Showing papers in "Contemporary Economic Policy in 2011"

Inverse relationship between productivity and farm size: the case of china

Abstract: I. INTRODUCTION In the development literature, it is alleged that farm size (e.g., land area) and productivity (e.g., total farm output divided by land area) are inversely related in developing countries (Sen 1962). (1) Although Chayanov (1926) is credited with being the first to suggest this relationship for prewar Russian agriculture, Sen (1962) is considered the earliest modern reference on the subject. If the inverse relationship does exist, then policies such as "small but efficient" come into play, and land redistribution to break up large farms may be proposed. The Kerala Land Reforms Act of 1963 imposes a ceiling of 15 acres for land owned by individuals and joint farming families in the Indian state of Kerala. In China's agriculture, results from investigating the relationship between farm productivity and farm size are of interest to policy makers. Many Chinese farms are tiny and their small size limits mechanization. A rapidly growing Chinese nonfarm economy has attracted large numbers of rural labor into the major cities, which has provided opportunities for land consolidation in rural areas to reduce fragmentation and to increase farm size through land rental markets (Deininger and Jin 2005). If, indeed, small farms are more efficient than their larger counterparts, efforts to promote consolidation should not be pursued. (2) A recent resolution of the Central Committee of the Communist Party of China quelled speculations that land privatization, or other radical forms of land reform, was on the immediate agenda. (3) Meanwhile, the resolution asserted both the importance to exploit the scale economies of modern agricultural technologies and an increasing role of land rental markets, which are in line with recommendations made by Deininger and Binswanger (1999). With the notable exceptions of Benjamin and Brandt (1997, 2002), few studies have examined the relationship between productivity and farm size in China's agriculture. (4) Since the implementation of the Household Responsibility System (HRS) during 1978-1984, most arable land in rural China is owned collectively by rural communities and distributed by village councils to local families for farming (Dong 1996). Following the initiative in the 1982 Chinese Constitution, the Agriculture Law, approved in 1993 and amended in 2002, stresses collective ownership by rural communities over rural land and the allocation of rights of use to land area to rural households. The objective of this article is to examine the empirical relationship between farm productivity and farm size in China's agriculture over 1995-1999 when farmers were gaining better access to modern farming technologies and equipment. We conclude that the inverse relationship between farm productivity and farm size can be attributed to measurement error arising from improper measurement of farmland, for example, failure to account for land quality. This article contributes to the literature in the following areas. First, although China's land tenure system is unique, it is not uncommon to observe similar collectively held land ownership in developing or transition countries, for example, in Vietnam (Deininger and Jin 2008), Central Europe (Rozelle and Swinnen 2004), and in certain countries in Africa (Deininger and Feder 2001). Hence, conclusions from this study may provide useful insights to land policy and land reforms in other economies. Second, we exploit the fact that an objective of rural village councils is to ensure local families to meet basic nutritional needs (Burgess 2007; Deininger and Binswanger 1999) and the variation in the number of dependents and hukou registration in rural households (note that it is possible for a rural household to have members with urban hukou registration) to motivate an instrumental variable estimation. Although our use of instrumental variable estimation is similar to that in Benjamin (1995), the mechanism we hypothesized is new to the literature. …

Minimum wage impacts in china: estimates from a prespecified research design, 2000–2007

Abstract: I. INTRODUCTION Issues associated with minimum wages are generating heated debate in China. Supporters argue that in the transition to a market economy, minimum wages can serve an important safety-net role by providing a minimum floor on wages, thereby protecting otherwise vulnerable workers from the most egregious aspects of intensively competitive markets (Sun 2006; Zhang 2007; Zhang and Deng 2005). This is especially the case for the large influx of rural migrant workers coming from the countryside to the city, both from within the province and from other provinces. Furthermore, the higher labor cost may foster managerial efficiency and labor productivity and induce employers to move up the value-added chain and invest in productivity improving technology (Cooke 2005). From these lines of argument, Chinese scholars have often argued in favor of the more proactive use of minimum wages, which they often regard as otherwise too low and ineffective (Han and Wei 2005). In contrast, opponents of minimum wage laws argue that they inhibit the transition to a market economy by interfering with China's comparative advantage based on an abundance of low-wage labor. Such regulations raise costs and inhibit the growth in demand for Chinese products and hence in the derived demand for their labor. Such growth would otherwise increase both employment and wages. Opponents reiterate the basic arguments against minimum wage legislation in that it will reduce the employment opportunities of low-wage labor and also lead to offsets in such forms as reductions in other elements of the compensation package (Gong 2009; Chen 2001; Xue 2001; Ye 2005). This argument is part-and-parcel of the broader argument that artificially raising wages can jeopardize the growth process that by itself will foster increases in the demand for labor and hence foster higher wages and improved labor standards in general. (1) China's experience with minimum wages is new, having first introduced them in 1993. As discussed subsequently, however, minimum wages have been altered many times since then such that they can be regarded as a potentially important policy instrument. In spite of this importance, there are very few empirical studies on the effects of minimum wages in China (Luo 2007a, 2007b; Shi 2009) and only one study in English (unpublished) to our knowledge (Ni, Wang, and Yao 2008). This is part of the more general gap of a lack of evidence on labor markets in developing countries (Hamermesh 2002)--evidence that could otherwise facilitate critical evidence-based policy making. This is particularly important in the minimum wage area because minimum wages are obviously subject to policy control and manipulation, and in countries such as China, they are an integral part of the transition to a market economy. The purpose of this article is to begin to fill that gap by providing evidence of the impact of minimum wages in China. We do so using the novel methodology of a prespecified research design (Levine 2001; Neumark 2001) based on data that provide a large number of minimum wage changes from which to identify the effects of minimum wages. The article is structured as follows. Section II discusses the theoretically expected impact of minimum wages and Section III outlines the existing empirical evidence from the literature in both developed and developing countries. Section IV provides details on minimum wage legislation and its implementation in China. Section V outlines the methodology of the prespecified research design and provides the estimating equation, while Section VI outlines the data. The empirical results are presented in Section VII, and Section VIII provides a concluding summary. II. EXPECTED IMPACT (2) Unlike the empirical evidence that is controversial (discussed subsequently), the theoretically expected impact of minimum wage legislation is well established in the literature. …

Economy-wide effects of reducing illegal immigrants in u.s. employment

Abstract: We use an economy-wide model to analyze the effects of three broad programs to reduce illegal immigrants in US employment: tighter border security; taxes on employers; and vigorous prosecution of employers After looking at macroeconomic industry and occupational effects, we decompose the welfare effect for legal residents into six parts covering changes in: producer surplus and illegal wage rates; skilled employment opportunities for natives; aggregate capital; aggregate legal employment; the terms of trade; and public expenditure The type of program matters Our analysis suggests a prima facie case in favor of taxes on employers (JEL J61, C68)

Does the clarity of central bank communication affect volatility in financial markets? evidence from humphrey‐hawkins testimonies

Abstract: I. INTRODUCTION This article investigates whether greater clarity of central bank communication coincides with lower levels of volatility in financial markets. Recent empirical work has established that central bank talk is often an important source of information for the private sector. Surveying the literature, Blinder et al. (2008) conclude that "communication can be an important and powerful part of the central bank's toolkit since it has the ability to move financial markets." Still, it is not clear what would constitute an optimal communication strategy. In practice, large differences exist in the way in which central banks communicate. Some central banks, such as the Federal Reserve and the Bank of England, publish detailed minutes of their monetary policy meetings, whereas others, such as the European Central Bank, do not. At the same time, the European Central Bank is one of the few central banks holding an elaborate press conference shortly after the interest rate decision. Finally, some central banks, such as the Reserve Bank of New Zealand and Norges Bank, publish forecasts of their own policy rate, whereas most monetary authorities refrain from doing so. Alongside the issue of optimal communication, there has been a long-standing debate on central bank transparency. A greater degree of transparency may have important benefits, such as well-anchored inflation expectations. At the same time, various authors have suggested that limits to transparency may exist (Cukierman and Meltzer 1986, Morris and Shin 2002). Whether transparency is beneficial, and to what extent, is in the end an empirical matter. The evidence in favor of transparency has accumulated over the years. Although Geraats (2002) cautiously concluded that the available evidence "suggests that transparency tends to be beneficial," more recently, van der Cruijsen and Eijffinger (2007) find that "The empirical results are largely in favor of more transparency." Many studies in the literature use measures of institutional transparency, such as whether the central bank publishes macroeconomic forecasts or information on its policy deliberations. So far, the clarity of actual central bank communications has received little attention. (1) Still, if the central bank communicates regularly, but does so in a nonaccessible manner, it can hardly be called transparent. Moreover, the relationship between clarity and volatility seems intuitive: when central bankers communicate clearly, financial markets have less difficulty in interpreting the central bank's message. This leads to less uncertainty, which is reflected in lower levels of volatility. Therefore, this article contributes to the literature by focusing on the effects of clarity of communication. For a broad range of financial instruments, it is tested whether clarity of communication affects volatility. Two readability statistics are used--the Flesch reading ease score and the Flesch-Kincaid grade level--to measure the clarity of central bank communication. Both statistics have been widely applied in other fields. (2) One benefit of these two criteria is their objectivity: they are completely based on the characteristics of the underlying texts. Readability statistics are applied to the testimony by the Chairman of the Federal Reserve at Congressional Monetary Policy Oversight hearings--more commonly known as the Humphrey-Hawkins hearings. For almost 30 years these testimonies have been one of the main communication channels of the Federal Reserve. This article has three key results. First, when clarity matters, the results point to the conclusion that clarity diminishes volatility. Second, clarity of communication matters mostly for volatility of medium-term interest rates. Third, the effects of clarity vary over time. There is an indication that clarity has especially mattered during Alan Greenspan's term at the Federal Reserve. Overall, the analysis shows the importance of transparent communication on monetary policy. …

Ethnic diversity and trust

Abstract: I. INTRODUCTION As Putnam (2007) argues, immigration has grown significantly across the rich countries of the world in the last few decades and it continues to grow. While the share of immigrants in the United States population, for example, increased by half, it tripled in Italy since 1990. Although diversity and immigration are not identical, growing immigration has increased ethnic diversity in rich countries. Because immigrants typically have higher fertility rates, ethnic diversity is likely to increase even more in the years ahead (Putnam 2007, p. 140). As most countries such as the United States get ethnically more and more diverse, the relationship between ethnic diversity and social capital, especially trust, (1) becomes increasingly important. Several studies such as by Knack and Keefer (1997) and Zak and Knack (2001) show the importance of trust for economic growth. As Knack (1999) argues, high-trust societies achieve higher economic growth due to lower transaction costs. Because trust protects property and contractual rights, it is not necessary to divert resources from production to protection. According to Knack and Keefer (1997), innovation hardly takes place in low-trust societies. Entrepreneurs, rather than devoting more time innovating new products, have to devote more time monitoring their employees. Trust not only affects economic variables such as growth but also affects political variables such as corruption. Uslaner (2008) finds that trust leads to higher institutional quality, particularly to lower political corruption. As both Rothstein (2003) and Uslaner (2004) argue, people who trust each other are likely to think that most people play by the rules in both "person-to-person" contacts and in their contacts with government institutions. That is, they are less likely to corrupt these institutions. If trust is that important for higher economic growth and lower political corruption, identifying the factors affecting trust and identifying if ethnic diversity is one of them is perhaps even more important. There are two competing hypotheses explaining the relationship between ethnic diversity and trust: conflict hypothesis and contact hypothesis. According to the conflict hypothesis, diversity causes trust to decrease. People have a tendency to associate with, socialize with, and be more comfortable with people who appear similar to themselves (Delhey and Newton 2005). A great example of such behavior was observed during the filming of "The Planet of the Apes." All actors who appeared as apes were put in make-up and dressed on the set and had lunch catered to them in specially designed and staffed eating areas. None of the actors in make-up was permitted off the set during the working day. Actors who played chimpanzees, gorillas, and orangutans socialized with their own kinds during breaks in production. Kim Hunter who was playing Dr. Zira, a chimp, for example, always ate with her fellow chimps and rarely spoke with her close friend Maurice Evans who was playing an orangutan, Dr. Zaius (Hofstede 2001). Conflict hypothesis simply states that the more people live in a society with people who belong to another ethnic group, the more they trust their own and the less they trust the other (Putnam 2007). Quite a few empirical studies find evidence supporting the conflict hypothesis. Using cross-country data, Delhey and Newton (2005), for example, find a negative relationship between ethnic diversity and trust as do Alesina and La Ferrara (2002) using U.S. data. According to contact hypothesis, as people have more contact with people who belong to other ethnic groups, they trust them more (Putnam 2007). Uslaner (2006), for example, argues that diversity causes trust to decrease only if there is lack of contact between people who belong to different ethnic groups. Using U.S. and Canadian data, Stolle et al. (2008) find that people who are regularly in contact with the other people are less affected by their ethnicity than people who lack contact. …

The regulation of migration in a transition economy: china's hukou system

Abstract: 1. INTRODUCTION In most countries, internal migration is unregulated. That is not the case in China, where migration is restricted through a "Household Registration System," also called "Hukou." Instituted in 1958, Hukou required every citizen seeking a change in residence to obtain permission from the public security bureau. If one wanted to move from a rural to urban area, for example he (or she) had to convert his (or her) local registration status from "agricultural" to "nonagricultural," an approval that was usually very difficult. (1) It has also been very difficult to move from a small city to a large city under Hukou. Urban registration brings substantial benefits such as access to coveted jobs in the state sector, housing, public schooling, and health care. (2) Hukou imposes both direct and indirect costs of relocation. For example, permanently leaving a village requires a migrant to abandon claims to land ownership and profits of village-owned industries. Hukou is effectively an internal passport system, as moving within or across provincial boundaries in China is analogous to moving across international boundaries. Thus, for researchers interested in the study of how restrictions affect the scale and structure of worldwide migration, China is a tremendously valuable natural experiment. Hukou has undergone an incremental dismantling over the last three decades. The history of this dismantling may be broken down into three periods--the 1980s, 1990s, and post-2000 period. (3) Up to the late 1980s, anyone wishing to travel within China had to show an official "permission" letter from his or her local government. Beginning in the late 1980s, identity cards replaced permission letters, making it much easier to travel. During the early 1990s, grain rationing coupons were abolished. These coupons had been the means by which people obtained food rations and they could only be used in the place of residence. In 2001, residency in small towns and townships was opened to all rural workers who were legally employed and had a place to live. At roughly the same time, medium-sized cities and some provincial capitals eliminated ceilings on the number of rural workers who could apply for permanent residence status or offer temporary registration for nonlocal residents. Some very large cities such as Shanghai and Beijing also eased restrictions on in-migration of nonlocal residents. (4) Since census data on migration flows are available back to 1985-90, a test of deregulation's effects is feasible. A small and mostly empirical literature on the determinants of internal migration in China has emerged. Its focus has been to examine the extent to which migration flows are driven by regional differences in labor markets. (5) While most researchers recognize the influence of Hukou on Chinese migration patterns, no study has attempted to estimate its effects on the scale and structure of migration. (6) While there have been applications of the modified gravity model to the Chinese case, no study has estimated this model with a Hukou measure included. (7) The most closely related study is Poncet (2006). She argued that as deregulation intensified, migration should have become more responsive to economic factors. Estimating a modified gravity model on migration data for 1985-90 and 1990-95, Poncet found that intra - and inter-provincial migration rates were more responsive to spatial income and unemployment rate differences during 1990-95. However, she did not include a Hukou variable in either her theoretical model or empirical specifications. Furthermore, Poncet's coefficient estimates likely suffer from omitted variables bias because a number of important controls were absent. Missing controls include migrant networks, foreign and domestic investments, industry mix, demographic characteristics, climate, and educational attainment. The goal of this study is twofold. First, we seek to estimate migration's sensitivity to Hukou. …

Preliminary evidence on internal migration, remittances, and teen schooling in india

Abstract: I. INTRODUCTION India's migration rate is on the rise (from 27.4% in 1991 to 30% of the population in 2001), where employment is the secondary motivation to marriage (Deshingkar 2006). While international remittance receipts are substantial ($17.4 billion USD in 2003), little is known regarding the amount of transfers received from internal migrants (World Bank 2009). (1) For households left behind, having a migrant leave can improve their welfare because migration frees up resources for the remaining household members. Remittances can additionally relax liquidity constraints. Moreover, internal migration offers an alternative for poor households to seek employment, higher earnings, and reduce income vulnerability cheaply by migrating to areas with labor shortages or facing different income distributions with respect to covariate shocks. In this paper, we examine the correlation of remittances received from internal migrants with teen and adult labor supply decisions, teen schooling enrollment, attendance, and absenteeism. We correlate remittances received and these outcomes to assess the potential effect of relaxing liquidity constraints on human capital accumulation. Moreover, we examine how labor supply shifts with the increase in income to understand the interaction between teen and adult labor supply. There is a vast literature, which measures the returns to migration and remittances on investment (de Haan 1999). Migration and remittances generate investments in housing, consumer durables, and land holdings (de Brauw and Giles 2008), shift production to more capital-intensive crops (de Brauw 2008), and increase time spent in capital-intensive enterprises (Yang 2008). Migration and remittances reduce household vulnerability to shocks through off-market access to employment (Giles 2006; Yang and Choi 2007). Migration can also reduce poverty (De Brauw and Giles 2008). (2) The link between migration, remittances, and human capital investment is also being established in the literature. An increase in household income (through the resources made available by an absent household member or transfer receipts) enables households to substitute leisure for consumption. Such an increase in income should reduce overall labor efforts of household workers. We might also expect concomitant declines in child labor, as studies find associations between poor human capital investment and imperfect credit markets (Jacoby 1994: Jacoby and Skoufias 1997). Baland and Robinson (2000) develop a dynamic theoretical model, which considers the allocation of child labor subject to borrowing constraints. A finding from the model is that Pareto inefficient levels of child labor can arise because of borrowing constraints. The empirical implications of their model are overall reductions in child labor, provided migration and remittances sufficiently relax liquidity constraints. Recent studies support the theoretical predictions on child labor and schooling. Mansuri (2006) provides empirical evidence of increased schooling attendance, retention, and accumulated years of schooling, and decreased child labor among migrant households in rural Pakistan. Female headship can lead to the loss of accumulated schooling among girls, suggesting mothers are more protective of boys at the expense of girls in rural Pakistan. De Brauw and Giles (2006) demonstrate migration hinders high school enrollment in rural China, which is attributable to the lower return to high school education in migrant labor markets. They show the opportunity cost to enroll in high school outweighs the returns to education above middle school by estimating the returns to education in migrant labor markets. Cox-Edwards and Ureta (2003) demonstrate remittances received positively affects school attendance and retention in El Salvador. Acosta (2006) shows the receipt of remittances in El Salvador encourages child enrollment; however, females ages 15 and over are more likely to increase their education and reduce their labor supply. …

The effect of legalized gambling on state government revenue

Abstract: 1. INTRODUCTION Legalized gambling has become an accepted form of entertainment in the United States, with every state except Hawaii and Utah offering some form of gambling. Each gambling industry is either run by or regulated by state governments. Nominally, the primary reason for legalizing gambling--especially recently in the cases of lotteries and casinos--is to provide alternative revenue sources to those which states typically employ. Arguably, the intended effect of these new revenue sources is to increase state revenues and reduce fiscal pressure. Oddly, few researchers have attempted to analyze whether this intended effect has, in fact, been realized. This neglect raises the important empirical question: What is the relationship actually observed between legalized gambling and state government revenues? This is a critical question, especially as many states struggle to deal with increasingly serious fiscal shortfalls. The issue also has significant international importance, as casinos spread worldwide. The proponents of legalized gambling point to total taxes paid by gambling industries as an indication of the benefits of gambling to the states. Table 1 lists government revenue by state from commercial casino taxes, lotteries, and pari-mutuel taxes for 2004. Although the tax revenue from legalized gambling is sizable in many states, this does not necessarily mean that legalized gambling has contributed to a net increase in overall state revenues. As people spend more of their income on gambling activities, their spending on other goods and services is likely to decline. Thus, the net effect of legalized gambling on state receipts depends on complicated relationships among spending on gambling industries, spending on non-gambling industries, and the tax rates imposed on the various forms of spending. Furthermore, politicians could substitute revenues from these new gambling sources for those from existing sources, leading to an ambiguous net effect on total state revenue. Clearly, the introduction of a new good does not necessarily imply increases in government revenue will follow. In this paper, we perform a relatively comprehensive analysis of the relationship between legalized gambling and state government revenues. We perform a panel data analysis on all 50 states for the 1985-2000 period, using annual data. We utilize data on gambling volume at casinos, Indian casinos, greyhound racing, horse racing, and lotteries; and total state government revenues net of transfers from the federal government. Our findings indicate mixed results. Lotteries and horse racing appear to have a positive impact on total state government receipts, but casinos and greyhound racing appear to have a negative effect on state revenues. Therefore, we argue that there is not a unique monotonic relationship between generic legalized gambling activity and overall state revenues. Of course, the effect of legalized gambling in a particular state or states may differ from the general effects we find. TABLE 1 Gambling-Related State Government Revenue, 2004 (millions $) (a) (1) (2) Net (3) (4) Total (5) Net Commercial Lottery Pari-mutuel Gambling State Casino Receipts Taxes Tax Revenue Revenue Taxes (b) (=1 + 2 + (c) 3) Alabama - - 3.2 3.2 15290.8 Alaska - - - 0.0 6659.0 Arizona - 108.0 0.6 108.6 17171.2 Arkansas - - 4.6 4.6 10206.4 California - 1045.8 42.1 1087.9 183736.7 Colorado 99.5 113.7 4.5 217.7 18550.8 Connecticut - 283.9 10. …

Kuznets Hypothesis In A Panel Of States

Abstract: I. INTRODUCTION The Kuznets hypothesis, Simon Kuznets' classic prediction for long-term evolution of income inequality, remains to date the most significant dictum in the development literature. Based on time-series observations on developed countries such as the United States, England, and Germany, Kuznets (1955) concludes that income inequality first worsens and then improves over the course of economic development. This inverted U-shaped relationship between inequality and development has been interpreted to imply that polarization in the early stages of development may be a necessary ingredient for future economic growth. In that respect, an economy that prematurely implements a policy designed to enhance equality may be trapped at a low stage of development. In light of its obvious policy importance, intense research has attempted to explore economic mechanisms that may generate the Kuznets curve. For example, Robinson (1976), Rauch (1993), and Anand and Kanbur (1993a) formalize the Kuznets hypothesis as a result of migration from the agricultural to the nonagricultural sector. Some studies, including Greenwood and Jovanovic (1990), Banerjee and Newman (1993), Perotti (1993), Aghion and Bolton (1997), and Lloyd-Ellis and Bernhardt (2000), rationalize the Kuznets process in the framework of dynamic general equilibrium with capital market imperfections. Specifically, Greenwood and Jovanovic (1990) obtain the Kuznets curve in a model of financial intermediation. In the study of Banerjee and Newman (1993) and Lloyd-Ellis and Bernhardt (2000), the Kuznets process arises in a model of occupational choice. Perotti (1993) focuses on political economy considerations and Aghion and Bolton (1997) highlight the role of capital accumulation in delivering the inverted U. Others, for example, Galor and Tsiddon (1996, 1997a, 1997b), Dahan and Tsiddon (1998) and Glomm and Ravikumar (1998), postulate that interplay between technological progress and human capital determines the inverted-U pattern of wage inequality. By contrast, Eicher and Garcia-Penalosa (2001) emphasize the dual role of human capital in determining the pattern of inequality over the course of secular economic growth. In particular, depending on the direct cost of education, the extent of externalities in the education process and the elasticity of substitution between skilled and unskilled workers in production, inequality may increase, decrease or follow a U-shaped path as a country accumulates skills. Empirical studies supporting the Kuznets inverted-U relationship between inequality and development, both in the cross-country and intertemporal contexts, are voluminous. For example, using a parametric specification of regressing inequality indicators on gross domestic product (GDP) per capita and its squared term, along with some other explanatory variables, Ahluwalia (1976a, 1976b) finds a positive coefficient on the GDP per capita variable and a negative coefficient on its squared term, which are consistent with the Kuznets hypothesis. Subsequent studies such as Campano and Salvatore (1988), Randolph and Lott (1993), Jha (1996). Dawson (1997), Eusufzai (1997), Mbaku (1997), Barro (2000), Bulir (2001), and Iradian (2005) also support this evidence. While most studies confirm the existence of the Kuznets curve, counterevidence also exists. As argued by Kanbur (2000), the Kuznets relationship, once accepted as a strong empirical regularity through the 1970s, is weakening over time. For example. Papanek and Kyn (1986) find that the Kuznets curve appears to be statistically significant but lacks explanatory power for variations in inequality across countries or over time. Li, Squire, and Zou (1998) assert that the Kuznets relation works better for a cross section of countries at a point in time than for the evolution of inequality over time within countries. Deninger and Squire (1998) and Lundberg and Squire (2003) also argue that a Kuznets-type relationship is, at best, uncertain and ambiguous. …

How green is your campus? an analysis of the factors that drive universities to embrace sustainability

Abstract: I. INTRODUCTION Much has been written on corporate sustainability and the factors that affect it, both in the academic literature and in the popular media. The literature on sustainability efforts at institutions of higher education (IHEs) is much smaller, although colleges and universities can also pose significant environmental liabilities. Like many corporations, IHEs consume large quantities of energy and water. (1) In addition, IHEs generate significant volumes of solid wastes, including toxic and hazardous wastes. (2) Also like corporations, IHEs currently face significant pressure to adopt sustainable practices. However, while corporations and IHEs face similar challenges in deciding whether to adopt sustainable practices, there are many reasons why sustainability efforts on campuses may depend on different factors than corporate sustainability efforts. Obviously, the non-profit nature of most IHEs suggests that campus leaders can make investments in sustainable practices that corporations would not find profitable. Additionally, the types of stakeholders that have an interest in sustainability efforts vary significantly across IHEs and corporations. Although companies may be pressured to adopt sustainable practices by consumers and investors, IHEs must respond to the concerns of students, faculty, and alumni. The goal of this article is to examine campus sustainability efforts to determine the factors that drive IHEs to adopt sustainable practices. Given that recent congressional education bills have included provisions for the establishment of sustainability programs in the Department of Education, we are likely to see increased government efforts to promote sustainable practices on campuses in the future. (3) A more complete understanding of the factors that drive campus sustainability will be essential for crafting effective policy on this issue. This knowledge should also help increase the effectiveness of private groups that are trying to promote campus sustainability. The analysis uses the same general framework that has been used to study corporate adoption of sustainable practices to highlight similarities and differences between the factors that affect corporate and campus behavior. Thus in addition to helping design programe to promote insight into the different in environmental decision making at non-profit and for profit entities more generally. In Section II, I present a brief summary of the related literature and outline a conceptual framework for my analysis. Section II, I discusses the analytical approach in detail, describing both the data and the econometric model used in the analysis. I then present the results of the analysis and discuss the policy implications of my findings before concluding. II. RELATED LITERATURE AND THE CONCEPTUAL FRAMEWORK FOR THE ANALYSIS The majority of the literature on campus sustainability is directed toward people who want to increase sustainable practices on particular campuses or at IHEs in general. (4) The general focus of these articles is on why sustainability is important or how it can be implemented at IHEs. This literature includes many case studies of successful sustainability programs. Additionally, there are few studies that take a more aggregate approach to understanding the factors that influence the success of sustainability initiatives. For example, based on 7 years of experience in implementing sustainable practices at IHEs, Sharp (2002) identifies a number of approaches to sustainability that have proved to be most successful including management support, effective communication, partnerships with students, and continuity. Looking at the issue from the opposite point of view, Velazquez, Munguia, and Sanchez (2005) identify barriers to implementing sustainable practices on campus. The authors find that the factors that are most frequently cited as impeding campus sustainability initiatives are a lack of awareness and interest in sustainability, the organizational structure of the institution, lack of funding, and lack of support from administrators. …

Short‐run and long‐run implications of environmental regulation on financial performance

Abstract: I. INTRODUCTION The Porter hypothesis asserts that properly designed environmental regulation motivates firms to innovate, which ultimately improves financial performance (Porter 1990, 1991; Porter and van der Linde 1995; van der Linde 1993). Many economists criticize this claim, arguing that firms voluntarily seek opportunities to improve financial performance regardless of regulation (Palmer, Oates, and Portney 1995). In particular, critics argue that environmental regulation undermines firms' abilities to pursue opportunities to improve financial performance. Although these arguments generally focus on the effect of regulation on long-run financial performance, they also apply to the effect of regulation on short-run financial performance. (1) Porter and van der Linde (1995) introduce their argument by indirectly attributing competitiveness to financial performance in the context of lower costs and higher revenues: Competitiveness at the industry level arises from superior productivity, either in terms of lower costs than rivals or the ability to offer products with superior value that justify a premium price, (pp. 97-98) Jaffe and Palmer (1997) describe this focus on financial performance as the "strong" version of the Porter hypothesis: The shock of a new regulation may therefore induce them [firms] to broaden their thinking and to find new products or processes that both comply with the regulation and increase profits, (p. 610) Our analysis tests the "strong" version of the Porter hypothesis: tighter regulation improves the financial performance of individual firms. By-testing this hypothesis, we contribute to the economic literature that assesses the effects of environmental regulation on various aspects including firms' competitiveness, innovation activities, employment, productivity, investment, location decisions, and financial performance. Previous empirical studies that examine consequences of environmental regulation generally do not examine both short-run and long-run consequences. In contrast, our study empirically examines both the short-run and long-run effects of environmental regulation on financial performance. In particular, we test the Porter hypothesis in terms of both short-run and long-run effects of Clean Water Act regulation (hereafter "clean water regulation") on the financial performance of publicly owned firms in the chemical manufacturing industries. To measure financial performance, we use return on sales (i.e., profits divided by sales), which captures profitability. As our measure of clean water regulation, we use permitted wastewater discharge limits, which are imposed on individual facilities. To strengthen our analysis, our study draws upon a panel data set. Thus, we are able to control more completely for heterogeneity across firms and exploit both interfirm and intrafirm variation. Our results indicate that tighter clean water regulation (i.e., lower permitted discharge limits) improves financial performance in both the short run and long run with a stronger effect in the long run. In particular, return on sales increases by 1.5% in the short run and 4.5% in the long run. II. RELATIONSHIP BETWEEN ENVIRONMENTAL REGULATION AND FINANCIAL PERFORMANCE A. Theoretical Literature To guide our empirical analysis, we first assess two conflicting theoretical arguments exploring the effect of environmental regulation on financial performance. Porter and van der Linde (1995) argue that properly designed and implemented environmental regulation removes organizational inertia and ultimately improves financial performance. Innovation and improved resource productivity are the mechanisms through which this relationship unfolds. As long as firms perceive their production processes and products as elements in a dynamic setting rather than a static setting, firms seize regulation as an opportunity to invest in technologies that not only minimize strains on the environment but also maximize the efficiency of production processes and/or improve the quality of products. …

Overseas Network of Export Promotion Agency and Export Performance: The Korean Case

Abstract: Governments have established export promotion agencies (EPAs) in an effort to boost exports. Despite criticism regarding the effectiveness of EPAs, the policy has not been abandoned and there has been an increasing recognition of the benefits on the basis of economic justification, including market failures. Such policies must be based strictly on evidence. Are EPAs truly crucial for export success? Some have argued that export success in Korea has been due largely to government policies targeted at the promotion of exports. This paper demonstrates that the network of EPA offices abroad has been a critical factor in the success of Korea's exports. An increase of 10% in the budget of EPA's overseas offices has been shown to increase exports by 2.45%–6.34%. The findings of this paper present a clear rationale for government intervention. (JEL F10, F14)

Video games and crime

Abstract: I. INTRODUCTION Regulating the content and marketing of video games so as to curb crime and violence has received growing interest among policymakers. Substantial evidence from psychological studies indicates a potential link between violent video game play and tendencies toward violent and possibly criminal activities. If so, these represent the sort of negative externality often addressed by public policy. To date, proposals to regulate the content of games have not been adopted because of both the difficulty in defining and implementing rules regarding the content appropriateness and the possible infringement of free speech protections. In the United States, the Federal Trade Commission has made six reports to the U.S. Congress on the broader topic of violence in media between 2000 and 2007 (Federal Trade Commission 2000, 2007). As of June 2006, there were seven bills in Congress addressing violence in video games (CNET News 2006). So far, the U.S. regulatory intervention has focused on placing limits on marketing to minors. Legislation aimed at video game violence is also proposed in many U.S. states. Many broader state-level restrictions have been struck down by the courts because they were found to infringe on constitutional rights (Theirer 2006). More interventionist policies are under consideration in the European Union (MacWorld 2007), Britain (Reuters 2007), and China (Peoples Daily Online 2007). The concern presupposes that violence in the video game context induces gamers into violent behaviors beyond the gaming context. Although the evidence indicates that these games heighten physical and emotional reactions related to violent, criminal, and antisocial attitudes, so far as I know, there have been no studies linking video game usage to observed behaviors in gamers. Besides the psychological theories, economic theory also suggests that it is plausible that one develops a proclivity for actual violence through virtual violent behavior. This might result from the accumulation of a specific stock of human capital that increases the consumption level required to generate a given level of utility as with rational addiction models (Becker and Murphy 1988). Gamers without immediate access to a game console required to "consume" virtual violence may instead choose to engage in violent behaviors outside the virtual environment. Alternatively, it is also plausible that virtual violence tends to diminish one's marginal utility from further violent activities. If virtual and actual violence are substitutes, increased consumption of violence through virtual gaming would reduce the demand for actual violence. If so, immediately after engaging in violent video game play, we might expect a gamer to display the enhanced emotional and physical responses normally associated with these activities. However, this experience would serve to partially sate the gamer's demand for violence, whether it is virtual or actual. That is, the psychological evidence is consistent with either virtual violence leading to an increase or a decrease in actual violence. More to the point, it is impossible to tell a priori if violent video game play and violent or antisocial behaviors appear as complements or substitutes. While evidence of a complementary effect would lend support to a more interventionist policy, evidence of a substitution effect could undermine such support. Relatedly, it is possible that violent games are particularly attractive to otherwise violent individuals. Independent of whether violent video game play causes a behavioral change in which individuals become more violent, it could substitute for the time spent in violent activities thereby decreasing the total amount of violence. Dahl and DellaVigna (2009) found evidence that the voluntary incapacitation around the time of the showing of violent movies is associated with short-run reductions in crime rates. Kendall's (2007) findings suggest that rapes decline with the availability of online pornography, especially among offenders for whom the internet induced a relatively larger decline in the non-pecuniary price of pornography--male teenagers. …

An evaluation of financial incentive policies for organ donations in the united states

Abstract: This paper examines the association between financial incentives and organ donations. Although the National Organ Transplant Act of 1984 prohibits financial compensation for organs for transplant, we focus on the impact of laws that influence the relative cost of deceased and live organ donations on the supply of organs for transplant. First, we hypothesize that states that have relatively stringent funeral regulations, which have been associated with higher whole-body donations, will have fewer organ donations. Second, we examine the impact of two common state laws that offer financial compensation to live donors: one that allows a tax deduction for costs incurred and the other which entitles government employees up to 30 days of paid leave. We find no evidence to support that these laws affect organ donations. (JEL I11, I18)

Will tax-based health insurance reforms help the self-employed stay in business?

Abstract: I. INTRODUCTION The self-employed face a tax-induced disadvantage relative to wage and salary workers when it comes to the payment of health insurance premiums. Wage and salary workers often pay their premiums out of pre-tax dollars for both income and payroll taxes but the self-employed are not able to deduct premium costs when calculating payroll taxes. This study examines whether expected claims of the health insurance deduction affect household self-employment decisions and serves as a source of empirical evidence for the ongoing policy debate over health reforms. The analysis expands the existing literature on the behavioral effects of taxation by focusing on a change in tax base, namely the deductibility of health insurance premiums, rather than tax rates. Using a panel of tax return data, this paper investigates whether the 25% self-employment health insurance deduction implemented under TRA86 had an effect on the probability of exit from self-employment. Admittedly, the 25% deduction represented a modest savings for a self-employed filer as would recent proposals for an exemption from Self-Employment Contributions Act (SECA) taxes. For example, among those claiming the deduction in 1988, the average value was $431. For a household in the 28% tax bracket, this represents a tax savings of $121 or 7% of the premium total. (1) In comparison, full deductibility in calculating SECA taxes, as proposed in recent bills in the House and Senate, would represent about a $250 tax savings. (2) The self-employed are an economically important group as they are most often associated with entrepreneurship. And entrepreneurs are thought to drive much of the growth and innovation in the economy. Permitting deductions of health insurance premiums in calculating the payroll tax would lower the after-tax price of health insurance premiums, increasing self-employment income and potentially reducing the variance in out-of-pocket health expenditures. The increase in income makes self-employment more attractive relative to the wage and salary sector. The reduction in health-related risks is also important from a policy perspective because although the self-employed are often assumed to be less risk averse than wage and salary workers, there is little empirical evidence on this issue and high-ability households, those most likely to generate innovation and economic growth, might have relatively lower risk tolerances. This work contributes to a growing literature on the effects of tax policy on labor markets. Most previous analyses of the effects of tax policy have focused exclusively on tax rates or entry into self-employment. This paper contributes to the literature by moving beyond rates and assessing the impacts on the currently self-employed. Results of the analysis also provide general insight into whether aspects of the tax code outside of tax rates affect employment sector decisions. The results also offer specific guidance in terms of whether equalizing the tax treatment of health insurance premiums would enhance the survival of sole proprietorships. Prior studies of the labor market effects of health insurance have examined the effects of portability or availability of health coverage but few have specifically addressed the effects of the tax treatment of premiums. The remainder of this document is organized as follows. Section II provides a brief history of the relative tax treatment of health insurance premiums paid by the self-employed. Related literature is summarized in Section III, and Section IV contains a description of the data and empirical methodology. Results are presented in Section V, and Section VI concludes with policy implications, limitations, and directions for future work. II. TAX POLICY AND INCENTIVE EFFECTS Health insurance premiums paid by employers on behalf of employees have historically received different tax treatment than premiums paid by the self-employed for themselves and their dependants. …

Nonprice competition in the turkish credit card market

Abstract: I. INTRODUCTION High and sticky credit card rates that respond asymmetrically to changes in the cost of funds have been frequently cited in the literature.1 During the financial crises of 2000-2001 in Turkey, banks immediately raised their credit card rates from 107% in the last quarter of 2000 to 181% in the first quarter of 2001 in response to soaring short-term interest rates. However, in the recovery and stabilization period that followed, although other credit rates smoothly responded to falling short-term interest rates, credit card rates persistently remained high (Figure 1). There are 22 credit card issuer banks in Turkey. Although this number would normally suffice to secure a competitive outcome in a market for relatively homogeneous products, the mounting profitability of the credit card business and persistently high credit card rates make the matter a considerable concern for both policymakers and researchers. Our objective, in this regard, is to pinpoint the underlying reasons of this apparent lack of competition in the credit card market and to propose coherent regulatory policies. Explanations abound for the high and sticky spread between credit card rates and funding costs. The primary justification is that the uncol-lateralized nature of credit card loans leads to higher default risk and consequently to higher interest rates. Another is the noninterest bearing grace period from the day of purchase to the payment due date. Banks incur a cost to finance their customers' purchases during this time. Furthermore, operating a credit card system entails huge investments in technology and other infrastructure. Small average balances, on the other hand, preclude the cost-effective collection process. Liquidity risk management, which is necessitated by banks' obligation to be ready to lend up to the full amount of the issued credit cards' limits at any time, also requires costly measures. In addition, banks may also increase their costs in efforts to differentiate their products through the distribution of benefits such as money points and other rewards. (2) By and large, the persistently high profitability of the credit card business, despite fluctuations in the above mentioned costs, suggests that inherent costs can only partially account for high and sticky credit card rates (Ausubel 1991). [FIGURE 1 OMITTED] There also exist some more sophisticated explanations. Chakravorti (2003) associates credit card rates with the proportion of convenience users to revolvers. Because banks subsidize convenience users and earn interest incomes only from revolvers, the higher the ratio of convenience users, the higher the banks' costs are. Ausubel (1991) classifies cardholders according to their rationality and how they use their credit cards. He then postulates that when banks are unable to observe cardholder types, they become reluctant to unilaterally lower their card rates for fear of attracting only adverse types. Calem and Mester (1995) and Stango (2000, 2002) emphasize the cost of cardholders switching to banks with lower rates. Mester (1994) and Park (2004) argue that sticky rates might be an equilibrium response to banks' asymmetric information about cardholders' future incomes. Using the Panzar-Rosse technique, Shaffer and Thomas (2007) demonstrate that banks are engaged in monopolistic competition in credit card markets and thus obtain monopoly power through differentiation. Shaffer and Thomas' account certainly holds for the Turkish market. Credit cards are by no means homogeneous products. Although there exists no price competition in the market (Akin et al. 2010), banks are actively engaged in fierce nonprice competition. To acquire market power, banks differentiate their cards by providing an array of card level benefits such as travel miles, bonus points, rewards, shopping discounts, the possibility of paying in installments, and travel and accident insurance. …

Participation in workplace employer‐sponsored training in canada: role of firm characteristics and worker attributes

Abstract: I. INTRODUCTION To be successful in the highly innovative and internationally competitive knowledge-based global economy, Canada must produce, attract, retain, and upgrade the well-educated labor force. In addition to producing new graduates and attracting skilled immigrants, renewing and upgrading skills of the existing labor force remain one of the most challenging and important tasks. Employer-sponsored training is one important vehicle for skills upgrading. On the one hand, employer-sponsored training in Canada has been falling short of international standards (Government of Canada 2002a, p. 59) but is increasingly demanded across industries (Government of Canada 2002b, p. 41). This is of particular importance considering the Canadian aging population and smaller future cohorts of new workers who would enter the labor force in the years and decades to come. On the other hand, as illustrated in this work, international evidence indicates that increased market competition, organizational changes, research and development, and technological innovation have raised the demand for job-related training in the United States. But the empirical evidence for Canada is quite limited. Many existing studies on employer-sponsored training are primarily based on household-based surveys (such as the Adult Education and Training Survey [AETS] for Canada) where the information on firm characteristics is not as rich as that in firm-based surveys (such as the Workplace and Employee Survey [WES] for Canada). Lin and Tremblay (2003) note that many existing Canadian studies have examined employer-sponsored training in programs and courses from the perspective of households but few studies have examined directly workplace job-related classroom and on-the-job training from the perspective of firms. Many studies have examined the relationship between worker attributes and participation in employer-sponsored training based on surveys that contain limited information on firm characteristics (e.g., firm size, industry, and union status) but few studies have examined the role of other critical firm characteristics such as market competition, research and development, technological innovation, and management practices. The WES data link these firm characteristics to their workers' attributes and record workplace classroom and on-the-job training. Therefore, the WES data enable us to better understand workplace training. This work adds to the literature in the following ways. First, we attempt to evaluate the role of firms' training provision in workers' participation. We find that when firms provide more training, their workers tend to participate more in workplace training. This finding has an important implication to firms and their training decisions. Second, we try to examine how workers' participation is correlated with changes in market competition, organizational changes, and technological innovation. The new evidence from the WES data indicates that changes in market competition, organizational changes, and technological innovation affect workers' participation in workplace training. This finding explains in part why workers in some firms participate more in workplace training than those in other firms. These new findings suggest that there is a strong and direct relationship between those important firm characteristics and workplace training. The remainder of the work proceeds as follows. In Section II, we review the existing literature and state our key hypotheses about workplace training participation. In Section III, we describe the WES data and highlight some observations based on the statistical analysis of workplace training participation with reference to all of the firm characteristics and worker attributes. In Section IV, we use the econometric models to analyze workplace training participation by taking into consideration all firm characteristics and worker attributes so that we can identify and interpret the net marginal impact of each of these determinants on workplace training participation. …

The poverty reduction success of public transfers for working age immigrants and refugees in the united states

Abstract: I. INTRODUCTION The welfare reform bill of 1996 spurred significant research on immigrant use of public assistance in the United States (Borjas 2002; Lofstrom and Bean 2002; Haider et al. 2004). Provisions in the bill that limited the access of certain immigrants to federal benefits drove researchers to study the impact of the reform on immigrant participation. We extend this work by focusing on the consequences the reforms had on the economic welfare of immigrants relative to natives. Since the reforms exempt refugees from the participation restrictions, we isolate the reform impacts on refugees relative to both other immigrants and natives. The foreign born comprise an increasing share of the U.S. population and account for more than 40% of the net population growth with roughly 10% of all new immigrants arriving with refugee status (U.S. Census Bureau and INS World Book). Refugees are admitted to the United States through an entirely different process than economic immigrants. Although most immigrants must demonstrate an ability to support themselves or have a permanent resident or sponsor who will provide support, refugees are largely exempt from this requirement. On average, refugees arrive with less preparation, weaker English language skills, weaker informal networks, and few if any assets. Since the Personal Responsibility Work Opportunity Reconciliation Act (PRWORA) of 1996, immigrants in general have had diminished access to the welfare system. This paper investigates the impact of recent policy changes on poverty measures for families headed by working age immigrants and refugees relative to the native born. This sample is of particular interest to policy makers because it includes a higher proportion of families who have children and who use programs affected by PRWORA. Although a number of authors examine program participation rates of immigrants, little work to date has examined the impact of such programs on actual poverty rates. The official poverty rate provides an important gauge of the degree of economic hardship facing families and individuals. From 1993 to 2001, the years surrounding the 1996 reforms, the official poverty rate in the United States decreased from 15.1% to 12.5%. Over the same time period, immigrant poverty fell from 23.0% to 17.2%. Poverty rates among new immigrants, and particularly among new refugee immigrants, are well above the national average. In the year 2000, 15.1% of refugees were poor compared with 13% for non-refugee immigrants and 10.5% for natives (Author's calculations, Current Population Survey [CPS]). The economic status of refugees has largely been overlooked in the economics literature. Several authors have recognized that refugees have significantly higher program participation than non-refugee immigrants (Borjas and Hilton 1996; Fix and Passel 1999). Efforts to study refugees, however, have been limited because measures of refugee status are typically not available in large cross-sectional datasets. Although ad hoc rules have been used by Borjas (2001) and Passel and Clark (1998), such rules lead to substantial misclassification. We address this problem through a two-sample approach, similar to two-sample instrumental variables, which allows us to statistically identify refugee poverty separate from that of other immigrants. Given the differential treatment of refugees under PRWORA, and the different circumstances under which most refugees emigrate, it is vital that policy makers understand the impact of policy on these increasingly important subpopulations. We find that although immigrants and refugees in particular had much higher poverty rates in the early 1990s, the strong economic growth throughout the decade led to a convergence of those poverty rates by 2000. All three groups (native born, refugees, and immigrants) saw declining poverty rates throughout the 1990s. Among those of working age, we find evidence that welfare reform had different impacts on non-refugee immigrants, refugees, and the native born. …

The asymmetric impact of “informative” and “uninformative” federal open market committee statements on asset prices

Abstract: I. INTRODUCTION Over the past decade, the policy statements issued by the Federal Open Market Committee (FOMC) after each meeting have become an increasingly important element of monetary policy-making in the United States. These statements provide information about the Fed's view on economic outlook, key forces that are likely to shape future developments and potential implications for monetary policy. Therefore, on policy announcement days, market participants monitor closely not only what the Fed does (interest rate decisions), but also what it says (FOMC statements). One striking example is the policy announcement of January 28, 2004, when the Fed kept its target rate unchanged (a move that was widely anticipated by the market), but unexpectedly altered the wording of the statement, causing one of the largest reactions on record in financial markets. Theoretically, central bank communication should not matter to market participants if the central bank is committed to an unchanged policy rule and the public has a perfect understanding of the rule, the objectives, and the thinking of the monetary authority. In reality, the central bank cannot possibly commit to an inflexible policy rule given that the number of contingent states is infinite (Blinder et al. 2008). Consequently, the public needs to estimate the policy function and because the central bank invariably knows more about its future moves, the dissemination of this information is important to market participants. It appears that, at least in practice, market participants should pay attention to the information content of FOMC statements. However, more information does not always translate to greater clarity and ill-conceived statements confuse rather than enlighten. Kahneman (2003) argues that there are limits to how much information can be digested effectively and more information may reduce common understanding among market participants. Moreover, central bank communication may be welfare reducing if agents place too much weight on policy statements and too little on their own information, thus crowding-out private beliefs which are an important source of information for the Fed (Amato, Morris, and Shin 2002; Morris and Shin 2002). In addition, the Fed may increase noise if it communicates information on which it has imprecise knowledge--such as on future economic developments rather than the policy path. This paper contributes to a young but rapidly growing literature on central bank communication by evaluating the impact of the information content of FOMC statements on the level and volatility of Treasuries and stock returns. To measure the "information content," we assess the consensus view about the importance of the statements by collecting news stories from three major news sources right after a policy meeting. This allows us to group statements into two broad categories, "informative" and "uninfor-mative," with informative statements delivering important information which was not previously anticipated by the consensus. A priori, we expect asset prices to respond asymmetrically to the type of information, with informative statements generating a larger response. Figure 1 seems to confirm this idea: the chart plots changes in S&P 500 and Treasury yields around policy announcements with solid bars representing dates when the statement was informative. As seen, the largest asset price changes typically occur when a statement releases important information, which indicates that markets do react to the information content. One reason for this oversized response is that the information delivered by these statements "creates news" in the sense that the content is both important and unexpected. If the news relates to future monetary policy, about which the Fed is expected to possess superior knowledge, then it should have a considerable impact on asset prices. However, statements routinely transmit the Fed's economic outlook which may be interpreted as an additional policy signal because this outlook presumably shapes the future course of monetary actions. …

Own‐ and cross‐price elasticities for games within a state lottery portfolio

Abstract: I. INTRODUCTION The prevalence and growth of lotteries around the world is typically explained in terms of the desire of governments to identify new sources of revenue without recourse to new or higher taxes. Thus, in most developed countries, specialist public agencies have been created and now offer a wide variety of lottery games to suit the tastes of players, seeking to maximize revenue for the state or its nominated organizations (such as those promoting sport). But the potential and performance of this source of revenue still needs to be better understood. In particular, as agencies have expanded the number of games on offer, there has been little analysis undertaken concerning the structure of the portfolio of games available. Looking at one game in isolation, the dominant approach in previous lottery studies, runs the risk of yielding recommendations (on, e.g., take-out) that are suboptimal because they fail to take into account impacts on sales of other lottery products (if these prove to be either substitutes or complements). The Spanish lottery agency, Loterias y Apuestas del Estado (LAE), one of the biggest in the world, has followed international practice in expanding the number of games in its portfolio over time. Its first lotto product, La Primitiva, was launched in 1985; Bonoloto was added in 1988; and El Gordo de la Phmitiva followed in 1993. Extra drawings of individual games were also introduced to present players with greater choice over when, as well as how, to play. It is the relationship between these various game offerings that is explored in this article. (1) All three games have long odds against winning the biggest prize (2) and in each case this generates frequent rollovers, permitting spectacular jackpots to accumulate on occasions. Thus, even though take-out rates are uniform across the games, there may be very substantial variation from week to week in the relative value for money available at each draw of each game. It depends on which games have accumulated large rollovers. Because the games are drawn on adjacent days over the course of a week, and are widely available through the same retail networks, they may then be expected to be revealed as either substitutes or complements by modeling of the response of sales of each product to the set of expected values of tickets available that week. Whether the relationship between games is that of substitutes or complements (and the strength of the relationship), it has implications for the pricing and marketing of the games offered by the lottery agency. According to standard economic usage, the definition of substitutes (or complements) depends on the sign of the cross-price elasticity. This study uses draw-by-draw data to examine the sign of the cross-price elasticities among Spanish lotto games and therefore to determine whether these games are substitutes or complements. Following practice since Clotfelter and Cook (1987) and Gulley and Scott (1993), price in the lottery literature is usually identified with the expected loss from the purchase of a single ticket. This is termed "effective price" and it will vary with the pattern of rollovers even if the nominal entry fee for a game is held constant. Here in the Spanish case, there is the complication that two changes in the nominal entry fee were in fact introduced during the data period. We will therefore model demand for each game as a function of its own effective price per euro paid for a ticket and of the (similarly defined) effective prices of rival games available at the same outlets. Estimates of own - and cross-price elasticities will then enable inference concerning whether net-of-prizes revenue is being maximized at current take-out rates and whether there are significant relationships between the demands for each game, which need to be taken into account. There have been a number of previous studies attempting to evaluate own-price elasticity for a lotto game (see, e. …

Economic transition and the gender earnings gap in chinese industry: the role of firm characteristics

Abstract: I. INTRODUCTION China's economic transition beginning in 1978 has brought about profound changes to the country's labor market. A large body of studies has emerged to analyze the impact of economic reforms on gender earnings inequality and the role of discrimination as an underlying determinant. Analysts argue that gender wage inequality in the post-reform economy is influenced by two opposing forces. On one hand, economic decentralization has granted managers more discretionary power to reward economically irrelevant characteristics such as gender. On the other hand, in accordance with Becker's theory of employers' discrimination (Becker, 1957), rising competition in factor and product markets as a result of reforms should punish discriminatory wage-setting behavior and thus decrease gender earnings inequality. As with traditional gender wage discrimination analyses, almost all the existing studies for transition economies rely on individual-level data. In these studies, a positive wage differential between men and women, after controlling for individual characteristics, such as education and experience, is interpreted as evidence of gender discrimination. Some analysts gauge the gender implications of market reforms by comparing the magnitudes of the residual wage gap between sectors with different degrees of exposure to market competition. (1) Some other researchers discern the effects of market reforms by looking at the variation of the residual wage gap over time periods. (2) Although the existing literature on gender wage gap provides insights into the gender impacts of China's economic transition, the analysis is constrained by two limitations. First, it is widely appreciated that the residual wage gap is an inadequate measure of wage discrimination. Labor productivity is determined not only by observed human capital characteristics but also by such factors as physical strength, motivation, and social norms, which are unobservable to researchers. Hence, it is contentious whether the fraction of the wage gap unexplained by observable characteristics is attributable to discrimination or to unobservable male-female differences in productivity as Altonji and Blank (1999) discuss. Second, because of lack of adequate information on firm characteristics, studies based on individual-level data drew inferences about market reforms and wage discrimination primarily from the between-sector or time variation of the residual wage gap as we mentioned. Because the wage variation is driven by multiple factors, the findings about the impacts of market reforms on wage discrimination are unsurprisingly moot. In recent years, several researchers have tackled the problem of measuring discrimination using firm-level data for established market economies. Cox and Nye (1989) examined gender wage discrimination in the nineteenth-century French textile industry and Hellerstein and Neumark (1998, 1999) studied the Israeli manufacturing sector. In both cases, the authors find that the marginal productivity of female workers is lower than that of male workers and that the difference between the productivity and the wage gaps is statistically insignificant. These results indicate that gender wage gap may reflect primarily productivity differences between men and women, not sex discrimination. Inspired by this new approach, Zhang and Dong (2008) and Dong and Zhang (2009) test gender wage discrimination with data on Chinese manufacturing enterprises in the late 1990s. They find that while compared to their male co-workers, female workers in state-owned enterprises (SOEs) are less productive and also receive lower wages, the male-female wage gap is significantly smaller than the productivity gap. In contrast, female workers in private firms are as productive as their male co-workers but receive lower pay. (3) The results suggest that female workers in the state sector receive wage premiums, whereas female workers in the private sector face wage discrimination. …

Charter school competition and its impact on employment spending in michigan's public schools

Abstract: I. INTRODUCTION The idea of school choice originated with Friedman (1962), who envisioned a system where every student in the country receives a voucher to be used only for schooling. Friedman argued that vouchers would create competition and market mechanisms would force schools to improve. If a school did not improve, few, if any, parents would choose to have their children attend that school and it would go out of business. The current reality of school choice is different from what Friedman (1962) envisioned. Currently there are two main types of school choice reform: vouchers and charter schools.(1) Vouchers are usually provided to children whose parents have low levels of income.(2) These parents are then free to choose for their children any private or public school which in turn receives the money from the voucher. Charter schools are for the most part public schools. Once a group receives permission to open a charter school (approval mechanisms vary from state to state), the charter school attempts to attract students. The school receives a set amount of funding (again the amount varies from state to state) for each attending student. (3) Despite these differences, both charter and voucher schools have the ability to create competition that was previously nonexistent for the traditional school. This paper focuses on the effect charter schools (most likely through competition) have on the traditional public school's demand for particular types of labor. Most previous studies have addressed the impact of school choice on educational outcomes. Hoxby (2002a, 2002b), Holmes, De-Simone, and Rupp (2003), Booker et al. (2004), Bettinger (2005), Bifulco and Ladd (2006), Sass (2006), and Chakrabarti (2008) examine voucher and charter schools' effects on public schools' test scores; these studies, with the exception of Bettinger (2005) and Bifulco and Ladd (2006) find that with an increase in competition, there is a small but significant positive effect on competition. (4) There has been little research on the impact of school choice on public spending decisions in general and employment mix in specific. For the most part, these studies were conducted prior to actual school choice reforms so they used traditional forms of choice, competition from private schools or number of school districts in a location (Tiebout choice) to measure the effects on inputs. Hoxby (1999) looks at how district choice affects the inputs of school districts. In a related study, Hoxby (2000b) finds that school choice increases demand for teachers that have a degree from a high quality college, that are highly skilled in math and science, that put out effort, and that are independent. She also finds that there is less demand for teachers that have certification-Hanushek and Rivkin (2003) use district choice in Texas in an attempt to measure how competition affects teacher quality. They find with more district choice, teacher education and test scores increase and that there is an increase in demand for teachers with more experience. Another related recent paper has also examined teachers in a school choice enviroment. Carruthers (2009) uses data from North Carolina to examine the difference among teachers who move to charter schools, those who move from one traditional school to another, and those who do not move. Among other results, she finds that those teachers moving to charter schools had students that did better on exams than those of teachers moving to other schools, but worse than of those teachers who did not move. My study uses panel data from Michigan along with fixed effects, lagged dependent variable, and instrumental variable techniques to examine how a school district's reaction to competition from charter schools affects the employees of the school district. Specifically this paper examines the effect that charter school competition has on the following variables in the traditional public schools: percentage of total general fund expenditures allocated toward instructors, administrators, and support personnel, along with average teacher salaries. …

Strategic Offsetting Behavior: Evidence from National Collegiate Athletic Association Men's Basketball

Abstract: I. INTRODUCTION Policies such as mandated safety equipment in automobiles, the workplace, and packaging of medicine are intended to have a positive effect on the well-being of individuals who consume the goods. Many such policies, however, may provide perverse incentives. By reducing the expected costs, individuals engage in more risky behavior. Hence, the target of the policy acts to offset the rule. This phenomenon has been referred to as the Offsetting Behavior Hypothesis (Peltzman 1975). The objective here is to illustrate that another but similar problem can exist with policies intended to elicit a particular outcome. A policy, while it may have the intended incentives for the targeted decision maker, may affect the incentives of an agent who is interacting strategically with the target. The non-targeted agent in a competitive environment may counteract the policy. I refer to this phenomenon as strategic offsetting behavior. Evidence of strategic offsetting behavior is provided using data from National Collegiate Athletic Association (NCAA) men's basketball. Beginning in the 2008-2009 basketball season the three-point line was moved out 12 in. farther from the basket. Presumably, an offensive player found such a shot more difficult to make ceteris paribus. Thus, one would expect the policy to lead to a lower three-point shooting percentage and a substitution toward taking closer two-point shots. A simple theoretical model of the interaction between the offense and the defense is presented. From this it is predicted that the defense, who wants to minimize the expected points scored by the offense in the possession, shifts its defensive strategy away from guarding against the more challenging three-point shot. This counteracts the difficulty of the strategy, or rather, strategically offsets the policy. As a test of this theory, if the defense is shifting its emphasis toward defending two-point shots, then the success of two-point shots should decrease. Empirical results support this assertion and show that success with two-point shots experienced a statistically significant decrease in 2008-2009 as compared to previous years. Additionally, evidence is presented that the policy change had a statistically significant effect on the success with three-point shots. The policy, which makes the three-point shot more difficult still reduces the success offenses have with this shot even with the strategic offset of the defense. Thus, it seems, at least in the application of men's basketball, the policy is only partially offset. While analyzing the impact of the rule change in men's college basketball, the results point to a potentially important effect with other policies. Offsetting behavior was first illustrated to be important in mandated automobile safety equipment (Peltzman 1975). Viscusi (1984) has illustrated its impact on the required use of childproof caps on analgesics. It has been analyzed in policies governing technological improvements in roads (e.g., width and surface of roads as well as distance from pedestrian paths) (Risa 1994) and has been shown to be important in the National Association for Stock Car Auto Racing (O'Roark and Wood 2004; Pope and Tollison 2010; Sobel and Nesbit 2007). With policies to increase the level of safety the offsetting behavior mitigates the benefit of the rule. The question becomes whether this offsetting is complete and whether, once the negative spillovers are considered, welfare is actually improved. The results presented here add another layer to the question: how does the policy affect the incentives of a third party interacting with the target? Furthermore, the work provides another example of the benefit of using competitive sports to analyze economic phenomenon. Basketball has been used to address issues such as incentives from contracting (Grier and Tollison 1990; Scully 1994) and racial discrimination (Hamilton 1997; Kahn and Sherer 1988; McCormick and Tollison 2001). …

The great recession, “rainy day” funds, and countercyclical fiscal policy in latin america

Abstract: I. INTRODUCTION The current financial crisis has been the most severe and widespread that the international economy has experienced since the Great Depression of the 1930s. Although it originated in the United States, the crisis spread internationally very quickly. Developing countries in particular were affected through various channels, both financial and real. The financial channels include sharp contractions in domestic asset prices and capital outflows, while the real channels include reductions in export volumes, declines in the prices of primary commodities, and reduced flows of workers' remittances. The worldwide nature of the crisis has generated a debate both in each affected nation and in all the major international financial organizations about the appropriate nature of the policy response. The complicating factors in addressing this issue are that the crisis manifested itself in different forms in different countries, that the effectiveness of the policy instruments available to confront it is likely to differ country by country, that each country faces country-specific constraints and tradeoffs in deploying such policy instruments, and that countries differ in the weights that they place on different policy objectives. Not surprisingly, therefore, there has been much international disagreement about appropriate policy responses, and individual countries have implemented quite different policies. This article considers the challenge of crisis policy from the perspective of Latin America, Its particular concern is with the appropriate role for countercyclical fiscal policy in response to the crisis. This issue was hotly debated within the region in the early stages of the crisis, and prominent voices argued for fiscal restraint, for reasons similar to those used to justify fiscal restraint more recently in many countries outside the region--that is, to safeguard market confidence. In the event, breaking with the past, countries in Latin America indeed undertook moderate fiscal stimulus. Instead of engineering fiscal restraint, fiscal balances in 2009 were allowed to accommodate the downturn in almost every country in the region. (1) In the typical country, the primary fiscal balance in 2009 deteriorated with respect to 2008 by 2.4 points of gross domestic product (GDP), 1.4 points because of lower fiscal revenues, and 1 point on account of higher expenditures. Countercyclical fiscal policy was behind not only spending expansion but, in part, revenue contraction because of lowering taxes. This impulse is planned to continue to some extent over 2010. Recovery is currently under way in Latin America. Because there were other forces driving that recovery, however (such as fast-growing demand for the region's primary products from booming economies in Asia), the contribution of fiscal stimulus to the region's recovery remains to be established. However, the question remains: was countercyclical fiscal policy an ex ante mistake that proved to be less harmful ex post because of fortunate developments in trade with Asia? Or have at least some economies in the region evolved to the point where a countercyclical fiscal stance--which indeed represents a significant break from the region's past--was appropriate ex ante in light of the severity of the crisis? The question is an important one, because it speaks to the crucial issue of whether, after two decades of reform, the region's macroeconomic institutions and circumstances have placed it in a position to be able to actively pursue macroeconomic stability in response to external shocks, rather than exercise restraint for the sake of preserving market confidence. In the event that the current recovery turns out not to be sustained or that an independent new crisis appears on the horizon in the near future, the formulation of an appropriate policy response requires that this question be addressed. Because theory suggests that the answer is likely to depend on country-specific conditions, we illustrate some of the important factors to be considered by focusing on the case of the seven largest economies in the region (the Latin American and Caribbean [LAC]-7 countries, consisting of Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela). …

Modeling the incidence of self-employment: individual and employment type heterogeneity

Abstract: Modelling the incidence of self-employment has traditionally proved problematic. Whilst the individual supply side characteristics of the self-employed are well documented, we argue that the literature has largely neglected demand-side aspects. We explore the determinants of self-employment using individual level data drawn from the U.S. Survey of Consumer Finances (SCF). We present results from an econometric framework, the Parameterised Dogit model, that allows us to separately, and simultaneously, model individual heterogeneity (i.e. supply side) and employment type heterogeneity (i.e. demand-side) influences that determine self-employment. Our findings suggest that whilst individual characteristics are important determinants of self-employment, there are also factors which are specific to the type of employment that influence whether an individual is self-employed.

Willingness to pay in china's new cooperative medical system

Abstract: I. INTRODUCTION Poor households in developing countries are less likely than nonpoor households to seek medical treatment because they often lack the means to pay for this care and because the quality of the care to which they have access is often substandard (Makinen et al., 2000). At the same time, illness and injury can cause households to fall into poverty as illness spurs lower productivity and treatment strains household budgets (e.g., Smith, 1999; Dercon and Hoddinott, 2004; Wagstaff, 2005). China is no exception to these trends. After the collapse of China's highly successful Rural Cooperative Medical System (RCMS) in the early 1980s, most farmers were left without health insurance of any sort (Akin, Dow, and Lance, 2004). As a result, health care expenses were responsible for increasing the poverty rate by 2.5 percentage points in the mid-1990s (Gustafsson and Li, 2003). Similarly, Ministry of Health (1999) reports that nearly a quarter of poor households attribute their low economic status to illness. Moreover, increases in the price of health care far outstripped increases in personal incomes such that 38% of rural residents who became sick in the early part of this decade chose to postpone or altogether forego medical treatment (Hsiao, 2005). Recognizing that such outcomes are incompatible with the new leadership's vision for building "harmonious society," the central government unveiled the New Cooperative Medical System (NCMS) in October 2002. The NCMS is a voluntary insurance program that targets people who may otherwise fall into poverty as a result of catastrophic illnesses. The program is administered at the county level, and as such, local administrators have tremendous flexibility in its design and management. Consequently, there is considerable heterogeneity in program implementation. For example, financing for the NCMS program is the joint responsibility of the central government, provincial and subprovincial governments, and individual participants. Each county sets its own participation fee, and some offer assistance or waive the required contribution for poor households (Wang and Rosenman, 2007). Although the central government has stipulated a minimum participation fee of 10 RMB per person, some counties have set participation fees as high as 40 RMB. These individual participation fees are matched by at least 20 RMB from local governments in poor counties. In addition, fees from participants in poorer western and central provinces are subject to an additional 20 RMB match from the central government. The total funding available for each participant thus averages 52 RMB (Nie, 2007). By the end of 2006, the budget for NCMS programs reached nearly 32 billion RMB (Nie, 2007), with participation fees accounting for about one-third of this total. However, the pooled fund in each county is small relative to total medical costs, sufficient to cover only 20%-30% of realized medical expenditures in most counties (World Health Organization, 2004). Thus, county administrators are tasked with providing catastrophic health care coverage to rural residents without exhausting the funding available to them. In practice, each county sets reimbursement rates, decides whether to restrict the types of covered ailments, and chooses whether to limit eligibility for reimbursement to certain clinics and hospitals. Various attempts to limit payouts appear to have been successful; for example, just 6% of hospital expenses were reimbursed in surveyed counties in 2004 (Yan et al., 2006). In the end, these considerations to limit payouts may undermine the long-term sustainability of the program as some members who fall ill remain unable to afford medical care. The goal of this paper is thus to analyze the factors that influence a household's willingness to pay for insurance through the NCMS program in order to allow each county to set participation fees so as to maximize the total funds available for risk pooling. …

Gender Differences in Native Preferences toward Undocumented and Legal Immigration: Evidence from San Diego

Abstract: I. INTRODUCTION Public views about immigration in the United States appear sharply divided--about half of respondents in a variety of U.S. surveys indicate they would prefer that the number of legal immigrants allowed to come to live in the United States decreased. (1) Likewise, the public is also divided in their views toward undocumented immigration. For instance, using data for San Diego County, we find that over 50% of natives believe that undocumented migrants should be required to go home, whereas slightly below 50% of natives believe that undocumented migrants should be granted some kind of legal status. These are all differences noted in the literature by studies that focus on native opinions regarding either legal or undocumented immigration, (2) as most surveys do not inquire natives about their preferences toward the two distinct types of immigrants. As such, lacking from the literature is an analysis for the same group of natives of the opinions they may hold with regard to legal as opposed to undocumented immigration, and of the factors driving their views. Using data for San Diego County we find that, while slightly more than half of natives in our sample oppose a generalized amnesty for undocumented immigrants, less than 30% of them want the number of legal immigrants admitted into the United States to be reduced. Therefore, it is crucial to distinguish between native opinions toward legal as opposed to undocumented immigration, avoiding any extrapolations of native views toward one group to the other group given that the factors shaping native opinions on legal and undocumented migrants are likely to differ. In this paper, we distinguish between individual attitudes toward legal as opposed to undocumented immigration into the United States by using data on: (1) native views toward legal immigration and (2) native preferences toward the passage of a generalized amnesty similar to the 1986 Immigration Reform and Control Act (IRCA). In particular, we are interested in finding out whether there are differences in how native men and women feel about legal as opposed to undocumented migrants and, if so, why. In line with the existing literature on native attitudes toward immigration, we examine the role played by a variety of economic and social factors in shaping native distinct preferences over legal and undocumented immigration. In particular, we focus on three broad explanations for differences in native male and female preferences over the two types of immigration; (1) fears of labor market competition, (2) the alleged economic burden imposed by undocumented migrants, and (3) prejudice toward immigrant groups. In sum, we ask ourselves the following questions: Are there differences in native views toward legal as opposed to undocumented immigration? Are these differences found in both native men and native women? And, if so, what explains such differences in native male and female opinions with regard to legal and undocumented immigration? A number of empirical studies have used survey data to assess the relevance of economic and social factors in explaining individual attitudes toward immigration. Some of the literature focuses on Great Britain, (3) some on the United States, (4) and, yet others, on a cross-section of countries. (5) Our study differs from the previous literature with regards to the questions being asked and the data being used. Indeed, owing to survey design, the past literature on native attitudes toward immigration has primarily centered on native preferences for legal immigration. (6) Only a few studies have focused on native attitudes toward undocumented immigration (Binder, Polinard, and Wrinkle 1997; Espenshade 1995; Espenshade and Calhoun 1993) and, to our knowledge, none has compared native preferences toward legal as opposed to undocumented immigration from the same group of male and female respondents. In this study, owing to the information on preferences over legal immigration as well as over an amnesty for undocumented immigrants collected from the same individuals, we are able to contrast and compare respondents' answers to both questions and learn about the factors driving their distinct opinions. …

The Role of Model Specification in Finding the Influence of Ownership and Regulatory Regime on Utility Cost: The Case of Swedish Electricity Distribution

Abstract: I. INTRODUCTION The restructuring of network industries during the last two decades has typically involved privatization of state- and municipally owned utilities and a change in regulatory regime from cost-of-service, or rate-of-return, regulation to incentive-based regulation. These re-regulatory initiatives have been encouraged by economic theories that predict that private suppliers and competition increase cost efficiency. (1) Such outcomes have in fact been observed in electricity and water distribution (Kumbhakar and Hjalmarsson 1998; Saal and Parker 2000). (2) Nevertheless, the restructuring seen in different countries varies from complete privatization of multiple utility services and a heavy reliance on cost incentives, in for example England and Wales, to no or only marginal adjustments, exemplified by the water, wastewater, and district heating sectors in Sweden. (3) The wide variety of adopted policies can be attributed to the empirical difficulty of establishing a unified view of how utility performance is affected by different ownership and regulatory arrangements. The mainstream predictions are questioned by, for example, Kwoka (2005a, 2005b) and Bhattacharyya et al. (1995), who suggest that publicly owned utilities are more cost efficient in electricity and water distribution, respectively, whereas others argue that ownership is only relevant in combination with other market and utility characteristics, such as type of regulation (Aroncena and Waddams Price 2002; Berg, Lin, and Tsaplin 2005) and utility size (Bhattacharyya et al. 1995). In terms of regulation, incentive models have been found to improve welfare (Estache and Rossi 2005) but Goto and Tsutsui (2008) find no effect of deregulatory initiatives in the U.S. electricity distribution, although the precise natures of the pre- and post-regulatory regimes are unclear in their case. (4) Aubert and Reynaud (2005) find that water utilities are more cost efficient under rate-of-return regulation than under price cap regulation. The authors attribute this outcome to the extensive access to information that supplements the particular rate-of-return regime they investigate. A tentative explanation to why conclusions vary is the specific conditions that prevail in each country and industry; however, the studies referred to above also suggest that ownership and regulation might not affect performance by themselves but rather through combinations with other factors. In addition, behavioral assumptions and model specifications vary, which can potentially inflate differences in empirical outcomes. Bhattacharyya et al. (1995), Berg, Lin, and Tsaplin (2005), Hattori, Jamasb, and Pollitt (2005), Aubert and Reynaud (2005), Pombo and Taborda (2006), and Goto and Tsutsui (2008) all use stochastic frontier (i.e., dual disturbance) specifications, whereas Kwoka (2005a, 2005b) and Saal and Parker (2000) use single disturbance specifications. The choice between dual and single disturbance specifications is related to the assumption of utility objective, because a frontier specification rests on an assumption of cost-minimization while a function through the average of the data assumes that utilities follow any arbitrary objective. If it can be assumed that utilities minimize costs, then frontier methods have superior economic properties because the presence of a frontier is consistent with the behavior of economic optimization with a departure from the frontier interpreted as a lack of ability and/or luck. However, the choice of utility objective is not straightforward and although a majority of the studies surveyed above apply frontier specifications, it has been claimed that a cost-minimizing assumption could be overly restrictive (Kwoka 2005a). It can nevertheless be argued that most incentive-based approaches encourage cost-minimization and they typically compose a double incentive structure to separately reward frontier reductions and penalize inefficiency. …

Does the provision of public goods correspond to local demand

Abstract: Recently China's central government has promoted public goods investment in pursuit of rural development and poverty reduction However, the top down nature of investment planning may lead to mismatches between public goods projects and the demands of local residents Using village- and household-level survey data, this study seeks to identify the determinants of project implementation, focusing on investments in roads, drinking water, and irrigation Contrary to some popular perception, our results suggest symmetry between farmers' reported demand and the types of projects implemented in their villages The relative contribution of local demand to project implementation is seen to vary, however, across different types of public goods (JEL D71, H41, H77, P35)

Breaking the glass ceiling: slow progress ahead

Abstract: 1. INTRODUCTION The glass ceiling that many women face as they attempt to move into top corporate positions has been studied extensively. The 1995 Report of the Glass Ceiling Commission cites many studies, all of which document the fact that a very small percentage of senior managers in large U.S. corporations are female. More recently, the organization Catalyst reported that in 2005 only 16.4% of the corporate officers in Fortune 500 companies were female. Using similar studies dating back to 1995, Catalyst calculated that the percentage of female corporate officers had increased by an average of only 0.82% per year from 1995 to 2005. Catalyst calculates that at this rate of increase it will take another 40 years for women to achieve parity in these positions. (1) Catalyst attributes this slow progress to three factors: (1) gender-based stereotyping, (2) the exclusion of women from informal networks, and (3) lack of role models for aspiring female managers. Although factors such as these may hamper women's progress toward parity, in this paper I will show that social change can occur very slowly, even in the absence of such barriers. Consider this scenario: imagine a representative large firm had from its inception employed only males in management positions. At a certain point of time, the firm dramatically alters its behavior and begins hiring equal numbers of male and female managers. Males and females are completely equal, with identical probabilities of retention, promotion, and exiting the firm. In this setting, how long will it take to transform this firm's once-entirely male management hierarchy into a gender-balanced management hierarchy? This question can be answered using an open Markov system, which is a common tool in manpower analysis. In this paper I derive equations that show the evolution of the gender composition of the management hierarchy over time for the setting described above. This scenario is interesting because it is the "best case" scenario for the advancement of women in management positions--once the firm abandons its old ways, there is no further discrimination in hiring, and no discrimination in promotion or retention. The nature of the model itself explicitly eliminates stereotyping and everything else that could conceivably hinder progress toward gender parity. The equations derived for this scenario therefore provide a lower bound for the time required to achieve gender parity. In the real world, lingering discrimination or a lack of role models may cause progress toward gender parity to be slower than what is suggested by these equations, but it is unlikely that progress will be faster. The equations I derive below show that the evolution of the gender composition of the managers depends on the retention probabilities within the firm. Previously published studies provide a range of real-world values for these probabilities. I generate 100,000 random samples of retention probabilities that fall within the ranges provided by published studies. Using this sample, I calculate the average gender composition of the management hierarchy 20, 40, and 60 years after the firm begins treating women equally. The results indicate that the slow progress toward parity reported by Catalyst is to be expected and will probably continue. However, the slow progress documented here is not the result of a glass ceiling or the exclusion of women from informal networks, for these have been explicitly eliminated. Change simply occurs slowly in such systems, even in the "best case" scenario. The outline of this paper is as follows: in Section II, I review open Markov systems and their convergence to a stable solution. In Section III, I consider a method to describe the path a Markov system takes as it moves from an arbitrary starting vector to its stable solution; knowing the path that the system traverses is integral to understanding how long it takes the system to move to its stable solution. …