Tyler J. Bowles

Impact of Globalization on Income Distribution Inequality in 60 Countries

This paper investigates the impact of globalization on income inequality distribution in 60 developed, transitional, and developing countries. Using Kearneys (2002, 2003 and 2004) data and principal component analysis (PCA), two globalization indices are created. One of these indices is the equally weighted index. The other index is derived from the principal component analysis. The Gini coefficient of a country is regressed on each index, respectively, in all 60 test cases.The main contribution of this paper is its finding of a negative relationship between both globalization indices and the Gini coefficient for all 60 countries under investigation. Furthermore, test results indicate that this relationship is robust. Therefore, the empirical evidence presented in this paper supports the claim that globalization helps reduce income distribution inequality within countries.

An Analysis of the Effectiveness of Supplemental Instruction: The Problem of Selection Bias and Limited Dependent Variables.

Single equation regression models have been used rather extensively to test the effectiveness of Supplemental Instruction (SI). This approach, however, fails to account for the possibility that SI attendance and the outcome of SI attendance are jointly determined endogenous variables. Moreover, the standard approach fails to account for the fact that these two endogenous variables are categorical. This article presents and applies a simultaneous equation, limited dependent variable model of SI effectiveness. Our analysis suggests that results from applying this type of model may differ markedly from the traditional statistical models applied in SI research. Specifically, our results suggest that students with below average academic ability are more likely to attend SI and that common measures of student ability included in single equation models fail to adequately control for this characteristic. Therefore, single equation OLS models may underestimate SI effectiveness.

The Effect of Supplemental Instruction on Retention: A Bivariate Probit Model

Single equation regression models have been used to test the effect of Supplemental Instruction (SI) on student retention. These models, however, fail to account for the two salient features of SI attendance and retention: (1) both SI attendance and retention are categorical variables, and (2) are jointly determined endogenous variables. Adopting primarily from the economics education literature, this article applies the bivariate probit model, a model appropriate for the case of simultaneous binary choice, to analyze the effect of SI attendance on retention. It is demonstrated that single equation methods are likely to overestimate this effect.

New Findings on Strategic IRA Investing

This article explores the issue of strategic IRA investing, but does so from an unusual premise. Comparing the traditional IRA with the Roth IRA, the authors confirm the well-known conclusion that the Roth alternative is preferable if the income tax rate during the distribution period is greater than the tax rate during the accumulation period and vice versa. However, they take the analysis a step further, demonstrating that this conventional wisdom only holds, however, if the individual is investing only in an IRA. If an individual is making unsheltered investments and IRA contributions, the Roth IRA is preferable to the regular IRA when the two tax rates are equal. They conclude with a review of the implications of converting from a traditional to a Roth IRA.

Assessing Economic Damages in Personal Injury and Wrongful Death Litigation: The State of Utah

This paper reviews the basic law and practice of determining economic losses in personal injury and wrongful death cases in Utah courts and was written primarily for the benefit of forensic economists. The paper is organized as follows. The first two sections review precedent and practice in personal injury and wrongful death actions, respectively. The case where lost business profits are claimed as a result of death or injury is given special attention. Then considerations with regard to the death of a child and medical malpractice litigation are reviewed. Finally, issues surrounding prejudgment interest, punitive damages, income taxes, and the rules of scientific evidence are discussed. As a general rule, the approach to measuring the economic losses is not unlike those in most other states. The guidelines offered in Martin and Vavoulis (2005), which are followed by most forensic economists, generally would be accepted by the Utah courts.

Sources of Error in Estimating the Personal Consumption Offset inRetirement

The economic loss appraisal in a wrongful death action typically includes a year-by-year calculation of the personal consumption expenditures of the deceased, which is then subtracted from earning capacity in order to determine a net loss of support to the survivors. 1 Sometimes, perhaps even often, this is simply done over the period of the worklife expectancy with consumption in the retirement years either ignored altogether or implicitly included by applying the offset factor to the component added to earnings for contributions to a retirement program during the worklife. For lack of a better term, the latter will be referred to as the “worklife only” or WLO appraisal approach. Generally, part of the fringe benefit payment includes the employer’s contribution to Social Security and to a private retirement program. To the extent that such contributions for retirement income are made to programs that are actuarially fair, 2 then applying the offset factor against such contributions does at least partially account for income and consumption in the retirement period. That is, the contribution is the present value of the future retirement benefit, and, by applying the offset factor against that contribution, at least part of the foregone future consumption of the deceased also is accounted for. However, such adjustments are likely to be imperfect at best. Unless the deceased died on the first day of his worklife, the approach will not account for contributions made in previous years that will generate retirement income and consumption from that income. Further, the consumption offset factor during the earlier working years tends to be lower than in the retirement years due to

A Time-Series Analysis of the Medical Care Price Index: Implications for Appraising Economic Losses

The time-series properties of wage growth rates, discount rates, and net discount rates have been a subject of significant forensic economics research. Payne, Ewing, and Piette (1999) provides the most recent example of this type of study; others include Pelaez (1991); Bonham and La Croix (1992); Gamber and Sorenson (1993, 1994); Pelaez (1996); and Payne, Ewing, and Piette (1998). Surprisingly, the time-series techniques used in this research (i.e., unit root and cointegration tests) have not been applied to other variables that often are part of economic loss appraisals. This paper fills part of this void by applying appropriate time-series analysis to the medical care price index, which is an important variable in valuing life care plans. The time-series properties of a second variable, the net discount rate defined approximately as the difference between the discount rate and medical care inflation, will be the subject of a subsequent paper.1 The assumptions about the time path of the medical care price index is an important determinant of the present value of a life care plan. The experience of the authors is that some economists and/or life care planners assume a medical care inflation rate that is inconsistent with their assumptions concerning overall inflation, nonmedical care inflation, and the discount rate. For example, it is not unusual to see some historic average medical care inflation rate used together with a current interest rate for discounting. As the latter reflects expected not historic inflation, the two parameters are not consistent. Furthermore, it also is not unusual for the projected medical care inflation rate to be significantly higher (sometimes more than twice as high) than the projected overall rate of inflation. In cases involving long projection periods–70 years or more for an infant injured at birth–these assumptions often result in extremely large damage calculations.2 More fundamentally, these inconsistent assumptions can lead to results that are economic nonsense. This will be demonstrated below.

A Statistical Analysis of Federal Income Tax Rate Stability Over Time and Implications for Valuing Lifetime Earnings

The relationship between federal income tax liability and adjusted gross income is estimated for the period 1958-96; the stability of that function is evaluated; and the use of an estimated tax function rather than a single average tax rate in appraising the tax consequences of an award to replace lost earnings is evaluated. It is found that there have been significant shifts in the tax function over time indicating that the function estimated for the most recent year should be used. Further, it is demonstrated that any measurement of the tax consequences in valuing lost earnings should rely on a tax function. Where a large share of the award is for non-wage loss components (e.g., household services, medical and related life care expenses, etc.), failure to account for taxes or accounting for them using some sort of historic average tax rate will significantly undercompensate an injured plaintiff.

An Empirical Basis for Allocating Enterprise and Personal Goodwill

Abstract Van Amburghs methodology for allocating personal and enterprise goodwill is flawed. We present a standard empirical approach that can be applied to the problem of allocating goodwill. Based on survey data of professional accounting firms, we apply regression analysis and estimate the percentage of total goodwill that is personal goodwill. These results suggest that personal goodwill for relatively small professional accounting practices ranges from approximately 45% to 88% of total goodwill. The same methodology and data are also applied to the problem of determining an individual owners share of total personal goodwill.

Update to Assessing Economic Damages in Personal Injury and Wrongful Death Litigation: The State of Idaho

This paper covers the current changes in personal injury and wrongful death litigation in the state of Idaho.