http://www.rssboard.org/rss-specification 720 https://escholarship.org/uc/ucsc_econ_seminar/rss Recent eScholarship items from Archived UCSC Economics Department Seminars Tue, 23 Jun 2026 16:41:16 +0000 https://escholarship.org/uc/item/3sf4q6nn <p>In this paper, we estimate a VAR model to present an empirical finding that an unexpected rise in the federal funds rate decreases the ratio of sales to stocks available for sales, while it increases finished goods inventories. In addition, dynamic responses of these variables reach their peaks several quarters after a monetary shock. In order to understand the ob- served relationship between monetary policy and finished goods inventories, we allow for the accumulation of finished goods inventories in an optimizing sticky price model, where prices are set in a staggered fashion. In our model, holding finished inventories helps firms to generate more sales at given their prices. We then show that the model can generate the observed relationship between monetary shocks and finished goods inventories. Furthermore, we find that allowing for inventory holdings leads to a Phillips curve equation, which makes the inflation rate dependent on the expected present-value of future marginal... https://escholarship.org/uc/item/3sf4q6nn Tue, 26 Apr 2005 00:00:00 +0000 Jung, YongSeung Yun, Tack https://escholarship.org/uc/item/4rs4202s <p>Why do firm growth and exit rates decline with size? What determines the size distribution of firms? This paper presents a theory of firm dynamics that simultaneously rationalizes the basic facts on firm growth, exit, and size distributions. The theory emphasizes the accumulation of industry specific human capital in response to industry specific productivity shocks. The theory implies that firm growth and exit rates should decline faster with size, and the size distribution should have thinner tails, in sectors that use human capital less intensively, or correspondingly, physical capital more intensively. In line with the theory, we document substantial sectoral heterogeneity in US firm dynamics and firm size distributions, which is well explained by variation in physical capital intensities.</p> https://escholarship.org/uc/item/4rs4202s Tue, 5 Apr 2005 00:00:00 +0000 Wright, Mark https://escholarship.org/uc/item/8xs3k3j8 <p>Employer-provided benefits are a large and growing share of compensation costs. In this paper, I consider three factors that can affect the value created by employer-sponsored benefits. First, firms have a comparative advantage (for example, due to scale economies or tax treatment) in purchasing relative to employees. This advantage can vary across firms based on size and other differences in cost structure. Second, employees differ in their valuations of benefits and it is costly for workers to match with firms that offer the benefits they value. Finally, some benefits can reduce the marginal cost to an employee of extra working time. I develop a simple model that integrates these factors. I then generate empirical implications of the model and use data from the National Longitudinal Survey of Youth to test these implications. I examine access to employer-provided meals, child-care, dental insurance, and health insurance. I also study how benefits are grouped together and... https://escholarship.org/uc/item/8xs3k3j8 Mon, 7 Mar 2005 00:00:00 +0000 Oyer, Paul https://escholarship.org/uc/item/2b49w6f1 <p>This paper exploits a new source of variation in Head Start funding to identify the program's long-term effects. In 1965 the Office of Economic Opportunity (OEO) provided technical assistance to the 300 poorest counties in the U.S. to develop Head Start funding proposals, but did not provide similar assistance to other counties. We show that the result is a substantial difference in Head Start funding and participation rates in those counties just above and below OEO's poverty-rate cutoff for technical assistance, differences that seem to have persisted through at least the 1970’s. This discontinuity in Head Start funding and participation are associated with discontinuities in educational attainment.</p> https://escholarship.org/uc/item/2b49w6f1 Wed, 2 Mar 2005 00:00:00 +0000 LUDWIG, JENS O Miller, Doug https://escholarship.org/uc/item/3z59c4p7 <p>We analyze oligopolistic competition in a multi-period dynamic setting for goods with network effects. Two or more infinitely-lived firms produce incompatible products differentiated in their inherent quality. Consumers live for a single period and receive the network effect of the previous period’s sales. We show existence and characterize Markov perfect equilibria that are unique given market shares at the beginning of time. We find that, generally, small network effects help the higher quality firm realize higher prices, sales, and profits. Intermediate network effects lead eventually to monopoly of the firm that provides the higher inherent quality, irrespective of original market shares. Strong network effects lead to a stable monopoly equilibrium in the long run which is achieved by the firm of sufficiently high starting market share. Although the case of monopoly resulting under strong network effects and determined by original market shares has been understood in the... https://escholarship.org/uc/item/3z59c4p7 Tue, 1 Mar 2005 00:00:00 +0000 Economides, Nicholas Mitchell, Matthew Skrzypacz, Andrzej https://escholarship.org/uc/item/4z54r2s3 Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs https://escholarship.org/uc/item/4z54r2s3 Wed, 1 Dec 2004 00:00:00 +0000 Knittel, Christopher R. https://escholarship.org/uc/item/9xr4f238 <p>This paper argues that when the exchange rate and projected sales in the host country are jointly determined by underlying macroeconomic variables, standard regressions of FDI flows on both exchange rate levels and volatility are subject to bias. The results hinge on the interaction of macroeconomic uncertainty, a sunk cost, and heterogeneous productivity across firms. They indicate that a multinational firm’s response to increases in exchange rate volatility will differ depending on whether the volatility arises from shocks in the firm’s native or host country. It is the first study to depart from the representative-firm framework in an analysis of direct investment behavior with money.</p> https://escholarship.org/uc/item/9xr4f238 Tue, 23 Nov 2004 00:00:00 +0000 Russ, Katheryn https://escholarship.org/uc/item/8zm571cw <p>Is the AFQT a measure of achievement or innate ability? In this paper, we test for a relationship between schooling and AFQT performance in the NLSY 79 by comparing test-takers with birthdays near state cutoff dates for school entry. We instrument for schooling at the test date with “academic cohort”—the year in which an individual should have entered first grade given her birthday and the state in which she was likely to have entered school—in a model which allows age at the test date to have a direct effect on AFQT performance. This identification strategy reveals large impacts of schooling on the AFQT performance of blacks and Hispanics, but no schooling effect for whites. Within race, schooling is generally found to have larger impacts on the more academic components of the underlying test battery. On balance, these findings provide support for the hypothesis that the AFQT measures school achievement.</p> https://escholarship.org/uc/item/8zm571cw Tue, 23 Nov 2004 00:00:00 +0000 Cascio, Elizabeth U. https://escholarship.org/uc/item/8853k4jd <p>Individuals living in society are bound together by a social network, the complex of relationships that brings them into contact with other agents. In many social and economic situations, individuals learn by observing the behavior of others in their local environment. This process is called social learning. Learning in incomplete networks, where different agents have different information sets, is especially challenging: because of the lack of common knowledge individuals must draw inferences about the actions others have observed as well as about their private information. Whether individuals can rationally process the information available in a network is ultimately an empirical question. This paper reports an experimental investigation of learning in three-person networks and uses the theoretical framework Gale and Kariv (2003) to interpret the data generated by the experiments. The family of three-person networks includes several nontrivial architectures, each of which... https://escholarship.org/uc/item/8853k4jd Tue, 23 Nov 2004 00:00:00 +0000 Kariv, Shachar https://escholarship.org/uc/item/81m0r0jj <p>Timing is crucial in situations ranging from currency attacks, to product introductions, to starting a revolution. These settings share the feature that payoffs depend critically on the timing of a few other key players—and their moves are uncertain. To capture this, we introduce the notion of clock games and experimentally test them. Each player’s clock starts on receiving a signal about a payoff relevant state variable. Since the timing of the signals is random, clocks are de-synchronized. A player must decide how long, if at all, to delay his after receiving the signal. We show that (i) Equilibrium is always characterized by strategic delay—regardless of whether moves are observable or not; (ii) delay decreases as clocks become more synchronized and increases as information becomes more concentrated; (iii) When moves are observable, players “herd” immediately after any player makes a move. We then show, in a series of experiments, that key predictions of the model are consistent... https://escholarship.org/uc/item/81m0r0jj Tue, 23 Nov 2004 00:00:00 +0000 Morgan, John https://escholarship.org/uc/item/70v7f9ff <p>A well developed financial system enhances competition in the industrial sector by allowing easier entry. The impact varies across industries, however. For some, small changes in financial development quickly induce entry and dissipate incumbents’ rents, generating strong incentives to oppose improvement of the financial system. In other sectors incumbents may even benefit from increased availability of external funds. The relative strength of promoters and opponents determines the political equilibrium level of financial system development. This may be perturbed by the effect of trade liberalization in the strength of each group. Using a sample of 41 trade liberalizers we conduct an event study and show that the change in the strength of promoters vis-à-vis opponents is a very good predictor of subsequent financial development. The result is not driven by changes in demand for external funds, or by the success of the trade policy. The relationship is mediated by policy... https://escholarship.org/uc/item/70v7f9ff Tue, 23 Nov 2004 00:00:00 +0000 Braun, Matias https://escholarship.org/uc/item/6rk9f1fm <p>We study effects of horizontal integration on firm reputation. In an environment where customers observe only imperfect signals about firms' effort/quality choices, firms cannot maintain reputations of high quality and earn quality premium forever. Even when firms are choosing high quality/effort, there is always a possibility that a bad signal is observed. In this case, firms must give up their quality premium, at least temporarily, as punishment. A firm's integration decision is based on the extent to which integration attenuates this necessary cost of maintaining a good reputation. Horizontal integration leads to a larger market base for the merged firm and may allow better monitoring of the firm's choices, hence improving the punishment scheme for deviations. On the other hand, it gives the merged firm more room for sophisticated derivations. We characterize the optimal level of integration and provide sufficient conditions under which nonintegration dominates integration.... https://escholarship.org/uc/item/6rk9f1fm Tue, 23 Nov 2004 00:00:00 +0000 Cai, Hongbin https://escholarship.org/uc/item/5cz0h23t <p>Increasingly, local governments compete by offering substantial subsidies to industrial plants to locate within their jurisdictions. This paper uses a novel research design to estimate the local consequences of successfully bidding for an industrial plant, relative to bidding and losing, on labor earnings, public finances, and property values. Each issue of the corporate real estate journal Site Selection includes an article titled "The Million Dollar Plant" that reports the county where a large plant chose to locate (i.e., the 'winner'), as well as the one or two runner-up counties (i.e., the 'losers'). We use these revealed rankings of profit-maximizing firms to form a counterfactual for what would have happened in the winning counties in the absence of the plant opening. We find that the plant opening announcement is associated with a 1.5% trend break in labor earnings in the new plant's industry in winning counties, as well as increased earnings in the same... https://escholarship.org/uc/item/5cz0h23t Tue, 23 Nov 2004 00:00:00 +0000 Moretti, Enrico https://escholarship.org/uc/item/2jg817p3 <p>Many states are under court-order to reduce local disparities in education spending. While a substantial body of literature suggests that these orders and the resulting school finance equalizations have increased the level and progressivity of state education spending, there is little evidence on the broader effects of such measures on the change in total resources available not only for schools, but for other local government programs as well. When states spend more on education, both state and local budget constraints change, which may affect both state and local spending and revenue decisions. We find that while mandated school finance equalizations increase both the level and progressivity of state spending on education, states finance the required increase in education spending in part by reducing their aid to localities for other programs. Local governments, in turn, respond to the increases in state taxation and spending by reducing both their own revenue-raising... https://escholarship.org/uc/item/2jg817p3 Tue, 23 Nov 2004 00:00:00 +0000 Gordon, Nora