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Journal Article
The geography, economics, and politics of lottery adoption
Since New Hampshire introduced the first modern state-sponsored lottery in 1964, 41 other states plus the District of Columbia have adopted lotteries. Lottery ticket sales in the United States topped $48 billion in 2004, with state governments reaping nearly $14 billion in net lottery revenue. In this paper the authors attempt to answer the question of why some states have adopted lotteries and others have not. First, they establish a framework for analyzing the determination of public policies that highlights the roles of individual voters, interest groups, and politicians within a state as ...
Journal Article
Nonlinear effects of school quality on house prices
We reexamine the relationship between quality of public schools and house prices and find it to be nonlinear. Unlike most studies in the literature, we find that the price premium parents must pay to buy a house in an area associated with a better school increases as school quality increases. This is true even after controlling for neighborhood characteristics, such as the racial composition of neighborhoods, which is also capitalized into house prices. In contrast to previous studies that use the boundary discontinuity approach, we find that the price premium from school quality remains ...
Working Paper
Information and drug prices: evidence from the Medicare discount drug card program
In early 2004, the U.S. Government initiated the Medicare Discount Drug Card Program (MDDCP), which created a market for drug cards that allowed elderly and handicapped subscribers to obtain discounts on their prescription drug purchases. Pharmacy-level prices for many drugs were posted on the program website weekly from May 29, 2004 to December 31, 2005, as the largest undertaking in the history of government-sponsored information release began with the hope of promoting competition by facilitating access to prices. A large panel of pharmacy-level drug price data collected from the Medicare ...
Working Paper
Spatial dependence in models of state fiscal policy convergence
We apply spatial econometric techniques to models of state and local fiscal policy convergence. Total tax revenue and expenditures, as well as broad tax and expenditure categories, of state and local governments in each of the 48 contiguous U.S. states are examined. We extend work by Scully (1991) and Annala (2003) in much the same way that Rey and Montouri (1999) extended the literature dealing with income convergence among U.S. states. Our results indicate that most fiscal policies have been converging and exhibit spatial dependence. A more specific interpretation of our general spatial ...
Working Paper
Identifying asymmetry in the language of the Beige Book: a mixed data sampling approach
Studies of the predictive ability of the Federal Reserve's Beige Book, an anecdotal measure of regional economic conditions, for aggregate output and employment have proven inconclusive. This might be attributed, in part, to the irregular release schedule of the Beige Book. In this paper, we use a model that allows for data sampling at mixed frequencies to analyze the predictive power of the Beige Book for both aggregate and regional data. We find that the Beige Book's national summary predicts GDP and aggregate employment, but that the information content in the district reports for regional ...
Working Paper
Spatial probit and the geographic patterns of state lotteries
We implement a spatial probit model to differentiate states with a lottery from those without a lottery. Our analysis extends the basic spatial probit model by allowing spatial dependence to vary across geographic regions. We also separate the spatial effects of neighbors versus non-neighbors. The methodology provides consistent and efficient coefficient estimation in light of the simultaneity in spatial dependence. We find evidence of spatial dependence and spatial heterogeneity in lottery usage, and we find that spatial patterns differ significantly by geographic region. The importance of ...
Working Paper
Differences in subprime loan pricing across races and neighborhoods
We investigate whether race and ethnicity influenced subprime loan pricing during 2005, the peak of the subprime mortgage expansion. We combine loan-level data on the performance of non-prime securitized mortgages with individual- and neighborhood- level data on racial and ethnic characteristics for metropolitan areas in California and Florida. Using a model of rate determination that accounts for predicted loan performance, we evaluate the differences in subprime mortgage rates in terms of racial and ethnic groups and neighborhood characteristics. We find evidence of adverse pricing for ...
Working Paper
Interjurisdictional competition with adverse selection
In this paper we study competition among non-benevolent local governments for mobile firms and evaluate the consequences of imposing alternative regimes of competition. In our model politicians act as regulators that offer incentives in the form of recommended output levels and socially-costly transfers to induce firms, which have private information on their costs, to operate in their community. Politicians fail to estimate correctly the social costs of public funds and competition drives firms' information rents to higher levels than under a cooperative regime. Therefore, from the ...
Working Paper
Strategic online-banking adoption
In this paper we study the determinants of banks? decision to adopt a transactional website for their customers. Using a panel of commercial banks in the United States for the period 2003-2005, we show that although bank-specific characteristics are important determinants of banks? adoption decision, competition plays a prominent role. The extent of competition is related to the geographical overlap of banks in different markets and their relative market share in terms of deposits. In more competitive markets banks are more likely to adopt earlier. Even more importantly, banks adopt earlier ...
Working Paper
A State-Level Analysis of Okun's Law
Okun's law is an empirical relationship that measures the correlation between the deviation of the unemployment rate from its natural rate and the deviation of output growth from its potential. This relationship is often referred to by policy makers and used by forecasters. In this paper, we estimate Okun's coefficients separately for each U.S. state using an unobserved components framework and find variation of the coefficients across states. We exploit this heterogeneity of Okun's coefficients to directly examine the potential factors that shape Okun's law, and find that indicators of more ...