Distributional Effects of a Continuous Treatment with an Application on Intergenerational Mobility

This paper considers the effect of a continuous treatment on the entire distribution of outcomes after adjusting for differences in the distribution of covariates across different levels of the treatment. Our methodology encompasses dose-response functions, counterfactual distributions, and ‘distributional policy effects’ depending on the assumptions invoked by the researcher. We propose a three-step estimator that consists of (i) estimating the distribution of the outcome conditional on the treatment and other covariates using quantile regression; (ii) for each value of the treatment, averaging over a counterfactual distribution of the covariates holding the treatment fixed; (iii) converting the resulting counterfactual distribution into parameters of interest that are easy to interpret. We show that our estimators converge uniformly to Gaussian processes and that the empirical bootstrap can be used to conduct uniformly valid inference across a range of values of the treatment. We use our method to study intergenerational income mobility where we consider effects of parents’ income on features of their child's income distribution such as (i) the fraction of children with income below the poverty line; (ii) the variance of child's income; and (iii) the inter-quantile range of child's income–all as a function of parents’ income.     

Net selectivity revisited: An extension

In this critique of Kochman and Badarinathi's study (1993) of net selectivity, mutual funds are not found to have a return distribution exhibiting limited semivariance when monthly return data are used. Several funds are overrated, however, in the sense that they have negative semivariance-adjusted excess returns, despite having positive beta-adjusted excess returns. Similar results are obtained using the Standard and Poor's 500 Index, which was employed by Kochman and Badarinathi, and the Wilshire 5000.     

SEQUESTERING CARBON ON AGRICULTURAL LAND: SOCIAL COST AND IMPACTS ON TIMBER MARKETS

Planting trees to sequester carbon has broad political appeal. However, effects of a major tree planting program on the agricultural sector and on timber markets are unclear. This paper examines social costs of sequestering carbon in tree plantations on U.S. agricultural land and investigates harvesting's effects on timber prices and on private timber producers' welfare. The analysis links a model of the U.S. agricultural sector that includes the land base in major production areas with a model of the U.S. softwood economy. Using current data on planting, maintenance, and harvesting costs for tree plantations and carbon sequestration rates, the models estimate the price and welfare effects of alternative carbon sequestration goals. Results indicate a range of outcomes. Consumers pay higher prices for food as farmers divert land from crops to trees. However, wood products consumers gain from falling timber prices if the trees enter commercial markets. Agricultural producers and landowners gain from higher commodity prices, but private forest owners lose. Large tree planting programs imply that policymakers must compensate private commercial tree planting to prevent farmers from displacing present tree plantations.     

Evidence of the Nostationarity of the Variance Rate of Return of New York Stock Exchange Listed Common Stock

The variance rate of return is shown to be nonstationary for the majority of stocks studied, with a median change of 100 percent over a period of one and one-half years. The degree of change declines as the interval between estimates is shortened as does the extent to which the variance rates of different of the change do not appear to be strongly related to the trading frequency of the stock.     

The economic consequences of substituting carbon payments for crop subsidies in U.S. agriculture

There is a growing body of literature on the costs of sequestering carbon. However, no studies have examined the interplay between farm commodity programs and carbon sequestration programs. This study investigates two dimensions of the interaction between farm commodity programs and afforestation programs, using a price-endogenous sector model of agriculture in the United States. First, this study compares the fiscal and welfare costs of achieving specific carbon targets through afforestation, with and without current farm programs. Second, it examines the welfare, fiscal, and carbon consequences of replacing existing farm subsidies, wholly or in part, with payments for carbon. Two approaches, Hicksian and Marshallian, are investigated. In the first, the sector model is used to quantify the carbon consequences and fiscal costs associated with various combinations of farm commodity and carbon sequestration programs that leave consumers and producers in the U.S. agricultural sector no worse off than under existing farm programs. The second approach focuses on the carbon and welfare consequences of various farm commodity and carbon sequestration programs that hold total program fiscal costs constant at current levels. Althouth the methodology and data are applied to the United States, the issues addressed are common in a number of developed nations, particularly within the European Union (EU). Adapting existing sector models in these nations to perform similar analyses would provide policy makers with more precise information about the nature of the trade-offs involved with second-best policies for replacing farm commodity subsidies with tree planting subsidies.The research reported in this paper was partially funded by the United States Environmental Protection Agency under contract number 68W90077. It does not reflect the official position of that agency. Mention of trade names does not constitute endorsement.