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Category Archives: 2009

Movements in the Digital Divide

By Benjamin Berg

I explore how the “Digital Divide” in the United States manifests during the
period from 2000 to 2007. I find that the digital divide is decreasing with home computer
and Internet use. But a new divide has emerged with high-speed Internet. Even though
the income gap is closing with home computer use, the evidence suggests that an
important income bottleneck is occurring at the computer acquisition level. Many never
have the chance to adopt the Internet at home because they do not have a computer.

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Advisor: Peter Arcidiacon

A Model of Speculative Attacks and Devaluations in Korea and Indonesia

By Austin Li

Since the beginning of the Bretton Woods era, currency crises and speculative attacks
have affected the world economy. This paper presents a model, originally derived by
Blanco and Garber, that predicts one-period ahead probabilities of a currency devaluation
and the expected exchange rate conditional on a devaluation. The analysis is then applied
to Korea and Indonesia during the periods of 1960-1980 and 1969-1989, respectively.
Despite numerous devaluations during both periods, all of the calculated probabilities of
devaluation in the next period are close to zero for both Korea and Indonesia. However,
it is promising that rises in predicted probabilities of devaluation are observed before
actual devaluations for Indonesia.

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Advisor: Kent Kimbrough

A Theory of Optimal Sick Pay

By Andrew Tutt

Illness significantly reduces worker productivity, yet how employers respond to the possibility of illness and its effects on work performance is not well understood. The 2003 American Productivity Audit pegged the cost to employers of lost productive time due to illness at 225.8 billion US dollars/year. More importantly, 71% of that loss was explained by reduced performance while at work. Studies of worker illness have been up to this point empirical, focused primarily on characteristics which co-vary with worker illness and absenteeism. This paper seeks to understand how employers mitigate the impact of illness on profits through a microeconomic model, elucidating how employers influence workers through salary-based incentives to mitigate its associated costs, providing firms and policy
makers with a comprehensive theoretical method for formulating optimal sick pay policies.

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Advisor: Huseyin Yildirim

Does the Quality of Public Transit Affect Commuters’ Response to Gasoline Price Changes?

By Allison Smith

The effect of public transportation on commuters’ sensitivity to gas prices is examined using a proxy for the quality of public transportation. This proxy is measured as the difference in the individual’s predicted commute times by private transit and public transit, estimated using the individual’s observable characteristics. The interaction of gasoline price with this measure is found to have a significant effect on annual vehicle miles traveled. Further, there is a strong correlation between the quality of public transit and elasticity of demand. This indicates that public transit could play an important role in increasing the effectiveness of gasoline taxes. This has timely policy implications with the federal allocations for public transit infrastructure in the 2009 stimulus bill.

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Advisor: Christopher Timmins

Homelessness: A Preliminary Evaluation of an Effort to End Homelessness Durham County, NC

By Alexander Tilley

The Durham Center is the public agency in Durham County responsible for connecting persons who are homeless or at risk of homelessness with the services that they need. In February of 2008 the Durham Center began to perform Care Review, where a 10-person Care Review team meets with an individual to develop a personalized system of care to place that person in permanent and/or stable housing and/or keep them there. Key indicators for successful placement by 3 months after initial review are access to prescription medicine services, age, race, primary medical home, and steady income.

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Advisor: Leslie Curtis

Multiparty Bargaining Strategies Comparing Nash Bargaining Payoffs of Bilateral and Multilateral Negotiation Strategies during Conflict Bargaining

by Alexander Crable

2003, the United States and North Korea have been at odds over the creation and continuation of a North Korean nuclear weapons program. While North Korea lobbies strongly for these differences to be sorted out through bilateral negotiations between the two nations, the United States refuses to partake in any negotiations other than the multilateral Six-Party Talks. Seeking to determine if the bargaining framework (bilateral or multilateral) between several economic agents might grant one or more agents a strategic advantage, we developed a three-player bargaining model for both a single multilateral negotiation and for a series of bilateral negotiations involving all three players. We also included in our model “conflict coefficients” which can simulate disagreement erupting into damaging conflict between two players. Hence, our model can further simulate nations on the brink of armed conflict, companies at risk of entering a price war, or other scenarios where players might cause a
decrease in each other’s initial wealth or utility. Conflict coefficients were designed in such a way that they can be removed from the model effortlessly to attain more general results. We concluded that there are indeed strategic advantages and disadvantages of multilateral and bilateral bargaining games for each player depending on their disagreement points and the surpluses being divided. In cases of conflict bargaining, expected payoffs for each player and preferred bargaining framework are further affected by their own conflict coefficient and those of the other players.

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Advisor: Huseyin Yildirim

Driven to Cheat: A Study on the Drivers of Dishonesty—through the Game of Golf

By Scott McKenzie

People like to think of themselves as more honest than the person sitting next to them. In practice, this cannot always be the case. Through two experiments, we investigated behavior in golf—a sport of self-governance, where the player is frequently confronted with opportunities to bend the rules and the score. Our research shows that people believe the average person will cheat more often than they themselves do, responding more strongly to both a decision’s perceived degree of dishonesty and the likelihood of being caught. We also found that altering the level of a competition did not change people’s beliefs about their dishonest behavior, even though cheating was directly related to competitiveness. In general, controlling for certain characteristics produces consistent predictions of reported cheating levels, and adding certain external circumstances drastically changed participants’ perceptions of dishonesty. People like to think of themselves as being in complete control of their decisions, but we will show that their perceptions can be changed without actually altering the terms of the decision.

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Advisor: Dan Airely

Caught Red-Handed: Corporate Labor Practices and the Investigatory Media, a New Look at Corporate Social Responsibility

By Jessica Lohrman

Firm self-regulation with regards to illegal and unethical labor practices has become a significant trend recently, as firms face possible negative exposure from the investigatory media. This paper provides a theoretical analysis of the determinants corporate labor practices and the role played by the investigatory media in firm self-regulation. The model finds that firms, when facing a media investigation, are no more likely to use unethical labor regardless of how cost effective it is. Instead, the firm is actually driven towards certain labor choices based upon the parameters of the investigatory media’s profitability. This communicates the importance of outside monitoring bodies on the road towards improved global labor standards.

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Advisor: Huseyin Yildirim

An Investigation into the Interdependency of the Volatility of Technology Stocks

By Zoraver Lamba

This paper examines the contemporaneous and dynamic relationships between the volatilities of the technology stocks in the S&P 100 index. Factor analysis and heterogeneous autoregressive regressions are used to examine contemporaneous and dynamic, inter-temporal relationships, respectively. Both techniques utilize high frequency data by measuring stock prices every 5 minutes from 1997-2008. We find that a strong industry effect explains the bulk of the volatility of the technology stocks and that the market’s volatility has very low correlation with the stocks’ volatility. Further, we find the market’s volatility has insignificant predictive content for the stocks’ volatility. The stocks themselves contain large quantities of unique predictive content for each other’s volatilities.

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Advisor: George Tauchen

Causal Inference and Understanding Causal Structure

By Alex Wang

This thesis aims to show that explicit understanding of possible causal structures often aids in inferring the true causes from data. This is done by first understanding that causes are chains of counterfactual dependence. Insofar as experiments, active or natural are not perfect, data can easily support false counterfactuals. Even those tools especially designed to identify unbiased estimates, like instrumental variables, often fail. Causal structure explains the failure of these tools, but more importantly allows us to better identify which counter factuals to reject or accept.

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Advisor: Kevin Hoover


Undergraduate Program Assistant
Jennifer Becker

Director of the Honors Program
Michelle P. Connolly