Showing papers in "The Review of Economics and Statistics in 2001"
TL;DR: In this paper, the authors employ recently developed techniques for testing hypotheses in cointegrated panels to test the strong version of purchasing power parity for a panel of post Bretton Woods data.
Abstract: This paper employs recently developed techniques for testing hypotheses in cointegrated panels to test the strong version of purchasing power parity for a panel of post Bretton Woods data. We compare results using fully modified and dynamic OLS approaches, and strongly reject the hypothesis. We also introduce a new between-dimension dynamic OLS estimator and find that the between-dimension FMOLS and DOLS estimates of the long-run deviation from purchasing power parity are larger than the corresponding within-dimension estimates. Finally, we attempt to reconcile these rejections with the mixed findings that have been reported in panel unit root studies.
1,767 citations
TL;DR: This paper found that bad environmental performance is negatively correlated with the intangible asset value of firms, and that legally emitted toxic chemicals have a significant effect on the intangible assets of publicly traded companies.
Abstract: Previous studies that attempt to relate environmental to financial performance have often led to conflicting results due to small samples and subjective environmental performance criteria. We report on a study that relates the market value of firms in the S&P 500 to objective measures of their environmental performance. After controlling for variables traditionally thought to explain firm-level financial performance, we find that bad environmental performance is negatively correlated with the intangible asset value of firms. The average ‘intangible liability’ for firms in our sample is $380 million—approximately 9% of the replacement value of tangible assets. We conclude that legally emitted toxic chemicals have a significant effect on the intangible asset value of publicly traded companies. A 10% reduction in emissions of toxic chemicals results in a $34 million increase in market value. The magnitude of these effects varies across industries, with larger losses accruing to the traditionally polluting in...
1,266 citations
TL;DR: In this article, the authors examined the impact of workplace practices, information technology, and human capital investments on productivity and found that it is not whether an employer adopts a particular work practice but rather how that work practice is actually implemented within the establishment that is associated with higher productivity.
Abstract: Using data from a unique nationally representative sample of businesses, we examine the impact of workplace practices, information technology, and human capital investments on productivity. We estimate an augmented Cobb-Douglas production function with both cross section and panel data covering the period of 1987–1993, using both within and GMM estimators. We find that it is not whether an employer adopts a particular work practice but rather how that work practice is actually implemented within the establishment that is associated with higher productivity. Unionized establishments that have adopted human resource practices that promote joint decision making coupled with incentive-based compensation have higher productivity than other similar nonunion plants, whereas unionized businesses that maintain more traditional labor management relations have lower productivity. Finally, plant productivity is higher in businesses with more-educated workers or greater computer usage by nonmanagerial employees.
1,090 citations
TL;DR: This article used three years of individual-level data to analyze the determinants of individual preferences over immigration policy in the United States and found no evidence that the relationship between skills and immigration opinions is stronger in high-immigration communities.
Abstract: This paper uses three years of individual-level data to analyze the determinants of individual preferences over immigration policy in the United States. We have two main empirical results. First, less-skilled workers are significantly more likely to prefer limiting immigrant inflows into the United States. Our finding suggests that, over the time horizons that are relevant to individuals when evaluating immigration policy, individuals think that the U.S. economy absorbs immigrant inflows at least partly by changing wages. Second, we find no evidence that the relationship between skills and immigration opinions is stronger in high-immigration communities.
870 citations
TL;DR: This article applied the Kalman filter to estimate jointly time-varying natural rates of interest and output and trend growth, finding a close link between the natural rate and the trend growth rate, as predicted by theory.
Abstract: The natural rate of interest—the real interest rate consistent with output equaling its natural rate and stable inflation—plays a central role in macroeconomic theory and monetary policy. Estimation of the natural rate of interest, however, has received little attention. We apply the Kalman filter to estimate jointly time-varying natural rates of interest and output and trend growth. We find a close link between the natural rate of interest and the trend growth rate, as predicted by theory. Estimates of the natural rate of interest, however, are very imprecise and subject to considerable real-time measurement error.
759 citations
TL;DR: In this article, the authors investigate whether foreign direct investment (FDI) also transfers technology across borders, and they find that FDI transfers technology, but only in one direction: a country's productivity is increased if it invests in R&D-intensive foreign countries, but not if foreign R&DI-intensive countries invest in it.
Abstract: Previous studies have found that importing goods from R&D-intensive countries raises a country's productivity. In this paper, we investigate econometrically whether foreign direct investment (FDI) also transfers technology across borders. The data indicates that FDI transfers technology, but only in one direction: a country's productivity is increased if it invests in R&D-intensive foreign countries—particularly in recent years—but not if foreign R&D-intensive countries invest in it. Other findings of the paper are that the ratio of foreign-R&D benefits conveyed by outward FDI to foreign R&D benefits conveyed by imports is higher for large countries than it is for small ones, that failure to account for international R&D spillovers leads to upwardly biased estimates of the output elasticity of the domestic R&D capital stock, and that there are much larger transfers of technology from the United States to Japan than there are from Japan to the United States.
685 citations
TL;DR: This paper used a sample of tenth-graders to test for peer-group influences on the propensity to engage in five activities: drug use, alcohol drinking, cigarette smoking, church going, and the likelihood of dropping out of high school.
Abstract: We use a sample of tenth-graders to test for peer-group influences on the propensity to engage in five activities: drug use, alcohol drinking, cigarette smoking, church going, and the likelihood of dropping out of high school. We find strong evidence of peer-group effects at the school level for all activities. Tests for bias due to endogenous school choice yield mixed results. We find evidence of endogeneity bias for two of the five activities analyzed (drug use and alcohol drinking). On the whole, these results confirm the findings of previous research concerning interaction effects at the neighborhood level.
571 citations
TL;DR: In this paper, the authors examined the effect of air quality regulation on productivity in some of the most heavily regulated manufacturing plants in the United States, the oil refineries of the Los Angeles (South Coast) Air Basin.
Abstract: We examine the effect of air quality regulation on productivity in some of the most heavily regulated manufacturing plants in the United States, the oil refineries of the Los Angeles (South Coast) Air Basin. We use direct measures of local air pollution regulation to estimate their effects on abatement investment. Refineries not subject to these regulations are used as a comparison group. We study a period of sharply increased regulation between 1979 and 1992. Initial compliance with each regulation cost $3 million per plant and a further $5 million to comply with increased stringency. We construct measures of total factor productivity using Census of Manufacturers output and materials data that report physical quantities of inputs and outputs for the entire population of refineries. Despite high costs associated with the local regulations, productivity in the Los Angeles Air Basin refineries rose sharply between 1987 and 1992, which was a period of decreased refinery productivity in other regions. We con...
495 citations
TL;DR: This article investigated the association between population age structure, particularly the share of the population in the prime saving years (40 to 64), and the returns on stocks and bonds, and found that the aging of the "baby boom" cohort is a key factor in explaining the recent rise in asset values, and by predictions that asset prices will decline when this group reaches retirement age and begins to reduce its asset holdings.
Abstract: This paper investigates the association between population age structure, particularly the share of the population in the ‘prime saving years’ (40 to 64), and the returns on stocks and bonds. The paper is motivated by recent claims that the aging of the ‘baby boom’ cohort is a key factor in explaining the recent rise in asset values, and by predictions that asset prices will decline when this group reaches retirement age and begins to reduce its asset holdings. This paper begins by considering household age-asset accumulation profiles. Data from repeated cross sections of the Survey of Consumer Finances suggest that, whereas age-wealth profiles rise sharply when households are in their thirties and forties, they decline much more gradually when households are in their retirement years. When these data are used to generate ‘projected asset demands’ based on the projected future age structure of the U.S. population, they do not show a sharp decline in asset demand between 2020 and 2050. The paper considers ...
431 citations
TL;DR: For instance, the authors found that monetary policy in the U.S. can be characterized as having reacted in a moderate fashion to output and in a slow manner to the Taylor rule.
Abstract: Estimates of the Taylor rule using historical data from the past decade or two suggest that monetary policy in the U.S. can be characterized as having reacted in a moderate fashion to output and in...
425 citations
TL;DR: In this article, a measure of dynamic comovement between (possibly many) time series and names it cohesion is defined in the frequency domain and is appropriate for processes that are costationary, possibly after suitable transformations.
Abstract: This paper proposes a measure of dynamic comovement between (possibly many) time series and names it cohesion. The measure is defined in the frequency domain and is appropriate for processes that are costationary, possibly after suitable transformations. In the bivariate case, the measure reduces to dynamic correlation and is related, but not equal, to the well known quantities of coherence and coherency. Dynamic correlation on a frequency band equals (static) correlation of bandpass-filtered series. Moreover, long-run correlation and cohesion relate in a simple way to co-integration. Cohesion is useful to study problems of business-cycle synchronization, to investigate short-run and long-run dynamic properties of multiple time series, and to identify dynamic clusters. We use state income data for the United States and GDP data for European nations to provide an empirical illustration that is focused on the geographical aspects of business-cycle fluctuations.
TL;DR: In this article, the authors approximate price discrimination with marginal implicit prices of ticket restrictions that carriers typically use to price discriminate: Saturday-night stayover re-quirements and advanced-purchase discounts.
Abstract: We test the hypothesis that price discrimination increases with competition in the airline market. Using a large cross section of tickets offered by several carriers on various routes, we approximate price discrimination with marginal implicit prices of ticket restrictions that carriers typically use to price discriminate: Saturday-night stayover re-quirements and advanced-purchase discounts. We find that the restrictions are associated with lower airfares, but that the discounts are smaller on routes with higher market concentration. The results suggest that price dispersion attributed to ticket restrictions increases as markets becomemore competitive.
TL;DR: In this paper, the authors examined empirically whether risk pooling is more advantageous among altruistic compared to selfish agents in a framework where individuals cannot make binding commitments and used simulation methods to establish tests of the roles of both altruism and commitment problems in determining the extent of insurance and the intertemporal movements in interhousehold transfers.
Abstract: In this paper, we examine empirically whether risk pooling is more advantageous among altruistic compared to selfish agents in a framework where individuals cannot make binding commitments. In particular, we incorporate altuism into a model of risk sharing under imperfect commitment and use simulation methods to establish tests of the roles of both altruism and commitment problems in determining the extent of insurance and the intertemporal movements in interhousehold transfers. The tests are carried out using three panel data sets from two countries of rural South Asia that provide detailed information on transfers and enable the measurement of income shocks. The estimates provide strong support for the notion that imperfect commitment substantially constrains informal transfer arrangements, whether kin-based or not, but also provide evidence that altruism plays an important role in ameliorating commitment constraints and thus in increasing the gains from income pooling.
TL;DR: In this article, a Phillips curve-type regression is used to obtain estimates of the NAIRU for the G7 except Japan, plus Australia, over the past 28 years.
Abstract: Several specifications of state-space models are used to obtain estimates of the NAIRU for the G7 except Japan, plus Australia, over the past 28 years. A Phillips curve-type regression is shown to deliver estimates that do not mimic low-frequency movements in unemployment rates, even when a drift is included in the specification of the NAIRU. Standard errors around the estimates are extremely large. Using information about the behavior of unemployment, in addition to inflation, alleviates both these shortcomings.
TL;DR: This paper used panel data to analyze the determinants of speaking fluency and wages of immigrants and found that subjective variables on an ordinal discrete scale, such as self-reported language ability, can suffer from misclassification errors.
Abstract: We use panel data to analyze the determinants of speaking fluency and wages of immigrants. Our model takes account of two problems that may bias OLS estimates of the impact of speaking fluency on earnings. First, subjective variables on an ordinal discrete scale, such as self-reported language ability, can suffer from misclassification errors. The model decomposes misclassification errors into a time-persistent and a time-varying component. Second, the model accounts for correlated unobserved heterogeneity in language and earnings equation, The main finding is that these two generalizations of the standard model both lead to substantial changes in the estimated effect of speaking fluency on earnings.
TL;DR: In this article, the authors propose a method to solve the problem of homomorphic clustering in the context of biomedical applications.http://www.mitpressjournals.org/doi/abs/10.1162/003465301753237731#.VMKObnvGp40.
Abstract: This is the publisher's version, also available electronically from http://www.mitpressjournals.org/doi/abs/10.1162/003465301753237731#.VMKObnvGp40.
TL;DR: In this article, the authors explore the price impact of minimum-wage hikes in Canada and the United States and find that restaurant prices generally rise with changes in the wage bill and that this response is concentrated in the quarter surrounding the month during which the legislation is enacted.
Abstract: This paper tests a textbook consequence of competitive markets: that an industry-wide increase in the price of labor is passed on to consumers through an increase in prices. Using several data sources on restaurant prices, I explore the price impact of minimum-wage hikes in Canada and the United States. Particular attention is paid to the timing of these price responses to gauge the ‘stickiness’ of minimum-wage cost shocks. I find that restaurant prices generally rise with changes in the wage bill and that this response is concentrated in the quarter surrounding the month during which the legislation is enacted.
TL;DR: The authors developed a model in which worker risk preferences and job safety performance lead to smokers facing a flatter market offer curve than nonsmokers, and the empirical results support the theoretical model.
Abstract: Using a large data set, the authors find that smokers select riskier jobs, but receive lower total wage compensation for risk than do nonsmokers. This finding is inconsistent with conventional models of compensating differentials. The authors develop a model in which worker risk preferences and job safety performance lead to smokers facing a flatter market offer curve than nonsmokers. The empirical results support the theoretical model. Smokers are injured more often controlling for their job's objective risk and are paid less for these risks of injury. Smokers and nonsmokers, in effect, are segmented labor market groups with different preferences and different market offer curves.
TL;DR: In this article, the authors compare the efficiency of family farms and partnerships with large-scale successor organizations of the collective and state farms (LSOs) using parametric and nonparametric techniques.
Abstract: Enterprise restructuring is expected to improve efficiency in transition economies. With data from former East Germany, we compare the efficiency of family farms and partnerships with large-scale successor organizations of the collective and state farms (LSOs). Using parametric and nonparametric techniques, we show that LSOs display lower technical efficiency than do family farms and partnerships but that this difference is small and declining during transition, mainly as a result of structural changes in agriculture. Family farms are not as scale efficient as partnerships and LSOs, and partnerships are superior to all other organizational forms.
TL;DR: In this paper, the authors consider two problems that arise in determining the role of cognitive ability in explaining the level of and change in the rate of return to schooling and find that ability and schooling are so strongly dependent that it is not possible, over a wide range of variation in schooling and ability, to independently vary these two variables and estimate their separate impacts.
Abstract: This paper considers two problems that arise in determining the role of cognitive ability in explaining the level of and change in the rate of return to schooling. The first problem is that ability and schooling are so strongly dependent that it is not possible, over a wide range of variation in schooling and ability, to independently vary these two variables and estimate their separate impacts. The second problem is that the structure of panel data makes it difficult to identify main age and time effects or to isolate crucial education-ability-time interactions which are needed to assess the role of ability in explaining the rise in the return to education.
TL;DR: In this article, the authors examine the evolution of productivity in U.S. manufacturing plants from 1963 to 1992 and define a vintage effect as the change in productivity of recent cohorts of new plants relative to earlier cohorts of manufacturing plants as it ages.
Abstract: This paper examines the evolution of productivity in U.S. manufacturing plants from 1963 to 1992. We define a vintage effect as the change in productivity of recent cohorts of new plants relative to earlier cohorts of new plants, and a survival effect as the change in productivity of a particular cohort of surviving plants as it ages. Both factors contribute to industry productivity growth, but play offsetting roles in determining a cohort's relative position in the productivity distribution. Recent cohorts enter with higher productivity than earlier entrants did, whereas surviving cohorts show productivity increases as they age. These two effects roughly offset each other, however, so there is a rough convergence in productivity across cohorts in 1992 and 1987.
TL;DR: In this paper, the efficiency of electric power generation plants in the United States was examined using a 1996 data set from the Utility Data Institute and county-level wage data from the Bureau of Labor stat...
Abstract: This paper examines the efficiency of electric power generation plants in the United States. A 1996 data set from the Utility Data Institute and county-level wage data from the Bureau of Labor stat...
TL;DR: The authors explored the link between real exchange rates and employment, wages, and overtime activity in U.S. manufacturing industries and found that exchange rates have statistically significant effects on industry wages, with the magnitude of these effects rising as industries increase their export orientation and declining as imported input use becomes more important.
Abstract: Using two decades of annual data, we explore the links between real exchange rates and employment, wages, and overtime activity in U.S. manufacturing industries. Especially in industries with lower price-over-cost markups, exchange rates have statistically significant effects on industry wages, with the magnitude of these effects rising as industries increase their export orientation and declining as imported input use becomes more important. Exchange rate implications for jobs and hours worked are smaller and less precisely measured. We find a much higher response of overtime wages and overtime hours to transitory exchange rates movements.
TL;DR: A new information-based approach for estimating systems of many equations with non-negativity constraints is presented in this paper, called generalized maximum entropy (GME), which is more practical and more efficient than the traditional maximum entropy approach.
Abstract: A new information-based approach for estimating systems of many equations with nonnegativity constraints is presented. This approach, called generalized maximum entropy (GME), is more practical and...
TL;DR: The authors explored the influence of domestic competition on international trade performance, using data from a broad sample of Japanese industries and found robust evidence that domestic rivalry has a positive and significant relationship with trade performance measured by world export share, particularly when R&D intensity reveals opportunities for dynamic improvement and innovation.
Abstract: The study explores the influence of domestic competition on international trade performance, using data from a broad sample of Japanese industries. Domestic rivalry is measured directly using market-share instability rather than employing structural variables such as seller concentration. We find robust evidence that domestic rivalry has a positive and significant relationship with trade performance measured by world export share, particularly when R&D intensity reveals opportunities for dynamic improvement and innovation. Conversely, trade protection reduces export performance. These findings support the view that local competition—not monopoly, collusion, or a sheltered home market— pressures dynamic improvement that leads to international competitiveness.
TL;DR: In this article, the authors explored a number of methodological issues related to the econometric analysis of stated preference data in the context of estimating the value of automobile travel time and found that the average willingness to pay (WTP) is low and does not exhibit much variation among motorists.
Abstract: This paper explores a number of methodological issues related to the econometric analysis of stated preference data in the context of estimating the value of automobile travel time. Estimates of parameters and the willingness to pay (WTP) to save time are obtained using conventional ordered probit and rank-ordered logit models and an innovation called mixed logit. We find that the average WTP is low and does not exhibit much variation among motorists. Although our findings using data on respondents' rankings of alternatives are robust, we find that caution should be used in estimating stated preferences based on respondents' ratings.
TL;DR: In this paper, the authors present a comprehensive test of the alternate hypothesis that variations in homelessness arise from changed circumstances in the housing market and in the income distribution, and suggest that simple economic principles governing the availability and pricing of housing and the growth in demand for the lowest-quality housing explain a large portion of the variation in homelessness.
Abstract: It is generally believed that the increased incidence of homelessness in the United States has arisen from broad societal factors, such as changes in the institutionalization of the mentally ill, increases in drug addiction and alcohol usage, and so forth. This paper presents a comprehensive test of the alternate hypothesis that variations in homelessness arise from changed circumstances in the housing market and in the income distribution. We assemble essentially all the systematic information available on homelessness in U.S. urban areas: census counts, shelter bed counts, records of transfer payments, and administrative agency estimates. We estimate similar statistical models using four different samples of data on the incidence of homelessness, defined according to very different criteria. Our results suggest that simple economic principles governing the availability and pricing of housing and the growth in demand for the lowest-quality housing explain a large portion of the variation in homelessness ...
TL;DR: Although prior studies of job displacement and disability have measured the impact of these shocks in terms of lost earnings, no previous research has linked these permanent earnings shocks to the... as discussed by the authors.
Abstract: Although prior studies of job displacement and disability have measured the impact of these shocks in terms of lost earnings, no previous research has linked these permanent earnings shocks to the ...
TL;DR: This article found that smokers react differently to health shocks than do those who quit smoking or never smoked, and these differences, together with insights from qualitative research conducted along with the statistical analysis, suggest specific changes in the health warnings used to reduce smoking.
Abstract: UBLIC policy toward cigarettes is about consumer sovereignty. Can people be trusted to interpret health warnings designed to reduce tobacco use, both what is on product labels and presented in public advertisements, as intended and to make rational smoking decisions? Evaluating smokers’ reactions to health warnings requires an understanding of how people form their beliefs about the risks from smoking and update them when they encounter new information. This paper reports the first effort to use data to evaluate how new information, acquired through exogenous health shocks, affects people’s longevity expectations. We find that smokers react differently to health shocks than do those who quit smoking or never smoked. These differences, together with insights from qualitative research conducted along with the statistical analysis, suggest specific changes in the health warnings used to reduce smoking.
TL;DR: In this article, the authors estimate the impact of employer-provided retiree health insurance (EPRHI) on the labor force transitions of men aged 51 to 62, using data from the Health and Retirement Survey.
Abstract: We estimate the impact of employer-provided retiree health insurance (EPRHI) on the labor force transitions of men aged 51 to 62. Data from the Health and Retirement Survey provide detailed and acc...