Estimating substitution elasticities in household production models

Summary Dynamic general equilibrium models that include explicit household production sectors provide a useful framework within which to analyze a variety of macroeconomic issues. However, some implications of these models depend critically on parameters, including the elasticity of substitution between market and home consumption goods, about which there is little information in the literature. Using the PSID, we estimate these parameters for single males, single females, and married couples. At least for single females and married couples, the results indicate a high enough substitution elasticity that including home production will make a significant difference in applied general equilibrium theory.We thank the National Science Foundation for financial support, and Ellen McGrattan, David Runkle, George Jakubson, Zvi Eckstein, Timothy J. Kehoe, Ed Prescott, a referee, and seminar participants at the Cleveland Fed and the Penn Macro Lunch Group for comments. The views expressed here are those of the authors and not necessarily those of any Federal Reserve Bank or the Federal Reserve System.     

ADDITIONAL EVIDENCE ON THE INCREMENTAL INFORMATION CONTENT OF THE 10-K

The goal of this investigation is to provide additional evidence concerning the incremental information content of the 10-K from the aggregate market perspective. As in Foster and Vickrey (1978), the phrase, incremental information content of the 10-K, refers to the information content of the data set in the 10-K which is in excess of that which is contained in the related annual report to shareholders and other preceding announcements such as earnings releases. The statistical procedures seem to imply that the 10-K did not, in general, possess incremental information content from the aggregate perspective for the firms considered herein.     

Fostering and facilitating entrepreneurship in organizations: Implications for organization structure and human resource management practices

Two particularly important factors involved in successful corporate entrepreneurship are organization structure and human resource management practices. By selecting and implementing the appropriate structure and practices, human resource professionals can systematically foster and facilitate innovation and entrepreneurship within their organizations. The more that new and different entrepreneurial activities are needed, the more that complete structural arrangements as well as policy and procedure flexibility are needed. In this article, structural practices appropriate for different degrees of entrepreneurial activity are described. But because appropriate structural practices alone are not sufficient for effectiveness, necessary human resource management practices are also described in detail. Throughout, implications for structural and human resource management practices in advancing entrepreneurship are considered.     

Does the invisible hand hold or lead? Market adjustment in an entrepreneurial economy

Adam Smith's “invisible hand” is one of the best-known phrases in economics, but its meaning is somewhat ambiguous. The invisible hand might be viewed as holding the economy close to equilibrium, yet Smith actually says that individuals are led by an invisible hand. Entrepreneurial forces lead an economy along a path that generates economic progress, and that path is determined by the disruptive forces of entrepreneurship. Rather than viewing an economy as tending toward an equilibrium, it is more accurate to view an economy as characterized by continuing progress, led by the invisible hand of entrepreneurial activity. JEL Code B53, D21, E32, O31     

Alternative theories of wage dispersion

We analyze labor market models where the law of one price fails—i.e., models with equilibrium wage dispersion. We begin considering ex ante heterogeneous workers, but highlight a problem with this approach: If search is costly the market shuts down. We then assume homogeneous workers but ex post heterogeneous matches. This model is robust to search costs, and delivers equilibrium wage dispersion. However, we prove that the law of two prices holds: Equilibrium implies at most two wages. We explore other models, including one combining ex ante and ex post heterogeneity which is robust and delivers more realistic wage dispersion.     

Efficient frontier estimation: a maximum entropy approach

An alternative efficiency estimation approach is developed utilizing generalized maximum entropy (GME). GME combines the strengths of both SFA and DEA, allowing for the estimation of a frontier that is stochastic, without making an ad hoc assumption about the distribution of the efficiency component. GME results approach SFA results as the one-sided inefficiency bounds used by GME shrink. Results similar to DEA are achieved as the bounds increase. The GME results are distributed like DEA, but yield virtually the same rankings as SFA. The results suggest that GME may provide a link between various estimators of efficiency.

The Effect of Terrorist Incidents on Capital Flows

Previous work has shown that terrorism has significant negative impact on countries' economies. We explore this relationship in more detail. Using an unbalanced panel of more than 160 countries for up to 25 years and the Global Terrorism Database (GTD) we show a decrease in foreign direct investment (FDI) as a consequence of terrorism. We also find evidence that FDI flows are more sensitive to terrorism than either portfolio investments or external debt flows. Finally, we test the hypothesis that terrorism has negative spill‐over effects on FDI flows into neighboring countries and find evidence that cultural, but not geographical, closeness matters.