nep-pbe New Economics Papers
on Public Economics
Issue of 2006‒03‒05
38 papers chosen by
Peren Arin
Massey University

  1. Optimal Income Taxation and Public Good Provision in a Two-Class Economy By Felix Bierbrauer
  2. The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output By Kevin Joseph Carey; Evan Tanner
  3. Macroeconomic Effects of Social Security and Tax Reform in the United States By Dennis P. J. Botman; Tamim A. Bayoumi; Manmohan S. Kumar
  4. Implications of Quasi-Fiscal Activities in Ghana By Mali Chivakul; Robert C. York
  5. The State Fiscal Costs of a First-Time Farmer Tax Exemption By Swenson, David A.
  6. How Middle-men can Undermine Anti-corruption Reforms By Kjetil Bjorvatn; Gaute Torsvik; Bertil Tungodden
  7. Corruption in Tax Administration: Lessons from Institutional Reforms in Uganda By Odd-Helge Fjeldstad
  8. Incentives for public investment under fiscal rules By Smart, Michael; Mintz, Jack M.
  9. The Net Worth Approach to Fiscal Analysis: Dynamics and Rules By Mercedes da Costa; V. Hugo Juan-Ramon
  10. The Ageing Challenge in Norway: Ensuring a Sustainable Pension and Welfare System By Benoît Bellone; Alexandra Bibbee
  11. BOFIT Discussion Papers - Taxation, growth and welfare: Dynamic effects of Estonia’s income tax act By Michael Funke; Holger Strulik
  12. Tax Evasion, Investors Protection and Corporate Governance By Jean-Bernard Chatelain; Kirsten Ralf
  13. Fiscal Transparency and Economic Outcomes By Farhan Hameed
  14. Procyclical Fiscal Policy: Shocks, Rules, and Institutions - A View From MARS By Paolo Manasse
  15. Harmonization of Domestic Consumption Taxes in Central and Western African Countries By Lubin Kobla Doe
  16. Measuring the Performance of Fiscal Policy in Russia By Antonio Spilimbergo
  17. China?s Fiscal System: A Work in Progress By Christine C.P. Wong; Richard M. Bird
  18. Optimal Fiscal Policy Rules in a Monetary Union By Tatiana Kirsanova; David Vines; Mathan Satchi; Simon Wren-Lewis
  19. Job Security and Work Absence: Evidence from a Natural Experiment By Lindbeck, Assar; Palme, Mårten; Persson, Mats
  20. Trinidad and Tobago: The Energy Boom and Proposals for a Sustainable Fiscal Policy By Saqib Rizavi; Delia Velculescu
  21. Tourism specialization and environmental sustainability in a dynamic economy By Fabio Cerina
  22. Fiscal Policy and Financial Markets By Thomas Stratmann; Bernardin Akitoby
  23. Public investment and higher education inequality By Berardino Cesi
  24. Non-discretionary and automatic fiscal policy in the EU and the OECD By Jacques Mélitz
  25. Chief Executives' Term Limits and Fiscal Policy Choices: International Evidence By Chiara Dalla Nogare; Roberto Ricciuti
  26. Tax Incentives and Investment in the Eastern Caribbean By Sebastian Sosa
  27. Financial Globalization and Fiscal Perfomance in Emerging Markets By David Hauner; Manmohan S. Kumar
  28. Fiscal Policy and Business Cycles in an Oil-Producing Economy: The Case of Venezuela By Alfredo Baldini
  29. Fiscal Policy and Financial Development By David Hauner
  30. Assessing Debt Sustainability in Emerging Market Economies Using Stochastic Simulation Methods By Philippe D Karam; Doug Hostland
  31. Tax Incentives for Foreign Investment in Latin America and the Caribbean: Do They Need to be Harmonized? By Richard M. Bird
  32. "Breaking out of the Deficit Trap: The Case Against the Fiscal Hawks " By James K. Galbraith
  33. Bribes, taxes and regulations: Business constraints for micro enterprises in Tanzania By Odd-Helge Fjeldstad; Ivar Kolstad; Knut Nygaard
  34. Outsourcing of Public Services in Australia - Seven Case Studies By Peter Abelson
  35. Estimating the Impact of State Policies and Institutions with Mixed-Level Data By Jeffrey Milyo; David M. Primo; Matthew L. Jacobsmeier
  36. Bank Ownership and Lending Behavior By Micco, Alejandro; Panizza, Ugo
  37. The risk premium for equity: implications for resource allocation, welfare and policy By Simon Grant; John Quiggin
  38. Using State Administrative Data to Measure Program Performance By Peter R. Mueser; Kenneth R. Troske; Alexey Gorislavsky

  1. By: Felix Bierbrauer (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: This paper combines the problem of optimal income taxation with the free-rider problem in public good provision. There are two groups of individuals with private information on their earning ability and their valuation of a public good. Adjustments of the transfer system are needed to discourage the more productive from exaggerating the desirability of public good provision. Similarly, the less productive need to be prevented from understating their valuation. Relative to an optimal income tax, which focuses solely on earning ability, income transfers are increased whenever a public good is installed and are decreased otherwise.
    Keywords: Income Taxation, Public Good Provision, Revelation of Preferences, Two-dimensional Heterogeneity
    JEL: D71 D82 H21 H41
    Date: 2006–01
  2. By: Kevin Joseph Carey; Evan Tanner
    Keywords: Taxes , Economic forecasting , Fiscal policy , Production ,
    Date: 2005–11–16
  3. By: Dennis P. J. Botman; Tamim A. Bayoumi; Manmohan S. Kumar
    Keywords: Fiscal management , United States , Social security , Tax reforms , Economic models ,
    Date: 2005–11–16
  4. By: Mali Chivakul; Robert C. York
    Keywords: Fiscal policy , Ghana , Fiscal management , Fiscal reforms , Energy , Public sector , Private sector ,
    Date: 2006–02–02
  5. By: Swenson, David A.
    Abstract: This is a study of the potential tax costs and participant benefits of an income tax credit to landowners that rent their land to beginning farmers. This study also contains highly detailed modeled information about the overall state income tax incidence borne by farmers ages 50 or more in Iowa.
    JEL: H2
    Date: 2006–02–22
  6. By: Kjetil Bjorvatn; Gaute Torsvik; Bertil Tungodden
    Abstract: The anti-corruption reform in the Tanzanian tax bureaucracy in the mid-1990s was apparently a short-lived success. In the wake of the reform, a number of "tax experts" established themselves in the market, many of them being laid off tax bureaucrats. We argue that middle-men can undermine the effect of an anti-corruption reform by reducing the uncertainty that firms face vis-à-vis a reformed tax bureaucracy, which in turn may encourage firms to pay bribes rather than taxes. Indeed, under some circumstances, middle-men can cause corruption to be higher after the reform than before the reform. Since the demand for middle-men may increase with the extent of the reform, we also demonstrate that a small reform may be more efficient in combatting corruption than a more radical reform.
    Keywords: Corruption Reform Middle-men Institutions Tanzania
    JEL: H26 K42 O12
    Date: 2005
  7. By: Odd-Helge Fjeldstad
    Abstract: Over the past two decades many developing countries have implemented comprehensive reforms of their tax administrations in order to increase revenue and curb corruption. This paper examines recent experiences in the fight against corruption in the Uganda Revenue Authority (URA). It argues that the technocratic remedies supported by donors have underplayed the degree to which progress in tax administration depends upon a thorough 'cultural change' in the public service. The motives of individual actors are often inextricably tied to the interests of the social groups to which they belong. In the URA patronage runs through networks grounded on ties of kinship and community origin. As such, people recognize the benefits of large extended families and strong kinship ties, even as their social and economic aspirations may be indisputably modern. This implies that such social relations may undermine formal bureaucratic structures and positions. If these problems, which are rooted in social norms and patterns of behavior rather than administrative features, are overlooked, the result may be to distort incentives. As a consequence, the government's commitment to reforming the tax administration may also be undermined.
    Keywords: Corruption Incentives Social norms Tax administration Tax evasion Uganda
    JEL: D73 H26 H30 J33 K42 Z13
    Date: 2005
  8. By: Smart, Michael; Mintz, Jack M.
    Abstract: The authors explore the relationship between fiscal rules and capital budgeting. The current budgetary approach to limit deficits to a fixed portion of GDP or to balance budgets could undermine incentives to invest in public capital with long-run returns since politicians concerned about electoral prospects would favor expenditures providing immediate benefits to their voters. An alternative budgetary approach is to separate capital from current revenues and expenditures and relax fiscal constraints by allowing governments to finance capital expenditures with debt, as suggested by the golden rule approach to capital funding. But the effect of capital budgeting would be to provide opportunities to politicians to escape the fiscal rule constraints by shifting current expenditures into capital accounts that are difficult to measure properly, thereby leading to increased borrowing. As an alternative, the authors propose a modified golden rule limiting debt finance to a proportion of the government ' s investment in self-liquidating assets.
    Keywords: Public Sector Economics & Finance,Investment and Investment Climate,Economic Theory & Research,Public & Municipal Finance,Urban Economics
    Date: 2006–03–01
  9. By: Mercedes da Costa; V. Hugo Juan-Ramon
    Keywords: Fiscal policy , Fiscal management , Debt , Stabilization funds , Oil , Public debt , Asset ratio , Economic models ,
    Date: 2006–01–31
  10. By: Benoît Bellone; Alexandra Bibbee
    Abstract: Norway will face a fast maturing old age pension scheme over the 30 next years whereas oil revenues will supply only a part of implicit liabilities related to the present generation. This working paper examines the recently proposed new measures to strengthen long term fiscal sustainability in Norway. Even though a broad agreement was reached in the parliament on the proposed principles of pension reform, crucial elements are still under discussion, among these the decision on a flexible retirement age based on actuarially fair notional accounts and the strength of the link between income and benefits. Estimated savings arising from strengthened work incentives introducing a longevity coefficient and less generous indexation are three percentage points of GDP over the long term compared to an expected nine percentage points of GDP financing gap for welfare spending. For the proposals to have maximum impact, public subsidies to existing early retirement schemes should be removed and eligibility for disability pensions and long-term sick leaves tightened. This paper relates to the 2005 OECD Economic Survey of Norway ( <P>Le défi du vieillissement en Norvège La Norvège va devoir faire face à des régimes sociaux arrivant rapidement à maturité alors que les recettes pétrolières ne couvriront plus qu'une partie des engagements implicites liés à la génération actuelle. Ce document de travail étudie les nouvelles mesures récemment proposées pour renforcer la soutenabilité des finances publiques en Norvège. Si un accord a été récemment conclu au parlement sur les principes d'une réforme des retraites, des éléments fondamentaux sont encore à l'étude, parmi lesquels la decision d'instaurer un âge flexible de départ en retraite basé sur des comptes notionnels instaurant une plus grande équité actuarielle, et de renforcer le lien entre pensions et revenus. Ces dispositions, qui conjuguent des incitations à travailler plus longtemps et une formule d'indexation moins généreuse, permettraient d'économiser l'équivalent de trois points de pourcentage du PIB sur le long terme, alors que les besoins de financement attendus concernant les dépenses sociales s'élèvent à 9 points de pourcentage de PIB. Pour que ces propositions aient un maximum d'impact, il faudrait aussi supprimer les aides publiques aux régimes de retraite anticipée et durcir les critères d'attribution des pensions d'invalidité et des congés maladie de longue durée. Ce document de travail se rapporte à l'Etude économique de l'OCDE de la Norvège 2005 (
    Keywords: Norway, Norvège, pension reform, réforme du système de retraite, fiscal sustainability, sick leave, congé maladie, disability, invalidité, work incentives, incitations au retour à l'emploi, soutenabilité des finances publiques
    JEL: H53 H55 J11 J26
    Date: 2006–02–16
  11. By: Michael Funke (Hamburg University); Holger Strulik (Copenhagen University)
    Date: 2005–09–03
  12. By: Jean-Bernard Chatelain (University of Orleans); Kirsten Ralf (The American University of Paris)
    Date: 2005–09–03
  13. By: Farhan Hameed
    Keywords: Fiscal transparency , Credit , Fiscal management , Corruption , Reports on the Observance of Standards and Codes ,
    Date: 2005–12–20
  14. By: Paolo Manasse
    Date: 2006–02–06
  15. By: Lubin Kobla Doe
    Keywords: Tax policy , Central African Economic and Monetary Community , West African Economic and Monetary Union , Africa , Consumption taxes , Value added tax , Excise taxes ,
    Date: 2006–01–19
  16. By: Antonio Spilimbergo
    Date: 2006–01–09
  17. By: Christine C.P. Wong; Richard M. Bird (Rotman School of Management, University of Toronto)
    Abstract: We argue in this paper that unless China begins to tackle more systematically the serious problems that have emerged in the finances of its various levels of sub-national government the problems to which the present unsatisfactory system give rise will over time increasingly distort resource allocation, increase distributional tensions, and slow down the impressive recent growth of the Chinese economy. Despite the lack of solid and reliable information on the size and nature of China?s real fiscal system, we show that the evidence available is generally consistent with this pessimistic reading. China?s fiscal and ? in time ? economic future thus rests to some extent on reforms to key aspects of its fiscal system, especially its intergovernmental finances. Moreover, a more consistent and purposive framework to this complex of problems seems needed. Given the scale and scope of China?s underlying public finance problems, the ?reactive gradualism? evidenced in recent ad hoc reforms to this or that piece of the fiscal system has, we suggest, run its course.
    Keywords: China;intergovernmental finance;taxation;budget
    JEL: H11 H70 O53 P21
    Date: 2005–10
  18. By: Tatiana Kirsanova (University of Exeter); David Vines (Baliol College, University of Oxford); Mathan Satchi (University of Kent); Simon Wren-Lewis (University of Exeter)
    Date: 2005–09–03
  19. By: Lindbeck, Assar (Institute for International Economic Studies, Stockholm University); Palme, Mårten (Dept. of Economics, Stockholm University); Persson, Mats (Institute for International Economic Studies, Stockholm University)
    Abstract: We analyze the consequences for sickness absence of a selective softening of job security legislation for small firms in Sweden in 2001. According to our differences-in-difference estimates, aggregate absence in these firms fell by 0.2-0.3 days per year. This aggregate net figure hides important effects on different groups of employees. Workers remaining in the reform firms after the reform reduced their absence by about one day. People with a high absence record tended to leave reform firms, but these firms also became less reluctant to hire people with a record of high absence.
    Keywords: Seniority rules; sick pay insurance; firing costs; moral hazard
    JEL: H53 I38 J22 J50 M51
    Date: 2006–02–24
  20. By: Saqib Rizavi; Delia Velculescu
    Keywords: Oil revenues , Trinidad and Tobago , Fiscal policy ,
    Date: 2005–10–25
  21. By: Fabio Cerina
    Abstract: This study focuses on the dynamic behaviour of a small open economy specialized in tourism based on natural resources when tourist services are supplied to foreign tourists who are crowding-averse and care for the environment. We analyse the steady-state properties of the model and a unique locally saddle-point equilibrium is found for both the market and the central planner solution. Then we compare the effects of two policies aiming at improving the market solution: in the first the government poses a corrective tax on residents' income and then redistributes the tax gains with lump-sum transfers while, in the second, the government taxes residents' income and employs the tax gains in pollution abatement technology. We find that the first policy is able to direct the economy towards its first-best dynamic path but the second policy, by relaxing the dynamic constraint on the environment, yields a higher steady-state utility when the externality effects and/or the natural regeneration rate of the environmental asset are low enough. Both policies, insofar they lead to an increase in tourists' willingness to pay, might work as an "implicit" tourist tax paid by tourists, with the difference that the first policy always leads to to this result, while the second obtains it only when tourists' aversion to crowding is not too high.
    Keywords: Tourism Specialization, Sustainability, Environment, Taxation, Crowding, Pollution Abatement
    JEL: H23 L83 O41 Q26 Q56
    Date: 2006
  22. By: Thomas Stratmann; Bernardin Akitoby
    Keywords: Fiscal policy , Risk premium , Bond markets , Emerging markets , Financial systems , Government expenditures , Revenues ,
    Date: 2006–01–30
  23. By: Berardino Cesi
    Abstract: Empirical results show that children from high income households achieve higher levels of education and are more likely to be enrolled in post compulsory school. Theoretical findings fail to answer clearly whether greater public investment in the higher education system effectively decreases the inequality between the educational attainment of rich and poor children. We show that if the child receives a monetary transfer from his parents and allocates it between private consumption and investment in private additional education, then a further public investment decreases the educational gap. This result holds under the assumptions of both sub-stitutability and complementarity between private and public education.
    Keywords: Higher education inequality; Public education; Altruism
    JEL: H31 H52 I21 J24
    Date: 2006–01
  24. By: Jacques Mélitz (University of Strathclyde)
    Date: 2005–09–03
  25. By: Chiara Dalla Nogare; Roberto Ricciuti
    Abstract: According to reputational models of Political Economy, a term limit may change the behavior of a chief executive because he does not have to stand for election. We test this hypothesis in a sample of 59 countries over the period 1975-1997, using government spending, revenue, surplus and social and welfare spending as policy choice variables. We use both cluster analysis and panel data estimation techniques. We are unable to find significant differences in the behavior of term limited chief executives with respect to those who are not. This is in contrast with some previous empirical results on US states and international data.
  26. By: Sebastian Sosa
    Date: 2006–02–01
  27. By: David Hauner; Manmohan S. Kumar
    Keywords: Emerging markets , Fiscal reforms , Fiscal management , Globalization , Interest rate differential , Financial stability ,
    Date: 2005–11–28
  28. By: Alfredo Baldini
    Keywords: Business cycles , Venezuela, Republica Bolivariana de , Fiscal policy , Oil sector ,
    Date: 2005–12–30
  29. By: David Hauner
    Date: 2006–02–02
  30. By: Philippe D Karam; Doug Hostland
    Keywords: Debt , Emerging markets , Risk premium , Fiscal policy , Fiscal management , Capital flows , Economic models ,
    Date: 2005–12–20
  31. By: Richard M. Bird (International Tax Program, Rotman School of Management, University of Toronto)
    Abstract: The issue of harmonizing tax incentives in the various regional economic groupings that exist in the Latin America and Caribbean region has recently again come under discussion. My aim in this paper is essentially to sketch a framework within which countries contemplating this issue may approach it in a way that may both reduce the ‘harm’ that might otherwise occur and also foster more judicious and reasoned consideration of the inevitable trade-offs facing them. To set the stage, I first outline the changing views of tax incentives over the last half-century and consider briefly some aspects of the tax incentives now in place in the region. Following a brief discussion about whether tax competition is bad, good, or simply inevitable, I conclude by outlining a general institutional framework within which economic groupings in the region may best deal with the issue of harmonizing tax incentives for foreign investment.
    Keywords: Latin America, Caribbean, tax incentives, policy harmonization, economic unions
    JEL: H25 H87 F15
    Date: 2006–01
  32. By: James K. Galbraith
    Abstract: From this paper's Preface, by Dr. Dimitri B. Papadimitriou, President: For some time, Levy Institute scholars have been engaged with issues related to the current account, government, and private sector balances. We have argued that the existing imbalances in these accounts are unsustainable and will ultimately present a serious challenge to the performance of the U.S. economy. Other scholars are also concerned, but for reasons that we do not share. They argue that the interest rate is determined by the supply and demand of saving.When the government reduces its saving, the total supply of saving falls, and the interest rate inevitably rises. The result, they say, is that interest-sensitive spending, and investment in particular, falls. Finally, these scholars say, less investment now necessarily implies less output in the future. In this new brief, Senior Scholar James K. Galbraith evaluates a recent article by William G. Gale and Peter R. Orszag, two economists who regard this view of deficits as plausible. He forwards an alternative, Keynesian view. This alternative suggests that deficits can increase overall output, possibly enabling the government to spend more money without increasing the ratio of the debt to GDP. He casts doubt on the notion that the interest rate is determined by the supply and demand of saving, arguing that monetary policy plays a much larger role than Gale and Orszag allow for. Moreover, he writes, strong demand for goods and services is more important than the supply of capital in determining the pace of technological advance and the rate of growth of output per worker. Though he is skeptical about Gale and OrszagÕs theoretical framework, Galbraith calls attention to some important econometric findings in their paper. Gale and Orszag calculate the effects of deficits on the interest rate. Consistent with GalbraithÕs view, monetary policy turns out to be a major determinant of long-term interest rates. When interest rates are measured as the current cost of funds, Gale and Orszag find that deficits have no significant impact on interest rates. GalbraithÕs theoretical view of interest rate determination, together with Gale and OrszagÕs empirical findings, constitutes a powerful rebuttal of the reflexively antideficit view. Recent economic history suggests that this rebuttal is plausible. The recent increase in the U.S. federal deficit has not yet resulted in high interest rates. Interest rates in Japan, where deficits have been very large, remain at rock-bottom levels. The Levy Institute continues to believe that, together, unsustainable economic imbalances amount to one of the nationÕs most pressing issues, as we believe our Strategic Analysis series has documented. As Galbraith demonstrates, however, some observers are placing an undue emphasis on government deficit reduction, as if the government were the source of all that ails the economy. A more balanced approach would take into account the pernicious effects of excessive private debt and the need to devalue the dollar. We believe that our readers, especially those who follow the Strategic Analysis series, will find this brief to be a helpful look at another facet of the complex and knotty deficits problem.
    Date: 2005–06
  33. By: Odd-Helge Fjeldstad; Ivar Kolstad; Knut Nygaard
    Abstract: This paper analyses the business environment for micro enterprises in Tanzania based on survey data. The primary objective of the study is to identify major constraints facing the firms' business operations. Taxation, corruption, and regulations in the form of licences and permits, are found to be the most important constraints on business operations. Reported constraints vary according to firm characteristics such as age, location, education and gender of the owner. Contrary to previous studies and current policies, financial constraints and property rights are not perceived as important constraints.
    Keywords: Small enterprise Business constriants Taxation Corruption Tanzania
    Date: 2006
  34. By: Peter Abelson (Department of Economics, Macquarie University)
    Abstract: The paper starts with a brief introduction to the main principles of outsourcing and a description of the recent history of outsourcing in the two largest states, New South Wales and Victoria. The main part of the paper then describes seven case studies which exemplify the process and possible outcomes of outsourcing. The case studies are not randomly selected. Indeed reported results of outsourcing are likely to be biased towards success stories because governments usually suppress poor results. Consistent with other studies, in five of the reported case studies, outsourcing cut costs or raised the quality of services, or both. These examples indicate that there are significant potential gains from outsourcing. However, the potential gains are not always achieved. To achieve these gains, contracting out often requires significant structural reform of an organization and always requires detailed planning and ongoing agency commitment. As the other two case studies show, with poor management contracting-out can produce expensive outcomes or major service failures.
    JEL: H11
    Date: 2005–04
  35. By: Jeffrey Milyo (Department of Economics, University of Missouri-Columbia); David M. Primo; Matthew L. Jacobsmeier
    Abstract: Researchers often seek to understand the effects of state policies or institutions on individual behavior or other outcomes in sub-state-level observational units (e.g., election results in state legislative districts). However, standard estimation methods applied to such models do not properly account for the clustering of observations within states and may lead researchers to overstate the statistical significance of state-level factors. We discuss the theory behind two approaches to dealing with clustering—clustered standard errors and multilevel modeling. We then demonstrate the relevance of this topic by replicating a recent study of the effects of state post-registration laws on voter turnout (Wolfinger, Highton, and Mullin 2005). While we view clustered standard errors as a more straightforward, feasible approach, especially when working with large datasets or many cross-level interactions, our purpose in this Practical Researcher piece is to draw attention to the issue of clustering in state and local politics research.
    Keywords: mixed-level data, voter turnout
    JEL: C10 D79 H79
    Date: 2006–02–22
  36. By: Micco, Alejandro; Panizza, Ugo
    Abstract: This paper checks whether state-ownership of banks is correlated with lending behavior over the business cycle and finds that their lending is less responsive to macroeconomic shocks than the lending of private banks.
    Keywords: State-owned banks; Credit Cycle
    JEL: G21 H11 E44
    Date: 2006–02
  37. By: Simon Grant (Department of Economics, Rice University); John Quiggin (Department of Economics, University of Queensland)
    Abstract: This paper describes experiences in the development and testing of three distinct financial models to support farm forestry decisions involving non-traditional tree species in northern Australia and in the Philippines. A variety of options were examined with respect to model design, yield prediction, computing platform, forestry performance criteria and other features. Two of the models focus on the forestry enterprise in isolation, while the third evaluates forestry within the context of the overall farm business. It is found that choice of model design depends on the particular type of application intended and availability of financial data for this application. Some complementarities were gained in replicating features when progressing from one model to the next. Model construction and testing were challenging tasks requiring considerable funds and for two of the models proceeding over a number of years. Validation involved the gradual gaining of confidence in a model as it progressed through various versions. For the more complex models, greater effort in development of the user interface was found to be warranted. The models have proved more suitable for use by extension agents than individual landholders. Even with major resource inputs into model development, a number of desirable additional features can be identified.
    Keywords: equity premium puzzle, public investment
    JEL: G12 H1
    Date: 2004–08
  38. By: Peter R. Mueser (Department of Economics, University of Missouri-Columbia); Kenneth R. Troske; Alexey Gorislavsky
    Abstract: This paper uses administrative data from Missouri to examine the sensitivity of job training program earnings impact estimates based on alternative nonexperimental methods. In addition to simple regression adjustment, we consider Mahalanobis distance matching and a variety of methods using propensity score matching. In each case, we consider both crosssectional estimates and difference-in-difference estimates based on comparison of pre- and postprogram earnings. Specification tests suggest that the difference-in-difference estimator may provide a better measure of program impact. We find that propensity score matching is generally most effective, but the detailed implementation of the method is not of critical importance. Our analyses demonstrate that existing data available at the state level can be used to obtain useful estimates of program impact.
    Keywords: Noexperimental Methods, Matching, Difference-in-Difference
    JEL: H43 I38 I28

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