bluuebunny/crossref_metadata_2025 huggingface dataset:
IN SEARCH OF THE WINNER'S CURSE
Authors: COX JAMES C. , ISAAC R. MARK
Published: January 2010

Earlier papers on the winner's curse have provided theoretical arguments that winning bidders in an auction will incur ex post losses even when all bidders use reasonable ex ante bidding strategies. This paper demonstrates that these arguments are erroneous: optimal ex ante bidders will never suffer from a winner's curse in an auction where only the winning bid is announced; furthermore, such bidders will on the average not suffer from a winner's curse in an auction where all bids are announced. Thus if a winner's curse is a behavioral reality then bidders are not generally using ex ante optimal strategies.
INNOVATION: ITS PUBLIC AND PRIVATE ASPECTS AND SOME OF THEIR EMPIRICAL IMPLICATIONS FOR MERGERS
Authors: TELSER LESTER G.
Published: January 2010

Innovators may have incentives to incur the expense of the search for new knowledge even if others can use the results without contributing to the costs of the search for them. Why?

Assume firms choose their actions independently. Assume new knowledge is a free public good: a firm can make the product at lower cost even if it spends nothing on research, if another does the research. The most plausible noncooperative equilibrium in this situation is stochastic: firms will decide what to do on the basis of a random device. The theory determines the probability that the firm spends nothing, or something, on research. In consequence, no firm can be certain that a rival will do the research; no firm can be certain of becoming a free rider. In consequence, there will be no relation on average between returns on research‐outlays and size of outlays; but the yield on research always will be positive.

Innovation can lead to differences among firms, but these differences should not persist, as firms can gain by eliminating them. In a non‐cooperative equilibrium, where firms have different cost conditions, the allocation of output among them is inefficient. Such inefficiency can be eliminated if information about methods of production is sold, say by way of licensing. But royalty receipts are a very small fraction of total revenues, even in research and development intensive industries such as chemicals and scientific instruments.

Merger is another avenue of cooperation. The theory which assumes research results are private predicts a positive relation between merger activity and technical change. Empirical evidence for the 1879–1930 inverval supports this prediction.
THE EFFECT OF TECHNICAL CHANGE ON MARKET STRUCTURE
Authors: GORT MICHAEL , WALL RICHARD A.
Published: January 2010

The paper examines the effects of technical change on market structure. It is found that: 1) the role of independent inventors and small firms is much more important in the early stages of the evolution of a product; 2) the net effect of innovations on entry reverses itself over the product cycle; 3) there is a shift in the importance of various sources of innovation over the product cycle. The two forces which contribute to this result are: 1) a decline in the importance of innovations as technology matures and 2) the proliferation of products adapted to specialized uses.
CONTRACTING PROBLEMS AND THE ADOPTION OF REGULATORY CARTELS
Authors: HALLAGAN WILLIAM S.
Published: January 2010

Since 1966 a USD A marketing order has governed the sales volume of domestic hop growers. Despite offering cartel‐like advantages, a hop marketing order proposal was defeated in a 1965 referendum of growers. Using individual grower votes from this referendum this paper identifies the sources of opposition to the 1965 marketing order. The analysis proceeds to examine the types of recontracting that transpired enabling the adoption of a revised proposal in 1966.
PRICING AND LOCATION OF PHYSICIAN SERVICES IN MENTAL HEALTH*
Authors: FRANK RICHARD G.
Published: January 2010

Puzzling results of a positive association between the number of physicians per capita and the level of fees for physician services have been reported in the literature. These results may be due to misspecification of econometric models and use of data aggregated across medical specialties. It is hypothesized that the unusual results would not persist with a carefully specified econometric model for a single medical specialty. A general model of pricing and location of physician's services is applied to the market for psychiatrist's services. The results imply that the market for psychiatrist's services operates in a manner consistent with the predictions of the competitive model.
NON‐PECUNIARY BENEFITS IN COMMERCIAL FISHING: EMPIRICAL FINDINGS FROM THE ALASKA SALMON FISHERIES
Authors: KARPOFF JONATHAN M.
Published: January 2010

The issue of non‐pecuniary benefits in commercial fishing is examined using data from the Alaska salmon fisheries, which are subject to entry limitations. It is concluded that, while limited entry permit prices reflect primarily pecuniary factors, the continued presence of many low‐revenue fishermen in the fisheries suggests that they, at least, derive non‐money benefits. However, the existence of non‐pecuniary benefits does not appear to depend substantially on the gear type or geography of the fishery.
PROTECTIONIST PRESSURES AND AGGREGATE ECONOMIC CONDITIONS: COMMENT ON TAKACS
Authors: FEIGENBAUM SUSAN , ORTIZ HENRY , WILLETT THOMAS D.
Published: January 2010

This paper explores the influence of U. S. macroeconomic conditions and the international trade position on protectionist pressures as measured by escape clause cases brought before the International Trade Commission. Several possible difficulties with Takacs' pioneering empirical study of this topic are considered. It is argued that while further support is found for her principal conclusion that the state of the domestic economy is a significant determinant of such protectionist pressures, the quantitative strength of such aggregate factors is less than was suggested by Takacs' original study.
THE EFFECTS OF STATE AUTOMOBILE DEALER ENTRY REGULATION ON NEW CAR PRICES
Authors: ECKARD E. W.
Published: January 2010

This paper examines the impact of state regulations restricting entry into new car retailing. The central hypothesis is that these regulations create artificial scarcity rents for existing dealers, which are collected through higher car prices. A reduced form multiple regression model is specified with retail price as the dependent variable. The model is estimated using transactions price data for a sample of over 5,000 Chevrolet dealers and seven car lines in 1978. The results confirm the hypothesis that entry restrictions cause higher car prices.
THE WELFARE COST OF THE UNDERGROUND ECONOMY
Authors: ALM JAMES
Published: January 2010

This paper estimates the welfare cost of taxes that create an incentive for resources to flow to the underground, or untaxed, sector in the United States. Using a general equilibrium model of the American economy, the welfare cost is found to be large and growing in absolute and relative terms over time. In 1980 the welfare cost may be as much as $220 billion, or over 9 percent of output; even conservative estimates place the loss at nearly $100 billion. It also is found that small reductions in tax rates substantially reduce the welfare cost.
THE INFLUENCE OF RISK VARIABLE DEFINITION ON VALUE‐OF‐LIFE ESTIMATES
Authors: DILLINGHAM ALAN E.
Published: January 2010

Empirical “value‐of‐life” estimates derived from labor market wage‐risk premiums have varied widely. This paper examines the influence of risk variable definition on these estimates. Value‐of‐life estimates are derived for one sample from a set of several risk measures. The analysis reveals that the risk variable definition can markedly affect the value‐of‐life estimate. Further, the paradoxical pattern of “high” estimates from industry risk data and “low” estimates from occupation data is shown to be attributable to different risk definition, not differences in the characterization of risk faced by a given sample of works. Finally, by associating consistently low estimates with one particular risk variable this study suggests much more uniformity in the value‐of‐life estimates than previously believed.
SIMULTANEOUS DETERMINATION OF CHURCH CONTRIBUTIONS AND CHURCH ATTENDANCE
Authors: SULLIVAN DENNIS H.
Published: January 2010

In a standard model of household allocation of time and income, church attendance and church contributions are determined simultaneously. There are life‐cycle aspects to both attendance and contributions, as Azzi and Ehrenberg (1975) and Ehrenberg (1977) have argued, and contributions behavior is affected by tax treatment and by a potential free‐rider problem as well. This paper motivates an econometric specification which recognizes these features and estimates the parameters with a data set of over 2000 Protestant church members.
THE EFFECT OF UNIT FEES ON THE CONSUMPTION OF QUALITY
Authors: KAEMPFER WILLIAM H. , BRASTOW RAYMOND T.
Published: January 2010

A law‐of‐demand explanation to the Alchian‐Allen, or “shipping the good apples out,” proposition rests on a change in the relative price of quality when a unit fee is introduced. However, the manner in which quality is consumed is crucial. In some cases, for instance, there is no substitution between the quality attribute and the priced, quantity‐measured attribute. This paper shows that in these cases the relative price of quality is unchanged by a unit fee. Nevertheless, while the “unit fee” proposition fails to obtain for individual choice, it does hold in aggregate.
THE USE OF COLLATERAL TO ENFORCE DEBT: PROFIT MAXIMIZATION
Authors: HESS JAMES
Published: January 2010

Collateral lowers the probability of default. This paper modifies the work of Benjamin (1978) by characterizing the competitive lender as a price‐taking profit maximizer rather than a profit eliminator. Most of Benjamin's results disappear when profit maximization is assumed; the results are corrected and extended. It is also suggested that the value of the collateral required for a standard loan is a variable that the loan market will adjust until long‐run expected profits from secured loans is driven to zero.
COMMENT ON “MONITORING AND BUDGET MAXIMIZATION IN THE CONTROL OF POLLUTION”
Authors: HARFORD JON D.
Published: January 2010

Lee's model of optimal pollution taxation and costly monitoring is examined. It is argued that his conclusions regarding the nature of the optimal tax and monitoring levels need to be modified to account for the likelihood of a corner solution to his first order conditions. Additionally, the predictions of Lee's version of the budget‐maximizing pollution control bureaucracy are compared to some (more or less) inconsistent facts.
MONEY, INCOME, AND PRICES IN THE UNITED KINGDOM: 1870–1913
Authors: DWYER GERALD P.
Published: January 2010

This paper examines certain aspects of the operation of the gold standard and its effects on the United Kingdom in the period before World War I. Reduced‐form tests and estimates of output and money‐demand equations are presented. The major conclusions are (1) Prices and interest rates in the United Kingdom can be represented as being determined independently of the money stock and output in the United Kingdom; and (2) Evidence concerning Lucas's version of the natural‐rate hypothesis indicates various inadequacies.
THE EFFECT OF PROVIDER CONTROL OF BLUE SHIELD PLANS ON HEALTH CARE MARKETS
Authors: ARNOULD RICHARD J. , DeBROCK LAWRENCE M.
Published: January 2010

Blue Shield plans often are granted regulatory advantages by the states in which they operate. Run efficiently, such not‐for‐profit firms should use these lower costs to eliminate their less advantaged rivals, the commercial insurers. However, these higher‐cost commercial providers have been able to offer insurance coverage at prices competitive with the Blues, as evidenced by the fact that Blue plans have, on average, less than 50 percent market share. Similar prices with lower overall costs implies that economic rents are being earned, rents which a not‐for‐profit firm cannot distribute to owners. In this paper we argue that when there are competing goals among the groups controlling the Blue Shield plans, the different possible “uses” of the regulatory advantage become endogenously determined, necessitating the use of simultaneous equation estimation. Testing this model we find the major effect of doctor‐control of Blue Shield plans is to raise doctors' fees while lowering the amount of rents captured by both consumers and administrators.
AGGREGATE CONSUMPTION AND DEFICIT FINANCING: AN ATTEMPT TO SEPARATE PERMANENT FROM TRANSITORY EFFECTS
Authors: REID BRADFORD G.
Published: January 2010

Many previous empirical studies of the Ricardian Equivalence Hypothesis have found a relatively high degree of future tax liability discounting such that current deficits appear to have relatively little or no influence on current consumption demand. However, the validity of these empirical estimates can be questioned as they may not have adequately distinguished between permanent and transitory income flows. This paper attempts to address this problem by using cycle‐averaging as a simple method of capturing the permanent path of income over time. The empirical evidence generated in this paper rejects the strict debt neutrality proposition of the Ricardian Equivalence Hypothesis.
DEMAND FOR NATIONAL PUBLIC GOODS: ESTIMATES FROM SURVEYS
Authors: HEWITT DANIEL
Published: January 2010

This paper presents an empirical method of estimating aggregate demand functions for national public goods. The technique combines survey responses and tax incidence figures in a probit model. The model provides estimates of average willingness‐to‐pay for federal government services and simultaneously regresses these estimates on socioeconomic characteristics, thus obtaining estimates of the demand function. The main findings are that demand for defense, space, foreign aid, welfare, education and aid to cities is a concave function of income, a negative function of expenditure level (generally) and dependent upon such characteristics as race, age, education level, and sex.
FACTOR SUBSTITUTION, RATIONAL EXPECTATIONS, AND THE EFFECTS OF COMMODITY PRICE SHOCKS ON EMPLOYMENT AND INVESTMENT
Authors: MORK KNUT ANTON
Published: January 2010

Within an aggregate model with three inputs to production, the paper studies the effects of an increase in the price of one of the inputs, called commodities. No restrictions are placed on the production possibility constraint, and expectations are assumed to be formed rationally. After considering the effects on the demand for the two remaining inputs, labor and capital, the paper analyzes the effects on employment under a wage rigidity constraint. A dynamic formulation is used to analyze the effects on investment, which are found to depend weakly and sometimes perversely on partial substitution parameters.
A COUNTRY RISK INDEX: ECONOMETRIC FORMULATION AND AN APPLICATION TO MEXICO
Authors: MELVIN MICHAEL , SCHLAGENHAUF DON
Published: January 2010

Dynamic factor analysis is used to estimate a monthly country risk index for Mexico. This method extracts the unobservable risk information contained in deviations from interest rate parity and allows for hypothesis tests regarding the important determinants of such risk. The results suggest that the ratios of imports to reserves and debt to exports are important determinants of Mexican country risk. The estimated risk index correctly anticipates the Mexican capital controls and financial crisis of August 1982. In addition, the index significantly leads the country risk rating published byInstitutional Investorbased on commercial bank surveys.
THE REACTION OF EXCHANGE RATES TO ECONOMIC NEWS
Authors: HAKKIO CRAIG S. , PEARCE DOUGLAS K.
Published: January 2010

This paper examines the short‐run responses of spot exchange rates to several types of economic news. Survey data are used to divide economic announcements into expected and unexpected components with the latter measuring news. The results indicate that exchange rates are systematically related to unexpected money announcements after the October 1979 switch in Federal Reserve operating procedures but not before. This response does not appear to have changed, however, after the October 1982 Federal Reserve regime change. Short‐run exchange rate movements are not systematically related to news on inflation or real activity.
DISCRIMINATION ON NONWAGE MARGINS: SAFETY IN THE WEST VIRGINIA COAL INDUSTRY, 1906–1925
Authors: FISHBACK PRICE V.
Published: January 2010

Most discrimination studies analyze wage differentials. This paper more stringently examines the market's ability to limit the impact of discrimination. It tests for safety discrimination in the absence of piece‐rate wage differentials in a turn‐of‐the‐century labor market unconstrained by antidiscrimination law and extensive regulation. A new method, comparisons of ethnic fatality‐experience profiles, captures the impact of the workers' experience on their ability to avoid danger, as well as racial differences in exposure to danger. The results are consistent with the hypothesis that blacks were not victims of safety discrimination in the labor market.
EVALUATING ALTERNATIVE JOB CREATION STRATEGIES
Authors: BASSI LAURIE J.
Published: January 2010

This paper examines the costs of job creation under a wide range of programs that the government has at its disposal. The framework chosen for the analysis is a standard neo‐classical model which allows for pockets of unemployment (created by structural imperfections in the operation of the labor market) but not cyclical unemployment. A general conclusion that emerges from the analysis is that job creation programs which are tightly targeted at disadvantaged workers (the structurally unemployed) are much less costly methods of creating additional employment than are untargeted programs.
RISK PREFERENCE AND THE WORK‐LEISURE TRADE‐OFF
Authors: DOWELL RICHARD
Published: January 2010

The paper investigates the interrelationships between the wage rate, period of employment, work‐leisure choice and the attitude toward risk. The model makes risk preference endogenous given external forces acting on individual choice. Beginning with assumptions normally considered consistent with risk aversion –––namely concave utility with respect to leisure and wealth along with perfect markets–––rational behavior consistent with the “insurance buying gambler” is shown to be a reasonable possibility. The theory also provides an explanation for the “repeating gambler paradox.”
SCARCITY AND RICARDIAN RENTS FOR CRUDE OIL*
Authors: MUELLER MICHAEL J.
Published: January 2010

This paper estimates scarcity rent/user cost and Ricardian rent for crude oil in Oklahoma. A model of firm behavior is proposed incorporating both development and production decisions considering crude oil as a nonrenewable natural resource. Profit maximization conditions derived from the model are applied to take into account cost differentials associated with oil found at varying depths. It is shown that oil with the highest cost is the marginal unit and it is the marginal output that determines Ricardian rent. Time series data is used to estimate equations derived from the necessary conditions. It is found that scarcity rent is a significant proportion of the price of crude oil and has increased in the past decade.
NOMINAL COSTS AND THE DEMAND FOR REAL TRANSACTIONS BALANCES
Authors: SWOFFORD JAMES L. , WHITNEY GERALD A.
Published: January 2010

The standard specification of constant real transactions costs assumes that over the sample period transactions costs move in lock‐step with the GNP deflator; our model assumes that transactions costs move negligibly compared to the GNP deflator. That is, nominal transactions costs are assumed constant here rather than real transactions costs as in other estimates of money demand. We find with this nominal‐transactions‐cost specification that the real money demand function is more stable in terms of the stability of the coefficients and the accuracy of out of sample predictions than indicated by earlier studies.
THE DETERMINANTS OF THE PUBLIC DEBT IN THE UNITED STATES, 1953–1978
Authors: HORRIGAN BRIAN R.
Published: January 2010

Barro claims that since the public rationally forecasts and discounts future taxes, government debt does not represent net wealth to the public and therefore does not affect any real economic variables. Then why are there ever deficits? Barro has presented a theory of optimal deficits based on intertemporal tax smoothing. The theory predicts that nominal debt grows in proportion to anticipated inflation, varies contracyclically with respect to real income cycles, and varies procyclically with respect to war cycles. Barro tested his theory using annual American data for 1922‐76 and found weak support for his theory. This paper reexamines Barro's tests, using quarterly American data for 1953:Q1 to 1978:Q4 and finds stronger support for Barro's theory than Barro found using annual data. This paper also concludes that state and local governments do not engage in tax‐smoothing behavior–––probably due to considerations of migration–––and that the debt held by the central bank should be included in the definition of public debt.
CAN THE RISK‐SHIFTING EMPLOYMENT MODEL EXPLAIN FLUCTUATING EMPLOYMENT?
Authors: MCDONALD IAN M.
Published: January 2010

It is shown by numerical examples that, for the simple “two states of the world” version of Azariadis' original model of implicit labour contracts, enormous fluctuations in output price are required to generate layoffs. The paper then modifies the simple model, replacing the perfectly competitive product market specification with a sales constraint. This modification makes a significant difference; the combination of sales constraints and risk‐shifting is shown to have the potential to explain layoffs. Since this sales constraint is unmotivated by micro analysis, its inclusion does not satisfy the original aim of the risk‐shifting employment model to explain layoffs as based on micro foundations. A secondary aim of the paper is to make the workings of the risk‐shifting employment model easier to understand by introducing a new diagrammatic analysis based on a contract curve.
INVESTIGATING THE CAUSAL RELATIONSHIP BETWEEN QUITS AND WAGES: AN EXERCISE IN COMPARATIVE DYNAMICS
Authors: KOCH PAUL D. , RAGAN JAMES F.
Published: January 2010

This paper examines the causal relationship between wages and quits in U.S. manufacturing industries. Logit and regression models then relate causality test results to industrial characteristics. Once these relationships are identified, they can be used to predict the causality classification for each industry, based on the characteristics of that industry. This technique can help the researcher choose the appropriate theoretical model for analysis. One finding is that quits respond to wages in most industries, but not in industries with highly skilled workforces.
COLLUSION, EFFICIENCY AND PRICING BEHAVIOR: EVIDENCE FROM THE BANKING INDUSTRY
Authors: SMIRLOCK MICHAEL , BROWN DAVID
Published: January 2010

This paper examines the validity of competing hypotheses used to explain the observed positive relationship between concentration and profits. Using price proxies from the banking industry, we find that leading (secondary) firms in a market act as price‐setters (price‐takers). This is true regardless of market concentration. We interpret this as evidence of the superior efficiency of leading firms and conclude that the higher profits earned by these firms is due to their superior efficiency and not collusive behavior.
MARKET POWER IN ORAL DOUBLE AUCTIONS
Authors: HOLT CHARLES A. , LANGAN LOREN W. , VILLAMIL ANNE P.
Published: January 2010

This paper reports the results of a series of oral‐double‐auction experiments in which some traders possess market power. A market is set up in which the configuration of the supply and demand curves leads to an asymmetry between buyers and sellers in their abilities to influence transactions prices. This market structure does not always lead to convergence to the competitive equilibrium price despite the competitive nature of the oral‐double‐auction institution. The nonconvergence occurs most frequently in the experiments involving experienced subjects.
THE SUPPLY OF INDIVIDUAL HOURS AND LABOR FORCE PARTICIPATION UNDER UNCERTAINTY
Authors: COYTE PETER C.
Published: January 2010

In the absence of labor supply constraints, this paper shows that an increase in wage‐rate uncertainty alters the optimal supply of individual hours but leaves the decision to participate unchanged. In the presence of these constraints, it is shown that if researchers are concerned with obtaining consistent parameter estimates of the labor supply function, then it is important to correctly specify the type of uncertainty faced by workers. Specifically, a mean preserving increase‐ in wage‐rate uncertainty lowers the participation rate, while an increase in non‐wage income uncertainty raises participation.
OPTIMAL PRICES AND ANIMAL CONSUMERS IN CONGESTED MARKETS
Authors: BATTALIO RAYMOND C. , KAGEL JOHN H. , PHILLIPS OWEN R.
Published: January 2010

We argue that congestion, when it affects the consumption of a commodity, ought to be measured by the product of the number of trips made to a seller and consumption per visit. When intensity of consumption is measured this way, uniform entry fees, the most common way of pricing congested goods, become nonoptimal. A strict user charge can be Pareto efficient. If a uniform entry fee is practiced, we present a model along with experimental data from diverse species subject groups that show consumers reduce visits and consume more per visit; this behavior may intensify the congestion problem.
INFORMATION STRUCTURES OF PRODUCT MARKETS
Authors: CAVES RICHARD E.
Published: January 2010

Buyers demand continuing information flows to guide their choices among competing product brands. They select portfolios of information types, some supplied by sellers of the branded goods, some not. This paper investigates the determinants of businesses' outlays on information (media advertising, sales force, other sales promotion). They include buyers' overall demands for information, buyers' access to sources not controlled by the seller, the relative efficiency of seller‐supplied information, and competitive conditions in the product market. The hypotheses about effects on sellers' total information outlays are strongly supported. Some evidence appears on determinants of the mixture of information types they provide.
THE DEMAND FOR EDUCATION FOR HOME PRODUCTION
Authors: CORMAN HOPE
Published: January 2010

This paper analyzes a type of education thus far ignored in the literature—non‐credit adult education to enhance home production skills. In the analysis, we test whether such education behaves as an investment in home productivity and also compare the differences between demands for home productivity enhancing education and labor market enhancing education. Results on four adult cohorts indicate that both types of schooling have investment components, although there are also significant differences in the two demand functions. Results also indicate that the two types of education are complementary rather than substitute activities.
THE DETERMINANTS OF RELATIVE POLITICAL CAMPAIGN EXPENDITURES
Authors: BENDER BRUCE
Published: January 2010

This paper develops and tests a model of relative political campaign spending in an election formulated within a capital theory framework. Probability of election is treated as a function of the relative political capital stocks of the candidates, and campaign expenditure is viewed as the mechanism by which candidates optimally adjust their political capital stocks. If contributors are risk‐neutral, then all factors that increase a candidate's initial political capital stock tend to decrease his relative campaign expenditures, while all factors that increase the value of the office to the candidate tend to increase his relative campaign expenditures. However, if contributors are risk‐averse, then the former effect is theoretically indeterminate. Empirically, a candidate is more likely to outspend his opponent if he is an incumbent, a member of the weaker political party, and the younger candidate.
FEDERAL DEFICITS, MACRO‐STABILIZATION GOALS, AND FEDERAL RESERVE BEHAVIOR
Authors: MCMILLIN W. DOUGLAS
Published: January 2010

The effects of federal deficits on Federal Reserve behavior as proxied by changes in the growth rate of the monetary base are analyzed in this study. Multivariate Granger‐causality tests are employed in the analysis. The deficit measure that is the focus of the analysis is the change in the real market value of privately held federal debt. The tests indicate that the deficit Granger‐causes the monetary base. Additionally, concerns for financial market stability, real output, and exchange rate movements in the period of floating rates also affect Federal Reserve behavior.
MARKET ENFORCED INFORMATION ASYMMETRY: A STUDY OF CLAIMING RACES
Authors: HALL CHRISTOPHER D.
Published: January 2010

This is a study of complementary markets. The race track polices the betting market with information revealed in a ‘claiming horse’ market. This policing reduces the adverse consequences of asymmetric information: experts in identifying horses and fraud are deterred from biasing betting odds against bettors at large. Consequently, bettors specialize in evaluating published race information. This ‘monitoring’ theory is compared to a competing theory of claim races as a self‐assessed horse market. Parametric data is used to evaluate each theory. Institutional details also provide a test of each theory.
ANTICIPATED INFLATION AND AGGREGATE EMPLOYMENT: THE CASE OF COSTLY PRICE ADJUSTMENT
Authors: KURAN TIMUR
Published: January 2010

Even if inflation is perfectly anticipated, a firm that finds nominal price adjustments sufficiently costly will reset its price at multi‐period intervals. Consequently, its average output will change in a direction that depends on properties of its profit function. On the basis of this observation, which does not involve money illusion, the paper shows that anticipated inflation can stimulate aggregate employment through a process that entails changes in the factor demands of individual monopolistic firms and in the intersectoral allocation of consumer expenditure. Simulations indicate, however, that the gain in aggregate employment is likely to be modest.
A RESPECIFIED TAX‐ADJUSTED FISHER RELATION
Authors: ROSE LOUIS A.
Published: January 2010

How much will a 1% increase in expected inflation increase nominal interest rates? Irving Fisher's famous equation implies that nominal interest rates will rise in proportion to an increase in expected inflation. Darby and Feldstein, correcting the Fisher equation for taxation, predict a nominal interest rate increase of [1/(1 ‐ T)]% where T is the marginal tax rate: i.e., if T =3, then a 1 % increase in expected inflation should cause a 1.4 % rise in interest rates.

Empirical evidence, however, suggests that the rise in interest rates is much smaller than the Darby/Feldstein prediction. Estimates are around 9, varying mostly between 5 and 1.15, which is much closer to Fisher's original prediction. It is important to know the size of the interest rate response to inflation expectations in a world in which inflation and interest rates are volatile and in which tax laws are designed to influence savings and investment through interest rates.

In this paper we attempt to close the gap between theorized and estimated effects of inflation by incorporating into the Fisher equation two important aspects of the U.S. tax code: historic cost depreciation and the lower tax rate on capital gains. Our model shows that the effect of expected inflation on interest rates is dampened by the lower benefits from depreciation deductions arid the capital gains tax.

Our corrected Fisher equation predicts a 1.12 % nominal interest rate increase, rather than the 1.4 % increase implied by the Darby/Feldstein model. The, our model closes about 56 % of the gap between theory and empirical evidence. The remainder could be closed by additional refinements in the model or better empirical modeling.
PEAK LOAD PRICING IN COMPETITIVE MARKETS
Authors: GERSTNER EITAN
Published: January 2010

The paper offers an explanation for temporal price dispersion. Temporal price dispersion in the model is due neither to exogenous shifts in demand nor to price discrimination motives as shown in other papers. In this paper the explanation relies on peak‐load pricing. In the model presented, consumers decide to purchase a given product in a certain time period according to the satisfaction they derive from the product at that time and to the prices and number of customers they expect at each firm and period. The demand in each period is controlled by sellers through prices. By offering different prices in different periods, sellers motivate consumers to spread themselves across periods in a profitable way. Therefore, the demand and price in each time period is determined endogeneously.
A POSITIVE THEORY OF DISCRETIONARY POLICY, THE COST OF DEMOCRATIC GOVERNMENT AND THE BENEFITS OF A CONSTITUTION
Authors: CUKIERMAN ALEX , MELTZER ALLAN H.
Published: January 2010

We offer an explanation of government's preference for discretionary policy action. The main elements are asymmetric information and the ability and desire of governments to maximize reelection prospects. Discretionary policy imposes a social cost. We show that the cost is eliminated if all voters have the same information as the government. An optimal, state contingent policy rule that precommits government through a constitution eliminates the cost by removing government's opportunities to exploit its informational advantage. Rules of this kind, and constitutional restrictions, are difficult to enforce in the presence of uncertainty and different information available to government and the public.
THE LAGGED IMPACT OF STATE AND LOCAL TAXES ON ECONOMIC ACTIVITY AND POLITICAL BEHAVIOR
Authors: BENSON BRUCE L. , JOHNSON RONALD N.
Published: January 2010

Politicians are frequently characterized as making fiscal decisions based on a shorter time horizon than is required for full taxpayer adjustment, thus generating near term benefits and relatively high tax rates. This argument requires a negative impact of taxes on economic activity distributed over a relatively long time period. Considerable empirical evidence suggests that state and local taxes do not significantly impact the geographic distribution of economic activity; this analysis, however, finds a significant negative distributed lag impact of such taxes on capital formation. The approach emphasizes interstate tax competition in formulating the cross‐section time‐series estimating equation.
MINIMUM WAGE EFFECTS WITH OUTPUT STABILIZATION
Authors: COX JAMES C. , OAXACA RONALD L.
Published: January 2010

What are the effects of legal minimum wage rates on the U.S. economy? Does minimum wage legislation promote the economic self‐interest of high wage union labor and impede the economic self‐interest of capitalists as our earlier research [Cox and Oaxaca 1982] suggested? This paper uses a nine sector econometric/simulation model of U.S. industry from 1975–1978 to answer these questions in the context of stabilization policies which hold aggregate real output constant. While most simulated percentage effects are small, those for the unskilled workers themselves are not. A 15.7 percent increase in the average nominal wage rate of unskilled labor, as a result of minimum wage legislation, produced an 11 percent decrease in unskilled employment, 2.2 million jobs lost, while increasing the real wage of unskilled workers by 15 percent. Simulated changes in several key variables support our earlier observations that the self‐interests of labor unions, with skilled workers, conflict with those of capitalists over the issue of minimum wage legislation.
THE INCENTIVES TO ORGANIZE AND DEMAND REGULATION: TWO ENDS AGAINST THE MIDDLE
Authors: BENSON BRUCE L. , FAMINOW M.D.
Published: January 2010

A consumer versus business view of regulation frequently is too simplistic. Producers as a group may also be able to obtain rents from non‐consumer surplus sources, and therefore may have relatively strong aggregate incentives to organize and seek favorable regulation as compared to consumers' incentives to avoid such regulation. This occurs in an increasing cost industry where producers purchase inputs whose supply curves are not infinitely elastic. The rents obtained by producers through regulatorily initiated output restrictions then include transfers from resource suppliers as well as from consumers, and exceed the potential losses consumers face.
A NOTE ON THE VANISHING LIQUIDITY EFFECT OF MONEY ON INTEREST
Authors: GRAHAM FRED C.
Published: January 2010

This paper provides a brief review and critique of some of the results and conclusions of Melvin [1983] concerning the effects of inflation on the response pattern of interest rates to changes in money growth rates. It also presents results concerning the significance of two different measures of the inflationary environment ––– the actual rate of inflation and the variance of the inflation rate ––– in explaining this response. The conclusion drawn here is that the variance of the inflation rate better explains the changing money‐interest relationship. This conclusion is rather different from that of Melvin.
AGGREGATE DEMAND AND INTEREST RATES: A MACROECONOMIC APPROACH TO THE TERM STRUCTURE
Authors: MCCAFFERTY STEPHEN
Published: January 2010

This paper develops a model in which the term‐structure of interest rates obtains as an equilibrium outcome of the interactions of firms, households and rationally informed speculators. Exogenous disturbances whose impact effects fall only in the market for short‐term bonds generate equilibrium movements in the yield on long‐term bonds and the level of investment spending. In the case of risk‐averse speculators, a purely transitory, unanticipated shock to the money supply generates a long distributed‐lag effect on the level of aggregate demand.
THE PROBLEM OF INSTREAM FLOWS
Authors: ANDERSON TERRY L. , JOHNSON RONALD N.
Published: January 2010

To obtain a surface water right in the arid American West, private appropriators have been required to undertake actual physical diversion of the water. That requirement largely negates the role of private contacting to preserve or enhance water flows for recreational, wildlife and aesthetic purposes. In this paper a model is developed and used to examine the courts' rationale for denying private claims to instream flows. The ways in which such claims can be made amenable to the prior appropriation system are explored. The paper is motivated by the failure of public agencies to achieve an approximately optimal solution.
STOCK RETURNS, INFLATION, AND REAL OUTPUT
Authors: COATE DOUGLAS , VANDERHOFF JAMES
Published: January 2010

This paper provides empirical evidence on the extent to which the inverse relationship between real stock returns and inflation in recent years is causal or spurious. The results indicate that this relationship is spurious and can be explained by the inverse correlation between unexpected inflation and unexpected real output. The expected and unexpected real output and inflation variables are generated from the ASA/NBER Business Outlook Surveys.
TAX EVASION AND THE MARGINAL COST OF PUBLIC FUNDS
Authors: USHER DAN
Published: January 2010

Tax evasion and deadweight loss have similar implications for the rules of public finance. The optimal mix of taxes can be derived from the minimization of the sum of aggregate deadweight loss and aggregate cost of tax evasion. Similarly, the marginal cost of public funds includes allowances for marginal deadweight loss and marginal cost of tax evasion per dollar of public revenue acquired.
TEACHER UNIONS AND THE COST OF PUBLIC EDUCATION
Authors: EBERTS RANDALL W. , STONE JOE A.
Published: January 2010

Do teacher unions affect the cost of public education? Based upon data from two national surveys and holding measures of educational output and other factors constant, the authors of this paper find that teacher unions raise costs by 7 to 15 percent. The estimated differential is not reduced by treating unionization as endogenous, by distinguishing between large and small districts, or by distinguishing between districts in large and small cities. The union effect on cost works through teacher compensation, production technology, and factor use, and is borne primarily by taxpayers, with little or no effect on average student achievement.
“BUMPING”, LAYOFFS, AND WORKSHARING
Authors: KATO TAKAO
Published: January 2010

This paper deals with an interesting but often‐neglected labor practice prevalent in large North American firms with well‐developed internal labor markets. Large North American firms typically respond to a decline in demand for their products by first reducing the number of hours worked (or worksharing). As the demand continues to fall, however, they begin to make skilled workers “bump onto” unskilled jobs, displacing unskilled workers. Skilled workers are laid off only after a considerable number have bumped. I develop an implicit contract model and explain the practice.
IDEOLOGY AND LEGISLATOR SHIRKING
Authors: NELSON DOUGLAS , SILBERBERG EUGENE
Published: January 2010

We argue that legislator shirking (voting on the basis of personal ideology rather than the interests of one's constituents) can exist, but its appearance should conform to the law of demand. We test and confirm this theory using votes on defense expenditure bills in the U.S. Senate in 1982. We assume the cost of shirking is relatively higher on narrowly focused bills on specific weapons systems with well‐defined beneficiaries, and relatively lower on general defense expenditure bills with uncertain final distribution of funds. We find greater influence for senators' ideology in general versus specific bills.
A SIMPLE MACROECONOMIC MODEL WITH MONOPOLISTIC FIRMS
Authors: ROWE NICHOLAS
Published: January 2010

This paper presents a simple macroeconomic model in which firms' outputs are imperfect substitutes, and explores the macroeconomic implications of monopolistic competition. The model is classical in some respects, but Keynesian in others. Multiple or unstable equilibria are not unlikely. Permanent price controls will, in principle, be desirable, since they allow a permanent and efficient increase in aggregate output. Small costs of price adjustment may induce large deviations of output from the natural rate. Fiscal policy will generally affect aggregate output, but the sign and magnitude of the government expenditure multiplier cannot be determined a priori.
KNIGHT'S “MORAL HAZARD” THEORY OF ORGANIZATION
Authors: BARZEL YORAM
Published: January 2010

In this paper I suggest that besides Knight's well recognized “uncertainty” explanation of the firm, he had another one. “Moral hazard” is the central feature in the second, largely overlooked theory. I argue, and attempt to document, that this theory is not a chance excursion but is rather quite well developed by Knight.
SENSATIONALISM, NEWSPAPER PROFITS AND THE MARGINAL VALUE OF WATERGATE
Authors: McCHESNEY FRED S.
Published: January 2010

Newspaper publishers supposedly profit some sensational events. Focusing on the two different products sold by publishers, newspapers and advertising space, this paper shows why sensational events do not necessarily increase publishers' wealth. It also uses financial market analysis to examine the wealth effects of one sensational event, Watergate, on a portfolio of newspaper stocks and on the Washington Post in particular. No significant effects are found.
PARETO IMPROVING MINIMUM WAGE LAWS
Authors: LANG KEVIN
Published: January 2010

By increasing the expected wage in low skill jobs, a minimum wage law can reduce the incentive for low skill workers to imitate high skill workers in the signalling process. The gain from reduced investment in the signal can more than offset the loss from unemployment among low skill workers so that total output increases. Moreover, with an appropriate poll tax on workers to compensate owners of capital, the law can make all workers and owners of capital better off.
CONTRACTING, CONTINGENCIES AND SINGLE‐FAMILY HOUSE PRICES
Authors: ALLEN PAUL R. , SHILLING JAMES D. , SIRMANS C. F.
Published: January 2010

This paper investigates the relationship between single‐family house prices and contingent terms in contracts. Since contingencies create uncertainty, the market should exact a price premium. The results indicate that the contracting for property rights affects house prices in the predicted ways.
HETEROGENEOUS FIRMS: A CONSUMER'S REPORT
Authors: HALL CHRISTOPHER D.
Published: January 2010

The august title ‘the theory of the firm’ is well known to every student of economics. Less well known is what a firm is exactly, what it may do, or of what use this ‘theory’ may be in understanding the world. W.Y. Oi adds substance to our vague outline of a ‘theory’ in his analysis of heterogeneous firms, while posing a definite challenge of explanation for it. If the result falls short of the mark, it is an interesting attempt, nevertheless.
CENTRAL BANK REPUTATION AND THE MONETIZATION OF DEFICITS: THE 1981 ITALIAN MONETARY REFORM
Authors: TABELLINI GUIDO
Published: January 2010

In 1981 the Bank of Italy was freed from the obligation to purchase the unsold public debt at the Treasury auctions. Since then, the Bank of Italy has reduced debt monetization. The paper seeks to explain this policy shift by analyzing a game between the monetary and fiscal authorities. The fiscal authority is imperfectly informed about the central bank preferences. An equilibrium exists in which the central bank does not monetize, so as to establish a reputation of being independent. Monetization raises fiscal deficits and may raise public debt relative to a non‐accommodative policy.
DISCONTINUITIES IN PENSION BENEFIT FORMULAS AND THE SPOT MODEL OF THE LABOR MARKET: IMPLICATIONS FOR FINANCIAL ECONOMISTS
Authors: PESANDO JAMES E.
Published: January 2010

In their analysis of corporate pension plans, financial economists typically invoke the simplest and the most tractable model of the labor market. This is the spot model, where the worker's cash wage plus accruing pension benefit equals the value of his marginal product in each and every period. This paper provides evidence against the empirical validity of the spot model, and uses provisions common to most pension plans to do so. These findings are relevant to the appropriate measurement of pension liabilities and thus to the present controversy surrounding the termination of overfunded plans and the recapture of surplus assets by the employer. The existence of incentive effects, ruled out by the spot model, may help to unravel certain well known “puzzles,” such as the failure of employers to fully fund their plans in spite of the tax advantages of doing so.
INFLATION, HEDGING AND THE DEMAND FOR MONEY: SOME EMPIRICAL EVIDENCE
Authors: KOSKELA ERKKI , VIREN MATTI
Published: January 2010

This paper explores the role of nominal rate of return uncertainty and inflation hedging as potentially important factors explaining the pattern of money demand. Using U.S. quarterly data over the period 1952.2–1982.4, it is shown that in conformity with theoretical considerations the nominal rate of return uncertainty variable tends to have a significantly positive effect and the inflation hedging variable (the covariance between nominal rate of return and inflation rate) a significantly negative effect on the demand for money. These findings seem to be reasonably robust in terms of various definitions of income, interest rates, inflation rate and money variables as well as in terms of different estimation methods.