William F. Lott

The optimal set of principal component restrictions on a least-squares regression

When a researcher is confronted with multicollinearity in the standard linear model, he should consider restrictions his estimates by the linear restriction implied by the dilation of that set of principal components of the independent variables which maximizes R2. This paper shows via the use of a monte carlo study that this procedure will select an estimator as good as or better than the ordinary least-squares estimator in terms of generalized mean square error with a relatively high frequency.

Can the Kuznets effect be relied on to induce equalizing growth

Abstract The use of internationally comparable income data to test Kuznets inverted-U hypothesis introduces several econometric problems. This study (a) explains and corrects for these econometric problems, (b) assesses the sensitivity of estimated results to alternative functional specifications and sample variations, (c) provides a more rigorous test for structural change between more and less-developed countries in the phasing of the inequality trend, and (d) estimates the time likely to elapse before various of the developing countries reach the turning point. The studys findings offer broad support for Kuznetss hypothesis, but do not support the advocacy of development policies focused exclusively on growth. For low-income countries, growths equalizing phase cannot be anticipated to set in for half a century.

The relative importance of campaign expenditures: An application of production theory

In an election campaign a politician attempts to combine the resources at his disposal so as to maximize the percent of the votes he receives. This behavior is consistent with an economic model of production where the producer combines inputs in order to maximize output.In this paper the concept of an election campaign as a production process is applied to elections to the U.S. House of Representatives. The three inputs were campaign expenditures, years of tenure in office, and the percent of registered voters in candidates party. Cobb-Douglas and CES versions of the production function are estimated. Each estimation indicated that the marginal productivity of campaign expenditures was very low. Further, the CES estimation indicated low elasticity of substitution between campaign expenditures and other inputs. This means that it is difficult for a candidate who faces a disadvantage—either because his opponent is an incumbent with several years experience, or because he belongs to a minority party—to overcome this disadvantage by simply spending more money.