DRUNK DRIVING LEGISLATION AND TRAFFIC FATALITIES: NEW EVIDENCE ON BAC 08 LAWS

This article reexamines the effectiveness of blood alcohol content (BAC) laws in reducing traffic fatalities. Differences-in-differences estimators of U.S. state-level data with standard errors corrected for autocorrelation show no evidence that lowering the BAC limits to 0.08 g/dL reduced fatality rates, either in total or in crashes likely to be alcohol related, or in states that passed BAC 08 in laws either in advance of or in response to federal pressure. Other legislations, including administrative license revocation and primary seat belt laws, are found effective in reducing fatalities in all specifications. Endogeneity tests using event analyses confirm the differences-in-differences estimates. ( JEL I18, K32)     

Research Published by Australian Economics and Econometrics Departments: 1988-93*

This paper measures an important component of the research output of economics and econometrics teaching departments, namely, the number of pages published during the period 1988-93, in journals listed by the Journal of Economic Literature. Based on page counts it is found that department rankings are similar over a broad range of journal groupings. It is also found that the median numbers of pages published by each of the groups of senior lecturers, associate professors and professors are quite small, indicating that within these groups research output is highly concentrated among a few active publishers.     

BREAKING THE SILOS: DISTRIBUTED KNOWLEDGE AND STRATEGIC RESPONSES TO VOLATILE EXCHANGE RATES

A model of effective decision-making in a situation of distributed knowledge is developed, drawing on three perspectives: the sociocognitive perspective, which focuses on framing issues; the economic perspective, which focuses on the role played by incentives in the integration of knowledge and decision-making authority; and the process perspective, which stresses the role of integrating mechanisms and of processes that either hinder or foster risk awareness and flexibility. The model is tested on a sample of managers from different functional areas of Fortune500 firms, using strategic responses to exchange-rate volatility as the context. The results show that all three perspectives—framing, incentives and process—are significant in explaining the effectiveness of strategic responses to volatile exchange rates. The findings suggest that simultaneously addressing managerial mindsets, incentives and process may be crucial to generating effective strategic responses across functions.     

Why Consumers Choose Managed Mutual Funds Over Index Funds: Hypotheses from Consumer Behavior

Much evidence exists which suggests that the vast majority of equity mutual fund managers do not possess differential information (or skills) which allow them to achieve above average market returns for their investors. Thus, when investors pay fees to equity mutual fund managers for investment advice and management, the very probable outcome is that they are reducing the return that they would otherwise achieve by investing in a nonmanaged index fund that tracks the total stock market (e.g., Wilshire 5000) or some significant portion of it (e.g., the Standard & Poor's 500). The long-term negative consumer welfare implications are large, very possibly in the hundreds of thousands of dollars for individual consumer investors. Drawing largely on insights from the psychology, consumer behavior, and behavioral finance literatures, we offer a series of hypotheses that may partially account for such consumer choices. We conclude with a call for increased government- and employer-sponsored education programs aimed at creating a more informed consumer investor.     

The Demand for Borrowed Reserves: A Switching Regression Model

A microeconomic model of bank demand for borrowed reserves from the Federal Reserve is developed based upon constrained cost minimization. The derived demand function was found to correspond to behavior appropriate to the unknown switchpoint switching regression problem. When estimated, parameters generally conformed to theoretical expectations. The model was also tested for existence of switching regression behavior against a model similar to Goldfeld and Kane [12]. Significance exceeded 99% in all cases. With the advent of reserve intermediate targeting, it appears especially necessary to reinvestigate the behavior determining this important source of reserves.     

A Model of Intertemporal Discount Rates in the Presence of Real and Inflationary Autocorrelations

This paper discusses the pricing of assets in an intertemporal rational-expectations model when real production and inflation evolve according to first-order autocorrelated processes. The focus is on the structure of the various intertemporal discount rates (yields) exhibited by this economy. Yield curves are identified for consumption claims, indexed bonds, and nominally riskless bonds and can be extended to any claim that can be approximated by a (finite) linear combination of such securities. The model demonstrates that, if the average term structure for nominally riskless securities is upward sloping, then the yield curve for consumption (market) claims is downward sloping, suggesting that conventional methods for computing long-term discount rates err by not accounting for maturity factors. The paper also explores the relationship between the intertemporal equilibrium and its embedded single-period equilibria. The single-period risk measures in this economy are derived and shown to be (generally) functions of maturity. A model of nominal bond betas is constructed along these lines. It is shown that bond betas that are increasing functions of maturity do not necessarily imply an upward-sloping term structure.