A Chain-Type Price Index for New Business Jet Aircraft

This paper presents a price index constructed to measure the real price and real output of corporate business jet aircraft. It employs a chained price index methodology to properly account for the effect of changes in aircraft quality and product lines on the price index. The index indicates that the average price level of corporate jets has significantly outpaced the general price level measured by the GDP deflator, nearly doubling the real price of the product over a 35-year period from 1968 to 2003, which could have negatively affected the demand for the product. Because the GDP deflator significantly understates the price increase in corporate jets, the industry’s real output is overstated when its nominal sales are deflated with a general price index. The paper suggests that an industry-specific price index allows more accurate analyses of real economic activity of an industry. The methodology used in this paper could be useful for other industries where product price movements vary significantly from the changes in the general price level. JEL Classification L160,L620     

The moderating effect of innovation protection mechanisms on the competitiveness of service firms

This empirical study examines the effectiveness of innovation protection mechanisms (IPMs) in capturing returns from innovation in service firms. To identify their effects, we set five types of IPMs (patents, other intellectual property rights, speed to market, secrecy, and complementary resources) as a moderator of the relationships between the innovation and firm competitiveness. Through a sample of service firms from the Korean Innovation Survey, the results of this study indicated that firm competitiveness cannot be influenced by service innovation alone but rather it is influenced by service innovation used in conjunction with IPMs other than patents. The results contribute to understanding innovation protection strategies for better competitiveness of service firms.     

Demographic factors and the pattern of household expenditures in the United States

Summary and Conclusions This study takes as its starting point the hypothesis that demographic characteristics of households are as relevant determinants of the pattern of consumer expenditures in the United States as are measured prices and incomes. Demographic characteristics of households are brought to bear upon their expenditure patterns not via their impact on consumer tastes but rather via their effect on “true” prices and “permanent” incomes faced by households. The Bureau of Labor Statistics' 1972/73 Consumer Expenditure Survey data are used to estimate several expenditure functions. The econometric results unequivocally demonstrate the validity of the authors' hypothesis. Various demographic factors such as the age of the household head, his/her educational attainment, the employment status of the household head and spouse, the household's race and region of location are all found to be significant determinants of the pattern of expenditures in the United States. An earlier version of this paper was presented at the 1979 Annual Meeting of the Atlantic Economic Society, October 10–12, 1979, Washington, D.C. The authors would like to thank Mr. Lee Grimes of the Computer Center at Tennessee Tech for many hours of patient help.     

Inference of Seasonal Cointegration: Gaussian Reduced Rank Estimation and Tests for Various Types of Cointegration*

An extension of Gaussian reduced rank estimation of Ahn and Reinsel (Journal of Econometrics, Vol. 62, pp. 317–350, 1994) to seasonal periods other than four is presented. Simple adjustments for estimation that are necessary because of complex‐valued seasonal unit roots are presented in detail and the asymptotic distribution of the estimators that takes the same form as that in Ahn and Reinsel (1994) is derived. Tests for contemporaneous cointegration and common polynomial cointegrating vectors (PCIVs) for different seasonal unit roots are presented. Finite sample properties are briefly examined through a small Monte Carlo simulation study and a numerical example is presented to illustrate the methods.     

Appraisals,Transaction Incentives,and Smoothing

This article is structured around three principal objectives. The first is to determine whether any incentives for appraisals support an underlying purchase offer, which may be termed a transaction bias. Appraisals that are lower than purchase prices could involve additional cost for justification and thus undermine the transaction. The second objective is to test whether appraisal data are smoothed or exhibit less volatility than purchase data. The article compares the volatility of separate appraisal and purchase data. Given separate appraisal and purchase time series, the third objective is to derive the implied optimal appraisal updating rule.The model is applied to appraisal and purchase price indices for 3.7 million repeat transactions on mortgages bought by Fannie Mae and Freddie Mac by using monthly data from January 1975 to December 1993. The estimation procedure uses generalized autoregressive conditioned heteroskedastic (GARCH) analysis to take account of persistence in means and volatility in the house price time series. The article draws three principal conclusions. First, appraisals are systematically higher than purchase data, a first-moment differential. Second, appraisal smoothing does not occur generally. Third, the appraisal updating rule for the United States appears to involve error correction whereby underappraisals from pervious periods are eventually adjusted.     

Racial and ethnic differences in housing demand: An econometric investigation

This article empirically investigates the sources of housing demand differences between racial (black and white) and ethnic (Hispanic and non-Hispanic) groups. We estimate the tenure-adjusted housing demand equations from the 1989 American Housing Survey (AHS) national sample data and measure the effects of different sources for demand disparities in housing demand, but much less so in explaining racial differences in housing demand. Specifically, 98% (96%) of the housing demand differences between Hispanic and non-Hispanic owners (renters) is due to differences in group endowments. For the racial groups, 29% (51%) of the housing demand differences between black and white owners (renters) is attributable to differences in group endowments. The residual differences explain 71% and 49% of the black-white differentials for owners and renters, respectively. The residual components in our model capture the effect of institutional and structural factors intrinsic to the housing market (such as racial discrimination or residential segregation) and/or the influence of important omitted or harder-tomeasure variables correlated with race or ethnicity (such as wealth, employment history, credit history, and cultural differences in housing consumption).     

Economic cost–benefit analysis of the addictive digital game industry

This study attempts to estimate the economic costs and benefits of the addictive digital game industry. Addiction to digital games induces economic costs such as increase in crime, facilities investments for curbing addiction, increase in counselling costs and other welfare losses. As a case study, we investigate the digital game industry in South Korea which is known to have one of the highest rates of game addiction. According to our calculations, the annual cost of game addiction is estimated to be approximately $3.5B while the annual benefit is approximately $24.3B ($3.7B for addicted user market). The proportion of the total costs to total benefits from the game industry is an alarming 14% (95% for addicted user market). We offer some policy recommendations.     

How do Labor Unions Influence the Gender Earnings Gap? A Comparative Study of the US and Korea

Abstract

This paper provides a comparative study of the United States and Korea regarding the effects of unions on gender earnings gaps in 2004. Using datasets representative of the population of the US and Korea, this contribution shows that gender differences in the workers' observed characteristics and the unobserved component reduce gender earnings gaps in union jobs in both the US and Korea. Fringe benefits in the union sector attract women workers with higher labor market qualifications into the union sector and thereby reduce the gender earnings gap in this sector. The study finds that this self-selection process in the union sector is stronger in Korea than in the US, but the seniority-based wage system that prevails in the Korean union sector widens the gender earnings gap.     

Forecasting future demand for large-screen television sets using conjoint analysis with diffusion model

The methodological framework proposed in this paper addresses two limitations of the basic Bass diffusion model: that it does not reflect competition among products nor does it forecast demand for products that do not exist in the marketplace. The model consists of four steps. First, to investigate consumer preferences for product attributes, we use conjoint analysis to estimate the utility function of consumers. Next we estimate the dynamic price function of each competing product to reflect technological changes and the evolving market environment. Then we derive dynamic utility function by combining the static utility function and the price function. Finally, we forecast the sales of each product using estimated market share and sales data for each period, which are derived from the dynamic utility function and from the Bass diffusion model, respectively.We apply this model to South Korea's market for large-screen televisions. The results show that (1) consumers are sensitive to picture resolution and cost and (2) in the near future, should the market see the introduction of liquid crystal display (LCD) TVs with screens larger than 50 inches, the high resolution and steep price drop of LCD will lead LCD TVs to capture a larger market share than TVs with other display types. Finally, our results show that TVs with 40-inch screens are preferred over TVs with larger screens.     

Evidence of a stock market wealth effect using household level data

Using the household level data of urban households in Korea, this paper presents evidence for a statistically significant stock market wealth effect for the highest income bracket households who typically hold a large share of corporate stock.