Home » Articles posted by Economics Dept (Page 4)
Author Archives: Economics Dept
Inflation Volatility and Economic Growth: A Disaggregated Analysis
By Nicholas Becker
Inflation volatility has been theorized to negatively affect real economic growth, but empirical analyses have returned somewhat mixed results. Constructing my own dataset of household group inflation rates by disaggregating and linking Consumer Expenditure Survey data with Consumer Price Index data, I analyze inflation volatility and economic growth from the ground-up. Calculating inflation volatility using a moving-window methodology, I find: 1) significant heterogeneity of inflation volatility across household groups; 2) a negative correlation between inflation volatility and economic growth from 2000-2012 for all household groups, with a stronger negative correlation at lower income levels; 3) a positive correlation between volatility and growth during expansions and a negative correlation between volatility and growth during recessions. Results suggest reducing inflation volatility and refining policymaking to account for the heterogeneity of inflation volatility could improve growth over the longrun. Further analysis is warranted.
Advisor: Nir Jaimovich, Alison Hagy | JEL Codes: E31, E32, O40 | Tagged: Inflation, Economic Growth
How does being a Serial Creator affect Probability of Campaign Success on Kickstarter?
By Minn Khine
This paper seeks to address the issue of how being a serial creator impacts campaign success on Kickstarter. My hypothesis is that being a serial creator – someone who has created 2 or more projects on Kickstarter – has a positive effect on probability of campaign success but there are diminishing marginal returns to this effect. A regression analysis over a sample of over 187 thousand Kickstarter projects from its inception in 2008 until December 2014 yields the following findings, which supports my hypothesis. I found that being a serial creator does have a positive effect on campaign success but there is diminishing marginal returns to being a serial creator. Furthermore, number of updates, number of reward levels, having a video, number of backers, FB Shares, FB Friends, and Number of Projects Backed all have positive effects on campaign success. On the other hand, comments, funding goal, and duration have negative effects on campaign success. The effect of the Fed Fund Rate on campaign success is inconclusive. In terms of how project characteristics and creator characteristics affect first time creators and serial creators differently, I found that Updates, Video, FBShares, FBFriends, and Goal matter less as number of projects created increases, in other words, for serial creators who’ve gathered more project experience. On the other hand, Rewards, Backers, ProjectsBacked, Comments, and Duration matter more as number of projects created increases.
Advisor: Edward Tower, Grace Kim, Kent Kimbrough | JEL Codes: G21, G24, L26 | Tagged: Crowdfunding, Kickstarter, Serial creator
Resource Adequacy and Energy-Only Market Design: Assessing The Impact of ERCOT’s Operating Reserve Demand Curve1
By Max Lipscomb
I examine the effect of an Operating Reserve Demand Curve (ORDC) which was recently implemented in Texas to assist power producers in recovering their fixed investment costs. I characterize and employ an economic plant dispatch model to examine the ORDC’s effects on representative natural gas plants in Texas, allowing me to determine whether or not the ORDC is likely to induce new capital deployment. I find that the ORDC’s positive effects are minimal and likely negated by the policy’s complexity, sending unclear signals to prospective investors. My results suggest that the policy itself is insufficient to incentivize the construction of new generation capacity in Texas’s electricity market.
Advisor: James Roberts, Alison Hagy, Kent Kimbrough | JEL Codes: L9, L94, L97 | Tagged: Demand Curve, Electricity, Energy-only Operting Reserve, ERCOT Texas, Resource Adequacy, Utility Power
A computational model of food choice: Utility optimization through external cuing and heuristic search
By Lucie Yang
The field of economics tends to view decision-making through a lens of assumed rationality and utility maximization. Unfortunately, choices in reality tend to be more complicated than perfect conscious value assignment. One such type of decision-making is food choice, which incorporates not only many inherent values (health, taste, price, energy), but also exists in a world of many external influences (marketing, social pressure). The details of the space in which choices are made can be highly influential, disrupting the typical top-down attentional decision-making assumed with a homo economicus. This paper seeks to utilize a behavioral experiment, eye-tracking, and a novel computational model (the drift diffusion model) in an effort to explore how humans make food decisions. The drift diffusion model links the metrics, reaction time, gaze fixations, and eye movement path length and frequency to the probability of subsequently choosing each item. The model takes into account not only the intrinsic attractiveness of each item, but also the context surrounding them, creating group distributions as well as individual distributions for parameters of the decision process. This paper aims to look at various aspects of food decisions: how do personal internal states, visual salience, and external cues effect how one weights the multiple value characteristics of food.
Advisors: Kent Kimbrough, Philip Sadowski, Scott Huettel, Jonathan Winkle | JEL Codes: D8, D80, D87 | Tagged: Decision-Making, Drift Diffusion Model, Food Consumption, Neuroeconomics
Multiples Valuation and Abnormal Returns
By Joon Sang Yoon
I investigate whether three commonly used valuation multiples—the Price-to-Earnings Ratio, the EV-to-EBITDA multiple, and the EV-to-Sales multiple—can be used to identify mispriced securities. I find that multiples are successful in identifying mispricing in both the equal and value weighted portfolios relative to the One-Factor CAPM. I further find, after controlling for size and value effects, that the bulk of the abnormal returns are concentrated in smaller firms. Moreover, the Sales multiple seems to outperform the other two multiples in the equal weighted design. In the value weighted design, however, the P/E ratio outperforms the others.
Advisor: Per Olsson, Michelle Connolly | JEL Codes: G12, G14, M4 | Tagged: Equity Valuation, Long-run Abnormal Returns, Market Efficiency, Multiples Valuation
Competition from Incumbent Firms During Mergers: Estimating the Effect of Low-Cost Carriers on Post-Merger Prices
By Jonathan Gao
In an evaluation of a merger, the type of existing competitors in the market should play a role in constraining market power following the merger. In the airline industry, heterogeneity between low-cost carriers (LCCs) and legacy carriers suggest that the types of airline competitors could affect the price effects of a merger. This paper investigates the pro-competitive effects that existing, non-merging airline carriers have on prices when an airline merger occurs. Using data in the years around the 2008 merger between Delta and Northwest Airlines, the results show that average price levels of Delta and Northwest dropped after the merger, with larger price decreases on routes with LCC competitors. There is evidence that incumbent LCC competitors have a larger influence than legacy competitors in restricting post-merger prices and market power, confirming that the type of competitors matters in assessing the level of competition in a market. This paper also shows that much of the cost efficiencies from the merger were concentrated on routes with a hub of Delta or Northwest.
Advisor: James Roberts | JEL Codes: L0, L11, L13 | Tagged: Airline Competition, Airline Merger, Market Structure
The Effect of Minority History on Racial Disparities in the Mortgage Market: A Case Study of Durham and New Haven
By Jisoo Yoon
In the aftermath of the housing market crash, the concentration of subprime mortgage loans in minority neighborhoods is a current and long-standing issue. This study investigates the presence of racial disparities in mortgage markets by examining two cities with contrasting histories of African American and Hispanic establishment: Durham, North Carolina and New Haven, Connecticut. This study examines data by the Home Mortgage Disclosure Act (HMDA), and distills the effect of minority legacy on the perception of racial risk by using econometric instruments to separate the behavior of national lenders and local lenders. The econometric methods allow national lenders to reflect objective risk measures and neighborhood race dynamics, while local lenders reflect subjective attitudes towards certain races. With its longer history of African American presence, Durham shows a positive attitude towards Black borrowers at the local level, while New Haven shows a more favorable attitude towards its Hispanic residents. Nonetheless, racial legacy also materializes as a negative factor in the form of increased residential segregation and spillover effects. Furthermore, a temporal variation analysis of pre- and post-mortgage market reform data affirms the disappearance of racial bias and continued presence of spillover risk in Durham.
Advisor: Christopher Timmins | JEL Codes: C01, G21, J15, R21, R23, R31 | Tagged: Econometrics, Mortgages, Economics of Minorities, Races, Census, Migration, Population, Neighborhood Characteristics, Housing Supply and Market
Security Without Equity? The Effect of Secure Communities on Racial Profiling by Police
By Jack Willoughby
Anecdotal and circumstantial evidence suggest that the implementation of Secure Communities, a federal program that allows police officers to more easily identify illegal immigrants, has increased racial bias by police. The goal of this analysis is to empirically evaluate the effect of Secure Communities on racial bias by police using motor vehicle stop and search data from the North Carolina State Bureau of Investigation. This objective differs from most previous research, which has largely attempted to quantify racial profiling for a moment in time rather than looking at how an event influences racial profiling. I examine the effects of Secure Communities on police treatment of Hispanics vs. whites with an expanded difference-in-difference approach that looks at outcomes in motor vehicle search success rate, search rate conditional on a police stop, stop rate, and police action conditional on stop. Statistical analyses yield no evidence that the ratification of Secure Communities increased racial profiling against Hispanics by police. This finding is at odds with the anecdotal and circumstantial evidence that has led many to believe that the ratification of Secure Communities led to a widespread increase in racial profiling by police, a discrepancy that should caution policy makers about making decisions driven by stories and summary statistics.
Advisor: Frank Sloan | JEL Codes: J15, K14, K37, K42 | Tagged: Racial Policing, Bias, Immigration Law, Secure Communities
Optimizing the Electricity Bill Creating a two-part electricity tariffs to induce a targeted level of rooftop solar adoption while meeting utility operating expenses
By Hoel Weisner
Renewable energy technologies are a much needed, clean alternative to the conventional fossil fuel electricity power plants of the last century. The market for installing solar panels on rooftops is a highly promising avenue for expanding the use of these technologies, but its profitability depends significantly on the electricity prices offered by electric utilities. Investing in solar panels offset a percentage of the electricity purchased from the utility. This paper models the investment decision of electricity consumers and looks at what the optimal per unit price of electricity should be in order to make building solar panels a profitable decision for a target share of households. The model shows how this optimal rate decreases at lower prices of investing, when the share of utility-purchased electricity offset by the panels increases, and when the target level of solar adoption decreases. Finally, it looks at how this per unit rate impacts the utility’s decision to set a fixed monthly charge for electricity in order to recover all of its operating expenses.
Advisor: Leslie Marx, Alison Hagy, Kent Kimbrough | JEL Codes: L94, Q42, Q48 | Tagged: Electricity Price, Renewable Energy, Solar Electricity
