Mary Beth Walker

The Random Utility Hypothesis and Inference in Demand Systems

In this paper, the authors examine the consequences of adopting the random utility hypothesis as an approach for randomizing a system of demand equations. Random utility models are appealing since they allow the usual assumption of deterministic utility-maximizing behavior by each consumer to coexist with the apparent randomness across individuals that is exhibited by data. Their results show that the use of random utility models implies that the disturbances of the demand equations may not be homoskedastic, but must be functions of prices and/or income. Copyright 1989 by The Econometric Society.

The Cultural Affinity Hypothesis and Mortgage Lending Decisions

This paper conducts an empirical analysis of the cultural affinity hypothesis put forth by Calomiris, et al. (1994) in the mortgage lending market. This hypothesis implies that white loan officers, because of a lack of familiarity with minority applicants, will rely more heavily on characteristics that can be observed at low cost (e.g., objective loan application measures) in evaluating the creditworthiness of minority applicants relative to white applicants. Using a cleansed sample of 1,991 loan applications drawn from data collected by the Federal Reserve Bank of Boston, the results of the analysis were consistent with the cultural affinity hypothesis. In particular, we found that marginal black and Hispanic applicants appeared to be held to higher quantitative standards on such objective factors as credit history and debt obligation ratios than were similarly situated marginal white applicants.

The Uneasy Case Against Discriminatory Excise Taxation: Soft Drink Taxes in Ireland

This study uses an empirical case study to investigate the revenue implications of reducing a discriminatory excise tax. The case study is Ireland, which provides a natural experiment because it has both imposed and removed such a discriminatory tax (on soft drinks) in the past two decades. The authors find that soft drink consumption is price elastic, income elastic, and sensitive to weather. They estimate that 30% of the amount of surrendered excise tax revenue is recaptured by the value-added tax and income tax. The remaining 70% loss is further reduced by a small reduction in welfare costs, elimination of administration costs, and reduced compliance costs. The rate-revenue curve has a negative slope, even though demand is price elastic, presumably because marginal costs are rising and the tax reduction is not fully captured in the price reduction. In effect, the authors find undershifting and no evidence of a Laffer effect.

Stochastic specification in random production models of cost-minimizing firms

Abstract We examine the implications of additive, homoskedastic errors for models of firms cost-minimizing behavior. The premise is that some factors unobservable to the econometrician are known to the firm and must satisfy the theoretical restrictions imposed by cost minimization. We analyze additive homoskedastic errors for both the input demand model and the cost share model. We find that this simple error structure is inconsistent with rational behavior if some part of the stochastic component is known to the decision-maker. Input demand models violate nonnegativity and cannot represent homothetic technologies. For cost share systems, nonnegativity is also a potential problem but, surprisingly, concavity can be easily satisfied. An empirical application assesses the practical significance of these results.

Trouble in the travel account

Abstract For several years a small but growing group of economists has been interested in the balance-of-payments aspects of international tourism and the travel account. This paper examines the reliability and consistency of international travel data provided by government agencies. Travel data are usually constructed from survey questionnaires, bank transfers, and records of travel agents. Often the quality of the data is low. In fact, it is likely that some countries are not able to tell whether they have a surplus or deficit on travel accounts. An examination of the inconsistencies in travel data reported by different countries will aid researchers in the numerous international travel demand studies.

Estimating Differential Responses to Local Fiscal Conditions: A Mixture Model Analysis

Alternative hypotheses exist regarding the impact of local sales and income taxes on local governments’ taxing and spending decisions. One hypothesis is that local governments use sales and income taxes to pay for spending increases and leave property tax collections unchanged, while an equally plausible alternative is that local governments use sales and income taxes to reduce property taxes. Traditional models that restrict the impact of these local taxes to be the same across all local governments are not able to capture both types of behavior. The methodological difficulty lies in allowing for differences in behavior with no a priori information on which cities belong in which category. In this article, the authors use panel data to estimate a mixture model of spending and property tax response to the existence of local taxes. These empirical results provide evidence to support both hypotheses. These differences are both substantive and statistically significant.

The Effect of Private School Competition on Public School Performance in Georgia

This article presents estimates of the effect of private school competition on public school performance. Using data on school districts in Georgia, the authors estimate models relating tenth- and third-grade test scores for either reading or mathematics to the level of private school competition. Test scores are not measurably or significantly higher in areas with greater private school competition, a result robust through multiple estimations using three measures of private school competition and a variety of control variables. The authors address the possible endogeneity between test scores and private school competition using instrumental variables estimators, with percentage of the population that is Catholic, county population in 1980, lagged competition, and various other measures as alternative instruments.

Measuring the effectiveness of voluntary emission reduction programmes

This paper examines the evaluation of state environmental policies aimed at reducing ground level ozone in order to meet air quality standards set by the US Environmental Protection Agency. Several states with metropolitan areas that violate federal air quality regulations have adopted voluntary emission reduction programmes. These programmes focus on emissions from mobile sources, with the chief source being the automobile. States are allowed to claim credit towards bringing their metro areas closer to compliance with regulations only if they can provide credible evidence that these voluntary programmes are successful in reducing emissions. A model is developed to forecast aggregate traffic volumes so that one can assess the impact of the programme in reducing traffic flows during ‘Ozone Action Days’. Background information on the difficulties of measuring the ozone problem and on the recent policies adopted by the US EPA is provided. Using data from the Atlanta, Georgia metropolitan area, the accuracy of the model is demonstrated and preliminary analysis of whether the programmes which began in the summer of 1998 has had the desired impact is provided.

Does Shortening the School Week Impact Student Performance? Evidence from the Four-Day School Week

Public schools face difficult decisions on how to pare budgets. In the current financial environment, school districts employ a variety of policies to close budget gaps and stave off teacher layoffs and furloughs. An increasing number of schools are implementing four-day school weeks hoping to reduce overhead and transportation costs. The four-day-week policy requires substantial schedule changes as schools must increase the length of their school day to meet state-mandated minimum instructional hour requirements. Although some schools have indicated that this policy eases financial pressures, it is unknown whether the restructured schedule has an impact on student outcomes. In this study, we use school-level longitudinal data from the state of Colorado to investigate the relationship between the four-day school week and academic performance among elementary school students. We exploit the temporal and spatial variation in the four-day school week using a difference-in-differences empirical strategy. Our results suggest that student academic achievement has not been hurt by the change in schedule. Instead, the evidence indicates that the adoption a four-day school week shares a positive and often statistically significant relationship with performance in both reading and mathematics; the math results in particular are generally robust to a range of specification checks. These findings have policy relevance to the current U.S. education system, where many school districts must cut costs. The four-day school week is a strategy currently under debate.

The minimum dropout age and student victimization

Over the years, the minimum dropout age has been raised to 18 in 21 states. Although these policy changes are promoted for their educational benefits, they have been shown to reduce crimes committed by youths in the affected age groups. However, an unintended consequence of increasing the minimum dropout age could be the displacement of crime from the streets to schools. We use data from the Youth Risk Behavior Surveys to estimate the relationship between minimum dropout age laws and student victimization. Our results suggest that higher minimum dropout ages increase the likelihood that females and younger students report missing school for fear of their safety and younger students are more likely to report being threatened or injured with a weapon on school property. Our results also yield some evidence that students are more likely to report being victims of in-school theft when the minimum dropout age is higher.