bluuebunny/crossref_metadata_2025 huggingface dataset:
THE POLITICAL ECONOMY OF NEW DEAL FISCAL FEDERALISM
Authors: WALLIS JOHN JOSEPH
Published: January 2010

While the introduction of federal matching grants to finance the New Deal relief programs is usually viewed as a mechanism to insure federal control over state relief spending, a careful study of the New Deal reveals that the reverse was the case: matching grants allowed the states to escape close federal control. The standard economic model of inter‐governmental grants reveals that the federal government will, if allowed, prefer to use discretionary rather than matching grants. With discretion, however, came power; power that neither the states nor Congress wished to see concentrated in the Executive branch.
EFFICIENCY WAGES AND EQUILIBRIUM WAGES
Authors: BLACK DAN A. , GAREN JOHN E.
Published: January 2010

We present a labor market model that allows as special cases a market paying equilibrium wages, one paying disequilibrium efficiency wages, and a market combining the two. Our analysis indicates that industrial wage differentials are not necessarily evidence of efficiency wages. Such differentials may be explained by differences across industries in labor performance standards or in the accuracy with which worker effort can be measured. We do find, however, that the relationship between wages and dismissals can be used to distinguish a market paying equilibrium wages from one paying efficiency wages.
IS RICARDIAN EQUIVALENCE A GOOD APPROXIMATION?
Authors: EVANS PAUL
Published: January 2010

Ricardian equivalence may be a good approximation even if all households have finite horizons, many households have short horizons, and an appreciable fraction of wage income is received by liquidity‐constrained households. The approximation is likely to be better, the more imperfect annuity markets are.
EXPERIMENTAL TESTS OF RICARDIAN EQUIVALENCE
Authors: CADSBY CHARLES BRAM , FRANK MURRAY
Published: January 2010

This study employs laboratory experiments to test aspects of Ricardian equivalence. An overlapping generations model forms the basis of the experimental design. Whenever Ricardian equivalence predicts a positive bequest, outcomes close to those predicted occur, after allowance for learning. Observed deviations from Ricardian equilibrium are small, but biased in a Keynesian direction: changes in bequests do not fully offset changes in government debt. The imposition of a binding nonnegativity constraint on bequests produces the predicted neoclassical behavior. The cost to the players of deviations from the theoretical equilibrium is apparently an important determinant of the variability of observed deviations.
CROSS‐COUNTRY ESTIMATES OF THE DEMAND FOR MONEY AND ITS COMPONENTS
Authors: KENNY LAWRENCE W.
Published: January 2010

The demand for money aggregates (M1, M2) and their components (currency, demand deposits, and time deposits) are estimated using a sample of 103 countries at two time periods. Money demand is found to be affected by age, literacy, industrial development, and political structure, as well as income and inflation. This expanded demand function helps to explain the considerable changes in money demand that have occurred over long periods and the large variation in money demand found across countries. The knowledge thus gained is useful for understanding differences in monetary and taxation policies across countries.
HETEROGENEITY UNDER COMPETITION
Authors: LIPPMAN STEVEN A. , MCCARDLE KEVIN F. , RUMELT RICHARD P.
Published: January 2010

A standard prediction of neoclassical microeconomics is that with perfect competition, free entry, and atomistic firms producing a homogeneous product, equilibrium finds all firms employing that technology which has minimum average cost. That competition drives out inefficient producers and reduces heterogeneity within industries is, consequently, a commonplace rule of thumb in economic thinking. This paper demonstrates that demand uncertainty is sufficient to produce heterogeneity in the equilibrium employment of production technologies and to permit the coexistence of producers exhibiting different minimum average costs. This heterogeneity is ubiquitous because the conditions for its presence are not stringent.
COMMITTEE ASSIGNMENTS, CONSTITUENT PREFERENCES, AND CAMPAIGN CONTRIBUTIONS
Authors: Grier Kevin B. , Munger Michael C.
Published: January 2010

We model the behavior of a vote‐maximizing legislator in order to predict interest group campaign contributions to incumbent politicians. We show that committee assignments and voter preferences affect the price a legislator requires to produce policies for any interest group. An econometric analysis of actual interest group contributions shows that these groups make significantly larger contributions to legislators on committees with jurisdiction over especially relevant policy issues and to incumbents with non‐hostile constituencies. These results support our theory; interest groups act as if committees matter in the determination of policy and voters' interests constrain interest group behavior.
MEASURING THE NOMINAL VALUE OF FINANCIAL SERVICES IN THE NATIONAL INCOME ACCOUNTS
Authors: Fixler Dennis , Zieschang Kimberly D.
Published: January 2010

The recent growth in the U. S. financial service sector has resurrected the controversy over the treatment of financial services in the national income accounts. The main points of contention are the treatment of interest payments and the valuation of “free” financial services provided by banks. To examine different treatments of financial services, we employ a financial firm model that links financial service prices to the user cost of money. We show that our approach subsumes both the Department of Commerce and the U. N. Statistical Office approaches and thereby provides a heretofore absent economic foundation for their methods.
DETERMINANTS OF VOLUNTARY OVERTIME DECISIONS
Authors: Idson Todd L. , Robins Philip K.
Published: January 2010

This paper develops and estimates a model of the labor supply for overtime work when some workers' choices are constrained by mandatory overtime provisions of employers. Economic incentives are shown to have a significant effect on workers' overtime decisions. Policy simulations suggest that an increase in the overtime premium would lead to greater voluntary overtime work, as would a lowering of the level of weekly hours after which the mandatory premium takes effect. The estimated effects of these changes are not quantitatively large, indicating that workers are fairly insensitive to changes in monetary incentives in making overtime decisions.
A NOTE ON RISK AVERSION AND PREFERENCES
Authors: Mann Barbara S.
Published: January 2010

The relationship between Arrow‐Pratt measures of risk aversion and the standard income and substitution effects in certainty problems is presented. Particular emphasis is placed on the relationship between curvature properties of indifference maps and properties of relative risk aversion. The results are applied to the demand for insurance and in models with asymmetric information.
COMPETITION AND THE CIGARETTE TV ADVERTISING BAN
Authors: Eckard E. Woodrow
Published: January 2010

The 1970 ban on television advertising for cigarettes constitutes a quasi‐experiment allowing the effect of advertising on competition to be evaluated. Assuming the ban reduced the efficacy of industry advertising, an analysis of various proxies for competition before and after the ban enables one to deduce whether advertising promotes or limits competition among cigarette firms. The results indicate that in this case the restriction of advertising reduced competition.
FIRM PARTICIPATION IN STEEL INDUSTRY LOBBYING
Authors: Herander Mark G. , Pupp Roger L.
Published: January 2010

Why do firms participate in steel industry lobbying to obtain antidumping and countervailing duties? In contrast to previous work, we find that economic variables, measured at the industry level, do not significantly affect the degree of participation by individual firms. We find that steel producers tend to free‐ride, but firms in segments of the steel industry that can control free riding tend to participate more. We also find that the distribution of benefits and the costs of contributing are significant determinants of the number of contributing firms.
FIRM SPECIFIC TRAINING, LAYOFFS, AND UNRELIABLE WORKERS
Authors: Cothren Richard
Published: January 2010

This paper determines the optimal level of firm specific training and the optimal level of layoffs when some workers are unreliable in that they may receive and accept offers from outside the firm; more specifically, the paper determines the evolution of firm specific training and layoffs as a worker acquires a reputation for reliability with his employer. The paper shows, for example, that layoffs may be higher or lower than the level implied by the condition that a worker's value of leisure equal the value of his contribution to output.
PROFIT AND EXPENDITURE FUNCTIONS IN PUBLIC FINANCE: A CORRECTION
Authors: Rothstein Paul
Published: January 2010

This note corrects and extends an earlier result on the measurement of deadweight loss.
INTEREST RATES, EXPECTED FUTURE DEFICITS AND TAX PROPOSALS
Authors: Johnson Colleen F.
Published: January 2010

Several recent publications have presented evidence suggesting a negative wealth effect in response to federal deficits. This paper investigates the hypothesis that rational economic agents use the legislative process to forecast the future path of federal deficits and then act on that information. A tax legislation variable, included in a reduced form interest rate equation, is tested for significance. The legislative variable that mirrors the effects of current and past deficits is often significant.
IMPACT OF THE NEW ZEALAND SEAT BELT LAW
Authors: Garbacz Christopher
Published: January 2010

Offsetting consumer behavior may have reduced the effectiveness of a mandatory seat belt law in reducing fatalities in New Zealand. It appears that the favorable effect on automobile occupants may be offset partially, or in some models perhaps completely, by deaths among cyclists and pedestrians that may be caused by more dangerous driving by drivers who feel safer. Furthermore, the improvement in safety found for occupants is smaller than generally reported in the literature. A caveat is that speed may be endogenous for some models.
THE DISTRIBUTION OF WEALTH AND THE EFFICIENCY OF INSTITUTIONS
Authors: Eaton B. Curtis , White William D.
Published: January 2010

This paper explores the efect on economic efficiency of the distribution of wealth and systems for enforcing property rights. We construct a two‐person, two‐period economy in which each person can consume, plant, transfer or steal corn. We find circumstances in which redistribution of wealth is Pareto optimal and in which increasing sanctions against theft to their maximum level is not. These results suggest that it is not only important to consider distribution in the design of property institutions, but also that redistribution itself may serve to increase the efficiency of systems of property rights.
A BANDWAGON EFFECT IN PERSONALIZED LICENSE PLATES?
Authors: Biddle Jeff
Published: January 2010

The bandwagon effect is a consumption externality that exists when an individual's demand for a good is increased by his observation of other consumers using that good. This paper models a product demand curve with a bandwagon effect and, using data on sales of personalized license plates, estimates such a demand curve. Certain more conventional models of product demand, including information diffusion and habit formation models, are observationally similar to the bandwagon model, despite being conceptually different from it. I attempt to use the license plate data to discriminate between the bandwagon model and these other models.
A COMMENT ON COMPETITION AND BIDDING BEHAVIOR: SOME EVIDENCE FROM THE RICE MARKET
Authors: Beutel Phillip A.
Published: January 2010

In testing agents' responses to increased competition in sealed‐bid first price‐rice auctions, Meyer [1988] makes two erroneous assumptions: (1) that agents know ex ante the number of bidders in the auction, and (2) that firms forecast resale prices with information unavailable at the time of the auction. These two misspecifications are identified and corrected. A probit model provides a forecast of market competition, and agents' bids are modeled as a function of expected competition and factors affecting the value of each rice lot. The bias toward zero in Meyer's estimated coefficient on market competition is reduced.
THE IMPACT OF BAD WRITING IN ECONOMICS
Authors: Laband David N. , Taylor Christopher N.
Published: January 2010

We find significant style differences between articles written by economists for their professional journals and articles by the same economists in the Wall Street Journal. We find no evidence that style influences the professional success of economists, which suggests that the private rewards to improving the quality of writing are low. Indeed, each community of scholars has probably adopted a “professionally correct” writing style, from which its members diverge little. However, scholars do alter their rhetorical style to communicate effectively with audiences other than the professional community. This suggests that intra‐ and inter‐group (written) communication by economists is efficient.
WHAT'S LEGAL and WHAT'S NOT: THE REGULATION OF OPIATES IN 1912
Authors: Michaels Robert J.
Published: January 2010

This paper develops a model to explain state‐level opiate regulation in 1912. The personal choice of whether to engage in mainstream or deviant activity is determined by consumption technology and market prices, and voting determines the legality of deviant behavior. Voting outcomes depend on population characteristics including diversity, tolerance, visibility of deviance, and the distribution of consumption efficiencies. A logit equation whose dependent variable is the presence of a state opiate prescription law is estimated. Results broadly support the collective choice model and disconfirm the role of interest groups, particularly physicians, in determining prescription regulation.
AN EXPRESSIVE VOTING THEORY OF STRIKES
Authors: Glazer Amihai
Published: January 2010

Union members may vote for a strike even if they do not expect to thereby increase their wages. For under majority voting any one member's vote for a strike is unlikely to be decisive. A union member who obtains a non‐infinitesimal emotional benefit from the act of voting for a strike may therefore vote in its favor. This hypothesis can explain the existence of strikes and the conditions which make strikes especially likely.
STABILIZATION POLICY CAN LEAD TO CHAOS
Authors: Dwyer Gerald R.
Published: January 2010

Nonlinearities in economies, as elsewhere, can generate chaotic equilibria. The presence of Pareto‐inferior chaotic equilibria might seem reason enough to use stabilization policy to select preferable equilibria. However, I show that a stabilization policy with feedback can itself lead to chaotic dynamics. Thus the existence of nonlinearities in the economy does not by itself justify monetary or fiscal policies aimed at reducing economic instability. Current evidence cannot distinguish whether monetary policy stabilizes a nonlinear economy, creates nonlinear dynamics in the economy, or both.
IMPERFECT COMPETITION and BUSINESS CYCLES: AN EMPIRICAL INVESTIGATION
Authors: Lebow David E.
Published: January 2010

Does imperfect competition increase the magnitude of business cycles? If so, the variability of an industry's employment and output should be positively related to the market power of firms in that industry. This paper demonstrates that the opposite is true: U.S. manufacturing industries with high price‐cost margins display less employment variability than do low‐markup industries. These high‐markup industries display less price variability as well. Highly concentrated industries, however, do display more employment variability. To some degree, markups may reflect labor hoarding rather than market power; this may account for part, but not all, of the negative correlation between markups and variability.
TEACHING TOOLS: ON JOURNALISTS‘ USE OF MACROECONOMIC CONCEPTS
Authors: Kennedy Peter
Published: January 2010

Five macroeconomic concepts are presented which are prominent in the business sections of newspapers, but which are not given equivalent prominence in macroeconomic textbooks. These are the discouraged worker phenomenon, the use of inventories in forecasting, the effect of changes in the money supply on the bond market, and the effects of inflation and nominal interest rates in the foreign exchange market. These concepts are presented via news clips illustrating the way they typically appear in the press. Instructors are urged to place extra emphasis on these concepts.
HOW MANY CHEERS FOR ANTITRUST'S 100 YEARS?
Authors: DEMSETZ HAROLD
Published: January 2010

This article describes the ambiguity inherent is U.S. antitrust policy, arguing that it is a necessary consequence of the true, but not commonly understood, task of antitrust policy. Competition is multidimensional in form, and its different dimensions cannot be maximized together. Therefore, antitrust policy cannot maximize competition per se, but aims to achieve an efficient mix of competitive forms. Inadequate knowledge of the technical and preference tradeoffs involved guarantees that questions about the appropriate competitive mix will remain open to debate. The resulting policies, in the author's opinion, merit one cheer out of a possible three.
THE INFLUENCE OF ECONOMICS ON ANTITRUST LAW
Authors: KOVACIC WILLIAM E.
Published: January 2010

Economists today play prominent roles in formulating antitrust policy and litigating antitrust cases. This paper explains why economics influences antitrust law and describes how economic theories enter and shape the antitrust system. Antitrust policy and doctrine change over time in response to developments in economic theory, and the decentralization of the antitrust adjudication system and the wide latitude accorded judges in interpreting antitrust statutes ensure that legal rules will reflect advances in the economic literature concerning the appropriate content of standards governing business conduct.
UNDERPAID and OVERWORKED: MEASURING THE EFFECT OF IMPERFECT INFORMATION ON WAGES
Authors: HOFLER RICHARD A. , MURPHY KEVIN J.
Published: January 2010

This paper investigates the degree of shortfall between the wages workers earn and what they could earn assuming perfect or costless information in the labor market. We use the stochastic frontier regression technique to estimate the degree of shortfall found in wages on an individual basis. The paper tests, in addition, a number of hypotheses supplied by search theory in this context. The results generally confirm the propositions from search theory and indicate that, on the average, worker wages fall short of worker potential wages by approximately 10 percent.
DEPOSIT INSURANCE and BANK FAILURES: NEW EVIDENCE FROM THE 1920s
Authors: WHEELOCK DAVID C.
Published: January 2010

This paper examines the contribution of deposit insurance to bank failures during the 1920s. Using individual bank data from Kansas, where membership in the state insurance system was voluntary, I find that the balance sheets of insured banks reflected greater risk‐taking, and probit model estimates indicate that insured banks were more likely to fail than non‐insured banks. Insurance had an especially strong impact the closer a bank was to failure. Because regulation was comparatively strict in Kansas the findings suggest that deposit insurance had an even greater impact in other states and in the recent U.S. experience.
UNCERTAIN EFFECTS OF MONEY AND THE LINK BETWEEN THE INFLATION RATE AND INFLATION UNCERTAINTY
Authors: HOLLAND A. STEVEN
Published: January 2010

In the postwar period high rates of inflation are associated with high levels of inflation uncertainty. In this paper I argue that the inflation rate and inflation uncertainty are linked by forecasters' uncertainty about the impact of money growth on the price level, and I present evidence indicating that this has been the case. As long as the impact of money growth on the price level remains unpredictable, then even predictable money growth will cause inflation uncertainty with its accompanying adverse effects on employment and output.
RIGHT‐TO‐WORK LAWS AND FREE RIDING
Authors: DAVIS JOE C. , HUSTON JOHN H.
Published: January 2010

Many economists argue that state right‐to‐work laws, by disallowing union shops, encourage free riding and thus diminish union viability. Others counter that right‐to‐work laws are not enforced and that they represent local attitudes and employee characteristics which would encourage free riding in any me. We find that when other factors which affect free riding are taken into account, the marginal impact of right‐to‐work laws remains significant, although of a smaller magnitude than that found in previous bivariate studies.
THEORY AND EXPERIMENTS ON SPATIAL COMPETITION
Authors: BROWN‐KRUSE JAMIE , CRONSHAW MARK B. , SCHENK DAVID J.
Published: January 2010

We present theoretical and experimental results on spatial competition between two firms. Firms choose locations simultaneously along a line representing a linear market. Identical consumers with non‐increasing demand functions are uniformly distributed along this line. We solve for symmetric equilibrium payoffs in an infinitely repeated game for the case of linear demand and an arbitrary discount factor. The set of equilibriums found includes both competitive and collusive payoffs. In laboratory experiments in which the final period was unknown to the players in advance, we observed both competitive and collusive outcomes. Non‐binding communication led to collusion.
PRICE CEILINGS AND PARTY PRIVILEGE
Authors: FELDER JOSEPH
Published: January 2010

This paper uses the consumer/producer surplus approach to provide insight into Party privilege, waiting lines, black markets, and the public policy preferences of Party members and others in Communist countries. At the same time, it uses those topics to teach about the price of time, price discrimination, the gains from trade, social welfare, and comparative statics. This analysis can be used by instructors of Intermediate Microeconomics, Comparative Systems, and Economic Development, and by those instructors of Microeconomic Principles who use the consumer/producer surplus approach to welfare economics.
FRIEDMAN'S METHODOLOGY OF POSITIVE ECONOMICS: A SOFT READING
Authors: MAYER THOMAS
Published: January 2010

In his “Methodology of Positive Economics” Friedman aimed to provide a useful heuristic for working economists and not a sophisticated philosophical analysis. Hence, one should be cautious about reading specific philosophical positions, such as instrumentalism, into it. In the context of its time, it was a plea for a positivistic interplay of theory and observation. On such a reading Friedman's plea for unrealistic assumptions becomes much more defensible, and Friedman's essay is broadly consistent with the methodology that most economists now affirm, at least in principle.
BUSINESS CYCLE ASYMMETRY: A DEEPER LOOK
Authors: SICHEL DANIEL E.
Published: January 2010

This paper distinguishes two types of asymmetry in business cycles: deepness and steepness. Deepness is defined as the characteristic that troughs are further below trend than peaks are above. Most previous research has focused exclusively on steepness, which refers to cycles in which contractions are steeper than expansions. A test for deepness is proposed and applied to U.S. post‐war quarterly unemployment, real GNP, and industrial production. Evidence of deepness is found for unemployment and industrial production, while the evidence for real GNP is weaker. Previous evidence of steepness in unemployment is confirmed.
MONEY DEMAND DURING HYPERINFLATION AND STABILIZATION: BOLIVIA, 1980–1988
Authors: ASILIS CARLOS M. , HONOHAN PATRICK , MCNELIS PAUL D.
Published: January 2010

This paper examines the demand for money in Bolivia during the 1980s, a decade of extreme instability with annual inflation rates reaching over 20,000 percent, and a subsequent stabilization, with annual rates falling to less than 25 percent and remaining so for more than five years.

Our empirical analysis makes use of error‐correction approaches, time‐varying‐parameter estimation with Kalman filtering, and GARCH models of expected inflation and inflation variance. We find that expected inflation and inflation uncertainty both matter for money demand. Time‐varying estimates show that the reaction to monetary disequilibria was significantly faster during hyperinflation.
COMOVEMENTS OF BUDGET DEFICITS, EXCHANGE RATES, AND OUTPUTS OF TRADED AND NON‐TRADED GOODS
Authors: NAKIBULLAH ASHRAF
Published: January 2010

Between 1974:I‐1989:II, it appears that U.S. budget deficits and real exchange rates are correlated. This paper attempts to provide a structural explanation of these comovements in government budget deficits and exchange rates. The model expands on previous works to include fiscal policy considerations in a stochastic set‐up. It shows that within a simple two‐country cash‐in‐advance constraint model, it is possible to have a positive correlation between budget deficits and exchange rates, as well as a negative correlation between exchange rates and domestic traded goods production.
CONSUMERS ARE NOT RICARDIAN: EVIDENCE FROM NINETEEN COUNTRIES
Authors: EVANS PAUL
Published: January 2010

I develop a model which nests both Ricardian equivalence and an alternative non‐Ricardian theory. The alternative is a stochastic variant of Blanchard's [1985] model, and its empirical implications are derived. I then test Ricardian equivalence against this alternative using data from nineteen countries. Ricardian equivalence is resoundingly rejected. Moreover, the estimated deviation from Ricardian equivalence is roughly what one would expect if households faced perfect insurance markets and did no have altruistic bequest motives. For many purposes, however, the estimated deviation from Ricardian equivalence has no practical import.
NASH EQUILIBRIUM AND BUYER RATIONING RULES: EXPERIMENTAL EVIDENCE
Authors: KRUSE JAMIE BROWN
Published: January 2010

Laboratory experiments compare the results of two different buyer rationing rules on Bertrand‐Edgeworth duopoly markets. The two rationing rules, a value queue and a random queue, specify the ordering of buyers and generate different predictions under otherwise identical conditions. These experiments show market outcome can chane significantly with a change in the ordering of buyers. The direction of these changes agrees with the predictions of the stage‐game Nash equilibrium. Thus, the single‐shot Nash equilibrium is show to have predictive power even in repeated games.
COMMON LAW, STATUTE LAW, AND THE THEORY OF LEGISLATIVE CHOICE: AN INQUIRY INTO THE GOAL OF THE SHERMAN ACT
Authors: KLEIT ANDREW N.
Published: January 2010

Although the Sherman Antitrust Act is more than a century old, debate continues over its goals. In contrast to what many have argued, I contend that the Act's main goal is to maximize economic efficiency, rather than the welfare of consumers. The Sherman Act is a modest extension of the common law, which the “Law and Economics” literature indicates moves towards economic efficiency. Further, unlike the Interstate Commerce Act of 1887, Sherman Act decisions are made by courts, not a regulatory agency. Thus, the theory of legislature choice also implies that the goal of the Act is to maximize economic efficiency.
CENTRAL BANK SECRECY, INTEREST RATES, AND MONETARY CONTROL
Authors: Cosimano Thomas F. , VAN Huyck John B.
Published: January 2010

We construct a dynamic rational expectations model of the federal funds and deposit market that provides a rationale for central bank secrecy about current monetary aggregate objectives. In this analysis, the Trading Desk values secrecy because it reduces the influence of monetary control policy on interest rates. We then examine actual U.S. experience with monetary control and determine that the reserve bias predicted by the model is present in the data from 1978 to 1985. Finally, we demonstrate that central bank secrecy may not lower the value of commercial banks.
FRANK KNIGHT ON RISK, UNCERTAINTY, AND THE FIRM: A NEW INTERPRETATION
Authors: Langlois Richard N. , Cosgel Metin M.
Published: January 2010

We attempt to interpret Frank Knight by taking him on his own terms. Among our conclusions are the following. (1)Knight's distinction between risk and uncertainty is not solely a distinction between insurable and uninsurable risk. (2)Knight's explanation for the existence of firms does not reduce to a moral‐hazard theory, except perhaps in the broadest and least‐interesting sense. And (3) Knight's treatment of the problem of the separation of ownership from control is not as obviously wrong as commentators have made it out to be.
POT‐BELLIES, CATTLE BREEDS AND REVEALING SIGNALS
Authors: Allen Douglas W.
Published: January 2010

Believe it or not, there are many interesting economic puzzles at cattle auctions. For example, why does the Holstein breed completely dominate veal sales? And why do other breeds get slaughtered in terms of price when they enter the veal ring? The answer lies in the nature of veal production and the characteristics of the auction which provide the potential for opportunistic behavior. The Holstein's unique pot‐belly signal provides a cheap solution to the cheating problem and results in the domination of the Holstein breed at the auction.
AN ANALYSIS OF THE IMPACT OF CONGRESSIONAL TERM LIMITS
Authors: Reed W. Robert , Schansberg D. Eric
Published: January 2010

We examine the impact of a six‐term tenure limit on members of the U.S. House of Representatives. The first part of this study develops a methodological framework for simulating the quantitative impact of term limits. The second part of this study uses this framework to estimate the effects of term limits on (i) the value of holding office, (ii) turnover, and (iii) the size of the Democratic majority in the House. Both steady‐state and transition period effects are explored.
VOTING AND IMITATIVE BEHAVIOR
Authors: Nelson Phillip
Published: January 2010

Political behavior generates private benefits by helping people fit in with desired friends. A voter imitates other voters, but at the same time they imitate him. An equilibrium solution requires exogenous variables: the narrow self‐interest of the participants. The reduced form makes one's vote a function of the narrow self‐interest of others as well as one's own. In accord with the model, a person's party identification depends on his ethnic group's current income and its income in 1909 as well as his own income.
THE POLITICAL ECONOMY OF HEINRICH VON STACKELBERG
Authors: Konow James
Published: January 2010

Although Heinrich von Stackelberg is famous for his contributions to the theory of imperfect competition, until recently scant attention has been paid to the life, other theoretical work and political thinking of this National Socialist economist. This paper examines his political economy as well as the events in his life which helped form it. Stackelberg devised a unique defense of fascist economic policy based on neoclassical economic analysis. At the same time, he may be credited with creating a novel theoretical framework for addressing a still unfinished line of inquiry into unstable markets and related informational issues.
TERRITORIAL RESTRICTIONS IN FRANCHISE CONTRACTS
Authors: Mathewson Frank , Winter Ralph
Published: January 2010

Efficient contracts set incentives through the assignment of rights and profit shares., Although efficient contracts have been used to explain the nature of the firm, the use of contractual rights in specific business contracts is relatively unexplored. We analyze contractual rights in franchise systems, in particular the right to add franchisees. An exclusive territory assigned to an initial franchisee is not an immutable guarantee, but rather a starting point for subsequent renegotiation in the franchise relationship. Exclusivity is therefore profitable when franchisee efforts are critical to the venture. A sample of franchise contracts reveals evidence consistent with the model's prediction.
ASYMMETRIC INFORMATION AND THE EXCESS VOLATILITY OF STOCK PRICES
Authors: Eden Benjamin , Jovanovic Boyan
Published: January 2010

Evidence suggests the volatility of stock prices cannot be accounted for by information about future dividends. We argue that some of the volatility of stock prices in excess of fundamentals results from fluctuations in the amount of public information over time. Our model assumes that dividends and consumption are constant in the aggregate but that there are good firms and bad firms whose identity may be unknown to the public, as in Akerlof's “lemons” problem. In that case, the collective valuation of the constant dividend stream depends on the degree of informational asymmetry.
THE DISTRIBUTION OF POLITICAL POWER, THE COSTS OF RENT‐SEEKING, AND ECONOMIC GROWTH
Authors: Sturzenegger Federico , Tommasi Mariano
Published: January 2010

Poor economic growth in many countries can be explained by the misallocation of entrepreneurial resources to activities that do not foster growth. This paper deals with the relation between the distribution of political power, the allocation of entrepreneurial resources and growth. We model growth as deriving from Schumpeterian entrepreneurs who try to increase profits through innovation. We endogenize the choice of time devoted to this activity vis‐a‐vis other ways of increasing income, such as obtaining government subsidies. More unequal access to the political redistribution mechanism makes rent‐seeking activities less profitable, and results in higher growth.
ARE PUBLIC GOODS REALLY COMMON POOLS? CONSIDERATIONS OF THE EVOLUTION OF POLICING AND HIGHWAYS IN ENGLAND
Authors: Benson Bruce L.
Published: January 2010

A series of property rights alterations made by the English government undermined individuals' incentives to cooperate in the production of both policing and road maintenance, ultimately leading to government production. The result is more accurately characterized as a free‐access common pool than as a public good. Common pool analysis suggests an array of possible policy prescriptions involving the internalization of costs and benefits through privatization of rights. In contrast, the public‐goods concept appears to be simply an ex post justification for claiming that the only efficient policy is public provision of these services at zero money prices.
CAPITAL MARKET IMPERFECTIONS, LABOR MARKET DISEQUILIBRIUM AND MIGRATION: A THEORETICAL AND EMPIRICAL ANALYSIS
Authors: Morrison Andrew R.
Published: January 2010

Traditional analyses of the determinants of migration in less developed countries have focused on labor market conditions. This paper adapts a simple model to show that capital market conditions may be an important factor in individuals' migration decisions. Data from Ecuador are used to test this model, and the empirical results confirm the role of capital market imperfections—chiefly caused by financial repression—in shaping migration flows. Traditional labor market factors still matter, but the new finding may provide policy makers with new and lower‐cost tools with which to affect migration outcomes.
EMPIRICAL EVIDENCE ON ON VERTICAL FORECLOSURE
Authors: Rosengren Eric S. , Meehan James W.
Published: January 2010

Recent papers have shown conditions under which vertical mergers can result in anticompetitive foreclosure of unintegrated rivals. One implication of these models is that a necessary condition for anticompetitive foreclosure is that unintegrated rival firms are less profitable after a vertical merger. We test this hypothesis by examining the stock prices of unintegrated rivals at the time of a vertical merger announcement and at the time of a government antitrust complaint. We find no evidence to support the foreclosure hypothesis.
STRATEGIC COMPLEMENTARITY SLOWS MACROECONOMIC ADJUSTMENT TO TEMPORARY SHOCKS
Authors: Oh Seonghwan , Waldman Michael
Published: January 2010

A number of studies have employed strategic complementarity to show that many features of the Keynesian framework can be captured in models consistent with the microfoundations approach. We argue that strategic complementarity is an important factor in understanding why an economy may exhibit a slow return to steady‐state behavior after a temporary shock. That is, given any of a variety of factors which would cause temporary shocks to have long‐term effects, the speed with which the economy returns to steady‐state behavior after a temporary shock is negatively related to the degree of strategic complementarity in the environment.
LABOR SUPPLY CONSTRAINTS, PROFIT‐SHARING AND VOLATILITY RENTS IN AN UNSTABLE ECONOMY
Authors: Morton Peter J.
Published: January 2010

Contracts which pay part of labor compensation as a profit share may be made distributionally identical to fixed‐wage contracts under long‐run equilibrium conditions, but this does not guarantee distributional equivalence in the presence of mean‐preserving turbulence around the equilibrium state. This paper demonstrates how, given a full‐employment constraint, the small‐scale introduction of share contracting reduces cyclical unemployment but lowers cyclical average profits compared to a fixed‐wage regime. As share contracting is extended to cover the entire wage bill, the tendency is to freeze factor shares at their long‐run equilibrium values, regardless of shocks.
ALLOCATION OF GOODS BY LOTTERY
Authors: Boyce John R.
Published: January 2010

Many authors have argued that lotteries are used to allocate resources because of the fairness of the mechanism. However, a number of historical examples suggest otherwise. Participation fees are almost always charged and they are often discriminatory. In addition, goods (or bads) allocated by lotteries are usually not transferable. Both lottery participation fees and restrictions on transferability reduce rent‐seeking from speculators. Each feature increases the rents to the primary user groups relative to the rents attainable from alternative mechanisms such as auctions, queues, or merit allocations.
IS THE BUDGET DEFICIT “TOO LARGE”?: SOME FURTHER EVIDENCE
Authors: Tanner Evan , Liu Peter
Published: January 2010

The size of the federal budget deficit has alarmed politicians and the general public both. Following recent work, we examine the long‐run solvency of the U.S. government by testing for cointegration of federal expenditures and revenues. We include a break term in the cointegrating recession for 1981 to capture a shift in the fiscal process in the first Reagan administration. Tests show the break to be significant; and with the break, in contrast to earlier work, expenditures and revenues are cointegrated with a coefficient of one. Thus, we find the deficit to be stationary and so potentially sustainable.
WHY DO FIRMS CONTRIVE SHORTAGES? THE ECONOMICS OF INTENTIONAL MISPRICING
Authors: Haddock David D. , Mcchesney Fred S.
Published: January 2010

Given buyers' product‐specific information capital, firms may increase long‐run profits by “under‐pricing” (rationing) rather than clearing markets when demands or costs rise transitorily. To minimize resulting shortages' costs, sellers predictably would distinguish among customer groups, managing any queues of disappointed loyal buyers that materialized (but largely ignoring transitory buyer queues), and would discourage resale. Unlike other shortage models, short‐run excess demand necessarily implies neither buyers who prefer consuming in groups, nor waiting costs that are negligible. Any sense of “unfair” price increases would arise endogenously from sellers'failures to value appropriately customers' otherwise prudent informational investments.
OPTIMAL MONETARY POLICY IN A CASH‐IN ADVANCE ECONOMY
Authors: Fuerst Timothy S.
Published: January 2010

The issue of optimal monetary policy within a particular general equilibrium model of the monetary transmission mechanism is addressed. The model analyzed is a member of the recent class of “liquidity models” of the monetary business cycle. The nature of the trading frictions that define these models introduces a role for activist monetary policy. In particular, to the extent that the central bank can adjust liquidity more rapidly than the private sector, there is a welfare‐improving role for monetary policy. In contrast to traditional policy prescriptions for “aggregate demand management,” this is a prescription for “liquidity management.”
ON THE INFREQUENT ADJUSTMENT OF PRICE BY FIRMS
Authors: Naish Howard F.
Published: January 2010

Many firms change price no more than twice a year. This phenomenon is readily explained by very small price adjustment costs, and the fact that the firm's rate of profit is often insensitive to deviations in the interval between price changes from its optimal level. As a result, firms which change price only once or twice a year may earn almost as much profit as firms that adjust price optimally. This refutes the standard objection that price adjustment costs are too small to matter. The argument does not require extreme assumptions about the flatness of the firm's profit function.
INCOMPLETE OWNERSHIP, RENT DISSIPATION, AND THE RETURN TO RELATED INVESTMENTS
Authors: Deacon Robert T.
Published: January 2010

The welfare loss from free access resource use is examined in a general equilibrium model. Actions that intensify competition for the resource, either by lowering the private cost or raising the private benefit of using it, can raise this loss above the rent the resource would earn if owned. Such ‘excess dissipation’is illustrated with examples applicable to unowned groundwater. Regulatory policies that fix inputs needed to acquire the resource work by transferring part of the resource's rent to controlled inputs. The resulting welfare effect depends on the elasticity of substitution between, and relative prices of, controlled and uncontrolled inputs.
HOW MANY PAYCHECKS? AN EXAMPLE OF A SELF‐IMPOSED CONSTRAINT
Authors: Archibald Robert B.
Published: January 2010

Many faculty members prefer to receive their salary in twenty‐four equal payments over the entire year as opposed to receiving the salary sooner, in eighteen equal payments over the academic year. I consider two explanations for this choice: (1) it is chosen to eliminate transactions costs associated with administering a similar plan oneself, or (2) it is chosen as a self‐imposed constraint to insure against one's own potential imprudent behavior. The paper provides a test which clearly supports the second alternative.
SELECTING A SELLING INSTITUTION: AUCTIONS VERSUS SEQUENTIAL SEARCH
Authors: ARNOLD MICHAEL A. , LIPPMAN STEVEN A.
Published: January 2010

We consider the seller's choice between sequential search and an auction when selling n homogeneous units of a good in the presence of informational asymmetries, discounting, and transaction costs. Our analysis shows that the expected return per unit from sequential selling decreases in n, the number of units being sold. For the auction with suitable restrictions, the expected return per unit increases in n. Thus, sequential search is the preferred institution if n is small, whereas the auction is preferred if n is large. Historical details of the evolution of livestock markets closely fit our theoretical results.
TAX‐RATE UNCERTAINTY, FACTOR SUPPLIES, AND WELFARE
Authors: KIM ILTAE , SNOW ARTHUR , WARREN RONALD S.
Published: January 2010

Uncertainty about prospective changes in tax rates may increase factor supplies, and hence the tax base, permitting a reduction in tax rates that could result in a net increase in welfare. Under empirically relevant assumptions about attitudes towards risk we find that when an individual exclusively saves or works, the tax base rises in response to greater tax‐rate uncertainty, so that welfare could indeed increase. However, when an individual both saves and works, the supply of the randomly taxed factor declines with increased uncertainty, implying that tax revenue and welfare decrease when the nonrandom tax rate is sufficiently low.
GOOD GRAPES AND BAD LOBSTERS: APPLYING THE ALCHIAN AND ALLEN THEOREM
Authors: COWEN TYLER , TABARROK ALEXANDER
Published: January 2010

We consider the well‐known theorem of Alchian and Allen that adding a per unit charge to the price of two substitute goods increases the relative consumption of the higher price good. The current literature misspecifies the conditions under which the theorem holds. When applying the theorem the fixed cost should be applied on a per unit basis, rather than in terms of an entry fee for consumption. We state the necessary conditions for the theorem to hold when the consumers are shipped to the goods.
DO LABOR MARKETS PROVIDE ENOUGH SHORT‐HOUR JOBS? AN ANALYSIS OF WORK HOURS AND WORK INCENTIVES
Authors: REBITZER JAMES B. , TAYLOR LOWELL J.
Published: January 2010

This paper examines the role that work incentives play in the determination of work hours. We use a conventional efficiency wage model to analyze how firms respond to worker preferences regarding wage‐hours packages. In contrast to previous work, we study markets in which workers have heterogeneous preferences. In this context we demonstrate that job offers will specify both wages and work hours and many individuals will not be able to work their preferred number of hours. We show that the labor market equilibrium may be characterized by a less than optimal number of short‐hour jobs.
EMPIRICAL ADVANCES IN POLITICAL ECONOMY
Authors: ZUPAN MARK A. , Wykoff Frank C.
Published: January 2010

Editor's Note: I wish to thank Coeditor Mark Zupan, who took responsibility for organizing and implementing both the special symposium on public choice and the processing of papers through the refereeing and editorial process for this special section. On behalf of all the editors, I also would like to express thanks to Carolyn Williams, editorial coordinator, for taking on yet another responsibility in arranging the conference symposium meetings and the management of the files. The symposium on public choice was held at Lake Tahoe during the 1993 WE A meetings. The many efforts of authors, referees, editors and staff have resulted in an exciting complement to this year'sEconomic Inquiryofferings.
DEVIATIONS FROM CONSTITUENT INTERESTS: THE ROLE OF LEGISLATIVE STRUCTURE AND POLITICAL PARTIES IN THE STATES
Authors: GILLIGAN THOMAS W. , MATSUSAKA JOHN G.
Published: January 2010

This paper investigates the determinants of state spending over 1960—1990. Recent empirical studies suggest that state government expenditure is greater than the electorate desires. Our main finding is that expenditure was positively related to the number of seats in a state's legislature. This is consistent with the hypothesis that logrolling leads representatives to spend more than their constituents would like. We also find that political parties do not have a pronounced effect on overall levels of expenditure, but do influence the composition of spending. In particular, Democratic control of state government is associated with higher levels of welfare spending.
WHERE DOES ECONOMIC DEVELOPMENT REALLY COME FROM? CONSTITUTIONAL RULE AMONG THE CONTEMPORARY SIOUX AND APACHE
Authors: CORNELL STEPHEN , KALT JOSEPH P.
Published: January 2010

Governments are public goods that provide the organizational and legal structures by which societies arrange and enforce “rules of the game” that enable divisions of labor, exchange, and collective action. We argue that shared, pre‐constitutional cultural norms of political legitimacy among rational individuals provide the foundations of effective self‐government. The performance of contemporary Apache and Sioux economies on Indian reservations governed by common federally imposed constitutions is examined to test the framework. Unlike the impoverished Sioux, the relatively successful Apaches are found to have pre‐existing political norms that (serendipidously) match the structure of their formal constitution.