COMPENSATORY RESTORATION IN A RANDOM UTILITY MODEL OF RECREATION DEMAND

Natural Resource Damage Assessment cases often call for compensation in non‐monetary or restoration equivalent terms. In this article, we present an approach that uses a conventional economic model, a travel cost random utility model of site choice, to determine compensatory restoration equivalents for hypothetical beach closures on the Gulf Coast of Texas. Our focus is on closures of beaches on the Padre Island National Seashore and compensation for day‐trip users. We identify restoration projects that compensate for beach closures and that have good alignment in terms of compensating those who actually suffer from the closures. (JEL Q26)     

Convergent Validity of Revealed and Stated Recreation Behavior with Quality Change: A Comparison of Multiple and Single Site Demands

We consider the convergent validity of several demand models using beach recreation data. Two models employ multiple site data: a count data demand system model and the Kuhn–Tucker demand system model. We explore the role of existing variation in beach width in explaining trip choices, and analyze a hypothetical 100 foot increase in beach width. We compare these models to a single equation model where we jointly estimate revealed and stated preference trip data, and focus on a hypothetical scenario considering a 100 foot increase in beach width. In each case we develop estimates of the change in beach visits and the welfare impacts from the increase in width. The trip change estimates from two of the three models are similar and convergent valid, though the willingness to pay estimates differ in magnitude.     

WHY IS CASH (STILL) SO ENTRENCHED? INSIGHTS FROM CANADIAN SHOPPING DIARIES

One similarity among many developed economies is the predominance of cash over electronic payments in terms of payment frequency, especially for the low‐value transactions that are the bulk of retail payments. We use the Bank of Canada's 2009 Methods‐of‐Payment Survey, which collected information on consumers' payment choices through shopping diaries, to estimate a simple model of choice between cash and other payment methods. Results suggest that the main reasons cash is still a popular payment instrument in Canada, especially for low‐value transactions, are its wide acceptance among merchants compared with other alternatives, speed and ease of use, and low marginal cost when on hand. (JEL E41, D12, L81)     

THE PROPERTY VALUE PREMIUM OF A PLACE OF WORSHIP

Using a unique data set of residential housing values, we improve on previous hedonic pricing and event studies literature to estimate the amenity effects of a new religious structure on local property values. We improve on previous research by extending our analysis with a pre‐ and post‐treatment model. Using a pre‐ and post‐treatment model, we do not find that the religious structure that we examined influenced the value of surrounding properties in the period after its completion. The results suggest that previous research using only post‐completion data may mischaracterize the amenity effects of religious structures. (JEL R3)     

MEASURING THE IMPACT OF VALUING HEALTH INSURANCE ON LEVELS AND TRENDS IN INEQUALITY AND HOW THE AFFORDABLE CARE ACT OF 2010 COULD AFFECT THEM

A substantial part of the U.S. inequality literature focuses on yearly levels and trends in pre‐tax, post‐transfer cash income and its distribution over time and finds that median income appears to be stagnating, with income growth primarily coming at higher income levels. When we use data from the Current Population Survey for 1995–2008 and add the value of employer‐ and government‐provided health insurance coverage, not only does it increase the upward trend in the level of resources controlled by Americans, but also reduces the level of inequality in these resources and its upward trend. We then provide a highly stylized example of this broader income measure's value in capturing the impact of two key provisions of the Affordable Care Act of 2010—an expansion in Medicaid and the provision of subsidies to lower‐income families for purchasing private coverage on state‐run exchanges. Even though these incremental expansions build on existing systems of government‐provided health insurance, we find that the vast majority of the benefits would still accrue to the bottom three deciles of the income distribution when we include the value of employer‐ and government‐provided health insurance in our expanded yearly income measure. (JEL D31, H51, I14)     

The Power of the Euro–Sterling Rates in Explaining Asset Market Rates: A High‐frequency Analysis

This article makes use of high‐frequency asset market data to explain unexpected changes in interest rates using the methodology proposed by Cochrane and Piazzesi (2002) . This work departs from the existing literature because it uses UK market expectations to capture unexpected movements in the base rate, and explores its effect on a large number of asset market variables. Results indicate that the relation between asset market data and unexpected base rate changes is stronger and more consistent than the relation between asset market data and raw base rate changes. Results appear to be robust to extreme value changes.     

Rigid labour markets with trade and capital mobility: theory and evidence

Abstract We develop a multi‐country model with imperfect labour markets to study the effect of labour market frictions on bilateral trade flows. We use a framework that allows for goods trade and capital mobility and show that labour market imperfections exert opposite effects in the absence of capital mobility (the short run) and its presence (the long run), respectively. In the short run, a higher degree of labour market rigidity decreases the value of total trade, but increases the share of intra‐industry trade for a country that is larger than its trading partner. The reverse effects are observed when capital is allowed to cross country borders. Using data on unemployment and income distribution for 23 OECD countries, we compute the central parameter in our theoretical model that describes the degree of labour market rigidity. We use this new empirical concept to provide evidence for our theoretical findings by means of reduced‐form regressions as well as simulation results of a calibrated general equilibrium model.     

THE VALUE OF IN‐STREAM WATER TEMPERATURE FORECASTS FOR FISHERIES MANAGEMENT

Water temperature is an important factor affecting aquatic life within the stream environment. Cold water species, such as salmonids, are particularly susceptible to elevated water temperatures. This paper examines the economic value of short‐term water temperature forecasts for salmonid management. Forecasts may have economic value if they allow the water resource manager to make better water allocation decisions. This study considers two applications: water releases for management of Chinook salmon in the Klamath River and leasing water from agriculture for management of steelhead trout in the John Day River. We incorporate biophysical models and water temperature distribution data into a Bayesian framework to simulate changes in fish populations and the corresponding benefit from recreational fishing and opportunity cost of water under different temperature forecast accuracies. Simulation results indicate that use of the forecasts results in increased fish production and that marginal costs decline and net benefits increase as forecast accuracy increases, suggesting that provision and use of such stream temperature forecasts would have value to society. (JEL Q22, Q25, Q28, Q50)     

Can People Value Protection against Invasive Marine Species? Evidence from a Joint TC–CV Survey in the Netherlands

Harmful algal-bloom species (HABs) are invasiveexotic species that are primarily introduced inNorth European waters through ballast water ofships. Some produce important damages to themarine ecosystem such as the red tides thatcause a massive destruction of marine livingresources, including fish and bottom-livinganimals. Others are responsible for theproduction of thick foams with repellent odorsand the coloration of the beach water, causingimportant damages on beach recreation. Thisarticle reports a monetary valuation study of amarine protection program. This program focuseson the prevention of HABS along the coastlineof the Netherlands. It entails the constructionof a ballast water disposal treatment in theRotterdam harbor and the implementationof a monitoring program of the water quality inthe open sea along the North-Holland beaches.The valuation study is based on a questionnaireundertaken at Zandvoort, a famous Dutchbeach resort. The economic value of the marineprotection program includes non-market benefitsassociated with beach recreation, human healthand marine ecosystem impacts. Both contingent-valuation and travel-cost methods are used.These valuation techniques have not yet beenapplied to value HABs damages. The valuationresults indicate that the protection programmakes sense from an economic perspective aslong as its cost is, in any case, less than 225 millioneuro, and possibly less than 326 million euro, depending on how survey refusals are dealt with.     

LOST IN TRANSLATION? TEACHER TRAINING AND OUTCOMES IN HIGH SCHOOL ECONOMICS CLASSES

Using data from a 2006 survey of California high school economics classes, we assess the effects of teacher characteristics on student achievement. We estimate value‐added models of outcomes on multiple choice and essay exams, with matched classroom pairs for each teacher enabling random‐effects and fixed‐effects estimation. The results show a substantial impact of specialized teacher experience and college‐level coursework in economics. However, the latter is associated with higher scores on the multiple‐choice test and lower scores on the essay test, suggesting that a portion of teachers' content knowledge may be “lost in translation” when conveyed to their students. (JEL A21, I21)     

Administrative and Survey Data in Personnel Economics

The number of empirical studies in personnel economics using administrative data has grown rapidly in recent years. We survey the use of administrative data to examine employment contracts. Specifically, we consider three types of data that have been widely used in empirical studies: historical firm‐level records, contemporary firm‐level records and national matched employer–employee records. Studies using this sort of administrative data have shed considerable light on the nature of employment relationships.     

ALCOHOL PREVALENCE,ALCOHOL POLICIES,AND CHILD FATAL INJURY RATES FROM MOTOR VEHICLE CRASHES

In this study, we consider the effects of state alcohol policies on motor vehicle fatalities for children. While numerous studies have considered the effects of such policies on motor vehicle fatalities for the overall population, for teens, and for the elderly, their effects on fatalities among children in particular have not previously been studied. We use state‐level cross‐sectional time series data for 1982–2002. The dependent variable of interest is fatalities among child motor vehicle occupants (CMVO). Separate models are estimated for 0‐ to 4‐yr‐olds, 5‐ to 9‐yr‐olds, and 10‐ to 15‐yr‐olds, as well as for fatalities occurring during the day versus the night. We find that number of fatalities among CMVO is strongly correlated to alcohol use measured at the state level and that administrative license revocation policies and higher beer tax rates appear to consistently reduce such fatalities. For two of the three age groups, beer tax rates appear to reduce fatalities during the night rather than the day. However, zero tolerance and blood alcohol concentration limit laws do not seem to have any statistically significant effects on fatalities. (JEL I18, J13)     

DEMOCRATIC AID AND THE DEMOCRATIZATION OF RECIPIENTS

We investigate whether democratic aid flows, which are directed toward the democratization of recipients by covering democracy‐related programs and government and civil society activities, affect the future political regime of recipient countries. We introduce a multinomial multivariate logit model and we use 5‐yr averaged data covering the period 1972–2004 for 59 democracy aid‐recipient countries categorized into three broad classes according to the prevalent political regime. We find strong evidence that democratic aid flows are positively associated with the likelihood of observing a partly democratic or a fully democratic political regime in democratic aid‐recipient countries and that this result is robust to the potential endogeneity of democratic assistance.(JEL D70, F35, C25)     

TESTING FOR STATIONARITY IN HETEROGENEOUS PANEL DATA IN THE CASE OF MODEL MISSPECIFICATION

This paper investigates the performance of the tests proposed by Hadri and by Hadri and Larsson for testing for stationarity in heterogeneous panel data under model misspecification. The panel tests are based on the well known KPSS test (cf. Kwiatkowski et al.) which considers two models: stationarity around a deterministic level and stationarity around a deterministic trend. There is no study, as far as we know, on the statistical properties of the test when the wrong model is used. We also consider the case of the simultaneous presence of the two types of models in a panel. We employ two asymptotics: joint asymptotic, T, N →∞ simultaneously, and T fixed and N allowed to grow indefinitely. We use Monte Carlo experiments to investigate the effects of misspecification in sample sizes usually used in practice. The results indicate that the assumption that T is fixed rather than asymptotic leads to tests that have less size distortions, particularly for relatively small T with large N panels (micro‐panels) than the tests derived under the joint asymptotics. We also find that choosing a deterministic trend when a deterministic level is true does not significantly affect the properties of the test. But, choosing a deterministic level when a deterministic trend is true leads to extreme over‐rejections. Therefore, when unsure about which model has generated the data, it is suggested to use the model with a trend. We also propose a new statistic for testing for stationarity in mixed panel data where the mixture is known. The performance of this new test is very good for both cases of T asymptotic and T fixed. The statistic for T asymptotic is slightly undersized when T is very small (≤10).     

FREQUENT NEWS AND PURE SIGNALS: THE CASE OF A PUBLICLY TRADED FOOTBALL CLUB

We use stock market data for Borussia Dortmund GmbH & Co. KGaA – one of the leading German football clubs – for an application of the news model. Owing to the specific characteristics of the news‐generating process, the case of a publicly traded sport club is a very appropriate candidate for testing this model. By applying a traditional as well as a reversed news model, we elaborate whether new information can explain subsequent changes in the stock price of Borussia Dortmund. We find that sport as well as corporate governance‐related variables are important drivers of the stock price.     

Controlling Illegal Immigration: On the Scope for Cooperation with a Transit Country

We consider the implications of cooperation with respect to immigration control between a final‐destination country (D) and its poorer neighbor (T). Assuming that the latter serves as a transit country for undocumented immigrants, a key question is how much aid should D provide to T for the purpose of strengthening its immigration controls. The problem for T is to determine what proportion of aid to use strictly for immigration control rather than trying to meet other border‐security objectives. We examine the Nash equilibrium values of the policy instruments of both countries and compare them with those which are optimal when international cooperation on immigration control extends to maximization of joint welfare. We also consider a two‐stage game in which D first decides on how much aid to transfer to T, with the latter subsequently choosing how to use it.     

Fiscal Policy in Real Time*

In this paper, I estimate the ex ante or intentional cyclical stance of fiscal policy in OECD countries. I use the fiscal plans reported at the time of budgeting, together with other information available to fiscal policy‐makers in real time. Indeed, fiscal plans might be significantly different from ex post outcomes because governments do not have complete control over their implementation, which is influenced by several exogenous factors. When fiscal‐policy rules are estimated using real‐time data, I show in this paper that OECD countries have often planned a counter‐cyclical fiscal stance, especially during economic expansions. This contrasts with conventional findings based on actual data, which tend to point towards a‐cyclicality or pro‐cyclicality. Forecast errors for the government structural balance and the output gap play a central role in explaining the differences between estimates based on ex ante and ex post data.     

THE 2007–2008 U.S. RECESSION: WHAT DID THE REAL‐TIME GOOGLE TRENDS DATA TELL THE UNITED STATES?

In the extant literature of business cycle predictions, the signals for business cycle turning points are generally issued with a lag of at least 5 months. In this paper, we make use of a novel and timely indicator—the Google search volume data—to help to improve the timeliness of business cycle turning point identification. We identify multiple query terms to capture the real‐time public concern on the aggregate economy, the credit market, and the labor market condition. We incorporate the query indices in a Markov‐switching framework and successfully “nowcast” the peak date within a month that the turning occurred. (JEL E37, G17)