mark E.
Published: July 2021

In this paper, we show that the data have difficulty distinguishing a stock price decomposition in which expectations of future real dividend growth is a primary determinant of stock price movements from one in which expectations of future excess returns are a primary determinant. The data cannot distinguish between these very different decompositions because movements in the price‐dividend ratio are very persistent whereas neither real dividend growth nor excess returns are; most of the information about low‐frequency movements in dividend growth and excess returns is contained in stock prices and not the series themselves. We further show that this inability to identify the source of stock price movements is not solely due to poor power and size properties of our statistical procedure, nor does it appear to be due to the presence of a rational bubble.
More Detail on the Pattern of Returns to Educational Signals
Authors: Habermalz Steffen
Published: July 2021

This paper develops a multiperiod model in which workers are matched with jobs according to imperfect educational signals, and their subsequent productivities depend on both their inherent ability and on the quality of the job match. The model outlines a sequential process in which underpaid employees reveal their true productivities and overpaid employees are detected by the firm until every match is perfect. The model produces increasing returns to above median educational signals early in a worker's career—a new feature that earlier models did not capture. Estimates using data from the Current Population Survey are consistent with the theoretical result and are suggestive of a concave time pattern for the returns to educational signals.
Effects of Child Health on Sources of Public Support
Authors: Reichman Nancy E. , Corman Hope , Noonan Kelly
Published: July 2021

We estimate the effects of having a child in poor health on the mother's receipt of Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), and public support in the form of food (Special Supplemental Nutrition Program for Women, Infants, and Children [WIC] or food stamps), health insurance (Medicaid), and housing. We find that mothers with unhealthy children are between 2 and 8 percentage points (8‐33%) more likely to rely on TANF than those with healthy children. There are stronger effects for mothers with older children than for those having first births. Mothers of children in poor health are also more likely than those with healthy children to receive SSI, Medicaid, and housing assistance but not WIC or food stamps. Given the restrictive new welfare environment, mothers who rely on TANF to cope with the burden of caring for unhealthy infants may soon encounter difficulties making ends meet and have insufficient resources to invest in their children's health.
Do the Rich Save More? A New View Based on Intergenerational Transfers
Authors: Fan C. Simon
Published: July 2021

Do richer people have higher saving rates? The short‐run and long‐run consumption functions have different answers to this question, which results in the “consumption puzzle” that was a focus of macroeconomic research in the 1950s and 1960s. In a recent empirical contribution, Dynan, Skinner, and Zeldes (2004) revive this old question and make this “consumption puzzle” more intriguing, by showing that the average propensity to consume decreases not only with current income but also with lifetime income. This paper provides a model that helps resolve this puzzle from an intergenerational perspective.
Price Indices and Nonlinear Mean‐Reversion of Real Exchange Rates
Authors: Wu Jyh‐Lin , Chen Pei‐Fen
Published: July 2021

The purpose of this article is to apply a symmetric band‐threshold autoregressive model to investigate several interesting issues regarding purchasing power parity (PPP). We find that the nonlinear adjustment toward PPP is sensitive to price indices and is supported if a traded‐goods real exchange rate is applied. Moreover, we also uncover the sources of the real exchange rate adjustments toward PPP. Finally, our evidence points out that the estimated half‐life with a large shock, based on a generalized impulse response function, can be explained by nominal rigidities.
An Analysis of the Determinants of Tipping Behavior: A Laboratory Experiment and Evidence from Restaurant Tipping
Authors: Parrett Matt
Published: July 2021

This paper explores several determinants of tipping behavior. First, I consider two social norms explanations—reciprocity and letdown (guilt) aversion—of why consumers tip in restaurants. Second, I examine three aspects of the tipping situation that influence how much consumers tip in restaurants: table size, sex, and method of bill payment. I address these issues using two data sources: a field survey and laboratory experiments. Customers were surveyed individually as they left a set of restaurants in Richmond, Virginia. The laboratory experiments vary service quality, table size, and information about others' tips in a controlled setting. Results from both data sets show support for reciprocity and letdown aversion, and that tip size decreases with table size. Sex differences, which exist only in the experimental data, show that men tip more than women. Finally, the size of the tip does not depend on the method of bill payment.
Sibling Rivalry and Strategic Parental Transfers: A Comment
Authors: Miyazawa Kazutoshi
Published: July 2021

This note shows that Proposition 5 in Chang and Weisman (Southern Economic Journal 71:821–36) contains a mistake. Although not affecting the paper's basic intuition, our result shows that the parental transfer under the noncooperative game could be less than under the cooperative one if the children oversupply family services.
State Abortion Restrictions and Child Fatal‐Injury: An Exploratory Study
Authors: Sen Bisakha
Published: July 2021

This paper tests the hypothesis that state‐level restrictions on abortion access are linked to increases in child fatal‐injury rates. The rationale is that such restrictions may disproportionately increase births of “unwanted” children as well as births to young, single, and low socioeconomic‐status mothers, which in turn may lead to more adverse child outcomes—including more child fatal injury deaths. The paper uses state‐level data on child fatal injuries in the 0‐4 age group for 1981‐2002, and estimates count‐data models with state and year effects separately for white and black children. The abortion restrictions considered are enforced parental consent and notification laws, no public funding, and mandatory delays. Many of the restrictions are found to be significantly associated with increased homicide‐resultant fatal injuries for white and black children, and increased unintentional fatal injuries for white children. Results for unintentional fatal injuries for black children are mixed.
The Unit Root Hypothesis for Aggregate Output May Not Hold after All: New Evidence from a Panel Stationarity Test with Multiple Breaks
Authors: Romero‐Ávila Diego
Published: July 2021

This paper investigates the hypothesis of a unit root in output for four panels of real gross domestic product (GDP) and real GDP per capita series in the Organization for Economic Cooperation and Development (OECD). For that purpose, a panel stationarity test is employed that assumes a highly flexible trend function by incorporating an unknown number of breaks in level and slope. This analysis renders clear‐cut evidence in favor of regime‐wise trend stationarity in OECD output for the three data sets of annual data, while evidence of nonstationarity is found for the data set based on quarterly data, which is composed of only seven countries over the shortest time span. Overall, the results herein stand in stark contrast to previously published results that do not control for the existence of structural change in the trend function, but accord well with those that employ panel unit root tests that allow for a single homogeneous break in the trend function.
Unit Root Tests, Persistence, and the Unemployment Rate of the U.S. States
Authors: Romero‐Ávila Diego , Usabiaga Carlos
Published: July 2021

In this paper, we investigate the existence of infrequent shocks and the degree of persistence of U.S. state unemployment over the period 1976‐2004. We first apply individual Lagrange multiplier (LM) unit root tests and fail to reject the hysteresis hypothesis in forty states. When two changes in level are incorporated, we again fail to reject the hysteresis hypothesis in forty states. Since individual unit root tests normally lack power, we employ the recently developed panel LM unit root tests with up to two changes in level. Only in this case are we able to reject the joint unit root hypothesis in favor of regime stationarity. Computation of half‐lives through impulse‐response functions indicates the high degree of persistence of U.S. state unemployment. These results contrast with the common belief among scholars that U.S. state unemployment is closer to the natural rate paradigm than to the hysteresis paradigm.
Trade, Social Values, and the Generalized Trust
Authors: Chan Kenneth S.
Published: July 2021

The present paper investigates, empirically, whether global economic integration can lead to national social disintegration, as proclaimed by Rodrik. One can perhaps conjecture that a drop in the generalized trust in a country may signal a rise in social disintegration. Using the survey data on the generalized trust provided by the World Values Surveys, the present paper finds that, in general, there is a positive openness‐trust relationship. However, when globalization undermines domestic income distribution, it will weaken this openness‐trust relationship. There is also evidence of a threshold inequality above which the openness‐trust relationship turns negative.
People Playing Games: The Human Face of Experimental Economics
Authors: Eckel Catherine C.
Published: July 2021

Experiments can be used not only to test theory but also to measure preferences and assess heterogeneity of behavior. I discuss the design of experimental measures of altruism and trust, as well as their uses in assessing how behavior varies across individuals, and across partners that a given individual might encounter. Experiments show that women are more altruistic than men. The appearance of a partner substantially impacts trust and trustworthiness, in part through the association of attractiveness and skin tone with expectations about a partner's behavior.
Examining the Robustness of the Inflation and Growth Relationship
Authors: Hineline David R.
Published: July 2021

Using Bayesian Model Averaging, we examine whether inflation's effects on economic growth are robust to model uncertainty across numerous specifications. Cross‐sectional data provide little evidence of a robust inflation‐growth relationship, even after allowing for non‐linear effects. Panel data with fixed effects suggest inflation is one of the more robust variables affecting growth, and non‐linear results suggest that high inflation observations drive the results. However, this robustness is lost when estimation is carried out with instrumental variables.
Estimating the Effect of Air Quality: Spatial versus Traditional Hedonic Price Models
Authors: Neill Helen R. , Hassenzahl David M. , Assane Djeto D.
Published: July 2021

Empirical studies of hedonic housing prices show that the spatial maximum likelihood estimation (MLE) method is preferable to the traditional ordinary least squares (OLS) hedonic method. Current computing capabilities restrict the MLE method to relatively small data sets. This paper circumvents this limitation by coupling the spatial MLE method with block bootstrapping, a form of Monte Carlo simulation that accounts for spatially dependent data. Blocks are created based on monthly and census tract information for resampling. For each month, we obtained 50 resamples of 750 observations from a data set of 15,727 residential properties to compare OLS and MLE empirical results. We find that the spatial MLE method consistently outperforms the traditional OLS method under these simulated conditions and that air quality matters irrespective of the method used.
Two‐Stage Team Rent‐Seeking: Experimental Analysis
Authors: Cadigan John
Published: July 2021

This paper presents a two‐stage team rent‐seeking model with a contest prize that is not excludable among winning team members. When early effort is a perfect substitute for late effort, early actors can free ride on their late‐moving teammates. However, when early and late efforts are complements, all team members exert positive effort levels. Asymmetries in early effort reduce effort choices for all late movers. The theory is tested with laboratory experimental methods. Although subjects overinvest relative to the Nash equilibrium in all treatments, chosen effort levels provide limited support for the model. Early movers exerted higher effort in the complement treatment, and second‐stage effort choices were broadly consistent with best response functions. Surprisingly, in both single‐shot and repeated play environments, early movers in the substitute treatment did not free ride, choosing effort levels similar to those of late movers.
Is Marriage Poisonous? Are Relationships Taxing? An Analysis of the Male Marital Wage Differential in Denmark
Authors: Gupta Nabanita Datta , Smith Nina , Stratton Leslie S.
Published: July 2021

Differences in the pattern of marriage, cohabitation, childbirth, and intrahousehold specialization between the United States and Denmark, as well as a rich, register‐based panel sample of about 35,000 young Danish men, are exploited to shed light on the nature of the male marital wage differential. The results indicate that failing to control for cohabitation can seriously bias estimates of the marital wage differential, that marriage is a more selective state than cohabitation, and that specialization may explain some of the marital wage differential in the United States but not in Denmark. In Denmark, by contrast, there is evidence that fatherhood has a significant impact on earnings.
Asymmetric Competition on Commuter Routes: The Case of Gasoline Pricing
Authors: Cooper Thomas E. , Jones John T.
Published: July 2021

The intensity of competition among firms depends on commuting patterns, as has been noted, because commuters can reach any store located on their route to work without incurring any incremental travel costs. We incorporate this insight into our estimation of a retail gasoline price function for Lexington, Kentucky, by treating each commuter route as a separate market. Competition in these markets, however, displays an asymmetry because all the commuters travel to the Central Business District (CBD). To accommodate this asymmetry, we treat the market segments on each side of a firm as distinct submarkets and include independent variables (number of competitors and submarket length) from each submarket. Both sets of structural variables influence gasoline prices in the expected direction, but the variables representing the submarket near the CBD have significantly stronger effects. Refinements show that a firm's strongest competition comes from sellers of different brands and from its nearest neighbor.
Determinants of Long‐Run Unemployment
Authors: Liu Haoming , Zeng Jinli
Published: July 2021

This paper investigates the determinants of long‐run unemployment and growth by extending the endogenous growth model of Howitt and Aghion (1998) to allow for a more general treatment of the labor market in the spirit of Pissarides (1990). We find that (i) both long‐run growth and unemployment depend not only on factors that affect long‐run growth as identified in endogenous growth models with full employment, but also on certain labor market parameters; (ii) long‐run unemployment may rise or fall with growth depending on the model's parameters; and (iii) though government policies that promote growth indirectly through improvement in labor market efficiency always reduce the long‐run unemployment rate, policies that directly encourage investment in research and development may increase the unemployment rate.