Working Papers Series
Papers below are in pdf.
Substantially revised as WP-1008
Subtantially revised in WP 09-03
We exploit the existence of substantial variation in state policies toward public health insurance for children between 1990 and 2002 to estimate the economic and political determinants of state eligibility levels. Controlling for state and year effects, eligibility levels are not significantly associated with either the percentage of uninsured children in the state or the eligibility policy of neighboring states; further, variation in eligibility levels within state is negatively associated with both the federal matching rate and state fiscal capacity. We also observe that state political preferences, measured by the Democrats’ share of seats in the lower chamber of the state legislature, are a relatively important a determinant of state eligibility levels. However, other political factors, such as party control of state government, voter turnout, legislative term limits and campaign finance regulations do not influence state eligibility levels.
JEL Codes: D78, H75, I78
Keywords: medicaid, SCHIP, political economy, race-to-the-bottom
Explaining Public Attitudes on State Legislative Professionalism
David M. Konisky, Jeffrey Milyo & Lilliard E. Richardson, Jr.
Scholars have long argued that state legislative professionalism, or the provision of staff, legislator salary, and session length, has behavioral incentives for legislators and implications for legislative capacity. Scant attention, however, has been devoted to public attitudes on the provision of these legislative resources. Using survey data on preferences for features associated with a citizen legislature versus a professional legislature, we examine the contours of public attitudes on professionalism and test models on the factors associated with these attitudes. Results suggest partisanship, trust, and approval of the local delegation matter, but the factors differ by the legislative professionalism of the respondent’s state and for low versus high knowledge citizens.
JEL Codes: D72, H79, H83
Keywords: legislative professionalism, public opinion, political economy
Environmental Policy Attitudes: Issues, Geographical Scale, and Political Trust
David M. Konisky, Jeffrey Milyo & Lilliard E. Richardson, Jr.
Objectives. This article examines environmental policy attitudes, focusing on
the differences in preferences across issue type (i.e., pollution, resource preservation)
and geographical scale (i.e., local, national, global). In addition, we study
whether an individual�s trust in government influences environmental policy attitudes.
Methods. Analyzing data from the 2007 Cooperative Congressional Election Study, we estimate a series of OLS regression models to examine the public�s environmental policy attitudes. Results. We find stronger public support for government action to address pollution issues than resources issues, and stronger support for local and national pollution abatement than dealing with global problems. We also find that Republicans and ideological conservatives are less likely to support further government effort to address the environment, and that more trusting individuals are more favorable to government action to address pollution and global issues.
Conclusion. Environmental policy attitudes vary by the nature of the issue; however, political ideology and partisan affiliation are consistent predictors of preferences across issues, even when controlling for an individual�s level of trust in government.
JEL Codes: Q5, H1, R5
Keywords: environment, NIMBY, public opinion, political economy
Published in Social Science Quarterly 2008
Crude Oil and Stock Markets: Stability, Instability, and Bubbles
J. Isaac Miller & Ronald A. Ratti
We analyze the long-run relationship between the world price of crude oil and international stock markets over 1971:1-2008:3 using a cointegrated vector error correction model with additional regressors. Allowing for endogenously identified breaks in the cointegrating and error correction matrices, we find evidence for breaks after 1980:5, 1988:1, and 1999:9. We find a clear long-run relationship between these series for six OECD countries for 1971:1-1980.5 and 1988:2-1999.9, suggesting that stock market indices respond negatively to increases in the oil price in the long run. During 1980.6-1988.1, we find relationships that are not statistically significantly different from either zero or from the relationships of the previous period. The expected negative long-run relationship appears to disintegrate after 1999.9. This finding supports a conjecture of change in the relationship between real oil price and real stock prices in the last decade compared to earlier years, which may suggest the presence of several stock market bubbles and/or oil price bubbles since the turn of the century.
JEL Codes: C13, C32, Q43
Keywords: crude oil, stock market prices, cointegrated VECM, structural stability, stock market bubble, oil price bubble
Published in Energy Economics 2009
Supersize It: The Growth of Retail Chains and the Rise of the "Big Box" Retail Format
Emek Basker, Shawn Klimek, & Pham Hoang Van
This paper documents and explains the recent rise of "big box" general merchandisers. Data from the Census of Retail Trade for 1977-2007 show that general-merchandise chains grew much faster than specialist retail chains, and that general merchandisers that added the most stores also disproportionately increased their product offerings. We explain these facts with a model in which a retailer's scale economies interact with consumer gains from one-stop shopping to generate a complementarity between a retailer's scale and scope.
JEL Codes: L11, L25, L81
Keywords: retail, chain, big box, superstore, economies of scale, general merchandise, one stop shopping
Published in Journal of Economics and Management Strategy 2012
This paper examines whether educational production in secondary school involves joint production among teachers across subjects. In doing so, it also provides insights into the reliability of value-added modeling. Teacher value- added to reading test scores is estimated for four different teacher types: English, math, science and social studies. While the initial results indicate that reading output is jointly produced by math and English teachers, post-estimation falsification tests debunk the math-teacher �effects� - that is, there is in fact no evidence of joint production in secondary school. The results offer a mixed review of the value-added methodology, suggesting that it may be useful in some contexts but not others.
JEL Codes: I20, I22
Keywords: value-added, teacher quality, secondary school teachers, educational production
published in Economics of Education Review 2009
Value-added measures of teacher quality may be sensitive to the quantitative properties of the testing instruments upon which they are based. This paper focuses on the sensitivity of value-added to a particularly relevant testing-instrument property � test-score-ceiling effects. Test-score ceilings are likely to be increasingly common in testing instruments across the country as education policy continues to emphasize proficiency-based reform. Encouragingly, we show that over a wide range of test-score- ceiling severity, teachers� value-added estimates are only negligibly influenced by ceiling effects. However, as ceiling conditions approach those found in minimum-competency testing environments, value-added results are significantly altered.
JEL Codes: I20, I21 and J24
Keywords: value added, test score ceiling, ceiling cffects, teacher quality, teacher value added
published in Education Finance and Policy 2010
This paper applies the theories of exposure order effects, developed in the psychology literature, to an industrial organization model to explore their role in advertising competition. There are two firms and infinitely many identical consumers. The firms produce a homogeneous product and distribute their brands through a common retailer. Consumers randomly arrive at the retailer and buy their most preferred brands. The order in which a consumer sees the advertising messages affects his brand preferences. Under the primacy effect the consumer prefers the brand he first saw advertised, under the recency -- the last encountered brand. The equilibrium of the advertising game is characterized separately under the primacy and the recency effects. In the first setting all consumers are initially unaware of the product existence. The equilibrium advertising intensities, remarkably, do not depend on the type of exposure order effect. In the other two settings some consumers have already formed their brand preferences. The primacy and the recency effects give rise to different equilibrium outcomes.
JEL Codes: C73, D11, D43, L13, M37
Keywords: advertising order effects, primacy, recency
Published in Journal of Economic Behavior and Organization 2009
I estimate the aggregate income elasticity of Wal-Mart's and Target's revenues using quarterly data for 1997-2006. I find that Wal-Mart's revenues increase during bad times, whereas Target's revenues decrease, consistent with Wal-Mart selling "inferior goods" in the technical sense of the term. An upper bound on the aggregate income elasticity of demand for Wal-Mart's wares is -0.5.
JEL Codes: L81, D12
Keywords: retail, Wal-Mart, Target, inferior goods
Published in Economic Inquiry 2011
Imports "R" Us: Retail Chains as Platforms for Developing-Country Imports
Emek Basker and Pham Hoang Van
Wal-Mart, Toys "R" Us, and other large retail chains are often identified with cheap imports. We use data from the Census of Retail Trade and the International Trade Commission over the period 1997-2002 to test whether big chains serve as platforms for imports from LDCs. Using difference-in-difference specifications we show that Chinese and other LDC imports have increased disproportionately in retail sectors with the sharpest consolidation into chains. To quantify the importance of chain growth to import growth we apply a numerical algorithm that generates marginal propensities to import by firm size. The largest retail firms' propensity to import from China is 17 percentage points higher than that of smaller retailers; the corresponding difference in import propensities from LDCs as a whole is 27 points. The disproportionate growth of large retailers between 1997 and 2002 explains 5% of the overall growth in consumer goods imports, 20% of the growth in consumer goods imports from China, and 22% of the growth in consumer goods imports from LDCs.
JEL Codes: F12, F14, L11, L81
Keywords: imports, retail chains
published in American Economic Review (Papers and Proceedings) 2010
Standard target zone exchange rate models are based on nonlinear functions of unobserved economic fundamentals, which are assumed to be bounded, similarly to the target zone exchange rates themselves. Using a novel estimation and testing strategy, I show how this key but often overlooked assumption may be tested. Empirical results cast doubt on its validity in practice, providing a reason for well-documented empirical difficulties of these models in the literature.
JEL Codes: F3, C22, C52
Keywords: target zone exchange rates, economic fundamental, unscented Kalman filter, rescaled range statistic
Published in Economic Modelling 2011
We investigate the efficiency properties of population mobility when localities compete in an environment with local amenities and local externalities. Our model is dynamic, incorporating land and labor markets in a context where firms and workers form rational expectations. Concern focuses on whether and under what conditions the substantive conclusions from static models can be reinterpreted to apply in a dynamic context where moving is costly. In the spirit of Tiebout (1956), it can be shown in static models that taxes or subsidies developed by each local jurisdiction representing the interests of landowners can induce an efficient population allocation even in the presence of local externalities. We show that, in a dynamic model, efficiency of mobility requires that localities represent the interests of other local stakeholders, including residents and firms, as well as landowners. There may be multiple sets of equilibrium flows corresponding with alternative expectations. We consider institutional arrangements that may facilitate preferred paths.
JEL Codes: H21, J61
Keywords: geographic mobility, optimal population distribution
Substantially revised as WP11-23
We consider nonlinear transformations of random walks driven by thick-tailed innovations that may have infinite means or variances. These three nonstandard characteristics: nonlinearity, nonstationarity, and thick tails interact to generate a spectrum of asymptotic autocorrelation patterns consistent with long-memory processes. Such autocorrelations may decay very slowly as the number of lags increases or may not decay at all and remain constant at all lags. Depending upon the type of transformation considered and how the model error is speci- fied, the autocorrelation functions are given by random constants, deterministic functions that decay slowly at hyperbolic rates, or mixtures of the two. Such patterns, along with other sample characteristics of the transformed time series, such as jumps in the sample path, excessive volatility, and leptokurtosis, suggest the possibility that these three ingredients are involved in the data generating processes of many actual economic and financial time series data. In addition to time series characteristics, we explore nonlinear regression asymptotics when the regressor is observable and an alternative regression technique when it is unobservable. To illustrate, we examine two empirical applications: wholesale electricity price spikes driven by capacity shortfalls and exchange rates governed by a target zone.
JEL Codes: C22, C16
Keywords: persistency in memory, nonlinear transformations, random walks, thick tails, stable distributions, wholesale electricity prices, target zone exchange rates
Revised version published in Journal of Econometrics 2010