BANK COMPETITION AND CONSUMER SEARCH OVER CREDIT CARD INTEREST RATES

This article models bank competition facing consumers with different search incentives and finds that consumers with higher credit card balances have lower interest rates given their risk class due to their greater search effort. It also finds that a default history leads to higher interest rates. The equilibrium interest rate corresponding to risk type and motive (borrowing versus convenience/transactions) is derived theoretically, and the determinants of the interest rate are estimated using an original data set. Endogeneity of default is handled with a two-equation system.(JEL D14 , D12 , D11 )     

UNDERSTANDING THE COSTS OF CONSUMER DURABLE ADJUSTMENTS

This article examines whether adjustment frictions help account for the patterns of household consumption expenditures observed in the Consumer Expenditure Survey, namely, that the variance of log durable expenditure is four times larger than that of log nondurable expenditure for annual data and this gap substantially widens for quarterly data. Estimating a structural model of household consumption with nondurable and durable goods with the simulated method of moments, I find that the fixed costs associated with durable adjustments are important in matching the cross‐sectional moments. Using the estimated model, I also examine the response of nondurable and durable expenditures to income shocks. (JEL D12, D91, E21)     

RENT-SEEKING FIRMS, CONSUMER GROUPS, AND THE SOCIAL COSTS OF MONOPOLY

Do consumers' consumer-surplus (CS)–defending activities increase the social costs of monopoly compared to when consumers are inactive? Given just one rent-seeking firm, consumers ' CS-defending activities generally increase the social costs of monopoly, but given two or more rent-seeking firms, such activities generally reduce the social costs. (JEL D72, L12)     

EXTENSIVE SEARCH, INTENSIVE SEARCH, AND HIRING COSTS: NEW EVIDENCE ON EMPLOYER HIRING ACTIVITY

This paper presents recent evidence on employer search to fill a position. A 1982 employer survey sponsored by the National Institute of Education and the National Center for Research in Vocational Education provides the basis for analyzing employer search and hiring costs. The paper examines the effects of such factors as employer size, dismissal costs, unionization, on-the-job training, adjustment costs, capital, and labor market conditions on intensive employer search, extensive employer search, and hiring costs. Intensive employer search is measured by the average number of hours the employer spends recruiting, screening, and interviewing per applicant. Extensive search is measured by the number of applicants seen per applicant interviewed and the number interviewed per employment.     

LABOR MARKET DYNAMICS WITH SEARCH FRICTIONS AND FAIR WAGE CONSIDERATIONS

Fairness considerations in wage setting can improve the ability of the Diamond‐Mortensen‐Pissarides search and matching model to account for U.S. labor market dynamics. Firms' production is influenced by workers' effort input, which depends on whether workers consider the employment relation as fair. A typical worker's effort is determined in a comparison of individual current wage with wage norms, including the outside option, the individual past wage, and the wage level in the steady state. The fairness considerations in the search framework give rise to endogenous real wage rigidity, and realistic volatilities of unemployment, vacancies, and labor market tightness. (JEL E24, E32, J64)     

LABOR MARKET SEARCH: AN EXPERIMENTAL STUDY

The theoretical results derived from models of economic search have implications which relate to the structure and performance of labor markets. Utilizing a series of laboratory experiments, we attempt to capture many of the features of workers' search and also the conditions under which labor markets operate. By varying certain of the experimental conditions, we are able to determine the searchers' responses to changes in the terms of unemployment insurance, to the existence of a minimum wage, and to different states of information about the underlying distribution of wages. In most cases the behavior of the searchers is consistent with that predicted by theory.     

LABOR MARKET PERFORMANCE EFFECTS OF DISCRIMINATION AND LOSS OF SKILL

We examine the impact of discrimination on labor market performance when workers are subject to a risk of losing skills during an unemployment experience. Within a search and matching framework, we show that both natives and immigrants are affected by discrimination. Discrimination in one sector has positive spillovers, inducing employment to increase in the other sector and the effect on labor market performance therefore depends on whether discrimination is present in only one sector or in both. Discrimination may induce workers to train more or less than natives after having lost their skills, dependent upon in which sector there is discrimination. Net output tends to be most negatively affected by discrimination among high‐skilled workers. (JEL J15, J31, J61, J64, J71)     

ENGLISH PROFICIENCY AND LABOR MARKET PERFORMANCE: EVIDENCE FROM THE ECONOMICS PROFESSION

This article investigates whether the global spread of the English language provides an inherent advantage to native English speakers. This question is studied within the context of the economics profession, where the impact of being a native English speaker on future publishing success is examined. English speakers may have an advantage because they are writing in their native language, the quality of writing is a crucial determinant of publishing success, and all the top economics journals are published in English. Using a ranking of the world's top 2.5% of economists, this article confirms that native English speakers are ranked 100 spots higher (better) than similar non‐native English speakers. A variety of extensions examine and dispel many other potential explanations. (JEL A11, J44, F66)     

MANAGERIAL MOTIVES, MARKET STRUCTURES AND THE PERFORMANCE OF HOLDING COMPANY BANKS

Since the late 1960's bank holding companies have become a dominant force in U. S. banking; they now account for over 2/3 of the nation's total deposits. This paper tests the hypothesis that the holding company form of organization leads to relatively risk-taking behavior by affiliated banks. A major finding is that holding company banks react to monopolistic market situations by choosing risker portfolios and by leveraging to a greater extent than their independent counterparts. Such a behavioral characteristic has important implications for the allocation of resources in the country's 2600 local banking markets and for the regulation of financial institutions in general.     

CONSUMER CONFIDENCE AND ECONOMIC FLUCTUATIONS

If consumers become pessimistic about the state of the economy, can there be a slowdown in output, even if their pessimism is not based on economic fundamentals? Recent macroeconomic models show the answer is yes, if there are “strategic complementarities” and multiple equilibria. We investigate the link between consumer confidence and economic fluctuations using vector autoregressions. In all models, after controlling for economic fundamentals, the hypothesis that consumer sentiment does not cause GNP (in the Granger sense) can be rejected. Variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of GNP.     

TRADE COSTS AND TRADE COMPOSITION

In this paper, we investigate whether countries' trade costs act like other national endowments by affecting the composition of countries' exports. Using an econometric approach that controls for endogeneity by accounting for potentially relevant omitted variables, we find strong evidence for a sample of 37 industrialized and transition countries that national trade costs systematically affect the composition of trade and can be viewed therefore as a source of comparative advantage. Industries located in countries with low trade costs capture significantly higher shares of world exports, where this effect is stronger in trade cost intensive industries. (JEL F11, F14)     

PRODUCTION COSTS, TRANSACTION COSTS, AND LOCAL GOVERNMENT CONTRACTOR CHOICE

Local governments that choose to externally produce a service can contract with other governments, for-profit firms, or nonprofit organizations. This contractor choice is modeled as one in which the local government decision maker minimizes service delivery costs, both production and transaction costs, subject to political and fiscal constraints. The model is estimated using data on three frequently contracted health services obtained from a national survey of local government service delivery arrangements. The empirical analysis reveals the importance of both production and transaction costs, as well as the choice set of available suppliers, to contractor choice.     

JOB SECURITY and JOB SEARCH IN MORE THAN ONE LABOR MARKET

I analyze job search behavior of unemployed workers who may search for work in several sectors of the economy. Although reservation wages are equal in each sector, workers search more intensively in sectors with lower layoff rates. Thus workers more quickly find and accept jobs with more security.     

MEDIA CONCENTRATION AND CONSUMER PRODUCT PRICES

This article examines the interaction of commercial media and retail producers of well-known consumer products when advertising is used to differentiate brands. In particular, I address how competition in the media market affects choices of advertising and program quality. The results suggest counterintuitively that advertisers may actually prefer media markets with less competition for audiences. Product differentiation through advertising is more effective when media markets are less competitive, leading to higher prices for advertised products. As a result, media concentration may lead to higher profits for advertising firms if the additional revenue exceeds the higher advertising costs associated with media concentration. (JEL L11 , L82 , M37 )     

CREDIT COUNSELING AND CONSUMER CREDIT TRAJECTORIES

Nonprofit credit counseling provides consumers with financial education, individualized financial counseling, and debt restructuring. Despite potential benefits, relatively little is known about its efficacy. This study uses administrative data to assess the relationship between counseling and consumer credit outcomes. We estimate difference‐in‐difference models to analyze credit outcomes for a counseled group relative to a matched comparison group for six quarters after a baseline period. We find evidence of a substantial credit shock around the time of counseling. Post‐treatment, counseling is associated with a persistent reduction in debt even after accounting for bankruptcies, foreclosures, debt charge‐offs, or participation in debt consolidation programs. (JEL D12)