How Right-to-Work Laws Affect Wages

I examine the wage effects of Right-To-Work (RTW). Using state-level data, I estimate that, ceteris paribus, RTW states have average wages that are significantly higher than non-RTW states. This result is robust is across a wide variety of specifications. An important distinctive of this study is that it controls for state economic conditions at the time states adopted RTW. States that adopted RTW were generally poorer than other states. Failure to control for these initial conditions may be the reason that previous studies have not identified a positive wage impact for RTW.Right-to-Work

The Robust Relationship Between Taxes and State Economic Growth

I estimate the relationship between taxes and economic growth using data from 1970-1999 and the forty-eight continental U.S. states. I find that taxes used to fund general expenditures are associated with significant, negative effects on economic growth. Further, this finding is robust across (i) alternative variable specifications, (ii) alternative estimation procedures, (iii) alternative ways of dividing the data into ¡°five-year¡± periods, and (iv) allowing for individual-specific time and state effects. I also provide an explanation for why previous research has had difficulty identifying this ¡°robust¡± relationship.U.S. states; Economic development; Economic growth; Fiscal policy; Taxes; Tax burden; Panel data

More Evidence on the Use of Constructed-Response Questions in Principles of Economics Classes

This study provides evidence that constructed response (CR) questions contribute information about student knowledge and understanding that is not contained in multiple choice questions (MC). We use an extensive data set of individual assessment results from Introductory Macro- and Microeconomics classes at a large, public university. We find that (i) CR scores contain information not contained in MC questions, (ii) this information is correlated with a measure of student knowledge and understanding of course material, and (iii) CR questions are better able to “explain” academic achievement in other courses than additional MC questions. There is some evidence to suggest that this greater explanatory power has to do with the ability of CR questions to measure higher-level learning as characterized by Bloom’s taxonomy (Bloom, 1956). Both (i) the generalisability of our results to other principles of economics classes, and (ii) the practical significance (in terms of students’ grades) of our findings, remain to be determined.Principles of Economics Assessment; Multiple Choice; Constructed Response; Free Response; Essay

A Monte Carlo Evaluation of Some Common Panel Data Estimators when Serial Correlation and Cross-sectional Dependence are Both Present

This study employs Monte Carlo experiments to evaluate the performances of a number of common panel data estimators when serial correlation and cross-sectional dependence are both present. It focuses on fixed effects models with less than 100 cross-sectional units and between 10 and 25 time periods (such as are commonly employed in empirical growth studies). Estimator performance is compared on two dimensions: (i) root mean square error and (ii) accuracy of estimated confidence intervals. An innovation of our study is that our simulated panel data sets are designed to look like “real-world” panel data. We find large differences in the performances of the respective estimators. Further, estimators that perform well on efficiency grounds may perform poorly when estimating confidence intervals, and vice versa. Our experimental results form the basis for a set of estimator recommendations. These are applied to “out of sample” simulated panel data sets and found to perform well.Panel Data estimation; Monte Carlo analysis; FGLS; PCSE; Groupwise Heteroscedasticity; Serial Correlation; Cross-sectional Dependence; Stata; EViews

Do Constructed-Response and Multiple-Choice Questions Measure the Same Thing?

Our study empirically investigates the relationship between constructed-response (CR) and multiple-choice (MC) questions using a unique data set compiled from several years of university introductory economics classes. We conclude that CR and MC questions do not measure the same thing. Our main contribution is that we show that CR questions contain independent information that is related to student learning. Specifically, we find that the component of CR scores that cannot be explained by MC responses is positively and significantly related to (i) performance on a subsequent exam in the same economics course, and (ii) academic performance in other courses. Further, we present evidence that CR questions provide information that could not be obtained by expanding the set of MC questions. A final contribution of our study is that we demonstrate that empirical approaches that rely on factor analyses or Walstad-Becker (1994)-type regressions are unreliable in the following sense: It is possible for these empirical procedures to lead to the conclusion that CR and MC questions measure the same thing, even when the underlying data contain strong, contrary evidence. JEL Classifications: A22Principles of Economics Assessment; Multiple Choice; Constructed Response; Free Response; Essay

One For All or All For One? Using Multiple-listing Information in Event Studies

In an event study where at least some of the sample firms have their equity securities listed in more than one market, the question arises as to which is the most appropriate market (or markets) to use for the purpose of estimating mean abnormal returns. When arbitrage activity across these markets is restricted in some way, estimating abnormal returns from just one of the markets potentially throws away valuable information. On the other hand, indiscriminate pooling is likely to result in the same information being counted more than once. We develop a Generalized Least Squares estimator that (i) uses all the information available from multiple listings, (ii) ‘downweights’ listing observations that provide little new information, and (iii) yields efficient abnormal return estimates. Finally, we apply this generalized approach to a sample of Chinese foreign mergers and acquisitions and compare the results with conventional estimates of mean abnormal returns.event study; multiple listings; mergers and acquisitions; China

The PCSE Estimator is Good -- Just Not as Good as You Think

This paper investigates the properties of the Panel-Corrected Standard Error (PCSE) estimator. The PCSE estimator is commonly used when working with time-series, crosssectional (TSCS) data. In an influential paper, Beck and Katz (1995) (henceforth BK) demonstrated that FGLS produces coefficient standard errors that are severely underestimated. They report Monte Carlo experiments in which the PCSE estimator produces accurate standard error estimates at no, or little, loss in efficiency compared to FGLS. Our study further investigates the properties of the PCSE estimator. We first reproduce the main experimental results of BK using their Monte Carlo framework. We then show that the PCSE estimator does not perform as well when tested in data environments that better resemble “practical research situations.” When (i) the explanatory variable(s) are characterized by substantial persistence, (ii) there is serial correlation in the errors, and (iii) the time span of the data series is relatively short, coverage rates for the PCSE estimator frequently fall between 80 and 90 percent. Further, we find many “practical research situations” where the PCSE estimator compares poorly with FGLS on efficiency grounds.Panel data estimation; Monte Carlo analysis; FGLS; Parks; PCSE; finite sample

The Effect of Welfare on Work and Marriage: A View From the States

This study provides a comprehensive examination of the work and family structure incentives of public assistance, focusing on the consequences of state-determined programs. Such an approach allows state policy- makers to understand the tradeoffs implicit in their current program parameters. It allows them to better identify alternative arrangements that may be more consistent with policy goals. And it discovers linkages between work and family structure incentives that may be otherwise difficult to discern. We follow the previous literature in working through a small set of common scenarios meant to represent typical experiences of public assistance recipients. However, accompanying this study is an EXCEL spreadsheet program that allows interested readers to extend the analysis for the complete set of program participation/family characteristics permutations. The spreadsheet has a user-friendly interface and may be downloaded from the internet.

Chinese Overseas M&A Performance and the go Global Policy

This paper investigates whether stock markets view Chinese OMAs as increasing shareholder wealth. The subject is of interest given the influential role that the government plays in Chinese firms’ overseas activities, and the fact that the government may have objectives other than maximization of shareholder wealth. We examine 145 OMAs by Chinese acquiring firms over the year 1994-2008. We find some evidence that markets positively responded to news of Chinese OMAs. However, we also find that markets responded less favorably after China implemented its Go Global policy encouraging overseas investment. We hypothesize two reasons for this: First, the expansion of OMAs under Go Global resulted in Chinese firms pursuing less attractive targets, on average. Second, Go Global re-directed investment towards industries having national strategic value but diminished profit value. Using a Blinder-Oaxaca decomposition procedure, we find no evidence to support this latter hypothesis. Thus, to whatever extent strategic interests may motivate China’s Go Global policy, it does not appear that their pursuit has come at the expense of shareholder wealth.Economic Development; China Economy; Overseas Mergers and Acquisitions; Event Study; Go Global