Private Enterprise Research Center (PERC)
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The mission of the Private Enterprise Research Center (PERC) is to provide Texas A&M University, the state of Texas and the Nation with analysis of important policy issues. PERC actively supports academic research and market oriented solutions to public policy problems.
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Browsing Private Enterprise Research Center (PERC) by Type "WorkingPapers"
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Item Almost Stochastic Dominance: Magnitude Constraints on Risk Aversion(Private Enterprise Research Center, Texas A&M University, 2021-06-01) Liu, Liqun; Meyer, JackAlmost stochastic dominance (ASD) extends conventional first and second degree stochastic dominance by placing restrictions on the variability in the first and second derivatives of utility. Such restrictions increase the number of random variables for which a unanimous ranking of one over the other occurs. This paper advances an alternative approach to ASD in which the magnitude of absolute or relative risk aversion is constrained with both an upper bound and a lower bound. Using the results of Meyer (1977b), the paper provides cumulative distribution function (CDF) characterizations of these forms of ASD. Simple closed-form necessary and sufficient conditions for these ASD relations are determined for the special cases where the absolute or relative risk aversion is only bounded on one end or where the pair of random variables under comparison have single-crossing CDFs.Item Alternative Approaches to Comparative nth-Degree Risk Aversion(Private Enterprise Research Center, Texas A&M University, 2018-07-30) Liu, Liqun; Neilson, William S.Economists have used the risk premium and the probability premium that are revealed through individual choices to compare how risk averse two individuals are. These behavioral, or choice-based, measures of risk aversion – such as the risk premium and the probability premium – are important because they can be used in experimental investigations into individual characteristics like gender, age, or income that affect the strength of risk aversion. Higher- degree risk aversion (e.g. downside risk aversion or prudence) has recently been shown to play critical roles in decision making under uncertainty. Consequently, it is important to study how to measure the strength of higher-degree risk aversion. In working paper 1805, Alternative Approaches to Comparative nth-Degree Risk Aversion, PERC researcher Liqun Liu and co-author William S. Neilson generalize the three main existing behavioral approaches to measuring risk aversion – including the probability premium approach, the risk premium approach, and the comparative statistics approach – to measuring higher-degree risk aversion. Findings show that, within the expected utility framework, behavior patterns in these behavioral approaches to measuring higher-degree risk aversion are equivalent and can be characterized by the same set of conditions on the utility functions.Item Am I the Big Fish? The Effect of Self-Perceived Ordinal Rank on Student Academic Performance in Middle School(Private Enterprise Research Center, Texas A&M University, 2018-12-20) Yu, HanIn the educational setting, it is well known that relative achievement can affect individual outcomes. The ordinal academic rank of a student may affect the student’s academic achievement through a student’s self-confidence, parental expectations, effort provision, etc. In this paper, the author investigates the causal impact of the self-perceived ordinal rank of middle school students on their test scores in Mathematics, Chinese and English using a randomized sample from China. This paper provides the first direct evidence showing that middle school students’ self-perceived ordinal rank has a positive and salient effect on their test scores in a later year in middle school. The results suggest that while students with a relatively better perceived academic performance benefit from perceiving a favorable relative position in study, students who believed that their ordinal rank is among the lowest in class suffer substantially more hurt with respect to future test scores. Moreover, the results suggest that perceiving a higher rank raises a student’s confidence in study and expectations on his/her own educational and occupational achievement in the future and more support from parents, teachers, and classmates in the present. Self-perceived rank also affects students' academic performance through effort provision and the quality of friends. The results also suggest a positive effect of female teachers on the self-perceived rank of female students.Item Are Charters the Best Alternative?(Private Enterprise Research Center, Texas A&M University, 2016-01-01) Gronberg, Timothy; Jansen, Dennis; Taylor, LoriTexas has been part of the charter school movement since 1995, when the 74th Texas Legislature authorized the State Board of Education to establish open enrollment (OE) charter schools in the state. According to the Texas Education Agency, in 2010-11 there were 199 OE charter districts operating 482 campuses in Texas, serving 133,697 students, nearly 3% of public school students in the state. Despite the growing role of these alternative schools in the U.S. edcucational system, they are seldom studied. In Working Paper 1606, we provide the first careful empirical study of the costs of alternative education. Their results show charters to be more cost-efficient in providing alternative education compared to traditional public school districts.Item Business Cycle Implications of Firm Market Power in Labor and Product Markets(Private Enterprise Research Center, Texas A&M University, 2021-05-06) Zubairy, Sarah; Alpanda, SamiIn this paper, Sarah Zubairy Sami Alpanda analyze the business cycle implications of firms having oligopsony power in labor markets, as well as oligopoly power in product markets, within the context of a New Keynesian dynamic stochastic general equilibrium model with firm entry and exit. Relative to the standard setup with monopolistic competition in both goods and labor markets, the strategic interaction between intermediate goods firms in the current setup results in larger price markups as well as wage markdowns, while the slopes of the aggregate price and wage Phillips curves become flatter. These effects are strengthened in a strongly non-linear fashion as the number of firms in each sector decline. Oligopsonistic labor markets also render wage shocks expansionary, unlike in the standard setup. Results indicate that a secular increase in industry concentration would not only reduce the labor share of income, but also weaken the pass-through from firms’ marginal costs to prices and from productivity increases to real wages.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 Comparative Risk Apportionment(Private Enterprise Research Center, Texas A&M University, 2021-01-04) Liu, Liqun; Paan Jindapon; Neilson, William S.A decision maker who would rather apportion an independent risk in a state with a good lottery than in a state with a bad lottery is said to have a preference for risk apportionment (Eeckhoudt & Schlesinger, 2006). In this paper, Liqun Liu and coauthors Paan Jindapon and William S. Neilson propose a measure for the strength of nth-degree risk apportionment preference based on Pratt’s probability premium (Pratt, 1964). Under expected utility theory, the authors analyze the relationship between a greater preference for risk apportionment and both the Ross and Arrow-Pratt versions of comparative risk aversion.Item Coronavirus Economics: The Impact of Shutting Down Meatpacking Plants(Private Enterprise Research Center, Texas A&M University, 2020-06-25) Jansen, Dennis W.; Liu, Liqun; Rettenmaier, Andrew J.Motivated by the observed beef and livestock market impacts of coronavirus-caused meatpacking plant shutdowns, this paper constructs a theoretical model to study the effects of closures among downstream producers on both consumers and upstream producers. It analyzes the pre-shock long-run equilibrium, the effects of firm shutdowns among the downstream producers, the effects of government subsidies, and the new long-run equilibrium if the underlying cause for firm shutdowns persists.Item Corrupt Police(Private Enterprise Research Center, Texas A&M University, 2020-08-21) Serra, Danila; Abbink, Klaus; Ryvkin, DmitryPERC Professor Danila Serra, along with Klaus Abbink and Dmitry Ryvkin employ laboratory experiments to examine the effects of corrupt law enforcement on crime within a society. The authors embed corruption in a social dilemma setting where citizens simultaneously choose whether to obey the law or to break the law and impose a negative externality on others. Police officers observe citizens' behavior and decide whether to impose fines on law-breakers or, in treatments with corruption, extort bribes from any citizen. In the first study, findings show that the presence of police substantially reduces crime, as compared to a baseline setting without police. This is true also when police officers are corrupt. This result is driven by corrupt police officers using bribes in a targeted manner as a substitute for official fines to punish law-breakers. In the second study, the authors test the effectiveness of two reward mechanisms aimed at reducing police corruption, both of which are based on society-wide police performance measures and not on the observation/monitoring of individual officers. Results show that both mechanisms make bribery more targeted toward law-breakers, and one of them leads to a moderate reduction in crimeItem Disbursing Emergency Relief through Utilities: Evidence from Ghana(Private Enterprise Research Center, Texas A&M University, 2021-05-06) Puller, Steven; Berkouwe, Susanna B.r; Biscaye, Pierre E.; Wolfram, Catherine D.Government transfer programs to distribute food, water, or electricity at low or no cost have been widespread during the COVID-19 global health crisis. How does program design affect the efficiency and distributional implications of these policies? And what design features determine their political popularity? The authors study these questions in the context of a program to distribute relief through the electric utility in Accra, Ghana, using data from 1,200 households surveyed during the COVID-19 crisis. Findings show that distributing relief through electricity transfers has significant advantages. It enables an immediate government response to the crisis because it leverages the existing financial infrastructure between the government utility and households. Moreover, theoretical efficiency concerns about in-kind transfers are mitigated because the transfers are inframarginal for most households and electricity credit can be stored, with many even preferring electricity transfers over cash. These advantages do not preclude delays in transfer receipt and the exclusion of some eligible households, however, and the program is regressive in both design and implementation. The households least likely to receive relief are those who use less electricity, pay a landlord or other intermediary for electricity, or share an electricity meter with other users—all common among low-income electricity consumers in urban settings. Finally, transfer receipt increases support for the governing party but support for the program drops significantly if even a fraction of its costs are to be recovered through future electricity tariff increases. Concerns around disbursing relief through utility transfers in this context thus arise not from efficiency loss, but from regressivity, distributional challenges, and politicization.Item Discounting Environmental Benefits to Future Generations: Implications of a Coordinating Debt Policy and Tax Distortions in the Capital Market(Private Enterprise Research Center, Texas A&M University, 2018-04-28) Liu, Liqun; Rettenmaier, Andrew J.; Saving, Thomas R.Looking beyond today’s fiscal problems in the U.S., the debate about the how to best incorporate the well-being of subsequent generations in current public policy discussions continues. Authors Liqun Liu, Andrew J. Rettenmaier, and Thomas R. Saving discuss coordinating the evaluation of long-term environmental projects with debt reduction given that both benefit future generations. This paper establishes a cost-benefit rule used to assess whether long-term projects are Pareto improving with a focus on how the generational benefits and costs should be discounted. This paper goes beyond the existing analysis of intergenerational discounting by exploring the implications of tax distortions in the capital market that drives a wedge between the marginal productivity of capital (the gross rate) and the consumer’s interest rate (the net rate) which have historically been in the range of 7% and 3%, respectively. It concludes that while the lower net rate should be used for future benefits within generations, the higher gross rate is the relevant discount rate for future generations.Item Diversity In Economics Seminars: Who Gives Invited Talks?(Private Enterprise Research Center, Texas A&M University, 2021-04-12) Doleac, Jennifer L.; Erin Hengel; Pancotti, ElizabethIn economics, as in many other academic disciplines, it is common for departments to invite external speakers to give research talks in academic seminars. These invited seminars are a primary way that academic economists get feedback on their work, disseminate their work, and expand their professional networks. In this paper, authors Jennifer L. Doleac, Erin Hengel, Elizabeth Pancotti describe the characteristics of invited seminar speakers, using a balanced panel of 66 economics and economics-adjacent departments from August 2014 through December 2019. Our data are the result of a multi-year, ongoing effort to collect this information from the websites of a broad range of departments in the United States and abroad.Item Does Fundraising Create New Giving?(Private Enterprise Research Center, Texas A&M University, 2016-02-01) Meer, JonathanDespite an extensive literature on the impacts of a variety of charitable fundraising tech-niques, little is known about whether these activities increase overall giving or merely cause donors to substitute away from other causes. Using detailed data from Donorschoose.org, an online plat-form linking teachers with prospective donors, the author examines the extent to which matching grants for donations to certain requests affect giving to others. Eligibility for matches is determined in entirely by observable attributes of the request, providing an exogenous source of variation in incentives to donate between charities. Findings show that, while matches increase giving to eligible requests, they do not appear to crowd out giving to similar ones, either contemporaneously or over timItem Does Maternity Leave Duration Affect Labor Force Participation and Productivity?(Private Enterprise Research Center, Texas A&M University, 2018-12-03) Aslim, Erkmen Giray; Panovska, Irina; Tas, M. AnilGiven the extensively documented evidence that increases in female labor force participation rate are beneficial for the economy in the long run, a natural question that arises in this context is whether policy changes can affect female labor force participation. In this paper coauthored by Erkmen Giray Aslim, Irina Panovska and M. Anil Tas, the authors explore to what extent maternity leave affects female and male labor force participation, and to what extent changes in duration of maternity leave directly affect productivity. Using narrative evidence that identifies the exact dates when legislative changes to maternity leave policies were enacted and enforced, the authors build a comprehensive maternity leave data for a panel of middle and high-income countries with emerging financial markets. Findings show that maternity leave has positive but limited effects on female labor force participation, but it signi�cantly increases male labor force participation. There is some evidence that increases in maternity leave duration decrease productivity in the short run, but there are no signi�cant adverse effects in the intermediate run. The authors also find evidence of substitutability between male and female workers and strong evidence in favor of a nonlinear relationship between GDP per capita and labor force participation.Item Does Playing Against an Error Prone Opponent Influence Learning in Nim?(Private Enterprise Research Center, Texas A&M University, 2014-04-01) McKinney, C. Nicholas, Jr.; Van Huyck, JohnWhen learning to play a game well, does it help to play against an opponent who makes the same sort of mistakes one tends to make or is it better to play against a procedurally rational algorithm, which never makes mistakes? This paper investigates subject performance in the game of Nim. We nd evidence that subject performance improves more when playing against a human opponent than against a procedurally rational algorithm. We also nd that subjects learn to recognize certain heuristics that improve their overall performance in more complex games.Item Does Race Matter for Police Use of Force? Evidence from 911 Calls(Private Enterprise Research Center, Texas A&M University, 2020-03-10) Hoekstra, Mark; Sloan, CarlyWillWhile there is much concern about the role of race in police use of force, identifying causal effects is difficult. This is in part because of selection, and in part because researchers often observe only interactions that end in use of force, necessitating nontrivial benchmarking assumptions. This paper by Rex B. Grey Professor Mark Hoekstra and Graduate Student Fellow CarlyWill Sloan addresses these problems by using data on officers dispatched to over two million 911 calls in two cities. By using a location-by-time �xed effects approach that isolates the random variation in officer race, results show white officers use force 60 percent more on average than black officers, and use gun force twice as often. To examine how civilian race affects use of force, the authors compare how white officers increase use of force as they are dispatched to more minority neighborhoods, compared to minority officers. Perhaps most strikingly, findings show that while white and black officers use gun force at similar rates in white and racially mixed neighborhoods, white officers are �ve times as likely to use gun force in predominantly black neighborhoods. Similarly, white officers increase use of any force much more than minority officers when dispatched to more minority neighborhoods.Item Does Strategic Ability Affect Efficiency? Evidence from Electricity Markets(Private Enterprise Research Center, Texas A&M University, 2017-04-01) Puller, Steven L.; Luco, Fernando; Hortacsu, Ali; Zhu, DongniEven within the same market, firms vary across a number of dimension--structure, production capacity, market experience, and general core competency. If you go as far as to observe individual managers, you will find resumes with differing academic training and experience. It is easy to imagine how these differing backgrounds play a role in strategic decision making. In this study, the authors ask whether strategic ability affects efficiencItem Does the Elderly's Private Pension Ownership Intensify Aggregate Equity Demand? Empirical Evidence in the U.S.(Private Enterprise Research Center, Texas A&M University, 2022-07-05) Jansen, Dennis W.; Kim, Sei-Wan; Kim, Young-Min; Lu, YanxinIn this paper, the authors investigate how the old generation income structure affects aggregate equity purchases, using Flows of Funds Accounts and Survey of Consumer Finances. Results suggest that the risk aversion that increases with age could be modified to incorporate the old’s pension ownership. In particular, private pension income to elder households are related to increased aggregate equity purchases, even considering other pension and all other income. In this sense, private pensions are a ‘stepping-stone’ to increased equity investment in U.S. households.Item The Effect of Open-Air Waste Burning on Infant Health: Evidence from Government Failure in Lebanon(Private Enterprise Research Center, Texas A&M University, 2020-06-15) Hoekstra, Mark; Mouganie, Pierre; Ajeeb, RubaAn estimated 40 percent of the world's garbage is burned in open-air fires, which are responsible for as much as half of the global emissions of some pollutants. However, there is little evidence on the health consequences of open-air waste burning. In this paper, PERC’s Rex B. Grey Professor Mark Hoekstra, along with coauthors Pierre Mouganie and Ruba Ajeeb, estimate the effect of in utero exposure to open-air waste burning on birth outcomes. The authors do so by examining the consequences of the Lebanese garbage crisis of 2015, which led to an abrupt, unanticipated increase in waste burning in residential neighborhoods in Beirut and Mount Lebanon. To identify effects, the authors exploit variation in exposure across neighborhoods before and after the crisis. Results indicate exposure had large impacts on birth outcomes; in utero exposure to at least one open-air waste burn increased premature births by 4 percentage points (50%) and low birth weight by 5 to 8 percentage points (80 { 120%). Given previous research documenting the long-run effects of prenatal shocks on adult health, human capital, and labor market outcomes, this suggests open-air waste burning imposes significant costs on populations worldwide.Item The Effect of Own-Gender Juries on Conviction Rates(Private Enterprise Research Center, Texas A&M University, 2018-07-11) Hoekstra, Mark; Street, BrittanyThe right to an impartial jury is the cornerstone of the U.S. justice system and is enshrined in the Bill of Rights, but are these juries truly impartial, or do they favor defendants who are similar to themselves? In PERC working paper 1803, PERC’s Rex Grey Professor Mark Hoekstra and co-author Brittany Street study whether gender matches between jurors and defendants affect criminal conviction rates using administrative data on the juror selection process and trial proceedings for two large counties in Florida. Findings show that own-gender juries result in significantly lower conviction rates on drug charges, though no evidence of effects were found for other charges. Estimates indicate that a one standard deviation increase in expected own-gender jurors (and estimated 10 percentage points) results in a 19 percentage point reduction in conviction rates on drug charges and a 13 percentage point decline in the likelihood of being sentenced to at least some jail time.