DOMESTIC OR U.S. NEWS: WHAT DRIVES CANADIAN FINANCIAL MARKETS?

Using a generalized autoregressive conditional heteroscedasticity (GARCH) model, we study the effects of Canadian and U.S. central bank communication and macroeconomic news on Canadian bond, stock, and foreign exchange market returns and volatility. First, Canadian central bank communication is more relevant than its U.S. counterpart, whereas in the case of macro news, that originating from the United States dominates. Second, we find evidence that the impact of Canadian news reaches its maximum when the Canadian target rate departs from the U.S. target rate (2002–2004) and thereafter. The introduction of fixed announcement dates initially does not cause a noticeable break in the data. (JEL E52, G14, G15)     

JOBLESS RECOVERIES: STAGNATION OR STRUCTURAL CHANGE?

Within the existing literature a number of competing explanations for jobless recoveries have emerged. On the one hand there is evidence of dynamic structural change including offshoring/globalization and technological advances that are resulting in the loss of middle‐skill (routine) employment. Other studies emphasize a less dynamic economy with slower growth, reduced labor market fluidity, a decline in startup activity, and even economic stagnation. This study exploits variation among U.S. states to assess the degree that stagnation and/or important structural changes in the economy contribute to the recent phenomenon of jobless recoveries. We find support for both the stagnation and structural change theories of jobless recoveries. On the stagnation side, we find evidence that lower startup rates are a significant predictor of jobless recoveries. We also find evidence that links dynamic structural change to the jobless recovery phenomenon. More specifically states experiencing a long‐run downward trend in the share of routine employment are more likely to experience a jobless recovery. Our results are consistent with the polarization theory where routine‐replacing technological advances permanently reduce demand for middle‐skill labor, thus contributing to jobless recoveries. (JEL E32, E24)     

STEREOTYPE OR TRANSGRESSION?

Through a four-pronged methodology which includes textual analyses of the films, film reviews, and interviews with Rosie Perez as well as possible spectatorship positions to Rosie Perez films, the author examines the construction of Latinas in Hollywood film, especially in regard to traditional ethnic stereotypes. In addition, the author ventures into an understudied area of scholarship—namely the consideration of active audience and Latinas/Latinos. This combined methodology which examines both representation and interpretations—that is the production of meaning both at the sending and reception of popular culture—allows for a complicated reading of what Rosie Perez might mean to different segments of the audience.     

IS THERE ADVERSE SELECTION IN LIFE INSURANCE MARKETS?

Adverse selection theory predicts people with a high risk of death are more likely to own life insurance. Using a unique data set merging administrative and survey records, we test this theory and find the opposite: people with high death risk are less likely to own life insurance. We postulate advantageous selection and price discrimination swamp adverse selection in individual life insurance markets. To determine which effect is more powerful, we analyze group life insurance markets, where insurance companies cannot price discriminate as well as in individual markets. Our data suggest that price discrimination has a stronger effect than advantageous selection. (JEL D8, G1, I1)     

COLLECTION SALES: GOOD OR BAD FOR JOURNALS?

This article discusses the impact of collection sales (i.e., the bundling of several journals for sale by publishers to libraries) on journals. The advent of electronic journal distribution implies that bundling is an efficient sales strategy and can act to extend the reach of a journal. Current arrangements are discussed and shown to lead to tensions between commercial publishers and nonprofit journals. The article argues that nonprofit journals should not necessarily abandon collection sales programs. Rather, nonprofit journals may benefit from withdrawing from commercial publishers which distribute their own for-profit journals, and joining together to be distributed by less commercial publishers who set relatively low prices for their collections. ( JEL D82, L31, L42, L82)     

WAGE DIFFERENTIALS ACROSS LABOR MARKETS AND WORKERS: DOES COST OF LIVING MATTER?

Wage differential studies rarely account for interarea differences in cost of living, owing both to data limitations and theoretical ambiguity. This study develops a price index for 185 metropolitan areas comprising about 70% of the U.S. labor force. Current Population Survey data for 1985–95 and data on site-specific amenities are used to estimate earnings differentials based on nominal wages, wages fully adjusted for measured cost of living, and a simple approximation of "real" wages with partial adjustment for price-level differences. Dispersion in approximate real wages across 185 labor markets and differentials by region and city size are substantially lower than dispersion in nominal or full adjustment wages. Estimates of racial and ethnic differentials display moderate sensitivity to choice of a wage measure, whereas other standard differentials do not. Both nominal wages and wages fully adjusted for cost of living may provide misleading estimates of real wage differentials. Absent data on interarea prices and amenities, researchers should include detailed controls for region and city size in nominal wage equations. ( JEL J31, R23)     

ALTERNATIVE PATHS TO PARENTHOOD: IVF OR CHILD ADOPTION?

This article analyzes the effects of child adoption on the utilization of assisted reproductive technology (ART) in the United States. Using state‐level longitudinal data for 1999–2006, we show that ART use is responsive to changes in adoption markets. After controlling for state‐specific fixed effects, our estimates reveal that a 10% increase in adoptions leads to a 1.3%–1.5% decrease in the number of ART cycles performed. The responsiveness is higher when we consider infant adoptions, adoptions by older women, and international adoptions, while there is no substitutability between ART and adoption of related children. (JEL I11, J13, J18)     

OPTIMAL MONETARY POLICY AND IMPERFECT FINANCIAL MARKETS: A CASE FOR NEGATIVE NOMINAL INTEREST RATES?

This article studies optimal monetary policy in a model with credit frictions and money demand. We show that augmenting a standard New Keynesian model with money demand and financial frictions generates a mechanism that, in equilibrium, gives rise to optimal negative nominal interest rates. In addition, we find that the tighter credit markets are, the lower the optimal nominal policy interest rate and the more likely it is to be negative. Quantitatively, when credit constraints are binding, a standard calibration of the model generates an optimal nominal policy interest rate that is roughly ?4% annually. (JEL E31, E41, E43, E44, E52, E58)     

SPENDING WISELY? HOW RESOURCES AFFECT KNOWLEDGE PRODUCTION IN UNIVERSITIES

Every year billions of dollars are spent on research grants to produce new knowledge in universities. However, as grants may also affect other research funding, the effects of financial resources on knowledge production remain unclear. To uncover how financial resources affect knowledge production, we study the effects of research spending itself. Utilizing the legal constraints on university spending from an endowment we develop an instrumental variables approach. Our approach instruments for university research spending with time‐series variation in stock prices interacted with cross‐sectional variation in initial endowment market values for research universities in the United States. Our analysis reveals that research spending has a substantial positive effect on the number of papers produced, but not their impact. We also demonstrate that research spending effects are quite similar at private and public universities. (JEL H5, I2, O3)     

AFDC AND WORK: MAGNETS OR ANCHORS FOR THE POOR?

Literature analyzing the linkage between welfare and interstate migration is divided. Lack of consistent findings partially depends on sample used and time period when studies are done. Choice of analytical modeling technique has also led to divergent findings. This paper addresses these issues by comparing the effects of welfare and work on poor/nonpoor migration patterns using contemporary structural and household data. Findings offer no support for the welfare magnet hypothesis. Effects of Aid to Families with Dependent Children (AFDC) differ by poverty status at the place of destination for 1985 and 1990. Householders are migrating to states with lower AFDC benefits. Effects of work also differ by poverty status. For 1985, householders are moving to states with lower unemployment rates. For 1990, householders are moving to states with lower wages. In general, householders remain in states with lower AFDC benefits giving more credence to an anchor effect of higher welfare benefits.     

BENIGN NEGLECT OF COVENANT VIOLATIONS: BLISSFUL BANKING OR IGNORANT MONITORING?

Theoretically, bank's loan monitoring activity hinges critically on its capitalization. To proxy for monitoring intensity, we use changes in borrowers' investment following loan covenant violations, when creditors can intervene in the governance of the firm. Exploiting granular bank‐firm relationships observed in the syndicated loan market, we document substantial heterogeneity in monitoring across banks and through time. Better capitalized banks are more lenient monitors that intervene less with covenant violators. Importantly, this hands‐off approach is associated with improved borrowers' performance. Beyond enhancing financial resilience, regulation that requires banks to hold more capital may thus also mitigate the tightening of credit terms when firms experience shocks. (JEL G21, G32, G33, G34)     

CENTRALIZED OR DECENTRALIZED INFORMATION: WHICH IS BETTER FOR PROVIDING INCENTIVES?

A risk‐neutral ruler must invest in improving the quality of his country's infrastructures. Higher quality infrastructures increase the profitability of capital investment by foreign entrepreneurs. The ruler wishes to maximize the amount of capital investment that flows into the country. Before selecting their investment, entrepreneurs receive a signal on the quality of infrastructures. We consider two cases. First, all entrepreneurs observe the same signal (centralized information). Second, each entrepreneur receives an independently drawn signal (decentralized information). We compare the effectiveness of these two scenarios for incentivizing the ruler. We find remarkably clear‐cut results. When the entrepreneurs’ investments are strategic complements, centralized information does a better job in incentivizing the ruler. The opposite holds when investments are strategic substitutes. This may help understand the role of media, rating agencies, public announcements, and ambiguity. (JEL D82, D62)     

THE SOLOW RESIDUAL FOR AUSTRALIA: TECHNOLOGY SHOCKS OR FACTOR UTILIZATION?

This paper presents evidence which implies that fluctuations in the Solow residual for Australia do not solely reflect technology shocks. Recent work suggests that the Solow residual is a noisy measure of technology shocks. One source of noise in the standard measure of the Solow residual is changes in factor utilization. In this paper a structural vector autoregression model for capacity utilization and the Solow residual is estimated. A transitory shock is identified that accounts, for about 30% of the short term variation in the Solow residual and virtually 100% of the variation in capacity utilization at all horizons. ( JEL E3, E32, O4)     

FINANCIAL AND INSURANCE SERVICES TRADE: DOES EXCHANGE RATE OR INCOME MATTER?

This paper aims to investigate the impacts of exchange rate and income changes on financial and insurance services trade by utilizing the quarterly bilateral trade data of the United States and its major trading partners from 2003 to 2017. No long‐run exchange rate effects on imports and exports of insurance services trade are found. The impact of exchange rates on insurance services may be weak since competition among service providers depends on product differentiation than on exchange rates. On the contrary, income demonstrates significant impacts on both financial and insurance services trade in the United Kingdom, Canada, Japan and Australia. (JEL C22, F14, G20)     

ARE INVESTMENT EXPECTATIONS RATIONAL,ADAPTIVE OR REGRESSIVE?

A unique previously unavailable dataset is employed to study the nature of expectations formed by manufacturing plants as they plan their own capital expenditures. Both conventional rational expectations and adaptive expectations hypotheses are found to be inconsistent with the data, which instead favor a regressive expectations formation process. These results, obtained using real‐world data on plants, further develop the growing recent literature on survey expectations and the information about economic models that can be gleaned from them. (JEL E22, C23, C83)     

VIOLENCE OR DISCIPLINE? WORKING WITH MULTICULTURAL COURT-ORDERED CLIENTS

Therapists working with court-ordered clients from cultures differing from the mainstream face challenging issues of compulsory therapy in the context of cultural diversity. This article reviews the literature on court-ordered and multicultural counseling, highlighting central elements of both. It then suggests guidelines that blend these elements. The author illustrates how using these guidelines can enable therapists to engage these clients in the therapeutic process and focus on culture as the context for change.     

TALENT AND/OR POPULARITY: WHAT DOES IT TAKE TO BE A SUPERSTAR?

We show that both talent and popularity significantly contribute to stars' market values in German soccer. The talent‐versus‐popularity controversy on the sources of stardom goes back to Rosen (1981) and Adler (1985) . All attempts to resolve the controversy empirically face the difficulty of accurately identifying talent. In professional sports, rank‐order tournaments help in ascertaining talent. Analyzing a team setting, we use 20 different performance indicators to estimate a player's talent according to his ability to increase the team's winning probability. (JEL J31, J44, L83)