Working Papers Series

Papers below are in pdf.

2009

WP 09-13
A Non-Experimental Evaluation of Curricular Effectiveness in Math
Cory Koedel & Rachana Bhatt

We use non-experimental data from a large panel of schools and districts in Indiana to evaluate the impacts of math curricula on student achievement. Using matching methods, we obtain causal estimates of curriculum effects at just a fraction of what it would cost to produce experimental estimates. Furthermore, external validity concerns that are particularly cogent in experimental curricular evaluations suggest that our non-experimental estimates may be preferred. In the short term, we find large differences in effectiveness across some math curricula. However, as with many other educational inputs, the effects of math curricula do not persist over time. Across curriculum adoption cycles, publishers that produce less effective curricula in one cycle do not lose market share in the next cycle. One explanation for this result is the dearth of information available to administrators about curricular effectiveness.

JEL Codes: I21, I28 and H75
Keywords: curricular effectiveness, math curricula, non-experimental methods, matching methods, education policy

Updated substantially as WP 11-22

WP 09-12
Recent Changes In The Characteristics Of Unemployed Workers
Marios Michaelides & Peter R. Mueser

We examine how gender, racial, and ethnic variation in unemployment and Unemployment Insurance (UI) receipt changed over time in the U.S. economy and how these changes are influenced by shifts in the occupational and industrial composition of employment. Using Current Population Survey (CPS) data, we find that, in the past 50 years, the unemployment rates for women, nonwhites, and Hispanics have been converging to those of the rest of the population. Between 1992 and 2007, women had the same unemployment rates as men; nonwhites still had higher unemployment rates than whites; and the rate for Hispanics was approaching that of non-Hispanics. Once we control for industry-occupation differences, women have higher unemployment and UI receipt rates than men, while Hispanics have similar unemployment rates but lower UI receipt rates than non-Hispanics. Nonwhites still have appreciably higher unemployment rates but the same UI receipt rates as whites.

JEL Codes: J11, J15, J16, J65
Keywords: Unemployment, Unemployment Insurance, Gender, Race, Ethnicity

WP 09-11
Selection of Multivariate Stochastic Volatility Models via Bayesian Stochastic Search
Antonello Loddo, Shawn Ni & Dongchu Sun

We propose a Bayesian stochastic search approach to selecting restrictions on multivariate regression models where the errors exhibit deterministic or stochastic conditional volatilities. We develop a Markov Chain Monte Carlo (MCMC) algorithm that generates posterior restrictions on the regression coefficients and Cholesky decompositions of the covariance matrix of the errors. Numerical simulations with artificially generated data show that the proposed method is effective in selecting the data-generating model restrictions and improving the forecasting performance of the model. Applying the method to daily foreign exchange rate data, we conduct stochastic search on a VAR model with stochastic conditional volatilities.

JEL Codes: C11, C15, C32
Keywords: Bayesian VAR, Particle Filter, Markov Chain Monte Carlo, Model Selection

WP 09-10
The Social Cost of Open Enrollment as a School Choice Policy
Cory Koedel, Julian R. Betts, Lorien A. Rice & Andrew C. Zau

We evaluate the integrating and segregating effects of school choice in a large, urban school district. Our findings, based on applications for fall 2001, suggest that open enrollment, a school-choice program that does not have explicit integrative objectives and does not provide busing, segregates students along three socioeconomic dimensions – race/ethnicity, student achievement and parental-education status. Using information on expenditures to promote integration at the district, we back out estimates of the social cost of open enrollment realized in terms of student segregation. Our social-cost estimates range widely depending on the weights that we place on the different dimensions of integration. However, even using conservative valuations of the different integrative measures suggests a social cost at this single district of over 3.4 million dollars (in year-2000 dollars). When considered in the context of the nation as a whole, where open-enrollment programs are commonplace, this estimate from a single district is substantial. However, we also note that there may be benefits not related to integration that counterbalance some or all of these costs.

JEL Codes: I20, J15, R23
Keywords: school choice, open enrollment, integration, segregation, segregation costs

WP 09-09
Auctioning the Right to Choose When Competition Persists
Ronald M. Harstad

Several papers compare auctioning heterogeneous assets sequentially with sequentially selling the right to choose among assets not yet taken. Typically motivated by auctions of condos for owner occupation, these papers have assumed that each winning bidder exits, so each successive auction has less competition. In many heterogeneous-asset-sale situations, a winning bidder may still be interested in acquiring further assets. We build a simple model of persistent competition, in which the distribution of equilibrium revenue from separate sales is shown to be a mean-preserving spread of the distribution of revenue from selling rights to choose. Persistent competition reveals that a high bidder does not always select his most preferred asset, and that one asset being slightly more likely to be a favored asset discontinuously affects equilibrium bidding.

JEL Codes: D44, D82
Keywords: auction theory; rights-to-choose auctions; revenue comparisons; persistent competition; private information

WP 09-08
Information Variability Impacts in Auctions
Justin Jia, Ronald M. Harstad & Michael H. Rothkopf

A wide variety of auction models exhibit close relationships between the winner's expected profit and the expected difference between the highest and second-highest order statistics of bidders' information, and between expected revenue and the second-highest order statistic of bidders' expected asset values. We use stochastic orderings to see when greater environmental variability of bidders' information enhances expected profit and expected revenue.

JEL Codes: D44, D82, L14, C62
Keywords: winner's curse; adverse selection; common-value auctions; procurement; product quality

WP 09-07
Winner's Curse Corrections Magnify Adverse Selection
Ronald M. Harstad & Robert Bordley

The adverse-selection literature has only considered the case in which competing sellers' costs of supply are independent and privately known by the individual sellers. In contrast, the auction literature has ignored adverse selection by implicitly assuming that a bid-taker is indifferent between suppliers at a given price. We show that competition in auctions with common-value elements serves to magnify the impact of adverse selection, as a bidder supplying a higher-cost product rationally makes a heightened winner's curse correction in a procurement auction. Hence lower-cost suppliers are disproportionately likely to win the auction, potentially creating a more serious quality problem for the procurer than mainstream adverse-selection models suggest.

JEL Codes: D44, D82, L14, C62
Keywords: winner's curse; adverse selection; common-value auctions; procurement; product quality

WP 09-06
Postsecondary Education Structure
Originally listed as:Postsecondary Education Structure and Human Capital Production
Cory Koedel

States differ substantially in the structures of their public four-year university systems. This paper uses micro-level data to evaluate the effects of postsecondary education structure on individuals’ educational and labor-market outcomes. Postsecondary education structure affects whether individuals attend universities at all, whether they attend public or private universities, and whether they attend large or small universities. Individuals who are exposed to more-fractionalized structures are adversely affected in the labor market. In conjunction with evidence that it is more expensive to educate students at smaller universities, this latter result suggests that states with more-fractionalized postsecondary education structures should look to consolidate their resources into fewer, larger universities.

JEL Codes: I20, I23, J24
Keywords: postsecondary education structure, higher education structure,
small university, large university, postsecondary education costs

WP 09-05
Brand Familiarity and Product Knowledge in Customization
Oksana Loginova

This paper challenges the assumption commonly used in the theoretical literature
on customization that consumers always get their ideal varieties when they
purchase a customized product. I adopt Hotelling's horizontal diffierentiation model
with two firms competing for a continuum of consumers. Each consumer has a
most preferred variety and possesses a certain level of category-specific knowledge.
Initially, the firms produce standard products located at the end points of the variety
interval. Suppose one of the firms offers customization. Consumers familiar
with the brand can easily transfer their needs into appropriate characteristics of
this brand. Consumers unfamiliar with the brand have difficulty in expressing their
preferences. Category-specific knowledge is crucial here. Knowledgeable consumers
are more capable of analyzing information than less knowledgeable ones, and the
products they design better match their preferences. The game runs as follows.
First, the firms simultaneously decide whether to offer customization, then engage
in price competition. I show that while customization makes the products less differentiated, the frictions introduced into consumer co-design activities relax price
competition. As a result, customization by one of the firms occurs in equilibrium.

JEL Codes: D43, L13, C72
Keywords: horizontal differentiation, price competition, customization, brand familiarity,
product knowledge

Published in International Journal of Economic Theory

WP 09-04
Customization: Ideal Varieties, Product Uniqueness and Price Competition
Oksana Loginova & X.H. Wang

We study customization in the Hotelling model with two firms. In addition to providing ideal varieties, the perceived uniqueness of a customized product contributes independently to consumer utility. We show that only when consumer preferences for uniqueness are high customization occurs in equilibrium.

JEL Codes: D43, L13, C72
Keywords: customization, product differentiation, product uniqueness, price competition

published in Economics Bulletin

WP 09-03
Customization with Vertically Differentiated Products
Oksana Loginova & X.H. Wang

We study an asymmetric duopoly market in which the firms' products are initially differentiated in both variety and quality. Each consumer has a most preferred variety and a quality valuation. Customization provides ideal varieties for consumers but has no effect on product qualities. The firms first choose whether to customize their products, then engage in price competition. For the customization stage we consider two different games: the simultaneous-move game and the endogenous-timing game. In the latter, whether customization choices are made simultaneously or sequentially is endogenously determined. We show that both quality and the timing of customization choices play important roles in determining the equilibrium outcome. Customization occurs only if the quality difference is sufficiently large. Endogenous timing sometimes enables the firms to achieve an outcome that is Pareto superior to that if they were to make their customization choices simultaneously. Although the higher quality firm is more likely to customize, endogenous timing sometimes enables the lower quality firm to obtain an advantage that it would not have in the simultaneous-move game.

JEL Codes: D43, L13, C72
Keywords: customization, horizontal differentiation, vertical differentiation, endogenous timing.

Published in Journal of Economics and Management Strategy

WP 09-02
Does Student Sorting Invalidate Value-Added Models of Teacher Effectiveness? An Extended Analysis of the Rothstein Critique
Cory Koedel & Julian R. Betts

Value-added modeling continues to gain traction as a tool for measuring teacher performance. However, recent research (Rothstein, 2009, forthcoming) questions the validity of the value-added approach by showing that it does not mitigate student-teacher sorting bias (its presumed primary benefit). Our study explores this critique in more detail. Although we find that estimated teacher effects from some value-added models are severely biased, we also show that a sufficiently complex value-added model that evaluates teachers over multiple years reduces the sorting-bias problem to statistical insignificance. One implication of our findings is that data from the first year or two of classroom teaching for novice teachers may be insufficient to make reliable judgments about quality. Overall, our results suggest that in some cases value-added modeling will continue to provide useful information about the effectiveness of educational inputs.

JEL Codes: I20, I28 and I21
Keywords: value added, measurement of teacher quality, outcome-based teacher
quality

WP 09-01
New Estimates of Public Employment and Training Program Net Impacts: A Nonexperimental Evaluation of the Workforce Investment Act Program
Carolyn J. Heinrich, Peter R. Mueser, Kenneth R. Troske, Kyung-Seong Jeon, and Daver C. Kahvecioglu

This paper presents nonexperimental net impact estimates for the Adult and Dislocated Worker programs under the Workforce Investment Act (WIA), the primary federal job training program in the U.S. The key measure of interest is the difference in average quarterly earnings or employment attributable to WIA program participation for those who participate, estimated for up to four years following entry into the program. These estimates of WIA program impact are based on administrative data from 12 states, covering approximately 160,000 WIA participants and nearly 3 million comparison group members. Propensity score matching methods are used to compare WIA program participants with comparison groups of individuals who are observationally equivalent across a range of demographic characteristics, social welfare benefit receipt, geographic area, and prior labor market experiences but who either did not receive WIA services or did not receive WIA training. The results for the average participant in the WIA Adult program show that participating is associated with a several-hundred-dollar increase in quarterly earnings. The marginal benefits of training may exceed $400 in earnings each quarter three years after program entry. Dislocated Worker program participants experience smaller benefits than for those in the Adult program. Although it is not possible to rule out the possibility that some of our estimates may be influenced by systematic selection, we undertake a variety of robustness tests suggesting that the general pattern of the results almost surely reflects actual program impacts on individual participants.

JEL Codes: I38, J08, J24
Keywords: Job Training, Program Evaluation, Workforce Investment Act, Matching

Updated in WP10-03