21 research outputs found
Essays on firm location decisions, regional development and choices under risk
My dissertation consists of four papers. The first two papers study regional economic development. In particular, they focus on broadband Internet and agglomeration economies in rural areas. One paper tests whether broadband improves rural economy and find positive broadband effects on new firm location choices. The other paper explores whether agglomeration economies operate even in rural areas and find that agglomeration economies are important for new firm location choices and commuting decisions. Those findings from the two papers have useful implications to regional economic development policies.
My two other papers study choices under risk. One paper focuses on risk elicitation methods with a multiple price list format, which is widely used in the literature. The paper compares subjects’ choices between the elicitation method and one question selected from the method. The paper finds significant differences in the comparison and show that the differences occur due to reference-dependent preferences. Those results suggest that the elicitation method is not reliable because loss aversion influences elicited risk aversion. The other paper tests whether pre-play learning removes inconsistent preference rankings between choice and pricing for lotteries. Inconsistent preference rankings have been studied last four decades because standard economic theory cannot explain inconsistent preference rankings. Pre-play learning is simple ex-ante lottery learning, where subjects observe playing lotteries before they make decisions. The paper finds that pre-play learning removes inconsistent preference rankings, which suggests that pre-play learning makes preference rankings consistent between choice and pricing as predicted in standard economic theory. Those results from the two papers have meaningful implications to the literature
Business Ownership by Workers: Are Worker Cooperatives a Viable Option?
One possible strategy for both succession and new business development is employee ownership.� New business formation as an employee-owned firm or cooperative may have some advantages over formation as a sole proprietorship or partnership: pooling financial resources, spreading risk and combining the various knowledge and skills of the members involved. In the case of business succession, selling to employees provides a tax benefit to the owners and increases the probability that the business will continue to exist in its current location, benefitting both the employees themselves and the local community. While worker cooperatives (or employee-owned cooperatives) are currently rare in the United States, successful examples exist, suggesting potential for future development of this type of organization. This paper reviews the literature on worker cooperatives and presents data on the extent and nature of worker cooperatives in the United States. It concludes with a discussion of the implications for employee-owned cooperative development in Iowa and provides suggestions for future research and outreach programming on this topic.
Pre-play Learning and the Preference Reversal Phenomenon
Elicited preference rankings for two lotteries are typically inconsistent in choice and price. We test whether pre-play learning makes preference rankings consistent. Pre-play learning denotes ex-ante lottery learning, where subjects observe playing lotteries before making decisions. We find that pre-play learning makes the average selling prices for the p-bet, of subjects who choose the p-bet, higher than their average selling prices for the $-bet. However, pre-play learning is not strong enough to equalize the rates of standard and non-standard reversals, although pre-play learning reduces the rate of standard reversals
Business ownership by workers: are worker cooperatives a viable option?
One possible strategy for both succession and new business development is employee ownership. New business formation as an employee-owned firm or cooperative may have some advantages over formation as a sole proprietorship or partnership: pooling financial resources, spreading risk and combining the various knowledge and skills of the members involved. In the case of business succession, selling to employees provides a tax benefit to the owners and increases the probability that the business will continue to exist in its current location, benefitting both the employees themselves and the local community. While worker cooperatives (or employee-owned cooperatives) are currently rare in the United States, successful examples exist, suggesting potential for future development of this type of organization. This paper reviews the literature on worker cooperatives and presents data on the extent and nature of worker cooperatives in the United States. It concludes with a discussion of the implications for employee-owned cooperative development in Iowa and provides suggestions for future research and outreach programming on this topic
Understanding Behavioral Explanations of the WTP-WTA Divergence Through a Neoclassical Lens: Implications for Environmental Policy
The often observed empirical divergence between WTA and WTP measures of welfare change continues to be a topic of interest to both theoretical and applied economists. The divergence has particularly important implications for environmental policy. In this article, we review behavioral and other explanations of the disparity, with a focus on their connections to neoclassical welfare theory, and evaluate the empirical evidence of these explanations through the same lens. Some explanations of the disparity are consistent with neoclassical models, and some are not. Likewise, some imply that the divergences are attributed to underlying preferences (neoclassical or not), whereas others suggest that the divergences are due to elicitation methods, cognitive limitations, or other non-preference-related reasons. We argue that the source of the divergence can inform the choice of which measure, WTP or WTA, to use in a given empirical application
Can the Trend of Rural Population Decline Be Reversed?
In 1900, Iowa’s rural population was just shy of 1.7 million, with almost three-fourths residing on farms or in small towns. However, with the exception of the 1990s, Iowa’s rural population has declined in every census over the last 110 years, as shown in Figure 1. By 2010, only 36% of Iowans remained in rural areas
Does agglomeration matter everywhere?: new firm location decisions in rural and urban markets
We test whether commonly used measures of agglomeration economies encourage new firm entry in both urban and rural markets. Using new firm location decisions in Iowa and North Carolina, we find that measured agglomeration economies increase the probability of new firm entry in both urban and rural areas. Firms are more likely to locate in markets with an existing cluster of firms in the same industry, with greater concentrations of upstream suppliers or downstream customers, and with a larger proportion of college-educated workers in the local labor supply. Firms are less likely to enter markets with no incumbent firms in the sector or where production is concentrated in relatively few sectors. The same factors encourage both stand-alone start-ups and establishments built by multiplant firms. Commuting decisions exhibit the same pattern as new firm entry with workers commuting from low to high agglomeration markets. Because agglomeration economies are important for rural firm entry also, policies encouraging new firm entry should focus on relatively few job centers rather than encouraging new firm entry in every small town
Which Small Towns Attract Start‐Ups and Why? Twenty Years of Evidence from Iowa
Using data on a sample of small Iowa towns consistently collected over two decades, we investigate how agglomeration economies, social capital, human capital, local fiscal policy, and natural amenities affect new firm entry. We find that human capital and agglomeration are more conducive to new firm entry than are natural amenities, local fiscal policy, or social capital. The impact of local fiscal policy is too small to overcome the locational disadvantages from insufficient endowment of human capital and agglomeration. A rural development approach that encourages firm entry in rural towns with the largest endowments of human capital and market agglomeration would be more successful than trying to raise firm entry in every town
Essays on firm location decisions, regional development and choices under risk
My dissertation consists of four papers. The first two papers study regional economic development. In particular, they focus on broadband Internet and agglomeration economies in rural areas. One paper tests whether broadband improves rural economy and find positive broadband effects on new firm location choices. The other paper explores whether agglomeration economies operate even in rural areas and find that agglomeration economies are important for new firm location choices and commuting decisions. Those findings from the two papers have useful implications to regional economic development policies.
My two other papers study choices under risk. One paper focuses on risk elicitation methods with a multiple price list format, which is widely used in the literature. The paper compares subjects’ choices between the elicitation method and one question selected from the method. The paper finds significant differences in the comparison and show that the differences occur due to reference-dependent preferences. Those results suggest that the elicitation method is not reliable because loss aversion influences elicited risk aversion. The other paper tests whether pre-play learning removes inconsistent preference rankings between choice and pricing for lotteries. Inconsistent preference rankings have been studied last four decades because standard economic theory cannot explain inconsistent preference rankings. Pre-play learning is simple ex-ante lottery learning, where subjects observe playing lotteries before they make decisions. The paper finds that pre-play learning removes inconsistent preference rankings, which suggests that pre-play learning makes preference rankings consistent between choice and pricing as predicted in standard economic theory. Those results from the two papers have meaningful implications to the literature.</p
Overconfidence and Public Intoxication Arrest: Evidence from a University Town Police Log
We show that overconfident individuals are likely to be arrested for public intoxication by using arrest records from a university town police log. This relationship is robust to various control variables such as risk aversion, time discounting, present bias, self-control, selfishness, loss aversion, and socializing with peers arrested for public intoxication. However, this relationship is no longer significant using only self-reported arrest data. We hypothesize that overconfident individuals are likely to underreport their arrests. This result has important implications for the use of self-reported data on public intoxication arrests rather than actual arrest records.JEL Classification: I12, K42, D91This article is published as Hoffman, Elizabeth and Kim, Younjun. "Overconfidence and Public Intoxication Arrest: Evidence from a University Town Police Log" The B.E. Journal of Economic Analysis & Policy, 2022. https://doi.org/10.1515/bejeap-2022-0060. Posted with permission