Department of Economics

Abstract: Data on 778 establishments indicates that firms in Kenya rely on technologies such as computers, generators, and cell-phones to conduct operations when regulations, infrastructure, security, workforce, corruption, and finance pose significant hurdles in the business environment.  Obstacles related to regulations, security, and workforce, increase the probability of technology ownership, whereas obstacles related to infrastructure in particular, reduces the probability that firms own technology.  Results indicate that while all firms rely on technology in the face of regulatory and other obstacles, those with female principal owners experience net effects that are statistically distinct from those experienced by their counterparts.  A gender-of-owner disaggregated Oaxaca-Blinder type decomposition of differences in technology ownership indicates that up to 18% of the total gap is unexplained by differences in measurable characteristics between firms that are female-owned and those that are not, suggesting that female-owned firms may own technology to a higher level than is warranted by their observed covariates.

Abstract: In a study of the effect of war on women’s work, this paper examines how Nepal’s 1996-2006 civil conflict affected women’s decisions to engage in employment. Using three waves of Nepal Demographic and Health Survey, we employ a difference-in-difference approach to identify the impact of war on women’s employment decisions. Results indicate that as a result of the Maoist-led insurgency, women’s employment probabilities were substantially higher in 2001 and 2006 relative to the outbreak of war in 1996. These employment results also hold for self-employment decisions, and they hold for smaller sub-samples that condition on husband’s migration status and women’s status as widows or household heads. Robustness checks of the difference-in-difference estimates based on alternative empirical methods provide substantial evidence that women’s likelihood of employment increased as a consequence of the conflict.

18. Menon, Nidhiya & Rodgers, Yana (Rutgers), "Gender Differences in Socioeconomic Status and Health: Evidence from the 2008 Vietnam Household Living Standard Survey" (2010).

Abstract: The study provides new evidence on gender differences in educational attainment, labor market status, health status, and land titling in Vietnam. Up-to-date statistical evidence on household well-being in Vietnam is particularly important given the heavy weight the government has placed on meeting the needs of vulnerable members of the population, reducing overall poverty, and improving societal well-being. Vietnam’s government has placed priority emphasis on achieving gender equality in the 2006 Law on Gender Equality.  One of the major themes addressed in this report is Vietnam’s demonstrated progress in achieving social development targets.  The study also identifies a few areas where female outcomes lag those of men, and suggests policies that might help to reduce the observed gaps.

17. Menon, Nidhiya & Rodgers, Yana (Rutgers), "Impact of the 2008-2009 Food, Fuel, and Financial Crisis On the Philippine Labor Market" (2010).

Abstract: This study examines how the 2008-2009 surges in international food and fuel prices and coinciding global financial crisis impacted the Philippine labor market, with a focus on gendered outcomes. A battery of descriptive statistics and probit regressions based on repeated cross sections of the Philippine Labor Force Survey indicate that both men and women experienced declines in the likelihood of employment, especially in 2008 and in manufacturing. While men’s job losses were limited to wage employment, women lost job opportunities in wage- and self-employment, and they experienced increases in unpaid family work. Real wages fell for men and women, with much of the decline at the upper tails of the wage distribution. If one considers education as a proxy for skill, results suggest that unskilled workers were affected most adversely when the crisis began, especially in terms of employment losses, but as the crisis conditions wore on, skilled workers experienced negative impacts as well, especially in terms of real wage cuts.

16. Menon, Nidhiya & Pitt, Mark (Brown), "Spatial Decentralization and Program Evaluation: Theory and an Example from Indonesia" (2010).

Abstract: This paper proposes a novel instrumental variable method for program evaluation that only requires a single cross-section of data on the spatial intensity of programs and outcomes.   The instruments are derived from a simple theoretical model of government decision-making in which governments are responsive to the attributes of places and their populations, rather than to the attributes of individuals, in making allocation decisions across space, and have a social welfare function that is spatially weakly separable, that is, that the budgeting process is multi-stage with respect to administrative districts and sub-districts. The spatial instrumental variables model is then estimated and tested by GMM with a single cross-section of Indonesian census data.  The results offer support to the identification strategy proposed.

Abstract: In this paper, we establish three new facts about price-setting by multi-product firms and contribute a model that can explain our findings. On the empirical side, using micro-data on U.S. producer prices, we first show that firms selling more goods adjust their prices more frequently but on average by smaller amounts. Moreover, the higher the number of goods, the lower is the fraction of positive price changes and the more dispersed the distribution of price changes. Second, we document substantial synchronization of price changes within firms across products and show that synchronization plays a dominant role in explaining pricing dynamics. Third, we find that within-firm synchronization of price changes increases as the number of goods increases. On the theoretical side, we present a
state-dependent pricing model where multi-product firms face both aggregate and idiosyncratic shocks. When we allow for firm-specific menu costs and trend inflation, the model matches the empirical findings.

14. LeBaron, Blake, "Wealth Dynamics and a Bias Toward Momentum Trading" (2010).

Abstract: Evolutionary metaphors have been prominent in both economics and finance.  They are often used as basic foundations for rational behavior and efficient markets.  Theoretically, a mechanism which selects for rational investors actually requires many caveats, and is far from generic.  This paper tests wealth based evolution in a simple, stylized agent-based financial market.   The setup borrows extensively from current research in finance that considers optimal behavior with some amount of return predictability.  The results confirm that with a homogeneous world of log utility investors wealth will converge onto optimal adaptive forecasting parameters.  However, in the case of utility functions which differ from log, wealth selection alone converges to parameters which are economically far from the optimal forecast parameters.  This serves as a strong reminder that wealth selection and utility maximization are not the same thing.   Therefore, suboptimal financial forecasting strategies may be difficult to drive out of a market, and may even do quite well for some time.

13. Petri, Peter, Plummer, Michael (Johns Hopkins), & Zhai, Fan (China Investment Corporation), "The Economics of the ASEAN Economic Community" (2010).

Abstract: The ASEAN Economic Community (AEC) is the largest integration effort attempted in the developing world; if realized, it will create a single market with the free movement of goods, services, foreign direct investment and skilled labor, and freer movement of capital encompassing nearly 600 million people. The study finds that the AEC could yield benefits similar to those of the European Union, amounting to 5.3% of the region’s GDP and more than twice that if, as expected, the AEC leads to free trade agreements with key external partners. Every ASEAN member will share in these benefits.  There will be mild trade and investment diversion effects, but the world as a whole will benefit from the AEC. Nevertheless, the AEC poses political challenges: the study finds that the project will imply significant structural adjustment in several ASEAN economies.

12. Petri, Peter, "The Determinants of Bilateral FDI: Is Asia Different?" (2010).

Abstract: Intra-Asian foreign direct investment (FDI) is dominated by flows from high technology economies to medium technology economies, while FDI elsewhere primarily consists of flows among high technology economies.  This distinctive pattern is not due simply to differences in the relative distribution of Asian FDI recipients by technology, or to systematic differences in Asia’s technology characteristics.  A gravity model analysis is used to explore whether Asian FDI patterns differ significantly from those elsewhere, and if so, in what ways.  The results show that Asian FDI flows, in contrast to other FDI flows, systematically favor hosts with relatively low technology achievement and relatively strong intellectual property rights regimes.  This type of “Asian exceptionalism” is consistent with “flying geese” theories that have argued that Asian development is the result of technology flows among economies that occupy nearby rungs of the technology ladder. 

11. Petri, Peter, "Beyond the Golden Era: Asia Pacific Cooperation after the Global Financial Crisis" (2010).

Abstract:  The half century leading up to the crisis of 2008-2009 was the best such period in world economic history, especially in the Asia Pacific.  Peace and relative economic stability permitted unprecedented liberalization, economic integration, and advances in productivity and growth.  But the institutions and strategies of this system are hitting roadblocks.  Economic power has become more diffuse and the challenges for cooperation more complex. The world trading system may be entering a period of “contested stability”—continuity with limited prospects for forward progress.  In this system cooperation will involve managing interdependence rather than negotiating new agreements.  A new, layered approach to cooperation is likely to emerge, with stronger bilateral and regional mechanisms complementing weaker global processes, such as the G-20.  World growth need not suffer if new, distributed drivers of productivity emerge to replace deepening economic integration as the engine of progress.