bluuebunny/crossref_metadata_2025 huggingface dataset:
REGULATORY REFORM: LESSONS FOR NATURAL GAS PIPELINES
Authors: BRAEUTIGAM RONALD R.
Published: January 2010

This article examines regulatory reform and some possible consequences of reform designed to increase the role that competition plays in the interstate natural gas pipeline industry. The analysis first provides a conceptual framework for viewing the “problem of natural monopoly” as a basis for regulation. It summarizes ways in which introducing competition for a market may be possible even if competition within a market is not possible–through competitive auctions, monopolistic competition, or contestability. The analysis then relates briefly to this framework the experiences of three U.S. industries that have undergone substantial reform during recent years–airlines, motor carriers, and railroads. Finally, it compares the natural gas pipeline industry with the others examined and suggests types of regulatory reform that might succeed–and those that might not succeed–in improving resource allocation.
THE STRAIGHT STORY ABOUT THE GREENHOUSE EFFECT
Authors: FIROR JOHN
Published: January 2010

During the hot, dry summer of 1988, nearly every newspaper, magazine, and television and radio station in the United States discussed the hot weather and its possible connection with the “greenhouse effect.” This public discussion was needed to alert many people to an important topic, but it also led to many misunderstandings about the physical and technical facts and studies involved in considering future climate heating. Some of these misunderstandings originate with the media, some result from the manner in which climate modelers make heating calculations, and a few result from words having meanings that are slightly different to scientists than they are to the general public. The most basic facts that one must understand are as follows, (i) Theory foreseeing a rapid climate heating during the coming decades is based on some of the best understood features of the atmosphere, (ii) The average surface temperature of the earth has increased during the past 120 years, but this increase has been far from uniform and does not prove or disprove that a climate heating is under way. (Hi) The technology is available to begin decreasing rapidly the emission of infrared‐trapping gases.
OFFSETTING NEW CO2EMISSIONS: A RATIONAL FIRST GREENHOUSE POLICY STEP
Authors: DUDEK DANIEL J. , LeBLANC ALICE
Published: January 2010

This paper describes and assesses a policy to slow the increase of carbon dioxide (CO2) emissions in the atmosphere. Policy governing new CO2sources would either prevent emissions, procure compensating emissions reductions, or sequester emissions in sinks. The paper uses electric power plants to demonstrate the mechanics of the policy and the control or offset choices. Offset options include scrubbing, fuel switching, investments in energy conservation and efficiency, and afforestation.

Costs per ton ofC02sequestered range from $1.35 for planting shade trees to $59.41 for scrubbing. All options except scrubbing cost less than $11.00, and the median cost is around $6.00 per ton removed. Planting trees on erodible cropland in conjunction with the Conservation Reserve Program combines the goals of reduced erosion, surplus agricultural production, and greenhouse warming. This policy is a first sane step toward reducing the accumulation of greenhouse gases. Having an international framework for managing emissions is most desirable. In the interim, however, the United States can demonstrate environmental leadership, generate substantial conservation benefits, and spark ingenuity in searching for alternatives, broadening the options, and lowering the ultimate costs of reducing CO2emissions.
ECONOMIC VALUATION OF ACID DEPOSITION DAMAGES
Authors: CALLAWAY JOHN M. , ENGLIN JEFFREY E.
Published: January 2010

This paper summarizes estimates of the monetary value of the physical damages that acid deposition causes in the United States. These estimates were developed for the Interim Assessment of the National Acid Precipitation Assessment Program (NAPAP) but were not included in the final version of the assessment report. This paper describes this research and discusses why these estimates received so little support within the NAPAP. It outlines the role of economics in the current Integrated Assessment and discusses the extent to which lessons learned earlier have been integrated into the current assessment.
FOUR REVOLUTIONS IN ELECTRIC EFFICIENCY
Authors: LOVINS AMORY B.
Published: January 2010

Demand prospects for electricity are being altered profoundly by four synergistic types of revolutionary change: new technologies for improved end‐use efficiency, new ways to finance and deliver those technologies to customers, cultural change within utilities, and regulatory reforms to reward efficient behavior.

Dramatic energy savings achieved so far have been largely in direct fuels and not in electricity, mainly due to price distortions and unique market failures. Resulting inefficient use of electricity is misallocating some $60 billion a year to unnecessary expansions of U.S. electric supply. Yet the best technologies now on the market could save about 92 percent of U.S. lighting energy, about half of motor energy, and much of the electricity used for other purposes. Complete retrofit could deliver equal or better services with only a fourth of the electricity now used. The levelized cost of that quadrupled end‐use efficiency averages about 0.6 cents/kWh– well below short‐run marginal cost. Analogous oil‐saving potential from the best demonstrated technologies is about 80 percent of present oil consumption at an average cost below $3/bbl, partly because two of the 9–10 prototype cars already tested at 67–138 miles per gallon are said to cost nothing extra to make.

Many utilities already save large amounts of electricity very quickly and cheaply by financing customers' efficiency improvements through loans, gifts, rebates, or leases. Even more promising is an emerging “negawatt market” making saved electricity a fungible commodity subject to competitive bidding, arbitrage, derivative instruments, secondary markets, etc.

Utilities can make more money selling less electricity and more efficiency. They can earn a spread on the difference in discount rates between themselves and their customers. They can save operating and capital costs while avoiding the associated risks and, under emerging regulatory reforms, can even keep as extra profit part of what they save. They also can generate tradeable emissions rights under the new Clean Air Act. Some utilities now properly ignore sunk costs and seek to minimize marginal variable costs. These utilities, driven by economic– not accounting–principles, find this approach both profitable and operationally advantageous.
REVENUE‐NEUTRAL INCENTIVES FOR EFFICIENCY AND ENVIRONMENTAL QUALITY
Authors: KOOMEY JONATHAN , ROSENFELD ARTHUR H.
Published: January 2010

Recently, interest has grown in using monetary incentives as an efficient way to promote energy efficiency and environmental quality. This paper describes issues raised in designing revenue‐neutral incentive policies to achieve these goals. Such policies involve charging fees in proportion to undesirable characteristics and giving rebates in proportion to desirable characteristics. The fees pay for the rebates and for any administrative costs of the program.

This paper analyzes the conceptual issues raised in designing such incentive policies to correct for externalities and to promote the efficiency of buildings and automobiles. The paper examines the nature and importance of externalities, presents the rationale for revenue‐neutral incentive policies, and describes six revenue‐neutral incentive programs for achieving these goals. In addition, it analyzes the criteria that one should use in determining the size of fees and rebates, in light of the large uncertainties. Finally, the paper addresses key implementation issues.
WILL ELECTRIC UTILITIES COMPETE EFFECTIVELY WITHOUT A PROFIT MOTIVE?
Authors: MESSENGER MICHAEL
Published: January 2010

This paper reviews the factors leading to the decline of utility participation in the energy conservation market over the past decade in California. The analysis finds that California's regulatory focus on mandating conservation program funding levels, rather than on measuring and rewarding the achievement of energy savings from utility conservation programs, has contributed to a decline in both program scope and program effectiveness. Other major reasons for this decline include potential revenue losses resulting from conservation programs on the generation side, a preoccupation with identifying winners and losers using benefit‐cost tests, and a regulatory focus on “system” impacts from conservation programs that precluded a more direct marketing focus on utility customers' values and needs. The paper concludes that both regulators and utilities should work to develop new indicators of success in the conservation market. These should focus on achieving energy conservation results and rewarding the results with increased profits as opposed to rewarding just effort with expense recovery.
SOCIAL COSTS OF ELECTRICITY GENERATION: WIND AND PHOTOVOLTAIC VERSUS FOSSIL AND NUCLEAR
Authors: HOHMEYER OLAV
Published: January 2010

This paper presents the results of research on the total costs to society of different technologies for electric power production in the Federal Republic of Germany. The analysis views electricity costs from a macroeconomic perspective and includes the internal or private costs as well as the social costs. The focus is on fossil and nuclear fuels as conventional energy sources on the one side and on wind and photovoltaic electricity as examples of renewable energy sources on the other.
PRELIMINARY ESTIMATES OF CUMULATIVE PRIVATE AND EXTERNAL COSTS OF ENERGY
Authors: HALL DARWIN C.
Published: January 2010

This is a summary comparison and “first rough cut” cumulation of recent estimates regarding private and external costs of energy. The estimates of external costs take into consideration damage to health and property caused by air pollution from coal, oil, and gas; damage caused by acid rain from coal, and costs of reducing acid rain; costs of delaying global warming caused by carbon dioxide from coal, oil, and gas; national security costs of importing oil, and benefits of oil security; national security costs of minimizing damage from terrorist attacks on nuclear power plants; insurance subsidies for nuclear accidents; storage of nuclear waste; loss of nuclear reactors from accidents and safety risks; and benefits from additional nuclear safety requirements. The estimates of private costs focus on nuclear plants, coal, oil, gas, conservation, wind, solar power plants, and geothermal steam.
THE BANKING SYSTEM CRISIS IN LATIN AMERICA
Authors: TREBAT THOMAS J.
Published: January 2010

A major “bootstraps” challenge lies ahead for Latin America: finding enough savings capacity at home to finance needed increases in investment during the 1990s. The banking system throughout the region cannot carry out its role in this process, however, due to a ruinous process of internal debt accumulation and corporate bankruptcy—the domestic analog of the external debt crisis of the 1980s.

This paper briefly reviews recent financial liberalization experiences in Latin America. It identifies three factors as contributing to the undermining of the banking system and the failure of liberalization in the region: (i) foreign exchange risks that the banking system has assumed, (ii) unsound lending and borrowing practices, and (Hi) inadequate regulatory and supervisory frameworks. A case study of Chile illustrates the dynamics of frustrated reform and privatization in the financial markets.

The paper concludes that Latin America has no real choice but to pursue liberalization and to rely more on the private sector in the financial markets. The path to deeper financial markets is extremely complex, however, and Latin America must continue seeking the proper balance between state sector supervision and intervention and an increased role for the private sector. An agenda for research points to some thorny issues awaiting empirical investigation.
U.S. OIL DEMAND AND CONSERVATION
Authors: BROWN S. P. A. , PHILLIPS KEITH R.
Published: January 2010

Recent history has lent casual support to three popular theories about U.S. oil demand: (i) U.S. oil consumption is very insensitive to changing oil prices, (ii) non‐price conservation has reduced U.S. oil demand, and (Hi) U.S. oil consumption falls more when oil prices rise than it rises when oil prices fall. Together, these theories suggest that one could hold oil consumption constant without much economic sacrifice. The authors' econometric evidence does not support these theories. This evidence indicates that U.S. oil consumption is fairly responsive to price changes over the long run, but with a considerable lag. Sharp oil price increases—or an equivalent policy action—would be needed to hold oil consumption constant during the 1990s.
SEIGNORAGE AND EUROPEAN MONETARY UNION
Authors: CODY BRIAN J.
Published: January 2010

Inflation differentials in Europe have narrowed substantially since the inception of the European Monetary System in 1979. However, their persistence after more than a decade raises the question of why these differentials are so difficult to eliminate. Some European Community countries systematically use seignorage—financing government expenditures with money creation—while others do not. This increases the difficulty of achieving the convergence of monetary policies and inflation rates required for irrevocably fixed exchange rates in Europe. This paper, utilizing a model of government finance that minimizes the social cost of financing government expenditures, examines monetary finance in the European Community. It rejects soundly the social cost minimization model of seignorage collection.
CROSSING DUPUIT'S BRIDGE AGAIN: A TRIGGER POLICY FOR EFFICIENT INVESTMENT IN INFRASTRUCTURE
Authors: SALANT DAVID J. , WOROCH GLENN A.
Published: January 2010

This paper borrows Dupuit's parable of a bridge so as to reexamine the problem of selecting and financing public investment projects in a dynamic and strategic setting. A regulator imposes a price ceiling, and a firm makes a sunk investment each period. Three simple examples reveal the connection between the non‐cooperative equilibrium of this relationship and the second‐best optimum. One cannot implement this “planning solution” generally since the firm and the regulator each behaves opportunistically toward the other's irreversible actions. The facility never will be built if investment in it is infinitely lumpy and if the facility is perfectly durable. Departing from this extreme case, however, one can restore proper incentives by adopting “trigger policies.” The regulator responds to a deviation from a candidate path by cutting price down to operating cost, and the firm halts all investment. If capital does not depreciate too slowly and the future is not discounted too much, then one can approximate the planning solution by an equilibrium. The success of trigger policies suggests that reformers should relax many regulatory rules and procedures to support efficient investment in infrastructure.
HOW LARGE A FEDERAL BUDGET DEFICIT CAN WE SUSTAIN?
Authors: JOINES DOUGLAS H.
Published: January 2010

Governments may be unable to sustain large budget deficits indefinitely. Investors may impose limits on the amount of government debt—relative to gross national product (GNP)—they are willing to hold and thus limit the size of the deficit a government can sustain. The size of sustainable nominal deficits, then, would depend on the growth rate of nominal GNP. Reasonable assumptions regarding the GNP growth rate imply that the federal government can main tain its debt/GNP ratio at historically typical levels if it runs deficits of $175 billion in the near term and even larger amounts during future years.
INSTITUTIONAL PRESERVATION AT THE FEDERAL RESERVE
Authors: AUERBACH ROBERT D.
Published: January 2010

This paper explains and presents supporting evidence for the hypothesis that institutional preservation is the central motive for Federal Reserve decision makers' behavior. Welfare maximization can, under certain conditions (i.e., via a vote maximization motive or the direct attribution of socially desirable goals), be a part of the preservation hypothesis, but it is inconsistent with substantial parts of Federal Reserve behavior. This paper presents evidence of this inconsistent behavior that the preservation hypothesis can explain. Such evidence includes opposing better coordination with voters'choices, creating an internally authorized fund that makes foreign loans without congressional authorization, opposing better monetary control procedures, organizing lobbying campaigns to defeat legislation to audit the Federal Reserve and make its meetings open to public scrutiny, failing to take minutes after legislation was enacted, and impairing information dispersal about funding for the Watergate burglars. The paper analyzes, in terms of institutional preservation, the results of recent research on the relationship of central banks' independence from short‐run political forces and their anti‐inflationary monetary policies.
RATIONALE FOR DISSENT: THE CASE OF FOMC MEMBERS
Authors: BELDEN SUSAN
Published: January 2010

This paper investigates monetary policymakers' rationale for dissent to test for a hypothesized difference in policy preferences between bank presidents and members of the Board of Governors. The paper analyzes the cited reasons for dissent, the identity of the dissenter, and uses multiple regression to make inferences regarding the differences.

Examining the identity of dissenters and the given reasons for dissent yields four conclusions, (i) A broad base of bank presidents dissent for tighter policy because they want to control inflation by keeping monetary aggregates within targeted ranges. (ii) On the other hand, board members' dissent for tighter policy is dominated by one man–Henry Wallich—who apparently was disturbed by the inflationary outbreak during the late 1970s and early 1980s. (Hi) Several board members dissent for looser policy to stimulate the real economy, (iv) But only a few bank presidents, primarily from the Northeast, dissent for looser policy with the same objective.

Regression analysis supports the assertion that bank presidents dissenting for tighter policy do so to keep monetary aggregates on target in order to control inflation. The analysis confirms Wallich's focus on inflation during the late 1970s and early 1980s. It also allows for the possibility that the various board members dissenting for looser policy either have an inherent preference for looser policy or have diverse reasons for dissent.
THE PSYCHOPATHOLOGY OF MONETARY POLICY
Authors: HAVRILESKY THOMAS
Published: January 2010

This paper develops some implications of assigning the Federal Reserve the contradictory goals of keeping interest and unemployment rates from rising while at the same time expecting the Fed to control inflation. The resulting imbalance causes Fed officials to engage in the classical psychological defenses of denial, projection, and obfuscation. Prolonged defense of an unbalanced state may lead to protective postures with dysfunctional implications. Federal Reserve secrecy, self‐censorship, illusions of unanimity, and perceptions of need for insulation from external threat all are protective postures that may cause the Fed to lose credibility and alienate its professional staff. This, in turn, may promote the cause of monetary reform. This paper distinguishes between radical and piecemeal monetary reform and indicates why the latter could succeed in garnering political support.
REFORMING THE FED: ITS INDEPENDENCE AND LESSONS FROM HUMPHREY‐HAWKINS
Authors: BARRETT ANTHONY
Published: January 2010

The last session of Congress witnessed renewed calls for reforming the Federal Reserve System so as to better coordinate monetary and fiscal policies. This paper examines how the current institutional structure, established by the Humphrey‐Hawkins Act of 1978, performed when the supply‐side tax cuts were implemented during 1981 and 1982. The findings reveal that authorities barely discussed the necessary policy coordination at the Humphrey‐Hawkins hearings. Further, the record reveals that Fed Chairman Volcker refused to utilize the Fed's independence to publicly oppose the supply‐side tax cuts.
RISK TAKING BY THRIFT INSTITUTIONS: A FRAMEWORK FOR EMPIRICAL INVESTIGATION
Authors: GOLBE DEVRA L. , SHULL BERNARD
Published: January 2010

The discussion surrounding the recent reregulation of the thrift industry suggests that (i) thrifts engaging in “risky” activities are more likely to become insolvent and that (ii) thrifts already near insolvency are likely to take on more risks resulting in increased loss. This paper considers the relationship between insolvency and risk taking in a simultaneous framework and uses 1978–1983 data for Illinois thrifts to investigate the relationship. The paper explores the likelihood that risk taking by thrifts increases as the probability of insolvency increases, that risk taking increases as the probability of failure (i.e., closure by the regulator) increases, and that the probability of insolvency increases as risk taking increases. Preliminary empirical results suggest that an increase in the probability of insolvency increases risk taking and that an increase in risk taking increases the likelihood of insolvency. This latter result is (statistically) significant only when one measures risk by an index of diversification. If sustained in more extensive testing, this result implies that regulatory restrictions on asset diversification are counterproductive.
OUTLOOK FOR THE EUROPEAN MONETARY UNION: THE MESSAGE FROM EASTERN EUROPE
Authors: SWEENEY RICHARD J.
Published: January 2010

The European Community (EC) seems headed toward monetary union, either with “permanently” fixed exchange rates or with a common currency. Ceteris paribus, the breakup of the Soviet empire in Eastern Europe makes monetary union less desirable. One can expect further shocks from the East. Analyzing stock markets' reactions to events in the East from late 1988 to early 1990 shows that these shocks typically differentially affect EC members, particularly Germany. These differential shocks often call for adjustments in relative national price levels, which can be accomplished most easily with exchange‐rate adjustments. The likelihood of such pressures reduces the credibility of a system of pegged rates and makes the system more vulnerable to speculative runs. A common currency is more credible by its nature but may give an inflationary bias to the European Monetary Union.
BILATERAL TRADE RELATIONSHIP BETWEEN THE UNITED STATES AND CANADA: IMPLICATIONS OF THE FREE TRADE AGREEMENT
Authors: KOO WON W. , UHM IHN HO , GOLZ JOEL T.
Published: January 2010

This study's primary objective is to evaluate empirically the economic effects of the U.S.‐Canada Free Trade Agreement (FTA). The paper emphasizes bilateral trade flows of agricultural and industrial products between the United States and Canada, given that the FTA removes tariff and non‐tariff barriers. It evaluates the FTA's impact on the two countries' trade with third countries. The paper specifies a traditional log‐linear trade model consisting of import demand and export supply equations for both agricultural and industrial products. It uses quarterly time‐series U.S. and Canadian trade data for 1972–1985.

The study uses the two‐stage least‐squares estimator to estimate the models. The models had R coefficients ranging from 0.78 to 0.99, indicating that the models' explanatory variables explain most causes of variations in the dependent variable. This study reveals that U.S. imports of agricultural and industrial products from Canada were more sensitive than were Canadian imports not only to import and domestic prices but also to world prices. This is because Canadian consumers have less domestic substitutes than do their U.S. counterparts. Also, Canada has a smaller internal market than does the United States. The study estimates that U.S. imports from Canada will increase $2.8 billion while Canadian imports from the United States will increase $1.2 billion. The impact on the two countries' trade with third‐party countries will be insignificant.
LIBERALIZATION WITHOUT DEREGULATION: U.S. TELECOMMUNICATIONS POLICY DURING THE 1980s
Authors: CRANDALL ROBERT W.
Published: January 2010

During the past 20 years, the U.S. telephone industry has undergone a remarkable evolution from a set of government‐enforced monopolies to a much more competitive environment. Long‐distance service, private‐line service, data communications, and terminal equipment once were available only from the telephone monopolist. Now they are freely available from numerous competitive suppliers due to a series of regulatory and judicial decisions. But despite this veritable explosion in competition, the telephone industry still is regulated at both the federal and state levels. Only the provision of terminal equipment is totally deregulated.

Regulating telephone rates has created a highly inefficient rate structure replete with cross‐subsidies. Legislators' and state regulators' reluctance to eliminate these cross‐subsidies remains the most important hurdle to transforming the telephone industry to a fully competitive market. Nevertheless, liberalizing entry has generated some economic efficiencies through its effect on productive efficiency and on regulated rates. Productive efficiency gains may have reached $3 billion by 1988, and the welfare gains from the limited rationalization of rates caused by entry are nearly $1 billion per year.

Fully deregulating long‐distance and local service requires that regulators abandon their policies of cross‐subsidizing rural residences at the expense of businesses and of cross‐subsidizing local service at the expense of long‐distance service. Movement toward deregulation is progressing at the federal level and in some states, but full deregulation appears unlikely in the foreseeable future.
SOCIAL CONTRACTS AND PIPE DREAMS
Authors: ELLIG JEROME , HIGH JACK
Published: January 2010

Economists' debate over the public utility “regulatory contract” has increasingly focused on three issues created by sunk costs: (i) Protection of sunk capital, (ii) Division of “windfalls” in a world of uncertainty, and (Hi) Mechanisms to control the regulator who administers long‐term agreements. This article uses these three criteria to evaluate regulatory alternatives in the natural gas industry. Facing similar problems under criteria 1 and 2 are: government regulation of pipelines as integrated gas merchants, government regulation of pipelines as gas transporters, and private regulation through competitive contracting. Private contracting, however, offers superior control over the contract administrator, because it removes the Federal Energy Regulatory Commission's monopoly on contract administration.
CHILD SUPPORT, ROUTINE INCOME WITHHOLDING, AND POST‐DIVORCE INCOME
Authors: KLAWITTER MARIEKA M. , GARFINKEL IRWIN
Published: January 2010

Policymakers are proposing child support reform as a way of reducing “welfare dependency” and countering the “feminization of poverty” while increasing the well‐being of children living in single‐parent households. The federal government and some states have begun to change laws regarding establishment of child support awards and collection of payments. The 1988 Family Support Act mandates routine income withholding of child support payments—i.e., collecting child support directly from the payer's paycheck. This article assesses the effects on post‐divorce income by using data from a demonstration of routine withholding in ten Wisconsin counties. Unfortunately, these data conclude that routine income withholding has little effect on post‐divorce income, at least in the year following divorce. The authors suggest three requirements for substantially increasing post‐divorce income, as well as child support: (i) More family court cases must establish awards, (ii) The amount of those awards must be greater. (Hi) The collection rate for those who have awards must improve.
FEDERAL BUDGET DEFICITS, MONEY, AND EXCHANGE RATES
Authors: DERAVI KEIVAN , GREGOROWICZ PHILIP , HEGJI CHARLES E.
Published: January 2010

The dollar's strength during the 1980s appears to many—particularly as reported in the financial press—to have been directly linked to the decade's large budget deficits and the subsequent increase in the stock of federal debt outstanding. The popular argument is that the budget deficit and the growth of federal government credit market demand caused U.S. interest rates to rise over that period, inducing large capital inflows from abroad to finance the deficit. According to the argument, the capital inflows caused the dollar to appreciate. Despite the argument's popularity, the empirical literature does not strongly support it. Evidence on the relationship between the federal deficit and the dollar is at best mixed.

This article reconsiders the effects of federal budget deficits on the exchange rate. The analysis involves estimating a vector autoregressive (VAR) model of exchange rates that includes monetary, fiscal, and price level variables. Within the VAR framework, impulse analysis traces the dynamic response of exchange rates to various budget deficit measures.

The analysis finds that deficits do not directly Granger cause exchange rates, but it also finds evidence of an indirect effect working through the money supply and price level. Moreover, the analysis reveals some evidence that foreign exchange markets are forward looking and react to expected budget deficits. The innovations accounting and impulse analysis also suggest a forward‐looking dynamic relationship between deficits and exchange rates, but the relationship is sensitive to the ordering of the variables.
THE FUTURE OF THE U.S. DEFENSE INDUSTRY
Authors: WEIDENBAUM MURRAY
Published: January 2010

Defense contractors in the United States face a painful choice between downsizing or investing in new high‐risk commercial ventures. Past experience reveals numerous failed efforts to penetrate commercial markets and few, if any, successes.

The capabilities required to succeed in civilian business are fundamentally different from those needed to design and produce weapon systems. Defense firms and defense divisions of diversified corporations lack adequate knowledge of commercial products, production methods, advertising and distribution, financial approaches, and customer demand.

Given the outlook for a sustained decline in U.S. military spending, the author advises companies catering to military markets to cut their costs by reducing excess capacity. Smaller but more competitive positions can be achieved through restructuring, mergers, sales of assets, and, if necessary, closing down unneeded facilities. Firms that ignore the pleas for “conversion” and do not dissipate their assets in civilian markets alien to them stand the best chance of surviving during a period of reduced military demand.
IMMIGRANT WELFARE RECIPIENCY: RECENT TRENDS AND FUTURE IMPLICATIONS
Authors: TREJO STEPHEN J.
Published: January 2010

Using microdata from the 1970 and 1980 U.S. Censuses, this article examines recent trends in immigrant welfare recipiency. Immigrant welfare use increased over the 1970s, both in absolute terms and in comparison to the welfare use of natives. A small number of source country characteristics explain over two‐thirds of the large variation in welfare recipiency that exists across national origin groups. Moreover, changes in the average source country characteristics of the foreign‐born population between 1970 and 1980 can account for almost all of the increase in immigrant welfare recipiency that occurred over the decade.
RECENT EVIDENCE ON THE DISTRIBUTION OF AIR POLLUTION EFFECTS
Authors: BRAJER VICTOR , HALL JANE V.
Published: January 2010

This study associates levels of exposure to ozone and fine particulate matter in the South Coast Air Basin of California with resident income, race, age and education. A Regional Human Exposure Model provides the basis for estimating exposure not only on location or residence, but also on mobility within the Basin and time spent in various activities indoors and outdoors. The results are consonant with earlier research in most respects, except that population density is negatively related to exposure. Ethnic minorities and children receive the greatest exposure levels. The highest income group exhibits a strongly negative association with exposure.
SAVING MEASURES AS ECONOMIC GROWTH INDICATORS
Authors: Cullison WILLIAM E.
Published: January 2010

The decline of the U.S. saving rate during the 1980s and its potential impact on future economic growth has been the subject of considerable concern. The National Income Accounts (NIA) measures of saving are the empirical basis for the concern. However, the economics literature has soundly criticized the NIA concepts of saving and investment. Moreover, little evidence exists that the United States suffered a capital shortage during the 1980s, when it enjoyed its second longest peacetime economic expansion. This paper examines the relation of NIA and other saving measures to future real GDP. Findings indicate that no measurable relation exists between the lagged NIA saving measures and real GDP. However, findings also indicate a significant relation does exist between real GDP and the sum of personal saving from the flow‐of‐funds accounts plus an approximation of government saving for infrastructure purposes. Unlike the NIA saving rate, this constructed saving rate did not decline precipitously in the 1980s. Since the saving rate relevant to economic growth did not fall, the future of the U.S. economy might not be nearly so bleak as many assume.
MAQUILADORA RESPONSE TO U.S. AND ASIAN RELATIVE WAGE RATE CHANGES
Authors: Truett LILA J. , Truett DALE B.
Published: January 2010

ThiS paper investigates whether the output of the Mexican maquiladoras is an alternative to production in the Pacific Rim. The analysis involves estimating supply functions for Mexican maquiladora output using relative wage data for Mexico, Singapore, and the United States. It also involves estimating the impact of relative wage rates on maquiladora output in five industries as well as on more aggregated levels. Results indicate that production in Mexico and in the Pacific Rim are substitutes, although this relationship is stronger for some industries than for others.
BUDGET DEFICITS, DOMESTIC INVESTMENT, AND TRADE DEFICITS
Authors: Arora HARJIT K. , Dua PAMI
Published: January 2010

This paper summarizes recent empirical studies on the effects of budget deficits on interest rates, investment, and trade deficits in the United States. It also reports new evidence on the effects of budget deficits on investment and on trade deficits for the 1980s. The results support the view that budget deficits crowd out domestic investment and increase trade deficits.
HOW SHOULD BANK REGULATORY AGENCIES BE ORGANIZED?
Authors: Shull BERNARD
Published: January 2010

The U.S. Treasury Department (1991) makes a strong case for consolidating federal bank regulatory authority. However, its proposal to eliminate direct FDIC authority over insured nonmember banks contributes little to this end because deposit insurance requires supervisory oversight. The U.S. Treasury Department (1991) also maintains an independent role for the Federal Reserve. Elimination of neither the insurance agency nor the central bank appears practical. A better approach to regulatory agency consolidation would combine supervision with deposit insurance and central banking in an institutional structure modified somewhat from the present Federal Reserve structure.
LIMITING U.S. OIL IMPORTS: COST ESTIMATES
Authors: Huntington HILLARD G.
Published: January 2010

The Energy Modeling Forum recently compared ten world oil models. This paper examines the costs of curtailing growth in U.S. oil imports based upon the supply and demand responses to price in six of these models. The analysis estimates direct resource costs over the 1989–2010 period from U.S. results for aflat and a rising price case spanning an $18 per barrel difference by the year 2000 and beyond. To provide a balanced perspective, the paper also includes estimates of some potential benefits from import‐reduction policies. These benefits include smaller wealth transfers during a disruption and lower oil prices without disruptions. While keeping future oil imports at today's level appears to be quite costly, the results here indicate that less aggressive import‐reduction programs offer some opportunity for economic gain.
IMPACT OF CHILD QUALITY ON EARNINGS: THE PRODUCTIVITY‐OF‐SCHOOLING HYPOTHESIS
Authors: Ganderton PHILIP , Griffin PETER
Published: January 2010

This paper investigates the relationship between average earnings, education (measured by years of schooling), and rates of return to education for major racial/ethnic groups in the United States. It considers the effect of including previously omitted “productivity‐of‐schooling” (also referred to here as “child quality”) variables. An upward‐sloping average education, rate‐of‐return‐to‐education profile exists for His‐panics, blacks, and whites. Productivity‐of‐schooling (i.e., child quality) measures– including family size, family composition, ability, and parental inputs–significantly affect earnings and rates of return to education. The results here are consistent with Chiswick (1988). Conditions within the family play a larger role in determining the value of education for minority males than for white males, a conclusion of obvious interest to policymakers.
OCEAN SHIPPING ECONOMICS: FREE TRADE AND ANTITRUST IMPLICATIONS
Authors: Butz DAVID A.
Published: January 2010

Many economists and antitrust experts claim that ocean shipping conferences are essentially legalized cartels. They often advocate eliminating ocean shipping conferences' antitrust immunity. This paper argues that conferences also help to coordinate their members' joint investments and thereby allow the historically small firms in this industry to exploit vast network economies (akin to those in other transportation industries) that small firms could not capture on their own. The paper proposes reducing rather than eliminating immunity and calls for an end to many of the regulations currently stifling the industry.
WILLINGNESS TO PAY FOR AIR QUALITY: THE CASE OF OUTDOOR EXERCISE
Authors: FARBER STEPHEN , RAMBALDI ALICIA
Published: January 2010

This study uses a contingent valuation (CV) survey to establish a sample of outdoor exercisers' willingness to pay (WTP) for ambient air quality improvements in East Baton Rouge parish, Louisiana. Estimated annual median and mean WTP values are £95 and £191, respectively, per person per year for assurance that ozone levels would not become “unhealthful” on any day. The survey informed respondents that in the prior year the local community experienced 14 days on which ozone levels exceeded federal standards. The study makes the strong assumptions that respondents believed they were “buying” 14 more healthy days and that WTP per day “bought” is constant. Given these assumptions, one can scale this WTP response to represent annual medians and means of approximately £7 and £14 per person per day, respectively. An econometric procedure for generalizing the community's annual WTP to avoid the 14 unhealthful days yields estimates ranging from £3.21 and £5.36 per person per healthy day, or between £12.4 and £20.6 million per year. The unit day estimates are comparable to CV and household production finction estimates of WTP in the Los Angeles basin, suggesting their usefulness for benefits transfer.
WAGE MOBILITY AND WAGE INEQUALITY AMONG YOUNG WORKERS
Authors: VEUM JONATHAN R.
Published: January 2010

This analysis uses data from the National Longitudinal Surveys to examine wage inequality and wage mobility within the wage distribution for young high school graduates during their early years in the labor market. The analysis constructs a new index that facilitates measuring mobility changes over time. The data indicate that no strong relationship exists between wage mobility and wage inequality for young workers. Controlling for time invariant differences between individuals also indicates that between the 1970s and 1980s factors that impact mobility underwent very few changes.
LIFE INSURANCE COMPANY RISK EXPOSURE: MARKET EVIDENCE AND POLICY IMPLICATIONS
Authors: III ELIJAH BREWER , MONDSCHEAN THOMAS H.
Published: January 2010

Life insurance company (LIC) risk exposure increased during the 1980s while capital ratios declined. State guarantee funds that exist to handle policyholder's losses in the event of LIC failure can create incentives for excessive risk taking, just as the federal deposit insurance system did for savings and loan associations. This paper examines the relationship between stock market risk and LIC risk exposure. A sample of 44 LICs revealed that stock market risk is positively related to financial leverage as well as to differences in asset mix. This finding confirms that market data can help identify LICs with greater risk exposure.
VALUING EFFECTS OF CLIMATE CHANGE AND FISHERY ENHANCEMENT ON CHINOOK SALMON
Authors: ANDERSON DAVID M. , SHANKLE STEVEN A. , SCOTT MICHAEL J. , NEITZEL DUANE A. , CHATTERS JAMES C.
Published: January 2010

This paper represents a continuing multidisciplinary analysis of species preservation and global change. It explores the economic cost of a potential regional warming's effect on the spring chinook salmon (Oncorhynchus tshcawytscha). Climate change and planned habitat improvements impact the production and economic value of spring chinook salmon in the Yakima River tributary of the Columbia River in eastern Washington. A chinook salmon's total economic value includes the summation of the existence, commercial, recreational, and capital values. The analysis here applies currently available data on these four components of value to estimated changes in chinook salmon population resulting from regional warming. Results show that the estimated change in economic value per fish associated with reducing one fish run is significant.
GENDER DIFFERENCES IN PH.D. ECONOMISTS' CAREERS
Authors: SINGELL LARRY D. , STONE JOE A.
Published: January 2010

This study of Ph.D. economists' careers during the period 1960–1989 examines both initial and current employment and explicitly accounts for the joint relationship between choosing an employment sector and placement within the academic sector. Initial placement and market conditions create effects that tend to persist throughout an isndividual's career. With the exception of the labor and welfare fields, women are not less likely than men either to enter or to persist in academia. But significant evidence shows that in the past, women have placed in lower‐ranked departments. Among recent degree recipients, however, underplacement of women as a general phenomenon apparently has disappeared.
TRADE CREATION AND DIVERSION EFFECTS OF THE U.S.‐CANADIAN FREE TRADE AGREEMENT
Authors: KAREMERA DAVID , KOO WON W.
Published: January 2010

This study empirically estimates and evaluates the economic benefits of the U.S. and Canadian Free Trade Agreement (FTA). Most past studies rely on aggregate data. The analysis here emphasizes the trade effects of removing tariff and nontariff barriers on each commodity group classified by the Standard International Trade Classification. Estimating the amount of trade expansion under FTA for both countries involves using the import demand elasticities from a dynamic demand model. Results show that U.S. imports from Canada are more sensitive to domestic, import, and world prices than are Canadian imports from the United States. U.S. imports from Canada would increase roughly £3.257 billion compared to the £2.432 billion increase for Canadian imports from the United States.
KEIRETSU SHAREHOLDING TIES: ANTITRUST ISSUES
Authors: FLATH DAVID
Published: January 2010

Antitrust concern about keiretsu shareholding ties is misplaced and at odds with economic reasoning and with empirical investigation. Holding stock in a trading partner slants the bargaining over product market variables in favor of the trading partner. Divesting such a stock interest accomplishes the reverse. The firm holding shares in a trading partner can credibly threaten to divest should the trading partner behave opportunistically. Divesting withdraws the bargaining advantage that the equity position had conferred. Therefore, a firm may establish a partial equity position in a trading partner to deter opportunism. Additionally, Japanese banks' shareholding in the companies to which they lend resolves agency problems and lowers borrowing costs. Organizing firms into cross‐shareholding groups magnifies these favorable effects by assuring that direct shareholding by banks gives rise to indirect shareholding as well. Keiretsu shareholding ties impede U.S. exports to Japan because they lower the keiretsu members' costs of transacting with one another and not because they raise rivals' costs.
OUTSIDE INFLUENCES ON MONETARY POLICY: A SUMMARY OF RECENT FINDINGS
Authors: HAVRILESKY THOMAS
Published: January 2010

This paper reports on a program that begun in 1985 to research political and private pressures on monetary policy. The program developed a number of measures of outside pressures on monetary policy, identified the time periods and circumstances under which the Federal Reserve was responsive to these measures, and indicated how different classes of Fed officials responded to certain of these pressures. Initial findings appear in a number of journal articles from 1987 to 1992. Havrilesky (1993) extends and refines these findings by employing new and larger data sets. Subsequent articles amplify the findings by estimating monetary policy reaction functions that specifically introduce outside influences together with state‐of‐the‐economy measures as explanatory variables.
ROLE OF VOLUNTARY PROGRAMS IN AGRICULTURAL NONPOINT POLLUTION POLICY
Authors: NORTON NANCY ANDERS , PHIPPS TIM T. , FLETCHER JERALD J.
Published: January 2010

Voluntary programs' effectiveness in reducing agricultural pollution is under debate in the professional literature, within government regulatory agencies, and among legislators. In general, non‐farm business owners bear little or none of the costs of environmental degradation that their business activities cause. However, farmers who reside on the farm may bear some of the costs associated with using chemicals. As a result, voluntary programs encouraging adoption of management practices that simultaneously improve on farm and off‐farm environmental quality may not require subsidizing farmers for their full loss in profits. However, farmers likely will not adopt regulatory agencies' recommended management practices that do not positively affect on farm environmental quality unless subsidies exceed full adoption costs.
INFLATION STABILIZATION AND NOMINAL ANCHORS
Authors: CALVO GUILLERMO A. , VÉGH CARLOS A.
Published: January 2010

This paper analyzes the choice of a nominal anchor in disinflation programs in chronic inflation countries. Both theory and evidence suggest several conclusions. (i) The recessionary effects associated with disinflation appear in the early stages of money‐based programs but only in the late stages of exchange rate‐based programs. (ii) Lack of credibility is more disruptive under fixed exchange rates than under floating exchange rates. (iii) Attempting to pursue a disinflationary policy while maintaining a given level of the real exchange rate is likely to be self‐defeating. (iv) A high degree of currency substitution favors the exchange rate as the nominal anchor.