Economics Commons^™

Grandma Was Right: Why Cohabitation Undermines Relational Happiness, But Is Increasing Anyway, Bruce Wydick

Economics Faculty Publications

This paper uses a game theoretic model to explain empirical research which has revealed higher relational satisfaction among married couples than cohabiting couples, as well as among married couples who did not cohabit before marriage. Despite these findings, in recent decades cohabitation rates have dramatically increased in both Europe and the United States. Instrumental variables estimations on data from 28 industrialized countries and 50 U.S. states show cohabitation strongly correlated with increases in women’s labor force participation, where a 10 percent increase in women’s labor force participation results in a 6.4 to 14.6 percent increase in cohabitation.

Credit Information Systems In Less Developed Countries: A Test With Microfinance In Guatemala, Jill Luoto, Craig Mcintosh, Bruce Wydick

Economics Faculty Publications

Increases in formal sector lending among the poor have created a need for credit information systems that provide potential lenders both positive and negative data about borrowers. In this paper we provide an overview of the development and use of credit information systems in industrialized and developing countries. The paper subsequently presents a test of the effects of a newly implemented credit information system using fixed effects estimation on panel data from Guatemala. Results indicate that improved screening effects from the system caused the level of portfolio arrears to decline between 2 and 3.5 percentage points six months after it …

Two-Stage Team Rent-Seeking: Experimental Analysis, John J. Cadigan

Economics Faculty Publications

This paper presents a two-stage team rent-seeking model with a contest prize that is not excludable among winning team members. When early effort is a perfect substitute for late effort, early actors can free ride on their late-moving teammates. However, when early and late efforts are complements, all team members exert positive effort levels. Asymmetries in early effort reduce effort choices for all late movers. The theory is tested with laboratory experimental methods. Although subjects overinvest relative to the Nash equilibrium in all treatments, chosen effort levels provide limited support for the model. Early movers exerted higher effort in the …

Efficiency In Deregulated Electricity Markets: Offer Cost Minimization Vs. Payment Cost Minimization Auction, Rimvydas Baltaduonis

Economics Faculty Publications

A payment cost minimization (PCM) auction has been proposed to solve the problem of inflated wholesale electricity prices. In the electricity industry, where even small changes in $/MW are worth tens of millions of dollars, it is highly important that policy makers have a good understanding of the tradeoffs and impacts of new institutional rules. In this paper we examine efficiency performance of the proposed PCM auction in contrast with the offer cost minimization (OCM) auction currently used by most independent system operators (ISOs) in the United States. For most of the analysis we concentrate on production efficiency, which is …

Internal Increasing Returns To Scale And Economic Growth, John A. List, Haiwen Zhou

Economics Faculty Publications

This study develops a model of endogenous growth based on increasing returns due to firms' technology choices. Particular attention is paid to the implications of these choices, combined with the substitution of capital for labor, on economic growth in a general equilibrium model in which the R&D sector produces machines to be used for the sector producing final goods. We show that incorporating oligopolistic competition in the sector producing finals goods into a general equilibrium model with endogenous technology choice is tractable, and we explore the equilibrium path analytically. The model illustrates a novel manner in which sustained per capita …

Wright State University Regional Economic Report, December 2006, Thomas L. Traynor

Economics Faculty Publications

No abstract provided.

A Soft Landing, Steady Growth, And Accelerating Farm Income, John Austin, Chris Decker, Tom Doering, Ernie Goss, Nick Hernandez, Bruce Johnson, Ken Lemke, Franz Schwarz, Scott Strain, Eric Thompson, Keith Turner

Economics Faculty Publications

After years of accelerating growth, the U.S. economy achieved a soft landing in 2006. The rate of economic growth remained positive but slowed sufficiently to reduce inflation pressures and the need for further interest rate increases. At the same time the economy remained strong enough to continue the current expansion which has been in place since late 2001. Such a soft landing is vital because it should allow the economy to continue to expand for years to come, but with moderate inflation.

Pillars Of Growth In Nebraska's Non-Metropolitan Economy, Eric Thompson, Ernie Goss, Chris Decker, Cheryl A. Burkhart-Kriesel, Bruce Johnson, Ben Schmitz, Julian Neira, Pavel Jeutang

Economics Faculty Publications

Agriculture is a critical part of Nebraska’s economy, and changes in the fortunes of agriculture play an important role in the success of the state’s non-metropolitan regions. Trends toward consolidation and rising productivity in agriculture, however, have raised concerns about the future of non-metropolitan Nebraska. Some citizens and policymakers have begun to wonder if the economy can create sufficient job opportunities for non-metropolitan residents. The answer to this question depends not only upon the relative strength of the agricultural sector, but also upon the presence of other industries that can join agriculture as pillars for employment growth in non-metropolitan Nebraska. …

Schumpeter's Creative Destruction: A Review Of The Evidence, Arthur M. Diamond Jr.

Economics Faculty Publications

Thoughtful scholars from Adam Smith to Jared Diamond, have asked the same life-and-death question: why do some societies succeed, and others fail, in producing the goods that make life long, healthy and prosperous? Smith's answer was basically that when societies adopt the rules of market capitalism, their economies grow,:and when they do not adopt the rules of market capitalism, their economies do not. Since Smith, other economists have developed more formal models of economic growth. The classic "Solow growth model" emphasized the investment of capital. Romer's "New Growth Theory," includes knowledge as a variable. What is mainly missing from both …

Consumer Confidence Surveys: Can They Help Us Forecast Consumer Spending In Real Time?, Dean D. Croushore

Economics Faculty Publications

In 1993, the Philadelphia Fed undertook a project to develop a real-time data set for macroeconomists, who can use these data in many ways — for example, when analyzing indexes of consumer confidence. existing research indicates that consumer-confidence measures, though highly correlated with future spending, do not improve forecasts of future spending. but these studies used revised data that were not available to forecasters at the time they made their forecasts. In this article, Dean Croushore uses the real-time data set to investigate an important question: Does using data available to forecasters at the time — that is, real-time data …

Manufacturing Rebounds, John Austin, Chris Decker, Tom Doering, Ernie Goss, Nick Hernandez, Bruce Johnson, Ken Lemke, Donis Petersan, Franz Schwarz, Eric Thompson, Keith Turner

Economics Faculty Publications

National economic conditions will continue to favor growth over the next three years, including sustained increases in manufacturing employment. Higher energy prices, particularly for oil, gasoline, and natural gas, will impact the economy, but probably only will moderate economic growth rather than cause a significant slowdown.

After rapid growth in 2004 and 2005, growth in real gross domestic product is expected to moderate in 2006-2008, due to higher long-term interest rates as well as higher energy prices. Real gross domestic product will grow 3 percent in 2006 and fall to 2.5 percent growth in later years. The housing market will …

Mexico's Labor Market : The Importance Of Education - Occupation Matching On Wages And Productivity In Developing Countries, Michael A. Quinn, Stephen Rubb

Economics Faculty Publications

The positive impact of education on earnings , wages, economic growth is well documented, however the issue of education - occupation matching in developing countries has been largely ignored. Since workers 'level of schooling and their occupations ' required level of education both affect wages , policy makers may find it useful to note if such mismatch exist, if they impact wages, and if they can be avoided. Empirical results from Mexico suggest that in order to obtain the maximum economic benefits from increases in educational attainment levels, a developing country needs to take steps to assure increases in occupational …

Testing Monetary Policy Intentions In Open Economies, Jim Granato, Melody Lo, M.C. Sunny Wong

Economics Faculty Publications

Temple (2002) argues that the inflation level used in Romer (1993) lacks power in revealing the policy intentions of monetary authorities. Temple also points out that Romer's use of the openness--inflation correlation cannot be explained by time consistency theory. In this article, we demonstrate that more open economies experience less inflation volatility and persistence. We attribute our findings to the hypothesis that monetary authorities in more open economies adopt more aggressive monetary policies. This pattern emerges strongly after 1990. Our results indicate that the near-universal regime shift in 1990 is not just a simple process of increased monetary policy aggressiveness, …

Teaching The Ethical Foundations Of Economics: The Principles Course, Jonathan B. Wight

Economics Faculty Publications

When we analyze the source of humor, one ingredient is surely incongruity, the juxtaposition of opposites. So when Tom Lehrer, the consummate Harvard mathematician, openly calls for plagiarism, this is funny because it is exactly the opposite of what we expect - it is absurd. And yet, from the viewpoint of modern economics, is plagiarism really so absurd? We teach our students to maximize short-term profits (in a moral vacuum). We drill them that producers minimize private costs of production (without reference to ethical codes of conduct). We expect economic agents to operate with atomistic selfishness, assuring them that this …

Intra-Firm Specialization, Income Distribution, And International Trade, Haiwen Zhou

Economics Faculty Publications

The impact of international trade on a firm’s degree of specialization and income distribution is studied in a general equilibrium framework in which firms engage in oligopolistic competition. International trade increases a firm’s degree of specialization, but the number of goods a country produces may not change. Trade may lower the welfare of the scarce factor of production. Sufficient conditions for a country’s welfare to increase with trade are provided.

Smith’S Humean Criticism Of Hume’S Account Of The Origin Of Justice, Spencer J. Pack, Eric Schliesser

Economics Faculty Publications

Adam Smith criticizes David Hume's account of the origin of and continuing adherence to the rule of law for being not sufficiently Humean. Hume explained that adherence to the rule of law originated in the self-interest to restrain self-interest. According to Smith, Hume does not pay enough attention to the passions of resentment and admiration, which have their source in the imagination. Smith offers a more naturalistic and evolutionary account of the psychological preconditions of the establishment and morality of justice than Hume had. Smith severs the intimate connection that Hobbes and Hume made between justice and property.

(Review) Self-Interest Before Adam Smith: A Genealogy Of Economic Science, Spencer J. Pack

Economics Faculty Publications

Pierre Force, Self-Interest Before Adam Smith: A Genealogy of Economic Science (Cambridge: Cambridge University Press, 2003), pp. ix, 279, $65.00. ISBN 0-521 83060-5.

(Review) Pierre Force, Self-Interest Before Adam Smith: A Genealogy Of Economic Science, Spencer J. Pack

Economics Faculty Publications

Pierre Force, Self-Interest Before Adam Smith: A Genealogy of Economic Science (Cambridge: Cambridge University Press, 2003), pp. ix, 279, $65.00. ISBN 0-52183060-5.

Continued Growth In Nebraska, Saeed Ahmad, John Austin, Tom Doering, Ernie Goss, Bruce Johnson, Donis Petersan, Franz Schwarz, Eric Thomson, Keith K. Turner

Economics Faculty Publications

National economic conditions will continue to favor growth over the next three years. Increased business investment will combine with rising industrial production, expanding exports, and moderate increases in consumer spending to grow the economy. The rate of inflation is expected to increase as well. The rate of real (inflation-adjusted) growth will moderate compared to strong economic growth during 2004. Real gross domestic product will grow 3 percent to 3.5 percent over the next three years. High oil prices will remain a drain on the economy, siphoning spending from domestically produced goods and services. Fuel prices are expected to remain at …

Remittances, Savings And Relative Rates Of Return, Michael A. Quinn

Economics Faculty Publications

This paper presents a model of migrant behavior in which remittances are treated as both a consumption transfer to households and as an alternative savings mechanism for migrants. This approach leads to the implication that migrants ' remittances/savings behavior should be affected by the relative rate of return on their savings and on the savings of their remittance receiving households. Statistical support for this hypothesis is found using data from Mexican workers in the United States. The paper finds this evidence using selectivity corrective remittance and savings equations. These results hold when the equations are estimated separately or jointly . …

Wright State University Regional Economic Report, Spring 2005, Thomas L. Traynor

Economics Faculty Publications

No abstract provided.

Competition And Microfinance, Craig Mcintosh, Bruce Wydick

Economics Faculty Publications

Competition between microfinance institutions (MFIs) in developing countries has increased dramatically in the last decade. We model the behavior of non-profit lenders, and show that their non-standard, client-maximizing objectives cause them to cross-subsidize within their pool of borrowers. Thus when competition eliminates rents on profitable borrowers, it is likely to yield a new equilibrium in which poor borrowers are worse off. As competition exacerbates asymmetric information problems over borrower indebtedness, the most impatient borrowers begin to obtain multiple loans, creating a negative externality that leads to less favorable equilibrium loan contracts for all borrowers.

Adam Smith And Greed, Jonathan B. Wight

Economics Faculty Publications

The virtues of greed have been widely promoted by some economists in the 20th century. Allegedly it is Adam Smith who provides this new dignity to greed (Lerner, 1937, ix). Kenneth Arrow and Frank Hahn in the General Equilibrium Analysis (1971), for example, implicitly assume that Adam Smith's self-interest is the greed that promotes economic efficiency (quoted in Evensky, 1993, 203). Walter Williams (1999), a devoted follower of Smith, writes in his column that, "Free markets, private property rights, voluntary exchange, and greed produce preferable outcomes most times and under most conditions." These pronouncements have become part of the cultural …

Living Wages And The Retention Of Homecare Workers In San Francisco, Candace Howes

Economics Faculty Publications

This study records the impact on workforce retention of the nearly doubling of wages for homecare workers in San Francisco County over a 52-month period. Using descriptive statistics and logistic regression analysis I find that the annual retention rate of new providers rose from 39 percent to 74 percent following significant wage and benefit increases and that a $1 increase in the wage rate from $8 an hour – the national average wage for homecare – would increase retention by 17 percentage points. I also show that adding health insurance increases the retention rate by 21 percentage points.

Culture And Prosperity: The Truth About Markets—Why Some Nations Are Rich But Most Remain Poor (Book Review), Jonathan B. Wight

Economics Faculty Publications

John Kay’s latest book offers an absorbing romp through the history of economic thought in the 20th century. Kay attempts to explain the complex reality of a modern market system rather than resorting to simplistic theorizing about it. Gone are perfectly rational traders, perfectly competitive markets, incentive compatibilities, low transaction costs, informational symmetries, and no externalities. Kay highlights problems and problem solving as the ubiquitous and historical strata through which markets in the West evolved.

Sustained Growth In Nebraska, Saeed Ahmad, John Austin, Tom Doering, Ernie Goss, Bruce Johnson, Mike Lundeen, Donis Petersan, Franz Schwarz, Eric Thompson, Keith K. Turner

Economics Faculty Publications

National Macroeconomic conditions are favorable for future expansion of income, employment, and revenue in Nebraska. In particular, the U.S. economy is now in the heart of an expansion expected to persist over the three year forecast period. The principal engine of growth will be a sustained expansion in private sector investment and consumption demand. However, the rate of growth in the national economy likely will be moderate rather than rapid. At least three factors will act to moderate growth. The first is higher energy prices. Rapid growth in global demand is expected to keep prices for oil and natural gas …

Upgrading California’S Home Care Workforce: The Impact Of Political Action And Unionization, Candace Howes

Economics Faculty Publications

Candace Howes examines the recent history of one of California's rapidly growing occupations: home care. As the author's analysis demonstrates, home care has been extensively transformed in recent years through large-scale unionization and coalition-based political action, which have led to major improvements in wages and benefits. Apart from providing many home care workers with better pay, the upgrading of this occupation has also improved the quality of care that clients receive, since higher wages make for lower turnover. The improved working and living conditions that result benefit caregivers and those they serve alike. The author's empirical analysis has obvious ramifications …

An Empirical Examination Of The Impact Of College Financial Aid On Family Savings, James Monks

Economics Faculty Publications

The system of distributing financial aid dollars using needs analysis formulae implicitly imposes a financial aid tax on assets. Existing studies provide mixed evidence of the influence of this implicit tax on assets on wealth accumulation. This paper attempts to contribute to the literature on this topic by examining the sensitivity of results to various assumptions, specifications, and categories of assets, using more recent data that allows for the incorporation of recent developments in financial aid and college costs. I find much weaker evidence than existing studies that college financial aid has a significant impact on family savings.

Wright State University Regional Economic Report, Spring 2004, Thomas L. Traynor

Economics Faculty Publications

No abstract provided.

Wright State University Regional Economic Report, December 2003, Thomas L. Traynor

Economics Faculty Publications

No abstract provided.