Offering a unifying theoretical perspective not readily available in any other text, this innovative guide to econometrics uses simple geometrical arguments to develop students' intuitive understanding of basic and advanced topics, emphasizing throughout the practical applications of modern theory and nonlinear techniques of estimation. One theme of the text is the use of artificial regressions for estimation, reference, and specification testing of nonlinear models, including diagnostic tests for parameter constancy, serial correlation, heteroscedasticity, and other types of mis-specification. Explaining how estimates can be obtained and tests can be carried out, the authors go beyond a mere algebraic description to one that can be easily translated into the commands of a standard econometric software package. Covering an unprecedented range of problems with a consistent emphasis on those that arise in applied work, this accessible and coherent guide to the most vital topics in econometrics today is indispensable for advanced students of econometrics and students of statistics interested in regression and related topics. It will also suit practising econometricians who want to update their skills. Flexibly designed to accommodate a variety of course levels, it offers both complete coverage of the basic material and separate chapters on areas of specialized interest.

Estimation and Inference in Econometrics

A key open question for theories of reference-dependent preferences is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision. We find that effort provision is significantly different between treatments in the way predicted by models of expectation-based reference-dependent preferences: if expectations are high, subjects work longer and earn more money than if expectations are low.

Reference Points and Effort Provision

Many countries, especially developing ones, follow procyclical fiscal policies, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less-than-benevolent government to appropriate rents. Voters have incentives similar to the "starving the Leviathan" classic argument, and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well. We test this argument against more traditional explanations based purely on borrowing constraints, with a reasonable amount of success.

/pdf/why-is-fiscal-policy-often-procyclical-1korenvcjc.pdf

Why is Fiscal Policy Often Procyclical

https://www.econstor.eu/bitstream/10419/19010/1/cesifo1_wp1546.pdf

Trade and business cycle synchronization in OECD countries: A re-examination

Worker industry affiliation plays a crucial role in how trade policy affects wages in many trade models. Yet, most research has focused on how trade policy affects wages by altering the economy-wide returns to a specific worker characteristic (i.e. skill or education) rather than through worker-industry affiliation. This Paper exploits drastic trade liberalizations in Colombia in the 1980s and 1990s to investigate the relationship between protection and industry wages. Using the Colombian National Household Survey we first compute industry wage premiums, adjusting for a series of worker, job, and firm characteristics. We find that Colombian industry wage premiums exhibit remarkably less persistence over time than US wage premiums. Similarly, tariffs are less correlated over time than in the US data, indicating that trade liberalization has changed the structure of protection. We next relate wage premiums to trade policy in a framework that accounts for the political economy of trade protection. Accounting for time-invariant political economy factors is critical. When we do not control for unobserved time-invariant industry characteristics, we find that workers in protected sectors earn less than workers with similar observable characteristics in unprotected sectors. Allowing for industry fixed effects reverses the result: trade protection increases relative wages. This positive relationship persists when we instrument for tariff changes. Our results are in line with short- and medium-run models of trade where labour is immobile across sectors, or, alternatively, with the existence of industry rents that are reduced by trade liberalization. In the context of the current debate on the rising income inequality in developing countries, our findings point to a source of disparity beyond the well-documented rise in the economy-wide skill premium: because tariff reductions were proportionately larger in sectors employing a high fraction of less-skilled workers, the decrease in the wage premiums in these sectors affected such workers disproportionately.

Trade, Wages and the Political Economy of Trade Protection: Evidence from the Colombian Trade Reforms

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 within a standard protection for sale framework, how the costliness of raising revenue via taxation may make export subsidies less desirable and import tariffs more desirable. The model is then estimated and its predictions are tested using U.S. tariff data. An empirical estimate of the costliness of revenue-raising is also obtained.

Costly Revenue-Raising and the Case for Favoring Import-Competing Industries

Some recent empirical studies, motivated by Grossman and Helpman's (1994) well-known "Protection for Sale" model, suggest that very few factors (none of them laborrelated) determine trade protection. This paper reexamines the roles that labor issues play in the determination of trade policy. We introduce collective bargaining, differences in labor mobility across industries, and trade union lobbying into the protection for sale model and show that the equilibrium protection rate in our model depends upon these labor market variables. In particular, our model predicts that trade protection is structurally higher than in the original Grossman-Helpman model if the trade union of a sector lobbies but capital owners do not, because union workers collect part of the protection rents. On the other hand, equilibrium protection is lower if capital owners lobby but the trade union does not, because part of the protection rents is dissipated to workers. Using data from U.S. manufacturing, we find that collective bargaining, differences in labor mobility across industries, and trade union lobbying do indeed play important roles in the determination of U.S. trade policy.

/pdf/do-labor-issues-matter-in-the-determination-of-u-s-trade-6le9kwh1ev.pdf

Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation

Some recent empirical studies, motivated by Grossman and Helpman’s (1994) well-known “Protection for Sale” model, suggest that very few factors (none of them laborrelated) determine trade protection. This paper reexamines the roles that labor issues play in the determination of trade policy. We introduce collective bargaining, differences in labor mobility across industries, and trade union lobbying into the protection for sale model and show that the equilibrium protection rate in our model depends upon these labor market variables. In particular, our model predicts that trade protection is structurally higher than in the original Grossman-Helpman model if the trade union of a sector lobbies but capital owners do not, because union workers collect part of the protection rents. On the other hand, equilibrium protection is lower if capital owners lobby but the trade union does not, because part of the protection rents is dissipated to workers. Using data from U.S. manufacturing, we find that collective bargaining, differences in labor mobility across industries, and trade union lobbying do indeed play important roles in the determination of U.S. trade policy.

/pdf/do-labor-issues-matter-in-the-determination-of-u-s-trade-3m5za87y4v.pdf

This paper examines the relationship between oshoring activity by U.S. multinational rms and the structure of U.S trade preferences. We combine rm level panel data on U.S. foreign aliate activity from the U.S. Bureau of Economic Analysis (BEA) with detailed measures of U.S. trade preferences from the U.S. International Trade Commission (USITC) to create a three-way panel that spans 80 industries, 184 countries, and ten years (1997-2006). Consistent with existing theory, we nd that o- shoring and preferential market access are positively and consistently correlated, both in the pooled sample and within countries, industries, and years. Using both instru- mental variables and simultaneous equations approaches to address the endogeneity of export-oriented foreign investment, we nd that a 10% increase in U.S. foreign aliate exports to the U.S. from a particular industry and country is associated with a 4 per- centage point increase in the rate of preferential duty-free access. Restricting attention to the Generalized System of Preferences (GSP) among potentially eligible develop- ing countries, we nd that the inuence of multinational aliate sales on preferential market access more than triples.

/pdf/u-s-multinationals-and-preferential-market-access-a0eaypf707.pdf

U.S. Multinationals and Preferential Market Access

After a brief overview of different company valuation theories, this paper presents the main functions (decision, arbitration, and argument or negotiation function) of company valuation according to the functional (i.e., purpose-oriented) theory. The main body of the paper focuses on the decision function and shows how the decision value can be derived as a subjective limit value that different economic agents assign to the company. Finally, the differences between the functional and the market value oriented theory of company valuation are discussed.

/pdf/fundamentals-of-functional-business-valuation-38z5iun888.pdf

Xenia Matschke

Papers

Costly Revenue-Raising and the Case for Favoring Import-Competing Industries

Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation

Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation

U.S. Multinationals and Preferential Market Access

Fundamentals of Functional Business Valuation