bluuebunny/crossref_metadata_2025 huggingface dataset:
TEACHING TOOLS: SHOULD WE TEACH MICROECONOMIC PRINCIPLES BEFORE MACROECONOMIC PRINCIPLES?
Authors: LOPUS JANE S. , MAXWELL NAN L.
Published: January 2010

No consensus exists about the optimal sequencing of economics principles courses. We show that most top‐ranked economics departments either do not specify an ordering or require microeconomics first, while most textbooks present macroeconomics before microeconomics. Using a national economic education database, we find that students learn more in principles of microeconomics after taking a course in macroeconomics. However, students do not learn more in principles of macroeconomics after taking a course in microeconomics. This implies that, ceteris paribus, principles of macroeconomics should be taught before principles of microeconomics for optimal student learning.
GORDON TULLOCK'S CONTRIBUTIONS TO THE THEORY OF PUBLIC CHOICE
Authors: TOLLISON ROBERT D.
Published: January 2010

This paper offers a commentary on Gordon Tullock's various contributions to economics and social science. Tullock's methodology and style, and various critical appraisals of Tullock's work are discussed. The importance of Tullock's work and its significance for the future of economics are also assessed.
LOGROLLING IN THE U.S. CONGRESS
Authors: STRATMANN THOMAS
Published: January 2010

Does exchange, i.e., vote trading, occur in legislatures?!f so, is it quantitatively important or optimal? How important are political parties for the organization of logrolling coalitions? To address these questions, this paper investigates a broad range of votes where logrolling has been reported among interests favoring subsidies for urban, labor, and farm interests. The findings suggest that logrolling agreements are widespread, that many Democratic congressmen changed votes because of logrolling agreements, and that the Democratic party served to facilitate logrolling between its members. Furthermore, logrolling coalitions exhibited a strong degree if stability.
THE EFFECTS OF DIFFERENTIAL MORTALITY RATES ON THE PROGRESSIVITY OF SOCIAL SECURITY
Authors: GARRETT DANIEL M.
Published: January 2010

Does the Old‐Age and Survivors Insurance portion of Social Security become regressive once we allow for the shorter lifespan of poor people? This paper compares the net returns of poor households to the net returns of other households after taking into account differential longevity. Earnings and Social Security tax and benefit histories are simulated for families of various income levels in the 1925 birth cohort. These tax and benefit profiles are then weighted by the agents' probabilities of survival. For some plausible values of key mortality parameters, differences in mortality eliminate the progressive spread in returns across income categories.
COULD STABLE MONEY HAVE AVERTED THE GREAT CONTRACTION?
Authors: BORDO MICHAEL D. , CHOUDHRI EHSAN U. , SCHWARTZ ANNA J.
Published: January 2010

We test the hypothesis that the Great Contraction would have been attenuated had the Federal Reserve not allowed the money stock to decline. We simulate a model that estimates separate relations for output and the price level and assumes that output and price dynamics are not especially sensitive to policy changes. The simulations include a strong and a weak form of Friedman's constant money growth rule. The results support the hypothesis that the Great Contraction would have been mitigated and shortened had the Federal Reserve followed a constant money growth rule.
SHOPPING HOURS AND PRICE LEVELS IN THE RETAILING INDUSTRY: A THEORETICAL AND EMPIRICAL ANALYSIS
Authors: TANGUAY GEORGES A. , VALLGE LUC , LANOIE PAUL
Published: January 2010

We explore the effect of extended shopping hours on the demand faced by small and large stores and on their prices. Our theoretical model predicts that prices at large stores will increase after opening hours are deregulated. We then test this prediction using a set of Quebec data collected before and after the deregulation of opening hours in July 1990. The results support our view that prices have increased at large stores since deregulation and that consumers pay for greater shopping flexibility.
ESTIMATING CAPITAL EFFICIENCY SCHEDULES WITHIN PRODUCTION FUNCTIONS
Authors: Doms Mark E.
Published: January 2010

I estimate capital efficiency schedules within a production function, allowing the data to reveal how the efficiency of capital goods evolves as they age. A parameterized investment stream is used as a capital variable in a production function, and the parameters of the production function are estimated simultaneously with the parameters of the investment stream. Plant‐level panel data for steel plants employing a common technology are used to estimate the model. I find that the estimated efficiency schedules appear to follow a geometric pattern, which is consistent with the estimates of economic depreciation of Hulten and Wykoff [1981].
DEPRECIATION IN PRODUCTION ANALYSIS AND IN INCOME AND WEALTH ACCOUNTS: RESOLUTION OF AN OLD DEBATE
Authors: Triplett Jack E.
Published: January 2010

In this article, I propose a resolution for the long‐standing controversy over depreciation. I develop, from capital theory, income and wealth accounting capital concepts and compare them with those from production analysis and productivity measurement. I conclude that depreciation in economic accounts is exactly the same measurement as in production analysis. As for empirical implications, market‐based measures of depreciation are appropriate for economic accounts, provided they are appropriate empirical measures of economic depreciation.
THEORY‐BASED MEASUREMENT OF THE SAVING‐INVESTMENT CORRELATION WITH AN APPLICATION TO NORWAY
Authors: Jansen W. Jos , Schulze Günther G.
Published: January 2010

The work of Feldstein and Horioka has stimulated much research on the correlations of national savings and investment rates and their relation to the degree of international capital mobility. Theory implies a cointegrating relation between these variables, which suggests this correlation is measured best by an error correction model. This model includes all previous specifications as special cases, which we show are potentially misspeced on theoretical grounds. Applied to Norway, our model outperforms prevailing specifications. We detect structural breaks, and find the correlation's time profile is consistent with other indicators of capital mobility.
CONSUMER SEARCH COSTS AND MARKET PERFORMANCE
Authors: Davis Douglas D. , Holt Charles A.
Published: January 2010

We conduct laboratory markets to evaluate the effects of consumer search costs on market performance. The primary research goal is to assess the behavioral relevance of Diamond's [1971] paradoxical conclusion that the injection of a small consumer search cost alters the equilibrium price prediction from competitive to monopoly levels. Although monopoly prices are not consistently observed, we find that search costs do tend to raise prices. Additional experimentation indicates that below‐monopoly prices are not explained by buyer avoidance of high‐pricing sellers, but that prices increase as search costs are raised.
TEACHING TOOLS: HOW IS INTRODUCTORY ECONOMICS TAUGHT IN AMERICA?
Authors: Siegfried John J. , Saunders Phillip , Stinar Ethan , Zhang Hao
Published: January 2010

We describe the faculty, students, teaching methods, and assessment instruments used in 180 introductory economics classes taught by 122 different instructors at 53 different colleges and universities. Despite variation in class size and types of institution, both introductory macroeconomics and introductory microeconomics are taught predominantly as lecture courses, with the largest part of students' course grades determined by performance on multiple‐choice question tests. There seems to be little experimentation with alternative pedagogies or assessment techniques despite an in‐creasing amount of attention to these issues in recent years.
THE OPTIMAL GOVERNMENT SIZE: FURTHER INTERNATIONAL EVIDENCE ON THE PRODUCTIVITY OF GOVERNMENT SERVICES
Authors: Karras Georgios
Published: January 2010

This paper estimates the optimal government size for several sets of economies by investigating the role of public services in the production process. I assume government services are optimally provided when their marginal product equals unity (the “Barro rule”). The empirical results suggest: (1) government services are significantly productive; (2) they are overprovided in Africa, underprovided in Asia, and optimally provided everywhere else; (3) the optimal government size is 23 percent for the average country but ranges from 14 percent for the average OECD country to 33 percent in South America; and (4) the marginal productivity of government services is negatively related to government size.
THE BIAS TOWARDS ZERO IN AGGREGATE PERCEPTIONS: AN EXPLANATION BASED ON RATIONALLY CALCULATING INDIVIDUALS
Authors: Fremling Gertrud M. , Lott John R.
Published: January 2010

We show that individuals' errors in identifying the relationships among variables cause downward biases in the aggregate that are equivalent to the public underestimating the strengths of the true relationships. We argue that rational expectations has considered only the “misestimation” type of error, which can “cancel out” in the aggregate, but that with errors in identifying relationships, there is no similar cancelling‐out effect. The result is that the public appears “irrationally” to underestimate the strength of relationships among variables even when all individual agents behave rationally. Empirical evidence that forecasts are systematically biased is reinterpreted using our discussion.
AN EXAMINATION OF THE MARKET FOR FAVORS AND VOTES IN CONGRESS
Authors: Groseclose Tim
Published: January 2010

This paper examines the strategies that “horse traders” and “power brokers” adopt in trading favors to pass legislation. Although the favors that they trade are generally impossible to observe, the paper develops a model that allows tests of favor trading. With data from the Senate vote on the Byrd Amendment to the 1990 Clean Air Act I conduct such a test. The test provides evidence that on this vote (i) favor trading occurred, (ii) the coalition leaders practiced price discrimination, and (iii) the coalition leaders did not collude with each another.
TESTING A PRODUCTION‐BASED ASSET‐PRICING MODEL
Authors: Arroyo Cristino R.
Published: January 2010

We develop a dynamic production‐based asset‐pricing model from the solution cf a representative firm's investment and financing problem. Nonnegative correlation between capital stocks and asset returns is accommodated, as well as equity premia arisingfrom dtfferential costs of stock versus bondfinance. Under our adjustment‐costs specfication, the returns on the firm's financial instruments become linear functions of the firm's average capital productivity, its investment‐capital ratio, and financial instrument‐specific costs. Empirical tests using U.S. T‐bill rates and common stock returns yield plausible parameter estima tes and coofrm the significance qfthesefictors.
TEACHING TOOLS: WHY WORKERS SHOULD WANT MANDATED BENEFITS TO LOWER THEIR WAGES
Authors: Lee Dwight R.
Published: January 2010

Mandating that employers provide job‐related benefits is not a free lunch for employees. Despite the claims of some advocates of mandated benofts, economists have long recognized that much of the cost of those benefifs is passed on to employees in lower wages. What has gone unrecognized is that the more employees pay fir a mandated bentefit relative to its cost the more they gain from having the benefit provided.
RATIONALITY, EVOLUTION, AND ACQUISITIVENESS
Authors: Demsetz Harold
Published: January 2010

The first part of this paper discusses Alchian's classic 1950 article “Uncertainty, Evolution, and Economic Theory” and argues against the notion that it is easy to eliminate rationality from economic behavior by appealing to evolution as a substitute. The second section discusses rationality and develops a specc meaning for this term that distinguishes it from the axioms of choice found in economic theory. In the final section, I use this definition and link rationality to a behavioral propensity almost unique to the human species—acquisitiveness, concluding from this linkage that acquisitiveness can speed up the evolution of intelligence.
EVIDENCE ON ELECTORAL ACCOUNTABILITY IN THE U.S. SENATE: ARE UNFAITHFUL AGENTS REALLY PUNISHED?
Authors: Schmidt Amy B. , Kenny Lawrence W. , Morton Rebecca B.
Published: January 2010

Many have questioned whether voters are able to hold incumbent officials electorally accountable through a retrospective voting strategy. We examine U.S. Senate elections from 1962 to 1990 in forty‐one states, explaining which incumbents ran for reelection and their success in seeking reelection. We find that an incumbent's deviation from her state party platform decreases the probability that she will run for reelection and win if she runs. Furthermore, the electoral mechanism is found to be more efficient when voters are better informed. Finally, we find that our divergent party platform model provides a better fit than the median voter model.
MODELING MONETARY TRENDS IN ITALY USING HISTORICAL DATA: THE DEMAND FOR BROAD MONEY 1861—1990
Authors: Muscatelli Vito Antonio , Spinelli Franco
Published: January 2010

In this paper we estimate a stable demand for money relationship for Italy using a long series of historical data. We extend previously available data sets to obtain a sample for the years 1861 to 1990 and use cointegration analysis and two‐stage estimation procedures to obtain a dynamic model for M2 demand. By employing a small number of explanatory variables and a nonlinear error‐correction model we find a stable demand for money relationship. Our model incorporates significant inflation and interest rate effects, in contrast to previous studies of this type.
EFFICIENCY EFFECTS OF EXCLUSIVE TERRITORIES: EVIDENCE FROM THE INDIANA BEER MARKET
Authors: Sass Tim R. , Saurman David S.
Published: January 2010

The welfare effects of vertically imposed exclusive territories and the appropriate antitrust policy toward them have long been debated. This paper sheds light on the exclusive‐territory controversy by examing the effects of Indiana's 1979 ban on the grant of exclusive territories to beer wholesalers. Using time‐series data for 1948–1990 we find the ban reduced beer consumption in Indiana by 6 percent. Coupled with previous evidence that Indiana's ban reduced price, our results suggest that exclusive territories in the beer industry increase demand and enhance welfare by stimulating the provision of dealer services.
THE EFFECT OF MATERNAL DRUG USE ON BIRTH WEIGHT: MEASUREMENT ERROR IN BINARY VARIABLES
Authors: Kaestner Robert , Joyce Theodore , Wehbeh Hassan
Published: January 2010

We develop a method to correct for non‐random measurement error in a binary indicator of illicit drugs. Our results suggest that estimates of the effect of self‐reported prenatal drug use on birth weight are biased upwards by measurement error—a finding contrary to predictions of a model of random measurement error. More accurate estimates of the true effect of drug use on birth weight can be obtained by using the predicted probability of falsely reporting drug use. Thus out‐of‐sample information on drug use may improve estimates of the effect of reported drug use in other settings.
WAGE DISCRIMINATION ACROSS ETHNIC GROUPS: EVIDENCE FROM ISRAEL
Authors: Neuman Shoshana , Silber Jacques G.
Published: January 2010

We investigate wage differentials between ethnic groups in Israel, proposing a new methodology and an illustration based on the latest Israeli census. By using separate wage equations for the various occupations, our methodology allows us to decompose the wage differential into three components: one reflecting human capital differences; one reflecting wage discrimination; and a third indicating occupational segregation. We find that 70 percent of the wage gap is due to segregation, 26 percent to wage discrimination and only 4 percent to human capital differences. Evidence is also found for the existence of duality in the Israeli labor market.
USE, ESTEEM, AND PROFIT IN VOLUNTARY PROVISION: TOLL ROADS IN CALIFORNIA, 1850—1902
Authors: Klein Daniel B. , Yin Chi
Published: January 2010

Early Californians took stock in toll roads for a variety of reasons: use of the road, esteem of fellows, and profits from stock. Whatever the motivation, in operation all toll road companies felt the profit motive. This paper presents a historical survey of voluntary organizations taking the stock‐corporation form. These cases demonstrate how various motivations and incentives intermingled and supported one another in the days before the corporation was legally bifurcated into either “for‐profit” or “not‐for‐profit” enterprise.
THE SPATIAL DISTRIBUTION OF BLACK EMPLOYMENT BETWEEN THE CENTRAL CITY AND THE SUBURBS
Authors: Ihlanfeldt Keith R. , Young Madelyn V.
Published: January 2010

The share of fast food restaurant jobs held by blacks is smaller in the suburbs than in the central city. This is of interest because expected wages are higher in the suburbs. Estimating a model of the racial composition of the restaurant's workforce, we find that 36 percent of the difference in black employment share between central city and suburban firms is attributable to the fact that suburban firms are less frequently served by public transit. City/suburban differences in the race of managers and customers also play an important role, accounting for 29 percent of the difference.
POLITICAL AND ECONOMIC DETERMINANTS OF INTEREST RATE BEHAVIOR: ARE CENTRAL BANKS DIFFERENT?
Authors: Johnson David R. , Siklos Pierre L.
Published: January 2010

Political influences on short‐term interest rates in seventeen OECD countries from 1960–1990 are measured. After controlling for unexpected changes in inflation and unemployment, as well as changes in the world interest rate, short‐term interest rates in most countries do not respond to political events, neither the timing of elections nor changes in the governing party. Thus, on this criterion, the central banks in this sample do not reveal large differences in their degree of independence from political influence. The small differences are not closely related to rankings of central bank independence based on quantification of central bank laws.
POTENTIAL COMPETITION AND POSSIBLE COLLUSION IN FOREST SERVICE TIMBER AUCTIONS
Authors: Brannman Lance Eric
Published: January 2010

Potential competition significantly affects the size of winning bids in Forest Service sealed‐bid timber auctions and has little effect on winning bids in oral auctions. Winning sealed bids depend even more, however, on actual competition, a result suggesting collusion. This explanation is supported using an index representing the likelihood an auction was rigged. Preclusive bidding (a type of collusion) in oral auctions is indicated by a positive relationship between hauling distances and the size of winning sealed bids. Comparisons of winning‐bid variances, overbids, and numbers of bidders across auction type support this explanation of oral auction prices.
CUMULATION AND ITC DECISION‐MAKING: THE SUM OF THE PARTS IS GREATER THAN THE WHOLE
Authors: Hansen Wendy L. , Prusa Thomas J.
Published: January 2010

In 1984 Congress amended the antidumping and countervailing duty laws, man‐dating that the International Trade Commission (ITC) “cumulate” imports across countries when determining injury. We estimate that cumulation increases the probability of an affirmative injury determination by 20 to 30 percent and has changed the ITC's decision (from negative to affirmative) for about one‐third of cumulated cases. We also show that the protective effect of cumulation increases as the number of countries involved increases, holding import market share constant. That is, cumulated imports have a super‐additive effect on ITC decision‐making.
THE EFFECT OF THE FOOD STAMP PROGRAM ON NUTRIENT INTAKE
Authors: Butler J. S. , Raymond Jennie E.
Published: January 2010

Receipt of food stamps is often observed to be positively correlated with intake of nutrients. However, this observed fact could be the result of self‐selection into the food stamp program by those individuals who are more interested in maintaining good nutrition. We observe that, controlling for participation in the food stamp program, nutrition is negatively affected by food stamp income for a sample of elderly people. However, we find that the levels of nutrients do not decrease enough to cause individuals to fall below the Recommended Dietary Allowance.
POLITICAL INSTABILITY AND DEBT MATURITY
Authors: MILLER VICTORIA
Published: January 2010

Political instability has been blamed for many poor macroeconomic outcomes such as high inflation, unemployment and low growth. I propose yet another negative consequence of political instability: political instability and polarization generate inflation uncertainty which causes the term structure to steepen, consequently political instability and polarization reduce the average maturity and increase the expected cost of debt. A model is derived which illustrates these relationships. Political instability and polarization are then proxied and shown to be inversely related to debt maturity for a sample of OECD countries.
LABOR IMMOBILITY AND THE FORMATION OF GENDER WAGE GAPS IN LOCAL MARKETS
Authors: MERRILL HAIM OFEK AND YESOOK
Published: January 2010

Family ties have an important effect on the wage gap between male and female workers because wives are often more geographically tied to their husband's location, which may not be the best market for the wife's skills. Theory implies a testable inverse relationship between urban size—reflecting labor market size—and male‐female wage differentials. Our results indicate that the wage gap between married men and women narrows with urban size. About 17 percent of the wage gap between married men and women can be accounted for by urban size—or, more fundamentally, by geographic immobility due to the family tie constraint.
THE ROLE OF THE MEDIAN LEGISLATOR IN U.S. TRADE POLICY: A HISTORICAL ANALYSIS
Authors: HANSEN WENDY L. , PRUSA THOMAS J.
Published: January 2010

In this historical analysis of U.S. trade policy, we apply the median voter model to explain legislative decision making. In this model, the level of tariff protection is expected to change with changes in the median legislator. We show that this simple model does a remarkable job if explaining trade policy until the mid‐1930s, when it breaks down. We offer several possible explanations for the breakdown of this model, focusing particularly on the impact of domestic and international institutional changes that may have altered the role of the median legislator in trade policy formation.
UNEMPLOYMENT AND FINANCIAL CONSTRAINTS FACED BY SMALL FIRMS
Authors: JEFFERSON PHILIP N.
Published: January 2010

A distinguishing feature of small firms is that most small business owners work for themselves and only employ relatives and friends. We examine conditions under which this labor market practice is an economic outcome and consider the link between this outcome and unemployment. The model is motivated by empirical evidence that suggests that small firms are subject to financial constraints that are supported by information asymmetries. I show that, in a constrained equilibrium, sole proprietorship and unemployment arise from an information imperfection in the credit market that makes infeasible the consummation of mutually beneficial contracts in the labor market.
THE EFFECT OF SELECTIVE INS MONITORING STRATEGIES ON THE INDUSTRIAL EMPLOYMENT CHOICE AND EARNINGS OF RECENT IMMIGRANTS
Authors: DÁVILA ALBERTO , PAGAN JOSE A.
Published: January 2010

One effect of 1986's immigration reform was to make INS inspection of firms more costly relative to other industries. In response, we suggest, the INS refocused its enforcement efforts toward industries with a higher concentration of illegals per establishment, especially manufacturing. We test this hypotheses and model the effects of a selective monitoring strategy on the employment choice and wages of illegal workers. We find evidence of selective monitoring by the INS and that this policy has redistributed illegal workers from closely to weakly monitored industries. Specifically, we find a shift from the higher‐paying manufacturing sector to the agricultural.
EXPLAINING STATE BANS ON CORPORATE FARMING
Authors: KNOEBER CHARLES R.
Published: January 2010

State laws banning corporate farming present a puzzle for a rent‐seeking explanation of political outcomes since family farmer proponents may receive no direct benefit from these bans. An explanation, developed here, is that these farmers benefit indirectly. Forestalling corporate entry preserves the farm political coalition structured around those cooperatives patronized by family farmers and so indirectly preserves federal subsidies and supply restrictions. That the incidence of state bans is positively related to the importance of federal farm programs, the importance of cooperatives, and the homogeneity of farmers within a state is consistent with this indirect rent‐seeking explanation.
UNOBSERVABLE INDIVIDUAL EFFECTS, MARRIAGE AND THE EARNINGS OF YOUNG MEN
Authors: CORNWELL CHRISTOPHER , RUPERT PETER
Published: January 2010

While there is compelling evidence that married men earn more than unmarried men, the source of this premium remains unsettled. Using panel data from the National Longitudinal Survey of Young Men, we show that much of the premium normally attributed to marriage is associated with unobservable individual effects that are correlated with marital status and wages. To the extent there is a gain, it is purely an intercept shift and no more than 5% to 7%. Our findings cast doubt on the interpretation that marriage enhances productivity through specialization.
MONEY DEMAND AND QUANTITY CONSTRAINTS: EVIDENCE FROM THE SOVIET INTERVIEW PROJECT
Authors: ASGARY NADER , GREGORY PAUL , MOKHTARI MANOUCHEHR
Published: January 2010

This paper examines the effects of shortages on the demand for money of Soviet citizens. It is the first to examine the demand for money in a centrally planned economy using cross‐section data in which alternatives to income and interest rates are used to explain money demand. We find demand for broad money and liquid assets depends on income, illiquid wealth, participation in the underground economy, and the severity of quantity constraints as well as demographic factors. Our findings show that quantity constraints decrease demand for the national currency and increase demand for convertible currencies and barter transactions.
BLACK‐WHITE WEALTH INEQUALITY: IS INHERITANCE THE REASON?
Authors: MENCHIK PAUL L. , JIANAKOPLOS NANCY AMMON
Published: January 2010

Racial differences in the receipt of financial inheritances he& to explain why the average difference in wealth between black and white households is larger than the average difference in income. Using data from a panel of prime‐aged males and from a representative survey of the U.S. population, we document the greater likelihood of white households receiving an inheritance than black households. Controlling for other factors which contribute to racial differences in wealth, we estimate that financial inheritances may account for between 10% and 20% of the average difference in black‐white household wealth.
A SIMPLE PRINCIPAL‐AGENT EXPERIMENT FOR THE CLASSROOM
Authors: ORTMANN ANDREAS , COLANDER DAVID
Published: January 2010

In this note we describe a simple, flexible and instructive moral hazard experiment. It can be used in a variety of classes, including principles classes, to illustrate the basic incentive conflicts in principal‐agent interactions, the importance of information, and the power of reputational enforcement.
THE IMPACT OF CLASSROOM EXPERIMENTS ON THE LEARNING OF ECONOMICS: AN EMPIRICAL INVESTIGATION
Authors: FRANK BJÖRN
Published: January 2010

This paper provides limited evidence on the effectiveness of a simple classroom experiment. In different courses in environmental economics or public finance, a brief take‐some game was performed. Students who took part in this classroom experiment, as well as those who just watched it, were more successful in answering a multiple‐choice test on the “tragedy of the commons” than control groups from the same courses.
AN EMPIRICAL INVESTIGATION OF ASYMMETRIC BEHAVIOR IN CORPORATE DIVIDEND POLICY
Authors: SHIRVANI HASSAN , WILBRATTE BARRY
Published: January 2010

Employing three alternative measures of ability to pay, we find support for the Lintner hypothesis that firms pursue a long‐run target payout ratio and also that current earnings better explain long‐run dividends than cash flows or stock prices. The evidence further indicates that corporations adjust dividends with a ratchet effect, raising them more readily than they lower them. More specifically, when dividends are below target levels, firms move toward equilibrium by increasing them, but when dividends are above target levels, firms approach equilibrium by restricting dividend increases as earnings rise.
A COMMON PROPERTY EXPERIMENT WITH A RENEWABLE RESOURCE
Authors: HAZLETT DENISE
Published: January 2010

This series of three classroom experiments demonstrates the tragedy of the commons and suggests two possible solutions: communication and individual property rights. In the first and second experiments, students jointly own a renewable resource in the form of a plate of M&Ms. Communication is not allowed in the first experiment, whereas in the second experiment students may try to influence each other's desired harvest. The third experiment divides the plate to establish individual property rights.
PROFIT MAXIMIZATION PROBLEM
Authors: HEMENWAY DAVID , KOHLBERG ELON
Published: January 2010

This business problem for microeconomic students might be used as part of a problem set or as a take‐home exam. It highlights the importance of marginal analysis, and the implications of the fact that rational individuals will undertake the most cost‐effective measures first.
THE OPTIMAL MONETARY RESPONSE TO TECHNOLOGY SHOCKS
Authors: IRELAND PETER N.
Published: January 2010

This paper develops a model in which both technology and monetary shocks are important sources of variation in aggregate output and employment. The model rationalizes a policy under which money responds actively to technology shocks. The welfare cost of adopting the constant money growth rule advocated by Milton Friedman rather than the optimal activist policy is small, however. (JEL E52, E32)
AUTOCRATIC, DEMOCRATIC, AND OPTIMAL GOVERNMENT
Authors: NISKANEN WILLIAM A.
Published: January 2010

All types of government face two major fiscal decisions: the level of government services and the average tax rate. This paper develops models of autocratic, democratic, and optimal government. The effects of alternative government structures are estimated using a common set of parameters based on US. data. Output and government services are higher in u democracy than in an autocracy, but the tax rate is lower. Output is even higher with an optimal government and both government services and the tax rate are lower. The relative outcomes in any government depend strongly on the fiscal horizon of those who govern. (JEL H11)
MORAL HAZARD, ASSET SPECIFICITY, IMPLICIT BONDING, AND COMPENSATION: THE CASE OF FRANCHISING
Authors: WIMMER BRADLEY S. , GAREN JOHN E.
Published: January 2010

In franchising, many of the elements of moral hazard models merge. Issues of two‐sided moral hazard, bonding, and asset specificity all play a role. We extend the literature by considering how asset specificity creates an implicit bond and affects incentive pay. This approach implies that if one party posts a larger bond, this improves their incentives and allows enhancement of the other party's incentives through a larger residual income claim. Our empirical work supports this approach. For example, reductions in the specificity of the franchisee's investment due to leasing lowers the royalty rate and raises the franchise fee. (JEL L14, 533)
VOTING BEHAVIOR, DISCRIMINATION AND THE NATIONAL BASEBALL HALL OF FAME
Authors: FINDLAY DAVID W. , REID CLIFFORD E.
Published: January 2010

We investigate whether black, Latin, and white major league baseball players receive the same consideration by the Baseball Writers' Association of America in voting for membership into The National Baseball Hall of Fame. The first stage of Heckman's two‐step procedure indicates that the probability a black player will ever receive at least one vote is significantly lower than that for his white counterpart. The second stage suggests that race or ethnicity sometimes matter in determining the number of votes a candidate receives for Hall of Fame membership. (JEL J7, D72)
ARE AUTOMOBILE SAFETY REGULATIONS WORTH THE PRICE: EVIDENCE FROM USED CAR MARKETS
Authors: DUNHAM WAYNE R.
Published: January 2010

The value consumers place on automobile safety regulations can be determined by examining the instantaneous effects changes in these regulations have on used vehicle prices. If consumers value safety regulations more than their cost, used vehicle prices decrease in response to a change in safety regulations. If consumers place at least some value on the safety induced by safety regulations, a change in emission control regulations will have a greater positive impact on used automobile prices than a change in safety regulations. Empirical results strongly support the latter case and, surprisingly, offer some support for the former case. (JEL L51, L62)
FISCAL STRUCTURES AND ECONOMIC GROWTH: INTERNATIONAL EVIDENCE
Authors: MILLER STEPHEN M. , RUSSEK FRANK S.
Published: January 2010

Our paper systematically examines the effects of fiscal structure on economic growth. We find that for developing countries, debt‐financed increases in government expenditure retard growth and tax‐financed increases stimulate growth, while for developed countries, debt‐financed increases in government expenditure do not affect growth and tax‐financed increases lower growth. We impose the government budget constraint on the regression equations so that the precise changes in fiscal policy can be identified (e.g., the effect of a debt‐financed increase in health expenditure), employing a pooled cross‐section, time‐series sample and fixed‐ and random‐effect methods. (JEL 04, E6)
RESOURCE ALLOCATION IN PUBLIC POLICY: THE EFFECTS OF THE 65‐MPH SPEED LIMIT
Authors: LAVE CHARLES , ELIAS PATRICK
Published: January 2010

In 1987 the U.S. government allowed states to raise speed limits to 65‐mph on some highways. We evaluate the consequences using a resource allocation perspective: the chance to drive faster reallocates traffic from side roads to the safer interstate highways, and a higher speed limit permits highway patrols to shift manpower from speed enforcement to other safety activities. This perspective implies that we should measure the effect of a speed limit by its systemwide rather than its local effects. We do so and find that the fatality rate dropped by 3.49%‐5.1% following the speed limit increase. (JEL A10, R40)
DONOR PREFERENCES AND RECIPIENT FISCAL BEHAVIOR: A SIMULTANEOUS ANALYSIS OF FOREIGN AID
Authors: CASHEL‐CORDO PETER , CRAIG STEVEN G.
Published: January 2010

We theoretically develop and empirically estimate a preference model determining foreign aid donor behavior. Aid access and levels are separately determined by endogenous budgetary allocations, the international economic environment, the distribution of income between countries, basic human needs, the small country effect, and regional bias. We find fungibility of aid in recipient budgets is due to donor and recipient preferences. Despite the importance of other economic influences, we find a significant pro‐poor country bias in aid allocations, although little aggregate influence of basic human needs or regional bias. The small country effect is significant for two (of six) donors. (JEL F35, O19, H 77)
ADAM SMITH'S RATIONAL CHOICE LINGUISTICS
Authors: LEVY DAVID M.
Published: January 2010

Adam Smith offers an account, based on rational choice considerations, of the grammatical change experienced by languages when adults attempt to communicate across languages in such a way as to minimize transactions costs. His model predicts what is known to linguists as a “pidgin,” a language learned by adults in which to make trades. His model can be extended to predict the grammatical trajectory toward pidgin experienced by dying languages. (JEL A1, B3)
MORTGAGE LENDING IN BOSTON: A RECONSIDERATION OF THE EVIDENCE
Authors: HARRISON GLENN W.
Published: January 2010

Is there statistical evidence of racial discrimination in home mortgage markets? The Boston Fed recently addressed this concern head‐on, by collecting all available data from loan applications in Boston. They find that the extent of discrimination is reduced after one accounts for all of the confounding variables measured in these applications, but that it remains statistically significant. However, their strong conclusions are unwarranted due to the use of invalid statistical methods. Correctly evaluated, their data provide no significant evidence of racial discrimination in mortgage markets. (JEL K31, J7)
AN EMPIRICAL ANALYSIS OF ALCOHOL ADDICTION: RESULTS FROM THE MONITORING THE FUTURE PANELS
Authors: GROSSMAN MICHAEL , CHALOUPKA FRANK J. , SIRTALAN ISMAIL
Published: January 2010

In a panel of young adults, we find that alcohol consumption is addictive in the sense that increases in past or future consumption cause current consumption to rise. The positive and significant future consumption effect is consistent with the hypothesis of rational addiction. The long‐run price elasticity is approximately 60% larger than the short‐run price elasticity and twice as large as the elasticity that ignores addiction. Thus, a tax hike policy to curtail consumption or abuse may not have a favorable cost‐benefit ratio unless it is based on the long‐run price elasticity. (JEL 110)
EXPERIMENTAL COMPARISONS OF AUCTIONS UNDER SINGLE‐AND MULTI‐UNIT DEMAND
Authors: ALSEMGEEST PAUL , NOUSSAIR CHARLES , OLSON MARK
Published: January 2010

An English clock auction and a sealed‐bid auction with lowest accepted‐bid pricing are studied in a controlled laboratory setting. Buyers bid for either a single unit or two units of the good. The sealed‐bid auction generates more revenue than the English clock auction in both cases. The revenue from the English clock auction is lower in the two‐unit demand environment than in the single‐unit demand environment, due to strategic demand reduction on the part of bidders. (JEL C92, D44)
EXPERIENCE‐DEPENDENT INFORMATION DIFFUSION AND PRODUCT QUALITY
Authors: KAMP BRAD
Published: January 2010

In a monopoly market for an experience good the diffusion of product‐quality information may depend on whether or not the information is favorable. To capture this asymmetry, our model uses as its information source a quality survey which suffers from response bias. Consumers may attempt to adjust for bias, but are not required to do so correctly. As a result, quality under perfect information need not be, and usually will not be, higher than quality under imperfect information. In addition, the externality exerted by informed consumers on uninformed consumers may not be the traditional beneficial externality. (JEL L15)
INFLATION AND ASYMMETRIC OUTPUT ADJUSTMENTS BY FIRMS
Authors: BUCKLE ROBERT A. , CARLSON JOHN A.
Published: January 2010

Using ordered probit analyses of a unique micro data set, we find evidence of output asymmetry that is systematically related to inflation and to price asymmetry. As predicted by theory, firms are more likely at higher rates of inflation to raise prices in response to positive cost and demand shocks and less likely to lower prices in response to negative cost and demand shocks. The expected effects of higher inflation on output asymmetry, however, come primarily from cost and demand increases and to a lesser (and statistically insignificant) extent from cost and demand decreases. (JEL E3, D4)
THE LONG‐RUN LINK BETWEEN MONEY GROWTH AND INFLATION
Authors: CROWDER WILLIAM J.
Published: January 2010

Is inflation always a monetary phenomenon? Many economists believe that the link between money growth and inflation in the U.S. has weakened over the last two decades due in part to the Federal Reserve's policy experiment in 1979–1982 and innovations in the financial sector of the economy. I find that the long‐run relationship between money growth and inflation is strong in a statistical sense and important economically. The key result is that the trend or growth component in CPI inflation is entirely due to the trend component of monetary base growth. (JEL C32, E31, E51)
PAYOFF DOMINANCE VS. COGNITIVE TRANSPARENCY IN DECISION MAKING
Authors: IRWIN JULIE R. , McCLELLAND GARY H. , McKEE MICHAEL , SCHULZE WILLIAM D. , NORDEN N. ELIZABETH
Published: January 2010

This paper reports on three laboratory experiments designed to investigate the roles of decision costs and rewards on the accuracy of economic decisions. The experimental vehicle is a purchase decision employing the Becker‐DeGroot‐Marshak (BDM) mechanism. The first experiment verifies the incentive‐compatibility of the BDM in a pure induced‐value setting; the second tests its performance under different information regimes and payoff schedules; the third addresses the role of feedback information. Steep payoff schedules are found to be necessary to optimizing behavior only in cases where subjects must search out an optimal strategy rather than being able to deduce it from information provided. (JEL C91, D83)
MARKET POWER AND COLLUSION IN THE OCEAN SHIPPING INDUSTRY: IS A BIGGER CARTEL A BETTER CARTEL?
Authors: CLYDE PAUL S. , REITZES JAMES D.
Published: January 2010

The regulatory structure of the ocean shipping industry allows carriers to enter into joint pricing agreements (conference agreements) that are free from antitrust scrutiny, and requires freight rates to be published and policed by a government agency. We test whether this regulatory structure leads to the exercise of market power, and identify whether that market power resides with conferences themselves or requires the participation of carriers outside the conference. The results suggest that liner conferences are not particularly effective cartels although some market power may exist in ocean shipping. Market concentration may be a contributing factor to this market power. (JEL L12, L43, L92, K21)
WOMEN AND TARIFFS: TESTING THE GENDER GAP HYPOTHESIS IN A DOWNS‐MAYER POLITICAL‐ECONOMY MODEL
Authors: HALL H. KEITH , KAO CHIHWA , NELSON DOUGLAS
Published: January 2010

This paper tests a variant of the standard endogenous tariff model under direct democracy (the Downs‐Mayer model) with a gender gap. Specifically, we argue that, if there is a division of economic activity between men and women, and political preferences are affected by one's relationship to the economy, there will be a gender gap in political activity. We test this hypothesis with respect to the effect of political enfranchisement of women on the level of the U.S. tariff. The empirical results strongly support the hypothesis (JEL F4, D7, N4)
POSTED PRICES VERSUS BARGAINING IN MARKETS WITH ASYMMETRIC INFORMATION
Authors: ARNOLD MICHAEL A. , LIPPMAN STEVEN A.
Published: January 2010

A search model is employed to analyze the choice between posting a price and bargaining for the seller of an asset who is imperfectly informed about both buyer valuations and buyer bargaining abilities. A mean preserving increase in risk of buyer valuations is relevant (and beneficial) to the seller; however, only the mean ȳ (and not the distribution) of buyer bargaining abilities is relevant. If ȳ is sufficiently high, the seller utilizes a posted price. Interestingly, social welfare decreases in ȳ while an increase in ȳ reduces expected search costs, it also results in misallocation of the good because the seller is less discriminating. (JEL D42, D83)
HEALTH AND AMENITY EFFECTS OF GLOBAL WARMING
Authors: MOORE THOMAS GALE
Published: January 2010

This study shows that climate change would probably reduce mortality in the United States by about 40,000 per year, assuming a 4.5° warmer climate—the IPCC best estimate of temperature change with a doubling of carbon dioxide. Benefits would extend to lower medical costs nationwide. Measuring willingness to pay by wage rates shows that people prefer warm climates and would be willing to give up between $30 billion and $100 billion annually for a 4.5° increase in temperatures. (JEL Q25, J17, J31)
MONETARY POLICY, BANKING, AND GROWTH
Authors: HASLAG JOSEPH H.
Published: January 2010

There is ample empirical evidence suggesting that countries with high inflation tend to grow slower than countries with low inflation. Based on the regression evidence, the inflation‐rate effect is fairly large; on average, per‐capita real GDP grows between 1/4‐ and 3/4‐percentage‐points slower in a country in which the average inflation rate is 10% as compared with a country in which inflation is 0%. The purpose of this paper is to determine whether a model economy that is reasonably calibrated can account for such large inflation‐rate effects. The answer is yes. (JEL O41, E58)
THE EFFECT OF BUSINESS CYCLES ON GROWTH: KEYNES VS. SCHUMPETER
Authors: DEHEJIA VIVEK H. , ROWE NICHOLAS
Published: January 2010

In contrast to recent ‘neo‐Schumpeterian’ models, which argue that business cycles are good for growth, we develop a ‘neo‐Keynesian’ model, where monopolistically competitive firms set prices and produce output in advance of the realization of (stochastic) monetary velocity. In such a setting, there is an asymmetry in the effect of business cycles on income: recessions are bad, because the representative firm is demand‐constrained and its unsold output is wasted, but booms are not good, because the firm is output‐constrained and cannot produce any more output. A more severe business cycle thus reduces the expected income of a firm, and the expected return to investment, which reduces the growth rate of the economy. (JEL E32, E52, O41, L13)
STOCK PRICE EFFECTS OF PERMANENT AND TRANSITORY SHOCKS
Authors: CROWDER WILLIAM J. , WOHAR MARK E.
Published: January 2010

This paper exploits the long‐run equilibrium relationship between stock prices and dividends, implied by the present value model, to structurally identify a dynamic model that governs the behavior of stock prices. The innovations to the data are dichotomized into those that leave a permanent imprint on both series and those that have only transitory effects. Unlike previous studies, however, we do not impose arbitrary identifying restrictions to decompose the joint process, restrictions that may not be consistent the data. (JEL C12, C32, E24)
GENDER, EARNINGS, AND THE ENGLISH SKILL ACQUISITION OF HISPANIC WORKERS IN THE UNITED STATES
Authors: MORA MARIE T. , DÁVILA ALBERTO
Published: January 2010

Using the 1980 and 1990 Public Use Microdata Samples, we find that labor market outcomes associated with English proficiency vary with respect to gender. For example, a synthetic cohort analysis provides evidence of gender‐related differences in Hispanic workers' English skill acquisition. Moreover, we observe that Hispanic women face a lower English deficiency earnings penalty that rises more sharply with education than the penalty obtained by their otherwise similar male peers. Finally, English fluency appears to serve as a stronger occupational sorting mechanism for women than men. (JEL J3, J1)