Knowledge that Transforms

This paper analyzes the effect of market concentration and product differentiation on the observed outcomes of competition among oligopolists. The empirical framework is designed to examine whether competition is less intense in markets with equal levels of concentration but more differentiation among the products offered. A two-stage estimation procedure is proposed to address the endogeneity problem inherent in comparing outcomes across different market structures. I estimate the competitive effects using data from a cross section of oligopoly motel markets located along U.S. interstate highways. The results indicate that firms benefit substantially by offering differentiated products. The presence of any market competitor drives down prices, but the effect is much smaller when the competitor is a different product type. Differentiation is optimal product choice behavior because the resulting competition among firms is less tough when their products are differentiated.

The need for school-to-work programs or other means of increasing early job market stability is predicated on the view that the “chaotic” nature of youth labor markets in the United States is costly because workers drift from one job to another without developing skills, behavior, or other characteristics that in turn lead to higher adult earnings. However, there is also ample evidence that workers receive positive returns to job shopping. This paper asks whether youths in unstable jobs early in their careers suffer adverse labor market consequences as adults. Its specific contribution is to account for the endogenous determination of early job stability and adult wages as outcomes of a job search/job shopping process. Labor market conditions in the early years in the labor market are used as instrumental variables for the job stability experienced during those years. The instrumental variables estimates generally point to substantial positive effects of early job stability on adult wages, in contrast to OLS estimates, which indicate little or no relationship.

The introduction of a new zoning ordinance to Chicago in 1923 offers a natural experiment that allows us to determine the effects of zoning on relative land-value growth rates. Policymakers claimed at the time that land-use zoning would raise aggregate land values by reducing negative externalities associated with mixed land use. After controlling for initial land use and the endogeneity of zoning decisions, we find that residential zoning led to higher land value growth rates than commercial zoning.

This paper explores the effects of peers, friends, family, IQ, and academic performance, observed in the last year of high school, on earnings at ages 35 and 53. All significantly affect earnings at both ages. The effects of IQ are much smaller than asserted in, for example, The Bell Curve, and badly overstated in the absence of controls for family, wider context, or academic performance. Aspirations appear to be very important. Socialization and role models may be as well, but not ability spillovers. Feasible increases in academic performance and education can compensate for the effects of many cognitive and contextual deficits.

This paper examines the historical effects of the El Niño-Southern Oscillation (ENSO) cycle on world prices and economic activity. The primary focus is on world real non-oil primary commodity prices, although the effects on G-7 consumer price inflation and GDP growth are also considered. This paper has several distinct advantages over previous studies. First, several econometric models are estimated using fairly broad measures of prices and economic activity. Second, the models include continuous measures of ENSO intensity (sea surface temperature and sea-level air pressure anomalies in the Pacific Ocean) rather than dummy variable measures. Finally, confidence intervals are constructed for all estimated effects of ENSO on world prices and economic activity. The analysis indicates that ENSO has economically important and statistically significant effects on world real commodity prices. A one-standard-deviation positive surprise in ENSO, for example, raises real commodity price inflation about 3.5 to 4 percentage points. Moreover, ENSO appears to account for almost 20% of commodity price inflation movements over the past several years. ENSO also has some explanatory power for world consumer price inflation and world economic activity, accounting for approximately 10% to 20% of movements in those variables.

The use of incentive regulation and other alternative regulatory programs in U.S. electricity markets has grown during the past two decades. Within a stochastic frontier framework, I investigate the effect of individual programs on the technical efficiency of a large set of coal and natural gas generation units. I find that those programs tied directly to generator performance and those that modify traditional fuel cost pass-through programs, to provide a greater incentive to reduce fuel costs, are associated with greater efficiency levels. Other programs have no statistical association with efficiency levels.

Using a recently released confidential data set from the National Center for Educational Statistics (NCES), we find some evidence of “white flight” from public schools into private schools partly in response to minority schoolchildren. We also examine whether white flight is from all minorities or only from certain minority groups, delineated by race or income. We find that white families are fleeing public schools with large concentrations of poor minority schoolchildren. In addition, the clearest flight appears to occur from poor black schoolchildren. The results for white flight from Asians and Hispanics are less clear.

This paper compares the performance of U.K. plants that were acquired by the foreign-owned sector during 1987-1992 with other comparable subgroups of plants operating at the same time (including plants acquired by U.K.-owned companies). The principal aim is to consider the types of plants that were acquired and whether after acquisition they performed above or below average when compared to other manufacturing plants. The results show that foreign-owned enterprises acquired the most-productive plants previously operated by U.K. enterprises. After acquisition, there is some evidence that productivity declined, which would be consistent with difficulties associated with assimilating these established plants into the new organization.

For a “genuine” small open economy that has experienced both dictatorship and democracy, we find support for the predictions of the Grossman-Helpman (1994) “Protection for Sale” model. In contrast to previous studies, we use various protection measures (including tariffs, the direct measure of the theoretical model) and perform both single-year and panel regressions. Using Turkish industry-level data, the government's weight on welfare is estimated to be much larger than that on contributions. More importantly, we find that this weight is generally higher for the democratic regime than for dictatorship.

This paper seeks to reconcile the growth empirics technique of Mankiw, Romer, and Weil (1992) with the empirical results of Barro and Sala-“i-Martin (1991) through the development of a new database covering the 1977-96 period. We create state-by-state capital stock and gross investment estimates by apportioning the national capital stock among the states. Using these estimates along with gross state product and employment data, we find evidence that the Solow growth model explains state-wide growth during this period. We consistently find a rate of convergence of around 2%. Our results, as a consequence, suggest that the empirical results of Barro and Sala-í-Martin are driven by the neoclassical growth process of Solow.