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.

2002

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

September 13, 2002 MAFI,Elham;West VirginiaUniversity. "Does a Less Active Central Bank Lead to Greater Economic Stability? Evidence from the European Monetary Union."
Abstract: Substantial disagreement exists among economists about the degree to which central banks should pursue discretionary stabilization policy. Activists believe that central banks can promote greater macroeconomic stability through the use of discretionary policy, while nonactivists (such as the monetarists) do not. In particular, monetarists believe that lags and timing problems will result in even the best-intentioned discretionary policy actually resulting in less (rather than more) macroeconomic stability. The formation of the European Monetary Union provides a unique opportunity to test whether a shift to a less active central bank has resulted in more or less macroeconomic stability for these countries.

September 20, 2002 ZHANG, Duo; West Virginia University. "Intangible Assets and Stock Trading Strategies."
Abstract: Hall (2001a) hypothesizes that the fact that the book value of firms is often well below the market value is due to market valuation of intangible assets. This essay tests the relationship between future stock returns and inferred intangibles and indirectly tests Hall's hypothesis by using different portfolio switching strategies. It also examines the linkage between the inferred intangibles and the book-to-market equity ratio. It is found that the inferred intangibles have predictive power over stock returns and the way they predict stock returns is consistent with the three-factor model of Fama and French (1992). Thus the intangible assets hypothesis of Hall does not hold.

September 27, 2002 HUMPHREYs, Brad; University of Maryland, Baltimore County. "The Effect of Professional Sports on the Earnings of Individuals:Evidence from Microeconomic Data."
Abstract:This paper explores the relationship between professional sports teams and stadiums and the wages of individuals who live in cities with professional sports. Much of the previous literature has focused on the direct economic impact of professional sports on local economies. We adapt the model of amenities and wages developed by Roback (1982) by assuming that sports teams and facilities, like pleasant weather or low pollution, can be viewed as amenities to the residents of cities. In this context, the relationship between sports and wages in a city may be either negative or positive, depending on the effect of sport on firms.
Estimates of wage equations for individuals in cities with professional sports teams and franchises using data from the March Supplement to the Current Population Survey (CPS) for the period 1977 to 1998 find a compensating differential for sports; the mean impact of sports on wages is decrease in inflation adjusted earnings of $46.11 annually, although estimates for narrow occupational groups find a positive impact on wages of workers directly employed by sports teams and facilities. The results of the study confirm the finding that sports have a negative effect on earnings reported in previous research.

October 4, 2002 OKUYAMA, Yasuhide; Regional Research Institute. "Economic Impact of Natural Disasters."

October 11, 2002 REPHANN, Terry; Allegany College of Maryland. "Results from a dynamic, spatial microsimulation model."
Sweden has a fairly liberal immigration policy compared to many other developed countries and the foreign-born now constitute approximately 11% of the population. However, in recent years, this policy has been re-examined as the ability of the country to absorb large streams of immigrants, particularly refugees, has been called into question. This paper examines the economic and demographic consequences of immigration using a dynamic, spatial microsimulation model called SVERIGE (System of Visualizing Environmental and Regional Influences Governing the Environment). The empirical section presents the results of simulations that vary three key characteristics of immigration: (1) the magnitude of the immigration stream, (2) the ethnic origin of the immigrants, and (3) the settlement characteristics of the immigrants. Outcome variables examined include immigration, emigration, births, population, migration, labor force participation, and average earnings. Results show that a large increase of immigration can be accommodated by a host country with modest economic-demographic effects and the characteristics of immigrants, including initial settlement choice, have a recognizable influence on outcomes.

October 18, 2002 WAGNER, Gary; Duquesne University. "Fiscal Policy and Cyclical Fluctuations: An Investigation of U.S. State Budget Stabilization Funds."
Abstract:The creation of the European Monetary Union (EMU) has generated a renewed interest in exploring the use of fiscal policy as a means to promote business cycle stabilization. In most U.S. states the use of fiscal policy to stabilize cyclical fluctuations has been institutionalized in the form of budget stabilization funds. This paper explores the impact of stabilization funds on state expenditure volatility. While the results indicate that expenditure smoothing may exist with properly structured stabilization funds, we find no evidence of smoothing during recessionary periods. Thus, the expenditure smoothing the paper uncovers comes from smoothing in non-recessionary periods.

October 25, 2002 SHIFFMAN, Gary; , Director, Government Affairs Greenberg Traurig (Washington DC Law Firm). "Castro's Choices: The Economics of Economic Sanctions." Homepage.

November 1, 2002 GARRETT, Thomas; Federal Reserve Bank of St. Louis. "Scale Economies in Rural and Urban School Districts."
Abstract:This article estimates economies of scale for rural and urban school districts in Arkansas and Kansas. We show that estimates from previous studies on education scale economies may suffer from simultaneity bias. Our results suggest that school districts, especially rural districts, would experience measurable cost-savings from consolidation. We simulate a hypothetical rural district consolidation in each state to obtain an estimate of cost-savings from consolidation. Simulations indicate that districts could save 24 percent in variable costs per academic year. At the state level, consolidation of rural districts in Arkansas and Kansas would annually save $34 million and $56 million, respectively.

November 15, 2002 KRISHNA, Pravin; Brown University. "Trade Policy, Income Risk and Welfare."

November 22, 2002 DU, Ding; West Virginia University. "Stock Market Prices Are Not Predictable in the Long Run: Evidence from a New Specification Test."
Abstract:There is no direct statistical evidence to support the long run predictability of stock prices. Once possible reason may be that tests used by researchers generally are not able to distinguish between long run and short run autocorrelation, a severe shortcoming in testing the long run predictability of stock prices since there is already strong evidence of the presence of short run autocorrelation in stock returns. In this paper, by modifying the variance ratio test of Lo and MacKinlay (1988) and Chow and Denning (1993), I construct a test statistic, the covariance-variance ratio statistic, which is able to differentiate short run autocorrelation from long run autocorrelation. When this statistic is applied to weekly US stock prices over period 1963:07:05 – 2002:01:25, there is still no evidence of the existence of long run autocorrelation. I also compare the size of covariance-variance ratio statistic against that of alternative statistics. The covariance-variance ratio statistic is shown to yield the most reliable inference in finite samples. Interestingly, Lo (1991) and Chow, Pan and Sakano (1996) also find no evidence of long-range dependence even when the effects of short-range dependence are accounted for.

December 6, 2002 KREFT, Steven; West Virginia University. "Explaining the Trend Toward City Managers."
Abstract:Previous research has concluded that there are no significant differences in efficiency between the two major forms of U.S. city government: elected mayor-council (EMC) and council-manager (CM). What remains then, is a puzzle as to why so many cities are switching from an EMC form to a CM form. The aim of this paper is to provide explanation for the recent trend towards adopting the CM form of government. This paper hypothesizes that the large budget items analyzed in the previous literature, are not adequate to fully capture differences in the efficiency of city spending patterns. Relying on the capitalization theory of local public services and taxes, I develop a hedonic price model for home sales occurring in the six largest Ohio cities, in 1991. Results show that houses within a CM city have a pricing premium that can be attributed to the greater efficiency of the CM form of government.

	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. 2002 If you do not have Acrobat Reader for your browser, you can download it freely from Adobe's Web site. Download Adobe Acrobat Reader
September 13, 2002	MAFI,Elham;West VirginiaUniversity. "Does a Less Active Central Bank Lead to Greater Economic Stability? Evidence from the European Monetary Union." Abstract: Substantial disagreement exists among economists about the degree to which central banks should pursue discretionary stabilization policy. Activists believe that central banks can promote greater macroeconomic stability through the use of discretionary policy, while nonactivists (such as the monetarists) do not. In particular, monetarists believe that lags and timing problems will result in even the best-intentioned discretionary policy actually resulting in less (rather than more) macroeconomic stability. The formation of the European Monetary Union provides a unique opportunity to test whether a shift to a less active central bank has resulted in more or less macroeconomic stability for these countries.
September 20, 2002	ZHANG, Duo; West Virginia University. "Intangible Assets and Stock Trading Strategies." Abstract: Hall (2001a) hypothesizes that the fact that the book value of firms is often well below the market value is due to market valuation of intangible assets. This essay tests the relationship between future stock returns and inferred intangibles and indirectly tests Hall's hypothesis by using different portfolio switching strategies. It also examines the linkage between the inferred intangibles and the book-to-market equity ratio. It is found that the inferred intangibles have predictive power over stock returns and the way they predict stock returns is consistent with the three-factor model of Fama and French (1992). Thus the intangible assets hypothesis of Hall does not hold.
September 27, 2002	HUMPHREYs, Brad; University of Maryland, Baltimore County. "The Effect of Professional Sports on the Earnings of Individuals:Evidence from Microeconomic Data." Abstract:This paper explores the relationship between professional sports teams and stadiums and the wages of individuals who live in cities with professional sports. Much of the previous literature has focused on the direct economic impact of professional sports on local economies. We adapt the model of amenities and wages developed by Roback (1982) by assuming that sports teams and facilities, like pleasant weather or low pollution, can be viewed as amenities to the residents of cities. In this context, the relationship between sports and wages in a city may be either negative or positive, depending on the effect of sport on firms. Estimates of wage equations for individuals in cities with professional sports teams and franchises using data from the March Supplement to the Current Population Survey (CPS) for the period 1977 to 1998 find a compensating differential for sports; the mean impact of sports on wages is decrease in inflation adjusted earnings of $46.11 annually, although estimates for narrow occupational groups find a positive impact on wages of workers directly employed by sports teams and facilities. The results of the study confirm the finding that sports have a negative effect on earnings reported in previous research.
October 4, 2002	OKUYAMA, Yasuhide; Regional Research Institute. "Economic Impact of Natural Disasters."
October 11, 2002	REPHANN, Terry; Allegany College of Maryland. "Results from a dynamic, spatial microsimulation model." Sweden has a fairly liberal immigration policy compared to many other developed countries and the foreign-born now constitute approximately 11% of the population. However, in recent years, this policy has been re-examined as the ability of the country to absorb large streams of immigrants, particularly refugees, has been called into question. This paper examines the economic and demographic consequences of immigration using a dynamic, spatial microsimulation model called SVERIGE (System of Visualizing Environmental and Regional Influences Governing the Environment). The empirical section presents the results of simulations that vary three key characteristics of immigration: (1) the magnitude of the immigration stream, (2) the ethnic origin of the immigrants, and (3) the settlement characteristics of the immigrants. Outcome variables examined include immigration, emigration, births, population, migration, labor force participation, and average earnings. Results show that a large increase of immigration can be accommodated by a host country with modest economic-demographic effects and the characteristics of immigrants, including initial settlement choice, have a recognizable influence on outcomes.
October 18, 2002	WAGNER, Gary; Duquesne University. "Fiscal Policy and Cyclical Fluctuations: An Investigation of U.S. State Budget Stabilization Funds." Abstract:The creation of the European Monetary Union (EMU) has generated a renewed interest in exploring the use of fiscal policy as a means to promote business cycle stabilization. In most U.S. states the use of fiscal policy to stabilize cyclical fluctuations has been institutionalized in the form of budget stabilization funds. This paper explores the impact of stabilization funds on state expenditure volatility. While the results indicate that expenditure smoothing may exist with properly structured stabilization funds, we find no evidence of smoothing during recessionary periods. Thus, the expenditure smoothing the paper uncovers comes from smoothing in non-recessionary periods.
October 25, 2002	SHIFFMAN, Gary; , Director, Government Affairs Greenberg Traurig (Washington DC Law Firm). "Castro's Choices: The Economics of Economic Sanctions." Homepage.
November 1, 2002	GARRETT, Thomas; Federal Reserve Bank of St. Louis. "Scale Economies in Rural and Urban School Districts." Abstract:This article estimates economies of scale for rural and urban school districts in Arkansas and Kansas. We show that estimates from previous studies on education scale economies may suffer from simultaneity bias. Our results suggest that school districts, especially rural districts, would experience measurable cost-savings from consolidation. We simulate a hypothetical rural district consolidation in each state to obtain an estimate of cost-savings from consolidation. Simulations indicate that districts could save 24 percent in variable costs per academic year. At the state level, consolidation of rural districts in Arkansas and Kansas would annually save $34 million and $56 million, respectively.
November 15, 2002	KRISHNA, Pravin; Brown University. "Trade Policy, Income Risk and Welfare."
November 22, 2002	DU, Ding; West Virginia University. "Stock Market Prices Are Not Predictable in the Long Run: Evidence from a New Specification Test." Abstract:There is no direct statistical evidence to support the long run predictability of stock prices. Once possible reason may be that tests used by researchers generally are not able to distinguish between long run and short run autocorrelation, a severe shortcoming in testing the long run predictability of stock prices since there is already strong evidence of the presence of short run autocorrelation in stock returns. In this paper, by modifying the variance ratio test of Lo and MacKinlay (1988) and Chow and Denning (1993), I construct a test statistic, the covariance-variance ratio statistic, which is able to differentiate short run autocorrelation from long run autocorrelation. When this statistic is applied to weekly US stock prices over period 1963:07:05 – 2002:01:25, there is still no evidence of the existence of long run autocorrelation. I also compare the size of covariance-variance ratio statistic against that of alternative statistics. The covariance-variance ratio statistic is shown to yield the most reliable inference in finite samples. Interestingly, Lo (1991) and Chow, Pan and Sakano (1996) also find no evidence of long-range dependence even when the effects of short-range dependence are accounted for.
December 6, 2002	KREFT, Steven; West Virginia University. "Explaining the Trend Toward City Managers." Abstract:Previous research has concluded that there are no significant differences in efficiency between the two major forms of U.S. city government: elected mayor-council (EMC) and council-manager (CM). What remains then, is a puzzle as to why so many cities are switching from an EMC form to a CM form. The aim of this paper is to provide explanation for the recent trend towards adopting the CM form of government. This paper hypothesizes that the large budget items analyzed in the previous literature, are not adequate to fully capture differences in the efficiency of city spending patterns. Relying on the capitalization theory of local public services and taxes, I develop a hedonic price model for home sales occurring in the six largest Ohio cities, in 1991. Results show that houses within a CM city have a pricing premium that can be attributed to the greater efficiency of the CM form of government.