Comparing Apples to Apples: Estimating Fiscal Need in the United States with a Regression-Based Representative Expenditure Approach

Atlantic Economic Journal - State fiscal governance requires both raising revenue and spending on government services. The literature on fiscal equalization and horizontal equity has established...     

“PAY IT FORWARD” AND HIGHER EDUCATION SUBSIDIES: A MEDIAN VOTER MODEL

Since 2012, at least 24 states have considered legislation on Pay It Forward (PIF) models of higher education finance (which enable students to pay the price of college upon departure from an institution, as opposed to paying upfront tuition). This paper proposes a theoretical model of PIF policies within a framework in which voters belonging to different income groups vote over the level of subsidies to higher education. We analyze the impact of two types of potential PIF policies—a deferred tuition approach and an income share approach—on college access and on voting equilibria over subsidy levels. The results show that college access is enhanced by PIF policies. The equilibrium level of subsidies depends crucially on the pattern of income distribution, in particular on the relationship between mean income and the income of the median income group, and on whether higher education widens or narrows the distribution of income. We show that the equilibrium level of subsidies to higher education will not necessarily decline under PIF, and may increase in some circumstances due to changes in college access for low‐income groups. (JEL I22, I23)     

Consumer demand for local honey

How to best target and attract niche market consumers is an important marketing problem for producers of specialty agricultural products. It is particularly an issue in the honey market where consumers increasingly face media messages regarding threats to honey bee health, honey adulteration and health benefits of locally produced honey. Using auction experiments, this research evaluates consumer behaviour related to informational messages about honey that is produced locally, domestically and internationally. Results from 115 adult consumers show that consumers’ demand for honey varies significantly based on the geographic location of the honey’s production, product packaging and the information they have about the product. Consumers demonstrate greater demand for locally produced honey, especially when provided information about negative aspects of internationally produced honey that include adulteration. This shows that such negative media attention on specialty products offers small producers an opportunity to increase profitability by marketing themselves as a specialized niche alternative.     

Stock returns and inflation with supply and demand disturbances

We account for the relation between stock returns and inflationwith two independent disturbances: supply shocks and demandshocks. Supply shocks reflect real output shocks and cause anegative relation between stock returns and inflation, whiledemand shocks are mainly due to monetary shocks and generatea positive relation between stock returns and inflation. Weshow, both theoretically and empirically, that the stock return-inflationrelation varies over time and across countries, depending onthe relative importance of the two types of shocks. Our empiricalevidence is based on pre- and postwar periods in the UnitedStates, as well as the postwar period in the United Kingdom,Japan, Germany.     

Spatial economic development in South Africa: an overview and evaluation of the platinum spatial development initiative

The Platinum Spatial Development Initiative (Platinum SDI), located in the North West province of South Africa, is examined in this article. The article commences with a historical synopsis of industrial policy and regional industrial development policy in South Africa. Thereafter the trade and industrial policies of the North West Provincial Government are discussed in the contexts of its economic development strategies ‘North West 2001’ from 1997, and the ‘North West Economic Development and Industrialisation Strategy’ from 2002. Various arguments for and against the viability of the Platinum SDI are put forward.     

Portfolio performance measurement: theory and applications

Any admissible portfolio performance measure should satisfyfour minimal conditions: it assigns zero performance to eachreference portfolio and it is linear, continuous, and nontrivial.Such an admissible measure exists if and only if the securitiesmarket obeys the law of one price. A positive admissible measureexists if and only if there is no arbitrage. This article characterizesthe (infinite) set of admissible performance measures. It isshown that performance evaluation is generally quite arbitrary.A mutual fund data set is also used to demonstrate how the measurementmethod developed here can be applied.     

Litigation risk, intermediation, and the underpricing of initial public offerings

We formally examine the role of litigation risk in initial publicoffering (IPO) pricing. The underwriter's pricing decision tradesoff current revenue against expected future litigation costs,both of which are increasing in the IPO price. Given a time-consistencyconstraint and rational expectations on the part of investors,however, the 'standard' litigation risk argument does not leadto equilibrium underpricing. We develop a richer model thatprovides sufficient conditions under which there is equilibriumunderpricing. The issuer's choice of employing an underwriterversus floating the IPO on its own is examined, and varioustestable implications of the model are developed.