bluuebunny/crossref_metadata_2025 huggingface dataset:
THE RELATIVE STICKINESS OF WAGES AND PRICES
Authors: SPENCER DAVID E.
Published: January 2010

While many modern business cycle theories posit the existence of nominal wage and/or output price stickiness, their relative importance remains an unsettled issue. Using a structural VAR model, this paper exploits evidence on the behavior of real wages to assess the relative importance of these two sources of stickiness. The empirical results suggest that a positive shock to aggregate demand causes a significant temporary fall in real wages. This is taken as evidence that sticky wages have played a more important role than sticky prices in transmitting aggregate demand shocks to real economic activity in the post‐war U.S. (JEL E32)
DO EMPLOYERS PAY FOR CONSISTENT PERFORMANCE?: EVIDENCE FROM THE NBA
Authors: BODVARSSON ÖRN B. , BRASTOW RAYMOND T.
Published: January 2010

In a world of uncertainty in which a worker's performance is variable over time and average performance is unknown when hiring, how will employers determine compensation? We develop a monitoring and signaling model where information is symmetric and parties are risk neutral. Monitoring costs increase with inconsistency, lowering pay for inconsistent workers. If discrimination exists, minority workers will be rewarded less than majority workers for improving consistency. Testing these and other predictions using National Basketball Association data, we find that consistent professional basketball players are paid more, but, in contrast to previous studies, there is no evidence of discrimination. (JEL J3, J7)
PROFIT‐SHARES, BARGAINING, AND UNEMPLOYMENT
Authors: GEORGES CHRISTOPHRE
Published: January 2010

This paper considers the effect of profit sharing on unemployment in a simple model with an employment externality, overhead costs, and free entry. When wages are determined by Nash bargains and employment is set by firms, equilibrium unemployment is unambiguously reduced by mandated profit sharing. However, a bargained profit share may have the perverse effect of lowering both employment and compensation in general equilibrium. If overhead costs relevant to firms' entry decisions are excluded from the profit share accounting, then a mandated profit share may also have such a perverse effect. (JEL E24)
WHY DO INCREASED ARREST RATES APPEAR TO REDUCE CRIME: DETERRENCE, INCAPACITATION, OR MEASUREMENT ERROR?
Authors: LEVITT STEVEN D.
Published: January 2010

This paper attempts to discriminate between deterrence, incapacitation, and measurement error as explanations for the negative empirical relationship between arrest rates and crime. Measurement error cannot explain the observed patterns in the data. Incapacitation suggests that an increase in the arrest rate for one crime will reduces all crime rates; deterrence predicts that an increase in the arrest rate for one crime will lead to a rise in other crimes as criminals substitute away from the first crime. Empirically, deterrence appears to be the more important factor, particularly for property crimes. (JEL K42)
ELASTIC CAPITAL SUPPLY AND THE EFFECTS OF FISCAL POLICY
Authors: DOLMAS JIM , WYNNE MARK A.
Published: January 2010

Existing analyses of the effects of fiscal policy in general equilibrium models have typically been conducted under the assumption that the long‐run supply of capital is perfectly elastic at a fixed rate of time preference. These analyses have shown that the long‐run response of the capital stock to changes in fiscal policy is crucial to generating the potential for “multiplier” effects in these models. In this paper we ask, what are the implications of relaxing the assumption of perfectly elastic capital supply for the analysis of fiscal policy? We show that with less than perfectly elastic capital supply, the potential for multipliers is actually enhanced. (JEL E62, D90)
CONSUMPTION SPENDING AND THE PAPER‐BILL SPREAD: THEORY AND EVIDENCE
Authors: WEBER CHRISTIAN E.
Published: January 2010

This paper explains recent findings that the paper‐bill spread helps forecast consumption spending using an intertemporal optimizing model of consumption and portfolio allocation. The spread is simply the opportunity cost in terms of foregone future consumption of holding government debt rather than higher yielding private debt. Thus, if government debt appears along with consumption in the single period utility function, the spread appears in one of the Euler equations for consumption and asset accumulation. Empirical tests strongly support the model. Finally, including the spread in a rule of thumb model of consumption reduces the importance of non‐optimizing behavior. (JEL E21, E43, C22, C32)
PRIMARY AND SECONDARY REFORM
Authors: CONLON JOHN R. , PECORINO PAUL
Published: January 2010

An import competing industry hires lobbyists to obtain protection, where binding quotas may be utilized in the trade regime. Rent seekers compete with one another to obtain valuable import licenses. Rent seeking and lobbying are assumed to involve similar skills, so that a reform of the rent‐seeking sector will have feedback effects on lobbying and vice versa. We show that the feedback effects from reform targeting the lobbying activity (primary reform) often tend to reinforce the original reform, while reforms targeting the rent‐seeking sector (secondary reform) tend to have negative feedback effects on the reform process. (JEL D72, F13)
INSTITUTIONS, INVESTMENT, AND GROWTH: NEW CROSS‐COUNTRY AND PANEL DATA EVIDENCE
Authors: DAWSON JOHN W.
Published: January 2010

This paper outlines the alternative channels through which institutions affect growth, and studies the empirical relationship between institutions, investment, and growth. The empirical results indicate that (i) free‐market institutions have a positive effect on growth; (ii) economic freedom affects growth through both a direct effect on total factor productivity and an indirect effect on investment; (iii) political and civil liberties may stimulate investment; (iv) an important interaction exists between freedom and human capital investment; (v) Milton Friedman's conjectures on the relation between political and economic freedom are correct; (vi) promoting economic freedom is an effective policy toward facilitating growth and other types of freedom. (JEL O17, O40, P51)
ARE WOMEN MORE RISK AVERSE?
Authors: JIANAKOPLOS NANCY AMMON , BERNASEK ALEXANDRA
Published: January 2010

We find that single women exhibit relatively more risk aversion in financial decision making than single men. Using U.S. sample data, we examine household holdings of risky assets to determine whether there are gender differences in financial risk taking. As wealth increases, the proportion of wealth held as risky assets is estimated to increase by a smaller amount for single women than for single men. Gender differences in financial risk taking are also influenced by age, race, and number of children. Greater financial risk aversion may provide an explanation for women's lower levels of wealth compared with men's. (JEL J16, D81, G11)
EXPLAINING INDUSTRY LABOR PRODUCTIVITY MOVEMENTS
Authors: FEASEL EDWARD M.
Published: January 2010

The paper investigates the importance of three shocks at the industry level for explaining industry labor productivity movements; industry demand shocks, supply shocks, and labor supply shocks. The results from vector autoregressions show that the two supply shocks are the main determinants of labor productivity movements, where increases in labor supply are associated with persistently declining labor productivity. Labor supply shocks can explain from 65% to 73% of labor productivity variation at a three‐year horizon in the trade and services industries. (JEL O, O3, J22, L6‐L9)
THE IMPACT OF LABOR CONTRACTS: EVIDENCE FROM BRAZIL
Authors: Dole Carol A. , Denslow David A. , Rush Mark
Published: January 2010

The conventional Keynesian model suggests that frictions created by nominal wage contracts generate a positive relationship between inflation and output. On the other hand, the New Classical/Real Business Cycle theory claims that firms and workers base their employment behavior, and hence output, on the marginal product of labor ignoring the efficiencies of fixed nominal wage contracts. Using Brazilian data, where nominal wages were indexed by law, tests show that fixed nominal wage contracts insignificantly affected output. Thus, the data support the view that fixed nominal wages play an insignificant role in determining the evolution of output. (JEL E31)
ECONOMIC ACTIVITY IN THE SHADOW OF CONFLICT
Authors: Anderton Charles H. , Anderton Roxane A. , Carter John R.
Published: January 2010

Appropriation possibilities significantly alter economic fundamentals in a production and exchange economy. This is the primary lesson of our model, which combines Ricardian trade and the potential for predator/prey behavior. The model shows how conflict can be subdued by mutual gains from trade, but at a resource cost that modifies the exchange itself. On the other hand, it identifies conditions wherein appropriation incentives are so strong that specialized production and trade are precluded altogether. The model also reveals a new way to think about and measure the gains from trade. (JEL C72, D51, D74, F10)
WOMEN'S RISING MARKET OPPORTUNITIES AND INCREASED LABOR FORCE PARTICIPATION
Authors: Lombard Karen V.
Published: January 2010

This paper examines the secular increase in the labor market activity of married women in the United States from 1975 to 1991. The research stresses two findings consistent with the hypothesis that married women increased their attachment to the labor force during this time period. First, increasing duration, not incidence, of married women's employment spells contributes the most to the increase in their rate of employment from 1975 to 1991. Second, the increase in married women's employment over the 1980s is largely due to their increased willingness to work more at any given wage, not their rising wage opportunities. (JEL J22, J31, J64)
ECONOMIC GROWTH REGRESSIONS FOR THE AMERICAN STATES: A SENSITIVITY ANALYSIS
Authors: Crain W. Mark , Lee Katherine J.
Published: January 2010

We use extreme‐bounds analysis to assess the sensitivity of numerous control variables identified in the state growth literature. We employ annual panel data on the American states to identify which variables are robust to small changes in the conditioning information set. The results provide a set of core variables as a starting point for future research that relies on state growth regressions. The findings also demonstrate that several important conclusions in the literature depend on how variables are measured. (JEL R11, O23, C23, 018)
THE PHYSICIAN LABOR MARKET IN A MANAGED CARE‐DOMINATED ENVIRONMENT
Authors: Hirth Richard A. , Chernew Michael E.
Published: January 2010

The belief that doctors respond to declining demand by treating patients more aggressively has created skepticism about relying on market forces to restructure physician supply. We argue that even if the physician labor market is dysfunctional under fee‐for‐service incentives, it can perform better as managed care becomes dominant. Our model implies a nonlinear effect of managed care penetration on incomes. Physicians can offset most or all of initial declines in demand, but cannot insulate themselves indefinitely. This may explain the observation that, until recently, the growth of managed care has not been accompanied by large physician income changes. (JEL III, J31)
VALUING PETROLEUM RESERVES USING CURRENT NET PRICE
Authors: Davis Graham A. , Cairns Robert D.
Published: January 2010

Miller and Upton propose the “Hotelling Valuation Principle”: producing mineral reserves can be valued by multiplying the mineral's current net price by the reserve estimate. Adelman argues that, by omitting production constraints, the Hotelling value provides an upper bound on oil reserve value. Others claim oil reserves are options on oil, with the Hotelling value being a lower bound on their value. In an optimizing model of oil production we incorporate uncertainty and production constraints and find that the Hotelling value is a theoretical upper bound on value. We also find that a modified net price rule approximates reserve value. (JEL Q41, G13, G12)
THE DEMAND for ILLICIT DRUGS
Authors: Saffer Henry , Chaloupka Frank
Published: January 2010

This paper estimates the effects of alcohol prices, marijuana decriminalization, cocaine prices, and heroin prices on the demand for these four substances. Both own price effects and cross price effects are estimated. The estimated price elasticities for alcohol, cocaine, and heroin are, respectively, –.30, –.28 and –.94. Marijuana decriminalization was found to increase the probability of marijuana participation by about 8%. The results for the cross price effects provide general evidence of complementarity. It is estimated that decriminalization of cocaine and heroin might lead to about 260,000 new regular cocaine users and about 47,000 new regular heroin users. (JEL 110)
AN ANALYSIS OF WOMEN'S RETURN‐TO‐WORK DECISIONS FOLLOWING FIRST BIRTH
Authors: Barrow Lisa
Published: January 2010

Women's labor force participation has increased sharply over the last two decades, particularly for married women with young children. This suggests women are spending less time out of the labor force for child bearing and rearing. Using the detailed information available in the NLSY, I explore women s decisions to return to work within one year of their first child's birth, focusing on the effect of child care costs. Consistent with economic theory, women facing lower child care costs are more likely to return to work as are women with higher potential wages and lower family income from other sources. (JEL J0)
INDUSTRIAL OUTPUT VARIABILITY AND REAL WAGE FLUCTUATIONS: DETERMINANTS AND IMPLICATIONS
Authors: Kandil Magda
Published: January 2010

The cyclical behavior of the real wage differentiates between the empirical validity of major new Keynesian sticky‐wage and sticky‐price explanations of business cycles. Across industries of the United States, an increase in price flexibility relative to wage flexibility correlates with a reduction in output fluctuations in the face of demand shocks. Further, industrial real output variability does not vary significantly with nominal wage flexibility. In contrast, an increase in price flexibility moderates industrial real output variability. Consistently, an increase in the real wage response to demand shocks correlates with an increase in industrial output variability. (JEL E32, E31)
CHANGES IN THE COMOVEMENT OF EUROPEAN EQUITY MARKETS
Authors: Chelley‐Steeley Patricia L. , Steeley James M.
Published: January 2010

This paper investigates the impact that the removal of exchange controls within major European economies has had on the interdependence of European equity markets. For five years prior to the removal of exchange controls and five years following their removal, we use impulse responses and variance decompositions from vector autoregressions to illustrate that European equity markets have become substantially more integrated after the removal of exchange controls. We undertake further tests that demonstrate that, even if we allow for parallel macroeconomic harmonization, the removal of exchange controls has been a major cause of increased equity market integration within Europe. (JEL F33, F36, G15)
RENT‐SEEKING FIRMS, CONSUMER GROUPS, AND THE SOCIAL COSTS OF MONOPOLY
Authors: Baik Kyung Hwan
Published: January 2010

Do consumers' consumer‐surplus (CS)–defending activities increase the social costs of monopoly compared to when consumers are inactive? Given just one rent‐seeking firm, consumers ' CS‐defending activities generally increase the social costs of monopoly, but given two or more rent‐seeking firms, such activities generally reduce the social costs. (JEL D72, L12)
THE VALUE OF THE VOTE: A MODEL AND TEST OF THE EFFECTS OF TURNOUT ON DISTRIBUTIVE POLICY
Authors: Fleck Robert K.
Published: January 2010

This article demonstrates important effects of voter participation. A model shows why, for some types of distributive policy, incumbents are more likely to be reelected if high‐turnout regions receive more funds than do low‐turnout regions. The model predicts, therefore, greater allocations to high‐turnout regions. This prediction is tested with county‐level data from the New Deal's Federal Emergency Relief Administration (FERA). The estimates suggest that by voting rather than not voting, an individual increased by about $30 the expected FERA allocation for the individual's county. The size of the estimated effect differs across states.(JELD72, N42)
AN EXPERIMENTAL INVESTIGATION OF RESEARCH TOURNAMENTS
Authors: Fullerton Richard , Linster Bruce G. , Mckee Michael , Slate> Stephen
Published: January 2010

Research tournaments are predicted to encourage R&D. Recent theoretical developments in research tournaments are grounded in search theory. Although the economic intuition behind tournaments is straightforward, computing equilibrium strategies is complex. The participants compute a stopping rule based on the number of participants, the prize and the cost of research. It is an empirical question whether agents will behave as predicted or will employ simple “rule of thumb” strategies such as taking a predetermined number of draws. This paper reports the results of a series of laboratory experiments designed to test the predictions of the search model of tournaments.(JELC9, D8)
A TEST OF COMPETING EXPLANATIONS OF COMPENSATION DEMANDED
Authors: Horowitz John K. , Mcconnell K. E. , Quiggin John
Published: January 2010

We find that prospect theory behavior is significantly more prevalent than utility theory behavior in experiments involving multiple, real items. In the experiments, subjects were endowed with three items and asked the minimum payments they required to be willing to return one, two, or three of them. Our key observation is that prospect theory implies concavity of compensation demanded, whereas utility theory implies convexity. We examine whether the compensation demanded is convex or concave in the number of items returned. (JEL C91)
COMPETITION AND PRODUCTIVITY GROWTH: THE CASE OF THE U.S. TELEPHONE INDUSTRY
Authors: Gort Michael , Sung Nakil
Published: January 2010

The article focuses on the relation of competition to changes in productivity. Specifically, it compares the experience of AT&T Long Lines, operating in an increasingly competitive market, with that of eight local telephone monopolies. Both the estimation of total factor productivity growth and the analysis of shifts in cost functions show a markedly faster change in efficiency in the effectively competitive market than for the local monopolies. The article also examines three channels through which competition produces differential changes in efficiency. The results support, by implication, a policy of permitting entry and increasing competition in local telephone markets. (JEL L11, L96)
Children's altruism in public good and dictator experiments
Authors: Harbaugh WT , Krause K
Published: January 2010

We examine the development of altruistic and free‐riding behavior in 6‐12 year‐old children. We find that the level of altruistic behavior in children is similar to that of adults but that repetition has a different effect. Younger children's contributions of older children, like those of adults, tend to decline. Group attachment is associated with higher contributions. Contributions in a subsequent dictator experiment are correlated with first‐round contributions in the public good experiment, but are not strongly correlated with last‐round contributions.
The effects of smoking laws on seating allocations of restaurants, bars, and taverns
Authors: Dunham J , Marlow ML
Published: January 2010

Supporters of smoking laws often argue that they do not harm restaurants, bars, and taverns and may even raise their profits. Opponents argue that owners cater to customer preferences regarding smoking and that laws mandating specific smoking policies will therefore negatively impact profits of some firms. This article tests hypotheses regarding how smoking laws affect seating allocations, using data from a nationwide survey of restaurant and bar owners. The empirical evidence indicates that smoking laws exert no significant effect on seating allocations. Firms are shown to allocate greater shares of seating to nonsmoking use when customers exhibit stronger preferences for such seating.
The economics of organized crime and optimal law enforcement
Authors: Garoupa N
Published: January 2010

This article extends the optimal law enforcement literature to organized crime. I model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion. As long as extortion is a costless transfer from individuals to the criminal organization, not only the existence of extortion is social welfare improving because it makes engaging in a criminal offense less attractive but it also allows the government to reduce expenditures on law enforcement. When extortion is costly because the criminal organization resorts to threats and violence, the existence of extortion is social welfare diminishing and may lead to higher expenditures on law enforcement.
Life cycle consumption of a harmful and addictive good
Authors: Goldbaum D
Published: January 2010

This article demonstrates that the endogenous desire to quit smoking can result from a rational consumption path chosen at the time the consumer begins smoking. This result is obtained without relying on hidden costs or unknown preferences. A finite‐lived agent chooses a path of consumption of a harmful and addictive good to maximize present discounted utility. The consumer chooses his consumption rate to account for the future health consequence of smoking and the withdrawal costs of quitting. A consumer may choose to smoke even if it means a lowered utility level for the majority of the time spent smoking.
A theory of quality‐related differences in retail margins: why there is a ‘premium’ on premium gasoline
Authors: Barron JM , Taylor BA , Umbeck JR
Published: January 2010

This paper develops a theory of vertical and horizontal product differentiation to explain observed price‐cost margin differentials for goods that differ in quality. The difference in price‐cost margins between the high‐ and low‐quality goods is shown to depend positively on consumers' average valuation for incremental increases in quality and positively on the distance to each competitor's closest rival. These predictions are largely supported using an extensive station‐level data set of premium and regular unleaded gasoline prices from the Los Angeles Basin area from 1992–1995.
Productivity of highly skilled immigrants: economists in the postwar period
Authors: McDowell JM , Jr LD Singell
Published: January 2010

Prior work finds declining immigrant quality in the postwar period that is linked to source‐country and skill‐composition changes associated with the 1965 Immigration Act. This paper uses a unique panel of foreign‐ and native‐born American Economic Association members to show that the highly skilled experienced a similar shift away from European migrants toward those from Asia. However, the findings do not indicate that this change in source‐country composition has been accompanied by a decline in quality; rather, the most recent cohorts of foreign‐born economists appear to be more productive than their native counterparts.
Has the rise in globalization reduced U.S. inflation in the 1990s?
Authors: Gamber EN , Hung JH
Published: January 2010

This article investigates whether increased globalization of the U.S. economy has helped hold down inflation in the 1990s. Based on several measures, we find that globalization has increased. Further, we find that import prices exert a greater impact on prices of products in industries faced with greater import penetration. High foreign excess capacity accounts for much of the recent decline in U.S. inflation. Our results suggest that the decline in inflation is explained by the interaction of increased globalization and high excess foreign capacity. Globalization by itself does not lead to less inflation, just greater sensitivity to foreign economic conditions.
THEORIES OF COMMITMENT, ALTRUISM AND RECIPROCITY: EVIDENCE FROM LINEAR PUBLIC GOODS GAMES
Authors: CROSON RACHEL T. A.
Published: January 2010

Theories of commitment, altruism, and reciprocity have been invoked to explain and describe behavior in public goods and social dilemma situations. Commitment has been used to explain behaviors like water conservation and voting. Altruism has been applied to explain contributions to charities and intergenerational transfers and bequests. Reciprocity has been invoked to explain gift exchange and labor market decisions. This paper describes a set of experiments, which distinguish between these competing theories by testing their comparative statics predictions in a linear public goods setting. Results provide strong support for reciprocity theories over either theories of commitment or of altruism.(JELC9, D64, H41, C72)
THE PROCYCLICAL LEVERAGE EFFECT OF COLLATERAL VALUE ON BANK LOANS—EVIDENCE FROM THE TRANSACTION DATA OF TAIWAN
Authors: CHEN NAN‐KUANG , WANG HUNG‐JEN
Published: January 2010

We investigated the empirical relationship between firms’ collateral values and land‐secured loans over asset price cycles. A simultaneous equation model of loan demand and supply was estimated using a transaction‐level data set from Taiwan. The data set contains collateral information and identifies lenders and borrowers. We found that the value of collateralizable assets has positive and significant effects on loan amounts and that the leverage effect of collateral is procyclical to asset price cycles. Firms in the electronics industry, the star industry in the sample period, are found to borrow more than other firms do at each marginal dollar of collateral. (JEL C50, E30, G20)
INFORMATION AND THE PROVISION OF QUALITY DIFFERENTIATED PRODUCTS
Authors: BROUHLE KEITH , KHANNA MADHU
Published: January 2010

Governments often enact information provision policies to overcome asymmetric information of product qualities. We show that increasing awareness among consumers of the quality of a good can (but will not always) encourage firms to produce goods with higher levels of quality. Even if product qualities increase, social welfare may fall as information provision results in too much product differentiation. We show that the effectiveness of emission taxes and output subsidies are affected by the level of consumer knowledge of product quality, and we identify conditions under which information provision is welfare enhancing relative to these price instruments.(JELL1 5, Q58)
BELIEVING IN ECONOMIC THEORIES: SEX, LIES, EVIDENCE, TRUST, AND IDEOLOGY
Authors: AUSTIN D. ANDREW , WILCOX NATHANIEL T.
Published: January 2010

Political economics views heterogeneity of political preferences largely as a reflection of heterogeneity in valuations of known policy outcomes. Voters, however, may be uncertain about policy outcomes, in part, because of uncertainty about how the economic world actually works. Heterogeneity of people’s beliefs about how well economic theories predict outcomes could then affect policy through democratic institutions. Using a combination of experimental and survey techniques drawn from economics and social and political psychology, we examine several potential sources of heterogeneity in beliefs about the predictive content of supply and demand theory, with a particular focus on the role of ideology.(JELA110, A130, C420, C900)
SOCIAL DYNAMICS OF OBESITY
Authors: BURKE MARY A. , HEILAND FRANK
Published: January 2010

We explain the recent increases in obesity in the United States with a model involving falling food prices, endogenous social body weight norms, and heterogeneous human metabolism. Calibrating an analytical choice model to American women in the 30‐ to 60‐yr‐old age bracket, we compare the predicted weight distributions to National Health and Nutrition Examination survey data spanning (intermittently) the years 1976–2000. The model, the first to describe explicitly complete weight distribution dynamics for this group, predicts average weights and obesity rates with considerable accuracy and captures a significant portion of the recent growth in upper quantile weights. (JEL D11, I12, Z13)
AN EXPERIMENTAL TEST ON RETIREMENT DECISIONS
Authors: FATAS ENRIQUE , LACOMBA JUAN A. , LAGOS FRANCISCO
Published: January 2010

As part of the current debate on the reform of pension systems, this paper presents an original experimental test where subjects face three different payoff sequences with identical expected value. Two central questions are analyzed. First, whether the distribution of retirement benefits across time influences the retirement decision. And second, whether actuarially fair pension systems distort the retirement decision. The results indicate both that a lump‐sum payment rather than annuity benefits is far more effective in delaying the retirement decision and that recent reforms that encourage the link between lifetime contributions and pension benefits to delay the retirement decision should take into account timing considerations. (JEL C91, H55, J26)
KILLING THE GOOSE THAT LAYS THE GOLDEN EGG: INSTITUTIONAL CHANGE AND ECONOMIC GROWTH IN HONG KONG
Authors: GROENEWOLD NICOLAAS , TANG SAM HAK KAN
Published: January 2010

This article examines how the rule of law and democratic accountability have affected Hong Kong’s Gross Domestic Product (GDP) growth rate in the past 20 yr. We find that democratic accountability has deteriorated substantially since the changeover of sovereignty in 1997, while the rule of law has remained strong and stable. Empirical results from autoregressive distributed lag bounds tests show a positive long‐run relationship between growth and democratic accountability, and Granger causality tests reveal that democratic accountability causes the growth rate of GDP in the short run. These conclusions are robust to control for the effects of investment and the Asian financial crisis in 1997. (JEL O18, O49, P17)
READING, WRITING, AND SEX: THE EFFECT OF LOSING VIRGINITY ON ACADEMIC PERFORMANCE
Authors: SABIA JOSEPH J.
Published: January 2010

Controlling for a wide set of individual‐ and family‐level observables available in the National Longitudinal Study of Adolescent Health, ordinary least squares (OLS) estimates show that sexually active adolescents have grade point averages that are approximately 0.2 points lower than virgins. However, when information on the timing of intercourse decisions is exploited and individual fixed effects are included, the negative effect of sexual intercourse disappears for females, but persists for males. Taken together, the results of this study suggest that while there may be adverse academic spillovers from engaging in intercourse for some adolescents, previous studies’ estimates are overstated due to unmeasured heterogeneity. (JEL I10, I21, I18)
A HUMAN CAPITAL MODEL OF THE EFFECTS OF ABILITY AND FAMILY BACKGROUND ON OPTIMAL SCHOOLING LEVELS
Authors: REGAN TRACY L. , OAXACA RONALD L. , BURGHARDT GALEN
Published: January 2010

This paper develops a theoretical model of optimal schooling levels where ability and family background are the central explanatory variables. We derive schooling demand and supply functions based on individual wealth maximization. Using the National Longitudinal Survey of Youth 1979 data, we stratify our sample into 1‐yr full‐time equivalent (FTE) work experience cohorts for 1985–1989. The estimated Mincerian “overtaking” cohort (the years of work experience at which individuals’ observed earnings approximately equal what they would have been based on schooling and ability alone) corresponds to 13 FTE years of experience, yielding on average a rate of return of 10.3% and an average (optimal) 11.4 yr of schooling. (JEL J24, J31, J22)
DO NONPROFIT AND GOVERNMENT NURSING HOMES ENTER UNPROFITABLE MARKETS?
Authors: BALLOU JEFFREY P.
Published: January 2010

Using data from markets in the rural United States, this study addresses whether nonprofit and government nursing facilities locate in markets that for‐profit firms cannot profitably enter, thereby expanding access to nursing care to populations that would not otherwise be served. The results indicate that while nonprofit and for‐profit nursing homes typically enter similar markets, government nursing homes are more likely to enter markets that have small populations generally and too few elderly residents to be profitable for for‐profits. The results have implications for the efficient provision of access to long‐term care for isolated populations and other underserved groups. (JEL L10, L20, I11)
INSTITUTIONAL QUALITY AND TRADE: WHICH INSTITUTIONS? WHICH TRADE?
Authors: MÉON PIERRE‐GUILLAUME , SEKKAT KHALID
Published: January 2010

Using a panel of countries over 1990–2000, this paper examines the extent to which different dimensions of the institutional framework affect total exports, exports of manufactured goods, and exports of nonmanufactured goods. It is observed that exports of manufactured goods are positively affected by the quality of institutions but neither total exports nor nonmanufactured exports. The latter may even correlate negatively with the quality of institutions. The results are robust to estimation methods. (JEL F14, F15, O17)
THE AUCTION MARKET FOR MODERN PRINTS: CONFIRMATIONS, CONTRADICTIONS, AND NEW PUZZLES
Authors: PESANDO JAMES E. , SHUM PAULINE M.
Published: January 2010

Using a large data set with 80,214 repeat sales, we find that the real return on a diversified portfolio of modern prints sold at auctions worldwide averaged a modest 1.51% during the period 1977–2004. We address several issues regarding the performance of modern prints as investments: the selection bias arising from the self‐interest of auction houses; the impact of an ever‐expanding universe of auction houses on investment returns; the “masterpiece” effect, or whether more expensive works of art outperform the market as a whole; and the differences in returns that arise due to random fluctuations in collector tastes. (JEL Z11, G11, G14)
IS THERE RECIPROCITY IN A RECIPROCAL‐EXCHANGE ECONOMY? EVIDENCE OF GENDERED NORMS FROM A SLUM IN NAIROBI, KENYA
Authors: GREIG FIONA , BOHNET IRIS
Published: January 2010

Norms of reciprocity help enforce cooperative agreements in bilateral sequential exchange. We examine the norms that apply in a reciprocal‐exchange economy. In our one‐shot investment game in a Nairobi slum, people adhered to the norm of “balanced reciprocity,” which obligates quid‐pro‐quo returns for any level of trust. The norm is gendered, with people more likely to comply when confronted with women rather than men, and differs from “conditional reciprocity,” prevalent in developed countries, according to which greater trust is rewarded with proportionally larger returns. Balanced reciprocity produces less trust and trustworthiness and smaller gains from trade than conditional reciprocity. (JEL C72, C91)
DISAGGREGATE EVIDENCE ON PRICE STICKINESS AND IMPLICATIONS FOR MACRO MODELS
Authors: GWIN CARL R. , VAN HOOSE DAVID D.
Published: January 2010

We use the methodology applied at the aggregate level by Gali and Gertler (1999) to analyze price and cost data for U.S. six‐digit North American Industry Classification System (NAICS) industries. Industries with price adjustment periods of at least 6 quarters generate no more than about 43% of total sales of industries we analyze. Industries with estimated price adjustment speeds of less than a year generate at least 44% of sales. Our conclusion is that disaggregate U.S. data provide as much support in favor of relatively high price flexibility as they do for the assumption of widespread price stickiness utilized in many modern macroeconomic theories. (JEL E31, L16)
FIXED REVENUE AUCTIONS: THEORY AND BEHAVIOR
Authors: DECK CARY A. , WILSON BART J.
Published: January 2010

In this paper, we study auctions in which the revenue is fixed but the quantity is determined by the auction mechanism. Specifically, we investigate the theory and behavior of English quantity clock, Dutch quantity clock, last‐quantity sealed bid, and penultimate‐quantity sealed bid auctions. For theoretically equivalent fixed quantity and fixed revenue auctions, we find that fixed revenue auctions are robust to all the previously observed empirical regularities in fixed quantity auctions. (JEL C9, D4, L2)
HAS WAL‐MART BURIED MOM AND POP?: THE IMPACT OF WAL‐MART ON SELF‐EMPLOYMENT AND SMALL ESTABLISHMENTS IN THE UNITED STATES
Authors: SOBEL RUSSELL S. , DEAN ANDREA M
Published: January 2010

This paper explores the widely accepted view that Wal‐Mart causes significant harm to the traditional, small “mom and pop” business sector of the U.S. economy. We present the first rigorous econometric investigation of this issue by examining the rate of self‐employment and the number of small employer establishments using both time series and cross‐sectional data. We also examine alternative measures and empirical techniques for robustness. Contrary to popular belief, our results suggest that the process of creative destruction unleashed by Wal‐Mart has had no statistically significant long‐run impact on the overall size and profitability of the small business sector in the United States. (JEL L81, D59, C21)
SELF‐SELECTION AND THE EFFICIENCY OF TOURNAMENTS
Authors: ERIKSSON TOR , TEYSSIER SABRINA , VILLEVAL MARIE‐CLAIRE
Published: January 2010

The literature has shown that the overall efficiency of exogenously imposed tournaments is reduced by a high variance in performance. This article reports results from an experiment analyzing whether allowing subjects to self‐select into different payment schemes is reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament instead of a piece‐rate payment scheme, the average effort is higher and the between‐subject variance is substantially lower than when the same payment scheme is imposed. Mainly based on risk aversion, sorting is efficiency enhancing since it increases the homogeneity of the contestants. (JEL M52, J33, J31, C81, C91)
STRICT PRODUCT LIABILITY AND SAFETY: EVIDENCE FROM THE GENERAL AVIATION MARKET
Authors: NELSON RANDY A. , DREWS JAMES N.
Published: January 2010

This paper examines the impact of a strict product liability standard on the accident rate in the general aviation (GA) industry. Liability expenses increased by 775% between 1976 and 1986, reducing the sales of new GA aircraft by 90% and increasing the age of the GA fleet. Using both aggregate and model‐specific data, our results indicate that the increase in the age of the GA fleet increased the accident rate by 25%–35% during 1981–2000. In addition, the higher price of GA aircraft boosted sales of homebuilt planes, which have higher accident and fatality rates than GA aircraft. (JEL K13, L62, L15)
VOLATILITY AND IRISH EXPORTS
Authors: BREDIN DON , COTTER JOHN
Published: January 2010

We analyze the impact of volatility per se on real exports for a small open economy concentrating on Irish trade with the United Kingdom and the United States. An important element is that we take account of the time lag between the trade decision and the actual trade or payments taking place by using a flexible lag approach. Rather than adopting a single measure of risk, we adopt a spectrum of risk measures and detail varied size characteristics and statistical properties. We find that the ambiguous results found to date may be due to not taking account of the timing effect, which varies substantially depending on which volatility measure is used. (JEL C32, C51, F14, F31)
RACE AND CHARITABLE CHURCH ACTIVITY
Authors: HUNGERMAN DANIEL M.
Published: January 2010

The availability of public funding for charitable church activity has increased dramatically in recent years. A key dispute over this increase is whether congregations’ propensity to provide charitable services depends upon the local community’s racial composition. Using three congregation‐level data sets, this article investigates how race affects charitable church activity. Each data set indicates that all‐white congregations become less charitably active as the share of black residents in the community grows. This response is found only for charitable activities and not for other activities. Additionally, all‐white congregations favorably disposed toward receiving government funding respond no differently to black residents than do not‐all‐white congregations. (JEL H41, J15, Z12)
HEDONIC IMPUTATION AND THE PRICE INDEX PROBLEM: AN APPLICATION TO HOUSING
Authors: HILL ROBERT J. , MELSER DANIEL
Published: January 2010

In this study, we show how use of the hedonic imputation method complicates the price index problem. In addition to the usual choice between formulas such as Fisher and Törnqvist, the fact that index compilers have some discretion over which prices are imputed implies that it is necessary to choose as well between different varieties of each formula. The functional form of the hedonic model must also be taken into account. We illustrate the importance of these issues in a housing context using house price data for three regions in Sydney over a 3‐yr period. (JEL C43, E31, O47, R31)
ROBUSTNESS OF BIDDER PREFERENCES AMONG AUCTION INSTITUTIONS
Authors: IVANOVA‐STENZEL RADOSVETA , SALMON TIMOTHY C.
Published: January 2010

In previous work, we found that bidders strongly prefer the ascending to the first‐price sealed‐bid auction on a ceteris paribus basis, but perhaps surprisingly, they are not willing to pay up to an entry price for the ascending auction that would equalize the profits. Risk aversion was proposed as an explanation. In this study, we examine two alternative explanations for the observed behavior: loss aversion and aversion to the dynamic bidding process. We find that neither alternative explanation can account for bidders’ auction choice behavior, leaving risk aversion as the only unfalsified hypothesis. (JEL C91, D44)
CORPORATE PRODUCTIVITY GROWTH: CHAMPIONS, LEADERS, AND LAGGARDS
Authors: GEROSKI PAUL , KRETSCHMER TOBIAS , WALTERS CHRIS
Published: January 2010

This paper examines the relative productivity growth performance of a sample of large UK firms between 1986 and 1995. We find that superior productivity growth, however measured, is not persistent—firms with high productivity growth rates relative to (say) the average in 1 yr are as likely as not to display below‐average performance in the following year. Studying the determinants of the length of time for which firms outperform their peers, we find that innovative firms carrying low debt who are relatively free from financial distress are likely to display whatever persistently superior performance we observe in the data.(JELD24, O33, O4)
THE EFFECTS OF UNCERTAINTY ON THE LEVERAGE OF NONFINANCIAL FIRMS
Authors: BAUM CHRISTOPHER F. , STEPHAN ANDREAS , TALAVERA OLEKSANDR
Published: January 2010

This paper investigates the link between the optimal level of nonfinancial firms’ short‐term leverage and macroeconomic and idiosyncratic sources of uncertainty. We develop a structural model of a firm’s value maximization problem that predicts a negative relationship between uncertainty and optimal levels of borrowing. This proposition is tested using a panel of nonfinancial U.S. firms drawn from the COMPUSTAT quarterly database covering the period 1993–2003. The estimates confirm that as either form of uncertainty increases, firms decrease their levels of short‐term leverage. This effect is stronger for macroeconomic uncertainty than for idiosyncratic uncertainty. (JEL C23, D8, D92, G32)
ENCLOSURE
Authors: TAUB BART , ZHAO RUI
Published: January 2010

We model the development of property rights as an endogenous process, driven by capital accumulation. Property rights internalize the portion of the return to capital that is otherwise treated as common property. This enclosure further encourages capital accumulation and sustains economic growth. We view effective property rights as multilateral agreements among agents that can only be implemented and sustained when agents are sufficiently patient. Patience is determined by the marginal product of capital; the marginal product of capital shrinks, and consequently patience increases, as capital grows. Hence, property rights can be established only when an economy is rich enough. (JEL P14, O11, C73)
THE DETERMINANTS OF U.S. STATE ECONOMIC GROWTH: A LESS EXTREME BOUNDS ANALYSIS
Authors: REED W. ROBERT
Published: January 2010

This study investigates U.S. state economic growth from 1970 to 1999. I innovate on previous studies by developing a new approach for addressing “model uncertainty” issues associated with estimating growth equations. My approach borrows from the “extreme bounds analysis” approach of Leamer while also addressing concerns raised by Granger and Uhlig, Sala‐i‐Martin, and others that not all specifications are equally likely to be true. I then apply this approach to identify “robust” determinants of state economic growth. My analysis confirms the importance of productivity characteristics of the labor force and industrial composition of a state’s economy. I also find that policy variables such as (1) size and structure of government and (2) taxation are robust and economically important determinants of state economic growth. (JEL 040, 051, H10, H20, H30, H70, R11, R58, C51)
MIXED OLIGOPOLY, SEQUENTIAL ENTRY, AND SPATIAL PRICE DISCRIMINATION
Authors: HEYWOOD JOHN S. , YE GUANGLIANG
Published: January 2010

This paper is the first to examine the welfare consequences of a public firm in a traditional model of spatial price discrimination. It demonstrates that when a private firm acts as a Stackelberg location leader, the presence of a public firm always improves welfare. Moreover, when three firms locate sequentially, the presence of a public firm improves social welfare unless it locates last. Thus, despite examining a variety of location timings, including simultaneous location, privatization never improves welfare and usually harms welfare. This conclusion differs from several currently in the literature in which privatization often improves welfare. (JEL L13, L32, L33, L52)
BANKING SPREADS IN LATIN AMERICA
Authors: GELOS R. GASTON
Published: January 2010

Intermediation spreads in Latin America are high by international standards. This paper examines the determinants of bank interest margins in that region using bank‐ and country‐level data from 85 countries, including 14 Latin American economies. The results suggest that Latin America has higher interest rates, less efficient banks, and larger reserve requirements than other regions and that these factors have a significant impact on spreads. However, Latin American countries do not differ markedly from their peers in other aspects that are found important in determining the cost of financial intermediation, such as inflation and bank profit taxation. (JEL E43, E44, G21, O54)
GAME THEORY FOR PLAYING GAMES: SOPHISTICATION IN A NEGATIVE‐EXTERNALITY EXPERIMENT
Authors: SPRAGGON JOHN M. , OXOBY ROBERT J.
Published: January 2010

We explore the extent to which the lack of Nash payoff maximization in experimental games is attributable to the “sophistication” of participants (i.e., their understanding of strategic decision making and profit‐maximizing decisions). To this end, we compare the behaviors of sophisticated participants (i.e., those who have been exposed to the concepts of game theory) against those of a more standard subject pool in a moral hazard environment. Results suggest that sophisticated subjects are significantly more likely to adopt strategies predicted by standard theory and arrive at a Nash equilibrium. (JEL C72, C91, C92, D63, D64)
CENTRAL BANK INDEPENDENCE AND INFLATION: A NOTE
Authors: CARLSTROM CHARLES T , FUERST TIMOTHY S
Published: January 2010

We document increased central bank independence within the set of industrialized nations. This increased independence can account for nearly two‐thirds of the improved inflation performance of these nations over the past two decades. (JEL E42, E58)