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Assessing Consumer Valuation of Fuel Economy in Auto Markets
By Daniel Fifer
The need for and efficacy of CAFE standards for auto-makers depends largely on whether consumers properly value fuel efficiency in their vehicle purchases. In this paper we use data describing heterogeneous driving behavior and a hedonic model of new car prices to evaluate how well consumers value incremental changes in fuel economy in terms of avoided fuel costs. Results indicate car and SUV buyers mostly underpay for initial fuel economy investment while truck and van buyers dramatically overpay for fuel economy relative to avoided cost – implying that CAFE standards may be most necessary in car and SUV markets.
Advisor: Christopher Timmins, Richard Newell
The Impact of Rising Gasoline Prices on US Public Transit Ridership
by Christopher Blanchard
Abstract
This paper analyzes the impact of increasing fuel prices on public transit ridership in the United States. Using regional gasoline prices and transit ridership and supply figures from 218 US cities from 2002 to 2008, I estimate the cross-price elasticity of demand for four modes of transit with respect to gasoline price. I report how these estimates vary between cities and test to see if these cross-price elasticities have changed over time. I find a cross-price elasticity of transit demand with respect to gasoline price ranging from -0.012 to 0.213 for commuter rail, -0.377 to 0.137 for heavy rail, -0.103 to 0.507 for light rail, and 0.047 to 0.121 for bus. These estimates vary significantly between cities but are not highly correlated with urban population size. Additionally, I find evidence suggesting that the cross-price elasticity has increased over this time period for commuter rail, light rail, and motorbus transit.
Professor Christopher Timmins, Faculty Advisor
Fundamental Volatility’s Eect on Asset Volatility
by Evan Beard
Abstract
This paper examines the effect of macroeconomic variable volatility on implied and realized asset price level volatilities in the U.S. using monthly data from 1986 – 2008. Two approaches are taken: An autoregressive distributed lag model using rolling standard deviations and a GARCH model. The S&P 500’s volatility is used as a proxy for historical (actual) volatility and the VIX is used as a proxy for implied volatility. For the distributed lag model, each linear regression tests granger causality (using Newey-West robust standard errors) of a single macroeconomic variable by incorporating lagged values (as determined by comparing Bayesian Information Criteria of both the constructed macroeconomic variable and the dependent asset volatility variable). Capacity utilization, PPI, and employment volatility are found to be significant for predicting S&P volatility, while PPI and M2 volatility are significant for the VIX. For the GARCH regressions, terms of trade, employment, and capacity utilization volatility are statistically significant. Forecasts are then constructed using those variables shown to be granger casual, but a two-sided t-test rejects the null hypothesis that forecast errors are zero in every case.
Professor Lori Leachman, Faculty Advisor
Wife’s labor supply and marital dissolution: evidence from the NLSY79
by Wichsinee Wilbulpoprasert
Abstract
In response to the changing family and social structures in the United States, an accurate understanding of mechanisms and the driving forces of marital dissolution is important in many aspects. For one, the knowledge helps policy and law makers to conjecture possible results of the legislation (e.g. unilateral divorce law, child alimony, or child custody), and the welfare system (e.g. welfare benefits to children and women after divorce) on marriages, divorces, and labor supply. Our goal is to provide additional evidence to a debatable issue in labor and family economics: Does married women’s labor supply increases the chance of their future divorces? or is the relationship the other way around? Prior studies have produced conflicting results. We first propose and estimate a dynamic model, namely a divorce hazard analysis, that allows us to predict the risks of marital dissolution at different stages during the marital life course as a function of endogenous wife’s labor supply. By estimating the proposed model on a more recent data set, the NLSY79, we hope to address econometrics issues occurred in earlier studies, as well as present new evidence for these competing claims.
Professor Marjorie McElroy, Faculty Advisor
Valuing Localized Externalities: Hog Operations in North Carolina
by Sara Murray
Abstract
In the early 1990s, eastern North Carolina experienced a boom in industrial hog production. Among the negative externalities generated by this activity, residential property value losses due to operation proximity are some of the most significant. This paper discusses the impact of hog operation presence on median housing values for census tracts and blocks (the smallest geographic unit the Census Bureau keeps data on). It concludes that measuring localized externalities at the tract level yields insignificant results, but that measuring these at the block level accurately shows the marginal impacts
on housing values.
Professor Christopher Timmins, Faculty Advisor
The Miscommunications and Misunderstandings of Nicholas Georgescu-Roegen
by Samuel Iglesias
Abstract
If there is any takeaway from 1971’s The Entropy Law and the Economic Process, it’s this: beneath every intersection of the supply and demand curve, there’s a slow, but steady, process of environmental degradation. Try as you will to recycle waste materials, the book argues—this process cannot be reversed. A formulation of economics backed with this insight was the life vision of Nicholas Georgescu-Roegen, whose work on environmental economics has recently received a new round of academic scrutiny. But one might ask, why wasn’t Georgescu well received the first time around, during his time? This paper explores that topic.
Professor E. Roy Weintraub, Faculty Advisor
Keywords: Economic History, Nicholas Georgescu-Roegen,
The Determinants of Congressional Voting on the Emergency Economic Stabilization Act of 2008
by Ryan Miller
Abstract
The purpose of this paper is to discover the determinants of Congressional voting in the House on the two different versions the Emergency Economic Stabilization Act of 2008, and to determine what caused Congressmen to switch their votes from the first bill to the second. Using a Probit model and independent variables representing the personal, this study finds that ideology, political contributions, “closeness” of the 2008 electoral race, other personal and political characteristics of House members, and other demographic characteristics of their home districts were important in determining the vote; the forces driving vote switching were more difficult to ascertain.
Professor Edward Tower, Faculty Advisor
Hop, Skip and Jump – What Are Modern “Jump” Tests Finding in Stock Returns?
by Michael Schwert
Abstract
This paper applies several jump detection tests to intraday stock price data sampled at various frequencies. It finds that the choice of sampling frequency has an effect on both the amount of jumps detected by these tests, as well as the timing of those jumps. Furthermore, although these tests are designed to identify the same phenomenon, they find different amounts and timing of jumps when performed on the same data. These results suggest that these jump detection tests are probably identifying different types of jump behavior in stock price data, so they are not really substitutes for one another.
Professor George Tauchen, Faculty Advisor
Contagion in Risk Markets
by Matthew Moore and James Schulhof
Abstract
During periods of market dislocation, which can be characterized by high asset volatility, correlations between assets generally tend to increase. However, there has been little research on the behavior of correlations between risk measures across securities markets. The aim of our research is to examine correlation dynamics between alternative risk measures rather than asset classes. Correlations between credit default swaps, equity volatility skew, and at-the-money volatility were found to increase during the recent period of market dislocation. To ascertain when the dislocation period began, we built a regime shift model to estimate the date at which the dislocation began. We have chosen to focus our analysis on risk measures for financial institutions in particular, as this industry has been most severely affected by the current financial crisis.
Professor Emma Rasiel, Faculty Advisor
