MARKET FORCES AND AIRCRAFT SAFETY: THECASEOFTHEDC-10

The May 25th, 1979 Chicago DC-10 crash provides the opportunity to test an important proposition in the theory of consumer product safety: Can market forces provide safety when products are too complex to permit buyer prepurchase inspection? This paper combines economic theory with modern finance theory to measure the cost of the crash to shareholders of the plane's manufacturer, McDonnell Douglas. The results indicate that the DC-10 crash resulted in a $200 million loss to McDonnell Douglas stockholders and that this amount exceeds any reasonable estimate of regulatory or liability costs.     

Closing the Wealth Gap: A Review of Racial and Ethnic Inequalities in Homeownership

Homeownership plays an important role in the socioeconomic well‐being of Americans. Despite recent major losses in wealth due to the subprime market crash, home equity remains the largest source of wealth for the average American family. A marker of class status, owning one's home provides access to neighborhoods with the best schools, quality public services, and lowest crime. This article demonstrates that minorities have not had the same access to homeownership that Whites have, and this contributes to continuing socioeconomic disparities between Whites and minorities. This article explores the homeownership experience of Blacks – including African‐Americans, Caribbeans, and Africans – Hispanics, and Asians in the United States relative to non‐Hispanic Whites. Minorities rely heavily on homeownership and home equity as the key component of their wealth and remain less likely than Whites to hold alternative forms of investment such as stocks. The role that homeownership plays in perpetuating intergenerational wealth disparities between Whites and minorities is discussed as are challenges to minority homeownership such as the pervasiveness of risky mortgage products. Exploring the racial gap in homeownership is fundamental to understanding racial inequalities and formulating strategies and policies to help close such disparities. This article concludes with suggestions for future research.     

American Airlines’ use of mediated employee channels after the 9/11 attacks

This study investigates American Airlines’ employee response to the 9/11 attacks. Interviews with corporate communicators at the airline and analysis of electronic publications released internally within the airline reveal how mediated communication channels supported the supervisory communication efforts after the 9/11 attacks. An internal employee campaign called Good Words is used to illustrate how emerging technologies can support the emotional needs of employees after a crisis. The article concludes with lessons American Airlines learned from the terrorist attacks and implications for crisis communicators.     

A new paradigm: the wealth effect of the stock market on consumption,in a context of interacting bio-systems

This study examines the existence of a stock market wealth effect on aggregate private consumption in the economy. A theory of investor/consumer behavior is suggested, in a context of a symbiotic relationship between two quasi-bio-systems. The model offers predictions about likely outcomes in capital market interaction with the underlying economy in general and consumption in particular. These predictions are validated empirically. Specifically, the paper finds that investors/consumers do not respond immediately to a stock market rise (fall). Rather, they wait at first and thereafter gradually accelerate their ‘wealth spending’ on consumption only after they are convinced that the gain is permanent (a variation of the ‘income smoothing’ that was suggested many years ago by Friedman (1957)). The paper suggests that the capital markets and the economy interact like two bio-systems symbiotically responding to each other. This study presents evidence that the consumption wealth spending peaks at approximately 2.5% of the stock market wealth CUMULATIVE gain in the previous 12–24-month period, with some effects lingering on up to 36 months. For example, it shows that over 40% of the growth in consumer spending in 1999 was attributable to gains in the stock market in previous years, contributing to a strong GDP in that year.     

What the 2008 stock market crash means for retirement security

The 2008 stock market crash raises concerns about retirement security, especially since the increased prevalence of 401(k) and similar retirement saving plans means that more Americans are now stakeholders in the equity market than in the past. Using a dynamic microsimulation model, this paper explores the ability of alternate future stock market scenarios to restore retirement assets. The authors find that those near retirement could fare the worst because they have no time to recoup their losses. Mid-career workers could fare better because they have more time to rebuild their wealth. They may even gain income if they buy stocks at low prices and get above-average rates of return. High-income groups will be the most affected because they are most likely to have financial assets and to be invested in the stock market.     

What the 2008 Stock Market Crash Means for Retirement Security

The 2008 stock market crash raises concerns about retirement security, especially since the increased prevalence of 401(k) and similar retirement saving plans means that more Americans are now stakeholders in the equity market than in the past. Using a dynamic microsimulation model, this paper explores the ability of alternate future stock market scenarios to restore retirement assets. The authors find that those near retirement could fare the worst because they have no time to recoup their losses. Mid-career workers could fare better because they have more time to rebuild their wealth. They may even gain income if they buy stocks at low prices and get above-average rates of return. High-income groups will be the most affected because they are most likely to have financial assets and to be invested in the stock market.     

Decomposing the Black-White Wealth Gap: The Role of Parental Resources, Inheritance, and Investment Dynamics

Much research has shown that even after controlling for income, African Americans suffer from drastically lower net worths than their white counterparts; these differences in net worth have important implications for the overall well‐being of blacks and whites. If not directly from labor market disadvantages–i.e., income differentials–then from what does this racial gap in wealth arise? The current study assesses two complementary accounts of this race difference in asset holdings. The first, the historical legacy thesis, suggests that net wealth differences in the current generation are largely a result of discrimination in past generations; that is, they can be traced to the “head start” that whites have enjoyed in accumulating assets and passing them on. The second theory, the contemporary dynamics thesis, holds that current dynamics of institutional racism in the housing and credit markets are more responsible for the gap. The current study tests the relative impact of multi‐generational forces and contemporary property and credit dynamics by using two‐generational data from the Panel Study of Income Dynamics. It finds that parental wealth and income levels and inheritance all have a significant impact on the wealth levels of the current generation net of respondent socioeconomic characteristics; however, parental wealth and inheritance fail to explain the black‐white gap. Further, this study shows that even predicting net worth from that same family's net worth five years prior (also controlling for savings during the interim), there remains a significantly negative effect of African American race. However, breaking out initial net worth into asset types shows that it may be different investment types and returns that explain the difference in asset accumulation over a five‐year period.     

The effect of strikes on shareholder returns

Relationships between labor disputes and shareholder wealth are examined through analysis of 91 strikes between 1951 and 1973. Stock market reactions to strikes of different durations are analyzed through a market model methodology. Different market adjustments are found for short, intermediate, and long duration strikes. Shareholder returns prior to strikes are below market returns for firms in the short strike category, approximately equal to the market returns for firms in the short strike category, approximately equal to the market for firms in the intermediate strike duration category, and above the market for firms in the long strike category. After strikes, shareholder returns decline for firms in the short and long strike duration categories.     

United Airlines’ and American Airlines’ online crisis communication following the September 11 terrorist attacks

The terrorist attacks of September 11, 2001, provided a challenging series of events for the crisis communication efforts of American Airlines and United Airlines. Based on crisis communication theory and organizational use of the Web, this study examined how the two companies used their Web sites during the first three weeks after the incidents as one means of conveying information following the attacks.Theoretically, analysis of incident-related segments of the two sites showed that the airlines evidenced key elements of crisis response. They provided instructing communication by giving facts, stating how their publics should take action, and providing information regarding how the problem was being corrected. Additionally, they offered adjusting communication through a series of condolence messages and links to relief organizations before emphasizing normal operations.From an online perspective, this study revealed that the Web enabled both companies to provide an immediate response to the attacks. The Web also allowed United and American to offer frequent updates about the incidents to their publics and to communicate their crisis response process to various publics simultaneously.     

SENSATIONALISM, NEWSPAPER PROFITS AND THE MARGINAL VALUE OF WATERGATE

Newspaper publishers supposedly profit some sensational events. Focusing on the two different products sold by publishers, newspapers and advertising space, this paper shows why sensational events do not necessarily increase publishers' wealth. It also uses financial market analysis to examine the wealth effects of one sensational event, Watergate, on a portfolio of newspaper stocks and on the Washington Post in particular. No significant effects are found.     

THE IMPACT OF STOCK MARKET FLUCTUATIONS ON THE MENTAL AND PHYSICAL WELL‐BEING OF CHILDREN

The stock market crash of 2008 caused a severe impact to households. Earlier research has explored the impacts of a stock market crash on life well‐being, psychological stress, and adult health behaviors. We extend this literature by documenting impacts of stock market fluctuations on a range of child outcomes; including effects on both mental and physical health. We show a negative effect of a market crash on hospitalizations, child reported health status, sick days from school, and an aggregate health index measure. Both graphical and regression‐based analysis reveal that our results are not driven by a preexisting trend of declining child health before the market crash and extensive sensitivity analysis demonstrates that the results are robust to multiple empirical specifications. (JEL I15, E32, J13)     

Discouraging Workers: Estimating the Impacts of Macroeconomic Shocks on the Search Intensity of the Unemployed

Discouraged and marginally attached workers have received increasing attention from policy makers over the past several years. Through slackness in the labor market, periods of high unemployment should reduce the likelihood of receiving a job offer and thus create more discouraged workers. However, the existing literature generally fails to find evidence of such pro-cyclicality in search intensity. Surprisingly, search appears to be acyclical. We hypothesize the observed acyclicality may be the result of coarse measurement of search intensity in previous studies and the failure to account for changes in individuals’ wealth across the business cycle. In this paper we use daily time use dairies from the American Time Use Survey 2003–2011 to examine the cyclicality of search intensity to explain this apparent contradiction between theory and data. Results indicate that workers do reduce their search in response to deteriorating labor market conditions, but these effects appear to be offset by the positive effects on search that are correlated with declines in household wealth.     

Migration Shocks: Integrating Lesotho’s Retrenched Migrant Miners

This paper finds that the decline in the numbers of Basotho 1 migrant mine workers since the 1990s was not market induced but rather a result of political and policy changes in South Africa. As a result of these changes, household income throughout rural Lesotho dropped significantly. As current migrant households generally do not have skilled workers or operate family businesses, the paper makes a case for training in skills and entrepreneurship as a means of utilizing Lesotho’s comparative advantages to generate domestic employment and absorb retrenched and prospective migrant mine workers.     

An asset-building agenda for the twenty-first century: giving families something to live for

Though studies have clearly illustrated that education is one of the primary paths to upward mobility, a growing body of research is beginning to show that the returns on education are determined more by initial wealth than innate ability and exerted effort in school. This accounting directly contradicts Americans’ understanding of the promise of the American Dream: a level playing field and a path towards a more prosperous future. Currently, this contradiction goes largely unchecked by researchers because of their reluctance to engage in a discussion about values. As a result, the mere discussion of wealth transfer, a policy about thriving, is seen as taboo, and we are left with conversations about how to provide the poor with enough merely to survive. However, in this paper, the conversation about wealth transfer is revived and articulated as an American idea consistent with American values. It goes on to offer Children’s Savings Accounts, in combination with a substantial progressive wealth transfer into these accounts, as a means of leveling the playing field and restoring education as an equalizer in society.     

How Does Occupational Access for Older Workers Differ by Education?

To assess the employment opportunities of older job-changers in the years prior to retirement, this study examines the how the breadth of occupations in which they find employment narrows as they age past their prime working years and how this differs by gender and educational attainment. The results indicate that workers who change jobs in their early 50s find employment in a reasonably similar set of occupations as prime-age workers, with opportunities narrowing at older ages. They also indicate that job opportunities broadened significantly for better-educated older workers since the late 1990s. While job opportunities now narrow significantly for less-educated men in their late 50s, this narrowing primarily occurs in the early 60s for women and better-educated men. In contrast to previous research, the study finds that employer policies that emphasize hiring from within are less important barriers to the hiring of older job-seekers. The study also finds that the narrowing of job opportunities is associated with a general decline in job quality as measured by median occupational earnings, a decline associated with differences in occupational skill requirements and the underlying economic environment. These results suggest that older hiring is not as limited to a select few occupations as it had been in previous decades, and that policy reforms aimed at increasing opportunities and improving labor market fluidity might best be served if they focused on less-educated men.     

The Boss's “Brains”: Political Capital,Democratic Commerce and the New York Tweed Ring, 1868–1871

Departing from Pierre Bourdieu's contention that capital takes on many forms beyond the economic, including a political form, this article examines how commodification patterned nineteenth century American politics. A case study of the Tweed Ring, which briefly governed Gilded Age New York, is reevaluated as a speculative political bubble that produced empirically identifiable political profits. From an election sweep in 1868 to a bank run in 1871, William Tweed gained and lost political power and material wealth through management of what the editorial cartoonist Thomas Nast hailed as the boss's “Brains,” or democratic commerce, the market in political commodities.     

The Frisch Elasticity in the Mercosur Countries: A Pseudo‐Panel Approach

In estimating the Frisch elasticity – i.e., the elasticity of substitution between worked hours and real wages, holding constant the marginal utility of wealth – for the Mercosur countries, this article finds a strong heterogeneity. It argues that severe liquidity constraints are the main reason for the negative estimates and that the heterogeneity is the outcome of differences in many relevant economic dimensions – ranging from sectorial specialisation to welfare‐state provisions and labour‐market specificities. The diversity of Frisch elasticities calls for the development of a cross‐country (rather than a within‐country) policy approach, since they crucially affect the dynamics of the business cycle, the synchronisation of which is a step prior to the design of macro‐convergence policies in the Mercosur context.     

PUBLIC MUNIFICENCE FOR PRIVATE BENEFIT: LITURGIES IN CLASSICAL ATHENS

Liturgies or public services became less efficient as a source of state revenue in Classical Athens over the democratic period. This is illustrated in a model in which each citizen, knowing his own wealth and the probability distribution of the visible wealth of others, can engage in costly wealth concealment to improve his chances of avoiding a liturgy. Relative to a wealth tax, liturgies are efficient as long as their performers can acquire sufficient private benefits through public munificence. The observed decline in these benefits over the democratic period reduced or eliminated this relative efficiency.     

THE DETERMINANTS OF THE PUBLIC DEBT IN THE UNITED STATES, 1953–1978

Barro claims that since the public rationally forecasts and discounts future taxes, government debt does not represent net wealth to the public and therefore does not affect any real economic variables. Then why are there ever deficits? Barro has presented a theory of optimal deficits based on intertemporal tax smoothing. The theory predicts that nominal debt grows in proportion to anticipated inflation, varies contracyclically with respect to real income cycles, and varies procyclically with respect to war cycles. Barro tested his theory using annual American data for 1922-76 and found weak support for his theory. This paper reexamines Barro's tests, using quarterly American data for 1953:Q1 to 1978:Q4 and finds stronger support for Barro's theory than Barro found using annual data. This paper also concludes that state and local governments do not engage in tax-smoothing behavior–––probably due to considerations of migration–––and that the debt held by the central bank should be included in the definition of public debt.     

Productivity of highly skilled immigrants: economists in the postwar period

Prior work finds declining immigrant quality in the postwar period that is linked to source-country and skill-composition changes associated with the 1965 Immigration Act. This paper uses a unique panel of foreign- and native-born American Economic Association members to show that the highly skilled experienced a similar shift away from European migrants toward those from Asia. However, the findings do not indicate that this change in source-country composition has been accompanied by a decline in quality; rather, the most recent cohorts of foreign-born economists appear to be more productive than their native counterparts.