Automation versus Intermediation: Evidence from Treasuries Going Off the Run

This paper examines the choice of trading venue by dealers in U.S. Treasury securities to determine when services provided by human intermediaries are difficult to replicate in fully automated trading systems. When Treasury securities go “off the run” their trading volume drops by more than 90%. This decline in trading volume allows us to test whether intermediaries' knowledge of the market and its participants can uncover hidden liquidity and facilitate better matching of customer orders in less active markets. Consistent with this hypothesis, the market share of electronic intermediaries falls from 81% to 12% when securities go off the run.     

ASSESSING THE IMPACT OF RETAILER STORE BRAND PRESENCE ON MANUFACTURER BRANDS IN AN EQUILIBRIUM FRAMEWORK*

This article assesses the impact of retailer store brand products on manufacturer brand prices, profitability and consumer welfare in Boston's white fluid milk market. Estimates from a random coefficients logit demand model are used to specify and test a set of pricing games. Under the selected model, milk manufacturers are Stackelberg leaders to retailers, and store brand milks are procured by retailers at cost. The model is used to investigate counterfactual markets without retailer store brand milks. Counterfactual Simulation results indicate that store brands increase channel profits, retailer profits and consumer welfare, while having mixed effects on equilibrium retail prices.     

Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data

Traditional estimates that often find minimum wage disemployment effects include controls for state unemployment rates and state‐ and year‐fixed effects. Using CPS data on teens for the period 1990–2009, we show that such estimates fail to account for heterogeneous employment patterns that are correlated with selectivity among states with minimum wages. As a result, the estimates are often biased and not robust to the source of identifying variation. Including controls for long‐term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but very small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out all but very small negative long‐run effects. In addition, we do not find evidence that employment effects vary in different parts of the business cycle. We also consider predictable versus unpredictable changes in the minimum wage by looking at the effects of state indexation of the minimum wage.     

The Priority Structure of Corporate Liabilities

Most discussions of corporate capital structure effectively assume that all debt is the same. Yet debt differs by maturity, covenant restrictions, conversion rights, call provisions, and priority. Here, we examine priority structure across a sample of 4995 COMPUSTAT industrial firms from 1981 to 1991. We analyze the variation in the use of capital leases, secured debt, ordinary debt, subordinated debt, and preferred stock both as a fraction of the firm's market value and as a fraction of total fixed claims. Our evidence provides consistent support for contracting cost hypotheses, mixed support for tax hypotheses, and little support for the signaling hypothesis.     

THE UK ECONOMY: ANALYSIS AND PROSPECTS

In this section of the review, Oxford Economic Forecasting providesan analysis of the current economic climate in the UK and abroadas well as setting out the main features of its latest forecast.In Section II the UK forecast up to 1988 is described. In SectionIII, following the theme of this issue, we analyse the effectsof changes in trend productivity growth on the UK economy.     

The Market Impact of Trends and Sequences in Performance: New Evidence

Bloomfield and Hales (2002) find strong evidence that experimental market subjects are influenced by trends and patterns in a manner supportive of the shifting regimes model of Barberis, Shleifer, and Vishny (1998) . We subject the model to further empirical scrutiny using the football wagering market as our price laboratory. Sports betting markets have several advantages over traditional capital markets as an empirical setting, and commonalities with traditional markets allow for useful insights. We find scant evidence that investors behave in accordance with the model.     

Book Reviews

Official Reserves and Currency Management in Asia: Myth, Reality and the Future: Geneva Reports on the World Economy 7 by HANS GENBERG, ROBERT McCAULEY, YUNG CHUL PARK and AVINASH PERSAUD (London: Centre for Economic Policy Research, 2005), pp. 128, £25.00 paperback, ISBN 1 898128 90 1. Growth, Inequality and Poverty: Prospects for Pro‐Poor Economic Development by ANTHONY SHORROCKS and ROLPH VAN DER HOEVEN (eds.) (Oxford: Oxford University Press, 2005), pp. 283, paperback, ISBN 0 19 928824 2. Competition and Growth: Reconciling Theory and Evidence by PHILIPPE AGHION and RACHEL GRIFFITH (Cambridge, MA: MIT Press, 2005), pp. 104, £18.50 hardback, ISBN 0 262 01218 9. The World Trade Organization. A Very Short Introduction by AMRITA NARLIKAR (Oxford: Oxford University Press, 2005), pp. 175, £6.99, paperback, ISBN 0 19 280608 4.