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2017

Economics Working Papers, 2017

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

17-01

Author(s): Christian Deutscher, Eugen Dimant and Brad R. Humphreys 
Title:   "Match Fixing and Sports Betting in Football: Empirical Evidence from the German Bundesliga"  
Abstract: Corruption in sports represents an important challenge to their integrity. Corruption can take many forms, including match fixing by players, referees, or team officials. Match fixing can be difficult to detect. We use a unique data set to analyze variation in bet volume on Betfair, a major online betting exchange, for evidence of abnormal patterns associated with specific referees who officiated matches. An analysis of 1,251 Bundesliga 1 football matches from 2010/11 to 2014/15 reveals evidence that bet volume in the Betfair markets in these matches was systematically higher for four referees relative to matches officiated by other referees. Our results are robust to alternative specifications and are thus suggestive of potentially existing match fixing and corruption in the German Bundesliga.

17-02

Author(s): Amir Borges Ferreira Neto
Title:    "Charity and Public Libraries: Does Government Funding Crowd-out Donations?"  
Abstract: There are over 9,000 public libraries in the United States servicing more than 1.5 billion people and raising over $11.5 billion dollars in revenue with approximately 8% of this total coming from donations. This paper analyzes the determinants of donations to public libraries testing the following hypothesis: is there a crowding-out effect from government funding of public libraries? I address this issue by looking at novel data, the Public Library Survey, and use panel from 2000 to 2013. The results suggest a crowding in effect in all levels of government: 4 to 6 cents in local government, 20 to 23 cents in state government and 75 cents to 1 dollar and 33 cents in federal government. Also, the government expenditure has an inverted U shape.

17-03

Author(s): Adam Nowak and Juan Sayago-Gomez 
Title:     "Homeowner Preferences after September 11th, a Microdata Approach"
Abstract: The existence of homeowner preferences - specifically homeowners' preferences for neighbors - is fundamental to economic models of sorting. This paper investigates whether or not the terrorist attacks of September 11, 2001 (9/11) impacted on local preferences for Arab neighbors. We test for changes in preferences using a differences-in-differences framework in a hedonic pricing model. Relative to sales before 9/11, we find properties within 0.1 miles of an Arab homeowner sold at a 1.5% discount in the 180 days after 9/11. The results are robust to a number of specifications including time horizon, event date, distance, alternative ethnic groups, and the presence of nearby mosques. Previous research has shown price effects at neighborhood levels but has not identified effects at the micro or individual property level, and for good reason: most transaction level data sets do not include ethnic identifiers. Applying methods from the machine learning and biostatistics literature, we develop a binomial classifier using a supervised learning algorithm and identify Arab homeowners based on the name of the buyer. We train the binomial classifier using names from Summer Olympic Rosters for 221 countries during the years 1948-2012. We demonstrate the exibility of our methodology and perform an interesting counterfactual by identifying Hispanic and Asian homeowners in the data; unlike the statistically significant results for Arab homeowners, we find no meaningful results for Hispanic and Asian homeowners following 9/11.

17-04

Author(s): Elham Erfanian and Amir B. Ferreira Neto
Title:  "Scientific output: labor or capital intensive? An analysis for selected countries." 
Abstract:  Scientific research contributes to sustainable economic growth environments. Hence, policy-makers should understand how the different inputs - namely labor and capital - are related to a country's scientific output. This paper addresses this issue by estimating output elasticities for labor and capital using a panel of 31 countries in nine years. Due to the nature of scientific output, we also use spatial econometric models to take into account the spillover effects from knowledge produced as well as labor and capital. The results show that capital elasticity is closer to the labor elasticity. The results suggest a decreasing return to scale production of scientific output. The spatial model points to negative spillovers from capital expenditure and no spillovers from labor or the scientific output.

17-05

Author(s): Brad R. Humphreys and Hyunwoong Pyun
Title:   "Professional Sporting Events and Traffic: Evidence from US Cities"  
Abstract:   Sporting events concentrate people at specific locations on game day. No empirical evidence currently exists linking sporting events to local traffic conditions. We analyze urban mobility data from 25 US  etropolitan areas with MLB teams over the period 1990 to 2014 to assess the relationship between local traffic and Major League Baseball (MLB) games. Instrumental variable regression results indicate MLB attendance causes increases in local vehicle-miles traveled. At the sample average attendance of 2.8 million, average daily vehicle-miles traveled increases by about 6.9% in cities with MLB teams. Traffic congestion increases by 2%, suggesting that MLB games generate congestion externalities.

17-06

Author(s): Joshua Hall and John Levendis 
Title:    "The Efficient Corruption Hypothesis and the Dynamics between Economic Freedom, Corruption, and National Income"   
Abstract:  Income, economic freedom, and corruption interact in complex ways as all three variables are arguably endogenous. We explicitly model this endogeneity using a panel VAR framework. The pVAR models we estimate are able to explicitly model this endogeneity better than the single-equation panel data models previously used in the literature. Using data on corruption and income from the World Bank and economic freedom from the Fraser Institute, we provide evidence that corruption and the absence of economic freedom have a negative effect on national income. 

17-07

Author(s): Ricardo da Silva Freguglia and Amir Borges Ferreira Neto
Title: "How much does talent matter? Evidence from the Brazilian Formal Cultural Industry"
Abstract: The goal of this paper is to evaluate how much does talent – the individual non-observed characteristics – matter to explain the wage differences between workers from the cultural industry and workers from other formal industries in Brazil. To do so we use the data from 2003 to 2008 of the Rais-Migra – MTE, which is a true panel of formal workers from Brazil, and use fixed effects estimators to capture the talent measure and the Blinder (1973) and Oaxaca (1973) decomposition to seek for evidences of wage difference. The results imply that the talent is important in the determination of wages especially when considering formal workers in the cultural activities, occupations and workers in both cultural activities and occupation. The Oaxaca decomposition provides evidence that when considering talent, each of the groups paid their workers more per se, proving that not only the talent matter, but also that the formal cultural environment in Brazil positively discriminates their workers.

17-08

Author(s): Joshua C. Hall, Josh Matti and Yang Zhou
Title:  "The Economic Impact of City-County Consolidations: A Synthetic Control Approach" 
Abstract: Although more rapid development is a primary motivation behind city-county consolidations, relatively few empirical papers explore the actual impact of consolidation on development. This study uses the synthetic control method (SCM) to examine the long-term impact of city-county consolidations on per capita income, population, and employment. The results from the three cases explored indicate that consolidation does not guarantee development and can actually have negative eects. Additionally, the eects vary based upon the county, time horizon, and development measure.

17-09

Author(s): Joshua C. Hall
Title:   "A 'Model' Model: McCloskey and the Craft of Economics"  
Abstract: In this essay, I highlight some of the contributions of Deirdre McCloskey to the practice of economics as a teacher and scholar. I highlight her influence on my teaching and scholarship in the areas of economic education and economic freedom.

17-10

Author(s): Daniel Grossman, Brad Humphreys and Jane Ruseski
Title:   "Out of the Outhouse: The Impact of Place-Based Policies on Dwelling Characteristics in Appalachia"
Abstract: The Appalachian Regional Commission (ARC) administers and partially funds investment projects designed to improve economic conditions in the Appalachian Region, an area of persistent poverty and reduced economic opportunity in the eastern US in and around the Appalachian mountains. Previous research on the effectiveness of ARC programs is mixed. We analyze the impact of ARC investment projects related to expanding sewerage and waste water treatment on dwelling characteristics. Results from a difference-in-differences model using a quasi experimental approach show that ARC investment projects improved access to running water, and increased sewer hook-ups and indoor bathrooms in dwellings.

17-11

Author(s): Candon Johnson and Joshua Hall
Title:   "Do National Basketball Association Players Need Higher Salaries to Play in High Tax States? Evidence from Free Agents"
Abstract: This paper investigates the impact of taxes on the salaries received by National Basketball Association free agents from 2010-2014. High state income tax rates affect the after-tax income received by players from their team as well as on any ancillary income. Using data on 576 free agents, we find statistically significant evidence that free agents signing in high tax states receive higher salaries, ceteris paribus. Our results suggest that a one-unit increase in the average tax rate experienced by a free agent in a state leads to free agent salaries being over $60,000 higher.

17-12

Author(s): Joshua Hall and Yang Zhou
Title:   "The Sinuous Dragon: Economic Freedom and Economic Growth in China"
Abstract: With sinuous reforms and economic openness over the last four decades, China has enjoyed substantial economic development. Though still a developing country, its GDP per capita has grown over 10% annually, from $183(US) in 1977 to $7,590 (US) in 2014. This miracle in economic growth is attributed by some to a series of pro-market policies and reforms. Although the general trend is greater economic freedom, China has experienced brief periods of decreasing or stagnant economic freedom that correspond with slowdowns in the growth rate. In this paper we trace these changes in economic freedom in China and discuss prospects for future improvement.

17-13

Author(s): Amir B. Ferreira Neto and Joshua Hall
Title:   "Economies of Scale and Governance of Library Systems: Evidence from West Virginia"
Abstract: Public libraries are a billion dollar industry in the United States. We explore the institutional determinants of public library technical efficiency using data from West Virginia. We first document considerable cross-district variation in library efficiency. While the average library district in our sample is between 81% and 90% efficient depending upon the year and measure, there are many district-years that are under 50%. We then explain our technical efficiency measures as a function of institutional variables reflecting the type of district and sources of funding. We find consistent evidence that urban libraries are more inefficient, perhaps because they are too small to achieve sufficient economies-of-scale in production of library services. In addition, we find revenue from local sources is associated with reduced efficiency, contrary to what would be predicted by local public goods producer theory.

17-14

Author(s): Amir B. Ferreira Neto, Adam Nowak and Amanda Ross
Title:   "Do tourists tip more than local consumers? Evidence of taxi rides in New York City"
Abstract: We revisit the mechanisms that drive tipping behavior by comparing tourists and locals in New York City. It is unlikely a tourist will tip as a way of enforcing repeated interactions since they are not from the area, while a local may tip as an enforcement mechanism. However, if people tip because of social norms, we should see both tourists and locals tipping similar amounts. We compare locals and tourists who are theatergoers to control for education and income, as these factors are likely to affect tipping behavior. Using data from the New York City and Limousine Commission on yellow taxis, we identify tourists as those trips leaving from or going to a hotel and theatergoers as trips where the drop off or pick up is near Broadway within 30 minutes of the beginning or end of a show. Our results suggest that tourists and theatergoers tip more than locals and non-theatergoers, and tourists who are theatergoers tip even more, between 0.51% and 0.67% more. These results are robust across specifications and suggest that social norms are likely driving tipping behavior.

17-15

Author(s): Amir B. Ferreira Neto and Joshua Hall
Title:   "The Effect of Health Care Entrepreneurship on Local Health: The Case of MedExpress in Appalachia"
Abstract: We test the hypothesis that the opening of an Urgent Care Center (UCC) has positive impacts on the local community. There are several mechanisms through which a UCC can have an impact: lower health care costs, emergency room decongestion, and improved access to medical information. We examine the entry of MedExpress into Appalachian counties between 2001 and 2013. Employing data from Health Resources Files, which provides information for all counties for specific years, we use Propensity Score Matching to create a year 2000 control group for the counties “treated” by MedExpress entry beginning in 2001. We then employ a standard difference-in-difference model on an unbalanced panel between 2001 and 2013. Our results suggest that MedExpress has a positive impact on different health outcome variables.

17-16

Author(s): Brad R. Humphreys and Candon Johnson
Title:   "The Effect of Superstar Players on Game Attendance: Evidence from the NBA"
Abstract: Economic models predict that "superstar" players generate externalities that increase attendance and other revenue sources beyond their individual contributions to team success. We investigate the effect of superstar players on individual game attendance at National Basketball Association games from 1981/82 through 2013/14. Regression models control for censoring due to sellouts, quality of teams, unobservable team/season heterogeneity, and expected game outcomes. The results show higher home and away attendance associated with superstar players. Michael Jordan generated the largest superstar attendance externality, generating an additional 5,021/5,631 fans at home/away games.

17-17

Author(s): Adam Nowak and Juan Sayago-Gomez
Title:   "Homeowner Preferences after September 11th, a Microdata Approach"
Abstract: The existence of homeowner preferences - specifically homeowner preferences for neighbors - is fundamental to economic models of sorting. This paper investigates whether or not the terrorist attacks of September 11, 2001 (9/11) impacted local preferences for Arab neighbors. We test for changes in preferences using a differences-in-differences approach in a hedonic pricing model. Relative to sales before 9/11, we find properties within 0.1 miles of an Arab homeowner sold at a 1.4% discount in the 180 days after 9/11. The results are robust to a number of specifications including time horizon, event date, distance, time, alternative ethnic groups, and the presence of nearby mosques. Previous research has shown price effects at neighborhood levels but has not identified effects at the micro or individual property level, and for good reason: most transaction level data sets do not include ethnic identifiers. Applying methods from the machine learning and biostatistics literature, we develop a binomial classifier using a supervised learning algorithm and identify Arab homeowners based on the name of the buyer. We train the binomial classifier using names from Summer Olympic Rosters for 221 countries during the years 1948-2012. We demonstrate the flexibility of our methodology and perform an interesting counterfactual by identifying Hispanic and Asian homeowners in the data; unlike the statistically significant results for Arab homeowners, we find no meaningful results for Hispanic and Asian homeowners following 9/11.

17-18

Author(s): Brad R. Humphreys, Adam Nowak and Yang Zhou
Title:   "Chinese Superstition and Real Estate Prices: Transaction-level Evidence from the US Housing Market"
Abstract: We investigate the impact of Chinese superstition on prices paid by Chinese home buyers in Seattle, Washington. Chinese consider 8 lucky and 4 unlucky. Empirical results indicate Chinese buyers pay a 1-2% premium for addresses including an 8 and a 1% discount for addresses including a 4. These results are unrelated to unobserved property quality: no premium exists when Chinese sell to non-Chinese. Absent explicit identifiers for Chinese individuals, we develop a binomial name classifier using methods from the biomedical and document classification literature, allowing for falsification tests using other ethnic groups and mitigating ambiguity attributable to transliteration of Chinese characters into the Latin alphabet.

17-19

Author(s): Gregory DeAngelo and Emily G. Owens
Title:   "Learning the Ropes: General Experience, Task-Specific Experience, and the Output of Police Officers"
Abstract: We estimate the role that law enforcement officer experience has on the probability of punishment, using a unique data set of tickets issued by the Idaho State Police linked to human resource records. All else equal, officers issue fewer tickets earlier in their career than later in their career. Quasi-exogenous shocks to an officer’s task-specific experience, generated by law changes, cause a temporary reduction in the frequency with which a subset of troopers “use” those laws, creating disparities in the likelihood that individual citizens are cited for law violations. The reduction in ticketing in response to a law change is largest for newer troopers, and law changes later in a trooper’s career have a smaller effect on his use of that law.

17-20

Author(s): Cocker Liu, Adam Nowak and Patrick Smith
Title:   "Some Remarks on Real Estate Pricing"
Abstract: This paper develops a framework for addressing the omitted variable bias that plagues most real estate research. We incorporate qualitative information from text to control for property attributes that are generally unobserved. The textual information is entered by real estate agents for every property sold on a Multiple Listing Service (MLS). The agents, who arguably have the most local market and property specific knowledge, use the unstructured text to highlight important information that is not clearly conveyed in other areas of the listing. Although the framework can be applied universally in real estate research, we demonstrate its effectiveness in the estimation of agent-owned sales premiums. Similar to previous studies, we find agent-owned premiums between 2% to 6% when no textual information is included. When we include the textual information the agent-owned premiums dissipate. The results suggest that the market distortions reported in Rutherford et al. [2005] and Levitt and Syverson [2008] do not exist.

17-21

Author(s): Adam Nowak and Patrick Smith
Title:   "Agent Intermediation and Racial Price Differentials"
Abstract: In most housing transactions the home buyer and seller do not meet, in which case the buyer's race is not revealed and the seller cannot discriminate against them. Despite this fact, previous studies estimate racial price differentials based on the race of the home buyer. In this study we identify the dimensions along which differential treatment occurs in housing markets. We show that home buyers disproportionately hire real estate agents of the same race and that the race of the agent, not the home buyer, is the primary mechanism of discrimination. The results of this study have important implications for fair housing policy.

17-22

Author(s): Yang Zhou and Joshua C. Hall
Title:   "The Impact of Marketization on Entrepreneurship in China: Recent Evidence"
Abstract: While marketization has been linked to provincial-level economic growth in China, how marketization leads to growth has not been explored. We hypothesize that marketization creates an environment that encourages entrepreneurship, which manifests itself in economic growth. While this argument is not new, it has not been explored in the Chinese context. We fill this gap by empirically testing the relationship between marketization and measures of entrepreneurship across Chinese provinces. Our primary measures of entrepreneurship are level changes in the number of "private enterprises" and "self-employed individuals". We find that higher levels of marketization are positively related to higher levels of entrepreneurship. These positive effects are largely driven by three areas of marketization. \Government and market" drives both measures of entrepreneurship, while "Legal frameworks" in uences only private enterprises and "ownership structure" in uences self-employment.

17-23

Author(s): J.R. Clark, Joshua C. Hall and Ashley S. Harrison
Title:   "The Relative Value of AER P&P Economic Education Papers"
Abstract: The CEE had been allocated one session in the AER Papers and Proceedings (P&P) since 1964. In 2008, the American Economic Association evaluated the allocation of AER Papers and Proceedings sessions to various AEA Committees. In response, the CEE was asked to prepare a one-page rationale for keeping that session. Their response (Committee on Economic Education, 2008) made several important defenses of the session, including that the quality of the papers published in these sessions must speak for itself. In this paper, we propose to evaluate the relative quality of AER P&P papers through citation analysis. Using the Social Science Citation Index, the citation counts of CEE AER P&P papers are compared to other papers included in the issue.

17-24

Author(s): Qi Ge, Brad Humphreys and Kun Zhou
Title:   "Are Fair Weather Fans Affected by Weather? Rainfall, Habit Formation and Live Game Attendance"
Abstract: We analyze habit formation in sports attendance utilizing rainfall as an unexpected, transitory shock to attendance costs. Using attendance data from Major League Baseball (MLB) and NOAA weather data, we analyze the impact of variation in game day weather conditions on current and future MLB attendance. The empirical strategy permits identifcation of both the formation and persistence of habit from exogenous weather shocks. Past adverse weather shocks increase future attendance by about 200 fans per game. Our study contributes to the literature developing empirical evidence of habit formation in the field and provides policy implications for optimal ticket pricing strategies.

17-25

Author(s): Daniel S. Grossman and David J.G. Slutsky
Title:   "The Effect of an Increase in Lead in the Water System on Fertility and Birth Outcomes: The Case of Flint, Michigan"
Abstract: Flint changed its public water source in April 2014, increasing lead exposure. The effects of lead in water on fertility and birth outcomes are not well established. Exploiting variation in the timing of births we find fertility rates decreased by 12%, fetal death rates increased by 58% (a selection effect from a culling of the least healthy fetuses), and overall health at birth decreased (from scarring), compared to other cities in Michigan. Given recent efforts to establish a registry of residents exposed, these results suggests women who miscarried, had a stillbirth or had a newborn with health complications should register.

17-26

Author(s): Shaomeng Jia and Yang Zhou
Title:   "Economic Freedom and Government Efficiency: Recent Evidence from China"
Abstract: We investigate the effects of economic freedom (marketization) on governance efficiency defined with the newest provincial level economic indicator data (NBSC, 2017) and economic freedom data (Fan et al., 2017) from 2008 to 2014 in China. With two different measures, the results suggest that economic freedom is positively correlated with governance efficiency. Moreover, the liberalization and marketization progress in the “factors market” is the single most significant area for both governance efficiency measures, while other areas like “market intermediary & legal system” have no significant effects.

17-27

Author(s): Fan Zhang, Joshua Hall and Feng Yao
Title:  "Does Economic Freedom Affect The Production Frontier? A Semiparametric Approach With Panel Data"
Abstract: This paper applies a multi-step semiparametric stochastic production frontier estimator proposed by Yao et al. (2017) to investigate the effects of economic freedom on the production frontier and technical efficiency. We allow output elasticities and technical efficiency to depend on the economic freedom variable, estimate a smooth coefficient stochastic production frontier, and compare with parametric alternatives, the Cobb-Douglas and translog estimates. Our results add to the literature on economic freedom and growth in three ways. First, our results highlight the flexibility of semiparametric approaches as we find the commonly used parametric approaches to be too restrictive in estimating the marginal productivity of inputs. Second, we find that the output elasticities of labor, human capital, and physical capital vary with the level of economic freedom. Third, our average efficiency estimates are at least 20% higher than those obtained from the parametric counterparts, suggesting that previous papers have mismeasured the impact of economic freedom on technical efficiency.

17-28

Author(s): Eduardo Minuci, Amir B. Ferreira Neto and Joshua Hall
Title:  "Efficiency, But At What Cost? Evidence from a DEA Analysis of WV School Districts"
Abstract:  West Virginia schools are consistently below the national average on the NAEP. Using Data Envelopment Analysis, we estimate the technical efficiency of West Virginia school districts. We find less variation in technical efficiency in West Virginia than in similar studies conducted in other states. This appears to be because of state policy imposing homogeneity of input usage. Due to the limited variation in technical efficiency across districts, we cannot analyze how non-school inputs such as socioeconomic factors affect technical efficiency across districts. Summary statistics organized by county economic status, however, suggest that socioeconomic status plays a role. Our results highlight an important limitation of DEA analysis on schools.

17-29

Author(s):  Joshua Hall and Serkan Karadas
Title:  "Tuition Increases Geaux Away? Evidence from Voting on Louisiana’s Amendment 2"
Abstract:  In many states, public institutions of higher education have the autonomy to raise tuition. This has not been the case in Louisiana since a 1995 constitutional amendment required a two-thirds majority of the state legislature for any tuition increase. In November of 2016, voters in Louisiana rejected Amendment 2, a constitutional amendment that would have given state institutions of higher education autonomy in setting tuition. We examine parish-level voting on Amendment 2 using an empirical political economy model and find that parishes with a greater percentage of African-Americans and university employees were more likely to vote yes. Student enrollment at public institutions seemingly did not play a role in Amendment 2 losing.

17-30

Author(s):  Brad Humphreys and Levi Pérez
Title: "Loss Aversion, Upset Preference, and Sports Television Viewing Audience Size"
Abstract:  A growing body of research examines the effect of loss aversion (LA) on consumers’ decisions to watch or attend sporting events. Much of this research focuses on live game attendance. In contrast to the predictions of uncertainty of outcome hypothesis (UOH), loss-averse consumers prefer watching either potential upsets, or dominant performances by strong favorites, to events with uncertain outcomes. We test for LA vs. UOH effects in television viewing audience data for free over-the-air broadcasts of 304 Spanish football matches from 2008/09 to 2015/16. This setting generates substantial variation home team win probabilities because of the presence of Real Madrid CF and FC Barcelona. The results support the importance of LA/upset preferences: audience size for matches when home teams are large underdogs and when heavily favored are larger than for matches with uncertain outcomes, even when controlling for observable and unobservable factors affecting the number of viewers.

17-31

Author(s): Brad Humphreys
Title: "An Overview of Sports Betting Regulation in the United States"
Abstract: The United States employs an ad hoc, unconventional method of regulating sports betting, banning it almost everywhere while granting a monopoly to firms in a single state, Nevada. This approach encourages illegal sports betting markets, ignores negative externalities, and generates welfare losses among the large population of responsible recreational gamblers. I review the current state of sports betting regulation in the U.S. and assess its economic viability in advance of the Supreme Court of the United States decision on the landmark Christie v. National Collegiate Athletic Association case.

17-32

Author(s):  Yulia Chikish, Brad Humphreys, Crocker Liu and Adam Nowak
Title: "Professional Sports Events, Concerts, and Urban Place Based Policy: Evidence from the Staples Center"
Abstract: We analyze the relationship between sports events and concerts, important hospitality demand drivers and key components of many urban renewal projects, in the Staples Center in Los Angeles, an arena home to three pro teams, and nearby hotel performance, exploiting exogenous daily variation in the timing of games and concerts from 2002 to 2017. Results show a small positive impact on revenue per available room at hotels within one mile of the arena and an offsetting decrease at hotels located one to four miles away. Granting nearby hotels exemptions from Los Angeles hotel taxes reduces potential tourism-generated hotel tax revenue increases.