Template-Type: ReDIF-Paper 1.0 Author-Name: Juan Aparicio Author-X-Name-First: Juan Author-X-Name-Last: Aparicio Author-Person: Author-Workplace-Name: University Miguel Hernandez of Elche Author-Name: Jesus T. Pastor Author-X-Name-First: Jesus T. Author-X-Name-Last: Pastor Author-Person: Author-Workplace-Name: University Miguel Hernandez of Elche Author-Name: Subhash Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: An Overall Measure of Technical Inefficiency at the Firm and at the Industrial Level: The 'Lost Return on the Dollar' Revisited Abstract: As a measure of overall technical inefficiency the Directional Distance Function (DDF) introduced by Chambers, Chung, and Färe ties the potential output expansion and input contraction together through a single parameter. By duality, the DDF is related to a measure of profit inefficiency, which is calculated as the normalized deviation between optimal and actual profit at market prices. As we show, in the most usual case, the associated normalization represents the sum of the actual revenue and the actual cost of the assessed firm. Consequently, the corresponding dual formulation of the DDF has no obvious economic interpretation. In contrast, in this paper we allow outputs to expand and inputs to contract by different proportions. This results in a modified DDF that retains most of the properties of the original DDF. The corresponding dual problem has much simpler interpretation as the lost return on outlay that can be decomposed into a technical and an allocative inefficiency component. JEL Classification: C61, D20 Key words: Data Envelopment Analysis, Directional Distance Function, Profit Inefficiency Length: 31 pages Number: 2012-02 Note: Creation-date: 201201 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2012-02.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2012-02 Template-Type: ReDIF-Paper 1.0 Author-Name: Richard M. H. Suen Author-X-Name-First: Richard M. H. Author-X-Name-Last: Suen Author-Person: psu62 Author-Workplace-Name: University of Connecticut Title: Time Preference and the Distribution of Wealth and Income Abstract: This paper analyzes the connection between time preference heterogeneity and economic inequality. To achieve this, we extend the standard neoclassical growth model by introducing three additional features, namely (i) heterogeneity in consumers’ discount rates, (ii) direct preferences for wealth, and (iii) human capital formation. The second feature prevents the wealth distribution from collapsing into a degenerate distribution. The third feature generates a strong positive correlation between earnings and capital income across consumers. A calibrated version of the model is able to generate patterns of wealth and income inequality that are very similar to those observed in the United States. Classification-JEL: D31, E21, O15 Keywords: Inequality, Heterogeneity, Time Preference, Human Capital Length: 36 pages Number: 2012-01 Note: Creation-date: 201201 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2012-01.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2012-01 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin M. Cosgel Author-X-Name-First: Metin M. Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Bogac A. Ergene Author-X-Name-First: Bogac A. Author-X-Name-Last: Ergene Author-Person: Author-Workplace-Name: University of Vermont Title: Inequality of Wealth in the Ottoman Empire: War, Weather, and Long-term Trends in Eighteenth Century Kastamonu Abstract: This article offers a quantitative analysis of wealth inequality in the Ottoman Empire, employing data from probate inventories (terekes) of eighteenth-century Kastamonu, a town located in northern Anatolia. Extracting information on the wealth levels and personal characteristics of individuals, we estimate aggregate measures of wealth inequality, namely the Gini Coefficient, the coefficient of variation, and the wealth shares of the wealthiest 10 and 25 percents of population. We use regression analysis to identify the time trend of wealth inequality and determine how warfare, significant weather events, macroeconomic variables, and shifts in population characteristics affected it. JEL Classification: D3, D6, E3, E6, I3, J1, N3, N9, O53 Key words: Wealth, Inequality, War, Weather, Ottoman Empire Length: 39 pages Number: 2011-29 Note: Creation-date: 201112 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-29.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-29 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin M. Cosgel Author-X-Name-First: Metin M. Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Jared Rubin Author-X-Name-First: Jared Author-X-Name-Last: Rubin Author-Person: pru106 Author-Workplace-Name: Chapman University Title: Political Legitimacy and Technology Adoption Abstract: A fundamental question of economic and technological history is why some civilizations adopted new and important technologies and others did not. In this paper, we construct a simple political economy model which suggests that rulers may not accept a productivity-enhancing technology when it negatively affects an agent’s ability to provide the ruler legitimacy. However, when other sources of legitimacy emerge, the ruler will accept the technology as long as the new legitimizing source is not negatively affected. This insight helps explain the initial blocking but eventual accepting of the printing press in the Ottoman Empire and industrialization in Tsarist Russia. JEL Classification: D7, H2, H3, N4, N7, O3, O5, P48, P5, Z12 Key words: Techonolgy, Political Economy, Legitimacy, Tsarist Russia, Ottoman Empire Length: 37 pages Number: 2011-28 Note: Creation-date: 201112 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-28.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-28 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: Impact of Liberalization and Globalization on Productivity in Indian Banking: A Comparative Analysis of Public Sector, Private, and Foreign Banks Abstract: Although dominated by public sector banks, India already had a significant presence of private domestic banks and foreign banks. What the banking reforms have done is to create a more level playing field where banks of different ownership types compete within a new set of broad (and far more relaxed) regulations. Data on the performance of the three different categories of banks over the past two decades offer an opportunity to assess to what extent the regulatory changes have improved the productive efficiency of the banking sector in India. Apart from analyzing the standard descriptive measures of performance, this paper uses the nonparametric approach of Data Envelopment Analysis to measure total factor productivity growth and its components to assess the impact of liberalization on different ownership categories of banks in India. The broad conclusion is that it is possible to promote financial soundness by introducing proper prudential norms and to improve operational efficiency without wholesale privatization by allowing competition between public, private and foreign banks. This can be a valuable lesson for other developing countries. JEL Classification: G21, C61 Key words: Banking Reforms, Data Envelopment Analysis, Efficiency Analysis Length: 75 pages Number: 2011-27 Note: This paper was prepared for the WTO-UNCTAD Conference in Delhi in November 2011. The author is grateful to Abhiman Das for providing him the data in a readily usable form and also for valuable comments. Creation-date: 201111 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-27.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-27 Template-Type: ReDIF-Paper 1.0 Author-Name: Jason M. Fletcher Author-X-Name-First: Jason M. Author-X-Name-Last: Fletcher Author-Person: pfl40 Author-Workplace-Name: Yale University and Columbia University Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Estimating the Effects of Friendship Networks on Health Behaviors of Adolescents Abstract: This paper estimates the effects of friends’ health behaviors, smoking and drinking, on own health behaviors for adolescents while controlling for the effects of correlated unobservables between those friends. Specifically, the effect of friends’ health behaviors is identified by comparing similar individuals who have the same friendship opportunities because they attend the same school and make similar friendship choices, under the assumption that the friendship choice reveals information about an individual’s unobservables. We combine this identification strategy with a cross-cohort, within school design so that the model is identified based on across grade differences in the clustering of health behaviors within specific friendship patterns. Finally, we use the estimated information on correlated unobservables to examine longitudinal data on the on-set of health behaviors, where the opportunity for reverse causality should be minimal. Our estimates for both behavior and on-set are very robust to bias from correlated unobservables. Classification-JEL: D85, I19, I21, J13 Keywords: Peer Effects, Friendship Networks, Adolescent Health, Smoking, Drinking, Cohort Study Length: 60 pages Number: 2011-26 Note: Creation-date: 201112 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-26.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-26 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: The Use of Economics for Understanding Law: An Economist's View of the Cathedral Abstract: This essay offers some observations, from the perspective of an economist, on the usefulness of economics for understanding law. Economic analysis provides a coherent theoretical framework for unifying different areas of law based on the pursuit of efficiency. It does this by recognizing common problems across different areas, which give rise to solutions that, while outwardly different, have the same underlying form. In this way, economics provides a theory of law. But economists can also learn a lot about how the economy functions by thinking more carefully about the role of law in facilitating economic activity. The success of law and economics ultimately resides in the recognition of this fundamental interrelationship between the two disciplines. Classification-JEL: K00 Keywords: Law and Economics Length: 36 pages Number: 2011-25 Note: Creation-date: 201112 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-25.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-25 Template-Type: ReDIF-Paper 1.0 Author-Name: Tsvetan Tsvetanov Author-X-Name-First: Tsvetan Author-X-Name-Last: Tsvetanov Author-Person: pts94 Author-Workplace-Name: University of Connecticut Author-Name: Kathleen Segerson Author-X-Name-First: Kathleen Author-X-Name-Last: Segerson Author-Person: pse47 Author-Workplace-Name: University of Connecticut Title: Re-Evaluating the Role of Energy Efficiency Standards: A Time-Consistent Behavioral Economics Approach Abstract: The economic models that prescribe Pigovian taxation as the first-best means of reducing energy-related externalities and argue that taxes are superior to energy efficiency standards are typically based on the neoclassical model of rational consumer choice. Yet, observed consumer behavior with regards to energy use and the purchase of energy-using durable goods is generally thought to be far from efficient, giving rise to the concept of the “energy-efficiency gap.” In this paper, we present a welfare analysis of Pigovian taxes and energy efficiency standards that is based on an alternative, time-consistent behavioral model. We adapt the model of temptation and self-control of Gul and Pesendorfer (2001, 2004) to the context of the purchase of energy-using durable goods. Our results suggest that (i) temptation or self-control might be a contributing factor in explaining the energy-efficiency gap, (ii) standards might be used as a commitment device to address inefficiencies in consumer choice that stem from temptation, and (iii) in the presence of temptation, a policy that combines standards with a Pigovian tax can yield higher social welfare than a Pigovian tax alone. Classification-JEL: D03, Q48, Q58 Keywords: behavioral economics, temptation, self-control, time-consistent preferences, energy-efficiency gap, energy efficiency standards, Pigovian taxes Length: 44 pages Number: 2011-24 Note: Creation-date: 201112 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-24.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-24 Template-Type: ReDIF-Paper 1.0 Author-Name: Richard M. H. Suen Author-X-Name-First: Richard M. H. Author-X-Name-Last: Suen Author-Person: psu62 Author-Workplace-Name: University of Connecticut Title: Concave Consumption Function and Precautionary Wealth Accumulation Abstract: This paper examines the theoretical foundations of precautionary wealth accumulation in a multi-period model where consumers face uninsurable earnings risk and borrowing constraints. We begin by characterizing the consumption function of individual consumers. We show that consumption function is concave when the utility function has strictly positive third derivative and the inverse of absolute prudence is a concave function. These conditions encompass all HARA utility functions with strictly positive third derivative as special cases. We then show that when consumption function is concave, a mean-preserving spread in earnings risk would encourage wealth accumulation at both the individual and aggregate levels. Classification-JEL: D81, D91, E21 Keywords: Consumption function, borrowing constraints, precautionary saving Length: 59 pages Number: 2011-23 Note: Creation-date: 201111 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-23.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-23 Template-Type: ReDIF-Paper 1.0 Author-Name: Mainak Mazumdar Author-X-Name-First: Mainak Author-X-Name-Last: Mazumdar Author-Person: Author-Workplace-Name: Centre De Science Humaines Author-Name: Meenakshi Rajeev Author-X-Name-First: Meenakshi Author-X-Name-Last: Rajeev Author-Person: pra176 Author-Workplace-Name: Institute for Social and Economic Change Author-Name: Subhash Ray Author-X-Name-First: Subhash Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: Sources of Heterogeneity in the Efficiency of Indian Pharmaceutical Firms Abstract: Using the non parametric approach of Data Envelopment Analysis (DEA) this paper examines firm’s heterogeneity in the Indian pharmaceutical industry by measuring their input and output efficiencies for the period 1991 to 2005. The analysis establishes that even though firms have been able to make efficient use of inputs like labor and raw material the output efficiency of the firms reveals a declining trend. The phenomenon can be attributed to the differences in the size of firms and the presence of economies of scale in production. Further analysis reveals the importance of firm specific factors like its strategies and structure for variation in output efficiency. We find firms that are vertically integrated with down-stream raw-material industry are more efficient. We also find that R&D is a possible strategic option for firms to gain higher efficiency but only for the large sized firms. Classification-JEL: L65, C61 Keywords: Patents, Pareto-Koopmans Efficiency, Data Envelopment Analysis (DEA) Length: 41 pages Number: 2011-22 Note: Creation-date: 201111 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-22.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-22 Template-Type: ReDIF-Paper 1.0 Author-Name: Parag Waknis Author-X-Name-First: Parag Author-X-Name-Last: Waknis Author-Person: pwa449 Author-Workplace-Name: University of Connecticut and University of Massachusetts Dartmouth Title: Monetary Policy under Leviathan Currency Competition Abstract: In this paper, we use a dual currency Lagos-Wright model to explore the nature of optimal monetary policy under currency competition using different timing protocols. The central banks are utility maximizing players. To characterize equilibrium with reputation, we model the centralized market sub period of the Lagos-Wright economy as an infinitely repeated game between the two Leviathan central banks (long run players) and a continuum of competitive agents (short run players). Concentrating on Markov strategies in such a game shows that the Markov perfect equilibrium features highest inflation tax. However, allowing for reputation concerns improves the inflation outcome. Such a game typically features multiple equilibriums but the competition between the banks allows the use of renegotiation proof-ness as an equilibrium selection mechanism. Accordingly, equilibrium featuring the lowest inflation tax is weakly renegotiation proof, suggesting that better inflation outcome is more likely in the case of Leviathan currency competition than in the single Leviathan bank case. Classification-JEL: E52, E61 Keywords: Monetary policy, currency competition, Leviathan, inflation tax, money search Length: 28 pages Number: 2011-21 Note: Creation-date: 201110 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-21.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-21 Template-Type: ReDIF-Paper 1.0 Author-Name: Parag Waknis Author-X-Name-First: Parag Author-X-Name-Last: Waknis Author-Person: pwa449 Author-Workplace-Name: University of Connecticut and University of Massachusetts Dartmouth Title: Endogenous Monetary Policy: A Leviathan Central Bank in a Lagos-Wright Economy Abstract: This paper studies the nature of optimal monetary policy under a Leviathan monetary authority in a microfounded model of money based on ?. Such a monetary authority is a reality whenever and wherever fiscal policy is a primary driver of the monetary policy. Under no commitment, we characterize and solve for a Markov perfect equilibrium as well as for equilibrium with reputation concerns. For the Markov equilibrium, a generalized Euler equation is derived to characterize optimal policy that trades off the current benefit of increasing consumption against the reduced ability to do so in the future. Under reputation equilibrium, centralized market interaction is modeled as an infinitely repeated game of perfect monitoring, between a Leviathan monetary authority (a large player) and the economic agents (small players). Such a game has multiple equilibriums but the large-small player dynamics pins down the equilibrium set of payoffs and features less than maximum inflation tax. Depending on howwe interpret the Leviathan central bank, the factors determining the realized equilibrium differ. Higher fiscal profligacy of the underlying political authority leads to a higher monetary growth rate and inflation tax, while existence of threat of competition in case of a private money supplier or threat of external aggression in case of a self interested sovereign leads to a lower one. The realized equilibrium monetary growth rate and the associated inflation tax is thus, affected by the intensity of context contingent factors. Concentrating only on Markov strategies in this repeated game shows that the Markov perfect equilibrium features maximum inflation tax. Classification-JEL: E52, E61 Keywords: Endogenous monetary policy, Leviathan, central bank, inflation tax, money search Length: 27 pages Number: 2011-20 Note: Creation-date: 201110 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-20.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-20 Template-Type: ReDIF-Paper 1.0 Author-Name: Dong Jin Lee Author-X-Name-First: Dong Jin Author-X-Name-Last: Lee Author-Person: ple398 Author-Workplace-Name: University of Connecticut Author-Name: Jong Chil Son Author-X-Name-First: Jong Chil Author-X-Name-Last: Son Author-Person: Author-Workplace-Name: The Bank of Korea Title: Nonlinearity and Structural Breaks in Monetary Policy Rules with Stock Prices Abstract: This paper empirically examines how the Fed responds to stock prices and inflation movements, using the forward-looking Taylor rule augmented with the stock price gap. The typical linear policy reaction function has a substantial change after 1991, but lacks the robustness in that the estimation result is sensitive to a minor change of the sample period. To alleviate the problem, we allow for temporary and permanent variations of the reaction coefficients by introducing nonlinearity and a structural break. The time variation of the inflation coefficient shows that the Fed is more aggressive in periods of inflationary pressure. However, unlike the linear model case, we find little evidence of a significant change in the Fed's active response to inflationary pressure after the structural break at 1991:I. We also find a positive response to the stock price change after 1991:I. But the time varying pattern of the response is counter-cyclical to stock price change, which does not support the view that the Fed actively reacts to a stock price bubble. Classification-JEL: E31, E44, E52 Keywords: Monetary policy rule, nonlinear model, stock market, structural break, and time varying coefficient Length: 35 pages Number: 2011-19 Note: Creation-date: 201110 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-19.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-19 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin Cosgel Author-X-Name-First: Metin Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Bogac A. Ergene Author-X-Name-First: Bogac A. Author-X-Name-Last: Ergene Author-Person: Author-Name: Haggay Etkes Author-X-Name-First: Haggay Author-X-Name-Last: Etkes Author-Person: Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Controlling Corruption in Law Enforcement: Incentives, Safeguards, and Institutional Change in the Ottoman Empire Abstract: Until the seventeenth century, the Ottomans used fines extensively for law enforcement and employed agents to collect the fines. Fines can be costly to implement because of agency problems and corruption. To solve the problem of corruption, the Ottomans implemented a variety of mechanisms, including periodic rotation of officials, separation of adjudication from punishment, and compensation for law enforcers through a two-part scheme consisting of fines and taxes. The system underwent a significant transformation after the seventeenth century, following a period of high inflation that raised the agency cost of a fixed fine system. Imperial decentralization in the provinces and the institution of long-term taxfarming also altered the government’s relationship with local law enforcement agents and reduced the effectiveness of control mechanisms. Consequently, the Ottomans relied less on fines for punishment. Using insights from the law and economics literature, we examine how the earlier mechanisms helped to combat corruption in law enforcement and why they were less effective in later periods. Classification-JEL: H1, K4, N45 Keywords: Corruption, criminal fines, deterrence, incentives, institutional change, Ottoman Empire Length: 37 pages Number: 2011-18 Note: Creation-date: 201109 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-18.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-18 Template-Type: ReDIF-Paper 1.0 Author-Name: Huiping Yuan Author-X-Name-First: Huiping Author-X-Name-Last: Yuan Author-Person: pyu72 Author-Workplace-Name: Xiamen University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Nevada, Las Vegas and University of Connecticut Title: The Optimality and Controllability of Discretionary Monetary Policy Abstract: This paper addresses two issues -- the time-inconsistency of optimal policy and the controllability of target variables within new-classical and new-Keynesian model structures. We can resolve both issues by delegation. That is, we design central bank loss functions by determining the two target values and the weight between the two targets. With a single decision maker, the time-inconsistency issue does not exist; the target controllability issue does. Delegating the long-run target values (target variables’ equilibriums under the Ramsey optimal policy) and the same weight as society to the central bank can achieve Ramsey optimality and path controllability. With multiple decision makers (game), both issues of time-inconsistency and target controllability exist and the delegation becomes more complicated. The long-run target values can only achieve asymptotic, not path, controllability. Path controllability requires the delegation of short-run target values, which commits or binds the central bank to follow exactly the Ramsey optimal paths. The short-run inflation target value conforms to the macroeconomic structure (i.e., Phillips curve). With path controllability, the constant average and state-contingent inflation biases are removed. To eliminate the stabilization bias, the delegated weight must differ from society in a dynamic game. When the Phillips curve exhibits output (inflation) persistence, the central bank must place more weight on output (inflation) stabilization. When the Phillips curve exhibits principally forward-looking behavior, the delegated weight can require a conservative or liberal central bank. In sum, delegating certain short-run target values and a different weight can cause discretionary monetary policy to prove Ramsey optimal and path controllable in a dynamic game. Classification-JEL: E420, E520, E580 Keywords: Optimal Policy, Controllability, Policy Rules Length: 60 pages Number: 2011-17 Note: Creation-date: 201108 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-17.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-17 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Kathleen Segerson Author-X-Name-First: Kathleen Author-X-Name-Last: Segerson Author-Person: pse47 Author-Workplace-Name: University of Connecticut Title: Regulatory Takings Abstract: A regulatory taking occurs when a government regulation reduces the value of private property to such a degree that the owner is entitled to compensation under the Fifth Amendment Takings Clause. This chapter reviews legal and economic theories aimed at determining when a regulation crosses the compensation threshold. It also assesses the consequences of various compensation rules on the efficiency of land use decisions and government policymaking. Classification-JEL: H11, K11, Q28 Keywords: Compensation, eminent domain, regulation, takings Length: 43 pages Number: 2011-16 Note: Creation-date: 201107 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-16.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-16 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Title: Civil War and Willingness to Pay for Independence: The American Revolution Abstract: This paper uses a similar theoretical approach to that in the modern literature on the propagation of civil wars to assess the causes of the American Revolution. Economic causes are weighed relative to political causes as a contribution to the more than 200-year inconclusive debate among historians as to why the Americans rebelled. The key question investigated is whether the economic benefit of leaving the Empire was great enough to warrant bearing the expected cost of war with Great Britain? The main finding is “no”, and that political grievances must have played the predominant role in sparking the American Revolution. Classification-JEL: K14, K33 Keywords: American Revolution, British Empire, civil war, causes of war, war of secession Length: 27 pages Number: 2011-15 Note: Creation-date: 201107 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-15.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-15 Template-Type: ReDIF-Paper 1.0 Author-Name: Catalina Granda-Carvajal Author-X-Name-First: Catalina Author-X-Name-Last: Granda-Carvajal Author-Person: pgr245 Author-Workplace-Name: University of Connecticut and Universidad de Antioquia Title: Macroeconomic Implications of the Underground Sector: Challenging the Double Business Cycle Approach Abstract: Within the literature on business cycles featuring shadow economic activities, there is an approach based on the arguable premise that fluctuations in the official and unofficial sectors are negatively correlated. The present paper develops a real business cycle model that does not impose such an assumption. To do so, preferences are characterized so that regular and irregular labor are additively separable. Furthermore, leisure time is spent on both irregular work effort and non-market activities. Simulations are conducted to examine the performance of the model economy and to compare the resulting cyclical features with related empirical findings. In addition, computational experiments allow to analyze the effects of different tax structures, enforcement rates and tastes for irregular labor on the volatility and comovements of aggregate variables. These simulations and experiments overall offer a more comprehensive view of the cyclical implications of the shadow economy. Classification-JEL: E26, E32, H26, O17 Keywords: Underground economy, shadow economy, business cycles, dynamic stochastic general equilibrium models Length: 58 pages Number: 2011-14 Note: I am greatly indebted to my adviser, Christian Zimmermann, for his valuable comments and support. Also, I would like to thank seminar participants at the University of Connecticut. Any errors are entirely mine. Creation-date: 201107 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-14.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-14 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Kathleen Segerson Author-X-Name-First: Kathleen Author-X-Name-Last: Segerson Author-Person: pse47 Author-Workplace-Name: University of Connecticut Title: Sequential Bargaining, Land Assembly, and the Holdout Problem Abstract: Although the holdout problem is a well-established part of legal and economic lore, the exact source of the problem is not well understood. The problem is usually attributed to high transaction costs or excessive bargaining power on the part of sellers once they recognize the scope of the project. In an effort to isolate the essential features of the problem, this paper considers the simplest possible setting in which a buyer bargains sequentially with a series of sellers, each of whose land is necessary to realize the gain from a large-scale project. Using ordinary Nash bargaining and assuming complete information, we identify a minimum set of factors that give rise to a holdout problem, which highlight the importance of commitment and the inefficiency of partial assembly. Classification-JEL: D40, K11, L14, R14 Keywords: Bargaining, holdout problem, land assembly Length: 19 pages Number: 2011-13 Note: Revision-date: 201201 Creation-date: 201106 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-13R.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2011-13.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2011-13 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: The Law and Economics of International Cooperation Against Maritime Piracy Abstract: Article 100 of the U.N. Convention on the Law of the Sea requires signatories to “cooperate” against maritime piracy, but “cooperate” is undefined. Enforcement is a public good – creating uncompensated benefits for others, so suffering from free-rider problems. Our analysis readily explains why more pirates captured are released than prosecuted; why the U.N. and International Maritime Organization are seeking to reduce enforcement costs; why some in the shipping industry want to apply the 1988 Convention against terrorism at sea; and why still others want to move prosecution of pirates out of national courts to an international court. Classification-JEL: K14, K33 Keywords: International law, law enforcement, maritime piracy Length: 27 pages Number: 2011-12 Note: Creation-date: 201106 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-12.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-12 Template-Type: ReDIF-Paper 1.0 Author-Name: Xiaoming Li Author-X-Name-First: Xiaoming Author-X-Name-Last: Li Author-Person: pli577 Author-Workplace-Name: University of Connecticut Title: Fixed Effects Estimation in Panel Nonlinear Fractional Response Models Abstract: Estimations of nonlinear panel models that include individual specific fixed effects are complicated by the incidental parameters problem, that is, the asymptotic bias in the estimation of typical fixed effects panel models generally results in inconsistent estimates. In this paper, I characterize the leading term of a large-T expansion of the biases in the nonlinear least square estimator (NLSE) and estimators of the average partial effects in panel fractional response models. The resulting estimator after analytical bias correction is robust to the incidental parameters bias and reduces the bias order from O(T−1) to O(T−2). I also examine the finite sample performance of the proposed estimator using a new data generating process in which panel fractional response variables are collapsed from repeated, clustered cross-sectional binary probit choices. A proof showing the generated data satisfies the identification assumption at the cluster level has been given. Simulation results suggest that, in the static case, the bias corrected estimator performs comparably to the quasi-maximum likelihood estimator (QMLE), which is the standard approach in the literature, for 8 or more periods, while in the dynamic case, the bias corrected estimators are substantially superior to those QMLE’s. Classification-JEL: C23, C25, I22 Keywords: Fractional responses, Panel Data, Unobserved effects, Probit, Partial effects, Bias, Incidental parameters problem, Fixed effects, Bias Correction Length: 39 pages Number: 2011-11 Note: Creation-date: 201106 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-11.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-11 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: The Political Economy of Decline of Industry in West Bengal: Experiences of a Marxist State Within a Mixed Economy Abstract: Over more than six decades following Independence, industry in West Bengal has steadily gone downhill. Usually the Left Front government effectively controlled by the Marxist Communist Party (CPM), that has ruled the state for the past 34 years until its recent defeat in the state assembly elections, is held responsible for the plight of industry in the state. The party and its followers, on the other hand, blame denial of the due share of the state in the central resources by a hostile government at the center for industrial retardation. This paper takes a close look at the available statistical evidence to argue that the main reason for the decline is a direct outcome of poor work culture, political interference, and failure of governance that has resulted in industrial anarchy that scares off private investment in the state. While the Left Front has its share of responsibility, the newly anointed Chief Minister of the State, Mamata Banerjee, has herself contributed generously to fostering and cultivating this chaos by calling wildcat general strikes in her erstwhile role as the ‘one person opposition party’. The only thing that can revive industry in West Bengal is liberating civil administration from the grip of political party bosses. Classification-JEL: R50, O14 Keywords: Center-State Relationship, Trade Unions, Governance Length: 21 pages Number: 2011-10 Note: Creation-date: 201105 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-10.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-10 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: “Keystone Cops” Meet “Pirates of the Somali Coast”: The Failure of International Efforts to Control Maritime Piracy. Abstract: Modern-day piracy on the high seas once again poses a serious threat to international shipping. This paper develops an economic of model of piracy that emphasizes the strategic interaction between pirates (offenders) and shippers (victims), a factor not previously studied in the law enforcement literature. A key implication of the model is that greater enforcement efforts will not necessarily result in less activity by pirates. Optimal enforcement policies are complicated by the need for international cooperation in the apprehension and prosecution of pirates. Free riding and other problems therefore impede the effectiveness of current international laws against piracy. Classification-JEL: K14, K33 Keywords: International law, law enforcement, piracy Length: 30 pages Number: 2011-09 Note: Creation-date: 201105 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-09.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-09 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Markets, Contracts, and Firms: A Unified Model of Organizational Choice Abstract: This paper examines markets, firms, and the law as alternative institutional arrangements for organizing transactions that involve transaction-specific investments and uncertain performance. The analysis is the logical extension of Coase's seminal examination of the market-firm boundary on one hand, and the market-law boundary on the other. It thus combines insights from the literature on industrial organization and law and economics. The result is a unified framework that reveals the relative advantages and disadvantages, within a fairly simple economic setting, of market exchange, court ordering (contracts), and internal governance (agency). Classification-JEL: D23, K12, L14, L22 Keywords: Asset specificity, contracts, firms, markets, transaction costs Length: 25 pages Number: 2011-08 Note: Creation-date: 201104 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-08.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-08 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Title: The implications of dynamic financial frictions for DSGE models Abstract: This paper shows that when financial frictions are dynamically modeled, broader inferences can be drawn from DSGE models with asymmetric information costs. By embedding a partial equilibrium framework of bankruptcy proceedings in a dynamic New Keynesian model I find, for example, that financial liberalization episodes are only effective in countries with an efficient judicial system. More generally, I find that the response of output to various shocks depends on the duration of bankruptcy proceedings. These relationships, however, are not strictly unidirectional. The responses to adverse shocks are amplified (mitigated) when the shocks also generate an increase (a decrease) in real interest rates and an increase (decrease) in the stock of bankruptcy cases. I find empirical support for one prediction of the model by investigating macroeconomic and foreclosure data from U.S. states; monetary policy is more effective in states that have longer foreclosure proceedings. Classification-JEL: C63; E02; E44; E52 Keywords: Foreclosure, DSGE, financial frictions, court efficiency. Length: 39 pages Number: 2011-07 Note: I thank James Guldi and Melanie Guldi for helpful comments and discussions. Creation-date: 201104 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-07.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-07 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Kathleen Segerson Author-X-Name-First: Kathleen Author-X-Name-Last: Segerson Author-Person: pse47 Author-Workplace-Name: University of Connecticut Title: Holdups and Holdouts: What do They Have in Common? Abstract: The holdup and holdout problems arise in different contexts, but they share certain fundamental similarities that have not generally been recognized. In particular, both involve activities requiring an up-front, non-salvageable investment, and both require the investor to purchase an input, the price of which is determined by bargaining after the initial investment has been made. The effect of the up-front investment is to reduce the investor's bargaining power with the seller of the input. The anticipation of the outcome of this bargaining creates a disincentive for the investor to undertake the project in the first place, causing some efficient projects to be foregone. Classification-JEL: D23, K11, L14, L23 Keywords: Holdup problem, holdout problem, non-salvageable investments, eminent domain Length: 21 pages Number: 2011-06 Note: Creation-date: 201104 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-06.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-06 Template-Type: ReDIF-Paper 1.0 Author-Name: Dong Jin Lee Author-X-Name-First: Dong Jin Author-X-Name-Last: Lee Author-Person: ple398 Author-Workplace-Name: University of Connecticut Title: Bootstrap Tests for Structural Breaks When the Regressors and Error Term are Nonstationary Abstract: This paper considers tests for structural breaks in linear models when the regressors and the serially dependent error process are unstable. The set of models contains various economic circumstances such as the structural breaks in the regressors and/or the error variance, and a linear trend model with I(0)/I(1) error. We show that the existing heteroscedasticity robust tests and the fixed regressor bootstrap method of Hansen (2000) have severe size distortion problem even in the asymptotics. We suggest a method which combines the fixed regressor bootstrap and the sieve-wild bootstrap method to nonparametrically approximate the serially dependent unstable error process. The suggested method is shown to asymptotically replicates the true distribution of the existing tests under various circumstances. Monte Carlo experiments show significant improvements both in the size and the power properties. Once the size is controlled by the bootstrap, Wald type tests have better power properties relative to LM type tests. Classification-JEL: C10, C12, C22 Keywords: Structural break, sieve bootstrap, fixed regressor bootstrap, robust test, break in linear trend Length: 44 pages Number: 2011-05 Note: Creation-date: 201103 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-05.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-05 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: Measuring Cost Efficiency in an Integrated Model of Production and Distribution: A Nonparametric Approach Abstract: In production economics, little attention is paid to transportation costs in any discussion of cost minimization by the firm. When the output is produced at multiple locations, transportation costs can become quite important in light of the geographical dispersion of plants and markets. In network models within the operations research literature, on the other hand, the main interest lies in minimization of the total transportation and inventory costs and only casual attention is devoted to production costs. This paper formulates an optimization problem that minimizes the total delivered cost of the firm. A numerical example is included for illustration. Classification-JEL: C61, D24 Keywords: Data Envelopment Analysis, Multi-plant Production, Transportation Cost Length: 21 pages Number: 2011-04 Note: An earlier version of this paper was presented at the Annual Conference of INFORMS held in November 2010 at Austin, TX and has benefited from comments received from the participants. Creation-date: 201102 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-04.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-04 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: Nonparametric Measurement of Cost Efficiency of a Demand Constrained Branch Network: An Application to Indian Banking Abstract: In the present study we evaluate the overall cost efficiency of a network of branches of a single large public sector bank in India within the city of Calcutta using the data for the year 2002. Our objective is to determine the optimal number of branches within a postal district that could provide the observed amounts of banking services to the customers in that area at the minimum operating cost. Our DEA results show that while in many cases, consolidating multiple branches would be more cost efficient, there are numerous instances, where increasing the number of branches would be optimal. Classification-JEL: C61, G21, L25 Keywords: Network Efficiency; DEA; Banking. Length: 22 pages Number: 2011-03 Note: Creation-date: 201101 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-03.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-03 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Pretoria Author-Name: Alain Kabundi Author-X-Name-First: Alain Author-X-Name-Last: Kabundi Author-Person: pka395 Author-Workplace-Name: University of Johannesburg Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Author-Name: Josine Uwilingiye Author-X-Name-First: Josine Author-X-Name-Last: Uwilingiye Author-Person: puw4 Author-Workplace-Name: University of Johannesburg Title: Using Large Data Sets to Forecast Sectoral Employment Abstract: We implement several Bayesian and classical models to forecast employment for eight sectors of the US economy. In addition to standard vector-autoregressive and Bayesian vector autoregressive models, we also include the information content of 143 additional monthly series in some models. Several approaches exist for incorporating information from a large number of series. We consider two approaches -- extracting common factors (principle components) in a factor-augmented vector autoregressive or vector error-correction, Bayesian factor-augmented vector autoregressive or vector error-correction models, or Bayesian shrinkage in a large-scale Bayesian vector autoregressive models. Using the period of January 1972 to December 1999 as the in-sample period and January 2000 to March 2009 as the out-of-sample horizon, we compare the forecast performance of the alternative models. Finally, we forecast out-of sample from April 2009 through March 2010, using the best forecasting model for each employment series. We find that factor augmented models, especially error-correction versions, generally prove the best in out-of-sample forecast performance, implying that in addition to macroeconomic variables, incorporating long-run relationships along with short-run dynamics play an important role in forecasting employment. Classification-JEL: C32, R31 Keywords:Sectoral Employment, Forecasting, Factor Augmented Models, Large-Scale BVAR models Length: 58 pages Number: 2011-02 Note: Creation-date: 201101 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-02.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-02 Template-Type: ReDIF-Paper 1.0 Author-Name: Tao Chen Author-X-Name-First: Tao Author-X-Name-Last: Chen Author-Workplace-Name: University of Connecticut Author-Name: Gautam Tripathi Author-X-Name-First: Gautam Author-X-Name-Last: Tripathi Author-Person: ptr18 Author-Workplace-Name: University of Connecticut Title: Testing Conditional Symmetry Without Smoothing Abstract: We test the assumption of conditional symmetry used to identify and estimate parameters in regression models with endogenous regressors without making any distributional assumptions. The specification test proposed here is computationally tractable, does not require nonparametric smoothing, and can detect n1/2-deviations from the null. Since the limiting distribution of the test statistic turns out to be a non-pivotal gaussian process, the critical values for implementing the test are obtained by simulation. In a Monte Carlo study we use the approach proposed here to test the assumption of conditional symmetry maintained in the seminal paper of Powell (1986b). Results from this finite sample experiment suggest that our test can work very well in moderately sized samples. Classification-JEL: C12, C14 Keywords: Length: 53 pages Number: 2011-01 Note: Creation-date: 201101 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2011-01.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2011-01 Template-Type: ReDIF-Paper 1.0 Author-Name: Nicholas Apergis Author-X-Name-First: Nicholas Author-X-Name-Last: Apergis Author-Person: pap5 Author-Workplace-Name: University of Piraeus Author-Name: Christina Christou Author-X-Name-First: Christina Author-X-Name-Last: Christou Author-Workplace-Name: University of Piraeus Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: Convergence Patterns in Financial Development: Evidence from Club Convergence Abstract: This paper analyzes the degree of convergence of financial development for a panel of 50 countries. We apply the methodology of Phillips and Sul (2007) to various financial development indicators to assess the existence of convergence clubs. We consider nine such indicators that various researchers use to proxy for the degree of financial development in countries. Overall, the results do not support the hypothesis that all countries converge to a single equilibrium state in financial development. Nevertheless, strong evidence exists of club convergence. Countries demonstrate a high degree of convergence in the sense that they form only two or three converging clubs, depending on the measure of financial development used. We then apply the Phillip-Sul method to per capita output and also find strong evidence of seven distinct convergence clubs in per capita output. Finally, we compare the various convergence clubs associated with financial development indicators to those clubs for per capita output. We conclude that strong evidence supports the correspondence between the convergence clubs for financial development and those for per capita output. Classification-JEL: F43, F32, G21, C33 Keywords: economic growth, financial development, convergence clustering approach, financial indicators Length: Number: 2010-34 Note: Creation-date: 201012 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-34.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-34 Template-Type: ReDIF-Paper 1.0 Author-Name: Nicholas Apergis Author-X-Name-First: Nicholas Author-X-Name-Last: Apergis Author-Person: pap5 Author-Workplace-Name: University of Piraeus Author-Name: Christina Christou Author-X-Name-First: Christina Author-X-Name-Last: Christou Author-Workplace-Name: University of Piraeus Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: Country and Industry Convergence of Equity Markets: International Evidence from Club Convergence and Clustering Abstract: This study employs the panel convergence methodology developed by Phillips and Sul (2007) to explore the convergence dynamics of international equity markets. The analysis considers both country and industry effects. While traditional portfolio management strategies usually follow a top-down procedure, assuming that country-level effects drive financial aggregates, e.g. stock returns, our empirical results suggest that the equity markets of 35 of the 42 counties in our sample do form a unified convergence club. The empirical findings also show more numerous stock-price convergence clubs in certain industries. That is, industry factors play a more important role in explaining the actual divergence in stock prices than does the stock market itself. Conversely, the volatility of stock prices exhibits much more evidence of convergence than stock prices. These findings should assist portfolio managers in the design and implementation of appropriate portfolio management strategies. Regulatory authorities also can benefit in the design of financial regulation. Classification-JEL: C32, C33 Keywords: equity markets convergence, industry effects, international equity markets, panel convergence methodology Length: Number: 2010-33 Note: Creation-date: 201012 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-33.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-33 Template-Type: ReDIF-Paper 1.0 Author-Name: Giorgio Canarella Author-X-Name-First: Giorgio Author-X-Name-Last: Canarella Author-Person: pca633 Author-Workplace-Name: California State University, Los Angeles, and University of Nevada, Las Vegas Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Author-Name: Stephen K. Pollard Author-X-Name-First: Stephen K. Author-X-Name-Last: Pollard Author-Workplace-Name: California State University, Los Angeles Title: Stochastic Convergence in the Euro Area Abstract: We investigate the dynamics of stochastic convergence of the original Euro Area countries for inflation rates, nominal interest rates, and real interest rates. We test for convergence relative to Germany, taken as the benchmark for core EU standards, using monthly data over the period January 2001 to September 2010. We examine, in a time-series framework, three different profiles of the convergence process: linear convergence, nonlinear convergence, and linear segmented convergence. Our findings both contradict and support convergence. Stochastic convergence implies the rejection of a unit root in the inflation rate, nominal interest rate, and real interest rate differentials. We find that the differentials are consistent with a unit-root hypothesis when the alternative hypothesis is I(0) with a linear trend. But we frequently, but not always, reject the unit-root hypothesis when the alternative is I(0) with a broken trend. We also note that the current financial crisis plays a significant role in dating the breaks. Classification-JEL: F36, F42, C20, C50 Keywords: Stochastic convergence, Nonlinearity, Unit-root tests, Structural breaks. Length: Number: 2010-32 Note: Creation-date: 201012 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-32.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-32 Template-Type: ReDIF-Paper 1.0 Author-Name: Oskar R. Harmon Author-X-Name-First: Oskar R. Author-X-Name-Last: Harmon Author-Person: pha123 Author-Workplace-Name: University of Connecticut Author-Name: James Lambrinos Author-X-Name-First: James Author-X-Name-Last: Lambrinos Author-Workplace-Name: Union Graduate College Title: Online Graphing Activity for Principles of Economics Courses Abstract: This paper describes how an online drawing program and bulletin board are used to create active learning activities for a principles of economics class. In the activity the student downloads an initial diagram that sets up a textbook principles scenario. The student uses an image-editing program to complete the diagram, so that it represents the outcome predicted in the textbook and posts it to a bulletin board. The tools for the activity: SumoPaint.com, and WikiSpaces.com; are free and available on the Internet. By appropriately adjusting the information included in the initial diagram, there is flexibility to adjust the difficulty level, for high school AP courses or college level courses, and to adapt the exercise to a range of different classroom formats and varied physical locations of the student. Classification-JEL: A2 Keywords: Online, Blended, Hybrid, Teaching Economics Length: 7 pages Number: 2010-31 Note: Creation-date: 201012 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-31.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-31 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: C. F. Sirmans Author-X-Name-First: C. F. Author-X-Name-Last: Sirmans Author-Workplace-Name: Florida State University Title: Efficiency Rents: A New Theory of the Natural Vacancy Rate for Rental Housing Abstract: This paper adapts the theory of efficiency wages to explain the natural vacancy rate in rental housing markets. An equilibrium vacancy rate penalizes landlords who fail to maintain their units because if a tenant vacates a unit, the landlord will not be able to fill it immediately, thus costing him the rental income for a finite period of time. We provide evidence for the theory by showing that vacancy rates across metropolitan areas vary inversely with the stringency of state habitability laws. We also find some evidence for the search-cost theory of the natural vacancy rate. Classification-JEL: K11, R31 Keywords: Efficiency rents, natural vacancy rate, rental housing Length: 18 pages Number: 2010-30 Note: Creation-date: 201011 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-30.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-30 Template-Type: ReDIF-Paper 1.0 Author-Name: Richard N. Langlois Author-X-Name-First: Richard N. Author-X-Name-Last: Langlois Author-Person: pla2 Author-Workplace-Name: University of Connecticut Title: Business Groups and the Natural State Abstract: Recent revisionist accounts of corporate governance in both business history and finance are challenging the tradition narrative, associated with Berle and Means (1932) and Alfred Chandler (1977), in which the American model of diffuse ownership and coherent diversification is both an inevitable outcome of economic development and perhaps a normative standard for the world to follow. This essay is an attempt to rethink that narrative in light of the continued significance of the pyramidal business group as a governance structure around the world. Drawing on the North, Wallis, and Weingast (2009) theory of the state, I argue that the evolution of corporate governance can be understood only in institutional terms and that institutional development is driven by the coalitional structure of the polity. This is true as much in open-access orders like the U. S. as in the “natural states” that rule most of the world. In the end, I endorse the view that the much-discussed and oft-misunderstood exceptionalism of the U. S. in corporate governance has its roots of the differential effect on the U. S. of the collapse of globalization during the middle years of the twentieth century. Classification-JEL: G38, H10, K22, L22 Keywords: Business groups, corporate governance, diversification, pyramids, theory of the state. Length: 47 pages Number: 2010-29 Note: Creation-date: 201011 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-29.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-29 Template-Type: ReDIF-Paper 1.0 Author-Name: Moussa Diop Author-X-Name-First: Moussa Author-X-Name-Last: Diop Author-Workplace-Name: Pennsylvania State University Author-Name: Steven P. Lanza Author-X-Name-First: Steven P. Author-X-Name-Last: Lanza Author-Workplace-Name: University of Connecticut Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: C. F. Sirmans Author-X-Name-First: C. F. Author-X-Name-Last: Sirmans Author-Workplace-Name: Florida State University Title: Public Use or Abuse? The Use of Eminent Domain for Economic Development in the Era of \textit{Kelo} Abstract: The Supreme Court decision in Kelo v. New London (2005) authorized the use of eminent domain for economic redevelopment projects provided that there are sufficient spillover benefits to the public in the form of enhanced taxes and new jobs. This paper examines the economic basis for this decision, and tests the conclusions using cross-state data on economic development takings. It also examines the factors underlying the political actions by states to limit such takings following the Kelo decision. The results are consistent with the economic justification for eminent domain as a means of overcoming holdout problems associated with land assembly. Classification-JEL: H11, H41, H42, O12, K11, R11 Keywords: Economic development, eminent domain, holdout problem, takings Length: 35 pages Number: 2010-28 Note: Creation-date: 201011 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-28.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-28 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Judicial versus "Natural" Selection of Legal Rules with an Application to Accident Law Abstract: Law and economics scholars argue that the common law evolves toward efficiency. Invisible hand theories suggest that the law is primarily driven by a selection process whereby inefficient laws are litigated more frequently than efficient laws, and hence are more likely to be overturned. But the preferences of judges also necessarily affect legal change. This paper models the interaction of these two forces to evaluate the efficiency claim, and then applies the conclusions to the evolution of accident law in the U.S. Specifically, it attributes the persistence of negligence to its efficiency properties, despite its having been initially selected by judges for a different reason. Classification-JEL: B52, K13, K41 Keywords: Accident law, legal change, judicial decision-making, natural selection Length: 21 pages Number: 2010-27 Note: Creation-date: 201011 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-27.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-27 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Author-Name: Arpita Ghose Author-X-Name-First: Arpita Author-X-Name-Last: Ghose Author-Workplace-Name: Jadavpur University Title: Production Efficiency in Indian Agriculture: An Assessment of the Post Green Evolution Years Abstract: In this paper we use the nonparametric approach of Data Envelopment Analysis (DEA) to obtain Pareto-Koopmans measures of technical efficiency of individual states in India over the years 1970-71 through 2000-01 in a multi-output, multi-input model of agricultural production. The Pareto-Koopmans measure is a complete measure of efficiency that reflects all unrealized potential for increasing \textit{any} output and decreasing \textit{any} input that the firm has failed to exploit. In our empirical analysis, we disaggregate overall efficiency into two distinct components representing output and input efficiencies and identify the contributions of individual outputs and inputs to the measured level of overall efficiency. Because introduction of modern inputs has been a major component of the process of modernization of Indian agriculture, we examine to what extent different states succeeded in utilizing the modern inputs compared to the traditional inputs. Finally, we use regression analysis to explain variations in efficiency across states in terms of differences in various infra-structural, institutional, and demographic factors. Classification-JEL: Q16, C61, O33 Keywords: Data Envelopment Analysis; Pareto-Koopmans Efficiency; Modern and traditional inputs. Length: 30 pages Number: 2010-26 Note: Creation-date: 201010 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-26.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-26 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Michael P. Stone Author-X-Name-First: Michael P. Author-X-Name-Last: Stone Author-Person: pst398 Author-Workplace-Name: Quinnipiac University Title: The Determinants of State-Level Caps on Punitive Damages: Theory and Evidence Abstract: Under the standard economic model of torts, punitive damages correct for imperfect detection. Incorporating litigation costs into the model provides a justification for punitive damage caps. At the optimum, caps balance deterrence against the cost of litigation. Empirical testing of the model is performed via Cox proportional and parametric hazard analyses, using a panel dataset from 1981 to 2007. The results reveal a positive relationship between judicial and legal expenditures (a proxy for legal costs) and cap enactment, and a negative relationship between state GSP (a proxy for damages) and cap enactment. Cap enactment is also influenced by political ideology. Classification-JEL: K13, K41 Keywords: Deterrence, litigation costs, punitive damages, statutory caps Length: 35 pages Number: 2010-25 Note: We acknowledge the helpful advice of Stephen Ross and the comments of participants at the Department of Economics Brownbag, University of Connecticut, November 2009. Creation-date: 201010 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-25.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-25 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin Cosgel Author-X-Name-First: Metin Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Bogac A. Ergene Author-X-Name-First: Bogac A. Author-X-Name-Last: Ergene Author-Workplace-Name: University of Vermont Title: Intergenerational Wealth Accumulation and Dispersion in the Ottoman Empire: Observations from Eighteenth-Century Kastamonu Abstract: This article studies the accumulation and intergenerational transmission of wealth in early-modern Ottoman Anatolia by employing data from probate estate inventories (terekes) as found in the court records (sicils) of eighteenth-century Kastamonu, a town located in northern Anatolia. Extracting information on the wealth levels and personal characteristics of father-son pairs in the period between 1710 and 1806, we conduct regression analysis of factors determining the wealth of sons. In this first attempt to simultaneously analyze the estate inventories of parents and children in the Ottoman Empire, we also compare our results with those obtained for regions that were growing rapidly in this era and discuss the implications of our findings for the prospects of capital accumulation in the Ottoman context. Our results show that wealth holding was more equal in Kastamonu than in Britain in the eighteenth century. This was caused in part by the significantly lower transmission of wealth from fathers to sons. Although there was a significant correlation between the wealth-levels of fathers and sons in Kastamonu, this relationship was weaker there than what has been observed for eighteenth-century Britain. Regression to the mean among the sons was more rapid in Kastamonu. Finally, in at least one Ottoman context, our calculations cast doubt on the argument that Islamic inheritance practices led to excessive levels of wealth fragmentation. Classification-JEL: D3, E24, N3, O53, Z12 Keywords: Length: 37 pages Number: 2010-24 Note: Creation-date: 201009 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-24.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-24 Template-Type: ReDIF-Paper 1.0 Author-Name: Leshui He Author-X-Name-First: Leshui Author-X-Name-Last: He Author-Workplace-Name: University of Connecticut Author-Person: phe341 Title: The Ownership of the Firm under A Property Rights Approach Abstract: The boundaries of the firm and the ownership of the firm have been two of the main themes of the economics of organization over the past several decades. In this paper, I develop a general multi-party framework that integrates the ownership of the firm into the property-rights approach to the firm. I consider the ownership of the firm as the ownership of the rights to terminate cooperation with any party while maintaining a contractual or employment relation with all the other related parties of the firm. The model in this paper allows for the separation of the ownership of the firm from the ownership of the alienable assets that partly constitute it. Such a general multi-party setup may provide new tools for the study of the problem of the firm's boundaries as well as inspiration for further applications of the theory of property rights. Classification-JEL: D2, L2, Y4 Keywords: Owner of the Firm; Boundary of the Firm; Property Rights Theory; Theory of the Firm. Length: 31 pages Number: 2010-23 Note: The author is grateful to Professor Richard N. Langlois as the dissertation advisor, and Professor Christian Zimmermann, Professor Vicki I. Knoblauch as the committee members for advice and suggestions, and to Professor Thomas J. Miceli, Professor Kathleen Segerson, Professor Xenia Matschke, and seminar participants at the Univ. of Connecticut for helpful comments. Any remaining errors are those of the author's alone. Creation-date: 201009 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-23.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-23 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Miceli Author-X-Name-First: Thomas Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Brian Volz Author-X-Name-First: Brian Author-X-Name-Last: Volz Author-Person: pvo97 Author-Workplace-Name: Assumption College Title: Application of DEA to Voting for the Baseball Hall of Fame Abstract: This paper applies Data Envelopment Analysis (DEA) to voting for the Baseball Hall of Fame. The approach interprets a player's career statistics as inputs, and the percentage of votes he received for the HOF as the output. A constructed frontier based on past voting defines the maximum number of votes that a player should receive based on his statistical profile. Our results suggest that about a third of current members of the HOF (excluding Negro League players, managers, umpires, and executives) should be replaced by more deserving players. Our conclusions, however, do not account for those aspects of a player's career (both positive and negative) not captured by statistics. Classification-JEL: C44, D20, L83 Keywords: Baseball hall of fame; data envelopment analysis; production theory Length: 21 pages Number: 2010-22 Note: Creation-date: 201008 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-22.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-22 Template-Type: ReDIF-Paper 1.0 Author-Name: Mehmet Balcilar Author-X-Name-First: Mehmet Author-X-Name-Last: Balcilar Author-Person: pba722 Author-Workplace-Name: Eastern Mediterranean University Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Pretoria Author-Name: Anandamayee Majumdar Author-X-Name-First: Anandamayee Author-X-Name-Last: Majumdar Author-Workplace-Name: Arizona State University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: Forecasting Nevada Gross Gaming Revenue and Taxable Sales Using Coincident and Leading Employment Indexes Abstract: This paper provides out-of-sample forecasts of Nevada gross gaming revenue and taxable sales using a battery of linear and non-linear forecasting models and univariate and multivariate techniques. The linear models include vector autoregressive and vector error-correction models with and without Bayesian priors. The non-linear models include non-parametric and semi-parametric models, smooth transition autoregressive models and artificial neural network autoregressive models. In addition to gross gaming revenue and taxable sales, we employ recently constructed coincident and leading employment indexes for Nevada's economy. We conclude that non-linear models generally outperform linear models in forecasting future movements in gross gaming revenue and taxable sales. Classification-JEL: C32, R31 Keywords: Forecasting, Linear and non-linear models, Nevada gross gaming revenue, Nevada taxable sales Length: 47 pages Number: 2010-21 Note: Creation-date: 201007 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-21.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-21 Template-Type: ReDIF-Paper 1.0 Author-Name: Sami Alpanda Author-X-Name-First: Sami Author-X-Name-Last: Alpanda Author-Person: pal228 Author-Workplace-Name: Amherst College Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Title: Bank globalization and the balance sheet channel of monetary transmission Abstract: The literature typically finds that the development of financial markets has decreased the ability of central banks to affect the real economy. This paper shows that this negative relationship does not hold for the balance sheet channel of monetary transmission and bank globalization -- one aspect of financial development. The reason is that global banks are more sensitive to borrowers' leverage. By affecting this leverage, monetary policy has a larger impact on global banks' lending and aggregate economic activity. We use bank-level, Call Report data to obtain this disparity between more and less global banks. We then use this data in the estimation of a general equilibrium model and find that the balance sheet channel of monetary policy operates mainly through more global banks. Classification-JEL: E44, F31, F41, O16 Keywords: balance sheet channel, bank globalization, financial accelerator Length: 36 pages Number: 2010-20 Note: Creation-date: 201007 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-20.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-20 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Title: Reforming Taxation in the Scotland Act (1998): Hard Budget Constraints and the Inadequacy of the Calman Commission Proposals Abstract: We demonstrate that both the Barnett formula used to calculate changes in public spending by the Scottish Parliament and Government under the Scotland Act (1998), as well as the recent Calman Commission proposals for fiscal reform, are soft budget constraints that do not and will not encourage the Scottish Government and Parliament to promote economic growth in Scotland and do not offer true accountability. However, fiscal autonomy would offer a hard budget constraint, and would encourage the adoption of policies aimed at growing the Scottish tax base and make the Scottish polity truly accountable. Secondly, fiscal autonomy is argued to be a viable fiscal reform within the existing and continuing UK constitutional settlement. Thirdly, existing empirical studies in-so-far as they relate to the Scottish case are shown to largely support the case for tax devolution. Classification-JEL: H77 Keywords: Barnett formula, Calman Commission, fiscal autonomy, fiscal federalism, non-cooperative game, regional finance, Scottish Executive, Scottish Parliament, secession. Length: 31 pages Number: 2010-19 Note: Creation-date: 201007 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-19.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-19 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Author-Name: Melanie Guldi Author-X-Name-First: Melanie Author-X-Name-Last: Guldi Author-Person: pgu209 Author-Workplace-Name: Mount Holyoke College Author-Name: Ralf Hepp Author-X-Name-First: Ralf Author-X-Name-Last: Hepp Author-Person: phe136 Author-Workplace-Name: Fordham University Title: Securitization and the balance sheet channel of monetary transmission Abstract: This paper shows that the balance sheet channel of monetary transmission works mainly through U.S. bank holding companies that securitize their assets. This finding is different, in spirit, from the widely-found negative relationship between financial development and the strength of the lending channel of monetary transmission. Focusing on the balance sheet channel, and using bank-level observations, we find that securitized banks are more sensitive to borrowers' balance sheets and that monetary policy has a greater impact on this sensitivity for securitizing bank holding companies. The optimality conditions from a simple partial equilibrium framework suggest that the positive effects of securitization on policy effectiveness could be due to the high sensitivity of security prices to policy rates. Classification-JEL: E44, F31, F41, O16 Keywords: balance sheet channel, banks, bank holding companies, securitization. Length: 33 pages Number: 2010-18 Note: Creation-date: 201007 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-18.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-18 Template-Type: ReDIF-Paper 1.0 Author-Name: Catalina Granda-Carvajal Author-X-Name-First: Catalina Author-X-Name-Last: Granda-Carvajal Author-Person: pgr245 Author-Workplace-Name: University of Connecticut and Universidad de Antioquia Title: The Unofficial Economy and the Business Cycle: A Test for Theories Abstract: The shadow economy is an extensive phenomenon worldwide. It poses several questions, the consequences on fluctuations in economic activity being among the major ones. Based on official data, this paper establishes a set of cyclical properties of macroeconomic aggregates and studies how these vary across countries with the size of the unofficial sector. Through comparisons with the existing literature on business cycles in economies featuring underground activities, the obtained ‘stylized facts’ are used to test the relevance of theoretical predictions on the influence of the shadow economy. Using this procedure allows to confirm that the evidence is not entirely of the sort suggested in business cycle models. In particular, some important macro aggregates and cyclical properties have been neglected in the analysis altogether, while others have been paid too much attention for no apparent empirical reason. Some possible avenues for future research can be drawn from this exercise. Classification-JEL: E26, E32, O17, C82, C52 Keywords: Shadow economy, Business cycles, Model evaluation. Length: 33 pages Number: 2010-17 Note: I would like to thank my adviser, Christian Zimmermann, for his comments and motivation. This paper has benefited from suggestions from seminar participants at the University of Connecticut and at the International Workshop Shadow Economy, Tax Policy, and Labour Markets in International Comparison: Options for Economic Policy, University of Potsdam, April 15-16, 2010. All errors are entirely mine. Financial assistance from Universidad de Antioquia is gratefully acknowledged. Creation-date: 201007 Price: Free Publication-Status: Forthcoming in International Economic Journal File-URL: http://www.econ.uconn.edu/working/2010-17.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-17 Template-Type: ReDIF-Paper 1.0 Author-Name: James W. Boudreau Author-X-Name-First: James W. Author-X-Name-Last: Boudreau Author-Person: pbo258 Author-Workplace-Name: The University of Texas-Pan American Author-Name: Vicki Knoblauch Author-X-Name-First: Vicki Author-X-Name-Last: Knoblauch Author-Person: pkn3 Author-Workplace-Name: University of Connecticut Title: The Price of Stability in Matching Markets Abstract: This paper studies the inefficiency of one-to-one matching markets as measured by the price of stability. We begin by providing some theoretical upper bounds on this type of inefficiency, bounds that vary with the composition of participants’ ordinal preference lists. We then turn to simulation experiments to further describe how changes in basic characteristics of agents’ preferences can increase or decrease the efficiency of stable matchings. Our results have important implications for those who seek to improve the functioning of real-world matching markets. Though it may be difficult or even impossible to completely ascertain preferences in a real-world market, it is possible to get a sense of general levels of correlation and intercorrelation from an empirical sample. Our results can then be of help to market designers, letting them know how substantial the price of stability is likely to be. Classification-JEL: C78, D63, C63 Keywords: Price of stability, matching Length: 28 pages Number: 2010-16 Note: Creation-date: 201004 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-16.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-16 Template-Type: ReDIF-Paper 1.0 Author-Name: James W. Boudreau Author-X-Name-First: James W. Author-X-Name-Last: Boudreau Author-Person: pbo258 Author-Workplace-Name: The University of Texas-Pan American Author-Name: Vicki Knoblauch Author-X-Name-First: Vicki Author-X-Name-Last: Knoblauch Author-Person: pkn3 Author-Workplace-Name: University of Connecticut Title: Dividing Profits Three Ways: Impartiality vs. Consensuality Abstract: A rule for three-way division of profits based on peer evaluation reports is impartial if the calculation of each partner’s share ignores her report, and is consensual if it respects evaluations when the three partners’ reports are in agreement. We give an approximate solution to the problem of finding a three-way impartial division rule of minimal average deviation from consensuality. We also use a calculus of variations technique to give an exact solution to a simple version of the problem. Classification-JEL: D70, D63 Keywords: division function, impartial, consensual Length: 21 pages Number: 2010-15 Note: Creation-date: 201004 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-15.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-15 Template-Type: ReDIF-Paper 1.0 Author-Name: Michael P. Stone Author-X-Name-First: Michael P. Author-X-Name-Last: Stone Author-Person: pst398 Author-Workplace-Name: University of Connecticut Title: Optimal Attorney Advertising Abstract: Attorney advertising routinely targets tort victims. In this paper, a theoretical model is developed which incorporates advertising intensity, litigation costs, and an endogenous number of lawsuits. Since advertising induces victims to bring suit, it increases the level of injurer care. However, litigation costs are also incurred. At the optimum, the marginal benefit of deterrence equals the sum of the marginal costs of litigation and advertising. It is shown that even though blanket prohibitions on attorney advertising are likely suboptimal, ethical regulations which increase the marginal cost of advertising may be justified. Nevertheless, despite the widespread use of legal services advertising, it is unclear whether law firms are currently advertising excessively or inefficiently low. Whether firms are advertising excessively from a social standpoint is a purely empirical question. Classification-JEL: K13, L84 Keywords: Tort, Liability, Advertising, Attorneys, Lawyer, Legal Services Length: 22 pages Number: 2010-14 Note: Creation-date: 201007 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-14.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-14 Template-Type: ReDIF-Paper 1.0 Author-Name: Ralf Hepp Author-X-Name-First: Ralf Author-X-Name-Last: Hepp Author-Person: phe136 Author-Workplace-Name: Fordham University Author-Name: Juergen von Hagen Author-X-Name-First: Juergen Author-X-Name-Last: von Hagen Author-Person: pvo15 Author-Workplace-Name: University of Bonn and Indiana University Title: Interstate Risk Sharing in Germany: 1970-2006 Abstract: We study the channels of interstate risk sharing in Germany for the time period 1970 to 2006, estimating the degrees of smoothing of a shock to a state's gross domestic product by factor markets, the government sector, and credit markets, respectively. Within the government sector, we pay special attention to Germany's fiscal equalization mechanism. For pre-unification Germany, we find that about 19 percent of a shock are smoothed by private factor markets, 50 percent are smoothed by the German government sector, and a further 17 percent are smoothed through credit markets. For the post-reunification period, 1995 to 2006, the relative importance of the smoothing channels has changed. Factor markets contribute around 50.5 percent to consumption smoothing. The government sector's role is diminished: it smoothes around 10 percent of a shock. Fiscal equalization only plays a very small role for consumption smoothing in Germany. Classification-JEL: H77, E63, F42 Keywords: Regional Risk-sharing, Factor Markets, Consumption Smoothing, Fiscal Federalism Length: 23 pages Number: 2010-13 Note: This paper was partially written while Ralf Hepp was visiting the University of Connecticut Creation-date: 2010 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-13.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-13 Template-Type: ReDIF-Paper 1.0 Author-Name: Douglas Gollin Author-X-Name-First: Douglas Author-X-Name-Last: Gollin Author-Person: pgo22 Author-Workplace-Name: Williams College Author-Name: Christian Zimmermann Author-X-Name-First: Christian Author-X-Name-Last: Zimmermann Author-Person: pzi1 Author-Workplace-Name: University of Connecticut Title: Global Climate Change and the Resurgence of Tropical Disease: An Economic Approach Abstract: We study the impact of global climate change on the prevalence of tropical diseases using a heterogeneous agent dynamic general equilibrium model. In our framework, households can take actions (e.g., purchasing bed nets or other goods) that provide partial protection from disease. However, these actions are costly and households face borrowing constraints. Parameterizing the model, we explore the impact of a worldwide temperature increase of 3C. We find that the impact on disease prevalence and especially output should be modest and can be mitigated by improvements in protection efficacy. Classification-JEL: I1, O11, E13, E21, Q54 Keywords: DSGE model, climate change, tropical disease, incomplete markets Length: 17 pages Number: 2010-12 Note: This paper was written while Gollin was on leave at the Yale School of Forestry and Environmental Studies. Creation-date: 201006 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-12.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-12 Template-Type: ReDIF-Paper 1.0 Author-Name: Lei Chen Author-X-Name-First: Lei Author-X-Name-Last: Chen Author-Person: pch812 Author-Workplace-Name: University of Connecticut Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: Cost Efficiency and Scale Economies in General Dental Practices in the U.S.: A Non-parametric and Parametric Analysis Abstract: This paper uses both the non-parametric method of Data Envelopment Analysis (DEA) and the econometric method of Stochastic Frontier Analysis (SFA) to study the production technology and cost efficiency of the U.S. dental care industry using practice level data. The American Dental Association (ADA) 2006 survey data for a number of general dental practices in Colorado are used for the empirical analyses. The result shows that the average cost efficiency score is 0.79 for DEA and 0.87 for SFA, and the cost inefficiency comes mainly from the allocative inefficiency. The minimum average cost of production is 50.6 cents for each dollar of gross billing generated. The optimal output level for a dental practice to fully exploit the economies of scale is at $1.68 million. Both DEA and SFA provide generally consistent results. Classification-JEL: I1,C2, D2 Keywords: Dental Care, Cost Efficiency, Economies of Scale, Data Envelopment Analysis, Stochastic Frontier Analysis Length: 21 pages Number: 2010-11 Note: Creation-date: 201006 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-11.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-11 Template-Type: ReDIF-Paper 1.0 Author-Name: Xiaoming Li Author-X-Name-First: Xiaoming Author-X-Name-Last: Li Author-Workplace-Name: University of Connecticut Author-Name: AKM Rezaul Hossain Author-X-Name-First: AKM Rezaul Author-X-Name-Last: Hossain Author-Person: pho117 Author-Workplace-Name: St. Mary's College Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Neighborhood Information Externalities and the Provision of Mortgage Credit Abstract: Recent theoretical models and empirical analyses argue that mortgage market activity creates information and lowers the costs of underwriting mortgages. We re-examine this question using models that control for neighborhood-lender fixed effects and address the potential endogeneity of market volume using information on lagged volumes. We find that the omission of neighborhood fixed effects substantially biases analyses of the effect of neighborhood volume on underwriting, and our tests imply that the one or two period lags of volume typically used in cross-sectional studies cannot be treated as exogenous due to the persistence of neighborhood economic shocks. In our preferred specification, we cannot rule out the possibility that overall market activity has a small positive influence on mortgage underwriting, but the statistical evidence for the existence of such effects is weak. On the other hand, we find that lender-specific activity in a neighborhood has strong positive effects on the mortgage approval decision, and this effect is underestimated in traditional cross-sectional models. Classification-JEL: D8, G2, L8, R3 Keywords: Length: 27 pages Number: 2010-10 Note: Creation-date: 201005 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-10.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-10 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: From Detroit to Singur: On the Question of Land Acquisition for Private Development Abstract: Private land is often taken by the government on behalf of another private investor in the interest of employment creation or general economic development of a region. This paper draws upon the parallel between the experiences of General Motors in Poletown, MI in the 1980s and the recent events relating to Tata Motors and the agricultural land in Singur, West Bengal to raise a number of questions about government taking of land for private development .A brief review of the history of land acquisition through Eminent Domain in the US serves as the background for a discussion of the different important questions like the problem of strategic holdouts and fair compensation. The essay ends with an emphasis on the moral obligation of the government, especially in India, for proper rehabilitation of the displaced when exercise of Eminent Domain powers becomes unavoidable. Classification-JEL: K11, R11 Keywords: Eminent Domain; Strategic Holdout; Fair compensation Length: 19 pages Number: 2010-09 Note: Except for the introductory section written for readers unfamiliar with the incidents at Singur, West Bengal, this essay is an English rendering of my original piece published in the Nov 17, 2009 issue of the Bengali magazine, Desh. Creation-date: 201005 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-09.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-09 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: The Real Puzzle of Blackmail: An Informational Approach Abstract: The "puzzle" of blackmail is that threats to reveal private information that would be harmful to someone in exchange for money are illegal, but revelation is not. The resolution is that concealment of information about product quality impedes the efficient operation of markets, whereas revelation promotes it. The real puzzle is why possessors aren't naturally inclined to sell to uninformed parties, who value the information more than would-be blackmail victims. The answer has to do with the public good qualities of information, which create an appropriability problem in transactions with uninformed parties. The paper also discusses incentives to acquire compromising information. Classification-JEL: D82, K42 Keywords: Asymmetric information, blackmail, adverse selection Length: 18 pages Number: 2010-08 Note: Creation-date: 201004 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-08.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-08 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: A One-Step Procedure for Returns to Scale Classification of Decision Making Units in Data Envelopment Analysis Abstract: The input-output bundle of an efficient decision making unit (DMU) is located at a specific point on the frontier of the production possibility set. Returns to Scale (RTS) at this point can be unequivocally characterized. For an inefficient DMU, however, the input- and output-oriented projections on to the frontier will be different and RTS classifications at these two points may differ. In the existing literature, one needs to solve two DEA problems, one input-oriented and another output-oriented to determine the nature of RTS at these two different efficient projections. This paper shows how one can determine the returns to scale properties of an inefficient bundle simultaneously at both projections from the optimal solution of a single CCR-DEA problem either output- or input-oriented. A data set used by Christensen and Greene in their well known study of US electric utilities is used for an illustration of the proposed method in a numerical example. Classification-JEL: D2, C6 Keywords: Most Productive Scale Size; Convex Technologies, Nonparametric Efficiency Analysis Length: 23 pages Number: 2010-07 Note: Creation-date: 201004 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-07.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-07 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Pretoria Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Author-Name: Dylan van Wyk Author-X-Name-First: Dylan Author-X-Name-Last: van Wyk Author-Workplace-Name: University of Pretoria Title: Financial Market Liberalization, Monetary Policy,and Housing Price Dynamics Abstract: This paper considers how monetary policy, a Federal funds rate shock, affects the dynamics of the US housing sector and whether the financial market liberalization of the early 1980s influenced those dynamics. The analysis uses impulse response functions obtained from a large-scale Bayesian Vector Autoregression (LBVAR) model over the periods 1968:01 to 1982:12 and 1989:01 to 2003:12, including 21 housing-sector variables at the national and four census regions. Overall, the 100 basis point Federal funds rate shock produces larger effects on the real house prices, both at the regional level and the national level, in the post-liberalization period when compared to the pre-liberalization era. While the precision of the estimates do not imply significant differences, the finding does offer a caution. That is, the housing market appears more sensitive to monetary policy shocks in the post-liberalization period. On the one hand, this suggests that monetary policy possesses increased leverage. On the other hand, the housing market cycle traditionally contributes an important component to the aggregate business cycle. Thus, the monetary authorities may need to exercise more care in implementing Federal funds rate adjustments going forward. In addition, contractionary monetary policy exerts a negative effect on house prices at the national level, indicating the absence of the price puzzle in small structural vector autoregressive models. The puzzles absence in the housing sector possibly emerges as a result of proper identification of monetary policy shocks within a data-rich environment. Finally, we find that the reaction of housing sector proves heterogeneous across regions, with the housing sector in the South driving the national data after liberalization, while before liberalization, the Middle West appears to drive the housing market. The responses in the West differ the most from the other regions. Classification-JEL: C32, R31 Keywords: Monetary policy, Housing price dynamics, Large-Scale BVAR models Length: 28 pages Number: 2010-06 Note: We would like to thank Marta Banbura for providing us with the codes used in estimating the large-scale BVAR and her assistance with its implementation. Creation-date: 201003 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-06.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-06 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Schroeder Author-X-Name-First: Thomas Author-X-Name-Last: Schroeder Author-Workplace-Name: European Investment Bank and Sacred Heart University Author-Name: Kwamie Dunbar Author-X-Name-First: Kwamie Author-X-Name-Last: Dunbar Author-Person: pdu135 Author-Workplace-Name: University of Connecticut and Sacred Heart University Title: Effectively Hedging the Interest Rate Risk of Wide Floating Rate Coupon Spreads Abstract: Bond issuers frequently immunize/hedge their interest rate exposure by means of interest rate swaps (IRS). The receiving leg matches all bond cash-flows, while the pay leg requires floating rate coupon payments of form LIBOR + a spread. The goal of hedging against interest rate risk is only achieved in full if the present value of this spread is zero. Using market data we show that under a traditional IRS hedging strategy an investor could still experience significant cash flow losses given a 1% shift in the underlying benchmark yield curve. We consider the instantaneous interest-rate risk of a bond portfolio that allows for general changes in interest rates. We make two contributions. The paper analyzes the size of hedging imperfections arising from the widening of the floating rate spread in a traditional swap contract and subsequently proposes two new practical, effective and analytically tractable swap structures; Structure 1: An Improved Parallel Hedge Swap, hedges against parallel shifts of the yield curve and Structure 2: An Improved Non-Parallel Hedge Swap, hedges against any movement of the swap curve. Analytical representations of these swaps are provided such that spreadsheet implementations are easily attainable. Classification-JEL: G11, G12, G32 Keywords: Portfolio Immunization; Interest Rate Swaps; Hedging; Floating Rate Spreads; Interest Rate Risk and Yield Curve Length: 30 pages Number: 2010-05 Note: The opinions expressed in this article refer to the authors only and do not necessarily reflect the positions of European Investment Bank. Creation-date: 201002 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-05.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-05 Template-Type: ReDIF-Paper 1.0 Author-Name: Giorgio Canarella Author-X-Name-First: Giorgio Author-X-Name-Last: Canarella Author-Workplace-Name: California State University, Los Angeles, and University of Nevada, Las Vegas Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Author-Name: Stephen K. Pollard Author-X-Name-First: Stephen K. Author-X-Name-Last: Pollard Author-Workplace-Name: California State University, Los Angeles Title: Unit Roots and Structural Change: An Application to US House-Price Indices Abstract: This paper addresses two issues. First, we employ unit-root tests that allow for two endogenous breaks as suggested by Lumdaine and Papell (1997) and, more recently, Lee and Strazicich (2003) to investigate the integration properties of the returns on the S&P/Case-Shiller Home Price Indices. The findings of the tests that assume structural stability provide no evidence against the unit-root hypothesis in all returns series. Conversely, the Lumdaine-Papell and Lee-Strazicich tests indicate that significant structural breaks exist in the US housing market. Only the Lee-Strazicich test, however, which incorporates structural changes under the null hypothesis, finds that the returns to houses exhibit trend stationarity with structural breaks, in most cases, rather than a random walk. Second, we apply these tests to analyze what UK researchers call the "ripple effect" in the British housing markets. Following Meen (1999), we investigate the stationarity of the metropolitan house-price ratios. The findings of the Lumsdaine-Papell test provide no evidence against the unit-root hypothesis in all house-price ratio series. Conversely, the Lee-Strazicich test finds broken-trend stationarity of the metropolitan house-price ratios for Boston, Miami, and New York. This provides limited evidence that some ripple effects do indeed exists in the US housing market. Classification-JEL: G10, C30, C50 Keywords: House-price indexes, Time-series properties, "Ripple" effects Length: 42 pages Number: 2010-04 Note: Revision-date: 201012 Creation-date: 201002 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-04r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2010-04.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2010-04 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin M. Cosgel Author-X-Name-First: Metin M. Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Haggay Etkes Author-X-Name-First: Haggay Author-X-Name-Last: Etkes Author-Workplace-Name: Bank of Israel Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Private Law Enforcement, Fine Sharing, and Tax Collection: Theory and Historical Evidence Abstract: This paper contributes to the literature on private law enforcement by proposing a novel solution to the problem of underenforcement by monopolistic enforcers. Monopolistic enforcers underinvest in fine collection because, by maximizing net expected revenue, they ignore the social benefits of deterrence. We show that this problem can be partially resolved by combining the tasks of law enforcement with tax collection because a joint enforcer-collector will have an interest in reducing the crime rate in order to maximize his income from taxes. In support of the theory, we discuss two historical examples of this practice: decentralized law enforcement under European feudalism, and centralized law enforcement in the Ottoman Empire. Classification-JEL: H11, K42, N40 Keywords: Criminal fines, deterrence, private law enforcement, tax collection Length: 18 pages Number: 2010-03 Note: Creation-date: 201001 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-03.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-03 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin M. Cosgel Author-X-Name-First: Metin M. Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Jared Rubin Author-X-Name-First: Jared Author-X-Name-Last: Rubin Author-Person: pru106 Author-Workplace-Name: Chapman University Title: The Political Economy of Mass Printing: Legitimacy and Technological Change in the Ottoman Empire Abstract: New technologies have not always been greeted with full enthusiasm. Although the Ottomans were quick to adopt advancements in military technology, they waited almost three centuries to sanction printing in Ottoman Turkish (in Arabic characters). Printing spread relatively rapidly throughout Europe following the invention of the printing press in 1450 despite resistance by interest groups and temporary restrictions in some countries. We explain differential reaction to technology through a political economy approach centered on the legitimizing relationships between rulers and their agents (e.g., military, religious, or secular authorities). The Ottomans regulated the printing press heavily to prevent the loss it would have caused to the ruler’s net revenue by undermining the legitimacy provided by religious authorities. On the other hand, the legitimizing relationship between European religious and political authorities was undermined over a century prior to the invention of the press. European rulers thus had little reason to stop the spread of printing as public policy, nor could the Church have stopped it had it wanted to. The Ottomans eventually sanctioned printing in Arabic script in the eighteenth century after alternative sources of legitimacy emerged. Classification-JEL: D7, H2, H3, N4, N7, O3, O5, P48, P5, Z12 Keywords: Technology, Printing, Political Economy, Legitimacy, Ottoman Empire Length: 44 pages Number: 2010-02 Note: Revision-date: 201201 Creation-date: 201001 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2010-02R.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-02 Template-Type: ReDIF-Paper 1.0 Author-Name: WenShwo Fang Author-X-Name-First: WenShwo Author-X-Name-Last: Fang Author-Person: pfa149 Author-Workplace-Name: Feng Chia University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut Title: The Lag in Effect of Inflation Targeting and Policy Evaluation Abstract: The lag in effect of monetary policy contains vital information for the policy evaluation. Allowing for a time-varying treatment effect, we show that inflation targeting effectively lowers inflation for both developed and developing countries. Developed countries reach their targets rapidly with a two-year lag in effect. Developing countries, however, reduce inflation gradually toward their targets and do not reach their ultimate goal by the end year of 2007. Classification-JEL: C52, E31, E52 Keywords: time lag, inflation targeting, time-varying treatment effect, policy evaluation Length: Number: 2010-01 Note: Creation-date: 201001 Price: Free Publication-Status: Forthcoming in Applied Economic Letters. File-URL: http://www.econ.uconn.edu/working/2010-01.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2010-01 Template-Type: ReDIF-Paper 1.0 Author-Name: Marina-Selini Katsaiti Author-X-Name-First: Marina-Selini Author-X-Name-Last: Katsaiti Author-Person: pka267 Author-Workplace-Name: University of Connecticut and University of Athens Title: Obesity and Happiness Abstract: This paper provides insight on the relationship between individual obesity and happiness levels. Using the latest available panel data from Germany (GSOEP), UK (BHPS), and Australia (HILDA), we examine whether there is statistical evidence on the impact of overweight on subjective well being. Instrumental variable analysis is utilized under the presence of endogeneity, stemming from several explanatory variables. Results indicate that in all three countries obesity has a negative effect on the subjective well being of individuals. The results also have important implications for the effect of other socio-demographic, economic and individual characteristics on well being. Classification-JEL: D60, I31 Keywords: Happiness, Obesity, Instrumental Variable Analysis, Subjective Well Being Length: 29 pages Number: 2009-44 Note: Revision-date: 201104 Creation-date: 200910 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-44R.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2009-44.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2009-44 Template-Type: ReDIF-Paper 1.0 Author-Name: Michael A. Cohen Author-X-Name-First: Michael A. Author-X-Name-Last: Cohen Author-Person: pco456 Author-Workplace-Name: University of Connecticut Author-Name: Marina-Selini Katsaiti Author-X-Name-First: Marina-Selini Author-X-Name-Last: Katsaiti Author-Person: pka267 Author-Workplace-Name: University of Connecticut and University of Athens Title: Evaluating Health Care Externality Costs Generated by Risky Consumption Goods Abstract: We present an overlapping-generations (OLG) macroeconomic model that applies a behavioral interpretation of preferences for goods that generate health risks. In this paper proneness to poor health is viewed as a cognitive miscalculation by economic agents between their expected health state over various consumption bundles and the actual health care they require for their health outcome. To model this the paper borrows insight from prospect theory and applies the reference-dependent preference framework to the specication of out utility model. In our model of the economy individual preferences are decomposed into intrinsic consumption utility and gain-loss utility associated with the miscalculation. Agents in the economy are stratied in their health states as well as their expected health care consumption according to some probability measure over the population. Heterogeneity introduced in this way generates consumers of varied proneness to risk associated with consumption of unhealthy goods because individuals have various marginal valuations of their miscalculation. In such a population, when all agents pay the same insurance premium, health-conscious agents shoulder the health care costs of their less health-conscious counterparts and the less health-conscious are engaged in less healthy consumption than they would if they paid actuarially fair premia. We demonstrate these eects in simulations by comparing the risk pooling equilibria to the actuarially fair pricing equilibria. This paper introduces the mathematical programming equilibrium constraint (MPEC) computational approach to compute model equilibria; we believe this approach is new to heterogeneous agent OLG model simulation. Classification-JEL: I19,E21, O41 Keywords: Risky Consumption, Health care Cost, Insurance Premia Pricing, Two Sector Model, Obesity. Length: 29 pages Number: 2009-43 Note: We would like to thank Christian Zimmermann and Dennis Heffley for comments that lead to improvements in this paper. Any errors are ours alone. Creation-date: 200912 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-43.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-43 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Pretoria Author-Name: Alain Kabundi Author-X-Name-First: Alain Author-X-Name-Last: Kabundi Author-Person: pka395 Author-Workplace-Name: University of Johannesburgh Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: Forecasting the US Real House Price Index: Structural and Non-Structural Models with and without Fundamentals Abstract:We employ a 10-variable dynamic structural general equilibrium model to forecast the US real house price index as well as its turning point in 2006:Q2. We also examine various Bayesian and classical time-series models in our forecasting exercise to compare to the dynamic stochastic general equilibrium model, estimated using Bayesian methods. In addition to standard vector-autoregressive and Bayesian vector autoregressive models, we also include the information content of either 10 or 120 quarterly series in some models to capture the influence of fundamentals. We consider two approaches for including information from large data sets -- extracting common factors (principle components) in a Factor-Augmented Vector Autoregressive or Factor-Augmented Bayesian Vector Autoregressive models or Bayesian shrinkage in a large-scale Bayesian Vector Autoregressive models. We compare the out-of-sample forecast performance of the alternative models, using the average root mean squared error for the forecasts. We find that the small-scale Bayesian-shrinkage model (10 variables) outperforms the other models, including the large-scale Bayesian-shrinkage model (120 variables). Finally, we use each model to forecast the turning point in 2006:Q2, using the estimated model through 2005:Q2. Only the dynamic stochastic general equilibrium model actually forecasts a turning point with any accuracy, suggesting that attention to developing forward-looking microfounded dynamic stochastic general equilibrium models of the housing market, over and above fundamentals, proves crucial in forecasting turning points. Classification-JEL: C32, R31 Keywords: US House prices, Forecasting, DSGE models, Factor Augmented Models, Large-Scale BVAR models Length: 37 pages Number: 2009-42 Note: We gratefully acknowledge Matteo Iacoviello and Stefano Neri for many helpful comments. All remaining errors are ours. Creation-date: 200912 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-42.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-42 Template-Type: ReDIF-Paper 1.0 Author-Name: Natalya Y. Shelkova Author-X-Name-First: Natalya Y. Author-X-Name-Last: Shaelkova Author-Person: psh304 Author-Workplace-Name: Guilford College and University of Connecticut Title: Collusion at the Non-Binding Minimum Wage: An Automatic Stabilizer? Abstract: This paper examines unemployment dynamics through the lens of a wage-posting model with two sectors and two types of workers. The model assumptions include collusion at a non-binding minimum wage, costly entry and intersectoral labor mobility. Model simulations demonstrate that collusion at a non-binding minimum wage induces entry into the low-wage sector. This dampens the overall negative employment impact of economic downturns. The excess of low-wage vacancies has shown not only to secure low unemployment rates for the low-skilled workers, but also to provide employment opportunities for the high-skilled when their industries substantially decline. Classification-JEL: J30 Keywords: unemployment, search, minimum wage, collusion Length: 40 pages Number: 2009-41 Note: Creation-date: 200912 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-41.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-41 Template-Type: ReDIF-Paper 1.0 Author-Name: Natalya Y. Shelkova Author-X-Name-First: Natalya Y. Author-X-Name-Last: Shelkova Author-Person: psh304 Author-Workplace-Name: Guilford College and University of Connecticut Title: The Minimum Wage Spike in the Search Economy with Wage-Posting Abstract: Empirical wage and wage offer distributions exhibit substantial clustering in economies with a mandated minimum wage, the phenomenon knows as the minimum wage spike, as well as wage dispersion. Existing search-theoretic literature does not replicate both of the empirical phenomena simultaneously. This paper attempts to reconcile the two under assumptions of wage-posting, urn-ball matching and firm productive heterogeneity. A non-degenerate minimum wage spike and wage dispersion are obtained when firm wage determination embodies both incentives for collusion at the minimum wage and competition at the same time, making the spike and the dispersion the outcomes of partially collusive equilibrium. Besides this main result, the paper also shows that a higher minimum wage may reduce unemployment. Classification-JEL: J30, J64 Keywords:wage-posting, minimum wage, minimum wage spike, wage dispersion, unemployment Length: 33 pages Number: 2009-40 Note: Creation-date: 200912 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-40.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-40 Template-Type: ReDIF-Paper 1.0 Author-Name: Huiping Yuan Author-X-Name-First: Huiping Author-X-Name-Last: Yuan Author-Person: pyu72 Author-Workplace-Name: Xiamen University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut Title: Understanding Central Bank Loss Functions: Implied and Delegated Targets Abstract: The paper studies the dynamic nature of optimal solutions under commitment in Barro-Gordon and new-Keynesian models and, finds two interesting parameters -- the implied targets and the persistence parameter that governs the adjustment toward the implied targets. The implied targets generally differ from the social ones, but exhibit a trade-off between targets and equal the long-run equilibrium values of target variables. The implied targets prove consistent with the models and the social targets do not. Moreover, the implied targets emerge in the long run according to the persistence parameter. As such, the government delegates to the central bank short-term, state-contingent targets, which guide discretionary policy to evolve along optimal paths as these targets converge to their long-run implied targets. For the Barro-Gordon model with output persistence, the correct delegated targets eliminate the constant average and state-contingent inflation biases, and a weight-liberal central bank removes the stabilization bias. For the new-Keynesian models, delegated targets, combined with the appropriate weight-liberal or -conservative central bank, can eliminate all three biases. The delegated targets may reflect backward- or forward-looking behavior, depending on the model. Classification-JEL: E420, E520, E580 Keywords: Optimal Policy, Central Bank Loss Functions, Policy Rules Length: 58 pages Number: 2009-39 Note: Professor Yuan gratefully acknowledges the financial support from the National Social Science Foundation of China, the China Scholarship Council, and the Wang Yanan Institute for Studies in Economics, Xiamen University. Creation-date: 200910 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-39.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-39 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Author-Name: Lei Chen Author-X-Name-First: Lei Author-X-Name-Last: Chen Author-Workplace-Name: University of Connecticut Title: Data Envelopment Analysis for Performance Evaluation: A Child's Guide Abstract: In this paper we offer a simple exposition of the neoclassical production theoretic foundations of Data Envelopment Analysis. The concepts of technical efficiency (both input- and output-oriented), scale efficiency, and cost efficiency are explained and the corresponding DEA models are described in details. We offer step-by-step instruction on how to write the codes for solving the various DEA models using the Solver option in the widely accessible MS Excel software. An important feature of this paper is a detailed exposition of how to write various Visual Basic Macro programs for solving DEA problems. We also describe the non-convex Free Disposal Hull (FDH) procedure and the second-stage regression analysis that seeks to account for variation in measured efficiency scores due to external factors. Classification-JEL: C6, D2 Keywords: Efficiency; Linear Programming; Benchmarking; Excel Solver Length: 52 pages Number: 2009-38 Note: This paper builds on the material from a keynote address delivered by the first author at the CDE-Swiss Re Workshop on Performance Measurement held by the Delhi School of Economics in Delhi in January 2009. Creation-date: 200911 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-38.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-38 Template-Type: ReDIF-Paper 1.0 Author-Name: Paramita Dhar Author-X-Name-First: Paramita Author-X-Name-Last: Dhar Author-Workplace-Name: University of Connecticut Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: School Quality and Property Values: Re-examining the Boundary Approach Abstract: This paper examines the hypothesis that the strong reduction in the effect of school quality on housing prices from the inclusion of boundary fixed affects can be attributed to uncertainty associated with school assignment near attendance zone boundaries, rather than unobserved neighborhood attributes. We examine this hypothesis using repeated cross-sections of housing transactions near school district boundaries in Connecticut since these boundaries are primarily town boundaries and for the most part have not changed in many decades. However, once we control for the across boundary neighborhood quality differences that are likely to arise over time with permanent boundaries, we find fairly small effects of test scores on property values; findings that are very similar to the findings of traditional studies based on attendance zone boundaries. Classification-JEL: I2, R2, R5 Keywords: School District Performance, Housing Price, District Boundaries, Boundary Uncertainty, Test Scores, Omitted Neighborhood Attributes. Length: 31 pages Number: 2009-37 Note: Revision-date: 201005 Creation-date: 200911 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-37r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2009-37.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2009-37 Template-Type: ReDIF-Paper 1.0 Author-Name: Kwamie Dunbar Author-X-Name-First: Kwamie Author-X-Name-Last: Dunbar Author-Person: pdu135 Author-Workplace-Name: University of Connecticut and Sacred Heart University Title: Stochastic Business Cycle Volatilities, Capital Accumulation and Economic Growth: Lessons from the Global Credit Market Crisis Abstract: The recent global economic downturn in a number of economies was preceded by rising credit market risk brought on by a massive financial market failure. This paper develops a small open economy model that analyzes the interaction of business cycle volatilities with capital accumulation and the subsequent impacts on economic growth. We use a stochastic dynamic programming model to test the central hypothesis that rising volatility shocks is an inhibitor to capital accumulation and subsequently economic growth. The model illustrates that traditional capital-based growth models which assume a constant capital stock are not consistent with the business cycle variation in capital accumulation. Furthermore, it appears that an increase in precautionary savings arising from a stochastic shock does not completely translate into productive capital investment need for growth, since risk-averse households will seek out risk-free government or foreign assets. We find this conclusion consistent with the empirical findings of Ramey et al (1995) and Badinger (2009) who both argued that, business cycle volatility is important to the growth discussion because of its robust net negative effect on output growth. Classification-JEL: C61, D81, E13, E32, E44 Keywords: Economic Growth; Capital Accumulation; Business Cycle Volatilities; Stochastic Optimal Control; Economic Contraction; Credit Default Swaps; Credit Crisis; Credit Markets Length: 29 pages Number: 2009-36 Note: Creation-date: 200910 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-36.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-36 Template-Type: ReDIF-Paper 1.0 Author-Name:Maroula Khraiche Author-X-Name-First:Maroula Author-X-Name-Last: Khraiche Author-Workplace-Name: University of Connecticut Title: Trade, Firm Structure, and Migration of Talent Abstract: Throughout economic history there have been episodes in which the liberalization of trade has been accompanied by a positive flow of migrants. Such phenomena are notable because they contradict the basic Heckscher-Ohlin conclusion that trade and labor mobility are substitutes. Also notable is the fact that migrants to the U.S. have been largely skilled rather than unskilled. This paper links these two phenomena by pointing out the simple fact that increased trade can involve different types of firm structures and different types of goods being traded, which in turn have different effects on skilled and unskilled labor. The interaction between different frictions that impact labor movements, specifically the interaction between capital adjustment costs and trade costs, has a significant effect on the gap between the returns to labor in the South and North. Although the decrease in trade costs and increase in trade dampens labor movements, the existence of asymmetric capital adjustment costs in the North and South increases it. To show these results formally, this paper calibrates and solves a two-country, two-sector model of trade and migration, in which countries differ in skill endowments and capital adjustment costs and sectors differ in structures and capital intensities. Empirical analysis is then provided, with results supporting the main qualitative implications of the model. Classification-JEL: F16, F22, F23, E2. Keywords: International migration, multinational firms, capital adjustment cost. Length: 36 pages Number: 2009-35 Note: Creation-date: 200910 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-35.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-35 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Title: An alternative method for measuring financial frictions Abstract: Costly state verification models predict that the sensitivity of borrowing costs to financial leverage is positively related to the level of state verification costs (financial frictions). This paper constructs a measure of financial frictions that is consistent with this prediction of theory. Using bond deals from 47 countries, financial frictions are captured as the sensitivity of bond spreads to the issuing firms' financial leverage. This dynamic measure of financial frictions provides new insights into three characteristics of financial frictions. 1) In contrast to the inferences from widely-used measures, financial frictions display a large degree of variability, and have decreased over time. 2) The effect of financial frictions on private credit supply has decreased both in significance and magnitude over time. 3) Bankruptcy reforms, in general have not been effective in improving creditor/borrower rights. Classification-JEL: G15; K22; O75 Keywords: financial frictions, leverage sensitivity, financial accelerator, bond deals. Length: 38 pages Number: 2009-34 Note: Creation-date: 200910 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-34.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-34 Template-Type: ReDIF-Paper 1.0 Author-Name: Mathhew Baker Author-X-Name-First: Mattew Author-X-Name-Last: Baker Author-Person: pba114 Author-Workplace-Name: Hunter College, City University of New York Author-Name: Metin Cosgel Author-X-Name-First: Metin Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Debtors' Prisons in America: An Economic Analysis Abstract: Debtors' prisons have been commonplace throughout history, including in the United States. While imprisonment for debt no doubt elicited some repayment by benefactors of the debtor, we argue that its primary function was to deter default in the first place by giving borrowers an incentive to disclose hidden assets. Because of its cost, however, imprisonment was destined to be replaced by more efficient ways of preventing borrowers from sheltering assets. Empirical analysis of state laws banning imprisonment for debt provides support for this argument. In particular, the results suggest that states in which the publishing industry developed sooner (thus facilitating the flow of information) were more likely to enact early bans on imprisonment for debt. Classification-JEL: D82, E51, G21, K24 Keywords: Debtors' prison, default, imprisonment Length: 30 pages Number: 2009-33 Note: Creation-date: 200910 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-33.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-33 Template-Type: ReDIF-Paper 1.0 Author-Name: Brian Volz Author-X-Name-First: Brian Author-X-Name-Last: Volz Author-Person: pvo97 Author-Workplace-Name: University of Connecticut Title: The Interleague Advantage: A Difference in Differences Analysis Abstract: It has been argued that the introduction of interleague play in Major League Baseball provides an advantage to American League teams due to their use of the designated hitter. This paper examines whether this advantage actually exists and if so how large any advantage may be. The question is analyzed using a difference in differences model based on player performance data on interleague games from 1997 to 2008. It is shown that American League teams do have a small and statistically significant offensive advantage during interleague play. American League teams are estimated to have a 1.1 to 7.3 point advantage in batting average, a 0.1 to 9.8 point advantage in on base percentage, and a 1.2 to 9.9 point advantage in slugging percentage. Classification-JEL: L83 Keywords: Baseball, League Structure, Difference in Differences Length: 15 pages Number: 2009-32 Note: Creation-date: 200910 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-32.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-32 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Social Interactions within Cities: Neighborhood Environments and Peer Relationships Abstract: Cities and their surrounding suburbs provide the homes, workplaces, and social and educational environments for most individuals and families in developed nations, but these urban areas are typically characterized by substantial stratification across racial, ethnic, and economic groups and associated with substantial levels of inequality. This chapter will examine our knowledge concerning the impact such stratification has on individual outcomes especially through its influence on the social interactions that occur within neighborhoods, schools, workplaces, and other institutions. The largest challenge faced in understanding the causal impact of social interactions arises from the fact that stratification is not an outside event, but rather is the result of individuals making choices that involve segregating themselves from others that differ in some way. The extent to which an individual makes segregating choices is invariably related to that individual's specific opportunities and therefore highly correlated with unobservables that drive that individual's success and life outcomes. Accordingly, the chapter will focus heavily on approaches for obtaining causal estimates of the effect of social interactions and evidence that arises from studies that have a convincing strategy for identifying these causal effects. Classification-JEL: I2, J1, J6, R2 Keywords: Neighborhood Effects, Peer Effects, Social Interactions, Friendship Networks Length: 45 pages Number: 2009-31 Note: Creation-date: 200909 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-31.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-31 Template-Type: ReDIF-Paper 1.0 Author-Name: Robert Bifulco Author-X-Name-First: Robert Author-X-Name-Last: Bifulco Author-Workplace-Name: Syracuse University Author-Name: Delia Furtado Author-X-Name-First: Delia Author-X-Name-Last: Furtado Author-Person: pfu51 Author-Workplace-Name: University of Connecticut Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Why Are Ghettos Bad? Examining the Role of the Metropolitan Educational Environment Abstract: Relative to whites, blacks that reside in highly segregated metropolitan areas have worse educational and labor market outcomes than those that reside in less segregated areas. Using data from the 1990 U.S. Census combined with measures of metropolitan educational environment created from the Common Core of Data (CCD), we test whether the strong empirical relationship between residential segregation and black outcomes can be attributed to the educational environment in those metropolitan areas. We find that our measures of metropolitan educational environment can explain a substantial fraction of the effect of segregation on educational outcomes and idleness. Classification-JEL: I1, R2 Keywords: Racial Segregation, School Segregation, Neighborhood Effects, Peer Effects Length: 41 pages Number: 2009-30 Note: Creation-date: 200909 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-30.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-30 Template-Type: ReDIF-Paper 1.0 Author-Name: John P. Harding Author-X-Name-First: John P. Author-X-Name-Last: Harding Author-Workplace-Name: University of Connecticut Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Regulation of Large Financial Institutions: Lessons from Corporate Finance Theory Abstract: Equity capital is the shock absorber for our financial system and the current financial crisis, like a bumpy road for an auto designer, provides a unique opportunity for financial regulators to evaluate the predictions of theory and improve the design of the regulatory system. The purpose of this paper is to apply a simple model of firm capital structure to the current situation and summarize the insights it provides regarding the regulation of large financial institutions in a post-crisis world. The paper begins with a brief summary of the model and uses the results of that model to place the evolution of the current crisis into perspective. The paper concludes with forward-looking observations and suggestions for future regulation. Classification-JEL: G2, G2, L5 Keywords: Financial Institutions, Financial Crisis, Capital Regulation, Regulatory Reform, Firm Capital Structure Length: 20 pages Number: 2009-29 Note: Creation-date: 200909 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-29.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-29 Template-Type: ReDIF-Paper 1.0 Author-Name: Vicki Knoblauch Author-X-Name-First: Vicki Author-X-Name-Last: Knoblauch Author-Person: pkn3 Author-Workplace-Name: University of Connecticut Title: Topologies Defined by Binary Relations Abstract: The importance of topology as a tool in preference theory is what motivates this study in which we characterize topologies induced by binary relations and present topological versions of two classical preference representation theorems. We then use our characterizations to construct examples of topologies that are not induced by binary relations. We also present examples that illustrate our topological preference representation results. The preference literature contains characterizations of order topologies, that is, topologies induced by total preorders, but ours are the first characterizations of topologies induced by binary relations that are not neccesarily total preorders. Classification-JEL: C02, D11 Keywords: consumer preferences, order topology, preference representation Length: 17 pages Number: 2009-28 Note: This paper previously circulated under the title "Order Topologies: Characterizations and Counterexamples." I would like to thank Esteban Indurain for many valuable suggestions. Revision-date: 200912 Creation-date: 200909 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-28r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2009-28.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2009-28 Template-Type: ReDIF-Paper 1.0 Author-Name: Susan Randolph Author-X-Name-First: Susan Author-X-Name-Last: Randolph Author-Person: pra64 Author-Workplace-Name: University of Connecticut Author-Name: Sakiko Fukuda-Parr Author-X-Name-First: Sakiko Author-X-Name-Last: Fukuda-Parr Author-Person: pfu69 Author-Workplace-Name: The New School Author-Name: Terra Lawson-Remer Author-X-Name-First: Terra Author-X-Name-Last: Lawson-Remer Author-Person: pla361 Author-Workplace-Name: The New School Title: Economic and Social Rights Fulfillment Index: Country Scores and Rankings Abstract: Building on previously proposed methodology for an index of economic and social rights fulfillment, this paper presents country scores and rankings based on the Economic and Social Rights Fulfillment Index (ESRF Index). Unlike socio-economic indicators, which are often used as proxies for the extent to which rights-holders enjoy economic and social rights, the ESRF Index incorporates the perspective of the duty-bearer as well as the rights-holder, and takes into account the concept of progressive realization. The resulting scores and rankings provide important new information that complements other measures of economic and social rights fulfillement. The ESRF Index is an important conceptual an methodological breakthrough although is still does not capture all key human rights principles, such as the right to non-discrimination and equality. The paper also analyzes the results of the global ranking and outlines some priorities for further research. Classification-JEL: Keywords: Human Rights; Economic and Social Rights; Human Development; Economic Development; Measurement; Progressive Realization; Inequality; Global Ranking. Length: 47 pages Number: 2009-27 Note: Creation-date: 200909 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-27.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-27 Template-Type: ReDIF-Paper 1.0 Author-Name: Dong Jin Lee Author-X-Name-First: Dong Jin Author-X-Name-Last: Lee Author-Person: ple398 Author-Workplace-Name: University of Connecticut Title: Testing Parameter Stability in Quantile Models: An Application to the U.S. Inflation Process Abstract: This paper considers parameter instability tests in conditional quantile models. I suggest tests for quantile parameter instability based on the asymptotically optimal tests of Lee (2008) both in parametric and semiparametric set-up. In parametric models, Komunjer (2005)'s tick-exponential family of distributions is used as the underlying distribution, in which the test has asymptotically correct sizes even when the error distribution is misspecified. I apply our test statistic to various quantile models of the U.S. inflation process such as Phillips curve, P-star model, and autoregressive models. The test result shows an evidence of parameter instability in most quantile levels of all models. The semiparametric test rejects the stability even in more recent period with moderate economic volatility. Phillips curve model and autoregressive model have asymmetric test results across quantile levels, implying the asymmetric response of inflation to economic shocks. Classification-JEL: C12, C22, E31 Keywords: Quantile Model, optimal test, parameter instability, Phillips curve, inflation Length: 33 pages Number: 2009-26 Note: Creation-date: 200902 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-26.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-26 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Deterrence and Incapacitation Models of Criminal Punishment: Can the Twain Meet? Abstract: The standard economic model of crime focuses on the goal of deterrence, but actual punishment schemes, most notably recent three-strikes laws, seem to rely more on imprisonment than is prescribed by that model. One explanation is that prison also serves an incapacitation function. The current paper seeks to develop an economic model of law enforcement that combines the deterrence and incapacitation motives for criminal punishment. The resulting hybrid model retains the rationality assumption that is the basis of the pure deterrence model, but assumes that offenders face repeated criminal opportunities over their lifetimes. In this setting, deterrence and incapacitation emerge naturally as complementary motivations for imposing criminal punishment. Classification-JEL: K14, K42 Keywords: Deterrence, incapacitation, law enforcement, prison Length: 39 pages Number: 2009-25 Note: Creation-date: 200908 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-25.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-25 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Author-Name: Ryan Brady Author-X-Name-First: Ryan Author-X-Name-Last: Brady Author-Person: pbr159 Author-Workplace-Name: Unites States Naval Academy Author-Name: Adam Honig Author-X-Name-First: Adam Author-X-Name-Last: Honig Author-Person: pho244 Author-Workplace-Name: Amherst College Title: Financial Frictions and Monetary Transmission Strength: A Cross-Country Analysis Abstract: This paper examines the effect of financial frictions on the strength of the monetary transmission mechanism. The financial accelerator model of Bernanke, Gertler, and Gilchrist (1999) implies that the transmission mechanism of monetary policy should be stronger in countries with high levels of financial frictions. The intuition is that in these countries, external finance premiums are more sensitive to firms’ financial leverage. By affecting asset prices, therefore, monetary policy has greater impact on external finance premiums and output. We test this model’s result by estimating SVAR models on cross-country data to generate indicators for the strength of monetary transmission. We find a positive relationship between various measures of financial frictions and the strength of monetary transmission, confirming the predictions of the model. Classification-JEL: E44; F31; F41 Keywords: credit channel, financial frictions, bankruptcy costs Length: 53 pages Number: 2009-24 Note: Revision-date: 201006 Creation-date: 200908 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-24r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2009-24.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2009-24 Template-Type: ReDIF-Paper 1.0 Author-Name: Richard N. Langlois Author-X-Name-First: Richard N. Author-X-Name-Last: Langlois Author-Person: pla2 Author-Workplace-Name: University of Connecticut Title: Economic Institutions and the Boundaries of the Firm: The Case of Business Groups Abstract: Business groups in all of their manifestations are informational mechanisms for coordinating complementary activities -- for "gap filling." This is well known in the literature on business groups outside the Anglo-American sphere. Especially in developing economies, where markets are thin and institutions (including both political institutions and what I call market-supporting institutions) are weak or non-existent, coordination is often more cheaply undertaken within the boundaries of business groups organized as financial pyramids, typically under family control. These organizations are intimately linked to the coalition of territorial rulers that North and his coauthors (2009) call a natural state; and, indeed, such business groups are arguably themselves examples of a natural state, in that they represent a self-enforcing coalition with its own rules, norms, and mechanisms of enforcement. But even in developed economies, novelty and change create the sorts of gaps that call for business groups in the widest sense, including less-formal sets of "intermediate" relationships, as, for example, in industrial districts. In this sense, the economics of organization generally has perhaps more to learn from the literature on business groups than the other way around. Classification-JEL: L2, L63, N62, O33, O34 Keywords: business groups, vertical integration, transaction costs, institutional economics, business history. Length: 38 pages Number: 2009-23 Note: Paper presented at the Kyoto International Conference "Evolutionary Dynamics of Business Groups in Emerging Economies," November 26-28, 2007, Kyoto University and Doshisha University Creation-date: 200907 Price: Free Publication-Status: Forthcoming in Asli M. Colpan, Takashi Hikino, and James R. Lincoln, eds., The Oxford Handbook of Business Groups. Oxford: Oxford University Press, in preparation. File-URL: http://www.econ.uconn.edu/working/2009-23.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-23 Template-Type: ReDIF-Paper 1.0 Author-Name: Juan-Pedro Garces Author-X-Name-First: Juan-Pedro Author-X-Name-Last: Garces Author-Person: pga427 Author-Workplace-Name: University of Connecticut Title: On the Quality of Private and Public Education: the Case of Chile Abstract: In this essay, we intend to measure the contribution of different factors within the educational system that affect the quality of education. The purpose is to compare, in a completely dispassionate way, the academic achievements of public and private schools (mainly at the secondary level) in one country: Chile. We take Chile because it has the most extensive (voucher-type) program for subsidizing private education and because it has a fairly wide and accessible amount of data. Amongst other factors, we study the influence of the public/private divide, the socio-economic level of the students and the pupil/teacher ratio. The quality of education is measured by the performance of students in standardized national tests administered to all schools in Chile. Classification-JEL: I2, O1 Keywords: education, development Length: 32 pages Number: 2009-22 Note: The author is very grateful to all of those who provided him with useful advice and comments; in particular, Susan Randolph, Samson Kimenyi and Francis Ahking. Creation-date: 200907 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-22.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-22 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Title: Learning and Profitability in a Theory of the Firm Abstract: Teams combine tacit and separable knowledge so complicating the pricing of knowledge and mitigating against knowledge transfer between firms. The efficient markets hypothesis suggests that entities possessing insider information should be ablest at accurately pricing any given complementary set of knowledge. Thus, even though some knowledge in a given complementary set is separable from a team, the easily transferable pieces are still most likely to be used within the originating firm. The boundaries of a firm may therefore expand even when knowledge is not tacit and transaction costs in markets for ideas are otherwise low. Classification-JEL: D23, F23, L80 Keywords: asymmetric information, evolutionary theory of the firm, governance, holdup, insider information, path dependency, rent appropriation, tacit information, transaction costs. Length: 22 pages Number: 2009-21 Note: Creation-date: 200907 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-21.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-21 Template-Type: ReDIF-Paper 1.0 Author-Name: Heinrich Hock Author-X-Name-First: Heinrich Author-X-Name-Last: Hock Author-Person: pho147 Author-Workplace-Name: Florida State University Author-Name: Delia Furtado Author-X-Name-First: Delia Author-X-Name-Last: Furtado Author-Person: pfu51 Author-Workplace-Name: University of Connecticut Title: Female Work and Fertility in the United States: Effects of Low-Skilled Immigrant Labor Abstract: This paper examines the effects of low-skilled immigration on the work and fertility decisions of high-skilled women born in the United States. The evidence we present indicates that low-skilled immigration to large metropolitan areas between 1980 and 2000 lowered the cost of market-based household services. Using a novel estimation technique to analyze joint decision making, we find that college-educated native females responded, on average, by increasing fertility and reducing short-run labor force participation. These changes were accompanied by a weakening of the negative correlation between work and fertility, as well as an increase in the proportion of women who both bore children and participated in the labor force. Taken in combination, our estimates imply that the continuing influx of low-skilled immigrants substantially reduced the work-fertility tradeoff facing educated urban American women. Classification-JEL: D10, F22, J13, J22, R23 Keywords: Child care, fertility, household services, labor supply, immigration Length: 59 pages Number: 2009-20 Note:We are particularly grateful to Mary Ellen Benedict, Karin L. Brewster, Kenneth A. Couch, B. Lindsay Lowell, Stephen L. Ross, Carl P. Schmertmann, Anastasia Semykina, and Thomas W. Zuehlke for valuable feedback on previous versions of this paper. Any remaining errors are our own. Creation-date: 200906 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-20.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-20 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Pretoria Author-Name: Marius Jurgilas Author-X-Name-First: Marius Author-X-Name-Last: Jurgilas Author-Person: pju52 Author-Workplace-Name: Bank of England Author-Name: Alain Kabundi Author-X-Name-First: Alain Author-X-Name-Last: Kabundi Author-Person: pka395 Author-Workplace-Name: University of Johannesburg Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Model Abstract: Our paper considers this channel whereby monetary policy, a Federal funds rate shock, affects the dynamics of the US housing sector. The analysis uses impulse response functions obtained from a large-scale Bayesian Vector Autoregression (LBVAR) model that incorporates 143 monthly macroeconomic variables over the period of 1986:01 to 2003:12, including 21 variables relating to the housing sector at the national and four census regions. We find at the national level that housing starts, housing permits, and housing sales fall in response to the tightening of monetary policy. Housing sales reacts more quickly and sharply than starts and permits and exhibits more duration. Housing prices show the weakest response to the monetary policy shock. At the regional level, we conclude that the housing sector in the South drives the national data. The responses in the West differ the most from the other regions, especially for the impulse responses of housing starts and permits. Classification-JEL: C32, R31 Keywords: Monetary policy, Housing sector dynamics, Large-Scale BVAR models Length: Number: 2009-19 Note: We would like to thank Marta Banbura for providing us with the codes used in estimating the large-scale BVAR and her assistance with its implementation. The views expressed herein are those of the authors and do not necessarily reflect the views of the Bank of England. Creation-date: 200906 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-19.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-19 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Author-Name: Melanie Guldi Author-X-Name-First: Melanie Author-X-Name-Last: Guldi Author-Person: pgu209 Author-Workplace-Name: Mount Holyoke College Title: Exchange rate exposure: A nonparametric approach Abstract: The typical conclusion reached when researchers examine exchange rate exposure using a linear model is that only a few firms are exposed. This finding is puzzling since institutional knowledge and basic finance theory points to a larger effect. In this paper, we compare results obtained using a linear approach with those from nonlinear, partially parametric and nonparametric models. Our data consist of nonfinancial firms in five emerging market countries and the US. Among firms that were not found to have a linear exposure, we find that a considerable proportion of these are exposed when nonlinear, partially parametric or nonparametric models are used. The increase in exposure is most striking when a nonparametric model is used. We also find evidence that firms' hedging activities decrease linear exposure but do not affect nonparametric exposure. Classification-JEL: E44; F31; F41 Keywords: nonparametric, exchange rate exposure, hedging. Length: 32 pages Number: 2009-18 Note: Creation-date: 200906 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-18.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-18 Template-Type: ReDIF-Paper 1.0 Author-Name: Brian Volz Author-X-Name-First: Brian Author-X-Name-Last: Volz Author-Person: pvo97 Author-Workplace-Name: University of Connecticut Title: Race and the Likelihood of Managing in Major League Baseball Abstract: The effects of race on the probability of former Major League Baseball players becoming managers are analyzed using probit models with sample selection correction. The models are estimated using data on the performance and personal characteristics of players from 1955 to 2007. It is shown that given the same performance, personal characteristics, and popularity black former players are 70 to 82 percent less likely to become Major League managers than white former players. It is also shown that being Hispanic does not have a significant effect on the probability of becoming a manager. Additionally, it is observed that catchers and shortstops who are popular but not necessarily good players are most likely to become managers. Classification-JEL: J71, L83 Keywords: Baseball, Management, Race, Discrimination Length: 32 pages Number: 2009-17 Note: Creation-date: 200906 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-17.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-17 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Title: Deterred or Detained? A Unified Model of Criminal Punishment Abstract: The standard economic model of crime since Becker (1968) is primarily concerned with deterrence. Actual punishment policies, however, appear to rely on imprisonment to a greater extent than is prescribed by that model. One reason may be the incapacitation function of prison. The model developed in this paper seeks to incorporate incapacitation into the standard model. A key finding of the hybrid model is that when prison is the only form of punishment and the probability of apprehension is fixed, incapacitation can result in a longer or a shorter optimal prison term compared to the deterrence-only model. It is longer if there is underdeterrence, and shorter if there is overdeterrence. When fines are also available and are not constrained by offenders' wealth, the optimal prison term is zero. Since the fine achieves first-best deterrence, only efficient crimes are committed, and hence, there is no gain from incapacitation. Other aspects of the standard model are also studied within the context of the hybrid model. Classification-JEL: K14, K42 Keywords: Deterrence, imprisonment, incapacitation, law enforcement Length: 26 pages Number: 2009-16 Note: I appreciate the comments of Steve Shavell on an earlier draft. Creation-date: 200906 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-16.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-16 Template-Type: ReDIF-Paper 1.0 Author-Name: Robert Bifulco Author-X-Name-First: Robert Author-X-Name-Last: Bifulco Author-Workplace-Name: Syracuse University Author-Name: Jason M. Fletcher Author-X-Name-First: Jason M. Author-X-Name-Last: Fletcher Author-Person: pfl40 Author-Workplace-Name: Yale University Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: The Effect of Classmate Characteristics on Individual Outcomes: Evidence from the Add Health Abstract: We use data from the National Longitudinal Study of Adolescent Health (Add Health) to examine the effects of classmate characteristics on economic and social outcomes of students. The unique structure of the Add Health allows us to estimate these effects using comparisons across cohorts within schools, and to examine a wider range of outcomes than other studies that have used this identification strategy. This strategy yields variation in cohort composition that is uncorrelated with student observables suggesting that our estimates are not biased by the selection of students into schools or grades based on classmate characteristics. We find that increases in the percent of classmates whose mother is college educated has significant, desirable effects on educational attainment and substance use. We find no evidence that in-school achievement, student attitudes, or behaviors serve as mechanisms for this effect. The percent of students from disadvantaged minority groups does not show any negative effects on the post-secondary outcomes we examine, but is associated with students reporting less caring student-teacher relationships and increased prevalence of some undesirable student behaviors during high school. Classification-JEL: I21, I19, J13, J15 Keywords: Education, Peer Effects, Cohort Study, Substance Abuse Length: 49 pages Number: 2009-15 Note: The authors would like to thank Joseph Altonji, Barry Hirsch, David Figlio, Erdal Tekin, Spencer Banzhaf, Tom Downes, Vida Maralani, Randy Reback, and Jonah Rockoff who provided comments on the work presented here, as well as participants at the Syracuse University education policy seminar, the Tufts economics department seminar, the Yale labor economics lunch and Center for Research on Inequalities and the Life Course (CIQLE) seminar, the Georgia State University labor/health economics seminar, and the New York Federal Reserve Education Seminar. This research uses data from Add Health, a program project designed by J. Richard Udry, Peter S. Bearman, and Kathleen Mullan Harris, and funded by a grant P01-HD31921 from the National Institute of Child Health and Human Development, with cooperative funding from 17 other agencies. Special acknowledgment is due Ronald R. Rindfuss and Barbara Entwisle for assistance in the original design. Persons interested in obtaining data files from Add Health should contact Add Health, Carolina Population Center, 123 W. Franklin Street, Chapel Hill, NC 27516-2524 (addhealth@unc.edu). Creation-date: 200906 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-15.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-15 Template-Type: ReDIF-Paper 1.0 Author-Name: WenShwo Fang Author-X-Name-First: WenShwo Author-X-Name-Last: Fang Author-Person: pfa149 Author-Workplace-Name: Feng Chia University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, las Vegas Author-Name: ChunShen Lee Author-X-Name-First: ChunShen Author-X-Name-Last: Lee Author-Person: ple373 Author-Workplace-Name: Feng Chia University Title: Short- and Long-Run Differences in the Treatment Effects of Inflation Targeting on Developed and Developing Countries Abstract: Recent studies that evaluate inflation targeting through average treatment effects generally conclude the window-dressing view for industrial countries and policy effectiveness for developing countries. Allowing for a time-varying relationship (treatment effect) between the monetary policy and its effects on economic performance over time, this paper provides new findings. First, developed countries lower inflation and reach their targets rapidly in two years and developing countries reduce inflation and move to their targets gradually in that disinflation still continues seven years after the policy adoption in our sample. Second, intertemporal tradeoffs occur for eight developed-country targeters. That is, targeting inflation significantly reduces inflation at the costs of higher inflation and growth variability and a lower output growth in the short-run, although no substantial effects in either the medium term or long-run. In contrast, no costs, only gains, emerge for thirteen developing-country targeters. Now, targeters achieve lower inflation following policy adoption as well as lower inflation and output growth variability in the short-run, medium term, and long-run. Output growth catches up in the medium term, although this effect is not significant in the long run. Interpretations of empirical findings and implications for monetary policy are discussed. Classification-JEL: C5; E5 Keywords: inflation targeting evaluation, time-varying treatment effects, developed and developing countries Length: Number: 2009-14 Note: This paper was presented at the 84th annual conference of the Western Economic Association International in Vancouver, BC. It previously circulated with the titles "Inflation Targeting Evaluation: Short-run Costs and Long-run Irrelevance" and "What Can We Learn about Inflation Targeting? Evidence from Time-Varying Treatment Effects." Revision-date: 201007 Creation-date: 200906 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-14r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2009-14.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2009-14 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Pretoria Author-Name: Alain Kabundi Author-X-Name-First: Alain Author-X-Name-Last: Kabundi Author-Person: pka395 Author-Workplace-Name: University of Johannesburg Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: Using Large Data Sets to Forecast Housing Prices: A Case Study of Twenty US States Abstract: We implement several Bayesian and classical models to forecast housing prices in 20 US states. In addition to standard vector-autoregressive (VAR) and Bayesian vector autoregressive (BVAR) models, we also include the information content of 308 additional quarterly series in some models. Several approaches exist for incorporating information from a large number of series. We consider two approaches -- extracting common factors (principle components) in a Factor-Augmented Vector Autoregressive (FAVAR) or Factor-Augmented Bayesian Vector Autoregressive (FABVAR) models or Bayesian shrinkage in a large-scale Bayesian Vector Autoregressive (LBVAR) models. In addition, we also introduce spatial or causality priors to augment the forecasting models. Using the period of 1976:Q1 to 1994:Q4 as the in-sample period and 1995:Q1 to 2003:Q4 as the out-of-sample horizon, we compare the forecast performance of the alternative models. Based on the average root mean squared error (RMSE) for the one-, two-, three-, and four--quarters-ahead forecasts, we find that one of the factor-augmented models generally outperform the large-scale models in the 20 US states examined in this paper. Classification-JEL: C32, R31 Keywords: Housing prices, Forecasting, Factor Augmented Models, Large-Scale BVAR models Length: 34 pages Number: 2009-13 Note: We acknowledge the assistance of D. Liu and D. W. Jansen, who provided the data on the 308 macroeconomic indicators, as well as for clarifying all the data related issues. Creation-date: 2009 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-13.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-13 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin M. Cosgel Author-X-Name-First: Metin M. Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Jared Rubin Author-X-Name-First: Jared Author-X-Name-Last: Rubin Author-Person: pru106 Author-Workplace-Name: California State University, Fullerton Title: Guns and Books: Legitimacy, Revolt and Technological Change in the Ottoman Empire Abstract: New technologies have not always been greeted with great enthusiasm. Although the Ottomans were quick to adopt advancements in military technology, they waited for almost three hundred years to allow the first book to be printed in Arabic script. We explain differential reaction to technology through a political economy approach centered on the legitimizing relationship between the rulers and their agents (e.g., military or religious authorities). The Ottomans readily accepted new military technologies such as gunpowder and firearms because they increased the net revenue available to the ruler and reduced the expected value of revolting against him. But they objected to the printing press because it would have decreased the ruler's net revenue by undermining the legitimacy provided by religious authorities, and it would have raised the probability and expected value of a revolution. The printing press was allowed in the eighteenth century after alternative sources of legitimacy emerged. Classification-JEL: H2, N45, N75, O3, O53, P48, Z12 Keywords: technology, state, military, printing, religion, legitimacy, revolt, Ottoman Empire Length: 34 pages Number: 2009-12 Note: Creation-date: 200903 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-12.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-12 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Deterrence and Incapacitation: Towards a Unified Theory of Criminal Punishment Abstract: Economic models of crime have focused primarily on the goal of deterrence; the goal of incapacitation has received much less attention. This paper adapts the standard deterrence model to incorporate incapacitation. When prison only is used, incapacitation can result in a longer or a shorter optimal prison term compared to the deterrence-only model. It is longer if there is underdeterrence, and shorter if there is overdeterrence. In contrast, when a fine is available and it is not constrained by the offender's wealth, the optimal prison term is zero. Since the fine achieves first-best deterrence, only efficient crimes are committed and hence, there is no gain from incapacitation. Classification-JEL: K14, K42 Keywords: Career criminals, deterrence, incapacitation, law enforcement Length: 15 pages Number: 2009-11 Note: Creation-date: 200903 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-11.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-11 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Pretoria Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: The Time-Series Properties on Housing Prices: A Case Study of the Southern California Market Abstract: We examine the time-series relationship between housing prices in eight Southern California metropolitan statistical areas (MSAs). First, we perform cointegration tests of the housing price indexes for the MSAs, finding seven cointegrating vectors. Thus, the evidence suggests that one common trend links the housing prices in these eight MSAs, a purchasing power parity finding for the housing prices in Southern California. Second, we perform temporal Granger causality tests revealing intertwined temporal relationships. The Santa Anna MSA leads the pack in temporally causing housing prices in six of the other seven MSAs, excluding only the San Luis Obispo MSA. The Oxnard MSA experienced the largest number of temporal effects from other MSAs, six of the seven, excluding only Los Angeles. The Santa Barbara MSA proved the most isolated in that it temporally caused housing prices in only two other MSAs (Los Angels and Oxnard) and housing prices in the Santa Anna MSA temporally caused prices in Santa Barbara. Third, we calculate out-of-sample forecasts in each MSA, using various vector autoregressive (VAR) and vector error-correction (VEC) models, as well as Bayesian, spatial, and causality versions of these models with various priors. Different specifications provide superior forecasts in the different MSAs. Finally, we consider the ability of theses time-series models to provide accurate out-of-sample predictions of turning points in housing prices that occurred in 2006:Q4. Recursive forecasts, where the sample is updated each quarter, provide reasonably good forecasts of turning points. Classification-JEL: C32, R31 Keywords: Housing prices, Forecasting Length: 49 pages Number: 2009-10 Note: Revision-date: 200912 Creation-date: 200903 Price: Free Publication-Status: Forthcoming in Journal of Real Estate Finance and Economics File-URL: http://www.econ.uconn.edu/working/2009-10r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2009-10.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2009-10 Template-Type: ReDIF-Paper 1.0 Author-Name: John P. Harding Author-X-Name-First: John P. Author-X-Name-Last: Harding Author-Workplace-Name: University of Connecticut Author-Name: Xiaozhong Liang Author-X-Name-First: Xiaozhong Author-X-Name-Last: Liang Author-Workplace-Name: State Street Corporation Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Bank Capital Requirements and Capital Structure Abstract: This paper studies the impact of capital requirements, deposit insurance and tax benefits on a bank's capital structure. We find that properly regulated banks voluntarily choose to maintain capital in excess of the minimum required. Central to this decision is both tax advantaged debt (a source of firm franchise value) and the ability of regulators to place banks in receivership stripping equity holders of firm value. These features of our model help explain both the capital structure of the large mortgage Government Sponsored Enterprises and the recent increase in risk taking through leverage by financial institutions. Classification-JEL: G21, G28, G32, G38, M48 Keywords: Banks, Capital Structure, Capital Regulation, Financial Intermediation, Leverage, GSE, Investment Banks Length: 41 pages Number: 2009-09 Note: Creation-date: 200902 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-09.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-09 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Author-Name: Ambyre Ponivas Author-X-Name-First: Ambyre Author-X-Name-Last: Ponivas Author-Workplace-Name: University of Connecticut Title: A New Economic Analysis of the American Revolution Abstract: We offer an analysis of the American Revolution in which actors are modeled as choosing the sovereign organization that maximizes their net expected benefits. Benefits of secession derive from satisfaction of greed and settlement of grievance. Costs derive from the cost of civil war and lost benefit of Empire membership. When expected net benefits are positive for both secessionists and the Empire civil war ensues, otherwise it is settled or never begins in the first place. The novelty of our discussion is to show how diverse economic and non-economic factors (such as pamphleteering by Thomas Paine and the morale of the Revolutionary forces) can be integrated into a single economic model. Classification-JEL: F5, K33, N40, P48 Keywords: American Revolution, autonomous regions, causes of war, civil war, collapse of empire, empire, international borders, secession, self determination, theory of history, transaction costs, war of secession Length: 37 pages Number: 2009-08 Note: Creation-date: 200902 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-08.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-08 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: C. F. Sirmans Author-X-Name-First: C. F. Author-X-Name-Last: Sirmans Author-Workplace-Name: Florida State University Author-Name: Geoffrey K. Turnbull Author-X-Name-First: Geoffrey K. Author-X-Name-Last: Turnbull Author-Workplace-Name: Georgia State University Title: Lease Defaults and the Efficient Mitigation of Damages Abstract: The traditional law of leases imposed no duty on landlords to mitigate damages in the event of tenant breach, whereas the modern law of leases does. An economic model of leases, in which absentee tenants may or may not intend to breach, shows that the traditional rule promotes tenant investment in the property by discouraging landlord entry. In contrast, the modern rule prevents the property from being left idle by encouraging landlords to enter and re-let abandoned property. The model reflects the historic use of the traditional rule for agricultural leases, where absentee use was valuable, and the emergence of the modern rule for residential leases, where the primary use entails continuous occupation. Classification-JEL: K11, K12, O18, R11 Keywords: contracts, land development, leases, mitigation of damages Length: Number: 2009-07 Note: We acknowledge the helpful comments of Matthew Kahn and two reviewers. Creation-date: 200901 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-07.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-07 Template-Type: ReDIF-Paper 1.0 Author-Name: Peter C. Dawson Author-X-Name-First: Peter C. Author-X-Name-Last: Dawson Author-Person: pda60 Author-Workplace-Name: Dallas, Texas Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: Optimal Negotiated Transfer Pricing in Theory and Practice: Tangible and Intangible Intra-Firm Transfers Abstract: We review and extend the core literature on international transfer price manipulation to avoid or evade taxes. Under negotiated transfer pricing with a viable bargaining structure, including performance evaluation disconnected from the transfer price, divisions voluntarily exchange accurate information to obtain firm-wide optimality, a result not dependent on restraint from exercising internal market power. For intangible licenses, a larger optimal profit shift for a given tax rate change strengthens incentives for transfer pricing abuse. In practice, an intangible's arm's length range is viewed as a guideline, a context where incentives for abuse materialize. Transfer pricing for intangibles obliges greater tax authority scrutiny. Classification-JEL: F23, H25, H26, L29, O34 Keywords: Negociated transfer pricing, licensing intangibles, decentralized MNC Length: 58 pages Number: 2009-06 Note: This paper previously circulated with the title "International Transfer Pricing for Goods and Intangible Asset Licenses in a Decentralized Multinational Corporation: Review and Extensions" Revision-date: 201012 Creation-date: 200901 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-06r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2009-06.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2009-06 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Pretoria Author-Name: Stephen M. Miller Author-X-Name-First:Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: "Ripple Effects" and Forecasting Home Prices in Los Angeles, Las Vegas, and Phoenix Abstract: We examine the time-series relationship between housing prices in Los Angeles, Las Vegas, and Phoenix. First, temporal Granger causality tests reveal that Los Angeles housing prices cause housing prices in Las Vegas (directly) and Phoenix (indirectly). In addition, Las Vegas housing prices cause housing prices in Phoenix. Los Angeles housing prices prove exogenous in a temporal sense and Phoenix housing prices do not cause prices in the other two markets. Second, we calculate out-of-sample forecasts in each market, using various vector autoregessive (VAR) and vector error-correction (VEC) models, as well as Bayesian, spatial, and causality versions of these models with various priors. Different specifications provide superior forecasts in the different cities. Finally, we consider the ability of theses time-series models to provide accurate out-of-sample predictions of turning points in housing prices that occurred in 2006:Q4. Recursive forecasts, where the sample is updated each quarter, provide reasonably good forecasts of turning points. Classification-JEL: C32, R31 Keywords: Ripple effect, housing prices, forecasting Length: 38 pages Number: 2009-05 Note: Revision-date: 200906 Creation-date: 200901 Price: Free Publication-Status: Forthcoming in Annals of Regional Science File-URL: http://www.econ.uconn.edu/working/2009-05r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2009-05.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2009-05 Template-Type: ReDIF-Paper 1.0 Author-Name: Kwamie Dunbar Author-X-Name-First: Kwamie Author-X-Name-Last: Dunbar Author-Person: pdu135 Author-Workplace-Name: University of Connecticut and Sacred Heart University Title: Solving the Non-Linear Dynamic Asset Allocation Problem: Effects of Arbitrary Stochastic Processes and Unsystematic Risk on the Super Efficient Portfolio Space Abstract: In this paper we propose a methodology that we believe improves the effectiveness of several common assumptions underlying Modern Portfolio Theory's dynamic optimization framework. The paper derives a general outline of a stochastic nonlinear-quadratic control for analyzing and solving a non-linear mean-variance optimization problem. The study first develops and then investigates the role of unsystematic (credit) risk in this continuous time stochastic asset allocation model where the wealth generating process has a non-negative constraint. The paper finds that given unsystematic risk, wealth constraints and higher order moments the market price of risk is non-constant and the investor's optimal terminal return may be lower than previously indicated by a number of classical models. This result provides a convenient solution to practitioners seeking to evaluate competing investment strategies. Classification-JEL: G0, G10, C02, C15 Keywords: Dynamic Optimization; Credit Risk; Mean-Variance Analysis; Linear Quadratic Control; Credit Default Swaps; Capital Market Line; Gram-Charlier expansion; unsystematic risks Length: 38 pages Number: 2009-04 Note: Creation-date: 200901 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-04.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-04 Template-Type: ReDIF-Paper 1.0 Author-Name: Kwamie Dunbar Author-X-Name-First: Kwamie Author-X-Name-Last: Dunbar Author-Person: pdu135 Author-Workplace-Name: University of Connecticut and Sacred Heart University Title: The Effects of Credit Risk on Dynamic Portfolio Management: A New Computational Approach Abstract: The study investigates the role of credit risk in a continuous time stochastic asset allocation model, since the traditional dynamic framework does not provide credit risk flexibility. The general model of the study extends the traditional dynamic efficiency framework by explicitly deriving the optimal value function for the infinite horizon stochastic control problem via a weighted volatility measure of market and credit risk. The model's optimal strategy was then compared to that obtained from a benchmark Markowitz-type dynamic optimization framework to determine which specification adequately reflects the optimal terminal investment returns and strategy under credit and market risks. The paper shows that an investor's optimal terminal return is lower than typically indicated under the traditional mean-variance framework during periods of elevated credit risk. Hence I conclude that, while the traditional dynamic mean-variance approach may indicate the ideal, in the presence of credit-risk it does not accurately reflect the observed optimal returns, terminal wealth and portfolio selection strategies. Classification-JEL: G0, G10, C02, C15 Keywords: Dynamic Strategies; Credit Risk; Mean-Variance Analysis; Optimal Portfolio Selection; Viscosity Solution; Credit Default Swaps; Default Risk; Dynamic Control Length: 35 pages Number: 2009-03 Note: Revision-date: 200902 Creation-date: 200901 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-03r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2009-03.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2009-03 Template-Type: ReDIF-Paper 1.0 Author-Name: Eric J. Brunner Author-X-Name-First: Eric J. Author-X-Name-Last: Brunner Author-Person: pbr139 Author-Workplace-Name: Quinnipiac University Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Is the Median Voter Decisive? Evidence of 'Ends Against the Middle' From Referenda Voting Patterns Abstract: This paper examines whether the voter with the median income is decisive in local spending decisions. Previous tests have relied on cross-sectional data while we make use of a pair of California referenda to estimate a first difference specification. The referenda proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50 percent and 67 to 55 percent, respectively. We find that voters rationally consider future public service decisions when deciding how to vote on voting rules, but the empirical evidence strongly suggests that an income percentile below the median is decisive for majority voting rules. This finding is consistent with high income voters with weak demand for public educational services voting with the poor against increases in public spending on education. Classification-JEL: H4, H7, I2 Keywords: Median Voter Hypothesis, Voting, Referenda, Education Spending Length: 38 pages Number: 2009-02 Note: Revision-date: 201005 Creation-date: 200901 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-02r.pdf File-Format: Application/PDF File-Function: Full textm (revised version) File-URL: http://www.econ.uconn.edu/working/2009-02.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2009-02 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Free Riders, Holdouts, and Public Use: A Tale of Two Externalities Abstract: Free riders and holdouts are market failures that potentially impede the completion of otherwise beneficial transactions. The key difference is that the free rider problem is a demand side externality that requires taxation to compel payment for a public good, while the holdout problem is a supply side externality that requires eminent domain to force the sale of land for large scale projects. This paper highlights that distinction between these two problems and uses the resulting insights to clarify the meaning of the public use requirement of the Fifth Amendment takings clause. Classification-JEL: H41, K11 Keywords: Eminent domain, free riders, holdouts, public use, takings Length: Number: 2009-01 Note: Creation-date: 200901 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2009-01.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2009-01 Template-Type: ReDIF-Paper 1.0 Author-Name: Richard N. Langlois Author-X-Name-First: Richard N. Author-X-Name-Last: Langlois Author-Person: pla2 Author-Workplace-Name: University of Connecticut Author-Name: Giampaolo Garzarelli Author-X-Name-First: Giampaolo Author-X-Name-Last: Garzarelli Author-Person: pga71 Author-Workplace-Name: University of the Witwatersrand Title: Of Hackers and Hairdressers: Modularity and the Organizational Economics of Open-source Collaboration Abstract: By employing modularity theory, we study the general phenomenon of open-source collaboration, which includes, e.g., collective invention and open science besides open-source software production. We focus on how open-source collaboration coordinates the division of labor. We find that open-source collaboration is an organizational form based on the exchange of effort rather than of products where suppliers of effort self-identify like suppliers of products in a market rather than accepting assignments like employees in a firm. Our finding suggests that actual open-source software (and other) projects are neither bazaars nor cathedrals, but hybrids manifesting both voluntary production and conscious planning. Classification-JEL: D02, D23, L17, L23 Keywords: Innovation, Integrality, Intellectual Division of Labor, Modularity, Open Source Software, Theory of the Firm. Length: 40 pages Number: 2008-53 Note:Previous versions of this paper have benefited from the feedback received from Davide Consoli, Martin Michlmayr, audiences at DRUID June 18-20, 2006,Copenhagen and EURAM May 16-19 2007, Paris, seminar participants at Wits on April 25, 2007, and three referees of this journal. Creation-date: 200804 Price: Free Publication-Status: Published in Industry and Innovation 15(2) 125-143 (April 2008) (Special Issue: Online Communities and Open Innovation) with minor revisions. File-URL: http://www.econ.uconn.edu/working/2008-53.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-53 Template-Type: ReDIF-Paper 1.0 Author-Name: Vicki Knoblauch Author-X-Name-First: Vicki Author-X-Name-Last: Knoblauch Author-Person: pkn3 Author-Workplace-Name: University of Connecticut Title: Recognizing One-Dimensional Euclidean Preference Profiles Abstract: A preference profile has a one-dimensional Euclidean representation if it can be derived from an arrangement of individuals and alternatives on a line, with each individual preferring the nearer of each pair of alternatives. We provide a polynomial-time algorithm that determines whether a given preference profile has a one-dimensional Euclidean representation and, if so, constructs one. This result has electoral and mechanism design applications. Classification-JEL: D11, D72 Keywords: spatial elections, preference representation, mechanism design Length: 14 pages Number: 2008-52 Note: Creation-date: 2008 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-52.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-52 Template-Type: ReDIF-Paper 1.0 Author-Name: Nicholas Apergis Author-X-Name-First: Nicholas Author-X-Name-Last: Apergis Author-Person: pap5 Author-Workplace-Name: University of Piraeus Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: Do Structural Oil-Market Shocks Affect Stock Prices? Abstract: This paper investigates how explicit structural shocks that characterize the endogenous character of oil price changes affect stock-market returns in a sample of eight countries --- Australia, Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. For each country, the analysis proceeds in two steps. First, modifying the procedure of Kilian (2008a), we employ a vector error-correction or vector autoregressive model to decompose oil-price changes into three components: oil-supply shocks, global aggregate-demand shocks, and global oil-demand shocks. The last component relates to specific idiosyncratic features of the oil market, such as changes in the precautionary demand concerning the uncertainty about the availability of future oil supplies. Second, recovering the oil-supply shocks, global aggregate-demand shocks, and global oil-demand shocks from the first analysis, we then employ a vector autoregressive model to determine the effects of these structural shocks on the stock market returns in our sample of eight countries. We find that international stock market returns do not respond in a large way to oil market shocks. That is, the significant effects that exist prove small in magnitude. Classification-JEL: G12, Q43 Keywords: real stock returns; structural oil-price shocks; variance decomposition Length: Number: 2008-51 Note: Creation-date: 200807 Price: Free Publication-Status: Published in Energy Economics, July 2009. File-URL: http://www.econ.uconn.edu/working/2008-51.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-51 Template-Type: ReDIF-Paper 1.0 Author-Name: Brian Volz Author-X-Name-First: Brian Author-X-Name-Last: Volz Author-Person: pvo97 Author-Workplace-Name: University of Connecticut Title: Efficient Production of Wins in Major League Baseball Abstract: Data Envelopment Analysis (DEA) is applied to Major League Baseball salary and performance data from 1985 to 2006 in order to identify those teams which produced wins most efficiently and the characteristics which lead to efficient production. It is shown that on average both National and American League teams over allocate the most resources to first basemen. Additionally, it is found that National League teams should allocate significantly more resources towards starting pitching while American League teams should allocate significantly more resources toward second base. It is also observed that efficient teams use younger less experienced players and employ rosters with a greater number of previous all star appearances. Classification-JEL: L83, D24 Keywords: Baseball, DEA, Efficiency Length: 46 pages Number: 2008-50 Note: Creation-date: 200812 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-50.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-50 Template-Type: ReDIF-Paper 1.0 Author-Name: Giorgio Canarella Author-X-Name-First: Giorgio Author-X-Name-Last: Canarella Author-Workplace-Name: California State University, Los Angeles, and University of Nevada, Las Vegas Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Nevada, Las Vegas, and University of Connecticut Author-Name: Stephen K. Pollard Author-X-Name-First: Stephen K. Author-X-Name-Last: Pollard Author-Workplace-Name: California State University, Los Angeles Title: Dynamic Stock Market Interactions between the Canadian, Mexican, and the United States Markets: The NAFTA Experience Abstract: This paper explores the dynamic linkages that portray different facets of the joint probability distribution of stock market returns in NAFTA (i.e., Canada, Mexico, and the US). Our examination of interactions of the NAFTA stock markets considers three issues. First, we examine the long-run relationship between the three markets, using cointegration techniques. Second, we evaluate the dynamic relationships between the three markets, using impulse-response analysis. Finally, we explore the volatility transmission process between the three markets, using a variety of multivariate GARCH models. Our results also exhibit significant volatility transmission between the second moments of the NAFTA stock markets, albeit not homogenous. The magnitude and trend of the conditional correlations indicate that in the last few years, the Mexican stock market exhibited a tendency toward increased integration with the US market. Finally, we do note that evidence exists that the Peso and Asian financial crises as well as the stock-market crash in the US affect the return and volatility time-series relationships. Classification-JEL: G10, C30, C50 Keywords: NAFTA stock markets, cointegration, impulse response, volatility transmission Length: 95 pages Number: 2008-49 Note: Creation-date: 200812 Price: Free Publication-Status: Published in Stock Returns: Cyclicality, Prediction, and Economic Consequences, Ed. G. I. Ellison, Nova Science Publishers, Inc., 4th quarter 2009. File-URL: http://www.econ.uconn.edu/working/2008-49.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-49 Template-Type: ReDIF-Paper 1.0 Author-Name: WenShwo Fang Author-X-Name-First: WenShwo Author-X-Name-Last: Fang Author-Person: pfa149 Author-Workplace-Name: Feng Chia University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Nevada, Las Vegas, and University of Connecticut Author-Name: ChunShen Lee Author-X-Name-First: ChunShen Author-X-Name-Last: Lee Author-Person: ple373 Author-Workplace-Name: Feng Chia University Title: The Great Moderation Flattens Fat Tails: Disappearing Leptokurtosis Abstract: Recently, Fagiolo et al. (2008) find fat tails of economic growth rates after adjusting outliers, autocorrelation and heteroskedasticity. This paper employs US quarterly real output growth, showing that this finding of fat tails may reflect the Great Moderation. That is, leptokurtosis disappears after GARCH adjustment once we incorporate the break in the variance equation. Classification-JEL: C32, E32, O40 Keywords: Real GDP growth, the Great Moderation, leptokurtosis, GARCH models Length: Number: 2008-48 Note: 10 pages Creation-date: 200812 Price: Free Publication-Status: Published in Empirical Economic Letters, June 2010. File-URL: http://www.econ.uconn.edu/working/2008-48.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-48 Template-Type: ReDIF-Paper 1.0 Author-Name: WenShwo Fang Author-X-Name-First: WenShwo Author-X-Name-Last: Fang Author-Person: pfa149 Author-Workplace-Name: Feng Chia University Author-Workplace-Name: University of Connecticut Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Nevada, Las Vegas, and University of Connecticut Title: Modeling the Volatility of Real GDP Growth: The Case of Japan Revisited Abstract: Previous studies (e.g., Hamori, 2000; Ho and Tsui, 2003; Fountas et al., 2004) find high volatility persistence of economic growth rates using generalized autoregressive conditional heteroskedasticity (GARCH) specifications. This paper reexamines the Japanese case, using the same approach and showing that this finding of high volatility persistence reflects the Great Moderation, which features a sharp decline in the variance as well as two falls in the mean of the growth rates identified by Bai and Perron's (1998, 2003) multiple structural change test. Our empirical results provide new evidence. First, excess kurtosis drops substantially or disappears in the GARCH or exponential GARCH model that corrects for an additive outlier. Second, using the outlier-corrected data, the integrated GARCH effect or high volatility persistence remains in the specification once we introduce intercept-shift dummies into the mean equation. Third, the time-varying variance falls sharply, only when we incorporate the break in the variance equation. Fourth, the ARCH in mean model finds no effects of our more correct measure of output volatility on output growth or of output growth on its volatility. Classification-JEL: C32, E32, O40 Keywords: Japan, real GDP growth, the Great Moderation, outlier, structural changes, IGARCH effect Length: 45 pages Number: 2008-47 Note: Creation-date: 200812 Price: Free Publication-Status: Published in Japan and the World Economy, August 2009. File-URL: http://www.econ.uconn.edu/working/2008-47.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-47 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Author-Name: Ronald MacDonald Author-X-Name-First: Ronald Author-X-Name-Last: MacDonald Author-Person: pma235 Author-Workplace-Name: University of Glasgow Title: A Review of the Empirical Evidence on the Effects of Fiscal Decentralization on Economic Efficiency: With Comments on Tax Devolution to Scotland Abstract: This paper reviews the existing empirical evidence on tax decentralization ("tax .devolution") from central government to sub-central government. Sub-central government is taken to be levels above the local level: such as within the UK at the level of Scottish government/executive in Edinburgh, and at the provincial government level in Canada or Spain. Our interpretation of the literature is that there is increasing empirical support for the proposition that tax decentralization helps in promoting economic efficiency and economic growth. It is noted that a distinction must be drawn between tax decentralization and spending decentralization. Where tax decentralization follows spending decentralization - as would be the Scottish case, any adverse economic effects emanating from spending decentralization cannot be blamed on tax decentralization. Indeed, as we argue elsewhere, tax decentralization has the potential of correcting any negative economic effects caused by spending decentralization. Classification-JEL: H21, H21 Keywords: tax decentralization, tax devolution, taxes and economic efficiency, taxes and economic growth Length: 30 pages Number: 2008-46 Note: Creation-date: 200811 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-46.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-46 Template-Type: ReDIF-Paper 1.0 Author-Name: James W. Boudreau Author-X-Name-First: James W. Author-X-Name-Last: Boudreau Author-Person: pbo258 Author-Workplace-Name: University of Connecticut Title: Sequential Pre-Marital Investment Games: Implications for Unemployment Abstract: Agents on the same side of a two-sided matching market (such as the marriage or labor market) compete with each other by making self-enhancing investments to improve their worth in the eyes of potential partners. Because these expenditures generally occur prior to matching, this activity has come to be known in recent literature (Peters, 2007) as pre-marital investment. This paper builds on that literature by considering the case of sequential pre-marital investment, analyzing a matching game in which one side of the market invests first, followed by the other. Interpreting the first group of agents as workers and the other group as firms, the paper provides a new perspective on the incentive structure that is inherent in labor markets. It also demonstrates that a positive rate of unemployment can exist even in the absence of matching frictions. Policy implications follow, as the prevailing set of equilibria can be altered by restricting entry into the workforce, providing unemployment insurance, or subsidizing pre-marital investment. Classification-JEL: C78, H30, E24 Keywords: Matching, pre-marital investment, unemployment. Length: 27 pages Number: 2008-45 Note: Creation-date: 200810 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-45.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-45 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Deterrence, Incapacitation, and Repeat Offenders Abstract: This paper develops an economic model of criminal enforcement that combines the goals of deterrence and incapacitation. Potential offenders commit an initial criminal act if the present value of net private gains is positive. A fraction of these offenders become habitual and commit further crimes immediately upon release from their initial prison term (if any). The optimal punishment scheme in this setting generally involves a finite prison term for first-time offenders (based on the goal of deterrence), and an infinite (life) sentence for repeat offenders (based on the goal of incapacitation). Classification-JEL: K14, K42 Keywords: Deterrence, incapacitation, prison, repeat offenders Length: 21 pages Number: 2008-44 Note: Creation-date: 200810 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-44.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-44 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephane Pallage Author-X-Name-First: Stephane Author-X-Name-Last: Pallage Author-Person: ppa3 Author-Workplace-Name: Universite du Quebec a Montreal Author-Name: Lyle Scruggs Author-X-Name-First: Lyle Author-X-Name-Last: Scruggs Author-Person: psc208 Author-Workplace-Name: University of Connecticut Author-Name: Christian Zimmermann Author-X-Name-First: Christian Author-X-Name-Last: Zimmermann Author-Person: pzi1 Author-Workplace-Name: University of Connecticut Title: Unemployment Insurance Generosity: A Trans-Atlantic Comparison Abstract: The goal of this paper is to establish if unemployment insurance policies are more generous in Europe than in the United States, and by how much. We take the examples of France and one particular American state, Ohio, and use the methodology of Pallage, Scruggs and Zimmermann (2008) to find a unique parameter value for each region that fully characterizes the generosity of the system. These two values can then be used in structural models that compare the regions, for example to explain the differences in unemployment rates. Classification-JEL: J65, E24 Keywords: unemployment insurance, labor market policy, measurement, France Length: 13 pages Number: 2008-43 Note: Creation-date: 200811 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-43.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-43 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephane Pallage Author-X-Name-First: Stephane Author-X-Name-Last: Pallage Author-Person: ppa3 Author-Workplace-Name: Universite du Quebec a Montreal Author-Name: Lyle Scruggs Author-X-Name-First: Lyle Author-X-Name-Last: Scruggs Author-Person: psc208 Author-Workplace-Name: University of Connecticut Author-Name: Christian Zimmermann Author-X-Name-First: Christian Author-X-Name-Last: Zimmermann Author-Person: pzi1 Author-Workplace-Name: University of Connecticut Title: Measuring Unemployment Insurance Generosity Abstract: In this paper, we develop a methodology to summarize the various policy parameters of an unemployment insurance scheme into a single generosity parameter. Unemployment insurance policies are multdimensional objects. They are typically defined by waiting periods, eligibility duration, benefit levels and asset tests when eligible, which makes intertemporal or international comparisons difficult. To make things worse, labor market conditions, such as the likelihood and duration of unemployment matter when assessing the generosity of different policies. We build a first model with such complex characteristics. Our model features heterogeneous agents that are liquidity constrained but can self-insure. We then build a second model that is similar, except that the unemployment insurance is simpler: it is deprived of waiting periods and agents are eligible forever with constant benefits. We then determine which level of benefits in this second model makes agents indifferent between both unemployment insurance policies. We apply this strategy to the unemployment insurance program of the United Kingdom and study how its generosity evolved over time. Classification-JEL: J65, E24 Keywords: unemployment insurance, labor market policy, measurement Length: 23 pages Number: 2008-42 Note: Creation-date: 200811 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-42.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-42 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Author-Name: Adam Honig Author-X-Name-First: Adam Author-X-Name-Last: Honig Author-Person: pho244 Author-Workplace-Name: Amherst College Title: Bankruptcy Costs, Liability Dollarization, and Vulnerability to Sudden Stops Abstract: Emerging market countries that have improved institutions and attained intermediate levels of institutional quality have experienced severe financial crises following capital flow reversals. However, there is also evidence that countries with strong institutions and deep capital markets are less affected by external shocks. We reconcile these two observations using a calibrated DSGE model that extends the financial accelerator framework developed in Bernanke, Gertler, and Gilchrist (1999). The model captures financial market institutional quality with creditors. ability to recover assets from bankrupt firms. Bankruptcy costs affect vulnerability to sudden stops directly but also indirectly by affecting the degree of liability dollarization. Simulations reveal an inverted U-shaped relationship between bankruptcy recovery rates and the output loss following sudden stops. We provide empirical evidence that this non-linear relationship exists. Classification-JEL: E44; F31; F41 Keywords: sudden stops, bankruptcy costs, financial accelerator, liability dollarization. Length: 46 pages Number: 2008-41 Note:We thank Jun Ishii, George Shuster, and Christian Zimmerman for helpful comments and discussions. Creation-date: 200810 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-41.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-41 Template-Type: ReDIF-Paper 1.0 Author-Name: Dong Jin Lee Author-X-Name-First: Dong Jin Author-X-Name-Last: Lee Author-Person: ple398 Author-Workplace-Name: University of Connecticut Title: Parametric and Semiparametric Efficient Tests for Parameter Instability Abstract: This paper proposes asymptotically point optimal tests for parameter instability under the feasible circumstance that the researcher has little information about the unstable parameter process and the error distribution. The shape of the unstable parameter process is not identified but is asymptotically described by the Winer process, which is weak enough to cover a wide range of structural breaks and time varying parameter processes. I first derive a test under known error distribution, and show that the test is asymptotically equivalent to likelihood ratio tests for correctly identified unstable parameter processes under suitable conditions. The test is then extended to semiparametric models in which the underlying distribution is unknown but treated as an infinite dimensional nuisance parameter. An adaptive test is shown to be attainable without further restrictive conditions on the error distribution, which implies that the semiparametric power envelope is asymptotically equivalent to that of parametric models. Classification-JEL: C12, C14, C22 Keywords: Adaptation, optimal test, parameter instability, semiparametric modl, semiparametric power envelope, structural break, time varying parameter Length: 43 pages Number: 2008-40 Note: Revision-date: 200908 Creation-date: 200810 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-40r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-40.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-40 Template-Type: ReDIF-Paper 1.0 Author-Name: Anupam Nanda Author-X-Name-First: Anupam Author-X-Name-Last: Nanda Author-Person: pna105 Author-Workplace-Name: Mumbai Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study using Propensity Scores Abstract: We examine the impact of seller's Property Condition Disclosure Law on the residential real estate values. A disclosure law may address the information asymmetry in housing transactions shifting of risk from buyers and brokers to the sellers and raising housing prices as a result. We combine propensity score techniques from the treatment effects literature with a traditional event study approach. We assemble a unique set of economic and institutional attributes for a quarterly panel of 291 US Metropolitan Statistical Areas (MSAs) and 50 US States spanning 21 years from 1984 to 2004 is used to exploit the MSA level variation in house prices. The study finds that the average seller may be able to fetch a higher price (about three to four percent) for the house if she furnishes a state-mandated seller.s property condition disclosure statement to the buyer. When we compare the results from parametric and semi-parametric event analyses, we find that the semi-parametric or the propensity score analysis generals moderately larger estimated effects of the law on housing prices. Classification-JEL: C14, K11, L85, R21 Keywords: Property Condition Disclosure, Housing Price Index, Propensity Score Matching, Event Study Length: 33 pages Number: 2008-39 Note: Authors acknowledge helpful comments from John Clapp, Dennis Heffley, James Davis, Katherine Pancak, Thomas Miceli, and seminar participants at the University of Connecticut, Economics Brownbag Seminar Series, and 2006 AREUEA Doctoral Session in Boston. We would also like to thank Tim Storey (National Conference of State Legislatures), Daniel Conti (Bureau of Labor Statistics) for assistance with data, and Sascha Becker of University of Munich for assistance with STATA module on propensity score matching algorithm (written by Sascha Becker and Andrea Ichino). Creation-date: 200809 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-39.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-39 Template-Type: ReDIF-Paper 1.0 Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Author-Name: Roxana Gutierrez Romero Author-X-Name-First: Roxana Author-X-Name-Last: Gutierrez Romero Author-Workplace-Name: University of Oxford Title: Identity, Grievances, and Economic Determinants of Voting in the 2007 Kenyan Elections Abstract: What might have caused the post-2007 election violence in Kenya? Was it election irregularities as widely claimed or could it have been simmering ethnic-rivalries waiting to spill over? While not directly focusing on the post-election violence, we investigate a number of issues that divided Kenyans in the 2007 Presidential election. Following a rational choice framework and using survey data of voter opinions, we find that Kenyan voters are strategic, seeking to maximize their well-being and influenced by a number of factors that go beyond their ethnicity such as their absolute and relative living standards, access to public goods and also grievances arising from perceptions of discrimination. The evidence suggests that Kenyan voting behavior is economically motivated, with retrospective interests, thus contrasting other studies that consider Kenyans to be wholly identity voters. The study also reveals significant heterogeneity depending on the voters' primary loci of identification-- either in terms of their ethnicity, occupation or nationalistic terms (Kenyans). The apparent ethnic divisions have resulted in a polarized society with consequential weakening of the institutional base for economic development. The study points to the necessity of institutional reforms that can better harmonize ethnic claims and avert conflicts in the future. Classification-JEL: D72, D74 Keywords: Election, Economics of Voting, Ethnic Divisions, Conflict Length: 43 pages Number: 2008-38 Note: This document is an output from research funding by the UK Department for International Development (DFID) as part of the iiG, a research programme to study how to improve institutions for pro-poor growth in Africa and South-Asia. The views expressed are not necessarily those of DFID. The authors are grateful to Center for the Study of African Economies for financial support. Creation-date: 200809 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-38.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-38 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: Comparing Input- and Output-Oriented Measures of Technical Efficiency to Determine Local Returns to Scale in DEA Models Abstract: This paper shows how one can infer the nature of local returns to scale at the input- or output-oriented efficient projection of a technically inefficient input-output bundle, when the input- and output-oriented measures of efficiency differ. Classification-JEL: D2, C6 Keywords: Most Productive Scale Size; Convex Technologies, Nonparametric Efficiency Analysis Length: 8 pages Number: 2008-37 Note: Creation-date: 200809 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-37.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-37 Template-Type: ReDIF-Paper 1.0 Author-Name: Brian Volz Author-X-Name-First:Brian Author-X-Name-Last: Volz Author-Workplace-Name: University of Connecticut Author-Person: pvo97 Title: Minority Status and Managerial Survival in Major League Baseball Abstract: The effect of minority status on managerial survival in Major League Baseball is analyzed using survival time analysis and data envelopment analysis. Efficiency scores based on team performance and player salary data from 1985 to 2006 are computed and included as covariates in a survival time analysis. It is shown that when controlling for performance and personal characteristics minorities are on average 9.6 percentage points more likely to return the following season. Additionally, it is shown that winning percentage has no impact on managerial survival when efficiency is controlled for. Classification-JEL: J71, L83, C41 Keywords: Baseball, Management, Race, Survival, DEA Length: 31 pages Number: 2008-36 Note: Creation-date: 200809 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-36.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-36 Template-Type: ReDIF-Paper 1.0 Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Author-Name: Roxana Gutierrez Romero Author-X-Name-First: Roxana Author-X-Name-Last: Gutierrez Romero Author-Workplace-Name: University of Oxford Title: Tribalism as a Minimax-Regret Strategy: Evidence from Voting in the 2007 Kenyan Elections Abstract: Although many studies find that voting in Africa approximates an ethnic census in that voting is primarily along ethnic lines, hardly any of the studies have sought to explain ethnic voting following a rational choice framework. Using data of voter opinions from a survey conducted two weeks before the December 2007 Kenyan elections, we find that the expected benefits associated with a win by each of the presidential candidates varied significantly across voters from different ethnic groups. We hypothesize that decision to participate in the elections was influenced by the expected benefits as per the minimax-regret voting model. We test the predictions of this model using data of voter turnout in the December 2007 elections and find that turnout across ethnic groups varied systematically with expected benefits. The results suggest that individuals participated in the elections primarily to avoid the maximum regret should a candidate from another ethnic group win. The results therefore offer credence to the minimax regret model as proposed by Ferejohn and Fiorina (1974) and refute the Downsian expected utility model. Classification-JEL: D72 Keywords: Economics of Voting, Voting Paradox, Minimax-regret, Ethnic Divisions Length: 12 pages Number: 2008-35 Note: Creation-date: 200806 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-35.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-35 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Legal Change and the Social Value of Lawsuits Abstract: This paper integrates the literatures on the social value of lawsuits, the evolution of the law, and judicial preferences to evaluate the hypothesis that the law evolves toward efficiency. The setting is a simple accident model with costly litigation where the efficient law minimizes the sum of accident plus litigation costs. In the steady state equilibrium, the distribution of legal rules is not necessarily efficient but instead depends on a combination of selective litigation, judicial bias, and precedent. Classification-JEL: K40, K41 Keywords: Efficiency of the law, judicial decision making, legal change, precedent, value of lawsuits Length: Number: 2008-34 Note: Creation-date: 200809 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-34.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-34 Template-Type: ReDIF-Paper 1.0 Author-Name: Natalya Y. Shelkova Author-X-Name-First: Natalya Y. Author-X-Name-Last: Shelkova Author-Person: psh304 Author-Workplace-Name: University of Connecticut Title: Low-Wage Labor Markets and the Power of Suggestion Abstract: Low-wage labor markets are traditionally viewed as competitive, and the possibility of strategic behavior by employers is dismissed. However, such behavior is not impossible. This paper investigates the possibility of tacit collusion by low-wage employers while setting wages. A game-theoretic explanation along the lines of the Folk theorem is offered, suggesting that a non-binding minimum wage may serve as a focal point for tacit collusion, proposing a symmetric solution to an infinitely played game of wage-setting. Several empirical techniques were employed in testing the hypothesis, including hurdle models of collusion. CPS monthly data is used for the years 1990-2005, covering the last four federal minimum wage increases. The likelihood of collusion at minimum wage is evaluated, as well as its dynamics during this period. The results generally support the collusion hypothesis and suggest that employers respond strategically to changes in minimum wage legislation while using the statutory minimum wage as a coordination tool in tacit collusion. Classification-JEL: J31, J38, J42, L10 Keywords: minimum wage, low-wage markets, collusion, tacit collusion, focal points Length: 48 pages Number: 2008-33 Note:I thank my adviser Christian Zimmermann for advice and support; professors Alpert, Couch, Dharmapala and Furtado for their discussions and comments; participants of the 2008 IRS Sundance Conference on Monopsony, particularly David Card, 2008 SOLE meetings, 10th IZA Summer School in Labor Economics, and UConn brownbag seminars for their input. All remaining mistakes are my own. Revision-date: 200812 Creation-date: 200809 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-33r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-33.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-33 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Henry J. Munneke Author-X-Name-First: Henry J. Author-X-Name-Last: Munneke Author-Workplace-Name: University of Georgia Author-Name: C. F. Sirmans Author-X-Name-First: C. F. Author-X-Name-Last: Sirmans Author-Workplace-Name: Florida State University Author-Name: Geoffrey K. Turnbull Author-X-Name-First: Geoffrey K. Author-X-Name-Last: Turnbull Author-Workplace-Name: Georgia State University Title: A Question of Title: Property Rights and Asset Values Abstract: This paper examines the impact of land title systems on property values. The predominant system in the U.S., the recording system, awards title to claimants over current possessors, whereas the Torrens registration system awards title to the current owner. In theory, the registration system maximizes property value, all else equal, but in practice, the systems differ depending on the risk of a claim and administrative costs. A natural experiment in Cook County, Illinois, where both systems have existed since 1897, allows a test of the theory. The results, based on commercial and industrial properties, reveal that parcels tend to self-select into the two systems based on the predictions of the theory. Classification-JEL: K11, P14, R14 Keywords: Land title system, property rights, recording system, Torrens system Length: 25 pages Number: 2008-32 Note: Creation-date: 200808 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-32.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-32 Template-Type: ReDIF-Paper 1.0 Author-Name: Gautam Tripathi Author-X-Name-First: Gautam Author-X-Name-Last: Tripathi Author-Person: ptr18 Author-Workplace-Name: University of Connecticut Title: GMM Based Inference with Standard Stratified Samples when the Aggregate Shares are Known Abstract: We show how to do efficient moment based inference using the generalized method of moments (GMM) when data is collected by standard stratified sampling and the maintained assumption is that the aggregate shares are known. Classification-JEL: C30 Keywords:Generalized method of moments, GMM, standard stratified sampling. Length: 19 pages Number: 2008-31 Note: Revision-date: 200911 Creation-date: 200809 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-31r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-31.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-31 Template-Type: ReDIF-Paper 1.0 Author-Name: James W. Boudreau Author-X-Name-First: James W. Author-X-Name-Last: Boudreau Author-Person: pbo258 Author-Workplace-Name: University of Connecticut Author-Workplace-Name: University of Connecticut Title: Stratification and Growth in Agent-based Matching Markets Abstract: This paper examines the dynamic impact of matching on economic mobility and growth. To account for complex interactions over time, experimental economies of heterogeneous agents are simulated with the match process acting as a fitness selection mechanism. Even with perfect information and substantial variety in both offspring and entrants, two-sided matching inevitably causes the population to evolve into stratified groups. Corrective measures are possible to improve mobility, but by altering the path of market evolution, a policy may have unintended negative impacts on growth and inequality. Classification-JEL: C78, E24, O43 Keywords: Matching, stratification, path dependence. Length: 25 pages Number: 2008-30 Note: Creation-date: 200805 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-30.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-30 Template-Type: ReDIF-Paper 1.0 Author-Name: James W. Boudreau Author-X-Name-First: James W. Author-X-Name-Last: Boudreau Author-Person: pbo258 Author-Workplace-Name: University of Connecticut Title: Preference Structure and Random Paths to Stability in Matching Markets Abstract: This paper examines how preference correlation and intercorrelation combine to influence the length of a decentralized matching market's path to stability. In simulated experiments, marriage markets with various preference specifications begin at an arbitrary matching of couples and proceed toward stability via the random mechanism proposed by Roth and Vande Vate (1990). The results of these experiments reveal that fundamental preference characteristics are critical in predicting how long the market will take to reach a stable matching. In particular, intercorrelation and correlation are shown to have an exponential impact on the number of blocking pairs that must be randomly satisfied before stability is attained. The magnitude of the impact is dramatically different, however, depending on whether preferences are positively or negatively intercorrelated. Classification-JEL: C78, C15, P41 Keywords: Marriage matching, stability, random paths. Length: 17 pages Number: 2008-29 Note: Creation-date: 200808 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-29.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-29 Template-Type: ReDIF-Paper 1.0 Author-Name: Vicki Knoblauch Author-X-Name-First: Vicki Author-X-Name-Last: Knoblauch Author-Person: pkn3 Author-Workplace-Name: University of Connecticut Title: Three-agent Peer Evaluation Abstract: I show that every rule for dividing a dollar among three agents impartially (so that each agent's share depends only on her evaluation by her associates) underpays some agent by at least one-third of a dollar for some consistent profile of evaluations. I then produce an impartial division rule that never underpays or overpays any agent by more than one-third of a dollar, and for most consistent evaluation profiles does much better. Classification-JEL: D70, D63 Keywords: division function, impartial, consensual Length: 9 pages Number: 2008-28 Note: Creation-date: 200808 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-28.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-28 Template-Type: ReDIF-Paper 1.0 Author-Name: James W. Boudreau Author-X-Name-First: James W. Author-X-Name-Last: Boudreau Author-Person: pbo258 Author-Workplace-Name: University of Connecticut Author-Name: Vicki Knoblauch Author-X-Name-First: Vicki Author-X-Name-Last: Knoblauch Author-Person: pkn3 Author-Workplace-Name: University of Connecticut Title: Marriage Matching and Intercorrelation of Preferences Abstract:Men's and women's preferences are intercorrelated to the extent that men rank highly those women who rank them highly. Intercorrelation plays an important but overlooked role in determining outcomes of matching mechanisms. We study via simulation the effect of intercorrelated preferences on men's and women's aggregate satisfaction with the outcome of the Gale-Shapley matching mechanism. We conclude with an application of our results to the student admission matching problem. Classification-JEL: C78, D63, C15 Keywords: Two-Sided Matching, intercorrelated preferences, Gale-Shapley algorithm Length: 14 pages Number: 2008-27 Note: Creation-date: 200808 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-27.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-27 Template-Type: ReDIF-Paper 1.0 Author-Name: Vicki Knoblauch Author-X-Name-First: Vicki Author-X-Name-Last: Knoblauch Author-Person: pkn3 Author-Workplace-Name: University of Connecticut Title: Recognizing a Single-Issue Spatial Election Abstract: A single-issue spatial election is a voter preference profile derived from an arrangement of candidates and voters on a line, with each voter preferring the nearer of each pair of candidates. We provide a polynomial-time algorithm that determines whether a given preference profile is a single-issue spatial election and, if so, constructs such an election. This result also has preference representation and mechanism design applications. Classification-JEL: D11, D72 Keywords: spatial elections, preference representation, mechanism design Length: 13 pages Number: 2008-26 Note: Creation-date: 200808 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-26.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-26 Template-Type: ReDIF-Paper 1.0 Author-Name: YongDong Zou Author-X-Name-First: YongDong Author-X-Name-Last: Zou Author-Workplace-Name: Sany Group Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Author-Name: Bernard Malamud Author-X-Name-First: Bernard Author-X-Name-Last: Malamud Author-Workplace-Name: University of Nevada, Las Vegas Title: Geographic Deregulation and Commercial Bank Performance in US State Banking Markets Abstract: This paper examines the effects of geographical deregulation on commercial bank performance across states. We reach some general conclusions. First, the process of deregulation on an intrastate and interstate basis generally improves bank profitability and performance. Second, the macroeconomic variables -- the unemployment rate and real personal income per capita -- and the average interest rate affect bank performance as much, or more, than the process of deregulation. Finally, while deregulation toward full interstate banking and branching may produce more efficient banks and a healthier banking system, we find mixed results on this issue. Classification-JEL: E5, G2 Keywords: commercial banks, geographic deregulation, bank performance Length: 30 pages Number: 2008-25 Note: Creation-date: 200808 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-25.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-25 Template-Type: ReDIF-Paper 1.0 Author-Name: Giorgio Canarella Author-X-Name-First: Giorgio Author-X-Name-Last: Canarella Author-Workplace-Name: California State University, Los Angeles, and University of Nevada, Las Vegas Author-Name: WenShwo Fang Author-X-Name-First: WenShwo Author-X-Name-Last: Fang Author-Person: pfa149 Author-Workplace-Name: Feng Chia University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, las Vegas Author-Name: Stephen K. Pollard Author-X-Name-First: Stephen K. Author-X-Name-Last: Pollard Author-Workplace-Name: California State University, Los Angeles Title: Is the Great Moderation Ending? UK and US Evidence Abstract: The Great Moderation, the significant decline in the variability of economic activity, provides a most remarkable feature of the macroeconomic landscape in the last twenty years. A number of papers document the beginning of the Great Moderation in the US and the UK. In this paper, we use the Markov regime-switching models of Hamilton (1989) and Hamilton and Susmel (1994) to document the end of the Great Moderation. The Great Moderation in the US and the UK begin at different point in time. The explanations for the Great Moderation fall into generally three different categories -- good monetary policy, improved inventory management, or good luck. Summers (2005) argues that a combination of good monetary policy and better inventory management led to the Great Moderation. The end of the Great Moderation, however, occurs at approximately the same time in both the US and the UK. It seems unlikely that good monetary policy would turn into bad policy or that better inventory management would turn into worse management. Rather, the likely explanation comes from bad luck. Two likely culprits exist . energy-price and housing-price shocks Classification-JEL: C32, E32, O40 Keywords: Great Moderation, Regime switching, SWARCH Length: 52 pages Number: 2008-24 Note: Creation-date: 200808 Price: Free Publication-Status: Published in Modern Economy, May 2010 File-URL: http://www.econ.uconn.edu/working/2008-24.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-24 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Title: Minimizing the Price of Tranquility: How to Discourage Scotland's Secession from the United Kingdom Abstract: What some view as overly-generous funding of the Scottish parliament results from Scotland.s credible threat to secede from the United Kingdom. Scotland is shown to benefit from a second mover advantage in a non-cooperative sequential game over the allocation of public funds. Various reform proposals are criticized for not recognizing that reform of Scottish government finances must be consistent with Scotland.s credible threat. Fiscal autonomy -- in which the Scottish parliament finances a much greater proportion of its spending from Scottish-sourced taxes, is demonstrated to be a viable reform within the existing political context and, in some circumstances, could remove Scotland.s second mover advantage. We also use a cooperative bargaining game model to demonstrate that an Australian style grants commission would not be a viable reform in the British context. Classification-JEL: H77 Keywords: Barnett formula, cooperative game, fiscal autonomy, fiscal federalism, grants commission, non-cooperative game, public finance, regional finance, Scottish executive, Scottish parliament, secession, vertical balance, United Kingdom, vertical imbalance. Length: 31 pages Number: 2008-23 Note: Creation-date: 200808 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-23.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-23 Template-Type: ReDIF-Paper 1.0 Author-Name: Sakiko Fukuda-Parr Author-X-Name-First: Sakiko Author-X-Name-Last: Fukuda-Parr Author-Person: pfu69 Author-Workplace-Name: The New School Author-Name: Terra Lawson-Remer Author-X-Name-First: Terra Author-X-Name-Last: Lawson-Remer Author-Workplace-Name: New York University Author-Name: Susan Randolph Author-X-Name-First: Susan Author-X-Name-Last: Randolph Author-Person: pra64 Author-Workplace-Name: University of Connecticut Title: Measuring the Progressive Realization of Human Rights Obligations: An Index of Economic and Social Rights Fulfillment Abstract: In response to an increasing demand for rigorous monitoring of state accountability in meeting their human rights obligations, a growing literature on human rights measurement has emerged. Yet there are no widely used indicators or indices of human rights obligations fulfillment. This paper proposes a methodology for an index of economic and social rights fulfillment that: uses available survey-based objective, rather than subjective data; focuses on state obligations rather than solely on individual enjoyment of rights; and captures progressive realization of human rights subject to maximum available resources. Two calculation methods are proposed: the ratio approach and the achievement possibilities frontier approach. The paper identifies key conceptual and data constraints. Recognizing the complex methodological challenges, the aim of this paper is not to resolve all the difficulties, but rather to contribute to the process of building rigorous approaches to human rights measurement. The proposed index thus has recognized limitations, yet is an important first step based on available data. Our goal here is to contribute to the longer term development of a methodology for measuring economic and social rights fulfillment. The paper concludes that the proposed index provides important new information compared with other measures of economic and social rights fulfillment, but still does not capture some desired features such as the right to non-discrimination and equality, and the right to social security. The paper also outlines an agenda for longer term research and data collection that would make more complete measurement possible. Classification-JEL: I31, Z0 Keywords: Human rights; Measurement; Progressive realization; Inequality; Human Development; Global Length: 39 pages Number: 2008-22 Note: : The authors are grateful to many people who have provided useful advice and comments in the course of developing this index. Thanks are particularly due to Claes Johansson, David Stewart, and John Stewart, and to all those too numerous to name individually but the participants in brainstorming meetings and presentations held at the New School (through 2006/07), UNDP New York (May 2008), UN Office of the High Commissioner for Human Rights (June 2008), the New School workshop New York (June 2008), as well as others who were consulted individually. We also thank those who helped organize these meetings, especially the Canadian International Development Agency whose support made possible the June 2008 workshop in New York. All errors and omission however are the responsibility of the author. Creation-date: 200808 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-22.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-22 Template-Type: ReDIF-Paper 1.0 Author-Name: Robert Bifulco Author-X-Name-First: Robert Author-X-Name-Last: Bifulco Author-Workplace-Name: Syracuse University Author-Name: Jason Fletcher Author-X-Name-First: Jason Author-X-Name-Last: Fletcher Author-Person: pfl40 Author-Workplace-Name: Yale University Author-Name: Stephen Ross Author-X-Name-First: Stephen Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: The Effect of Classmate Characteristics on Individual Outcomes: Evidence from the Add Health Abstract: We use data from the National Longitudinal Study of Adolescent Health (Add Health) to examine the effects of classmate characteristics on economic and social outcomes of students. The unique structure of the Add Health allows us to estimate these effects using comparisons across cohorts within schools, and to examine a wider range of outcomes than other studies that have used this identification strategy. This strategy yields variation in cohort composition that is uncorrelated with student observables suggesting that our estimates are not biased by the selection of students into schools or grades based on classmate characteristics. We find that increases in the percent of classmates whose mother is college educated has significant, desirable effects on educational attainment and substance use. We do not find much evidence that the percent of classmates who are black or Hispanic has significant effects on individual outcomes, on average. Additional analyses suggest, however, that an increase in the percent black or Hispanic may increase dropout rates among black students and post-high school idleness among males. Classification-JEL: I21, I19, J13, J15 Keywords: Education, Peer Effects, Cohort Study, Substance Abuse Length: 49 pages Number: 2008-21 Note: This research uses data from Add Health, a program project designed by J. Richard Udry, Peter S. Bearman, and Kathleen Mullan Harris, and funded by a grant P01-HD31921 from the National Institute of Child Health and Human Development, with cooperative funding from 17 other agencies. Special acknowledgment is due Ronald R. Rindfuss and Barbara Entwisle for assistance in the original design. Persons interested in obtaining data files from Add Health should contact Add Health, Carolina Population Center, 123 W. Franklin Street, Chapel Hill, NC 27516-2524 (addhealth@unc.edu). The authors would like to thank Joseph Altonji, Barry Hirsch, Erdal Tekin, Spencer Banzhaf, and Tom Downes who provided comments on the work presented here, as well as participants at the Syracuse University education policy seminar, the Tufts economics department seminar, the Yale labor economics lunch, and the Georgia State University labor/health economics seminar. Revision-date: 200901 Creation-date: 200808 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-21r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-21.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-21 Template-Type: ReDIF-Paper 1.0 Author-Name: Per G. Fredriksson Author-X-Name-First: Per G. Author-X-Name-Last: Fredriksson Author-Person: pfr73 Author-Workplace-Name: University of Louisville Author-Name: Xenia Matschke Author-X-Name-First: Xenia Author-X-Name-Last: Matschle Author-Person: pma237 Author-Workplace-Name: University of Connecticut Author-Name: Jenny Minier Author-X-Name-First: Jenny Author-X-Name-Last: Minnier Author-Person: pmi170 Author-Workplace-Name: University of Kentucky Title: For Sale: Trade Policy in Majoritarian Systems Abstract: We provide a theory of trade policy determination that incorporates the protectionist bias inherent in majoritarian systems, suggested by Grossman and Helpman (2005). The prediction that emerges is that in majoritarian systems, the majority party favors industries located disproportionately in majority districts. We test this prediction using U.S. tariff data from 1993, and House campaign contribution data from two electoral cycles. We find evidence of a protectionist bias due to majoritarian system politics that is comparable in magnitude to the payoff from being an organized industry. Classification-JEL: F13 Keywords: Length: 18 pages Number: 2008-20 Note: We would like to thank Scott Baier, Josh Ederington, Jose Fernandez, Martin Gassebner, Noel Gaston, Angeliki Kourelis, Dani Rodrik and participants at the SEA meetings in Charleston for helpful comments and discussion, Alessandro Nicita for providing the import elasticity data, and Jessie Roberts for valuable research assistance. Any errors are our own. Creation-date: 200806 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-20.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-20 Template-Type: ReDIF-Paper 1.0 Author-Name: Xenia Matschke Author-X-Name-First: Xenia Author-X-Name-Last: Matschke Author-Person: pma237 Author-Workplace-Name: University of Connecticut Author-Name: Anja Schottner Author-X-Name-First: Anja Author-X-Name-Last: Schottner Author-Person: psc154 Author-Workplace-Name: University of Bonn Title: Antidumping as Strategic Trade Policy Under Asymmetric Information Abstract:In the last two decades, trade liberalization under GATT/WTO has been partly offset by an increase in antidumping protection. Economists have argued convincingly that this is partly due to the inclusion of sales below cost in the definition of dumping during the GATT Tokyo Round. The introduction of the cost- based dumping definition gives regulating authorities a better opportunity to choose protection according to their liking. This paper investigates the domestic government's antidumping duty choice in an asymmetric information framework where the foreign firm's cost is observed by the domestic firm, but not by the government. To induce truthful revelation, the government can design a tariff schedule, contingent on firms' cost reports, accompanied by a threat to collect additional information for report verification (i.e., auditing) and, in case misreporting is detected, to set penalty duties. We show that depending on the concrete assumptions, the domestic government may not only be able to extract the true cost information, but also succeeds in implementing the full-information, governmental welfare-maximizing duty. In this case, the antidumping framework within GATT/WTO does not only offer the means to pursue strategic trade policy disguised as fair trade policy, but it also helps overcome the informational problems with regard to correctly determining the optimal strategic trade policy. Keywords:antidumping duties, asymmetric information, trade protection, strategic trade policy. Classification-JEL: F13 Length: 35 pages Number: 2008-19 Note: Revision-date: 201001 Creation-date: 200806 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-19r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-19.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-19 Template-Type: ReDIF-Paper 1.0 Author-Name: Eric Brunner Author-X-Name-First: Eric Author-X-Name-Last: Brunner Author-Person: pbr139 Author-Workplace-Name: Quinnipiac University Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Author-Name: Ebonya Washington Author-X-Name-First: Ebonya Author-X-Name-Last: Washington Author-Workplace-Name: Yale University Title:Economics and Ideology: Causal Evidence of the Impact of Economic Conditions on Support for Redistribution and Other Ballot Proposals Abstract: There is a large literature demonstrating that positive economic conditions increase support for incumbent candidates, but little understanding of how economic conditions affect preferences for parties and for particulars of their platforms. We ask how exogenous shifts to the value of residents. human capital affect voting behavior in California neighborhoods. As predicted by economic theory, we find that positive economic shocks decrease support for redistributive policies. More notably, we find that conservative voting on a wide variety of ballot propositions--from crime to gambling to campaign finance--is increasing in economic well being. Classification-JEL: D72, H0 Keywords: Voting, Employment, Taxes, Expenditures Length: 53 pages Number: 2008-18 Note: We are grateful to Alberto Alesina, Elizabeth Oltmans Ananat, David Autor, Rafael di Tella, Yan Chen, Rachel Croson, Dhammika Dharmapala, Erica Field, Alan Gerber, Timothy Guinnane, Elizabeth Hoffman, Gregory Huber, Lawrence Katz, Lawrence Kenny, Ulrike Malmendier, Sendhil Mullainathan, Antoinette Schoar and Ken Shotts and to seminar participants at the Brookings Institute, Clark University, Harvard University, MIT, University of Chicago, University of Connecticut, University of Kentucky and University of Pennsylvania for helpful comments. Revision-date: 200808 Creation-date: 200806 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-18r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-18.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-18 Template-Type: ReDIF-Paper 1.0 Author-Name: Marco Novarese Author-X-Name-First: Marco Author-X-Name-Last: Novarese Author-Person: pno2 Author-Workplace-Name: Universita del Piemonte Orientale Author-Name: Christian Zimmermann Author-X-Name-First: Christian Author-X-Name-Last: Zimmermann Author-Person: pzi1 Author-Workplace-Name: University of Connecticut Title: Heterodox Economics and Dissemination of Research through the Internet: the Experience of RePEc and NEP Abstract: We study how the democratization of the diffusion of research through the Internet could have helped non traditional fields of research. The specific case we approach is Heterodox Economics as its pre-prints are disseminated through NEP, the email alert service of RePEc. Comparing heterodox and mainstream papers, we find that heterodox ones are quite systematically more downloaded, and particularly so when considering downloads per subscriber. We conclude that the Internet definitely helps heterodox research, also because other researcher get exposed to it. But there is still room for more participation by heterodox researchers. Classification-JEL: B50, A14 Keywords: NEP, RePEc, heterodox economics, diffusion of research Length: 8 pages Number: 2008-17 Note: Creation-date: 200805 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-17.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-17 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: An Equilibrium Model of Lawmaking Abstract: This paper embeds a model of lawmaking in an equilibrium framework in which the demand for trials is rationed by court delay. The lawmaking process depends on a combination of selective litigation, judicial bias, and precedent. The steady state equilibrium of the model determines both the length of delay and the distribution of legal rules. Comparative statics show that an increase in the supply of trials reduces delay but may or may not increase the proportion of efficient rules. An increase in the fraction of judges biased in favor of the efficient rule, however, will likely improve efficiency on both counts. Classification-JEL: K40, K41 Keywords:Court delay, judicial decisionmaking, lawmaking, precedent, rationing by waiting Length: 29 pages Number: 2008-16 Note: Creation-date: 200805 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-16.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-16 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Understanding Racial Segregation: What is known about the Effect of Housing Discrimination Abstract: A central purpose of this chapter is to assess whether the available empirical evidence supports the view that current levels of housing discrimination are a significant contributor to residential segregation in U.S. cities and metropolitan areas. Through the course of this chapter, the reader will find that the empirical patterns of racial segregation in the U.S. are often inconsistent the available evidence on housing discrimination. Admittedly, strong evidence exists that both housing discrimination exists today and that housing discrimination throughout much of the Twentieth Century was central to creating the high levels of segregation that we observe in U.S. metropolitan areas today, but the appropriate policy responses may differ dramatically depending upon how these two phenomena are currently interrelated. Classification-JEL: J7, L85, R21, R30 Keywords: Housing Discrimination, Residential Segregation, Neighborhood Quality Length: 36 pages Number: 2008-15 Note: Revision-date: 200811 Creation-date: 200804 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-15r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-15.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-15 Template-Type: ReDIF-Paper 1.0 Author-Name: Oskar Harmon Author-X-Name-First: Oskar Author-X-Name-Last: Harmon Author-Person: pha123 Author-Workplace-Name: University of Connecticut Author-Name: James Lambrinos Author-X-Name-First: James Author-X-Name-Last: Lambrinos Author-Workplace-Name: Union Graduate College Author-Name: Judy Buffolino Author-X-Name-First: Judy Author-X-Name-Last: Buffolino Author-Workplace-Name: University of Connecticut Title: Is the Cheating Risk Always Higher in Online Instruction Compared to Face-to-Face Instruction? Abstract: This article analyzes the exposure to cheating risk of online courses relative to face-to-face courses at a single institution. For our sample of 20 online courses we report that the cheating risk is higher than for equivalent face-to-face courses because of reliance on un-proctored multiple choice exams. We conclude that the combination of a proctored final exam, and strategic use cheating deterrents in the administration of un-proctored multiple choice exams, would significantly reduce the cheating risk differential without substantially altering the assessment design of online instruction. Classification-JEL: A22 Keywords: Academic Dishonesty, Cheating, Online Instruction, Principles of Economics Length: 24 pages Number: 2008-14 Note: Revision-date: 201009 Creation-date: 200804 Price: Free Publication-Status: Published in Online Journal of Distance Learning Administration, vol. 13, no. 3, Fall 2010 File-URL: http://www.econ.uconn.edu/working/2008-14r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-14.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-14 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: A Note on the Social versus Private Value of Suits when Care is Bilateral Abstract: This paper re-examines the social versus private value of lawsuits when both injurers and victims can take care. The basic conclusions of that literature remain valid in this context: the private and social values generally differ, and there is no necessary relationship between them, meaning that there may be either too many or too few suits. Introducing the possibility of victim care does, however, alter the calculation of the deterrent effect of lawsuits. In particular, because allowing suits tends to reduce the incentives for victims to invest in precaution, the social value of prohibiting suits increases in direct relation to the productivity of victim care in lowering accident risk. Classification-JEL: K13, K40, K41 Keywords: Accidents, deterrence, lawsuits, litigation costs, social versus private value Length: 15 pages Number: 2008-13 Note: Creation-date: 200804 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-13.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-13 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: The Social versus Private Incentive to Sue Abstract: The private value of lawsuits is based on plaintiffs' expected recovery at trial compared to their filing costs, whereas the social value consists of the incentives suits create for injurers to invest in accident avoidance. Generally, there is no relationship between these two values: there may be either too many or too few suits from a social perspective. Thus, there is scope for corrective measures, although there is no simple policy. Extending the model to consider a negligence rule rather than strict liability, and to allow for pretrial settlements, leads to some modified conclusions but does not alter the basic insights. Classification-JEL: K13, K40, K41 Keywords: Accidents, deterrence, lawsuits, litigation costs, social versus private value Length: 21 pages Number: 2008-12 Note: Creation-date: 200804 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-12.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-12 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Author-Name: Lei Chen Author-X-Name-First: Lei Author-X-Name-Last: Chen Author-Workplace-Name: University of Connecticut Author-Name: Kankana Mukherjee Author-X-Name-First: Kankana Author-X-Name-Last: Mukherjee Author-Workplace-Name: Worcester Polytechnic Institute Title: Input Price Variation Across Locations and a Generalized Measure of Cost Efficiency Abstract: We propose a nonparametric model for global cost minimization as a framework for optimal allocation of a firm's output target across multiple locations, taking account of differences in input prices and technologies across locations. This should be useful for firms planning production sites within a country and for foreign direct investment decisions by multi-national firms. Two illustrative examples are included. The first example considers the production location decision of a manufacturing firm across a number of adjacent states of the US. In the other example, we consider the optimal allocation of US and Canadian automobile manufacturers across the two countries. Classification-JEL: Keywords:Cost minimization; Data Envelopment Analysis; Heterogeneous technology; Location efficiency Length: 22 pages Number: 2008-11 Note: The authors are grateful to William W. Cooper for insightful comments and suggestions for improvement on an earlier version of the manuscript. Responsibility for errors remains with the authors. Creation-date: 200803 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-11.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-11 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: Are Indian Firms too Small? A Nonparametric Analysis of Cost Efficiency and Industry Structure of Indian Manufacturing Abstract: In this paper we use the 2004-05 Annual Survey of Industries data to estimate the levels of cost efficiency of Indian manufacturing firms in the various states and also get state level measures of industrial organization (IO) efficiency. The empirical results show the presence of considerable cost inefficiency in a majority of the states. Further, we also find that, on average, Indian firms are too small. Consolidating them to attain the optimal scale would further enhance efficiency and lower average cost. Classification-JEL: C61, D21, L60 Keywords: Data Envelopment Analysis; Efficient Production Scale; Industry Efficiency Length: 25 pages Number: 2008-10 Note: Creation-date: 200803 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-10.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-10 Template-Type: ReDIF-Paper 1.0 Author-Name: Michael Bratton Author-X-Name-First: Michael Author-X-Name-Last: Bratton Author-Workplace-Name: Michigan State University Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Title: Voting in Kenya: Putting Ethnicity in Perspective Abstract: Do Kenyans vote according to ethnic identities or policy interests? Based on results from a national probability sample survey conducted in the first week of December 2007, this article shows that, while ethnic origins drive voting patterns, elections in Kenya amount to more than a mere ethnic census. We start by reviewing how Kenyans see themselves, which is mainly in non-ethnic terms. We then report on how they see others, whom they fear will organize politically along ethnic lines. People therefore vote defensively in ethnic blocs, but not exclusively. In Decem- ber 2007, they also took particular policy issues into account, including living standards, corruption and majimbo (federalism). We demonstrate that the relative weight that individuals grant to ethnic and policy voting depends in good part on how they define their group identities, with "ethnics" engaging in identity voting and "non-ethnics" giving more weight to interests and issues. Classification-JEL: D72, D74, D78 Keywords: Democracy, Elections, Kenya, Ethnic Divisions, Ethnic Conflict. Length: 24 pages Number: 2008-09 Note: Creation-date: 200803 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-09.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-09 Template-Type: ReDIF-Paper 1.0 Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Author-Name: William F. Shughart II Author-X-Name-First: William F. Author-X-Name-Last: Shughart Author-Person: psh101 Author-Workplace-Name: University of Mississippi Title: The Political Economy of Constitutional Choice: A Study of the 2005 Kenyan Constitutional Referendum Abstract: Recent studies of the linkages between the wealth of nations and the institutions of governance suggest that concentrating political power in a monarchy or a ruling coalition impedes economic growth and, moreover, that while power-diffusing reforms can enhance the wellbeing of society in general, opposition by groups benefitting from the status quo is predictable. In November 2005, Kenyans rejected a proposed constitution that, despite promises made by their new chief executive, would not have lessened the powers of the presidency. Using a unique, constituency-level dataset on the referendum vote, we estimate a model of the demand for power diffusion and find that ethnic groups' voting decisions are influenced by their expected gains and losses from constitutional change. The results also highlights the importance of ethnic divisions in hindering the power-diffusion process, and thus establish a channel through which ethnic fragmentation adversely impacts economic development. Classification-JEL: D72 Keywords: Constitutions, Direct Democracy, Public Goods, Interest Groups, Ethnic Divisions. Length: 40 pages Number: 2008-08 Note: We benefitted from the comments of participants in economics department seminars at the University of Mississippi, the University of Connecticut and at Oxford University's Center for the Study of African Economies. Thanks to John Colon, Krishna Ladha, Simona Tick, Mark Van Boening, Steve Ross, Christian Zimmermann, Dennis Heffley, Hui-chen Wang and, especially, the Kenyan members of the audience attending a BB\&T Lecture at West Virginia University. Brandon Ramsey's research assistance also is gratefully acknowledged. As is customary, however, the authors nevertheless accept full responsibility for any and all errors. Creation-date: 200803 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-08.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-08 Template-Type: ReDIF-Paper 1.0 Author-Name: Kenneth B. Petersen Author-X-Name-First: Kenneth B. Author-X-Name-Last: Petersen Author-Person: ppe268 Author-Workplace-Name: Laffer Associates and University of Connecticut Author-Name: Vladimir Pozdnyakov Author-X-Name-First: Vladimir Author-X-Name-Last: Pozdnyakov Author-Workplace-Name: University of Connecticut Title: Predicting the Fed Abstract: Predicting the federal funds rate and beating the federal funds futures market: mission impossible? Not so. We employ a Markov transition process and show that this model outperforms the federal funds futures market in predicting the target federal funds rate. Thus, by using purely historical data we are able to better explain future monetary policy than a forward looking measure like the federal funds futures rate. The fact that the federal funds futures market can be beaten by a statistical model, suggests that the federal funds futures market lacks eciency. The mar- ket allocates too much weight to current Federal Reserve communication and other real-time macro events, and allocates too little weight to past monetary policy behavior. Classification-JEL: E44, E47, E52, E58, G13 Keywords: Monetary policy, Federal funds futures market, Markov modeling Length: 25 pages Number: 2008-07 Note: The views expressed here do not necessarily reflect the opinion and views of Laffer Associates. Creation-date: 200803 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-07.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-07 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Author-Name: Melanie Guldi Author-X-Name-First: Melanie Author-X-Name-Last: Guldi Author-Workplace-Name: Mount Holyoke College Title: Increasing Derivatives Market Activity in Emerging Markets and Exchange Rate Exposure Abstract: Using firm level data, we report a significant fall in the exchange rate exposure of emerging market firms over the past 10 years, and relate this to higher derivatives market participation. Our methodology follows a three stage approach. First, we measure and report foreign exchange exposures for each year using the popularized extension of the Adler-Dumas (1984) model. Next, we use an indirect approach to estimate the derivatives market participation at the firm level. Finally, we investigate the implications of the level of derivative market activity on a firm's foreign exchange exposure. Our results show that foreign exchange exposure is negatively related to derivatives usage, and support the hedging explanation of the exchange rate exposure puzzle. Classification-JEL: G15; G32; F31 Keywords: Exchange rate exposure; derivatives; emerging markets Length: 36 pages Number: 2008-06 Note: We are grateful to Thomas Schneeweis and Raj Gupta at the CISDM of UMass and Esen Onur for allowing us to access the data used in this paper. We would like to thank Charles Dale and the participants of the 2007 WEAI and EEA conferences, and the Colloquium series at University of Connecticut, Stamford. Revision-date: 200810 Creation-date: 200803 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-06r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-06.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-06 Template-Type: ReDIF-Paper 1.0 Author-Name: Kwamie Dunbar Author-X-Name-First: Kwanie Author-X-Name-Last: Dunbar Author-Person: pdu135 Author-Workplace-Name: University of Connecticut Title: The Impact of the FOMC's Monetary Policy Actions on the growth of Credit Risk: the Monetary Policy - Liquidity Paradox Abstract: Credit risk is influenced by interest rates and market liquidity. This paper examines the direct and indirect impacts of unexpected monetary policy shifts on the growth of corporate credit risk, with the aim of quantifying the size and direction of the response. The results surprisingly indicate that monetary policy and liquidity impulses move counter to each other in their effects on credit risk ("The monetary policy-liquidity paradox"). The analysis indicates that while contractionary monetary policy creates tight money which subsequently leads to a slowing in the growth of credit risk and a reduction of liquidity in credit markets, reduced liquidity indirectly affects credit risk by accelerating its growth. The net effect of these transitory opposing forces generates the final impact on credit risk. An unexpected policy shifts is captured via a combination of the forward Fed fund rate curve and the Fed's FOMC policy announcements. Following the approach of Bernanke and Kuttner (2005), Hausman and Wongswan (2006) who examined asset prices under FOMC announcements, the study found that the estimated credit risk responses to FOMC announcements vary across credit qualities. Hence the analyses indicates that a typical unanticipated 25 basis point cut in the target fed funds rate generally resulted in an acceleration in the growth of credit risk by 0.50 percent for AAA rated corporate grade debt, and by 3.5 percent for BB rated corporate debt. Moreover, the study found a direct effect of the FOMC's policy instrument on market liquidity which had a significant effect on the growth in credit risk. The results indicate that a 1 percentage point increase in liquidity for AAA and CCC rated bonds resulted in a 0.7% and 52.45% decrease in the rate of growth in credit risk respectively. Classification-JEL: Keywords: Credit Risk, Default Risk, Credit Default Swap, Monetary Policy, Credit Markets, Financial Markets, Vector Autoregressive Model, Federal funds rate. Length: 46 pages Number: 2008-05 Note: Creation-date: 200802 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-05.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-05 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin Cosgel Author-X-Name-First: Metin Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Thomas Miceli Author-X-Name-First: Thomas Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: State and Religion Abstract: State and religion have historically had an uneasy relationship, at times being close allies, at others harsh adversaries, and at still others largely independent. This paper develops an economic model of this relationship, where the state's objective is to maximize net tax revenue. Religious goods benefit the state in two ways: first, they provide utility to citizens, thus allowing the state to extract more taxes before running up against citizens' reservation utility (the point at which they would revolt), and second, they potentially provide legitimacy to the state, thereby lowering the costs of tax collection. If the latter effect is strong enough, the state may find it optimal to take control of religion, either to enhance its legitimizing effect, or to suppress its delegitimizing effect. Greater competition in the religion market and democratic polity make it less likely for the state to control religion. To evaluate the model's implications, we use recent cross-country data on the relationship between religion and state, including variables from the "Religion and State Project" and measures coded from the 2001, 2003, and 2005 International Religious Freedom reports. We also examine in more detail some of the paradigmatic cases indicated by the model, presenting various types of evidence from current and historical examples of each case. Classification-JEL: H10, P5, N4, Z12 Keywords: Church, state, religion, legitimacy, power Length: 48 pages Number: 2008-04 Note:We acknowledge the comments of participants in the Economics Department Brownbag Seminar, February 7, 2008. We especially appreciate the comments of Dhammika Dharmapala, Dick Langlois, Lanse Minkler, Jared Rubin, and Christian Zimmermann. We also acknowledge the research assistance of Moussa Diop, Parag Waknis, and Michael Stone. Revision-Date: 200903 Creation-date: 200802 Price: Free Publication-Status: Forthcoming in the Journal of Comparative Economics File-URL: http://www.econ.uconn.edu/working/2008-04r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-04.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-04 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul L. Robertson Author-X-Name-First: Paul L. Author-X-Name-Last: Robertson Author-Person: pro95 Author-Workplace-Name: University of Tasmania Author-Name: David Jacobson Author-X-Name-First: David Author-X-Name-Last: Jacobson Author-Workplace-Name: Dublin City University Author-Name: Richard N. Langlois Author-X-Name-First: Richard N. Author-X-Name-Last: Langlois Author-Person: pla2 Author-Workplace-Name: University of Connecticut Title: Innovation Processes and Industrial Districts Abstract: In this survey, we examine the operations of innovation processes within industrial districts by exploring the ways in which differentiation, specialization, and integration affect the generation, diffusion, and use of new knowledge in such districts. We begin with an analysis of the importance of the division of labor and then investigate the effects of social embeddedness on innovation. We also consider the effect of forms of organization within industrial districts at various stages of product and process life, and we examine the negative aspects of embeddedness for innovation. We conclude with a discussion of the possible consequences of new information and communications technologies on innovation in industrial districts. Classification-JEL: L14, L25, O31, R11 Keywords: industrial districts, innovation, division of labor, embeddedness, information technology. Length: 26 pages Number: 2008-03 Note: Draft chapter for Giacomo Becattini, Marco Bellandi, and Lisa De Propris, eds., Handbook of Industrial Districts. Cheltenham: Edward Elgar, in preparation. We thankfully acknowledge suggestions made by the editors and by Arnaldo Camuffo and Paola Cillo. Any errors, of course, remain our responsibility Creation-date: 200801 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-03.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-03 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Author-Name: Ronald MacDonald Author-X-Name-First: Ronald Author-X-Name-Last: MacDonald Author-Person: pma235 Author-Workplace-Name: University of Glasgow Title: International Money and Finance Abstract: We discuss the effectiveness of pegged exchange rate regimes from an historical perspective, drawing conclusions for their effectiveness today. Starting with the classical gold standard period, we point out that a succession of pegged regimes have ended in failure; except for the first, which was ended by the outbreak of World War I, all of the others we discuss have been ended by adverse economic developments for which the regimes themselves were partly responsible. Prior to World War II the main problem was a shortage of monetary gold that we argue is implicated as a cause of the Great Depression. After World War II, more particularly from the late-1960s, the main problem has been a surfeit of the main international reserve asset, the US dollar. This has led to generalized inflation in the 1970s and into the 1980s. Today, excessive dollar international base money creation is again a problem that could have serious consequences for world economic stability. Classification-JEL: F31, F33, N20 Keywords: Bretton Woods, exchange rate expectations gold standard, new Bretton Woods, realignment expectations, pegged exchange rates, target zone, world economic instability Length: 49 pages Number: 2008-02 Note: Creation-date: 200801 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-02.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2008-02 Template-Type: ReDIF-Paper 1.0 Author-Name: Per G. Fredriksson Author-X-Name-First: Per G. Author-X-Name-Last: Fredriksson Author-Person: pfr73 Author-Workplace-Name: University of Louisville Author-Name: Xenia Matschke Author-X-Name-First: Xenia Author-X-Name-Last: Matchke Author-Person: pma237 Author-Workplace-Name: University of Connecticut Author-Name: Jenny Minier Author-X-Name-First: Jenny Author-X-Name-Last: Minier Author-Person: pmi170 Author-Workplace-Name: University of Kentucky Title: Environmental Policy in Majoritarian Systems Abstract: This paper sheds new light on the determination of environmental policies in majoritarian federal electoral systems such as the U.S., and derives implications for the environmental federalism debate on whether the national or local government should have authority over environmental policies. In the absence of majority bias, the socially preferred policy would be federal district-level taxation which accounts both for cross-boundary pollution and differences in industry concentration across districts. In majoritarian systems, however, where the legislature consists of geographically distinct electoral districts, the majority party (at either the national or the state level) favors its own home districts; depending on the location of polluting industries and the associated pollution damages, the majority party may therefore impose sub-optimally high or low pollution taxes due to a majority bias. We show that majority bias can influence the social-welfare ranking of alternative government policies. In some cases, the existence of majority bias may actually make decentralized or federal uniform taxation the preferred solution. Classification-JEL: Q48, D72, D78, H20, R50 Keywords: Institutions, environmental policy, environmental federalism, geography, majority bias, political economy. Length: 32 pages Number: 2008-01 Note: We thank Josh Ederington and the participants at a presentation at the 54th Annual North American Meetings of the Regional Science Association International in Savannah for helpful comments. Revision-date: 200909 Creation-date: 200801 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2008-01r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2008-01.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2008-01 Template-Type: ReDIF-Paper 1.0 Author-Name: Anup Kumar Bhandari Author-X-Name-First: Anup Kumar Author-X-Name-Last: Bhandari Author-Workplace-Name: Indian Statistical Institute, Kolkata Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title:Technical Efficiency in the Indian Textiles Industry: A Nonparametric Analysis of Firm-Level Data Abstract: The Indian textiles industry is now at the crossroads with the phasing out of quota regime that prevailed under the Multi-Fiber Agreement (MFA) until the end of 2004. In the face of a full integration of the textiles sector in the WTO, maintaining and enhancing productive efficiency is a precondition for competitiveness of the Indian firms in the new liberalized world market. In this paper we use data obtained from the Annual Survey of Industries for a number of years to measure the levels of technical efficiency in the Indian textiles industry at the firm level. We use both a grand frontier applicable to all firms and a group frontier specific to firms from any individual state, ownership, or organization type in order to evaluate their efficiencies. This permits us to separately identify how locational, proprietary, and organizational characteristics of a firm affect its performance. Classification-JEL: L67, C61 Keywords: Data Envelopment Analysis; Meta-Frontier; Technology Closeness ratio Length: 23 pages Number: 2007-49 Note: Creation-date: 200711 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-49.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-49 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin M. Cosgel Author-X-Name-First: Metin M. Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Tax Collection in History Abstract: Methods of tax collection employed by modern governments seem dull when compared to the rich variety observed in history. Whereas most governments today typically use salaried agents to collect taxes, various other types of contractual relationships have been observed in history, including sharing arrangements which divide the tax revenue between the government and collectors at fixed proportions, negotiated payment schemes based on the tax base, and sale of the revenue to a collector in exchange for a lump-sum payment determined at auction. We propose an economic theory of tax collection that can coherently explain the temporal and spatial variation in contractual forms. We begin by offering a simple classification of tax collection schemes observed in history. We then develop a general economic model of tax collection that specifies the cost and benefits of alternative schemes and identifies the conditions under which a government would choose one contractual form over another in maximizing the net revenue. Finally, we use the conclusions of the model to explain some of the well-known patterns of tax collection observed in history and how choices varied over time and space. Classification-JEL: H11, H20, N40 Keywords: Tax collecting, tax farming, share contracts, rent contracts, wage contracts Length: 38 pages Number: 2007-48 Note: Revision-date: 200809 Creation-date: 200712 Price: Free Publication-Status: Forthcoming in Public Finance Review File-URL: http://www.econ.uconn.edu/working/2007-48r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-48.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-48 #Template-Type: ReDIF-Paper 1.0 #Author-Name: Metin M. Cosgel #Author-X-Name-First: Metin M. #Author-X-Name-Last: Cosgel #Author-Person: pco79 #Author-Workplace-Name: University of Connecticut #Title: Stagnation and Change in Islamic History #Abstract: There appear to be two seemingly contradictory images of economic change in the #Islamic World and mixed evidence on whether Islamic societies have been open or #conservative against modern ideas, technological advancements, and legal developments. #Whereas a conservative attitude has been dominant in some societies and time periods, #Muslims were at the forefront of scientific, technological, and legal developments in #others. Rather than rely on ad hoc assumptions about the attitudes and characteristics of #societies or the inherent qualities of new developments, this paper explains attitudes #towards change by studying the political economy of the relationship between the rulers #and the legal community. I extend recent theories of endogenous institutional change to #develop a framework based on how rulers and legal community reacted to new #developments immediately and how their strategic interaction unleashed an endogenous #process toward change in the long run. Using this framework, I identify conditions under #which new ideas, technologies, and legal developments have resulted in immediate #change in Islamic societies. I also examine the process of change in the long run, #whether and how immediate outcomes could be sustained over time as strategic #interaction continued repeatedly. #Classification-JEL: C7, D02, D7, H1, H3, K4, N4, O0 #Keywords: #Length: 35 pages #Number: 2007-47 #Note: Presented at the Conference: "Law and Economic Development: a Historical Perspective", Utrecht, Utrecht University, Sept. 20-22, 2007 #Creation-date: 200709 #Price: Free #Publication-Status: #File-URL: http://www.econ.uconn.edu/working/2007-47.pdf #File-Format: Application/PDF #File-Function: Full text #Handle: RePEc:uct:uconnp:2007-47 Template-Type: ReDIF-Paper 1.0 Author-Name: Tsvetanka Karagyozova Author-X-Name-First: Tsvetanka Author-X-Name-Last: Karagyozova Author-Person: pka289 Author-Workplace-Name: University of British Columbia Title: Asset Pricing with Heterogeneous Agents, Incomplete Markets and Trading Constraints Abstract: The consumption capital asset pricing model is the standard economic model used to capture stock market behavior. However, empirical tests have pointed out its inability to account quantitatively for the high average rate of return and volatility of stocks over time for plausible parameter values. Recent research has suggested that the consumption of stockholders is more strongly correlated with the performance of the stock market than the consumption of non-stockholders. We model two types of agents, non-stockholders with standard preferences and stock holders with preferences that incorporate elements of the prospect theory developed by Kahneman and Tversky (1979). In addition to consumption, stockholders consider fluctuations in their financial wealth explicitly when making decisions. Each agent faces idiosyncratic shocks to his labor income as well as aggregate shocks to the per-share dividend but markets are incomplete and agents cannot hedge consumption risks completely. In addition, consumers face both borrowing and short-sale constraints. Data from the Panel Study of Income Dynamics are used to calibrate the labor income processes of the two types of agents. Our results show that in equilibrium, agents hold different portfolios. Our model is able to generate a time-varying risk premium of about 6% while maintaining a low risk free rate, thus suggesting a plausible explanation for the equity premium puzzle reported by Mehra and Prescott (1985). Classification-JEL: G12, E44 Keywords: asset pricing, equity premium puzzle, prospect theory, heterogeneous agents Length: 62 pages Number: 2007-46 Note: I am grateful for comments and encouragement to Christian Zimmermann. I also thank Andra Ghent, seminar participants at the University of British Columbia and the University of Connecticut, and participants in the Canadian Economic Association 2008 Annual Meeting for helpful comments. Any conceptual or other errors are my fault. Revision-date: 200809 Creation-date: 200711 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-46r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-46.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-46 Template-Type: ReDIF-Paper 1.0 Author-Name: WenShwo Fang Author-X-Name-First: WenShwo Author-X-Name-Last: Fang Author-Person: pfa149 Author-Workplace-Name: Feng Chia University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Nevada, Las Vegas, and University of Connecticut Author-Name: Chih-Chuan Yeh Author-X-Name-First: Chih-Chuan Author-X-Name-Last: Yeh Author-Workplace-Name: The Overseas Chines Institute of Technology, Taichung Title: Does a Threshold Inflation Rate Exist? Quantile Inferences for Inflation and Its Variability Abstract: Using quantile regressions and cross-sectional data from 152 countries, we examine the relationship between inflation and its variability. We consider two measures of inflation -- the mean and median -- and three different measures of inflation variability -- the standard deviation, relative variation, and median deviation. All results from the mean and standard deviation, the mean and relative variation, or the median and the median deviation support both the hypothesis that higher inflation creates more inflation variability and that inflation variability raises inflation across quantiles. Moreover, higher quantiles in both cases lead to larger marginal effects of inflation (inflation variability) on inflation variability (inflation). We particularly consider whether thresholds for inflation rate or inflation variability exist before finding such positive correlations. We find evidence of thresholds for inflation rates below 3 percent, but mixed results for thresholds for inflation variability. Finally, a series of robustness checks, including a set of additional explanatory variables as well as controlling for potential endogeneity with instrumental variables, leaves our findings generally unchanged. Classification-JEL: C21; E31 Keywords: inflation, inflation variability, inflation targeting, threshold effects, quantile regression Length: 52 pages Number: 2007-45 Note: This paper previously circulated with the title "Quantile Inferences for Inflation and Its Variability: Does a Threshold Inflation Rate Exist?" Revision-date: 200906 Creation-date: 200712 Price: Free Publication-Status: Published in Empirical Economics, December 2010. File-URL: http://www.econ.uconn.edu/working/2007-45r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-45.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-45 Template-Type: ReDIF-Paper 1.0 Author-Name: Yongil Jeon Author-X-Name-First: Yongil Author-X-Name-Last: Jeon Author-Workplace-Name: Sungkyunkwan University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Nevada, Las Vegas, and University of Connecticut Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Title: MBA Program Reputation And Quantitative Rankings: New Information for Students, Employers, And Program Administrators Abstract: Since 1988, Business Week biennially ranks MBA programs based on qualitative ("subjective") surveys of students and employers. The Business Week ranking, and similar rankings, based on perceptions of MBA-program customers, rings the alarm that image, rather than substance, may become the raison d'etre of MBA-program evaluation and selection. We rank MBA programs using the quantitative ("objective") data collected with the 2004 Business Week survey, attempting to address these concerns about image over substance. We employ equal-weighted and principal components indexes to rank MBA programs. Our indexes fall into three categories - output, input, and output-input indexes - that rank MBA programs proximately from the interests of students, employers, and MBA program administrators, respectively. Classification-JEL: M00 Keywords: MBA Programs, Reputation, Ranking, Principal Component Length: 36 pages Number: 2007-44 Note: This paper updates analysis contained in Jeon, Miller, and Ray (2003). That earlier paper employs the Business Week survey from 1998. This paper provides a new look, using the principal components technique to construct a ranking index and using the more recent 2004 Business Week survey. Creation-date: 200710 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-44.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-44 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Kathleen Segerson Author-X-Name-First: Kathleen Author-X-Name-Last: Segerson Author-Person: pse47 Author-Workplace-Name: University of Connecticut Author-Name: C. F. Sirmans Author-X-Name-First: C. F. Author-X-Name-Last: Sirmans Author-Workplace-Name: University of Connecticut Title: Tax Motivated Takings Abstract: Tax motivated takings are takings by a local government aimed purely at increasing its tax base. Such an action was justified by the Supreme Court's ruling in Kelo v. New London, which allowed the use of eminent domain for a private redevelopment project on the grounds that the project promised spillover public benefits in the form of jobs and taxes. This paper argues that tax motivated takings can lead to inefficient transfers of land for the simple reason that assessed values understate owners' true values. We therefore propose a reassessment scheme that greatly reduces the risk of this sort of inefficiency. Classification-JEL: H71, K11, R51 Keywords: Eminent domain, holdout problem, property taxes, takings, urban redevelopment Length: 17 pages Number: 2007-43 Note: Creation-date: 200711 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-43.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-43 Template-Type: ReDIF-Paper 1.0 Author-Name: Nicholas Shunda Author-X-Name-First: Nicholas Author-X-Name-Last: Shunda Author-Person: psh174 Author-Workplace-Name: University of Connecticut Title: Auctions with a Buy Price: The Case of Reference-Dependent Preferences Abstract: In an auction with a buy price, the seller provides bidders with an option to end the auction early by accepting a transaction at a posted price. The "Buy-It-Now" option on eBay is a leading example of an auction with a buy price. This paper develops a model of an auction with a buy price in which bidders use the auction's reserve price and buy price to formulate a reference price. The model both explains why a revenue-maximizing seller would want to augment her auction with a buy price and demonstrates that the seller sets a higher reserve price when she can affect the bidders' reference price through the auction's reserve price and buy price than when she can affect the bidders' reference price through the auction's reserve price only. Introducing a small reference-price effect can shrink the range of buy prices bidders are willing to exercise. The comparative statics properties of bidding behavior are in sharp contrast to equilibrium behavior in other models where the existence and size of the auction's buy price have no effect on bidding behavior. Classification-JEL: D44, D82, L86 Keywords: Auction, Buy price, Internet, Reference-dependence? Length: 37 pages Number: 2007-42 Note: I would like to thank Vicki Knoblauch for her insightful comments on earlier versions of this paper. Creation-date: 200710 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-42.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-42 Template-Type: ReDIF-Paper 1.0 Author-Name: Robert Bifulco Author-X-Name-First: Robert Author-X-Name-Last: Bifulco Author-Workplace-Name: University of Connecticut Author-Name: Helen F. Ladd Author-X-Name-First: Helen F. Author-X-Name-Last: Ladd Author-Person: pla158 Author-Workplace-Name: Duke University Author-Name: Stephen Ross Author-X-Name-First: Stephen Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Public School Choice and Integration: Evidence from Durham, North Carolina Abstract: Using evidence from Durham, North Carolina, we examine the impact of school choice programs on racial and class-based segregation across schools. Theoretical considerations suggest that how choice programs affect segregation will depend not only on the family preferences emphasized in the sociology literature but also on the linkages between student composition, school quality and student achievement emphasized in the economics literature. Reasonable assumptions about the distribution of preferences over race, class, and school characteristics suggest that the segregating choices of students from advantaged backgrounds are likely to outweigh any integrating choices by disadvantaged students. The results of our empirical analysis are consistent with these theoretical considerations. Using information on the actual schools students attend and on the schools in their assigned attendance zones, we find that schools in Durham are more segregated by race and class as a result of school choice programs than they would be if all students attended their geographically assigned schools. In addition, we find that the effects of choice on segregation by class are larger than the effects on segregation by race. Classification-JEL: H31, I20, R28 Keywords: School Choice, Segregation, Sorting Length: 43 pages Number: 2007-41 Note: The authors wish to thank Clara Muschkin for comments on the paper and Justin Knight for his efforts as a research assistant. We would also like to acknowledge the assistance and support received from North Carolina Education Research Data Center, especially Gary Thompson's assistance with student address data, from Bill Bartholomay at Durham Public Schools at the City of Durham, and from Rob Cushman from City of Durham Technology Solutions. Revision-date: 200806 Creation-date: 200710 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-41r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-41.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-41 Template-Type: ReDIF-Paper 1.0 Author-Name: Rasha Ahmed Author-X-Name-First: Rasha Author-X-Name-Last: Ahmed Author-Person: pah42 Author-Workplace-Name: University of Connecticut Author-Name: Kathleen Segerson Author-X-Name-First: Kathleen Author-X-Name-Last: Segerson Author-Person: pse47 Author-Workplace-Name: University of Connecticut Title: Emissions Control and the Regulation of Product Markets: The Case of Automobiles Abstract: The paper investigates alternative policies to regulate emissions from polluting product markets, specifically considering the case of the automobiles market. The two policies we consider are: a quota that limits the quantity produced of the polluting model and a more flexible average efficiency standard that requires a minimum energy efficiency across all models produced by a firm, similar to the US Corporate Average Fuel Economy (CAFE) standards. We use a duopoly model of vertical differentiation where firms produce both an economy (i.e., low polluting) version and a luxury (i.e., high polluting) version of a given product. We show that while a quota can raise firm profit over a certain range, CAFE always reduces firm profit relative to the pre-regulation. We also show that while the quota reduces emissions, it is possible that emissions increase under CAFE. The optimal policy choice will depend on the magnitude of unit damages. We show that when unit damages are sufficiently high, the quota policy is more efficient than the average efficiency standard. This suggests that instead of tightening CAFE to limit damages from emissions, policy makers can shift to a quota policy which is both welfare enhancing and more profitable for firms. Classification-JEL: Q48, Q58 Keywords: automobiles market, emission control, green markets, energy/fuel efficiency Length: 38 pages Number: 2007-40 Note: Creation-date: 200710 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-40.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-40 Template-Type: ReDIF-Paper 1.0 Author-Name: Xenia Matschke Author-X-Name-First: Xenia Author-X-Name-Last: Matschke Author-Person: pma237 Author-Workplace-Name: University of Connecticut Author-Name: Anja Schottner Author-X-Name-First: Anja Author-X-Name-Last: Schottner Author-Person: psc154 Author-Workplace-Name: University of Bonn Title: Antidumping Duties Under Asymmetric Cost Information Abstract: In the last two decades, trade liberalization under GATT/WTO has been partly offset by an increase in antidumping protection due to the inclusion of sales below cost in the definition of dumping. The cost-based definition gives regulating authorities an opportunity to choose protection according to their liking. This paper investigates the domestic government's antidumping duty choice in an asymmetric information framework where the foreign firm's cost is observed by the domestic firm, but not by the government. To induce truthful revelation, the government can design a tariff schedule, contingent on firms' cost reports, accompanied by a threat to collect additional information for report verification (i.e., auditing) and, in case misreporting is detected, to set penalty duties. We devise a mechanism where the domestic and foreign firm may be asked to provide cost reports under which the full-information, i.e., efficient, tariffs are implementable. We also discuss the conditions under which this policy is optimal and when it may be better to instead adopt a "facts available" policy, i.e., a policy where no information from the foreign firm is solicited. Classification-JEL: F13, F16 Keywords: antidumping duties, asymmetric information, trade protection Length: 24 pages Number: 2007-39 Note: Creation-date: 200710 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-39.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-39 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Author-Name: Chiranjib Neogi Author-X-Name-First: Chiranjib Author-X-Name-Last: Neogi Author-Workplace-Name: Indian Statistical Institute, Calcutta Title: A Non-Radial Measure of Efficiency in Indian Textile Industry: An Analysis of Unit-Level Data Abstract: In this paper we apply Data Envelopment Analysis (DEA) to firm level data from various years of Annual Survey of Industry to obtain Pareto-Koopmans measures of technical efficiency in the Indian textile garments industry. The overall efficiency measure is multiplicatively decomposed into an input- and an output-oriented Russell type non-radial measure. For the second stage regression of DEA efficiency scores in terms of age, ownership, regional location, and other characteristics of a firm, we perform a Box-Cox transformation of the one-sided dependent variable to avoid using a Tobit regression in a context where there is no obvious censoring of the data. Classification-JEL: L67, C61 Keywords: DEA, Pareto-Koopmans Efficiency, Box-Cox Transformation Length: 29 pages Number: 2007-38 Note: Creation-date: 2007 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-38.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-38 Template-Type: ReDIF-Paper 1.0 Author-Name: Kenneth Petersen Author-X-Name-First: Kenneth Author-X-Name-Last: Petersen Author-Person: ppe268 Author-Workplace-Name: University of Connecticut Title: Does the Federal Reserve Follow a Non-Linear Taylor Rule? Abstract: The Taylor rule has become one of the most studied strategies for monetary policy. Yet, little is known whether the Federal Reserve follows a non-linear Taylor rule. This paper employs the smooth transition regression model and asks the question: does the Federal Reserve change its policy-rule according to the level of inflation and/or the output gap? I find that the Federal Reserve does follow a non-linear Taylor rule and, more importantly, that the Federal Reserve followed a non-linear Taylor rule during the golden era of monetary policy, 1985-2005, and a linear Taylor rule throughout the dark age of monetary policy, 1960-1979. Thus, good monetary policy is associated with a non-linear Taylor rule: once inflation approaches a certain threshold, the Federal Reserve adjusts its policy-rule and begins to respond more forcefully to inflation. Classification-JEL: E4, E5 Keywords: Taylor rule, Federal Reserve, non-linearity, monetary policy Length: 22 pages Number: 2007-37 Note: I would like to thank Christian Zimmermann (adviser), Paul Beaumont, Steve Cunningham, and Philip Shaw for many good conversations about monetary policy and time series econometrics. Creation-date: 200709 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-37.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-37 Template-Type: ReDIF-Paper 1.0 Author-Name: Christian Zimmermann Author-X-Name-First: Christian Author-X-Name-Last: Zimmermann Author-Person: pzi1 Author-Workplace-Name: University of Connecticut Title: Academic Rankings with RePEc Abstract: This documents describes the data collection and use for the computation of rankings within RePEc (Research Papers in Economics). This encompasses the determination of impact factors for journals and working paper series, as well as the ranking of authors, institutions and geographic regions. The various ranking methods are also compared, using a snapshot of the data. Classification-JEL: A14, A10, A11, A13, Z00 Keywords: RePEc, rankings, impact factors, working papers, h-index, citations. Length: 30 pages Number: 2007-36 Note: This paper benefited from discussions and electronic correspondence with Kit Baum, Oded Galor, Bill Goffe, N. Gregory Mankiw, and Ekkehard Schlicht. The data used in these rankings would not exist without the major contributions of Jose Manuel Barrueco Cruz, Kit Baum, Sune Karlsson, Thomas Krichel, Ivan Kurmanov and all the other volunteers working on RePEc. This version updates the previous one with several criteria that have been added since the last version, as well as updates for the tables. Revision-date: 200903 Creation-date: 200709 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-36r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-36.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-36 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Title: From Tranquility to Secession and Other Historical Sequences: A Theoretical Exposition Abstract: A model is developed explaining many common historical sequences: inter alia, the rise and fall of empires, expansion or contraction in the geographic size of nations, wars of secession, non-contested secessions, and growth of supra-national unions. The basic unit of analysis is a transaction in international (or national) law that verifies and legitimizes transformations from one organizational entity to another. Decision-makers for national, or super-national entities as well as those at sub-levels are assumed to be welfare maximizers under cost constraints. Potential secessionists face dispute costs, and decision-makers for the higher-level entity incur persuasion costs. Both costs may include military expenses. These transaction costs are shown to play a crucial role in determining the optimal number of independent countries in the world. Classification-JEL: F5, K33, N40, P48 Keywords: autonomous regions, causes of war, civil war, clash of civilizations, collapse of empire, economic union, empire, end of history, federalism, human rights, international borders, secession, self determination, theory of history, transaction costs, unitary state, war of secession. Length: 37 pages Number: 2007-35 Note: Creation-date: 200709 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-35.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-35 Template-Type: ReDIF-Paper 1.0 Author-Name: Marius Jurgilas Author-X-Name-First: Marius Author-X-Name-Last: Jurgilas Author-Person: pju52 Author-Workplace-Name: University of Connecticut and Elon University Title: Monetary Policy Under a Currency Board Abstract: The consensus view is that central banks under currency boards do not have tools for active monetary policy. In this paper, we analyze the foreign exchange fee as a monetary policy instrument that can be used by a central bank under a currency board. We develop a general equilibrium model showing that changes in this fee may have the same effects as a change in the monetary policy stance. Thus central banks under the currency board are shown to have an avenue to implement active monetary policy. Classification-JEL: E52, E58 Keywords: interbank market, monetary policy, currency board Length: 31 pages Number: 2007-34 Note: Creation-date: 200709 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-34.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-34 Template-Type: ReDIF-Paper 1.0 Author-Name: Delia Furtado Author-X-Name-First: Delia Author-X-Name-Last: Furtado Author-Person: pfu51 Author-Workplace-Name: University of Connecticut and IZA Title: Cross-Nativity Marriages, Gender, and Human Capital Levels of Children Abstract: Because the demographic composition of todays immigrants to the US differs so much from those of natives, immigrants may be less likely to socially integrate into U.S. society, and specically less likely to marry natives. This paper explores the relationship between immigrants' marriage patterns and the academic outcomes of their children. Using 2000 Census data, it is found that while marital decisions of foreign born females do not affect their children's academic success, foreign born males that marry foreign born females are less likely to have children that are high school dropouts. These relationships remain after using various methods to control for the endogeneity of the intermarriage decision. Although we cannot disentangle whether the benefits of same-nativity marriages for foreign born males arise from a more efficient technology in human capital production within the household or from increased participation in ethnic networks, it does appear that immigrant males have better educated children when they marry immigrant females. Classification-JEL: J12, J15, Z13 Keywords: Cross-Nativity Marriage, Education, Ethnic Networks .% Length: 29 pages Number: 2007-33 Note: Creation-date: 200708 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-33.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-33 Template-Type: ReDIF-Paper 1.0 Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Title: Institutional Infrastructure to Support 'Super Growth' in Kenya: Governance Thresholds, Reversion Rates and Economic Development Abstract: Kenya Growth Vision 2030 proposes policy and institutional reforms that make it possible for the country to achieve development status of a middle income country by 2030. This paper outlines the institutional framework necessary to achieve 'Super Growth,' which describes the character of growth required to meet targets stipulated in the Vision. The paper provides evidence confirming the importance of improving the quality of governance to the achievement of the Vision. The paper also demonstrates that the country is characterized by a high probability of reverting to poor governance. It is argued that, to achieve super growth, the country must attain an institutional tipping point which associates with low reversion rates to weaker institutions. The paper provides suggestions for institutional reforms that result in the achievement of an institutional tipping point and super growth. Classification-JEL: O10, O20, O55 Keywords: Geovernance, Super Growth, Institutional Tipping, Kenya Growth Vision 2030 Length: 45 pages Number: 2007-32 Note: Creation-date: 200709 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-32.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-32 Template-Type: ReDIF-Paper 1.0 Author-Name: Jeong-Yoo Kim Author-X-Name-First: Jeong-Yoo Author-X-Name-Last: Kim Author-Person: pki93 Author-Workplace-Name: Kyun Hee University Author-Name: Insik Min Author-X-Name-First: Insik Author-X-Name-Last: Min Author-Person: pmi199 Author-Workplace-Name: Kyun Hee University Author-Name: Christian Zimmermann Author-X-Name-First: Christian Author-X-Name-Last: Zimmermann Author-Person: pzi1 Author-Workplace-Name: University of Connecticut Title: The Economics of Citation Abstract: In this paper, we study the citation decision of a scientific author. By citing a related work, authors can make their arguments more persuasive. We call this the correlation effect. But if authors cite other work, they may give the impression that they think the cited work is more competent than theirs. We call this the reputation effect. These two effects may be the main sources of citation bias. We empirically show that there is a citation bias in Economics by using data from RePEc. We also report how the citation bias differs across regions (U.S., Europe and Asia). Classification-JEL: D81 Keywords: citation bias, correlation effect, reputation effect, signal, strategy, RePEc Length: 25 pages Number: 2007-31 Note: This research was begun when the first author was visiting ISER, Osaka University in the winter of 2005. We are grateful to seminar audiences at the University of Connecticut and participants in the applied microeconomics workshop held at Korea Foundation of Advanced Studies for helpful comments. Creation-date: 200708 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-31.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-31 Template-Type: ReDIF-Paper 1.0 Author-Name: Douglas Gollin Author-X-Name-First: Douglas Author-X-Name-Last: Gollin Author-Person: pgo22 Author-Workplace-Name: Williams College Author-Name: Christian Zimmermann Author-X-Name-First: Christian Author-X-Name-Last: Zimmermann Author-Person: pzi1 Author-Workplace-Name: University of Connecticut Title: Malaria: Disease Impacts and Long-Run Income Differences Abstract: Malaria is a parasitic disease that causes over 300 million "acute illness" episodes and one million deaths annually. Most occur in the tropics, especially sub-Saharan Africa. Countries with high rates of malaria prevalence are gen- erally poor, and some researchers have suggested a direct link from malaria to poverty. We explore the interactions between malaria and national income, using a dynamic general equilibrium framework with epidemiological features. We find that without prevention or control, malaria can have a large impact on income. However, if people have any effective ways of avoiding infection, the disease has little effect on income levels. Classification-JEL: I1, O11, E13, E21 Keywords: Malaria, Epidemiology, GDP, Disease prevention, Sub-Saharan Africa. Length: 33 pages Number: 2007-30 Note: Portions of this research were undertaken while Gollin was on leave at the Economic Growth Center, Yale University, and at the Centre for Study of African Economies, Oxford University. Gollin gratefully acknowledges support and facilities at both institutions. Hoyt Bleakley has kindly shared information and preliminary results. We have also benefited from the comments of Ben Bridgman, Steve Meardon, Lara Shore-Sheppard, Gustavo Ventura, David Weil, and seminar and conference participants at the Arizona State University Conference on Economic Development; the Society for Economic Dynamics 2005 meetings in Budapest; the University of Essex; Rutgers University; the University of Delaware; University of Connecticut; University of Houston; Wesleyan University; LAMES 2006 in Mexico City; the Northeast Universities Development Conference 2005 at Brown University; and the Harvard Center for International Development.s May 2007 conference on Health Improvements for Economic Growth. Revision-date: 201004 Creation-date: 200708 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-30r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-30.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-30 Template-Type: ReDIF-Paper 1.0 Author-Name: John P. Harding Author-X-Name-First: John P. Author-X-Name-Last: Harding Author-Workplace-Name: University of Connecticut Author-Name: Xiaozhing Liang Author-X-Name-First: Xiaozhong Author-X-Name-Last: Liang Author-Workplace-Name: State Street Corporation Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: The Optimal Capital Structure of Banks: Balancing Deposit Insurance, Capital Requirements and Tax-Advantaged Debt Abstract: The capital structure and regulation of financial intermediaries is an important topic for practitioners, regulators and academic researchers. In general, theory predicts that firms choose their capital structures by balancing the benefits of debt (e.g., tax and agency benefits) against its costs (e.g., bankruptcy costs). However, when traditional corporate finance models have been applied to insured financial institutions, the results have generally predicted corner solutions (all equity or all debt) to the capital structure problem. This paper studies the impact and interaction of deposit insurance, capital requirements and tax benefits on a bank's choice of optimal capital structure. Using a contingent claims model to value the firm and its associated claims, we find that there exists an interior optimal capital ratio in the presence of deposit insurance, taxes and a minimum fixed capital standard. Banks voluntarily choose to maintain capital in excess of the minimum required in order to balance the risks of insolvency (especially the loss of future tax benefits) against the benefits of additional debt. Because we derive a closed- form solution, our model provides useful insights on several current policy debates including revisions to the regulatory framework for GSEs, tax policy in general and the tax exemption for credit unions. Classification-JEL: Keywords: Length: 51 pages Number: 2007-29 Note: We wish to thank Dwight Jaffee, William Lang, Wenli Li, Nancy Wallace and James Wilcox for comments, as well as participants at seminars given at the Haas School, the Federal Reserve Banks of Philadelphia and St. Louis, FannieMae, and State Street Corporation. Revision-date: 200802 Creation-date: 200707 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-29r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-29.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-29 Template-Type: ReDIF-Paper 1.0 Author-Name: Eric J. Brunner Author-X-Name-First: Eric J. Author-X-Name-Last: Brunner Author-Person: pbr139 Author-Workplace-Name: Quinnipiac University Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: How Decisive Is the Decisive Voter? Abstract: This paper examines whether the voter with the median income is decisive in local spending decisions. Previous tests have relied on cross-sectional data while we make use of a pair of California referenda to estimate a first difference specification. The referenda proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50 percent and 67 to 55 percent, respectively. The jurisdiction median income appears to accurately capture the expected outcomes of majority votes on public service spending, and voters rationally consider such future public service decisions when deciding how to vote on voting rules Classification-JEL: H4, H7, I2 Keywords: Median Voter Hypothesis, Voting, Referenda, Preference Heterogeneity, Education Spending Length: 41 pages Number: 2007-28 Note: Revision-date: 200808 Creation-date: 200707 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-28r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-28.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-28 Template-Type: ReDIF-Paper 1.0 Author-Name: Lanse Minkler Author-X-Name-First: Lanse Author-X-Name-Last: Minkler Author-Person: pmi41 Author-Workplace-Name: University of Connecticut Title: Integrity and Agreement: Economics When Principles Also Matter Abstract: Classification-JEL: Keywords: Length: 12 pages Number: 2007-27 Note: 2007 University of Michigan Press, Forthcoming. From the series "Economics, Cognition, and Society," edited by Timur Kuran. Included here are the table of contents and introductory chapters. All rights reserved by the University of Michigan. Creation-date: 200707 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-27.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-27 Template-Type: ReDIF-Paper 1.0 Author-Name: Shihe Fu Author-X-Name-First: Shihe Author-X-Name-Last: Fu Author-Person: pfu39 Author-Workplace-Name: Southwestern University of Finance and Economics (China) Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Wage Premia in Employment Clusters: Does Worker Sorting Bias Estimates? Abstract:This paper tests whether the correlation between wages and the spatial concentration of employment can be explained by unobserved worker productivity differences. Residential location is used as a proxy for a worker's unobserved productivity, and average workplace commute time is used to test whether location based productivity differences are compensated away by longer commutes. Analyses using confidential data from the 2000 Decennial Census Long Form find that the agglomeration estimates are robust to comparisons within residential location and that the estimates do not persist after controlling for commutes suggesting that the productivity differences across locations are due to agglomeration, rather than productivity differences across individuals. Classification-JEL: R13, R30, J24, J31 Keywords: Agglomeration, Wages, Sorting, Locational Equilibrium, Human Capital Length: 55 pages Number: 2007-26 Note: The authors are grateful to Elizabeth Ananat, Richard Arnott, Patrick Bayer, Nate Baum-Snow, Dan Black, Keith Chen, Steven Durlauf, Hanming Fang, Li Gan, Vernon Henderson, Bill Kerr, Patrick Kline, Barry Nalebuff, Derek Neal, Francois Ortalo-Magne, Eleanora Patacchini, Stuart Rosenthal, Yona Rubinstein, Christopher Tabor, Bill Wheaton, and Siqi Zheng for their thoughtful comments and conversation. The authors also wish to thank seminar participants at the Brown Urban Economics Lunch, Duke Applied Microeconomics Seminar, Yale Applied Micro Summer Lunch, MIT Real Estate Seminar, Peking University, Institute for Real Estate Studies at Tsinghua University, and Southwestern University of Finance and Economics (China), the University of Wisconsin Labor Workshop, and conference participants at the 2006 North American Regional Science Association, 2007 International Symposium on Contemporary Labor Economics at Xiamen University and the 2008 American Economic Association meetings. Shihe Fu gratefully acknowledges the financial support from the China Scholarship Council. The research in this paper was conducted while the authors were Special Sworn Status researchers of the US Census Bureau at the Boston Census Research Data Center (BRDC). Research results and conclusions expressed are our own and do not necessarily reflect the views of the Census Bureau. This paper has been screened to insure that no confidential data are revealed. Revision-date: 200912 Creation-date: 200706 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-26r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-26.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-26 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Miceli Author-X-Name-First: Thomas Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Legal Change: Integrating Selective Litigation, Judicial Preferences, and Precedent Abstract: The claim that the common law displays an economic logic is a centerpiece of the positive economic theory of law. A key question in this literature is whether this outcome is due to the conscious efforts of judges, or the result of invisible hand processes. This paper develops a model in which to two effects combine to determine the direction of legal change. The main conclusions are, first, that judicial bias can prevent the law from evolving toward efficiency if the fraction of judges biased against the efficient rule is large enough; and second, that precedent affects the rate of legal change but not its direction. Classification-JEL: K40, K41 Keywords: Legal change, judicial decision making, precedent Length: 15 pages Number: 2007-25 Note: Creation-date: 200706 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-25.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-25 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Miceli Author-X-Name-First: Thomas Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: The Economics of Criminal Procedure Abstract: Criminal procedure concerns the rules regarding the treatment of criminal defendants during the time from their arrest until the determination of a final verdict. From an economic perspective, the goal of this process is to achieve the most accurate determination of guilt at the lowest possible cost. The process encompasses plea bargaining, the bail system, rules regarding the determination of guilt at trial, and appeal. Criminal procedure also affects deterrence because it ultimately determines the expected punishment imposed on offenders. However, uncertainty in enforcement necessarily leads to a conflict between the goals of deterrence and error avoidance. Classification-JEL: K40, K42 Keywords: Criminal procedure, plea bargaining, rules of evidence Length: 29 pages Number: 2007-24 Note:I acknowledge the insightful comments of Richard Adelstein. Creation-date: 200706 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-24.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-24 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Author-Name: Ronald MacDonald Author-X-Name-First: Ronald Author-X-Name-Last: MacDonald Author-Person: pma235 Author-Workplace-Name: University of Glasgow Author-Name: Ian Marsh Author-X-Name-First: Ian Author-X-Name-Last: Marsh Author-Person: pma170 Author-Workplace-Name: City University Title: Did Impending War in Europe Help Destroy the Gold Bloc in 1936? An Internal Inconsistency Hypothesis Abstract: This paper investigates the gold bloc operated between France, the Netherlands, Switzerland and Belgium, especially over the period after the USA left the gold standard in March 1933 to its end in September 1936. It enquires into the effect of military-political developments in Germany and Italy on the sustainability of the gold bloc between its members. Juxtaposed is the view of leading political scientists, such as Henry Kissinger, who see impending war in Europe as deeply and adversely affecting psychology in Europe, and what may be called the standard "economists' view" that sees the demise of the gold bloc as being caused almost exclusively by economic factors. Developing concepts of external and internal inconsistency of the gold bloc, this investigation concludes that both economic and military-political developments played important roles in destroying the last vestiges of the gold standard. Classification-JEL: F33, N24, N44 Keywords: French devaluation, German remilitarization, gold bloc, international monetary system Length: 35 pages Number: 2007-23 Note: Creation-date: 200706 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-23.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-23 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Title: A Note on US Royalty Relief, Rent Sharing and Offshore Oil Production Abstract: This paper offers an economic analysis explaining why royalty relief under US Federal legislation is expensive in terms of revenue foregone, but is largely ineffective in increasing US offshore oil production. Repeal of royalty relief is therefore justified. Classification-JEL: Q48 Keywords: oil taxation, royalty relief, offshore oil Length: 10 pages Number: 2007-22 Note: Creation-date: 200704 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-22.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-22 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul Hallwood Author-X-Name-First: Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Title: An Economic Analysis of Drawing Lines in the Sea Abstract: It is shown that low dispute costs relative to expected resource rents from oceanic resources favor drawn out disputes over maritime boundaries; asymmetric dispute costs favor agreement on boundaries wanted by the low dispute cost state party; and high symmetric dispute costs favor formation of joint development zones. The fact that most maritime boundaries have not yet been drawn suggests that state parties think that resource rents that can be drawn from the oceans are high relative to dispute costs. Moreover, the recent mini-trend towards JDZs in East Asia suggests that state parties in the area have recently reassessed dispute costs as being higher than previously believed. Classification-JEL: F51, Q22, Q58 Keywords: Law of the Sea, joint development zones, maritime boundaries, marine boundaries, lines in the sea Length: 19 pages Number: 2007-21 Note: Creation-date: 200705 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-21.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-21 Template-Type: ReDIF-Paper 1.0 Author-Name: WenShwo Fang Author-X-Name-First: WenShwo Author-X-Name-Last: Fang Author-Workplace-Name: Feng Chia University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Author-Name: ChunShen Lee Author-X-Name-First: ChunShen Author-X-Name-Last: Lee Author-Workplace-Name: Feng Chia University Title: Cross-Country Evidence on Output Growth Volatility: Nonstationary Variance and GARCH Models Abstract: This paper revisits the issue of conditional volatility in real GDP growth rates for Canada, Germany, Italy, Japan, the United Kingdom, and the United States. Previous studies find high persistence in the volatility. This paper shows that this finding largely reflects a nonstationary variance. Output growth in the six countries became noticeably less volatile over the past few decades. In this paper, we employ the modified ICSS algorithm to detect structural change in the variance of output growth. One structural break exists in each of the six countries after identifying outliers and mean shifts in the growth rates. We then use generalized autoregressive conditional heteroskedasticity ( GARCH) specifications, modeling output growth and its volatility with and without the break in volatility. The evidence shows that the time-varying variance falls sharply in Canada and Japan, and disappears entirely in Germany, Italy, the U.K. and the U.S., once we incorporate the break in the variance equation of output for the six countries. That is, the integrated GARCH (IGARCH) effect proves spurious and the GARCH model demonstrates misspecification, if researchers neglect a nonstationary variance. Moreover, we also consider the possible effects of our more correct measure of output volatility on output growth as well as the reverse effect of output growth on its volatility. The conditional standard deviation possesses no statistical significance in all countries, except a significant negative effect in Japan. The lagged growth rate of output produces significant negative and positive effects on the conditional variances in Germany and Japan, respectively. No significant effects exist in Canada, Italy, the U.K., and the U.S. Classification-JEL: C32; E32; O40 Keywords: Nonstationary variance, the Great Moderation, real GDP growth and volatility, modified ICSS algorithm, IGARCH effect Length: 47 pages Number: 2007-20 Note: Revision-date: 200803 Creation-date: 200704 Price: Free Publication-Status: Published in Scottish Journal of Political Economy, September 2008 File-URL: http://www.econ.uconn.edu/working/2007-20r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-20.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-20 Template-Type: ReDIF-Paper 1.0 Author-Name: Huiping Yuan Author-X-Name-First: Huiping Author-X-Name-Last: Yuan Author-Workplace-Name: Xiamen University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: A General Schema for Optimal Monetary Policymaking: Objectives and Rules Abstract: This paper examines four equivalent methods of optimal monetary policymaking, committing to the social loss function, using discretion with the central bank long-run and short-run loss functions, and following monetary policy rules. All lead to optimal economic performance. The same performance emerges from these different policymaking methods because the central bank actually follows the same (similar) policy rules. These objectives (the social loss function, the central bank long-run and short-run loss functions) and monetary policy rules imply a complete regime for optimal policy making. The central bank long-run and short-run loss functions that produce the optimal policy with discretion differ from the social loss function. Moreover, the optimal policy rule emerges from the optimization of these different central bank loss functions. Classification-JEL: E42, E52, E58 Keywords: Optimal Policy, Central Bank Loss Functions, Policy Rules Length: 42 pages Number: 2007-19 Note: Professor Yuan gratefully acknowledges financial support from the National Social Science Foundation of China and the China Scholarship Council. Creation-date: 200703 Price: Free Publication-Status: Published in Economic Modelling, May 2010. File-URL: http://www.econ.uconn.edu/working/2007-19.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-19 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas A. Severini Author-X-Name-First: Thomas A. Author-X-Name-Last: Severini Author-Workplace-Name: Northwestern University Author-Name: Gautam Tripathi Author-X-Name-First: Gautam Author-X-Name-Last: Tripathi Author-Person: ptr18 Author-Workplace-Name: University of Connecticut Title: Efficiency Bounds for Estimating Linear Functionals of Nonparametric Regression Models with Endogenous Regressors Abstract: Consider a nonparametric regression model Y=mu*(X) + e, where the explanatory variables X are endogenous and e satisfies the conditional moment restriction E[e|W]=0 w.p.1 for instrumental variables W. It is well known that in these models the structural parameter mu* is 'ill-posed' in the sense that the function mapping the data to mu* is not continuous. In this paper, we derive the efficiency bounds for estimating linear functionals E[p(X)mu*(X)] and int_{supp(X)}p(x)mu*(x)dx, where p is a known weight function and supp(X) the support of X, without assuming mu* to be well-posed or even identified. Classification-JEL: C14 Keywords: Efficiency bounds, Linear functionals, Nonparametric regression, Endogenous regressors Length: 23 pages Number: 2007-18 Note: We thank Gary Chamberlain, Enno Mammen, Whitney Newey, and participants at several seminars for helpful suggestions and conversations. The first author also thanks the NSF for financial support. Creation-date: 200705 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-18.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-18 Template-Type: ReDIF-Paper 1.0 Author-Name: Vicki Knoblauch Author-X-Name-First: Vicki Author-X-Name-Last: Knoblauch Author-Person: pkn3 Author-Workplace-Name: University of Connecticut Title: A Universal Formula for Continuous Utility Abstract: A single formula assigns a continuous utility function to every representable preference relation. Classification-JEL: D01, D11 Keywords: utility, preferences, continuity Length: 4 pages Number: 2007-17 Note: Creation-date: 200705 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-17.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-17 Template-Type: ReDIF-Paper 1.0 Author-Name: Onur B. Celik Author-X-Name-First: Onur B. Author-X-Name-Last: Celik Author-Person: pce32 Author-Workplace-Name: University of Connecticut Author-Name: Vicki Knoblauch Author-X-Name-First: Vicki Author-X-Name-Last: Knoblauch Author-Person: pkn3 Author-Workplace-Name: University of Connecticut Title: Marriage Matching with Correlated Preferences Abstract: Authors of experimental, empirical, theoretical and computational studies of two-sided matching markets have recognized the importance of correlated preferences. We develop a general method for the study of the effect of correlation of preferences on the outcomes generated by two-sided matching mechanisms. We then illustrate our method by using it to quantify the effect of correlation of preferences on satisfaction with the men-propose Gale-Shapley matching for a simple one-to-one matching problem. Classification-JEL: C78, D63, B41 Keywords: Two-Sided Matching, Correlated preferences, Gale-Shapley algorithm Length: 21 pages Number: 2007-16 Note: The authors would like to thank Fusun Yaman for programming assistance and James Boudreau for helpful comments and suggestions. Creation-date: 200705 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-16.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-16 Template-Type: ReDIF-Paper 1.0 Author-Name: Vicki Knoblauch Author-X-Name-First: Vicki Author-X-Name-Last: Knoblauch Author-Person: pkn3 Author-Workplace-Name: University of Connecticut Title: Marriage Matching: A Conjecture of Donald Knuth Abstract: Variations of the Gale-Shapley algorithm have been used and studied extensively in real world markets. Examples include matching medical residents with residency programs, the kidney exchange program and matching college students with on-campus housing. The performance of the Gale-Shapley marriage matching algorithm (1962) has been studied extensively in the special case of men's and women's preferences random. We drop the assumption that women's preferences are random and show that En /n ln n -> 1, where En is the expected number of proposals made when the men-propose Gale-Shapley algorithm is used to match n men with n women. This establishes in spirit a conjecture of Donald Knuth (1976, 1997) of thirty years standing. Under the same assumptions, we also establish bounds on the expected ranking by a woman of her assigned mate. Bounds on men's rankings of their assigned mates follow directly from the conjecture. Classification-JEL: C78, D63, D70 Keywords: Two-Sided Matching, Gale-Shapley algorithm Length: 16 pages Number: 2007-15 Note: Creation-date: 200705 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-15.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-15 Template-Type: ReDIF-Paper 1.0 Author-Name: Rimvydas Baltaduonis Author-X-Name-First: Rimvydas Author-X-Name-Last: Baltaduonis Author-Person: pba329 Author-Workplace-Name: University of Connecticut and George Mason University Title: Simple-Offer vs. Complex-Offer Auctions in Deregulated Electricity Markets Abstract: In my recent experimental research of wholesale electricity auctions, I discovered that the complex structure of the offers leaves a lot of room for strategic behavior, which consequently leads to anti- competitive and inefficient outcomes in the market. A specific feature of these complex-offer auctions is that the sellers submit not only the quantities and the minimum prices at which they are willing to sell, but also the start-up fees that are designed to reimburse the fixed start-up costs of the generation plants. In this paper, using the experimental method I compare the performance of two complex-offer auctions (COAs) against the performance of a simple-offer auction (SOA), in which the sellers have to recover all their generation costs --- fixed and variable ---through a uniform market-clearing price. I find that the SOA significantly reduces consumer prices and lowers price volatility. It mitigates anti-competitive effects that are present in the COAs and achieves allocative efficiency more quickly. Classification-JEL: C72, D4, D61, L94 Keywords: strategic behavior, sealed-bid auction, complex offer auction, electricity, efficiency Length: 44 pages Number: 2007-14 Note: The author would like to thank the National Science Foundation under grant SES 0648937, and the International Foundation for Research in Experimental Economics for financial support. The author is grateful to the Engineering and Economics faculty and students at the University of Connecticut working on the electricity project and the faculty and students at the Interdisciplinary Center for Economic Science at George Mason University for their helpful comments. The author would like to thank in particular Vicki Knoblauch and Bart Wilson for their valuable suggestions, Jeffrey Kirchner for writing the software for the experiments, Feng Zhao and William Blankson for explaining the complex-offer optimization algorithms. All mistakes are the responsibility of the author. The data are available upon request. Creation-date: 200704 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-14.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-14 Template-Type: ReDIF-Paper 1.0 Author-Name: Rimvydas Baltaduonis Author-X-Name-First: Rimvydas Author-X-Name-Last: Baltaduonis Author-Person: pba329 Author-Workplace-Name: University of Connecticut and George Mason University Title: An Experimental Study of Complex-Offer Auctions: Payment Cost Minimization vs. Offer Cost Minimization Abstract: A Payment Cost Minimization (PCM) auction has been proposed as an alternative to the Offer Cost Minimization (OCM) auction to be used in wholesale electric power markets with the intention to lower the procurement cost of electricity. Efficiency concerns about this proposal have relied on the assumption of true production cost revelation. Using an experimental approach, I compare the two auctions, strictly controlling for the level of unilateral market power. A specific feature of these complex-offer auctions is that the sellers submit not only the quantities and the minimum prices at which they are willing to sell, but also the start-up fees that are designed to reimburse the fixed start-up costs of the generation plants. I find that both auctions result in start-up fees that are significantly higher than the start-up costs. Overall, the two auctions perform similarly in terms of procurement cost and efficiency. Surprisingly, I do not find a substantial difference between less market power and more market power designs. Both designs result in similar inefficiencies and equally higher procurement costs over the competitive prediction. The PCM auction tends to have lower price volatility than the OCM auction when the market power is minimal but this property vanishes in the designs with market power. These findings lead me to conclude that both the PCM and the OCM auctions do not belong to the class of truth revealing mechanisms and do not easily elicit competitive behavior. Classification-JEL: C72, D4, D61, L94 Keywords: strategic behavior, sealed-bid auction, complex offer auction, electricity, efficiency Length: 44 pages Number: 2007-13 Note: The author would like to thank the National Science Foundation under grant SES 0648937, and the International Foundation for Research in Experimental Economics for financial support. The author is grateful to the Engineering and Economics faculty and students at the University of Connecticut working on the electricity project and the faculty and students at the Interdisciplinary Center for Economic Science at George Mason University for their helpful comments. The author would like to thank in particular Vicki Knoblauch and Bart Wilson for their valuable suggestions, Jeffrey Kirchner for writing the software for the experiments, Feng Zhao and William Blankson for explaining the optimization algorithms. Any mistakes are the responsibility of the author. The data is available upon request. Creation-date: 200704 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-13.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-13 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Miceli Author-X-Name-First: Thomas Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Kathleen Segerson Author-X-Name-First: Kathleen Author-X-Name-Last: Segerson Author-Person: pse47 Author-Workplace-Name: University of Connecticut Title: Private Property, Public Use, and Just Compensation: The Economics of Eminent Domain Abstract: The eminent domain clause of the U.S. Constitution concerns the limits of the government's right to take private property for public use. The economic literature on this issue has examined (1) the proper scope of this power as embodied by the 'public use' requirement, (2) the appropriate definition, and implications, of 'just compensation,' and (3) the impact of eminent domain on land use incentives of owners whose land is subject to a taking risk. This essay reviews this literature and draws implications for our understanding of eminent domain law. Classification-JEL: K11, R52 Keywords: Eminent domain, just compensation, land use incentives, public use Length: 71 pages Number: 2007-12 Note: We acknowledge the comments of participants at the Urban Economics and Real Estate Finance Seminar, Center for Real Estate, MIT, April 2007; and participants at the UConn-Wesleyan Mini Conference, May 2007. Creation-date: 200705 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-12.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-12 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Miceli Author-X-Name-First: Thomas Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: C. F. Sirmans Author-X-Name-First: C. F. Author-X-Name-Last: Sirmans Author-Workplace-Name: University of Connecticut Title: The Optimal Response to Default: Renegotiation or Extended Maturity? Abstract: This paper reinforces the argument of Harding and Sirmans (2002) that the observed preference of lenders for extended maturity rather than renegotiation of the principle in the case of loan default is due to the superior incentive properties of the former. Specifically, borrowers have a greater incentive to avoid default under extended maturity because it reduces the likelihood that they will be able to escape paying off the full loan balance. Thus, although extended maturity leaves open the possibility of foreclosure, it will be preferred to renegotiation as long as the dead weight loss from foreclosure is not too large. Classification-JEL: D82, G33 Keywords: Agency costs, default, extended maturity, renegotiation, moral hazard Length: 19 pages Number: 2007-11 Note: Creation-date: 200705 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-11.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-11 Template-Type: ReDIF-Paper 1.0 Author-Name: Kwamie Dunbar Author-X-Name-First: Kwamie Author-X-Name-Last: Dunbar Author-Person: pdu135 Author-Workplace-Name: University of Connecticut, Stamford, and Sacread Heart University Author-Name: Albert J. Edwards Author-X-Name-First: Albert J. Author-X-Name-Last: Edwards Author-Workplace-Name: Northeast Utilities Service Company Title: Empirical Analysis of Credit Risk Regime Switching and Temporal Conditional Default Correlation in Credit Default Swap Valuation: The Market liquidity effect Abstract: In this paper, we extend the debate concerning Credit Default Swap valuation to include time varying correlation and co-variances. Traditional multi-variate techniques treat the correlations between covariates as constant over time; however, this view is not supported by the data. Secondly, since financial data does not follow a normal distribution because of its heavy tails, modeling the data using a Generalized Linear model (GLM) incorporating copulas emerge as a more robust technique over traditional approaches. This paper also includes an empirical analysis of the regime switching dynamics of credit risk in the presence of liquidity by following the general practice of assuming that credit and market risk follow a Markov process. The study was based on Credit Default Swap data obtained from Bloomberg that spanned the period January 1st 2004 to August 08th 2006. The empirical examination of the regime switching tendencies provided quantitative support to the anecdotal view that liquidity decreases as credit quality deteriorates. The analysis also examined the joint probability distribution of the credit risk determinants across credit quality through the use of a copula function which disaggregates the behavior embedded in the marginal gamma distributions, so as to isolate the level of dependence which is captured in the copula function. The results suggest that the time varying joint correlation matrix performed far superior as compared to the constant correlation matrix; the centerpiece of linear regression models. Classification-JEL: Keywords: Credit Default Swaps, Market Liquidity, Copulas, Joint conditional distributions, Markov process, Regime Switching, Illiquidity, and Correlation. Length: 37 pages Number: 2007-10 Note: We are extremely grateful to Ben Fine, Department of Mathematics, Fairfield University, for his many insightful suggestions and guidance which helped to improve the final manuscript. This is a preprint of an article submitted for consideration in the Journal of Empirical Finance. Creation-date: 200704 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-10.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-10 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Author-Name: Kankana Mukherjee Author-X-Name-First: Kankana. Author-X-Name-Last: Mukherjee Author-Workplace-Name: Worcester Polytechnic Institute Title: Efficiency in Managing the Environment and the Opportunity Cost of Pollution Abatement Abstract: Using the directional distance function we study a cross section of 110 countries to examine the efficiency of management of the tradeoffs between pollution and income. The DEA model is reformulated to permit 'reverse disposability' of the bad output. Further, we interpret the optimal solution of the multiplier form of the DEA model as an iso-inefficiency line. This permits us to measure the shadow cost of the bad output for a country that is in the interior, rather than on the frontier of the production possibilities set. We also compare the relative environmental performance of countries in terms of emission intensity adjusted for technical efficiency. Only 10% of the countries are found to be on the frontier. Also, there is considerable inter-country variation in the imputed opportunity cost of CO2 reduction. Further, differences in technical efficiency contribute substantially to differences in the observed levels of CO2 intensity. Classification-JEL: Keywords: Data Envelopment Analysis, directional distance function, pollution- income tradeoff, shadow price. Length: 30 pages Number: 2007-09 Note: Creation-date: 200704 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-09.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-09 Template-Type: ReDIF-Paper 1.0 Author-Name: Kwamie Dunbar Author-X-Name-First: Kwamie Author-X-Name-Last: Dunbar Author-Person: pdu135 Author-Workplace-Name: University of Connecticut, Stamford, and Sacred Heart University Title: US Corporate Default Swap Valuation: The Market Liquidity Hypothesis and Autonomous Credit Risk Abstract: This paper develops a reduced form three-factor model which includes a liquidity proxy of market conditions which is then used to provide implicit prices. The model prices are then compared with observed market prices of credit default swaps to determine if swap rates adequately reflect market risks. The findings of the analysis illustrate the importance of liquidity in the valuation process. Moreover, market liquidity, a measure of investors. willingness to commit resources in the credit default swap (CDS) market, was also found to improve the valuation of investors. autonomous credit risk. Thus a failure to include a liquidity proxy could underestimate the implied autonomous credit risk. Autonomous credit risk is defined as the fractional credit risk which does not vary with changes in market risk and liquidity conditions. Classification-JEL: Keywords: Credit Default Swaps; Market Liquidity; Bid-Ask Spreads; Autonomous Credit Risk, Risk Premium Length: 40 pages Number: 2007-08 Note: This is a preprint of an article submitted for consideration in the Journal of Quantitative finance 2007; cc Taylor and Francis; The Journal of Quantitative Finance is available online at http://journalsonline.tandf.co.uk/ Creation-date: 200701 Price: Free Publication-Status: Forthcoming in The Journal of Quantitative Finance File-URL: http://www.econ.uconn.edu/working/2007-08.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-08 Template-Type: ReDIF-Paper 1.0 Author-Name: Richard N. Langlois Author-X-Name-First: Richard N. Author-X-Name-Last: Langlois Author-Person: pla2 Author-Workplace-Name: University of Connecticut Title: Organizing the Electronic Century Abstract: This paper's title is an echo of Alfred Chandler's (2001) chronicle of the electronics industry, Inventing the Electronic Century. The paper attempts (A) a general reinterpretation of the pattern of technological advance in (American) electronics over the twentieth century and (B) a somewhat revisionist account of the role of organization and institution in that advance. The paper stresses the complex effects of product architecture and intellectual property regime on industrial organization and technological change. Whereas large research-oriented multi-divisional firms always played a crucial role in the industry's history, such firms proved most adept at systemic innovation, as in the case of television. But, as in the cases of early radio and of the IBM 360 mainframe computer, the multi-divisional firm was capable of bottling up within its boundaries (often through intellectual property rights) a relatively modular architecture whose "option value" such firms could not fully exploit. America's adherence to the model of industrial research within the vertically integrated corporation arguably contributed to the demise of American consumer electronics in the 1970s and 1980s. And America's subsequent relative success in semiconductors and personal computers --- and in today's converged digital consumer electronics --- owes much to the specialized and "fragmented" character of American industry, which could take fuller advantage of competitive global value chains and of the option value of modular architectures. Classification-JEL: L2, L63, N62, O33, O34 Keywords: electronics, modularity, product architecture, vertical integration. Length: 71 pages Number: 2007-07 Note: Paper for the conference "Has There Been a Third Industrial Revolution in Global Business?" November 16-18, 2006, Bocconi University, Milan. Creation-date: 200703 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-07.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-07 Template-Type: ReDIF-Paper 1.0 Author-Name: Nicholas Apergis Author-X-Name-First: Nicholas Author-X-Name-Last: Apergis Author-Person: pap5 Author-Workplace-Name: University of Macedonia Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: Total Factor Productivity and Monetary Policy: Evidence from Conditional Volatility Abstract: This paper empirically assesses whether monetary policy affects real economic activity through its affect on the aggregate supply side of the macroeconomy. Analysts typically argue that monetary policy either does not affect the real economy, the classical dichotomy, or only affects the real economy in the short run through aggregate demand %G–%@ new Keynesian or new classical theories. Real business cycle theorists try to explain the business cycle with supply-side productivity shocks. We provide some preliminary evidence about how monetary policy affects the aggregate supply side of the macroeconomy through its affect on total factor productivity, an important measure of supply-side performance. The results show that monetary policy exerts a positive and statistically significant effect on the supply-side of the macroeconomy. Moreover, the findings buttress the importance of countercyclical monetary policy as well as support the adoption of an optimal money supply rule. Our results also prove consistent with the effective role of monetary policy in the Great Moderation as well as the more recent rise in productivity growth. Classification-JEL: E32; E51 Keywords: Total Factor Productivity; Monetary Policy; Volatility; GARCH models Length: 31 pages Number: 2007-06 Note: The authors express their gratitude to Parantap Basu, three anonymous referees of this journal and the Editor of International Finance for their valuable comments and suggestions on an earlier draft of this paper. Needless to say, the usual disclaimer applies. Creation-date: 200703 Price: Free Publication-Status: Published in International Finance, Summer 2007 File-URL: http://www.econ.uconn.edu/working/2007-06.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-06 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Author-Name: Thomas M. Springer Author-X-Name-First: Thomas M. Author-X-Name-Last: Springer Author-Workplace-Name: Clemson University Title: Cost Improvements, Returns to Scale, and Cost Inefficiencies for Real Estate Investment Trusts Abstract: This paper extends the existing research on real estate investment trust (REIT) operating efficiencies. We estimate stochastic-frontier, panel-data models specifying a translog cost function. The specified model updates the cost frontier with new information as it becomes available over time. The model can identify frontier cost improvements, returns to scale, and cost inefficiencies over time. The results disagree with most previous research in that we find no evidence of scale economies and some evidence of scale diseconomies. Moreover, we also generally find smaller inefficiencies than those shown by other REIT studies. Contrary to previous research, higher leverage associates with more efficiency. Classification-JEL: G2, L25, L85 Keywords: Real Estate Investment Trusts, X-efficiency, scale economies Length: 36 pages Number: 2007-05 Note: Creation-date: 200702 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-05.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-05 Template-Type: ReDIF-Paper 1.0 Author-Name: WenSho Fang Author-X-Name-First: WenSho Author-X-Name-Last: Fang Author-Workplace-Name: Feng Chia University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: The Great Moderation and the Relationship between Output Growth and Its Volatility Abstract: This study examines the effect of the Great Moderation on the relationship between U.S. output growth and its volatility over the period 1947 to 2006. First, we consider the possible effects of structural change in the volatility process. In so doing, we employ GARCH-M and ARCH-M specifications of the process describing output growth rate and its volatility with and without a one-time structural break in volatility. Second, our data analyses and empirical results suggest no significant relationship between the output growth rate and its volatility, favoring the traditional wisdom of dichotomy in macroeconomics. Moreover, the evidence shows that the time-varying variance falls sharply or even disappears once we incorporate a one-time structural break in the unconditional variance of output starting 1982 or 1984. That is, the integrated GARCH effect proves spurious. Finally, a joint test of a trend change and a one-time shift in the volatility process finds that the one-time shift dominates. Classification-JEL: C32; E32; O40 Keywords: Great Moderation, economic growth and volatility, structural change in variance, IGARCH Length: 35 pages Number: 2007-04 Note: Creation-date: 200703 Price: Free Publication-Status: Published in Southern Economic Journal, January 2008 File-URL: http://www.econ.uconn.edu/working/2007-04.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-04 Template-Type: ReDIF-Paper 1.0 Author-Name: Oskar R. Harmon Author-X-Name-First: Oskar R. Author-X-Name-Last: Harmon Author-Person: pha123 Author-Workplace-Name: University of Connecticut Author-Name: James Lambrinos Author-X-Name-First: James Author-X-Name-Last: Lambrinos Author-Workplace-Name: Union University Title:Student Performance in Traditional vs. Online Format: Evidence from Introductory Economics Classes Abstract: This study uses a different approach to testing for a difference in student performance between traditional and online courses than prior studies that compare learning outcomes in economics courses. The study uses exam questions as the unit of observation and a specification that includes indicator variables for each student. These indicator variables capture the effect of differences in unobserved student characteristics on learning outcomes and thereby eliminate omitted variable bias. The study reports the finding that for an MBA introductory economics course taught in hybrid format the students had a significantly greater chance of answering a question correctly if it came from a chapter covered online (p<.0075), and that for two undergraduate courses in principles of microeconomics, one online and one traditional, there was a marginally significant result in three different models (p< .1023, .0829, .0737). Classification-JEL: A2, A22 Keywords: online, instruction, economics, traditional Length: 26 pages Number: 2007-03 Note: Revision-date: 200812 Creation-date: 200703 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-03r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2007-03.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2007-03 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Miceli Author-X-Name-First: Thomas Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Public Goods, Taxes, and Takings Abstract: Blume, Rubinfeld, and Shapiro (1984) first showed that compensation for takings can lead to a moral hazard problem that results in overinvestment in land suitable for public use. To the contrary, this paper shows that the compensation rule is irrelevant regarding the level of investment landowners make in their property, as well as the amount of land they authorize the government to acquire, both of which will be efficient. Intuitively, landowners recognize the equivalence of taxes and takings in budgetary terms, causing the distortionary effects of compensation and property taxation to cancel each other out through the balanced budget condition. Classification-JEL: H41, K11, R52 Keywords: Compensation for takings, eminent domain, moral hazard, public goods Length: 18 pages Number: 2007-02 Note: Creation-date: 200702 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2007-02.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-02 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin Cosgel Author-X-Name-First: Metin Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Author-Name: Rasha Ahmed Author-X-Name-First: Rasha Author-X-Name-Last: Ahmed Author-Person: pah42 Author-Workplace-Name: University of Connecticut Author-Name: Thomas Miceli Author-X-Name-First: Thomas Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: Law, State Power, and Taxation in Islamic History Abstract:The ruler's power varied greatly in Islamic history over time and space. We explain these variations with a political economy approach to public finance, identifying factors affecting economic power and its constraints. An influential interest group capable of affecting the ruler's power was the legal community ('ulama'). This community could increase the ruler's ability to extract a surplus from the citizenry by conferring legitimacy, thereby lowering the cost of tax-collection. It could also limit power through legal constraints on taxation. We show how changes in legitimacy and legal constraints affected the economic power of rulers in representative episodes of Islamic history and identify general trends and dynamic processes underlying the relationship between the state and the legal community. Classification-JEL: D7, H10, K34, P48 Keywords: state power, legitimacy, taxation, political economy, Islamic Law, legal constraints Length: 43 pages Number: 2007-01 Note:We thank Barclay Rosser, Timur Kuran, and two anonymous referees for detailed comments and suggestions on an earlier version of this paper presented at the Economic Research on Civilizations Conference on "The Economic Performance of Civilizations: Roles of Culture, Religion, and the Law," held at the University of Southern California in February, 2007. We have also received useful comments from other participants at the IERC conference and participants at the 2007 Economic History Association meetings in Austin, TX, and in seminars at UConn, Wesleyan, and Yale. We are grateful to Templeton/Metanexus Institute for financial support received through the IERC. Revision-date: 200807 Creation-date: 200701 Price: Free Publication-Status: Forthcoming in the Journal of Economic Behavior and Organization, 2009 File-URL: http://www.econ.uconn.edu/working/2007-01r.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2007-01 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Title: Capital Flows, Maturity Mismatches and Profitability in Emerging Markets: Evidence from Bank Level Data Abstract: Despite the extensive work on currency mismatches, research on the significance of maturity mismatches in emerging market countries is scarce. In this paper, I show that emerging market banks' maturity mismatches increase during periods of high capital inflows, and that banks with high maturity mismatches are less profitable during crisis periods but more profitable otherwise. Hence, banks face a tradeoff between higher returns and risk. These results follow from a panel regression on a data set I constructed by merging bank level data with aggregate data. A simple Diamond-Dybvig (1983) partial equilibrium framework motivates the empirical analysis. Classification-JEL: E44, F32, F34, F41 Keywords: bank level data, maturity mismatches, liquidity, profitability and debt structure ratios, price volatility, mergentonline. Length: 52 pages Number: 2006-29 Note: Revision-date: 200710 Creation-date: 200608 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-29r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2006-29.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2006-29 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Title: Testing for Balance Sheet Effects in Emerging Market Countries Abstract: This paper tests the presence of balance sheets effects and analyzes the implications for exchange rate policies in emerging markets. The results reveal that the emerging market bond index (EMBI) is negatively related to the banks. foreign currency leverage, and that these banks. foreign currency exposures are relatively unhedged. Panel SVAR methods using EMBI instead of advanced country lending rates find, contrary to the literature, that the amplitude of output responses to foreign interest rate shocks are smaller under relatively fixed regimes. The findings are robust to the local projections method of obtaining impulse responses, using country specific and GARCH-SVAR models. Classification-JEL: E44, F31, F41 Keywords: EMBI, bank balance sheets, leverage, country risk premium, exchange rates. Length: 35 pages Number: 2006-28 Note: Creation-date: 200608 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-28.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-28 Template-Type: ReDIF-Paper 1.0 Author-Name: Uluc Aysun Author-X-Name-First: Uluc Author-X-Name-Last: Aysun Author-Person: pay31 Author-Workplace-Name: University of Connecticut Title: Automatic Stabilizer Feature of Fixed Exchange Rate Regimes in Emerging Markets Abstract: This paper shows that countries characterized by a financial accelerator mechanism may reverse the usual finding of the literature -- flexible exchange rate regimes do a worse job of insulating open economies from external shocks. I obtain this result with a calibrated small open economy model that endogenizes foreign interest rates by linking them to the banking sector's foreign currency leverage. This relationship renders exchange rate policy more important compared to the usual exogeneity assumption. I find empirical support for this prediction using the Local Projections method. Finally, 2nd order approximation to the model finds larger welfare losses under flexible exchange rate regimes. Classification-JEL: E44, F31, F41 Keywords: accelerator, balance sheets, welfare, EMBI Length: 45 pages Number: 2006-27 Note: Revision-date: 200808 Creation-date: 200608 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-27r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2006-27.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2006-27 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Title: On Negligence Rules and Self-Selection Abstract: Economic models of negligence ordinarily involve a single standard of care that all injurers must meet to avoid liability. When injurers differ in their costs of care, however, this leads to distortions in their care choices. This paper derives the characteristics of a generalized negligence rule that induces injurers to self-select their optimal care levels. The principal features of the rule are (1) the due standard of care is maximal, and (2) liability increases gradually as injurers depart further from this standard. The results are broadly consistent with the gradation in liability under certain causation rules and under comparative negligence. Classification-JEL: D82, K13 Keywords: Liability, negligence rules, self-selection Length: 19 pages Number: 2006-26 Note: I acknowledge the helpful comments of Francesco Parisi, Richard Posner, Steven Shavell, and two referees. Creation-date: 200604 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-26.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-26 Template-Type: ReDIF-Paper 1.0 Author-Name: Matthew J. Baker Author-X-Name-First: Matthew J. Author-X-Name-Last: Baker Author-Person: pba114 Author-Workplace-Name: City University of New York, Hunter College Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: C. F. Sirmans Author-X-Name-First: C. F. Author-X-Name-Last: Sirmans Author-Workplace-Name: University of Connecticut Title: An Economic Theory of Mortgage Redemption Laws Abstract: Redemption laws give mortgagors the right to redeem their property following default for a statutorily set period of time. This paper develops a theory that explains these laws as a means of protecting landowners against the loss of nontransferable values associated with their land. A longer redemption period reduces the risk that this value will be lost but also increases the likelihood of default. The optimal redemption period balances these effects. Empirical analysis of cross-state data from the early twentieth century suggests that these factors, in combination with political considerations, explain the existence and length of redemption laws. Classification-JEL: G21, K11 Keywords: Mortgage redemption, default, subjective value Length: 23 pages Number: 2006-25 Note: We acknowledge the very helpful comments of two reviewers. Creation-date: 200609 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-25.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-25 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Workplace-Name: University of Connecticut Title: Criminal Solicitation, Entrapment, and the Enforcement of Law Abstract: This paper examines the optimal use of criminal solicitation as a law enforcement strategy. The benefits are greater deterrence of crime (due to the greater likelihood of apprehension), and the savings in social harm as some offenders are diverted away from committing actual crimes through solicitation. The costs are the expense of hiring undercover cops and the greater likelihood of punishment. The optimal use of solicitation balances these factors. The paper also examines the justification for the entrapment defense, which exonerates those caught in a criminal solicitation but who otherwise had no predisposition to commit a crime. Classification-JEL: K14, K42 Keywords: Entrapment, criminal solicitation, law enforcement Length: 22 pages Number: 2006-24 Note:I acknowledge the helpful comments of Bruce Hay and two referees. Creation-date: 200609 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-24.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-24 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Katherine A. Pancak Author-X-Name-First: Katherine A. Author-X-Name-Last: Pancak Author-Workplace-Name: University of Connecticut Author-Name: C. F. Sirmans Author-X-Name-First:C. F. Author-X-Name-Last: Sirmans Author-Workplace-Name: University of Connecticut Title: Is the Compensation Model for Real Estate Brokers Obsolete? Abstract: This study examines the traditional compensation model for real estate brokers under which both the listing and buyer brokers are paid by the seller based on a percentage of the property sales price. We argue that this model has not evolved to reflect contemporary legal agency relationships and technology-driven information availability. It therefore creates substantial transactional inefficiencies for buyers and sellers at both the matching and bargaining stages of a transaction. While there is evidence that market forces are pushing for a change in the status quo, there is also evidence that the brokerage industry is resisting this change by pursuing anti-competitive policies and laws. We explore the economics of the current and alternative compensation structures and suggest policy implications regarding anti-competitive behavior in the brokerage industry. Classification-JEL: D83, L85, R33 Keywords: agency, brokerage, multiple listings, percentage commission Length: 31 pages Number: 2006-23 Note: We acknowledge the helpful comments of Abdullah Yavas (special issue editor), an anonymous reviewer, and participants at the Annual Meeting of the Real Estate Society, April 2006. Creation-date: 200611 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-23.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-23 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Miceli Author-X-Name-First: Thomas Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Kathleen Segerson Author-X-Name-First: Kathleen Author-X-Name-Last: Segerson Author-Person: pse47 Author-Workplace-Name: University of Connecticut Title: A Bargaining Model of Holdouts and Takings Abstract: The holdout problem is commonly cited as the justification for eminent domain, but the nature of the problem is not well understood. This paper models the holdout problem in a bargaining framework, where a developer seeks to acquire several parcels of land for a large-scale development. We show that in the absence of eminent domain, holdouts are inevitable, threatening costly delay. However, if the developer has the power to use eminent domain to acquire the land from holdouts, all sellers will bargain, thus avoiding delay. An offsetting cost is that owners may negotiate prices below their true value, possibly resulting in excessive transfer of land to the developer. Classification-JEL: C78, K11, R14, R52 Keywords: Eminent domain, holdout problem, bargaining Length: 28 pages Number: 2006-22 Note:We acknowledge the comments of participants at the Takings Conference at the University of California, Santa Barbara, May 12-13, 2006. Revision-date: 200703 Creation-date: 200606 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-22r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2006-22.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2006-22 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Author-Name: Yves Zenou Author-X-Name-First: Yves Author-X-Name-Last: Zenou Author-Person: pze5 Author-Workplace-Name: Research Institute of Industrial Economics, Stockholm Title: Are Shirking and Leisure Substitutable? An Empirical Test of Efficiency Wages Based on Urban Economic Theory Abstract: Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioral substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade-off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labor market outcomes, which is tested using the Public Use Microdata sample of the 2000 U.S. Decennial Census. The empirical results suggest that efficiency wages operate primarily for blue collar workers, i.e. workers who tend to be in occupations that face higher levels of supervision. For this subset of workers, longer commutes imply higher levels of unemployment and higher wages, which are both consistent with shirking and leisure being substitutable. Classification-JEL: J41, R14 Keywords: Efficiency wage, leisure, urban unemployment Length: 47 pages Number: 2006-21 Note: We would like to thank the editor, Richard Arnott, and two anonymous referees for very helpful comments. We are also grateful to Jeffrey Zax and Deborah Garvey as well as the participants of the 2004 SOLE conference for excellent comments. Yves Zenou thanks the Marianne and marcus Wallenberg Foundation for financial support. Creation-date: 200611 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-21.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-21 Template-Type: ReDIF-Paper 1.0 Author-Name: Tsvetanka Karagoyozova Author-X-Name-First: Tsvetanka Author-X-Name-Last: Karagoyozova Author-Person: pka289 Author-Workplace-Name: University of Connecticut Author-Name: Peter Siegelman Author-X-Name-First: Peter Author-X-Name-Last: Siegelman Author-Person: psi126 Author-Workplace-Name: University of Connecticut Title: Is There Propitious Selection in Insurance Markets? Abstract: The theory of adverse selection in insurance markets has been enormously influential among scholars, regulators, and the judiciary. But empirical support for adverse selection has been much less persuasive, and several recent studies have found little or no evidence of such selection in insurance markets. "Propitious" (advantageous) selection offers an alternative mechanism that is consistent with these empirical findings. Like adverse selection, the theory assumes that insureds have an informational advantage over insurers. However, propitious selection relies on the plausible assumption that risk aversion is negatively correlated with the riskiness or probability of loss across insureds - the more risk-averse are also the more careful, and hence are least likely to experience a loss. Theorists have recognized the possibility of equilibria in which highly risk averse insureds with a low probability of loss are willing to remain in the market, despite an actuarially unfair premium. But these conclusions derive from models with only two types of insureds. We use a simulation model that allows for flexible correlation between risk aversion and riskiness across a continuum of types, with plausible distributions of risk aversion and riskiness. We find that propitious selection alone can not preserve equilibrium in insurance markets. When insureds have moderate uncertainty about their own riskiness, however, equilibrium does become possible, albeit with considerable selection. Classification-JEL: Keywords: Length: 40 pages Number: 2006-20 Note:We thank seminar participants at the University of Connecticut,Wesleyan University and UC Berkeley Law School for useful comments. We would also like to thank Tom Baker, Set Chandler, Dhammika Dharmapala, Kathleen Segerson, Dan Silverman, Christian Zimmermann and especially Jill Horwitz for comments and encouragement. Any remaining conceptual or other errors are our fault. Part of this work was completed while Siegelman was visiting at the University of Michigan Law School (Spring 2006). Creation-date: 200611 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-20.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-20 Template-Type: ReDIF-Paper 1.0 Author-Name: Marius Jurgilas Author-X-Name-First: Marius Author-X-Name-Last: Jurgilas Author-Person: pju52 Author-Workplace-Name: University of Connecticut Title: Interbank Markets under Currency Boards Abstract: This paper analyzes interbank markets under currency boards. Under such an environment, problematic endogeneity issues common to other monetary regimes do not arise. Using daily data from the interbank markets in Bulgaria and Lithuania we show, that contrary to the existing literature, overnight interest rates tend to decrease towards the end of the reserve holding period. Empirical results are supported by a finite horizon heterogeneous agents model showing that interest rates tend to decrease in the case of excess aggregate reserves in the banking system. Results contrast with Quir'os and Mendiz'abal (2006) who find that interest rates should be increasing regardless of the outstanding aggregate liquidity in the market. We also show that responsiveness of banks to interest rate changes diminishes as the end of reserve holding period approaches. Under certain circumstances this could lead to multiple equilibria with increasing or decreasing interest rates. Classification-JEL: E52, E58 Keywords: Interbank market, Currency board Length: 30 pages Number: 2006-19 Note: Creation-date: 200610 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-19.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-19 Template-Type: ReDIF-Paper 1.0 Author-Name: Rasha Ahmed Author-X-Name-First: Rasha Author-X-Name-Last: Ahmed Author-Person: pah42 Author-Workplace-Name: University of Connecticut Author-Name: Kathleen Segerson Author-X-Name-First: Kathleen Author-X-Name-Last: Segerson Author-Person: pse47 Author-Workplace-Name: University of Connecticut Title: Collective Voluntary Agreements and the Production of Less Polluting Products Abstract: Recently, some industries have collectively agreed not to produce models that do not meet an energy efficiency (and hence an environmental) standard. This paper presents a simple model that can be used to examine a voluntary collective agreement to limit or completely eliminate the low efficiency model of a given product (e.g., a low efficiency washing machine). We show that, when there is competition between firms, a collective agreement to limit or even eliminate production of the polluting model can actually increase profits for all firms in the industry. This suggests that a collective agreement of this type might actually be beneficial to firms, while at the same time improving environmental quality. However, the implicit enforcement that comes from the public nature of the commitment is necessary to ensure this outcome. This suggests that, by promoting such agreements, policymakers may be able to achieve substantial environmental gains with relatively little inducement. The impact on social welfare will then depend on whether these gains are sufficiently large to offset consumer losses from reductions in product variety and the associated price increases. Classification-JEL: Q48, Q58 Keywords: Voluntary agreements, collective agreements, energy/fuel efficiency Length: 41 pages Number: 2006-18 Note: We acknowledge the very useful comments of Madhu Khanna, Tom Lyons, seminar participants at Yale University, the University of Central Florida and the University of Rhode Island, and participants at the ASSA meetings in Philadelphia. Any remaining errors are our own. Revision-date: 200705 Creation-date: 200607 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-18r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2006-18.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2006-18 Template-Type: ReDIF-Paper 1.0 Author-Name: Philip Shaw Author-X-Name-First: Philip Author-X-Name-Last: Shaw Author-Person: psh125 Author-Workplace-Name: University of Connecticut Author-Name: Marina-Selini Katsaiti Author-X-Name-First: Marina-Selini Author-X-Name-Last: Katsaiti Author-Person: pka267 Author-Workplace-Name: University of Connecticut Author-Name: Marius Jurgilas Author-X-Name-First: Marius Author-X-Name-Last: Jurgilas Author-Person: pju52 Author-Workplace-Name: University of Connecticut Title: Corruption and Growth Under Weak Identification Abstract: The goal of this paper is to revisit the influential work of Mauro [1995] focusing on the strength of his results under weak identification. He finds a negative impact of corruption on investment and economic growth that appears to be robust to endogeneity when using two-stage least squares (2SLS). Since the inception of Mauro [1995], much literature has focused on 2SLS methods revealing the dangers of estimation and thus "traditional" types of inference under weak identification. We reproduce the original results of Mauro [1995] with a high level of confidence and show that the instrument used in the original work is in fact "weak" as defined by Staiger and Stock [1997]. Thus we update the analysis using a test statistic robust to weak instruments. Our results suggest that under Mauro's original model there is a high probability that the parameters of interest are locally almost unidentified in multivariate specifications. To address this problem, we also investigate other instruments commonly used in the corruption literature and obtain similar results. After identifying an instrument with sufficient strength we fail to reject a zero effect of corruption on investment and economic growth. Classification-JEL: C31, D73 Keywords: Corruption, Growth, Weak Identification, LAU Length: 26 pages Number: 2006-17 Note: The authors would like to thank Paulo Mauro, Gautam Tripathi, Nicholas Shunda, Christian Zimmermann, and Francis Ahking for comments and suggestions. We would also like to thank the contributing participants of the Sixth Annual Missouri Economics Conference for their valuable feedback. Revision-date: 200703 Creation-date: 200609 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-17r.pdf File-Format: Application/PDF File-Function: revised version File-URL: http://www.econ.uconn.edu/working/2006-17.pdf File-Format: Application/PDF File-Function: original version Handle: RePEc:uct:uconnp:2006-17 Template-Type: ReDIF-Paper 1.0 Author-Name: Anupam Nanda Author-X-Name-First: Anupam Author-X-Name-Last: Nanda Author-Person: pna105 Author-Workplace-Name: National Association of Home Builders and University of Connecticut Title: Property Condition Disclosure Law: Why Did States Mandate 'Seller Tell All'? Abstract: Thirty-six US states have already enacted some form of seller's property condition disclosure law. At a time when there is a movement in this direction nationally, this paper attempts to ascertain the factors that lead states to adopt disclosure law. Motivation for the study stems from the fact that not all states have yet adopted the law, and states that have enacted the law have done so in different years. The analytical structure employs hazard models, using a unique set of economic and institutional attributes for a panel of 50 US States spanning 21 years, from 1984 to 2004. The proportional hazard analysis of law adoption reveals that greater number of disciplinary actions tends to favor passage of the law. Greater broker supervision, implying generally higher awareness among real estate agents, seems to have a negative impact on the likelihood of a state adopting a property condition disclosure law. Classification-JEL: C41, D82, K11, L51, L85, R52. Keywords: Property Condition Disclosure, Law Adoption, Hazard Analysis, Housing Price Index Length: 23 pages Number: 2006-16 Note: This paper is adapted from the first chapter of my doctoral dissertation at the University of Connecticut, Storrs, CT. I would like to thank my advisors, Stephen L. Ross, John M. Clapp, and Dennis R. Heffley for their insightful comments on the idea and methodology. I would also like to thank Tim Storey (National Conference of State Legislatures), Daniel Conti (Bureau of Labor Statistics) for assistance with data. All remaining errors are mine. Creation-date: 200606 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-16.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-16 Template-Type: ReDIF-Paper 1.0 Author-Name: Habib Ahmed Author-X-Name-First: Habib Author-X-Name-Last: Ahmed Author-Workplace-Name: Islamic Development Bank Author-Name: C. Paul Hallwood Author-X-Name-First: C. Paul Author-X-Name-Last: Hallwood Author-Person: pha112 Author-Workplace-Name: University of Connecticut Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: The Exchange Rate-Investment Nexus and Exchange Rate Instability: Another Reason for 'Fear of Floating' Abstract: We show that expansionary monetary policy causes exchange rate overshooting due to the secondary repercussion comes through the reaction of firms to changed asset prices and the firms' decisions to invest in real capital. This overshooting effect adds to any overshooting that occurs through the traditional Dornbusch (1976) channel, since our model with its market clearing in the short run excludes any Dornbusch overshooting. The model sheds further light on the volatility of real and nominal exchange rates. It suggests that changes in corporate sector profitability may affect exchange rates through international portfolio diversification in corporate securities, and it offers an additional reason for 'fear of floating'. Classification-JEL: F31, F32 Keywords: exchange rates, open economy macroeconomics, monetary policy, exchange rate overshooting Length: Number: 2006-15 Note: This paper previously circulated under the title "Monetary Policy, Exchange Rate Overshooting, and Endogenous Physical Capital". Revision-date: 200901 Creation-date: 200606 Price: Free Publication-Status: Published in Keio Economic Studies, 2008. File-URL: http://www.econ.uconn.edu/working/2006-15.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-15 Template-Type: ReDIF-Paper 1.0 Author-Name: Georgios E. Chortareas Author-X-Name-First: Georgios E. Author-X-Name-Last: Chortareas Author-Person: pch133 Author-Workplace-Name: University of Essex Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: The Walsh Contracts for Central Bankers Are Optimal After All! Abstract: Candel-Sanchez and Campoy-Minarro (2004) argue that the Walsh linear inflation contract does not prove optimal when the government concerns itself about the cost of the central bank contract. This result relies on the authors. assumption that the participation constraint does not represent an effective constraint on the central banker's decision. Instead, the government can "impose" or "force" the contract on the central banker, even though the contract violates the participation constraint. We argue that such a contract does not make sense. The government can impose it, but it does not affect the central banker's incentives. The policy outcomes do not match those of commitment. Then we show that the Walsh linear inflation contract does produce the optimal outcome, even when the government cares about the cost of the contract. Classification-JEL: E42, E52, E58 Keywords: central banks, contracts, Walsh Length: 16 pages Number: 2006-14 Note: Creation-date: 200604 Price: Free Publication-Status: Published in Public Choice, April 2007 File-URL: http://www.econ.uconn.edu/working/2006-14.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-14 Template-Type: ReDIF-Paper 1.0 Author-Name: Patrick Bayer Author-X-Name-First: Patrick Author-X-Name-Last: Bayer Author-Workplace-Name: Duke University Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application Abstract: Researchers have long recognized that the non-random sorting of individuals into groups generates correlation between individual and group attributes that is likely to bias naive estimates of both individual and group effects. This paper proposes a non-parametric strategy for identifying these effects in a model that allows for both individual and group unobservables, applying this strategy to the estimation of neighborhood effects on labor market outcomes. The first part of this strategy is guided by a robust feature of the equilibrium in the canonical vertical sorting model of Epple and Platt (1998), that there is a monotonic relationship between neighborhood housing prices and neighborhood quality. This implies that under certain conditions a non-parametric function of neighborhood housing prices serves as a suitable control function for the neighborhood unobservable in the labor market outcome regression. The second part of the proposed strategy uses aggregation to develop suitable instruments for both exogenous and endogenous group attributes. Instrumenting for each individual's observed neighborhood attributes with the average neighborhood attributes of a set of observationally identical individuals eliminates the portion of the variation in neighborhood attributes due to sorting on unobserved individual attributes. The neighborhood effects application is based on confidential microdata from the 1990 Decennial Census for the Boston MSA. The results imply that the direct effects of geographic proximity to jobs, neighborhood poverty rates, and average neighborhood education are substantially larger than the conditional correlations identified using OLS, although the net effect of neighborhood quality on labor market outcomes remains small. These findings are robust across a wide variety of specifications and robustness checks. Classification-JEL: J6, R2, C3 Keywords: Length: 53 pages Number: 2006-13 Note: The authors are grateful to the Department of Housing and Urban Development, Federal Reserve Bank of New York, and the Center for Real Estate and Urban Economic Studies at the University of Connecticut for financial support. We are especially thankful to Steven Durlauf for extensive comments on an earlier draft and to William Brock, Fernando Ferreira, Albert Saiz, Holger Sieg, Todd Sinai and seminar participants at UC Berkeley, NYU, Penn-Wharton, and Wisconsin for many helpful comments and suggestions. The research in this paper was conducted while the authors were Special Sworn Status researchers of the U.S. Census Bureau at the Boston Research Data Center (BRDC). The research results and conclusions expressed are those of the authors and do not necessarily reflect the views of the U.S. Census Bureau, the Department of Housing and Urban Development or any other agency of the U.S. Government. This paper was screened to insure that no confidential data are revealed. Revision-date: 200901 Creation-date: 200604 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-13r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2006-13.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2006-13 Template-Type: ReDIF-Paper 1.0 Author-Name: Xenia Matschke Author-X-Name-First: Xenia Author-X-Name-Last: Matschke Author-Person: pma237 Author-Workplace-Name: University of Connecticut Title: Do Labor Market Imperfections Increase Trade Protection? A Theoretical Investigation Abstract: Labor market imperfections are commonly believed to be a major reason for imposing trade impediments. In this paper, I introduce labor market rigidities that are prevalent in continental European countries into the well-known protection for sale model proposed by Grossman and Helpman (1994). I show that contrary to commonly held views, imperfections in the labor market do not necessarily increase equilibrium trade protection. A testable equilibrium trade protection equation is also derived. The findings in this paper are hence particularly relevant for empirical tests of trade policy determinants in economies with more regulated labor markets. Classification-JEL: F13, F16 Keywords: Tariffs, trade protection, protection for sale, labor market. Length: 22 pages Number: 2006-12 Note: I thank Scott Taylor for extensive discussions regarding this paper. His valuable comments and advice led to substantial improvements. Bob Baldwin, Bob Staiger, Achim Wambach and seminar participants at various universities provided helpful suggestions as well. Financial support from a Deutsche Forschungsgemeinschaft research fellowship is gratefully acknowledged. Revision-date: 200704 Creation-date: 200604 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-12r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2006-12.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2006-12 Template-Type: ReDIF-Paper 1.0 Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Title: The Demand for Power Diffusion: A Case Study of the 2005 Constitutional Referendum Voting in Kenya Abstract: Recent studies on the history of economic development demonstrate that concentration of power on a monarch or a ruling coalition impedes economic growth and that institutional changes that diffuse power, though beneficial to the society in general, are opposed by some social groups. In November 2005, Kenyans rejected a proposed constitution primarily because it did not reduce the powers of the executive to any significant degree. Using data of voting patterns in the constitutional referendum and following the rational choice framework, I estimate a model of the demand for power diffusion and demonstrate that groups voting decisions depend on expected gains and likelihood of monopolizing power. The results also reveal the importance of ethnic divisions in hindering the power diffusion process, and therefore the study establishes a channel through which ethnic fragmentation impacts on economic development. Classification-JEL: D72 Keywords: Length: 22 pages Number: 2006-11 Note: Creation-date: 200604 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-11.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-11 Template-Type: ReDIF-Paper 1.0 Author-Name: Eric J. Brunner Author-X-Name-First: Eric J. Author-X-Name-Last: Brunner Author-Person: pbr139 Author-Workplace-Name: Quinnipiac University and University of Connecticut Author-Name:Jennifer Imazeki Author-X-Name-First: Jennifer Author-X-Name-Last: Imazeki Author-Person: pim13 Title: Tiebout Choice and the Voucher Abstract: This paper examines who is likely to gain and who is likely to lose under a universal voucher program. Following Epple and Romano (1998, 2003), and Nechyba (2000, 2003a), we focus on the idea that gains and losses under a universal voucher depend on two effects: changes in peer group composition and changes in housing values. We show that the direction and magnitude of each of these effects hinges critically on market structure, i.e., the amount of school choice that already exists in the public sector. In markets with little or no Tiebout choice, potential changes in peer group composition create an incentive for high-socioeconomic (SES) households to vote for the voucher and for low-SES households to vote against voucher. In contrast, in markets with significant Tiebout choice, potential changes in housing values create an incentive for high-SES households to vote against the voucher and for low-SES households to vote for the voucher. Using data on vote outcomes from California's 2000 voucher initiative, we find evidence consistent with those predictions. Classification-JEL: H7, I2, L1 Keywords: School Vouchers, Tiebout Choice, Voting Length: 32 pages Number: 2006-10 Note: : For helpful comments on a previous draft of this paper, we are indebted to Lawrence Kenny, Brian Knight, Jon Sonstelie, Steve Ross, Kim Rueben, Miguel Urquiola, and seminar and meeting participants at Columbia University, New York University, the University of Connecticut, the University of Kentucky, the Public Policy Institute of California, the American Education Finance Association, and the Southern Economic Association. Creation-date: 200604 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-10.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-10 Template-Type: ReDIF-Paper 1.0 Author-Name: Eric J. Brunner Author-X-Name-First: Eric J. Author-X-Name-Last: Brunner Author-Person: pbr139 Author-Workplace-Name: Quinnipiac University and University of Connecticut Author-Name: Jon Sonstelie Author-X-Name-First: Jon Author-X-Name-Last: Sonstelie Author-Workplace-Name: University of California, Santa Barbara Title: California's School Finance Reform: An Experiment in Fiscal Federalism Abstract: The 1971 ruling of the California Supreme Court in the case of Serrano v. Priest initiated a chain of events that abruptly ended local financing of public schools in California. In seven short years, California transformed its school finance system from a decentralized one in which local communities chose how much to spend on their schools to a centralized one in which the state legislature determines the expenditures of every school district. This paper begins by describing California's school finance system before Serrano and the transformation from local to state finance. It then delineates some consequences of that transformation and draws lessons from California's experience with school finance reform. Classification-JEL: H1, H2, I2 Keywords: School Finance Reform, Centralization, Fiscal Federalism Length: 42 pages Number: 2006-09 Note: Creation-date: 200604 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-09.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-09 Template-Type: ReDIF-Paper 1.0 Author-Name: Oskar R. Harmon Author-X-Name-First: Oskar R. Author-X-Name-Last: Harmon Author-Person: pha123 Author-Workplace-Name: University of Connecticut Author-Name: James Lambrinos Author-X-Name-First: James Author-X-Name-Last: Lambrinos Author-Workplace-Name: Union University Title: Are Online Exams an Invitation to Cheat? Abstract: This study uses data from two online courses in principles of economics to estimate a model that predicts exam scores from independent variables of student characteristics. In one course the final exam was proctored, in the other course the final exam was not proctored, and in both courses the first three exams were unproctored. If no cheating took place we expect the prediction model to have the same explanatory power for all exams, and conversely, if cheating occurred in the unproctored exam the explanatory power would be lower. Our findings are that both across and within class variations in the R-squared statistic suggest that cheating was taking place when the exams were not proctored. Classification-JEL: A2, A22 Keywords: online, cheating, assessment, undergraduate economics, face-to-face Length: 18 pages Number: 2006-08 Note: Forthcoming in Journal of Economic Education Revision-date: 200702 Creation-date: 200603 Price: Free Publication-Status: Forthcoming in Journal of Economic Education File-URL: http://www.econ.uconn.edu/working/2006-08r.pdf File-Format: Application/PDF File-Function: Full text, revised version File-URL: http://www.econ.uconn.edu/working/2006-08.pdf File-Format: Application/PDF File-Function: Full text, first version Handle: RePEc:uct:uconnp:2006-08 Template-Type: ReDIF-Paper 1.0 Author-Name: Oskar R. Harmon Author-X-Name-First: Oskar R. Author-X-Name-Last: Harmon Author-Person: pha123 Author-Workplace-Name: University of Connecticut Author-Name: James Lambrinos Author-X-Name-First: James Author-X-Name-Last: Lambrinos Author-Workplace-Name: Union University Title: Online Format vs. Live Mode of Instruction: Do Human Capital Differences or Differences in Returns to Human Capital Explain the Differences in Outcomes? Abstract: Our paper asks the question: Does mode of instruction format (live or online format) effect test scores in the principles of macroeconomics classes? Our data are from several sections of principles of macroeconomics, some in live format, some in online format, and all taught by the same instructor. We find that test scores for the online format, when corrected for sample selection bias, are four points higher than for the live format, and the difference is statistically significant. One possible explanation for this is that there was slightly higher human capital in the classes that had the online format. A Oaxaca decomposition of this difference in grades was conducted to see how much was due to human capital and how much was due to the differences in the rates of return to human capital. This analysis reveals that 25% of the difference was due to the higher human capital with the remaining 75% due to differences in the returns to human capital. It is possible that for the relatively older student with the appropriate online learning skill set, and with schedule constrains created by family and job, the online format provides them with a more productive learning environment than does the alternative traditional live class format. Also, because our data are limited to the student s academic transcript, we recommend future research include data on learning style characteristics, and the constraints formed by family and job choices. Classification-JEL: A2 Keywords: economic education, distance education, online instruction, pedagogy Length: 14 pages Number: 2006-07 Note: Creation-date: 200603 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-07.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-07 Template-Type: ReDIF-Paper 1.0 Author-Name: Huiping Yuan Author-X-Name-First: Huiping Author-X-Name-Last: Yuan Author-Workplace-Name: Xiamen University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: The Making of Optimal and Consistent Policy: An Implementation Theory Framework for Monetary Policy Abstract: This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a simple model, finding that the cause of the inconsistency with optimal policy traces to inconsistent targets in the social loss function. As a result, the social loss function cannot serve as a direct loss function for the central bank. Accordingly, we employ implementation theory to design a central bank loss function (mechanism design) with consistent targets, while the social loss function serves as a social welfare criterion. That is, with the correct mechanism design for the central bank loss function, optimal policy and consistent policy become identical. In other words, optimal policy proves implementable (consistent). Classification-JEL: E42, E52, E58 Keywords: Length: 30 pages Number: 2006-06 Note: We presented an earlier version at Federal Reserve Bank of Boston. Revision-date: 200901 Creation-date: 200602 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-06r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2006-06.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2006-06 Template-Type: ReDIF-Paper 1.0 Author-Name: Huiping Yuan Author-X-Name-First: Huiping Author-X-Name-Last: Yuan Author-Workplace-Name: Xiamen University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Author-Name: Langnan Chen Author-X-Name-First: Langnan Author-X-Name-Last: Chen Author-Workplace-Name: Sun Yat-sen University Title: The Making of Optimal and Consistent Policy: An Analytical Framework for Monetary Models Abstract: This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a simple model, finding that the cause of the inconsistency with optimal policy traces to inconsistent targets in the social loss function. Control theory can identify the optimal plan and, thus, the optimal economic outcomes. Then, we can seek a consistent plan that coincides with the optimal plan through institutional design. That is, the optimal plan can indicate how to design the optimal institution, through which we implement the optimal plan with a consistent plan. Classification-JEL: E42, E52, E58 Keywords: Length: 35 pages Number: 2006-05 Note: We presented an earlier version at Federal Reserve Bank of San Francisco. We thank Richard Dennis, Mark Spiegel, and Tao Wu for helpful comments and assistance. Revision-date: 200901 Creation-date: 200602 Price: Free Publication-Status: Published in Scottish Journal of Political Economy, February 2011, with the title "The Optimality and Controllability of Monetary Policy through Delegation with Consistent Targets." File-URL: http://www.econ.uconn.edu/working/2006-05r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2006-05.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2006-05 Template-Type: ReDIF-Paper 1.0 Author-Name: Rimvydas Baltaduonis Author-X-Name-First: Rimvydas Author-X-Name-Last: Baltaduonis Author-Person: pba329 Author-Workplace-Name: University of Connecticut Title: Efficiency in Deregulated Electricity Markets: Offer Cost Minimization vs. Payment Cost Minimization Auction Abstract: This study of the wholesale electricity market compares the efficiency performance of the auction mechanism currently in place in U.S. markets with the performance of a proposed mechanism. The analysis highlights the importance of considering strategic behavior when comparing different institutional systems. We find that in concentrated markets, neither auction mechanism can guarantee an efficient allocation. The advantage of the current mechanism increases with increased price competition if market demand is perfectly inelastic. However, if market demand has some responsiveness to price, the superiority of the current auction with respect to efficiency is not that obvious. We present a case where the proposed auction outperforms the current mechanism on efficiency even if all offers reflect true production costs. We also find that a market designer might face a choice problem with a tradeoff between lower electricity cost and production efficiency. Some implications for social welfare are discussed as well. Classification-JEL: C72, D44, D61, L94 Keywords: strategic behavior, multi-unit auction, efficiency, electricity Length: 17 pages Number: 2006-04 Note: The author would like to thank the National Science Foundation for financial support under grant ECS-0323685. The author is grateful to the Engineering and Economics faculty and students at the University of Connecticut working on the electricity project, especially to the PI on the grant Peter Luh and Senior Economist Vicki Knoblauch. Creation-date: 200603 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-04.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-04 Template-Type: ReDIF-Paper 1.0 Author-Name: Delia Furtado Author-X-Name-First: Delia Author-X-Name-Last: Furtado Author-Person: pfu51 Author-Workplace-Name: University of Connecticut Title: Human Capital and Interethnic Marriage Decisions Abstract: Despite a longstanding belief that education importantly affects the process of immigrant assimilation, little is known about the relative importance of different mechanisms linking these two processes. This paper explores this issue through an examination of the effects of human capital on one dimension of assimilation, immigrant intermarriage. I argue that there are three primary mechanisms through which human capital affects the probability of intermarriage. First, human capital may make immigrants better able to adapt to the native culture thereby making it easier to share a household with a native. Second, it may raise the likelihood that immigrants leave ethnic enclaves, thereby decreasing the opportunity to meet potential spouses of the same ethnicity. Finally, assortative matching on education in the marriage market suggests that immigrants may be willing to trade similarities in ethnicity for similarities in education when evaluating potential spouses. Using a simple spouse-search model, I first derive an identification strategy for differentiating the cultural adaptability effect from the assortative matching effect, and then I obtain empirical estimates of their relative importance while controlling for the enclave effect. Using U.S. Census data, I find that assortative matching on education is the most important avenue through which human capital affects the probability of intermarriage. Further support for the model is provided by deriving and testing some of its additional implications. Classification-JEL: J12, I21, J15 Keywords: Interethnic Marriage, Human Capital, Second-Generation Immigrants, Assimilation Length: 58 pages Number: 2006-03 Note: I would especially like to thank Andrew Foster for his guidance and insightful comments. I am also grateful to Rachel Friedberg, Kaivan Munshi, and all of the seminar participants at Brown University, University of Connecticut, and the Institute for the Study of Labor (IZA) in Bonn, Germany. All remaining errors are my own. Creation-date: 200602 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-03.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-03 Template-Type: ReDIF-Paper 1.0 Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Title: Economic Reforms and Pro-Poor Growth: Lessons for Africa and other Developing Regions and Economies in Transition Abstract: The paper discusses the meaning and measurement of pro-poor growth and also reviews evidence of pro-poor growth (or the lack of it) in a large cross-section of countries and time periods. The emerging story is that many episodes of growth are not pro-poor and also that although economic reforms have had positive effects in those countries that have been steadfast in implementing market reforms, the overall impact on growth has been small for many countries and in most cases not pro-poor. I present a general theory of pro-poor growth that includes ten principles that should be incorporated in all economic reforms that seek to generate pro-poor growth. These principles highlight the importance of understanding the poor, their economic activities, capabilities, constraints that impede their participation in markets and also an appreciation of linkages within sectors and regions. It is argued that pro-poor reforms cannot have the intended impact unless there are significant changes in the institutions of governance. Finally, the principles presented underscore the fact that pro-poor growth policies cannot be sustained without workable partnerships between markets and states in the ever changing and complex processes of social and economic development. Classification-JEL: O10, O21, I30 Keywords: Economic Reform, Pro-Poor Growth, Developing Countries, Economies in Transition, Africa, Poverty Reduction. Length: 50 pages Number: 2006-02 Note: Paper prepared for presentation at the Senior Polic Seminar VIII organized b African Economic Research Consortium, March 7-9, 2006, Dakar, Senegal. I am grateful to Prof. Germano Mwabu for helpful comments. Creation-date: 200602 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-02.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2006-02 Template-Type: ReDIF-Paper 1.0 Author-Name: Eric Brunner Author-X-Name-First: Eric Author-X-Name-Last: Brunner Author-Person: pbr139 Author-Workplace-Name: Quinnipiac University Author-Name: Jennifer Imazeki Author-X-Name-First: Jennifer Author-X-Name-Last: Imazeki Author-Workplace-Name: San Diego State University Author-Name: Stephen L. Ross Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Person: pro69 Author-Workplace-Name: University of Connecticut Title: Universal Vouchers and Racial Segregation Abstract: Opponents of school vouchers often argue that school vouchers will lead to .white flight. from public schools that are disproportionately non-white, creating more racially segregated schools. In this paper, we present new evidence on whether universal vouchers will lead to a systematic departure of whites from predominantly minority schools increasing racial segregation in those schools. Specifically, we use data on vote outcomes from a state-wide universal voucher initiative to estimate the likelihood that white households with children currently in public schools will use vouchers to switch out of more-integrated schools. Our results indicate that white households with children attending schools with large concentrations of non-white schoolchildren are significantly more likely to support school vouchers, an effect that is absent for non-white households with children and households without children. Finally, follow-up analyses suggest that this result is driven less by race, per se, but more by other student characteristics that are correlated with race. Classification-JEL: H3, I2, R2 Keywords: Length: 45 pages Number: 2006-01 Note: Revision-date: 200808 Creation-date: 200601 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2006-01r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2006-01.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2006-01 Template-Type: ReDIF-Paper 1.0 Author-Name: Nicholas Apergis Author-X-Name-First: Nicholas Author-X-Name-Last: Apergis Author-Person: pap5 Author-Workplace-Name: University of Macedonia Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Title: Resurrecting the Wealth Effect on Consumption: Further Analysis and Extension Abstract: This paper investigates whether various components of wealth affect real consumption asymmetrically through a threshold adjustment model. The empirical findings for the U.S. show that only stock market assets, financial assets including stock market assets, and household net assets exert a practical wealth effect on consumption expenditure. By contrast, financial assets excluding stock market assets, tangible assets, total assets, and the Lettau-Ludvigson measure of net assets do not exert a practical wealth effect on consumption expenditure. In addition, the empirical findings favor the presence of an asymmetric effect on real consumption for the former cases, with negative 'news' affecting consumption less than positive 'news'. Classification-JEL: E21; E44 Keywords: Consumption; Stock market; Wealth effect; Asymmetry Length: 32 pages Number: 2005-57 Note: Creation-date: 200511 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-57.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-57 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas J. Miceli Author-X-Name-First: Thomas J. Author-X-Name-Last: Miceli Author-Person: pmi45 Author-Workplace-Name: University of Connecticut Author-Name: Richard P. Adelstein Author-X-Name-First: Richard P. Author-X-Name-Last: Adelstein Author-Workplace-Name: Wesleyan University Title: An Economic Model of Fair Use Abstract: The doctrine of fair use allows limited copying of creative works based on the rationale that copyright holders would consent to such uses if bargaining were possible. This paper develops a formal model of fair use in an effort to derive the efficient legal standard for applying the doctrine. The model interprets copies and originals as differentiated products and defines fair use as a threshold separating permissible copying from infringement. The analysis highlights the role of technology in shaping the efficient standard. Discussion of several key cases illustrates the applicability of the model. Classification-JEL: K11, O34 Keywords: Fair use, copyright law, technological improvement Length: 30 pages Number: 2005-56 Note:We wish to acknowledge the helpful comments of two referees. Creation-date: 200511 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-56.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-56 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Person: pmi16 Author-Workplace-Name: University of Connecticut and University of Nevada, Las Vegas Author-Name: Huiping Yuan Author-X-Name-First: Huiping Author-X-Name-Last: Yuan Author-Workplace-Name: Xiamen University Title: Consistent Targets and Optimal Monetary Policy: Conservative Central Banker Redux Abstract: Kydland and Prescott (1977) consider the issue of the time-inconsistency of optimal policy and its source. Our paper provides additional insight on this issue. They develop a simple model of monetary policy making, where the central bank needs some commitment technique to achieve optimal monetary policy over time. Although not their main focus, they illustrate the difference between consistent and optimal policy in a sequential-decision one-period world. In our solution, the government appoints a central bank or delegates to the central bank an objective function that differs from the social welfare function. The central bank's welfare function causes the consistent policy implemented by the central bank to prove optimal for society. The optimal institutional design for the Kydland-Prescott sequential-decision one-period model requires the appointment or delegation to a completely conservative central banker. Classification-JEL: E42, E52, E58 Keywords: Length: 9 pages Number: 2005-55 Note: This paper previously circulated under the title "Consistent Targets and Optimal Monetary Policy: A Note". We presented an earlier version at Federal Reserve Bank of Boston. Revision-date: 200901 Creation-date: 200512 File-URL: http://www.econ.uconn.edu/working/2005-55r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2005-55.pdf File-Format: Application/PDF File-Function: Full text (original version) Price: Free Publication-Status: Published in International Journal of Business and Economics, April 2010, with the title "Designing Central Bank Loss Functions." Handle: RePEc:uct:uconnp:2005-55 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Author-Name: Kankana Mukherjee Author-X-Name-First: Kankana. Author-X-Name-Last: Mukherjee Author-Workplace-Name: Worcester Polytechnic Institute Title: The Validity of Input Aggregation in DEA Models: A Statistical Test Abstract: We address the problem of input aggregation in DEA models within a broader framework and provide a direct link between input aggregation in DEA on the one hand and the test of parameter restrictions implied by input aggregation in an explicitly specified production function on the other. We show that when input prices vary across firms, the DEA LP problems for measuring efficiency scores of individual firms from the aggregated model have to be appropriately modified. An empirical application of the revised model using data from Indian manufacturing sector reveals that the validity of aggregating production and non-production workers into a composite labor input using Banker's F-test cannot be rejected. Classification-JEL: C61, D21, L6 Keywords: Banker's F-test, data envelopment analysis, input aggregation, parameter restrictions Length: 26 pages Number: 2005-54 Note: The paper has benefited from comments received from participants at the 2006 INFORMS Annual Meeting. Revision-date: 200611 Creation-date: 200510 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-54r.pdf File-Format: Application/PDF File-Function: Full text (revised version) Handle: RePEc:uct:uconnp:2005-54 Template-Type: ReDIF-Paper 1.0 Author-Name: Nicholas Shunda Author-X-Name-First: Nicholas Author-X-Name-Last: Shunda Author-Workplace-Name: University of Connecticut Author-Person: psh174 Title: A Model of Rights Abstract: In this paper, we develop a simple model of the rights a government provides its citizenry. Rights are treated as public goods and taken as primitives in agents utility functions; each agent has preferences over the entire policy vector. We model the interaction among citi-zens and the government as a game in which an exogenous lobbying set makes contributions to the government to in uence policy formu-lation in the matter of rights. When examining contribution schedules comprising truthful Nash strategies, we find that members of the lob-bying set obtain rights closer to their most-preferred bundle, while the rights of non-lobbyers further diverge from their most-preferred bun-dle. Further, if the lobbying set comprises the entire population, the government s allocation of rights does not differ from the allocation achieved in the absence of contributions. Classification-JEL: D72, D73, D78, H41, P48 Keywords: contributions, political economy, rights, voting Length: 22 pages Number: 2005-53 Note: Creation-date: 200510 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-53.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-53 Template-Type: ReDIF-Paper 1.0 Author-Name: Olivier F. Morand Author-X-Name-First: Olivier F. Author-X-Name-Last: Morand Author-Workplace-Name: University of Connecticut Author-Person: pmo63 Author-Name: Kevin L. Reffett Author-X-Name-First: Kevin L. Author-X-Name-Last: Reffett Author-Workplace-Name: Arizona State University Title: Stationary Markovian Equilibrium in Overlapping Generation Models with Stochastic Nonclassical Production Abstract: This paper provides new sufficient conditions for the existence, computation via successive approximations, and stability of Markovian equilibrium decision processes for a large class of OLG models with stochastic nonclassical production. Our notion of stability is existence of stationary Markovian equilibrium. With a nonclassical production, our economies encompass a large class of OLG models with public policy, valued fiat money, production externalities, and Markov shocks to production. Our approach combines aspects of both topological and order theoretic fixed point theory, and provides the basis of globally stable numerical iteration procedures for computing extremal Markovian equilibrium objects. In addition to new theoretical results on existence and computation, we provide some monotone comparative statics results on the space of economies. Classification-JEL: C62, E13, O41 Keywords: Length: 43 pages Number: 2005-52 Note: The authors would like to thank John Coleman, Manjira Datta, Jaime Erikson, Len Mirman, Seppo Heikkila, Manuela Santos, John Stachurski and Yiannis Vailakis for very helpful discussions on topics related to this paper. All mistakes are our own. Creation-date: 200509 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-52.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-52 Template-Type: ReDIF-Paper 1.0 Author-Name: Jaime Erikson Author-X-Name-First: Jaime Author-X-Name-Last: Erikson Author-Workplace-Name: SUNY-Fredonia Author-Name: Olivier F. Morand Author-X-Name-First: Olivier F. Author-X-Name-Last: Morand Author-Workplace-Name: University of Connecticut Author-Person: pmo63 Author-Name: Kevin L. Reffett Author-X-Name-First: Kevin L. Author-X-Name-Last: Reffett Author-Workplace-Name: Arizona State University Title: Isotone Recursive Methods for Overlapping Generation Models with Stochastic Nonclassical Production Abstract: Based on an order-theoretic approach, we derive sufficient conditions for the existence, characterization, and computation of Markovian equilibrium decision processes and stationary Markov equilibrium on minimal state spaces for a large class of stochastic overlapping generations models. In contrast to all previous work, we consider reduced-form stochastic production technologies that allow for a broad set of equilibrium distortions such as public policy distortions, social security, monetary equilibrium, and production nonconvexities. Our order-based methods are constructive, and we provide monotone iterative algorithms for computing extremal stationary Markov equilibrium decision processes and equilibrium invariant distributions, while avoiding many of the problems associated with the existence of indeterminacies that have been well-documented in previous work. We provide important results for existence of Markov equilibria for the case where capital income is not increasing in the aggregate stock. Finally, we conclude with examples common in macroeconomics such as models with fiat money and social security. We also show how some of our results extend to settings with unbounded state spaces. Classification-JEL: C62, E13, O41 Keywords: Length: 42 pages Number: 2005-51 Note: The authors would like to thank Elena Antoniadou, Robert Becker, Manjira Datta, Seppo Heikkil\"a, Len Mirman, Jayaram Sethuraman, Yiannis Vailakis, Itzhak Zilcha, and especially John Stachurski for very helpful discussions on topics related to this paper. All mistakes are our own. Creation-date: 200508 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-51.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-51 Template-Type: ReDIF-Paper 1.0 Author-Name: Kenneth A. Couch Author-X-Name-First: Kenneth A. Author-X-Name-Last: Couch Author-Workplace-Name: University of Connecticut Author-Person: pco89 Author-Name: Robert Fairlie Author-X-Name-First: Robert Author-X-Name-Last: Fairlie Author-Workplace-Name: University of California, Santa Cruz Title: Last Hired, First Fired? Black-White Unemployment and the Business Cycle Abstract: Past studies have tested the claim that blacks are the last hired during periods of economic growth and the first fired in recessions by examining the movement of relative unemployment rates over the business cycle. Any conclusion drawn from this type of analysis must be viewed as tentative because the cyclical movements in the underlying transitions into and out of unemployment are not examined. Using Current Population Survey data matched across adjacent months from 1989 to 2004, this paper examines labor market transitions for prime age males to test this hypothesis. Considerable evidence is presented that blacks are the first fired as the business cycle weakens. However, no evidence is found that blacks are the last hired. Instead, blacks are initially hired from the ranks of the unemployed early in the business cycle and later are drawn from non-participation. Narrowing of the racial unemployment gap near the peak of the business cycle is driven by a reduction in the rate of job loss for blacks rather than increases in hiring. There is also evidence that residual differences in the racial unemployment gap vary systematically over the business cycle in a manner consistent with discrimination being more evident in the economy at times when its cost is lower. Classification-JEL: J1, J6, J7 Keywords: unemployment, race, business cycle, discrimination Length: 43 pages Number: 2005-50 Note: We thank David Card and seminar participants at the University of Connecticut, the Federal Reserve Bank of San Francisco, the 2005 Society of Labor Economists Meetings, and Wesleyan University for helpful comments. Daniel Beltran and Oded Gurantz provided excellent research assistance. Creation-date: 200511 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-50.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-50 Template-Type: ReDIF-Paper 1.0 Author-Name: Richard N. Langlois Author-X-Name-First: Richard N. Author-X-Name-Last: Langlois Author-Person: pla2 Author-Workplace-Name: University of Connecticut Title: The Secret Life of Mundane Transaction Costs Abstract: Transaction costs, one often hears, are the economic equivalent of friction in physical systems. Like physicists, economists can sometimes neglect friction in formulating theories; but like engineers, they can never neglect friction in studying how the system actually does let alone should work. Interestingly, however, the present-day economics of organization also ignores friction. That is, almost single-mindedly, the literature analyzes transactions from the point of view of misaligned incentives and (especially) transaction-specific assets. The costs involved are certainly costs of running the economic system in some sense, but they are not obviously frictions. Stories about frictions in trade are not nearly as intriguing as stories about guileful trading partners and expensive assets placed at risk. But I will argue that these seemingly dull categories of cost what Baldwin and Clark (2003) call mundane transaction costs actually have a secret life. They are at least as important as, and quite probably far more important than, the more glamorous costs of asset specificity in explaining the partition between firm and market. These costs also have a secret life in another sense: they have a secret life cycle. I will argue that these mundane transaction costs provide much better material for helping us understanding how the boundaries among firms, markets, and hybrid forms change over time. Classification-JEL: D23, L22 Keywords: transaction costs, division of labor, modularity, standards, property rights. Length: 43 pages Number: 2005-49 Note: Solicited for Peripheral Vision section of Organization Studies. The author benefited from presenting early versions of this paper at the miniconference on Linking Strategy, Technology and Organization: Strategic and Institutional Perspectives on Modularity, London Business School, October 2, 2003, and at the conference on The Evolution of Designed Institutions, Max Planck Institute for Research into Economic Systems, February 19-21, 2004, Jena, Germany, as well as at seminars at the Copenhagen Business School and the Fisher School of Business at Ohio State. Creation-date: 200511 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-49.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-49 Template-Type: ReDIF-Paper 1.0 Author-Name: Nicholas Shunda Author-X-Name-First: Nicholas Author-X-Name-Last: Shunda Author-Person: psh174 Author-Workplace-Name: University of Connecticut Title: Strategic Behavior in Day-Ahead and Real-Time Markets for Electricity: Offer Cost or Payment Cost Minimization? Abstract: This study compares the procurement cost-minimizing and productive efficiency performance of the auction mechanism used by independent system operators (ISOs) in wholesale electricity auction markets in the U.S. with that of a proposed alternative. The current practice allocates energy contracts as if the auction featured a discriminatory final payment method when, in fact, the markets are uniform price auctions. The proposed alternative explicitly accounts for the market clearing price during the allocation phase. We find that the proposed alternative largely outperforms the current practice on the basis of procurement costs in the context of simple auction markets featuring both day-ahead and real-time auctions and that the procurement cost advantage of the alternative is complete when we simulate the effects of increased competition. We also find that a trade-off between the objectives of procurement cost minimization and productive efficiency emerges in our simple auction markets and persists in the face of increased competition. Classification-JEL: C72, D44, L10, L94 Keywords: strategic behavior, multi-unit auction, wholesale electricity, Bertrand competition Length: 33 pages Note: I am grateful for the insightful comments from and helpful discussions with Vicki Knoblauch, Peter Luh, Joseph Yan, and William Blankson while this paper was being written. Generous financial support from the National Science Foundation under grant ECS-03233685 is gratefully acknowledged. Number: 2005-48 Creation-date: 200510 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-48.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-48 Template-Type: ReDIF-Paper 1.0 Author-Name: Anupam Nanda Author-X-Name-First: Anupam Author-X-Name-Last: Nanda Author-Person: pna105 Author-Workplace-Name: University of Connecticut Title: Property Condition Disclosure Law: Does 'Seller Tell All' Matter in Property Values? Abstract: At the time when at least two-thirds of the US states have already mandated some form of seller's property condition disclosure statement and there is a movement in this direction nationally, this paper examines the impact of seller's property condition disclosure law on the residential real estate values, the information asymmetry in housing transactions and shift of risk from buyers and brokers to the sellers, and attempts to ascertain the factors that lead to adoption of the disclosur law. The analytical structure employs parametric panel data models, semi-parametric propensity score matching models, and an event study framework using a unique set of economic and institutional attributes for a quarterly panel of 291 US Metropolitan Statistical Areas (MSAs) and 50 US States spanning 21 years from 1984 to 2004. Exploiting the MSA level variation in house prices, the study finds that the average seller may be able to fetch a higher price (about three to four percent) for the house if she furnishes a state-mandated seller's property condition disclosure statement to the buyer. Classification-JEL: C14, K11, L85, R21 Keywords: Property Condition Disclosure, Housing Price Index, Propensity Score Matching Event Study Length: 43 pages Number: 2005-47 Note: This paper is adapted from the third chapter of my doctoral dissertation. I would like to thank my advisors - Stephen L. Ross, John M. Clapp, and Dennis R. Heffley for their insightful comments on the idea and methodology. I greatly benefited from helpful comments from James Davis and Katherine Pancak. Comments from Dhamika Dharmapala, Thomas Miceli, and seminar participants at the University of Connecticut, Economics Brownbag Seminar Series are acknowledged. I would also like to thank Tim Storey (National Conference of State Legislatures), Daniel Conti (Bureau of Labor Statistics) for assistance with data, and Sascha Becker of University of Munich for assistance with STATA module on propensity score matching algorithm (written by Sascha Becker and Andrea Ichino). All remaining rrors are mine. Revision-date: 200607 Creation-date: 200511 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-47r.pdf File-Format: Application/PDF File-Function: Revised version File-URL: http://www.econ.uconn.edu/working/2005-47.pdf File-Format: Application/PDF File-Function: Original version Handle: RePEc:uct:uconnp:2005-47 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin Cosgel Author-X-Name-First: Metin Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Title: The Socioeconomics of Consumption: Solutions to the Problems of Interest, Knowledge, and Identity Abstract: This paper is a review of the socio-economic literature on consumption. Considering consumption as a social activity, it examines how consumption solves the problems of interest, knowledge, and identity. It also discusses the main themes and important contributions in each category and offers suggestions for further research. Classification-JEL: A12, A13, A14, D1, D8 Keywords: consumption, socio-economics, interest, knowledge, identity Length: 27 pages Number: 2005-46 Note: Creation-date: 200510 Price: Free Publication-Status: Forthcoming in The Elgar Handbook of Socio-Economics edited by John B. Davis, Wilfred Dolfsma, Elizabeth Oughton, and Jane Wheelock File-URL: http://www.econ.uconn.edu/working/2005-46.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-46 Template-Type: ReDIF-Paper 1.0 Author-Name: Angelica E. Njuguna Author-X-Name-First: Angelica E. Author-X-Name-Last: Njuguna Author-Workplace-Name: Kenyatta University and KIPPRA Author-Name: Stephen N. Karingi Author-X-Name-First: Stephen N. Author-X-Name-Last: Karingi Author-Workplace-Name: United Nations Economic Commission for Africa Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Title: Measuring Potential Output and Output Gap and Macroeconomic Policy: The Case of Kenya Abstract: Measuring the level of an economy.s potential output and output gap are essential in identifying a sustainable non-inflationary growth and assessing appropriate macroeconomic policies. The estimation of potential output helps to determine the pace of sustainable growth while output gap estimates provide a key benchmark against which to assess inflationary or disinflationary pressures suggesting when to tighten or ease monetary policies. These measures also help to provide a gauge in the determining the structural fiscal position of the government. This paper attempts to measure Kenya.s potential output and output gap using alternative statistical techniques and structural methods. Estimation of potential output and output gap using these techniques shows varied results. The estimated potential output growth using different methods gave a range of .2.9 to 2.4 percent for 2000 and a range of .0.8 to 4.6 for 2001. Although various methods produce varied results, they however provided a broad consensus on the over-all trend and performance of the Kenyan economy. This study found that firstly, potential output growth is declining over the recent time and secondly, the Kenyan economy is contracting in the recent years. Classification-JEL: N10, N17, O47 Keywords: Length: 49 pages Number: 2005-45 Note: The authors would like to acknowledge the valuable research assistance provided by Paul Gachanja; and the helpful comments from the participants of the 8th Annual Conference on Econometric Modelling for Africa (University of Stellenbosch, South Africa, July 2003), particularly from Adrian Pagan, John Muellbauer, Stephen Hall and Nelene Ehlers; also of John Randa from KIPPRA. Creation-date: 200510 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-45.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-45 Template-Type: ReDIF-Paper 1.0 Author-Name: Alemayehu Geda Author-X-Name-First: Alemayehu Author-X-Name-Last: Geda Author-Workplace-Name: Institute of Social Studies and Addis Ababa University Author-Name: Niek de Jong Author-X-Name-First: Niek Author-X-Name-Last: de Jong Author-Workplace-Name: Institute of Social Studies, The Hague Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Author-Name: Germano Mwabu Author-X-Name-First: Germano Author-X-Name-Last: Mwabu Author-Workplace-Name: University of Nairobi and Yale University Title: Determinants of Poverty in Kenya: A Household Level Analysis Abstract: Strategies aimed at poverty reduction need to identify factors that are strongly associated with poverty and that are amenable to modification by policy. This article uses household level data collected in 1994 to examine probable determinants of poverty status, employing both binomial and polychotomous logit models. The study shows that poverty status is strongly associated with the level of education, household size and engagement in agricultural activity, both in rural and urban areas. In general, those factors that are closely associated with overall poverty according to the binomial model are also important in the ordered-logit model, but they appear to be even more important in tackling extreme poverty. Classification-JEL: I30, I32, N97 Keywords: Poverty, Kenya, Africa, Probability Models Length: 27 pages Number: 2005-44 Note: Creation-date: 200501 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-44.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-44 Template-Type: ReDIF-Paper 1.0 Author-Name: Carmelo Giaccotto Author-X-Name-First: Carmelo Author-X-Name-Last: Giaccotto Author-Workplace-Name: University of Connecticut Author-Name: Rexford E. Santerre Author-X-Name-First: Rexford E. Author-X-Name-Last: Santerre Author-Person: psa151 Author-Workplace-Name: University of Connecticut Author-Name: Francis W. Ahking Author-X-Name-First: Francis W. Author-X-Name-Last: Ahking Author-Person: pah11 Author-Workplace-Name: University of Connecticut Title: The Aggregate Demand for Private Health Insurance Coverage in the U.S. Abstract: This paper estimates the aggregate demand for private health insurance coverage in the U.S. using an error-correction model and by recognizing that people are without private health insurance for voluntary, structural, frictional, and cyclical reasons and because of public alternatives. Insurance coverage is measured both by the percentage of the population enrolled in private health insurance plans and the completeness of the insurance coverage. Annual data for the period 1966-1999 are used and both short and long run price and income elasticities of demand are estimated. The empirical findings indicate that both private insurance enrollment and completeness are relatively inelastic with respect to changes in price and income in the short and long run. Moreover, private health insurance enrollment is found to be inversely related to the poverty rate, particularly in the short-run. Finally, our results suggest that an increase in the number cyclically uninsured generates less of a welfare loss than an increase in the structurally uninsured. Classification-JEL: I10 Keywords: Length: 41 pages Number: 2005-43 Note: We have received many helpful comments from Mark Pauly, Barbara Beliveau, Dave Gulley, John Harding, Staff Johnson, Steve Miller, Tom O.Brien, and John Vernon. We also thank two anonymous referees of this journal for helpful comments on an earlier version of this paper. All remaining errors are our responsibility. Creation-date: 200510 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-43.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-43 Template-Type: ReDIF-Paper 1.0 Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Title: Efficiency and Efficacy of Kenya's Constituency Development Fund: Theory and Evidence Abstract: Kenya's Constituency Development Fund (CDF) is one of the ingenious innovations of the National Rainbow Coalition (NARC) Government of Kenya. Unlike other development funds that filter from the central government through larger and more layers of administrative organs and bureaucracies, funds under this program go directly to local levels and thus provide people at the grassroots the opportunity to make expenditure decisions that maximize their welfare consistent with the theoretical predictions of decentralization theory. Increasingly, however, concerns about the utilization of funds under this program are emerging. Most of the concerns revolve around issues of allocative efficiency. In this note, I highlight some of the constituency characteristics that impact on the efficiency and efficacy of CDF and also some political economy aspects associated with this program. In particular it is observed that CDF could have negative outcomes because of fiscal illusion and reduced local fiscal effort. The paper recommends an in-depth analysis of constituency characteristics that impact on the utilization of funds to ensure that the program achieves its full potential. Classification-JEL: D21, D70, H60 Keywords: Length: 8 pages Note: Research Concept Note Number: 2005-42 Creation-date: 200504 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-42.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-42 Template-Type: ReDIF-Paper 1.0 Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Author-Name: Germano Mwabu Author-X-Name-First: Germano Author-X-Name-Last: Mwabu Author-Workplace-Name: Yale Growth Center and University of Nairobi Title: Policy Advice during a Crisis Abstract: Good policy making is an art. It involves a substantial element of personal judgement about risks and consequences of alternative courses of actions and decisions. It is also a science because it requires systematic gathering and analysis of evidence about a policy issue, and rational assessment of costs and benefits of various ways of addressing the issue. However, in a crisis, there is little time to gather evidence or to search for imaginative solutions to a problem. There is a tendency, in such a situation, to act under pressure rather than on the basis of evidence, analysis or informed judgement. Furthermore, a crisis often creates a situation in which policy makers receive all sorts of advice. This note discusses a set of concepts, originating mainly from economics, that can be used to assess soundness of policy and advice, particularly during a crisis. These are concepts of rationality, sustainability, inclusiveness, feasibility, practicality and tipping, which can be used in decision making in normal and crisis times to reduce risks of disastrous advice or policy. Classification-JEL: D78 Keywords: Policy, risk and uncertainty, crisis, prudence, tipping. Length: 19 pages Number: 2005-41 Note: Creation-date: 200509 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-41.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-41 Template-Type: ReDIF-Paper 1.0 Author-Name: Mwangi S. Kimenyi Author-X-Name-First: Mwangi S. Author-X-Name-Last: Kimenyi Author-Person: pki109 Author-Workplace-Name: University of Connecticut Title: Economic Rights, Human Development Effort and Institutions Abstract: This paper focuses on the link between economic rights and institutions. Simple analysis of data is used to demonstrate countries' human development effort in advancing economics rights of the citizens. A country's human development effort is evaluated on the basis of the well-being of the poorest members of the society. An analysis of data reveals that there is a wide variation in countries' pro-poor stance. While it is accepted that positive rights are pro-poor, this paper argues that so too are negative economic rights and in fact the two are complements rather than substitutes. Classifying countries into human development income deficit and human development effort deficit, it is demonstrated that a large number of countries could achieve higher welfare levels for the poor if they improved on bother positive and negative economic rights. The paper attempts to explain variations in the observed commitment to economic rights by focusing on pro-poor institutions. The basic thesis advanced in the paper is that pro-poor policies are more likely to be implemented and sustained in those institutions where power is sufficiently diffused such that even the poor have leverage over policy outcomes. The paper focuses on how institutions impact on power diffusion and therefore the adoption of pro-poor growth and policies. The failure of countries to adopt pro-poor growth and policies is attributed to institutional failures manifested in concentration of power. The policy recommendations emanating from the analysis focus on institutional reforms to enhance power diffusion. These policies include enlarging the political space through democratization, strengthening institutions and capacity to fight corruption and improve transparency, and bringing the government closer to the people through appropriate design and implementation of decentralization schemes. Some recent examples of improvements in economic rights following power diffusion are provided. Classification-JEL: O15, I30, I31 Keywords: Length: 66 pages Number: 2005-40 Note: Paper prepared for presentation at the Economics Rights Conference organized by the Human Rights Institute, University of Connecticut, October 27-29, 2005. An earlier version of this paper entitled "Institutions of Governance, Power Diffusion and Pro-Poor Growth and Policies," was presented at a Senior Policy seminar organized by African Economic Research Consortium, March 22-24, 2005, Cape Town, South Africa. I am grateful to members of the Economic Rights Reading Group for helpful comments and suggestions. Creation-date: 200510 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-40.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-40 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Connecticut and University of Pretoria Title: Financial Liberalization and Inflationary Dynamics in the Context of a Small Open Economy Abstract: The paper develops a short-run model of a small open financially repressed economy characterized by unorganized money markets, capital good imports, capital mobility, wage indexation, and flexible exchange rates. The analysis shows that financial liberalization, in the form of an increased rate of interest on deposits and tight monetary policy, unambiguously and unconditionally causes deflation. Moreover, the results do not depend on the degree of capital mobility and structure of wage setting. The paper recommends that a small open developing economy should deregulate interest rates and tighten monetary policy if reducing inflation is a priority. The pre-requisite for such a policy, however, requires the establishment of a flexible exchange rate regime. Classification-JEL: E31, E44, E52, F41. Keywords: Financial Liberalization; Inflation; Small open economy. Length: 19 pages Number: 2005-39 Note: This is a revised version of a paper that was written as a part of my coursework in Monetary Theory and Policy at the University of Connecticut. I am particularly grateful to Professor Stephen M. Miller for many helpful comments. Creation-date: 200507 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-39.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-39 Template-Type: ReDIF-Paper 1.0 Author-Name: Gautam Tripathi Author-X-Name-First: Gautam Author-X-Name-Last: Tripathi Author-Person: ptr18 Author-Workplace-Name: University of Connecticut Title: Moment Based Inference with Stratified Data Abstract: Many datasets used by economists and other social scientists are collected by stratified sampling. The sampling scheme used to collect the data induces a probability distribution on the observed sample that differs from the target or underlying distribution for which inference is to be made. If this effect is not taken into account, subsequent statistical inference can be seriously biased. This paper shows how to do efficient semiparametric inference in moment restriction models when data from the target population is collected by three widely used sampling schemes: variable probability sampling, multinomial sampling, and standard stratified sampling. Classification-JEL: C14 Keywords: Empirical likelihood, Moment conditions, Stratified sampling. Length: 28 pages Number: 2005-38 Note: I thank the co-editors and two anonymous referees for comments that greatly improved this paper. I also thank Paul Devereux and seminar participants at several universities for helpful suggestions and conversations. Financial support for this project from NSF grant SES-0214081 is gratefully acknowledged. Revision-date: 200701 Creation-date: 200509 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-38r.pdf File-Format: Application/PDF File-Function: Revised version File-URL: http://www.econ.uconn.edu/working/2005-38.pdf File-Format: Application/PDF File-Function: Original version Handle: RePEc:uct:uconnp:2005-38 Template-Type: ReDIF-Paper 1.0 Author-Name: Basab Dasgupta Author-X-Name-First: Basab Author-X-Name-Last: Dasgupta Author-Workplace-Name: University of Connecticut Author-Person: pda117 Title: Liquidity Constraint and Child Labor In India: Is Market Really Incapable Of Eradicating It From Wage-Labor Households? Abstract: One way to measure the lower steady state equilibrium outcome in human capital development is the incidence of child labor in most of the developing countries. With the help of Indian household level data in an overlapping generation framework, we show that production loans under credit rationing are not optimally extended towards firms because of issues with adverse selection. More stringent rationing in the credit market creates a distortion in the labor market by increasing adult wage rate and the demand for child labor. Lower availability of funds under stringent rationing coupled with increased demand for loans induces the high risk firms to replace adult labor by child labor. A switch of regime from credit rationing to revelation regime can clear such imperfections in the labor market. The equilibrium higher wage rate elevates the household consumption to a significantly higher level than the subsistence under credit rationing and therefore higher level of human capital development is assured leading to no supply of child labor. Classification-JEL: O16, O17, E26 Keywords: Credit Rationing, Informal Credit, Child Labor, Self Revelation Mechanism Length: 38 pages Number: 2005-37 Note: I am really grateful to my advisors, Christian Zimmermann and Steven Ross for their guidance and valuable comments and to Prof. Samar K. Datta, IIMA, India for his help. Usual disclaimer applies. Creation-date: 200508 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-37.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-37 Template-Type: ReDIF-Paper 1.0 Author-Name: Subhash C. Ray Author-X-Name-First: Subhash C. Author-X-Name-Last: Ray Author-Person: pra51 Author-Workplace-Name: University of Connecticut Author-Name: Kankana Mukherjee Author-X-Name-First: Kankana Author-X-Name-Last: Mukherjee Author-Workplace-Name: Worcester Polytechnic Institute Author-Name: Yanna Wu Author-X-Name-First: Yanna Author-X-Name-Last: Wu Author-Workplace-Name: PricewaterhouseCoopers LLP Title: Direct and Indirect Measures of Capacity Utilization: A Nonparametric Analysis of U.S. Manufacturing Abstract: We measure the capacity output of a firm as the maximum amount producible by a firm given a specific quantity of the quasi-fixed input and an overall expenditure constraint for its choice of variable inputs. We compute this indirect capacity utilization measure for the total manufacturing sector in the US as well as for a number of disaggregated industries, for the period 1970-2001. We find considerable variation in capacity utilization rates both across industries and over years within industries. Our results suggest that the expenditure constraint was binding, especially in periods of high interest rates. Classification-JEL: D24, L6 Keywords: Data envelopment analysis, expenditure constraint, indirect production function Length: 36 pages Number: 2005-36 Note: Creation-date: 2005 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-36.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-36 Template-Type: ReDIF-Paper 1.0 Author-Name: Xia Wang Author-X-Name-First: Xia Author-X-Name-Last: Wang Author-Person: pwa194 Author-Workplace-Name: University of Connecticut Title: Technological Characteristics and R&D Alliance Form: Evidence from the U.S. Biotechnology Industry Abstract: This study seeks to advance and test the knowledge-based theory of the firm as it applies to explaining the governance structure of R&D alliances. Unlike transaction-cost economics, the knowledge-based theory attempts to explain organizational form not primarily in terms of incentive misalignment but in terms of the creation, acquisition, and coordination of productive capabilities. To study the role played by firm-specific technological competencies, I consider three technological characteristics of an alliance: technological similarity, technological relatedness, and technological diversity. With a sample of 111 biotech-biotech R&D alliances, I find that technological relatedness and diversity increase the probability that allying firms would select the higher integration mode. Technological similarity, though, bears a non-monotonic relationship with organizational choice. Overall, the results support the knowledge-based argument that the idiosyncrasy in technological traits influences which type of alliance forms would be selected by allying firms. Classification-JEL: L22, O32, L65 Keywords: technology, governance, alliance, R&D Length: 47 pages Number: 2005-35 Note: I thank Richard N. Langlois, John Cantwell, Michelle Gittelman, Rachelle C. Sampson, and Anu Wadhwa for helpful comments on this paper. Will Mitchell has made the paper possible by allowing me access to ReCap. This paper also benefited from comments received at the 11th CCC conference at Goizueta Business School, Emory University, and the brownbag presentation at the Department of Economics, University of Connecticut. Financial support was provided by the Department of Economics and the Graduate School at the University of Connecticut. Creation-date: 200508 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-35.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-35 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Pretoria Title: Tax Evasion and Financial Repression Abstract: Using a simple overlapping generations framework, calibrated to four Southern European countries, we analyze the relationship between tax evasion, determined endogenously, and financial repression. We show that higher degree of tax evasion within a country, resulting from a higher level of corruption and a lower penalty rate, yields higher degrees of financial repression as a social optimum. However, a higher degree of tax evasion, due to a lower tax rate, reduces the severity of financial restriction. Classification-JEL: E26, E63 Keywords: Underground Economy; Tax evasion; Macroeconomic Policy. Length: 39 pages Number: 2005-34 Note: This paper previously circulated under the title "Policy Response of Endogenous Tax Evasion" Revision-date: 200706 Creation-date: 200507 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-34r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2005-34.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2005-34 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Connecticut and University of Pretoria Title: Asymmetric Information, Tax Evasion and Alternative Instruments of Government Revenue Abstract: Using a pure-exchange overlapping generations model, characterized with tax evasion and information asymmetry between the government (the social planner) and the financial intermediaries, we try and seek for the optimal tax and seigniorage plans, derived from the welfare maximizing objective of the social planner. We show that irrespective of whether the economy is characterized by tax evasion, or asymmetric information, a benevolent social planner, maximizing welfare and simultaneously financing the budget constraint, should optimally rely on explicit rather than implicit taxation. Classification-JEL: E26, E63 Keywords: Tax evasion; Information Asymmetry in Financial Markets Length: 22 pages Number: 2005-33 Note: This is a revised version of the fourth chapter of my dissertation at the University of Connecticut. I am particularly grateful to my advisors Christian Zimmermann and Dhammika Dharmapala for many helpful comments and discussions. All remaining errors are mine. Creation-date: 200507 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-33.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-33 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Connecticut and University of Pretoria Title: Financial Liberalization and Inflationary Dynamics: An Open Economy Analysis Abstract: The paper analyzes the effects of financial liberalization on inflation. We develop a monetary and endogenous growth, dynamic general equilibrium model of a small open semi-industrialized economy, with financial intermediaries subjected to obligatory "high" reserve ratio, serving as the source of financial repression. When calibrated to four Southern European semi-industrialized countries, namely Greece, Italy, Spain and Portugal, that typically had high reserve requirements, the model indicates a positive inflation-financial repression relationship irrespective of the the specification of preferences. But the strength of the relationship obtained from the model is found to be much smaller in size than the corresponding empirical estimates. Classification-JEL: E31, E44 Keywords: Inflation; Financial Markets and the Macroeconomy Length: 31 pages Number: 2005-32 Note: This is a revised version of the third chapter of my dissertation at the University of Connecticut. I am particularly grateful to my major advisor Christian Zimmermann for many helpful comments and discussions. All remaining errors are mine. Creation-date: 200507 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-32.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-32 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Person: pgu80 Author-Workplace-Name: University of Connecticut and University of Pretoria Title: Financial Liberalization and Inflationary Dynamics Abstract: The paper analyzes the effects of financial liberalization on inflation. We develop a monetary and endogenous growth, dynamic general equilibrium model with financial intermediaries subjected to obligatory "high" cash reserves requirement, serving as the source of financial repression. When calibrated to four Southern European semi-industrialized countries, namely Greece, Italy, Spain and Portugal, that typically had high reserve requirements, the model indicates a positive inflation-financial repression relationship irrespective of the the specification of preferences. But the strength of the relationship obtained from the model is found to be much smaller in size than the corresponding empirical estimates. Classification-JEL: E31, E44 Keywords: Inflation; Financial Markets and the Macroeconomy Length: 26 pages Number: 2005-31 Note: This is a revised version of the second chapter of my dissertation at the University of Connecticut. I am particularly grateful to my major advisor Christian Zimmermann for many helpful comments and discussions. All remaining errors are mine. Creation-date: 200507 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-31.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-31 Template-Type: ReDIF-Paper 1.0 Author-Name: Metin Cosgel Author-X-Name-First: Metin Author-X-Name-Last: Cosgel Author-Person: pco79 Author-Workplace-Name: University of Connecticut Title: Conversations between Anthropologists and Economists Abstract: Interdisciplinary citation patterns and other indicators of the flow and sharing of academic knowledge suggest that economists and anthropologists do not talk to each other. Previous studies of this puzzling trend have typically attributed the problem to methodological differences between the two disciplines. Although there are significant differences between economics and anthropology in behavioral assumptions and modes of inquiry, similar differences exist between them and other disciplines (some with much heavier volumes of cross-citations with economics or anthropology), suggesting that the source of the problem lies elsewhere. This paper considers the problem at a deeper level by examining systematic differences in the preferences, capabilities, and literary cultures of economists and anthropologists. Adopting a rhetorical perspective, I consider not the firms, households, or tribes as the principal objective of analysis in the two disciplines, but the conversations between these units. These conversations (through non-verbal as well as verbal media) can be grouped into two genres, based on the type of problem they aim to solve. Those in the first genre aim to solve the problem of interest--how to align the incentives of the parties involved. Those in the second genre deal with the problem of knowledge--how to align localized, and dispersed information. Economists are interested and capable of dealing with primarily, if not exclusively, the first genre, and anthropologists focus on the second. This difference has far reaching consequences for how economists and anthropologists conduct their own scholarly conversations with their own colleagues, why they are having difficulty talking to each other across disciplinary boundaries, and what can be done to change the patterns of communication. Classification-JEL: A12, B4, O5, Z1 Keywords: anthropology, conversation, interest, incentive, knowledge Length: 27 pages Number: 2005-29 Note: For presentation at the 4th International Rhetoric Culture Conference Johannes Gutenberg-University, Mainz, July, 16-20, 2005 Creation-date: 200507 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-29.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-29 Template-Type: ReDIF-Paper 1.0 Author-Name: Xenia Matschke Author-Person: pma237 Author-X-Name-First: Xenia Author-X-Name-Last: Matschke Author-Workplace-Name: University of Connecticut Title: Costly Revenue-Raising and the Case for Favoring Import-Competing Industries Abstract: A standard finding in the political economy of trade policy literature is that we should expect export-oriented industries to attract more assistance than import-competing industries. In reality, however, trade policy is heavily biased toward supporting import industries. This paper shows how the costliness of raising revenue via taxation makes trade subsidies less desirable and trade taxes more desirable in a standard protection for sale framework. The model is then estimated and its predictions tested using U.S. tariff data. An empirical estimate of the costliness of revenue-raising is also obtained. Classification-JEL: F13, F16 Keywords: Protection for sale, tariffs, trade policy, costly taxation, political economy Length: 26 pages Number: 2005-28 Note: I thank the co-editor Kala Krishna and two anonymous referees for comments that greatly improved this paper. Thanks also go to Kishore Gawande and Daniel Trefler for providing data and to Emily Blanchard, Dhammika Dharmapala, Josh Ederington, Kishore Gawande, Susumu Imai, Mary Lovely, Giovanni Maggi, Devashish Mitra, Paul Pecorino, Bob Staiger, Gautam Tripathi, and Christian Zimmermann for helpful comments on an earlier version of this paper. The hospitality of Hans-Werner Sinn and the CES-ifo Institute at the Ludwig-Maximilians University in Munich, where part of this research was conducted, is gratefully acknowledged. Revision-date: 200704 Creation-date: 200506 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-28r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2005-28.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2005-28 Template-Type: ReDIF-Paper 1.0 Author-Name: Richard N. Langlois Author-Person: pla2 Author-X-Name-First: Richard N. Author-X-Name-Last: Langlois Author-Workplace-Name: University of Connecticut Title: The Entrepreneurial Theory of the Firm and the Theory of the Entrepreneurial Firm Abstract: The entrepreneurial theory of the firm argues that entrepreneurship, properly understood, is a crucial but neglected element in explaining the nature and boundaries of the firm. By contrast, the theory of the entrepreneurial firm presumably seeks not to understand the nature and boundaries of "the firm" in general but rather to understand a particular type of firm: one that is entrepreneurial. This paper is an attempt to reconcile the two. After briefly delving for the concept of entrepreneurship in the work of Schumpeter, Kirzner, and (especially) Knight, the paper makes the case for the entrepreneurial theory of the firm. In such a theory, the firm exists as the solution to a coordination problem in a world of change and uncertainty, including Knightian or structural uncertainty. Taking a historical or developmental perspective, the paper then examines the changing nature of the entrepreneurial coordination problem over the life-cycle. In this formulation, "the entrepreneurial firm" is a nascent firm or proto-firm facing a problem of coordinating systemic change in economic capabilities. Lacking (by definition) adequate guidance from existing systems of rules of conduct embedded in markets or organizations, the entrepreneurial firm typically relies on a form of organization Max Weber called charismatic authority. In the end, although there is no such thing as a non-entrepreneurial firm, firms that must solve coordination problems in a world of novelty and systemic change ("entrepreneurial firms") are perhaps the purest case of the entrepreneurial theory of the firm. Classification-JEL: B25, L22, M13 Keywords: entrepreneurship, transaction costs, coordination, Coase, Knight, Schumpeter, Weber. Length: 41 pages Number: 2005-27 Note: Paper for the conference "Why Do Entrepreneurial Firms Exist?" Ohio State University, October 27-29, 2005. To be considered for a special issue of the Journal of Management Studies. Revision-date: 200510 Creation-date: 200506 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-27r.pdf File-Format: Application/PDF File-Function: Full text (revised version) Handle: RePEc:uct:uconnp:2005-27 Template-Type: ReDIF-Paper 1.0 Author-Name: John M. Clapp Author-X-Name-First: John M. Author-X-Name-Last: Clapp Author-Workplace-Name: University of Connecticut Author-Name: Anupam Nanda Author-X-Name-First: Anupam Author-X-Name-Last: Nanda Author-Workplace-Name: University of Connecticut Author-Name: Stephen L. Ross Author-Person: pro69 Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Workplace-Name: University of Connecticut Title: Which School Attributes Matter? The Influence of School District Performance and Demographic Composition on Property Values Abstract: Increasing levels of segregation in American schools raises the question: do home buyers pay for test scores or demographic composition? This paper uses Connecticut panel data spanning eleven years from 1994 to 2004 to ascertain the relationship between property values and explanatory variables that include school district performance and demographic attributes, such as racial and ethnic composition of the student body. Town and census tract fixed effects are included to control for neighborhood unobservables. The effect of changes in school district attributes is also examined over a decade long time frame in order to focus on the effect of long run changes, which are more likely to be capitalized into prices. The study finds strong evidence that increases in percent Hispanic has a negative effect on housing prices in Connecticut, but mixed evidence concerning the impact of test scores on property values. Evidence is also found to suggest that student test scores have increased in importance for explaining housing prices in recent years while the importance of percent Hispanic has declined. Finally, the study finds that estimates of property tax capitalization increase substantially when the analysis focuses on long run changes. Classification-JEL: D1, D4, I2, R2, R5. Keywords: School District Performance, Test Score, Demographics, House Price, Omitted Neighborhood Attributes. Assessed Value model. Length: 26 pages Number: 2005-26 Note: Authors appreciate helpful comments from Donald Haurin, Allen Goodman, David Brasington, Randell Reback, as well as participants at the 2006 American Economics Association Meetings, 2005 Southern Economics Association Meetings, 2004 AREUEA International Meetings, and the 2005 University of Connecticut Seminar Series. Revision-date: 200701 Creation-date: 200507 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-26r.pdf File-Format: Application/PDF File-Function: Revised version File-URL: http://www.econ.uconn.edu/working/2005-26.pdf File-Format: Application/PDF File-Function: Original version Handle: RePEc:uct:uconnp:2005-26 Template-Type: ReDIF-Paper 1.0 Author-Name: Yongil Jeon Author-X-Name-First: Yongil Author-X-Name-Last: Jeon Author-Workplace-Name: Central Michigan University Author-Name: Stephen M. Miller Author-Person: pmi16 Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Workplace-Name: University of Nevada, Las Vegas, and University of Connecticut Title: An 'Ideal' Decomposition of Industry Dynamics: An Application to the Nationwide and State Level U.S. Banking Industry Abstract: This paper considers the aggregate performance of the banking industry, applying a modified and extended dynamic decomposition of bank return on equity. The aggregate performance of any industry depends on the underlying microeconomic dynamics within that industry . adjustments within banks, reallocations between banks, entry of new banks, and exit of existing banks. Bailey, Hulten, and Campbell (1992) and Haltiwanger (1997) develop dynamic decompositions of industry performance. We extend those analyses to derive an ideal decomposition that includes their decomposition as one component. We also extend the decomposition, consider geography, and implement decomposition on a state-by-state basis, linking that geographic decomposition back to the national level. We then consider how deregulation of geographic restrictions on bank activity affects the components of the state-level dynamic decomposition, controlling for competition and the state of the economy within each state and employing fixed- and random-effects estimation for a panel database across the fifty states and the District of Columbia from 1976 to 2000. Classification-JEL: L1, G2 Keywords: aggregate fluctuations, dynamic decomposition, productivity Length: 44 pages Number: 2005-25 Note: Previous versions of this paper were presented at the University of California, San Diego, the Bank of England, and Yonsei University. Creation-date: 200506 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-25.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-25 Template-Type: ReDIF-Paper 1.0 Author-Name: Yongil Jeon Author-X-Name-First: Yongil Author-X-Name-Last: Jeon Author-Workplace-Name: Central Michigan University Author-Name: Stephen M. Miller Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Workplace-Name: University of Nevada, Las Vegas, and University of Connecticut Title: Has Deregulation Affected Births, Deaths, and Marriages in the U.S. Commercial Banking Industry? Abstract: Regulatory change not seen since the Great Depression swept the U.S. banking industry beginning in the early 1980s and culminating with the Interstate Banking and Branching Efficiency Act of 1994. Banking analysts anticipated dramatic consolidation with large numbers of mergers and acquisitions. Less well documented, but equally important, was the continuing entry of new banks, tempering the decline in the overall number of banking institutions. This paper examines whether deregulation affected bank new-charter (birth), failure (death), and merger (marriage) rates during the 1980s and 1990s after controlling for bank performance and state economic activity. We find evidence that intrastate deregulation stimulated births and marriages, but not deaths. Moreover, we find little evidence that interstate deregulation affected births, deaths, or marriages, except that the marriage rate rose after the implementation of the Interstate Banking and Branching Efficiency Act. Finally, pair-wise temporal causality tests among births, deaths, and marriages show that mergers temporally lead new charters and that failures lead mergers (a demonstration effect). Classification-JEL: G21, L51 Keywords: commercial banks, new charters, failures, mergers Length: 37 pages Number: 2005-24 Note: An earlier version, "Births, Deaths, and Marriages in the U.S. Commercial Banking Industry" was presented at the Eastern Economic Association meetings, New York City, February 2001. We acknowledge the helpful comments of the discussant, T. Critchfield, and a colleague, B. Wimmer. Creation-date: 200501 Price: Free Publication-Status: Published in Economic Inquiry, April 2007 File-URL: http://www.econ.uconn.edu/working/2005-24.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-24 Template-Type: ReDIF-Paper 1.0 Author-Name: Yonjil Jeon Author-X-Name-First: Yongil Author-X-Name-Last: Jean Author-Workplace-Name: Central Michigan University Author-Name: Stephen M. Miller Author-Person: pmi16 Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Workplace-Name: University of Nevada, Las Vegas, and University of Connecticut Title: Bank Performance: Market Power or Efficient Structure? Abstract: Regulatory change not seen since the Great Depression swept the U.S. banking industry beginning in the early 1980s, culminating with the Interstate Banking and Branching Efficiency Act of 1994. Significant consolidations have occurred in the banking industry. This paper considers the market-power versus the efficient-structure theories of the positive correlation between banking concentration and performance on a state-by-state basis. Temporal causality tests imply that bank concentration leads bank profitability, supporting the market-power, rather than the efficient-structure, theory of that positive correlation. Our finding suggests that bank regulators, by focusing on local banking markets, missed the initial stages of an important structural change at the state level. Classification-JEL: E5, G2 Keywords: commercial banks, concentration, profitability Length: 27 pages Number: 2005-23 Note: Creation-date: 200506 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-23.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-23 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephen M. Miller Author-Person: pmi16 Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Workplace-Name: University of Nevada, Las Vegas, and University of Connecticut Title: Equity Markets, the Money Market, and Long-Run Monetary Neutrality Abstract: This paper outlines a process for teaching long-run neutrality of money, drawing an analogy between equity markets and the money market. The key points in the discussion include the following: (1) What is the price of money? (2) Why does the long-run demand for money trace out a rectangular hyperbola? (3) Why does the slow adjustment of goods and service prices to changes in the stock of money lead to a different short-run demand for money? and (4) Why does a successful currency reform generate similar short-run movements in the price of money as movements in equity share prices after a change in the supply of shares? I have used this approach successfully for over 30 years at all levels, wherever I need to discuss the money market in a macroeconomic model. Classification-JEL: Keywords: Length: 15 pages Number: 2005-22 Note: I gratefully acknowledge the comments and suggestions of W. McEachern and R. Cronovich. Creation-date: 200507 Price: Free Publication-Status: Published in International Review of Economics Education, June 2010. File-URL: http://www.econ.uconn.edu/working/2005-22.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-22 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephen M. Miller Author-Person: pmi16 Author-X-Name-First: Stephen M. Author-X-Name-Last: Miller Author-Workplace-Name: University of Nevada, Las Vegas, and University of Connecticut Author-Name: Terrence M. Clauretie Author-X-Name-First: Terrence M. Author-X-Name-Last: Clauretie Author-Workplace-Name: University of Nevada, Las Vegas Author-Name: Thomas M. Springer Author-X-Name-First: Thomas M. Author-X-Name-Last: Springer Author-Workplace-Name: Clemson University Title: Economies of Scale and Cost Efficiencies: A Panel-Data Stochastic-Frontier Analysis of Real Estate Investment Trusts Abstract: This paper extends the existing research on real estate investment trust (REIT) operating efficiencies. We estimate a stochastic-frontier panel-data model specifying a translog cost function, covering 1995 to 2003. The results disagree with previous research in that we find little evidence of scale economies and some evidence of scale diseconomies. Moreover, we also generally find smaller inefficiencies than those shown by other REIT studies. Contrary to previous research, the results also show that self-management of a REIT associates with more inefficiency when we measure output with assets. When we use revenue to measure output, selfmanagement associates with less inefficiency. Also contrary with previous research, higher leverage associates with more efficiency. The results further suggest that inefficiency increases over time in three of our four specifications. Classification-JEL: G2, L25, L85 Keywords: Real Estate Investment Trusts, X-efficiency, scale economies Length: 22 pages Number: 2005-21 Note: Presented at the Money Macro and Finance Research Group conference "Efficiency Analysis in Macroeconomics and Finance," 3 June 2005 at the University of Essex, United Kingdom. Creation-date: 200507 Price: Free Publication-Status: Published in The Manchester School, July 2006. File-URL: http://www.econ.uconn.edu/working/2005-21.pdf File-Format: Application/PDF File-Function: Full text Handle: RePEc:uct:uconnp:2005-21 Template-Type: ReDIF-Paper 1.0 Author-Name: Rangan Gupta Author-Person: pgu80 Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Workplace-Name: University of Connecticut and University of Pretoria Title: A Generic Model of Financial Repression Abstract: The paper develops a growth model in an overlapping generations framework of a financially repressed small open economy, and analyzes the effects of financial liberalization. The following observations are made: An increase (decrease) of interest rate (reserve requirements) reduces (increases) the steady-state stock of capital and the trade balance, but improves (deteriorates) the level of foreign exchange reserves. However, financial liberalization, in any form, is always welfare-improving. The paper, thus, advocates financial liberalization policies to be oriented towards reduction of reserve requirements rather than interest rate deregulation, if foreign reserve holding is not in a critical position. Classification-JEL: E22, E26, E44, E52 Keywords: Financial Repression; Capital Stock and Investment; Unofficial Financial Markets. Length: 20 pages Number: 2005-20 Note: This is the first chapter of my dissertation at the University of Connecticut. I am particularly grateful to my major advisor Christian Zimmermann for many helpful comments and discussions. All remaining errors are mine. Revision-date: 200507 Creation-date: 200506 Price: Free Publication-Status: File-URL: http://www.econ.uconn.edu/working/2005-20r.pdf File-Format: Application/PDF File-Function: Full text (revised version) File-URL: http://www.econ.uconn.edu/working/2005-20.pdf File-Format: Application/PDF File-Function: Full text (original version) Handle: RePEc:uct:uconnp:2005-20 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephen L. Ross Author-Person: pro69 Author-X-Name-First: Stephen L. Author-X-Name-Last: Ross Author-Workplace-Name: University of Connecticut Title: The Continuing Practice and Impact of Discrimination Abstract: This chapter provides a detailed discussion of the evidence on housing and mortgage lending discrimination, as well as the potential impacts of such discrimination on minority outcomes like homeownership and neighborhood environment. The paper begins by discussing conceptual issues surrounding empirical analyses of discrimination including explanations for why discrimination takes place, defining different forms of discrimination, and the appropriate interpretation of observed racial and ethnic differences in treatment or outcomes. Next, the paper reviews evidence on housing market discrimination starting with evidence of segregation and price differences in the housing market and followed by direct evidence of discrimination by real estate agents in paired testing studies. Finally, mortgage market discrimination and barriers in access to mortgage credit are discussed. This discussion begins with an assessment of the role credit barriers play in explaining racial and ethnic differences in homeownership and follows with discussions of analyses of underwriting and the price of credit based on administrative and private sector data sources including analyses of the subprime market. The paper concludes that housing discrimination has declined especially in the market for owner-o