MTSU Department of Economics and Finance Working Papers

 

Abstract: Some key features of the Borana household economy are explored in the changing context of growing pastoralist exposure to the exchange system. Despite past commercialization efforts, the pastoral economy has largely remained unmonetized. The average cattle off-take rate is found to be well below 10% for the sample Borana households of which only 11% of the household off-take decisions were made for the primary purpose of financing non-pastoral business. Such decisions are largely made by the actual conditions of life principally associated with the need to procure cereal grains and meeting other basic needs. The analysis of household expenditure patterns reveals income diversity as a key determinant of the growing importance of "imported" items in pastoral household budgets. The apparent elastic demand for stimulants in this connection is a critical matter for local actions in the context of eroding traditional values.

Abstract: Consumers of higher education face a bewildering array of product and price combinations. We compare U. S. institutions with a Data Envelopment Analysis (DEA) multi-factor frontier using 2000-2001 data for 1,188 four-year institutions of higher education. The input is net price or tuition, fees, room, and board less per student financial aid. Outputs include SAT score, athletic expenditures, instructional expenditures, value of buildings, dorm capacity, and student body characteristics. The DEA efficiency scores indicate the distance of each institution from the “best buy” frontier, providing an objective means of ranking institutions as the best buys in higher education.

Abstract: Poverty has historically been associated with a decrease in food consumption.  This at least partially changed in 1964 when the Food Stamp Act began guaranteeing food for those in poverty.  Since the Act’s passage, the prevalence of obesity has increased dramatically, particularly among those with low incomes.  This paper examines the effects of the Food Stamp Program on the prevalence of obesity using 1979 National Longitudinal Survey of Youth data.  Results indicate food stamps have significant positive effects on obesity and the obesity gap for females, but these effects are relatively small and such benefits, consequently, are approximated to have played a minor role in increasing obesity at the aggregate level.

Abstract: With over 66 % of Americans overweight, expectant mothers are unusual because they are encouraged to gain weight while pregnant.  Food stamp receipt (FSR) may facilitate recommended weight gain for pregnant women by providing additional resources for food and nutrition.  I examine the effects of FSR on the amount of weight gained by low-income expectant mothers using NLSY79 data.  Results indicate FSR decreases the probability gaining an insufficient amount of weight but does not exacerbate the probability of gaining too much weight.  Examining the effects of FSR on pregnancy weight gain is important because low birth weight is more likely when expectant mothers gain an insufficient amount of weight.

Abstract: Before 1996, households were typically ineligible for welfare if they had assets worth more than $1,000, where $1,500 from each vehicle’s value was excluded from this determination.  However, the 1996 welfare reform act began allowing states to increase their asset limits and vehicle exclusions.  This may prompt low-income households to reallocate resources to or from vehicles.  We examine the effects of state vehicle asset rules on vehicle assets.  Results show liberalizing asset rules increases vehicle assets and that this increase is driven largely by eligible individuals increasing vehicle assets, with no evidence indicating ineligible individuals reduce vehicle assets to become eligible.

Abstract: This paper explains US macroeconomic outcomes with an empirical new-Keynesian model in which monetary policy minimizes the central bank's loss function. The presence of expectations in the model forms a well-known distinction between two modes of optimization, termed commitment and discretion. I estimate the model separately under each policy using maximum likelihood over the Volcker-Greenspan-Bernanke period. Comparisons of fit reveal that the data favor the specification with discretionary policy. Estimates of the loss function weights point to an excessive concern for interest rate smoothing in the commitment model but a more balanced concern relative to inflation and output stability in the discretionary model.

Abstract: It is not uncommon for upstream manufacturers to make payments to downstream firms in order to obtain preferential treatment. These payments may generally be called “consideration payments.” Examples of this include the slotting allowance payments often discussed in the grocery, pharmaceutical, and consumer electronics industries. Payola in the radio industry shares many of the same characteristics as slotting allowances.  The prohibition of radio payola in 1960 gives us an opportunity to empirically examine the effect that these payments had on the record labels using them and on overall product variety. We construct a unique variety measure based on the musical styles of Billboard chart artists and supplement this with information on radio airplay from Billboard charts to evaluate the effects of payola.  We find that the prohibition of payola reduced musical variety and overall record sales, but may have helped increase access for smaller record labels.  These findings support the theory that payola payments, which may impose a non-trivial financial burden on the record label, serve to reduce the radio station’s risk.

Abstract: The long-term effects of shocks are examined in the context of a traditional pastoral community. The impacts are empirically examined in connection with the micro-level poverty trap hypothesis and the associated minimum poverty threshold estimates reported in previous studies. We argue that these estimates cannot be taken as definitive and the core explanations behind them are incongruent with the institutional realities of the pastoral community for which they are reported. The reality is that shocks have implied long-term community-wide deprivation with a lasting effect of deterioration in the indigenous capacity to cushion those who slide into permanent destitution. This is evident in the empirically identified increasing loss of confidence in the indigenous social support structures. The findings rather highlight the need for policy interventions to focus on system level community-wide development issues rather than the commonly emphasized individual targeting implied by such exercises as asset-based poverty threshold estimates.

Abstract: From 1995-2007, worldwide tourist arrivals increased about 68.2 percent (or an average annual growth rate of about 5.2 percent) from 534 million to 898 million (UNWTO, 2008). Over the same period, Latin America countries (Central and South America) have experienced a rise in tourist arrivals from 14.3 million to 27.9 million (about 49 % growth) and tourist receipts growth from $2.3 billion to $3.7 billion (about 61 % growth), respectively. The tourism industry in Latin American countries (LAC) has also experienced a sizable increase in annual market share growth rate of 8.7 percent in 2004. Despite this fact, there are only few empirical studies that investigate the contributions of tourism to economic growth and development for Latin American economies. Using a panel data of 17 Latin American countries for the years that span from 1995 to 2004, this study investigates the impact of the tourism industry on the economic growth and development Latin American countries within the framework of the conventional neoclassical growth model. The empirical results show that revenues from the tourism industry positively contribute to both the current level of gross domestic product and the economic growth of LACs as do investments in physical and human capital. Our findings imply that Latin American economies may enhance their economic growth by strategically strengthening the tourism industry while not neglecting the other sectors which also promote growth.

Abstract: Since the 2001 Doha Round of multilateral trade negotiations, members of the World Trade Organization (WTO) have shown a renewed interest in using a new type of aid known as aid for trade (hereafter to be simply referred as AFT) as a means for catapulting the economic growth performance of developing countries. Japan, U.S., and the United Kingdom account for a significant proportion of AFT outlays being extended to developing countries. Despite the rise in the amount of funding outlays, to date, there is little information as to what determines the allocation of the AFT funds to different countries and the impact of the aid on the economic performance of the recipient developing economies. Using data on U.S. AFT outlays extended to a panel of 54 developing countries during 1999-2005, this study identifies some salient donor and recipient specific factors that influence the propensity and intensity of AFT allocation. Our study indicates that the share of AFT given to a country is greater: the larger is the relative magnitude of the donor’s exports to the recipient country, the more vulnerable the recipient country is to external economic shocks, the more politically globalized and landlocked the recipient is, the lower the level of economic freedom enjoyed by the citizens of the recipient country, and the higher the amount of the traditional Non-AFT aid per capita inflow is to the country. On the other hand, both the propensity and intensity of U.S. AFT falls with a rise in the recipient country’s ability to serve as a source for U.S. import supply and the more integrated it is with the rest of the world.

Abstract: Location quotient (LQ) is an index frequently used in geography and economics to measure the relative concentration of activities. This quotient is calculated in a variety of ways depending on which group to use as a reference. Here, we focus on simultaneous inference for the ratios of the individual proportions to the overall proportion based on binomial data. Apparently, this is a multiple comparison problem and multiplicity adjusted location quotients have not been addressed up to now. In fact, there is a negative correlation between the comparisons. The quotients can be simultaneously tested against unity and simultaneous confidence intervals can be constructed for the LQs based on existing probability inequalities and by directly using the asymptotic joint distribution of the associated z-statistics. The proposed inferences are appropriate for analysis based on sample surveys. A real data set is used to demonstrate the application of multiplicity adjusted LQs. A simulation study is also carried out to assess the performance of the proposed methods in terms of achieving a nominal coverage probability. It is observed that the coverage of the simple Bonferroni adjusted Fieller intervals for LQs is just as good as the coverage of the method which directly takes the correlations into account.

Abstract: The paper estimates a health production function for Sub-Saharan Africa based on the Grossman (1972) theoretical model that treats social, economic, and environmental factors as inputs of the production system. In estimating this function, socioeconomic and environmental factors such as income per capita, illiteracy rate, food availability, ratio of health expenditure to GDP, urbanization rate, and carbon dioxide emission per worker are specified as determinants of health status, proxied by life expectancy at birth. The parameters of the function are estimated by a method of one-way and two-way panel data analyses. The results obtained from two-way random effect model suggest that an increase in income per capita, a decrease in illiteracy rate, an increase in food availability are well associated with improvement in life expectancy at birth. Overall results suggest that a health policy, which may focus on the provision of health, services, family planning programs, and emergency aids to the exclusion of other socioeconomic aspects may do little in efforts directed toward improving the current health status of the region.

Abstract: This paper studies the role of unemployment insurance in a sticky-price model that features an efficiency-wage view of the labor market based on unobservable effort. The risk-sharing mechanism central to the model permits, but does not force, agents to be fully insured. Structural parameters are estimated using a maximum-likelihood procedure on US data. Formal hypothesis tests reveal that the data favor a model in which agents only partially insure each other against employment risk. The results also show that limited risk sharing helps the model capture many salient properties of the business cycle that a restricted version with full insurance fails to explain.

Abstract: This paper examines the recently growing adoption of non-pastoral livelihood strategies among the Borana pastoralists in southern Ethiopia. A large portion of the current non-pastoral participation is in petty and natural resource-based activities. Pastoral and crop production functions are estimated using the Cobb-Douglas model to analyse the economic rationale behind the growing pastoralist shift to cultivation and other non-pastoral activities. The low marginal return to labour in traditional pastoralism suggests the existence of surplus labour that can gainfully be transferred to non-pastoral activities. An examination of the pastoralist activity choices reveals that the younger households with literacy and more exposure to the exchange system display a more diversified income portfolio preference. The findings underscore the importance of human capital investment and related support services for improving the pastoralist capacity to manage risk through welfare-enhancing diversified income portfolio adoption.

Abstract: Policy makers need accurate measures of school district-level costs for a variety of reasons, including salary equity efforts and state-level funding of local schools. Since salaries constitute most of the operating costs for local education providers, teacher salary data provide a ready resource for constructing school cost indices. This paper provides an example of such an index, using year 2000 data for over 60,000 teachers employed by Tennessee public schools. The index is constructed using the parameters from a hedonic wage regression, and the resulting figures are published in the tables in the appendix.

Abstract: Since the 1970’s, countries of the Sub-Saharan African region have experienced slow economic growth and development in comparison to other regions of the world. This paper studies the role of perceived financial risk in explaining the divergence of economic growth among Sub-Saharan African countries by employing regression techniques on panel data for the period of 1984 to 2000. Our findings suggest that higher ratings of a country’s investment environment (used as a proxy for reduced perceived financial risk) tend to make the flow of external funds more accessible to African countries and spur their economic growth.

Abstract: Recent experimental games conducted by ethnographers (Henrich et al. 2004) have shown that groups with higher levels of market integration exhibit higher levels of prosocial behavior. In order to see whether these results are confirmed in a broader ethnographic sample, this paper draws from the Standard Cross-Cultural Sample variables measuring the degree to which a culture seeks to inculcate generosity, honesty, and trust. Using these as dependent variables, models are developed where market-related variables are among the independent variables. The paper uses the methodology developed by Dow (2007) to correct for Galton’s problem, and uses multiple imputation to deal with the problem of missing data. The results fail to confirm a systematic association between generalized prosocial behavior and market integration.

Abstract: For more than half a century, there have been heated debates on the sources of economic growth in developing economies. The perceived factors of economic growth have ranged from surplus labor to capital investment and technological change, foreign aid, foreign direct investment, investment in human capital, increasing returns from investment in new ideas and research and development. The positive or negative impacts of the above listed traditional sources of economic growth have been well documented in literature. Other researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, voice and accountability on economic growth and development. Despite the increasing importance of remittances in total international capital flows, however, the direct or indirect relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on economic growth within the conventional neoclassical growth framework using an unbalanced panel data spanning from1980 to 2004 for 37 African countries. We find that remittances boost growth in countries where the financial systems are less developed by providing an alternative way to finance investment and helping overcome liquidity constraints.

Abstract: In recent years, development co-operations that seek to promote trade flows between countries have continued to emerge from the notion that trade has a positive impact on economic growth. We evaluate the impact of one such initiative, the African Growth and Opportunity Act (AGOA), on the eligible Sub-Saharan African (SSA) countries’ exports to the U.S. We find that the implementation of the AGOA has contributed to the initiation of new and the intensification of existing SSA countries’ exports to the U.S. across several sectors. Our results imply that the contribution of such development and cooperation efforts to enhance the long-term economic growth of the parties involved through increased trade flows depends on the ability of policy makers in building upon the trade-initiation impetus generated by the policy change.

Abstract: We evaluate the impact of the unilateral trade policy concession known as African Growth and Opportunity Act (AGOA) on U.S. imports from eligible Sub-Saharan African (SSA) countries. Using U.S.-SSA countries’ trade data that span the years 1991-2006, we find that AGOA has contributed to the initiation of new and the intensification of existing U.S. imports in both manufactured and non-manufactured goods and several product categories. However, compared to its import initiation impact, the import intensification effect of the Act has been marginal. Our results have important policy implication for further intensification of African exports to the U.S. markets.

Abstract: This paper extends empirical research on marital instability in two dimensions. First, I examine the effects of household income volatility on divorce. Second, I examine the effects of household income volatility on the divorce behavior of lower- and higher household income individuals. The results indicate that increases in household income volatility raise the probability of divorce for men, regardless of whether the household income shocks are positive or negative. For women, the effect is not consistent across different household income volatility measures; however, the preferred model specification suggests that only negative shocks raise the risk of divorce.

Abstract: This paper extends empirical research on determinants of divorce in two ways.  First, I examine the effect of inflation on divorce.  Second, the use of a structural time-series modeling approach attributes unobservables and omitted variables to an unobserved component, which allows for the model’s parameters to be estimated consistently.  Inflation is statistically significant, positive, and persistent.  I show that the effects of inflation are robust to the inclusion of additional explanatory variables and various trend specifications.  The long-run implications of inflation are also substantial.  I conclude that price stability has the potential to reduce divorce rates.

Abstract: Over the decade of the 1990s, Africa has experienced a rise in tourist arrivals from 8.4 million to 10.6 million and receipts growth from $2.3 billion to $3.7 billion, respectively. According to the World Tourism Organization (WTO, 2006), the tourism industry in Sub-Saharan Africa enjoyed a robust annual market share growth rate of 10 percent in 2006. In spite of this, there are only few empirical studies that investigate the contributions of tourism to economic growth and development for African economies. Using a panel data of 42 African countries for the years that span from 1995 to 2004, this study explores the potential contribution of tourism to economic growth and development within the conventional neoclassical framework. The results show that receipts from the tourism industry significantly contribute both to the current level of gross domestic product and the economic growth of Sub-Saharan African countries as do investments in physical and human capital. Our findings imply that African economies could enhance their short-run economic growth by strategically strengthening their tourism industries.

Abstract: This paper seeks to shed light on the role of school funding in individual school performance. A unique data set is utilized for the Metropolitan Nashville – Davidson County School District in Tennessee, known colloquially as Metro. In 2005 the Metro school board undertook the task of breaking down individual school spending levels by funding source. The resulting 2004-2005 financial data are combined with academic test scores and demographic data for 2003-2004 and 2004-2005 academic years for each of 70 elementary schools. Econometric tests are then conducted to examine whether contemporaneous test score performance is determined by funding, or whether funding is determined by prior performance, or whether other school characteristics influence both.

Abstract: A divisia index of total factor productivity (TFP) growth is calculated for each of 16 regulated local telephone companies operating in Tennessee over the years 1989 through 1993. Year over year changes in TFP, in Tornqvist form, yield a growth in total factor productivity estimate for each company. These growth rates, however, contain the effects of both scale and technical change. Using the method suggested by Caves and Christensen, the effects are decomposed indirectly by regressing the annual percentage changes in TFP growth against measures of scale, service density, and network size. The results are consistent with the findings of economies of density and nearly constant returns to scale prevalent in the telecommunications literature.

Abstract: The characteristics of time as a resource are examined in order to seek evidence of these characteristics in fundamental concepts of Economics. A series of thought experiments on time travel demonstrate that a constant irreversible rate of time usage underlies the concepts of opportunity cost, time preference, and interest. This leads to the startling suggestion that the root question in Economics concerns the choice of how to spend time. Thus, the principles of Economics are tied closely to the human perception of time and more closely to the human condition than is generally admitted in undergraduate classes on the subject.

Abstract: The U.S. Supreme Court held that litigation for anticompetitive ends (“sham litigation”) must be “baseless” in order to face antitrust liability. The filing of such suits continues apace, as does the legal commentators’ debate, but economic analysis has lagged. Here, a game theoretic model is constructed in which plaintiffs file suit to achieve collateral gains and defendants may countersue for damages under the Sherman Act. In equilibrium, settlement fails and all suits are litigated, but the threat of countersuit deters low-expected-value plaintiffs. As the legal standard for sham litigation approaches “baselessness,” this deterrence effect is weakened and litigation may increase.

Abstract: This paper adds to the literature estimates of local labor market effects on gang participation.  I use data from the 1997 cohort of the National Longitudinal Survey of Youth (NLSY97) to model the probability of gang involvement.  The effect of the local unemployment rate is statistically significant and positive, across a wide-range of model specifications.  However, robustness checks reveal gang participation of individuals less than sixteen years-of-age (the legal minimum age for most jobs) is not responsive to the local unemployment rate.  Gang participation among individuals with lower ASVAB scores is more sensitive to the local unemployment rate.

Abstract: This paper examines the impact of unemployment insurance on the propagation of monetary disturbances in a staggered price model of the business cycle. To motivate a role for risk sharing behavior, I construct a quantitative equilibrium model that gives prominence to an efficiency-wage theory of unemployment based on imperfectly observable labor effort. Dynamic simulations reveal that under a full insurance arrangement, staggered price-setting is incapable of generating persistent real effects of a monetary shock. Introducing partial insurance, however, bolsters the amount of endogenous wage rigidity present in the model, enriching the propagation mechanism. Positive real persistence appears in versions of the model that exclude capital accumulation as well as in versions that do not.

Abstract: Objectives. Most researchers who use survey data must grapple with the problem of how best to handle missing information. This article illustrates multiple imputation, a technique for estimating missing values in a multivariate setting. Methods. I use multiple imputation to estimate missing income data and update a recent study that examines the influence of parents’ standard of living on subjective well-being. Using data from the 1998 General Social Survey, two ordered probit models are estimated; one using complete cases only, and the other replacing missing income data with multiple imputation estimates. Results. The analysis produces two major findings: 1) parents’ standard of living is more important than suggested by the complete cases model, and 2) using multiple imputation can help to reduce standard errors. Conclusions. Multiple imputation allows a researcher to use more of the available data, thereby reducing biases that may occur when observations with missing data are simply deleted..

Abstract: A growing number of studies investigate the determinants of happiness, or subjective well-being. Few, however, specifically examine the financial aspects of subjective well-being. This study estimates the determinants of subjective financial wellbeing (SWB) for a city in the American Southwest. The results show that income, health insurance, home ownership, and children at home have significant impacts on financial well-being. Missing survey values are estimated using multiple imputation; model results with and without imputed data are compared. Estimates from the complete case model show bias compared with the multiple imputation model. Home ownership and children at home are important predictors of financial well-being in the multiple imputation model but not the complete cases model.

Abstract: The Tennessee lottery scholarship (TELS) program is intended to make college more affordable for young people in Tennessee, with the aim of increasing higher education enrollment and retention rates. One way to evaluate the effectiveness of TELS is to determine to what extent did the scholarship change student behavior? That is, does TELS induce desirable behavior that would not otherwise occur? Using a logit model to predict year-over-year college retention, we conclude that TELS has a positive, but small, effect on student behavior in Tennessee. The biggest impact of TELS occurs among continuing students, with no effect for first-time students.

Abstract: OLS regression has typically been used in housing research to determine the relationship of a particular housing characteristic with selling price. Results differ across studies, not only in terms of size of OLS coefficients and statistical significance, but sometimes in direction of effect. This study suggests that some of the observed variation in the estimated prices of housing characteristics may reflect the fact that characteristics are not priced the same across a given distribution of house prices. To examine this issue, this study uses quantile regression, with and without accounting for spatial autocorrecation, to identify the coefficients of a large set of diverse variables across different quantiles. The results show that purchasers of higher-priced homes value certain housing characteristics such as square footage and the number of bathrooms differently from buyers of lower-priced homes. Other variables such as age are also shown to vary across the distribution of house prices.

Abstract: This article fills in some notable gaps in the literature on the existence and empirical implementation of dual cost and production models embodying the time utilization of capital.  A proof of the existence of such dual cost and production functions is provided; previous results of Betancourt (1986) and Klein (1984) are extended to the general N-input-factor, continuously variable time-utilization case; and the restrictive conditions under which a conventional neoclassical empirical cost model captures the characteristics of a capital-utilization technology are derived.  The general specification of cost functions that capture utilization effects is indicated.

Abstract: To gain analytical insight into whether input resources matter in public education, a Becker/Peltzman/Stigler model of the determination of local educational budgets and outputs by political authorities is constructed.  The model results are consistent with empirical findings that resources don’t matter, even when all schools are efficient, if errors in measurement and specification occur.   When all outputs are not observed, one cannot distinguish an inefficient school district from one that chooses an idiosyncratic output mix.  Blind application of efficiency measurement techniques in this context yields perverse or counterintuitive findings. Interpretation of feasible approaches to education production studies are discussed.

Abstract: A multi-sector growth model is developed where public spending affects output in one of two ways. First, the government taxes income to fund capital expenditures. Second, public capital is used in the production of both final goods and intermediate private capital goods. Inclusion of an intermediate private capital sector allows the potential of public capital investment to affect output in an indirect way that has previously not been studied in that past public investments make the accumulation process for private capital more efficient. In this case, it is shown that public investment policy is directly related to the relative price of intermediate investment goods and final goods. Using a panel of OECD countries, we find that public capital spending shocks account for a statistically important percentage of the movements in the relative price of private investment. As a result, deviations in public investment policy can account for a nontrivial portion of the cyclical variations in output even though the direct effect of public investment policy on final good production is found to be small (public capital's share in the output of final goods is only 2%).

Abstract: This paper extends previous empirical research on the determinants of aggregate property crime rates in two dimensions.  First, we examine the effect of inflation on property crime rates.  Then, using a structural time-series approach we show that it is possible to estimate consistently the effects of exogenous macroeconomic variables on aggregate property crime rates without introducing endogenous deterrence to the model.  Inflation is statistically significant, positive, and persistent for all property crime rates examined.  We conclude that price stability contributes considerably to the reduction of property crimes.

Abstract: Mayan towns in the Guatemalan highlands hold markets on specific days of the week. A market is attended by local townspeople, by peasants residing in the town’s hinterland, and by vendors bringing wares from other towns. A market functions to bring in goods from other ecological zones, to bring in goods from higher order centers, and to sell surpluses of locally produced goods. To understand how these markets are integrated, we develop a gravity model, examining the flow of vendors from 85 towns of residence to 15 market towns. In our model, the flow of vendors from one town to another is a function not only of physical distance, but of ecological complementarities, of linguistic differences, of road access, and of demographic endowments.

Abstract: Concern over the loss of genetic diversity in the world’s field crops has increased due to the commercial introduction of genetically modified crops. Mexico is particularly sensitive to this issue, as it is the center of genetic diversity for maize and home to a large number of indigenous farmers who propagate this diversity. This paper analyzes to what extent the biodiversity of maize may be endangered as subsistence farmers are forced off their land. Off-farm migration is suggested as a potential rational response of farmers to the large and rapidly growing imports of maize from the U.S., a large share of which consists of genetically modified maize. The maize imports from the U.S. are seen not only as worsening the terms of trade of subsistence farmers but also as raising the risk of lower yields as indigenous varieties of maize may lose their resilience to environmental stress through contamination with genetically modified maize.

Abstract: This paper presents a Generalized Method of Moments algorithm for estimating the structural parameters of a macroeconomic model subject to the restriction that the coefficients of the monetary policy rule minimize the central bank's expected loss function. The algorithm combines least-squares normal equations with moment restrictions derived from the first-order necessary conditions of the auxiliary optimization. We assess the performance of the algorithm with Monte Carlo simulations using three increasingly complex models. We find that imposing the optimizing restrictions when they are true improves estimation accuracy and that imposing those restrictions when they are false biases estimates of some of the structural parameters but not of the policy rule coefficients.

Abstract: This paper provides a direct test for forecast bias using the Thiel equation. In this test the constant term is simply the difference between the mean of the forecast and the mean of the actual data. A simple data transformation leads to this specification of the constant term. The approach is expanded to include a function with additional independent variables where one is interested in the constant term being simply the difference of the means of the dependent and any one of the independent variables.

Abstract: In a stylized economy with price and wage stickiness, this paper argues that delegating a nominal wage target to a central bank operating under discretion generally delivers better social outcomes than delegating price level or inflation targets. Although both policies impart inertia into central bank actions, wage targeting dominates price level targeting because the former delivers a more favorable tradeoff between the stabilization goals appearing in the social welfare function, namely, price inflation, wage inflation, and the output gap. Delegation of a dual policy featuring both price level and nominal wage targets, however, nearly replicates the efficient outcome accompanying the precommitment policy from a timeless perspective.

Abstract: Inter-county flows of commuters have long been used by the Bureau of the Census to identify MSAs and by the BEA to identify its Economic Areas. This paper looks at U.S. interregional flows of commuters, population, and goods in an effort to identify broader patterns of relationships among U.S. regions. A region’s primary flow up the central place hierarchy is found using tools commonly employed in Social Network Analysis. The results allow classification of regions in two ways: 1) as levels in a hierarchy; or 2) as a member of a group of regions all tied to the same member of the next-highest level of the hierarchy.

Abstract: The effects of changes in monetary policy are studied in a general equilibrium model where money facilitates transactions. Because there are two types of agents, workers and capitalists, different elasticities of money demand exist, implying that monetary policy influences the distribution of income. When earnings inequality is incorporated into monetary policy rule is the model able to replicate cyclical fluctuations of both real and nominal aggregates as well as the inequality measure. Additionally, monetary policy becomes more countercyclical when the fraction of transfers received by the workers increases.

Abstract: Many studies delete incomplete data prior to model estimation, resulting in less efficient and potentially biased parameter estimates.  Multiple imputation provides a model-based method of simultaneously estimating missing values for several variables, conditioned on the observed values.  The technique is applied to financial well-being data collected by survey from householders in Oklahoma County, Oklahoma.  Ordered logistic models are estimated for both complete cases and multiply imputed data.  Estimates from the complete case model are somewhat biased and less efficient compared with the multiple imputation model.

Abstract: Middle Tennessee is growing rapidly:  two Midstate counties rank among the top 100 counties nationally for population growth, and Rutherford County ranks at the top nationally among other large counties for payroll employment growth.  Middle Tennessee is growing, but what are the implications for long-term economic development, especially the demand for public services?  This study reviews the performance of the Middle Tennessee economy since the recent recession and examines the implications of rapid growth for the demand for public services.

Abstract: Economists are giving more attention to the issue of subjective well-being.  A recent study of households in West Virginia treats subjective well-being in a quality of life context (Bukenya 2003) in rural areas.  Wolfers (2003) examines business cycle volatility and subjective well-being, while McBride (2001) models relative-income effects on subjective well-being.  A recent study (Praag 2002) considers financial situation as a domain of well-being, along with health, employment, leisure, housing, and environment.  This study examines the factors that determine financial well-being for households in Oklahoma County, Oklahoma.  The study is motivated by the availability of extensive household-level data for a six year period for Oklahoma County.

Abstract: The paper demonstrates through a number of Monte-Carlo experiments that, for the type of cross-section data sets typically encountered in applied economics, Chow tests on sorted variations of the data matrix can detect neglected parameter heterogeneity. The paper focuses on heterogeneity in the behavioral responses of economic actors that belong to different economically meaningful groups, such as the young, middle-aged, and old. Since the suggested methodology is easy to implement yet powerful, its routine use by applied economists would be desirable given the very significant estimation bias that can result from neglecting parameter heterogeneity.

Abstract: The effects of fiscal spending shocks are estimated by the introduction of a measure of fiscal policy into the neoclassical growth model via a parametric function that distorts the value of newly created capital. The model is estimated by Method of Simulated Moments (MSM) via conditional moments (IRFs) from a panel of countries. We find that fiscal spending distortions cannot be rejected as an important determinant for deviations in the relative price of investment for the OECD countries. An implication is that a one standard error shock to fiscal spending can increase GDP by as much as 1.12 percent over an eight year horizon. Alternatively, the price of investment seems not to be affected by fiscal policy shocks in less developed countries.

Abstract: The passage of the Interstate Banking and Branch Efficiency Act (IBBEA) of 1994 streamlined the consolidation process that had been underway since the formation of the first regional compact in 1982. This study shows that in the IBBEA’s aftermath, bank holding companies streamlined operation by consolidated bank charters within the holding companies; banks of mammoth size quickly emerged; concentration increased at that national level and bank size grew; and when segregating banks into five asset sizes, the consolidation among banks over the last 10 years came largely at the expense of the number of the nation’s smallest banks. The study also reports on forward-looking simulations that point to continued losses in the number of small banks.

Abstract: Today, many pregnant women take a brief period of time off from work to give birth.  In this paper, I identify the effects of pregnancy employment on health at birth.  My initial results show that pregnancy employment has beneficial effects.  However, these effects often become statistically insignificant when I control for earnings from pregnancy employment, when I exclusively examine women employed prior to the pregnancy, and when I examine siblings in fixed effects models.  I conclude that beneficial effects of pregnancy employment are partially due to increased family income via earnings during the pregnancy and partially due to unobserved heterogeneity.  There is no evidence that increased female labor force participation adversely affects health at birth.

Abstract: The 1993 Family and Medical Leave Act (FMLA) guarantees employees 12 weeks of unpaid leave to address family issues.  Twelve states and the District of Columbia passed similar legislation antedating the FMLA.  However, studies in the economics literature find either small or insignificant effects of the legislation on employment, leave-taking, work, and wages.  Perhaps employees are unable to use the mandated leave because it is unpaid and/or they do not need family leave because they already have the option of taking off work via vacation, sick leave, and disability leave policies.  If so, then family leave legislation may have increased employer-provided family leave without corresponding effects on employment-related outcomes.  This paper examines family leave legislation’s effects on employers’ family leave policies, finding significant positive effects.

Abstract: Positive autocorrelation implies that proximate observations take on similar values. “Proximate” can be defined in many different dimensions. In a cross-section of U.S. regions, it can be defined using physical distance, cultural similarity, ecological similarity, or using frequency and intensity of interaction, such as migration or commuting relationships. Autocorrelation of regression residuals presents well-known problems in least-squares estimation, but autocorrelation also provides useful information for exploratory data analysis and model specification. The paper shows that autocorrelation is widespread in U.S. regional data.

Abstract: Some basic dynamic programming techniques are introduced by way of example with the help of the computer algebra system Maple. The emphasis is on building confidence and intuition for the solution of dynamic problems in economics. To better integrate the material, the same examples are used to introduce different techniques. One covers the optimal extraction of a natural resource, another consumer utility maximization, and the final example solves a simple real business cycle model. Every example is accompanied by Maple computer code to make replication and extension easy.

Abstract: Property rights will be more carefully defined and enforced when the value of a resource rises or the probability of losing the resource increases. A simple model is estimated on litigation data for Colorado to test this hypothesis. According to the model, the number of water rights cases will rise when the demand for water increases or the supply of water decreases. Several versions of such a model with a deterministic and, alternatively, a stochastic trend component are estimated. The estimates are robust across model type and confirm the theoretical conclusions on the determinants of water rights cases.

Abstract: Accountability reforms have led to a bewildering array of public school performance measures. Policy makers, parents, and the public would often like to use this information to rank schools by differing degrees of effectiveness. Combining measures from different performance dimensions into a single index should be done in such a way that the resulting index is fair to each school, gives each school the incentive to change in the most desirable directions, and reduces the confusing mass of information to the simplest possible ordinal rank differences. This paper proposes a flexible weights approach, based on a modification of Data Envelopment Analysis. The resulting index maximally reduces information, is fair, and allows policymakers some discretion in guiding the direction schools take in their improvement.

Abstract: The cyclical behavior of the acquisition of skills over the life-cycle is investigated. The OLG model employed includes the human capital production sector of Heckman (1976) that has two possible responses in skill acquisition to a productivity shock; a substitution and an income effect. The calibrated model predicts, for all age groups, that the substitution effect dominates the income effect implying opportunity-cost considerations tend to make schooling countercyclical. However, the data on college enrollments suggests that the ability-to-pay consideration, or the income effect, is more important for the very young since enrollments for the recently graduated from high-school are procyclical. By making human capital acquisition shocks positively correlated with the TFP shock, the income effect of the young is increased thereby replicating the observed data. 

Abstract: Positive autocorrelation implies that proximate observations take on similar values. “Proximate” can be defined in many different dimensions. In a cross-section of nations, it can be defined using physical distance, cultural similarity, ecological similarity, or using frequency and intensity of interaction, such as trade relationships or enemy and ally relationships. Autocorrelation of regression residuals presents well-known problems in least-squares estimation, but autocorrelation also provides useful information for exploratory data analysis and model specification. The paper shows that autocorrelation is widespread in international datasets. The paper demonstrates the usefulness of autocorrelation in uncovering stylized facts about international relations, and in specifying a least-squares model.