bluuebunny/crossref_metadata_2025 huggingface dataset:
Modeling Credit Card Borrowing: A Comparison of Type I and Type II Tobit Approaches
Authors: Min Insik , Kim Jong‐Ho
Published: July 2021

This study focuses on credit cards as a borrowing medium using 1998 Survey of Consumer Finance data. The type II Tobit approach used here overcomes a shortcoming of the conventional type I Tobit model, which restricts the coefficients of the binary borrowing decision (the first step) and balance level decision (the second step) to have the same sign. By separately estimating the first and second steps as reduced‐form functions in which the overall effects of supply and demand are incorporated, the type II Tobit procedure yields more consistent results with other studies and quantifies the marginal effect (elasticity) of a particular determinant for practical uses.
Folk Economics
Authors: Rubin Paul H.
Published: July 2021

Folk economics is the intuitive economics of untrained people. It is concerned with distribution, and does not allow for or understand incentives. Folk economic notions evolved in our ancestors m circumstances where there was little in the way of specialization, division of labor, capital investment, or economic growth. It can explain the beliefs of naïve individuals regarding matters such as international trade, labor economics, law and economics, and industrial organization. It is important that voters understand economic principles. Economists would do a better job of persuading others and of teaching if we paid explicit attention to folk economics. Because untrained individuals do not fully understand gains from trade, training in economics is likely to improve welfare by increasing the number of trading opportunities. There is evidence that this is m fact true.
On the Relative Well‐Being of the Nonmetropolitan Poor: An Examination of Alternate Definitions of Poverty during the 1990s
Authors: Jolliffe Dean
Published: July 2021

Using Foster‐Greer‐Thorbecke poverty indices, this paper shows that although the incidence of poverty was higher in nonmetropolitan than metropolitan areas throughout the 1990s, the poverty‐gap index was only statistically significantly higher in nonmetropolitan areas in six of the 10 years, and the squared poverty‐gap index was worse in only three years. This paper also provides design‐corrected standard errors for the indices, which result in more than doubling the uncorrected estimates. An examination of the ratio of the poverty‐gap to the head count index establishes that the average shortfall of the poor as a fraction of the poverty line was worse in the metropolitan areas during all 10 years of the 1990s. Similarly, the distribution of income divided by the poverty line indicates that disproportionately more of the nonmetropolitan poor subsisted on incomes near the poverty line, whereas the metropolitan poor were relatively more likely to be living in extreme poverty.
The Predictability of FOMC Decisions: Evidence from the Volcker and Greenspan Chairmanships
Authors: Lapp John S. , Pearce Douglas K. , Laksanasut Surachit
Published: July 2021

This paper examines whether there is a systematic relationship between FOMC decisions and publicly available data that would potentially allow the public to anticipate FOMC policy changes. We characterize each FOMC decision as a move to tighten, ease, or leave policy unchanged and use ordered probit to estimate models of the probabilities of each choice. We find a statistically significant relationship between FOMC decisions and measures of inflation and real activity, but this relationship does not accurately predict the directions of FOMC decisions. While short‐term interest rate changes prior to FOMC meetings have predictive power, suggesting that the financial market can anticipate FOMC decisions somewhat, other financial variables such as stock price movements appear unrelated to FOMC policy changes. Overall, FOMC decisions are not highly predictable using publicly available data, and adding the private information contained in the FOMC's Greenbook does not significantly increase the predictive accuracy.
Marginal q, Tobin's q, Cash Flow, and Investment
Authors: Gugler Klaus , Mueller Dennis C. , Yurtoglu B. Burcin
Published: July 2021

Many studies of the determinants of investment use Tobin's q to control for the investment opportunities of a firm. Tobin's q roughly measures the average return on a firm's capital anticipated by the market. More relevant for investment decisions, however, is the marginal return on capital. In this paper we estimate investment and research and development (R&D) equations using a measure of marginal q. We use marginal q to identify the existence of cash constraints and managerial discretion and as a separate explanatory variable. For a sample of 560 U.S. firms observed over the 1977‐1996 period we present evidence confirming the existence of both cash constraints in some companies and managerial discretion in others.
Multiplant Firms and Innovation Adoption and Diffusion
Authors: Jensen Richard A.
Published: July 2021

A new theoretical explanation is provided for the empirical observation that large firms usually adopt sooner, although there are notable exceptions. The analysis focuses on the adoption of an innovation of uncertain profitability by a large firm with two plants and a small firm with one. Marginal production costs are increasing in each plant, and economies of multiplant operation are possible. These have conflicting effects on the incentive to adopt. The large firm benefits more from adopting a success. However, if an adopter must shut down a plant to learn about the innovation, the loss of multiplant economies reduces the large firm's incentive to adopt. Absent multiplant economies, the large firm is more likely to lead a diffusion because its greater return from a success dominates. However, the small firm is more likely to lead a diffusion if there are multiplant economies and the large firm's learning cost disadvantage dominates.
Comparing Student Achievement across Experimental and Lecture‐Oriented Sections of a Principles of Microeconomics Course
Authors: Emerson Tisha L. N. , Taylor Beck A.
Published: July 2021

An increasingly popular alternative to the lecture‐oriented “chalk‐and‐talk” approach to teaching principles of microeconomics is the use of classroom experiments. Like other alternatives to traditional teaching methods, there exists little more than anecdotal evidence supporting the effectiveness of the experimental approach. We estimate the effect of participating in classroom experiments on student achievement in a principles of microeconomics course. Nine sections (300 students) participated in the study, two of which (59 students) relied heavily on classroom experiments throughout the semester. The remaining seven sections (241 students) used no experiments. We find that students in the experimental sections experienced significantly higher gains in Test of Understanding in College Economics (TUCE) scores but differed little on other more qualitative outcomes. Additionally, results indicate that certain student characteristics, including gentler, major, and grade point average, can be used to predict a student's likely success when choosing between courses that rely on experiments and those that employ more traditional forms of pedagogy.
The Declining Contribution of Socioeconomic Disparities to the Racial Gap in Infant Mortality Rates, 1920‐1970
Authors: Collins William J. , Thomasson Melissa A.
Published: July 2021

This article examines the racial gap in infant mortality rates from 1920 to 1970. Using state‐level panel data with information on income, urbanization, women's education, and physicians per capita, we can account for a large portion of the racial gap in infant mortality rates between 1920 and 1945. The educational gap between white and nonwhite women was especially important in this regard. In the postwar period, socioeconomic characteristics account for a declining portion of the racial infant mortality gap. We discuss the postwar experience in light of trends in birth weight, maternal characteristics, smoking and breast‐feeding behavior, air pollution, and insurance coverage.
Speculative Bubbles in U.K. House Prices: Some New Evidence
Authors: Garino Gaia , Sarno Lucio
Published: July 2021

In this article, we test the view, widely held among both academics and practitioners, that speculative bubbles have characterized the time series behavior of U.K. house prices in recent times. We motivate our empirical analysis using a stylized overlapping‐generations model which generates a housing demand function of the form assumed by a large literature, illustrating how rational bubbles may arise as a solution to the house price determination equation. Employing two recently developed econometric techniques specifically designed to test for rational bubbles, we then provide empirical evidence for the existence of bubbles in U.K. house prices over the sample period 1983‐2002.
Is There Job Lock? Evidence from the Pre‐HIPAA Era
Authors: Berger Mark C. , Black Dan A. , Scott Frank A.
Published: July 2021

We estimate discrete time hazard models of employment duration and standard logarithmic wage equations using the 1987 and 1990 panels of the Survey of Income and Program Participation (SIPP) to examine the phenomenon of job lock. We lest for job lock using differences‐in‐differences approaches among those with and without employer‐provided health insurance and family members with and without health problems. We find no statistically significant evidence of job lock on employment duration or wages using this approach. We do find some evidence of shorter employment spells for those with employer‐provided health insurance and spouse‐provided health insurance, and longer employment spells for those with employer‐provided health insurance and large families. Others have interpreted these findings as evidence of job lock. However, the wage equation results using these measures are not consistent with job lock. Although anecdotal evidence makes it clear that some workers have been locked into less‐than‐optimal jobs because of the combination of health problems and employer‐provided health insurance, our results do not suggest that this phenomenon is pervasive in the U.S. economy.
Subjective Outcomes in Economics
Authors: Hamermesh Daniel S.
Published: July 2021

This study examines the various uses of subjective outcomes as a focus of interest for economists. It outlines the possible channels by which economists can usefully add to what is already a massive literature on such outcomes in the other social sciences. Generally, we contribute little if we merely engage in fancier empirical work and still less if we describe subjective outcomes by other subjective outcomes. Our biggest contributions can be in adducing economic theories that allow a better understanding of objective behavior using subjective outcomes, or of the determinants of subjective outcomes, or in understanding subjective outcomes, such as expectations, that underlie objective economic behavior.
Can Consumer Attitudes Forecast Household Spending in the United States? Further Evidence from the Michigan Survey of Consumers
Authors: Kwan Andy C. C. , Cotsomitis John A.
Published: July 2021

This article examines the usefulness of various measures of consumer confidence in forecasting household spending in the United States. Using the reduced‐form equation of Carroll, Fuhrer, and Wilcox (American Economic Review 84:1397‐1408, 1994), we find that for the post‐World War II period, the Index of Consumer Expectations is incrementally more informative about household spending than the Index of Consumer Sentiment for all categories of consumption examined. A similar conclusion emerges when Carroll, Fuhrer, and Wilcox's data set is used. Our overall results confirm the view that indices of consumer confidence reflect consumers' perception of future economic conditions. Also, the ability of these confidence indices to predict future consumption growth can be construed as a clear rejection of the random walk hypothesis of Hall (Journal of Political Economy 86:971‐87, 1978).
Employment, Wages, and Alcohol Consumption in Russia
Authors: Tekin Erdal
Published: July 2021

This article investigates the association between alcohol consumption and labor market outcomes in Russia, using data from the Russian Longitudinal Monitoring Survey (RLMS). It estimates cross‐sectional and fixed effects models of the impacts of alcohol consumption on employment and wages for males and females using three different measures of drinking. The cross‐sectional findings indicate that alcohol consumption has an inverse U‐shaped impact on employment and wages for females. The impact on males appears to be positive but the inverse‐U shape is less pronounced. Once the unobserved individual heterogeneity is accounted for using fixed effects, alcohol consumption is found to have no significant effect on employment for either males or females. The fixed effect wage models indicate that alcohol consumption has a small, positive, but linear impact on the wage rate for both males and females. Models including fixed effects generate estimates that are smaller in magnitude compared with those of cross‐sectional models. The findings are robust to several diagnostic checks.
Transitions from Welfare and the Employment Prospects of Low‐Skill Workers
Authors: Ribar David C.
Published: July 2021

This study examines the effects that labor market conditions and welfare policy changes had on single mothers' welfare participation and economic outcomes using longitudinal, individual‐level data from the 1992 and 1993 panels of the Survey of Income and Program Participation (SIPP). The study uses special versions of the SIPP panels that include state and county identifiers and links the individual information to county‐specific measures of low‐skill employment opportunities and state measures of welfare policies. It estimates transition models of program entry and exit and regression models of economic outcomes. The study finds that employment conditions and welfare benefit levels were significant determinants of single mothers' welfare participation and economic success over the period 1992‐95. However, it does not find statistically distinguishable differences in participation and economic success between states that did and did not reform their welfare programs through waivers to the federal rules.
Differential Demand Systems: A Further Look at Barten's Synthesis
Authors: Matsuda Toshinobu
Published: July 2021

Barten's synthetic model is attractive to applied researchers since it is useful for testing the adequacy of the competing functional forms of differential demand systems including the popular Rotterdam and almost ideal demand systems. This article shows that the synthetic model is not a mere artificial composite of the known differential demand systems as it has been considered, but rather viewed as a model in its own right. It is demonstrated that, at the individual consumer level, Barten's model has the same marginal budget shares as generated by specific forms of Engel curves formulated by the Box‐Cox transformation.
Guns and Crime
Authors: Moody Carlisle E. , Marvell Thomas B.
Published: July 2021

We estimate several models of handguns and crime based on state‐level panel data for 1977‐1998 using both General Social Survey data on gun availability and a new measure of handgun prevalence. We find that handguns have a negligible effect on crime. Apparently, there is either no causation between guns and crime, or a rough equilibrium between criminals who use guns in the commission of crime and ordinary citizens who use guns to defend themselves and deter crime.
Airline Schedule Recovery after Airport Closures: Empirical Evidence since September 11
Authors: Rupp Nicholas G. , Holmes George M. , DeSimone Jeff
Published: July 2021

Since the September 11, 2001, terrorist attacks, repeated airport closures due to security breaches have imposed substantial costs on travelers, airlines, and government agencies in terms of flight delays and cancellations. Using data from the year following September 11, this study examines how airlines recover flight schedules upon reopening of airports that have been closed for security reasons. As such, this is the first study to empirically examine service quality during irregular airport operations. Our results indicate that economic considerations, particularly the potential revenue per flight, have predictable effects on service quality following airport closures. Airport concentration, hub destination, and various logistical factors also significantly influence flight outcomes.
Sibling Rivalry and Strategic Parental Transfers
Authors: Chang Yang‐Ming , Weisman Dennis L.
Published: July 2021

This paper develops a noncooperative Nash model in which two siblings compete for their parents' financial transfers. Treating sibling rivalry as a “rent‐seeking contest” and using a Tullock‐Skaperdas contest success function, we derive the conditions under which more financial resources are transferred to the sibling with lower earnings. We find that parental transfers are compensatory and that the family as an institution serves as an “income equalizer.” Within a sequential game framework, we characterize the endogeneity of parental transfers and link it to parents' income, altruism, and children's supply of merit goods (e.g., parent‐child companionship or child services). We show that merit goods are subject to a “moral hazard” problem from the parents' perspective.
The Consumption Effects Associated with Filing for Personal Bankruptcy
Authors: Filer Larry H. , Fisher Jonathan D.
Published: July 2021

This article examines the response of food consumption to filing for personal bankruptcy in the spirit of previous work on the benefits of other social‐insurance programs. Using the Panel Study of Income Dynamics (PSID), we find that an increase in the financial benefit to filing for bankruptcy increases the growth in food consumption. In addition, we find that filing under chapter 7 of the bankruptcy code provides consumption insurance, while filing under chapter 13 of the bankruptcy code provides no significant consumption benefits.
Parental Behavior and the Value of Children's Health: A Health Production Approach
Authors: Dickie Mark
Published: July 2021

Data on individual children and on sibling pairs are used to examine how family resource allocations affect children's health and to estimate willingness to pay for reduced acute illness in children. Results highlight the importance of accounting for the endogeneity of child health and suggest that children with greater stocks of health capital whose parents invest in preventive and remedial medical care experience fewer days of illness. Estimated willingness to pay to avoid one day of illness‐induced school loss is about $100 to $150, a range broadly consistent with limited prior evidence but substantially more than unit values applied in recent policy analyses. All else equal, willingness to pay is higher among single parents and for uninsured children, and the estimated income elasticity is only 0.14. Implied aggregate benefits of reductions in children's sick time associated with air pollution control may be substantial.
Health and Financial Strain: Evidence from the Survey of Consumer Finances
Authors: Lyons Angela C. , Yilmazer Tansel
Published: July 2021

Using data from the Survey of Consumer Finances, this study examines the relationship between health status and financial strain controlling for the dual endogeneity between the two factors. Simultaneous two‐stage probit models are estimated for self‐reported health status and three measures of financial strain. The results from all three models indicate that poor health significantly increases the probability of financial strain. There is little evidence that financial strain contributes to poor health. The findings suggest that severe health conditions may result in larger financial burdens while large financial burdens are unlikely to accelerate a decline in health status. In the end, health may be contributing to widening financial disparities, especially among the poor who are in poor health.
“Linguistic Distance” as a Determinant of Bilateral Trade
Authors: Hutchinson William K.
Published: July 2021

We introduce a measure of language difficulty called “linguistic distance” into a modified gravity model to determine whether a language being further away from English affects the level of trade. Our sample of 36 non‐English‐speaking countries includes Japan and South Korea, which we argue are special cases because of World War II, the Korean War, and subsequent close political and economic ties with the United States. Presence of a stock of immigrants in the home country has been shown to enhance trade with the country of origin. Controlling for immigrant network and information attributes, the special relationship with Japan and Korea, and the standard gravity model variables, we find that trade will be less between the United States and a country the further that country's language is from English. These results hold for aggregate exports and imports and for exports and imports of consumer and producer manufactures.
Behavioral Economics and Institutional Innovation
Authors: Shiller Robert J.
Published: July 2021

Behavioral economics has played a fundamental role historically in innovation in economic institutions even long before behavioral economics was recognized as a discipline. Examples from history, notably that of the invention of workers' compensation, illustrate this point. Though scholarly discussion develops over decades, actual innovation tends to occur episodically, particularly at times of economic crisis. Fortunately, some of the major professional societies, the Verein für Sozialpolitik, the American Economic Association, and their successors, have managed to keep a broad discourse going involving a variety of research methods, including some that may be described today as behavioral economics, thereby maintaining an environment friendly to institutional innovation. Further, the broad expansion of behavioral economics that is going on today can be expected to yield even more such important institutional innovations.
The Bundesbank's Communications Strategy and Policy Conflicts with the Federal Government
Authors: Siklos Pierre L. , Bohl Martin T.
Published: July 2021

In this paper we provide an estimate of the likelihood of conflict between the federal government and the Bundesbank for the 1989‐1998 period. We rely on a novel proxy for the impact of public communication by Bundesbank officials on the probability of conflict, in addition to interest rate, exchange rate, money supply behavior, as well as electoral influences. The empirical evidence is consistent with the view that speeches by the Bundesbank president dealing with inflation and economic policy are a positive source of conflict in a probabilistic sense. Conflict was not a constant but flared up at times of economic stress and could be exacerbated by the “talking” of Bundesbank officials.
An Efficiency Analysis of Proposed State and Local Sales Tax Reforms
Authors: Russo Benjamin
Published: July 2021

With few exceptions, state and local general sales and use taxes are levied primarily on tangible goods. Secular trends in production and consumption of goods and services, as well as legislated exemptions and exclusions, have eroded sales tax bases. A number of reforms designed to reduce base erosion have been proposed, including base broadening, conversion to a consumption tax, and wholesale replacement of sales taxes with income taxes. Each proposal has potential to shore up sales tax bases. From an economic perspective, the policy choice should turn on efficiency, equity, and simplicity. This paper reports on a computer analysis of efficiency effects. The results suggest that (i) base broadening can increase economic efficiency, (ii) converting to a consumption tax base dominates base broadening, (iii) replacing sales taxes with higher income taxes could produce large efficiency losses, (iv) base broadening could generate efficiency gains even if untaxed remote sales become a “sizable” fraction of total sales, and (v) even partial base broadening could produce sizable efficiency improvements.
Finance and Income Inequality: What Do the Data Tell Us?
Authors: Clarke George R. G. , Xu Lixin Colin , Zou Heng‐fu
Published: July 2021

Although there are distinct conjectures about the relationship between finance and income inequality, little empirical research compares their explanatory power. We examine the relationship between finance and income inequality for 83 countries between 1960 and 1995. Because financial development might be endogenous, we use instruments from the literature on law, finance, and growth to control for this. Our results suggest that, in the long run, inequality is less when financial development is greater, consistent with Galor and Zeira (1993) and Banerjee and Newman (1993). Although the results also suggest that inequality might increase as financial sector development increases at very low levels of financial sector development, as suggested by Greenwood and Jovanovic (1990), this result is not robust. We reject the hypothesis that financial development benefits only the rich. Our results thus suggest that in addition to improving growth, financial development also reduces inequality.
Labor Market Implications of Weak Ties
Authors: Tassier Troy
Published: July 2021

Although many workers find employment through weak ties, previous studies have shown little empirical support for a connection between weak ties and income. In this article, I explain one reason why the survey methods used in previous studies underestimate, perhaps greatly, the effect of weak ties on income. In addition, I demonstrate a more direct method of estimating the effect of weak ties on income by using information from the General Social Survey on the overlap of close friends of respondents. I find that the range of social connections provided by weak ties has a significant and economically meaningful effect on income.
Subsidizing Charitable Giving with Rebates or Matching: Further Laboratory Evidence
Authors: Eckel Catherine C. , Grossman Philip J.
Published: July 2021

We examine two different ways to subsidize charitable giving: by a rebate (returning a portion of the donation to the giver) or by a match (adding additional donations to the giver's donation). In previous experimental research, we have shown that participants give more to charity under the match than under an equivalent rebate. The previous within‐subject experimental design required participants to make a series of decisions under both types of subsidy. Each decision consisted of an allocation of an endowment between the subject and a charity chosen by the subject from a specified list. This article examines whether that result is an artifact of the previous within‐subjects design: subjects may have failed to fully distinguish the two types of subsidy. In the current article, we report results from a between‐subjects design, where participants are required to make only one type of decision—involving rebates or involving matching subsidies. Our results confirm previous findings.
Efficiency in Pari‐Mutuel Betting Markets across Wagering Pools in the Simulcast Era
Authors: Gramm Marshall , Owens Douglas H.
Published: July 2021

Simulcast wagering, where bets from across the country are taken at tracks, off‐track betting facilities, casinos, by phone or online and incorporated into the same mutuel pool, has contributed to a large increase in betting volume on American horse races since the mid‐1990s. This article investigates betting‐market efficiency in the simulcast era focusing on whether the interrelated betting markets comprised of win, place (finishing in the top two), and show (finishing in the top three) wagering are efficiently priced. We find that the increased accessibility and betting volume associated with simulcasting has reduced, but not eliminated, the inefficiencies seen in prior studies. Despite the inefficiencies in these markets, arbitrage is not profitable because market closing prices are unknown when bets are placed.
HOPE for the Pell? Institutional Effects in the Intersection of Merit‐Based and Need‐Based Aid
Authors: Singell Larry D. , Waddell Glen R. , Curs Bradley R.
Published: July 2021

Prior empirical evidence finds that general enrollment effects of merit‐aid programs such as the Georgia Helping Outstanding Pupils Educationally (HOPE) scholarship are large and significant, while the effects of need‐based aid programs such as the Pell grant are modest and often insignificant. This paper uses new panel data on Pell awards to examine the influence of the Georgia HOPE scholarship on needy‐student enrollments. We demonstrate that the introduction of merit aid in Georgia generally improves the college access of needy students and has been leveraged into greater federal Pell assistance. While institution‐specific increases in both Pell enrollment and funding are largest at two‐year and less selective four‐year institutions, the results suggest that Pell students are not crowded out of more selective schools by HOPE's intent to retain the best Georgia high school students, as might have been anticipated.
Putting Out Fires: An Examination of the Determinants of State Clean Indoor‐Air Laws
Authors: Gallet Craig A. , Hoover Gary A. , Lee Junsoo
Published: July 2021

Although numerous studies have examined the effect of clean indoor‐air laws on tobacco consumption, a handful of other studies have sought to address the demand for smoking restrictions. This paper adds to this body of research by using a random effects Probit procedure that controls for the endogeneity of cigarette consumption and cigarette taxes to estimate the determinants of clean indoor‐air laws. By treating cigarette consumption and cigarette taxes as exogenous, we found that taxes complement smoking restrictions. However, when we accounted for endogeneity, the role of cigarette taxes shifted toward being a policy substitute. Results further revealed that the probability of a state adopting a smoking restriction is particularly sensitive to per capita cigarette consumption, political affiliation, metropolitan population, per capita income, and tobacco production.
Margin, Short Selling, and Lotteries in Experimental Asset Markets
Authors: Ackert Lucy F. , Charupat Narat , Church Bryan K. , Deaves Richard
Published: July 2021

The robustness of bubbles and crashes in markets for assets with finite lives is perplexing. This paper reports the results of experimental asset markets in which participants trade two assets. In some markets, price bubbles form. In these markets, traders pay higher prices for the asset with lottery characteristics (i.e., a claim on a large, unlikely payoff). However, institutional design has a significant impact on deviations in prices from fundamental values, particularly for an asset with lottery characteristics. Price run‐ups and crashes are moderated when traders finance purchases of the assets themselves and are allowed to short sell.
Prescription Drug Expenditures in the United States: The Effects of Obesity, Demographics, and New Pharmaceutical Products
Authors: Vandegrift Donald , Datta Anusua
Published: July 2021

During the period 1990‐1998, real per capita expenditures on prescription drugs in the United States increased by 84% (1996 dollars, GDP deflator). This paper examines the factors driving prescription drug expenditures in the United States and provides some quantitative measures. Panel data from all 50 states for 1990‐1998 are employed. In addition to an aging population, other important determinants of rising prescription drug expenditures include changes in income, obesity, and new drug approvals. Overall, the estimates suggest that about 8% of the increase in spending on prescription drugs during 1990‐1998 can be explained by the increased prevalence of obesity. Rising real incomes account for about 55% of the increase. Increases in the percentage of the population over 65 years of age and new drug approvals exert a significant positive effect on per capita prescription drug expenditures. Finally, increases in the unemployment rate exert a significantly negative effect on per capita prescription drug expenditures.
The Effect of Reimbursement on the Intensity of Hospital Services
Authors: Lindrooth Richard C. , Bazzoli Gloria J. , Clement Jan
Published: July 2021

We examine how hospital treatment intensity is affected by an exogenous change in average reimbursement for an admission. Theory predicts that treatment intensity would be most affected for highly profitable services but unaffected for unprofitable services. We use Medicare inpatient data from 11 states for 16 disease categories that vary in the generosity of reimbursement to test this prediction. Using the coefficients from quantile regressions, we calculate a difference‐in‐difference estimate of the effect of the Balanced Budget Act (BBA) of 1998, comparing the pre‐ and post‐BBA change in treatment intensity at high Medicare share hospitals to low Medicare share hospitals. We find that not‐for‐profit hospitals cut treatment intensity at the 50th, 75th, and 95th quantiles only for generously reimbursed services. Intensity at the 25th percentile was unaffected, regardless of generosity. We did not measure a statistically significant response at for‐profit or public hospitals to the BBA.
The Diffusion of a Medical Innovation: Is Success in the Stars?
Authors: Burke Mary A. , Fournier Gary M. , Prasad Kislaya
Published: July 2021

This paper relates the diffusion of the coronary stent to the presence of prominent or “star” physicians within a local peer group. The paper uses panel data on coronary care in Florida covering the period immediately following the 1995 Food and Drug Administration (FDA) approval of the stent, a significant improvement in coronary angioplasty. Adoption timing and utilization varied considerably across doctors between 1995 and 2001. We consider the role of asymmetric social influence among physicians based on professional status. Defining “star” status as having completed residency at a top‐ranked hospital, we find that the diffusion of stents by non‐stars depends positively on the number of stars practicing contemporaneously at the same hospitals, while we find no social influence in the opposite direction. The findings indicate that lack of local exposure to star physicians may slow adoption, and clustering of stars in a small number of hospitals may entail welfare costs.
A Mismatch Made in Heaven: A Hedonic Analysis of Overeducation and Undereducation
Authors: McMillen Daniel P. , Seaman Paul T. , Singell Larry D.
Published: July 2021

In this paper, a hedonic pairing process is modeled in which some workers may be overeducated or undereducated as an equilibrium outcome of a dynamic labor market. Undereducated workers are those whose abilities and training permit them to move into a job with higher qualifications, whereas overeducated workers are highly qualified workers who select into lower‐skill, entry‐level jobs that provide the training (or signal) necessary for promotion. The empirical model shows that these pairing types cannot be directly identified in a cross section since all workers are exactly educated during a portion of their career. However, pairing types may be imputed by comparing predicted and observed qualifications of the worker and predicted and observed requirements of the firm. Using a rich cross section and a panel of British working‐age males to identify the pairing types, we confirm the predicted career development patterns with regard to on‐the‐job training, promotion, and wages.
Leveling the Playing Field or Just Lowering Salaries? The Effects of Redistribution in Baseball
Authors: Solow John L. , Krautmann Anthony C.
Published: July 2021

In an attempt to even the playing field, Major League Baseball has considered a number of different redistribution programs. To successfully address the problem of imbalance in the league, redistribution must affect teams' marginal revenue functions. Previous theoretical work has shown that efforts to redistribute revenues from rich to poor teams will lower the marginal value of winning of all teams, thus reducing the payments to labor. But it remains an empirical question as to whether the net effects of such programs have improved balance. In this paper we provide an empirical assessment of whether redistributive efforts between 1996 and 2001 succeeded in reallocating talent to less advantaged teams by estimating the effect of redistribution on the marginal revenue functions of small‐ and large‐market teams. Our results indicate that redistribution lowered salaries by approximately 22% without affecting league balance.
An Experimental Analysis of Trust and Trustworthiness
Authors: Chaudhuri Ananish , Gangadharan Lata
Published: July 2021

We report results from experiments analyzing trust and trustworthiness, which are components of social capital and have an impact on diverse economic phenomena. We conduct a within‐subjects experiment where subjects participate in both the trust game and the dictator game and find that transfers in the trust game are higher and are motivated by expected reciprocation. Subjects in our experiment exhibit positive reciprocity. We find that trustworthiness in the trust game implies trust but not vice versa. Trustworthy subjects are also more generous in the dictator game. Finally we explore gender differences in behavior and find that men are more trusting than women but there are no significant gender differences in reciprocal behavior.
Testing for (Efficiency) Catching‐up
Authors: Henderson Daniel J. , Zelenyuk Valentin
Published: July 2021

We used advances in data envelopment analysis (DEA) techniques to examine efficiency scores and investigate the issue of convergence and divergence in a cross‐country analysis. Specifically, we used bootstrapping techniques to examine a data set of 52 developed and developing countries. We found that when using the standard DEA model, some of the results were not robust. Further, we broke the sample into groups to examine club convergence. We found that efficiency scores were significantly different between groups and that there was some evidence of convergence of efficiency scores within each group.
The Rise and Decline of Mancur Olson's View ofThe Rise and Decline of Nations
Authors: Rosser J. Barkley
Published: July 2021

The evolution of Mancur Olson's views regardingThe Rise and Decline of Nations, the second of his three main books, is examined. It expands and extends to history and to the world the arguments presented in his earlier work,The Logic of Collective Action.Although Olson never abandons the idea that the accumulation of interest groups in a democratic society can lead to its economic stagnation, how this comes about and can be overcome changes somewhat by the time of his final book,Power and Prosperity, which focuses on the problems of transition economies and proper political governance. A sign of the greater complexity of his later views emerges in his analysis of the U.S. South, presented in his 1983 presidential address to the Southern Economic Association.
Are Real GDP Levels Trend, Difference, or Regime‐Wise Trend Stationary? Evidence from Panel Data Tests Incorporating Structural Change
Authors: Hegwood Natalie , Papell David H.
Published: July 2021

The unit root hypothesis for international real GDP and real GDP per capita has been the subject of extensive investigation. Using panel methods that incorporate structural change, we reject the unit root null in favor of the alternative of trend stationarity, with one or two changes in the slope for two panels with postwar data and one or two changes in both the slope and the intercept for a panel with long‐horizon data. We conclude that real GDP levels are better characterized as regime‐wise trend stationary than as either trend stationary without structural change or difference stationary with unit roots.
Freedom of Entry, Market Size, and Competitive Outcome: Evidence from English Soccer
Authors: Buraimo Babatunde , Forrest David , Simmons Robert
Published: July 2021

A primary prediction of the theory of sports leagues is that teams with higher revenues will have higher league positions or winning percentages than teams with smaller revenues. Behind this prediction lies the key influence of market size, yet this has been underexplored in the empirical literature on sports leagues. This paper combines detailed census of population data with panel data on team performance for an open sports league, the English Football League, to test the hypothesis that market size matters for team performance. We find a particularly important role for population close to the team's location. The impact of local population is reduced but not eliminated when allowance is made for entry in the form of competition from neighboring clubs. We assess implications of these findings for both European and North American sports league structures.
Estimating the Output Gap in a Changing Economy
Authors: Kara Hakan , Öğünç Fethi , Özlale ümit , Sarıkaya Çağrı
Published: July 2021

Univariate filters used in output gap estimation are subject to criticism as being purely statistical and having no economic content. The information content of the output gap measures estimated by standard multivariate filtering techniques, on the other hand, can be distorted because of the possibly unrealistic restriction that system parameters stay constant over time. In this study, we seek to address these shortcomings by proposing an output gap estimation method that takes into account changing economic relations. We employ a nonlinear time series framework along with the extended Kalman filter, in which economic content is used by inflation and output gap dynamics and the parameters are allowed to be time varying. We use the Turkish economy as a laboratory to show that our method provides useful results, both in terms of the properties of output gap estimates and for the assessment of change in macroeconomic dynamics.
Going Home: Evacuation‐Migration Decisions of Hurricane Katrina Survivors
Authors: Landry Craig E. , Bin Okmyung , Hindsley Paul , Whitehead John C. , Wilson Kenneth
Published: July 2021

In the wake of Hurricane Katrina, many evacuees from the Gulf region began the difficult process of deciding whether to rebuild or restart elsewhere. We examine pre‐Katrina Gulf residents' decision to return to the postdisaster Gulf region—which we call the “return migration” decision. We estimate two separate return migration models, first using data from a mail survey of individuals in the affected region and then focusing on self‐administered questionnaires of evacuees in Houston. Our results indicate that return migration can be affected by household income; age; education level; and employment, marital, and home ownership status, but the results depend on the population under consideration. We find no effect of “connection to place” on the return migration decision. Although the effect of income is relatively small within subsamples, we find a much higher proportion of middle income households planning to return than lower income households when comparing across the subsamples. In addition, the real wage differential between home and host region influences the likelihood of return. Larger implicit costs, in terms of foregone wages for returning, induce a lower likelihood of return. Exploiting this difference at the individual level, we are able to produce estimates of willingness to pay (WTP) to return home. Average WTP to return home for a sample of relatively poor households is estimated at $1.94 per hour or $3954 per year.
Asymmetric Information, Bargaining, and Comparative Advantage in Trade Relationships: An Interactive Game
Authors: Chiang Eric P.
Published: July 2021

The concept of comparative advantage is a fundamental tool in economics. Yet, it is a concept that new students of economics frequently find challenging to grasp. In this interactive classroom game, I highlight the three essential lessons of comparative advantage: (i) individuals can have a comparative advantage (and thus benefit from specialization) in an activity despite not having an absolute advantage, (ii) the gains from specialization are greatest when individuals have the most heterogeneous skill sets, and (iii) the extent of each individual's share of the gains from specialization is often left to negotiation, with asymmetric information playing an influential role. This classroom game allows each player to possess a unique production function, thus better resembling the diverse pool of potential trade partners that characterizes real life.
The Rise of the Sunbelt
Authors: Glaeser Edward L. , Tobio Kristina
Published: July 2021

In the last 50 years, population and incomes have increased steadily throughout much of the Sunbelt. This paper assesses the relative contributions of rising productivity, rising demand for Southern amenities, and increases in housing supply to the growth of warm areas, using data on income, housing price, and population growth. Before 1980, economic productivity increased significantly in warmer areas and drove the population growth in those places. Since 1980, productivity growth has been more modest, but housing supply growth has been enormous. We infer that new construction in warm regions represents a growth in supply, rather than demand, from the fact that prices are generally falling relative to the rest of the country. The relatively slow pace of housing price growth in the Sunbelt, relative to the rest of the country and relative to income growth, also implies that there has been no increase in the willingness to pay for sun‐related amenities. As such, it seems that the growth of the Sunbelt has little to do with the sun.
Food Stamp Program Participation of Refugees and Immigrants
Authors: Bollinger Christopher R. , Hagstrom Paul
Published: July 2021

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) dramatically changed the availability of food stamps to immigrants, but not to refugees. However, refugee usage of food stamps in the post‐reform era has declined more than usage of either other immigrants or native citizens. We investigate food stamp program participation of immigrants and refugees to ascertain if the resulting decline was an unintended effect of the reform or is due to some other phenomena. We use data from the Immigration and Naturalization Service to construct an instrument for refugees. We find that refugees are more likely than other immigrants to use food stamps. While PRWORA clearly reduced non‐refugee immigrant food stamp participation, the post‐reform era decline in refugee usage is fully attributable to a strong refugee response to changing labor market conditions. We also find that refugees' use of food stamps declines rapidly with time in the United States, unlike that of other immigrants.