bluuebunny/crossref_metadata_2025 huggingface dataset:
Teaching Price Discrimination: Some Clarification
Authors: Carroll Kathleen , Coates Dennis
Published: July 2021

This paper describes some common pitfalls in the teaching of price discrimination. The paper then presents some clarification of these issues and makes suggestions for teaching price discrimination to students in Principles and Intermediate Microeconomics classes.
Remembering Mancur Olson
Authors: Oates Wallace , Oppenheimer Joe , Schelling Thomas C.
Published: July 2021

Mancur Olson, professor of Economics at the University of Maryland‐College Park, died February 19, 1998. He served the Southern Economic Association as a member of the Executive Committee in 1978‐80, as President‐Elect in 1980‐81, and as President in 1981‐82. Three of his colleagues, Wallace Oates, Joe Oppenheimer, and Thomas Schelling, contributed personal essays to a memorial symposium inPublic Choice Studies(No. 31, 1998), a journal published in Japanese. The Editor thanks the Japan Public Choice Society for permission to publish these contributions in English for the benefit of our readers.
Urban Development in the United States, 1690‐1990
Authors: Kim Sukkoo
Published: July 2021

The United States transformed itself from a rural to an urban society over the last three centuries. After a century of unremarkable growth, the pace of urbanization was historically unprecedented between the nineteenth and the early twentieth centuries. In the twentieth century, the urban population continued to increase but in a much more dispersed manner as the suburban population increased. Throughout these developments, cities also exhibited considerable variation in their population sizes. This paper finds that the pace and pattern of U.S. urban development are explained by changes in regional comparative advantage and in economies in transportation and local public goods, which in turn were determined by the changes in the economic structures of cities. This paper also finds that cities varied considerably in size because the larger cities reduced market transaction costs associated with coordinating greater geographic division of labor.
Diagrammatic Approach to Capacity‐Constrained Price Discrimination
Authors: Reece William S. , Sobelt Russell S.
Published: July 2021

This paper presents a diagrammatic solution to the firm's profit‐maximizing price discrimination problem in the face of capacity constraints. Airlines, hotels, and other firms practice yield management, allocating fixed capacity to customer groups paying different prices. In these cases, the firm's short‐run problem is not a decision about production levels, but it is one of allocating a fixed number of output units among customers. Our diagram shows that the conditions for profit‐maximizing price discrimination are very different under these circumstances than in the standard model in which the firm is not constrained by capacity.
Who Minimum Wage Increases Bite: An Analysis Using Monthly Data from the SIPP and the CPS
Authors: Burkhauser Richard V. , Couch Kenneth A. , Wittenburg David C.
Published: July 2021

We use monthly data from theSurvey of Income and Program Participationand theCurrent Population Surveyto estimate the effect of the minimum wage. Minimum wage increases significantly reduce the employment of the most vulnerable groups in the working‐age population—young adults without a high school degree (aged 20‐24), young black adults and teenagers (aged 16‐24), and teenagers (aged 16‐19). While we also find that minimum wage increases significantly reduce the overall employment of young adults and teenagers, these more vulnerable subpopulations are even more adversely affected.
An Economic Theory of Avant‐Garde and Popular Art, or High and Low Culture
Authors: Cowen Tyler , Tabarrok Alexander
Published: July 2021

Artists face choices between the pecuniary benefits of selling to the market and the nonpecuniary benefits of creating to please their own tastes. We examine how changes in wages, lump‐sum income, and capital‐labor ratios affect the artist's pursuit of self‐satisfaction versus market sales. Using our model of labor supply, we consider the economic forces behind the high/low culture split, why some artistic media offer greater scope for the avant‐garde than others, why so many artists dislike the market, and how economic growth and taxation affect the quantity and form of different kinds of art.
The Effects of Model Specification on Foreign Direct Investment Models: An Application of Count Data Models
Authors: Tomlin KaSaundra M.
Published: July 2021

Previous studies have drawn a theoretical and empirical connection between foreign direct investment (FDI) and exchange rates using continuous measures of FDI. However, FDI data are often in discrete count form. I take a representative study of the FDI/exchange rate relationship by Jose M. Campa (1993), and I analyze the sensitivity of the results to specification of the dependent variable. Whereas Campa uses a Tobit specification, I use a count data specification to model counts of FDI occurrences. Using data on FDI in the United States from 1982 to 1993, controlling for the traditional determinants of FDI, I find that the results are sensitive across specifications. Significance levels and the magnitude of the coefficients change when going from a continuous Tobit specification to a zero inflated Poisson (ZIP) model designed for count data. Formal statistical testing finds that the ZIP specification likely models the data most properly. Thus, I indicate that misspecification bias from modeling discrete data with continuous distributions is important.
The Effects of Monetary Policy Shocks: Comparing Contemporaneous versus Long‐Run Identifying Restrictions
Authors: McMillin W. Douglas
Published: July 2021

This study compares the effects of monetary policy shocks on the macroeconomy using four different procedures for identifying policy shocks that use contemporaneous restrictions and a procedure that uses long‐run restrictions. Impulse response functions are computed using the same vector autoregressive (VAR) model and sample period. The comparison is done for a model that includes only a short‐term interest rate and for a model that adds a long‐term rate as well. Sources of differences in the magnitude of effects across identification schemes are examined.
Spatial Price Discrimination and Merger: The N‐Firm Case
Authors: Heywood John S. , Monaco Kristen , Rothschild R.
Published: July 2021

The consequences of merger are analyzed in an N‐firm model of spatial price discrimination. The merger occurs with known probability after location decisions have been made. The possibility of merger alters locations, generates inefficiency, and increases the profit of the merging firms. In the case of corner mergers, but never in the case of interior mergers, the possibility of merger may also reduce the profit of the excluded firms.
Is Delayed Disinflation More Costly?
Authors: Boschen John F. , Weise Charles L.
Published: July 2021

An often‐stated piece of monetary policy wisdom is that postponing disinflation raises the ultimate cost of disinflation. However, there is little empirical work that directly tests the validity of this view. This paper is a study of the relation between the duration of inflation and the cost of subsequent disinflation using 67 disinflation episodes in OECD countries from 1960 through 1993. The estimates indicate that delaying disinflation raises the output loss per unit of inflation reduction, although the effect is not statistically significant in all models. The largest marginal effects of delay occur soon after inflation is allowed to get under way, a finding consistent with a rapid decline in the credibility of the inflating central bank.
Trade and International R&D Spillovers among OECD Countries
Authors: Funk Mark
Published: July 2021

This paper examines the relationship between trade patterns and international research‐and‐development (R&D) spillovers using Kao and Chiang's (1998) and Kao's (1999) recently developed panel cointegration techniques. Monte Carlo‐type tests demonstrate that the choice of weights used in constructing foreign R&D stocks is informative of the spillover transmission when panel cointegration techniques are employed. However, the evidence does not support a relationship between import patterns and R&D spillovers. The relationship between export patterns and R&D spillovers is then considered. Consistent with recent theoretical models (Ben‐David and Loewy 1998), the evidence suggests that exporters receive substantial R&D spillovers from their customers.
Trade Barriers and the Collapse of World Trade During the Great Depression
Authors: Madsen Jakob B.
Published: July 2021

Using panel data estimates of export and import equations for 17 countries in the interwar period, this paper estimates the effects of increasing tariff and nontariff trade barriers on worldwide trade over the period 1929 to 1932. The estimates suggest that real world trade contracted approximately 14% because of declining income, 8% as a result of discretionary increases in tariff rates, 5% owing to deflation‐induced tariff increases, and a further 6% because of the imposition of nontariff barriers. Allowing for feedback effects from trade barriers on income and prices, discretionary impositions of trade barriers contributed about the same to the trade collapse as the diminishing nominal income.
Measurement of Technical Efficiency in Public Education: A Stochastic and Nonstochastic Production Function Approach
Authors: Chakraborty Kalyan , Biswas Basudeb , Lewis W. Cris
Published: July 2021

This paper uses both the stochastic and nonstochastic production function approach to measure technical efficiency in public education in Utah. The stochastic specification estimates technical efficiency assuming half normal and exponential distributions. The nonstochastic specification uses two‐stage data envelopment analysis (DEA) to separate the effects of fixed inputs on the measure of technical efficiency. The empirical analysis shows substantial variation in efficiency among school districts. Although these measures are insensitive to the specific distributional assumptions about the one‐sided component of the error term in the stochastic specification, they are sensitive to the treatment of fixed socioeconomic inputs in the two‐stage DEA.
The Power of Cointegration Tests Versus Data Frequency and Time Spans
Authors: Zhou Su
Published: July 2021

Using Monte Carlo methods, this study illustrates the potential benefits of using high frequency data series to conduct cointegration analysis. The study also provides an account of why the results are different from those reported by Hakkio and Rush (1991). The simulation results show that when the studies are restricted by relatively short time spans of 30 to 50 years, increasing data frequency may yield considerable power gain and less size distortion, especially when the cointegrating residual is not nearly nonstationary, and/or when the models with nonzero lag orders are required for testing cointegration. The study may help clarify some misconceptions and misinterpretations surrounding the role of data frequency and sample size in cointegration analysis.
Is Democracy a Normal Good? Evidence from Democratic Movements
Authors: Minier Jenny A.
Published: July 2021

A frequent assertion of economists and political scientists is that democracy is a normal good, or that higher incomes lead citizens to “desire” more democracy. This assertion, however, has been difficult to test directly. I introduce a data set of democratic movements, and use it to address the relationship between income and the demand for democracy. Logit analysis of the estimated probability that a democratic movement occurs in an authoritarian country suggests that this probability is increasing in income per capita up to a level of approximately $5000. Unlike previous results, this does not suggest that all countries will become democratic once they pass some income threshold.
Response by Adults to Increases in Cigarette Prices by Sociodemographic Characteristics
Authors: Farrelly Matthew C. , Bray Jeremy W. , Pechacek Terry , Woollery Trevor
Published: July 2021

Cigarette excise taxes are widely viewed by health economists as an effective tool to reduce cigarette consumption. However, those opposed to increasing cigarette excise taxes often state that the taxes unfairly target certain segments of the population, notably the poor and minorities. Some of this opposition may have been fueled by a lack of understanding of how the tax will affect the health and welfare of various demographic groups of interest. This article provides guidance to policy makers by estimating price elasticities among adults by gender, income, age, and race or ethnicity. Women, adults with income at or below the median income, young adults, African‐Americans, and Hispanics are most responsive to cigarette price increases. For example, adults with income at or below the median are more than four times as price‐responsive as those with income above the median.
Four Parameters of Interest in the Evaluation of Social Programs
Authors: Heckman James , Tobias Justin L. , Vytlacil Edward
Published: July 2021

This paper reviews four treatment parameters that have become commonly used in the program evaluation literature: the average treatment effect, the effect of treatment on the treated, the local average treatment effect, and the marginal treatment effect. We derive simply computed closed‐form expressions for these treatment parameters in a latent variable framework with Gaussian error terms. These parameters can be estimated using nothing more than output from a standard two‐step procedure. We also briefly describe recent work that seeks to go beyond mean effects and estimate the distributions associated with various outcome gains. The techniques presented in the paper are applied to estimate the return to some form of college education for various populations using data from the National Longitudinal Survey of Youth.
Illicit Drug Use, Employment, and Labor Force Participation
Authors: French Michael T. , Roebuck M. Christopher , Alexandre Pierre Kébreau
Published: July 2021

Illicit drug use has declined among the U.S. adult population, but national surveys show the majority of illicit drug users are employed. Concern about workplace productivity, absenteeism, and safety has led many employers to establish employee assistance and drug testing programs. Given the sharp interest in workplace interventions, more information is needed about the relationships between drug use and labor market status. This study estimated the probability of employment and labor force participation for different types of drug users using nationally representative data from the 1997 National Household Survey on Drug Abuse. Results strongly indicated that chronic drug use was significantly related (negative) to employment for both genders and labor force participation for males. Furthermore, nonchronic drug use was not significantly related to employment or labor force participation. These findings suggest that workplace policies for illicit drug use should consider chronic or problem drug users apart from light or casual users.
Efficiency Wages, Interfirm Comparison, and Unemployment
Authors: Johansen Kåre , Strøm Bjarne
Published: July 2021

The paper presents an efficiency wage model where worker effort depends on own wages relative both to wages of other workers in the firm and to similar workers in other firms. First, we show how the Solow conditions are modified if internal comparison effects are at work. Second, we discuss the effect of internal wage comparison on wage inequality within firms. Third, we study unemployment and relative wage determination within a general equilibrium model, and analyze the effect of technological change and various tax policies on equilibrium unemployment and relative wages. Finally, the short‐run effects of aggregate demand shocks are analyzed.
Long‐Run Purchasing Power Parity with Asymmetric Adjustment
Authors: Enders Walter , Dibooglu Selahattin
Published: July 2021

Tests of purchasing power parity (PPP) that use panel data are more supportive of the theory than are bilateral tests. The article uses threshold cointegration to explore long‐run PPP. Using data from the post‐Bretton Woods period, we show that cointegration with threshold adjustment holds for a number of European countries on a bilateral basis. Focusing on France and Germany as base countries, we show that the error‐correction model has important nonlinear characteristics in that prices and the exchange rate have markedly different adjustment patterns for positive gaps from PPP than negative gaps.
Savings and Investment: Some International Perspectives
Authors: Schmidt Martin B.
Published: July 2021

Consistent with neoclassical growth models, recent estimates of the close association between domestic saving and investment rates may allow policy makers the opportunity to alter investment through the introduction of polices that alter domestic savings. However, such an interpretation presumes an endogenous investment response. Equally likely, at least theoretically, is that the close association is maintained by movements in domestic savings. The present paper explicitly examines the endogeneity of domestic saving and investment rates. For a subset of countries, including the United States, the results suggest that saving adjustments make up only a small portion of investment behavior.
Population Growth and Economic Growth: Long‐Run Evidence from Latin America
Authors: Thornton John
Published: July 2021

Unit root tests, the Johansen maximal likelihood methodology, and Granger causality tests in the context of a one‐step error correction model are used to examine the long‐run relation between population and per capita GDP in seven Latin American countries over most of the 20th century. The results suggest that no long‐run relation has existed and, hence, population growth neither causes per capita GDP growth nor is caused by it.
Hospital Technology in a Nonmarket Health Care System
Authors: Bilodeau Daniel , Crémieux Pierre‐Yves , Ouellette Pierre
Published: July 2021

This article presents a quantitative analysis of the production of hospital services in a nonmarket environment based on production theory and a very complete data set on the hospital industry. It provides both insights into the optimality of the hospital industry structure and a useful framework to evaluate the impact of anticipated industry structural changes. We find that the industry structure is far from optimal; it is characterized by overcapitalization and would experience difficulty responding to increased demand for some types of services.
Excess Returns of Industrial Stocks and the Real Estate Factor
Authors: He Ling T.
Published: July 2021

In order to identify the major risk factors in pricing industrial stocks, this study estimates different models based on six explanatory factors: the overall stock market, size, book‐to‐market equity ratio, the term structure, default risk, and the unsecuritized real estate market. The results of this study indicate that the real estate factor plays an important role in explaining excess returns on industrial stocks, along with other risk factors. The coefficient of the stock market factor declines when the real estate market factor is included in the model. Therefore, the large coefficient in the single‐factor (stock market) model probably results from covariation between the overall stock market factor and the real estate factor. Results for subperiods indicate that the effects of the real estate factor are quite stable and second only to the overall stock market factor.
Valuing Mitigation: Real Estate Market Response to Hurricane Loss Reduction Measures
Authors: Simmons Kevin M. , Kruse Jamie Brown , Smith Douglas A.
Published: July 2021

This paper explores valuation of two measures of windstorm mitigation in a Gulf Coast city. Since the home owner is not able to reduce the probability that a hurricane or tropical storm will occur at the structure's location, any voluntary mitigation intended to fortify the home is a form of self‐insurance as defined by Ehrlich and Becker (1972). This distinction is important because market insurance and self‐insurance are substitutes and thus subject to the standard moral hazard problem. Using a unique Multiple Listing Service data set with detailed information on several hurricane mitigation features, we construct two models to test the influence of mitigation on resale price. The results of the hedonic study indicate that individuals place a positive value on a self‐insurance type of mitigation.
An Illustrated Case for Active Learning
Authors: Salemi Michael K.
Published: July 2021

Educational psychologists and instructional specialists agree that students should be actively involved in the educational process. Despite evidence that students learn better and are more committed to learning when they work with course material, chalk‐and‐talk remains the dominant pedagogy in economics instruction. This article provides a rationale for active learning in undergraduate economic courses based on the literature and on the author's experience. It provides examples of active learning exercises, explains why students and teachers benefit from active learning, and concludes that the benefits of active learning outweigh the costs. The exercises in this article focus on the concept of present value. A companion Web site provides exercises useful for teaching other financial market concepts.
Cross‐Subsidization in Nursing Homes: Explaining Rate Differentials Among Payer Types
Authors: Troyer Jennifer L.
Published: July 2021

Are Medicaid patients being subsidized by other residents in nursing homes? This article employs cross‐sectional data on nursing homes and residents in a multiproduct empirical cost analysis to obtain the benchmark magnitudes of patient service costs needed to assess the issues. The estimated cost function provides evidence that Medicaid reimbursement rates are lower than the average incremental cost of care for Medicaid patients in approximately one quarter to one third of Florida nursing homes. One possible explanation for this apparent cross‐subsidization, considered here, is that patients pay a premium in self‐insured rates early in their residency to fairly cover the expected future losses if they later convert to Medicaid. Based on the empirical frequencies of patient transitions to different payer status over the length of the nursing home stay, it is shown that the apparent cross‐subsidization is explained, to a large extent, by an intertemporal conversion surcharge.
Education Vouchers, the Peer Group Problem, and the Question of Dropouts
Authors: Ferris J. Stephen , West Edwin G.
Published: July 2021

This paper extends the analysis of Epple and Romano (1998a, b), who argue that vouchers encourage private schools to “skim the cream off” public schools. Because the education received by students depends on the quality of their classmates, this loss reduces the quality of education received by those remaining in the public system—the peer group effect. In our model, vouchers allow low‐income students to escape the frustration of having to conform to the uniformity of the public school system. Ultimately, the size of the dropout effect relative to the peer group effect is an empirical question. Nevertheless, to the extent that voucher use reduces the student dropout rate, the peer group externality becomes insufficient in itself to prevent reconsideration of a voucher system on equity as well as efficiency grounds.
Turning Points in the U.S. Civil War: Views from the Grayback Market
Authors: Weidenmier Marc D.
Published: July 2021

This article introduces a new high‐frequency time series of Confederate money prices taken from the newspapers of Richmond and leading cities in the Eastern Confederacy. The new grayback series is tested for turning points. The empirical analysis suggests that turning points in the Confederate grayback market were different from those identified in the Northern greenback market by Willard, Guinnane, and Rosen (1996). It appears that war did not always have symmetric effects on Northern and Southern money prices.

Financial and commercial matters fluctuate under the successes and reverses of the war like ebb and tide, and it is not to be wondered that under the great military events that are now transpiring [Gettysburg], there should be a suspension of operations in [gold] trade. (Richmond Examiner July 9. 1863. p. 1)
Pollution Taxes When Firms Choose Technologies
Authors: Amacher Gregory S. , Malik Arun S.
Published: July 2021

We consider the properties of a pollution tax when the regulated firm has a discrete choice of technologies with which to reduce pollution. The firm's technology choice makes possible two sequences of play: the traditional one in which the regulator moves first, committing to a tax rate before the firm adopts a technology, and an alternative one in which the firm moves first by adopting a technology. We find that a range of pollution levels, including possibly the first‐best one, are unattainable when the regulator moves first. The regulator may be better able to achieve the first‐best outcome when the firm moves first.
Economics as Theology: Adam Smith's Wealth of Nations
Authors: Waterman A. M. C.
Published: July 2021

Adam Smith's Wealth of Nations may be read as a work of natural theology similar in general style to Newton's Principia. Smith's ambiguous use of the word “nature” and its cognates implies an intended distinction between a positive sense in which “natural” means “necessary” and a normative sense in which “natural” means “right.” The “interest” by which humans are motivated is “natural” in the first sense, but it may not bring about social outcomes that are “natural” in the second sense. It will do so only if the social institutions within which agents seek their own “interest” are well formed. Smith provides a large‐scale, quasi‐historical account of the way in which well‐formed institutions gradually develop as unintended consequences of private “interest.” In so doing, he provides a theodicy of economic life that is cognate with St. Augustine's theodicy of the state as remedium peccatorum.

“If a great book such as Smith's Wealth of Nations is read repeatedly, on even a fifth or a tenth reading one continues to learn new things. I doubt whether anyone will ever fully apprehend all the things that Smith wished to express, and there is even more to learn from an interesting mind than its owner wished to teach us.”

George Stigler (1982, p. 108)
The Logit Equilibrium: A Perspective on Intuitive Behavioral Anomalies
Authors: Anderson Simon P. , Goeree Jacob K. , Holt Charles A.
Published: July 2021

This paper considers a class of models in which rank‐based payoffs are sensitive to “noise” in decision making. Examples include auctions, price competition, coordination, and location games. Observed laboratory behavior in these games is often responsive to the asymmetric costs associated with deviations from the Nash equilibrium. These payoff‐asymmetry effects are incorporated in an approach that introduces noisy behavior via a logit probabilistic choice function. In the resulting logit equilibrium, behavior is characterized by a probability distribution that satisfies a “rational expectations” consistency condition: The beliefs that determine players' expected payoffs match the decision distributions that arise from applying the logit rule to those expected payoffs. We prove existence of a unique, symmetric logit equilibrium and derive comparative statics results. The paper provides a unified perspective on many recent laboratory studies of games in which Nash equilibrium predictions are inconsistent with both intuition and experimental evidence.
Competition and Prices in USDA Commodity Procurement
Authors: MacDonald James M. , Handy Charles R. , Plato Gerald E.
Published: July 2021

We evaluate United States Department of Agriculture (USDA) food procurement auctions. The Department spends nearly $1 billion a year for products for domestic feeding programs, such as the National School Lunch Program, and another $2.5 billion for international food programs. USDA's purchasing relics primarily on auction mechanisms designed to induce “hard” manufacturer price competition. We compare private‐sector prices to low bids in 25,000 auctions, and find that typical private‐sector prices substantially exceed USDA low bids for comparable products. We also assess the effects of competition on low bids. Low bids fall as the number of bidders increases, and the effects are nonlinear. Additional bidders have a very small effect on prices when there are already five or six bidders, but a stronger effect in markets with only one or two bidders. Even in this highly transparent bidding environment, competition matters.
Classroom Game on the Theory of Rent Seeking: Some Practical Experience
Authors: Bischoff Ivo , Hofmann Kai
Published: July 2021

On the basis of our practical experience in applying the classroom game on rent seeking proposed by Goeree and Holt, we suggest two setup modifications and one extension to the original game. The modifications are intended to increase the teaching value of the classroom game by enlarging the choice space of the teams and further clarifying the welfare consequences of rent seeking. The extension is introduced to show that teams' high risk preference does not result from a misperception of the decision‐making problem. Instead, this preference is argued to be the consequence of the rivalrous nature of the game.
Monetary Policy Rules with Model and Data Uncertainty
Authors: Ghysels Eric , Swanson Norman R. , Callan Myles
Published: July 2021

In this paper we examine the prevalence of data, specification, and parameter uncertainty in the formation of simple rules that mimic monetary policymaking decisions. Our approach is to build real‐time data sets and simulate a real‐time policy‐setting environment in which we assume that policy is captured by movements in the actual federal funds rate, and then to assess what sorts of policy rule models and what sorts of data best explain what the Federal Reserve actually did. This approach allows us not only to track the performance of alternative rules over time (hence facilitating a type of model selection among competing rules), but also to more generally assess the importance of the data revision process in the formation of macroeconomic time series models. From the perspective of real‐time data, our results suggest that the use of data that are erroneous, in the sense that they were not available at the time decisions could have been made based on forecasts from the rules, can lead to the selection of quantitatively different models. From the perspective of finding a rule that best approximates what the Federal Reserve Board (Fed) has actually done (and hence from the perspective of finding a rule that best approximates what the Fed will do in the future), we find that (i) our version of “calibration” is better than naïve estimation, although both are dominated by an approach to rule formation based on the use of adaptive least‐squares learning; (ii) rules based on data that are not seasonally adjusted are more reliable than those based on seasonally adjusted data; and (iii) rules based solely on preliminary data do not minimize mean square forecast error risk. In particular, early releases of data can be noisy, and for this reason it is useful to also use data that have been revised when making decisions using policy rules.
Land Development under the Threat of Taking
Authors: Turnbull Geoffrey K.
Published: July 2021

This paper presents a model of the land developer's response to the threat of regulatory taking. It shows that the threat of regulation affects development timing and density differently than the regulation imposed with certainty. Planned development proceeds at a more rapid pace under the taking threat, whereas the development density varies systematically by location in a spatial land market. Further, property on which regulations are actually imposed will be developed later than planned when the demanded density is falling over time. Regulated property, however, may be developed even more quickly than planned when the demanded density is rising over time.
Nominal Revaluation of Cross‐Border Assets, Terms‐of‐Trade Changes, International Portfolio Diversification, and International Risk Sharing
Authors: Kim Soyoung
Published: July 2021

Using a simple theoretical model, I suggest that the nominal revaluation of cross‐border assets (the international wealth redistribution through the changes in nominal variables) may work as an international risk‐sharing mechanism at the aggregate level. Then, I empirically examine three risk‐sharing channels: the nominal revaluation of cross‐border assets, the terms‐of‐trade channel suggested by Cole and Obstfeld (1991), and cross‐border security ownership (international portfolio diversification). Empirical results suggest that the nominal revaluation hedges country‐specific consumption risks at the aggregate level but that the other two channels do not. The results have interesting implications on international risk‐sharing and exchange rate regime comparison.
Permanent and Temporary Components of Stock Prices: Evidence from Assessing Macroeconomic Shocks
Authors: Gallagher Liam A. , Taylor Mark P.
Published: July 2021

This paper outlines a simple macro model with overlapping wage contracts to investigate how the temporary and permanent components of stock price movements may be related to aggregate macro‐economic supply and demand disturbances. In the content of the model, we show that aggregate demand shocks have only temporary effects on real stock prices, while supply shocks may affect the level of real stock prices permanently. Moreover, the temporary component in U.S. stock prices, identified by placing appropriate structural restrictions on a vector autoregressive system estimated for the postwar period, is statistically significant. This evidence supports the mean‐reversion hypothesis that stock prices are not pure random walks. The finding is robust to the choice of variables used in the vector autoregressive system and periodicity.
What Is Fair? Experimental Evidence
Authors: Dickinson David L. , Tiefenthaler Jill
Published: July 2021

There has been growing interest within the economics discipline in the role of equity concerns in the distribution of resources. This paper presents empirical evidence from controlled laboratory experiments where third‐party decision makers allocate resources between two individuals. The experimental results indicate that subjects view a wide range of different allocations as the fair distribution of resources. However, regression analysis indicates that both treatment effects and a few demographic variables explain some of this variation in fairness concepts. Most significantly, decision makers rewarded subjects who earned their favorable positions, and the gender of the decision maker was an important predictor of the allocation chosen.
Wages and the Composition of Experience
Authors: Goldsmith Arthur H. , Veum Jonathan R.
Published: July 2021

This paper provides evidence on the relation between alternative forms of experience and wages using data drawn from the National Longitudinal Survey of Youth. Prior labor market experience is segmented into mutually exclusive categories based on industry and occupation to examine how subsequent employers value skills acquired on previous jobs. We find that most forms of experience, including tenure at the current job, provide a comparable return. However, the wage return to prior experience in a different occupation and industry is significantly lower. Such “career changes” constitute over half of all prior work experience among workers in their mid‐30s.
The Effect of Child Care Costs on the Employment and Welfare Recipiency of Single Mothers
Authors: Connelly Rachel , Kimmel Jean
Published: July 2021

This paper considers the effect of child care costs on two labor market outcomes for single mothers—whether to work for pay and whether to receive welfare. Hourly child care expenditures are estimated using data drawn from the 1992 and 1993 panels of the Survey of Income and Program Participation (SIPP). These expenditures are then used to predict the probability of welfare recipiency and employment. While the direction and significance of key variables are robust to changes in specification, the quantitative results are found to be sensitive to identification restrictions. All results show a substantial positive effect of child care costs on welfare recipiency, with the child care price elasticity of welfare recipiency varying from 1.0 to 1.9. Similarly, we find a significant negative effect of child care price on employment with elasticity estimates from ‐.3 to ‐1.1, showing that controlling for the welfare choice does not reduce the price elasticity of employment found in other studies.
Demographic Effects on Personal Saving in the Future
Authors: Pryor Frederic L.
Published: July 2021

After briefly examining the various proposed causes for the decline in the U.S. personal saving rate in the past decade, this essay then argues that a shift in the demographic composition of the population will be a much more important cause for a decline in personal saving in the future. A change in the balance between those in the labor force who are saving and retirees who are dissaving will result in a considerable fall in the aggregate saving rate under most assumptions. The simulation model used to examine this phenomenon takes into account the interest rate, the growth rate of the economy, the retirement age. the growth of population, and the life expectancy. Attention is also given to certain consequences of the fall in the saving rate, such as changes in the interest rate, changes in asset prices, and a decline in the GDP growth rate.
Occupational Licensing of a Credence Good: The Regulation of Midwifery
Authors: Adams A. Frank , Ekelund Robert B. , Jackson John D.
Published: July 2021

A general theoretical and empirical model of the impact of regulation on supply and demand (prices and quantities) is developed in this paper. The regulation of midwifery services—of certified nurse‐tnidwives (CNMs)—relative to obstetricians (OBs) is analyzed within this framework. Demand‐side (quality assurance) effects are distinguished from supply‐side (Stigler‐Peltzman) effects in the model. Since both unambiguously predict a price increase, we focus on the regulatory impact on quantity. We find, within the empirical model, that while both effects are present, supply‐restricting effects dominate quality assurance in the U.S. market for CNM services. When mean regulations are compared to minimum regulations in the sample, CNM births increase from just under 6% of all births to a little over 11%. On net, regulation reduces the quantity of CNM births.
Impact of the 1996 Summer Olympic Games on Employment and Wages in Georgia
Authors: Hotchkiss Julie L. , Moore Robert E. , Zobay Stephanie M.
Published: July 2021

Using a standard differences‐in‐differences (DD) technique and a modified DD technique in the slopes, this paper determines that hosting the 1996 Summer Olympic Games boosted employment by 17% in the counties of Georgia affiliated with and close to Olympic activity, relative to employment increases in other counties in Georgia (the rate of growth increased 0.002 percentage points per quarter). Estimation of a random‐growth model confirms a positive impact of the Olympics on employment. In addition, the employment impact is shown not to be merely a “metropolitan statistical area (MSA) effect”; employment in the northern Olympic venue areas was found to increase 11% more post‐ versus pre‐Olympics than it did in other, similar southern MSAs. The evidence of an Olympic impact on wages is weak.
The Effects of Maternity Leave Legislation on Mothers' Labor Supply after Childbirth
Authors: Baum Charles L.
Published: July 2021

In the late 1980s and early 1990s, 12 states and the District of Columbia passed maternity leave legislation (MLL) allowing mothers a period of leave from work after childbirth. In 1993, President Clinton signed the first piece of federal MLL, the Family and Medical Leave Act (FMLA). Similar to state legislation, the FMLA guarantees 12 weeks of unpaid leave for eligible mothers. I evaluate the effect of MLL on the incidence of leave taking, the probability that mothers will eventually return to work at their prechildbirth jobs, and the timing of their return. The results indicate that the legislation increases the number of mothers who eventually return to their prechildbirth jobs but that MLL does not have a statistically significant effect on the incidence of leave taking. The results also indicate that MLL allows mothers to delay their return to work at their prechildbirth jobs.
New Evidence on Unions and Plant Closings: Britain in the 1990s
Authors: Addison John T. , Heywood John S. , Wei Xiangdong
Published: July 2021

In this paper, we exploit the longitudinal element of the 1990 and 1998 Workplace Employee Relations Surveys for Britain to investigate the effect of unionism on establishment closings. Contrary to both recent U.S. research and long‐standing British work, we find a strong positive association between two measures of unionism—union recognition for collective bargaining purposes and union coverage—and plant closings. This association is robust to the inclusion of highly detailed industry controls but is driven by plants that are parts of multiestablishment entities. No such relationship obtains in the case of single‐plant enterprises. In explaining our findings, we address their consistency with the widely perceived reduction in the “disadvantages of (British) unionism” in recent years.
Payment Certainty in Discrete Choice Contingent Valuation Responses: Results from a Field Validity Test
Authors: Vossler Christian A. , Ethier Robert G. , Poe Gregory L. , Welsh Michael P.
Published: July 2021

Two methods for calibrating discrete choice contingent valuation responses—the dichotomous choice with follow‐up certainty question method of Champ et al. (1997) and the multiple‐bounded method of Welsh and Poe (1998)—are evaluated using data from a field validity comparison of hypothetical and actual participation decisions in a green electricity pricing program. Both calibration methods can produce hypothetical participation levels that closely correspond with actual program participation rates. However, the two methods demonstrate procedural variance as they yield significantly different underlying distributions of willingness to pay.
Food Stamp Caseloads over the Business Cycle
Authors: Ziliak James P. , Gundersen Craig , Figlio David N.
Published: July 2021

We use a dynamic model of food stamp caseloads with state‐level panel data to estimate the impact of the business cycle on food stamp caseloads in the era of welfare reform. The macroeconomy has a substantial impact on food stamp caseloads: A one‐percentage‐point increase in the unemployment rate leads to a 2.3% increase after one year. In terms of welfare policy, a 10‐percentage‐point increase in the share of a state's population waived from rules limiting food stamp receipt among able‐bodied adults without dependents (ABAWDs) results in a 0.5% increase in contemporaneous caseloads. States with waivers from the Aid to Families with Dependent Children (AFDC) program in the mid‐1990s had caseloads about 1.9% higher than nonwaiver states. While changes in AFDC caseloads have historically resulted in coincident changes in food stamp caseloads, our results suggest that the link between AFDC caseload and food stamp caseload changes has dissipated substantially after welfare reform. The cyclical sensitivity of food stamp caseloads indicates the importance of food stamps in smoothing consumption during economic recessions.
Boundaries of the Tournament Pricing Effect in Asset Markets: Evidence from Experimental Markets
Authors: Isaac R. Mark , James Duncan
Published: July 2021

Tournament compensation of asset traders has been shown to promote deconvergence from intrinsic value pricing in an experimental asset market where all traders are so compensated (James and Isaac 2000). This paper explores the extent of this effect as experimental design parameters—proportion of traders facing tournament compensation, details of the tournament contract, and time horizon of the asset being traded—are varied. We find that the original results are replicated using the original parameters, that a tournament contract modified to provide a penalty for underperformance does not necessarily eliminate the effect, and that reducing the proportion of traders facing tournament compensation to half the market largely eliminates the effect.
A Latent Structure Approach to Measuring Reputation
Authors: Quagrainie Kwamena K. , McCluskey Jill J. , Loureiro Maria L.
Published: July 2021

The present study provides estimates of reputation as a dynamic latent variable that is determined by price premiums and market data. Further, it analyzes the effect of extrinsic factors on reputation. Specifically, this study seeks to (i) quantify the reputation of Washington apples over time, (ii) study the dynamic nature of reputation, and (iii) analyze the effect of the label “Washington Apple.” The model adopted in this study is the dynamic multiple‐indicator multiple‐cause (DYMIMIC) modeling approach, which is a special case of the general latent variable modeling scheme called “state‐space” models. Both DYMIMIC and hedonic approaches are applied to the data on Washington apples, and results from the two approaches are compared.
The Correlation between Shocks to Output and the Price Level: Evidence from a Multivariate GARCH Model
Authors: Cover James Peery , Hueng C. James
Published: July 2021

Previous research indicates that the price‐output correlation is time varying. This paper therefore estimates a vector autoregression (VAR) model with a bivariate generalized autoregressive conditional heteroskedasticity (GARCH) error process to obtain quarterly estimates of the price‐output correlation for the United States for the period 1876:IV‐1999:IV. The estimated correlation is usually positive before 1945 and zero during 1945‐1963. Negative correlations become important only after 1963 but do not become obviously more important than zero correlations. Prior to 1945, the estimated correlation typically is positive during both recessions and expansions. After 1945, the estimated correlation remains largely positive during recessions but becomes mainly negative during expansions, suggesting that changes in the sign of the price‐output correlation are the result primarily of changes in its sign during expansions.
Factor Use and Productivity Change in the Alcoholic Beverage Industries
Authors: Xia Yin , Buccola Steven
Published: July 2021

Technology structure and change in the beer, wine, and spirits industries are examined here in a dual cost framework. Productivity growth in these industries has been strong and uninterrupted for the past four decades, outstripping that in the general food sector. Scale economies continue to be significant in brewing and distilling but are weak to nonexistent in winemaking. Substitution between raw materials and value‐adding (labor and capital) inputs is high, implying that any reversal in factor price trends likely will bring substantial changes to production processes. Despite recent rapid increases in relative capital prices, technical change has shifted capital‐material expansion paths toward capital, suggesting that new equipment is designed for its ability to save on raw material and packaging cost.