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Economics Working Papers, 2015

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


Author(s): Joshua Hall, Robert Lawson and Saurav Roychoudhury
Title: "Creating the Environment for Entrepreneurship through Economic Freedom"
Abstract: In this paper we argue that the ability of people to freely trade, enter into contracts, and start businesses in a system of private property and the rule of law is crucial for productive entrepreneurship. One measure of how freely individuals can engage in economic activity is the Economic Freedom of the World (EFW) index. After examining the economic policies that harm economic freedom and possibly entrepreneurship, we highlight the correspondence between economic freedom and a number of measures of entrepreneurship. We conclude with some thoughts regarding future research involving economic freedom and entrepreneurship.


Author(s): Michael Williams and Joshua Hall
Title: "Hackerspaces: A Case Study in the Creation and Management of a Common Pool Resource"
Abstract: Hackerspaces are community-operated physical places where individuals get together to build things. While the organization itself is private, the ‘space’ that is created for individuals to work has elements of a common pool resource (CPR). Previous literature finds technology to be important in effective CPR management. Through an ethnographic study of a hackerspace, we show how technology is crucial for management of the ‘space’. In addition, we highlight how technology is used in hackerspaces to satisfy three of Elinor Ostrom’s design principles for stable CPR management.


Author(s): Eric Bowen and Donald J. Lacombe
Title: "Spatial interaction of Renewable Portfolio Standards and their effect on renewable generation within NERC regions"
Abstract: While several studies have examined the effectiveness of renewable portfolio standard laws on renewable generation in states, previous literature has not assessed the potential for spatial dependence in these policies. Spatial dependence in the electric grid is likely, considering the connectivity of the electric grid across NERC regions. Using the latest spatial panel methods, this paper estimates a number of econometric models to examine the impact of RPS policies when spatial autocorrelation is taken into account. Consistent with previous literature, we find that RPS laws do not have a significant impact on renewable generation within a state. However, once spatial dependence is accounted for, we find evidence that a state’s RPS laws have a significant positive impact on the share of renewable generation the NERC region as a whole. These findings provide evidence that electricity markets are efficiently finding the lowest-cost locations to serve renewable load to states with more stringent RPS laws.


Author(s): Ho-Po Crystal Wong
Title: "The Quantity and Quality Adjustment of Births when Having More is Not Subsidized: the Effect of the TANF Family Cap on Fertility and Birth Weight"
Abstract: I examine whether the family cap policy that reduces or eliminates incremental welfare benefits for additional births born to mothers already on welfare would affect both the quantity and quality of births in terms of birth weight. I find that the family cap produces very pronounced effect on reducing out of wedlock birth and low birth weight rates among teenagers. The evidence suggests that the family cap policy might not just produce a deterrent effect on non-marital childbearing but also a quality effect on birth: those births that actually occur are endowed with better health in terms of birth weight.


Author(s): Jamie Bologna and Amanda Ross
Title: "Corruption and Entrepreneurship: Evidence from a Random Audit Program"
Abstract: In this paper, we examine the effect of corruption on business activity in Brazilian municipalities. Previous research that has examined the impact of corruption has relied primarily on survey or conviction data, which may be problematic as these measures likely to be biased. We use a new measure of corruption that draws upon random audit data of municipal governments’ finances in Brazil. We find that higher levels of corruption cause reductions in the number of businesses operating in an area. Furthermore, we find that these effects become larger over time, suggesting that corruption is more detrimental to long-run economic activity. However, we find that if institutional quality is poor, then higher levels of corruption result in more businesses locating in a jurisdiction. This supports the argument that if there are poor institutions operating in an area, corruption can “grease the wheels” and is an alternative mechanism to help new businesses in the area.


Author(s): Brad Humphreys and Adam Nowak
Title: "Professional Sports Facilities, Teams and Property Values: Evidence from Seattle's Key Arena"
Abstract: Professional sports teams and facilities can generate negative or positive amenities to be capitalized into nearby property prices. We investigate the effect of the departure of a National Basketball Association team, the Seattle SuperSonics, from Key Arena in Seattle in 2008 on nearby residential property values. The arena continued to operate after the team left, so this departure represents a natural experiment to identify the net effects of a sports team from the effect of a facility and other events that take place in the facility. Results from a repeat sale regression model indicate that the departure of the SuperSonics was associated with excess appreciation of condo prices near Key Arena, suggesting that the team generated disamenities in this market.


Author(s): Joshua Hall, Dean Stansel and Danko Tarabar
Title: "Economic Freedom Studies at the State Level: A Survey"
Abstract: This chapter synthesizes and elaborates on much of the existing research using the Economic Freedom of North America (EFNA) index. Our consensus after reading this literature is that the EFNA index, similarly to the Economic Freedom of the World (EFW) index, is largely positively related with “good” outcomes, and negatively related with “bad” ones, although there are a few exceptions. The literature using the EFNA is growing rapidly and can provide a useful guide towards future policy changes and economic outcomes.


Author(s): Alexander William Salter and Andrew T. Young
Title: "Would a Free Banking System Target NGDP Growth?"
Abstract: Building on Selgin (1994), we develop a simple model of free banking and study the system’s effects on familiar macroeconomic variables. We show a free banking system does in fact stabilize nominal income in response to aggregate demand shocks. However, in the event of an aggregate supply shock, a free banking system instead stabilizes inflation, engaging in mildly pro-cyclical behavior. We conclude by calling for a broader study of nominal income targeting and free banking in the tradition of ‘monetary constitutionalism’ (Yeager 1962; White et al. 2014) to ascertain whether this result, while almost certainly not the best of all possible worlds, is in fact the best of all probable worlds.


Author(s): Andrew T. Young
Title: "Visigothic Retinues: Roving Bandits that Succeeded Rome"
Abstract: I employ a case study of the Visigoths in the fourth and fifth centuries to analyze the collective action problems faced by roving versus stationary bandits. A roving bandit provides exclusive collective goods to its members. A stationary bandit also provides exclusive goods to its members, but it also provides inclusive collective goods to out-group individuals in its domain. The inclusive goods provided to the out-group are an input to the production of the exclusive goods enjoyed by the in-group members. I describe how the transition from the former to the latter likely involves redefinition of the relevant group, its shared interest, and the type of good(s) that it provides. The Gothic retinues of the fourth century were essentially roving bandits. Having been driven across the Danube into the Roman Empire by an invasion of Huns, a group of these retinues formed the Visigothic confederacy. The Visigoths sacked Rome and were subsequently settled in Gaul, eventually becoming the stationary Visigothic Kingdom. I describe how the Visigothic elite came to recognize an encompassing interest in their domain and drew upon the human capital of the Gallo-Roman senators to provide inclusive collective goods.


Author(s): Joshua Hall and Marta Podemska-Mikluch
Title: "Teaching the Economic Way of Thinking Through Op-eds"
Abstract: There are many goals an instructor may wish to accomplish in a course on economic principles. For us one goal should be the education of a generation of sensible and active members of civil society. This is an ambitious goal: it requires that students internalize the economic way of thinking and learn to exercise active citizenry. After experimenting with a variety of methods, we have concluded that requiring students to write an op-ed is the most conducive to the development of the economic way of thinking. Here we share what we have learned in the process, hoping that the pedagogical capability of writing an op-ed will encourage others to adopt the assignment into their classrooms.


Author(s): Chris Shultz, Joshua Hall and Michael P. Strager
Title: "Production of Wind Energy and Agricultural Land Values: Evidence from Pennsylvania"
Abstract: Given the push toward renewable and alternative energy, a new energy mix is emerging. Wind is the fastest growing source of renewable electricity in the United States. The siting of wind turbines has proven controversial with multiple operations facing local resistance. Opponents cite issues such as noise, bird deaths, and aesthetics. Given that farmer portfolios are heavily comprised of land assets, the possibility that surrounding wind energy operations may reduce agricultural land value is of concern. This study examines that possibility using a hedonic regression analysis comparing per acre land value to a series of land characteristics and distance variables for Somerset County, PA. Results indicate no significant relationship between the presence of wind turbines and the value of agricultural land. This confirms the findings of similar studies which have examined the same relationship.


Author(s): Scott Beaulier, Robert Elder, Cheryl Han and Joshua Hall
Title: "An Ordinal Ranking of Economic Institutions"
Abstract: We provide the first ranking of countries’ economic institutions using an ordinal methodology. Using the five areas of the Fraser Institute’s Economic Freedom of the World (EFW) Index, we find that final rankings of a country’s institutions are sensitive to the importance-ordering of Area 1 (Size of Government). When Areas 2-5 are in the most important position, we find that there is no significant difference between the EFW rankings and our rankings. When Area 1 is placed in the most important position, however, a number of European countries with large welfare states but good governance do poorly.


Author(s): Erin Borchers, John Deskins and Amanda Ross
Title: "Can State Tax Policies Be Used to Grow Small and Large Business?"
Abstract: The existing literature studying the relationship between small business activity and U.S. state tax policy has focused primarily on a few measures of small business. We expand this literature by estimating the effect of state tax policy on small businesses by using a broader measures of small business activity using a longitudinal dataset for the U.S. states. We also estimate the relationship between state tax policy and large business activity. Results provide evidence that state tax policy can influence small business firm, establishment, payroll, and employment growth in important ways but provide limited evidence that such policy significantly influences large business growth.


Author(s): Joshua Hall and Antonis Koumpias
Title: "The Volatility of School District Income Tax Revenues: Is Tax Base Diversification a Good Idea?"
Abstract: School districts typically derive their own-source revenue from the property tax. Ohio is a prominent exception as local school districts have the option of diversifying their revenue base by adopting a residency-based income tax. While diversification has clear benefits, a potential downside is greater revenue volatility. Using a panel of 609 Ohio school districts from 1990 to 2008, we find that while school district revenues from the income tax are pro-cyclical, they fluctuate mildly. We also find that for every dollar increase in school district income, revenues from the income tax increased by 25 cents per pupil.


Author(s): Bryan McCannon, Colleen Tokar Asaad and Mark Wilson
Title: "Contracts and Trust"
Abstract: Social preferences and third-party enforcement of formal contracts are two mechanisms that facilitate performance of an agreement. The standard argument is that formal contracting substitutes when social preferences are lacking. We explore the hypothesis that social preferences and contract enforcement are complements. We measure social preferences from a Trust Game and use it is an explanatory variable in a contract game. We find that both increased contract enforcement and high trusting preferences lead to enhanced rates of contract formation and larger investments. There is an interaction effect where trusting individuals make larger investment agreements, specifically when enforcement is greater. Thus, contracts and social preferences complement one another.


Authors: Claudio Detotto and Bryan McCannon
Title: "Economic Freedom and Public, Non-Market Institutions: Evidence from Criminal Prosecution"
Abstract: Economic freedom, which measures the protection of property and freedom to contract, is generally argued to capture the quality of a state’s institutions regarding market activity. As to be expected, numerous studies have found that economic freedom is associated with good economic outcomes. Additionally, much effort in public economics has worked to identify the features of quality non-market public institutions. No effort has been made to connect institutions that influence market activity and institutions that govern non-market activities. We take a first step. We employ a linear programming method for measuring relative efficiencies known as Data Envelopment Analysis. We apply this technique to information on the use of inputs to the production of the prosecution of crime across the thousands of local prosecutor offices in the U.S. We then compare state-level measurements of prosecution productivity with data on state-level economic freedom from the Economic Freedom of North America index. We show that there is a positive and statistically significant relationship between the two. Those states that develop institutions respecting economic freedom also tend to be the states that develop efficient publicly-provided services.


Author(s): Joshua Hall, Brad Humphreys and Jane Ruseski
Title: "Economic Freedom and Participation in Physical Activity"
Abstract: Physical activity is an important part of a healthy lifestyle and influences a variety of health outcomes. Across countries, economic freedom has been found to be positively associated with greater participation in physical activity and well-being. We empirically investigate the relationship between economic freedom and physical activity across U.S. states. Contrary to the cross-country results, we find that states with higher levels of economic freedom have lower rates of participation in physical activity.


Author(s): Joshua Hall, Amanda Ross and Christopher Yencha
Title: "The Political Economy of the Essential Air Service Program"
Abstract: We find that congressional influences affect the amount of airport subsidies that a congressional district receives from the Essential Air Service (EAS) program. The EAS program was passed with the goal of helping to continue commercial air service to rural communities following the deregulation of the airline industry. Using subsidy data from 1998-2014, we find strong evidence that subsidies are higher in districts having congressional representation on the House Transportation Committee. Representation on the House Appropriations Committee is also associated with higher subsidies. Our empirical results, combined with news reports, are consistent with the EAS serving private as well as public interests.


Author(s): Riccardo Marselli, Bryan McCannon and Marco Vannini
Title: "Bargaining in the Shadow of Arbitration"
Abstract: Arbitration, as an alternative to litigation for contract disputes, reduces costs and time. While it has frequently been thought of as a substitute to pretrial bargaining and litigation, in fact, parties may be able to reach a settlement privately while engaged in the arbitration process. Consequently, the institutional design may influence the bargaining. We develop a theoretical model of pre-arbitration bargaining that is able to identify the impact of the institutional features on its success. A detailed data set from arbitration proceedings in Italy is analyzed. The exogenous heterogeneity in the composition of the panel of arbitrators allows us to illustrate its effect on bargaining. We show that the number of arbitrators used interacts with their experience and independence to reduce uncertainty and facilitate settlement.


Author(s): Bryan McCannon
Title: "Replacement Referees and NFL Betting Markets
Abstract: Are betting markets efficient? The 2012 labor dispute between the NFL and the referees is used as a quasi-experiment to assess whether the betting markets are able to achieve accurate “prices” in an uncertain environment. More points were scored and underdogs performed relatively better resulting in upsets and closer-than-expected games. Betting markets, though, were unable to anticipate or adjust to this systematic effect even though irregularities in gambling markets were reported before the beginning of the season. Not only were they inefficient, but profitable betting strategies can be identified.


Author(s): Roger Congleton
Title: "On the Political Economy of Privacy: Information Sharing between Friends and Foes"


Author(s): Bryan McCannon and John Stevens
Title: "Role of Personality Style on Bargaining Outcomes"
Purpose: The motivation for the research is to identify whether personality traits can help explain the outcomes that arise in bargaining outcomes.
Design: Experiments with subjects playing the alternating-offers bargaining game are considered. Both full information and asymmetric information treatments are considered. Subjects also complete standardized Myers-Briggs Type Indicator assessments.
Findings: Personality type measurements are shown to help explain the opening offers, rejections, and resulting wealth in the negotiations. It is shown that interactions between the personality dimensions are important and that the interaction between personality and information play a key role in bargaining outcomes.
Research limitations/implications: The research utilizes laboratory experiments to generate data. This expands our understanding of individual level behaviour, but suffers from the limitation of not replicating realistic bargaining situations.
Practical Implications: The work should serve as a guide to organizations to identify traits of effective negotiators.
Social Implications: Bargaining is a central economic activity. Being able to identify the root of differences in outcomes from negotiations should be able to inform institutional design issues.
Originality/Value: Little work has been done connecting the rich literature in social psychology and management on personality to economic outcomes. The research on bargaining neglects to incorporate individual-level traits into the process. This research begins to bridge this gap and informs both bargaining theory as well as emphasizes the importance of personality in application.


Author(s): Roger Congelton
Title: "The Logic of Collective Action and Beyond"
Abstract: This article provides an overview of Mancur Olson’s Logic of Collective Action and its impact on Olson’s subsequent work. It also suggests that the implications of his simple, elegant, theory have not yet been fully worked out. To illustrate this point, the second half of the essay demonstrates that the number of privileged and latent groups and their costs in a given society are not entirely determined by economic factors or group size alone. Politics, technology, and culture also matter.


Author(s): Bryan McCannon
Title: "Leadership and Motivation for Public Goods Contribution"
Abstract: Results from a leader-follower public goods game are presented. An individual, when randomly selected to make a contribution knowing that others will observe the selection, gives more than one does in the simultaneous-move public goods game. Followers adopt a quasi-matching strategy where they systematically donate less than the leader, but contribute more when the leader does and contribute less when the leader free rides. The net result is increased provision of a public good when contributions are sequential. The results highlight that psychological preferences, rather than solely social preferences, can explain behavior.


Author(s): Roger Congelton
Title: "On the Evolution of Organizational Governance: Divided Governance and Survival in the Long Run"
Abstract: This paper analyzes the formation, refinement, and evolution of organizational decision making processes, e.g. organizational governments. In doing so, it develops a framework for analyzing a broad cross section of private and non-private formal organizations. Formal organizations are all founded, e.g. they have a beginning. As a consequence, decision making authority within an organization is often initially distributed in a manner that provides their founders (formeteurs) with substantial control over their organizations. However, that control is rarely, if ever, complete, because formeteurs have interests that can often be advanced by trading and/or delegating authority to others in exchange for services and other resources that increase organizational surplus. The result tends to be divided, rule-based, governance based on the king and council template.


Author(s): Bryan McCannon, Colleen Tokar Asaad and Mark Wilson
Title: "Financial Competence, Overconfidence, and Trusting Investments: Results from an Experiment"
Abstract: Financial transactions sometimes occur in an environment where third-party enforcement is lacking. Behavioral explanations typically allude to the social preferences, where an individual’s utility is directly affected by another’s outcome, as the driver of the trusting investments and reciprocal returns. We hypothesize that, in part, these decisions are determined by an individual’s financial literacy. Experimental evidence is coupled with an innovative financial literacy assessment, which measures general competence, numeracy skills, and overconfidence in one’s knowledge. Results indicate that overconfidence is a significant determinant of behavior. Specifically, overconfident individuals make larger contributions in the investment game. We also document that there is an escalated effect in overconfident individuals who are also exhibit risk loving preferences.


Author(s): Roger Congleton and Dongwoo Yoo
Title: "Constitutional Bargaining, Eminent Domain, and the Quality of Contemporary African Institutions: A Test of the Incremental Reform Hypothesis"
Abstract: According to the incremental reform hypothesis, constitutions are rarely adopted whole cloth; thus the starting point, scope for bargaining, and number of reforms, jointly determine the trajectory of constitutional history. We test the relevance of this theory for Africa by analyzing the formation and reform of the independence constitutions negotiated and adopted during the 1950s and early 1960s. We find historical evidence that independence occurred incrementally and that the African countries that experienced the fewest constitutional moments and narrowest domain of bargaining after independence have better contemporary institutions than states that began with less restrictive constitutional rules and experienced more constitutional moments.


Author(s): Adam Nowak, Amanda Ross and Christopher Yencha
Title: "Small Business Borrowing and Peer-to-Peer Lending: Evidence from Lending Club"
Abstract: This study is interested in the ability of borrowers and lenders to signal to each other in the peer-to-peer lending market. We focus on small business loans and investigate the relationship between the loan description that a borrower provides and the impact of this description on the potential funding of the loan by investors. We nd that the loan descriptions in the data can be used to predict the probability that the entire loan will be funded. In addition, we also nd that an index created from a textual analysis of the loan description can be used to forecast the performance of the loan; a 1 standard deviation increase in the index will decrease the odds of default by 14%. Thus, it appears as if investors are not making investment decisions based on improper signals.


Author(s): Richard Cebula, Joshua Hall and Maria Tackett
Title: "Nonpublic Competition and Public School Performance: Evidence from West Virginia"
Abstract: In this study, we investigate whether nonpublic school enrollment affects the performance of public school districts. If homeschooling and private schools act as competition, public school districts test scores should be positively associated with nonpublic enrollment. Using data on West Virginia county school districts, and controlling for endogeneity with an instrumental variables approach, we find that a one standard deviation increase in relative nonpublic enrollment in a county is associated with statistically significant increases in public school district test scores. Our findings thus confirm that nonpublic enrollment and the competition it provides act to improve, rather than impede, public school performance.


Author(s): Joshua Hall and Danko Tarabar
Title: "Explaining the Worldwide Decline in Military Conscription: 1970-2010"
Abstract: We empirically investigate the determinants of the decline in compulsory military ser- vice (conscription) from 1970 to 2010 using data on military conscription from the Economic Freedom of the World (EFW) index. We nd that the probability of a shorter military service time is strongly associated with the percentage of the population over the age of 65 and the size of government, while the presence of political violence works in the opposite direction. Our results are robust to dynamic panel and ordered probit estimations.


Author(s): J.R. Clark, Joshua Hall and Ashley Harrison
Title: "Jack Soper: A Pioneer in Economic Education"
Abstract: John “Jack” Soper passed away on August 9, 2013. A prolific researcher who retired as the John J. Kahl Sr. Chair in Entrepreneurship at John Carroll University, Soper was a leading light in the field of economic education. His scholarship in the 1970s and 1980s played a very important role in establishing the field. In this educational note, we summarize and highlight his contributions to the measurement of economic literacy and the modelling of student learning in the collegiate and precollege classrooms.


Author(s): Kaitlyn Harger, Brad Humphreys and Amanda Ross
Title: "Do New Sports Facilities Attract New Business?"
Abstract: We examine the impact of new sports facilities on new businesses, an unexplored topic in the literature. We use data from the Dun and Bradstreet MarketPlace to examine how new sports facilities affect nearby business activity in terms of the number of new businesses and workers. We find no evidence of increased new businesses openings after the opening of new sports facilities in 13 US cities in the 2000s; employment at new businesses near new facilities is larger than at new businesses elsewhere in the MSA; this increase cannot be linked to businesses in any specific industry.


Author(s): Joshua Hall, Donald Lacombe and Timothy Shaughnessy
Title: "Economic Freedom and Economic Growth Across U.S. States: A Spatial Panel Data Analysis"
Abstract: There is a substantial literature estimating the effect of economic freedom on economic growth. Most studies examine the relationship between freedom and growth for countries, while a few examine the relationship for U.S. states. Absent in the state-level literature is consideration of the presence of spatial spillovers affecting the freedom-growth relationship. Neglecting to account for spatial autocorrelation can bias estimation results and therefore inferences drawn. We find evidence of a spatial pattern in real per-capita GSP that affects non-spatial estimates of the freedom-growth relationship. Taking into account the direct and indirect effects of economic freedom on GSP, we find a 10 percent increase in economic freedom is associated with a 4.2 percent increase in GSP.


Author(s): Adam Nowak and Patrick Smith
Title: "Textual Analysis in Real Estate"
Abstract: This paper incorporates text data from MLS listings from Atlanta, GA into a hedonic pricing model. Text is found to decrease pricing error by more than 25%. Information from text is incorporated into a linear model using a tokenization approach. By doing so, the implicit prices for various words and phrases are estimated. The estimation focuses on simultaneous variable selection and estimation for linear models in the presence of a large number of variables. The LASSO procedure and variants are shown to outperform least-squares in out-of-sample testing.


Author(s): Joshua Hall and Chris Shultz
Title: "Determinants of Voting Behavior on the Keystone XL Pipeline"
Abstract: After lengthy debate, the Keystone XL Pipeline bill passed in January 2015. We use this event to better understand the determinants of Senator voting behavior. Specifically, this paper attempts to examine the relative impacts of political and economic influences. This is accomplished through the use of a binary logit regression model with legislator vote as the dependent variable. Results indicate that while legislators do appear to be representing their political constituency, the role of campaign funding plays an important role as well. The economic effect of such funding, controlling for other factors, is quantitatively small.


Author(s): Brad Humphreys, Jane Ruseski and Li Zhou
Title: "Physical Activity, Present Bias, and Habit Formation: Theory and Evidence From Longitudinal Data"
Abstract: We investigate temporal decisions to participate in exercise in a dynamic model featuring present bias and habit formation. The model highlights naivete about present bias and projection bias about habit formation/decay and implies that promoting participation in physical activity must both encourage the inactive to start and discourage the active from quitting as behavioral biases apply to both. Our empirical analysis using data from the British Household Panel Survey (BHPS) develops evidence consistent with predictions about present bias and habit formation/decay and an interesting asymmetry between starting and quitting that furthers understanding of existing empirical evidence.


Author(s): Joshua Hall, Christopher Shultz and E. Frank Stephenson
Title: "The Political Economy of Local Fracking Bans"
Abstract: Concerns about harmful effects arising from the increased use of hydraulic fracturing (fracking) to extract underground fuel resources has led to efforts to ban the practice. Many townships in western New York, which lies above the gas-rich Marcellus shale formation, have enacted bans or moratoria. Using spatial econometric techniques, we examine factors related to townships' choice to adopt fracking bans and document the importance of spatial dependence when analyzing fracking bans. We find education levels, the poverty rate, and veterans groups are associated with an increased probability of a township banning or putting a moratorium on fracking.


Author(s): Stratford Douglas and Seth Wiggins
Title: "Effects of Acid Rain Regulations on Production of Eastern Coals of Varying Sulfur Content"
Abstract: We analyze the effects of the EPA’s Acid Rain Program on county-level production of coals of varying sulfur content in the Appalachian and Illinois basins, controlling for Powder River Basin production, proximity of power plants to mines, and scrubber installation. Using a thirty-year panel data set, we find that during the Acid Rain Program coal sulfur content positively affected mine closure and negatively affected production in most coal-producing counties, with the greatest effect from 1995-2000. Estimated effects of power plant flue gas desulfurization equipment installation are substantial, and depend on coal sulfur content, scrubber unit size, and distance from the mines. The estimated elasticity of coal mine output to sulfur allowance price varies widely by coal sulfur content and is negative only for mines producing coals above the 77th percentile in sulfur content. Our results complement previous studies of regulatory effectiveness, limiting the degree to which reductions in acid rain may be attributed to market rather than regulatory factors.


Author(s): Joshua Hall
Title: "The Liberal Arts and Scholarship on the Fiscal Effects of Statehood"
Abstract: This comment highlights several important questions in two major areas that were inspired by reading The Fiscal Case Against Statehood. The first major area concerns the sociology of business disciplines, accounting in particular, with respect to interdisciplinary scholarship. Questions in the second major area focus on methodological questions surrounding the fiscal effects of statehood.


Author(s): Joshua Hall
Title: "Institutional Convergence: Exit or Voice?"
Abstract: There is a small but growing literature on the determinants of economic freedom. In this paper I contribute to this literature in two ways. First, I empirically show that Beta-convergence in economic freedom occurred from 1980 to 2010. Countries with low levels of economic freedom in 1980 "catch up" at a rate of 0.7 percent a year on average, ceteris paribus. Second, I document the structural characteristics that contribute to this institutional convergence. My conditional convergence estimates suggest democratic institutions do not contribute to conditional convergence. Exitability, a variable that captures how easy it is for citizens to "vote with their feet" is related to the change in economic freedom from 1980 to 2010 in a statistically significant manner across all specifications. This provides some to the importance of "exit" versus "voice" with respect to the question of institutional change.


Author(s): Andrew T. Young
Title: "Hospitalitas"
Abstract: Good government requires a constitution that demarcates what political agents can and cannot do, and such a constitution must be self-enforcing. The medieval West was characterized by the estates system, where the political power of monarchs was roughly balanced by that of a landed and militarized nobility. This rough balance of power contributed to a Western tradition of limited government and constitutional bargaining. I argue that this balance has important roots in the fifth and sixth century barbarian settlements that occurred within the frontiers of the declining Western Roman Empire. These settlements provided barbarians with allotments consisting of lands or claims to taxes due from those lands. These allotments aligned the incentives of barbarian warriors and Roman landowners; they also realigned (or newly aligned) the incentives of barbarian warriors and leadership elite as their roving confederacies became stationary kingdoms. Barbarian military forces became decentralized and the warriors became political powerful shareholders of the realm.


Author(s): Joshua C. Hall
Title: "Higher Education Accreditation: Market Regulation or Government Regulation Revisited"
Abstract: Higher education is under fire in the United States. Pressure, both financial and political, is being placed on colleges and universities to reform. One barrier to reform that has been put forth is accreditation. While calls for reform have identified what appear to be problems with accreditation, it is important to not engage in the nirvana fallacy and assume that what we can imagine will be better will be better. In that light, I look at the history of the accreditation process with a focus on the role the federal government has played and how that has influenced other players in the higher education market. After surveying the history, I conclude that accreditation as currently practiced in not self- regulation, but rather government regulation.


Author(s): Joshua C. Hall, Brad R. Humphreys and Jane E. Ruseski
Title: "Economic Freedom, Race, and Health Disparities: Evidence from US States"
Abstract: The social determinants of health include the communities in which people reside. Associated with geographic areas are public policies that influence a variety of economic and social outcomes. The group of public policies associated with economic freedom have been found to be positively related to a number of economic and social outcomes. In this paper, we investigate the impact of economic freedom on self-reported health and racial health disparities. We use propensity score matching to construct a control group of whites who can be compared to blacks in the 2011 BRFSS. After accounting for confounding variables and possible selection, we find evidence that economic freedom is associated with lower levels of self reported health for the population overall. After allowing for the effects of economic freedom to differ by race, we find that higher levels of economic freedom mitigate the observed gap in health status.


Author(s): Daniel Grossman
Title: "The Effect of Urban Empowerment Zones on Fertility and Health: A Case Study of Chicago, New York City, and Philadelphia"
Abstract: I estimate the health impacts of the Empowerment Zone (EZ) program - a federal program that gave sizeable grants and tax breaks to certain high-poverty census tracts in selected cities. Using difference-in-differences methods, I find that the EZ program decreased fertility rates by 11 percent and improved birth outcomes. This increase in infant health was not driven by changes in the composition of births. Synthetic control methods and estimates using an alternate control group support these findings. Recent research on the later-life impacts of low birth weight suggest that the health impacts of this program may have substantial long-term benefits.


Author(s): Chensheng Xu, Feng Yao and Fan Zhang
Title: "An Investigation of Confucius Institute’s Effects on China’s OFDI via Cultural Difference and Institutional Quality"
Abstract: This paper uses a panel data of China's outward foreign direct investment (OFDI) from 2004-2012 to investigate the influence of Confucius Institute on China's OFDI. We find that Confucius Institute, as a comprehensive platform for China's foreign cultural exchange, has a significant positive effect on China’s OFDI. Interestingly, the positive effect can be reduced with larger cultural difference and can be increased in host countries with lower institutional quality. Correspondingly, we find that Confucius Institute’s impact on China’s OFDI is more obvious in host countries with smaller cultural difference or lower institutional quality.


Author(s): Xin Geng, Carlos Martins-Filho and Feng Yao
Title: "Estimation of a Partially Linear Regression in Triangular Systems"
Abstract: We propose a kernel-based estimator for a partially linear regression in a triangular system where endogenous regressors appear both in the nonparametric and linear components of the regression. Compared with alternative estimators currently available in the literature (Ai and Chen 2003; Otsu 2011), our estimator has an explicit functional form, is easier to implement, and exhibits better experimental finite sample performance. The estimator is inspired by the control function approach of Newey et al. (1999) and was initially proposed by Martins-Filho and Yao (2012). It explores conditional moment restrictions that make it suitable for additive regression estimation as in Kim et al. (1999) and Manzan and Zerom (2005). We establish consistency and asymptotic normality of the estimator for the parameters in the linear component of the model and give a uniform convergence rate for the estimator of the nonparametric component. In addition, for statistical inference, a consistent estimator for the covariance of the limiting distribution of the parametric estimator is provided. We illustrate the empirical viability of our estimation procedure by applying it to the study of the impact of foreign aid and policy on growth of per capita gross domestic product (GDP) in developing countries.


Author(s): Peter J. Boettke, Joshua C. Hall and Kathleen M. Sheehan
Title: "Was Adam Smith Right About Religious Competition?"
Abstract: Adam Smith famously argued that increased competition in religion would result in more religious tolerance and that the benefits of competition in the marketplace would also be seen in religious instruction when many religious sects are tolerated. We use a cross-section of a maximum of 167 countries to explore whether increased religious competition results in less governmental regulation of religion and less governmental favoritism of religion. Our measure of religious regulation and favoritism comes from the Association of Religion Data Archives. Our empirical analysis also explores the influence of economic and political factors, including the size of the economy, openness of trade, legal origins, education, the amount of checks and balances on the government and the role of democracy.


Author(s): Brad R. Humphreys and Hyunwoong Pyun
Title: "Monoposony Exploitation in Professional Sport: Evidence from Major League Baseball Position Players, 2000-2011"
Abstract: Some professional athletes still face monoposony power in labor markets, underscoring the importance of estimating players' marginal revenue product (MRP) to assess its effects. We introduce two new empirical approaches, spline revenue functions and fixed-effects stochastic production functions, into the standard Scully (1974) approach to MRP estimation, and calculate Monoposony Exploitation Ratios (MERs) for position players in Major League Baseball over the 2001-2011 seasons. Estimates indicate that MERs are about 0.89 for rookie players, 0.75 for arbitration eligible players, and 0.21 for free agents. Recent collective bargaining agreements have reduced MERs for free agents, but had no effect on MERs for other players.


Author(s): Joshua C. Hall, Brad R. Humphreys and Hyunwoong Pyun
Title: "An Inventory of Sports Economics Courses in the US"
Abstract: Sports economics is a young, growing field in the discipline of economics. An examination of course catalogs at 169 national liberal arts colleges and 254 national universities uncovered undergraduate sports economics classes offered at 17% of the liberal arts colleges and 29.5% of the universities. The characteristics of colleges and universities offering sports economics courses are analyzed. The state of the undergraduate curriculum in economics and barriers to the creation of new elective course offerings are also discussed.


Author(s): Sriparna Ghosh and Joshua C. Hall
Title: "The Political Economy of Soda Taxation"
Abstract: There has been an increase in the prevalence of obesity in the United States over the past several decades. The academic literature has highlighted numerous possible causes, including the consumption of soda and other sugar-sweetened beverages. Soda taxes have been suggested as a way of reducing the consumption of sugar-sweetened beverages and a number of U.S. states disfavor" sugar-sweetened beverages relative to food in their tax code. In this note we employ a political economy model to explain the adoption of these soda taxes." We find that more Democratic states and those with a higher rate of adult obesity are more likely to have soda taxes and states with more convenience stores per capita are less likely to have adopted a tax.


Author(s): Kaitlyn R. Harger, Amanda Ross and Heather M. Stephens
Title: "What Matters More for Economic Development, the Amount of Funding or the Number of Projects Funded? Evidence from the Community Development Financial Investment Fund"
Abstract: Governments try to attract entrepreneurs to specific areas by providing incentives to new businesses that locate within their jurisdiction. However, there is a debate over how best to allocate these funds. Using establishment-level data from the National Establishment Time Series (NETS) database for California, and data on the location of disbursements from the Community Development Financial Institutions (CDFI) and New Market Tax Credit (NMTC) programs, we consider the effectiveness of these two programs in attracting new businesses to disadvantaged areas. Investors are eligible to receive funding through these programs if the census tract where they are located has a median family income less than or equal to 80% of the state’s median family income. Using this plausibly exogenous eligibility threshold, we find that higher levels of funding per project through the NMTC program result in an increase in the number of new establishments in that area. However, we find that the number of NMTC projects funded has no effect on attracting new firms to eligible tracts, and there is little evidence of a consistent effect of the CDFI program. The amounts of funding through the CDFI program are relatively small, though more projects were funded through this program than the NMTC. Thus, our findings suggest that the amount of funding allocated to these areas matters more for economic development than does the number of projects funded. In addition, we find that there are heterogeneous effects with regard to the impact of these programs, specifically across different firm sizes and industries, suggesting that these policies may cause firms to reallocate and sort across census tracts.