Miles B. Cahill

Exploring Economic Models Using Excel

This paper applies spreadsheet software to intermediate-level consumer theory concepts. Spreadsheets help make the concepts more accessible while allowing students to explore the ideas in more depth. Areas of application are utility functions, income and substitution effects, price indices, measures of welfare change, and the optimal saving rate. We chose the examples to stimulate awareness and discussion of the many classroom uses for four important Excel spreadsheet tools: three-dimensional (3-D) graphs, iteration, Goal Seek, and Solver.

Diminishing returns to GDP and the Human Development Index

This paper investigates the assumption of the human development index (HDI) that per capita GDP has diminishing returns to development. Alternative returns to scale assumptions for per capita GDP are evaluated using correlation and principal components analyses conducted on four separate samples of countries. Specifically, the correlation between various transformations of GDP and the other elements of the HDI are examined, and the principal components method of factor analysis is used to construct HDI-like indexes with the alternative transformations of GDP. Results generally support the diminishing returns assumption employed by the HDI, as a concave transformation of GDP is most highly correlated with the other variables, and the corresponding principal components HDI construction explains the largest amount of the variance of the original variables.

Using principal components to produce an economic and social development index: An application to Latin America and the U.S.

This paper presents a principal components methodology for determining the weights for a set of indicators in a composite index of development. The procedure is applied to a 36-variable data set consisting of 1990 data for 19 Latin American countries and corresponding 1960 and 1990 data for the individual U.S. states. This paper compares the results with other well-known indices and uses the combined data set to better understand the level and scope of development in each region and over time. The general results are that the level of development of Latin American countries in 1990 are roughly distributed over the U.S. states in 1960 (though with a larger range), and the structure of development in Latin America is similar to the U.S.

A framework for developing spreadsheet applications in economics

This article presents a framework for thinking about the different types of spreadsheet modeling applications available for teaching economics. Spreadsheet applications are categorized by the degree to which students are involved in the spreadsheet’s construction and the degree to which students are involved in the mathematics of the model. Examples of applications from each category call attention to the high degree of flexibility that instructors have in designing spreadsheet applications and suggest alternative ways that the instructor can tailor applications to fit his or her specific instructional style and setting. Although the costs associated with developing spreadsheet applications are significant, the authors believe that the costs are manageable, even for instructors who are new to spreadsheets. They conclude that the advantages imparted to students by carefully tailored spreadsheet applications are significant, and they hope to encourage the development and use of such applications.

Teaching Chain-Weight Real GDP Measures

Abstract In 1996, the Bureau of Economic Analysis (BEA) changed the method used to calculate measures of real GDP from a Laspeyres or Paasche index to a Fisher ideal index, also called a chain-weight index. Even though this is a significant change in approach and has resulted in extensive revisions of reported statistics, many authors of intermediate-level textbooks treat this topic casually, if at all. In this article, the author presents two applications in which this topic can be explored more thoroughly, with the help of spreadsheet software. One exercise introduces the concept of the chain-weight index by comparing it to Laspeyres, Paasche, and ideal indexes with the use of utility analysis. The second exercise is a step-by-step process to calculate chain-weight index statistics.

The Relationship between Aid and Debt in Developing Countries

This paper constructs a model in which debt and aid are complementary. Specifically, the model shows how aid can be extracted from industrialized country governments by LDCs to finance debts. Policy implications for understanding debt crises are outlined. Using recent World Bank data, the fundamental equations of the model are estimated. While it is found that the model overestimates the actual amount of aid and debt, the relationship between aid, GDP and absorption; and debt, aid, GDP and absorption is of the predicted direction.

Exploring the interaction between efficiency wages and labor market frictions

Abstract This paper explores the combined effects of efficiency wages and labor market matching frictions. A combined efficiency wage-frictional model is developed in which separate efficiency wage, frictional, and undistorted models are nested. It is found that the inclusion of efficiency wages puts upward pressure on wages and raises unemployment, while the friction puts downward pressure on wages and raises unemployment. Thus, it appears that unemployment generated by the frictional model cannot completely fulfill the role of unemployment as a discipline device, and vice versa. Other results show that the combined model has significantly different characteristics than its components.

Executive Compensation Incentives in a Volatile Market

Recent literature has been conflicted as to whether executive compensation schemes have significant incentive pay elements. The most well-known study supporting the existence of pay-for-performance used data corresponding to the recent bull market of the 1990s. This paper estimates a similar model of incentive pay using data from more recent volatile markets of 1999–2001, and finds that the incentive component of executive pay has at least diminished, and has perhaps reversed. Thus, incentive pay may be something of a “fair weather” phenomenon.

Truth or Macroeconomic Consequences: Theoretical Implications of the Decline and Rise of Job References in the United States

I In the 1970s, surveys showed that the large majority of firms were willing to answer reference requests (Paetzold and Willborn, 1992). More recent surveys document that a large majority of firms do not provide detailed reference materials. See Long (1997), Forster (1996), and Langdon et al. (1989) for reports on recent surveys. There are indications that other countries have had similar problems; see Hilson (1996) and Napier (1987) for cases in the United Kingdom, and Shine and Linhares (1997) for similar issues in New Zealand. 2 Interestingly, it is difficult to discover if plaintiffs have in fact been getting higher or more frequent settlements. See Paetzold and Willbom (1992) for a description of data-collection problems. Long (1997) notes that the risks from defamation lawsuits have not been properly assessed. Paetzold and Wi II born (1992) suggest that there has not been an increase in successful suits; Nye (1988), Fenton and Lawrimore (1992), and Manley (1989) present evidence that there has been. The Wall Street Journal reported in 1986 that the ultimate cost of defending a defamation suit in front of a jury ranged from

Is the Human Development Index Redundant

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