ARTICLE: Lewis Davis, "Individualism and women's economic rights" Journal of Economics, Management and Religion, Volume 198, Pages 579-597 - June 2022
- Authors: Lewis Davis
- Abstract: Individualism is associated with an emphasis on personal liberty and self-determination, values that reduce support for patriarchal norms and increase gender equality. Here, we investigate whether individualism affects women's economics rights, a key institutional determinant of the economic opportunities available to women. We provide evidence of an economically and statistically significant association between individualism and the de facto level of women's economic rights. This result is robust to a variety of controls, including per capita income, women's educational attainment, oil production, historical determinants of patriarchal culture, and the quality of legal and political institutions. In addition, we present evidence that this association is causal, drawing on instruments motivated by roles of climate and disease in cultural evolution. Finally, we show that individualism's influence on women's economic rights is magnified in democratic and common law countries, suggesting that democracies and common law systems channel cultural preferences into legal outcomes.
- Article: "Individualism and women's economic rights"
ARTICLE: Dong Cheng & Alyssa Trebino (Class of 2020), "Early 20th Century American Exceptionalism on Wheels: The Role of Rapid Automobile Adoption in Economic Development." Letters in Spatial and Resource Sciences - August 2021
- Authors: Dong Cheng & Alyssa Trebino (Class of 2020)
- Abstract: We investigate the contribution of automobile adoption to state-level real income in the United States using hand-collected historical data of the early twentieth century when the adoption was remarkably rapid. To achieve identification, we construct a Bartik-type instrumental variable for automobile adoption. We find an elasticity of income with respect to automobile adoption between 0.5 and 1. Furthermore, we reveal that the elasticity is significantly larger in high-income and automobile producing states.
- Article: "Early twentieth century American exceptionalism on wheels: the role of rapid automobile adoption in economic development"
ARTICLE: Stephen J. Schmidt, "Minimum Grade Requirements for Economics Majors: Effects on Enrollments and Student Learning." AEA Papers and Proceedings, 111: 107-11 - May 2021
- Authors: Stephen J. Schmidt
- Abstract: This paper studies one college's policy requiring minimum grades in core courses for completion of the economics major. The policy reduced majors by approximately 6 percent. Grades of C- and D (requiring students to retake the course) dropped substantially, while grades of C (the minimum acceptable grade) did not change, and grades from C+ to B rose. Difference-in-difference analysis suggests that the policy caused the grade shift. Because C grades did not change and grades as high as B increased, I conclude that the policy caused increased effort by students who were below and somewhat above the performance standard.
- Article: "Minimum Grade Requirements for Economics Majors: Effects on Enrollments and Student Learning"
ARTICLE: Dong Cheng, Zhongzhong Hu & Yong Tan, "Heterogeneous Impacts of Finance on Firm Exports: Evidence from Export Deregulation in A Large Developing Country." The World Economy - February 2021
- Authors: Dong Cheng, Zhongzhong Hu & Yong Tan
- Abstract: This paper investigates the heterogeneous effects of finance on firm exports through the lens of differential exporting modes. China's WTO accession leads to an export deregulation, which empowers private domestic firms with low registered capital to export directly. This quasinatural experiment encourages firms switching from indirect to direct exporting, and thus provides an ideal setting to explore the heterogeneous effects of finance on exports among switchers and non-switchers. Applying the difference-in-differences (DID) approach to a comprehensive survey data on Chinese manufacturing firms, we find that finance improves exports more for firms switching from indirect to direct exporting, relative to continuous indirect exporters. Our mechanism analysis shows that finance manifests a more pronounced encouraging effect on firm-level operation efficiency and productivity among switchers. Moreover, we show that the heterogeneous effects of finance on exports among switchers and non-switchers are more pronounced in the post-WTO accession period. The time-varying heterogeneous impacts suggest an economic loss caused by the export distortion before China's WTO accession because it prevents productive yet financially constrained private domestic firms from direct exporting.
- Article: "Heterogeneous Impacts of Finance on Firm Exports: Evidence from Export Deregulation in A Large Developing Country"
ARTICLE: Dong Cheng, "Housing boom and non-housing consumption: evidence from urban households in China." Empirical Economics - January 2021
- Authors: Dong Cheng
- Abstract: We study the response of non-housing consumption to housing price movements in urban China, which has been witnessing a real estate boom ever since 2003. Using Urban Household Survey data, we estimate an elasticity of consumption with respect to housing price of 0.06–0.07 for homeowners. Moreover, we find that the average marginal propensity to consume out of housing wealth is 0.025–0.03. We employ a novel instrumental variable associated with higher-education expansion to ensure that these estimates are causal effects. As for renters, we show that their consumption response to housing shocks is insignificant. We further reveal that the marginal propensity to consume is larger for homeowners who are more credit constrained.
- Article: "Housing boom and non-housing consumption: evidence from urban households in China"
ARTICLE: Dong Cheng, Xunpeng Shi & Jian Yu, "The Impact of Green Energy Infrastructure on Firm Productivity: Evidence From the Three Gorges Project in China." International Review of Economics & Finance - January 2021
- Authors: Dong Cheng, Xunpeng Shi & Jian Yu
- Abstract: Despite the dominant role of hydropower in the global power generation mix and the popularity of studying the productivity impact of infrastructure investment, there is a lack of research regarding the impact of hydropower projects on firm productivity. Such a positive impact can promote a more ambitious action plan for mitigating carbon emissions. This study investigates whether and how China’s Three Gorges Project (TGP), the world’s largest hydropower project, may affect the productivity of manufacturing firms in the province where the project is located. The empirical results reveal a statistically and economically significant positive impact of the TGP on manufacturing firms’ productivity, and various robustness checks confirm the soundness of our findings. We also verify three channels, the capital deepening effect, the scale effect, and the competition effect, robustly. This productivity impact suggests that hydropower projects have an economic benefit in addition to the other well-known ones, such as flood control and improvement of the shipping capacity. The findings imply that policy makers need to consider the broad benefits of green energy beyond the conventional cost-benefit tradeoff, which can help justify some marginal green energy projects and technologies.
- Article: "The Impact of Green Energy Infrastructure on Firm Productivity: Evidence From the Three Gorges Project in China"
ARTICLE: Lewis Davis, "On the Origin of Religious Values: Does Italian Weather Affect Individualism in Bolivia?" Journal of Economics, Management and Religion, Vol. 02, No. 02 - April 2022
- Authors: Lewis Davis
- Abstract: In this paper, I advance and empirically support the indigenous religious values hypothesis, which holds that religions espouse values indigenous to the countries in which they developed. To identify the indigenous values of a religion’s homeland, I rely on the negative relationship between individualism and rainfall variation. I find strong empirical support for the hypothesis that contemporary individualism depends on rainfall variation in the homelands of religions to which a country’s population adheres. Indeed, this relationship explains over a quarter of the international variation in individualism. This effect is robust to controls for the role of religion in institutional and technological transfers and the confluence of conversion and colonisation. In keeping with the explicitly religious nature of the mechanism proposed here, I also find that rainfall variation in religion homelands plays a greater role in explaining the values of countries with greater religious freedom and the values of individuals who are more religious or members of religious minorities.
- Article: "On the Origin of Religious Values: Does Italian Weather Affect Individualism in Bolivia?"
ARTICLE: Younghwan Song & Jia Gao, "Does Telework Stress Employees Out? A Study on Working at Home and Subjective Well-Being for Wage/Salary Workers." Journal of Happiness - October 2020
- Authors: Younghwan Song, Jia Gao
- Abstract: With the expansion of high-speed internet during the recent decades, a growing number of people are working from home. Yet there is no consensus on how working from home affects workers’ well-being in the literature. Using data from the 2010, 2012, and 2013 American Time Use Survey Well-Being Modules, this paper examines how subjective well-being varies among wage/salary workers between working at home and working in the workplace using individual fixed-effects models. We find that compared to working in the workplace, bringing work home on weekdays is associated with less happiness, and telework on weekdays or weekends/holidays is associated with more stress. The effect of working at home on subjective well-being also varies by parental status and gender. Parents, especially fathers, report a lower level of subjective well-being when working at home on weekdays but a higher level of subjective well-being when working at home on weekends/holidays. Non-parents’ subjective well-being does not vary much by where they work on weekdays, but on weekends/holidays childless males feel less painful whereas childless females feel more stressed when teleworking instead of working in the workplace. This paper provides new evidence on the impact of working at home and sheds lights for policy makers and employers to re-evaluate the benefits of telework.
- Article: "Does Telework Stress Employees Out? A Study on Working at Home and Subjective Well-Being for Wage/Salary Workers"
ARTICLE: Dong Cheng, Jian Yu & Hanyuan Zhang, "Exporting and Electricity Consumption: New Microeconomic Evidence from Manufacturing Firms in China." Applied Economics Letters - August 2020
- Authors: Dong Cheng, Jian Yu, Hanyuan Zhang
- Abstract: We investigate the relationship between firm exporting and energy consumption using newly matched manufacturing data from China. We reconfirm that exporting is negatively correlated with electricity consumption. Moreover, we document novel evidence that foreign exporters consume more electricity than domestic exporters, which supports the pollution haven hypothesis.
- Article: "Exporting and Electricity Consumption: New Microeconomic Evidence from Manufacturing Firms in China"
ARTICLE: Lewis Davis & Sumit Deole, "Refining the Salience Hypothesis: Does the Response to Immigration Differ Across Countries?" International Migration - June 2020
- Authors: Lewis Davis, Sumit Deole
- Abstract: Applied to immigration, Blalock’s (Toward a Theory of Minority-Group Relations. A Capricorn Giant, 1967) salience hypothesis predicts that contact with immigrants will tend to highlight the role of nationality in the identities of natives and thereby increase opposition to immigration. Drawing on group threat and cultural perspectives hypotheses, we consider the roles of macroeconomic conditions and national culture in salience effects. Our results indicate that economic concerns over immigration are more sensitive to the immigrant population share during difficult economic times and in countries with less religious diversity and more collectivist cultures. In contrast, cultural concerns over immigration are not sensitive to the macroeconomic and cultural variables we examine. Thus, the attitudinal response to immigration differs significantly across countries, a finding that is relevant to attempts to manage the social and political consequences of large immigration inflows.
- Article: "Refining the Salience Hypothesis: Does the Response to Immigration Differ Across Countries?"
ARTICLE: Lewis Davis & Claudia Williamson, "Cultural Roots of Family Ties." Journal of Institutional Economics - May 2020
- Authors: Lewis Davis, Claudia Williamson
- Abstract: We forward the hypothesis and empirically establish that variations in the strength of family ties are rooted in culture. In particular, we show that individualism is associated with looser family ties. We exploit the associations between contemporary individualism and historical climatic and disease environments to establish a causal relationship. At both the individual- and country-levels, we find strong support that individualism reduces family ties. The estimated effects are economically large and robust to a wide variety of potentially confounding variables.
- Article: "Cultural Roots of Family Ties"
ARTICLE: Dong Cheng, Jian Yu, Dayong Zhang & Wenping Zheng, "Is Heterogeneous Capital Depreciation Important for Estimating Firm-Level Productivity? Evidence from Chinese Manufacturing Firms." Research in International Business and Finance - April 2020
- Authors: Dong Cheng, Jian Yu, Dayong Zhang, Wenping Zheng
- Abstract: This paper contributes to the existing literature on estimating firm-level production functions. Using Chinese manufacturing survey data, we employ the firm-level heterogeneous capital depreciation rate to measure firms’ investment and assess its role using Olley and Pakes (1996) (OP) production function estimation technique. Although there is some ongoing debate on the econometric soundness of the OP technique, we argue quantitatively that the heterogeneous depreciation rate muffles the measurement error associated with the key input demand investment. In our sample, it significantly narrows the gap of total factor productivity (TFP) estimates between the OP technique and a state-of-the-art estimation method that works without investment. We further reveal that the improved performance primarily originates from the dynamic evolution in the distribution of the capital depreciation rate.
- Article: "Is Heterogeneous Capital Depreciation Important for Estimating Firm-Level Productivity? Evidence from Chinese Manufacturing Firms"
ARTICLE: Lewis Davis & Stephen Wu, "The Taste For Status In International Comparison." Journal of Happiness Studies - August 2020
- Authors: Lewis Davis, Stephen Wu
- Abstract: This paper provides the first comparative analysis of the preference for social status across countries. We develop and provide support for two hypotheses: the cultural foundations hypothesis, which claims that individuals’ preferences for status are rooted in persistent cultural values, and the standard of living hypothesis, which states that in more developed economies, relative income matters more and absolute income matters less to individual utility. To investigate these hypotheses, we propose a theoretically grounded measure of the taste for status, the marginal rate of substitution of relative for absolute income. We find empirical support both of these hypotheses. Specifically, we find that the taste for status is positively associated with individualism, egalitarianism and per capita income. We also identify and provide evidence regarding two threshold values of the taste for status, which are associated with the onset of status preferences and with the emergence of an hedonic treadmill. Our estimates indicate that most countries fall between these two thresholds, and thus experience a positive taste for social status. Only the poorest and most hierarchical and collectivist countries fall below the threshold for a taste for status, and only the richest and most individualist and egalitarian countries experience an hedonic treadmill.
- Article: "The Taste For Status In International Comparison."
ARTICLE: Lewis Davis & Jia Gao, "Preferences or Patriarchy: Why Do Religious Women Work Less?" Social Indicators Research - January 2020
- Authors: Lewis Davis, Jia Gao
- Abstract: Religious women work less than their non-religious counterparts. Is this because they want to work less or because patriarchal social norms limit their choices? To address this question, we estimate the employment happiness premium, which we define as the happiness gain associated with being employed, for men and women belonging to six world religions and for the non-religious. Our results indicate that the employment happiness premium is higher for men than for women for every world religion and that the gender gap in the employment happiness premium varies significantly across religions. Next, we ask whether the gender gap in the employment happiness premium can explain the gender gap in employment. That is, is it plausible that preferences explain employment patterns across religions and genders? We find that preferences plausibly explain the gender employment gap for Buddhists, Orthodox Christians, and the non-religious. In contrast, they explain less than half the observed gender employment gap for Hindus, Muslims, Catholics and Protestants. Our findings are consistent with a significant role for patriarchal social norms in constraining female employment in these religious traditions.
- Article: "Preferences or Patriarchy: Why Do Religious Women Work Less?"
ARTICLE: Dong Cheng, Yong Tan & Jian Yu, "Credit Rationing and Firm Exports: Microeconomic Evidence from Small and Medium-Sized Enterprises in China." The World Economy - December 2019
- Authors: Dong Cheng, Yong Tan, Jian Yu
- Abstract: This paper examines the effect of credit rationing on export performance by small and medium‐sized firms in China. We use a detailed firm‐level data provided by the Small and Medium‐sized Enterprises Dynamic Survey (SMEDS) during 2015–16 to conduct this analysis. The SMEDS provides firm‐specific measures of credit rationing based directly on firm‐level responses to the survey rather than indirect ones, based on firm‐level financial statements. We find that, at the extensive margin, weak and strong credit rationing reduces export probability of small and medium‐sized enterprises (SMEs) by 15.1% and 39.6%, respectively. At the intensive margin, they decrease SMEs' export values by more than 20.0% and over 28.8%, respectively. Different than existing literature, we construct valid firm‐level instruments, firm‐level housing stock, for credit rationing rather than using province‐level instruments. We also employ county‐industry‐level instruments and obtain consistent estimates. In addition, credit rationing exhibits heterogeneous impacts on firms with different liquidity ratios, product portfolios, external collateral and capital utilization rates.
- Article: "Credit Rationing and Firm Exports: Microeconomic Evidence from Small and Medium-Sized Enterprises in China"
ARTICLE: Lewis Davis & K.R. White, "Is Justice Blind? Evidence From Federal Corruption Convictions." Public Choice - November 2019
Authors: Lewis Davis, K.R. White
Abstract: Are federal prosecutors influenced by partisan political concerns? We examine that question by analyzing 40 years of federal corruption convictions at the state and federal district levels. Our key finding is that state-level federal corruption convictions fall by roughly 9% in years when a state’s governor belongs to the same party as the president who appointed local US Attorneys, a measure of state-federal political alignment. The result is robust to controls for the state political environment, election cycles, party tenure in the executive branch, public sector employment, federal aid to states, a state’s electoral importance, and the changes in Honest Services law, the statutory basis for many federal corruption cases. Our results are consistent with a significant level of partisan prosecutorial bias on the part of US Attorneys. In a placebo test, we find no evidence that state-federal political alignment affects the total number of federal criminal convictions. That finding provides support for the mechanism that we propose, namely the partisan exercise of prosecutorial discretion, rather than the partisan allocation of prosecutorial resources across federal districts.
ARTICLE: Lewis Davis, Claudia Williamson, "Does Individualism Promote Gender Equality?" World Development - November 2019
- Authors: Lewis Davis, Claudia Williamson
- Abstract: We argue that individualism promotes gender equality. Individualist values of autonomy and self-determination transcend gender identities and serve to legitimize women’s goals and choices. In contrast, collectivist values may subordinate women’s personal goals to their social obligations, generating greater acceptance of gender inequality. Using individual level data from World Values Surveys, we find that individualism is significantly associated with support for gender equal attitudes regarding employment, income, education, and political leadership. Individualism is also associated with greater levels of female employment and educational attainment, and lower levels of fertility. These results are robust to controlling for income, education, religion, historical plough use, gendered language, and country-time fixed effects. Our within country analysis allows us to isolate the impact of individualism from other confounding effects. Using historical rainfall variation as an instrument for individualism, we find that the exogenous portion of individualism reduces support for patriarchal attitudes and fertility, and it increases female employment and educational attainment. These effects are economically large. We address concerns over instrumental validity by controlling for a variety of factors, including historical plough use, religious affiliation, religiosity, social trust, average rainfall levels, distance from the equator, cool-water conditions, agricultural suitability, historical political and economic development, and the presence of large animals. This paper contributes to a mounting body of evidence suggesting a key role for highly persistent cultural norms and values in determining gender inequality, the gender division of labor, and economic and social outcomes for women.
- Article: "Does Individualism Promote Gender Equality?"
ARTICLE: Dong Cheng, Xuepeng Shi, Jian Yu & Dayong Zhang, "How Does the Chinese Economy React to Uncertainty in International Crude Oil Prices?" International Review of Economics & Finance - November 2019
- Authors: Dong Cheng, Xuepeng Shi, Jian Yu, Dayong Zhang
- Abstract: This paper investigates the dynamic impacts of uncertainty in international crude oil prices on the Chinese economy. We use two measures, sample standard deviation and conditional standard deviation estimated from a GARCH (1,1) model, to calculate uncertainty in oil prices. We find that an increase in volatility in oil prices tends to reduce the real gross domestic product (GDP) and investment, which in turn encourages the Chinese government to stabilize the economy through expansionary fiscal and monetary policy. Furthermore, when we differentiate the impacts of increases and decreases in oil price uncertainty, we obtain a symmetric result. An increase in oil price uncertainty reduces real GDP and investment, while a decrease boosts the macroeconomy. We attribute the effect of decreasing uncertainty to the combined factor of falling uncertainty and an expansionary monetary and fiscal policy. A cross-sectional check related to economic geography indicates that uncertainty shocks to oil prices has a significantly greater negative impact on real GDP and investment in eastern China, where the economy is more industrialized and depends more heavily on oil than other regions.
- Article: "How Does the Chinese Economy React to Uncertainty in International Crude Oil Prices?"
ARTICLE: Dong Cheng, Mario Crucini, Hyunseung Oh & Hakan Yilmazkuday, "Early 20th Century American Exceptionalism: Production, Trade and Diffusion of the Automobile." National Bureau of Economic Research Working Paper Series - November 2019
- Authors: Dong Cheng, Mario Crucini, Hyunseung Oh, Hakan Yilmazkuday
- Abstract: The beginning of the twentieth century provides a unique opportunity to explore the interaction of rapid technological progress and trade barriers in shaping the worldwide diffusion of a new, highly traded good: the automobile. We scrape historical data on the quantity and value of passenger vehicles exported from the United States to other destination countries, annually from 1913 to 1940. We model the rise of US automobile from global obscurity toward a level dependent upon the extent of long-run pass-through of US prices into destination markets and destination GDP per capita. The results based on a diffusion model with CES preferences and non-unitary income elasticity shows that 62% of the gap in diffusion levels between the U.S. and the rest of the world is due to price frictions such as markups, tariffs, and trade costs, while the remaining 38% is due to income effects.
- Article: "Early 20th Century American Exceptionalism: Production, Trade and Diffusion of the Automobile"
ARTICLE: Tomas Dvorak, Simon Halliday, Michael O'Hara & Aaron Swoboda, "Efficient Empiricism: Streamlining Teaching, Research, and Learning in Empirical Courses." Journal of Economic Education - June 2019
- Authors: Tomas Dvorak, Simon Halliday, Michael O'Hara, Aaron Swoboda
- Abstract: The increasing importance of empirical analysis in economics highlights the need for efficient ways to bring these skills to the classroom. R Markdown is a new technology that provides a solution by integrating writing, statistical work and computation into a single document. R Markdown benefits students and instructors by streamlining teaching, research, and collaboration. The authors report on their use of R Markdown in undergraduate teaching, including core courses, electives, and senior theses. They discuss the costs and benefits of adoption, and explain the advantages of R Markdown in teaching reproducibility of empirical work, avoiding time-consuming and error-prone “cut and paste,” and facilitating a one-stop solution for importing, cleaning, manipulating, visualizing, and communicating with data.
- "Efficient Empiricism: Streamlining Teaching, Research, and Learning in Empirical Courses"
ARTICLE: Stephen Schmidt, "Resources and the Acceptability of the Repugnant Conclusion." Theoria. An International Journal for Theory, History and Foundations of Science - April 2019
- Author: Stephen Schmidt
- Abstract: Parfit's Repugnant Conclusion argues, against intuition, that for any world A, another world Z with higher population and minimal well-being is better. That intuition is incorrect because the argument has not considered resources that support well-being. Z must have many more resources supporting well-being than A does. Z is repugnant because it spreads those resources among too many people; another world with Z's resources and fewer people, if available, would be far superior. But Z is still better than A; it is worth accepting its very large population to get the resources needed to support their well-being.
- Article: "Resources and the Acceptability of the Repugnant Conclusion"
ARTICLE: Lewis Davis, "Growth, Inequality and Tunnel Effects: A Formal Mode." Journal of Happiness Studies - April 2019
- Author: Lewis Davis
- Abstract: Hirschman and Rothschild’s (Q J Econ 87(4):544–566, 1973) tunnel effect refers to the propensity for individuals to be pleased by the success of others if they believe this signals an improvement in their own prospects. According to the current literature, tunnel effects may offset the utility losses from increases in peer income levels and income inequality. I develop a simple model of tunnel effects to evaluate these two channels of influence. The analysis confirms that tunnel effects create a positive link between happiness and economic growth. In contrast, rising income inequality generates a tunnel effect that increases the happiness of the rich but decreases happiness among the poor. The analysis confirms Hirschman and Rothschild’s informal analysis indicating that tunnel effects may increase the happiness of the poor in the case of uneven development that involves both growth and rising income inequality. The model also highlights the differential impact of tunnel effects across age and income groups within the population. I close by discussing the model’s implications for empirical investigations of tunnel effects.
- Article: "Growth, Inequality and Tunnel Effects: A Formal Mode"
ARTICLE: Younghwan Song, "Job Displacement and Subjective Well-Being: Findings From the American Time Use Survey Well-Being Models." Journal for Labour Market Research - November 2018
- Author: Younghwan Song
- Abstract: Using matched cross-sectional data drawn from the 2010 and 2012 Displaced Workers Supplements of the Current Population Surveys and the 2010, 2012, and 2013 American Time Use Survey Well-Being Modules, this paper examines the relationship between job displacement and various measures of subjective well-being by sex. Displaced men report lower levels of life evaluation than nondisplaced men due to the differences in employment, marital status and income, whereas displaced women report lower levels of net affect and happiness and increased pain, sadness, and stress than nondisplaced women, but no difference in their life evaluation. Among men, those displaced by layoffs, not by plant closings, express lower levels of life evaluation than those not displaced, but there is no such difference by cause of displacement among women. The negative relationship between job displacement and subjective well-being decreases over time for both men and women.
- Article: "Job Displacement and Subjective Well-Being: Findings From the American Time Use Survey Well-Being Models"
ARTICLE: Lewis Davis & Claudia Williamson, "Open Borders for Business? Causes and Consequences of the Regulation of Foreign Entry." Southern Economic Journal - October 2018
- Authors: Lewis Davis, Claudia Williamson
- Abstract: While an extensive literature examines the regulation of entry by domestic firms, the causes and consequences of the regulation of entry by foreign firms have not been previously considered. First, we analyze the roles of culture, legal origin, democracy, and geographic openness as determinants of regulation of foreign entry. Our findings also show that cultural values matter more in countries with common law traditions. In contrast, the association between democracy and the regulation or foreign entry is fragile. Next, we examine the consequences from foreign entry regulation. Evidence suggests a strong, negative, and economically significant association between the regulation of foreign entry and inward foreign direct investment (FDI). The regulation of domestic entry, however, is positively associated with FDI inflows. This result is robust to controlling for a variety of economic, cultural, and institutional variables.
- Article: "Open Borders for Business? Causes and Consequences of the Regulation of Foreign Entry"
ARTICLE: Lewis Davis, "Political Economy of Growth With a Taste for Status." Journal of Public Economics - December 2018
- Authors: Lewis Davis
- Abstract: This paper investigates the political economy of growth when individuals prefer high levels of relative consumption. A pivotal voter determines the equilibrium tax on capital, the revenues from which fund the provision of productive public goods. The taste for status and the distributions of wealth and political power interact to generate stylized versions of oligarchies, middle-class democracies and populist democracies. A rise in the taste for status increases the role of distributional concerns in policy preferences, lowering growth in an oligarchy or populist democracy, but increasing it in a middle-class democracy. In addition, the egalitarian redistribution of wealth or political power causes growth to first rise and then fall as the equilibrium tax rate approaches and then exceeds its growth-maximizing level, generating inverse U-shaped relationships between democracy and growth and inequality and growth.
- Article: "Political Economy of Growth With a Taste for Status"
ARTICLE: Lewis Davis & Megan Reynolds, "Gendered Language and the Educational Gender Gap." Economics Letters - July 2018
- Authors: Lewis Davis, Megan Reynolds
- Abstract: Languages differ in the degree to which they employ gender distinctions for nouns and pronouns. Speaking a gendered language may highlight gender roles. We find that speaking a gendered language is associated with a greater gender gap in educational attainment.
- Article: "Gendered Language and the Educational Gender Gap"
ARTICLE: Jack Mara, Lewis Davis & Stephen Schmidt, "Social Animal House: The Economic and Academic Consequences of Fraternity Membership." Contemporary Economic Policy - April 2018
- Authors: Jack Mara, Lewis Davis, Stephen Schmidt
- Abstract: We exploit changes in the residential and social environment on campus to identify the economic and academic consequences of fraternity membership at a small North-eastern college. Our estimates suggest that these consequences are large, with fraternity membership lowering student grade point average by approximately 0.25 points on the traditional 4-point scale, but raising future income by approximately 36%, for those students whose decision about membership is affected by changes in the environment. These results suggest that fraternity membership causally produces large gains in social capital, which more than outweigh its negative effects on human capital for potential members. Alcohol-related behavior does not explain much of the effects of fraternity membership on either the human capital or social capital effects. These findings suggest that college administrators face significant trade-offs when crafting policies related to Greek life on campus.
- Article: "Social Animal House: The Economic and Academic Consequences of Fraternity Membership"
ARTICLE: Younghwan Song, "Rotation Group Bias in Current Smoking Prevalence Estimates Using TUS-CPS." Journal of the European Survey Research Association - December 2017
- Author: Younghwan Song
- Abstract: This paper examined whether the sample rotation scheme of the Current Population Survey (CPS) results in an underestimation of current smoking prevalence in the Tobacco Use Supplement to the Current Population Survey (TUS-CPS). The TUS-CPS has been administered as part of the CPS, which has eight rotation groups of households in each month that are repeatedly interviewed based on a sample rotation scheme. Previous research has found that even though all eight rotation groups in the CPS are independent random samples of the population, some estimates, such as unemployment rates, tend to be significantly higher in the first rotation group than among other rotation groups. The probit regression results of this paper showed that although current smokers are more likely to attrite than nonsmokers in all years of the TUS-CPS, for the six waves of TUS-CPS before 2003 there is no evidence that current smoking prevalence estimates were significantly affected by the rotation scheme of the CPS. For the three waves of TUS-CPS since 2003, however, the results showed that current smoking prevalence has been underestimated likely due to panel attrition. It appears that rotation group bias in these waves was caused by the substantially increased number of additional questions smokers had to answer.
- Article: "Rotation Group Bias in Current Smoking Prevalence Estimates Using TUS-CPS"
ARTICLE: Mehmet Sener & Wolf-Heimo Grieben, "Wage Bargaining, Trade and Growth." Research in Economics - September 2017
- Authors: Mehmet Sener, Wolf-Heimo Grieben
- Abstract: We construct a North-South product-cycle model of trade with fully-endogenous growth and union wage bargaining. Economic growth is driven by Northern entrepreneurs who conduct R&D to innovate higher quality products. Northern production technologies can leak to the South upon successful imitation. The North has two sectors: a tradable industrial goods sector (manufacturing) where wages are determined via a bargaining process and a non-tradable sector (services) where wages are flexible. The South has only a tradable industrial goods sector where wages are flexible. We find that unilateral Northern trade liberalization, in the form of lower Northern tariffs on industrial goods, increases the rate of innovation but decreases both the bargained wage in the industrial sector and the flexible wage in the service sector. The wage effects are relative to the Southern wage rate. We also consider a variant of the model with Northern unemployment, driven by a binding minimum wage in the non-tradable service sector. In this case, Northern tariff cuts decrease the innovation rate and the bargained wage rate. In addition, the Northern unemployment rate increases. The model thus highlights the role of labor market institutions in determining the growth and labor market effects of tariff reductions. We also study the effects of unilateral Southern trade liberalization.
- Article: "Wage Bargaining, Trade and Growth"
ARTICLE: Younghwan Song, "A Cross-State Comparison of Measures of Selective Wellbeing." International Journal of Wellbeing - June 2017
- Author: Younghwan Song
- Abstract: Using data drawn from the 2010 American Time Use Survey Well-Being Module, this study examines the relationship between three measures of subjective wellbeing based on time-use data and an objective measure of wellbeing. Whereas the measures of affect—net affect and the U-index—are uncorrelated with the objective quality-of-life ranking of the 50 states in the United States, the measure of meaningfulness shows a significant correlation with objective ranking. The reason for the significant correlation between the measure of meaningfulness and the objective measure of wellbeing is because, when engaged in similar activities, people living in states with better quality of life felt, after controlling for their individual characteristics, their lives to be more meaningful than those living in states with poor amenities, not because time use varies substantially by state.
- Article: "A Cross-State Comparison of Measures of Selective Wellbeing"
ARTICLE: Lewis Davis & Farangis Abdurazokzoda, "Language, Culture and Institutions: Evidence From a New Linguistic Dataset." Journal of Comparative Economics - August 2016
- Authors: Lewis Davis, Farangis Abdurazokzoda
- Abstract: Kashima and Kashima's (1998) linguistic dataset has played a prominent role in the economics of culture, providing the instrumental variables used in two seminal works to identify the causal effect of culture on institutional quality. However, for economists, this dataset has a number of weaknesses, including poor overlap with a key cultural dataset and reliance on sources of linguistic information of uneven quality. We address these issues by constructing a new linguistic dataset based on an authoritative source of linguistic information, the World Atlas of Language Structures. The resulting dataset has greater overlap with key sources of cultural information, is arguably less subject to selection bias, and provides more refined information regarding key dimensions of linguistic variation. We show that the variables in this dataset are significantly correlated with commonly used measures of individualism and egalitarianism. In addition, we reexamine the key results from the literature on culture and institutions, showing the causal relationship between culture and institutions is robust to the use of the new linguistic instruments.
- Article: "Language, Culture and Institutions: Evidence From a New Linguistic Dataset"
ARTICLE: Lewis Davis, "Individual Responsibility and Economic Development: Evidence from Rainfall Data." Kyklos - August 2016
- Author: Lewis Davis
- Abstract: This paper estimates the effect of individual responsibility on economic development using an instrument derived from rainfall data. I argue that a taste for collective responsibility was adaptive in preindustrial societies that were exposed to high levels of agricultural risk, and that these attitudes continue to influence contemporary social norms and economic outcomes. The link between agricultural risk and collective responsibility is formalized in a model of optimal parental socialization effort. Empirically, I find a robust negative correlation between rainfall variation, a measure of exogenous agricultural risk, and a measure of individual responsibility. Using rainfall variation as an instrument, I find that individual responsibility has a large positive effect on economic development. The relationships between rainfall variation, individual responsibility and economic development are robust to the inclusion of variables related to climate and agricultural and institutional development.
- Article: "Individual Responsibility and Economic Development: Evidence from Rainfall Data"
ARTICLE: Lewis Davis & Claudia Williamson, "Culture and the Regulation of Entry." Journal of Comparative Economics - November 2016
- Authors: Lewis Davis, Claudia Williamson
- Abstract: Does culture affect the manner in which a society regulates the entry of new firms? Our results suggest it does. We find more individualistic countries regulate entry more lightly. We investigate how culture matters presenting evidence of significant interactions between individualism and formal legal and political institutions. Individualism has a greater impact on entry regulation in societies with democratic political institutions or a common law tradition. This outcome is consistent with the idea that culture influences social preference for regulation, and political and legal institutions determine the degree to which those preferences are expressed as policy outcomes.
- Article: "Culture and the Regulation of Entry"
ARTICLE: Stephen Schmidt & Manuel Pardo, "The Contribution of Study Abroad to Human Capital Formation." The Journal of Higher Education - December 2016
- Authors: Stephen Schmidt, Manuel Pardo
- Abstract: Studying abroad may allow students to form human capital in ways not possible at home and may enable them to earn higher incomes. On the other hand, study abroad has been criticized as insufficiently rigorous. Little is known about how study abroad affects skills and earnings in the long term. Using a data set of 3,155 students over a range of 43 years from a single college, we investigated the effects of study abroad and found it has no net effect on earnings compared with study at home. The advantages and disadvantages of study abroad are approximately balanced; human capital formed by study abroad is not more or less than that formed in residence. Colleges need not emphasize study abroad more than study on campus, but they also need not worry that study abroad is unproductive. Study abroad and study at home appear equally effective at forming human capital.
- Article: "The Contribution of Study Abroad to Human Capital Formation"
ARTICLE: Stephen Schmidt, "A Proposal for More Sophisticated Normative Principles in Introductory Economics." The Journal of Economic Education - December 2016
- Author: Stephen Schmidt
- Abstract: Introductory textbooks teach a simple normative story about the importance of maximizing economic surplus that supports common policy claims. There is little defense of the claim that maximizing surplus is normatively important, which is not obvious to non-economists. Difficulties with the claim that society should maximize surplus are generally not addressed. Economists are thus frequently criticized by non-economists for having a poor moral foundation for our normative claims. We should tell a more sophisticated normative story that justifies the moral importance of surplus, but acknowledges that other moral values may conflict with generating surplus and that distribution is not always separable from efficiency. This would allow students to make more compelling arguments in favor of normative positions they accept, regardless of the values they hold.
- Article: "A Proposal for More Sophisticated Normative Principles in Introductory Economics"
- ARTICLE: Younghwan Song, "Perspective on ‘'Flexibility at a Cost—Should Governments Stimulate Tertiary Education for Adults?' by Anders Stenberg and Olle Westerlund." Journal of the Economics of Ageing - 2016
ARTICLE: Tomas Dvorak & Miaoqing Jia, “Do the Timeliness, Regularity and Intensity of Online Work Habits Predict Academic Performance?” Journal of Learning Analytics - 2016
- Authors: Tomas Dvorak, Miaoqing Jia
- Abstract: This study analyzes the relationship between students’ online work habits and academic performance. We utilize data from logs recorded by a course management system (CMS) in two courses at a small liberal arts college in the U.S. Both courses required the completion of a large number of online assignments. We measure three aspects of students’ online work habits: timeliness, regularity, and intensity. We find that students with high prior GPAs and high grades in the course work on assignments early and more regularly. We also find that the regularity of work habits during the first half of the term predicts grade in the course, even while controlling for the prior GPA. Overall, however, the marginal predictive power of CMS data is rather limited. Still, the fact that high achieving students show vastly different work habits from low achieving students supports interventions aimed at improving time-management skills.
- Article: “Do the Timeliness, Regularity and Intensity of Online Work Habits Predict Academic Performance?”
ARTICLE: Stephen Schmidt, "Examining Theories of Distributive Justice with an Asymmetric Public Goods Game." The Journal of Economic Education - June 2015
- Author: Stephen Schmidt
- Abstract: In this article, the author presents an asymmetric version of the familiar public goods classroom experiment, in which some players are given more tokens to invest than others, and players collectively decide whether to divide the return to the group investment asymmetrically as well. The asymmetry between players raises normative issues about fairness, rights, and equality that are not present in the symmetric game, where efficiency is the major relevant normative concept. Playing the game in class requires students to confront the distributional question and shows how issues of efficiency can become entangled with other moral issues when solving economic policy problems. The game allows instructors to incorporate theories of distributive justice into economic reasoning in the classroom, as has been widely suggested recently.
- Article: "Examining Theories of Distributive Justice with an Asymmetric Public Goods Game"
ARTICLE: Tomas Dvorak, "Do 401k Plan Advisors Take Their Own Advice?" Journal of Pension Economics and Finance - 2015
- Author: Tomas Dvorak
- Abstract: Sponsors of defined contribution plans often hire financial advisors to help them design and monitor their plans. I find that advisors have a significant impact on the menu of investment options of their clients’ plans. Clients of the same advisor tend to hold the same funds and fund families. They also tend to delete and add the same funds. Advisors’ plans are similar to their clients’ plans in that they tend to hold identical funds, use the same fund families, and fund categories. Thus, to a large extent, advisors take their own advice. However, funds that are in clients’ plans but not in their advisors’ plans have higher expense ratios than the funds held by advisors. Since advisors’ compensation is often tied to the expense ratio of their clients’ funds, this pattern is consistent with misaligned incentives on the part of advisors and their clients.
- Article: "Do 401k Plan Advisors Take Their Own Advice?"
ARTICLE: Lewis Davis, "How to Generate Good Profit Maximization Problems." The Journal of Economic Education - July 2014
- Author: Lewis Davis
- Abstract: In this article, the author considers the merits of two classes of profit maximization problems: those involving perfectly competitive firms with quadratic and cubic cost functions. While relatively easy to develop and solve, problems based on quadratic cost functions are too simple to address a number of important issues, such as the use of second-order conditions and the short-run shutdown condition. Problems based on cubic cost functions are mathematically richer but often involve messy arithmetic; furthermore, many are not plausible representations of a firm's costs. Finding cubic functions that do not suffer from these drawbacks can be a time-consuming process. The author addresses this issue by providing a procedure to generate profit maximization problems that are theoretically interesting, economically plausible, and computationally simple.
- Article: "How to Generate Good Profit Maximization Problems"
ARTICLE: Claudia Canals & Mehment Sener, "Offshoring and Intellectual Property Rights Reform." Journal of Development Economics - May 2014
- Authors: Claudia Canals, Mehment Sener
- Abstract: This paper empirically assesses the responsiveness of US offshoring to intellectual property rights (IPR) reforms in 16 countries. We construct a measure of US offshoring at the industry level based on trade in intermediate goods, covering 23 industries for the period 1973–2006. For each industry, we differentiate between broad offshoring and intra-industry offshoring activities. We conduct a difference-in-difference analysis using the IPR reform years proposed in Branstetter et al. (2006, Quarterly Journal of Economics). We find that following IPR reform, neither broad nor intra-industry offshoring intensities change for the typical US industry at conventional levels of significance. However, high-tech (patent-sensitive) industries substantially expand their intra-industry offshoring activities, whereas low-tech (patent-insensitive) industries do not change their intra-industry offshoring activities in a statistically significant way. In addition, high-tech industries increase their broad offshoring relative to low-tech industries, but the effects are smaller and less robust than those estimated for intra-industry offshoring.
- Article: "Offshoring and Intellectual Property Rights Reform"
ARTICLE: Lewis Davis & Stephen Wu, "Social Comparisons and Life Satisfaction Across Racial and Ethnic Groups: The Effects of Status, Information and Solidarity." Social Indicators Research - July 2014
- Authors: Lewis Davis, Stephen Wu
- Abstract: This paper explores the role of within group social comparisons on the life satisfaction of different racial and ethnic groups in the US. For Whites, we find that higher group income levels are associated with lower levels of life satisfaction, a result that is consistent with a preference for within group status. In contrast, life satisfaction is increasing in group income for Blacks. This result is consistent with the existence of social norms that emphasize Black solidarity. It is also consistent with an information effect in which Blacks rely on peer income levels to form expectations regarding their future prospects. We introduce a theoretical framework to help to distinguish between solidarity and information effects. Our empirical results provide strong support for the hypothesis that solidarity rather than information accounts for the positive relationship between average Black income and the subjective wellbeing of US Blacks. Finally, we consider two theories of social solidarity and find support for social salience but not social density in determining the strength of solidarity effects.
- Article: "Social Comparisons and Life Satisfaction Across Racial and Ethnic Groups: The Effects of Status, Information and Solidarity"
ARTICLE: Younghwan Song & Sabrina Pabilonia, "Single Mothers' Time Preference, Smoking, and Enriching Childcare: Evidence from Time Diaries." Eastern Economic Journal - April 2013
- Authors: Younghwan Song, Sabrina Pabilonia
- Abstract: Previous research has shown that time preference affects individuals’ market time allocation and own human capital investments. This paper uses data from the CPS Tobacco Use Supplements, the American Time Use Survey, and the PSID-Child Development Supplement to examine how time preference, as measured by smoking behavior, affects mothers’ time investments in their children under age 13 and children’s future test scores. Results indicate that single mothers who smoke spend significantly less time with their children in educational activities, such as reading and homework, and sharing meals with their children than non-smokers. Their children also have lower reading test scores.
- Article: "Single Mothers' Time Preference, Smoking, and Enriching Childcare: Evidence from Time Diaries"
ARTICLE: Lewis Davis & Matthew Knauss, "The Moral Consequences of Economic Growth: An Empirical Investigation." The Journal of Socio-Economics - February 2013
- Authors: Lewis Davis, Matthew Knauss
- Abstract: In The Moral Consequences of Economic Growth, Benjamin Friedman argues that growth reduces the strength of interpersonal income comparisons, and thereby tends to increases the desire for pro-social legislation, a position he supports by drawing on the historical records of the US and several Western European countries. We test this hypothesis using a variable from the World Values Survey that measures an individual's taste for government responsibility, which we interpret as a measure of the demand for egalitarian social policy. Our results provide support for a modified version of Friedman's hypothesis. In particular, we find that the taste for government responsibility is positively related to the recent change in the growth rate and negatively related to the change in income inequality. We conclude by discussing the implications of these findings for attempts to further the egalitarian social goals.
- Article: "The Moral Consequences of Economic Growth: An Empirical Investigation"
ARTICLE: Tomas Dvorak & Jigme Norbu, "Do Mutual Fund Companies Eat Their Own Cooking?" Journal of Retirement - 2013
- Authors: Tomas Dvorak, Jigme Norbu
- Abstract: The authors find that mutual fund companies offer mostly their own mutual funds in the 401(k) plans for their own employees. However, there are systematic differences between companies that rely on their own funds and companies that include outside funds. The companies that include outside funds tend to operate funds with high expense ratios. Outside funds in the 401(k) plans of mutual fund companies have significantly lower expense ratios and better governance scores than company’s own funds. This evidence supports the claim that the interests of mutual fund companies are not perfectly aligned with the interests of their funds’ shareholders. The authors also find that among the company’s own funds, the funds selected for the company’s 401(k) plan are almost indistinguishable from the rest of the funds offered by the mutual fund companies. Thus, it is not the case that, within their own funds, mutual fund companies favor their inexpensive funds. In fact, within the companies’ own funds, participants (mutual fund company employees) gravitate towards higher-cost and more actively managed funds. Thus, in one context (choosing to use outside funds) mutual fund companies favor cheap and better governed funds, in another context (choosing among its own funds) mutual fund companies favor actively managed, expensive funds.
- Article: "Do Mutual Fund Companies Eat Their Own Cooking?"
ARTICLE: Tomas Dvorak & Shayna Toubman, "Are Women More Generous than Men? Evidence from Alumni Donations." Eastern Economic Journal - 2013
- Authors: Tomas Dvorak, Shayna Toubman
- Abstract: The explicit hierarchy of recognition in alumni giving offers a useful context in which to examine the nature of gender differences regarding charitable giving. Using 31 years of alumni-giving records at a small liberal arts college, we find that women are more likely to be donors. Among donors, women tend to give more frequently but generally make smaller donations than men. These results hold even after controlling for age, income, and participation in Greek organizations. The results are consistent with the hypotheses that the drive for recognition of charitable giving is stronger in men than women, and that women are more reciprocal than men.
- Article: "Are Women More Generous than Men? Evidence from Alumni Donations"
ARTICLE: Allison Frederick, Stephen Schmidt & Lewis Davis, "Federal Policies, State Responses, and Community College Outcomes: Testing an Augmented Bennett Hypothesis." Economics of Education Review - December 2012
- Authors: Allison Frederick, Stephen Schmidt, Lewis Davis
- Abstract: We estimate the impact of increases in Federal student aid and higher education funding, such as the recently proposed American Graduation Initiative (AGI), on the outcomes of community colleges, including enrollments, list and average tuitions, and educational quality. We develop a reduced form model of state-level education policy in which state policy makers, who have objectives that differ from those of Federal policy makers, respond to changes in Federal policies. Our empirical specification treats state and institutional variables as endogenous; we interpret the coefficients as measuring the responses of state and institution officials to changes in Federal policies. We simulate the effects of AGI and find little evidence that states recapture Federal education resources. AGI would have a significant effect on educational quality but a limited effect on enrollments. An equivalent increase in Federal student aid would have greater impact on access and enrollments, but decrease educational quality.
- Article: "Federal Policies, State Responses, and Community College Outcomes: Testing an Augmented Bennett Hypothesis"
ARTICLE: Lewis Davis & Mehmet Sener, "Private Patent Protection in the Theory of Schumpeterian Growth." European Economic Review - October 2012
- Authors: Lewis Davis, Mehmet Sener
- Abstract: We develop a Schumpeterian growth model with privately optimal intellectual property rights (IPRs) enforcement and investigate the implications for intellectual property and R&D policies. In our setting, successful innovators undertake costly rent protection activities (RPAs) to enforce their patents. RPAs deter innovators who seek to discover higher quality products and thereby replace the patent holder. RPAs also deter imitators who seek to capture a portion of the monopoly market by imitating the patent holder's product. We investigate the role of private IPR protection by considering the impact of subsidies to RPAs on economic growth and welfare. We find that a larger RPA subsidy raises the innovation rate if and only if the ease of imitation is above a certain level. With regards to welfare, we find that depending on the parameters it may be optimal to tax or subsidize RPAs. Thus a prohibitively high taxation of RPAs is not necessarily optimal. We also show that the presence of imitation strengthens the case for subsidizing R&D.
- Article: "Private Patent Protection in the Theory of Schumpeterian Growth"
ARTICLE: Tomas Dvorak, "Timing of Retirement Retirement Plan Contributions and Investment Returns: The Case of Defined Benefit versus Defined Contribution.” The B.E. Journal of Economic Analysis & Policy - May 2012
- Author: Tomas Dvorak
- Abstract: This paper examines the impact of the timing of contributions to defined benefit (DB) and defined contribution (DC) plans on investment returns. I show that net contributions to DB plans are counter-cyclical, while net contributions to DC plans are uncorrelated with the business cycle. Given the past mean reversion in equity prices, the counter-cyclicality of net contributions to DB plans means that dollar-weighted returns on DB plans are higher than the geometric average of annual returns. Therefore, using dollar-weighted returns as a measure of investment performance, the advantage of DB plans over DC plans is greater than using geometric average returns. Overall, I find that dollar-weighted returns on DB plans are more than one percentage point higher than that on DC plans.
- Article: "Timing of Retirement Retirement Plan Contributions and Investment Returns: The Case of Defined Benefit versus Defined Contribution”
ARTICLE: Lewis Davis & Mehmet Sener, "Intellectual Property Rights, Institutional Quality and Economic Growth." Journal of International Commerce, Economics and Policy - 2012
- Authors: Lewis Davis, Mehmet Sener
- Abstract: We consider intellectual property rights (IPRs) in a Schumpeterian growth model in which patent holders face the threats of profit loss due to imitation and complete valuation loss due to outside innovation. We disaggregate IPR policies by distinguishing between the quality of the IPR regime and the intensity of IPR enforcement. An increase in the quality of the IPR regime unambiguously promotes growth. However, the relationship between IPR enforcement intensity and growth follows an inverted U-shaped curve. The growth-maximizing intensity of IPR enforcement is decreasing in institutional quality. We also investigate the model's welfare implications and examine the economy under a no-growth equilibrium.
- Article: "Intellectual Property Rights, Institutional Quality and Economic Growth"
ARTICLE: Scott Morlando, Stephen Schmidt & Kathleen LoGuidice, "Reduction in Lyme Disease Risk as an Economic Benefit of Habitat Restoration." Restoration Ecology - July 2012
- Authors: Scott Morlando, Stephen Schmidt, Kathleen LoGuidice
- Abstract: Habitat restoration is costly and it is often necessary to justify the costs with evidence of benefits to society. These benefits are difficult to quantify because they are measured in terms of ecosystem services rather than currency. This paper introduces a somewhat novel restoration‐related ecosystem service, a reduction in the risk of tick‐borne disease, and incorporates it into a cost/benefit analysis of the restoration of a rare habitat. We use a cost‐of‐illness study to calculate the costs averted by preventing Lyme disease (LD), and a contingent‐valuation survey to estimate the benefit of biodiversity protection. The restoration, removal of an invasive tree, reduced the risk of LD by approximately 98%. Cost‐of‐illness studies show that the restoration would be financially justifiable if it averted 75 cases of LD per year. Given the local LD rate and the visitation rate to the preserve, the habitat restoration can plausibly be justified solely on the benefit of LD cases averted. However, as we do not know how many cases of LD are contracted in the preserve, we also establish the perceived value of protecting biodiversity in a contingent‐valuation survey. Results show that residents were willing to pay a significant fraction of the net cost of restoration to protect biodiversity. When these benefits are taken into account, the number of cases of disease that must be averted to justify remediation is reduced. This exercise spotlights an underappreciated ecosystem service that, when appropriate, can help establish the cost effectiveness of restoration.
- Article: "Reduction in Lyme Disease Risk as an Economic Benefit of Habitat Restoration"
ARTICLE: Younghwan Song, "Time Preference and Time Use: Do Smokers Exercise Less?" Labour - July 2011
- Author: Younghwan Song
- Abstract: Using matched data from the Tobacco Use Supplements to the Current Population Surveys and the American Time Use Surveys, this paper examines how differences in time preference, as measured by smoking status, affect time spent on various non‐market activities in a day. Even after controlling for a host of variables, the results show that individuals with a higher rate of time preference — current smokers — spend more time on non‐market activities that provide immediate gratification, such as watching television, but less time on non‐market activities that provide long‐term returns, such as exercising and education, compared with those who never smoked.
- Article: "Time Preference and Time Use: Do Smokers Exercise Less?"
ARTICLE: Lewis Davis & Mark Hopkins, "The Institutional Foundations of Inequality and Growth." The Journal of Development Studies - July 2011
- Authors: Lewis Davis, Mark Hopkins
- Abstract: After a decade of research, the effect of inequality on long-run economic growth remains unresolved, in part because researchers have treated omitted variable bias as an estimation problem rather than a deeper question of causality. In this article we argue that the key omitted variable is the quality of economic institutions. Using both cross-country and panel data specifications, we find no direct effect of inequality on growth in the long-run. Rather, the protection of property rights simultaneously raises growth rates and reduces income inequality. We interpret these findings as evidence that insecure property rights disproportionately disadvantage the poor.
- Article: "The Institutional Foundations of Inequality and Growth"
ARTICLE: Younghwan Song, "The Effect of Children on Early Retirement Behavior in Europe." Journal of Market Economy - June 2011
- Author: Younghwan Song
- Abstract: Using individual data drawn from the Survey of Health, Ageing and Retirement in Europe, this paper analyzes how having fewer children affects early retirement of the elderly in eleven European countries. To examine the endogeneity of the number of children, I use information on the number of siblings of the respondent as instruments. The estimates indicate that having fewer children increases the probability of early retirement among older workers in Europe. The reasons vary by sex. For men, it is because having fewer children reduces the likelihood of having young children who need financial support from them in later life. For women, it is because women with fewer children are less likely to have employment interruptions during their reproductive phase and thus become vested in pensions earlier than women with more children.
- Article: "The Effect of Children on Early Retirement Behavior in Europe"
ARTICLE: Lewis Davis & Emily LaCroix, "Legal Origin and the Evolution of Environmental Quality." Economics Bulletin - October 2011
- Authors: Lewis Davis, Emily LaCroix
- Abstract: We extend the empirical literature on the environmental Kuznets curve (EKC) by showing the legal origin matters for the evolution of environmental quality. Using observations of ambient sulfur dioxide levels, we find that the EKC for French and British legal origin countries diverge as incomes rise, with the EKC for French legal origin countries lying significantly below that for countries of British legal origin. This finding is robust to the inclusion of proxies for democracy and corruption, the institutional variables emphasized in the current EKC literature. Our results are consistent with the idea that the British common law tradition places a greater emphasis on private relative to collective property rights.
- Article: "Legal Origin and the Evolution of Environmental Quality"
2005 - 2010
ARTICLE: Tomas Dvorak & Henry Hanley, "Financial Literacy and the Design of Retirement Plans." Journal of Socio-Economics - December 2010
- Authors: Tomas Dvorak, Henry Hanley
- Abstract: We design and administer a financial literacy test tailored to a specific defined contribution plan. We find that participants show fairly good knowledge of the basic mechanics of the plan, but are unable to differentiate among various investment options. Knowledge is particularly low among women, low income and low education employees. We also find some evidence that personal contributions lead to more knowledge. These results support plan designs that have few investment options and encourage personal contributions.
- Article: "Financial Literacy and the Design of Retirement Plans"
ARTICLE: Stephanie Curcuru, Tomas Dvorak & Frank Warnock, “Decomposing the U.S. External Returns Differential." Journal of International Economics - January 2010
- Authors: Stephanie Curcuru, Tomas Dvorak, Frank Warnock
- Abstract: We decompose the returns differential between U.S. portfolio claims and liabilities into the composition, return, and timing effects. Our most striking and robust finding is that foreigners exhibit poor timing when reallocating between bonds and equities within their U.S. portfolios. The poor timing of foreign investors–caused primarily by deliberate trading, not a lack of portfolio rebalancing–contributes positively to the U.S. external returns differential. We find no evidence that the poor timing is driven by mechanical reserve accumulation by emerging market countries; rather, it is driven almost entirely by the poor timing of rich, developed (mainly European) countries. Finally, while poor foreign timing appears to be persistent across subsamples, other terms in our decomposition (the composition and return effects and U.S. timing abroad), as well as the overall differential, are sometimes negative, sometimes positive, and usually indistinguishable from zero.
- Article: “Decomposing the U.S. External Returns Differential"
ARTICLE: Ann Owen, Julio Videras & Lewis Davis, "Do all Countries Follow the Same Growth Process?" Journal of Economic Growth - December 2009
- Authors: Ann Owen, Julio Videras, Lewis Davis
- Abstract: We estimate finite-mixture models in which countries are sorted into groups based on the similarity of the conditional distributions of their growth rates. We observe countries growth experiences over the 1970–2000 period and find evidence for a model in which there are two classes of countries, each with its own distinct growth regime. Group membership does not conform to the usual categories used to address parameter heterogeneity such as region or income. We find strong evidence that the quality of institutions and specifically, the degree of law and order, helps to sort countries into different regimes. Once we control for institutional features of the economy, we find no evidence that geographic features such as latitude and being landlocked play a role in determining the country groupings.
- Article: "Do all Countries Follow the Same Growth Process?"
ARTICLE: Lewis Davis, "Institutional Flexibility and Economic Growth." Journal of Comparative Economics - September 2010
- Author: Lewis Davis
- Abstract: This paper develops a formal model to investigate the relationship between institutional quality – the current set of property rights – and institutional flexibility – the ability to develop new institutions – and relate these aspects of institutional structure to dynamic economic performance. The model is used to analyze two types of institutional reform. An increase in institutional quality lowers market transaction costs, producing an immediate but short lived increase in the rate of economic growth. In contrast, an increase in institutional flexibility results in a delayed but permanent increase in economic growth. The analysis suggests that the current work on institutions places too much emphasis on property rights and too little on the determinants of institutional change.
- Article: "Institutional Flexibility and Economic Growth"
ARTICLE: Wolf-Heimo Grieben & Mehmet Sener, "Globalization, Rent Protection Institutions, and Going Alone in Freeing Trade." European Economic Review - November 2009
- Authors: Wolf-Heimo Grieben, Mehmet Sener
- Abstract: We construct a two-country North–South Product-cycle model of trade with endogenous growth and trade barriers. We remove the scale effects on growth by incorporating rent protection activities by Northern incumbents. We examine the effects of two forms of globalization – an expansion of the relative size of the South and unilateral trade liberalization by either country. We find that the location of rent protection institutions and the sectoral trade structure determine whether or not globalization raises steady-state economic growth. We demonstrate that for accelerating worldwide economic growth, contrary to conventional wisdom, unilateral Northern trade liberalization is preferable to bilateral trade liberalization.
- Article: "Globalization, Rent Protection Institutions, and Going Alone in Freeing Trade"
ARTICLE: Younghwan Song, "Training, Technological Changes, and Displacement." Journal of Labour Research - September 2009
- Author: Younghwan Song
- Abstract: By matching industry/occupation data on training to displaced worker data from the Current Population Surveys, this paper analyzes why many older workers were displaced by technological changes in the 1990s, and why these workers incurred large earnings losses. When technological changes depreciate the existing stock of firm-specific human capital, older workers who receive higher wages from the sharing arrangement of the returns to investment in firm-specific human capital are dismissed as firms find it unprofitable to retain them. These displaced workers have higher predisplacement wages with steeper wage–tenure profiles, and hence incur larger earnings losses after displacement than other displaced workers.
- Article: "Training, Technological Changes, and Displacement"
ARTICLE: Younghwan Song, "Unpaid Work at Home." Industrial Relations - August 2009
- Author: Younghwan Song
- Abstract: A substantial number of people take work home without a formal payment arrangement. Using the Work Schedules and Work at Home Supplement to the May 2001 Current Population Survey, this paper investigates the determinants of unpaid work at home. Education, lack of overtime rates, being a team leader, efficiency wages, and larger earnings inequality in an occupation are positively related to the prevalence of unpaid work at home. Unpaid work at home appears to be a form of investment made in expectation of a return in the long run.
- Article: "Unpaid Work at Home"
ARTICLE: David Cotter & Younghwan Song, "The Religious Time Bind: U.S. Work Hours and Religion." Social Indicators Research - August 2009
- Authors: David Cotter, Younghwan Song
- Abstract: This article assesses the degree to which couples’ joint employment patterns affect their religious participation, examining in particular the social status and time scarcity hypotheses. The social status hypothesis views religious participation as linked with position in the community and as a form of “conspicuous consumption” (Veblen 1899) or status display (Demerath 1961; Hertel 1988). This social status hypothesis suggests that individuals with higher status have greater involvement in religious activities, thus higher income and higher education predict higher participation.
- Article: "The Religious Time Bind: U.S. Work Hours and Religion"
ARTICLE: Lewis Davis, "Teaching the Economics of Sin." Teaching Ethics - Spring 2009
- Author: Lewis Davis
- Abstract: This paper describes a course I developed on the Economics of Sin that integrates ethical and economic material. My hope is that this paper will be useful to economists interested in exploring economic phenomena and to philosophers who are interested in the ethical implications of economic markets and policies. In keeping with this agenda, I proceed by discussing a framework for relating economic outcomes to economic criteria. This is followed by two examples from the course, one involving policy in the market for heroin and the other addressing the economics and ethics of paired kidney exchange. These examples are intended to illustrate the potential for combining ethical and economic approaches to understanding ethically complex economic transactions. I conclude with a few practical remarks regarding the challenge of developing an interdisciplinary course.
- Article: "Teaching the Economics of Sin"
ARTICLE: Mehmet Sener & Laixun Zhao, "Globalization, R&D and the iPod Cycle." Journal of International Economics - February 2009
- Authors: Mehmet Sener, Laixun Zhao
- Abstract: This paper constructs a dynamic scale-free North–South model of trade with endogenous innovation. In the North a local-sourcing-targeted race and an outsourcing-targeted R&D race take place simultaneously within each industry. The former results in the winner firm manufacturing in the North, while the latter culminates in the winner firm's immediate outsourcing to the South, generating the iPod cycle. We study three aspects of globalization: reductions in the resource-requirement in outsourcing-targeted R&D, increased subsidies to outsourced production, and reduced Southern imitation due to TRIPs. Each event boosts outsourcing-targeted R&D and increases the frequency of iPod cycles. The aggregate innovation rate rises despite a possible fall in local-sourcing-targeted R&D, and the North–South relative wage decreases.
- Article: "Globalization, R&D and the iPod Cycle"
ARTICLE: Mehmet Sener, "R&D Policies, Endogenous Growth and Scale Effects." Journal of Economic Dynamics and Control - December 2008
- Author: Mehmet Sener
- Abstract: This paper constructs a scale-free endogenous growth model and studies the determinants of optimal R&D policy. The model combines two of the main approaches to removal of scale effects: the rent protection approach and the diminishing technological opportunities approach. The steady-state rate of innovation is a function of all of the model's parameters including the R&D subsidy/tax rate. Thus, growth is fully endogenous. Numerical simulations imply that it is optimal to tax R&D when innovations are of very small and very large magnitudes, and to subsidize R&D when innovations are of medium size. Under a wide range of empirically relevant calibrations, the subsidy rate turns out to be positive and fluctuates between 5% and 25%.
- Article: "R&D Policies, Endogenous Growth and Scale Effects"
ARTICLE: Stephanie Curcuru, Tomas Dvorak & Frank Warnock, "Cross-Border Returns Differentials." Quarterly Journal of Economics - November 2008
- Authors: Stephanie Curcuru, Tomas Dvorak, Frank Warnock
- Abstract: Using a monthly data set on the foreign equity and bond portfolios of U.S. investors and the U.S. equity and bond portfolios of foreign investors, we find that the returns differential for portfolio securities is far smaller than previously reported. Examining all U.S. claims and liabilities, we find that previous estimates of large differentials are biased upward. The bias owes to computing implied returns from an internally inconsistent data set of revised data; original data produce a much smaller differential. We also attempt to reconcile our findings with observed patterns of cumulated current account deficits, the net international investment position, and the net income balance. Overall, we find no evidence that the United States can count on earning substantially more on its claims than it pays on its liabilities.
- Article: "Cross-Border Returns Differentials"
ARTICLE: Stephen Schmidt & Therese McCarty, "Estimating Permanent and Transitory Income Elasticities of Education Spending from Panel Data." Journal of Public Economics - October 2008
- Authors: Stephen Schmidt, Therese McCarty
- Abstract: We use a twenty-one year panel of data to examine the role of past income and aid, and expectations of future income, in regressions explaining state and local education spending. We show that simple estimates of the elasticity of spending with respect to financial resources are not robust to specification changes because the variables are non-stationary over time, causing inconsistent estimation of model parameters. Estimation in first differences (or equivalently, in growth rates) solves the time-series problems and produces robust estimates of the model's parameters. We then show that current spending by states responds to changes in expected future income. This explains why using fixed effects in simpler models reduces estimated income elasticities; fixed effects partially capture permanent income effects on spending. Estimates of lagged income are significant when used in models that do not explicitly model the expectations process, but present and past aid both have no effect on education spending. Models with structural assumptions about expected income produce estimates very similar to simpler models which include lagged information on income as a control variable. We conclude with recommendations for estimating models when only cross-section data or only short panels are available.
- Article: "Estimating Permanent and Transitory Income Elasticities of Education Spending from Panel Data"
ARTICLE: Lewis Davis, "Scale Effects in Growth: A Role for Institutions." Journal for Economic Behavior & Organization - May 2008
- Author: Lewis Davis
- Abstract: Reliance on a Dixit–Stiglitz production function leads the growth literature naïvely to associate economic scale with the size of a country's population. I develop an alternative approach in which market size is endogenous, reflecting a trade-off between the gains to exploiting non-rival skills and market transaction costs. Transaction costs reflect a country's institutional framework. The model supports scale effects in transitional growth rates and steady state income levels, suggesting scale effects may be important for developing countries. In this framework effective market size depends on a country's institutions. It is independent of population size and other macroeconomic variables.
- Article: "Scale Effects in Growth: A Role for Institutions"
ARTICLE: Younghwan Song, "The Working Spouse Penalty / Premium and Married Women's Labor Supply." Review of Economics of the Household - September 2007
- Author: Younghwan Song
- Abstract: Using data drawn from the Current Population Surveys, this paper provides a consistent explanation for why the presence of a working wife reduces the husband’s wage among managers, but increases the husband’s wage among non-managers. It is not husband’s occupation per se but rather the distribution of husbands’ wage levels that underlies the working spouse penalty or premium. Positive correlations in earnings between married couples that arise from assortative mating make the cross-wage effects of the husbands’ wages on the wives’ hours of work first positive, then negative in cross-sectional data. The phenomenon of a working spouse penalty/premium is simply the flip side of this relationship.
- Article: "The Working Spouse Penalty / Premium and Married Women's Labor Supply"
ARTICLE: Younghwan Song, "Recall Bias in the Displaced Workers Survey: Are Layoffs Really Lemons?" Labour Economics - June 2007
- Author: Younghwan Song
- Abstract: This paper examines how the extent of recall bias in the Displaced Workers Surveys affects the often-cited empirical results found by Gibbons and Katz [Gibbons, R., Katz, L.F., 1991. Layoffs and lemons. Journal of Labor Economics 9 (4), 351−380] for the lemons effect of layoffs. Their finding that workers displaced by layoffs experience larger wage losses than do those displaced by plant closings is not due to the stigma attached to the layoff events. Rather it partly stems from recall bias in the 1984 and 1986 DWS, but mostly reflects the fact that workers displaced by layoffs have significantly higher predisplacement wage-tenure profiles than do those displaced by plant closings, while there is no such difference in postdisplacement wage-tenure profiles. A similar analysis using the 2000 and 2002 DWS shows that predisplacement wage losses are not different between workers displaced by layoffs and those displaced by plant closings.
- Article: "Recall Bias in the Displaced Workers Survey: Are Layoffs Really Lemons?"
ARTICLE: Elias Dinopoulos & Mehmet Sener, "New Directions in Schumpeterian Growth Theory." Elgar Companion to Neo-Schumpeterian Economics, Edward Elgar - February 2007
- Authors: Elias Dinopoulos, Mehmet Sener
- Abstract: Schumpeterian growth is a particular type of economic growth that is based on the endogenous introduction of new products and/or processes and is governed by the process of creative destruction described by Joseph Schumpeter (1942). This paper provides an exposition of the scale-effects property in the context of Schumpeterian growth models. In particular, the paper outlines the three distinct solutions to the scale effects problem, discusses their implications and offers an assessment of scale-invariant Schumpeterian growth models.
- Article: "New Directions in Schumpeterian Growth Theory"
ARTICLE: Lewis Davis, "Market Transaction Costs in Industrialization and Demographic Transition." Pacific Economic Review - February 2007
- Author: Lewis Davis
- Abstract: This paper presents a unified theory of growth involving human capital accumulation, labour specialization, market expansion and falling fertility rates. The model suggests that these processes, often analyzed separately, are intimately linked. The accumulation of specialized human capital increases the gains to labour specialization, leading agents to increase their participation in markets and reduce time spent at home. This raises the opportunity cost of child raising, lowering fertility rates. The model suggests a central role for market transaction costs in determining the timing and rate of fertility declines linked to rising income.
- Article: "Market Transaction Costs in Industrialization and Demographic Transition"
ARTICLE: Lewis Davis, "Explaining the Evidence on Inequality and Growth: Informality and Redistribution." The B.E. Journal of Macroeconomics - 2007
- Author: Lewis Davis
- Abstract: This paper constructs a simple model that can account for both the negative relationship between growth and income inequality observed in the cross-country data and the positive relationship observed within countries over time. The model employs a dual-economy structure with formal and informal sectors. Growth is driven by formal sector human capital spillovers. Restrictive institutions impose barriers to formality that reduce the growth rate and increase inequality. Redistributive taxation lowers inequality but blunts the incentive to accumulate, lowering growth. Institutional structures vary more across than within countries. Consequently, variations in institutional barriers to formality may account for the negative relationship between growth and inequality found in the cross-country data. Variations in the intensity of redistribution may account for the positive relationship observed within countries over time.
- Article: "Explaining the Evidence on Inequality and Growth: Informality and Redistribution"
ARTICLE: Tomas Dvorak, "Are the New and Old EU Countries Financially Integrated?" Journal of European Integration - 2007
- Author: Tomas Dvorak
- Abstract: During the last four years, the eight Eastern European countries that joined the EU in 2004 have made significant strides toward financial integration with the EU. Several pieces of evidence support this finding. First, yields on long‐term sovereign bonds in accession countries have converged towards EU levels. This is true for both bonds denominated in local currency and bonds denominated in euro. Secondly, while the issuance of euro‐denominated corporate bonds from accession countries is limited, yields on existing corporate bonds are in line with those in the old EU countries. Thirdly, margins in the banking sector have narrowed, which is consistent with the integration of banking markets. Finally, while country effects still play a more important role in explaining stock returns than industry effects, the continuing stock market rally in the region is consistent with financial integration into the EU.
- Article: "Are the New and Old EU Countries Financially Integrated?"
ARTICLE: David Bloom, David Canning, Michael Moore & Younghwan Song, "The Effect of Subjective Survival Probabilities on Retirement and Wealth in the United States." Population Aging, Intergenerational Transfers and the Macroeconomy - 2007
- Authors: David Bloom, David Canning, Michael Moore, Younghwan Song
- Abstract: We explore the proposition that expected longevity affects retirement decisions and accumulated wealth using micro data drawn from the Health and Retirement Study for the United States. We use data on a person's subjective probability of survival to age 75 as a proxy for their prospective lifespan. In order to control for the presence of measurement error and focal points in responses, as well as reverse causality, we instrument subjective survival probabilities using information on current age, or age at death, of the respondent's parents. Our estimates indicate that increased subjective probabilities of survival result in increased household wealth among couples, with no effect on the length of the working life. These findings are consistent with the view that retirement decisions are driven by institutional constraints and incentives and that a longer expected lifespan leads to increased wealth accumulation.
- Article: "The Effect of Subjective Survival Probabilities on Retirement and Wealth in the United States"
ARTICLE: Stephen Schmidt & Karen Scott, "Reforming Reforms: Changing Incentives in Education Finance in Vermont." Education Finance and Policy - Fall 2006
- Authors: Stephen Schmidt, Karen Scott
- Abstract: In 1997, Vermont passed Act 60, which reformed its education finance system to achieve greater equality of spending. The reform encouraged wealthy towns to reduce spending; it was politically unpopular and was replaced, in 2004, by Act 68. We analyze the spending incentives created by the two acts and estimate the effects the change will have on spending inequality. Act 68 reduces tax prices for education spending in all towns, but reduces them disproportionately for wealthy towns. It increases education spending in Vermont but also increases inequality of spending. Because spending is inelastic with respect to tax prices, the increase in inequality is small relative to existing inequality. Our findings demonstrate that understanding the way towns respond to financial incentives, economically and politically, is critical in designing successful reforms. They suggest that it is difficult to maintain finance systems that give wealthy towns strong incentives to spend less or subsidize poorer towns. Using state revenues to subsidize schools achieves nearly as much equality as more explicit attempts to force wealthy districts to share resources.
- Article: "Reforming Reforms: Changing Incentives in Education Finance in Vermont"
ARTICLE: Mehmet Sener, "Intellectual Property Rights and Rent Protection in a North-South Product-Cycle Model." Manuscript, Union College, Schenectady - July 2006
- Author: Mehmet Sener
- Abstract: This paper constructs a North-South product cycle model of trade and explores the global effects of strengthening Southern Intellectual Property Rights (IPRs) protection. Northern entrepreneurs undertake innovation, and Southern entrepreneurs undertake imitation. Successful innovators in the North are engaged in rent protection activities to deter the innovation and imitation efforts of their rivals. Endogenously determined rent protection activities remove the scale effects from the growth structure. I find that a stronger Southern IPR regime reduces the rates of innovation and imitation while leading to a larger North-South wage gap. With regards to multinationalization, I find that a stronger Southern IPR regime raises both the fraction of Multinational industries and the share of production shifted to the South within each Multinational firm.
- Article: "Intellectual Property Rights and Rent Protection in a North-South Product-Cycle Model"
ARTICLE: Tomas Dvorak & Richard Podpiera, “European Union Enlargement and Equity Markets in Candidate Countries.” Emerging Markets Review - June 2006
- Authors: Tomas Dvorak, Richard Podpiera
- Abstract: The announcement of the European Union enlargement coincided with a dramatic rise in stock prices in accession countries. This paper investigates the hypothesis that the rise in stock prices was a result of the repricing of systematic risk due to the integration of accession countries into the world market. We found that firm-level stock price changes are positively related to the difference between a firm's local and world market betas. This result is robust to controlling for changes in expected earnings, country effects and other controls, although the magnitude of the effect is not very large. The differences between local and world betas explain nearly 22% of the stock price increase.
- Article: “European Union Enlargement and Equity Markets in Candidate Countries”
ARTICLE: Mehmet Sener, "Labour Market Rigidities and R&D-Based Growth in the Global Economy." Journal of Economic Dynamics and Control - May 2006
- Author: Mehmet Sener
- Abstract: This paper constructs a dynamic model of trade between two countries, one with flexible wages (America) and another with a rigid wage for less-skilled workers (Europe). The model incorporates global R&D races that generate random switches in trade patterns. Furthermore, rigid wages in Europe give rise to unemployment in that region. Using the model, I study the role of international trade and labor market institutions in mediating local and global shocks. I also investigate the factors behind the stylized trends in Europe and the US: rising European unemployment, rising wage inequality (especially for the US), skill upgrading, and rising R&D intensities. I find that technology shocks coupled with institutional response from the European labor markets can generate results consistent with the trends.
- Article: "Labour Market Rigidities and R&D-Based Growth in the Global Economy"
ARTICLE: Lewis Davis, "Growing Apart: The Division of Labor and the Breakdown of Informal Institutions." Journal of Comparative Economics - March 2006
- Author: Lewis Davis
- Abstract: In this paper, we model the co-evolution of the division of labor and informal institutions based on three assumptions. First, informal institutions lower coordination costs among specialists, which increases the equilibrium division of labor. Second, advances in the division of labor increase the size of interpersonal trading groups and thereby undermine the game theoretic basis of informal institutions. Finally, the collective nature of informal institutions implies that they are undervalued in private decision making. Together these assumptions imply that the equilibrium division of labor is too high from a social perspective. Consequently, the economy has greater than optimal complexity and grows at a higher than optimal rate of growth.
- Article: "Growing Apart: The Division of Labor and the Breakdown of Informal Institutions"
ARTICLE: Selin Sayek & Mehmet Sener, "Outsourcing and Wage Inequality in a Dynamic Product Cycle Model." Review of Development Economics - January 2006
- Authors: Selin Sayek, Mehmet Sener
- Abstract: This paper constructs a dynamic North–South trade model with outsourcing and endogenous innovation. Production of high quality goods is first performed in the North (Northern phase), then split between the North and the South (Outsourcing phase), and finally shifted to the South (Southern phase). This cycle is reignited whenever a Northern firm innovates a higher quality product. We find that an increase in the fraction of outsourced production raises the Northern skill premium unambiguously, while raising the Southern skill premium if and only if the skill intensity of outsourced production is higher than that of local Southern production.
- Article: "Outsourcing and Wage Inequality in a Dynamic Product Cycle Model"
2000 - 2005
ARTICLE: Tomas Dvorak, "Do Domestic Investors Have a Information Advantage?" Journal of Finance - March 2005
- Author: Tomas Dvorak
- Abstract: Using transaction data from Indonesia, this paper shows that domestic investors have higher profits than foreign investors. In addition, clients of global brokerages have higher long‐term and smaller medium (intramonth) and short (intraday) term profits than clients of local brokerages. This suggests that clients of local brokerages have a short‐lived information advantage, but that clients of global brokerages are better at picking long‐term winners. Finally, domestic clients of global brokerages have higher profits than foreign clients of global brokerages, suggesting that the combination of local information and global expertise leads to higher profits.
- Article: "Do Domestic Investors Have a Information Advantage?"
ARTICLE: William Darity, Jr. & Lewis Davis, "Growth, Trade and Uneven Development." Cambridge Journal of Economics - January 2005
- Authors: William Darity, Jr., Lewis Davis
- Abstract: Theories of growth and international trade are reviewed critically from the perspective of understanding persistent inter-country and inter-regional income inequality. Three separate literatures are considered for the insights they offer about international disparity: Classical political economy, the North–South trade models, and the ‘new’ growth and trade theories that incorporate increasing returns and/or product differentiation. Classical antecedents of the more recent theories are identified, and contrasts are drawn between structuralist and neoclassical approaches to explaining the income gap between rich and poor nations.
- Article: "Growth, Trade and Uneven Development"
ARTICLE: Hsien-Hen Lu, Julian Palmer, Younghwan Song, Mary Clare Lennon & J. Lawrence Aber, "Children Facing Economic Hardships in the United States: Differentials and Changes in the 1990s." Demographic Research - June 2004
- Authors: Hsien-Hen Lu, Julian Palmer, Younghwan Song, Mary Clare Lennon, J. Lawrence Aber
- Abstract: This paper helps document significant improvements in the child low-income rate as well as the significant decrease in the proportion of children who relied on public assistance in the United States during the 1990s. Many disadvantaged groups of children were less likely to live in poor or low-income families in the late 1990s than such children a decade earlier. The improvement in the child low-income rates of these disadvantaged groups was accompanied by a substantial increase in parental employment. However, parental employment appears to do less to protect children from economic hardship than it did a decade earlier. This paper shows that working families’ children in many disadvantaged social groups, especially groups in medium risk ranks—children in families with parents between ages 25 to 29, with parents who only had a high-school diploma, and in father-only families—suffered the largest increase in economic hardship. Our results indicate that the increased odds of falling below low-income lines among children in working families facing multiple disadvantaged characteristics and the increased proportion of these children in various subgroups of working families in the 1990s can help explain the increased economic hardship among subgroups in the medium risk ranks listed above. Finally, the paper also notes that the official measure of poverty tends to underestimate low-income rates.
- Article: "Children Facing Economic Hardships in the United States: Differentials and Changes in the 1990s"
ARTICLE: Neil Bennett, Hsien-Hen Lu & Younghwan Song, "Welfare Reform and Changes in the Economic Well-Being of Children." Population Research and Policy Review - December 2004
- Authors: Neil Bennett, Hsien-Hen Lu, Younghwan Song
- Abstract: Since the implementation of the Temporary Assistance for Needy Families (TANF) program in late-1996, welfare rolls have declined by more than half. This paper explores whether improvements in the economic well-being of children have accompanied this dramatic reduction in welfare participation. Further, we examine the degree to which the success or failure of welfare reform has been shared equally among families of varying educational background. We analyze data from the March Current Population Surveys (CPS) over the years 1988 through 2001. Specifically, we link data for families with children who are interviewed in adjacent years and determine whether their economic circumstances either improved or deteriorated. We use two alternative approaches to address this general issue: a variety of regression models and a difference-in-differences methodology. These approaches provide consistent answers. In a bivariate framework TANF is associated with higher incomes; but this association becomes insignificant in the presence of business cycle controls. We also determine that children who were poor at an initial time period benefit differently, depending on their parents' educational attainment level. Poor children with parents who do not have a high school degree are significantly worse off in the TANF era, relative to the era prior to welfare reform, than are poor children of more educated parents.
- Article: "Welfare Reform and Changes in the Economic Well-Being of Children"
ARTICLE: Tomas Dvorak, “Asymmetric Information and Gross Capital Flows.” Journal of International Money and Finance - November 2003
- Author: Tomas Dvorak
- Abstract: This paper shows that the behavior of gross capital flows can identify the nature of information asymmetries in international equity markets. Information asymmetry between foreign and domestic investors implies a correlation between net flows and returns. Information asymmetry within groups of foreign and domestic investors implies that gross flows and absolute returns are correlated. I find that the correlation between gross flows and absolute returns is stronger than the correlation between net flows and returns, suggesting that information asymmetries within countries are more important than those between countries.
- Article: “Asymmetric Information and Gross Capital Flows”
ARTICLE: Lewis Davis, "The Division of Labor and the Growth of Government." The Journal of Economic Dynamics and Control - May 2003
- Author: Lewis Davis
- Abstract: This paper develops a dynamic, general equilibrium model of specialization-driven growth in which private coordination costs are decreasing in public expenditure on physical and institutional infrastructure. The model provides an explicitly economic explanation of the secular rise of government. In addition, endogenous specialization decisions imply the existence of four development stages, characterized by distinct outcomes regarding the division of labor, the role of government and the return to capital. Growth is characterized by capital accumulation, market integration, the division of labor and the growth of government. The effectiveness of government plays a central role in determining whether an economy converges to a high or low level equilibrium.
- Article: "The Division of Labor and the Growth of Government"
ARTICLE: Lewis Davis, Bruce Dehning & Theophanis Stratopoulos, "Does the Market Recognize IT-Enabled Competitive Advantage?" Information and Management - August 2003
- Authors: Lewis Davis, Bruce Dehning, Theophanis Stratopoulos
- Abstract: There is a belief that the payoffs from investments in information technology (IT) are difficult to recognize, and therefore a sustained competitive advantage from an IT-enabled strategy is difficult to distinguish from a temporary competitive advantage. We develop a model to test whether market participants are able to recognize a sustained competitive advantage due to an IT-enabled strategy, and test the model empirically. We find that a competitive advantage due to an IT-enabled strategy is discernable by market participants, and as apparent as a competitive advantage obtained through other means.
- Article: "Does the Market Recognize IT-Enabled Competitive Advantage?"
ARTICLE: Lewis Davis, "Toward a Unified Transaction Cost Theory of Economic Organization." Journal of Institutional and Theoretical Economics - September 2003
- Author: Lewis Davis
- Abstract: This paper develops a general equilibrium model endogenizing labor specialization, firm size, firm specialization, interfirm trade, and economic fragmentation. In contrast to the standard neoinstitutionalist understanding of firms and markets as substitutes in organizing production, firms and markets are shown to be complements in reaping economies to the division of labor. As a result, firm size varies directly, rather than inversely, with the extent of interfirm trade. Growth is facilitated by increases in the complexity of economic organization, involving increases in the division of labor, the size and specialization of firms, market size, and the complexity of interfirm trade.
- Article: "Toward a Unified Transaction Cost Theory of Economic Organization"
ARTICLE: Therese McCarty, Terri Sexton, Steven Sheffrin & Stephen Shelby, "Allocating Property Tax Revenue in California: Living with Proposition 13." Proceedings of the National Tax Association Annual Conference - March 2002
- Authors: Therese McCarty, Terri Sexton, Steven Sheffrin, Stephen Shelby
- Abstract: In this paper we explore alternative strategies for allocating property tax revenues among the local governments in a county. We identify allocation rules that are flexible with respect to local demand and cost conditions and yet are not overly complex. Before describing our methodology, we explain how property tax revenue is allocated in California.
- Article: "Allocating Property Tax Revenue in California: Living with Proposition 13"
ARTICLE: Stephen Schmidt, "Active and Cooperative Learning Using the World Wide Web." Journal of Economic Education - Spring 2003
- Author: Stephen Schmidt
- Abstract: The author discusses the advantages of using computers and the World Wide Web in classroom simulation exercises. Using networked computers permits a richer simulation design, allows more complicated decisions by the students, and facilitates reporting results for later discussion. The Web is an ideal technology for such simulations because computers already have Web-capable browsers, with which students are familiar, and information on creating Web sites is readily available. The author discusses these points in the context of a sample simulation that teaches basic economic principles of trade, investment, and public goods in the context of American economic history.
- Article: "Active and Cooperative Learning Using the World Wide Web"
ARTICLE: Mehmet Sener, "Schumpeterian Unemployment, Trade and Wages." Journal of International Economics - June 2001
- Author: Mehmet Sener
- Abstract: This paper develops a dynamic general equilibrium model of R&D-generated growth without scale effects and knowledge-based trade of higher quality products between two structurally-identical countries. A product replacement mechanism coupled with a time-consuming job-matching process generates Schumpeterian unemployment. A global reduction in tariffs stimulates innovation and growth. It also raises the relative wage of skilled workers, motivating more individuals to undergo skill upgrading. In addition, trade liberalization increases the unemployment rate of unskilled labor, but has an ambiguous effect on the economy-wide unemployment rate.
- Article: "Schumpeterian Unemployment, Trade and Wages"
ARTICLE: Therese McCarty & Stephen Schmidt, "Dynamic Patterns in State Government Finance." Public Finance Review - May 2001
- Authors: Therese McCarty, Stephen Schmidt
- Abstract: The authors estimate vector autoregressions for three categories of state government expenditure: education, highways, and welfare. Each regression contains state expenditure on that category, federal aid to the state in that category, total federal aid to the state, state general revenue, and personal income. The authors calculate impulse response functions for these vector autoregressions to analyze changes in aid and expenditure over time. The authors find that deviations in expenditure and category-specific aid have large and long-lasting effects on future expenditure. Category-specific aid has a much stronger effect than aid, revenue, or income, suggesting a flypaper effect in which aid is spent disproportionately in the category in which it is granted. This effect persists for up to 5 years, suggesting that there are structural dynamic links between category-specific aid and expenditure by states on those categories.
- Article: "Dynamic Patterns in State Government Finance"
ARTICLE: Stephen Schmidt, "Incentive Effects of Expanding Federal Mass Transit Formula Grants." Journal of Policy Analysis and Management - Spring 2001
- Author: Stephen Schmidt
- Abstract: Public subsidies to industries firms incentives to alter their behavior. When calculating the effects of such programs, previous assessments of transit subsidies have not included the effects of these incentives on the firms' output. This article reports the responses of mass transit firms to the federal transit subsidy program and changes the Transportation Equity Act for the 21st Century (TEA 21) made to that program, as predicted by a structural model of output choice. TEA 21 increases bus service in medium‐sized cities by 6‐8 percent, but increases service in large cities by only 1‐2 percent. The formula's incentive tier is weak, and the size of the subsidy depends little on whether that output results in increased ridership. The formula could be redesigned to provide stronger incentives to lower cost and increase ridership, thus encouraging a more efficient response from transit firms.
- Article: "Incentive Effects of Expanding Federal Mass Transit Formula Grants"
ARTICLE: Stephen Schmidt, "Market Structure and Market Outcomes in Deregulated Rail Freight Markets." International Journal of Industrial Organization - January 2001
- Author: Stephen Schmidt
- Abstract: Using cross-section data on a national sample of city-pair markets for rail freight, I examine correlations between prices, quantities, and the number of single-line and interline firms serving markets. I estimate the reduced form of a structural model in which rail rates and quantities depend on the number of firms. I find that rates increase as the number of firms serving the market falls, and quantities shipped rise as the number of firms falls. The result is consistent with market power for rail freight shippers that causes markups to rise when fewer firms serve the market, and is not consistent with other explanations of the relationship between number of firms and rates and quantities. Interline shipment is much more costly than single-line, suggesting that mergers may be desirable even if they exacerbate market power problems.
- Article: "Market Structure and Market Outcomes in Deregulated Rail Freight Markets"
ARTICLE: Mehmet Sener, "A Schumpeterian Model of Equilibrium Unemployment and Labour Turnover." Journal of Evolutionary Economics - September 2000
- Author: Mehmet Sener
- Abstract: This paper constructs a general equilibrium model of equilibrium unemployment by combining an endogenous growth model with a variant of equilibrium search theory. The analysis offers two explanations for the causes of widening wage gap between skilled and less-skilled labor, and rising unemployment rate among the less skilled: technological change in the form of an increase in the size of innovations or skilled labor saving technological change in R&D activity. In addition, the model identifies two distinct effects of faster technological progress on the aggregate unemployment rate. First, it increases the rate of labor turnover and therefore increases the aggregate unemployment rate – the creative destruction effect. Second, it creates R&D jobs, which offer workers complete job security, and consequently reduces the aggregate unemployment rate – the resource reallocation effect.
- Article: "A Schumpeterian Model of Equilibrium Unemployment and Labour Turnover"