bluuebunny/crossref_metadata_2025 huggingface dataset:
A Theory of Utilization Review
Authors: Dranove David , Spier Kathryn E.
Published: December 2005

Through utilization review (UR), managed care organizations (MCOs) monitor and alter physician treatment decisions. We show that the value of UR depends on physician incentives. Not surprisingly, when physicians have incentives to significantly overtreat patients, UR can improve social welfare by eliminating unnecessary utilization. More surprisingly, UR can also improve welfare when physicians have incentives to significantly undertreat patients. In this case, UR filters out the least valuable cases, encouraging physicians to recommend more treatments. We also show that the effectiveness of UR depends on MCO precommitment to a treatment approval threshold. Ex ante optimal precommitment can make it appear that the MCO is inappropriately withholding care ex post.
Piracy and the Legitimate Demand for Recorded Music
Authors: Hui Kai-Lung , Png Ivan
Published: December 2005

Publishers of computer software and music claimed losses of over $17.6 billion to piracy in 2002. Theoretically, however, piracy may raise legitimate demand through positive demand-side externalities, sampling, and sharing. Accordingly, the actual impact of piracy on the legitimate demand is an empirical issue. Addressing this issue in the context of recorded music, we develop and test hypotheses from theoretical models of piracy on international data for music CDs over the period 1994-98. Empirically, we find that the demand for music CDs decreased with piracy, suggesting that "theft" outweighed the "positive" effects of piracy. However, the impact of piracy on CD sales was considerably less than estimated by industry. We estimated that, in 1998, actual losses amounted to about 6.6% of sales, or 42% of industry estimates. But, we found evidence that publishers would have raised prices in the absence of piracy, suggesting that the actual revenue loss would have been higher.
An Index For Venture Capital, 1987-2003
Authors: Hwang Min , Quigley John M. , Woodward Susan E.
Published: December 2005

In this paper we build an index of value for venture capital. Our approach overcomes the problems of intermittent, infrequent pricing of private company deals by using a repeat valuation model to build the index, and it corrects for selection bias in the reporting of values. We use a unique data set from Sand Hill Econometrics which reports 50,734 funding events, which include the contemporaneous valuations of 9,092 private equity firms disclosed 19,208 times over almost 17 years. The resulting index measures the return and risk for venture capital. Its covariance with other asset classes from 1987 through 2003 enables us to explore the role of venture capital in diversified portfolios during a period of increased importance of venture capital in the economy.
Selective Enforcement of Copyright as an Optimal Monopolistic Behavior
Authors: Ben-Shahar Danny , Jacob Assaf
Published: December 2005

We present a perfect Nash equilibrium in which the creator of a work, motivated by economic considerations, selectively enforces her own copyright. In fact, the creator may not only permit, but may strategically promote infringement of the copyright, thereby participating indirectly in predatory pricing, and so raising barriers to entry. Our model is highly applicable to the software industry, where relatively high entry costs and the relatively low cost of copyright infringement make this phenomenon likely. We further show the conditions under which exogenous intervention, through intensive enforcement of copyrights, increases social welfare. Finally, we explore some potential strategies for such legal intervention.
On-the-Job Learning, Firing Costs and Employment
Authors: Díaz-Vázquez Pilar , Snower Dennis J , Arjona-Béjar Luis E
Published: December 2005

This paper explores the influence of on-the-job learning on the employment effect of firing costs. In the absence of on-the-job learning, the theoretical literature shows that firing costs may increase average employment (over the booms and recessions of the business cycle). We show that the existence of on-the-job learning weakens this effect. In fact, when the amount of on-the-job learning is sufficiently large, a rise in firing costs tends to reduce average employment.
Does Trade Promote Environmental Coordination?: Pollution in International Rivers
Authors: Sigman Hilary
Published: December 2005

This paper examines whether trade relationships facilitate resolution of international environmental spillovers. Trade might promote cooperation by providing opportunities for implicit side payments, allowing linkage between environmental and trade concessions, providing direct leverage over other countries' production, or instilling a perception of shared goals. Using data from the UN's Global Environmental Monitoring System (GEMS) on water quality in international rivers, the paper examines the influence of bilateral trade on pollution in rivers that cross international borders. It reports evidence of lower water pollution in rivers shared between countries with more extensive trade. Improved coordination from expanded trade may thus represent a benefit to weigh against the environmental costs of the pollution havens effect.
Willingness to Pay for Environmental Quality: Testable Empirical Implications of the Growth and Environment Literature
Authors: Israel Debra , Levinson Arik
Published: December 2005

Several different theoretical models of economic growth and environmental quality each generate inverse-U-shaped pollution-income paths, or "environmental Kuznets curves." They rely on different assumptions to generate the reversal of pollution trends, with correspondingly different policy implications. While the empirical implications for pollution are indistinguishable (by design), the models have distinct implications for the pattern of people's marginal willingness to pay (MWTP) for environmental improvements as a function of income. In this paper we demonstrate those different implications theoretically, and test for them empirically using data from the World Value Survey (WVS). We find strong relationships between MWTP and individual characteristics, such as age, income, and education, but little evidence that MWTP varies systematically with economic growth.
Information, the Introduction of Roths, and IRA Participation
Authors: Hrung Warren B.
Published: December 2005

This study investigates the issue of whether part of the increase in total IRA contributions from 1997 to 1998 can be attributed to increased advertising due to the introduction of Roth IRAs in 1998. In this study, the use of a tax preparer will proxy for exposure to information regarding IRAs. A preparer is expected to have less of an influence on IRA participation in 1998 relative to 1997. I find evidence supporting this prediction amongst taxpayers eligible for an IRA contribution in both 1997 and 1998. However, I also find evidence suggesting that more information would have led to a potentially sizable increase in participation for taxpayers newly eligible for an IRA contribution in 1998.
Instrumental Variables for Binary Treatments with Heterogenous Treatment Effects: A Simple Exposition
Authors: Manning Alan
Published: December 2005

This note provides a simple exposition of what IV can and cannot estimate in a model with binary treatment variable and heterogenous treatment effects. It shows how linear IV is essentially a misspecification of functional form and the reason why linear IV estimates will generally depend on the instrument used is because of this misspecification. It shows that if one can estimate the correct functional form then the treatment effects are independent of the instruments used. However, the data may not be rich enough in practice to be able to identify these treatments effects without strong distributional assumptions. In this case, one will have to settle for estimations of treatment effects that are instrument-dependent.
Cross-Country Policy Harmonization with Rent-Seeking
Authors: Hultberg Patrik T , Barbier Edward B
Published: December 2005

In a reciprocal market model with imperfectly competitive firms, domestic policies will differ across countries that are economically and politically diverse. We explore the implications of this standard result with regard to harmonization of environmental policies between corrupt and non-corrupt countries. Imposing a more stringent policy on a non-corrupt government will be welfare reducing to the receiving country, but may be welfare enhancing for the imposing country. However, where environmental standards are under the control of a corrupt government, it is possible that harmonization is welfare enhancing to both countries.
Robin Hood's Compromise: The Economics of Moderate Land Reforms
Authors: Bandiera Oriana , Levy Gilat
Published: December 2005

This paper analyses the consequences of an unusual type of land redistribution; we take land from the very rich, as usual, but give it to the rich instead of the poor. We show that such "moderate" reform reduces agency costs and thereby increases productivity, total surplus in the economy, and the welfare of rural workers. Compared to the classic redistribution "to the tiller", moderate reforms do worse in terms of equity and do not give the poor a collaterizable asset. They can however do equally well in terms of efficiency and might be more sustainable both financially and politically.
Racial Bias in Motor Vehicle Searches: Additional Theory and Evidence
Authors: Dharmapala Dhammika , Ross Stephen L
Published: December 2005

Knowles, Persico, and Todd (2001) develop a model of police search and offender behavior. Their model implies that if police are unprejudiced the rate of guilt should not vary across groups. Using data from Interstate 95 in Maryland, they find equal guilt rates for African-Americans and whites and conclude that the data is not consistent with racial prejudice against African-Americans. This paper generalizes the model of Knowles, Persico, and Todd by accounting for the fact that potential offenders are frequently not observed by the police, and by including two different levels of offense severity. We show that the data is consistent with prejudice against African-American males, no prejudice, and reverse discrimination, depending on the type of equilibrium that exists. Additional analyses, based on stratification by type of vehicle and time of day, do not shed any light on the nature of the equilibrium.
Environmental Information Provision as a Public Policy Instrument
Authors: Petrakis Emmanuel , Sartzetakis Eftichios Sophocles , Xepapadeas Anastasios
Published: December 2005

We examine information provision as a public policy instrument when products generate damages to consumers as well as environmental externalities. We show that information provision dominates taxation in terms of welfare, if information can be provided at low cost. This is because a uniform tax alone levies a heavier than optimal burden on informed consumers and allows the uninformed consumer to free ride partially on the informed consumers voluntary actions. If the cost of information provision is substantial, taxation is welfare superior. A policy regime that combines information provision and taxation leads to higher welfare relative to the use of either instrument alone.
Electoral Competition and Redistribution with Rationally Informed Voters
Authors: Larcinese Valentino
Published: December 2005

In spite of the negligible probability that everyone has to cast a decisive vote, political information can be relevant for a number of private decisions. Under quite mild assumptions, the demand for information is increasing in income. Being informed affects responsiveness to electoral platforms and vote-seeking political parties should take this into account in their optimization process. As a consequence, redistribution is generally lower than what the median voter theorem predicts. Moreover, in contrast with what most literature takes for granted, an increase in inequality does not unambiguously increase redistribution. This is consistent with most empirical research in this field. Finally, an increase in the cost of information induces a reduction in redistribution.
Environmental Regulation as Export Promotion: Product Standards for Dirty Intermediate Goods
Authors: McAusland Carol
Published: December 2005

We employ a stylized model of trade in dirty intermediate goods to examine the impacts of product standards on trade volumes and pollution levels. Our focus is on the case with economies of scale in intermediate good production. In this setting, changes in one country's demand for dirty inputs can feed back to affect the quality of intermediate goods offered for sale in international markets. We provide conditions under which tightening product standards in one country can raise both the profits of and exports from that country's final good producers. Greening product standards can have perverse environmental impacts: tightening rules governing emissions arising from the use of dirty inputs may raise rather than reduce local pollution.
Uncertain R&D and the Porter Hypothesis
Authors: Popp David
Published: December 2005

Ever since Michael Porter proposed that environmental regulations can improve competitiveness, much economic research has examined the potential for such outcomes. Attempts to model Porter hypothesis outcomes in a way consistent with neoclassical economics have focused on things such as strategic relationships between firms, moral hazard problems, and economies of scale. In this paper, I offer a simpler alternative. The results of any R&D project are uncertain. Calibrating a simple model of induced R&D with uncertainty so that the expected value of research is only positive with environmental policy, I find that between 8 and 24 percent of simulations result in cases where post-regulation profits are higher than pre-regulation profits. This result is consistent both with Porter finding specific cases with complete innovation offsets and with macro-level findings that environmental policy is not costless. I conclude by discussing the implication of these results for environmental policy and future research.
Competition Policy and Exit Rates: Evidence from Switzerland
Authors: Buehler Stefan , Kaiser Christian , Jaeger Franz
Published: December 2005

This paper provides evidence on the relation between the intensity of product-market competition and the probability of exit. We adopt a natural experiment approach to analyze the impact of a tightening of Swiss antitrust legislation on exit probabilities. Based on a sample of more than 68,000 firms from all major sectors of the Swiss economy, we find that the exit probability of non-exporting firms increased significantly, whereas the exit probability of exporting firms remained largely unaffected. Our results support the notion that there is a positive relationship between the intensity of product-market competition and the probability of exit.
Fatalistic Tendencies: An Explanation of Why People Don't Save
Authors: Wu Stephen
Published: December 2005

This paper uses data from the 2001 Survey of Consumer Finances (SCF) and the 2000 World Values Survey (WVS) to analyze the role of fatalism in determining household savings behavior. SCF respondents who feel that luck has played an important role in their financial affairs are more likely to realize their need to save, but are less likely to actually do so. Cross-country evidence from the WVS shows that those who believe they have little freedom and control over their lives are also less likely to save. The results hold after controlling for a number of demographic and behavioral factors, and are consistent across income and wealth levels.
Cost Optimization in the SIS Model of Infectious Disease with Treatment
Authors: Goldman Steven Marc , Lightwood James
Published: December 2005

We consider the intertemporal social optimization problem of minimizing the present value of the costs incurred from both disease and treatment. Though the analysis is complicated by the analytical failure of concavity, we are able to substantially characterize both the long run equilibria and the adjustment paths. The cost minimizing program is shown to exhibit decreased levels of treatment at higher disease levels. The socially optimal program is compared to individually rational behavior and the inefficiencies in private behavior from the infection externality are shown to cause increases in the equilibrium rate of infection.
Trade Tax Reform in a Small Open Economy with Distributional Objectives and Distortionary Taxation
Authors: Edwards Jeremy
Published: December 2005

The paper shows that, if two conditions are satisfied, both radial contraction and concertina trade tax reforms continue to be desirable in a small open economy that differs from the one usually considered by having distributional objectives and using distortionary taxes to raise revenue. The first condition is that some optimisation in the choice of commodity taxes takes place - at a minimum, taxes on nontraded goods must be optimally chosen while taxes on traded goods keep the consumer prices of such goods constant. The second is that pure profits are absent from every household's budget constraint. These conditions mean that some care is required in arguing the case for simple trade tax reforms in small open economies.
The Costs of A Medicare Prescription Drug Benefit
Authors: Goldman Dana P , Joyce Geoffrey F , Malkin Jesse Dylan
Published: December 2005

Medicare does not have an outpatient prescription drug benefit. Recently, there has been renewed interest in adding a prescription drug benefit to the program. In this paper, we present a microsimulation model to predict drug expenditures in 2001 for a representative cohort of Medicare beneficiaries under the status quo and three different plans: (1) a catastrophic plan modeled on the Medicare Catastrophic Coverage Act (PL 100-360), which was passed in 1988 but repealed one year later after higher-income Medicare beneficiaries protested new premiums, (2) a zero-deductible plan that caps out-of-pocket expenses at $4,000 per year, and (3) a zero-deductible plan that does not cap out-of-pocket expenses. We use data from a representative sample of Medicare Part B beneficiaries from the 1995 Medicare Current Beneficiary Survey (MCBS) Cost and Use file. Under the status quo, drug expenses average $1,459 per beneficiary, out-of-pocket costs average $646, and 8.2% of the population has very high expenses (defined as more than $2,000 out-of-pocket for drugs). Under a catastrophic plan, average annual drug expenses are $1,344, out-of-pocket costs are $645, and 6.8% of beneficiaries have very high expenses. Under a zero-deductible plan that does not cap out-of-pocket expenses average annual drug expenses are $1,395, out-of-pocket expenses are $459, and 5.3% of beneficiaries would have very high expenses. Under a zero-deductible plan that caps out-of-pocket expenses at $4,000 per year, average annual drug expenses are $1,414, out-of-pocket expenses are $442, and 5.5% of beneficiaries have very high expenses.
The Optimal Provision of Services in National Parks
Authors: Turner Robert W.
Published: December 2005

A national park provides recreational opportunities and also provides a pure public good. This paper presents an intergenerational model in which a club good and a pure public good are provided jointly. The focus is on optimality conditions for services provided by park managers. At the margin, the cost of providing the services should be balanced by the benefits of services. Services can directly enhance visitor enjoyment, both immediately and in the future; they can also affect congestion currently and in the future; they can affect the quality of park resources; and they can affect the pure public good provision. The framework developed in this paper suggests what information should be used by the National Park Service when deciding on the level and kind of services to provide.
Income Redistribution and Risky Occupational Choices
Authors: Poutvaara Panu
Published: December 2005

I analyze the effect of linear taxation on discrete choices between risky occupations. In the basic model, two occupations differ in the magnitude of income risks, and citizens differ in their expected productivity in one of the occupations. I derive sufficient conditions under which income redistribution encourages a greater part of the population to choose the riskier occupation associated with higher expected income. The results are then generalized to an arbitrary number of groups of citizens facing an arbitrary number of discrete occupational choices belonging to the same linear distribution class.
Horizontal Mergers Without Synergies May Increase Consumer Welfare
Authors: Stennek Johan
Published: December 2005

In imperfectly competitive markets firms with high costs produce positive output. The market's ability to minimize costs is also constrained by the fact that firms' costs are often private information. Mergers in such markets play a dual role. They reduce competition but they also generate an efficiency gain associated with the pooling of information. This paper shows that not only may costs be reduced as a result of merger, the price level may also decline and consumers may thus gain.
Can economic theory explain piracy behavior?
Authors: Holm Håkan J.
Published: December 2005

This paper investigates if economic theory can explain variations in piracy behavior between individuals and between countries. It is demonstrated that economic theory explains a notable part of the individual variation in a survey study. Individuals with a low net valuation of an original when a copy is available are more prone to engage in piracy than individuals with a higher valuation. Individuals with a low cost of obtaining and handling copies are also more engaged in piracy. The country-wise variation can also be explained by economic variables; GNI/capita and judicial efficiency explain a substantial part of this variation.
New Evidence on Eastern Europe's Pollution Progress
Authors: Kahn Matthew E
Published: December 2005

Under communism, Eastern Europe's cities were significantly more polluted than their Western European counterparts. An unintended consequence of communism's decline is to improve urban environmental quality. This paper uses several new data sets to measure these gains. National level data are used to document the extent of convergence across nations in sulfur dioxide and carbon dioxide emissions. Based on a panel data set from the Czech Republic, Hungary and Poland, ambient sulfur dioxide levels have fallen both because of composition and technique effects. The incidence of this local public good improvement is analyzed.
Time-Consistent Policy and Politics: Does Voting Matter When Individuals Are Identical?
Authors: Anderberg Dan , Perroni Carlo
Published: December 2005

We consider the implications of a lack of policy commitment when policies are chosen through a political process and individuals are ex-ante identical. We show that politics, by allowing ex-post distributional tensions to shape policy, can make it possible to sustain non-trivial equilibria in which the commitment problem is alleviated or fully eliminated. How effective politics can be at countering collective commitment problems in homogeneous groups depends on the nature of the political process and on the extent to which private choices are public information.
Preventive Health Care and Payment Systems
Authors: Barros Pedro P , Martinez-Giralt Xavier
Published: December 2005

Prevention has been a main issue of recent policy orientations in health care. This renews the interest on how different organizational designs and the definition of payment schemes to providers may affect the incentives to provide preventive health care.

We focus on the externality resulting from referral decisions from primary to acute care providers. This makes our analysis complementary to most works in the literature allowing to address in a more direct way the issue of preventive health care. The analysis is performed through a series of examples combining different payment schemes at the primary care center and hospital. When hospitals are reimbursed according to costs, prevention efforts are unlikely to occur. However, under a capitation payment for the primary care center and prospective budget for the hospital, prevention efforts increase when shifting from an independent to an integrated management. Also, from a normative standpoint, optimal payment schemes are simpler under joint management.
Do Unbundling Policies Discourage CLEC Facilities-Based Investment
Authors: Crandall Robert W. , Ingraham Allan T , Singer Hal J
Published: December 2005

An expanding economics literature has examined the theoretical linkages between mandatory unbundling in the telecommunications sector and the incentives to invest in facilities by both incumbent local carriers and competitive carriers. Recent empirical evidence that substantiates the theory has emerged. That literature documents CLECs’ reluctance to make facilities-based investments instead of availing themselves of incumbents’ UNEs at low regulated prices that are based on total element long-run incremental costs (TELRIC). By examining the variation in facilities-based investment in loops across U.S. states and over time, we find that facilities-based line growth relative to UNE growth was faster in states where the cost of UNEs was higher relative to the cost of facilities-based investment.
Pouring Money Down the Drain? How Sunk Investments and Signing Bonuses can Improve Employee Incentives
Authors: Arya Anil , Frimor Hans , Mittendorf Brian
Published: December 2005

A common explanation for why firms incur sunk costs is that technology considerations make them inescapable. This paper shows that sometimes firms may prefer to make early (less informed) investment decisions even when technology allows such decisions to be delayed. Sunk costs commit and clarify a firm's future course of action to prospective employees, thereby providing them with incentives to acquire firm-specific human capital. This benefit of sunk costs may also provide justification for offering employee signing bonuses.
Political Feasibility of Pension Reforms
Authors: Uebelmesser Silke
Published: December 2005

The impending demographic crisis calls for fundamental reforms of old-age security. In a democracy, however, reforms require the support of the majority. A reform that aims at reducing the size of unfunded pension systems is supported by the young and opposed by the old. As long as the young have the majority, this reform is feasible; as soon as society becomes a gerontocracy, there is risk of further expansion.

We determine for Germany, France and Italy the latest point in time at which a majority is in favour of a reform. For this, we calculate for each year the “indifference age” as the age of the cohort that is not affected by the reform and the “median age” as the age of the politically decisive cohort. In Germany, a reform can be democratically enforced until 2012. France becomes a gerontocracy in 2014 and Italy as early as 2006.
Franchise Bidding for Postal Services in Rural Regions
Authors: Borrmann Jörg
Published: December 2005

In this paper, we develop a franchise bidding mechanism for postal services under the Universal Service Obligation (USO) in rural areas. For the collection and delivery of mail on rural routes and for small town counter operations, monopoly franchises are awarded. Deficits caused by the USO are balanced by transfers between the government and the incumbent postal operator, i.e. the franchiser. We analyze the efficiency properties of the mechanism and discuss the drawbacks when extending the mechanism to urban areas.
Federal Tax Benefits for Child Care: Progressivity Over Time, EGTRRA, and the Alternative Minimum Tax
Authors: Eiler John R , Hrung Warren B.
Published: December 2005

This paper examines the progressivity of tax benefits for child care over time. We find that the Child and Dependent Care Tax Credit (CDCTC) became more progressive between 1989 and 1998. However, total tax benefits for child care, which include the employer exclusion for child care, were less progressive than the CDCTC alone and became less progressive over time. In simple simulations using 1998 data as the base, we find that the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) increases the progressivity of the CDCTC and total tax benefits for child care.
Estimating Productivity When Primal and Dual TFP Accounting Fail: An Illustration Using Singapore's Industries
Authors: Kee Hiau Looi
Published: December 2005

For both primal and dual TFP growth accounting to properly account for productivity growth, assumptions of constant returns to scale and perfect competition are necessary. This paper shows that without these assumptions, while both TFP growth accounting measures remain equal if factor shares are constant, they are also equally bad at measuring productivity growth. This paper proposes a structural regression to estimate productivity growth based on more general production and cost functions. Using Singapore's industries as illustrations, this paper finds that the assumptions are widely rejected, and the estimated productivity growth exceeds both the accounting measures. When the same methodology is applied to the aggregate Singapore data, the estimated productivity growth is 4.4 percent per year, significantly higher than that of Young's (1992) and Hsieh's (2002).
Foreign Portfolio Investment Improves Performance: Evidence from the Czech Republic
Authors: Weiss Andrew , Nikitin Georgiy A
Published: December 2005

When foreigners became the major shareholders of publicly traded firms in the Czech Republic, those firms experienced improvements in performance and increases in investment. In contrast, controlling for ownership type, ownership concentration had no independent effect on performance or investment. The results are robust to the estimation technique used, the choice of independent variables, and the methods used to control for selection bias.
Toll Competition Among Congested Roads
Authors: Engel Eduardo M , Fischer Ronald , Galetovic Alexander
Published: December 2005

Roads are being franchised to private firms in many countries, raising the issue of regulating the tolls they charge. When there is more than one road to get from one point to another, regulation need not be necessary, since competition may substitute for toll regulation. This paper studies toll competition among private asymmetric roads subject to congestion. We obtain two main results. First, in equilibrium tolls are higher than optimal, that is, there is too little congestion. This happens because road owners internalize the reduction in drivers’ willingness to pay due to congestion, thereby softening competition. It follows that the drawback of private competition is exercise of market power, not excessive congestion as is sometimes conjectured. Second, the distortion becomes smaller as market size and the number of roads grow, even if the density of drivers does not change. In the limit tolls converge to the socially optimal level and are just enough to make each driver internalize the congestion externality. This suggests that the scope for competition is better in larger networks.
Intranational Trade Diversion, the Canada-United States Free Trade Agreement, and the L Curve
Authors: Coulombe Serge
Published: December 2005

This paper provides an empirical analysis of the comparative evolution of intranational and international trade in the Canadian provinces since 1981. We establish a striking empirical fact, the L curve, that characterizes the comparative evolution of intranational (interprovincial) and international trade shares to GDP between 1981 and 2000. We also use a panel data model to evaluate the impact of changing trade costs induced by the CUSFTA on the intensity of international and interprovincial trade. The analysis casts doubt on the intranational trade diversion hypothesis, common in trade models such as the structural gravity model of Anderson and van Wincoop (2003) that was used recently to revisit the Canada–U.S. border effect. International trade appears to complement rather than substitute for interprovincial trade.
HIV Testing: a Trojan Horse?
Authors: Mechoulan Stéphane
Published: December 2005

The consequences of HIV testing are unclear. Some infected individuals, assuming they behave selfishly, would tend to increase their number of partners. Meanwhile, non-infected ones or those ignorant of their status would decrease theirs, the result of which, on the equilibrium level of infection, is uncertain. Simulations from a simple dynamic model show how to generate the Philipson-Posner conjecture, i.e., that disclosure of HIV status may result in higher disease prevalence. In this benchmark case, testing would also lower welfare. Those results, however, appear to be fragile. In particular, very little altruism seems needed for testing to become beneficial, and the public health literature tells us that a large proportion of individuals behave altruistically when tested positive and appropriately counseled. Beyond the mere availability of testing, the findings further suggest combining existing prevention measures with universal or mandatory testing to help eradicate the disease.
An Empirical Analysis of Gambling Addiction: Results from the Case of Taiwan
Authors: Chang Wen-Chun
Published: December 2005

This study analyzes gambling addiction in Taiwan by using lottery data from 1978 to 1984. Two main conclusions can be drawn from the empirical evidence of this study. First, lottery play is strongly addictive in Taiwan, and the results are consistent with the theory of rational addiction. Second, the estimated short-run and long-run price elasticities are -0.136, and -1.463, respectively. Because consumers are very likely rational, the concerns of public policy toward gambling should focus on the negative externalities rather than on its addictive nature.
Retirement Incentives and Couples' Retirement Decisions
Authors: Coile Courtney
Published: December 2005

The typical family in the US is now a dual-earner couple, yet there are relatively few studies that examine the retirement decision in a household framework, particularly outside the context of a structural model. This paper explores how husbands’ and wives’ retirement behavior is influenced by their own financial incentives from Social Security and private pensions and by “spillover effects” from their spouses’ incentives. Spillover effects are possible due to income effects and complementarity of leisure; if significant, their omission will bias estimates of the effect of changing Social Security policy on retirement. I estimate reduced-form retirement models and find that men and women are similarly responsive to their own incentives: an increase of $1,000 in the return to additional work is associated with a reduction of 0.9% of baseline retirement for men and 1.3% of baseline retirement for women. I find that men are very responsive to their wives’ financial incentives but that women are not responsive to their husbands’ incentives and present evidence to suggest that this may be due to asymmetric complementarities of leisure. Policy simulations indicate that estimates of the effect of a policy change on the probability of men working at age 65 are biased by 13% to 20% if spillover effects are omitted.
Economic Voting in U.S. Presidential Elections: Who Blames Whom for What
Authors: Eisenberg Daniel , Ketcham Jonathan
Published: December 2005

In United States presidential elections, the incumbent party’s fortunes depend significantly on recent economic conditions, as numerous studies have shown. Many details of how economic voting takes place, however, are still not well understood. Here we present evidence on four issues. 1) Which is more important for determining people’s votes, national or local economic conditions? 2) What time frame do people consider in economic voting? 3) Which demographic groups are most sensitive to the economy in their voting behavior? 4) How does economic voting depend on the political context—in particular, whether a candidate is running for re-election, and whether the incumbent party also controls Congress? Our study includes the first county-level analysis of economic voting in presidential elections. We find the answers to our four questions are: 1) national conditions, by far; 2) the most recent year; 3) blacks, females, and the non-elderly; and 4) no.
Global Health Warnings on Tobacco Packaging: Evidence from the Canadian Experiment
Authors: Gospodinov Nikolay , Irvine Ian J.
Published: December 2005

New health warnings on tobacco packaging in Canada became mandatory in January 2001. As of that time producers were required to print large-font warning text and graphic images describing the health consequences of using tobacco. This study uses micro data from two waves of Health Canada's Canadian Tobacco Use Monitoring Surveys bordering the legislation to investigate if the introduction of the warnings had any significant impacts on smokers. The recently drafted Framework Convention on Tobacco Control, under the sponsorship of the World Health Assembly, assigns a central role for this type of message. Our findings indicate that the warnings have not had a discernible impact on smoking prevalence. The evidence of their impact on quantity smoked is positive, though only at a relatively low level of confidence.
eBay's Buy-It-Now Function: Who, When, and How
Authors: Durham Yvonne , Roelofs Matthew R , Standifird Stephen S
Published: December 2005

This paper utilizes field experiment methodology and market data to study the "Buy-it-Now" (BIN) function in a series of eBay coin auctions. BIN auctions are typically listed by sellers with higher reputations. The probability an auction will end BIN increases with seller reputation and is not significantly affected by negative comments. Auctions listed by new sellers average lower prices and are less likely to end BIN. Buyer use of the BIN option increases as the BIN price decreases. We find that price is directly related to seller reputation, though not affected by negative comments, and is negatively related to buyer reputation. This result is driven by those auctions that start with a BIN price.
Public Venture Capital, Occupational Choice, and Entrepreneurship
Authors: Secrieru Oana , Vigneault Marianne
Published: December 2005

New businesses face constraints in the form of limited access to capital and managerial expertise. Many governments have developed public venture capital programs for the purpose of easing these constraints and assisting young firms in generating growth in output and employment. The paper develops a model that incorporates occupational choice and informational asymmetries with regard to the ability of entrepreneurs and supply of effort, and determines the optimal supply of entrepreneurship, financial assistance, and managerial advice provided by a public venture capital program.
Food Supply Management and Tariffication: A Game Theoretic Approach
Authors: Schmitz Troy G. , Schmitz Andrew
Published: December 2005

We compare the current Canadian supply management regime in which producers and importers benefit from rent-seeking activities that set production quota and import quota levels with those under a tariff, in which producers partakes in rent-seeking activities in order to induce the government to introduce a favorable tariff regime. We explore two different quota-setting games: (1) the import quota and production quota are set at a level that arises from a Cournot-Nash equilibrium between producers and importers; and (2) the producer marketing board acts as a Stackelberg leader, taking into account the importers reaction to its production quota level. We compare these quota-setting games with two different tariff-setting games: (1) A non-cooperative game in which the government sets the tariff at a level that maximizes tariff revenue; and (2) A cooperative game in which producers, through rent-seeking activities, induce the government to set the tariff at a level that maximizes joint government and producer rents.
Social Welfare and the Market Power-Efficiency Tradeoff in U.S. Food Processing: A Note
Authors: Lopez Rigoberto A , Lirón-España Carmen
Published: December 2005

This article computes the welfare changes from increases in industrial concentration in a sample of 35 U.S. food manufacturing industries, taking into account oligopoly power and efficiency effects. It is estimated that a 1% across-the-board increase in the Herfindahl index would lead to an increase in aggregate social welfare (with increases in 74% of the industries), nearly neutral consumer welfare effects, and increases in producer welfare due to efficiency gains that are not passed on. The results call into question the conventional wisdom that considers welfare losses from market power without considering potential gains in production efficiency.
The Gains and Losses from Agricultural Concentration: A Critical Survey of the Literature
Authors: Whitley John
Published: December 2005

This paper surveys some potential costs and benefits of increased concentration in agricultural markets in the context of an economic trade-off. The existing industrial organization literature is applied to agricultural markets to provide a more concrete structure for analysis. Although an important part of the debate, market power and the existing empirical literature measuring it are only part of a complete picture and suggestions are made on where this literature could go to increase its impact. Policy frameworks are examined to provide perspective on the relevant theoretical and empirical work.
Explaining Plant Exit in the U.S. Meat and Poultry Industries
Authors: Muth Mary K , Wohlgenant Michael K , Karns Shawn A , Anderson Donald W
Published: December 2005

Recent U.S. pathogen reduction and HACCP food safety regulations, which increased the costs of producing meat and poultry products, may have affected the rate of plant exit during the 1996 to early 2000 time period over which the regulations were implemented. We estimate and compare probit models for U.S. federally inspected meat slaughter (920 plants), poultry slaughter (280 plants), and meat and poultry processing-only (4,300 plants) plants to determine which factors most contributed to the probability of plant exit. The factors we consider include plant-level, company-level, and regional-level characteristics and regional supply conditions. Although plant size affected the probability of exit for slaughter plants, it did not affect exit for processing-only plants. Other variables, such as measures of market structure and competition, have different effects for each of the industries.
Inventory Constraints in a Dynamic Model of Imperfect Competition: An Application to Beef Packing
Authors: Hunnicutt Lynn , Aadland David
Published: December 2005

This paper incorporates inventory dynamics into a standard conjectural variations analysis of market power. Using a model which incorporates closed-loop equilibrium strategies, we show that measures of market power that ignore inventory dynamics are biased. We then apply the model to the beef-packing industry using annual data on cattle stocks, slaughter and prices from 1933-1999. Our estimates suggest that static measures overestimate the amount of market power exerted by beef-packing firms.
Concentration and Innovation in the U.S. Food Industries
Authors: Gopinath Munisamy , Pick Daniel , Li Yonghai
Published: December 2005

We investigate the effect of industrial concentration on productivity growth, a proxy for innovation, in the U.S. food industries. Here, we search for a possible critical level of concentration, i.e., the inverted-U hypothesis beyond which its relationship with productivity can turn negative. Productivity growth is specified as function of growth in concentration and vice versa with conditioning variables. The resulting simultaneous panel model is estimated using a panel (grouped) database comprising of 36 food-processing industries and the 1964-1992 period. Results suggest the conditioned productivity-industrial concentration relationship has an inverted-U shape. The critical level of concentration, where the relationship between growth rates of productivity and concentration turns negative, appears to be 62.3, a 24% increase from the current levels. A mapping of the net effects of an increase in concentration suggests that current deadweight loss of $7.8 billion can be reduced to about $2.8 billion when concentration increases by 18% from its current level. A reassessment of the income distributional effects of concentration suggests that consumers gain from lower food prices and agricultural producers face an increase in demand, albeit in a second-best world.
Costly (Dis)Agreement: Optimal Intervention, Income Redistribution, and Transfer Efficiency of Output Quotas in the Presence of Cheating
Authors: Giannakas Konstantinos , Fulton Murray
Published: December 2005

This study builds on previous work by Giannakas and Fulton (2003, 2000) on the economics of output quotas in the presence of cheating by examining the efficiency of the policy in transferring income to producers as well as the optimal regulatory response to enforcement costs and farmer noncompliant behavior in a decentralized policy making environment. Analytical results show that enforcement costs and cheating change the transfer efficiency of output quotas, the level of intervention that transfers a given surplus to producers, the socially optimal income redistribution, and the social welfare from intervention. The incidence of the policy is shown to depend on the relative political preferences of the policy makers and the policy enforcers making the consideration of the decentralized policy making structure critical in analyzing output quotas in the presence of cheating.
Phenomenological Kinetics of Isothermal Wet Air Oxidation: Operating Severity Factor and Recalcitrance Index
Authors: Belkacemi Khaled , Hamoudi Safia
Published: December 2005

In the present investigation, the kinetics governing wet air oxidation (WAO) of organic pollutants is modeled by two distinct parallel kinetic terms corresponding to a readily oxidizable and a recalcitrant structural parts of the pollutant molecule involving the concept of thermodynamic severity factor. The developed model was successfully applied to several classes of organic water pollutants including phenolic compounds as well as mono- and di-carboxylic acids. In the offshoot of the model, a recalcitrance index was proposed classifying the pollutant molecules according to their resistance to oxidation. For the carboxylic acids, it was found that the recalcitrance towards WAO was inversely correlated to the molecular size and weight. Acetic acid proved to be the more recalcitrant component. As for the phenolic compounds, the oxidation efficiency was shown to be affected by the nature of the substitutents present on the phenolic ring. The electron donating substitutents such as alkyl groups (CH3 or C2H5) confer to the molecule an enhanced reactivity towards WAO. On the contrary, electron-accepting substitutents, such as methoxy groups, lower the oxidation and consequently enhance the recalcitrance.