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Economics Working Papers, 2014

Copies may be downloaded on pdf, or hard copies may be requested from Joshua Hall, Working Paper Coordinator.


Author(s): Stratford Douglas and Anne Walker
Title: "Coal Mining and the Resource Curse in the Eastern United States."
Abstract: We measure the effect of resource sector dependence on long run income growth using the natural experiment of variation in coal endowments in a set of 409 relatively U.S. counties selected for homogeneity. Using a panel data set that extends over two separate boom and bust cycles (1970-2010), we find that coal dependence significantly reduces growth of per capita county income over the long run. These estimates indicate that a one standard deviation increase in the measure of resource intensity results in an estimated 0.7 percentage point drop in average annual growth rates. We also measure the extent to which the Appalachian coal resource curse operates by providing disincentives to education, and find that the education channel explains only about 15% to 40% of the curse.


Author(s): Eugene Bempong-Nyantakyi, Steven Husted, and Shuichiro Nishioka
Title: "Trade Frictions and Market Access of Developing Countries: A Product-Level Empirical Investigation."
Abstract: This paper examines the effects of trade frictions, including tariffs and a variety of factors that raise trade costs, on export market access at the product level and, in particular, the role these frictions have on the ability of developing countries to access world markets. We find that a variety of trade frictions do serve to limit market access. We find distance and efficiency in trade facilitation are significant determinants of the probability of success in entering foreign markets. We examine whether there are any systematic development-related biases from these frictions that further limit market access for exporters from developing countries. Our results suggest that developing countries are not differentially impacted by these factors. In the spirit of an earlier study by Markusen and Wigle (1990), we also conduct a series of counterfactual exercises to see the impact of significant reductions in trade frictions on developing country market access. In contrast to their results, our findings show that reductions in tariffs do not greatly improve the number of new markets for developing countries. Our results suggest a traditional recommendation to resolve the market access problem for developing countries: expansion and diversification of the industrial base and productivity improvements in the handling of exports. Both are vital preconditions to increasing the number of export markets.


Author(s): Stratford Douglas and W. Robert Reed
Title: "A Replication of 'The Political Determinants of Federal Expenditure at the State Level' (Public Choice, 2005)"
Abstract: This paper replicates and analyses a study by Hoover and Pecorino (2005) on federal spending in US states. H&P followed on path-breaking research by Atlas et al. (1995) in which evidence was claimed in favour of the "small state effect;" namely, that since every state is represented by two senators, small states have a disproportionate influence relative to their population size. Using H&P's data, we both replicate their results, and demonstrate strong support for the small state effect when we formally test their predictions. The contribution of this study is that we demonstrate that this empirical support vanishes when we (i) employ cluster robust standard errors rather than conventional OLS standard errors, and (ii) include a variable for population growth as suggested in a recent study by Larcinese et al. (2013). Our results lead us to conclude that there is no evidence to support the hypothesis of a "small state effect."


Author(s): Jamie Bologna
Title: "Is the Internet an Effective Mechanism for Reducing Corruption Experience? Evidence from a Cross-Section of Countries"
Abstract: This paper develops an indicator of Internet awareness of corruption as described in Goel et al. (2012) to see how this impacts both corruption perceptions and corruption experience.  The results confirm the finding of Goel et al. (2012) that corruption perceptions are highly influenced by Internet awareness. However, the effect Internet awareness has on corruption experience is unclear. This paper finds that Internet awareness decreases the frequency of corruption experience of households, while it increases the frequency of corruption experience in firms. Overall, the results suggest that the effect Internet awareness has on corruption is highly sensitive to the corruption measures used and the time the Internet data is constructed.


Author(s): Donald Lacombe and Amanda Ross
Title: "Revisiting the Question 'More Guns, Less Crime?' New Estimates Using Spatial Econometric Techniques"
Abstract: In a highly debated paper, Lott and Mustard (1997) found that allowing citizens to carry concealed handguns reduced crime. Since then, numerous researchers have questioned the validity of the findings. In addition, ongoing work has shown there is an important spatial component to crime. In this paper, we use spatial econometric techniques to estimate the impact of adoption of concealed weapons laws by some states on crime rates across the U.S. We find there are spillover effects of concealed weapons laws and that spatial dependence plays an important role when estimating the effect of these laws on crime.


Author(s): Amanda Ross and Anne Walker
Title: "Low Priority Laws and the Allocation of Police Resources"
Abstract: There is an ongoing literature in economics examining the deterrent effect of police officers on criminal activity. However, this literature tends to focus on the aggregate number of officers employed versus the relative allocation of an officer's time. In this paper, we examine how the reallocation of police resources affects police behavior and criminal activity using the adoption of low priority initiatives by some jurisdictions. Low priority initiatives mandated that minor marijuana possession offenses be the lowest enforcement priority for police officers. We first test whether adoption of the initiative decreased the arrest rate for minor marijuana possession offenses. If police officers devote fewer resources towards minor marijuana possession crimes, then more resources will be available to deter and solve more serious crimes. This would suggest that if misdemeanor marijuana arrest rates decreased, there may be a reduction in crime rates or clearance rates for more serious crimes, such as murder or robbery. Using city-level data from California, we find that those jurisdictions that adopted low priority laws experienced a reduction in arrests for misdemeanor marijuana offenses. However, we do not find a significant effect of enacting a low priority initiative on the crime rate or clearance rate of more serious felony crimes. Our findings are important for local policy makers, as we do not find evidence that the initiatives had an impact on more serious crimes as was intended by the legislation.


Author(s): Kaitlyn R. Wolf and Andrew T. Young
Title: "Globalization and Income Convergence"
Abstract: The income convergence literature suggests that poor countries can catch-up to rich ones conditional on sharing certain characteristics with rich countries. Good institutions such as strong property rights and rule-of-law are key amongst those characteristics. From a policy perspective this is disheartening because economists have little understanding of how to transplant those institutions to developing countries. Worse, good informal institutions seem to be a necessary condition for formal institutions to "stick". However, to the extent that good institutions can arise as a "spontaneous order" from individuals interacting with one another, allowing for an "open society" may be an effective development policy. To evaluate this proposition we explore whether or not increased globalization fosters income convergence. Based on a panel of up to 184 countries covering the years 1970 to 2009 we conclude that it does. In particular, the social dimension (as opposed to the economic or political dimensions) of globalization is robustly related to income convergence.


Author(s): Jac C. Heckelman and Andrew T. Young
Title: "How Global is Globalization?"
Abstract: We examine a balanced panel of globalization indices for 129 countries over the years 1991-2010. We report evidence of cross-country sigma convergence in the overall globalization index. Sigma convergence also holds for each of the economic, political, and social globalization indices, as well as each sub-index within these indices. However, the evidence for stochastic convergence, based on panel unit root tests, is only strong for the political globalization index. Regarding the economic and social dimensions of globalization, respectively, we find evidence for stochastic convergence only in the flows and cultural proximity sub-indices. For the OECD subsample, evidence supports stochastic convergence for the overall, economic and political globalization indices. Evidence to support regional convergence among the non-OECD nations on various globalization dimensions is much more limited. Our findings indicate that globalization convergence is truly global only on the political dimension.


Author(s): Amanda Mandzik and Andrew T. Young
Title: "Religion and AIDS in Sub-Saharan Africa: Unbundling Religious Institutions"
Abstract: "Evidence of relationships between religious affiliation and the African AIDS pandemic is found in the medical, religion, and sociology literatures. In particular, studies have shown that predominantly Christian countries tend to have higher HIV rates than predominantly Muslim countries. These relationships have been largely unexplored by economists and we seek to identify underlying institutions using a panel of up to 43 sub-Saharan African countries for 1990-2010. Catholic antagonism towards condom use has often but proposed, but we report that the protestant (rather than the Catholic) population share drives the Christianity/HIV correlation. (Also, condom use actually correlates positively with HIV prevalence, though reverse causation likely plays a role). Male circumcision rates have a large negative effect on HIV prevalence. While male circumcision has been linked to Islam in this context, we report that the male circumcision effect is robust to controlling for the Christian population share while the correlation of HIV prevalence and the Muslim population share is not. There is no significant relationship between an index of social regulation of religion and HIV prevalence.


Author(s): Maryam Naghsh Nejad and Andrew T. Young
Title: "Female Brain Drains and Women's Rights Gaps: A Gravity Model Analysis of Bilateral Migration Flows"
Abstract: "In this paper we model the migration decisions of high-skilled women as a function of the benefits associated with moving from an origin with relatively low women´s rights to a destination with a relatively high women´s rights. However, the costs faced by women are decreasing in the level of women´s rights provided. The model predicts a non-linear relationship between the relative levels of women's rights in destination versus origin countries (the women's rights gap) and the gender gap in high-skilled migration flows (the female brain drain ratio). In particular, starting from large values of the women´s rights gap (where women´s rights are very low in the origin) decreases in the gap may be associated with increases in the female brain drain ratio. However, starting from lower levels of the gap the relationship is positive: a greater gain in women´s rights moving from origin to destination is, all else equal, associated with a greater likelihood of migration. Using a cross section of over 3,000 bilateral migration flows across OECD and non-OECD countries and the women's rights indices from the CIRI Human Rights Dataset, we report evidence consistent with the theory. A statistically significant and nonlinear relationship exists between women's rights gaps and female brain drain ratios. The evidence is particularly strong for the case of women's political rights.


Author(s): Jamie Bologna, Donald J. Lacombe, and Andrew T. Young
Title: "A Spatial Analysis of Incomes and Institutional Quality: Evidence from U.S. Metropolitan Areas"
Abstract: We use the Stansel (2013) metropolitan area economic freedom index and 25 conditioning variables to analyze the spatial relationships between institutional quality and economic outcomes across 381 U.S. metropolitan areas. Specifically, we allow for spatial dependence in both the dependent and independent variables and estimate how economic freedom impacts both per-capita income growth and per-capita income levels. We find that while economic freedom and income levels are directly and positively related, increases in economic freedom in one area result in negative indirect effects on income levels in surrounding areas. In addition, we find that economic freedom has an insignificant relationship with economic growth.


Author(s): Shawn M. Rohlin and Amanda Ross
Title: "State Bankruptcy Law and Entrepreneurship: Evidence from a Border Analysis"
Abstract: This paper examines how differences in state bankruptcy laws, specifically the amount of the homestead exemption, affect business location decisions within a few miles of the state boundary. By focusing on these border areas, we are able to more effectively control for unobserved local attributes and isolate the effect of more wealth protection. We find that an increase in the homestead exemption attracts new businesses. We also find that a more generous homestead exemption has a positive impact on existing businesses, suggesting that asset protection through bankruptcy law encourages successful entrepreneurs to incur the risks. Our results indicate that the wealth protection provided by personal bankruptcy law is an important policy tool that state governments can use to attract new, successful businesses owners.


Author(s): Joshua Hall
Title: "Local Government Border Congruence and the Fiscal Commons: Evidence from Ohio School Districts"
Abstract: School district and municipal borders do not always align. Non-congruent borders can create a fiscal commons problem where new development does not entirely "pay its way." In response, frustrated citizens often respond by voting for lower school spending. Using GIS data on Ohio school districts, the degree of non-congruence between school district and municipal territory is calculated. The results indicate that school districts with non-congruent borders generate less revenue from local sources and that these effects seem to increase with the degree of non-congruence. The findings are robust between OLS and treatment effects regression.


Author(s): Kaitlyn Harger and Amanda Ross
Title: "Do Capital Tax Incentives Attract New Businesses? Evidence across Industries from the New Markets Tax Credit"
Abstract: All levels of government pursue policies to attract new businesses with the hope that these enterprises will create local economic growth. In this paper, we use the New Markets Tax Credit (NMTC) to determine the effect of a capital tax credit on where firms in different types of industries locate. When estimating the impact of the NMTC on business location, there are likely to be unobservable local characteristics that are correlated with where businesses choose to open that would cause OLS estimates to be biased. To control for the endogenous selection, we use a plausibly exogenous eligibility cutoff and compare census tracts that are just eligible for the tax credit to those that are just ineligible. Using data from the Dun and Bradstreet MarketPlace Files, we find that in Metropolitan Statistical Areas, the NMTC incentivized new businesses to locate in tracts that were eligible for the tax credit in 2002 and 2004. However, we find that in 2006 the tax credit deterred new establishments. When we stratify the 2006 sample by industry, we find that this capital tax credit attracted more capital intensive industries, such as manufacturing, while deterring more labor intensive industries, such as services. Our results are important to policy makers, as we find that the type of tax credit offered causes a sorting of different industries across locations. 


Author(s): Michael D. Eriksen and Amanda Ross
Title: "Housing Vouchers and the Price of Rental Housing"
Abstract: We estimate the effect of increasing the supply of housing vouchers on rents using a panel of housing units in the American Housing Survey. We do not find that an increase in vouchers affected the overall price of rental housing, but do estimate differences in effects based on an individual unit's rent before the voucher expansion. Our results are consistent with voucher recipients renting more expensive units after receiving the subsidy. We also find that the largest price increases were for units near the maximum allowable voucher rent in cities with an inelastic housing supply.


Author(s): Joshua Hall and Kaitlyn Harger
Title: "Teaching Students to "Do" Public Choice in an Undergraduate Public Sector Course
Abstract: This paper discusses one approach to using writing assignments in an undergraduate public economics to get students actively involved in doing public choice. Our goal is to provide an overview of the course and its writing assignments with an emphasis on how the scaffolding of assignments helps contribute to the development of interesting and publishable ideas in public choice. A course in public economics provides a good opportunity for an instructor to develop student interest in applied public choice.


Author(s): Brad R. Humphreys and Li Zhou
Title: "Loss Aversion, Team Relocations, and Major League Expansion"
Abstract: Professional sports teams receive large public subsidies for new facility construction. Empirical research suggests that these subsidies cannot be justified by tangible or intangible economic benefits. We develop a model of bargaining between local governments and teams over subsidies that includes league expansion decisions. The model features loss aversion by fans that captures lost utility when a team leaves a city. The model predicts that teams exploit this loss aversion to extract larger than expected subsidies from local governments, providing an explanation for these large subsidies and highlighting the importance of anti-trust exemptions in enhancing teams' bargaining positions.


Author(s): Crocker H. Liu, Adam D. Nowak, and Stuart Rosenthal
Title: "Bubbles, Post-Crash Dynamics, and the Housing Market"
Abstract: This paper documents and explains previously unrecognized post-crash dynamics following the collapse of a housing bubble. A simple model predicts that speculative developers ensure stable pre-crash relative prices between small and large homes while their post-crash exit allows small-home relative values to fall. Evidence from Phoenix supports the model. Although home prices doubled 2004-2006, relative prices of small-to-large homes remained nearly constant but then plummeted post-crash. As speculative developers return relative prices must return to pre-boom levels, consistent with patterns since 2011. Anticipated mean reversion indicates that cities can reduce post-crash volatility and mispricing by publicizing size-stratified house price indexes.


Author(s): XiaoGang Che and Brad R. Humphreys
Title: "Contests with a Price Externality and Stochastic Entry"
Abstract: We analyze a contest with stochastic participation and a prize externality. A unique symmetric equilibrium exists in the contest. We demonstrate that the presence of a prize externality affects individual equilibrium spending but active participants always face the same expected payoff as in a contest without a prize externality. A positive prize externality gives a higher impact on individual equilibrium spending than a negative prize externality. Regardless of the existence and the sign of a prize externality, ex-post over-dissipation occurs if the actual number of participants is sufficiently large. Independent of the prize externality's sign, active participants spend less but face a higher payoff compared to a fixed-participation contest with the same expected number of players.


Author(s): Karl L. Guntermann, Crocker Liu, and Adam D. Nowak
Title: "Repeat Sales Methods for Growing Cities and Short Horizons"
Abstract: The accurate estimation of real estate indices is important for many purposes. A common method to estimate these indices is to use a repeat‐sales procedure. Although this does not require property attributes, this method discards a large amount of sales. This paper proposes a method that can be used to incorporate a significant percentage of these discarded observations without requiring additional data collection by the researcher. We apply our method to the metropolitan statistical areas of Phoenix and Seattle and find that standard errors are on average two‐thirds the value of standard errors from a repeat‐sales procedure in Seattle and three‐eighths the value in Phoenix.


Author(s): Kaitlyn Harger and Joshua Hall
Title: "Obedience and Income Levels"
Abstract: We revisit the relationship between informal institutions and income levels. The empirical literature on institutions finds that indices of "informal institutions" such as trust, respect, respect, self-determination, and obedience are more important than "formal institutions" such as constitutional constraints in explaining income levels across countries. We add to this literature in two ways. First, we separate out the index of informal institutions into its component parts to see which informal institutions are primary. Second, we construct two new measures of obedience to test the robustness of obedience. Our reduced-form results indicate the primacy of obedience over other informal institutions.


Author(s): Brad R. Humphreys and Li Zhou
Title: "The Louis-Schmelling Paradox and the League Standing Effect Reconsidered"
Abstract: Fifty years on we examine two key propositions in Neale's (1964) "Peculiar Economics": the need for competitors in sport to have opponents of similar ability in order to earn large revenues and the effect of frequent changes sports leagues' standings on consumer demand. We develop a consumer choice model under uncertainty, and a structural econometric model, to motivate and test these ideas. Unfortunately, neither receives much empirical or theoretical support relative to alternative factors affecting consumer choice like loss aversion and home win preference.


Author(s): Jamie Bologna and Joshua C. Hall
Title: “Economic Freedom Research: Some Comments and Suggestions”
Abstract: The Economic Freedom of the World (EFW) index is extensively used in academic research to show how economic freedom relates to a wide array of economic and social outcomes. Given this, it is important that researchers understand the goal of the index and how to properly utilize this index in their research. There seem to be several common misconceptions about the EFW index resulting from a simple misunderstanding of the index itself. This paper discusses each of these misconceptions in turn and makes suggestions for future research. This paper aims to significantly improve the quality of research using the EFW index, and possibly the EFW index itself through the development of new datasets and weighting schemes.


Author(s): Brad R. Humphreys and Jie Yang
Title: “Peer Enforcement in Teams: Evidence from High-Skill Professional Workers with Repeated Interactions”
Abstract: Organizing employees into teams increases productivity but also generates incentives to shirk. Recent research suggests that peer enforcement plays an important role in deterring shirking in teams. We analyze 10 years of performance and compensation data for NFL offensive linemen, a high-skill, high-salary and repeatedly interacting team, using the Hausman-Taylor estimator to control for unobservable individual-specific heterogeneity. We find evidence that teammates’ effort signals reduce the salaries of individual offensive linemen, providing an optimal, low powered sanctioning mechanism for individual workers in this setting, and that a separate, independently monitored individual effort signal also reduces salaries.


Author(s): Brad R. Humphreys and Jane E. Ruseski
Title: “Adolescent Steroid Use and Intercollegiate Athletic Incentives”
Abstract: We examine the relationship between college athletic scholarships and adolescent use of performance enhancing drugs. Annually, 4.5 million male high school athletes compete for about 132,000 athletic scholarships o_ered by NCAA Division I and II universities. Estimates from a probit model of self-reported steroid use among US adolescent males using data from the YRBSS suggest each sanction-related athletic scholarship reduction at NCAA institutions in a state increases the probability that high school males in that state report using steroids by 3%. Competition for athletic scholarships generates incentives for adolescent males to improve athletic performance through use of steroids.


Author(s): Jamie Bologna
Title: “The Effect of Informal Employment and Corruption on Income Levels in Brazil”
Abstract: This paper exploits a unique dataset on corruption and informal sector employment in 476 Brazilian municipalities to estimate whether corruption impacts GDP or income levels once variation in informal economic activity is taken into account. Overall, I find that higher levels of corruption and a larger informal economy are generally associated with poor economic outcomes. However, only the size of the informal economy has a statistically significant effect. This effect is robust to the inclusion of a variety of controls and fixed effects, as well as an instrumental variable analysis. Further, these effects are large in magnitude. For example, a one standard deviation increase in the share of total employees that are informally employed explains a decrease in GDP per-capita of about 18 percent.


Author(s): Ninos P. Malek, Joshua C. Hall, and Collin Hodges
Title: "A Review and Analysis of the Effectiveness of Alternative Teaching Methods on Student Learning in Economics"
Abstract: Drawing largely on educational literature outside of economics, we provide a survey of perspectives on alternative teaching methods. We then report results regarding the effectiveness of various alternative methods such as cooperative learning, class discussions, and the use of multimedia sources compared to lecture-only instruction. A difference-in-means test is utilized to compare gains in learning between control classes and treatment classes. Alternative teaching methods were not shown to increase student performance in a statistically significant manner.


Author(s): Danko Tarabar and Joshua C. Hall
Title: "The Seventeenth Amendment, Senate Ideology, and the Growth of Government"
Abstract: The 17th Amendment disturbed the existing electoral system in the United States by requiring direct elections for state Senators. Scholars have argued this made the Senate more populist and contributed to the growth of government in the US post-1913. We employ econometric tools to investigate whether the mean ideology of the Senate and its winning policies experienced a structural change around the time of the enactment. We find no compelling evidence of a structural break at that time but do find some evidence for a change in the mid-to-late 1890s.


Author(s): Adam Hoffer, Brad R. Humphreys, Donald J. Lacombe, and Jane E. Ruseski
Title: "The NCAA Athletics Arms Race: Theory and Evidence"
Abstract: We develop and empirically test a model of intercollegiate athletic department expenditure decisions. The model extends general dynamic models of nonprice competition and includes the idea that nonprofit athletic departments may simply set expenditure equal to revenues. Own and rival prestige is included in the athletic departments' utility function, generating rivalrous interaction. The model predicts that current own and rival investment has multiperiod effects on prestige since investment is durable. We test the model using data from NCAA Division I athletic programs from 2006-2011; the models incorporate spatial autocorrelation that capture dynamic rivalrous interaction. Results support the prediction of both models - NCAA Division I athletic programs appear to engage in dynamic non-price competition in terms of expenditure and spend all revenues generated.


Author(s): Elaina Rose and Ho-Po Crystal Wong
Title: "But Who Will Get Billy? The Effect of Child Custody Laws on Marriage"
Abstract: Under the tender years doctrine in effect until the 1970’s, custody was virtually always awarded to the mother upon divorce. Gender-neutral custody laws introduced beginning in the 1970’s provided married fathers, in principle, equal rights to custody. Subsequent marriage-neutral laws extended the rights to unmarried fathers. We develop a theoretical model of the effect of custody regime on marriage and test the model’s predictions using a unique data set that merges custody law data with data from the Current Population Survey and Vital Statistics. We find that, under marriage non-neutrality, the introduction of gender-neutral laws reduced the hazard into marriage by at least 7.9 percent. There is no evidence that moving from marriage non-neutrality to marriage neutrality affected marriage under the gender-neutral custody regime.


Author(s): Ho-Po Crystal Wong
Title: "The Effects of Endogamous Marriage on Family Outcomes: Evidence from Exogenous Variation in Immigrant Flows During 1900-1930 in the United States"
Abstract: Positive assortative matching in terms of traits like ethnicity, race and personality has been prevalent in marital formation. One possible explanation for this is that husbands and wives in endogamous marriages have complementary skills and tastes that increase marital surplus. This paper aims to estimate the effects of ethnic assortative matching on a variety of household outcomes by using the exogenous variation in immigrant flows in the United States during the period 1900-1930 to disentangle the selection effect of partners. The major finding is that the complementarities in home production from same ethnic marriage enhances investment in household public goods such as childrearing and home ownership and reduces the market labor supply of wives. OLS and Logit estimates of this effect appear to be substantially biased downward, indicating positive selection into intermarriage in terms of unobservable traits that increase marital surplus.


Author(s): Ho-Po Crystal Wong
Title: "The Importance of Credible Commitments in Marriage: The Effect of Recognizing Homemakers’ Contribution in Property Division at Divorce in Law on Marital Formation and Dissolution"
Abstract: The unilateral divorce reform in the 1970's has been accompanied by a secular decline in marriage. This paper investigates how the homemaking provision in divorce law that gives recognition to homemakers' contribution during marriage in divorce property division affects marital formation and dissolution. Hypothetically the provision enhances the commitment to homemakers in marriage, which would increase the incentives to form marriage as it encourages spousal co-operation in time-allocation and marriage-specific investment. I find evidence that the homemaking provision stimulates marriage using both state and individual level data. The law also lowers divorce risk for individuals married prior to the reform by at least 9.7 percent.


Author(s): Russell S. Sobel and Joshua C. Hall
Title: "Has the War between the Rent Seekers Escalated?"
Abstract: Vedder and Gallaway (1991) develop and test a unique theory about the interactions between the levels of spending captured by rent-seeking interest groups. They hypothesize that initially rent seekers cooperate in ways that expand government spending and rents. At some point, however, groups can only expand their rents at the expense of other rent-seekers and that this relationship will strengthen over time. In this brief note, we update their empirical model 20 years into the future and find their prediction was accurate. The relationship is now stronger and more states have moved into the negative range.


Author(s): Joshua C. Hall, Kaitlyn Harger, and Dean Stansel
Title: "Economic Freedom and Recidivism: Evidence from US States"
Abstract: This paper provides an exploratory analysis into factors contributing to differences across states in recidivism rates. We provide the first such examination that incorporates differences in economic freedom. Using a panel data set from 1998-2010, we find that higher levels of economic freedom within a state are associated with lower recidivism rates within that state. A one percent increase in economic freedom is associated with a 0.47 percent decrease in recidivism. The relationship is stronger and more statistically significant for labor market freedom, with a one percent increase in labor market freedom being associated with a 0.67 percent decline in recidivism.


Author(s): Andrew T. Young, Matthew J. Higgins, Donald J. Lacombe, and Briana Sell
Title: "The Direct and Indirect Effects of Small Business Administration Lending on Growth: Evidence from U.S. County-Level Data"
Abstract: This paper provides an exploratory analysis into factors contributing to differences across states in recidivism rates. We provide the first such examination that incorporates differences in economic freedom. Using a panel data set from 1998-2010, we find that higher levels of economic freedom within a state are associated with lower recidivism rates within that state. A one percent increase in economic freedom is associated with a 0.47 percent decrease in recidivism. The relationship is stronger and more statistically significant for labor market freedom, with a one percent increase in labor market freedom being associated with a 0.67 percent decline in recidivism.


Author(s): Jamie Bologna and Andrew T. Young
Title: "Crises and Government: Some Empirical Evidence"
Abstract: We examine a panel of 70 countries during 1966-2010 and utilize Reinhart and Rogoff crisis dates to estimate the effects of crises on the size and scope of government over both 5-year and 10-year horizons. We also estimate cross section regressions using 40-year (1970-2010) changes in government variables. Banking crises appear to be associated with decreases in the size and scope of government, while sovereign external debt crises are associated with increases. Otherwise, the size and scope of government appears to be persistent to the extent that even crisis episodes fail to leave a significant mark upon them. A notable exception may be that, over 40-year periods, countries that spend more years in crisis are associated with weaker legal systems and property rights.


Author(s): Andrew T. Young
Title: "From Caesar to Tacitus: Changes in Early Germanic Governance circa 50 BC-50 AD"
Abstract: Julius Caesar and Cornelius Tacitus provide characterizations of early Germanic (barbarian) society around, respectively, 50 BC and 50 AD. The earlier date corresponds to expansion of Rome to the Rhine and Danube. During the subsequent century Germanic governance institutions changed in a number of ways. In particular, (1) temporary military commanders elected from the nobility gave way to standing retinues under the leadership of professional commanders, (2) public assemblies met more frequently and regularly, (3) councils made up of nobility gained agenda control in the assemblies, and (4) these councils relinquished their control over the allocations of land. I account for these constitutional exchanges in light of Rome’s encroachment upon Germania. In particular, it brought new sources of wealth and also constraints on the expansion of Germans into new lands. Incentives favored a reallocation of resources away from pastoralism and towards both sedentary farming and raids across the frontier.


Author(s): Zachary McGurk and Adam Nowak
Title: "The Relationship Between Stock Returns and Investor Sentiment: Evidence from Social Media"
Abstract: The recent behavioral finance literature has found investor sentiment having some predictive ability in equity returns. This differs from the standard finance theory provides no role for investor sentiment. We examine the relationship between investor sentiment and stock returns by employing textual analysis on social media posts. Overall we find that our investor sentiment measure has a positive and significant effect on stock returns. These finds are consistent across a number of different models and specifications, thus finding further evidence against the standard finance theory.


Author(s): Brad R. Humphreys
Title: "The Myth of Sports-Led Economic Development"
Abstract: Public subsidization of professional sports facilities has been prevalent for the past 40 years in the United States. These subsidies are allegedly justified by economic benefits owing from sports facilities, including the creation of new jobs, new tax revenues and higher income. Recent research suggests that cities have not benefited economically from the boom in professional stadium and arena construction; cities that built new sports facilities over the period 1969-1997 have experienced lower inflation adjusted income per person than those where no new facilities were built. This research calls into question the justification for public subsidization of professional sports facilities.


Author(s): Durga Gautam
Title: "Remittances and Governance: Does the Government Free Ride?"
Abstract: Through what channel and to what extent does the inflow of remittances affect the quality of governance in the recipient countries? Recent studies suggest that a rise in remittances reduces public goods provision. Scholars generally agree that remittances increase consumption expenditure of the recipient households. This implicit positive correlation between remittances and the ratio of household to government consumption indicates an increasing share of private goods in household consumption. The decreasing share of public goods, on the other hand, tends to reduce households0 incentives to monitor and hold the government accountable. As a result, the external benefits generated by household consumption induce the government to substitute the provision of public goods for remittances, thereby raising the scope of expected benefits for a rational government official from illegitimate transactions with a private partner. Using recently advanced kernel regression methods, we find that remittances lead to higher corruption and poor governance in countries with higher private consumption. These results provide supports for the ongoing global efforts to redirect remittance flows from household consumption toward productive investments.