THE EFFECTS OF AUTOMOBILE RECALLS ON THE SEVERITY OF ACCIDENTS

The number of automobile recalls in the United States has substantially increased over the last two decades, and after a record of over 30 million cars recalled in 2004, in the last few years it has consistently reached between 15 and 17 million, and in 2010 alone 20 million cars were recalled. Toyota's recall crisis in 2010 illustrates how recalls can affect a large number of American drivers and the defects connected to them can result in loss of life and serious accidents. However, in spite of the increase in public concern over recalls and the loss of property and life attached to them, there is no empirical evidence of the effect of vehicle recalls on safety. This paper investigates whether vehicle recalls reduce accidental harm measured by the severity of injuries in vehicle accidents. The results of our analysis show that if a recall for a new‐year model is issued, then the severity of injuries of accidents continuously diminishes during the first year after the recall, something we do not find among cars not subject to recalls. This is because defects are repaired over time but also because drivers react by driving more carefully until the defects are fixed. To minimize the losses attached to having dangerously defective cars on our roads, both quick and timely recall issuance are needed and more detailed information on defects should be delivered to owners of defective vehicles. The latter can be made possible through simple but important policy changes by the U.S. government regarding recall information sharing with drivers and insurance companies. (JEL L51, L62)     

SOME EFFECTS OF OWNERSHIP ON THE WHOLESALE PRICES OF ELECTRIC POWER

Differences in the property rights which distinguish government-owned and privately-owned, government-regulated business firms imply that government-owned electric utilities sell wholesale electric power at lower prices and buy it at higher prices than similarly-situated private firms. The hypotheses were tested using cross-section data. The results are generally favorable and suggest that the approach is fruitful.     

THE LAW OF ONE PRICE REVISITED: NEW EVIDENCE ON THE BEHAVIOR OF INTERNATIONAL PRICES

This paper is an empirical investigation of the long-run behavior of international prices at the microeconomic level. It analyzes the time-series behavior of a unique set of carefully matched, disaggregated export prices for manufactured goods from the U.S., Gemany, and Japan over the period 1974–90. The results provide little evidence of a long-run linear relationship between global prices of similar export goods from different sources, casting doubts on the empirical relevance of the law of one price.     

CHANGE-POINT ANALYSIS OF THE GROWTH EFFECTS OF STATE BANKING DEREGULATION

This article uses recent developments in change-point analysis to demonstrate that stronger income growth rates previously associated with state bank branch deregulation were in all cases temporary rather than permanent. In addition, patterns of temporal ordering across regions suggest that in many states deregulation was a response to economic conditions rather than the reverse. (JEL E44 , G28 )     

IMPACT OF COMPETITION,INVESTMENT, AND REGULATION ON PRICES OF MOBILE SERVICES: EVIDENCE FROM FRANCE

In this paper, we assess the impact of competition, investment, and regulation on prices of mobile services in France. We estimate hedonic price regressions using data on tariff plans offered by the main mobile telecommunications operator in France between May 2011 and December 2014. In this time period, the obtained quality‐adjusted price index decreased by about 42.8% as compared to a decline in weighted average prices without quality‐adjustment of 8.7%. In a second step, we relate the quality‐adjusted prices to a set of competition, investment, and regulation variables and find that the launch of 4G networks by mobile operators was the main driver of price reductions for classic tariffs with commitment. Low‐cost tariffs without commitment which were introduced to pre‐empt the entry of low‐cost competitor declined at the time of entry. Moreover, we find that regulation, which is approximated by the level of mobile termination charges and international roaming price caps for voice and data, has a joint significant impact on quality‐adjusted prices. In percentage terms, competition is responsible for about 23.4% of total price decline and investments in 4G for 56.1%. We conclude that the reduction in quality‐adjusted prices in the last years was largely caused by competition between operators for a new 4G technology and by entry of a fourth low‐cost operator. (JEL L13, L50, L96)     

THE STRUCTURE OF SLAVE PRICES IN NEW ORLEANS, 1804 TO 1862

This paper analyzes the structure of slave prices in New Orleans from 1804 to 1862 in an attempt to shed light on such issues as the competitive nature and economic "rationality" of the slave system, the impact of the slave trade on the separation of the slave family, the extent of slave skill formation and its importance to the Southern economy, and the personal relationships between owners and slaves. The analysis is based on the Rogert Fogel and Stanley Engerman (1974) sample of New Orleans slave invoices representing over 5700 slaves sold during the years 1804 to 1862. These invoices contain a rich assortment of information detailing the characteristics and attributes of slaves sold in the market as well as the particulars of slave transactions. The data are investigated within a regression model that relates the price of slaves sold in the market to their characteristics and to other aspects of the slave sale. After discussing the data and the regression model, the paper presents general results; subsequent sections of the paper focus on questions of more particular interest.     

THE CYCLICAL BEHAVIOR OF PRICES AND RELATIVE PRICES

Price and output shock correlations provide information concerning macroeconomic shocks. Previous research generally finds small or negative correlations between real gross domestic product (GDP) and GDP deflator shocks but positive correlations between industrial production (IP) and consumer price index (CPI) shocks at short forecast horizons. We show that mismatched price and output correlations may have different magnitudes or signs than matched pairs. Matched and mismatched correlations between disaggregated prices and output from the GDP accounts indicate the procyclical price of nondurables to durables makes correlations between mismatches misleading. Thus, there is reason to be skeptical of results based on IP and the CPI. (JEL E31, E32)     

ON THE LONG-RUN EFFECTS OF FASHION

We investigate the long-run dynamic interaction between fashion (brand loyalty) and industry structure. We analyze how this interaction affects the importance of fashion in the market for a product in the different stages of its life and characterize conditions under which fashion loses or preserves its relevance over time. The model can explain why some products survive fashion changes. ( JEL D21, L0)     

ARE AUTOMOBILE SAFETY REGULATIONS WORTH THE PRICE: EVIDENCE FROM USED CAR MARKETS

The value consumers place on automobile safety regulations can be determined by examining the instantaneous effects changes in these regulations have on used vehicle prices. If consumers value safety regulations more than their cost, used vehicle prices decrease in response to a change in safety regulations. If consumers place at least some value on the safety induced by safety regulations, a change in emission control regulations will have a greater positive impact on used automobile prices than a change in safety regulations. Empirical results strongly support the latter case and, surprisingly, offer some support for the former case. (JEL L51, L62)     

WITHIN‐MOTHER ESTIMATES OF THE EFFECTS OF WIC ON BIRTH OUTCOMES IN NEW YORK CITY

There is a large literature suggesting that “WIC works” to improve birth outcomes. However, methodological limitations related to selection into the Women, Infants, and Children (WIC) program have left room for doubt about this conclusion. This article uses birth records from New York City to address some limitations of the previous literature. We estimate models with mother fixed effects to control for fixed characteristics of mothers and we directly investigate the way that time‐varying characteristics of mothers affect selection into the WIC program. We find that WIC is associated with reductions in low birth weight, even among full‐term infants, and with reductions in the probability that a child is “small for dates.” These improvements are associated with a reduction in the probability that the mother gained too little weight during pregnancy. Improvements tend to be largest for first born children. We also find that women on WIC are more likely to be diagnosed with chronic conditions, and receive more intensive medical services, a finding that may reflect improved access to medical care. (JEL I12, H42)     

THE EFFECTS OF UNCERTAINTY ON THE LEVERAGE OF NONFINANCIAL FIRMS

This paper investigates the link between the optimal level of nonfinancial firms' short-term leverage and macroeconomic and idiosyncratic sources of uncertainty. We develop a structural model of a firm's value maximization problem that predicts a negative relationship between uncertainty and optimal levels of borrowing. This proposition is tested using a panel of nonfinancial U.S. firms drawn from the COMPUSTAT quarterly database covering the period 1993–2003. The estimates confirm that as either form of uncertainty increases, firms decrease their levels of short-term leverage. This effect is stronger for macroeconomic uncertainty than for idiosyncratic uncertainty. ( JEL C23, D8, D92, G32)     

THE STATE OF THE FEDERAL BUDGET AND THE STATE OF THE ECONOMY

This paper tests systematic responses of the Federal budget to forecasts of inflation and unemployment. Estimated coefficients from fiscal policy reaction functions are examined to determine whether there are such systematic responses. Additionally, the coefficients of these estimated fiscal policy reaction functions are used to test several hypotheses concerning fiscal policy which have been advanced in the political business cycle and public choice literatures.     

THE PASS‐THROUGH OF BEER TAXES TO PRICES: EVIDENCE FROM STATE AND FEDERAL TAX CHANGES

From a policy perspective, it is crucial to understand how changes in beer taxes affect retail beer prices. This study provides new evidence of the pass‐through rate of state beer taxes to prices in a post‐merger era. Our estimates that use state‐level beer tax changes suggest that a 10‐cent increase in beer taxes raises retail prices by about 17 cents. Comparable findings from the 1991 federal beer tax increase show a rise in retail beer prices of 19–22 cents. Our findings suggest that consumers fully bear the burden of increased beer taxes. (JEL H2, I0, D4)     

THE SUPPLY OF OCCUPATIONAL REGULATION

This paper examines the state's decision to supply monopoly rights to occupations. The two key aspects of the analysis are the degree of political competition and the proportion of market demand of the regulated service accounted for by government officials. An application of the analysis is developed to explain an episode of comparative occupational regulation in mercantile England and France. Other applications of the analysis are suggested.     

THE EFFECT OF STATE SECURITIES STATUTES ON TENDER OFFER ACTIVITY

The Williams Act passed in 1968, established Federal regulation of cash tender offers. Despite the additional constraints on tender offers provided by this federal legislation, thirty-six states have enacted more stringent securities laws since then. This paper briefly investigates the motivation for the state statutes, and then empirically tests the deterrent effects of these laws on tender offer activity for firms headquartered in the states affected. The evidence indicates that the presence of state statutes does deter tender offers, and that the recently enacted SEC tender offer rules will, ceteris paribus, decrease the total number of offers made by 8%.     

THE STATE OF THE FEDERAL BUDGET AND THE STATE OF THE ECONOMY: FURTHER EVIDENCE

Simultaneous monetary and fiscal policy reaction functions are derived and estimated for the 1969:2–1984.3 period. The results suggest that the Reagan administration has abandoned fiscal policy as a stabilization tool. Furthermore, although the average money growth rate declined in the Reagan administration, variation in the rate of money growth indicates that monetary policy has been used to combat unemployment. Finally, monetary and fiscal policies were not coordinated during this period. Rather, monetary and fiscal policy appear to be set by a Nash equilibrium in a non-cooperative game. In a Nash equilibrium, the policy chosen by each authority maximizes its payoff, given the policy choice of the other authority.