SOME EMPIRICAL EVIDENCE ON THE EFFECTIVENESS OF ANTIMERGER RELIEF IN THE UNITED STATES

The extent of structural relief obtained by the government in a Section 7 settlement is modeled as an outcome of a bargaining game between the antitrust agency and parties to the merger. This framework is applied to data from 73 Section 7 cases settled during 1990–2000. The fraction of competitive overlap subject to divestiture is shown to depend on the extent of merger-specific efficiencies, the anticompetitive potential of the merger, and the hostage effect facing the merging firms, as well as the degree of media coverage of the case, the workload of the agency, and the partisan composition of Congress.(JEL L44 , C24 )     

EMPIRICAL EVIDENCE ON ON VERTICAL FORECLOSURE

Recent papers have shown conditions under which vertical mergers can result in anticompetitive foreclosure of unintegrated rivals. One implication of these models is that a necessary condition for anticompetitive foreclosure is that unintegrated rival firms are less profitable after a vertical merger. We test this hypothesis by examining the stock prices of unintegrated rivals at the time of a vertical merger announcement and at the time of a government antitrust complaint. We find no evidence to support the foreclosure hypothesis.     

THE EFFECTS OF EMPLOYMENT PROTECTION ON LABOR TURNOVER: EMPIRICAL EVIDENCE FROM TAIWAN

This paper investigates the effects of employment protection legislation on the rates of hiring, separation, worker flows, job reallocation, and churning flows for the case of Taiwan. Our empirical identification takes advantage of a reform created by Taiwan's enactment of Labor Standards Law, which has substantially increased the costs of firing, and the implementation of the law's enforcement measures. Moreover, our identification also exploits the fact that the stringency of the law's provisions and the intensity of the law's enforcement vary with establishment size. On the basis of the monthly data at the establishment level for the period 1983–1995, we find that Taiwan's Labor Standards Law and its enforcement measures have dampened labor turnover for medium‐sized and large establishments, while that of small establishments was not affected. (JEL J65, J63, J88)     

FIGHT,FOLD OR SETTLE?: MODELLING THE REACTION TO FTC MERGER CHALLENGES

This paper models the reaction of firms to Federal Trade Commission (FTC) decisions which seek to block proposed horizontal mergers. We find that firms' responses to the FTC's decisions depend on a number f factors, but only weakly on the structural merits of the FTC's challenge. For a large number of the FTC's merger challenges, we find that firms have strong incentives to settle with the Commission, regardless of the relevant competitive concerns. Therefore, in these matters the FTC appears to have powers more like a regulatory agency than a prosecutor.     

ON THE INTERNAL REVENUE SERVICE'S SERVICE AND ENFORCEMENT

Built on the seminal work of Graetz et al. (1986), this study considers a model of tax compliance in which the Internal Revenue Service (IRS) services as well as audits taxpayers as in the real world. Taxpayers are uncertain about whether their incomes are eligible for deduction/exemption, and may seek advice from the taxpayer service provided by the IRS to mitigate the uncertainty. We show: (1) while the society's preferred quality of taxpayer service is likely to be sufficiently high, the IRS's preferred quality of taxpayer service is only at an intermediate level; and (2) the conflict between the society and the IRS tends to be intensified as the cost of tax audits becomes lower. Evidence in support of our results is addressed. We also extend our model to addressing the issue of corruption in tax administration and to considering a dynamic model. (JEL D82, H26, K42)     

QUANTIFYING THE DETERRENT EFFECT OF ANTICARTEL ENFORCEMENT

This paper presents a rare attempt to quantify the deterrent effect of anticartel policy. It develops a conceptual framework, which establishes the sort of information necessary for such quantification. This is then illustrated and calibrated by drawing upon existing literatures and using evidence from legal cartels to approximate what would be observed absent policy. Measuring impact by the proportion of all potential harm that is deterred, our best estimate is two‐thirds and, even on conservative assumptions, at least half of all harms (or seven times the detected harm) is deterred. (JEL H11, K21, L44)     

NEW EVIDENCE ON INCOME AND THE VELOCITY OF MONEY

Time series and cross-country empirical results suggest that cash holding as a proportion of income rises, or equivalently that velocity falls, as income increases. Numerous cross sectional findings at many points in time, in several countries conclude oppositely. It is argued here that the former findings suffer from omitted variable bias by ignoring sociodemographic variables affecting the demand for cash balances. When one incorporates such demand shifters into the analysis the time series and cross-country findings are seen as consistent with the critically reexamined cross sectional result that velocity increases with income.     

INTERNATIONAL EVIDENCE ON FRIEDMAN'S THEORY OF THE BUSINESS CYCLE

Milton Friedman's theory of the business cycle implies two empirical regularities tested for here. One regularity is that business cycles are asymmetric: The size of a contraction affects the size of the following expansion, but not vice versa. The second regularity is that a supply-side ceiling to aggregate output limits the size of expansions. Friedman's correlation methods yield only very weak support for the asymmetry hypothesis when applied to real GNP data of eight OECD countries. A time series model with a ceiling component fits the data well for a majority of the countries.     

THE IMPACT OF CLASSROOM EXPERIMENTS ON THE LEARNING OF ECONOMICS: AN EMPIRICAL INVESTIGATION

This paper provides limited evidence on the effectiveness of a simple classroom experiment. In different courses in environmental economics or public finance, a brief take-some game was performed. Students who took part in this classroom experiment, as well as those who just watched it, were more successful in answering a multiple-choice test on the "tragedy of the commons" than control groups from the same courses.     

EFFECT OF COOPERATIVE ENFORCEMENT STRATEGIES ON WASTEWATER MANAGEMENT

This paper examines the influence of the environmental enforcement approach on the effects of government interventions on corporate environmental management. The paper contrasts a potentially innovative cooperative approach with the standard coercive approach. Empirical results show that the effectiveness of enforcement at inducing better environmental management depends on the overall regulatory enforcement approach. For example, greater cooperation undermines the effectiveness of more severe enforcement forms. Specifically, as the environmental enforcement approach becomes more cooperative, the effectiveness of federal inspections and monetary penalties decreases. These results generally demonstrate that a cooperative enforcement approach proves less effective than a coercive approach. (JEL D22, K32, Q52, Q58)     

INFLATION, HEDGING AND THE DEMAND FOR MONEY: SOME EMPIRICAL EVIDENCE

This paper explores the role of nominal rate of return uncertainty and inflation hedging as potentially important factors explaining the pattern of money demand. Using U.S. quarterly data over the period 1952.2–1982.4, it is shown that in conformity with theoretical considerations the nominal rate of return uncertainty variable tends to have a significantly positive effect and the inflation hedging variable (the covariance between nominal rate of return and inflation rate) a significantly negative effect on the demand for money. These findings seem to be reasonably robust in terms of various definitions of income, interest rates, inflation rate and money variables as well as in terms of different estimation methods.     

THE EFFECTS OF EDUCATION ON FERTILITY: EVIDENCE FROM TAIWAN

This study investigates the impact of women's education on fertility. For identification, we use the 1968 compulsory education law change in Taiwan, which generated a regression discontinuity design (RDD) setting. We use the whole population of women from the 1980 and 2010 Population Censuses. Results of our RDD estimation using the exact date of birth suggest that the law change was effective in boosting women's education, but it did not have any impact on fertility. This is in stark contrast to most previous studies using only the birth year as the running variable or using it to construct instruments, which find that women's education depresses fertility. This study demonstrates that using a discrete running variable in RDD may generate a false discontinuity for an otherwise continuous regression function. (JEL J13, C21, I2)     

NEW EVIDENCE ON THE RETIREMENT AND DEPRECIATION OF MACHINE TOOLS

This paper uses data from machinery dealers to estimate the retirement and depreciation patterns for a broad set of conventional machine tools. According to the dealers, the average service life of these machines at the survey date was about thirty years. Service lives were even longer in the mid-1970s, with the reduction over time likely caused by the diffusion of superior, computer controlled machines. Consistent with the relatively long average life, the conventional machines have depreciated slowly. I use the results to assess the average service life assumed by the Bureau of Economic Analysis to construct capital stocks for metalworking machinery.     

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.     

THE IMPACT OF HIGH-TECH CAPITAL ON PRODUCTIVITY: EVIDENCE FROM AUSTRALIA

This article examines the relationship between high-tech capital use and productivity. Using Australian data, some evidence is found of a positive relationship between high-tech capital use and productivity in the market sector, but there is much less evidence of excess returns. These results are robust to the use of a variety of different measures of high-tech capital. At the industry level however, the relationship is significant and positive for only some industries. This suggests that the benefits of investment in high-tech capital are not spread evenly across the economy. (JEL O3 )     

MORE EVIDENCE ON THE MONEY-OUTPUT RELATIONSHIP

Recent studies have found that money loses its explanatory power over output if the 2980s are included in the sample. Interest rates, not money, appear to predict output. Using annual data for 1915–1993 and quarterly data for 1960–1993, we demonstrate that the supposed breakdown in the money-output relationship stems from the type of stationary assumption imposed on the data. Assuming difference-stationary produces results found in the literature. Assuming trend-stationary produces results indicating that money and output remain statistically related. Moreover, the change in the stationarity assumption greatly affects the quantitative importance cf interest rates in explaining output.     

LAW ENFORCEMENT LEADERS AND THE RACIAL COMPOSITION OF ARRESTS

This paper introduces a novel avenue of study for understanding the mechanisms behind racial discrimination in law enforcement. I exploit a new 25‐year panel history of the race of every U.S. sheriff to shed light on the potentially important role of managers who make hiring decisions and set departmental priorities. Comparing agencies that experience racial transitions to agencies with overlapping jurisdictions reveals that the ratio of Black‐to‐White arrests is significantly higher under White sheriffs. Heterogeneity analysis indicates that the effects are driven by arrests for less‐serious offenses and by targeting Black crime types. (JEL J15, K42, M54, H76)     

SURVEY EVIDENCE ON EXCESSIVE PUBLIC PESSIMISM ABOUT THE FUTURE BEHAVIOR OF UNEMPLOYMENT

Two of the questions in the Surveys of Consumer Attitudes undertakenby the Survey Research Center of the University of Michigandeal with households' expectations about inflation and the changein unemployment. We compare quarterly time series of the meanresponses with the actual behavior of inflation and unemploymentto see whether households are overly optimistic or pessimisticabout the future behavior of inflation and unemployment. Wefind an asymmetry. Over the 21 years of our analysis, on averagethe public is neither overly optimistic nor overly pessimisticabout future inflation. However, the public has been significantlytoo pessimistic about the future behavior of unemployment. Theseresults have an important implication for macroeconomic policy.If politicians respond to complaints from the public about inflationand unemployment they will target policy instruments at unemploymentto a greater extent than if the public was not so pessimisticabout the behavior of unemployment. The result may be a higherrate of inflation than if the public were not mistakenly pessimisticabout the behavior of unemployment.