Economics Department Seminar Series

Department of Economics

Seminar Series
Copies may be downloaded by clicking on the title of the paper.
For more information you may contact Stratford Douglas, the Seminar Series Coordinator.

Spring 2003

If you do not have Acrobat Reader for your browser, you can download it freely from Adobe's Web site. Download Adobe Acrobat Reader

January 8, 2003 Serdar Sayan, Bilkent University. "Heckscher-Ohlin Revisited: Results from a 2x2x2x2 Dynamic Model under Population Growth Rate Differentials."
Abstract: This paper considers a two-country world where the population in one country grows faster than the other, and investigates the implications of the addition of non-stationary population dynamics to a simple 2-commodity, 2-factor model of international trade within an overlapping-generations framework. The two countries in the world considered are assumed to be identical in every respect except for their population growth rates initially. The effects of differential speed of population growth on relative factor endowments and patterns of international trade are explored by comparing simulation results obtained from the overlapping-generations general equilibrium model under autarky and trade scenarios. Unequal population growth rates are shown to give rise to differentials in wage rates and rentals for capital under autarky conditions. This, in turn, causes costs of production and relative prices to differ, creating the grounds for trade in the sense of Heckscher-Ohlin (HO). Yet, the results from simulation exercises indicate that static welfare results from the standard 2x2x2 HO model can not be generalized to hold in a dynamic setting with overlapping generations of individuals.

February 21, 2003 Don Bruce,University of Tennessee. “Tax Policy and Entrepreneurship: New Time Series Evidence.”
Abstract:Have tax policies affected entrepreneurial activity in the U.S.? We extend the time series literature on this topic by using more recent data and modern econometric techniques to examine the importance of federal income, payroll, capital gains, corporate income, and estate taxes on self-employment rates. Regression results show that some taxes, namely capital gains and corporate income taxes, have significant but very small effects on self-employment activity. A battery of cointegration and causality tests confirms the general finding that taxes can have significant influences on entrepreneurship, but they are likely to be ineffective tools for generating meaningful changes in entrepreneurial activity.

February 28, 2003 Mark Toma, University of Kentucky. "Open Market Operations in the Early Fed: From Competitive to Managed."
Abstract:This paper models the early Federal Reserve as a market-driven system and provides evidence that competitive open market operations in the 1920s acted as a safety valve that guarded against periods of undue monetary tightness. In early 1930, the structure of the Fed shifted in a way that replaced the competitive system of the 1920s with a managed open market operation policy. Regime shift tests indicate that this one-time change in structure, which represented a move away from the letter and the spirit of the original Federal Reserve Act, contributed to the severity of the monetary contraction during the Great Depression.

April 4, 2003 Today's Seminar Has Been Canceled.

April 11, 2003 Abhra Roy, West Virginia University. "Endogenous Fertility and Child Labor."
Abstract:We use a partial equilibrium two good trade model with endogenous fertility to analyze the impact of various policies on fertility and child labor. We find that an increase in educational subsidy increases child labor and may increase fertility. At increase in the quality of schooling may increase or decrease child labor and is likely to increase fertility. We also show that there may be two types of equilibria, characterized by high and low fertility. Increases in wage rate reduce fertility if the economy is in low fertility equilibrium, otherwise the opposite result obtains. The effect of wages on child labor depends on the nature of the equilibrium. If the economy is in the high fertility equilibrium with respect to unskilled families then wage increase would increase child labor, if it the economy supports a low fertility equilibrium then the opposite result occurs. We also try to look at the efficacy of government-financed endowments given to unskilled households. Fertility and child labor are negatively related to endowments if and only if endowments schemes reward families with smaller size.

April 25, 2003 Huberto M. Ennis, Federal Reserve Bank of Richmond. "Economic Growth, Liquidity, and Bank Runs."
Abstract:We construct an endogenous growth model in which bank runs occur with positive probability in equilibrium. In this setting, a bank run has a permanent effect on the levels of the capital stock and of output. In addition, the possibility of a run changes the portfolio choices of depositors and of banks, and thereby affects the long-run growth rate. These facts imply that both the occurrence of a run and the mere possibility of runs in a given period have a large impact on all future periods. A bank run in our model is triggered by sunspots, and we consider two different equilibrium selection, rules. In the first, a run occurs with a fixed, exogenous probability, while in the second the probability of a run is influenced by banks’ portfolio choices. We show that when the choices of an individual bank affect the probability of a run on that bank, the economy both grows faster and experiences fewer runs.

	Seminar Series Copies may be downloaded by clicking on the title of the paper. For more information you may contact Stratford Douglas, the Seminar Series Coordinator. Spring 2003 If you do not have Acrobat Reader for your browser, you can download it freely from Adobe's Web site. Download Adobe Acrobat Reader
January 8, 2003	Serdar Sayan, Bilkent University. "Heckscher-Ohlin Revisited: Results from a 2x2x2x2 Dynamic Model under Population Growth Rate Differentials." Abstract: This paper considers a two-country world where the population in one country grows faster than the other, and investigates the implications of the addition of non-stationary population dynamics to a simple 2-commodity, 2-factor model of international trade within an overlapping-generations framework. The two countries in the world considered are assumed to be identical in every respect except for their population growth rates initially. The effects of differential speed of population growth on relative factor endowments and patterns of international trade are explored by comparing simulation results obtained from the overlapping-generations general equilibrium model under autarky and trade scenarios. Unequal population growth rates are shown to give rise to differentials in wage rates and rentals for capital under autarky conditions. This, in turn, causes costs of production and relative prices to differ, creating the grounds for trade in the sense of Heckscher-Ohlin (HO). Yet, the results from simulation exercises indicate that static welfare results from the standard 2x2x2 HO model can not be generalized to hold in a dynamic setting with overlapping generations of individuals.
February 21, 2003	Don Bruce,University of Tennessee. “Tax Policy and Entrepreneurship: New Time Series Evidence.” Abstract:Have tax policies affected entrepreneurial activity in the U.S.? We extend the time series literature on this topic by using more recent data and modern econometric techniques to examine the importance of federal income, payroll, capital gains, corporate income, and estate taxes on self-employment rates. Regression results show that some taxes, namely capital gains and corporate income taxes, have significant but very small effects on self-employment activity. A battery of cointegration and causality tests confirms the general finding that taxes can have significant influences on entrepreneurship, but they are likely to be ineffective tools for generating meaningful changes in entrepreneurial activity.
February 28, 2003	Mark Toma, University of Kentucky. "Open Market Operations in the Early Fed: From Competitive to Managed." Abstract:This paper models the early Federal Reserve as a market-driven system and provides evidence that competitive open market operations in the 1920s acted as a safety valve that guarded against periods of undue monetary tightness. In early 1930, the structure of the Fed shifted in a way that replaced the competitive system of the 1920s with a managed open market operation policy. Regime shift tests indicate that this one-time change in structure, which represented a move away from the letter and the spirit of the original Federal Reserve Act, contributed to the severity of the monetary contraction during the Great Depression.
April 4, 2003	Today's Seminar Has Been Canceled.
April 11, 2003	Abhra Roy, West Virginia University. "Endogenous Fertility and Child Labor." Abstract:We use a partial equilibrium two good trade model with endogenous fertility to analyze the impact of various policies on fertility and child labor. We find that an increase in educational subsidy increases child labor and may increase fertility. At increase in the quality of schooling may increase or decrease child labor and is likely to increase fertility. We also show that there may be two types of equilibria, characterized by high and low fertility. Increases in wage rate reduce fertility if the economy is in low fertility equilibrium, otherwise the opposite result obtains. The effect of wages on child labor depends on the nature of the equilibrium. If the economy is in the high fertility equilibrium with respect to unskilled families then wage increase would increase child labor, if it the economy supports a low fertility equilibrium then the opposite result occurs. We also try to look at the efficacy of government-financed endowments given to unskilled households. Fertility and child labor are negatively related to endowments if and only if endowments schemes reward families with smaller size.
April 25, 2003	Huberto M. Ennis, Federal Reserve Bank of Richmond. "Economic Growth, Liquidity, and Bank Runs." Abstract:We construct an endogenous growth model in which bank runs occur with positive probability in equilibrium. In this setting, a bank run has a permanent effect on the levels of the capital stock and of output. In addition, the possibility of a run changes the portfolio choices of depositors and of banks, and thereby affects the long-run growth rate. These facts imply that both the occurrence of a run and the mere possibility of runs in a given period have a large impact on all future periods. A bank run in our model is triggered by sunspots, and we consider two different equilibrium selection, rules. In the first, a run occurs with a fixed, exogenous probability, while in the second the probability of a run is influenced by banks’ portfolio choices. We show that when the choices of an individual bank affect the probability of a run on that bank, the economy both grows faster and experiences fewer runs.