Open Access. Powered by Scholars. Published by Universities.®
- Discipline
Articles 1 - 29 of 29
Full-Text Articles in Entire DC Network
Is There Propitious Selection In Insurance Markets?, Tsvetanka Karagoyozova, Peter Siegelman
Is There Propitious Selection In Insurance Markets?, Tsvetanka Karagoyozova, Peter Siegelman
Economics Working Papers
The theory of adverse selection in insurance markets has been enormously influential among scholars, regulators, and the judiciary. But empirical support for adverse selection has been much less persuasive, and several recent studies have found little or no evidence of such selection in insurance markets. "Propitious" (advantageous) selection offers an alternative mechanism that is consistent with these empirical findings. Like adverse selection, the theory assumes that insureds have an informational advantage over insurers. However, propitious selection relies on the plausible assumption that risk aversion is negatively correlated with the riskiness or probability of loss across insureds - the more risk-averse …
Are Shirking And Leisure Substitutable? An Empirical Test Of Efficiency Wages Based On Urban Economic Theory, Stephen L. Ross, Yves Zenou
Are Shirking And Leisure Substitutable? An Empirical Test Of Efficiency Wages Based On Urban Economic Theory, Stephen L. Ross, Yves Zenou
Economics Working Papers
Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioral substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade-off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labor market outcomes, which is tested using the Public …
Is The Compensation Model For Real Estate Brokers Obsolete?, Thomas J. Miceli, Katherine A. Pancak, C. F. Sirmans
Is The Compensation Model For Real Estate Brokers Obsolete?, Thomas J. Miceli, Katherine A. Pancak, C. F. Sirmans
Economics Working Papers
This study examines the traditional compensation model for real estate brokers under which both the listing and buyer brokers are paid by the seller based on a percentage of the property sales price. We argue that this model has not evolved to reflect contemporary legal agency relationships and technology-driven information availability. It therefore creates substantial transactional inefficiencies for buyers and sellers at both the matching and bargaining stages of a transaction. While there is evidence that market forces are pushing for a change in the status quo, there is also evidence that the brokerage industry is resisting this change by …
Interbank Markets Under Currency Boards, Marius Jurgilas
Interbank Markets Under Currency Boards, Marius Jurgilas
Economics Working Papers
This paper analyzes interbank markets under currency boards. Under such an environment, problematic endogeneity issues common to other monetary regimes do not arise. Using daily data from the interbank markets in Bulgaria and Lithuania we show, that contrary to the existing literature, overnight interest rates tend to decrease towards the end of the reserve holding period. Empirical results are supported by a finite horizon heterogeneous agents model showing that interest rates tend to decrease in the case of excess aggregate reserves in the banking system. Results contrast with Quir'os and Mendiz'abal (2006) who find that interest rates should be increasing …
Costly Revenue-Raising And The Case For Favoring Import-Competing Industries, Xenia Matschke
Costly Revenue-Raising And The Case For Favoring Import-Competing Industries, Xenia Matschke
Economics Working Papers
A standard finding in the political economy of trade policy literature is that we should expect export-oriented industries to attract more assistance than import-competing industries. In reality, however, trade policy is heavily biased toward supporting import industries. This paper shows within a standard protection for sale framework, how the costliness of raising revenue via taxation makes trade subsidies less desirable and trade taxes more desirable. The model is then estimated and its predictions tested using U.S. tariff data. An empirical estimate of the costliness of revenue-raising is also obtained.
Criminal Solicitation, Entrapment, And The Enforcement Of Law, Thomas J. Miceli
Criminal Solicitation, Entrapment, And The Enforcement Of Law, Thomas J. Miceli
Economics Working Papers
This paper examines the optimal use of criminal solicitation as a law enforcement strategy. The benefits are greater deterrence of crime (due to the greater likelihood of apprehension), and the savings in social harm as some offenders are diverted away from committing actual crimes through solicitation. The costs are the expense of hiring undercover cops and the greater likelihood of punishment. The optimal use of solicitation balances these factors. The paper also examines the justification for the entrapment defense, which exonerates those caught in a criminal solicitation but who otherwise had no predisposition to commit a crime.
An Economic Theory Of Mortgage Redemption Laws, Matthew J. Baker, Thomas J. Miceli, C. F. Sirmans
An Economic Theory Of Mortgage Redemption Laws, Matthew J. Baker, Thomas J. Miceli, C. F. Sirmans
Economics Working Papers
Redemption laws give mortgagors the right to redeem their property following default for a statutorily set period of time. This paper develops a theory that explains these laws as a means of protecting landowners against the loss of nontransferable values associated with their land. A longer redemption period reduces the risk that this value will be lost but also increases the likelihood of default. The optimal redemption period balances these effects. Empirical analysis of cross-state data from the early twentieth century suggests that these factors, in combination with political considerations, explain the existence and length of redemption laws.
Automatic Stabilizer Feature Of Fixed Exchange Rate Regimes In Emerging Markets, Uluc Aysun
Automatic Stabilizer Feature Of Fixed Exchange Rate Regimes In Emerging Markets, Uluc Aysun
Economics Working Papers
This paper shows that countries characterized by a financial accelerator mechanism may reverse the usual finding of the literature -- flexible exchange rate regimes do a worse job of insulating open economies from external shocks. I obtain this result with a calibrated small open economy model that endogenizes foreign interest rates by linking them to the banking sector's foreign currency leverage. This relationship renders exchange rate policy more important compared to the usual exogeneity assumption. I find empirical support for this prediction using the Local Projections method. Finally, 2nd order approximation to the model finds larger welfare losses under flexible …
Determinants And Effects Of Maturity Mismatches In Emerging Markets: Evidence From Bank Level Data, Uluc Aysun
Determinants And Effects Of Maturity Mismatches In Emerging Markets: Evidence From Bank Level Data, Uluc Aysun
Economics Working Papers
Despite the extensive work on currency mismatches, research on the determinants and effects of maturity mismatches is scarce. In this paper I show that emerging market maturity mismatches are negatively affected by capital inflows and price volatilities. Furthermore, I find that banks with low maturity mismatches are more profitable during crisis periods but less profitable otherwise. The later result implies that banks face a tradeoff between higher returns and risk, hence channeling short term capital into long term loans is caused by cronyism and implicit guarantees rather than the depth of the financial market. The positive relationship between maturity mismatches …
Testing For Balance Sheet Effects In Emerging Market Countries, Uluc Aysun
Testing For Balance Sheet Effects In Emerging Market Countries, Uluc Aysun
Economics Working Papers
This paper tests the presence of balance sheets effects and analyzes the implications for exchange rate policies in emerging markets. The results reveal that the emerging market bond index (EMBI) is negatively related to the banks' foreign currency leverage, and that these banks' foreign currency exposures are relatively unhedged. Panel SVAR methods using EMBI instead of advanced country lending rates find, contrary to the literature, that the amplitude of output responses to foreign interest rate shocks are smaller under relatively fixed regimes. The findings are robust to the local projections method of obtaining impulse responses, using country specific and GARCH-SVAR …
Property Condition Disclosure Law: Does 'Seller Tell All' Matter In Property Values?, Anupam Nanda
Property Condition Disclosure Law: Does 'Seller Tell All' Matter In Property Values?, Anupam Nanda
Economics Working Papers
At the time when at least two-thirds of the US states have already mandated some form of seller's property condition disclosure statement and there is a movement in this direction nationally, this paper examines the impact of seller's property condition disclosure law on the residential real estate values, the information asymmetry in housing transactions and shift of risk from buyers and brokers to the sellers, and attempts to ascertain the factors that lead to adoption of the disclosur law. The analytical structure employs parametric panel data models, semi-parametric propensity score matching models, and an event study framework using a unique …
A Bargaining Model Of Holdouts And Takings, Thomas J. Miceli, Kathleen Segerson
A Bargaining Model Of Holdouts And Takings, Thomas J. Miceli, Kathleen Segerson
Economics Working Papers
The holdout problem is commonly cited as the justification for eminent domain, but the nature of the problem is not well understood. This paper models the holdout problem in a bargaining framework, where a developer seeks to acquire several parcels of land for a large-scale development. We show that in the absence of eminent domain, holdouts are inevitable, threatening costly delay. However, if the developer has the power to use eminent domain to acquire the land from holdouts, all sellers will bargain, thus avoiding delay. An offsetting cost is that owners may negotiate prices below their true value, possibly resulting …
Property Condition Disclosure Law: Why Did States Mandate 'Seller Tell All'?, Anupam Nanda
Property Condition Disclosure Law: Why Did States Mandate 'Seller Tell All'?, Anupam Nanda
Economics Working Papers
Thirty-six US states have already enacted some form of seller's property condition disclosure law. At a time when there is a movement in this direction nationally, this paper attempts to ascertain the factors that lead states to adopt disclosure law. Motivation for the study stems from the fact that not all states have yet adopted the law, and states that have enacted the law have done so in different years. The analytical structure employs hazard models, using a unique set of economic and institutional attributes for a panel of 50 US States spanning 21 years, from 1984 to 2004. The …
Monetary Policy, Exchange Rate Overshooting, And Endogenous Physical Capital, Habib Ahmed, C. Paul Hallwood, Stephen M. Miller
Monetary Policy, Exchange Rate Overshooting, And Endogenous Physical Capital, Habib Ahmed, C. Paul Hallwood, Stephen M. Miller
Economics Working Papers
We develop an open economy macroeconomic model with real capital accumulation and microeconomic foundations. We show that expansionary monetary policy causes exchange rate overshooting, not once, but potentially twice; the secondary repercussion comes through the reaction of firms to changed asset prices and the firms' decisions to invest in real capital. The model sheds further light on the volatility of real and nominal exchange rates, and it suggests that changes in corporate sector profitability may affect exchange rates through international portfolio diversification in corporate securities.
The Walsh Contracts For Central Bankers Are Optimal After All!, Georgios E. Chortareas, Stephen M. Miller
The Walsh Contracts For Central Bankers Are Optimal After All!, Georgios E. Chortareas, Stephen M. Miller
Economics Working Papers
Candel-Sánchez and Campoy-Miñarro (2004) argue that the Walsh linear inflation contract does not prove optimal when the government concerns itself about the cost of the central bank contract. This result relies on the authors' assumption that the participation constraint does not represent an effective constraint on the central banker's decision. Instead, the government can "impose" or "force" the contract on the central banker, even though the contract violates the participation constraint. We argue that such a contract does not make sense. The government can impose it, but it does not affect the central banker's incentives. The policy outcomes do not …
Do Labor Market Imperfections Increase Trade Protection? A Theoretical Investigation, Xenia Matschke
Do Labor Market Imperfections Increase Trade Protection? A Theoretical Investigation, Xenia Matschke
Economics Working Papers
Labor market imperfections are commonly believed to be a major reason for imposing trade impediments. In this paper, I introduce labor market rigidities that are prevalent in continental European countries into the well-known protection for sale model proposed by Grossman and Helpman (1994). I show that contrary to commonly held views, imperfections in the labor market do not necessarily increase equilibrium trade protection. A testable equilibrium trade protection equation is also derived. The findings in this paper are hence particularly relevant for empirical tests of trade policy determinants in economies with more regulated labor markets.
The Demand For Power Diffusion: A Case Study Of The 2005 Constitutional Referendum Voting In Kenya, Mwangi S. Kimenyi
The Demand For Power Diffusion: A Case Study Of The 2005 Constitutional Referendum Voting In Kenya, Mwangi S. Kimenyi
Economics Working Papers
Recent studies on the history of economic development demonstrate that concentration of power on a monarch or a ruling coalition impedes economic growth and that institutional changes that diffuse power, though beneficial to the society in general, are opposed by some social groups. In November 2005, Kenyans rejected a proposed constitution primarily because it did not reduce the powers of the executive to any significant degree. Using data of voting patterns in the constitutional referendum and following the rational choice framework, I estimate a model of the demand for power diffusion and demonstrate that groups voting decisions depend on expected …
Tiebout Choice And The Voucher, Eric J. Brunner, Jennifer Imazeki
Tiebout Choice And The Voucher, Eric J. Brunner, Jennifer Imazeki
Economics Working Papers
This paper examines who is likely to gain and who is likely to lose under a universal voucher program. Following Epple and Romano (1998, 2003), and Nechyba (2000, 2003a), we focus on the idea that gains and losses under a universal voucher depend on two effects: changes in peer group composition and changes in housing values. We show that the direction and magnitude of each of these effects hinges critically on market structure, i.e., the amount of school choice that already exists in the public sector. In markets with little or no Tiebout choice, potential changes in peer group composition …
California's School Finance Reform: An Experiment In Fiscal Federalism, Eric J. Brunner, Jon Sonstelie
California's School Finance Reform: An Experiment In Fiscal Federalism, Eric J. Brunner, Jon Sonstelie
Economics Working Papers
The 1971 ruling of the California Supreme Court in the case of Serrano v. Priest initiated a chain of events that abruptly ended local financing of public schools in California. In seven short years, California transformed its school finance system from a decentralized one in which local communities chose how much to spend on their schools to a centralized one in which the state legislature determines the expenditures of every school district. This paper begins by describing California's school finance system before Serrano and the transformation from local to state finance. It then delineates some consequences of that transformation and …
On Negligence Rules And Self-Selection, Thomas J. Miceli
On Negligence Rules And Self-Selection, Thomas J. Miceli
Economics Working Papers
Economic models of negligence ordinarily involve a single standard of care that all injurers must meet to avoid liability. When injurers differ in their costs of care, however, this leads to distortions in their care choices. This paper derives the characteristics of a generalized negligence rule that induces injurers to self-select their optimal care levels. The principal features of the rule are (1) the due standard of care is maximal, and (2) liability increases gradually as injurers depart further from this standard. The results are broadly consistent with the gradation in liability under certain causation rules and under comparative negligence.
Identifying Individual And Group Effects In The Presence Of Sorting: A Neighborhood Effects Application, Patrick Bayer, Stephen L. Ross
Identifying Individual And Group Effects In The Presence Of Sorting: A Neighborhood Effects Application, Patrick Bayer, Stephen L. Ross
Economics Working Papers
Researchers have long recognized that the non-random sorting of individuals into groups generates correlation between individual and group attributes that is likely to bias naive estimates of both individual and group effects. This paper proposes a non-parametric strategy for identifying these effects in a model that allows for both individual and group unobservables, applying this strategy to the estimation of neighborhood effects on labor market outcomes. The first part of this strategy is guided by a robust feature of the equilibrium in the canonical vertical sorting model of Epple and Platt (1998), that there is a monotonic relationship between neighborhood …
Do Proctored Exams Matter In Online Classes?, Oskar R. Harmon, James Lambrinos
Do Proctored Exams Matter In Online Classes?, Oskar R. Harmon, James Lambrinos
Economics Working Papers
Does the format of assessment (proctored or un-proctored exams) affect test scores in online principles of economics classes? This study uses data from two courses of principles of economics taught by the same instructor to gain some insight into this issue. When final exam scores are regressed against human capital factors, the R-squared statistic is 61.6% for the proctored format exams while it is only 12.2% for the un-proctored format. Three other exams in the class that had the proctored final were also un-proctored and also produced lower R-squared values, averaging 30.5%. These two findings suggest that some cheating may …
Efficiency In Deregulated Electricity Markets: Offer Cost Minimization Vs. Payment Cost Minimization Auction, Rimvydas Baltaduonis
Efficiency In Deregulated Electricity Markets: Offer Cost Minimization Vs. Payment Cost Minimization Auction, Rimvydas Baltaduonis
Economics Working Papers
This study of the wholesale electricity market compares the efficiency performance of the auction mechanism currently in place in U.S. markets with the performance of a proposed mechanism. The analysis highlights the importance of considering strategic behavior when comparing different institutional systems. We find that in concentrated markets, neither auction mechanism can guarantee an efficient allocation. The advantage of the current mechanism increases with increased price competition if market demand is perfectly inelastic. However, if market demand has some responsiveness to price, the superiority of the current auction with respect to efficiency is not that obvious. We present a case …
Online Format Vs. Live Mode Of Instruction: Do Human Capital Differences Or Differences In Returns To Human Capital Explain The Differences In Outcomes?, Oskar R. Harmon, James Lambrinos
Online Format Vs. Live Mode Of Instruction: Do Human Capital Differences Or Differences In Returns To Human Capital Explain The Differences In Outcomes?, Oskar R. Harmon, James Lambrinos
Economics Working Papers
Our paper asks the question: Does mode of instruction format (live or online format) effect test scores in the principles of macroeconomics classes? Our data are from several sections of principles of macroeconomics, some in live format, some in online format, and all taught by the same instructor. We find that test scores for the online format, when corrected for sample selection bias, are four points higher than for the live format, and the difference is statistically significant. One possible explanation for this is that there was slightly higher human capital in the classes that had the online format. A …
The Making Of Optimal And Consistent Policy: An Implementation Theory Framework For Monetary Policy, Huiping Yuan, Stephen M. Miller
The Making Of Optimal And Consistent Policy: An Implementation Theory Framework For Monetary Policy, Huiping Yuan, Stephen M. Miller
Economics Working Papers
This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a simple model, finding that the cause of the inconsistency with optimal policy traces to inconsistent targets in the social loss function. As a result, the social loss function cannot serve as a direct loss function for the central bank. Accordingly, we employ implementation theory to design a central bank loss function (mechanism design) with consistent targets, while …
The Making Of Optimal And Consistent Policy: An Analytical Framework For Monetary Models, Huiping Yuan, Stephen M. Miller, Langnan Chen
The Making Of Optimal And Consistent Policy: An Analytical Framework For Monetary Models, Huiping Yuan, Stephen M. Miller, Langnan Chen
Economics Working Papers
This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a simple model, finding that the cause of the inconsistency with optimal policy traces to inconsistent targets in the social loss function. As a result, the central bank should adopt a loss function that differs from the social loss function. Carefully designing the central bank s loss function with consistent targets can harmonize optimal and consistent policy. This …
Economic Reforms And Pro-Poor Growth: Lessons For Africa And Other Developing Regions And Economies In Transition, Mwangi S. Kimenyi
Economic Reforms And Pro-Poor Growth: Lessons For Africa And Other Developing Regions And Economies In Transition, Mwangi S. Kimenyi
Economics Working Papers
The paper discusses the meaning and measurement of pro-poor growth and also reviews evidence of pro-poor growth (or the lack of it) in a large cross-section of countries and time periods. The emerging story is that many episodes of growth are not pro-poor and also that although economic reforms have had positive effects in those countries that have been steadfast in implementing market reforms, the overall impact on growth has been small for many countries and in most cases not pro-poor. I present a general theory of pro-poor growth that includes ten principles that should be incorporated in all economic …
Human Capital And Interethnic Marriage Decisions, Delia Furtado
Human Capital And Interethnic Marriage Decisions, Delia Furtado
Economics Working Papers
Despite a longstanding belief that education importantly affects the process of immigrant assimilation, little is known about the relative importance of different mechanisms linking these two processes. This paper explores this issue through an examination of the effects of human capital on one dimension of assimilation, immigrant intermarriage. I argue that there are three primary mechanisms through which human capital affects the probability of intermarriage. First, human capital may make immigrants better able to adapt to the native culture thereby making it easier to share a household with a native. Second, it may raise the likelihood that immigrants leave ethnic …
Universal Vouchers And White Flight, Eric J. Brunner, Jennifer Imazeki, Stephen L. Ross
Universal Vouchers And White Flight, Eric J. Brunner, Jennifer Imazeki, Stephen L. Ross
Economics Working Papers
Opponents of school vouchers often argue that school vouchers will lead to 'white flight' from public schools that are disproportionately nonwhite, creating more racially segregated schools. However, recent studies that examine white flight from public schools into private schools have produced conflicting evidence on whether or not white flight actually exists. In this paper, we present new evidence on whether universal vouchers will lead to more racially segregated schools. Specifically, we use data on vote outcomes from a state-wide universal voucher initiative to estimate the likelihood that white households with children currently in public schools will use vouchers to switch …