Economics Commons^™

How Global Is Globalization?, Jac C. Heckelman, Andrew T. Young

Economics Faculty Working Papers Series

We examine a balanced panel of globalization indices for 129 countries over the years 1991- 2010. We report evidence of cross-country sigma convergence in the overall globalization index. Sigma convergence also holds for each of the economic, political, and social globalization indices, as well as each sub-index within these indices. However, the evidence for stochastic convergence, based on panel unit root tests, is only strong for the political globalization index. Regarding the economic and social dimensions of globalization, respectively, we find evidence for stochastic convergence only in the flows and cultural proximity sub-indices. For the OECD subsample, evidence supports stochastic …

Trade Frictions And Market Access Of Developing Countries: A Product-Level Empirical Investigation, Eugene Bempong-Nyantakyi, Steven Husted, Shuichiro Nishioka

Economics Faculty Working Papers Series

This paper examines the effects of trade frictions, including tariffs and a variety of factors that raise trade costs, on export market access at the product level and, in particular, the role these frictions have on the ability of developing countries to access world markets. We find that a variety of trade frictions do serve to limit market access. We find distance and efficiency in trade facilitation are significant determinants of the probability of success in entering foreign markets. We examine whether there are any systematic development-related biases from these frictions that further limit market access for exporters from developing …

Niche Firms, Mass Markets, And Income Across Countries: Accounting For The Impact Of Entry Costs, Pedro Bento

Economics Faculty Working Papers Series

I develop a model of monopolistic competition in which I distinguish between niche markets and mass markets, in the spirit of Holmes and Stevens (2013). Firms choose between entering a small niche market with high markups or a large mass market with low markups. Entry costs have a much greater impact on output in the niche market as the gains to specialization are high, relative to the mass market where varieties are highly substitutable. Calibrated to match data from U.S. manufacturing, the model generates an elasticity of total factor productivity with respect to entry costs more than twice that in …

Patent Protection As A Tax On Competition And Innovation, Pedro Bento

Economics Faculty Working Papers Series

I introduce patents into a general equilibrium model of innovation, where innovators choose between creating a new product market and competing in an existing market. Patent holders demand royalties from sequential innovators, but are constrained by the ability of innovators to work around patents. I show patent protection acts as a net tax on sequential innovators, reducing both competition and productivity growth. Calibrated to match moments from U.S. data, the model predicts that eliminating patent protection in the U.S. would generate a 23% increase in steady-state productivity growth as well as an increase in welfare equivalent to that from a …

On The Finite Sample Properties Of Pre-Test Estimators Of Spatial Models, Gianfranco Piras, Ingmar R. Prucha

Regional Research Institute Working Papers

This paper explores the properties of pre-test strategies in estimating a linear Cliff-Ord -type spatial model when the researcher is unsure about the nature of the spatial dependence. More specifically, the paper explores the finite sample properties of the pre-test estimators introduced in Florax et al. (2003), which are based on Lagrange Multiplier (LM) tests, within the context of a Monte Carlo study. The performance of those estimators is compared with that of the maximum likelihood (ML) estimator of the encompassing model. We find that, even in a very simple setting, the bias of the estimates generated by pre-testing …

The Contractarian Constitutional Political Economy Of James Buchanan, Roger Congleton

Economics Faculty Working Papers Series

No abstract provided.

The Debt Equity Choice Of Japanese Firms, Terence Tai-Leung Chong, Daniel Tak Yan Law, Feng Yao

Economics Faculty Working Papers Series

Prior studies on the debt-equity choice of firms focus on capital market oriented economies. This paper examines whether firms in Japan, the world’s largest bank-oriented economy adjust their debt equity choice towards the target. We find that the leverage ratios of Japanese firms do adjust slowly towards their target levels. The adjustment speed has dwindled after the Asian Financial Crisis. In contrast to existing literature, we show that an increase in tangible assets reduces the leverage ratio of firms in Japan. It is also found that the effect of financial deficit is persistent while the market timing effect is not

Sentiment Bias In National Basketball Association Betting, Arne Feddersen, Brad R. Humphreys, Brian P. Soebbing

Economics Faculty Working Papers Series

We develop evidence of bettors with sentiment bias in the betting market on National Basketball Association (NBA) games. We use novel measures of team popularity, arena capacity-utilization and team all star votes received, as proxies for the presence of biased investors. Analysis of point spreads and bet outcomes for more than 33,000 NBA games played in 1981-2012 shows that bookmakers oer favorable point spreads on games involving popular teams, an outcome consistent with sentiment bias. These favorable point spreads do not translate into higher returns for informed bettors, suggesting that bookmakers shade point spreads to increase their profits.

Sentiment Bias And Asset Prices: Evidence From Sports Betting Markets And Social Media, Arne Feddersen, Brian P. Soebbing, Brad R. Humphreys

Economics Faculty Working Papers Series

Previous research using attendance-based proxies for the number of investors with sentiment bias supported the presence of investor sentiment in sports betting markets. We use data from social media (Facebook "Likes") to proxy for participants with investor sentiment and analyze variation in prices set by bookmakers for evidence of influence from investor sentiment. Based on prices and outcomes over two seasons in seven professional sports leagues in Europe and North America, we develop new evidence that asset prices reflect the presence of investor sentiment in these markets, or that bookmakers believe they exist, by offering favorable betting lines …

Competition As A Discovery Procedure: Schumpeter Meets Hayek In A Model Of Innovation, Pedro Bento

Economics Faculty Working Papers Series

I incorporate an insight of Friedrich Hayek - that competition allows a thousand flowers to bloom, and discovers the best among them -into a model of Schumpeterian innovation. Firms face uncertainty about the optimal direction of innovation, so more innovations implies a higher expected value of the `best' innovation. The model accounts for two seemingly contradictory relationships reported in recent empirical studies - a positive relationship between competition and industry-level productivity growth, and an inverted-U relationship between competition and firm-level innovation. Notwithstanding the positive relationship between competition and growth, I find antitrust policy reduces industry-level growth.

On The Inevitability Of Divided Government And Improbability Of A Complete Separation Of Powers, Rodger D. Congleton

Economics Faculty Working Papers Series

This paper provides a tightly written overview and modest extension of the constitutional exchange and evolution model developed in Perfecting Parliament and uses that approach to analyze the division of authority that one would expect to see in contemporary constitutional governments. The analysis suggests that constitutions tend to be written, based on the king and council template, and buttressed by a more or less independent court system. Moreover, it suggests that constitutions change at the margin through time as constitutional bargaining takes place. This suggests that a complete separation of power is unlikely to be observed in the long run. …

The State Of Play In Poland”S Unconventional Shale And Oil Development, J Wesley Burnett, Randall Jackson, Robert Blobaum

Regional Research Institute Working Papers

Following the huge gas and oil rush in the US, the world”s gas and oil companies have been eyeing reserves in other countries including Poland, which is believed to be sitting on one of the largest reserves in the European Union. The Poles, seeking to diversify their energy sources and meet EU emissions standards, which are driving up electricity costs, met the news with tremendous fanfare. Following initial geological assessments, major international oil and gas companies soon made announcements to begin drilling operations in Poland. However, one of the major challenges of shale gas development is that is often requires …

Composite Input-Output Production Functions, Randall Jackson

Regional Research Institute Technical Documents

This document describes the algorithm used for creating an aggregated linear production function for an industry by weighting subsector production functions. The result can be used as a column in an interindustry (I ×I) coefficients table or in a standard Use table (C × I) depending on the units (C or I) of the input data.

Integrated Modeling Frameworks, Randall Jackson

Regional Research Institute Resource Documents

This document is intended to clarify the foundations of the IO and CGE analytical frameworks and procedures that underlie the NSF and USDA/NIFA funded research projects. It covers environmental data, life cycle assessment (LCA), input-output models (IO), structural decomposition analysis (SDA), social accounting matrix models (SAMs), and computable general equilibrium modeling (CGE).

Efficient Kernel-Based Semiparametric Iv Estimation With An Application To Resolving A Puzzle On The Estimates Of The Return To Schooling, Feng Yao, Junsen Zhang

Economics Faculty Working Papers Series

An interesting puzzle in estimating the effect of education on labor market earnings (Card (2001)) is that the 2SLS estimate for the return to schooling typically exceeds the OLS estimate, but the 2SLS estimate is fairly imprecise. We provide a new explanation that it could be due to the restrictive linear functional form specification on the control variables and the reduced form. For the parameters of endogenous regressors, we propose two kernel-based semiparametric IV estimators that relax the tight functional form assumption on the control variables and the reduced form. They have explicit algebraic structures and are easily implemented without …

A J-Test For Panel Models With Fixed Effects, Spatial And Time, Harry H. Kelejian, Gianfranco Piras

Regional Research Institute Working Papers

In this paper we suggest a J-test in a spatial panel framework of a null model against one or more alternatives. The null model we consider has fixed effects, along with spatial and time dependence. The alternatives can have either fixed or random effects. We implement our procedure to test the specifications of a demand for cigarette model. We find that the most appropriate specification is one that contains the average price of cigarettes in neighboring states, as well as the spatial lag of the dependent variable. Along with formal large sample results, we also give small sample Monte …

Integrated Modeling Frameworks: A Guide For Research Projects, Randall Jackson

Regional Research Institute Technical Documents

This document is intended to clarify the foundations of the IO and CGE analytical frameworks and procedures that underlie the NSF and USDA/NIFA funded research projects. It covers environmental data, life cycle assessment (LCA), input-output models (IO), structural decomposition analysis (SDA), social accounting matrix models (SAMs), and computable general equilibrium modeling (CGE).

Comparing Implementations Of Estimation Methods For Spatial Econometrics, Roger Bivand, Gianfranco Piras

Regional Research Institute Working Papers

Recent advances in the implementation of spatial econometrics model estimation techniques have made it desirable to compare results, which should correspond between implementations across software applications for the same data. These model estimation techniques are associated with methods for estimating impacts (emanating effects), which are also presented and compared. This review constitutes an up to date comparison of generalized method of moments (GMM) and maximum likelihood (ML) implementations now available. The comparison uses the cross sectional US county data set provided by Drukker, Prucha, and Raciborski (2011c, pp. 6-7). The comparisons will be cast in the context of alternatives using …

State Lottery Revenue: The Importance Of Game Characteristics, Thomas A. Garrett, Russell S. Sobel

Economics Faculty Working Papers Series

No abstract provided.

Can Spatial Dependence Enhance Industry Sustainability? The Case Of Pasture-Based Beef, Inocencio Rodriguez, Gerard D'Souza, Thomas Griggs

Regional Research Institute Working Papers

Can sustainability be enhanced by maximizing the sum of private and social benefits from an industry? This might take place, for example, by identifying production options that increase profitability side-by-side with societal goals such as renewable energy production and carbon sequestration, healthier communities, environmental quality, and economic development. We explore this issue for pasture based beef (PBB), a nascent industry where industry profitability, community development, and quality of life can be enhanced by explicitly linking the PBB supply chain spatially and intertemporally, thereby increasing the sum of private and social benefits. We develop a framework based on optimal control theory …

Data Envelopment Analysis Of Relative Efficiencies Of Public And Private Institutions Of Higher Learning, Joseph Calhoun, Joshua Hall

Economics Faculty Working Papers Series

There has been considerable public debate surrounding the efficiency of higher education in the United States. Using Data Envelopment Analysis, we look at the efficiency of a majority of the institutions of higher learning in the United States. Using two different approaches, we find some evidence that private institutions of higher learning are more efficient than public ones. In particular, masters and bachelors-granting institutions with unrestricted revenue greater than 85% are more efficient than those with less than 85%. Public institutions tend to have more restricted funding, suggesting that their stakeholders constrain them from operating on the frontier.

Impact Estimates For Static Spatial Panel Data Models In R, Gianfranco Piras

Regional Research Institute Working Papers

In the present note we demonstrate how to implement the Lee and Yu (2010) procedure for fixed effects spatial panel data models available from the R (R Development Core Team 2012) package splm (Millo and Piras 2012). Additionally, we also show how to compute the impact estimates introduced by Kelejian, Tavlas, and Hondroyiannis (2006) and formalized in LeSage and Pace (2009). Unlike Matlab (MATLAB 2011), there was no R function specific to static panel data models for the calculation of the impact measures. After receiving numerous requests from the users of splm, we decided to extend the cross sectional functions …

Does School District And Municipality Border Congruence Matter? A Spatial Hedonic Approach, Joshua Hall

Economics Faculty Working Papers Series

Research on zoning typically assumes city planners aim to maximize housing prices with their land use decisions, either explicitly for public choice reasons or implicitly through the approval of land uses that create local net benefits. Noncongruence of school district and municipality borders severs the link between costs and benefits in the eyes of the median voter, however, which could result in excessive residential development and fiscal externalities that lowers property values. This paper uses a hedonic approach to indirectly observe the presence of these externalities. Border congruency between school districts and municipalities in Ohio is measured using GIS data …

Some Brief Syllabus Advice For The Young Economist, Emily Chamlee-Wright, Joshua Hall

Economics Faculty Working Papers Series

We touch on three major pieces of syllabus language that we think can help young economists manage their economics classes in a liberal arts environment. Like the writing of a constitution, it is not enough to just copy the words on the page in order for them to be effective. Instead they must fit the “facts on the ground” and the day-to-day experiences of students. If the syllabus talks about valuing everyone’s time and yet the classroom experience does not reflect that, the syllabus language is useless. Like constitutions, however, syllabi are useful as a starting point for nurturing a …

Estimation Of Spatial Models With Endogenous Weighting Matrices And An Application To A Demand Model For Cigarettes, Harry H. Kelejian, Gianfranco Piras

Regional Research Institute Working Papers

Weighting matrices are typically assumed to be exogenous. However, in many cases this exogeneity assumption may not be reasonable. In these cases, typical model specifications and corresponding estimation procedures will no longer be valid. In this paper we specify a spatial panel data model which contains a spatially lagged dependent variable in terms of an endogenous weighting matrix. We suggest an estimator for the regression parameters, and demonstrate its consistency and asymptotic normality. We also suggest an estimator for the large sample variance-covariance matrix of that distribution. We then apply our results to an interstate panel data cigarette demand model …

---

Go to article

News About Aggregate Demand And The Business Cycle, Jang-Ting Guo, Anca-Ioana Sirbu, Mark Weder

Economics Faculty Working Papers Series

We show that an otherwise standard one-sector real business cycle model with variable capital utilization and mild increasing returns-to-scale is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news shocks to future consumption demand. In sharp contrast to many studies in the existing expectations- driven business cycle literature, our results do not rely on non-separable preferences or investment adjustment costs.

Nonparametric Estimation Of Conditional Value-At-Risk And Expected Shortfall Based On Extreme Value Theory, Carlos Martins -Filho, Feng Yao, Maximo Torero

Economics Faculty Working Papers Series

We propose nonparametric estimators for conditional value-at-risk (VaR) and expected shortfall (ES) associated with conditional distributions of a series of returns on a financial asset. The return series and the conditioning covariates, which may include lagged returns and other exogenous variables, are assumed to be strong mixing and follow a fully nonparametric conditional location-scale model. First stage nonparametric estimators for location and scale are combined with a generalized Pareto approximation for distribution tails proposed by Pickands (1975) to give final estimators for conditional VaR and ES. We provide asymptotic characterizations of the proposed estimators and present the results of a …

The Role Of Regional Science In Shale Energy Development, Randall Jackson, Christa D. Court, Nancy White

Faculty & Staff Scholarship

The most recent boom in fossil fuel extraction is noteworthy through its extensive use of advanced technologies called hydraulic fracturing and horizontal drilling. The papers in this issue demonstrate the role that regional science can and should play in guiding policy, usefully complementing research from physical science and engineering disciplines that focuses on the important geological and environmental consequences of shale energy production. Furthermore, we underscore the need for expanding the traditional regional science focus in policy discussions pertaining to shale energy.

Metro And Non-Metro Business Incubators: Similarities And Critical Differences, Randall Jackson, Peter V. Schaeffer, Mark Middleton

Regional Research Institute Working Papers

Business incubators often figure prominently into regional economic development and innovation strategies. This paper reports on a recent survey aimed at identifying appropriate methods for the evaluation of nonmetropolitan, rural incubator performance. The results draw upon responses from 209 of 719 active U.S. Business incubators identified through our research. Roughly one quarter of the respondents were located outside of areas classified as metropolitan. This paper focuses on critical similarities and differences between metropolitan and non-metropolitan business incubators along the dimensions of economic role, function, and effectiveness. The survey and preliminary synthesis of follow-up interviews suggests that an explicit awareness of …

A Knowledge Base For The World's Energy Rich Regions, Hodjat Ghadimi, Davina Bird

Regional Research Institute Working Papers

Energy rich regions (ERRs) play an important role in the world economy. A knowledge base of energy rich economies on a regional level provides a useful tool for comparative research of sustainable development in ERRs with an interdisciplinary perspective. The purpose of this knowledge base is to present a foundation for understanding the attributes and development processes of various ERRs and the collective role they play in the world’s energy, environment, and development debate. The construction of the ERR knowledge base is described, including the steps and data sources, structure, and process. Using two databases on oil and gas giant …