Global price dispersion: are prices converging or diverging?

This paper documents significant time-variation in the degree of global price convergence over the last two decades. In particular, there appears to be a general U-shaped pattern with price dispersion first falling and then rising in recent years, a pattern which is remarkably robust across country groupings and commodity groups. This time-variation is difficult to explain in terms of the standard gravity equation variables common in the literature, as these tend not to vary much over time or have not risen in recent years. However, regression analysis indicates that this time-varying pattern coincides well with oil price fluctuations, which are clearly time-varying and have risen substantially since the late 1990s. As a result, this paper offers new evidence on the role of transportation costs in driving international price dispersion.Prices

Tradability, Productivity, and Understanding International Economic Integration

This paper develops a two-country macro model with endogenous tradability to study features of international economic integration. Recent episodes of integration in Europe and North America suggest some surprising observations: while quantities of trade have increased significantly, especially along the extensive margin, price dispersion has not decreased and may even have increased. We propose a way of reconciling these price and quantity observations in a macroeconomic model where the decision of heterogeneous firms to trade internationally is endogenous. Trade is shaped both by the nature of heterogeneity -- trade costs versus productivity -- and by the nature of trade policies -- cuts in fixed costs versus cuts in per unit costs like tariffs. For example, in contrast to tariff cuts, trade policies that work mainly by lowering various fixed costs of trade may have large effects on entry decisions at the extensive margin without having direct effects on price-setting decisions. Whether this entry raises or lowers overall price dispersion depends on the type of heterogeneity that distinguishes the new entrants from incumbent traders.

The micro-macro disconnect of purchasing power parity

The persistence of aggregate real exchange rates is a prominent puzzle, particularly since adjustment of international relative prices in microeconomic data is much faster. This paper finds that adjustment to the law of one price in disaggregated data is not just a faster version of the adjustment to purchasing power parity in the aggregate data; while aggregate real exchange rate adjustment works primarily through the foreign exchange market, adjustment in disaggregated data is a qualitatively distinct process, working through adjustment in local-currency goods prices. These distinct adjustment dynamics appear to arise from distinct classes of shocks generating macro and micro price deviations. A vector error correction model nesting aggregate and disaggregated relative prices permits identification of distinct macroeconomic and good-specific shocks. When half-lives are estimated conditional on shocks, the macro-micro disconnect puzzle disappears: microeconomic relative prices adjust to macro shocks just as slowly as do aggregate real exchange rates. These results provide evidence against theories of real exchange rate behavior based on sticky prices and on heterogeneity across goods.Foreign exchange rates ; Purchasing power parity ; Prices

The Micro-Macro Disconnect of Purchasing Power Parity

This paper reconciles the persistence of aggregate real exchange rates with the faster adjustment of international relative prices in microeconomic data. Panel estimation of an error correction model using a micro data set uncovers new stylized facts regarding this puzzle. First, adjustment to purchasing power parity deviations in aggregated data is not just a slower version of adjustment to the law of one price in microeconomic data, as arbitrage occurs in different markets, in response to distinct macroeconomic and microeconomic shocks. Second, when half-lives are estimated conditional on macro shocks, micro relative prices exhibit just as much persistence as aggregate real exchange rates. These results challenge theories of real exchange rate persistence based on sticky prices and on heterogeneity across goods, and support an explanation based on the presence of distinct macro and microeconomic shocks.

Applying Developmentally Appropriate Engineering Challenges in a First Grade Classroom

The intent of this study was to determine how implementing developmentally appropriate engineering challenges in a first grade classroom could positively impact the students’ levels of persistence, creativity and problem-solving. This study was conducted in a first grade classroom with 22 students located in a first-ring suburb of a major metropolitan area in Minnesota. Data collection methods included an engineering survey used to ascertain students’ knowledge of engineering and a student school attitude survey, both administered at the beginning and the end of the study, work completion tracked through a grade book, simple formative assessments, and teacher observations. The results showed a positive increase in self-esteem and attitudes towards school, engineering, and reading, as well as an increase in creativity and persistence. Students were actively engaged in the engineering design process. English language learners demonstrated an increased confidence in using their second language. While educators tend to neglect implementing engineering due to lack of training, materials and stresses of standardized testing, engineering design challenges rarely need special equipment and can be a simple extension of current units of study or trade books. In conclusion, young elementary school students can benefit from the inclusion of developmentally appropriate engineering projects

Evaluation of methods of reducing community noise impact around San Jose municipal airport

A computer simulation of the airport noise impact on the surrounding communities was used to evaluate alternate operational procedures, improved technology, and land use conversion as methods of reducing community noise impact in the airport vicinity. In addition, a constant density population distribution was analyzed for possible application to other airport communities with fairly uniform population densities and similar aircraft operational patterns. The introduction of sound absorption material (SAM) was found to reduce community noise annoyance by over 25 percent, and the introduction of refan was found to reduce community annoyance by over 60 percent. Replacing the present aircraft was found to reduce the noise problem to very small proportions, and the introduction of an advanced technology twin was found to essentially eliminate the community noise problem