Economics Commons^™

Department Of Economics Newsletter, V13, Winter 2006, University Of Northern Iowa. Department Of Economics.

Department of Economics Newsletter

Inside This Issue:
--A Message From the Department Head
--Scholarship News
--McElroy Award
--Alumni News
--New Display Case
--Alumni-in-Residence
--Reflections by Ron Rolighed
--Major Themes in Economics
--A Beautiful Mind
--Community College Connections
--If you build it, will they come?
--An Economist Looks at Tenure
--The Minimum Wage
--The Russia Trip-2006
--The Russia I Saw
--From Our Emeritus Faculty
--Dr. Ken McCormick Named Lawrence M. Jepson Professor of International Economics
--Faculty Notes...as They Report It!
--The Economics Club
--By the Numbers
--The Economics Challenge
--Guess Who?

Effects Of Eu Accession On The Politics Of Privatization - The Steel Sector In Comparative Perspective, Aleksandra Sznajder Lee

Political Science Faculty Publications

The purpose of this paper is to examine the effects of the European Union (EU) accession process on the restructuring and privatization of the steel sector of the four largest steel producers in Central and Eastern Europe (CEE), namely Poland, the Czech Republic, Romania, and Slovakia. The outcome to date for these countries' steel mills has been relatively uniform in that they have been integrated into the global production networks of some of the largest multinational steel enterprises. The pressures which brought this outcome about, however, were far from uniform. The variability in the modes of convergence is highlighted by …

Trade Lectures, Anwar Shaikh Phd

Archives of Anwar Shaikh

This collection includes.

• Shaikh, A., PhD. (n.d.). Symposium: Notes mentioning Steve Pressman and aggregate production functions (APFs) [Unpublished handwritten notes]. Manuscript.

• Shaikh, A., PhD. (n.d.). Handwritten notes on Steedman, Ian (1979), Trade amongst growing economies [Unpublished handwritten notes]. Manuscript.

• Felipe, J. (2002, January 15). Email to Anwar Shaikh discussing equations including Cobb–Douglas, translog, and CES [Unpublished email correspondence].

• Shaikh, A., PhD. (n.d.). Handwritten notes on aggregate production functions [Unpublished handwritten notes]. Manuscript.

• Shaikh, A., PhD. (n.d.). I: The secret of growth accounting [Unpublished handwritten notes]. Manuscript.

• Shaikh, A. (2001, December 4). Email to Jesus …

Capital Stock Reading, Anwar Shaikh Phd

Archives of Anwar Shaikh

This collection includes:

• Capital stock reading: chain index readings — Shaikh, A., PhD. October 2006. Unpublished manuscript.
• OECD data series in K stock — Shaikh, A., PhD. October 20, 2006. Unpublished manuscript.
• Whelan, K. June 2000. A guide to the use of chain aggregated NIPA data. Finance and Economics Discussion Series No. 2000-35. Board of Governors of the Federal Reserve System, Division of Research and Statistics, Washington, DC.
• Marginal annotations and derivations on "a guide to the use of chain aggregated NIPA data" — Shaikh, A., PhD. No date given. Unpublished manuscript.
• Liu, Y., Hamalainen, N., & Wong, B.-S. 2003. …

Intra-Industry Specialization And Trade Expansion In U.S. Trade With The Free Trade Areas Of The Americas (Ftaa), John R. Ledgerwood, E. M. Ekanayake, Mihalis Halkides

Publications

This paper aims to explain the extent of vertical and horizontal intra-industry trade (IIT) in United State's foreign trade with the other 33 members of the Free Trade Areas of the Americas (FTAA). It also attempts to identify the country- and industry-specific determinants of vertical and horizontal IIT. This study uses detailed trade data at the 10-digit Harmonized System (HS) industry level and covers a longer and more recent period, 1990 through 2005. The Grubel-Lloyd intra-industry trade index is used to calculate the intensity of these two types of intra-industry trade. One of the main findings is that, with the …

Role Of Home Equity In Retirement Saving: Building Your Nest (Egg), Caroline Theoharides

Honors Theses

This study examines the role of home equity in retirement saving. Using data from the 2001 and 2003 Panel Study of Income Dynamics, this study first updates the existing literature by regressing active saving on real housing capital gains using median regression techniques. Consistent with the literature, an increase in housing capital gains results in a decrease in active saving. While the active saving literature provides an initial analytical framework regarding saving behavior and home equity, the demographic shift in the U.S. due to the imminent retirement of the baby boomers indicates that the impact of changes in home equity …

Optimal Bandwidth Selection In Heteroskedasticity-Autocorrelation Robust Testing, Yixiao Sun, Peter C.B. Phillips, Sainan Jin

Cowles Foundation Discussion Papers

In time series regressions with nonparametrically autocorrelated errors, it is now standard empirical practice to use kernel-based robust standard errors that involve some smoothing function over the sample autocorrelations. The underlying smoothing parameter b, which can be defined as the ratio of the bandwidth (or truncation lag) to the sample size, is a tuning parameter that plays a key role in determining the asymptotic properties of the standard errors and associated semiparametric tests. Small- b asymptotics involve standard limit theory such as standard normal or chi-squared limits, whereas fixed-b asymptotics typically lead to nonstandard limit distributions involving Brownian bridge functionals. …

Sinusoidal Modeling Applied To Spatially Variant Tropospheric Ozone Air Pollution, Nicholas Z. Muller, Peter C.B. Phillips

Cowles Foundation Discussion Papers

This paper demonstrates how parsimonious models of sinusoidal functions can be used to fit spatially variant time series in which there is considerable variation of a periodic type. A typical shortcoming of such tools relates to the difficulty in capturing idiosyncratic variation in periodic models. The strategy developed here addresses this deficiency. While previous work has sought to overcome the shortcoming by augmenting sinusoids with other techniques, the present approach employs station-specific sinusoids to supplement a common regional component, which succeeds in capturing local idiosyncratic behavior in a parsimonious manner. The experiments conducted herein reveal that a semi-parametric approach enables …

Simultaneous Search, Hector Chade, Lones Smith

Cowles Foundation Discussion Papers

We introduce and solve a new class of “downward-recursive” static portfolio choice problems. An individual simultaneously chooses among ranked stochastic options, and each choice is costly. In the motivational application, just one may be exercised from those that succeed. This often emerges in practice, such as when a student applies to many colleges. We show that a greedy algorithm finds the optimal set. The optimal choices are “less aggressive” than the sequentially optimal ones, but “more aggressive” than the best singletons. The optimal set in general contains gaps. We provide a comparative static on the chosen set.

Economic Growth, Inequality And Poverty In Africa, Fassil N. Fanta

Masters Theses

The most important development endeavor is to reduce poverty. There has been an ongoing debate on the actual contribution of growth to poverty reduction. In addition, a related question frequently raised is whether the main focus of development strategies should be placed on growth, or poverty reduction with or without a change in inequality. Without doubt, faster economic growth is associated with faster poverty reduction, given other factors affecting poverty. But an interesting policy implication can be drawn by answering the question of how responsive is poverty for a given level of economic growth or a given change in inequality. …

Endogenous Money Theory: A Unique Alternative?, Goktug Aksan

Masters Theses

Modern monetary policy, applied in developed and developing countries, is based on economic theories that have been in existence for 300 years. These theories, considered for the purpose of this thesis as the New Consensus theory, have its roots in the classical quantity theory of money, Milton Friedman's monetarism, and the rational expectations variant of New Classical and New Keynesian economics. Fundamentally, this theory assumes changes in the money supply have only limited impact on real economic variables such as unemployment and output in the long run. The primary monetary policy derived from this theory is reduction of inflation, with …

The Effects Of Obesity On Health Care Expenditures And Health Insurance Premium Rates, Temenoujka Velkova

Masters Theses

This study investigates the influence of obesity on rising health care expenditures in the United States, which helps us understand the rising health insurance premium rates. Health care expenditures are measured as a share of state gross domestic product. This measure is chosen because it allows me to take a look at not only the out-of-pocket costs but at all other sources of payment, which includes private health insurance. The estimated results suggest that obesity contributes to rising health care expenditures as a share of state gross domestic product. Overweight, heavy drinking, and age also have been found to have …

Capacity Utilization Paper, Anwar Shaikh Phd

Archives of Anwar Shaikh

This collection includes:

• Shaikh, A. (2006, January). Capacity utilization paper [Handwritten notes]. Unpublished manuscript.

• Shaikh, A. (n.d.). Reference list for a paper on capacity utilization [Reference list]. Unpublished manuscript.

• Morin, N., & Stevens, J. (2004, August). Estimating capacity utilization from survey data (Finance and Economics Discussion Series) [Working paper]. Board of Governors of the Federal Reserve System.

• U.S. Census Bureau. (2005, November). Instructions for the survey of plant capacity utilization during the fourth quarter 2005 [Instructional document]. U.S. Department of Commerce.

• Shaikh, A. (n.d.). R and r and capacity utilization rates for various countries [Printed …

New Evidence On Race Discrimination Under "Separate But Equal", Bradley A. Hansen, Mary Eschelbach Hansen

Economics Articles

Recently uncovered data on teachers’ salaries in Virginia in 1906 allow for more precise and consistent estimations of marginal returns to certification and formal education than had been available in previous studies. Virginia's “separate but equal” educational system paid black teachers in rural counties lower wages than it paid white teachers and on average paid a lower premium to blacks for certification and formal education than it paid to whites. In incorporated cities, returns to certification and normal school education were about the same for black teachers and white teachers, although average salaries were lower for black teachers.

Informational Herding And Optimal Experimentation, Lones Smith, Peter Norman Sorensen

Cowles Foundation Discussion Papers

We show that far from capturing a formally new phenomenon, informational herding is really a special case of single-person experimentation — and ‘bad herds’ the typical failure of complete learning. We then analyze the analogous team equilibrium, where individuals maximize the present discounted welfare of posterity. To do so, we generalize Gittins indices to our non-bandit learning problem, and thereby characterize when contrarian behaviour arises: (i) While herds are still constrained efficient, they arise for a strictly smaller belief set. (ii) A log-concave log-likelihood ratio density robustly ensures that individuals should lean more against their myopic preference for an action …

Gaussian Inference In Ar(1) Time Series With Or Without A Unit Root, Peter C.B. Phillips, Chirok Han

Cowles Foundation Discussion Papers

This note introduces a simple first-difference-based approach to estimation and inference for the AR(1) model. The estimates have virtually no finite sample bias, are not sensitive to initial conditions, and the approach has the unusual advantage that a Gaussian central limit theory applies and is continuous as the autoregressive coefficient passes through unity with a uniform / n rate of convergence. En route, a useful CLT for sample covariances of linear processes is given, following Phillips and Solo (1992). The approach also has useful extensions to dynamic panels.

Refined Inference On Long Memory In Realized Volatility, Offer Lieberman, Peter C.B. Phillips

Cowles Foundation Discussion Papers

There is an emerging consensus in empirical finance that realized volatility series typically display long range dependence with a memory parameter (d) around 0.4 (Andersen et. al. (2001), Martens et. al. (2004)). The present paper provides some analytical explanations for this evidence and shows how recent results in Lieberman and Phillips (2004a, 2004b) can be used to refine statistical inference about d with little computational effort. In contrast to standard asymptotic normal theory now used in the literature which has an O ( n -1/2 ) error rate on error rejection probabilities, the asymptotic approximation used here has an error …

Repeated Games With Present-Biased Preferences, Hector Chade, Pavlo Prokopovych, Lones Smith

Cowles Foundation Discussion Papers

We study infinitely repeated games with observable actions, where players have present-biased (so-called beta-delta) preferences. We give a two-step procedure to characterize Strotz–Pollak equilibrium payoffs: compute the continuation payoff set using recursive techniques, and then use this set to characterize the equilibrium payoff set U(beta,delta). While Strotz–Pollak equilibrium and subgame perfection differ here, the generated paths and payoffs nonetheless coincide. We then explore the cost of the present-time bias. Fixing the total present value of 1 util flow, lower beta or higher delta shrinks the payoff set. Surprisingly, unless the minimax outcome is a Nash equilibrium of the stage game, …

Bandit Problems, Dirk Bergemann, Juuso Välimäki

Cowles Foundation Discussion Papers

We survey the literature on multi-armed bandit models and their applications in economics. The multi-armed bandit problem is a statistical decision model of an agent trying to optimize his decisions while improving his information at the same time. This classic problem has received much attention in economics as it concisely models the trade-off between exploration (trying out each arm to find the best one) and exploitation (playing the arm believed to give the best payoff).

Optimal Estimation Of Cointegrated Systems With Irrelevant Instruments, Peter C.B. Phillips

Cowles Foundation Discussion Papers

It has been know since Phillips and Hansen (1990) that cointegrated systems can be consistently estimated using stochastic trend instruments that are independent of the system variables. A similar phenomenon occurs with deterministically trending instruments. The present work shows that such “irrelevant” deterministic trend instruments may be systematically used to produce asymptotically efficient estimates of a cointegrated system. The approach is convenient in practice, involves only linear instrumental variables estimation, and is a straightforward one step procedure with no loss of degrees of freedom in estimation. Simulations reveal that the procedure works well in practice, having little finite sample bias …

Understanding Overbidding In Second Price Auctions: An Experimental Study, David J. Cooper, Hanming Fang

Cowles Foundation Discussion Papers

This paper presents results from a series of second price private value auction (SPA) experiments in which bidders are either given for free, or are allowed to purchase, noisy signals about their opponents’ value. Even though theoretically such information about opponents’ value has no strategic use in the SPA, it provides us with a convenient instrument to change bidders’ perception about the “strength” (i.e., the value) of their opponent. We argue that the empirical relationship between the incidence and magnitude of overbidding and bidders’ perception of the strength of their opponent provides the key to understand whether overbidding in second …

Caller Number Five: Timing Games That Morph From One Form To Another, Andreas Park, Lones Smith

Cowles Foundation Discussion Papers

There are two varieties of timing games in economics: In a war of attrition, more predecessors helps; in a pre-emption game, more predecessors hurts. In this paper, we introduce and explore a spanning class with rank-order payoffs that subsumes both as special cases. In this environment with unobserved actions and complete information, there are endogenously-timed phase transition moments. We identify equilibria with a rich enough structure to capture a wide array of economic and social timing phenomena — shifting between phases of smooth and explosive entry. We introduce a tractable general theory of this class of timing games based on …

Assortative Matching And Repubation, Axel Anderson, Lones Smith

Cowles Foundation Discussion Papers

Consider Becker’s classic 1963 matching model, with unobserved fixed types and stochastic publicly observed output. If types are complementary, then matching is assortative in the known Bayesian posteriors (the ‘reputations’). We discover a robust failure of Becker’s result in the simplest dynamic two type version of this world. Assortative matching is generally neither efficient nor an equilibrium for high discount factors. In a labor theoretic rationale, we show that assortative matching fails around the highest (lowest) reputation agents for ‘low-skill (high-skill) concealing’ technologies. We then find that as the number of production outcomes grows, almost all technologies are of either …

Participatory Watershed Management For Sustainable Rural Livelihoods In India, Budumuru Yoganand, Tesfa Gebremedhin

Regional Research Institute Working Papers

International development goals moved beyond increasing food production to include poverty reduction and protecting the environment in a sustainable way. Degradation of natural resources due to exploitation coupled with population pressure in developing countries causing food insecurity and environmental degradation further. Participatory watershed management approach is proposed to address this problem effectively.

Examining And Evaluating Aggregation Scale Effects On Interregional Commodity By Industry Trade Flow Estimates, Walter R. Schwarm, Randall Jackson

Regional Research Institute Working Papers

This study tests the implementation of interindustry transaction flows in a national system of economic regions derived from an interregional accounting framework and initial information on interregional shipments. The interregional flows connecting states are estimated using a method based on the Commodity Flow Survey data published by the Bureau of Transportation Statistics, which adjusts the estimated interregional SAM to insure the integrity of intraregional and system-wide, national accounts. The resulting US interregional framework describes flows within and among the 51 regions We examine results of a series of trials testing the validity of the resulting interregional trade-flow data versus other …

Macro And Capacity Utilization, Anwar Shaikh Phd

Archives of Anwar Shaikh

This collection includes:

• Palumbo, A., & Trezzini, A. (2003). Growth without normal capacity utilization [Annotated journal article]. The European Journal of the History of Economic Thought, 10(1), 109–135.

• Shaikh, A., PhD. (n.d.). Part II: Demand-determined growth [Annotated page].

• Halevi, J., Laibman, D., & Nell, E. J. (Eds.). (1992). Beyond the steady state: A revival of growth theory [Title page]. Macmillan.

• Flaschel, P., & Skott, P. (2006). Steindlian models of growth and stagnation [Annotated excerpts from journal article]. Metroeconomica, 57(3), 303–338.

Cointegration Capacity Utilization Paper Transparencies, Anwar Shaikh Phd

Archives of Anwar Shaikh

Shaikh, A. M., & Moudud, J. K. (2004, October 7). Measuring capacity utilization in OECD countries: A cointegration method [Draft manuscript]. Unpublished manuscript.

• Shaikh, A. (2006, January 22). Appendix I: Procedure using OLS to derive the long-run relation between output and the capital stock [Appendix]. Unpublished manuscript.

• Shaikh, A. (n.d.). Dummy variables and stability tests by country [Printed list]. Unpublished manuscript.

• Shaikh, A. (2005, June 8). Our capacity utilization model [Handwritten notes]. Unpublished manuscript.

• Shaikh, A. (2005, May 2). Logic of ARDL method [Handwritten notes]. Unpublished manuscript.

• Shaikh, A. (2005, April). EViews estimations: Eqardl00, eqardl01, …

Capital Stocks Spreadsheets Calculations And Simulations, Anwar Shaikh Phd

Archives of Anwar Shaikh

This collection includes:

• Capital Stock Spreadsheets: Simulations and Calculations, by A. Shaikh (2006, October). Unpublished manuscript.
• Fixed Business Capital in the United States, 1925–65, by Bureau of Economic Analysis (1967, February). Survey of Current Business, 47(2), 20–24. U.S. Department of Commerce, Office of Business Economics.
• Impact of Redefinition (i.e., Adjustment) of Prices on K, by A. Shaikh (2006, September 4). Unpublished manuscript.
• Rolling Base Year Measures of the Average Depreciation Rate, by A. Shaikh (2006, October 17). Unpublished manuscript.
• A Guide to the Use of Chain Aggregated NIPA Data, by K. Whelan (2000, p. …

The Interaction Between Individuals’ Destination Choice And Occupational Choice: A Simultaneous Equation Approach, Christiadi, Brian Cushing

Regional Research Institute Working Papers

This study examines the relationship between an individual’s occupation choice and destination choice. It portrays the relationship as an interaction between the supply of occupational skills by individuals and demand by different labor market regions. The analysis applies a two-equation simultaneous system: (1) a multinomial logit model of occupational choice and (2) a conditional logit model of state destination choice. The unusual merger of multinomial logit and conditional logit models in a simultaneous equation framework requires derivation of a unique variancecovariance matrix. The results indicate strong association between supply of (migration) and demand for (industry mix) an individual’s occupational skills. …

The Effects Of 9/11 On The Fire Fighter Labor Market, Kathleen E. Frawley '06

Honors Projects

The purpose of this study is to look at this apparent increase in demand for fire protection services in the theoretical framework of derived demand. The theory of derived demand tells us that the demand for labor in a certain field is determined by the demand for the goods or services produced by that labor (Freeman, 1972). More specifically, we should expect to see a shift to the right of the demand curve for fire fighters from the increased demand for fire protection services since September Eleventh. This should lead to greater employment levels and higher wages in the labor …