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If individuals process information differently when it is accessed electronically rather than on paper, then the transition from paper to electronic text may affect learning and retention. Using a randomized experiment, we compare learning outcomes of economics students who use electronic teaching tools with students who access the same material on paper. We find that students who submit homework online complete more assignments but have lower classroom attendance rates. However, there is no effect on exam scores. This suggests that while an electronic medium may enable instructional material to be accessed more easily, it does not significantly impact learning. JEL Classification: A22, 1. Introduction Information is increasingly accessed and read electronically rather than in print, as evidenced by the decline of newspaper circulation rates in favor of online versions (Plambeck 2010). In [...]

This paper explores the econometric nature of the bias and illustrates its potential severity with U.S. trade flow data from 1955 to 1969. The analysis leads to two conclusions. First, the expected value of the restricted coefficient can lie outside the range of the two unrestricted coefficients and even reverse sign. Second, for subtractive restrictions (unlike aggregation restrictions) the bias and likelihood of sign reversals is greater the stronger the direct correlation between the foreign and domestic variables. Since corresponding foreign and domestic variables are often highly correlated, standard empirical tests of a wide range of theories in international economics may frequently lead either to rejection of the true model or acceptance of a false model.
Empirical studies in international economics--including tests of monetary models, capital flow models, purchasing power parity, and interest rate arbitrage--typically impose the linear constraint that corresponding foreign and domestic explanatory variables have equal but opposite effects on the dependent variable. This paper demonstrates theoretically two previously unrecognized problems with the constraint: (1) estimates of such restricted coefficients (unlike estimates of coefficients on aggregated variables) can lie outside the range of the two unrestricted coefficients (and even reverse sign) when the foreign and domestic variables are directly correlated; and (2) this problem is more severe the stronger the direct correlation. Trade flow estimates for the U.S. from 1955 to 1969 illustrate empirically a sign reversal, hence the peculiar danger of testing models on the basis of subtractive linear constraints. Since empirical research in international economics is characterized both by ad hoc use of subtractive linear constraints and by strong direct correlation between foreign and domestic variables, these problems may plague much of this literature. [ABSTRACT FROM AUTHOR]

While several attempts have been made to identify the independent influence of preference similarity on trade propensities, such as multiple regressions and partial tank order correlations, we feel that a better test of the Linder hypothesis can be designed. In this paper we propose an alternative test; one which we feel is superior to the existing studies in its ability to deal with the distance problem. Specifically, by testing the theory in terms of changes in propensities to trade against changes in income differences between two points in time, the influence of distance is eliminated.
In this paper we have tested the Linder hypothesis using an intertemporal method which we feel is more robust than previous studies in the sense that the impact of distance is taken into account. The results do not support the Linder hypothesis. While the Linder thesis bas been supported in the past with studies employing cross-section evidence, those studies have not been free of the impact of distance.
While the results reported here do not support the Linder thesis, it is prudent to mention some possible limitations of this study. This study uses total trade rather than trade in manufactures and uses per capita income to measure preference similarity. While these variables were also employed by Linder, they are still surrogates for the variables discussed by Linder in his theory. Also the intertemporal analysis in the process of holding constant the influence of distance may introduce other unaccounted for variables. [ABSTRACT FROM AUTHOR]

The present paper will reexamine Alonso's interpretation and then suggest an alternative rent-maximization approach. More specifically, in order to remove the current undeveloped areas (ambiguities), this paper sets forth a formal mathematical model to more rigorously define the bid price curve as a vehicle for integrating the neo-classical production theory with location theory. In the process, the paper will also define and make explicit the constraints under which the theory of the bid price curve is valid. [ABSTRACT FROM AUTHOR]

This paper is aimed at clarification of ambiguities in the treatment of the relationship between uncertainty and choice, and with special attention to this relationship as it impacts on entrepreneurial choice. Much of the received doctrine in the theory of choice-under-uncertainty seems to reflect a fundamental neglect of the distinction between cognition and choice itself, a distinction partially reflected in our title.
This paper should not be interpreted as a critique of formalism, as such. It may be interpreted as a critique of the misapplication of formal theories of probability to choice, both in a positive and in a normative sense. Almost all of the formal theory of subjective probability retains direct relevance for the analysis of properties of structures that embody stochastically determinate patterns of outcomes. The role of information and information exchange in generating a convergence of priors, the role of experience and observation in modifying subjective estimates of predicted patterns, the whole of the Bayesian logic--these can be applied directly to the analysis of the individual's (any individual's) cognition of the structure within which he might or might not be required to or attracted to choose among alternative outcomes. [ABSTRACT FROM AUTHOR]

Many production activities generate undesirable outputs in conjunction with the desirable outputs. In this paper we present the first estimates of a multiple-input, multiple-output directional distance function that relates good and bad inputs from home, school, and environment to good and bad outputs, measured as children's cognitive and behavioral development. This household directional distance function is estimated using a balanced panel of 369 families from the National Longitudinal Survey of Youth-Child Sample for 1996 to 2000 using the generalized method of moments within estimator and instrumental variables. We recover consistent partial effects for the time-invariant variables in a second-stage regression and estimate their corrected asymptotic standard errors. We then compute and examine productivity differences among households defined as the increase (decrease) in good (bad) outputs that families could attain with constant inputs if they were operating on the technological frontier. Our estimates suggest the presence of significant inefficiency among sample families that diminishes over time. JEL Classification: C33, D13, I12, 1. Introduction In this paper we attempt to broaden and to redirect the standard theoretical and empirical approach in economics to the household production of human health, especially child health. [...]

This paper uses national data from 1975 to 2003 to examine which alternative academic disciplines were chosen by undergraduates as if they were complements to, or substitutes for, an economics major. One familiar hypothesis suggests that majoring in economics is a reluctant choice for students more interested in a business major. However, when the proportion of economics majors is considered across all disciplines, I find a striking inverse relation between the shares of graduating majors in economics and those in biology; no relationship between any other two disciplines is closer. The paper closes with speculations about possible reasons for the strong negative relation between the shares of graduates in biology and economics. JEL Classification: A12, I21, J24, 1. Introduction There are a variety of reasons to be interested in and concerned about the number of undergraduates who study economics. One major reason is that an economically informed [...]

Many production activities generate undesirable outputs in conjunction with the desirable outputs. In this paper we present the first estimates of a multiple-input, multiple-output directional distance function that relates good and bad inputs from home, school, and environment to good and bad outputs, measured as children's cognitive and behavioral development. This household directional distance function is estimated using a balanced panel of 369 families from the National Longitudinal Survey of Youth-Child Sample for 1996 to 2000 using the generalized method of moments within estimator and instrumental variables. We recover consistent partial effects for the time-invariant variables in a second-stage regression and estimate their corrected asymptotic standard errors. We then compute and examine productivity differences among households defined as the increase (decrease) in good (bad) outputs that families could attain with constant inputs if they were operating on the technological frontier. Our estimates suggest the presence of significant inefficiency among sample families that diminishes over time. JEL Classification: C33, D13, I12, 1. Introduction In this paper we attempt to broaden and to redirect the standard theoretical and empirical approach in economics to the household production of human health, especially child health. [...]

Many developing countries are plagued by persistent inequality in income distribution. While a growing body of economic-demographic literature emphasizes differential fertility channel, this paper investigates differential child mortality--differences in child mortality across income groups-as a critical link through which income inequality persists. Using an overlapping generations model in which both child mortality and fertility are endogenously determined by parental choice, this paper demonstrates that differential child mortality and its interaction with differential fertility may generate an 'income inequality trap.' The trap is characterized by higher child mortality and lower degree of skill formation among the poorer households. The model can also explain the behavior of aggregate fertility and mortality rates for countries at various stages of development, consonant with patterns of demographic transition. The results indicate that provision of public health that raises the productivity of private health spending may be an effective way to reduce income inequality. JEL Classification: D1, I1, J1, O1, 1. Introduction One of the earliest insights gained from the economic-demographic research is that inequality in the distribution of income may perpetuate itself if the lower income groups register faster [...]

Liquidity plays an important role in explaining how banks determine their allocation of funds. This paper examines whether this fact can explain yield spreads and the term structure of interest rates. The paper models banks' demand for liquidity in a manner similar to that often used to study household liquidity needs, namely, by using a cash-in-advance type model. The paper finds that the cash-in-advance constraint (liquidity constraint) plays an important role in determining yield spreads. The empirical part of the paper shows that the expectations hypothesis might be salvaged when account is taken of the liquidity premium and the risk premium. JEL Classification: E43, E44, G21, 1. Introduction The expectations hypothesis (hereafter EH) of the term structure of interest rates states that the long-term rate is determined by the expectation for the short-term rate plus a [...]

This paper analyzes the market and welfare effects of the United States Livestock Mandatory Reporting Act enacted in 2001. The act mandates meat packers to report their transactions daily to a government agency and requires the agency to make a summary of those transactions available to the public through the Mandatory Livestock Meat Market News Reports. Considering the case of an imperfect packer cartel that uses trigger price strategies, this paper examines the impact of market information provided by the reports on equilibrium livestock slaughter and the welfare of the groups involved and identifies the determinants of the socially optimal level of information. A key result of the paper is that, even when facilitating collusion among packers, increased market information can be social welfare enhancing. JEL Classification: L13, L15, L66, 1. Introduction The Livestock Mandatory Reporting Act (the Act) was enacted in 2001 to provide market participants with information on all cash and noncash transactions reported by packers to the [...]

In his Rise and Decline of Nations, Mancur Olson argues that politically stable countries suffer from declining growth rates caused by the growing influence of distributional coalitions that accumulate over time. The empirical literature supports the notion of a negative relationship between a country's duration of political stability and its growth rates but finds only weak support for a negative influence of distributional coalitions on growth. This paper sketches a simple model of party competition under model uncertainty, which may explain this mixed empirical picture. It shows that politically stable democracies are less well equipped to adjust to shifts in their economic environment than democracies with a shorter history of political stability. In a further step, the paper relates the major theme of this theory and Olson's theory to the more recent literature on institutions and growth. Directions for further research are discussed. JEL Classification: D72, D83, O43, B52, 1. Introduction Twenty-five years ago, Mancur Olson published his monograph on the Rise and Decline of Nations. Therein he argues that countries that have been politically stable for a long [...]

Atypical work has long been criticized in popular debate as providing poorly compensated, precarious employment. Yet the empirical evidence is both incomplete and mixed. The main contribution of the present paper is to estimate wage differences for the full set of these alternative work arrangements while simultaneously controlling for observed demographic characteristics and unobserved person-specific fixed effects. The paper also allows for the skewness in atypical worker earnings while retaining the Mincerian human capital earnings function. Our improved estimates are consistent with some of the more optimistic findings reported in the literature, the caveat being that we are examining here only the wage component of the total compensation package. JEL Classification: J20, J30, J40, 1. Introduction Even as the economy continues to recover, the U.S. is increasingly becoming a nation of part-timers and free-lancers, of temps and independent contractors. This 'disposable' labor force is [...]

This paper tests the hypothesis that state-level restrictions on abortion access are linked to increases in child fatal-injury rates. The rationale is that such restrictions may disproportionate|y increase births of 'unwanted' children as well as births to young, single, and low socioeconomic-status mothers, which in turn may lead to more adverse child outcomes--including more child fatal injury deaths. The paper uses state-level data on child fatal injuries in the 0-4 age group for 1981-2002, and estimates count-data models with state and year effects separately for white and black children. The abortion restrictions considered are enforced parental consent and notification laws, no public funding, and mandatory delays. Many of the restrictions are found to be significantly associated with increased homicide-resultant fatal injuries for white and black children, and increased unintentional fatal injuries for white children. Results for unintentional fatal injuries for black children are mixed. JEL Classification: J13, I12, I18, 1. Introduction In 1973, the U.S. Supreme Court decision in Roe v. Wade established that all women in the U.S. had the constitutional right to terminate a pregnancy via abortion. [...]

This paper relates the diffusion of the coronary stem to the presence of prominent or 'star' physicians within a local peer group. The paper uses panel data on coronary care in Florida covering the period immediately following the 1995 Food and Drug Administration (FDA) approval of the stent, a significant improvement in coronary angioplasty. Adoption timing and utilization varied considerably across doctors between 1995 and 2001. We consider the role of asymmetric social influence among physicians based on professional status. Defining 'star' status as having completed residency at a top-ranked hospital, we find that the diffusion of stents by non-stars depends positively on the number of stars practicing contemporaneously at the same hospitals, while we find no social influence in the opposite direction. The findings indicate that lack of local exposure to star physicians may slow adoption, and clustering of stars in a small number of hospitals may entail welfare costs. JEL Classification: I10, I11, O33, 1. Introduction Traditional economic theories of technology adoption and diffusion have naturally emphasized the role of economic incentives, predicting that new technologies will be adopted based on their expected costs [...]

A noncooperative model of a normal form game is developed using tools from fuzzy set theory. The paper extends the decision theory framework of Bellman and Zadeh (1970) to a game-theoretic setting. We identify conditions for the existence of equilibrium in this setting and provide a duopoly example. The paper also provides a review of the existing literature on noncooperative fuzzy games and their applications. JEL Classification: C7, D8, 1. Introduction In a recent issue of this journal, an interesting paper by West and Linster (2003) used fuzzy rules to show that Nash equilibrium behavior can be achieved by [...]

Rewards for publications in good economics journals are very high, and submission fees and other monetary costs associated with submitting an existing manuscript are low. Consequently, the editorial delay (especially the first-response time--the time until the first editorial decision), by postponing monetary rewards to publication, constitutes the major submission cost (from the author's perspective). Reducing the delay will induce many additional submissions of low-quality papers to good journals, increasing significantly the workload of editors and referees. Moreover, the rejection rate will increase and cause papers to be rejected more times before publication, offsetting at least some of the shorter first-response times. As a result, the efforts of many editors to reduce the editorial delay, although attracting more submissions to their journals, may have adverse effects from a social perspective, and the optimal delay might be longer than the current average of four months. JEL Classification: 123, A19, 1. Introduction The academic publishing process is an extremely important topic because it affects the productivity of scholars in producing and disseminating new knowledge, and yet it has received relatively [...]

This paper compares two similar samples of mining and steel corporations in pre-World War I Germany: one sample consists of corporations that were affiliated to one or more of the German 'Universal Banks', and the second sample consists of companies that had to rely on other sources of finance. Statistical analysis conducted in the framework of a linear fixed effects model indicates that the non-affiliated companies were liquidity constrained. The paper also sets out the corporate control structure as laid down in the trade law reform of 1884 and traces the origins of the current German dual board system, as well as the origins of several other aspects of the institutions that tied the German banking system to industrial concerns. The banks attend an industrial undertaking from its birth to its death, from promotion to liquidation, they stand by its side whilst it passes through the financial processes of economic life, whether usual or unusual, helping it and at the same time profiting from it. --Jeidels (1905, p. 50), 1. Introduction Theoretical and empirical literature on imperfect capital markets has established that asymmetric information and moral hazard problems increase the cost of raising external funds for corporations. As the [...]

Using Foster-Greer-Thorbecke poverty indices, this paper shows that although the incidence of poverty was higher in nonmetropolitan than metropolitan areas throughout the 1990s, the poverty-gap index was only statistically significantly higher in nonmetropolitan areas in six of the 10 years, and the squared poverty-gap index was worse in only three years. This paper also provides design-corrected standard errors for the indices, which result in more than doubling the uncorrected estimates. An examination of the ratio of the poverty-gap to the head count index establishes that the average shortfall of the poor as a fraction of the poverty line was worse in the metropolitan areas during all 10 years of the 1990s. Similarly, the distribution of income divided by the poverty line indicates that disproportionately more of the nonmetropolitan poor subsisted on incomes near the poverty line, whereas the metropolitan poor were relatively more likely to be living in extreme poverty., 1. Introduction Understanding the geographic distribution of poverty is important to help target poverty-reduction policies. Throughout the 1980s and 1990s, the proportion of people living in poverty in the United [...]

This paper shows the importance of the age path (life-cycle timing) of any tax for the accumulation of capital in the economy. Income, consumption, and wage taxes differ in their age paths as well as their incentive effects. This paper studies how the differing age path of each tax affects the capital accumulation of the economy in an empirically calibrated life-cycle model. We investigate lump-sum 'age' taxes and find in every case that the later the person pays tax, the higher the k of the economy. To analyze the life-cycle timing effect of conventional transactions-based taxes (income, consumption, and wage), we replace each tax with a lump-sum age tax that has the identical age path of tax payments over the life cycle. We find that the timing effect is quantitatively important and often causes the impact of a tax on capital accumulation to be very different from what would be predicted from the incentive effect., 1. Introduction The age path (life-cycle timing) of a tax is an important yet often overlooked property of the tax because it affects the capital accumulation of the economy. By [...]

This paper outlines a simple macro model with overlapping wage contracts to investigate how the temporary and permanent components of stock price movements may be related to aggregate macroeconomic supply and demand disturbances. In the content of the model, we show that aggregate demand shocks have only temporary effects on real stock prices, while supply shocks may affect the level of real stock prices permanently. Moreover, the temporary component in U.S. stock prices, identified by placing appropriate structural restrictions on a vector autoregressive system estimated for the postwar period, is statistically significant. This evidence supports the mean-reversion hypothesis that stock prices are not pure random walks. The finding is robust to the choice of variables used in the vector autoregressive system and periodicity., 1. Introduction This paper examines the interaction between macroeconomic shocks and stock price movements, from both a theoretical and an empirical perspective. The mean reversion and predictability of stock returns [...]

This paper considers a class of models in which rank-based payoffs are sensitive to 'noise' in decision making. Examples include auctions, price competition, coordination, and location games. Observed laboratory behavior in these games is often responsive to the asymmetric costs associated with deviations from the Nash equilibrium. These payoff-asymmetry effects are incorporated in an approach that introduces noisy behavior via a logit probabilistic choice function. In the resulting logit equilibrium, behavior is characterized by a probability distribution that satisfies a 'rational expectations' consistency condition: The beliefs that determine players' expected payoffs match the decision distributions that arise from applying the logit rule to those expected payoffs. We prove existence of a unique, symmetric logit equilibrium and derive comparative statics results. The paper provides a unified perspective on many recent laboratory studies of games in which Nash equilibrium predictions are inconsistent with both intuition and experimental evidence., 1. Introduction With the possible exception of supply and demand, the Nash equilibrium is the most widely used theoretical construct in economics today. Indeed, almost all developments in some fields [...]

This paper demonstrates that a seller prefers to exclude final consumers from an auction and sell only to resellers when these resellers can gain access, at a cost, to a sufficiently bigger market than the seller himself. The intuition is that resellers recoup their expenses for marketing the item by reselling it to final consumers. If some consumers participate in the first auction and are outbid by the resellers, then their values for the item are relatively low. Outbidding part of their customer base is 'bad news' for the resellers, and this depresses their bids when consumers compete with them. The socially optimal and revenue-maximizing choices of auction format may not coincide: Restricting participation of consumers may be socially optimal but privately suboptimal and vice-versa. The results suggest that (i) the exclusion of final consumers in some auctions may not be driven by transaction cost considerations, and (ii) sellers should not necessarily sell directly to consumers, even though new technolog ies allow them to do so at essentially zero cost, unless they can access a sufficiently large portion of the market., 1. Introduction This paper considers a private values auction in which some of an item's potential consumers compete for its possession against professional resellers (or intermediaries). If the resellers win, [...]

Hyeon-seung Huh (*) The purpose of this paper is to estimate the output cost associated with lowering inflation for Australia. The paper is particularly motivated by a strand of theoretical [...]

This paper will be concerned with the introduction of endogenous capital utilization into one of the sectors of the standard two-factor two-sector model of trade. There are two fundamentally different ways in which this introduction can take place. In the first approach as each firm increases its level of capital utilization, it in effect imposes abnormal hours of work on its existing labor force and it must increase the wage premium for labor during abnormal hours. In this model the firm's optimal level of capital utilization occurs where the increased wage premium from the increase in abnormal-hours work balances the saving of capital costs from the increase in capital utilization. We have presented a two-sector model in which there are essentially three factors of production, day labor, night labor, and capital. Workers differ in their distaste for day and night work and they move between the two times in response to the ratio of the two wages. Since night labor constitutes a third factor of production in this model, the Stolper-Samuelson and Rybcynski theorems are no longer valid. The striking contrast between these results and those of the single-labor-market model was noted in the introduction. [ABSTRACT FROM AUTHOR]

The main purpose of this paper is to present such a framework--a language, if one will, with which various theoretical problems surrounding complex transactions may be formulated and conceptually resolved. A language of this type provides a unifying viewpoint from which many seemingly different phenomena are seen to be structurally identical.
It will be shown, however, that this device does not work in all cases and is therefore unsuitable as a theoretical tool. It will further be shown that in most cases where the device does work its application is unnecessary, because there is then a better way to handle the problems it is designed to resolve. Also of interest here is a result by Goldfarb [8], which says that the demand curve for a normal good may, under rationing, slope upward. Clearly, if the purchase of rationed gasoline is forcibly cast in the form of a two-goods transaction, a downward-sloping demand curve will result; combining two goods into one may therefore lead to incorrect conclusions.
Complex transactions--transactions involving more than two goods--form a convenient means of analyzing such diverse phenomena as rationing, tied purchases and tied sales ('packaged goods'), goods with more than one price, labor contracts, product differentiation and, more generally, nonprice competition. Indeed, since probably every transaction requires effort (that is, an expenditure of the commodity 'labor power'), it is likely that every transaction is complex. [ABSTRACT FROM AUTHOR]

The primary purpose of this paper is to 1 Discussions of empirical tests of comparative costs theories can be found in Hufbauer [3] and Moroney [6]. 2 It should be noted that Linder's original work [5] is based on trade of all commodities further examine the empirical validity of Linder's hypothesis that trade in manufacturing commodities is demand oriented. In addition we will pursue the question of the importance of the "distance factor" as a determinant of manufacturing trade patterns. This question, initially raised by Linder, was first evaluated empirically by Fortune [1] and more recently by Hoftyzer [2].
It appears from the foregoing analysis that while trade patterns in manufactured goods may be related to demand in the manner hypothesized by Linder, this relation is not sufficiently strong to explain trade patterns among the regions studies herein. However, this analysis provides a fairly clear indication that is suggested by Linder, the "distance factor" is an important determinant of trade patterns in manufactured goods. The fact that distance appears to be more closely (and significantly) related to trade patterns should not, however, be interpreted as a refutation of Linder's hypothesis. As had been implied by others who have investigated the empirical validity of the Linder hypothesis [8], the evidence is as yet too scattered to warrant sweeping conclusions. Moreover, it should be noted that the findings reported herein are based on trade patterns among regions rather than nations. [ABSTRACT FROM AUTHOR]

The primary purpose of this paper is to provide an alternative mathematical framework in which the welfare implications of domestic distortions for the formation of a trade-diverting customs union will be explored. Specifically, the welfare gains due to trade diversion will be confirmed. Of more analytical and policy importance, we will demonstrate an interesting paradox that, contrary to the widely held view, trade creation can be inferior to trade diversion in the conventional three-countries-two-commodities customs union model when the economy is characterized by a distortionary interindustry wage differential.
In the foregoing analysis, we have mathematically demonstrated that trade diversion may still be welfare improving in the presence of a domestic distortion. Further, trade diversion may be superior to trade creation in the presence of an interindustry wage differential. Scully and Yu [34] have examined elsewhere the welfare implications for the theory of customs union when capital is mobile among the countries. Their result shows that trade diversion may also be superior to trade creation in the presence of international investment. [ABSTRACT FROM AUTHOR]

It is the purpose of this paper to test empirically the relationships of per capita incomes and bilateral trade intensity in manufactures. The approach will be different in methodology from that of Linder and Fortune and will use different trade data and country coverage than that used by the latter. Linder constructed a trade matrix with columns representing trade intensities and row elements representing the relevant per capita incomes from which, by visual inspection, one could determine that the postulated relationships were verified. Fortune, on the other hand, used multiple regression analysis as the technique to test the theory as well as including an additional variable, distance, to test the trade-braking effect on trade intensities.
A few comments may be made concerning those cases in which the data fail to yield the expected results in the original test involving the 31 nations. The United States, Israel, Union of South Africa, Greece, Portugal, and Ghana are in this category. Since cross-sectional data and analysis are used in this study, it is expected that any recent and significant economic changes in any of the involved nations or affecting their international relations require some time for adjustment to occur so that cross-sectional analysis should net be expected to fully account for them. [ABSTRACT FROM AUTHOR]

This collection of papers originated as seminar papers at Gay Meeks's Cambridge course on philosophical issues of economics. The papers cluster into related groups with a positive intersection. There is [...]

This note shows that Proposition 5 in Chang and Weisman (Southern Economic Journal 71:821-36) contains a mistake. Although not affecting the paper's basic intuition, our result shows that the parental transfer under the noncooperative game could be less than under the cooperative one if the children oversupply family services. JEL Classification: D1, 1. Introduction This note shows that Proposition 5 in Chang and Weisman (2005) contains a mistake. Although not affecting the paper's basic intuition, our result shows that the parental transfer [...]

This book, which is a compilation of papers presented at two seminars at Rutgers University, presents a wide range of generally high quality papers on the subject of incentive regulation [...]

This volume contains the papers presented at a 1992 NBER conference on the macroeconomic linkages between the global economy and the East Asian and North American countries. The papers, written [...]

In July 1993 over forty papers were presented to the third University of Tennessee Post Keynesian Workshop. From that group the editors selected fourteen papers to be included in this [...]

This collection of papers presents an international comparison of the economic education efforts and accomplishments in a variety of countries. The beginning papers raise issues familiar to those following the [...]

The Georgescu-Roegen Prize is awarded to the author(s) of the paper selected by the Board of Directors of the Southern Economic Association as the 'best paper' to appear in the [...]

This is the second volume of the proceedings of the International Economic Association Congress in Athens, 1989. The twelve papers are grouped into three parts: Part I, six papers on [...]

The papers collected in this volume are research products from a project organized by the National Bureau of Economic Research. The papers note that macroeconomic instability has dominated the economic [...]

A well-known approach to identifying second-degree price discrimination is based on examining correlations between product menus and prices. When product menus are endogenous, however, tests for price discrimination may be biased by the fact that unobservables affecting costs or demand may jointly determine product menus and prices, leading one to falsely infer price discrimination. Using observed product characteristics or fixed effects to control for these unobservables confounds inference on the nature of price discrimination by potentially 'overcorrecting' the original bias. I propose a difference-indifferences approach that is robust to this critique. An application to the pricing of different package sizes of paper towels is presented. JEL Classification: D4, L0, L1, 1. Introduction Many markets are characterized by competing firms, with each offering a menu of goods differing in a single dimension. Oftentimes these products are sold according to nonlinear price [...]

This paper focuses on third-degree price discrimination by an upstream firm with some degree of monopoly power. Downstream firms fall into two categories: efficient and inefficient, according to their relative costs of transforming a unit of the upstream good into a unit of final product. Under ordinary static conditions, price discrimination favors the inefficient firms, which have more elastic demands. We consider, however, the possibility that discrimination in the opposite direction can alter the downstream market structure toward greater efficiency. Discriminatory pricing, then, involves charging a higher price to the less efficient firms. Such pricing is shown to be both potentially profitable for the upstream firm and welfare improving as average consumer prices fall. JEL Classification: L10, L40, 1. Introduction Economists have long warned of the danger that, on occasion, antitrust enforcement might be used perversely to protect competitors at the expense of competition. (1) Moreover, one of [...]

This paper analyzes the relationship between financial development and economic growth in Latin America with a Granger causality test and impulse response functions in a panel vector autoregression (VAR) model. With annual observations from a sample of 18 countries from 1962 to 2005, it is shown that while economic growth causes financial development, financial development does not cause economic growth. This finding is robust to different model specifications and different financial indicators. Interestingly, when the sample is divided according to different income levels and institutional quality, there is two-way causality between financial development and economic growth only for the middle income group and for countries with stronger rule of law and creditor rights. The impulse response functions show that a shock to financial development has a positive impact on economic growth only for these subsamples, but the net effect of financial development on growth is relatively small. JEL Classification: G20, O16, 054, 1. Introduction During the 1980s, most Latin American countries suffered from distorted financial systems. In this decade the government kept interest rate controls, allocated credit arbitrarily, and deterred the expansion [...]

Several studies document asymmetric price adjustment in gasoline and agricultural markets. Do these results extend to other subsectors of the economy? This paper investigates the existence of asymmetric price adjustment in 269 6-digit North American Industrial Classification System (NAICS) industries using quarterly financial data from 1966-2006. Results, which are consistent with the previous literature, show that positive price asymmetry is frequent in nondurable goods and natural resource manufacturing. However, price asymmetry is not readily evident in mining, durable goods manufacturing, and service sectors. The differing results may best be explained by theoretical explanations of price asymmetry based on inventory management. JEL Classification: E31, D43, 1. Introduction A consumer need only go to the gasoline station or the grocery store to ponder the question: Why do retail prices always seem to go up so fast [...]

This paper reports laboratory experiments comparing arbitration behavior between and across two countries with extensive trade relations, the United States and Japan. Besides comparing disputes in both locations, we evaluate disputes between them. While we find nominal differences between the countries, we observe significant changes in both groups' behavior when facing someone from the other country. Specifically, Americans seek larger profits when facing a Japanese counterpart and Japanese subjects settle more frequently with an American counterpart. Our results suggest that the literature on bargaining behavior across cultures paints an incomplete picture of international comparisons by failing to consider bargaining interactions. JEL Classification: C70, C90, D74, J52, 1. Introduction The increasingly global nature of the economy increases the likelihood of disputes between geographically and culturally separated people from different nations. These international interactions increasingly extend to labor [...]

Standard dynamic small open economy models have predicted a counterfactual perfectly positive correlation between output and hours worked over the business cycle. In addition, this class of models exhibits a weak internal propagation mechanism. To address these anomalies, this paper incorporates intertemporally non-separable labor supply and variable capital utilization into the canonical Mendoza (1991) model with adjustment costs of net investment. Our analysis shows that a dynamic, technology shock--riven small open economy model with internal habit formation in labor hours and endogenous capital utilization is able to account for the main real business cycle regularities of Canada after 1981. JEL Classification: E32, F41, 1. Introduction Since the influential work of Mendoza (1991), it is now well known that dynamic stochastic general equilibrium models, specifically the real business cycle approach, can successfully explain some [...]

This paper studies the design of nonlinear social security schemes when individuals differ in productivity and in their degree of myopia. Myopic individuals may not save 'enough' for their retirement. The welfare function is paternalistic: The rate of time preference of the farsighted is used for both types. We show that the solution does not necessarily imply forced savings for the myopics: Paternalistic considerations are mitigated by incentive effects. Numerical results suggest that as the proportion of myopic individuals increases, there is less redistribution and more forced saving, and the desirability of social security increases. JEL Classification: H55, D91, 1. Introduction Social security systems typically fulfill several functions. They force myopic individuals (who are inclined to save less than what is reasonable, given their life expectancy) to save an [...]

The principles of economics course is the most common entry point for economic education and commands more attention among researchers than any other college-level course in the discipline. Over a period of 40 years, the senior author of this paper (K.G.E.) has taught this course to over 35,000 students at the University of Virginia. Using his teaching records, we have compiled a database of unusual size and continuity for a study of this kind. We examine conventional topics, such as the role of gender, race, and year of study, in predicting class performance. We also explore relatively unexamined territory, such as comparisons between "legacy students," athletes, transfer students, and the general student population. Contrary to earlier findings, we find that math SAT scores are the best predictor of success in the principles course, and, consistent with earlier studies, we find a male grade premium (at the highest grade levels). JEL Classification: A2, A20, A22, 1. Introduction One of the most dismal assertions ever made about teaching the "dismal science" was tendered by George J. Stigler in his American Economic Association presidential address. Stigler suggested [...]

It is well known that high tariffs tend to induce foreign direct investment (FDI) by encouraging the investors to jump the "tariff wall." This paper examines the economic interaction among tariffs, FDI, and international joint ventures (IJV). We show that in the presence of a strong local competitor, even if opening a fully owned subsidiary is not profitable to a foreign firm, the foreign firm may still enter the host country market through IJV. However, IJV is not profitable for sufficiently high tariff rates. Hence, we argue that liberal trade policies may attract foreign investments through the formation of joint ventures. JEL Classification: F1, L2, O1, D2, P, 1. Introduction A major incentive for foreign direct investment (FDI) in countries that restrict trade is to jump tariff and non-tariff barriers. Local production helps in reducing costs due to [...]

In this paper, we use the Blanchard-type uncertain lifetime overlapping generations framework to develop a three-good open economy to examine the effects of demand changes on the economic performance of small open economies with sectoral adjustment costs. Our simulation results reveal a discernible Harberger-Laursen-Metzler effect on both temporary and permanent terms-of-trade shocks. The inclusion of sectoral adjustment costs generates persistent deviations of the real exchange rate from its long-run equilibrium in response to terms-of-trade shocks, with the degree of sectoral adjustment costs having an effect on the subsequent dynamic transition of the economy. We also find that an increase in the mortality rate leads to a lowering of the current account. JEL Classification: F11, F32, F47, 1. Introduction Although the traditional macroeconomic models tend to explain economic fluctuations by focusing solely on supply shocks, given that equilibrium is determined by both demand and supply it would [...]

This paper offers new evidence on how housing markets capitalize school quality information. We use school assessment measures and house transaction data from a single school district that is coterminous with a unified city-county local government to examine the effects of two school assignment policy changes. The unusual school district-city-county government structure minimizes property tax rate and public service variation across observations, reducing the source of one problem that plagues many capitalization studies. The school reassignment events reveal direct ties between school quality capitalization and households' expectations--the latter reflected in private school enrollment and tax referendum voting. Different school performance measures convey different information to home owners. In particular, student test scores do not affect house prices when broader school performance measures are published. Prices respond to measured school improvement, but improvements in a given school are more highly valued than being reassigned to a better school. JEL Classification: H4, 12, R21, R00, 1. Introduction Education is one of the most important services provided by local governments. Low test scores, high dropout rates, high teacher turnover rates, and other problems indicate that large [...]