THE EXTENT OF THE MARKET AND INTEGRATION THROUGH FACTOR MARKETS: EVIDENCE FROM WHOLESALE ELECTRICITY

We document the influence of factor markets in determining the extent of the market, appealing to the Mundell hypothesis that trade in goods and factor markets are substitutes. We confirm this influence using the U.S. wholesale market for electric power. Although the Eastern, Western, and Texas regions cannot trade electricity, inputs such as natural gas move freely across these regions. Through a set of price transmission ratios, and a supply model for natural gas, we find regional electricity shocks do propagate across regions. We conclude output markets institutionally in autarky achieve modest degrees of economic integration through factor markets. (JEL C32, L94, Q41)     

ESTIMATING TIME‐VARYING BARGAINING POWER: A FISHERY APPLICATION

We propose an unobserved‐components‐inspired approach to estimate time‐varying bargaining power in bilateral bargaining frameworks. We apply the technique to an ex‐vessel fish market that changed management systems from a regulated open‐access system to an individual fishing quota (IFQ) system over the timespan analyzed. We find that post‐IFQ implementation fishers do improve their bargaining power and thus accrue more of the rents generated by the fishery. However, unlike previous studies, we find that fishers do not move to a point of complete rent extraction. Rather, fishers and processors appear to be in a near‐symmetric bargaining situation post‐IFQ implementation. (JEL C22, L11, Q22)     

THE EFFECTS OF MARKET PRACTICES IN OLIGOPOLISTIC MARKETS: AN EXPERIMENTAL EXAMINATION OF THE ETHYL CASE

This study reports on the performance of experimental markets characterized by industrial structure and practices similar to those at issue in the Ethyl case. The central question is whether price competition is affected by the practices of advanced notification of price changes and "most-favored nation" contracts or is determined by industrial organization and concentration alone.     

THE HAYEK HYPOTHESIS IN EXPERIMENTAL AUCTIONS: INSTITUTIONAL EFFECTS AND MARKET POWER

We report twelve market experiments utilizing a "seller market power" supply and demand structure where two of five sellers can unilaterally increase their profit by withholding supply. The data indicate that both the double auction and posted offer institutions result in traders extracting the bulk of the potential gains from exchange in the market; however, prices generally occur above the competitive equilibrium prediction. Market power in the form of strategic supply withholding does not appear to be responsible for the supra-competitive prices.     

PAYOFFS TO POWER AMONG MALES IN THE MIDDLE CLASS:

This article specifies the parameters of William Wilson's "declining significance of race' thesis and within the context of the debate about it uses data from the Panel Study of Income Dynamics to examine racial differences among a cohort of males in the earnings returns to two separate dimensions of job authority in middle-class jobs between 1976 and 1985. Findings do not support the Wilson thesis. Specifically, the gap in returns has increased for both authority dimensions over the approximately ten-year period. In addition, the racial gap is greater at higher than at lower hierarchical levels across both authority dimensions. Specific employment practices that explain the increase in the earnings gap over the work-career are identified and the overall implications of the findings for the Wilson thesis are discussed.     

VELOCITY FUTURES MARKETS: DOES THE FED NEED A STRUCTURAL MODEL?

Previous proposals suggesting monetary policy makers target private-sector forecasts have been shown to be problematic. As policy becomes more effective, private-sector forecasts become less informative. Under perfect stabilization private-sector forecasts provide no useful guidance to monetary policy makers about economic shocks. We illustrate a way around this circularity problem by creating a policy futures market linked to the ratio of the (realization of the) policy goal for next period and the current instrument setting. The implication is that extensive information gathering is unnecessary, weakening the argument that central banks need a structural model to conduct policy. (JEL E52, E44, E42 )     

REPUTATION TRANSMISSION WITHOUT BENEFIT TO THE REPORTER: A BEHAVIORAL UNDERPINNING OF MARKETS IN EXPERIMENTAL FOCUS

Reputation is a commonly cited check on opportunism, but it is often unclear what motivates an agent to report another's behavior when it is easy for the aggrieved individual to move on. In a sharply focused laboratory experiment, we find that many cooperators pay to report a defecting partner without the possibility of pecuniary benefit when this has the potential to deprive the latter of future gains and to help his next partner. We illustrate how a social preference can explain such costly reporting, and also discuss evidence for a role of emotions. (JEL C91, D03, D63)     

A QUALITY-ADJUSTMENT MODEL OF THE ACADEMIC LABOR MARKET: THE CASE OF ECONOMISTS

This paper uses some new data on the initial academic placements of new Ph.D. economists to test a quality-adjustment model, which is consistent with the hypothesis that most academic appointments follow a "downstream" pattern. By the use of weighted least squares the authors confirm the importance of the perceived quality of the faculty of the degree granting program, the publishing performance of former graduates of these programs, and the student/faculty ratio of these programs in economics over the period 1960 to 1978. Finally, it is shown that contrary to popular opinion, the extent of the "downstream" pattern has not been magnified in the so-called buyers markets of the 1970's.     

THE DEMAND TO REGULATE FRANCHISE MONOPOLY: EVIDENCE FROM CATV RATE DEREGULATION IN CALIFORNIA

The motivation to price control a franchise monopoly is examined in the context of three distinct economic views of regulatory behavior. These views are tested against data from the California cable television market, over the years 1980–85, during which a subset of monopoly firms converted from regulated to unregulated pricing for basic cable service. As the price constraints of regulation appear to be insignificant in a welfare analysis, the demand for such controls by municipalities is derived from their utility in enforcing vote-maximizing transfer schemes–a Peltzmanian political outcome with a Stiglerian economic welfare result.     

A SEMIPARAMETRIC DISCRETE CHOICE MODEL: AN APPLICATION TO HOSPITAL MERGERS

We propose a computationally simple semiparametric discrete choice estimator to model rich consumer heterogeneity. We assume groups of observably similar consumers have similar preferences, but allow preferences to vary freely across these groups. Model flexibility is easily adjusted by setting a single tuning parameter; we suggest a cross‐validation method to do so. We analyze the model's properties in the context of hospital mergers, both analytically and via a Monte Carlo analysis. The model performs well for policy relevant substitution and welfare measures, even if misspecified, when the tuning parameter is set within the neighborhood of the value chosen by cross validation. (JEL C14, D12, I11, L41)     

THE NONPROFIT FIRM: A POTENTIAL SOLUTION TO INHERENT MARKET FAILURES

This article analyzes the differences in products offered by nonprofit and for-profit firms in a monopolistically competitive industry where goods are differentiated both by product attributes and by the degree to which benefits are public. Because nonprofit firms receive donations, they provide a Pareto improvement of the equilibrium product set: nonprofit firms will be less biased against goods with a high social good component than will their for-profit counterparts, hi addition, the optimal donations function which equates the nonprofit equilibrium product set to the set which maximizes societal welfare is derived.     

DISCONTINUITIES IN PENSION BENEFIT FORMULAS AND THE SPOT MODEL OF THE LABOR MARKET: IMPLICATIONS FOR FINANCIAL ECONOMISTS

In their analysis of corporate pension plans, financial economists typically invoke the simplest and the most tractable model of the labor market. This is the spot model, where the worker's cash wage plus accruing pension benefit equals the value of his marginal product in each and every period. This paper provides evidence against the empirical validity of the spot model, and uses provisions common to most pension plans to do so. These findings are relevant to the appropriate measurement of pension liabilities and thus to the present controversy surrounding the termination of overfunded plans and the recapture of surplus assets by the employer. The existence of incentive effects, ruled out by the spot model, may help to unravel certain well known "puzzles," such as the failure of employers to fully fund their plans in spite of the tax advantages of doing so.     

PRODUCT SAFETY IN A REGULATED INDUSTRY: EVIDENCE FROM THE RAILROADS

It is sometimes argued that a relaxation of price controls in a regulated industry would lead to a decrease in profits and hence to an incentive for firms to skimp on safety. Theory does not allow us to sign the relationship between prices and safety a priori. Analysis of data from the railroad industry from 1963–67 indicates 1) profitable railroads have fewer accidents per mile than do unprofitable roads; 2) for profitable roads, if there is any relationship at all between accidents and profitability it is positive: more profitable roads have more accidents (per mile); and 3) for unprofitable roads, accident rates rise as losses rise.     

ESTIMATING NET INTERRACIAL MOBILITY IN THE UNITED STATES: A RESIDUAL METHODS APPROACH

This paper presents a residual methods approach to identifying social mobility across race/ethnic categories. In traditional demographic accounting models, population growth is limited to changes in natural increase and migration. Other sources of population change are absorbed by the model residual and can be estimated only indirectly. While these residual estimates have been used to illuminate a number of elusive demographic processes, there has been little effort to incorporate shifts in racial identification into formal accounts of population change. In light of growing evidence that a number of Americans view race/ethnic identities as a personal choice, not as a fixed characteristic, mobility across racial categories may play important roles in the growth of race/ethnic subpopulations and changes to the composition of the United States. To examine this potential, we derive a reduced-form population balancing equation that treats fertility and international migration as given and estimates survival from period life table data. After subtracting out national increase and net international migration and adjusting for changes in racial measurement and census coverage, we argue that the remaining error of closure provides a reasonable estimate of net interracial mobility among the native born. Using recent U.S. Census and ACS microdata, we illustrate the impact that identity shifts may have had on the growth of race/ethnic subpopulations in the past quarter century. Findings suggest a small drift from the non-Hispanic white population into race/ethnic minority groups, though the pattern varies by age and between time periods.     

DEREGULATION AND THE RELIGIOUS MARKET IN TAIWAN: A Research Note

The religious economy model predicts that when encountered with competition, loosely organized religions will fail or will be transformed into congregational religions. Over time, competition will drive congregational religions to establish an extended relationship with their consumers by generating exclusivist claims and exclusivist socialization. And thus exclusive religion tends to occupy the biggest market share. This model, however, has rarely been tested empirically. By analyzing religious trends in Taiwan after the deregulation of the late 1980s, we find that state suppression contributed to the weakness of organized religion while enhancing the popularity of unchurched congregational religions in Taiwan. We also find that deregulation is associated with the rise of organized and congregational faiths. But whether or not these newly organized religions become exclusive or not needs further studies. Implications of the findings for future research are offered.     

BARRIERS TO ENTRY IN THE MARKET FOR STUD SERVICES: GOVERNMENT AND "NON-PROFIT" INSTITUTIONS IN COLLUSION

Modern technologies are banned in the breeding of Thoroughbred horses. These practices have been banned by the states defining a Thoroughbred as a horse registered by the Jockey Club of New York, and by the Club refusing to register horses bred "unnaturally." Modern technologies would vastly increase the number of high quality foals and lead to a decline in industry prices and profits. The breeding restrictions protect the wealth of owners at the expense of consumers, potential input suppliers, and new breeders. Because of the distribution of costs and benefits in the political process, we foresee no end to legislatively mandated stagnation.     

BEYOND EDUCATION AND FAIRNESS: A LABOR MARKET TAXATION MODEL FOR THE GREAT GATSBY CURVE

Applied researchers have been drawn to models that attribute the demonstrated cross‐country differences in intergenerational income transmission to government failures to invest in the human capital of poor children. To highlight another potential mechanism, the disincentive effects of labor market taxation and redistribution, we present a simple model that can explain cross‐country differences in intergenerational mobility and other previously observed empirical patterns. Empirical tests using data on income mobility, tax rates, and public expenditures largely support the model predictions. We conclude that the common presumption that intergenerational mobility largely measures fairness or opportunity, and the resultant policy recommendations, are premature. (JEL D31, J24, J62)