Flood Risk and Salience: New Evidence from the Sunshine State

A growing literature finds evidence that flood risk salience varies over time, spiking directly following a flood and then falling off individuals' cognitive radar in the following years. In this article, we provide new evidence of salience exploiting a hurricane cluster impacting Florida that was preceded and followed by periods of unusual calm. Utilizing residential property sales across the state from 2002 through 2012, our main estimate finds a salience impact of ?8%, on average. The salience effect persists when we base estimation only on spatial variation in prices to limit confounding from other simultaneous changes due to shifting hedonic equilibria over time. These effects range from housing prices decreases of 5.4–12.3% depending on the year of sale. Understanding flood risk salience has important implications for flood insurance and disaster policy, the benefits transfer literature, and, more broadly, our understanding of natural disaster resilience. JEL Classification: Q51, Q54, R21     

Increasing linkages among European regions. The role of sectoral composition

This paper analyses changes in economic regional interlinkages in Europe over time and investigates the factors that could explain the dynamics of these changes. Our four main findings are the following: (i) we detect a significant surge in regional synchronisation after the Great Recession; (ii) we identify the regions most interrelated with the rest of Europe, namely, Ile de France, Inner London and Lombardia; (iii) we find that sectoral composition explains regional synchronisation in Europe, mainly after the Great Recession and (iv) we document that sectoral composition has important implications for aggregate economic fluctuations, in particular, that similarities in services-related sectors across regions explain a nonlinear relationship between sectoral composition and regional business cycle synchronisation. We also propose a new method to measure time-varying synchronisation in small samples that combines regime-switching models and dynamic model averaging.     

Carbon tax simulations using a household demand model

The main objective of this paper is to analyse consumer response and welfare effects due to changes in energy or environmental policy. To achieve this objective we formulate and estimate an econometric model for non-durable consumer demand in Sweden that utilises micro- and macro-data. In the simulations, we consider two revenue neutral scenarios that both imply a doubling of the CO₂ tax; one that returns the revenues in the form of a lower VAT and one that subsidise public transport. One conclusion from the simulations is that the CO₂ tax has regional distribution effects, in the sense that household living in sparsely populated areas carry a larger share of the tax burden.     

The Elasticity of Marginal Utility of Consumption: Estimates for 20 OECD Countries*

In social project appraisal, the policy profile of both distributional welfare weights and the social discount rate has risen considerably in recent years. This fact has important implications for the allocation of funds to social projects and policies in countries, and in unions of countries such as the EU. A key component in the formulae for both welfare weights and the social discount rate is the elasticity of marginal utility of consumption, e. A critical review of existing evidence on e suggests that the UK Treasury's preferred value of unity is too low. New evidence presented in this paper, based on the structure of personal income tax rates, suggests that, on average, for developed countries e is close to 1.4. This particular approach to the estimation of e has previously been under‐utilised by researchers.     

Cities under stress

This paper studies the effect of terrorist attacks on the internal structure of cities. We develop an urban framework with capital structures suitable for the study of this question and analyze the long and short term implications of this type of events. In the long run, the analysis shows that a terrorist attack will affect urban structure only modestly, relative to the potentially large decrease in the level of economic activity in the city. Land rents will not decline at all locations. In the short run, agglomeration forces will amplify the effect of the original destruction and will reduce urban economic activity temporarily.     

Entry and growth in a perfectly competitive vintage model

A perfectly competitive vintage-knowledge model of Schumpeterian growth is introduced to study the relation between growth, technology-lifetime, entry, and productivity-dispersion. The incentive to innovate is generated by the productivity-dispersion (latent in traditional vintage models) between new and old plants, rather than by monopoly rents. The model has a unique steady-state REE with endogenous growth. The endogenous extent of entry constitutes a buffer, dampening the effect of research-efficiency and completely neutralizing the effect of population size or population growth rates on per-capita income levels and growth rates. Variations of research-efficiency lead to a negative relation between growth and vintage-lifetime and a non-monotonic relation between growth and productivity-dispersion.     

Equity‐Based Compensation for Employees: Firm Performance and Determinants

I examine the effect of employee equity‐based compensation (EBC) on firm performance and the determinants of EBC. Using two samples, I find that firms have come to rely more heavily on EBC than in the past. For both samples, I document a significant, positive relation between Tobin's q and the percentage of employee compensation that is equity based. For accounting returns, I find a positive relation with the earlier sample. However, for the later sample I find that greater use of EBC leads to lower levels of future accounting returns. I also find that the determinants of the proportion of EBC are different between the two samples.     

A spatial tax harmonization model

Policies to harmonize value-added tax rates are controversial in the European Union. This paper formulates a multi-country model over a one-dimensional space as a non-cooperative Nash game, in which each country aims at maximizing its tax revenue, subject to the constraint that its tax rate lies within a given common band. Then we examine the effects of changes in the common band on tax rates, tax revenues and the number of cross-border shoppers at Nash equilibrium. We also analyze the effects of geographical variation in country size and location.     

The Impact of Regulation Fair Disclosure on Information Asymmetry and Trading: An Intraday Analysis

This study examines the impact of Regulation Fair Disclosure (FD) on liquidity, information asymmetry, and institutional and retail investors trading behavior. Our main findings suggest three conclusions. First, Regulation FD has been effective in improving liquidity and in decreasing the level of information asymmetry. Second, retail trading activity increases dramatically after earnings announcements but there is a significant decline in institutional trading surrounding earnings announcements, particularly in the pre‐announcement period. Last, the decline in information asymmetry around earnings announcements is closely associated with a lower participation rate in the pre‐announcement period and more active trading of retail investors after earnings releases.     

Capital structure around the world: The roles of firm- and country-specific determinants

We analyze the importance of firm-specific and country-specific factors in the leverage choice of firms from 42 countries around the world. Our analysis yields two new results. First, we find that firm-specific determinants of leverage differ across countries, while prior studies implicitly assume equal impact of these determinants. Second, although we concur with the conventional direct impact of country-specific factors on the capital structure of firms, we show that there is an indirect impact because country-specific factors also influence the roles of firm-specific determinants of leverage.