Social and Behavioral Sciences Commons^™

Working Capital Requirement And The Unemployment Volatility Puzzle, Tsu-Ting Tim Lin

Economics Faculty Publications

Shimer (2005) argues that a search and matching model of the labor market in which wage is determined by Nash bargaining cannot generate the observed volatility in unemployment and vacancy in response to reasonable labor productivity shocks. This paper examines how incorporating monopolistically competitive firms with a working capital requirement (in which firms borrow funds to pay their wage bills) improves the ability of the search models to match the empirical fluctuations in unemployment and vacancy without resorting to an alternative wage setting mechanism. The monetary authority follows an interest rate rule in the model. A positive labor productivity shock …

Indeterminacy In Stochastic Overlapping Generations Models: Real Effects In The Long Run, Zhigang Feng, Matthew Hoelle

Economics Faculty Publications

Indeterminate equilibria are known to exist for overlapping generations models, though recent research has been limited to deterministic settings in which all equilibria converge to a steady state in the long run. This paper analyzes stochastic overlapping generations models with 3-period lived representative consumers and adopts a novel computational algorithm to numerically approximate the entire set of competitive equilibria. In a stochastic setting with incomplete markets, indeterminacy has real effects in the long run. Our numerical simulations reveal that indeterminacy is an order of magnitude more important than endowment shocks in explaining long-run consumption and asset price volatility.

A Practitioner’S Guide To Testing Regional Industrial Localization, Andrew J. Cassey, Ben O. Smith

Economics Faculty Publications

The Ellison-Glaeser index is an unbiased measure of geographic industrial localization that improves upon simpler measures, such as the location quotient. We develop and describe software that allows for the Ellison-Glaeser index to be used in a statistical test to assess the chance that a particular industry is geographically localized. We give instructions on how to install the software, run the program, and interpret the results.

More Educated And More Equal? A Comparative Analysis Of Female Education And Employment In Japan, China And India, Sucharita Sinha Mukherjee

Economics Faculty Publications

This paper attempts to explore the connections between expanding female education and the participation of women in paid employment in Japan, China and India, three of Asia's largest economies. Analysis based on existing data and literature shows that despite the large expansion in educational access in these countries in the last half century, women have lacked egalitarian labour market opportunities. A combination of social discouragement and individual choice largely explains the withdrawal, non-participation or intermittent female presence in the labour force, notwithstanding increased educational access. In taking stock of these issues and debates across these countries, it is argued that …

A Way Around The Divided House Majority, Charles L. Weise, Bruce A. Larson

Economics Faculty Publications

For observers of the U.S. Congress, the inability of Republicans to unite behind a candidate for speaker has been by turn fascinating, exasperating, and frightening. When and if a candidate is finally chosen, Republicans will breathe a sigh of relief, as will many commentators. The real crisis, however, will have just begun. [excerpt]

Revealing The Political Decision Toward Chinese Carbon Abatement: Based On Equity And Efficiency Criteria, Jinlan Ni, Chu Wei, Limin Du

Economics Faculty Publications

China's economic reform over the past 30 years has allowed the free market to drive economic development. However, government still plays a key role in the energy sector by allocating energy conservation and emissions abatement. How does the government make an equity decision as a tradeoff to market efficiency? This is an unanswered question. The purpose of this paper is to illustrate the government's preference toward equity and efficiency. Using the provincial level CO2 intensity allocation data, we investigate the political decision that the government made based on the equity and efficiency criteria. We find that the equity index plays …

Social Network, Intra-Network Education Spillover Effect And Rural–Urban Migrants' Wages: Evidence From China, Chunchao Wang, Chenglei Zhang, Jinlan Ni

Economics Faculty Publications

This study examines the determinants of rural–urban migrant wages, paying special attention to the intra-network education spillover effect of the migrants' social network in China. Using the new migrant sample of Rural Urban Migration in China (RUMiC) 2009 survey data, we find that the migrants' social network does have a significant impact on their own earnings. In particular, we find evidence that there exists an education spillover effect of the migrants' social network, which indicates that the education level of the migrants' social network has a significant positive effect on their earnings. We also find that the education spillover effects …

Exploring The Racial Divide In Education And The Labor Market Through Evidence From Interracial Families, Peter Arcidiacono, Andrew Beauchamp, Marie Hull, Seth Sanders

Economics Faculty Publications

We examine gaps between minorities and whites in education and labor market outcomes, controlling for many covariates including maternal race. Identification comes from different reported races within the family. Estimates show two distinct patterns. First, there are no significant differences in outcomes between black and white males with white mothers. Second, large differences persist between these groups and black males with black mothers. The patterns are insensitive to alternative measures of own race and school fixed effects. Our results suggest that discrimination is not occurring on the basis of child skin color but through mother-child channels such as dialect or …

The Impact On Health Of Recurring Migrations To The United States, David Ortmeyer, Michael A. Quinn

Economics Faculty Publications

Considerable research has focused on whether or not immigrants’ health declines to match that of comparable native-born people. This immigrant health convergence is hypothesized to be driven by immigrants’ acculturation to American society and habits. This is particularly problematic for a country such as the United States which combines a high number of immigrants, bad health habits among the native born, and an expensive health care system. Previous research in this literature uses the duration of an immigrant’s current stay in the United States as the measure of exposure to acculturation. Using the duration of the immigrant’s current stay in …

Low-Cost, Transportable Hydrogen Fueling Station For Early Fcev Adoption, Ian A. Richardson, Jacob T. Fisher, Jacob W. Leachman, Patrick E. Frome, Ben O. Smith, Shaotong Guo, Sayonsom Chanda, Mikko S. Mcfeely, Austin M. Miller

Economics Faculty Publications

Thousands of public hydrogen fueling stations are needed to support the early Fuel Cell Electric Vehicle (FCEV) market in the U.S.; there are currently 12. The California state government has been the largest investor of the hydrogen fueling infrastructure funding 9 permanent stations currently open to the public with 48 more in development costing anywhere from $1.8M-$5.5M each. To attract private investors and decrease dependence on government funding, a low-cost, mobile hydrogen dispensing system must be developed. This paper describes a transportable hydrogen fueling station that has been designed for $423,000 using off-the-shelf components, less than 23% of the capital …

What’S The Value Of Teaching The Liberal Arts? Ask Adam Smith, Louis D. Johnston

Economics Faculty Publications

No abstract provided.

Rush To Judgment: The Sti-Treatment Trials And Hiv In Sub-Saharan Africa, Eileen Stillwaggon, Larry Sawers

Economics Faculty Publications

Introduction: The extraordinarily high incidence of HIV in sub-Saharan Africa led to the search for cofactor infections that could explain the high rates of transmission in the region. Genital inflammation and lesions caused by sexually transmitted infections (STIs) were a probable mechanism, and numerous observational studies indicated several STI cofactors. Nine out of the ten randomized controlled trials (RCTs), however, failed to demonstrate that treating STIs could lower HIV incidence. We evaluate all 10 trials to determine if their design permits the conclusion, widely believed, that STI treatment is ineffective in reducing HIV incidence.

Discussion: Examination of the …

Game, Set, And Match: Do Women And Men Perform Differently In Competitive Situations?, Michael Jetter, Jay K. Walker

Economics Faculty Publications

This paper analyzes potential gender differences in competitive environments using a sample of over 100,000 professional tennis matches. We focus on two phenomena of the labor and sports economics literature: the hot-hand and clutch-player effects. First, we find strong evidence for the hot-hand (cold-hand) effect. Every additional win in the most recent ten Tour matches raises the likelihood of prevailing in the current encounter by 3.1 (males) to 3.3 percentage points (females). Second, top male and female players are excelling in Grand Slam tournaments, arguably the most important events in tennis. For men, we also find evidence for top players …

I'M Retiring ... Well, Sort Of, Kevin F. Hallock

Economics Faculty Publications

I’m 45 years old and I’m retiring ... from writing regular columns for workspan. And that has me thinking about retirement and incentives as part of a total rewards system.

More Than Altruism: Cultural Norms And Remittances Among Hispanics In The U.S., Monika Lopez Anuarbe, María Amparo Cruz-Saco, Yongjin Park

Economics Faculty Publications

Cultural norms embody the communalism and familism that characterize social structures and traditions of care among certain identity groups, notably, Hispanics. In turn, they affect remitting behavior as they do family dynamics, thereby extending care transnationally. Using the 2006 Latino National Survey, the largest instrument that captures socio-economic variables and political perspectives among Hispanics residing in the U.S., we construct a Hispanic identity index that is used to capture the role of cultural norms in remittance behavior. This index is used as an explanatory variable in a logit model for the probability and frequency of remitting money. We find that …

Kocherlakota Takes On The Hottest Controversy In Monetary Policy, Louis D. Johnston

Economics Faculty Publications

No abstract provided.

Oil, Corruption And Foreign Direct Investment, Luisa Melo, Michael A. Quinn

Economics Faculty Publications

This paper addresses how oil changes the corruption-foreign direct investment relationship. With the advantage of our panel data set, we are able to account for issues of endogeneity in the causality between foreign direct investment and corruption. We find that corruption has a negative impact on attracting foreign direct investment but this is mitigated based on the amount of oil the receiving country produces. Foreign direct investment inflows are found to reduce corruption in countries, but not if the receiving country is a major oil producer. Results show that poor countries without oil may be using institutional corruption to attract …

Adam Smith, Natural Movement, And Physics (Working Paper), Spencer J. Pack

Economics Faculty Publications

No abstract provided.

Costly Distribution And The Non-Equivalence Of Tariffs And Quotas, James Lake, Maia K. Linask

Economics Faculty Publications

When governments impose a quota or tariff on imports, it is well known that the resulting rents and revenues trigger costly rent-seeking and revenue-seeking activities, which are welfare-reducing and may be economically more significant than the efficiency losses resulting from the protectionist-induced resource misallocation. Repeated interaction among firms can eliminate wasteful rent- and revenue-seeking expenditures through cooperation. We show that while aggregate outcomes are equivalent under tariffs and quotas if cooperation arises, the conditions under which cooperation arises differ by policy. This difference arises because a firm must incur additional cost to physically import and distribute the goods associated with …

Quotas On Boards And The Gender Gap, Kevin F. Hallock

Economics Faculty Publications

Back in the late 1990s, Marianne Bertrand and the author examined the pay gap between male and female executives listed in the proxy statements of publicly traded US firms from 1992 in 1997, which they later published in the October 2011 edition of Industrial and Labor Relations Review. They found that, taken as a whole, women in these top five positions earned about 45% less than men in these positions. At the same time, they found that as much as 75% of this gap could be explained by the fact that women managed smaller companies, and were less likely to …

Sustainability In The Curriculum And Teaching Of Economics: Transforming Introductory Macroeconomics, Madhavi Venkatesan

Economics Faculty Publications

Present models of economic growth primarily focus on the role of expenditures as captured in the commonly cited economic indicator, gross domestic product (GDP), where GDP is defined as the sum of final goods and services sold within a country’s natural borders. Noting that a country’s expenditures are referred to as “aggregate expenditures” and that the majority of spending is specific to consumption or consumer spending, especially in the United States where this spending category is nearly two-thirds of annual GDP (other expenditure categories for GDP include investment spending, government spending and foreign spending as proxied by net exports), there …

Health Care Use, Out-Of-Pocket Expenditure, And Macroeconomic Conditions During The Great Recession, Juan Du, Takeshi Yagihashi

Economics Faculty Publications

We study how macroeconomic conditions during the Great Recession affected health care utilization and out-of-pocket expenditures of American households. We use two data sources: the Consumer Expenditure (CE) Survey and the Survey of Income and Program Participation (SIPP); each has its own advantages. The CE contains quarterly frequency variables, and the SIPP provides panel data at the individual level. Consistent evidence across the two datasets shows that utilization of routine medical care was counter-cyclical, whereas hospital care was pro-cyclical during the Great Recession. When we examine the pre-recession period, the relationship between macroeconomic conditions and health care use was either …

Good Girl, Bad Boy: Corrupt Behavior In Professional Tennis, Michael Jetter, Jay K. Walker

Economics Faculty Publications

This paper identifies matches on the male and female professional tennis tours in which one player faces a high payoff from being "on the bubble" of direct entry into one of the lucrative Grand Slam tournaments, while their opposition does not. Analyzing over 378,000 matches provides strong evidence for corrupt behavior on the men's tour, as bubble players are substantially more likely to beat better ranked opponents when a win is desperately needed. However, we find no such evidence on the women's tour. These results prevail throughout a series of extensions and robustness checks, highlighting gender differences regarding corrupt and …

Intertemporal Elasticity Of Substitution And Risk Aversion: Are They Related Empirically?, Takeshi Yagihashi, Juan Du

Economics Faculty Publications

This article examines the relationship between two types of preference: preference of intertemporal choices and preference towards risk. In the simplest form of the constant relative risk aversion utility function, the intertemporal elasticity of substitution (IES) and risk aversion have an inverse relationship. However, there is no empirical evidence that suggests this inverse relationship holds. We examine the relationship between risk aversion and IES using household consumption data from the Consumer Expenditure Survey during 1996–2010. Multiple risk domains are selected to represent risk preference, and for each domain, we consider some households to be more risk averse than others. We …

Health Care Inflation And It's Implications For Monetary Policy, Takeshi Yagihashi, Juan Du

Economics Faculty Publications

Motivated by recent findings on the cyclical movement of both health and health spending, we construct a general equilibrium model that distinguishes health care demand from the demand for other goods. Using this model, we are able to generate inflation dynamics and cyclicality of health that match the US data. When the model is subjected to an expansionary monetary policy shock, it yields different output and inflation responses compared with a two-sector model with homogeneous demand. We show that the trade-off between leisure and health spending plays an important role in model dynamics. The model further predicts different degrees of …

Examining Industrial Interdependence Between Japan And South Korea: A Favar Approach, David D. Selover, Takeshi Yagihashi

Economics Faculty Publications

This paper investigates the economic relationship between Japan and South Korea by incorporating disaggregated output measures. Using a factor-augmented vector autoregression (FAVAR) model, we conduct several experiments to test the nature of the interdependence, both in the aggregate and by sector. We find that South Korean output shocks affect the Japanese economy in a significant manner, whereas Japanese output shocks have a limited effect on South Korea. By further examining the transmission mechanism of sectoral output shocks and comparing them with the direction of sectoral trade, we find evidence of cross-border production sharing, which explains the asymmetric results seen in …

Are Religion And Environmentalism Complements Or Substitutes?: A Club-Based Approach, Feler Bose, Timothy M. Komarek

Economics Faculty Publications

In this article, we analyze the causal link between membership in environmental groups and active participation and membership in religious groups. We use a club-based model and employ OLS and spatial econometrics with controls to test for whether membership and participation in a religious group is a substitute or complement for membership in environmental groups. Instrumental variables estimation was used as a robustness check. We found that religious participation and religious membership in evangelical groups are a substitute for environmental membership. Much of the work on environmental concerns has focused on answers to survey questions, not on membership. We used …

Unemployment And Economic Integration For Developing Countries, Haiwen Zhou

Economics Faculty Publications

While financial or trade integration between countries may increase the size of the market and aid the adoption of more advanced technologies, will it also increase the level of urban unemployment for a developing country? In this model, there is unemployment in the urban sector. Manufacturing firms engage in oligopolistic competition and choose increasing returns technologies to maximize profits. Financial firms provide capital to manufacturing firms and they also engage in oligopolistic competition. We show that an increase in the wage rate in the manufacturing sector changes neither the level of technology nor the level of employment in the manufacturing …

The Choice Of Technology And Equilibrium Wage Rigidity, Haiwen Zhou

Economics Faculty Publications

In this general equilibrium model, firms engage in oligopolistic competition and choose increasing returns technologies to maximize profits. Capital and labor are the two factors of production. The existence of efficiency wages leads to unemployment. The model is able to explain some interesting observations of the labor market. First, even though there is neither long-term labor contract nor costs of wage adjustment, wage rigidity is an equilibrium phenomenon: an increase in the exogenous job separation rate, the size of the population, the cost of exerting effort, and the probability that shirking is detected will not change the equilibrium wage rate. …

Time-Consistent Optimal Fiscal Policy Over The Business Cycle, Zhigang Feng

Economics Faculty Publications

This paper examines a dynamic stochastic economy with a benevolent government that cannot commit to its future policies. I consider equilibria that are timeconsistent and allow for history-dependent strategies. A new numerical algorithm is developed to solve for the set of equilibrium payoffs. For a baseline economy calibrated to the U.S. economy, the capital income tax with the highest social welfare is slightly procyclical, while the labor income tax is countercyclical. Compared with the data, this equilibrium provides a better account of the cyclical properties of U.S. tax policy than other solutions that abstract from history dependence. The welfare cost …