Jannett Highfill

FDI, Technology Spillovers, Growth, and Income Inequality: A Selective Survey

The present paper, restricting its attention to the empirical economics literature, attempts to gauge current thinking on the question of whether FDI causes economic growth. Since technological spillovers are a key determinant of long run economic growth, the survey begins with the firm level evidence on technological spillovers of FDI on domestic firms. The macro FDI and growth literature is covered next. Finally, we examine the effect of FDI on income inequality and/or employment, skills, or jobs. In many contexts policies that exacerbate income inequality come under special scrutiny even if they are welfare enhancing. Our major finding is that FDI is generally associated with positive technological spillovers, economic growth, and increasing income inequality. For all three of these results, however, there are significant counter examples in the literature which must be respected.

Tax Overwithholding as a Response To Uncertainty

This article analyzes a basic timing problem faced by taxpayers—they must choose their levels of withholding and/or estimated tax payments before knowing exactly what their incomes and deductibles will be. Thus, the laws on withholding impose a compliance cost on taxpayers because they must pay a government-imposed penalty when they underwithhold and they must, in essence, give the government an interest-free loan when they overwithhold. The model in this article shows that when the penalty for underwithholding exceeds the opportunity cost of overwithholding, it is optimal for taxpayers to overwithhold more often than they underwithhold. Furthermore, this model is shown to substantially explam the observed withholding patterns for the U.S. individual income tax.

The determinants of sales on eBay: the case of baseball cards

The popularity of online auctions has grown immensely with the eBay site being the largest auction site. One issue that has not received sufficient attention in the eBay auction literature is the effect of reserve-prices (or minimum prices) on the probability of a sale. Studies that have included this variable in their empirical specifications include Lucking-Reiley et al. (2000), Eaton (2002) and Jin and Kato (2002). However, all these studies used the book-price itself to determine its effect on auction outcomes. This study used alternative specifications of the reserve-price to determine if there were different effects of this variable on the probability of sale of baseball cards. These alternative specifications combined the reserve-price with the published book-prices for the baseball cards being sold. None of the three specifications of the reserve-price affected the probability of a sale including a binary variable representing reserve to book-price ratios >2.00. The rationale offered for these results is that there is a geographic mismatch when baseball cards are distributed and eBay extends the reach of the card market, which allows collectors to buy desirable cards at a premium.

An Application of Optimal Control to the Economics of Recycling

A citys landfill is an exhaustible resource; recycling is a backstop method of waste disposal. We formulate an optimal control model that maximizes the total utility of a representative consumer by choosing the appropriate levels of the two disposal techniques. The model is simple enough that some general conclusions can be drawn, and yet specific solutions will require some computations that show a few of the possibilities in optimal control problems. Among the primary results is that once recycling begins, it will increase. It is also likely that the level of recycling will assume the values at the endpoints of its domain as well as the more standard values in the interior.

The Economic Crisis as of December 2008: The Global Economy Journal Weighs In

The present crisis is too raw to have a catchy title, but while previous work of members of the International Trade and Finance Association and readers of the Global Economy Journal already helps us understand it, I anticipate many future contributions to the GEJ on the subject as well.

Multiple Worker Households and Multiple Job Holding: Rigid Vs. Flexible Hours

The paper examines a household production model in which there are two potential wage earners. One of the workers has two job possibilities. His or her higher paying job requires the worker to work a pre-determined, non-negotiable, number of hours. This job is a “Rigid Hours” job. The other jobs that may be taken by the household members allow the workers to optimally determine the number of hours worked. These jobs are “Flexible Hours” jobs. The paper examines the households optimal response to the constraints imposed upon it by the rigid hours job, as well as the usual time and budget constraints. The interdependence of the household members labor supply decisions is well established in the household production literature. Shisko and Rostker (“The Economics of Multiple Job Holding,” American Economic Review, 1976) provide a model of multiple job holding but do not consider a two person household or a complete set of time constraints. This paper will develop a framework for studying all of these disparate elements. The time allocations of “husband” and “wife” may seem paradoxical at first blush; a person may choose a lower paying job over a higher paying one; the “husband” may drop out of the labor force to be replaced by his lower paid “wife;” and the higher paid “husband” may do housework even though the marginal value of housework is less than the “wifes” wage. The key to these paradoxes in the time allocations of households is in the constraints.

Harriet Martineau: An economic view of Victorian arts and letters

It is sometimes interesting to see the disdpline of economics from another point of view. Popular writers have often moved into and out of an academic disdpline, either leaving their mark on the disdpline or having the discipline leave amark on their popular work. In the case of Harriet Martineau, a Victorian popular writer, the interest in economics came early, and while she has had tittle if any lasting effect on economics, it had a lasting effect on her. Still, she is of interest to economists, because a close interest by an ~mateur can make the professional stop and think. Are we really always so correct in our disdplinary view of the world? For Ms. Martineau, her first published work was a treatise in economics and it colored her subsequent world view and her subsequent work. She began her career with a major educational work on economics, the///ustrations of Political Economy (1832-34). The tlmlnoo of her work on political economy makes her of interest to economists because we can trace the effects that economics had on the rest of her work, whether she was writing on the condition of women, philosophy, travel, or arts and letters. The purpose of t hi~ short paper is to see how political economy affected her analysis of the arts and literature. Martinean began to formally develop thi~ analysis during a two-year visit to America after fini.~hing the Illustrations. Like many a nineteenth-century visitor, Martinean dismiesed American arts and letters out of hand. As we will show, she attributed their defidendes not to the abundance of market imperfections but instead to an immature society which had not yet learned the importance of laissez faire.

Do Price Guides Guide Ebay Prices: The Market for Individual Baseball Cards

The paper considers the question of whether eBay selling prices for baseball cards are correlated with “book prices.” Three book prices are used, “Lo,” and “Hi” from the price guide Beckett Baseball Card Plus, and their average “Avg. HiLo.” The paper demonstrates a close relationship between book prices and the final sale price. Higher book prices (by all three measures) were associated with higher eBay selling prices, and in separate regressions, each book price explained a substantial proportion of the variance of the final sale price. There is mixed evidence about which book price best is the best guide to the final sale price. The Lo price was closest to the final sales price, but the regression results suggest the Ave. HiLo price because its coefficient is relatively close to one.

Mixed bundling with profit and sales objectives

Suppose the marginal cost of a bundle is less than the sum of the marginal costs of the two products that make up the bundle. In this case, even when demands are completely uncorrelated, bundling is profitable but usually reduces total sales. The primary assumption of this paper is that firms are reluctant to bundle because they resist the loss in sales. Three optimization problems are analyzed: no bundling, mixed bundling, and bundling with profits and sales objectives, in which the firm has an objective function with a penalty for lost sales. This paper will show that firms benefit by bundling even if they modify their prices in such a way to reduce (or reverse) any loss in sales.

The Global Economy Journal as the Editor Sees It -- Or Hints for Contributors

The standard advice to those thinking of publishing in a given journal is to read it. But perhaps potential contributors might benefit from a few comments on what the editor sees when looking at the Global Economy Journal, past and present.