Hankamer School of Business

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Global Patent Protection: Channels of North & South Welfare Gain
(2005-08-13T16:58:35Z) Grinols, Earl L., 1951-; Lin, Hwan C.
Much of the dynamic literature on intellectual property protection (IPP) arrays goods along a segment of the real line, one endpoint of which expands with innovation. A single margin of innovation brings computational clarity, but implies that the innovating region cannot reassign its research and development efforts among multiple sectors. This leads to special results. This paper expands innovation to two dimensions and re-examines the question of North and South intellectual property protection. The model includes many of the features of earlier models but predicts avenues of cooperation and mutual interest that were previously unavailable. For example, the South may benefit from equal or even higher standards of IPP protection than in the North, and it is possible that the North gains from differentially weaker IPP enforcement in the South. The source of the different conclusions is traced to different channels of welfare influence that support the findings. Monopoly power is less important in explaining them than resource shifting between innovation sectors. Key features not previously found include the ability of lower Southern IPP to spur innovation of Northern goods and to make available greater resources for Northern production of current consumption.
Existence of Equilibriuim in Welfare-enhancing Free Trade Areas
(2005-08-13T17:05:39Z) Grinols, Earl L., 1951-; Silva, Peri A.
Proving the existence of equilibrium having specified properties is often synonymous with proving the result in trade theory. The Grandmont-McFadden proposition that any autarkic allocation can be replaced by a Pareto superior free trade equilibrium involving domestic transfers only depends on an existence proof, for example. Comparable proofs for free trade areas have not been provided to date because unharmonized tariffs imply goods prices that vary by member country and require potentially complicated rules of origin that block standard proofs. This paper fills this gap by providing the missing proof that starting from an arbitrary world trade equilibrium, a free trade area equilibrium can be found involving domestic transfers only that is at least as satisfactory for every consumer as the original allocation.
Does Consumer Search Matter for Firm Markups?
(2005-08-13T17:08:44Z) Gwin, Carl R.
This study investigates the relationship between consumer search costs, inflation, and firm markups in retail trade by employing actual measures of search cost. Consistent with theory, results indicate that markups can be higher if search costs are higher and increases in inflation lead to increases in markups if search costs are sufficiently high. Two competing hypotheses on the link between inflation and markups, namely consumer search costs and alternatively long-term seller/buyer contracts, are then evaluated. As long-term contracts are rare in retail trade, this study's results make it hard to justify studying how inflation impacts firm markups without considering search costs.
Do We Really Understand Home Ownership Rates? An International Study
(2005-08-13T17:12:19Z) Gwin, Carl R.; Ong, Seow-Eng
This paper attempts to fill two gaps in the homeownership literature identified by Dietz and Haurin (2003): homeownership in less developed countries and the effects of race, ethnicity and income on tenure choice. We use United Nations data from 1993 and 1998 to offer a cross-country analysis of the determinants of homeownership rates. Consistent with the previous literature, this study confirms that 1. The price-to-rent ratio is an important factor in tenure choice and 2. Increases in income are associated with increases in the percentage of consumers who choose to own. However, these relationships seem to hold generally only for higher income developed countries. In contrast to the previous literature that finds race and ethnicity account for a significant portion of the differences in U.S. homeownership rates, this study finds no evidence that these determinants account for differences across countries. We investigate the rule of law and find it is closely correlated with income measures which may indicate that countries with stronger laws encourage higher homeownership rates. Finally, capitalist / (formerly) communist regime differences do not appear to explain cross country differences in homeownership rates. The paper offers insights from the international evidence for the potential of selected policies to increase domestic homeownership rates and identifies several avenues for future international homeownership research.
Religious Pluralism and Religious Adherence in U.S. Counties: Assessing the Reassessment
(2005-08-13T17:24:19Z) North, Charles Mark, 1964-; Staha, Melissa B.
We conduct an empirical test of the relationship between religious pluralism and religious participation in U.S. counties using a fixed-effects panel estimation technique. The empirical technique allows us to control for unobserved heterogeneity across counties resulting from various cultural and historical factors. Contrary to prior cross-sectional research on the 1980 and 1990 Glenmary U.S. counties data, we find a significantly positive relationship between pluralism and participation from panel estimation on the same data. However, we also explain how changes between 1980 and 1990 in the composition of denominations in the Glenmary samples can generate a false positive relationship with the panel estimator. The results show the importance for future research on pluralism and participation of data that have a consistent denominational composition across time.
Unemployment Duration under Wrongful Discharge Law
(2005-08-13T17:28:26Z) Nicholson, Kristin A.; North, Charles Mark, 1964-
In the 1970’s and 1980’s, courts in most U.S. states adopted some type of common law wrongful discharge cause of action. The various causes of action for wrongful discharge are generally placed into three categories: public policy, implied contract, and good faith. This paper examines the effects of state-level wrongful discharge actions on the duration of unemployment spells. We use individual data from the March supplements to the Current Population Survey for 1979- 2000, refining the sample in various ways to correct for shortcomings inherent in CPS data on unemployment spell duration. Results indicate that judicial adoption of wrongful discharge law lengthened the duration of unemployment spells. For the broadest sample of workers, all three types of wrongful discharge law lengthened unemployment spells. However, when the analysis is limited to workers who can be matched across their two years of participation in the survey, only the implied contract action has a significant effect. In addition, we look for the presence of differential insider/outsider effects, as have been found in studies of European employment protection legislation, but we find only limited evidence of such effects.
Religious Freedom and State Religion in an Interational Panel
(2005-08-13T17:37:13Z) Gwin, Carl R.; North, Charles Mark, 1964-
This paper explores the determinants and implications of church-state relationships. A theoretical model of a government’s decision to establish, or disestablish, a state church is developed and then tested with data from a 65-year panel of 31 countries. We also examine the effects of state religion and legal protection of religious freedom on religious attendance and religious pluralism. We show that, due to economies of scale in the provision of religious services, governments are most likely to establish a state religion in countries with homogeneous populations. We further show that heterogeneity of religious preferences reduces the likelihood of a state religion, that state religions undermine the overall religiosity of the population in religiously pluralistic countries, and that religious freedom protection increases religious attendance and spurs increases in religious pluralism. The overall implication of our model and empirical findings is that state religion is inherently self-destructive when religious freedom is guaranteed.
Pharmaceuticals, Prescription Plans, and Promoting Progress
(2005-08-13T17:41:49Z) Grinols, Earl L., 1951-; Henderson, James W.
Monopoly response to buyers who pay fraction c of the product cost is to raise the buyer price for the initial quantity q0 from p0 to 1/c p0, and adjust to a different price and quantity only if profits are thereby raised further. A 25% prescription drug plan co-payment provision, for example, magnifies the pharmaceutical patent holder’s profits more than a fourfold increase in price at the original output would do. This is detrimental to the adoption and use of prescription drug plans. In addition to the appearance of abusing a prescription drug program, the inducement to patentable pharmaceutical research and development (R&D) cannot be optimal both before and after such a plan’s institution. Possibly it is optimal in neither. This paper describes an efficient incentive plan for R&D that does not depend on monopoly and thus is not an impediment to co-pay provisions that might be part of a prescription drug plan.
Openness, the Sacrifice Ratio, and Inflation: Is there a Puzzle?
(2005-08-13T17:45:15Z) Daniels, Joseph P.; VanHoose, David D.
The standard time-inconsistency-based explanation for the negative correlation between openness and inflation requires an inverse relationship between the sacrifice ratio and openness, but Daniels et al. (forthcoming) have provided evidence that controlling for central bank independence reveals a positive relationship. This paper embeds the time-inconsistency approach within a model of a multisector, imperfectly competitive, open economy. In this setting, greater openness raises the sacrifice ratio but reduces the inflation bias. Thus, failure to observe an inverse relationship between openness and the sacrifice ratio does not necessarily imply that the time-inconsistency approach is irrelevant to understanding the openness-inflation relationship.
Openness, Central Wage Bargaining, and Inflation
(2005-08-13T17:49:37Z) Daniels, Joseph P.; Nourzad, Farrokh; VanHoose, David D.
This paper develops a model of an open economy containing both sectors in which wages are market-determined and sectors with wage-setting arrangements. A portion of the latter group of sectors coordinate their wages, taking into account that their collective actions influence the equilibrium inflation outcome in an environment in which the central bank engages in discretionary monetary policymaking. Key predictions forthcoming from this model are (1) increased centralization of wage setting initially causes inflation to increase but then results in an inflation dropoff, (2) a greater degree of centralized wage setting reduces the inflation-restraining effect of greater central bank independence, and (3) increased openness is more likely to reduce inflation in nations with less centralized wage bargaining. Analysis of data for seventeen nations for the period 1970-1999 provides generally strong and robust empirical support for all three of these predictions.
Capital Regulation, Heterogeneous Monitoring Costs, and Aggregate Loan Quality
(2005-08-13T17:55:46Z) Kopecky, Kenneth; VanHoose, David D.
This paper develops a banking-sector framework with heterogeneous loan monitoring costs. Banks are exposed to the moral hazard behavior of borrowers and endogenously choose whether to monitor their loans to eliminate this exposure. After analyzing an unregulated banking system, we examine several cases in which regulatory capital requirements bind the notional loan supplies of various subsets of banks. To gauge the impact of capital requirements, we define loan ‘quality’ in terms of either the ratio of monitored to total loans or the ratio of monitoring banks to total bank population. We find that binding capital requirements unambiguously increase the market loan rate and reduce aggregate lending, but, in all but one case, have an ambiguous effect loan ‘quality.’ Equally important, we show that capital requirements create a misallocation of monitoring activity within the banking system. These results suggest that the benefit/cost ratio of capital requirements is not necessarily greater than unity.
Within-child Associations between Changes in Family Income and Changes in Externalizing and Internalizing Problems
(2005-08-13T18:00:15Z) Dearing, Eric; McCartney, Kathleen; Taylor, Beck A.
Within-child associations between family income and child externalizing and internalizing problems were examined using longitudinal data from the NICHD Study of Early Child Care and Youth Development (n = 1,132). Variations in income effects were estimated as a function of whether families were poor, whether mothers were partnered or not, and the number of hours mothers and their partners were employed. For all study children, increases in family income were associated with decreases in externalizing problems, although the estimated benefits of gains in income were greatest for children who were chronically poor. For both externalizing and internalizing problems, income gains were most strongly associated with problem decreases when chronically poor children’s mothers were partnered and employed.
A test of agglomeration using wage behavior.
(2006-10-13T16:42:06Z) Staha, Melissa B.; North, Charles Mark, 1964-; Economics.; Baylor University. Dept. of Economics.
The neoclassical economic model of wage behavior over time and place predicts that firms spread out and wages converge, given assumptions such as no transactions costs, homogenous products, and same access to resources and technology. However, there are rents called agglomeration economies that can be extracted in certain occupations and occupational groups simply by being located near other similar firms. In this case, the firms agglomerate and wages diverge. We use data from the Bureau of Labor Statistics to test if agglomeration is happening in certain occupational groups based on whether wages are converging or diverging over the short term. Although agglomeration happens more often in the higher-ordered occupational groups, overall, the evidence is mixed concerning the presence of agglomeration economies.
Hispanic assimilation to American health insurance.
(2006-10-26T19:00:44Z) Jamal, Sheri K.; Henderson, James W.; Economics.; Baylor University. Dept. of Economics.
Policy makers, insurance companies, physicians, healthcare administrators, and especially patients have acknowledged the need for healthcare reform. Some economists speculate high healthcare costs arise from charging paying patients enough to cover patients whom are unable to pay, the majority of those being uninsured. Hispanics maintain the highest percentage of uninsured, thirty percent; therefore are the main focus of this study. I hypothesize that assimilation and race, compared to many common factors play a significant role in health insurance. Not only do the results show Hispanics to be significantly less likely to have health insurance than blacks or whites, but immigrants are less likely to be insured than the first generation resident or subsequent generations. Specifically, Hispanic immigrants are less likely to be insured than white immigrants from 1980-1990. This study concludes that assimilation is a significant determinant of the percentage of the United States population that is uninsured.
A shirking model of NBA players.
(2007-01-11T21:54:27Z) Francis, Rashad J.; Kelly, Thomas M.; Economics.; Baylor University. Dept. of Economics.
As guaranteed National Basketball Association (NBA) contract salary amounts continuously increase there is a strong possibility of shirking due to difficulty in modeling contracts based upon future performance. Based on a 5-year panel of 121 NBA players this paper uses two stage least squares regression to test the possibility of player shirking by comparing performance in the final year of their contract versus other years. The analysis does not find evidence of shirking, although it does find evidence that player performance is significantly affected by individual characteristics, such as age, experience, and salary. The general conclusion of the study is that competitiveness in the market for NBA players is the primary determinant of player performance rather than attempts by players to consciously affect contract outcomes by selectively altering their performance.
Privatization and the resistance to change: technological, political, and sociological issues.
(2007-03-07T02:48:54Z) Lackmeyer, Jay.; Trower, Jonathan.; Vaughn, Randal L.; Information Systems.; Baylor University. Dept. of Information Systems.
Both Florida and Texas child welfare systems function heavily off of legislative mandates. In 1996, the Florida legislature mandated four pilot programs that privatized child welfare services through contracts with community-based agencies (McCullough and Associates). Since then Florida has privatized the entire state through 22 regionally defined lead agencies. Their role as a lead agency is to provide and/or sub contract all services related to maintaining children referred to them by the state or private investigators. In a similar fashion, Texas has pushed towards privatization with Senate Bill 6 which requires that all functions of foster care, adoption, and case management be moved to the private sector, with TDFPS (Texas Department of Family Protective Services) focusing only on abuse investigations. This thesis compares the Florida and Texas privatization story and through interviews with leading experts decides whether or not privatization is doomed to failure before it is initiated.
Teaching Business Ethics: A Faculty Seminar Model
(2007-12-20T15:51:32Z) Grinols, Anne Bradstreet
Who is responsible for the increasing incidence of ethical misconduct in businesses? The short answer: the ones who committed the ethical misconduct are responsible. As these incidents receive more and more coverage in the news, however, it is fair to ask if there is shared responsibility. Does some of that responsibility fall to those who teach business? Is teaching the ethics of doing business deemed just as necessary as the requisite accounting, finance, and management skills? How should business schools respond to the call for more ethics training in their graduates?
Could sub-debts of banks be potential tools for supervision? Empirical study with data set 1999-2007.
(2008-06-11T12:21:33Z) Zhang, Lin, 1983-; VanHoose, David D.; Economics.; Baylor University. Dept. of Economics.
Most previous research has discussed how spreads of sub-debts could be tools to signal the risks of banks. However, studies have focused on data preceding 1999, when the Financial Modernization Act (FMA) has not yet been implemented. In this thesis, I will concentrate on evaluating if the spreads of sub-debts could still serve as signals for the risks of banks after the implementation of FMA. From the results of regression I find that the spreads of sub-debts could still signal risks of banks in the post-FMA period. Compared to previous studies, I got different results about the effects of market leverage and logarithm of total assets on sub-debts spreads. Profitability of banks, ROA and ROE, has opposite influences on the spreads, and capital ratios have insignificant effects. Further, sub-debt spreads achieve their highest values before the 2001 recession and decreased after that. The information content of sub-debt yield spreads changes in the non-preferred economic conditions, such as recessions.
Measurement of total factor productivity growth in countries with high rates of structural change.
(2008-06-11T18:03:55Z) Racsa, Patrick N.; Pham, Van Hoang.; Economics.; Baylor University. Dept. of Economics.
In a neoclassical framework, high rates of economic growth can be sustained if the main source of this growth is improvements in technical efficiency, measured by Total Factor Productivity Growth (TFPG). This study argues that traditional aggregate growth accounting methods might not be a useful measure of technological gains when such gains are predominantly sector-specific. In rapidly industrializing countries, rates of structural change from changing of industries are high. This allows us to form the testable hypothesis: the observed change in the capital labor ratio in response to a change in the wage to capital cost ratio should be lower in economies with high rates of structural change than in economies with lower rates of structural change. We find robust empirical evidence supporting this hypothesis.
The utility of the passing time and measurement of the purchasing power of currencies in the flexible-exchange-rate system.
(2008-11-17T20:23:43Z) Seka, Gilles-Eric Kotchi.; Gardner, H. Stephen.; Economics.; Baylor University. Dept. of Economics.
In economics, it is not the quantity that matters the most; it is the amount of utility. The purchasing power of a currency is not merely the volume of goods the money can obtain, but the amount of utility it can command. Primarily, money exchanges for some units of time spent laboring. As such, the ratio of the utility of time to the money wage should measure the purchasing power of the currency. This marginal utility of the time is the first derivative of the utility production function, derived from the compound interest equation, with respect to time. It follows that the purchasing power of the currency is dependent on both the rate of interest and the wage rate. This measure of purchasing power allows computation of a purchasing-power-parity exchange rate that truly reflects the fundamentals of the economy.

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