Economics Commons^™

Foreign Aid And Adolescent Fertility Rate: Cross-Country Evidence, Hong Zhuang, Miao Wang, Joseph P. Daniels

Economics Faculty Research and Publications

This study examines the role of official development assistance (ODA) in affecting adolescent fertility rates in low- and middle-income countries. Approximately 95% of adolescent births occur in middle- and low-income countries, and the average adolescent fertility rate in low-income countries is five times higher than in high-income countries. Aid donors typically pursue multiple objectives when providing development aid, many of which can go beyond changes in per capita GDP and include human capital factors such as adolescent fertility and infant mortality. Using data over the period from 1995 to 2015, our results suggest that total ODA has a beneficial impact …

(Wp 2020-05) Change And Continuity In Economic Methodology And Philosophy Of Economics, John B. Davis

Economics Working Papers

This paper provides my reflections on the state of economic methodology and philosophy of economics as of the beginning of 2020 following the end a fifteen year co-editorship of the Journal of Economic Methodology with Wade Hands. It looks at how economic methodology and philosophy of economics, as a meta-field type of research, has changed since it emerged as a distinct subfield in economics in the 1980s. Using an evolution of technology analysis, it distinguishes two different possible scenarios for the field’s future according to environmental factors operating upon it and how specialization in research may affect both it and …

Experiential Learning In The Jesuit Business School Context: The Agbl Program, Nicholas J. C. Santos, Heather Kohls, Jennifer S. Maney

Economics Faculty Research and Publications

In an attempt to engage Jesuit business school students in transformational learning, Marquette University offers the Applied Global Business Learning (AGBL) Program. This program embodies the Ignatian pedagogy paradigm of helping students gain an understanding of a business need in a different part of the world, engages them in action, and has them reflect on and evaluate the experience as it relates to how they take the experience to change the world. This paper discusses the program’s relation to the Jesuit tradition, the history of the program including where students go and what they do, the impact on student learning, …

The Influence Of Learning And Price-Level Targeting On Central Bank Forward Guidance, Stephen J. Cole

Economics Faculty Research and Publications

This paper examines how the effectiveness of central bank forward guidance depends on two key channels: the expectations formation process and the monetary policy regime. The results show that rational expectations relative to an adaptive learning rule amplifies the positive benefits a price-level targeting central bank creates for forward guidance. Specifically, forward guidance generates greater amounts of output and inflation under a price-level than inflation targeting monetary policy regime, but rational expectations overstates these positive benefits compared to adaptive learning. The different responses of expectations between rational expectations and adaptive learning to forward guidance are driving this performance gap. Thus, …

The Limits Of Central Bank Forward Guidance Under Learning, Stephen J. Cole

Economics Faculty Research and Publications

This paper investigates the effectiveness of central bank forward guidance while relaxing two standard macroeconomic assumptions: rational expectations and frictionless financial markets. The results show that the addition of financial frictions amplifies the differences between rational expectations and adaptive learning to forward guidance. During a period of economic crisis, output under rational expectations displays more favorable responses to forward guidance than under adaptive learning. These differences are exacerbated when compared with a similar analysis without financial frictions. Thus, monetary policymakers should consider the way in which expectations and credit frictions are modeled when examining the effects of forward guidance.

Competitive Blind Spots And The Cyclicality Of Investment: Experimental Evidence, Cortney S. Rodent, Andrew Smyth

Economics Faculty Research and Publications

We report laboratory experiments investigating the cyclicality of profit‐enhancing investment in a competitive environment. In our setting, optimal investment is counter‐cyclical when investment costs fall following market downturns. However, we do not observe counter‐cyclical investment. Instead, we see much less strategic behavior than our rational investment model anticipates. Our participants exhibit what Porter (1980) terms a competitive blind spot, and heuristic investment models where individuals invest a fixed percentage of their liquidity, or a fixed percentage of anticipated market demand, better fit our data than does optimal investment. We also report a control treatment without cost changes and a treatment …

(Wp 2020-03) The Effect Of Central Bank Credibility On Forward Guidance In An Estimated New Keynesian Model, Stephen J. Cole, Enrique Martínez-García

Economics Working Papers

This paper examines the effectiveness of forward guidance in an estimated New Keynesian model with imperfect central bank credibility. We estimate credibility for the U.S. Federal Reserve with Bayesian methods exploiting survey data on interest rate expectations from the Survey of Professional Forecasters (SPF). The results provide important takeaways: (1) The estimate of Federal Reserve credibility in terms of for- ward guidance announcements is relatively high, which indicates a degree of forward guidance effectiveness, but still one that is below the fully credible case. Hence, anticipation effects are attenuated and, accordingly, output and inflation do not respond as favorably to …

(Wp 2020-04) Heterogeneity In Individual Expectations, Sentiment, And Constant-Gain Learning, Stephen J. Cole, Fabio Milani

Economics Working Papers

The adaptive learning approach has been fruitfully employed to model the formation of aggregate expectations at the macroeconomic level, as an alternative to rational expectations. This paper uses adaptive learning to understand, instead, the formation of expectations at the micro-level, by focusing on individual expectations and, in particular, trying to account for their heterogeneity.

We exploit survey data on output and inflation expectations by individual professional forecasters. We link micro and macro by endowing forecasters with the same information set that they would have as economic agents in a benchmark New Keynesian model. Forecasters are, however, allowed to differ in …

(Wp 2020-02) Belief Reversals As Phase Transitions And Economic Fragility: A Complexity Theory Of Financial Cycles With Reflexive Agents, John B. Davis

Economics Working Papers

This paper aims to contribute to the analysis of expectations and belief reversals in an evolutionary and complexity economics framework. It formulates its analysis in terms of the concept of reflexivity, drawing on the ideas regarding reflexivity in financial markets of George Soros, and lays out a model of how a financial cycle expresses a systematic pattern of interacting feedback effects. The paper develops this analysis as a complex interaction between sets of heterogeneous expectations derived from the behavior of reflexive economic agents. Positive and negative feedback phases in a cycle are distinguished and associated with boom and bust stages …

International Trade Policy Preferences: Evidence Of The Interaction Of Socio-Tropic Influences And Uncertainty Shocks, Joseph P. Daniels, Emily Kapszukiewicz, Marc Von Der Ruhr

Economics Faculty Research and Publications

This paper provides new evidence supporting the hypothesis that patriotism and nationalism influence personal trade policy preferences in addition to the typical economic determinants. It also examines the interaction of the 9/11 terrorist attacks along with patriotism and nationalism on policy preferences. Using the Heckscher-Ohlin model as a theoretical framework, ordered probit estimations were applied to survey responses from an International Social Survey Program survey question about preferences towards limiting imports. Extensions of the model were sequentially estimated to investigate the impact of national identity on policy preferences. The model was augmented to test how feelings of nationalism and patriotism …

(Wp 2020-01) The Sea Battle Tomorrow: The Identity Of Reflexive Economic Agents, John B. Davis

Economics Working Papers

This paper develops a conception of reflexive economic agents as an alternative to the standard utility conception, and explains individual identity in terms of how agents adjust to change in a self-organizing way, an idea developed from Herbert Simon. The paper distinguishes closed equilibrium and open process conceptions of the economy, and argues the former fails to explain time in a before-and-after sense in connection with Aristotle’s sea battle problem. A causal model is developed to represent the process conception, and a structure-agency understanding of the adjustment behavior of reflexive economic agents is illustrated using Merton’s self-fulfilling prophecy analysis. Simon’s …

(Wp 2019-02) A Road Not Taken? A Brief History Of Care In Economic Thought, John B. Davis, Robert Mcmaster

Economics Working Papers

Care is central to the human experience and part of the social provisioning process. Adam Smith recognized this, associating care with sympathy. Later contributions in the political economy tradition also provide scope for an analysis of care, but none as developed as Smith’s. With the emergence of the current mainstream, care is marginalized. Kenneth Boulding’s analysis provides an opportunity to interrogate care in the economy, but he fails to explicitly acknowledge care. It is left to feminist economics to highlight the centrality of care. An implication is that it challenges the conventional rubric of economic organization predicated on self-interest.

(Wp 2019-03) ‘Openness’ As A Methodological Principle Of Sraffa’S Economic Thinking, John B. Davis

Economics Working Papers

This paper discusses the impact of Sraffa’s thinking on economics. It argues increasing specialization in research is producing an ‘all trees, no forest’ fragmentation of economics that creates opportunities for a return to concerns that motivated classical political economy. It associates this with a methodological conception of what a more pluralistic economics involves, and applies this to relationships between production and distribution. A methodological conception of ‘openness’ is traced to a 1931 turning point in Sraffa’s thinking when he used an open-closed distinction to explain the relationship between production and distribution, and engaged in a philosophy of science reasoning reminiscent …

An Experiment On Innovation And Collusion, Andrew Smyth

Economics Faculty Research and Publications

This paper examines the relationship between product innovation and the success of price collusion using novel laboratory experiments. Average market prices in low innovation (LO) experiments are significantly higher than those in high innovation, but otherwise identical experiments. This price difference is attributed to LO experimental subjects' greater common market experience. The data illustrate how collusion can be perceived as the "only way to make it" in LO markets where product innovation is not a viable strategy for increasing profits. They suggest that product homogeneity can be a proximate cause, and product innovation an ultimate cause, of collusion.

Elite Influence On Climate Change Skepticism: Evidence From Close Gubernatorial Elections, Andrew G. Meyer

Economics Faculty Research and Publications

Many theorize that public opinion follows political elite on climate change skepticism, yet evidence of a causal link is lacking. I use a regression discontinuity design to establish the impact of the political party of a governor on constituents’ global warming beliefs. I find that, relative to the election of a Democratic governor, the election of a Republican governor significantly decreases the probability of a Republican constituent believing in global warming by approximately 11–15 percentage points; there is no significant impact on Democratic constituents. I also find a negative effect of a Republican governor on belief in human-caused global warming …

The Great Recession And Public Education, William N. Evans, Robert M. Schwab, Kathryn L. Wagner

Economics Faculty Research and Publications

We examine the impact of the Great Recession on public education finance and employment. Five major themes emerge from our work. First, nearly 300,000 school employees lost their jobs. Second, schools that were heavily dependent financially on state governments were particularly vulnerable to the recession. Third, local revenues from the property tax actually increased during the recession, primarily because millage rates rose in response to declining property values. Fourth, inequality in school spending rose sharply during the Great Recession. We argue, however, that we need to be very cautious about this result. School spending inequality has risen steadily since 2000; …

(Wp 2019-01) Stratification Economics As An Economics Of Exclusion, John B. Davis

Economics Working Papers

Stratification Economics (SE) is an emergent sub-field in economics, but its JEL classification misrepresents its content and its relationship to the whole of economics. This paper first develops a more accurate characterization of SE by identifying its differences with Mainstream Economics (ME), its commonalities with economics in a broad sense, and how the combination of these differences and commonalities define it as a distinct research program. It then applies this definition to an economic goods taxonomy that makes a distinction between local public goods and common pool goods to interpret SE’S distinct research program as an economics of exclusion. The …

State-Level Fdi And Within-Occupation Wage Inequality In The United States, Miao Wang, M. C. Sunny Wong, Hong Zhuang

Economics Faculty Research and Publications

Our paper explores the relationship between inward foreign direct investment (FDI) and within-occupation wage inequality at the state level in the U.S. We argue that sectoral FDI may affect different occupations differently, and our study looks at possible heterogeneous effects of sectoral FDI on wage inequality for 22 occupations. Using data over 1999–2007, our results show that state-level manufacturing FDI tends to reduce wage inequality, measured by the ratio of the 90th percentile wage and the 10th percentile wage in an occupation. Manufacturing FDI is significantly associated with less wage inequality in the production occupations and the construction and extraction …

Expected Inflation And The Sacrifice Ratio, Joseph P. Daniels, Sandeep Mazumder, David D. Vanhoose

Economics Faculty Research and Publications

Using inflation forecasts from the OECD Economic Outlook as proxy measures of inflation expectations, we examine the impact of inflation expectations on the sacrifice ratio for 20 OECD countries. The regression analysis considers four different empirical models of the determinants of the sacrifice ratio typically found in the existing literature. The impact of the level of inflation expectations is negative and significant, implying that a higher level of expected inflation is associated with lower sacrifice ratios. This result is consistent with the theoretical role of nominal wage and price rigidities in that reductions in wage and price stickiness diminish the …

Bank Efficiency And Regional Economic Growth: Evidence From China, Hong Zhuang, Haiyan Yin, Miao Grace Wang, Jiawen Yang

Economics Faculty Research and Publications

This paper examines for the first time the relationship between bank efficiency and regional economic growth in China with provincial data over 1995 - 2014. We find consistent and strong evidence that bank efficiency positively affects regional economic growth. Further, bank efficiency exerts a more pronounced impact on economic growth in inland provinces than coastal regions. The insignificant effect of the quantity of credit in our regressions suggests that a mere expansion of financial volume is not effective in promoting regional economic growth, whereas the improvement in the quality of financial intermediation plays an important role fostering provincial economic growth.

(Wp 2018-05) Specialization, Fragmentation, And Pluralism In Economics, John B. Davis

Economics Working Papers

This paper investigates whether specialization in research is causing economics to become an increasingly fragmented and diverse discipline with a continually rising number of niche-based research programs and a declining role for dominant cross-science research programs. It opens by framing the issue in terms of centrifugal and centripetal forces operating on research in economics, and then distinguishes descriptive from normative pluralism. It reviews recent research regarding the JEL code and the economics’ J. B. Clark Award that points towards rising specialization and fragmentation of research in economics. It then reviews five related arguments that might explain increasing specialization and fragmentation …

(Wp 2018-04) Economics And Economic Methodology In A Core-Periphery Economic World, John B. Davis

Economics Working Papers

This paper uses a core-periphery distinction to characterize contemporary economics, economic methodology, and also today’s world economy. First, it applies the distinction to the organization of contemporary economics through an examination of the problem of explaining economics’ relations to and boundaries with other disciplines. Second, it argues that economics’ core-periphery organization is replicated in a similar organization of the use and practice of contemporary economic methodology in economics Third, it draws on the use of the core-periphery thinking in economics itself and the uneven development of the world economy to provide possible foundations for economics and economic methodology being organized …

(Wp 2018-03) Comment On White On The Relationship Between Economics And Ethics, John B. Davis

Economics Working Papers

This short comment on Mark White’s comment on the relationship of economics and ethics focuses on the nature of economics and ethics as an emergent field of investigation. It discusses different types of between-discipline fields, and compares crossdisciplinary and transdisciplinary interpretations of economics and ethics. The ‘domestication’ thesis associated with borrowing across disciplines is examined in terms of the idea of a metaphorical transfers. Institutional constraints on between-discipline developments are evaluated relative to increasing specialization within and across disciplines. The transdisciplinary interpretation of economics and ethics is given a complexity theory explanation.

(Wp 2018-02) Extending Behavioral Economics’ Methodological Critique Of Rational Choice Theory To Include Counterfactual Reasoning, John B. Davis

Economics Working Papers

This paper extends behavioral economics’ realist methodological critique of rational choice theory to include the type of logical reasoning underlying its axiomatic foundations. A purely realist critique ignores Kahneman’s emphasis on how the theory’s axiomatic foundations make it normative. I extend his critique to the theory’s reliance on classical logic, which excludes the concept of possibility employed in counterfactual reasoning. Nudge theory reflects this in employing counterfactual conditionals. This answers the complaint that the Homo sapiens agent conception ultimately reduces to a Homo economicus conception, and also provides grounds for treating Homo sapiens as an adaptive, non-optimizing, reflexive agent.

Understanding Relationships Between Early Life Toxic Stress, Childhood Socioeconomic Disadvantage, And Allostatic Load In Adolescence, Amanda King

Dissertations (1934 -)

Chronic disease prevalence among children and adolescents is rising, which is thought to result in part from elevations in allostatic load (AL). AL is the cumulative physiological dysregulation that results from exposure to biological, social and environmental stressors over time. Socioeconomic disparities in chronic disease and AL have been well-documented in adult populations, including links between childhood socioeconomic disadvantage (CSD) and AL, yet little is known as to whether CSD may begin to impact AL earlier in life. Differential exposure and vulnerability to stress among racial/ethnic minorities may increase risk for elevated AL among those experiencing CSD. Framed by the …

Testing The Boundaries Of The Double Auction: The Effects Of Complete Information And Market Power, Erik O. Kimbrough, Andrew Smyth

Economics Faculty Research and Publications

We report boundary experiments testing the robustness of price convergence in double auction markets for non-durable goods in which there is extreme earnings inequality at the competitive equilibrium (CE). Following up on a conjecture by Smith (1976a), we test whether the well-known equilibrating power of the double auction institution is robust to the presence of complete information about traders’ values and costs and the presence of symmetric market power. We find that complete information is insufficient to impede convergence to CE prices; however, introducing market power consistently causes prices to deviate from the CE, whether or not subjects possess complete …

Team Payroll, Pitcher And Hitter Payrolls And Team Performance: Evidence From The U.S. Major League Baseball, Xing Lu, Jason Matthews, Miao Wang, Hong Zhuang

Economics Faculty Research and Publications

We use the U.S. Major League Baseball team level data in 1985-2015 and find an inverse U-shaped relationship between team payrolls and winning percentages. Furthermore, when investigating the winning effects of pitcher and hitter payrolls, we find the similar curvilinear relationship between pitcher/hitter salaries and team performance.

Shakeout In The Early Commercial Airframe Industry, Taylor Jaworski, Andrew Smyth

Economics Faculty Research and Publications

The commercial airframe industry in the US experienced a shakeout from the early 1930s into the post‐Second World War period. Unlike shakeouts in automobiles, tyres, or televisions, the commercial airframe industry's early life cycle was affected by external factors, particularly government demand. Using newly digitized data on all planes introduced in the commercial market between 1926 and 1965, we find that commercial airframe manufacturers with bomber contracts during the Second World War were more likely to have postwar market share than firms without such contracts, controlling for plane characteristics and other forms of government contracting. We attribute the effect of …

(Wp 2018-01) Ethics And Economics: A Complex Systems Approach, John B. Davis

Economics Working Papers

This chapter examines the nature of ethics and economics as a single subject of investigation, and uses a complex systems approach to characterize the nature of that subject. It then distinguishes mainstream economic and social economic visions of it, where the former assumes that market processes encompass social processes, and the latter assumes that market processes are embedded in social processes. For each vision, strong and weak theses are compared. Both visions are first explained in terms of their respective views of the positive-normative distinction, then in terms of a central normative principle, and then in terms of their policy …

The Effectiveness Of Central Bank Forward Guidance Under Inflation And Price-Level Targeting, Stephen J. Cole

Economics Faculty Research and Publications

This paper examines the effectiveness of central bank forward guidance under inflation and price-level targeting monetary policies. The results show that the beneficial effects of forward guidance increase if a central bank pursues price-level targeting instead of inflation targeting. Output and inflation respond more favorably to forward guidance with price-level targeting than inflation targeting. A monetary policy rule that aggressively reacts to inflation and includes interest rate inertia narrows the performance gap between the two policy regimes. However, forward guidance with price-level targeting is still preferred to forward guidance with inflation targeting after performing multiple robustness checks.