WP Series Archive

[60-51] [50-41] [40-31] [30-21] [20-11] [10-1]

Working Paper Series

30. Lebaron, Blake, "Searching For Lost Decades" (2010).

Abstract: This paper estimates the probability of a "lost decade'' where equity investments lose value over a ten year period.  The findings are a reminder that equity investments are risky even over longer time periods, and investors should take this into consideration when making portfolio choices.  It also introduces a simple method to allow the reader to combine beliefs about long run stock returns along with computer simulated return distributions. Finally, it is shown that mistaken perceptions of using arithmetic means could account for some common misconceptions about the chance of losses over a decade.

29. Lebaron, Blake, "Heterogeneous Gain Learning and the Dynamics of Asset Prices" (2010).

Abstract: This paper presents a new agent-based financial market.  It is designed to be both simple enough to gain insights into the nature and structure of what is going on at both the agent and macro levels, but remain rich enough to allow for many interesting evolutionary experiments.  The model is driven by heterogeneous agents who put varying weights on past information as they design portfolio strategies. It faithfully generates many of the common stylized features of asset markets. It also yields some insights into the dynamics of agent strategies and how they yield market instabilities.

28. Emami Namini, Julian (Erasmus), Facchini, Giovanni (Erasmus), & Lopez, Ricardo, "Export Growth and Factor Market Competition: Theory and Evidence" (2011).

Abstract: Empirical evidence suggests that sectoral export growth decreases exporters' survival probability, whereas non-exporters are unaffected. Models with firm heterogeneity in total factor productivity predict the opposite. To solve this puzzle, we develop a two-factor framework where firms differ in factor shares. In this
model, export growth increases competition for the factor used intensively by exporters, eliminating some of them, while non-exporters benefit. Our empirical analysis shows that the forces highlighted in the model drive the firm selection experienced by the Chilean manufacturing sector, suggesting that heterogeneity in factor shares is crucial to understand how firms react to trade liberalization.

27. Mann, Catherine, "Information Technology, Globalization, and Growth: Role for Scale Economies, Terms of Trade, and Variety" (2011).

Abstract: This paper considers three channels through which globalization of information technology products may affect economic growth: Terms of trade in IT products in international trade, economies of scale in IT production and trade, and variety in IT consumption and trade.  The empirical question relevant for policy makers is, what is the relative magnitudes of these channels. To catalyze economic growth and enhance performance, should policymakers promote IT exports to exploit economies of scale in production?  Or, should they promote imports and domestic consumption of a variety of IT products to gain from falling IT prices, get more variety, and through these channels support faster TFP?  Using a sample of 36 countries for 2000-2007, the findings are: (1) Importers of IT gain relatively more than exporters, on average, from the declining prices of IT coming through international trade.  (2) Despite falling IT prices, most exporters enjoy positive economy-wide benefits of trading in IT because of economies of scale in production. (3)  The extent of variety of traded IT products is related to the deviation of a country’s experience from that of the average country in its peer group.  Controlling for trade patterns, the countries that are below average (in terms of economy-wide benefits from trade in IT) are also those that import and export the least variety of IT products.  This suggests that gains to variety in consumption outweigh gains from economies of scale in production.

26. Bui, Linda, "The Impact of Quasi-Regulatory Mechanisms on Polluting Behavior: Evidence from Pollution Prevention Programs and Toxic Releases" (2011).

Abstract: To date, there is little convincing evidence on the effectiveness of “quasi-regulatory” mechanisms.  Here I investigate how quasi-regulatory policies known as pollution prevention (“P2”) programs affect toxic pollution.  I construct a data base on state-level P2 programs as well as the 1990 federal Pollution Prevention Act (PPA) and exploit variation in state adoption dates and program characteristics to study their effects on facility-level toxic releases.  I find strong evidence that these mechanisms can affect pollution outcomes.  In particular, I find that (1) the 1990 PPA has had a significant effect on toxic releases; (2) state programs geared to reducing the costs of P2 activities led to significant reductions in toxic releases; and (3) the response to P2 programs that increased the regulators’ ability to monitor polluting behavior could either increase or decrease reported releases, depending on the regulators’ ability to verify the accuracy of the reported releases.

25. Mobius, Markus (Harvard), & Schoenle, Raphael, "The Evolution of Work" (2006).

Abstract: The division of labor first increased during industrialization and then decreased again after 1970 as job roles have expanded. We explain these trends in the organization of work through a simple model where (a) machines require standardization to exploit economies of scale and (b) more customized products are subject to trends and fashions which make production tasks less predictable and a strict division of labor impractical. At the onset of industrialization, the market supports only a small number of generic varieties which can be mass-produced under a strict division of labor. Thanks to productivity growth, niche markets gradually expand, producers eventually move into customized production and the division of labor decreases again. The model predicts capital-skill substitutability during industrialization and capital skill complementarity in the maturing industrial economy. Moreover, conventional calculations of the factor content of trade underestimate the impact of globalization because they do not take
into account changes in product market competition induced by trade. We test our model by exploiting the time-lags in the introduction of bar-coding in three-digit SIC manufacturing industries in the US. We find that both increases in investments in computers and bar-coding have led to skill-upgrading. However, consistent with our model bar-coding has affected mainly the center of the skill distribution by shifting demand away from the high-school educated to the less-than-college educated.

24. Habibi, Nader, "Import Demand Behavior of Arab Countries: Recent Trends and Influence of Geopolitical Events" (2010).

Abstract: In light of the growing significance of the Arab import market for the global community this study focuses on how the market shares of leading exporters in the Arab world have evolved over the past two decades. In first part of the analysis I looked at the trends of these market shares over time and in comparison to other developing regions. I investigated the market shares of the United States, China, Japan and the aggregate market share of four largest European economies (France, Germany, Italy and the United Kingdom). Since GCC constitutes the largest and most important sub-regional import market inside the Arab world, the study focuses on GCC with more detail. The trend analysis revealed that during 1988-2007 the United States, Japan and European countries have lost market share in Arab markets. China’s market share, which was very small at the beginning of this period, enjoyed a substantial growth over these two decades. The market shares of European countries and the United States were relatively stable before 2000 and most of this market loss was realized during 2000-2007. For Japan on the other hand the market loss was most substantial during the first half of 1990s followed by another noticeable loss during 2005-2007.  China’s market share grew at a slow pace up until 2000, followed by faster growth during 2001-2007.
 In the second part of this analysis I used statistical regression models to investigate the impact of important geopolitical events on relative market shares of the same exporters that were studied in the first section. In light of the complex diplomatic and security relations between the United States and Arab countries it might be the case that Arab imports from the US are sensitive to the ups and downs of the US-Arab relations. To investigate this theory I focused on four important geopolitical events: Gulf War I (1991), Second Palestinian Intifada (2000-2001), The September 11 terror attack (2001) and the US invasion of Iraq (2003-2004). In my statistical model the dependent variables are the market shares of the leading exporters to each Arab country orbloc of countries.   The statistical results suggest that the Gulf War I and the US invasion of Iraq have both been associated with changes in US market share in Arab imports. We observe a positive association between Gulf War I and the US market share in GCC countries and the aggregate imports of Arab countries in 1991 and 1992. On the other hand we observe a negative association between the invasion of Iraq and the US market share in aggregate imports of the Arab world. Among GCC countries this negative association is only significant for the US market share in Saudi Arabia. Furthermore, the analysis shows a strong and positive growth in market shares of Asia and Europe during 2003 and 2004 which are associated with the US invasion of Iraq. The results for the second intifada/September 11 event are mixed. This period is associated with an increase in US market share in Bahrain and a negative market share in Saudi Arabia and the UAE. No significant association is detected in other GCC countries or in the aggregate imports of GCC as a group. Nevertheless we observe a negative association between this pair of events and the US market share in the aggregate imports of Arab countries.

23. Ashenfelter, Orley (Princeton), & Graddy, Kathryn, "Sale Rates and Price Movements in Art Auctions" (2011).

Abstract: This paper examines the relationship between sale rates and price shocks in art auctions.   Using data on contemporary and impressionist art, we show that while sale rates appear to have little relationship to current prices, there exists a strong negative relationship of sale rates to unexpected price shocks, which is reminiscent of a Phillips curve.  We  estimate an empirical model that suggests that the reserve price is set on average at  about 70% of the low estimate.

22. Mann, Catherine, & Sanyal, Paroma, "The Financial Structure of Startup Firms: The Role of Assets, Information, and Entrepreneur Characteristics" (2010).

Abstract: Using the Kauffman Firm Survey, we examine how characteristics of a startup's assets, information about the startup, and entrepreneur attributes relate to financial structure at inception. Startups with more physical assets or those where the entrepreneurs have other similar businesses are more likely to use external debt in the financial structure since these assets have a high liquidation value. Startups with human capital embodied in the entrepreneur or intellectual property assets have a lower probability of using debt, consistent with the higher asset specificity and lower collateral value of these assets. Startups characterized as small, unincorporated, solo, first-time, or home-office-based are more likely to be financed by self, family and friends, and importantly through credit cards, as these have both highly specific assets and information opacity. More educated founders and non-African American founders are more likely to be financed by external sources. Controlling for other attributes of the startup, the financial structure of women-owned startups does not differ from that of other startups. Hi-tech startups' financial structure differs significantly from that of startups in other business sectors.

21. Menon, Nidhiya, "Got Technology? The Impact of Computers and Cell-phones on Productivity in a Difficult Business Climate: Evidence from Firms with Female Owners in Kenya" (2010).

Abstract: Firms in Kenya rely on technologies such as computers, cell-phones, and generators to overcome constraints associated with regulations, infrastructure, security, workforce, corruption, and finance.  This study shows that such reliance has significant positive impacts on productivity as measured by value-added per worker, especially for firms with female principal owners.  The exogenous component of technology ownership is isolated by using information on the regional presence of missionary schools from Kenya’s colonial past, as well as geographical indicators such as rainfall, changes in forest cover, and average regional elevation.  Results indicate that for firms with female owners, technology adoption improves value-added per worker by about 49 percentage points.  It is also statistically evident that for such firms, the ownership of technologies such as computers, cell-phones, and generators succeeds in mitigating the costs of business obstacles.  For male-owned firms, such patterns are absent.