Does the sophistication of use of unemployment insurance evolve with experience?

Abstract The subject of this paper is the repeat use of UI/EI benefits in Canada. The first objective is to investigate empirically the pattern of adjustment that UI users exhibit over a multiple claim horizon. Our secondary objective is to investigate a behavioural channel that might potentially underlie observed adjustment effects, namely, individual learning effects. We estimate an econometric model of how certain features of their claims change as they file subsequent claims. We find strong empirical patterns suggesting that there does appear to be some sort of an adjustment process; beneficiaries tend to approach a desired value for these particular facets of their UI claims. There appears to be some process of growing sophistication of UI use – which some might label ‘gaming the system’– reflecting the adjustment of claims and the concomitant employment patterns to the provisions and rules of the regime. We also uncover evidence in favour of the existence of individual learning effects.     

Déjà Vu All Over Again: The Causes of U.S. Commercial Bank Failures This Time Around

In this study, we analyze why commercial banks failed during the recent financial crisis. We find that traditional proxies for the CAMELS components, as well as measures of commercial real estate investments, do an excellent job in explaining the failures of banks that were closed during 2009, just as they did in the previous banking crisis of 1985–1992. Surprisingly, we do not find that residential mortgage-backed securities played a significant role in determining which banks failed and which banks survived. Our results offer support for the CAMELS approach to judging the safety and soundness of commercial banks, but call, into serious question the current system of regulatory risk weights and concentration limits on commercial real estate loans.     

A two-state analysis of estate taxes and charitable bequests from the most generous decedents

This study uses Censored Quantile Regression (CQR) and probate records for the years 2000–2005 to analyze charitable bequests of the most generous decedents from two states, Virginia and Louisiana. We focus on the most generous decedents because they account for a large portion of total charitable bequests. The most generous decedents' charitable bequest tax price (i.e., one minus the marginal tax rate) elasticity is not significantly greater than one in both our full sample and the subsample of the decedents filing federal estate tax returns. Our finding suggests that allowing charitable bequests to be deductible is not a treasury efficient policy for the most generous decedents. We also find that the tax price and wealth effects for the most generous decedents are overestimated by the Tobit model that has been traditionally utilized by prior studies. Furthermore, filers' charitable bequests are predicted to decrease if the estate tax is repealed.     

Impact of youth injuries on the uninsured farm family's economic viability

The objective of this study is to estimate the impact of youth injuries on the uninsured farm family's economic viability. Using farm prototypes, we compared farm profits with costs of farm youth injuries. We built profit models for two types of farms, dairy and soybean farms. Then we estimated the cost impact of farm youth injuries of different levels of severity on a farm family with no health insurance. A severe child injury that requires at least 10 days of hospitalisation would cost almost equal to the operating profit of the average dairy farm with no health insurance and would turn the operating profit of the average soybean farm into a severe loss of $99,499. Prevention of child agricultural injuries would significantly improve the financial situation for farm families that lack health insurance.     

Optimal clearing arrangements for financial trades

Clearinghouses support financial trades by keeping records of transactions and by providing liquidity through short-term credit that participants clear periodically. We study efficient clearing arrangements for exchanges, where traders must clear with a clearinghouse, and for over-the-counter (OTC) markets, where traders can clear bilaterally. When clearing is costly, it can be efficient to subsidize OTC clearing by charging a higher clearing price for transactions conducted on exchanges. The clearinghouse then operates across both markets. Since clearinghouses offer credit, intertemporal incentives are needed to ensure settlement. When liquidity costs increase, concerns about default lead to a tightening of liquidity provision.     

Does Cultural Distance Hinder Trade in Goods? A Comparative Study of Nine OECD Member Nations

We examine the effect of cultural distance, a proxy for the lack of a minimum reservoir of trust necessary to initiate and complete trade deals, on bilateral trade flows. Employing data for 67 countries that span the years 1996–2001, we estimate a series of modified gravity specifications and find that cultural dissimilarity between nations has an economically significant and consistently negative effect on aggregate and disaggregated trade flows; however, estimated effects vary in magnitude and economic significance across measures of trade and our cohort of OECD reference countries. The consistently negative influence of cultural distance indicates that policymakers may wish to consider mechanisms that enhance the build-up of trust and commitment when seeking to facilitate the initiation and completion of international trade deals. Our findings also imply that coefficient estimates from related studies that do not account for the trade-inhibiting effect of cultural distance may be biased.