bluuebunny/crossref_metadata_2025 huggingface dataset:
GROWTH, WELFARE, AND THE SIZE OF GOVERNMENT
Authors: Knoop Todd A.
Published: January 2010

Using an endogenous growth model in which government purchases directly affect aggregate productivity and utility, fiscal policy experiments conducted here indicate that the macroeconomic effects of changes in fiscal policy are at least as sensitive to the mix of spending cuts as they are to the mix of tax cuts. In fact, reducing the size of the government actually reduces growth and welfare freductions in government expenditures are heavily weighted towards reductions in public capital or if the proceeds are not used to reduce capital taxation. In addition, across‐the‐board spending cuts are not likely to significantly improve growth and welfare. (JEL E62, 041)
INFLATION AND ELECTIONS: THEORY AND EVIDENCE FOR SIX OECD ECONOMIES
Authors: Carlsen Fredrik
Published: January 2010

This paper examines the relation between post‐election inflation and the incumbent's re‐election chances using data for 50 elections in six OECD economies. Ijnd that post‐election inflation is above average if the election race is close but not if the incumbent's election prospects are very good or very poor. The theoretical part of the paper shows that this result is consistent with rational political business cycle models. (JEL E31)
LIFESPAN AND OUTPUT
Authors: Swansonf Charles E. , Kopecky Kenneth J.
Published: January 2010

This paper develops a finite‐lifetime continuous‐time model of human capital acquisition. Exogenous technological progress has two aspects, a knowledge frontier and an ease‐of‐learning parameter. We find that as lifespan increases: (1) output per person‐hour rises in a concave fashion, and (2) learning during the work‐phase of life only occurs when individuals have a sufficiently long lifespan. As a result, countries that differ in the average lifespan of their inhabitants can have permanently different levels of output per person even in the presence of free trade, perfect capital markets and common production functions. (JEL O33, J24, F43, D91)
THE U.S. PRODUCTIVITY SLOWDOWN: A PEAK THROUGH THE STRUCTURAL BREAK WINDOW
Authors: Dolmas Jim , Raj Baldev , Slottje Daniel J.
Published: January 2010

This paper provides a formal test of the null hypothesis of a unit root in the log‐level of labor productivity against the alternative of linear trend stationarity with a one‐time structural break in the level and slope of the trend at an a priori unknown date. Using some newly developed time series tests, we show that the log‐level of productivity is more accurately modeled as following a deterministic trend with a regime shift rather than as a unit root process. Some implications of the results for detrending and for testing cointegration relationships between productivity and other variables are discussed. (JEL C22. O40)
ALTERNATIVE P* MODELS OF INFLATION FORECASTS
Authors: Lee Jim
Published: January 2010

This paper reevaluates the inflation forecast performance of M2‐based P* models relative to other competing models over the period of 1970–96. Included in the comparative study are newly developed monetary aggregates, including M2+, MZM, and M2*, and direct treatments of velocity changes associated with recent developments in M2. Out‐of‐sample rolling‐horizon forecast exercises suggest that the predictive accuracy of alternative P* model specifications relative to traditional inflation models is not robust to different subsamples. The switching forecast performance between money‐based and output‐based models across periods highlights the extent of structural instability in the inflation generating process. (JEL E3, E4, C2)
ARE “RISKY ASSETS” SUBSTITUTES FOR “MONETARY ASSETS”?
Authors: Drake Leigh , Fleissig Adrian R. , Mullineux Andy
Published: January 2010

The paper uses an asymptotically ideal model to estimate substitution elasticities between financial assets held by the U.K. personal sector. An important innovation is to extend the range of assets to include “risky” assets as well as capital certain “monetary” assets. The most significant result is the evidence of substitution between “risky” assets and “cash” assets. Also, as risk aversion increases substitution between “risky” assets and “cash” assets generally falls. (JEL E41)
THE ROLE OF THE GOLD STANDARD IN KEYNESIAN MONETARY THEORY
Authors: Sumner Scott
Published: January 2010

This paper shows that many of the most distinctive features of Keynesian economics are best understood if one views the General Theory as essentially a gold standard model. A close examination of Keynes's statements on contemporaneous policy issues suggests that the gold standard had a profound impact on his views on monetary policy effectiveness. In particular, I show that the liquidity trap has been widely misunderstood. Finally, I argue that post–General Theory developments in Keynesian economics are best understood as a response to the inapplicability of Keynes's original message to a world of fiat money regimes. (JEL B22, E12, N1)
DYNAMIC GAINS AND STATIC LOSSES IN OLIGOPOLY: EVIDENCE FROM THE BEER INDUSTRY
Authors: Gisser Mica
Published: January 2010

The paper provides a new perspective on the estimate of the welfare losses due to oligopoly. I argue that the conventional analysis of monopoly/oligopoly welfare losses can be misleading. If causation runs from investment in new technology to increased concentration, dynamic gains from innovation should be taken into account for a fuller analysis of welfare losses. I use beer‐industry data to demonstrate that technological changes Granger‐cause beer prices, and beer prices Granger‐cause the Herfindahl index. I then estimate the dynamic gains to consumers in the beer industry and find these gains to be impressive relative to conventional static losses. (JEL L10, L13)
PRODUCT SUBSTITUTABILITY AND COMPETITION IN LONG‐DISTANCE TELECOMMUNICATIONS
Authors: Ward Michael R.
Published: January 2010

I estimate the degree of substitutability between U.S. long‐distance telecommunications carriers. AT&T's Marshallian demand elasticity for basic long‐distance service is estimated to be about –10. With various assumptions regarding producer behavior, a range of residual demand elasticities, price‐cost margins, and the dead‐weight losses are calculated. I argue that producer behavior is such that the dead‐weight loss to supracompetitive pricing is likely to be about 1.5% of industry revenues. The results bear on whether AT&T's deregulation was merited and whether to allow the Bell Operating Companies to enter the long‐distance market. (JEL L13, L96, C30)
Market stability: backward‐bending supply in a laboratory experimental market. 1999 Presidential address Western Economic Association
Authors: Plott CR
Published: January 2010

This article investigates the stability properties of markets with backward‐bending supply curves. Parameters are chosen so that the two classic models of price dynamics, the Walrasian model and the Marshallian model, give opposite predictions. The results are (1) market instability can be observed, and (2) in the backward‐bending case stability is captured by the Walrasian model and the Marshallian model of dynamics is rejected. Previous experiments have demonstrated that the Marshallian model works in the forward‐falling case. Thus, which theory of dynamics is appropriate for a market depends on the underlying reasons for demand and supply shapes.
A common‐features analysis of Amsterdam and London financial markets during the eighteenth century
Authors: Dempster G , Wells JM , Wills DT
Published: January 2010

We examine the financial linkage between the London and Amsterdam financial markets using stock prices recorded in each market over the period 1723‐94 in conjunction with tests for common trends, cycles, and regime shifts. These tests reveal a surprising degree of integration between the markets as their prices move together in both the short and long run. Moreover, shocks to the assets translate quickly and accurately between markets. It also appears that Dutch investment did not destabilize London markets and stock prices in London were the primary determinant of prices in Amsterdam.
The level and uncertainty of inflation: results from OECD forecasts
Authors: Davis GK , Kanago BE
Published: January 2010

There is considerable evidence that inflation variability and the level of inflation are positively related across countries. Evidence of a within‐country relation is mixed. Evidence for a significant positive relation comes mostly from studies using some survey measure; contrary evidence comes mostly from studies using regression errors. Our measure of uncertainty is the squared forecast‐error from Organization for Economic Cooperation and Development inflation forecasts. Most countries do not exhibit a positive and significant relation. The greatest number of positive coefficients is for relative uncertainty regressed on contemporaneous inflation.
Spatial competition with three firms: an experimental study
Authors: Collins R , Sherstyuk K
Published: January 2010

This article reports the results of an experimental study of the three firm location problem. We compare the subjects’behavior in the experiments with the symmetric mixed strategy Nash equilibrium calculated by Shaked. Overall, the findings are consistent with the equilibrium prediction. However, the subjects’locations were significantly more dispersed than predicted by the theory. Three alternative explanations of this phenomenon ‐ inexperience, approximate equilibrium behavior and risk aversion ‐ are suggested and evaluated for their predictive power. Special attention is paid to risk aversion.
Relating labor productivity to wages in service sectors: a long‐run approach
Authors: Huther J
Published: January 2010

This article introduces a systematic approach to the study of unbalanced productivity growth that can be readily applied across any sectors with unbalanced productivity growth. This approach is based on a cointegrating relationship between sectoral productivity and real sectoral compensation. Strong support for this relationship is found in U.S. service sectors from 1947 to 1993. The results show that Baumol's theory of‘cost disease’due to unbalanced productivity growth has been a widespread phenomenon and that the relationship between labor productivity and real compensation is well represented with general forms of the production function.
Which countries protect intellectual property? The case of software piracy
Authors: Marron DB , Steel DG
Published: January 2010

Using data on software piracy, we examine how protection of intellectual property varies across countries. Consistent with other studies, we find that intellectual property receives greater protection in developed economies; high‐income countries have lower piracy rates. We also find that protection depends on cultural factors. Countries with an individualist culture have lower piracy rates than do countries with a collectivist culture. Piracy rates are also lower in countries that have strong institutions that enforce contracts and protect property from expropriation. These results suggest that national policies toward intellectual property reflect not only economic concerns but also national culture and institutions.
Does multinational activity displace trade?
Authors: Clausing KA
Published: January 2010

Using two‐panel data sets on the operations of U.S. multinational firms abroad and the operations of foreign multinational firms in the United States, this article examines the empirical relationship between international trade and multinational activity. The evidence supports the conclusion that multinational activity and trade are complementary activities, particularly multinational activity and intrafirm trade. This empirical result is consistent with the theoretical reasons one might expect a complementary relationship between the two activities and is also robust to different approaches and specifications.
Pretrial negotiation, litigation, and procedural rules
Authors: Gong J , McAfee RP
Published: January 2010

We model the civil dispute resolution process as a two‐stage game with the parties bargaining to reach a settlement in the first stage and then playing a litigation expenditure game at trial in the second stage. We find that the English rule shifts the settlement away from the interim fair and unbiased settlement in most circumstances. Overall welfare changes are in favor of the party who makes the offer in the pretrial negotiation stage. Lawyers however, always benefit from the English rule, because fee shifting increases the stake of the trial and thus intensifies the use of the legal service.
Does a helping hand put others at risk?: affirmative action, police departments, and crime
Authors: Jr JR Lott
Published: January 2010

Will increasing the number of minority and women police officers make law enforcement more effective by drawing on abilities that have gone untapped and creating better contact with communities and victims? Or will standards have to be lowered too far before large numbers of minorities and women can be hired? Using cross‐sectional time‐series data for U.S. cities for 1987, 1990, and 1993, I find that hiring more black and minority police officers increases crime rates, but this apparently arises because lower hiring standards involved in recruiting more minority officers reduces the quality of both new minority and new nonminority officers. The most adverse effects of these hiring policies have occurred in the areas most heavily populated by blacks. There is no consistent evidence that crime rates rise when more women are hired, and this raises questions about whether norming tests or altering their content to create equal pass rates is preferable. The article examines how the changing composition of police departments affects such measures as the murder of and assaults against police officers.
Precaution and liquidity in the demand for housing
Authors: Balvers RJ , Szerb L
Published: January 2010

We exploit cross‐sectional mortgage data to investigate the importance of liquidity constraints and a precautionary motive in the demand for housing. Households that are not liquidity constrained consume housing services essentially as the life cycle hypothesis suggests but with a significant precautionary component. Households that are liquidity constrained, in terms of not meeting standard loan‐to‐value or payments‐to‐income constraints, are similar to unconstrained households in most respects, including the precautionary motive, but they respond somewhat less to fluctuations in their lifetime income ‐ suggesting some influence of bank‐induced liquidity constraints. We additionally find, however, that banks enforce liquidity constraints only weakly.
Factor demands, effective discount rates, and liquidity constraints in the retail trade firm
Authors: Kwon E
Published: January 2010

This is a firm‐level empirical study of the impact of credit market frictions on firm factor demands. It extends previous work in two ways: it studies the impact of liquidity constraints on both fixed investment and employment and examines data on retail firms. Using the Euler equation approach, it finds strong evidence for the impact of financial constraints on factor demands. Estimated relationships in turn induce striking countercyclical movements in effective discount rates of firms with limited access to credit. The article concludes that the results found in previous work regarding excess sensitivities of investment to liquidity are indeed due to liquidity constraints.
Some evidence on the continuity of the growth process among the G7 countries
Authors: Ben‐David D , Papell DH
Published: January 2010

The stability of the growth process, whether growth rates are rising, falling, or constant, is one of the central questions of economic growth theory. We use recently developed techniques for identifying structural change in economic time series, and find evidence of multiple breaks in per capita real GDP of the G7 countries over the past 120 years. Once determined, these breaks are used to delineate time periods. Although there is some evidence of individual periods of slowdowns, the overall tendency appears to be one of increasing steady state growth over the long run.
Efficiency, growth, and concentration: an empirical analysis of hospital markets
Authors: Frech HE , Mobley LR
Published: January 2010

Taking an evolutionary view, Harold Demsetz hypothesized that firms differ persistently in efficiency and that industry concentration results from growth of efficient firms at the expense of inefficient ones. We test this idea with microdata from the hospital industry. Initial hospital efficiency and subsequent growth (and profitability) are significantly and positively related. Also, greater initial variation in hospital efficiency within local markets is positively related to subsequent growth in market concentration. Our findings support the evolutionary efficiency hypothesis, though they cannot confirm the stronger idea that variation in efficiency is the dominant explanation for changes in concentration.
Capacity constraints and the dynamics of underwriting profits
Authors: Higgins ML , Thistle PD
Published: January 2010

The presence of an underwriting profit cycle in property/liability insurance has become a stylized fact. Models of this‘underwriting cycle’imply that the insurance market is governed by two regimes, as capacity is constrained or not. We apply the smooth transition regression model to insurance industry data for 1934–1993 to test for a regime shift. We find a rapid shift between two distinct regimes with different dynamics. When capacity is not restricted, we find no evidence of a cycle. The cycle is present in periods when capacity is restricted, immediately following World War II and after 1968. The underwriting cycle appears to be a recent phenomenon.
Testing rent sharing using individualized measures of rent: evidence from domestic helpers
Authors: Suen W
Published: January 2010

The market for resident domestic helpers offers a rare opportunity where the surplus from employment relationship can be quantitatively measured for each individual employee. Using the difference between employer's cost of time and employee's wage as a measure of rent, it is found that wages for domestic helpers are positively related to rent. However the apparent sharing of rent is better explained by matching than by efficiency wage models. Rent sharing is observed even in households where monitoring or turnover costs are low. Rent sharing is not observed among newly arrived foreign domestic helpers, whose ability remains to be revealed.
Resource allocation and economic growth in China
Authors: Lin S
Published: January 2010

This article shows that the allocation of resources among enterprises of different types of ownership is important to economic growth. The data on 30 Chinese provinces indicate that the investment share of state enterprises is negatively related to the growth rate of per‐capita GDP, while the investment share of private enterprises is positively related to the growth rate. Meanwhile, the effect of total investment on the growth rate of per capita‐GDP appears to be insignificant. The share of trade in GDP was positively related to economic growth. Also, the illiteracy rate of employees was negatively related to economic growth.
Competition and privatization amidst weak institutions: evidence from Mongolia
Authors: Anderson JH , Lee Y , Murrell P
Published: January 2010

Mongolia's mass privatization program was implanted in a country that lacked the very basic institutions of capitalism. This paper examines the effects of competition and ownership on the efficiency of the newly privatized enterprises, using a representative sample of enterprises and controlling for possible selection biases. Competition has quantitatively large effects; perfectly competitive firms having nearly double the efficiency of monopolies. Enterprises with residual state ownership appear to be more efficient than other enterprises, reflecting an environment where the government was pressured to focus on efficiency and institutions gave little voice to outsider owners.
Rebates, inventories, and intertemporal price discrimination
Authors: Ault RW , Beard TR , Laband DN , Saba RP
Published: January 2010

We demonstrate that universally redeemed rebates can increase manufacturer profits by reducing the incentives of downstream retailers to hoard inventories when optimal wholesale prices vary predictably over time. By bypassing retailers and making direct contracts with buyers, the manufacturer can increase the variations in effective prices paid by consumers without concomitantly creating larger incentives for retailers to hold inventories. During profitable, high‐demand periods, manufacturer revenues are ordinarily constrained by‘competition’from retailer inventories, thus limiting profits. However, by selectively offering rebates to consumers while maintaining high wholesale prices, low‐demand periods can be accommodated without inducing retailer hoarding.
The suppression of state banknotes: a reconsideration
Authors: Selgin G
Published: January 2010

It is generally believed that Congress, in imposing a prohibitive 10% tax on state banknotes in 1865, made the public better off by doing away with inferior brands of currency while simultaneously helping finance the Civil War by stimulating bond sales to national banks. In truth, the tax served neither purpose. The true purpose of the 10% tax was not to enhance bond sales or to improve the quality of the currency but to offset the inflationary effects of greenbacks and national banknotes. In the long run, the public might have been better off had state banks retained their right to issue currency.
Testing structural hypotheses on cointegration relations with small samples
Authors: Zhou S
Published: January 2010

This study examines the finite‐sample bias of Johansen's [1991] likelihood ratio tests for structural hypotheses on cointegration relations among economic variables through the Monte Carlo experiments. It is found that the Johansen tests with small samples are biased toward rejecting the null hypotheses more often than what asymptotic theory suggests, even after the test statistics are adjusted by Sim's correction. A bootstrap method for obtaining problem‐specific critical values for the tests is proposed. It is shown that using the bootstrap procedure may substantially reduce the small‐sample bias. An empirical application of the procedure is demonstrated.
Gender and racial earnings differentials in academic labor markets
Authors: Monks J , Robinson M
Published: January 2010

This study estimates earnings differentials across racial and gender groups among college faculty, and decomposes these differentials into the components attributable to differences in individual and institutional characteristics and that which remains unexplained. We find that white females earn approximately 4 percent less than white males; black males earn 7.4 percent more; black females earn one percent more; Hispanic males earn 2.7 percent more; Hispanic females earn 1.7 percent less; and Asian males earn 7.7 percent more than comparable white males. We also find a significant earnings penalty for being a naturalized citizen or noncitizen versus an U.S.‐born citizen.
The credit channel of monetary policy transmission: evidence from stock returns
Authors: Warner EJ , Georges C
Published: January 2010

This paper offers a novel test of the credit view of the monetary policy transmission mechanism using stock market returns. We identify Fed policy shocks using newspaper accounts and track daily stock prices immediately following the shocks. If the credit channel is important, then firms that are dependent on bank credit and internal funds should receive a relatively greater benefit (loss) from a Fed easing (tightening) than firms with access to nonbank credit at favorable terms. We identify ten policy shocks during the expansion of 1993‐94 and the ‘credit crunch’ period of the 1990‐91 recession and find little evidence supportive of an operative credit channel.
Firm‐specific human capital, job matching, and turnover: evidence from major league baseball, 1900–1992
Authors: Glenn A , McGarrity JP , Weller J
Published: January 2010

The two dominant labor market turnover hypotheses, the firm‐specific human capital model (FSHCM) and the job‐matching model, suggest different patterns of player mobility in major league baseball. The matching hypothesis predicts greater mobility of players in positions that require substantial team production. A better match may offer large productivity gains. Alternately, the FSHCM predicts players in positions requiring the greatest amount of teamwork will benefit from specific knowledge, making them less likely to change teams. We examine the frequency distribution of trades by player position from 1900–1992 and find the FSHCM provides the best explanation for turnover in this industry.
A hierarchical theory of occupational segregation and wage discrimination
Authors: Baldwin ML , Butler RJ , Johnson WG
Published: January 2010

Becker's model of discrimination is extended to the case where men exhibit distastes for working under female managers. The distribution of women in the resulting occupational hierarchy depends on the number of women in lower occupations, the wages of male workers in lower occupations, and male distastes for female management. Thus, there exists an occupational sorting function, related to wages, that determines the occupational distribution of women. We integrate this sorting function into a standard wage equation to derive a new decomposition of male‐female wage differentials and apply it to a sample of insurance industry workers from the 1988 CPS.
The time‐varying performance of the long‐run demand for money in the United States
Authors: Hondroyiannis G , Swamy PAVB , Tavlas GS
Published: January 2010

This article investigates the issues of the stability and predictability and interest‐sensitivity of money demand over 1870–1997. Two different estimation methodologies are used ‐ random coefficient (RC) modeling and vector error correction (VEC) modeling. The former procedure allows the profiles of the coefficients to be traced over time and relaxes several restrictions routinely imposed in applied work. The results indicate that different estimation methodologies using different data periods and frequencies yield estimates of some of the coefficients of the long‐run demand for money that fall within a fairly narrow range. The results also suggest that specification errors have had an important influence on the time profile of the interest elasticity of money demand and that there is a tendency for the interest elasticity to decline in absolute value as interest rates decline.
Central bank independence, economic freedom, and inflation rates
Authors: Banaian K , Luksetich WA
Published: January 2010

Measures of central bank independence combine many attributes that may or may not affect inflation. Central bank attributes are chosen as a result of political calculations over the distribution of resources between competing interest groups. Simultaneity bias results from regressions of central bank independence or of economic and political freedom on inflation or growth. Our estimates demonstrate the connections between economic and political freedom and central bank attributes that lead to inflation. Countries showing high degrees of economic freedom adopt structures that lead to lower inflation; those that show high degrees of political freedom do not adopt inflation‐reducing institutional structures.
Academic economists behaving badly? A survey on three areas of unethical behavior
Authors: List JA , Bailey CD , Euzent PJ , Martin TL
Published: January 2010

This article measures the degree to which academic economists have engaged in unethical behavior and the degree to which academic economists believe the profession as a whole engages in unethical behavior. Three main types of unethical behavior are examined: (1) falsification of research; (2) expropriation of graduate student research or including an undeserving co‐author on a research paper; and (3) exchange of grades for gifts, money, or sex. Using a unique data set gathered at the 1998 American Economic Association (AEA) meetings, we find that there is a significant amount of misconduct, particularly in the second category.
Chivalry and solidarity in ultimatum games
Authors: Eckel CC , Grossman PJ
Published: January 2010

We report the results of ultimatum game experiments designed to test for differences in the behavior of women and men. Women's proposals are on average more generous than men's, regardless of the sex of the partner, and women respondents are more likely to accept an offer of a given amount. A given offer is more likely to be accepted if it comes from a woman; we term this result chivalry. Women paired with women almost never fail to reach an agreement; we term this result solidarity. Age, earnings, and race also significantly affect proposals and the rates of rejection.
Gender differences in the ultimatum game
Authors: Solnick SJ
Published: January 2010

I explore the behavior of men and women in the ultimatum game. In one treatment, players remain mutually anonymous. In the second treatment, players’gender is common knowledge. Average offers made do not differ based on the gender of player 1. Offers are affected by the gender of player 2, with men attracting higher offers, particularly from female players 1. Players 2 of both genders choose a higher minimum acceptable offer when facing a female player 1. These patterns led to substantial differences in earnings. Such striking differences in expectations and decisions could impact salary negotiations and other real‐world transactions.
Female self‐employment and demand for flexible, nonstandard work schedules
Authors: Lombard KV
Published: January 2010

Motivated by the rising importance of female self‐employment, this article develops and estimates a two‐step empirical model to explain why married women choose self‐employment over wage‐salary employment. The article also develops a bounded influence regression model to estimate self‐employment wage equations. In sum, a woman is more likely to choose self‐employment the greater her relative earnings potential as self‐employed, the greater her demand for flexibility, the greater her demand for a nonstandard work week, and if her husband has health insurance. The increase in women's earnings potential as self‐employed explains most of the increase in their self‐employment from 1979 to 1990.
The effect of recommended contributions in the voluntary provision of public goods
Authors: Croson R , Marks M
Published: January 2010

Recommended contributions are often observed in fundraising campaigns for charitable and other public goods. We present an experiment investigating the impact of recommended contributions in a voluntary threshold public goods process. We find that when valuations for the public good are heterogeneous, recommended contributions significantly increase the likelihood of efficient provision, although when valuations are homogeneous, the effect of recommendations is less compelling. This article represents a first step in understanding recommended contributions and other nonbinding, cheap‐talk announcements in public goods provision and charitable contributions.
Expectation formation in step‐level public good games
Authors: Offerman T , Sonnemans J , Schram A
Published: January 2010

This article focuses on the process of expectation formation. Specifically, the question is addressed whether individuals think strategically when they form beliefs about other players’behavior. Most belief learning models assume that people abstract from strategic considerations. Using an incentive‐compatible mechanism, experimental data are obtained on subjects’expectations in a step‐level public good game and in a game against nature. Beliefs in the interactive games develop in the same way as in the game against nature, providing evidence that strategic considerations do not play a role. The evidence is consistent with predictions derived from the naive Bayesian model.
Reliant behavior in the United States and Japan
Authors: Beard TR , Jnr RO Beil , Mataga Y
Published: January 2010

Japanese economic success is often attributed to culturally reinforced psychological conditioning that promotes interpersonal reliance, cooperation, and a group interest orientation. This article provides direct experimental evidence on differences in behavior among future business people in the United States and Japan. Utilizing a simple, two person extensive form game of perfect information introduced by Selten (1975), we provide evidence that, contrary to some views, the Japanese can be less reliant on the behavior of others and are more likely to take actions at variance with group welfare in some settings. Thus, popular explanations of Japanese economic achievements may require further exploration.
Marriage, divorce, and legal change: new evidence from England and Wales
Authors: Binner JM , Dnes AW
Published: January 2010

In this article, we explain the evolution of divorce rates in England and Wales over the post‐war period. Following the approach of the predominantly North American literature in this area, we focus on the liberalization of divorce law and socioeconomic factors as determinants of the divorce rate. In line with the development of the literature, we find that the introduction of liberalized, no‐fault divorce law had a significant effect on the divorce rate in England and Wales. The finding that the law affects the divorce rate is consistent with the view that marriage is characterized by indivisibilities that inhibit Coasian bargaining.
Why do married men earn more: productivity or marriage selection?
Authors: Chun H , Lee I
Published: January 2010

Using data from the Current Population Survey March Supplement 1999, this study examines why married men earn more than men who have never married. We find that the marriage wage premium cannot be attributed to the unobservable higher earnings capability of married men. Instead, wage gains from marriage are explained by the degree of specialization within the household. Our findings cast doubt on the argument that the selection of high‐ability men into marriage is the cause of the marriage wage premium.
So you want to earn a Ph.D. in economics: how much do you think you'll make?
Authors: Stock WA , Siegfried JJ
Published: January 2010

Using data from individuals who earned a Ph.D. in economics in 1996‐97, this study identifies factors associated with securing full‐time permanent positions and determinants of starting salaries for new Ph.D. economists. Where individuals attend graduate school and factors including the field of specialization and work as a teaching/research assistant impact whether graduates obtain full‐time permanent jobs. Choice of graduate program and amount of time spent in the program influence starting salary, as does obtaining a position outside academia or in a research‐oriented academic institution, both of which entail higher salaries relative to employment at a B.A.‐level academic institution.
HOURS FLEXIBILITY AND RETIREMENT
Authors: CHARLES KERWIN KOFI , DECICCA PHILIP
Published: January 2010

Data from the Health and Retirement Study indicate that hours constraints are a common feature of jobs held by workers nearing retirement. We present a simple model that predicts that workers who are not free to lower their usual hours of work should be more likely than their unconstrained counterparts to retire by some future date. Our estimates, which are robust to various specifications, support this prediction. The amount by which being hours constrained is estimated to raise retirement probabilities is nearly as large as the effect of being in relatively poor health, suggesting an economically significant effect. (JEL J26, J22, J14)
CONVEX COSTS AND THE MERGER PARADOX REVISITED
Authors: HEYWOOD JOHN S. , MCGINTY MATTHEW
Published: January 2010

Returning to the contention that convex costs provide a resolution to the merger paradox, we show that for reasonable degrees of convexity, the minimum market share needed for merger to be profitable remains close to that associated with linear costs. Moreover, convex costs do not eliminate the free rider problem identified as part of the merger paradox. Finally, we retain convex costs while modeling a firm‐by‐firm sequential merger process, showing that the paradox constrains a larger share of potential mergers. These findings help reduce the relevance of convex costs as a resolution to the merger paradox. (JEL L12, L13)
FISCAL POLICY, EXPECTATION TRAPS, AND CHILD LABOR
Authors: EMERSON PATRICK M. , KNABB SHAWN D.
Published: January 2010

This paper develops a dynamic model with overlapping generations where there are two possible equilibria: one without child labor, and one with it. It is shown that intergenerational transfers can eliminate the child labor equilibrium and that this intervention is Pareto improving. However, if society does not believe that the government will implement the transfer program, it won’t, reinforcing society’s expectations. This is true even if the transfer program would have been implemented in the absence of uncertainty. Thus a government may be powerless to prevent the child labor equilibrium if it does not command the confidence of their populace, leaving the country in an expectations trap. (JEL D91, E60, J20, O20)
CULTURAL DIVERSITY, DISCRIMINATION, AND ECONOMIC OUTCOMES: AN EXPERIMENTAL ANALYSIS
Authors: FERRARO PAUL J. , CUMMINGS RONALD G.
Published: January 2010

Does cultural diversity affect economic outcomes? We develop an experimental framework that complements ongoing research on this question. We vary the ethnic mix of bargaining sessions to study intercultural interactions among members of U.S. Hispanic and Navajo cultures. We control for demographic differences in our subject pools and elicit beliefs directly in order to differentiate between statistical discrimination and preference‐based discrimination. Hispanic and Navajo subjects behave differently, and their behavior is affected by the ethnic composition of the experimental session. Our experimental framework can shed light on economic behavior and outcomes in societies of mixed ethnicity, race, and religion.(JELC78, C90, Z10)
PAY, TECHNOLOGY, AND THE COST OF WORKER ABSENCE
Authors: COLES MELVYN , LANFRANCHI JOSEPH , SKALLI ALI , TREBLE JOHN
Published: January 2010

Conventional studies of absenteeism concentrate on labor supply. An equilibrium approach, however, establishes that the shadow cost of absenteeism varies across firms that operate different technologies. Using an unusual employee/employer matched data set from France, which records both individual worker absenteeism and information about technology, we show that firms operating just‐in‐time technology have higher shadow costs of absence than firms that do not. The estimates are used to calculate the economy‐wide cost of absence, which turns out to be very low. (JEL J22, J31, J41)
HEALTH, EDUCATION, AND LIFE CYCLE SAVINGS IN THE DEVELOPMENT PROCESS
Authors: TANG KAM KI , ZHANG JIE
Published: January 2010

This paper studies investment in health and human capital in a life cycle model. Health investment enhances survival to old age by improving health from its endowed level. The model predicts two distinctive phases of development. When income is low enough, the economy has no health investment and little savings, leading to slow growth. When income grows, health investment will become positive and the saving rate will rise, leading to higher life expectancy and faster growth. A health subsidy can move the economy from the first phase to the next. Subsidies on health and human capital investments can improve welfare. (JEL I00, J10, H50, O10)
VOTING, PUNISHMENT, AND PUBLIC GOODS
Authors: KROLL STEPHAN , CHERRY TODD L. , SHOGREN JASON F.
Published: January 2010

Researchers have found that voting can help increase voluntary contributions to a public good—provided enforcement through a third party. Not all collective agreements, however, guarantee third‐party enforcement. We design an experiment to explore whether a voting rule with and without endogenous punishment increases contributions to a public good. Our results suggest that voting by itself does not increase cooperation, but if voters can punish violators, contributions increase significantly. While costly punishment increases contributions at the price of lower efficiency, overall efficiency for a voting‐with‐punishment rule still exceeds the level observed for a voting‐without‐punishment rule.(JELC92, D72, H41)
SUSTAINABILITY OF THE FRIEDMAN RULE IN AN INTERNATIONAL MONETARY POLICY GAME
Authors: JANSEN DENNIS W. , LIU LIQUN , WENG MING‐JANG
Published: January 2010

This article develops a two‐country monetary economy model in order to analyze the international monetary policy game between governments and the domestic monetary policy game between each government and its private sector. We prove that if governments can commit to their own private sectors, the cooperative equilibrium of the game between governments is for them to follow the Friedman rule. When governments lack such ability to commit, we find that the Friedman rule is more likely to be sustained in our open‐economy model than in the closed‐economy model of Ireland. (JEL E31, E52, E61)
IS AGENCY THEORY SELF‐ACTIVATING?
Authors: ARCE DANIEL G.
Published: January 2010

This article examines the conditions under which the principal‐agent model is self‐activating/socially causal. We do so by exploring a principal‐agent framework that allows for the possibility that rational agents may hold intrinsic preferences for autonomy in decision making and experience disutility from being monitored. Using a dynamic model of preference formation, we identify conditions under which the principal‐agent model is self‐activating in that, over time, the introduction of the model in an otherwise efficient monitor‐worker relationship leads to the inefficient adoption of the agency model. We also examine the extent to which the agency model is robust when autonomy‐preferring agents are introduced into the population.(JELG30, L20, C72)
SOCIAL PREFERENCES AND TAX POLICY DESIGN: SOME EXPERIMENTAL EVIDENCE
Authors: ACKERT LUCY F. , MARTINEZ‐VAZQUEZ JORGE , RIDER MARK
Published: January 2010

This article reports the results of a set of experiments designed to examine whether a taste for fairness affects people’s preferred tax structure. Using the Fehr and Schmidt model, we devise a simple test for the presence of social preferences in voting for alternative tax structures. The experimental results show that individuals demonstrate concern for their own payoff and inequality aversion in choosing between alternative tax structures. However, concern for redistribution decreases as the deadweight loss from progressive taxation increases. Our findings have important implications for tax policy design.(JELC92, D63, H21, H23)
THE EFFECT OF REWARDS AND SANCTIONS IN PROVISION OF PUBLIC GOODS
Authors: SEFTON MARTIN , SHUPP ROBERT , WALKER JAMES M.
Published: January 2010

A growing number of field and experimental studies focus on the institutional arrangements by which individuals are able to solve collective action problems. Important in this research is the role of reciprocity and institutions that facilitate cooperation via opportunities for monitoring, sanctioning, and rewarding others. Sanctions represent a cost to both the participant imposing the sanction and the individual receiving the sanction. Rewards represent a zero‐sum transfer from participants giving to those receiving rewards. We contrast reward and sanction institutions in regard to their impact on cooperation and efficiency in the context of a public goods experiment. (JELC92)
STRATEGIC DECISIONS ON LAWYERS’ COMPENSATION IN CIVIL DISPUTES
Authors: BAIK KYUNG HWAN , KIM IN‐GYU
Published: January 2010

We study a model of civil dispute with delegation in which a plaintiff’s lawyer works on a contingent‐fee basis but a defendant’s lawyer on an hourly fee basis. We first derive the condition under which delegation to the lawyers brings both litigants more payoffs compared with the case of no delegation. We then show that under this profitable delegation condition, the contingent‐fee fraction for the plaintiff’s lawyer is about one‐third. Next, allowing the plaintiff to choose between the two fees, we show that under the profitable delegation condition, the plaintiff chooses the contingent fee, given that the defendant adopts the hourly fee.(JELK41, K13, D74, D72)
TRACING THE DYNAMICS OF COMPETITION: EVIDENCE FROM COMPANY PROFITS
Authors: CRESPO CUARESMA JESÚS , GSCHWANDTNER ADELINA
Published: January 2010

This article proposes a simple approach to analyzing profit dynamics, which allows for time‐varying persistence of profits. The time series model is a simple autoregressive process where the dynamics of the persistence parameter follow an autoregressive process. Using the longest time series available on profits for more than a hundred U.S. firms, we find that there is ample evidence of time variation in the persistence parameter. (JEL L00, C22)
NATURAL DISASTERS AS CREATIVE DESTRUCTION? EVIDENCE FROM DEVELOPING COUNTRIES
Authors: CRESPO CUARESMA JESÚS , HLOUSKOVA JAROSLAVA , OBERSTEINER MICHAEL
Published: January 2010

Recent studies found a robust positive correlation between the frequency of natural disasters and the long‐run economic growth after conditioning for other determinants. This result is interpreted as evidence that disasters provide opportunities to update the capital stock and adopt new technologies, thus acting as some type of Schumpeterian creative destruction. The results of cross‐country and panel data regressions indicate that the degree of catastrophic risk tends to have a negative effect on the volume of knowledge spillovers between industrialized and developing countries. Only countries with relatively high levels of development benefit from capital upgrading through trade after a natural catastrophe. (JELO13, O30, F18)
ON THE SOCIAL DIMENSION OF TIME AND RISK PREFERENCES: AN EXPERIMENTAL STUDY
Authors: GÜTH WERNER , LEVATI M. VITTORIA , PLONER MATTEO
Published: January 2010

When explaining risk taking, intertemporal allocation, and distributing behavior, economists rely on risk, time, and other‐regarding preferences but offer no guidance on how these three crucial aspects are interrelated. We report on an experiment exploring such interrelation. For this sake, we compare evaluations of several prospects, each of which allocates certain or risky and immediate or delayed payoffs to the actor and to another participant. We find that individuals are self‐oriented as to social allocation of risk and delay and other‐regarding with respect to expected payoffs. (JELC91, D63, D81)
WHY DO EUROPEANS WORK (MUCH) LESS? IT IS TAXES AND GOVERNMENT SPENDING
Authors: DHONT TINE , HEYLEN FREDDY
Published: January 2010

We develop and calibrate a theoretical model that explains per capita hours worked and output growth as a function of three fiscal policy variables. Differences in income taxes, productive government expenditures, and nonemployment transfers are sufficient to answer the question why Europeans work (much) less than Americans and why some Europeans work less than others. Differences in taste for leisure have little role to play given the actual variation of these three policy variables. (JEL E24, E62, J22, O41)