Published Articles

2004 | 2005 | 2006 | 2010

John C. Ham, Lara Shore-Sheppard. "The effect of Medicaid expansions for low-income children on Medicaid participation and private insurance coverage: evidence from the SIPP". Journal of Public Economics, Vol. 89, Issue 1, January 2005, Pages 57-83

Abstract: We examine Medicaid enrollment and private coverage loss following expansions of Medicaid eligibility. We attempt to replicate Cutler and Gruber's [Q. J. Econ. 111 (1996) 391.] results using the Survey of Income and Program Participation (SIPP), and find smaller rates of take-up and little evidence of crowding out. We find that some of the difference in results can be attributed to different samples and recall periods in the data sets used. Extending the previous literature, we find that take-up is slightly increased if a child's siblings are eligible and with time spent eligible. Focusing on children whose eligibility status changes during the sample, we estimate smaller take-up effects. We find little evidence of crowding out in any of our extensions.
Keywords: Medicaid; SIPP; Private insurance coverage

John C. Ham, John H. Kagel, Steven F. Lehrer. "Randomization, endogeneity and laboratory experiments: the role of cash balances in private value auctions". Journal of Econometrics, Vol. 125, Issues 1-2 , March-April 2005, Pages 175-205

Abstract: From a theoretical perspective, cash balances are thought to play a role in common value auctions because of limited liability. However, they have also been found to be important in common value auctions where limited liability is not an issue. This paper investigates whether this effect carries over to private value auctions, since limited liability issues do not arise in private value auctions. We address the issue that cash balances are likely to be endogenous. We show that additional randomization can be used to reduce endogeneity problems and to improve the performance of our estimators. Further, we find that standard panel data econometric techniques are very useful in the analysis of data from laboratory experiments. Finally, we find that the cash balance effect does indeed carry over from common value auctions to private value auctions.

John C. Ham, Robert J. LaLonde. "Special issue on Experimental and non-experimental evaluation of economic policy and models". Journal of Econometrics, Vol 125, Issues 1-2, March-April 2005 , Pages 1-13

John C. Ham. "Did Expanding Medicaid Affect Welfare Participation?", with S. Shore-Sheppard. Industrial & Labor Relations Review. Vol 58, (2005), Issue 3

Abstract: In a widely cited 1995 paper, Aaron Yelowitz concluded that Medicaid eligibility expansions for children were associated with increased labor force participation and reduced welfare participation among single mothers. The authors of the present study, using data from the 1988-96 Current Population Surveys, re-examine the evidence presented by Yelowitz. They find that Yelowitz's results resulted from two factors: he imposed a restriction on the parameter estimates not predicted by theory and rejected in the data, and he used only one of two income tests that families must pass to be eligible for welfare. The authors conclude that there is no evidence detectable in the CPS data of a relationship between welfare or labor force participation and the Medicaid income limits.

Robert Dekle. "The Chinese Economy from the Japanese Manga". Harvard Asia Pacific Review, Vol. VIII, Winter 2005 Issue.

Cheng Hsiao. "Aggregate vs Disaggregate Data Analysis - A Paradox in the Estimation of a Money Demand Function of Japan Under the Low Interest Rate Policy", with Y. Shen and H. Fujiki. Journal of Applied Econometrics, 20, (2005), 579-601.

Abstract: We use Japanese aggregate and disaggregate money demand data to show that conflicting inferences can arise. The aggregate data appears to support the contention that there was no stable money demand function. The disaggregate data shows that there was a stable money demand function. Neither was there any indication of the presence of a liquidity trap. Possible sources of discrepancy are explored and the diametrically opposite results between the aggregate and disaggregate analysis are attributed to the neglected heterogeneity among micro units. We provide necessary and sufficient conditions for the existence of cointegrating relations among aggregate variables when heterogeneous cointegration relations among micro units exist. We also conduct simulation analysis to show that when such conditions are violated, it is possible to observe stable micro relations, but unit root phenomenon among macro variables. Moreover, the prediction of aggregate outcomes, using aggregate data is less accurate than the prediction based on micro equations and policy evaluation based on aggregate data ignoring heterogeneity in micro units can be grossly misleading.

Cheng Hsiao. "Why Panel Data?" Invited Eminent Paper Series, Singapore Economic Review, 50,no.2, (2005) 1-12.

Abstract: We explain the proliferation of panel data studies in terms of (i) data availability, (ii) the more heightened capacity for modeling the complexity of human behavior than a single cross-section or time series data can possibly allow, and (iii) challenging methodology. Advantages and issues of panel data modeling are also discussed.
Keywords: Panel data; Longitudinal data; Unobserved heterogeneity; Random effects; Fixed effects

Easterlin, Richard A. (2005). "Feeding the Illusion of Growth and Happiness: A Reply to Hagerty and Veenhoven", Social Indicators Research, 74:3, pp. 429-443

Abstract: In a rebuttal of Easterlin (1995), Hagerty and Veenhoven (2003) analyze data for 21 countries and conclude that "growing national income does go with greater happiness." But the U.S. experience does not support this conclusion, which they obtain only by mixing together two sets of noncomparable surverys. Moreover, the result of studies of European countries and the U.S. by other scholars do not support their claim either. Furthermore, the experience of 6 out of 7 of their non-European countries fail to support their claim. Finally, if countries in their analysis with quite similar growth rates are grouped, one finds quite disparate trends in happiness, suggesting that factors other than growth in income are responsible for the differential trends in happiness. Instead of straining to feed the illusion that a focus on economic growth will create happiness, an approach is needed that explores the impact on national trends in life satisfaction, not just of material goods, but a lso of family life, health, work utility, and the like.
Key Words: happiness, economic growth, time series

Tan, Guofu (2005). "Recent Developments in Industrial Economics: A Selective Survey", Industrial Economics and Performance in Canada

Chew, S.H., and Tan, G. (2005). "The Market for Sweepstakes", Review of Economic Studies, 72, pp. 1009-1027

Niou, E., and Tan, G. (2005). "External Threat and Collective Action", Economic Inquiry, 43, pp. 519-530

Cheng, L., Qiu, L., and Tan, G. (2005) "Foreign Direct Investment and International Trade in a Continuum Ricardian Model", Journal of Development Economics, 77 (2), pp. 477-501

Pesaran, M. Hashem and Timmermann, Allan (2005). "Small Sample Properties of Forecasts from Autoregressive Models under Structural Breaks", Journal of Econometrics, 129, pp. 183-217.

Abstract: This paper develops a theoretical framework for the analysis of small-sample properties of forecasts from general autoregressive models under structural breaks. Finite-sample results for the mean squared forecast error of one-step ahead forecasts are derived, both conditionally and unconditionally, and numerical results for different types of break specifications are presented. It is established that forecast errors are unconditionally unbiased even in the presence of breaks in the autoregressive coefficients and/or error variances so long as the unconditional mean of the process remains unchanged. Insights from the theoretical analysis are demonstrated in Monte Carlo simulations and on a range of macroeconomic time series from G7 countries. The results are used to draw practical recommendations for the choice of estimation window when forecasting from autoregressive models subject to breaks.
JEL Classifications: C22, C53.
Key Words: Small sample properties of forecasts, MSFE, structural breaks, autoregression, rolling window estimator.

Coe, Patrick J., Pesaran, M. Hashem, and Vahey, Shaun P. (2005). "The Cost Effectriveness of the UK's Sovereign Debt Portfolio", Oxford Bulletin of Economics and Statistics, 67, pp. 467-495.

Abstract: This paper provides a recursive empirical analysis of the scope for cost minimization in public debt management when the debt manager faces a given short term interest rate dictated by monetary policy as well as risk and market impact constraints. It simulates the `real time' interest costs of alternative portfolios for UK government debt between April 1985 and March 2000. These portfolios are constructed using forecasts of return spreads based on a recursive modelling procedure. While we find statistically significant evidence of predictability, the interest cost savings are quite small when portfolio shares are constrained to lie within historical bounds.
JEL Classifications: E17, E44, G12, H63.
Keywords: Public debt management, cost minimization, recursive modelling, data snooping.

Binder, Michael, Hsiao, Cheng, and Pesaran, M. Hashem (2005). "Estimation and Inference in Short Panel Vector Autoregressions with Unit Roots and Cointegration", Econometric Theory, Vol. 21, No.4, pp. 795-837.

Abstract: This paper considers estimation and inference in panel vector autoregressions (PVARs) where (i) the individual effects are either random or fixed, (ii) the time-series properties of the model variables are unknown a priori and may feature unit roots and cointegrating relations, and (iii) the time dimension of the panel is short and its cross-sectional dimension is large. Generalized Method of Moments (GMM) and Quasi Maximum Likelihood (QML) estimators are obtained and compared in terms of their asymptotic and finite sample properties. It is shown that the asymptotic variances of the GMM estimators that are based on levels as well as first-differences of the model variables depend on the variance of the individual effects; whereas by construction the fixed effects QML estimator is not subject to this problem. Monte Carlo evidence is provided showing that the fixed effects QML estimator tends to outperform the various GMM estimators in finite sample under both normal and non-normal errors. The paper also shows how the fixed effects QML estimator can be successfully used for unit root and cointegration tests in short panels.
JEL-Classification: C12, C13, C33. 
Keywords: Panel Vector Autoregressions, Random/Fixed Effects, Unit Roots, Cointegration.

Bijwaard, Govert E. and Ridder, Geert (2005). "Correcting for selective compliance in a re-employment bonus experiment", Journal of Econometrics, Vol. 125, Issue 1, pp. 77-111

Abstract: We propose a two-stage instrumental variable estimator that is consistent if there is selective compliance in the treatment group of a randomized experiment and the outcome variable is a censored duration. The estimator assumes full compliance in the control group. We use the estimator to re-analyze data from the Illinois re-employment bonus experiment.
Keywords: Randomized experiment; Non-compliance; Treatment effect; Instrumental Variable (IV); Mixed Proportional Hazard (MPH)

Carillo, Juan (2005). "To Be Consumed with Moderation", European Economic Review, Vol. 49, pp. 99-111

Abstract: We study the optimal behavior of a hyperbolic discounting agent who has incomplete information about his own preferences and can only learn them through consumption. We show that, even if moderate current consumption and moderate future consumption always dominates abstinence, the agent may optimally decide not to consume as a commitment device against inefficient learning that would lead to future excesses. This provides a rationale for why smokers, gamblers or compulsive buyers stick to second-best personal rules of behavior - such as "abstinence" - without invoking standard habit formation arguments. We also study how urges modify the strategy of the individual.
Keywords: Hyperbolic discounting; Consumption; Abstinence; Self-knowledge
JEL classifications: A12; D83; D90

Carillo, Juan with Brocas, Isabelle (2005). "A Theory of Haste", Journal of Economic Behavior and Organization, Vol. 56, pp. 1-23

Abstract: We consider a hyperbolic discounting agent. At each period, he can undertake an irreversible consumption decision that yields an uncertain current benefit and a delayed cost. If he decides to defer consumption for the future, some information exogenously flows in. We show that the agent may rationally decide to consume with negative expected net present value (NPV), only to prevent himself from consuming in the future which could be profitable from a future perspective but highly detrimental from the current viewpoint. Comparative statics reveal that the value of information is U-shaped.
Keywords: Hyperbolic discounting; Haste; Investment under uncertainty
JEL classification: A12; D83; D92; Q20

Dekle, Robert (2005). "Exchange Rate Exposure and Foreign Market Competition: Evidence from Japanese Firms", Journal of Business, Vol. 78, No. 1, pp. 281-299

Dekle, Robert, with Ken Kletzler (2005). "Deposit Insurance, Regulatory Forbearance and Economic Growth: Implications for the Japanese Banking Crisis" in Michael Hutchison and Frank Westermann, edited., Economic Stagnation in Japan, MIT Press

Easterlin, Richard A. (2005). "Diminishing Marginal Utility of Income? Caveat Emptor", Social Indicators Research, 70, pp. 243-255

Abstract: Few generalizations in the social sciences enjoy such wide-ranging support as that of diminishing marginal utility of income. The data advanced in support of the diminishing returns generalization are typically cross sectional and consist of a simple bivariate comparison of happiness or life satisfaction with income without controls for other possible variables. This paper presents two test cases to see whether historical experience reproduces point-of-time relationships. The first case considers whether the experience of Japan since 1960 reproduces a 1960s international cross-section of income and happiness in which Japan appears as a low income country. The second examines whether the happiness-income pattern of an American birth cohort as it progresses over the life cycle replicates the typical cross sectional pattern within the United States . It turns out that income change over time within the income range used in the point-of-time studies does not generate the change in happiness implied by the cross sectional pattern. The implication is that, until much more time series research is done, one should think twice before assuming that bivariate cross sectional generalizations about diminishing marginal utility of income can be safely used to infer change over time.

MacLeod, Bentley (2005). "Regulation or Markets: The Case of Employment Contract", CESifo Economics Studies, Vol. 51, pp. 1-46

Abstract: Regulation of the employment contract is both wide spread and diverse. The diversity of regulation is surprising because it suggests that there is little consensus regarding optimal intervention into the labor market. This paper discusses several economic reasons why it may be efficient for employers and employees to enter into long term contracts that make employee dismissal expensive. This analysis suggests that employment contracts can be expected to be complex in practice, and hence can be viewed as part of the technology of exchange. Given that knowledge of a technology requires skill and know-how, one cannot expect all employee-employer matches to discover and use the most efficient contract terms possible. It is suggested that the regulation of the employment relationship might be improved with the creation of a market for contracts, similar to the one that currently exists in the United States for construction projects.
JEL Classifications: J300, J410, K310

Pesaran, Hashem M. and Timmermann, Allan (2005). "Real Time Econometrics", Econometric Theory, 21, pp. 212-231

Abstract: This paper considers the problems facing decision makers using econometric models in real time. It identifies the key stages involved and highlights the role of automated systems in reducing the effect of data snooping. It sets out many choices that researchers face in construction of automated systems and discusses some of the possible ways advanced in the literature for dealing with them. The role of feedbacks from the decision maker's actions to the data generating process is also discussed and highlighted through an example.
JEL Classifications: C51, C52, C53.
Keywords: Specification Search, Data Snooping, Recursive/Sequential Modelling, Automated Model Selection.

Tan, Guofu and Pinkse, Joris (2005). "The Affiliation Effect in First-Price Auctions", Econometrica, Vol. 73, No. 1, pp.263-277

Abstract: We study the monotonicity of the equilibrium bid with respect to the number of bidders n in affiliated private-value models of first-price sealed-bid auctions and prove the existence of a large class of such models in which the equilibrium bid function is not increasing in n. We moreover decompose the effect of a change in n on the bid level into a competition effect and an affiliation effect. The latter suggests to the winner of the auction that competition is less intense than she had thought before the auction. Since the affiliation effect can occur in both private- and common-value models, a negative relationship between the bid level and n does not allow one to distinguish between the two models and is also not necessarily (only) due to bidders taking account of hte winner's curse.
Keywords: Affiliation effect, first-price auctions, affiliated private values, the winner's curse

 

Greenwood, Jeremy, Seshadri, Ananth, and Vandenbroucke, Guillaume (2005). "The Baby Boom and Baby Bust", The American Economic Review, Vol. 95, No. 1

Abstract: What caused the baby boom? And can it be explained within the context of the secular decline in fertility that has occurred over the last 200 years? The hypothesis is that: (a) The secular decline in fertility is due to the relentless rise in real wages that increased the opportunity cost of having children; (b) The baby boom is explained by an atypical burst of technological progress in the household sector that occurred in the middle of the last century. This lowered the cost of having children. A model is developed in an attempt to account, quantitatively, for both the baby boom and bust.
JEL Classifications: E1, J1, 03