Diffusion performance of major steel-making countries: alternative econometric tests

The purpose of this study is to compare the speed of diffusion in major steel-making countries. This is a cross-system analysis, involving industrial market countries (Western Europe, the United States, Canada, and Japan), quasi-market economies (selected newly industrializing countries, India), and the central planning states (the Soviet Union and Eastern Europe). The study reveals that at least in this, significant case, the latter countries are clearly inferior, i.e. slower.The article seeks the most accurate measure of speed of diffusion of one radical steel innovation, the oxygen process. The speed is estimated by regressing a logistic function not applied to the steel industry to date. Parameters of a logistic function are estimated first with linear least squares methods and then with nonlinear (or iterative) least squares, to establish which offers more accurate estimation than the widely used linear approach. It is shown that the iterative method produces a better statistical fit.Associate Professor; the author would like to acknowledge computational assistance by Steve Langolis, Stanford University, and help in updating the author's data on the world steel production provided by Mark Shafter, London School of Economics.     

Toward Closing the Loop between Infrastructure Investments and Societal and Economic Impacts

The long-term value proposition of transportation infrastructure investments can be significantly distorted if the short-term effects of spatial externalities on land use patterns, economic expansions, and migration patterns are not properly included in the analysis. Some of these effects occur over a short period of time and soon after the investment materializes, whereas others take longer and follow more steady patterns. In this article, we develop a novel dynamical model of a primal society with constructs that are specifically geared toward transportation infrastructure expansions and investments. The model quantifies the impact of these expansions on some key performance indicators and on the overall utility and production capacity of the society. We argue that traditional analytical models that work on the premises of stationary behavior and a static response of society to changes in infrastructure do not correctly capture these effects. The land use patterns and spatial expansion computed from the model are validated against existing theory on land use. Preliminary results on how to use the model for value proposition analysis are also presented using simple case studies.     

Country spreads and emerging countries: Who drives whom?

This paper attempts to disentangle the intricate relation linking the world interest rate, country spreads, and emerging-market fundamentals. It does so by using a methodology that combines empirical and theoretical elements. The main findings are: (1) US interest rate shocks explain about 20% of movements in aggregate activity in emerging economies. (2) Country spread shocks explain about 12% of business cycles in emerging economies. (3) In response to an increase in US interest rates, country spreads first fall and then display a large, delayed overshooting; (4) US-interest-rate shocks affect domestic variables mostly through their effects on country spreads; (5) The feedback from emerging-market fundamentals to country spreads significantly exacerbates business-cycle fluctuations.     

Does health reform affect self-employment? Evidence from Massachusetts

This paper evaluates whether the implementation of the 2006 Massachusetts health reform law affected the decision of taxpayers to be self-employed, using both difference-in-differences and synthetic control methods on a panel of tax returns that spans 1999–2010. Though tenuous, our results suggest that the reform led to a decline in the rate of taxpayers earning a majority of income from self-employment. In addition, it appears to have had a positive impact on earning some self-employment income among joint filers and earning the majority of income from self-employment among older taxpayers, but these were offset by negative impacts on single filers and taxpayers age 35–49.     

Is the Information Deficiency in Real Estate Evident in Public Market Trading?

This paper examines the summary informativeness of trading in real estate securities. Prior literature on publicly traded real estate securities suggests that the information deficiency associated with local economies and unique rent dynamics will manifest itself as severe information asymmetry. To date, most studies concerned with these issues have focused on the conventional measures of liquidity (serial correlations, bid—ask spreads, etc.). However, the conventional measures have several shortcomings as pure measures of trading information. To address this issue, we use a vector autoregressive methodology pioneered by Hasbrouck. We examine the empirical proposition that information-gathering activities are related to trade informativeness. The evidence is consistent with a theoretical model in which traders are risk-averse and the number of information gatherers is small.     

On Licensing Under Bertrand Competition

This paper considers licensing by an innovating firm to its competitor in a differentiated duopoly with Bertrand competition. A principal finding is that royalty licensing may be superior to fee licensing for the innovating firm both when the innovation is drastic and when the innovation is non-drastic.     

Demand for education, and its estimation

Since education produces major externalities and has important merit want characteristics, the estimation of a demand schedule is extremely difficult. Demand estimation for higher education is made somewhat easier because of the great importance of the associated costs and the relevant private substitutes, i.e. private colleges and universities. Therefore higher education is a good candidate for the application of the individual (economic) preference approach, which is based on the assumption that individuals are aware of their need for education about as they are aware of their needs for products provided by the open market.

The estimation of demand for primary and secondary education can rely only to a minor extent on the individual (economic) preference approach. The voter's behavior approach analysis is likely to be more directly applicable. Study of the behavior of voters and the behavior of legislators and members of school boards can shed light on the demand for education. Analytic insight can be gained also by the “voting with one's feet”, and the “calculus of consent” methods.

Finally, benefit-cost analysis can be applied in situations where education gives an extremely weak demand signal. In education we often are less interested in overall benefit-cost estimates than in the benefit-cost positions in which different important interest groups find themselves with regard to education. Such analysis requires the identification of significant interest groups, bargaining strategies, and bargaining patterns, as well as of ways in which education decision makers respond to group pressures.     

The design of optimal climate policy with air pollution co-benefits

This paper develops a model of an optimal regulatory program for greenhouse gases (GHGs) emissions that accommodates the benefits due to reductions of co-pollutants including: sulfur dioxide (SO₂), nitrogen oxides (NO_x), volatile organic compounds (VOC), and fine particulate matter (PM_2.5). Employing per ton damage estimates for the co-pollutants produced by an integrated assessment model, co-pollutant damage estimates per ton carbon dioxide equivalent (CO₂e) are developed for over 10,000 sources of GHGs in the lower 48 states including both transportation sources and electric power generation. For coal-fired electric power generation, the co-pollutant damages are larger in magnitude than recent peer-reviewed estimates of the marginal damage for GHGs. The co-pollutant damage per ton CO₂e varies considerably across source types and source location. The paper estimates the welfare gain from adopting a policy that encompasses the spatially variant co-pollutant damage to be between $1 million and $85 million annually. The range depends on the slope of the marginal abatement cost curve. The paper also shows that a distortionary aggregate emission cap reduces the advantage of differentiated policy. Provided an excessively strict cap, the spatially differentiated policy may reduce aggregate welfare. This result has important implications for GHG policy in the United States; although co-pollutant benefits of abating GHGs have been shown to be significant in magnitude, tailoring climate policy to reflect these source-specific co-benefits is not necessarily socially beneficial. This bolsters arguments for upstream policy designs.     

Pricing of perpetual Bermudan options

Abstract

We consider perpetual Bermudan options and more general perpetual American options in discrete time. For wide classes of processes and pay‐offs, we obtain exact analytical pricing formulae in terms of the factors in the Wiener‐Hopf factorization formulae. Under additional conditions on the process, we derive simpler approximate formulae.