MTSU Department of Economics and Finance Working Papers
Abstract: Some land uses are considered incompatible. When a parcel is bordered by parcels with incompatible land uses, external costs will impact the property owner. Collective action by property owners then results in land use regulations designed to restrict neighboring parcels from incompatible uses. The pattern of observed land use contiguities thus testifies to cultural notions regarding incompatible land uses. Using urban planning data, a GIS, and methods from social network analysis, this paper attempts to uncover the tacit rules of spatial proximity among land uses in a United States city. The most salient patterns are a separation between places of residence and places of work, a separation of single family homes from other residential land uses, a separation of rural land uses from everything else, and a separation of condominiums from everything else. The paper then attempts to tie these observed spatial patterns to ideas from Thorstein Veblen, Georg Simmel, and Mancur Olson. It is suggested that the United States urban landscape has been shaped by the ethos of the middle class under capitalism, especially the cult of the family and the need to display status.
Abstract: The Security and Exchange Commission revoked the uptick rule in July 2007. The revocation of the uptick rule provides us with a unique setting to investigate the impact of short-sale constraints on various short-selling strategies in a controlled environment. Comparing short-selling behaviors for uptick-rule restricted and unrestricted stocks during the pre- and post-revocation periods, we find that contrarian short selling and voluntary-liquidity short selling are more profound in uptick-rule-restricted stocks than in unrestricted stock and that market trend chasing short selling is less profound in uptick-rule-restricted stocks than in unrestricted stocks. Our results also show that the uptick rule has no impact on risk-bearing short-selling strategies.
Abstract: In view of the sizable increase in recorded migrant workers' remittances to developing countries from $70 billion in 2000 to $167 in 2005, this study investigates the long-run relationship between remittances and financial services development (FSD) and control variables including exchange rate (ERS), the size of migrant stock (MSK), the domestic per capita income (DPC) in the receiving country and foreign per capita income (FPC) in the main host country. We use a newly developed panel fully modified OLS (PFMOLS) on annual panel data over the 1985-2007 period for 44 countries consisting of 25 from Africa and 19 from the Americas. It is found that financial development, exchange rate stability, and the size of migrant stock have positive and statistically significant effect on remittances in both regions and in each of the regions. The study has important policy implications for the role of the financial services development through domestic credit expansion by the banking industry as well as increased competition among money transfer operations and exchange rate stability in order to promote the continuation of remittance inflows as a major source of economic growth in Africa and the Americas. The study also shows that there are regional differences in the impact and magnitude of the determinants of remittances.
Abstract: The primary purpose of this study is to introduce an estimatable model of search and matching in real estate markets. A benefit of developing such a theory is so we may better understand the structure that determines these choices. The DCDP model that we propose produces the following results. First, the model is able to replicate several salient features of real estate markets. Second, the estimation method is able to accurately and efficiently recover the structural demand and supply functions of the buyers and sellers.
Abstract: The purpose of this study is to estimate a health production function for the 13 East European countries including Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Ukraine. Using panel data from 1997 to 2005 on a diverse array of economic, demographic, environmental, and lifestyles factors as inputs, we analyze a health production function at the macro level in order to determine the most efficient way of allocating limited resources for improving the overall health status of countries in the sample. To control for individual country heterogeneity, we employ panel analytic methods of fixed effects, random effects, and Arellano - Bond estimator. The results indicate that economic growth as measured by GDP per capita growth, investment in human capital formation, and residence in urban areas significantly reduce infant mortality and thus improve the health status of countries in the sample. These findings are useful, not only for serving as background for health care policy decisions, but also for a better understanding of the factors that affect the health condition of the region.
Abstract: This study estimates the macroeconomic impact of remittances and some control variables such as openness of the economy, capital/labor ratio, and economic freedom on the economic growth of African, Asian, and Latin American-Caribbean countries using newly developed panel unit-root tests, cointegration tests, and Panel Fully Modified OLS (PFMOLS). We use annual panel data from 1985- 2007for 64 countries consisting of 29 from Africa, 14 from Asia, and 21 from Latin America and the Caribbean region, respectively. We find that remittances, openness of the economy, and capital labor ratio have positive and significant effect on economic growth for all regions as a group and in each of the three in study. While the economic freedom index also has a positive and significant effect on growth in Africa and Latin America, however, its effect on the economic growth of Asia is mixed.
Abstract: This essay investigates the effect of education on different lifestyle variables using NLSY79 panels for 1992, 1994, and 1998. The lifestyle variables are smoking, drinking, marijuana use, and cocaine use. The analysis addresses the joint determination of lifestyle variables within the framework of the Seemingly Unrelated Regression (SUR) model. Unobserved heterogeneity is controlled by the robust fixed-effects model extended to SUR model. It is found that educational attainment has no significant effect on the lifestyle choices of individuals.
Abstract: Using the NLSY79 panel data set from 1979-2006 for a cross-section of 12,686 individuals, this paper investigates the effect of educational attainment on the health status of an individual as measured by 'the inability to work for health reasons.' The present study bridges the gap in the literature by using the fixed-effects model, random-effects model, between-effects, and the Arellano-Bond dynamic model to analyze the impact of education on health status. We use these alternative models to control unobserved heterogeneity. Educational attainment has a statistically significant and positive effect on the quality of an individual's health status.
Abstract: Sub-Sahara African countries have had a checkered past when it comes to good governance and good institutions. Increasingly, economists and policy makers are recognizing the importance of good governance and institutions for economic growth and development. The New Partnership for Africa's Development (NEPAD) which was initiated by the African Heads of State and endorsed by the G8 countries including the European Union, Japan, and China in October 2001 has four main goals: eradicating poverty, promoting sustainable growth and development, integrating Africa into the world economy, and accelerating the empowerment of women. The NEPAD objectives are based on the underlying principles of a commitment to good governance, democracy, human rights and conflict resolution, and the recognition that the maintenance of these standards is fundamental to the creation of an environment conducive to investment and long-term economic growth. The objective of this paper is to investigate the role of governance in explaining the sub-optimal economic growth performance of African economies while controlling for the conventional sources of growth. Our results suggest that good governance or lack thereof contributes to the gaps in income per capita between richer and poorer African countries. Furthermore, our results indicate that the role of governance on economic growth depends on the type and the level of income growth of countries under consideration.
Abstract: In this paper, we examine how the decisions of churches are impacted by the decisions of rival churches. Using a novel data set of Christian churches in two suburban Nashville, TN counties, we estimate a model of strategic interaction based on empirical models of discrete games. We focus on a church's decision of whether or not to provide a week-day child care program. Empirical evidence indicates that churches are more likely to offer a service when a nearby same-denomination church offers it, but are less likely to offer the service if a nearby different-denomination church offers the service. This suggests that churches may feel pressure to match the services offered by same-denomination churches. Using our estimates, we conduct counterfactual simulations which indicate that a new church's entry may increase or decrease the number of churches offering child care depending on the size and denomination of the entrant. Additional counterfactual simulations indicate that in some cases, increases in population may decrease the probability of a church offering child care.
Abstract: Conventional growth theories in the literature explain the poor economic performance of African economies by stressing the inadequacy of savings, human capital, and poor institutional quality. However, the key question is how to enhance savings for the accumulation of both physical and human capital in order to spur growth. A common thread that runs through the existing models is that the dependency ratio, not only remains constant over time, but has no long-run negative impact on economic growth. By relaxing this rigid assumption, this paper constructs a growth estimating equation which accommodates this demographic factor. The analytic results from the modified model suggest that economies with high dependency ratio face their stable equilibrium at lower levels of their income per capita. Moreover, econometric results from analysis of panel data drawn from Sub-Saharan Africa economies suggest that the growth puzzle can be well explained in terms of the demographic factors, especially the level and dynamics of dependency ratio of the region.
Abstract: Cross-cultural researchers often combine several component variables into a composite index or 'scale.' The value of a scale for a particular observation is sensitive not only to the values of its component variables, but also to the values of the weights used to combine the components. This sensitivity to weight values is unfortunate, given that the choice of weighting scheme is in some ways arbitrary. A method is presented here, based on linear programming, which reduces the sensitivity of a scale to the component weights. An example scale is produced, for the prevalence of markets and property rights in the societies of the Standard Cross-Cultural Sample. A program, written for R, is included.
Abstract: A peer worker is introduced in a controlled labor market experiment characterized by unobservable effort and incomplete contracts. Workers make decisions independently and without knowledge of each others' actions in a modified gift exchange experiment. Introducing a peer worker into an ongoing market has a negative and significant effect on effort provided in contrast to prior experimental studies of peer effects which find positive effects with observable effort. This decrease in effort is not driven by other-regarding equity concerns for the manager's payoffs.
Abstract: We conduct a field experiment to determine whether racial discrimination can be identified in product-market auctions and, if so, under what conditions it is more likely to emerge. We compare the prices paid for perfectly substitutable products sold on eBay between sellers with distinctively white and distinctively black names. Price differences arise in favor of sellers whose names match the expected racial characteristics of buyers. However, the price differences only emerge in markets characterized by low levels of competition, and eBay's feedback system, which reduces asymmetric information between buyer and seller, is successful at mitigating these differences. The results suggest, rather strongly, that competitive forces and market mechanisms designed to reduce informational asymmetries both can aid in promoting non-discriminatory outcomes in markets.
Abstract: For the last five decades, there have been heated debates on the sources of economic growth in developing economies. The perceived factors of economic growth have ranged from surplus labor to investment in human and physical capital, transfer of technological change, overseas development assistance, flow of private capital, increasing returns from investment in new ideas and research and development. The impacts of the above listed traditional sources of economic growth have been well documented in literature. Researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, voice and accountability on economic growth and development. Despite the increased size of remittances in the total international capital flows, however, the relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on the economic growth of 18 Latin American Countries within the conventional neoclassical growth framework using an unbalanced panel data spanning from 1980 to 2005. We find that remittances have a positive and significant effect on the growth of Latin American Countries where the financial systems are less developed by providing an alternative way to finance investment and helping overcome liquidity constraints.
Abstract: Some key features of the Borana household economy are explored in the changing context of growing pastoralist exposure to the exchange system. Despite past commercialization efforts, the pastoral economy has largely remained unmonetized. The average cattle off-take rate is found to be well below 10% for the sample Borana households of which only 11% of the household off-take decisions were made for the primary purpose of financing non-pastoral business. Such decisions are largely made by the actual conditions of life principally associated with the need to procure cereal grains and meeting other basic needs. The analysis of household expenditure patterns reveals income diversity as a key determinant of the growing importance of "imported" items in pastoral household budgets. The apparent elastic demand for stimulants in this connection is a critical matter for local actions in the context of eroding traditional values.
Abstract: Consumers of higher education face a bewildering array of product and price combinations. We compare U. S. institutions with a Data Envelopment Analysis (DEA) multi-factor frontier using 2000-2001 data for 1,188 four-year institutions of higher education. The input is net price or tuition, fees, room, and board less per student financial aid. Outputs include SAT score, athletic expenditures, instructional expenditures, value of buildings, dorm capacity, and student body characteristics. The DEA efficiency scores indicate the distance of each institution from the 'best buy' frontier, providing an objective means of ranking institutions as the best buys in higher education.
Abstract: Poverty has historically been associated with a decrease in food consumption. This at least partially changed in 1964 when the Food Stamp Act began guaranteeing food for those in poverty. Since the Act's passage, the prevalence of obesity has increased dramatically, particularly among those with low incomes. This paper examines the effects of the Food Stamp Program on the prevalence of obesity using 1979 National Longitudinal Survey of Youth data. Results indicate food stamps have significant positive effects on obesity and the obesity gap for females, but these effects are relatively small and such benefits, consequently, are approximated to have played a minor role in increasing obesity at the aggregate level.
Abstract: With over 66% of Americans overweight, expectant mothers are unusual because they are encouraged to gain weight while pregnant. Food stamp receipt (FSR) may facilitate recommended weight gain for pregnant women by providing additional resources for food and nutrition. I examine the effects of FSR on the amount of weight gained by low-income expectant mothers using NLSY79 data. Results indicate FSR decreases the probability gaining an insufficient amount of weight but does not exacerbate the probability of gaining too much weight. Examining the effects of FSR on pregnancy weight gain is important because low birth weight is more likely when expectant mothers gain an insufficient amount of weight.
Abstract: Before 1996, households were typically ineligible for welfare if they had assets worth more than $1,000, where $1,500 from each vehicle's value was excluded from this determination. However, the 1996 welfare reform act began allowing states to increase their asset limits and vehicle exclusions. This may prompt low-income households to reallocate resources to or from vehicles. We examine the effects of state vehicle asset rules on vehicle assets. Results show liberalizing asset rules increases vehicle assets and that this increase is driven largely by eligible individuals increasing vehicle assets, with no evidence indicating ineligible individuals reduce vehicle assets to become eligible.
Abstract: This paper explains US macroeconomic outcomes with an empirical new-Keynesian model in which monetary policy minimizes the central bank's loss function. The presence of expectations in the model forms a well-known distinction between two modes of optimization, termed commitment and discretion. I estimate the model separately under each policy using maximum likelihood over the Volcker-Greenspan-Bernanke period. Comparisons of fit reveal that the data favor the specification with discretionary policy. Estimates of the loss function weights point to an excessive concern for interest rate smoothing in the commitment model but a more balanced concern relative to inflation and output stability in the discretionary model.
Abstract: It is not uncommon for upstream manufacturers to make payments to downstream firms in order to obtain preferential treatment. These payments may generally be called 'consideration payments.' Examples of this include the slotting allowance payments often discussed in the grocery, pharmaceutical, and consumer electronics industries. Payola in the radio industry shares many of the same characteristics as slotting allowances. The prohibition of radio payola in 1960 gives us an opportunity to empirically examine the effect that these payments had on the record labels using them and on overall product variety. We construct a unique variety measure based on the musical styles of Billboard chart artists and supplement this with information on radio airplay from Billboard charts to evaluate the effects of payola. We find that the prohibition of payola reduced musical variety and overall record sales, but may have helped increase access for smaller record labels. These findings support the theory that payola payments, which may impose a non-trivial financial burden on the record label, serve to reduce the radio station's risk.
Abstract: The long-term effects of shocks are examined in the context of a traditional pastoral community. The impacts are empirically examined in connection with the micro-level poverty trap hypothesis and the associated minimum poverty threshold estimates reported in previous studies. We argue that these estimates cannot be taken as definitive and the core explanations behind them are incongruent with the institutional realities of the pastoral community for which they are reported. The reality is that shocks have implied long-term community-wide deprivation with a lasting effect of deterioration in the indigenous capacity to cushion those who slide into permanent destitution. This is evident in the empirically identified increasing loss of confidence in the indigenous social support structures. The findings rather highlight the need for policy interventions to focus on system level community-wide development issues rather than the commonly emphasized individual targeting implied by such exercises as asset-based poverty threshold estimates.
Abstract: From 1995-2007, worldwide tourist arrivals increased about 68.2 percent (or an average annual growth rate of about 5.2 percent) from 534 million to 898 million (UNWTO, 2008). Over the same period, Latin America countries (Central and South America) have experienced a rise in tourist arrivals from 14.3 million to 27.9 million (about 49% growth) and tourist receipts growth from $2.3 billion to $3.7 billion (about 61% growth), respectively. The tourism industry in Latin American countries (LAC) has also experienced a sizable increase in annual market share growth rate of 8.7 percent in 2004. Despite this fact, there are only few empirical studies that investigate the contributions of tourism to economic growth and development for Latin American economies. Using a panel data of 17 Latin American countries for the years that span from 1995 to 2004, this study investigates the impact of the tourism industry on the economic growth and development Latin American countries within the framework of the conventional neoclassical growth model. The empirical results show that revenues from the tourism industry positively contribute to both the current level of gross domestic product and the economic growth of LACs as do investments in physical and human capital. Our findings imply that Latin American economies may enhance their economic growth by strategically strengthening the tourism industry while not neglecting the other sectors which also promote growth.
Abstract: Since the 2001 Doha Round of multilateral trade negotiations, members of the World Trade Organization (WTO) have shown a renewed interest in using a new type of aid known as aid for trade (hereafter to be simply referred as AFT) as a means for catapulting the economic growth performance of developing countries. Japan, U.S., and the United Kingdom account for a significant proportion of AFT outlays being extended to developing countries. Despite the rise in the amount of funding outlays, to date, there is little information as to what determines the allocation of the AFT funds to different countries and the impact of the aid on the economic performance of the recipient developing economies. Using data on U.S. AFT outlays extended to a panel of 54 developing countries during 1999-2005, this study identifies some salient donor and recipient specific factors that influence the propensity and intensity of AFT allocation. Our study indicates that the share of AFT given to a country is greater: the larger is the relative magnitude of the donor's exports to the recipient country, the more vulnerable the recipient country is to external economic shocks, the more politically globalized and landlocked the recipient is, the lower the level of economic freedom enjoyed by the citizens of the recipient country, and the higher the amount of the traditional Non-AFT aid per capita inflow is to the country. On the other hand, both the propensity and intensity of U.S. AFT falls with a rise in the recipient country's ability to serve as a source for U.S. import supply and the more integrated it is with the rest of the world.
Abstract: Location quotient (LQ) is an index frequently used in geography and economics to measure the relative concentration of activities. This quotient is calculated in a variety of ways depending on which group to use as a reference. Here, we focus on simultaneous inference for the ratios of the individual proportions to the overall proportion based on binomial data. Apparently, this is a multiple comparison problem and multiplicity adjusted location quotients have not been addressed up to now. In fact, there is a negative correlation between the comparisons. The quotients can be simultaneously tested against unity and simultaneous confidence intervals can be constructed for the LQs based on existing probability inequalities and by directly using the asymptotic joint distribution of the associated z-statistics. The proposed inferences are appropriate for analysis based on sample surveys. A real data set is used to demonstrate the application of multiplicity adjusted LQs. A simulation study is also carried out to assess the performance of the proposed methods in terms of achieving a nominal coverage probability. It is observed that the coverage of the simple Bonferroni adjusted Fieller intervals for LQs is just as good as the coverage of the method which directly takes the correlations into account.
Abstract: The paper estimates a health production function for Sub-Saharan Africa based on the Grossman (1972) theoretical model that treats social, economic, and environmental factors as inputs of the production system. In estimating this function, socioeconomic and environmental factors such as income per capita, illiteracy rate, food availability, ratio of health expenditure to GDP, urbanization rate, and carbon dioxide emission per worker are specified as determinants of health status, proxied by life expectancy at birth. The parameters of the function are estimated by a method of one-way and two-way panel data analyses. The results obtained from two-way random effect model suggest that an increase in income per capita, a decrease in illiteracy rate, an increase in food availability are well associated with improvement in life expectancy at birth. Overall results suggest that a health policy, which may focus on the provision of health, services, family planning programs, and emergency aids to the exclusion of other socioeconomic aspects may do little in efforts directed toward improving the current health status of the region.
Abstract: This paper studies the role of unemployment insurance in a sticky-price model that features an efficiency-wage view of the labor market based on unobservable effort. The risk-sharing mechanism central to the model permits, but does not force, agents to be fully insured. Structural parameters are estimated using a maximum-likelihood procedure on US data. Formal hypothesis tests reveal that the data favor a model in which agents only partially insure each other against employment risk. The results also show that limited risk sharing helps the model capture many salient properties of the business cycle that a restricted version with full insurance fails to explain.
Abstract: This paper examines the recently growing adoption of non-pastoral livelihood strategies among the Borana pastoralists in southern Ethiopia. A large portion of the current non-pastoral participation is in petty and natural resource-based activities. Pastoral and crop production functions are estimated using the Cobb-Douglas model to analyse the economic rationale behind the growing pastoralist shift to cultivation and other non-pastoral activities. The low marginal return to labour in traditional pastoralism suggests the existence of surplus labour that can gainfully be transferred to non-pastoral activities. An examination of the pastoralist activity choices reveals that the younger households with literacy and more exposure to the exchange system display a more diversified income portfolio preference. The findings underscore the importance of human capital investment and related support services for improving the pastoralist capacity to manage risk through welfare-enhancing diversified income portfolio adoption.
Abstract: Policy makers need accurate measures of school district-level costs for a variety of reasons, including salary equity efforts and state-level funding of local schools. Since salaries constitute most of the operating costs for local education providers, teacher salary data provide a ready resource for constructing school cost indices. This paper provides an example of such an index, using year 2000 data for over 60,000 teachers employed by Tennessee public schools. The index is constructed using the parameters from a hedonic wage regression, and the resulting figures are published in the tables in the appendix.
Abstract: Since the 1970's, countries of the Sub-Saharan African region have experienced slow economic growth and development in comparison to other regions of the world. This paper studies the role of perceived financial risk in explaining the divergence of economic growth among Sub-Saharan African countries by employing regression techniques on panel data for the period of 1984 to 2000. Our findings suggest that higher ratings of a country's investment environment (used as a proxy for reduced perceived financial risk) tend to make the flow of external funds more accessible to African countries and spur their economic growth.
Abstract: Recent experimental games conducted by ethnographers (Henrich et al. 2004) have shown that groups with higher levels of market integration exhibit higher levels of prosocial behavior. In order to see whether these results are confirmed in a broader ethnographic sample, this paper draws from the Standard Cross-Cultural Sample variables measuring the degree to which a culture seeks to inculcate generosity, honesty, and trust. Using these as dependent variables, models are developed where market-related variables are among the independent variables. The paper uses the methodology developed by Dow (2007) to correct for Galton's problem, and uses multiple imputation to deal with the problem of missing data. The results fail to confirm a systematic association between generalized prosocial behavior and market integration.
Abstract: For more than half a century, there have been heated debates on the sources of economic growth in developing economies. The perceived factors of economic growth have ranged from surplus labor to capital investment and technological change, foreign aid, foreign direct investment, investment in human capital, increasing returns from investment in new ideas and research and development. The positive or negative impacts of the above listed traditional sources of economic growth have been well documented in literature. Other researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, voice and accountability on economic growth and development. Despite the increasing importance of remittances in total international capital flows, however, the direct or indirect relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on economic growth within the conventional neoclassical growth framework using an unbalanced panel data spanning from1980 to 2004 for 37 African countries. We find that remittances boost growth in countries where the financial systems are less developed by providing an alternative way to finance investment and helping overcome liquidity constraints.
Abstract: In recent years, development co-operations that seek to promote trade flows between countries have continued to emerge from the notion that trade has a positive impact on economic growth. We evaluate the impact of one such initiative, the African Growth and Opportunity Act (AGOA), on the eligible Sub-Saharan African (SSA) countries' exports to the U.S. We find that the implementation of the AGOA has contributed to the initiation of new and the intensification of existing SSA countries' exports to the U.S. across several sectors. Our results imply that the contribution of such development and cooperation efforts to enhance the long-term economic growth of the parties involved through increased trade flows depends on the ability of policy makers in building upon the trade-initiation impetus generated by the policy change.
Abstract: We evaluate the impact of the unilateral trade policy concession known as African Growth and Opportunity Act (AGOA) on U.S. imports from eligible Sub-Saharan African (SSA) countries. Using U.S.-SSA countries' trade data that span the years 1991-2006, we find that AGOA has contributed to the initiation of new and the intensification of existing U.S. imports in both manufactured and non-manufactured goods and several product categories. However, compared to its import initiation impact, the import intensification effect of the Act has been marginal. Our results have important policy implication for further intensification of African exports to the U.S. markets.
Abstract: This paper extends empirical research on marital instability in two dimensions. First, I examine the effects of household income volatility on divorce. Second, I examine the effects of household income volatility on the divorce behavior of lower- and higher household income individuals. The results indicate that increases in household income volatility raise the probability of divorce for men, regardless of whether the household income shocks are positive or negative. For women, the effect is not consistent across different household income volatility measures; however, the preferred model specification suggests that only negative shocks raise the risk of divorce.
Abstract: This paper extends empirical research on determinants of divorce in two ways. First, I examine the effect of inflation on divorce. Second, the use of a structural time-series modeling approach attributes unobservables and omitted variables to an unobserved component, which allows for the model's parameters to be estimated consistently. Inflation is statistically significant, positive, and persistent. I show that the effects of inflation are robust to the inclusion of additional explanatory variables and various trend specifications. The long-run implications of inflation are also substantial. I conclude that price stability has the potential to reduce divorce rates.
Abstract: Over the decade of the 1990s, Africa has experienced a rise in tourist arrivals from 8.4 million to 10.6 million and receipts growth from $2.3 billion to $3.7 billion, respectively. According to the World Tourism Organization (WTO, 2006), the tourism industry in Sub-Saharan Africa enjoyed a robust annual market share growth rate of 10 percent in 2006. In spite of this, there are only few empirical studies that investigate the contributions of tourism to economic growth and development for African economies. Using a panel data of 42 African countries for the years that span from 1995 to 2004, this study explores the potential contribution of tourism to economic growth and development within the conventional neoclassical framework. The results show that receipts from the tourism industry significantly contribute both to the current level of gross domestic product and the economic growth of Sub-Saharan African countries as do investments in physical and human capital. Our findings imply that African economies could enhance their short-run economic growth by strategically strengthening their tourism industries.
Abstract: This paper seeks to shed light on the role of school funding in individual school performance. A unique data set is utilized for the Metropolitan Nashville - Davidson County School District in Tennessee, known colloquially as Metro. In 2005 the Metro school board undertook the task of breaking down individual school spending levels by funding source. The resulting 2004-2005 financial data are combined with academic test scores and demographic data for 2003-2004 and 2004-2005 academic years for each of 70 elementary schools. Econometric tests are then conducted to examine whether contemporaneous test score performance is determined by funding, or whether funding is determined by prior performance, or whether other school characteristics influence both.
Abstract: A divisia index of total factor productivity (TFP) growth is calculated for each of 16 regulated local telephone companies operating in Tennessee over the years 1989 through 1993. Year over year changes in TFP, in Tornqvist form, yield a growth in total factor productivity estimate for each company. These growth rates, however, contain the effects of both scale and technical change. Using the method suggested by Caves and Christensen, the effects are decomposed indirectly by regressing the annual percentage changes in TFP growth against measures of scale, service density, and network size. The results are consistent with the findings of economies of density and nearly constant returns to scale prevalent in the telecommunications literature.
Abstract: The characteristics of time as a resource are examined in order to seek evidence of these characteristics in fundamental concepts of Economics. A series of thought experiments on time travel demonstrate that a constant irreversible rate of time usage underlies the concepts of opportunity cost, time preference, and interest. This leads to the startling suggestion that the root question in Economics concerns the choice of how to spend time. Thus, the principles of Economics are tied closely to the human perception of time and more closely to the human condition than is generally admitted in undergraduate classes on the subject.
Abstract: The U.S. Supreme Court held that litigation for anticompetitive ends ('sham litigation') must be 'baseless' in order to face antitrust liability. The filing of such suits continues apace, as does the legal commentators' debate, but economic analysis has lagged. Here, a game theoretic model is constructed in which plaintiffs file suit to achieve collateral gains and defendants may countersue for damages under the Sherman Act. In equilibrium, settlement fails and all suits are litigated, but the threat of countersuit deters low-expected-value plaintiffs. As the legal standard for sham litigation approaches 'baselessness,' this deterrence effect is weakened and litigation may increase.
Abstract: This paper adds to the literature estimates of local labor market effects on gang participation. I use data from the 1997 cohort of the National Longitudinal Survey of Youth (NLSY97) to model the probability of gang involvement. The effect of the local unemployment rate is statistically significant and positive, across a wide-range of model specifications. However, robustness checks reveal gang participation of individuals less than sixteen years-of-age (the legal minimum age for most jobs) is not responsive to the local unemployment rate. Gang participation among individuals with lower ASVAB scores is more sensitive to the local unemployment rate.
Abstract: This paper examines the impact of unemployment insurance on the propagation of monetary disturbances in a staggered price model of the business cycle. To motivate a role for risk sharing behavior, I construct a quantitative equilibrium model that gives prominence to an efficiency-wage theory of unemployment based on imperfectly observable labor effort. Dynamic simulations reveal that under a full insurance arrangement, staggered price-setting is incapable of generating persistent real effects of a monetary shock. Introducing partial insurance, however, bolsters the amount of endogenous wage rigidity present in the model, enriching the propagation mechanism. Positive real persistence appears in versions of the model that exclude capital accumulation as well as in versions that do not.
Abstract: Objectives. Most researchers who use survey data must grapple with the problem of how best to handle missing information. This article illustrates multiple imputation, a technique for estimating missing values in a multivariate setting. Methods. I use multiple imputation to estimate missing income data and update a recent study that examines the influence of parents' standard of living on subjective well-being. Using data from the 1998 General Social Survey, two ordered probit models are estimated; one using complete cases only, and the other replacing missing income data with multiple imputation estimates. Results. The analysis produces two major findings: 1) parents' standard of living is more important than suggested by the complete cases model, and 2) using multiple imputation can help to reduce standard errors. Conclusions. Multiple imputation allows a researcher to use more of the available data, thereby reducing biases that may occur when observations with missing data are simply deleted..
Abstract: A growing number of studies investigate the determinants of happiness, or subjective well-being. Few, however, specifically examine the financial aspects of subjective well-being. This study estimates the determinants of subjective financial wellbeing (SWB) for a city in the American Southwest. The results show that income, health insurance, home ownership, and children at home have significant impacts on financial well-being. Missing survey values are estimated using multiple imputation; model results with and without imputed data are compared. Estimates from the complete case model show bias compared with the multiple imputation model. Home ownership and children at home are important predictors of financial well-being in the multiple imputation model but not the complete cases model.
Abstract: OLS regression has typically been used in housing research to determine the relationship of a particular housing characteristic with selling price. Results differ across studies, not only in terms of size of OLS coefficients and statistical significance, but sometimes in direction of effect. This study suggests that some of the observed variation in the estimated prices of housing characteristics may reflect the fact that characteristics are not priced the same across a given distribution of house prices. To examine this issue, this study uses quantile regression, with and without accounting for spatial autocorrecation, to identify the coefficients of a large set of diverse variables across different quantiles. The results show that purchasers of higher-priced homes value certain housing characteristics such as square footage and the number of bathrooms differently from buyers of lower-priced homes. Other variables such as age are also shown to vary across the distribution of house prices.
Abstract: This article fills in some notable gaps in the literature on the existence and empirical implementation of dual cost and production models embodying the time utilization of capital. A proof of the existence of such dual cost and production functions is provided; previous results of Betancourt (1986) and Klein (1984) are extended to the general N-input-factor, continuously variable time-utilization case; and the restrictive conditions under which a conventional neoclassical empirical cost model captures the characteristics of a capital-utilization technology are derived. The general specification of cost functions that capture utilization effects is indicated.
Abstract: To gain analytical insight into whether input resources matter in public education, a Becker/Peltzman/Stigler model of the determination of local educational budgets and outputs by political authorities is constructed. The model results are consistent with empirical findings that resources don't matter, even when all schools are efficient, if errors in measurement and specification occur. When all outputs are not observed, one cannot distinguish an inefficient school district from one that chooses an idiosyncratic output mix. Blind application of efficiency measurement techniques in this context yields perverse or counterintuitive findings. Interpretation of feasible approaches to education production studies are discussed.
Abstract: A multi-sector growth model is developed where public spending affects output in one of two ways. First, the government taxes income to fund capital expenditures. Second, public capital is used in the production of both final goods and intermediate private capital goods. Inclusion of an intermediate private capital sector allows the potential of public capital investment to affect output in an indirect way that has previously not been studied in that past public investments make the accumulation process for private capital more efficient. In this case, it is shown that public investment policy is directly related to the relative price of intermediate investment goods and final goods. Using a panel of OECD countries, we find that public capital spending shocks account for a statistically important percentage of the movements in the relative price of private investment. As a result, deviations in public investment policy can account for a nontrivial portion of the cyclical variations in output even though the direct effect of public investment policy on final good production is found to be small (public capital's share in the output of final goods is only 2%).
Abstract: This paper extends previous empirical research on the determinants of aggregate property crime rates in two dimensions. First, we examine the effect of inflation on property crime rates. Then, using a structural time-series approach we show that it is possible to estimate consistently the effects of exogenous macroeconomic variables on aggregate property crime rates without introducing endogenous deterrence to the model. Inflation is statistically significant, positive, and persistent for all property crime rates examined. We conclude that price stability contributes considerably to the reduction of property crimes.
Abstract: Mayan towns in the Guatemalan highlands hold markets on specific days of the week. A market is attended by local townspeople, by peasants residing in the town's hinterland, and by vendors bringing wares from other towns. A market functions to bring in goods from other ecological zones, to bring in goods from higher order centers, and to sell surpluses of locally produced goods. To understand how these markets are integrated, we develop a gravity model, examining the flow of vendors from 85 towns of residence to 15 market towns. In our model, the flow of vendors from one town to another is a function not only of physical distance, but of ecological complementarities, of linguistic differences, of road access, and of demographic endowments.
Abstract: Concern over the loss of
genetic diversity in the world's field crops has increased due to the
commercial introduction of genetically modified crops.
Abstract: This paper presents a
Generalized Method of Moments algorithm for estimating the structural
parameters of a macroeconomic model subject to the restriction that the
coefficients of the monetary policy rule minimize the central bank's expected
loss function. The algorithm combines least-squares normal equations with
moment restrictions derived from the first-order necessary conditions of the
auxiliary optimization. We assess the performance of the algorithm with
Abstract: This paper provides a direct test for forecast bias using the Thiel equation. In this test the constant term is simply the difference between the mean of the forecast and the mean of the actual data. A simple data transformation leads to this specification of the constant term. The approach is expanded to include a function with additional independent variables where one is interested in the constant term being simply the difference of the means of the dependent and any one of the independent variables.
Abstract: In a stylized economy with price and wage stickiness, this paper argues that delegating a nominal wage target to a central bank operating under discretion generally delivers better social outcomes than delegating price level or inflation targets. Although both policies impart inertia into central bank actions, wage targeting dominates price level targeting because the former delivers a more favorable tradeoff between the stabilization goals appearing in the social welfare function, namely, price inflation, wage inflation, and the output gap. Delegation of a dual policy featuring both price level and nominal wage targets, however, nearly replicates the efficient outcome accompanying the precommitment policy from a timeless perspective.
Abstract: Inter-county flows of
commuters have long been used by the Bureau of the Census to identify MSAs and
by the BEA to identify its Economic Areas. This paper looks at
Abstract: The effects of changes in monetary policy are studied in a general equilibrium model where money facilitates transactions. Because there are two types of agents, workers and capitalists, different elasticities of money demand exist, implying that monetary policy influences the distribution of income. When earnings inequality is incorporated into monetary policy rule is the model able to replicate cyclical fluctuations of both real and nominal aggregates as well as the inequality measure. Additionally, monetary policy becomes more countercyclical when the fraction of transfers received by the workers increases.
Abstract: Many studies delete
incomplete data prior to model estimation, resulting in less efficient and
potentially biased parameter estimates. Multiple imputation
provides a model-based method of simultaneously estimating missing values for
several variables, conditioned on the observed values. The technique is applied
to financial well-being data collected by survey from householders in
Abstract: Economists are giving
more attention to the issue of subjective well-being. A recent study of
Abstract: The paper demonstrates through a number of Monte-Carlo experiments that, for the type of cross-section data sets typically encountered in applied economics, Chow tests on sorted variations of the data matrix can detect neglected parameter heterogeneity. The paper focuses on heterogeneity in the behavioral responses of economic actors that belong to different economically meaningful groups, such as the young, middle-aged, and old. Since the suggested methodology is easy to implement yet powerful, its routine use by applied economists would be desirable given the very significant estimation bias that can result from neglecting parameter heterogeneity.
Abstract: The effects of fiscal spending shocks are estimated by the introduction of a measure of fiscal policy into the neoclassical growth model via a parametric function that distorts the value of newly created capital. The model is estimated by Method of Simulated Moments (MSM) via conditional moments (IRFs) from a panel of countries. We find that fiscal spending distortions cannot be rejected as an important determinant for deviations in the relative price of investment for the OECD countries. An implication is that a one standard error shock to fiscal spending can increase GDP by as much as 1.12 percent over an eight year horizon. Alternatively, the price of investment seems not to be affected by fiscal policy shocks in less developed countries.
Abstract: The passage of the Interstate Banking and Branch Efficiency Act (IBBEA) of 1994 streamlined the consolidation process that had been underway since the formation of the first regional compact in 1982. This study shows that in the IBBEA's aftermath, bank holding companies streamlined operation by consolidated bank charters within the holding companies; banks of mammoth size quickly emerged; concentration increased at that national level and bank size grew; and when segregating banks into five asset sizes, the consolidation among banks over the last 10 years came largely at the expense of the number of the nation's smallest banks. The study also reports on forward-looking simulations that point to continued losses in the number of small banks.
Abstract: Today, many pregnant women take a brief period of time off from work to give birth. In this paper, I identify the effects of pregnancy employment on health at birth. My initial results show that pregnancy employment has beneficial effects. However, these effects often become statistically insignificant when I control for earnings from pregnancy employment, when I exclusively examine women employed prior to the pregnancy, and when I examine siblings in fixed effects models. I conclude that beneficial effects of pregnancy employment are partially due to increased family income via earnings during the pregnancy and partially due to unobserved heterogeneity. There is no evidence that increased female labor force participation adversely affects health at birth.
Abstract: The 1993 Family and
Medical Leave Act (FMLA) guarantees employees 12 weeks of unpaid leave to
address family issues. Twelve states and the
Abstract: Positive autocorrelation
implies that proximate observations take on similar values. 'Proximate' can be
defined in many different dimensions. In a cross-section of
Abstract: Some basic dynamic programming techniques are introduced by way of example with the help of the computer algebra system Maple. The emphasis is on building confidence and intuition for the solution of dynamic problems in economics. To better integrate the material, the same examples are used to introduce different techniques. One covers the optimal extraction of a natural resource, another consumer utility maximization, and the final example solves a simple real business cycle model. Every example is accompanied by Maple computer code to make replication and extension easy.
Abstract: Property rights will be
more carefully defined and enforced when the value of a resource rises or the
probability of losing the resource increases. A simple model is estimated on
litigation data for
Abstract: Accountability reforms have led to a bewildering array of public school performance measures. Policy makers, parents, and the public would often like to use this information to rank schools by differing degrees of effectiveness. Combining measures from different performance dimensions into a single index should be done in such a way that the resulting index is fair to each school, gives each school the incentive to change in the most desirable directions, and reduces the confusing mass of information to the simplest possible ordinal rank differences. This paper proposes a flexible weights approach, based on a modification of Data Envelopment Analysis. The resulting index maximally reduces information, is fair, and allows policymakers some discretion in guiding the direction schools take in their improvement.
Abstract: The cyclical behavior of the acquisition of skills over the life-cycle is investigated. The OLG model employed includes the human capital production sector of Heckman (1976) that has two possible responses in skill acquisition to a productivity shock; a substitution and an income effect. The calibrated model predicts, for all age groups, that the substitution effect dominates the income effect implying opportunity-cost considerations tend to make schooling countercyclical. However, the data on college enrollments suggests that the ability-to-pay consideration, or the income effect, is more important for the very young since enrollments for the recently graduated from high-school are procyclical. By making human capital acquisition shocks positively correlated with the TFP shock, the income effect of the young is increased thereby replicating the observed data.
Abstract: Positive autocorrelation implies that proximate observations take on similar values. 'Proximate' can be defined in many different dimensions. In a cross-section of nations, it can be defined using physical distance, cultural similarity, ecological similarity, or using frequency and intensity of interaction, such as trade relationships or enemy and ally relationships. Autocorrelation of regression residuals presents well-known problems in least-squares estimation, but autocorrelation also provides useful information for exploratory data analysis and model specification. The paper shows that autocorrelation is widespread in international datasets. The paper demonstrates the usefulness of autocorrelation in uncovering stylized facts about international relations, and in specifying a least-squares model.