This volume is the sixteenth annual publication of the Duke Journal of Economics. The Journal is a showcase for outstanding research in economics by Duke undergraduates.

We dedicate this issue to Professor Juanita Kreps. As Professor Robert Clark writes in his biography of her, which we reproduce in this volume, “Juanita Kreps has been one of the leading economists and policymakers of the last three decades. Her illustrious career is notable for its many successes and great diversity of experiences. Juanita has been a scholar, academic administrator, government policymaker, business leader and community leader. In each of these roles, she has attained the highest levels and left her mark on society.” We are grateful for her leadership in the economics department and in the Duke administration for many years.

Thanks go to Professors Robert Clark and Allen Kelley for their recollections of Juanita and to Profiles in Gerontology for permitting us to reprint Clark’s bibliography.

We congratulate the authors of the papers presented in this issue. Many of these papers began as undergraduate honors theses.

Duke undergraduates have also copublished in other scholarly journals. Joshua Phillips Duke BA 2002, Omer Gokcekus and Ed Tower published “School Choice: Money, Race and Congressional Voting on Vouchers,” in the spring 2004 issue of Public Choice. Ken Reinker, Duke BS 2003, and Ed Tower drew from Reinker’s honors thesis to publish “Predicting Equity Returns of 37 Countries: Tweaking the Gordon Formula,” in the Summer 2004 issue of the Journal of Investing and “Index Fundamentalism Revisited,” in the Summer 2004 issue of the Journal of Portfolio Management; Gretchen A. Phillips, Duke BS 2000, and Ed Tower drew on her honors thesis to publish “Labor PAC Contributions and NAFTA Legislators: Rhetoric or Retribution?” in Michael Plummer (ed.) Empirical Methods in International Trade: Essays in Honor of Mordechai E. Kireinin, Edward Elgar, 2004.

The Journal would like to thank the Allen Starling Johnson,Jr.Endowment Fund and donors to the Havrilesky Fund as well as members of the staff of the Duke University Economics Department and in particular Molly Brown, who put the journal on line, Kevin Campbell, Jennifer Socey, Masibuwa MacFarlane, and Ryan Millner.

Charles Becker & Ed Tower, Faculty Advisors to the Journal

Articles

Das Maynard Keynes Problem: Rethinking Rationality by Ailian Gan

Compensation, Free Agency, and Future Performance in the NFL: A Market Analysis by Wagish Bhartiya

Diversifying Among the Most Concrete of Assets; An Analysis of the Optimal Direct U.S. Real Estate Investment Portfolio by Paul J. Izzo

The Euro’s Impact on France’s Trade with Adopting and Non-adopting Countries by Julie DeRoo

Horizontal Licensing: A Strategic Tool for Joint Profit Maximization by Lauren Randa Hasson

High Frequency Autocorrelation in the Returns of the SPY and the QQQ by Scott Davis

Bolívar Distorted: The Effects of Exchange Controls on the Venezuelan Economy Or “Perhaps Chávez spent too much time reading Machiavelli and not enough time reading Adam Smith” by Erin Fletcher

Essays

Does Robert Barro’s Model Forecast Growth? by Michael Suher

Book Reviews

“The Roaring Nineties: Seeds of Destruction” by Joseph Stiglitz, reviewed by Michelle Robinson

Nothing Is Sacred: Economic Ideas for the New Millennium By Robert J. Barro, reviewed by Federico Siviero (Ca’ Foscari University)

This special issue of the Duke Journal of Economics features papers presented at the Second Annual Undergraduate Research Symposium. The Symposium, which was held on April 16-17, 2004, is a forum in which undergraduates from North Carolina institutions present their original research on economic topics, and discuss their findings with other students and researchers. It has the flavor of a professional academic conference, in that papers are selected on a competitive basis and authors are given a limited amount of time to present their main ideas and findings. On the other hand, each presentation is followed by a generous amount of time for audience discussion of the papers so that the authors can receive constructive criticism and continue to improve their work. Presenters and audience members agreed that this was an enjoyable and productive experience.

The Symposium was initiated last year because we believe that there is a great deal of high-quality undergraduate research taking place at Duke and other universities in the region that deserves recognition. The papers selected for the 2004 Symposium support this belief. Their topics are diverse, interesting, and timely. On the first day of the Symposium, papers were presented on the compensation of professional athletes, the impact of housing segregation on earnings, the effectiveness of AIDS awareness campaigns in Africa, and the effect of the Euro’s introduction on France’s foreign trade. The following day’s session included papers on the economic determinants of Congressional voting, the degree of rationality of college students, the factors that influence female crime, and the effect of charter schools on student achievement.

We commend all of the authors for the hard work and dedication that they demonstrated in producing such high quality research papers. Special congratulations go to Douglas Sue of UNC-Chapel Hill, whose paper entitled “Cognitive Anomalies and the Assumption of Economic Rationality: An Empirical Investigation of UNC Students” won the Best Paper Prize.
Many people contributed to the success of the Symposium and they have our sincere gratitude. We begin with the Paper Selection Committee, which included the following students: Jonathan Kirkland, Susan Wolff, Stacy Seely, Jared Toothman, Jamie Kleinerman, Stephanie Mata, Amir Khan, Peri Kadaster, Ailian Gan, and Shiying Lee. Several faculty also served on the Committee, including Lori Leachman, Emma Rasiel, Genna Miller, and Ed Tower. Paul Dudenhefer gave an excellent training session for the students on the Selection Committee. The staff of the EcoTeach Center was equally essential to the success of the Symposium. Ryan Millner, Jennifer Socey, and Dorothy Armento did a great job of planning the logistics and made sure the event ran smoothly.

Special thanks go to Steve Pagliuca, Managing Partner of Bain, for agreeing to speak at the Recognition Banquet, as well as to Professors Lori Leachman and Tom Nechyba, who welcomed the attendees on behalf of the Economics Department. Finally, our thanks go to the Allen Starling Johnson Jr. Fund, the EcoTeach Center, and the Department of Economics for their financial support of the Symposium.

We invite you to enjoy all of the Symposium papers in this issue, and we look forward to next year.

Connel Fullenkamp

Articles

Housing Segregation and Earnings: Identifying Regional Differences Over Time by Andrew T. Foerster

Women and Minor Forms of Property Crime by Johannes Norling

Cognitive Anomalies and The Assumption of Economics Rationality: An Empirical Investigation of UNC Students by Douglas R. Sue

The Euro’s Impact on France’s Trade with Adopting and Non-adopting Countries by Julie DeRoo

The Effect of Charter Schools on Academic Achievement in North Carolina by Katie Newmark

The Role of Special Interest Groups in the Debate over Prescription Drug Importation By Mike Adams

Patterns of AIDS Awareness in Southern Africa: Examining the Role of Social Capital by Ruth Carlitz

This volume is the fifteenth annual publication of the Duke Journal of Economics. The Journal is a showcase for outstanding research in economics by Duke undergraduates. We dedicate this issue to Professor Jack Blackburn. Jack led the Duke Economics Department as Chair and Duke University as Provost and Chancellor. Since retiring from Duke he has written two books on energy and natural resources. We are grateful to him for his wisdom, energy and warmth.

Our former colleague, Professor Emeritus Tom Naylor, sends his “congratulations and best wishes to Jack Blackburn – a first rate economist, an excellent teacher, a gentleman and a scholar, a conscientious environmentalist, and a compassionate citizen of Duke, Durham and the planet earth.”

Professors Roy Weintraub, Allen Kelley, and William Yohe wrote reflections on Professor Blackburn.

I wish to add my gratitude for help from Jack when I was Treasurer of the Carolina Friends School in Durham and Jack was a member of the board. Thanks also to Professors Allen Kelley, Roy Weintraub and Bill Yohe for their recollections of Jack.

We congratulate the authors of the papers presented in this issue. Many of these papers are undergraduate honors theses. Several of our undergraduates and graduate students have begun to publish their research and deserve congratulations.

Justin Bledin and Sharon Shewmake, Duke BA 2002, have received a revise and resubmit from the Journal of Economic Methodology on an article titled “Research Programmes and Model Building: Reassessing the Leontief Paradox,” which builds on their joint 2002 honors thesis.

Seth J. Wechsler, Duke BA 2001 and MA 2003, will publish his masters’ thesis “A Malthusian Take on Government Intervention in Fertility Decisions” in the September 2003 issue of the International Review of Economics and Business.

Five students wrote book reviews in the spring of 2003, that have been scheduled for publication in scholarly journals. We are delighted that their critical skills are being appreciated by the profession.

Richard Griffin, Review of Kyle Bagwell and Robert Staiger’s The Economics of the World Trading System, MIT Press, 2002, forthcoming in Kyklos.

Pia Jean Kristiansen. Review of Noreena Hertz’s The Silent Takeover: Global Capitalism and the Death of Democracy, Arrow Books, 2001, forthcoming in Development and Change.

Fernando Lohmann, Review of Sara Schoonmaker’s U.S.-Brazilian Conflicts in the Global Economy, University of Pittsburgh Press, 2002, forthcoming in The Journal of International Trade and Economic Development.

Chad Nicholson, Review of Amy Chua’s World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability, Doubleday, 2003, forthcoming in Development and Change.

Liane Schubert, Review of Daniel Litvin’s Empires of Profit: Commerce, Conquest and Corporate Responsibility, Texere, 2003, forthcoming in Kyklos.

Kristiansen earned her B.A. in economics from Duke in May 2003. Griffin and Nicholson are earning their J.D. degrees and their master’s degrees in economics from Duke.

Lohmann and Schubert are master’s students at the Stanford Institute of Public Policy.

It continues to be a joy to research with undergraduates. Ryan Gibbs, Duke B.A. 2002, Omer Gokcekus, Duke Ph.D. 1994, and I published “Is Talk Cheap?” as the lead article in the December 2002 Journal of Policy Reform, and much to our delight our calculations of what it costs in campaign contributions to buy a word on your industry’s behalf in the Congressional Record was the subject of Richard Morin’s “Unconventional Wisdom” column in The Washington Post, April 13, 2003.

The Journal would like to thank donors to the Havrilesky Fund and Allen Starling Johnson, Jr. Endowment Fund as well as members of the staff of the Duke University Economics Department, especially Ryan Millner. He designed the layout and worked with all the journal’s authors to polish their contributions. We continue to be grateful for the ideas that Priscilla Lane introduced as editor of the journal from 1999 through 2002.

Ed Tower, DJE Faculty Advisor

Articles

Diversifying Among Hedge Fund Strategies: An Alternative Frontier by Emily Perskie

An Empirical Devaluation Model of the Mexican Peso by Henry Eng

Women & Quality in American Public Education by Jasi Kamody

Still Ama$$ing Funds by Jason Levine

The Increased Risk in CEO Pay: A Response to Paul Krugman by Jason Liebel

Modeling the Model Minority: Educational Investments & Returns for Asian Americans by Jennifer T. Wang

Realizing the Potential of Crop Substitution: An Analysis of the Andean Coca Trade by Jessica E. Doerr

Real Estate Investment Trusts & Seasonal Volatility: A Periodic GARCH Model by Marc Winniford

Low-Wage Women: The Demographic Determinants of their Wages by Molly Jacobs

Does the Dividend Yield Predict International Equity Returns? by Navid K. Choudhury

The Panorama of the East Asian Crisis & the IMF’s Role Therein by Serdar Topak

The Chinese Informal Labor Market & the Hukou System: Its Origin, Implementation, and Social Consequences for Migrating Rural Women by Vera Liang

Does Corporate Giving Raise Firm Value? by Christina Chang

This special volume of the Duke Journal of Economics contains a selection of papers that were presented at the First Annual Undergraduate Economics Research Symposium. The Symposium, held on the campus of Duke University on April 4- 5, 2003, brought together eleven undergraduate students from colleges and universities across North Carolina to present their own original research.

The papers that were presented at the Symposium spanned a broad range of interests. Two papers dealt with international topics, three investigated macroeconomic issues, three explored questions in labor economics, and three considered topics in public economics. While most papers had some empirical contents, some theoretical work was also presented. All attendees of the seminar were impressed by the quality of research conducted by these undergraduate students. The below papers were chosen for publication in this special edition because of their outstanding content.

Of course, the symposium couldn’t have been such a success without the help of many. In particular, thanks for their hard work and dedication in organizing the Symposium goes to the students who gave their time as part of the Economics Students Union Symposium Planning Committee, including Patrick Dickinson, Shiying Lee, Ailian Gan, Alex Erlikh, Alicia Manning, Sara Unger, Jamie Kleinerman, Ivy Baumbah, and Justin Ford. A special thanks goes to Ruoxi Chen for his work on the Symposium web site. Drs. Connel Fullenkamp and Lori Leachman provided invaluable advice to the Planning Committee and Dr. Leachman also served as a key editor for this edition of the Duke Journal. Thanks for great administrative assistance and logistical planning go also to the Staff of the EcoTeach Center, Jennifer Socey and Ryan Millner, with special gratitude to Dorothy Armento. In addition, financial support from the Allen Starling Johnson, Jr. Fund, the EcoTeach Center, and the Duke University Department of Economics is gratefully acknowledged.

We trust that you will enjoy the below papers and look forward to our Second Annual Undergraduate Economics Research Symposium in Spring 2004!

Sincerely,
Professor Bradley Heim, Ph.D., Faculty Sponsor

Articles

Understanding the Crime Choice — The Role of Market Wages by Kathleen Wirth, who graduated from the University of North Carolina at Chapel Hill in May 2003 with a B.A. in economics. She is currently working at RTI International in Research Triangle Park, N.C.

A Statistical Analysis of OPEC Quota Violations by Pavel S. Molchanov, who graduated from Trinity College, Duke University in May 2003 with a B.S. in Economics, certificate in Markets and Management Studies, and a minor in German. He will start work later this year at Raymond James Financial.

Expanding the Monocentric Model: A Fixed Effects Approach to the Determination of Urban Land Values by James Roberts, who was the winner of the 2003 Economics Undergraduate Research Symposium Outstanding Research Prize. James Roberts is a Junior at Davidson College and is interested in pursuing a Ph.D. in economics after graduation.

Division of Labor in Marriages in Which She Earns More by Catherine Phillips

Home Sale Price and Public School Quality in Mecklenburg County by Laurel Clayton

This volume is the fourteenth annual publication of the Duke Journal of Economics. The Journal is a showcase for outstanding contributions made each year to the discipline of economics by Duke undergraduates.

We dedicate this issue to Professor Vladimir Treml. Professor Treml joined the Duke faculty in 1967 and retired in 1999, but he continues to teach and research in the department. The range of Professor Treml’s research interests include input-output techniques, analysis of the “shadow” economy, the study of Soviet and Russian economic statistics, and economics of alcohol abuse and alcoholism. He advised President Reagan and has testified at a number of congressional hearings. We are especially grateful to him for inspiring a Duke Mafia of Russian specialists, and grateful to a number of his protégés and to Roy Weintraub for sharing their stories of him and Emma, in this volume.

We congratulate the authors of the papers presented in this issue. Many of these papers are undergraduate honors theses. We are particularly pleased that a revised version of Peter Fishman’s essay will be published in the American Economist. In addition to the research presented here, two undergraduates wrote book reviews; both have been scheduled for publication in scholarly journals. We are delighted that their critical skills are being appreciated by the profession.

Patra Chakshuvej, Review of Peter Nolan’s China and the Global Economy, Palgrave, 2001, forthcoming in Kyklos.

Parema Damrithamanij, Review of David Sheff’s China Dawn: Story of a Technology and Business Revolution, New York, Harper Collins, 2002, forthcoming in Asian Pacific Business Review.

Lori Leachman, Omer Gokcekus and I got our starts as economics researchers coauthoring papers with our professors. In turn, we feel privileged to have worked with several Duke undergraduates this year in coauthoring papers that appear on the Duke Economics Working Papers Web Site.

Ryan Gibbs, Omer Gokcekus and Ed Tower, “Is Talk Cheap? Buying Congressional Testimony With Campaign Contributions.”

Mathew Harney and Ed Tower, “Rational Pessimism: Predicting Equity Returns by Tobin’s q and Price/Earnings Ratios.”

Lori Leachman, Vinay Kumar, Scott Orleck, “Explaining Variations in Private Equity: A Panel Approach.”

Joshua J. Phillips, Omer Gokcekus and Ed Tower, “School Choice: Money, Race and Congressional Voting Behavior.”

Kenneth S. Reinker and Ed Tower, “Predicting Equity Returns for 37 Countries: Tweaking the Gordon Formula.”

The Journal would like to thank donors to the Havrilesky Fund and Allen Starling Johnson, Jr. Endowment Fund as well as members of the staff of the Duke University Economics Department, especially Priscilla Lane. As in previous issues, in her role as Managing Editor she designed the layout, was instrumental in developing the structure of the Journal and worked with all the Journal’s authors to polish their contributions.

Ed Tower, Faculty Advisor the the Journal

Articles

The Social Security Debate: A Multiplicity of Purposes and a Cacophony of Voices by Gregory C. Baecher

Weaving Methodologies: Research Programmes, Science Studies and Model-Building, The Case of the Leontief Paradox by Justin Bledin and Sharon Shewmake

The Economics of Higher Education Throughout American History by Jennifer K. Dhatt

Competitive Balance and Free Agency in Major League Baseball by Peter FishmanRegret in First-Price Sealed Bid Auctions by Peter Fishman

Regret in First-Price Sealed Bid Auctions by Peter Fishman

Rationalizing Decisions: Economists’ Perspectives on Human Behavior by Brian Fried

Migration and Economic Policy: A Comparison of Two South Indian States by Aniruddha (Rudy) Gopalakrishnan

The Economics of the Internet Retail Industry and Its Impact on the Business-To-Consumer Retailing Environment by Amanda M. Jones

Why Does Private Equity Vary Across Countries and Time? by Vinay Kumar and Scott Orleck

A C++ Encoded Hull-White Interest Rate Tree-Builder by John H. Li

The Psychology, Life and Relevance of Thorstein Veblen by Lauren Alexis Moses

Enron and the Regulatory Cycle by Tara Naib

Measuring Intangibles: The Asset Value of Advertising by Amanda D.H. Smith

The Best Way To Do Economics: Moves and Countermoves in the History of Economic Methodology by Michael Weiss

An Empirical Analysis of Option Valuation Techniques Using Stock Index Options by Mohammad Yamin Yakoob