Interstate Cigarette Bootlegging: Extent, Revenue Losses, and Effects of Government Intervention

In this paper, we develop and estimate a model of commercial smuggling in which some, but not all, firms smuggle a portion of the cigarettes they sell. The model is used to examine the effects on interstate cigarette smuggling of the Contraband Cigarette Act and a change in the federal excise tax. We find that both policies have unintentional effects. While the Contraband Cigarette Act was imposed to reduce interstate smuggling, we find it had the opposite effect. In contrast, an increase in the federal tax is not intended to affect smuggling, but we find it increases the portion of cigarette sales that is commercially smuggled.

The Disclosure and Licensing of University Inventions

We examine the interplay of the three major university actors in technology transfer from universities to industry: the faculty, the technology transfer office (TTO), and the central administration. We model the faculty as an agent of the administration, and the TTO as an agent of both the faculty and the administration. Empirical tests of the theory are based on evidence from our survey of 62 US research universities. We find that the TTOs reported licensing objectives are influenced by their views of faculty and administration, which supports the assumption that the TTO is a dual agent. The theory yields predictions for whether or not faculty disclose inventions and if so, at what stage, which in turn affects license contract terms. We also examine how the portion of inventions disclosed at different stages varies with faculty quality. Quality is found to be inversely related to the share of license income allotted to faculty.

Elasticities in International Trade: Theoretical and Methodological Issues

This paper is a survey of recent research on specification, estimation and evaluation of trade elasticities. Since our focus is primarily methodological we do not give a compendium of recent estimates. Given the excellent and comprehensive nature of previous surveys, the marginal benefit of doing so would be small. In addition, we shall argue that any hope of obtaining a consensus of parameter values from trade equations must rely on taking a different approach. The approach involves using (and allowing the reader to use) as much information as is practically possible. There are both theoretical and econometric reasons to pursue such an approach, and we shall focus on studies which clarify them.Research Seminar in International Economics, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/101016/1/ECON455.pd

Bilateral Trade Flows, The Linder Hypothesis, and Exchange Risk

Bilateral trade flows are used to examine the Linder hypothesis and the effect of exchange-rate variability in a gra vity-type trade model derived from an underlying demand and supply mo del. A behavioral model is used to justify examining these issues joi ntly. The model performs well empirically using a sample of seventeen countries for the period 1974-82. The authors find overwhelming supp ort for the Linder hypothesis and this version of the gravity model. Moreover, they find strong support for the hypothesis that increased exchange-rate variability affects bilateral trade flows.Research Seminar in International Economics, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/101017/1/ECON456.pd

Smuggling, Camouflaging, and Market Structure

We examine how market structure and enforcement affect smuggling and welfare in a model where smuggling is camoflaged by legal sales. Conditions are given for when some, but not necessarily all, firms smuggle. With camouflaging, the market price is below the price when all sales are legal, so smuggling improves welfare if the price effect outweighs excess smuggling cost. This welfare effect is directly related to the degree of competition. Increased enforcement in this model potentially reduces welfare. The model is shown to be consistent with evidence on cigarette smuggling in the United States for 1975-1982.Research Seminar in International Economics, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100799/1/ECON259.pd

OLS or GLS in the presence of specification error? : An expected loss approach

Omitted variables in regression analysis can lead to the erroneous conclusion that autocorrelation or heteroscedasticity is present. The common response is to use the suggested GLS procedure, even if it is suspected that the error is a non-zero disturbance mean. The question addressed here is whether one is better off with the GLS or with the OLS estimator when the omitted portion of the regression cannot be incorporated into the regression. Using a loss function this paper relates the seriousness of OLS and GLS loss to identifiable parameters. With consistent estimators of these parameters the researcher can choose between OLS and GLS.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/26665/1/0000209.pd

Conveying Quality and Value in Emerging Industries: Star Scientists and the Role of Learning in Biotechnology

Managers of private entrepreneurial firms face obstacles in raising capital both in placing a value on a firm and conveying value to investors. These problems are exacerbated when the firm is small, has limited assets (except for human capital) and has yet to have a lead product. In such cases metrics are necessary to convey the value of the firm to investors. Here we explore the importance within the biotechnology industry of the non-financial metrics firms used to convey value during two important initial public offerings (IPO) windows (1989 to 1992 and 1996 to 2000). We also examine whether there was a change over time in the importance of various metrics in determining the value of a biotechnology firm. We find that firms with an affiliated Nobel laureate succeeded in raising the value of their firms by more than $30 million compared to firms without a Nobel laureate during the first period, suggesting that a Nobel laureate served as a powerful signal of firm value. Our results also suggest that the biotechnology regime changed and the Nobel Prize lost its luster as a signal of value in the second period. The importance of several other non-financial metrics changed as well. We conclude that these non-financial metrics of value change in relative importance to potential investors and financial markets as learning occurs and as an industry matures.