Price cap regulation and water quality

Journal of Regulatory Economics - A number of studies suggest that price cap regulation may reduce the quality of the regulated good. This paper analyzes the impact on drinking water quality of a...     

The Impact of Research Grant Funding on Scientific Productivity

In this paper, we estimate the impact of receiving an NIH grant on subsequent publications and citations. Our sample consists of all applications (unsuccessful as well as successful) to the NIH from 1980 to 2000 for standard research grants (R01s). Both OLS and IV estimates show that receipt of an NIH research grant (worth roughly $1.7 million) leads to only one additional publication over the next five years, which corresponds to a 7 percent increase. The limited impact of NIH grants is consistent with a model in which the market for research funding is competitive, so that the loss of an NIH grant simply causes researchers to shift to another source of funding.     

Assessing techno-economic alternatives for rural development in Northeast Mexico

In the arid zone of Northeast Mexico are located some of the most socially deprived and economically marginal communities in the nation. This paper analyzes the current status of their social and economic organization and suggests alternative techno-economic subsistence activities that could improve productive capacity while preserving the fragile ecological balance between communities and exploitable natural resources. It shows how recent advances in computer mapping, linear programming, and techno-social modelling (SOPA technique) can assist decision makers and planners in choosing the best mix of social, economic, and technical advantages from an array of scenarios of change. A major finding is that the use of cooperatives as a managerial format is not always the best one to utilize, given the variability of community cohesiveness and varying organizational requirements of different techniques of exploiting animal and plant resources.     

Rock around the clock: An agent-based model of low- and high-frequency trading

We build an agent-based model to study how the interplay between low- and high-frequency trading affects asset price dynamics. Our main goal is to investigate whether high-frequency trading exacerbates market volatility and generates flash crashes. In the model, low-frequency agents adopt trading rules based on chronological time and can switch between fundamentalist and chartist strategies. By contrast, high-frequency traders activation is event-driven and depends on price fluctuations. High-frequency traders use directional strategies to exploit market information produced by low-frequency traders. Monte-Carlo simulations reveal that the model replicates the main stylized facts of financial markets. Furthermore, we find that the presence of high-frequency traders increases market volatility and plays a fundamental role in the generation of flash crashes. The emergence of flash crashes is explained by two salient characteristics of high-frequency traders, i.e., their ability to i. generate high bid-ask spreads and ii. synchronize on the sell side of the limit order book. Finally, we find that higher rates of order cancellation by high-frequency traders increase the incidence of flash crashes but reduce their duration.     

An experimental study of costly coordination

This paper reports data for coordination game experiments with random matching. The experimental design is based on changes in an effort-cost parameter, which do not alter the set of Nash equilibria nor do they alter the predictions of adjustment theories based on imitation or best response dynamics. As expected, however, increasing the effort cost lowers effort levels. Maximization of a stochastic potential function, a concept that generalizes risk dominance to continuous games, predicts this reduction in efforts. An error parameter estimated from initial two-person, minimum-effort games is used to predict behavior in other three-person coordination games.     

Wage posting without full commitment

Wage posting models of job search typically assume that firms can commit to paying workers exactly the posted wage. We relax this assumption and impose “downward” commitment; firms can commit only to paying at least their advertised wage. As each firm can only commit to pay at least their advertised wage, workers may demand that the firm pay more than the advertised wage. In labor markets with a finite number of workers and firms, the strategic interaction between firms makes it costly for firms to provide applicants the incentive not to demand wages in excess of the advertised wage. In equilibrium, firms may settle for running job auctions at the cost of losing control of the number of applicants that they can attract. When this strategic interaction between firms vanishes, workers never choose to demand more than the advertised wage.     

Simultaneous Releases of U.S. and Foreign GAAP Earnings

Prior studies examine the incremental information content of U.S. generally accepted accounting principles (GAAP) reconciliation of U.S. listed foreign firms and find mixed results. One of the main methodological issues in prior studies is the uncertainty concerning the dates of the reconciliation releases. This study examines the information content of U.S.GAAP reconciliation for a sample of U.S. listed foreign firms that released both U.S. and foreign GAAP earnings information simultaneously. The findings show that there is no incremental information content for the U.S. GAAP reconciliation over foreign GAAP earnings. When added to other empirical evidence from prior studies, this studies' results of no incremental information content further support the recent SEC announcement to work towards eliminating the reconciliation by 2009 for firms using IFRS.     

How Should the Graduate Economics Core be Changed?

The authors present suggestions by graduate students from a range of economics departments for improving the first-year core sequence in economics. The students identified a number of elements that should be added to the core: more training in building microeconomic models, a discussion of the methodological foundations of model-building, more emphasis on institutions to motivate and contextualize macroeconomic models, and greater focus on econometric practice rather than theory. The authors hope that these suggestions will encourage departments to take a fresh look at the content of the first-year core.     

An EM algorithm for the destructive COM-Poisson regression cure rate model

In this paper, we consider a competitive scenario and assume the initial number of competing causes to undergo a destruction after an initial treatment. This brings in a more realistic and practical interpretation of the biological mechanism of the occurrence of tumor since what is recorded is only from the undamaged portion of the original number of competing causes. Instead of assuming any particular distribution for the competing cause, we assume the competing cause to follow a Conway–Maxwell Poisson distribution which brings in flexibility as it can handle both over-dispersion and under-dispersion that we usually encounter in count data. Under this setup and assuming a Weibull distribution to model the time-to-event, we develop the expectation maximization algorithm for such a flexible destructive cure rate model. An extensive simulation study is carried out to demonstrate the performance of the proposed estimation method. Finally, a melanoma data is analyzed for illustrative purpose.     

Tax Regimes and Capital Gains Realizations

This paper contrasts the individual capital gains realization behavior between progressive and proportional tax regimes. Using a longitudinal panel of over 288,000 individuals in Sweden, I exploit the 1991 tax reform in Sweden that changed progressive capital gains tax rates ranging from 12% to 80% to a proportional tax rate of 30%. Using the proportional tax system to control for non-tax reasons to realize capital gains, I show that individuals are highly responsive to capital gains tax incentives created by temporary income changes under a progressive capital gains tax. More specifically, I find that individuals with temporary negative (positive) income changes sell (hold) shares that they would hold (sell) in the absence of temporary tax incentives. Further, I show that high-income individuals are more tax sensitive than low-income individuals. This result indicates that low-income individuals facing temporary negative income changes could trade predominantly for non-tax reasons.