Economic determinants of deregulation in the gas distribution market

Many state public commissions have deregulated their utility markets. However, evidence of welfare or efficiency improvements under deregulation is ambiguous. It is also unclear why different states adopt consumer choice, price caps, sliding-scale plans, or retain rate-of-return regulation. This study evaluates several economic factors behind deregulation in gas distribution markets using a survey of state commissions. Logistic and hazard models show that utilities’ prices and capacity, and states’ stock of own gas wells, prices of competing fuels and the regulatory climate, help explain the pattern of deregulation. Demonstration effects from surrounding markets also contribute. These factors make the propensity to use price caps versus restructuring vary regionally.     

Deregulation,news releases,and price discovery

We hypothesize that the firm’s regulatory environment influences the sensitivity of its equity value to information. Using intraday stock price data of utilities operating in differing regulatory environments we test for systematic differences between the responsiveness of stock prices of utility firms operating in deregulated and regulated environments to a common information set. Our findings reveal sharp differences in responses, with those of utilities operating in deregulated environments the strongest, and the responses of utilities in highly regulated environments the weakest. While the evidence supports our hypothesis, in a broader sense, the evidence suggests that deregulation aids in the process of price discovery. We also find evidence that suggests that deregulation, per se, does not lead to higher stock price volatility.      

State investment tax incentives: A zero-sum game?

Over the past four decades, state investment tax incentives have proliferated. This emergence of state investment tax credits (ITC) and other investment tax incentives raises two important questions: 1) Are these tax incentives effective in achieving their stated objective, to increase investment within the state?; 2) To the extent these incentives raise investment within the state, how much of this increase is due to investment drawn away from other states?To begin to answer these questions, we construct a detailed panel dataset for 48 states for 20+ years. The dataset contains series on output and capital, their relative prices, and establishment counts. The effects of tax variables on capital formation and establishments are measured by the Jorgensonian user cost of capital that depends in a nonlinear manner on federal and state tax variables. Cross-jurisdictional differences in state investment tax credits and state corporate tax rates entering the user cost, combined with a panel that is long in the time dimension, are key to identifying the effectiveness of state investment incentives.Two models are estimated. The Capital Demand Model is motivated by the first-order condition for a profit-maximizing firm and relates at the state level the capital/output ratio to the relative user cost of capital. The Twin-Counties Model exploits both the spatial breaks (“discontinuities”) in tax policy at state borders and our panel dataset to relate at the county level the relative user cost to the location of manufacturing establishments. Using the Capital Demand Model, we find that own-state capital formation is substantially increased by tax-induced reductions in the own-state price of capital and, more interestingly, substantially decreased by tax-induced reductions in the price of capital in competitive-states. Similarly, using our Twin-Counties Model, we find that county manufacturing establishment counts around state borders are higher on the side of the border with the lower price of capital, but the difference is economically small, suggesting that establishments are much less mobile than overall capital. Extensions of the Capital Demand Model also reveal that state capital tax policy appears to be a zero-sum game among the states in that an equiproportionate increase in own-state and competitive-states user costs tends to have no effect on own-state capital formation.     

LOWER OIL PRICES AND STATE EMPLOYMENT

Even after two years of adjustment, it was apparent that the sharp drop in oil prices occurring during late 1985 and early 1986 would have a profound effect on the regional distribution of employment in the United States. In this paper, we develop and implement a procedure for quantifying the long-term consequences of lower oil prices on employment in each of the 50 states. We use the estimates developed to determine how much of the variation in state employment growth during 1986 can be attributed to the oil price decline. We also use the estimates to gauge the feasibility of political action, such as an oil import tariff, to reverse the oil price decline.     

Demand for cigarettes in the United States: effects of prices in bordering states and contiguity with Mexico and Canada

Based on a cross-section of US states for 2004, this article estimates a demand function for cigarettes after including a proxy for prices in the bordering states and simple proxies for contiguity with Mexico and Canada and for being a major tobacco producer. One major point seems to be that the negative elasticity for within-state price is similar in magnitude to the positive elasticity for the (lowest) price in bordering states. Several additional points also seem noteworthy. First, having a border with Mexico lowers sales in the state sizably. Second, the share of Hispanic/Latino population in the state also lowers sales significantly. Third, contiguity with Canada appears to have no significant effect. Fourth, partial impact of the state being a major tobacco producer appears minor even though consumption in these states is considerably higher. Fifth, education shows the expected negative association with cigarette consumption, but its statistical significance is low. Last, income carries a weak negative parameter, perhaps reflecting the lower prevalence of smoking in higher-income households.     

基于状态空间模型的房地产价格泡沫问题研究

文章首先对房地产价格泡沫进行了理论界定,并对基础价值的特点进行了分析。随后在检验变量之间协整关系的基础上,建立了商品房供给与需求的状态空间模型,基础价值作为一种状态变量被纳入到模型中,从而对上海市房地产价格泡沫问题进行了实证研究。研究结果表明上海市房地产价格泡沫已经出现,并且近四年来平均泡沫程度达到22.5%。     

GMM estimation of a structural demand model for yogurt and the effects of the introduction of new brands

The demand structure for yogurt is assumed to be properly described by a one level nested logit model that is applied to aggregate market data. Given the presence of endogenous regressors, suitably lagged endogenous variables (Arellano and Bover in J Econom 68:29–51, 1995; Blundell and Bond in J Econom 87:115–143, 1998) are proposed as instrumental variables. The validity of this set of instruments is discussed and price elasticities and marginal costs are recovered from the demand estimates. Total welfare gains associated to the introduction of two new brands by the same manufacturer are finally computed. Prices and profits decreased and total welfare increased.     

Firm-specific capital,inflation persistence and the sources of business cycles

This paper estimates a firm-specific capital DSGE model. Firm-specific capital improves the fit of DSGE models to the data (as shown by a large increase in the value of the log marginal likelihood). This results from a lower implied estimate of the NKPC slope for a given degree of price stickiness. Firm-specific capital leads to a better fit to the volatilities of macro variables and a greater persistence of inflation. It is also shown that firm-specific capital reduces the dependence of New Keynesian models on price markup shocks and that it increases the persistence of output to monetary shocks.     

The determination of government expenditure for short-term forecasting and policy simulation models

This paper analyzes the way short-term forecasting and policy simulation models currently treat government expenditure and the extent to which available research is indicative of future developments for this sector. Emphasis is placed on the problems of, and the necessity for, developing endogenous equations for the various transfers and goods and services expenditures. Consideration is also given to the adaption of budget estimates to form endogenous or exogenous variables for the models, the distinctive problems of including state and local government sectors, and the interaction of the different parts of government expenditure with the rest of the model.     

State monopolies and alcoholic beverage consumption

Fifteen states have state monopolies to regulate the retail distribution of distilled spirits or wine. One objective of state ownership is the reduction of consumption. However, previous research supports both no effect and a negative effect of state monopoly (control) states on consumption.Using improved data on prices, this paper provides a mixture of classical and Bayesian estimates of beverage-specific demand functions. The analysis is carried out at the state level for the year 1982. Independent variables include the real own-price, substitute prices, income, tourism activity, religious sentiment, youth proxy, and several regulatory measures including monopoly control, bans on price advertising, minimum legal drinking age, and restrictions on the number and type of retail outlets.The results indicate no direct effect of monopoly control on consumption that is separate from effects manifested by higher prices or, for beer, limited outlets. Furthermore, average prices are not significantly greater in the monopoly states. Several possible explanations are advanced to explain these results, including the likelihood that the higher transaction costs in the monopoly states are a tax on consumption of alcohol.     

Elasticity estimates of farmed salmon demand in Spain and Italy

In this paper, estimates of the elasticities that characterize the structure of demand for farmed salmon in Spain and Italy are reported. The demand models are specified using a Box-Cox transformation of the variables and a Hausman test is used to determine price endogeneity in the demand equations. The results show short-run unitary own-price elasticity of demand for farmed salmon in both markets, but long run estimates show significant elastic price response. Short run substitution of salmon for other fish species is not observed and, for both Spain and Italy, farmed salmon is characterized as a luxury good. Interestingly, we show that our a priori expectations about own-price elasticities being lower in smaller market areas is confirmed. Finally, the results obtained are compared to other recent results reported in the salmon demand literature.     

THE IMPACT OF INSURANCE SUBSIDIES ON SELF‐EMPLOYMENT: DO STATE NON‐GROUP HEALTH INSURANCE REGULATIONS MATTER?

This paper tests whether the effect of tax‐based subsidies for self‐employed health insurance on the level of self‐employment differs with the type of non‐group insurance regulatory regime at the state level. Using a panel of tax returns from 1999 to 2004, we estimate fixed effects instrumental variable regressions for the probability of being self‐employed, allowing the effect of the after‐tax price of self‐employed health insurance to differ by regulatory regime. Our results suggest that states with community rating and guaranteed issue regulations had significantly smaller increases in the fraction of taxpayers reporting some amount of self‐employment income as a result of a decrease in the after‐tax price of self‐employed health insurance. However, there is suggestive evidence that heavily regulated states experienced a larger increase in exclusive self‐employment, particularly among older taxpayers. (JEL J24, H24, I18)     

Estimating the elasticities of gasoline demand: an instrumental variable approach

This article uses a new identification strategy to estimate the demand for gasoline. I show that the monthly gasoline price is endogenous to gasoline demand at the state level, and that gasoline tax and domestic oil first purchasing price together are strong and valid instruments to correct for the endogeneity bias. In addition to estimating the price elasticity, this article also provides an estimate of the income elasticity. These updated estimates are critical factors in evaluating the environmental effect of gasoline tax and forecasting gasoline consumption.     

An extension of the Tiebout hypothesis of voting with one’s feet: the Medicaid magnet hypothesis

This study empirically extends the Tiebout hypothesis of ‘voting with one’s feet’ in two ways. First, it provides updated estimates using net migration data for the period 2000–2008. Second, in addition to investigating variables reflecting public education outlays, property taxation and income taxation, it investigates whether migrants are attracted to states with higher Medicaid benefits per recipient. The latter hypothesis is referred to as the ‘Medicaid magnet hypothesis’. The analysis includes three economic variables, three quality of life variables and three Tiebout-type factors in addition to Medicaid benefits. Results indicate that consumer voters were attracted to states with higher per pupil public school spending, lower property and income tax rates, and that certain consumer-voters may be attracted to states that offer higher levels of Medicaid benefits.     

ENDOGENOUS TIMING AND STRATEGIC CHOICE: THE COURNOT‐BERTRAND MODEL

Cournot establishes a Nash equilibrium to a duopoly game under output competition; Bertrand finds a different Nash equilibrium under price competition. Both treat the strategic choice variable (output versus price) and the timing of play as exogenous. We investigate Cournot‐Bertrand models where one firm competes in output and the other competes in price in both static and dynamic settings. We also develop a general model where both the timing of play and the strategic choice variables are endogenous. Consistent with the conduct of Honda and Scion, we show that Cournot‐Bertrand behaviour can be a Nash equilibrium outcome.     

MASS LAYOFFS,MANUFACTURING AND STATE BUSINESS CLIMATES: DOES STATE POLICY MATTER?

This study provides the first estimates on the relationship between state public policies and job losses in the manufacturing sector. In addition, spatial model estimation is adopted to identify any effect that state policies may have on the adopting state as well as upon neighboring states. We find evidence that favorable ratings regarding some elements of a state's business climate coincide with a lower incidence of job loss. This relationship holds beyond the adopting state and is correlated with lower job losses in contiguous states. (JEL J50, J60, M50)     

The interdependence between FDI and R&D: an application of an endogenous switching model to Taiwan's electronics industry

Foreign direct investment (FDI) and research & development (R&D) are mutually dependent and should be treated as endogenous variables in empirical studies. An endogenous switching regression model is used to examine the mutual effect of FDI and R&D in Taiwan's electronics industry. The empirical results show that FDI and R&D are positively related and do reinforce each other. Unbiased coefficients are obtained as they are compared to those estimates if FDI and R&D are treated as exogenous variables. The results have a strong public policy implication for Taiwan's foreign direct investment and can be further used to estimate the difference in R&D expenditures between FDI and non-FDI firms.     

THE IMPACT OF UTILITY DEREGULATION IN ARIZONA

This analysis assesses Arizona's short-run price response to utility energy deregulation in the commercial and industrial sectors and the long-term response to deregulated industrial utility prices. Using a standard utility industry approach, ordinary least squares regression confirms commercial/industrial utility prices remain inelastic and Arizona's deregulation efforts have not effectively promoted short-run price competition. Moreover, widening differences in utility rates could be a response to a stronger long-run price elastic effect across states. The findings suggest states not aggressively deregulating utility price to narrow artificial comparative price advantages could be at a competitive disadvantage for interstate manufacturing investment. ( JEL Q41, Q48, Q40)     

Business Civilization in Decline

Technological change is modeled as endogenous in the sense that it is affected by economic, behavioral, and institutional variables. Technological change is especially affected by changes in relative input prices and their level, of which the price of labor is particularly important. Input prices are affected by institutional variables. Such prices also impact on the firm's efficiency, which in turn affects growth rates as well as the rate of technical change. As relative factor prices or their level increase, firms are induced to innovate or adopt extant technology to remain competitive or to maintain current profit rates. High wage firms can be expected to engage in such induced technological change, leading the growth process thereby yielding lower unit costs and increasing the level of material welfare. Relatively low wage economies can be locked into a state of economic inefficiency and laggard technological progress, especially in the long run.     

Learning and Equilibrium Selection in a Monetary Overlapping Generations Model with Sticky Prices

We study adaptive learning in a monetary overlapping generations model with sticky prices and monopolistic competition for the case where learning agents observe current endogenous variables. Observability of current variables is essential for informational consistency of the learning setup with the model setup but generates multiple temporary equilibria when prices are flexible and prevents a straightforward construction of the learning dynamics. Sticky prices overcome this problem by avoiding simultaneity between prices and price expectations. Adaptive learning then robustly selects the determinate (monetary) steady state independent from the degree of imperfect competition. The indeterminate (non-monetary) steady state and non-stationary equilibria are never stable. Stability in a deterministic version of the model may differ because perfect foresight equilibria can be the limit of restricted perceptions equilibria of the stochastic economy with vanishing noise and thereby inherit different stability properties. This discontinuity at the zero variance of shocks suggests one should analyse learning in stochastic models.