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Browsing PERC Publications by Issue Date, starting with "2015"
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Item Testing Risk Dominance and Payoff Dominance in Repeated Global Stag Hunt Games(Private Enterprise Research Center, Texas A&M University, 2015-01-01) Van Huyck, John; Viriyavipart, AjalavatThis article was published as part of the PERCspectives on Research Newsletter, Winter 2015 Edition.Item What Happened to Rosie?(Private Enterprise Research Center, Texas A&M University, 2015-01-01) Rettenmaier, Andrew J.; Carr, Jillian B.Item The ACA and the States(Private Enterprise Research Center, Texas A&M University, 2015-01-01) Rettenmaier, Andrew J.; Saving, Thomas R.Item What Happened to Rosie?(Private Enterprise Research Center, Texas A&M University, 2015-02-01) Carr|, Jillian Beaugez|Rettenmaier, Andrew J.Identifying the relationship between wartime work and women’s lifetime outcomes is difficult due to scant work histories from the 1940s. This study identifies “Rosie the Riveters� using data from the 1973 Current Population Survey matched to Social Security earnings records. Relative to women who did not work during or immediately after the war, Rosies had greater labor force attachment later in life, but had similar earnings. Their husbands’ earnings were also higher. The Rosies’ outcomes were less distinguishable from the women who worked during and/or after the war, though they were more likely to be married as of 1973.Item Restricted Increases in Risk Aversion and Their Application(Private Enterprise Research Center, Texas A&M University, 2015-02-23) Eeckhoudt, Louis; Liu, Liqun; Meyer, JackThis paper proposes two restricted forms of an increase in risk aversion. Using examples from portfolio choice, self-protection and insurance demand, it is shown that these stronger notions of increased risk aversion facilitate clear-cut comparative statics analysis in environments where traditional concepts of increased risk aversion are insufficient.Item Tradeoffs for Downside Risk-Averse Decision-Makers and the Self-Protection Decision(Private Enterprise Research Center, Texas A&M University, 2015-03-26) Denuit, Michel M.; Eeckhoudt, Louis; Liu, Liqun; Meyer, JackBesides risk aversion, decision makers are often assumed to be downside risk averse. In order to investigate tradeoffs that downside risk averse decision makers face, this paper proposes five stochastic orders, each corresponding to a tradeoff involving a downside risk increase. In addition to obtaining their respective CDF characterizations, these orders are also combined with Ross more risk aversion and two versions of Ross more downside risk aversion to produce comparative static theorems identifying the choices of decision makers relative to that of a reference decision maker. The paper concludes with analysis of the decision to self-protect, a decision that increases downside risk along with making other changes. This exercise not only shows that all five stochastic orders studied in this paper find corresponding tradeoffs in the self-protection model, it also demonstrates that these five tradeoffs are the only meaningful tradeoffs that the standard self-protection model creates. Therefore, the concepts and results presented here provide a systematic and complete treatment of the relationship between self-protection and risk preferences.Item Cash for Corollas: When Stimulus Reduces Spending(Private Enterprise Research Center, Texas A&M University, 2015-04-01) Hoekstra, Mark; Puller, Steven L.; West, JeremyThe 2009 Cash for Clunkers program aimed to stimulate consumer spending in the new automobile industry, which was experiencing disproportionate reductions in demand and employment during the Great Recession. Exploiting program eligibility criteria in a regression discontinuity design, we show nearly 60 percent of the subsidies went to households who would have purchased during the two-month program anyway; the rest accelerated sales by no more than eight months. Moreover, the program’s fuel efficiency restrictions shifted purchases toward vehicles that cost on average $5,000 less. On net, Cash for Clunkers significantly reduced total new vehicle spending over the ten month periodItem The Probability Premium Approach to Comparative Risk Aversion(Private Enterprise Research Center, Texas A&M University, 2015-04-23) Liu, Liqun; Neilson, William S.In the framework of expected utility, nth-degree risk aversion/loving is unequivocally characterized by the sign of the nth-order derivative of the utility function, but there exist different notions of one decision maker being nth-degree more risk averse than another. This paper first reformulates Pratt’s (1964) probability premium approach to comparative (2nd-degree) risk aversion with a nonrandom starting wealth, and then shows that the reformulated probability premium approach can be easily extended to deal with random starting wealth and comparative nth-degree risk aversion. The paper shows that interpersonal comparisons of various versions of probability premia for nth-degree risk aversion are characterized by the (n/m)th-degree Ross more risk aversion of Liu and Meyer (2013), where n > m >1. Besides the original Pratt setting, the same comparative nth-degree risk aversion extends to probability premia derived from the risk apportionment setting of Eeckhoudt and Schlesinger (2006) and the comparative statics setting of Jindapon and Neilson (2007).Item The Probability Premium Approach to Comparative Risk Aversion(Private Enterprise Research Center, Texas A&M University, 2015-05-01) Liu, Liqun; Neilson, WilliamItem Is Social Security Wealth?(Private Enterprise Research Center, Texas A&M University, 2015-05-01) Rettenmaier, Andrew J.; Saving, Thomas R.Item Impact of China's Urban Employee Basic Medical Insurance on Heath Care Expenditures and Health Outcomes(Private Enterprise Research Center, Texas A&M University, 2015-05-01) Gan, Li; Huang, FenItem Power to Choose? An Analysis of Consumer Inertia in the Residential Electricity Market(Private Enterprise Research Center, Texas A&M University, 2015-06-01) Hortacsu, Ali; Madanizadeh, Seyed Ali; Puller, Steven L.Many jurisdictions around the world have deregulated utilities and opened retail markets to competition. However, inertial decisionmaking can diminish consumer benefits of retail competition. Using household-level data from the Texas residential electricity market, the authors document evidence of consumer inertia. They estimate an econometric model of retail choice to measure two sources of inertia: (1) search frictions/inattention, and (2) a brand advantage that consumers afford the incumbent. Findings show that households rarely search for alternative retailers, and when they do search, households attach a brand advantage to the incumbent. Counterfactual experiments show that low-cost information interventions can notably increase consumer surplus.Item Nonlinear Evidence on the Existence of Jobless Recoveries(Private Enterprise Research Center, Texas A&M University, 2015-07-01) Jansen, Dennis W.; Bradley, Michael D.The sluggish growth in employment following the Great Recession has spurred research into investigating its cause. Economists are split as to whether it reflects the advent of “jobless recoveries� or just reflects “slow recoveries� in which both output and employment are slow to recover. The authors estimate a version of Friedman’s plucking model to investigate this issue. Findings show evidence suggesting that employment does have its own dynamic response after a recession. Some of the slow growth in employment can be ascribed to the slow output growth, but there is a remaining portion which is consistent with the jobless recovery hypothesis. The authors then produce evidence relative to four different hypothesis of why jobless recoveries have occurred.Item Federal Liabilities 2015 Update(Private Enterprise Research Center, Texas A&M University, 2015-07-01) Liu, Liqun; Rettenmaier, Andrew J.; Saving, Thomas R.Item The Time Varying Effect of Monetary Policy Surprise on Stock Returns: Bursting Bubble Beating Forward Guidance(Private Enterprise Research Center, Texas A&M University, 2015-07-09) Jansen, Dennis W.; Zervou, Anastasia S.The authors study the time varying effects of monetary policy on the stock returns in order to capture changes in the effectiveness of monetary policy over time. They find that a one percentage point surprise federal funds rate increase decreases the one-day stock return by 1.33% during the period 1989 to 2000, and by 7.47% during the period 2001 to 2007, i.e., over five times more. Also, surprises of monetary policy announcements do not have significant effects on the stock returns for most of the 1990s, but have significant effects during the 2000s. The significant period coincides with higher transparency and greater efforts from the Federal Reserve to communicate with the public, especially in the grounds of future policy, i.e., forward guidance.Item The Time Varying Effect of Monetary Policy Surprise on Stock Returns: Bursting Bubble Beating Forward Guidance(Private Enterprise Research Center, Texas A&M University, 2015-09-01) Jansen, Dennis W.; Zervou, Anastasia S.Generally, stock prices react negatively to unanticipated and restrictive monetary policies. In PERC Working Paper 1505, Jordan Professor of Economics, Dennis W. Jansen, and Anastasia S. Zervou test to what extent surprises in monetary policy affect stock price returns and analyze how this relationship has changed over time. They find that a one percentage point surprise federal funds rate increase reduces the one-day stock return, and that the size of this effect is markedly different depending on the time period under consideration.Item Tradeoffs for Downside Risk-Averse Decision-Makers and the Self-Protection Decision(Private Enterprise Research Center, Texas A&M University, 2015-09-01) Liu, Liqun; Denuit, Michel; Eeckhoudt, Louis; Meyer, JackAgents who are averse to increases in downside risk are defined as being averse to changes that shift a certain amount of risk to a lower income level. For downside risk averse decision makers, there are several tradeoffs that must be considered. In PERC Working Paper 1503, PERC Research Scientist Liqun Liu and his coauthors Michel Denuit, Louis Eeckhoudt, and Jack Meyer introduce five new stochastic orders for studying these tradeoffs and show it is possible to make predictions regarding choices of downside risk averse decision makers.Item Moving Up(Private Enterprise Research Center, Texas A&M University, 2015-09-01) Rettenmaier, Andrew J.; Saving, Thomas R.America prides itself as a place where people who work hard and don't quit can move up. However, there are concerns growing economic inequality has stymied economic mobility. This issue of PERCspectives on Policy identifies how income inequality and mobility at the county level are related to intergenerational mobility. Thriving economic conditions are shown to be positively associated with upward mobility.Item The Impact of Teacher-Student Gender Matches: Random Assignment Evidence from South Korea(Private Enterprise Research Center, Texas A&M University, 2015-11-23) Meer, Jonathan; Lim, JaegeumGender disparities in academic performance may be driven in part by the interaction of teacher and student gender, but systematic sorting of students into classrooms makes it difficult to identify causal effects. The authors use the random assignment of students to Korean middle school classrooms and show that the female students perform substantially better on standardized tests when assigned to female teachers; there is little effect on male students. The evidence shows that teacher behavior drives the increase in female students’ achievement.