George R. Neumann

The Promise of Prediction Markets

The ability of groups of people to make predictions is a potent research tool that should be freed of unnecessary government restrictions.

On the Job Search and the Wage Distribution

The article structually estimates an on‐the‐job search model of job separations. Given each employer pays observably equivalent workers the same but wages are dispersed across employers, an employers separation flow is the sum of an exogenous outflow unrelated to the wage and a job‐to‐job flow that decreases with the employers wage. Using data from the Danish Integrated Database for Labour Market Research, the empirical results imply, as predicted by theory, that search effort declines with the wage. Furthermore, the estimates explain the employment effect, defined as the horizontal difference between the distribution of wages earned and the wage offer distribution.

Equilibrium Search Models and the Transition from School to Work

This paper applies an equilibrium search to study the transition from schooling to work of U.S. high school graduates. We consider the case where there is heterogeneity in firm productivity and the number of firm types is discrete. For this case the estimation problem is non-standard and the likelihood function is non-differentiable. This paper provides a computational method to obtain the MLE and, through several Monte Carlo studies, characterizes the behavior of the estimator. Applying these methods to the transition from school to work, our results show that nonemployed blacks receive fewer offers than whites and employed blacks are more likely to lose their jobs. Importantly, employed blacks and whites receive job offers at the same rate. However, the difference in job destruction rates is so great that it accounts for three-quarters of the black-white wage differential.

Use of Prediction Markets to Forecast Infectious Disease Activity

Prediction markets have accurately forecasted the outcomes of a wide range of future events, including sales of computer printers, elections, and the Federal Reserves decisions about interest rates. We propose that prediction markets may be useful for tracking and forecasting emerging infectious diseases, such as severe acute respiratory syndrome and avian influenza, by aggregating expert opinion quickly, accurately, and inexpensively. Data from a pilot study in the state of Iowa suggest that these markets can accurately predict statewide seasonal influenza activity 2-4 weeks in advance by using clinical data volunteered from participating health care workers. Information revealed by prediction markets may help to inform treatment, prevention, and policy decisions. Also, these markets could help to refine existing surveillance systems.

Semiparametric estimation of employment duration models

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A Generalized Moments Specification Test of the Proportional Hazards Model

Abstract This article describes a generalized moments specification test of the semiparametric proportional hazards model of Cox. In contrast to other specification tests for this model, the generalized moments test is applicable in the presence of continuous explanatory variables and does not require assigning the data to predetermined cells. The results of a Monte Carlo investigation suggest that the generalized moments test has good finite-sample properties and that it is more powerful than other available tests for models with continuous explanatory variables when the alternative is an accelerated failure time model. The test is based on generalized residuals for the proportional hazards model. When the model is correct, the generalized residuals have asymptotically the (possibly censored) unit exponential distribution. The generalized moments are means of functions of the generalized residuals. The generalized moments have known values when the generalized residuals have the unit exponential distribu...

How Long Is a Spell of Unemployment? Illusions and Biases in the Use of CPS Data

Most data used to study the durations of unemployment spells come from the Current Population Survey, which is a point-in-time survey and gives an incomplete picture of the underlying duration distribution. We introduce a new sample of completed unemployment spells obtained from panel data and apply CPS sampling and reporting techniques to replicate the type of data used by other researchers. Predicted duration distributions derived from this CPS-like data are then compared to the actual distribution. We conclude that the best inferences that can be made about unemployment durations using CPS-like data are seriously biased.

Long-run international trends in aggregate unionization

Abstract The major trends in aggregate unionization in the OECD-countries are analyzed for the whole period for which data are available. The analysis of the big country differences in both the level and the trend of unionization are related to cyclical as well as structural factors in the labour market and to the political and institutional developments. Three different national experiences can be clearly identified in the post-war years, i.e., a group of countries with decreasing unionization, a group with constant, and a group with increasing unionization. The difference between decreasing/constant and increasing unionization seems to be related to the institutional organization of unemployment insurance.

Searching for Google's Value: Using Prediction Markets to Forecast Market Capitalization Prior to an Initial Public Offering

We conducted prediction markets designed to forecast post-initial public offering (IPO) valuations before a particularly unique IPO: Google. The prediction markets forecast Googles post-IPO market capitalization relatively accurately. While Googles auction-based IPO price was 15.3% below the first-day closing market capitalization, the final prediction market forecast was only 4.0% above it. The forecast also accorded with the level of over-subscription in the IPO auction. Evidence available to both outsiders (from the prediction market forecasts) and insiders (through the orders in Googles auction) predicted similar degrees of underpricing. We argue that, with repetition, such markets could provide useful information for understanding the IPO process.

Goodness-of-Fit Tests for Functional Data

Economic data are frequently generated by stochastic processes that can be modelled as occurring in continuous time. That is, the data are treated as realizations of a random function (functional data). Sometimes an economic theory model specifies the process up to a finite-dimensional parameter. This paper develops a test of the null hypothesis that a given functional data set was generated by a specified parametric model of a continuous-time process. The alternative hypothesis is non-parametric. A random function is a form of infinite-dimensional random variable, and the test presented here a generalization of the familiar Cramer-von Mises test to an infinite dimensional random variable. The test is illustrated by using it to test the hypothesis that a sample of wage paths was generated by a certain equilibrium job search model. Simulation studies show that the test has good finite-sample performance. Copyright (C) The Author(s). Journal compilation (C) Royal Economic Society 2009