Investigation of the causes of serious injury and fatal crashes: An analysis using econometric models

The rate of fatal crashes in Florida has remained significantly higher than the national average for the last several years. The 2003 statistics from the National Highway Traffic Safety Administration (NHTSA), the latest available, show a fatality rate in Florida of 1.71 per 100 million vehicle-miles traveled compared to the national average of 1.48 per 100 million vehicle-miles traveled. The objective of this research is to better understand the driver, environmental, and roadway factors that affect the probability of injury severity in Florida. ^ In this research, the ordered logit model was used to develop six injury severity models; single-vehicle and two-vehicle crashes on urban freeways and urban principal arterials and two-vehicle crashes at urban signalized and unsignalized intersections. The data used in this research included all crashes that occurred on the state highway system for the period from 2001 to 2003 in the Southeast Florida region, which includes the Miami-Dade, Broward and Palm Beach Counties.^ The results of the analysis indicate that the age group and gender of the driver at fault were significant factors of injury severity risk across all models. The greatest risk of severe injury was observed for the age groups 55 to 65 and 66 and older. A positive association between injury severity and the race of the driver at fault was also found. Driver at fault of Hispanic origin was associated with a higher risk of severe injury for both freeway models and for the two-vehicle crash model on arterial roads. A higher risk of more severe injury crash involvement was also found when an African-American was the at fault driver on two-vehicle crashes on freeways. In addition, the arterial class was also found to be positively associated with a higher risk of severe crashes. Six-lane divided arterials exhibited the highest injury severity risk of all arterial classes. The lowest severe injury risk was found for one way roads. Alcohol involvement by the driver at fault was also found to be a significant risk of severe injury for the single-vehicle crash model on freeways. ^

Exchange rate overvaluation under hyperinflation: The case of Peru

This dissertation examines the behavior of the exchange rate under two different scenarios. The first one is characterized by, relatively, low inflation or a situation where prices adjust sluggishly. The second is a high inflation economy where prices respond very rapidly even to unanticipated shocks. In the first one, following a monetary expansion, the exchange rate overshoots, i.e. the nominal exchange rate depreciates at a faster pace than the price level. Under high levels of inflation, prices change faster than the exchange rate so the exchange rate undershoots its long run equilibrium value.^ The standard work in this area, Dornbusch (1976), explains the overshooting process in the context of perfect capital mobility and sluggish adjustment in the goods market. A monetary expansion will make the exchange rate increase beyond its long run equilibrium value. This dissertation expands on Dornbusch's model and provides an analysis of the exchange rate under conditions of currency substitution and price flexibility, characteristics of the Peruvian economy during the hyper inflation process that took place at the end of the 1980's. The results of the modified Dornbusch model reveal that, given a monetary expansion, the change in the price level will be larger than the change in the exchange rate if prices react more than proportionally to the monetary shock.^ We will expect this over-reaction in circumstances of high inflation when the velocity of money is increasing very rapidly. Increasing velocity of money, gives rise to a higher relative price variability which in turn contributes to the appearance of new financial (and also non-financial) instruments that report a higher return than the exchange rate, causing people to switch their demand for foreign exchange to this new assets. In the context of currency substitution, economic agents hoard and use foreign exchange as a store of value. The big decline in output originated by hyper inflation induces people to sell this hoarded money to finance current expenses, increasing the supply of foreign exchange in the market. Both, the decrease in demand and the increase in supply reduce the price of foreign exchange i.e. the real exchange rate. The findings mentioned above are tested using Peruvian data for the period January 1985-July 1990, the results of the econometric estimation confirm our findings in the theoretical model. ^

Regional growth, structural change, and natural disaster

Hurricanes, earthquakes, floods, and other serious natural hazards have been attributed with causing changes in regional economic growth, income, employment, and wealth. Natural disasters are said to cause; (1) an acceleration of existing economic trends; (2) an expansion of employment and income, due to recovery operations (the so-called silver lining); and (3) an alteration in the structure of regional economic activity due to changes in "intra" and "inter" regional trading patterns, and technological change.^ Theoretical and stylized disaster simulations (Cochrane 1975; Haas, Cochrane, and Kates 1977; Petak et al. 1982; Ellson et al. 1983, 1984; Boisvert 1992; Brookshire and McKee 1992) point towards a wide scope of possible negative and long lasting impacts upon economic activity and structure. This work examines the consequences of Hurricane Andrew on Dade County's economy. Following the work of Ellson et al. (1984), Guimaraes et al. (1993), and West and Lenze (1993; 1994), a regional econometric forecasting model (DCEFM) using a framework of "with" and "without" the hurricane is constructed and utilized to assess Hurricane Andrew's impact on the structure and level of economic activity in Dade County, Florida.^ The results of the simulation exercises show that the direct economic impact associated with Hurricane Andrew on Dade County is of short duration, and of isolated sectoral impact, with impact generally limited to construction, TCP (transportation, communications, and public utilities), and agricultural sectors. Regional growth, and changes in income and employment reacted directly to, and within the range and direction set by national economic activity. The simulations also lead to the conclusion that areal extent, infrastructure, and sector specific damages or impacts, as opposed to monetary losses, are the primary determinants of a disaster's effects upon employment, income, growth, and economic structure. ^

Essays on firm behavior and firm performance

This dissertation comprises three individual chapters in an effort to examine different explanatory variables that affect firm performance. Chapter Two proposes an additional determinant of firm survival. Based on a detailed examination of firm survival in the British automobile industry between 1895 and 1970, we conclude that a firm's selection of submarket (defined by quality level) influenced survival. In contrast to findings for the US automobile industry, there is no evidence of first-mover advantage in the market as a whole. However, we do find evidence of first-mover advantage after conditioning on submarket choice. Chapter Three examines the effects of product line expansion on firm performance in terms of survival time. Based on a detailed examination of firm survival time in the British automobile industry between 1895 and 1970, we find that diversification exerts a positive effect on firm survival. Furthermore, our findings support the literature with respect to the impacts of submarket types, pre-entry experience, and timing of entry on firm survival time. Chapter Four examines corporate diversification in U.S. manufacturing and service firms. We develop measures of how related a firm's diverse activities are using input-output data and the NAILS classification to construct indexes of "vertical relatedness" and "complementarity". Strong relationships between these two measures are found. We utilize profitability and excess value as the measure for firm performance. Econometric analysis reveals that there is no relationship between the degree of relatedness of diversification and firm performance for the study period.

Essays on exchange rate economics

Exchange rate economics has achieved substantial development in the past few decades. Despite extensive research, a large number of unresolved problems remain in the exchange rate debate. This dissertation studied three puzzling issues aiming to improve our understanding of exchange rate behavior. Chapter Two used advanced econometric techniques to model and forecast exchange rate dynamics. Chapter Three and Chapter Four studied issues related to exchange rates using the theory of New Open Economy Macroeconomics. ^ Chapter Two empirically examined the short-run forecastability of nominal exchange rates. It analyzed important empirical regularities in daily exchange rates. Through a series of hypothesis tests, a best-fitting fractionally integrated GARCH model with skewed student-t error distribution was identified. The forecasting performance of the model was compared with that of a random walk model. Results supported the contention that nominal exchange rates seem to be unpredictable over the short run in the sense that the best-fitting model cannot beat the random walk model in forecasting exchange rate movements. ^ Chapter Three assessed the ability of dynamic general-equilibrium sticky-price monetary models to generate volatile foreign exchange risk premia. It developed a tractable two-country model where agents face a cash-in-advance constraint and set prices to the local market; the exogenous money supply process exhibits time-varying volatility. The model yielded approximate closed form solutions for risk premia and real exchange rates. Numerical results provided quantitative evidence that volatile risk premia can endogenously arise in a new open economy macroeconomic model. Thus, the model had potential to rationalize the Uncovered Interest Parity Puzzle. ^ Chapter Four sought to resolve the consumption-real exchange rate anomaly, which refers to the inability of most international macro models to generate negative cross-correlations between real exchange rates and relative consumption across two countries as observed in the data. While maintaining the assumption of complete asset markets, this chapter introduced endogenously segmented asset markets into a dynamic sticky-price monetary model. Simulation results showed that such a model could replicate the stylized fact that real exchange rates tend to move in an opposite direction with respect to relative consumption. ^

A study of stock market fluctuations and their relation to business conditions

Most research on stock prices is based on the present value model or the more general consumption-based model. When applied to real economic data, both of them are found unable to account for both the stock price level and its volatility. Three essays here attempt to both build a more realistic model, and to check whether there is still room for bubbles in explaining fluctuations in stock prices. In the second chapter, several innovations are simultaneously incorporated into the traditional present value model in order to produce more accurate model-based fundamental prices. These innovations comprise replacing with broad dividends the more narrow traditional dividends that are more commonly used, a nonlinear artificial neural network (ANN) forecasting procedure for these broad dividends instead of the more common linear forecasting models for narrow traditional dividends, and a stochastic discount rate in place of the constant discount rate. Empirical results show that the model described above predicts fundamental prices better, compared with alternative models using linear forecasting process, narrow dividends, or a constant discount factor. Nonetheless, actual prices are still largely detached from fundamental prices. The bubblelike deviations are found to coincide with business cycles. The third chapter examines possible cointegration of stock prices with fundamentals and non-fundamentals. The output gap is introduced to form the nonfundamental part of stock prices. I use a trivariate Vector Autoregression (TVAR) model and a single equation model to run cointegration tests between these three variables. Neither of the cointegration tests shows strong evidence of explosive behavior in the DJIA and S&P 500 data. Then, I applied a sup augmented Dickey-Fuller test to check for the existence of periodically collapsing bubbles in stock prices. Such bubbles are found in S&P data during the late 1990s. Employing econometric tests from the third chapter, I continue in the fourth chapter to examine whether bubbles exist in stock prices of conventional economic sectors on the New York Stock Exchange. The ‘old economy’ as a whole is not found to have bubbles. But, periodically collapsing bubbles are found in Material and Telecommunication Services sectors, and the Real Estate industry group.

Three essays on hospital efficiency

This dissertation analyzes hospital efficiency using various econometric techniques. The first essay provides additional and recent evidence to the presence of contract management behavior in the U.S. hospital industry. Unlike previous studies, which focus on either an input-demand equation or the cost function of the firm, this paper estimates the two jointly using a system of nonlinear equations. Moreover, it addresses the longitudinal problem of institutions adopting contract management in different years, by creating a matched control group of non-adopters with the same longitudinal distribution as the group under study. The estimation procedure then finds that labor, and not capital, is the preferred input in U.S. hospitals regardless of managerial contract status. With institutions that adopt contract management benefiting from lower labor inefficiencies than the simulated non-contract adopters. These results suggest that while there is a propensity for expense preference behavior towards the labor input, contract managed firms are able to introduce efficiencies over conventional, owner controlled, firms. Using data for the years 1998 through 2007, the second essay investigates the production technology and cost efficiency faced by Florida hospitals. A stochastic frontier multiproduct cost function is estimated in order to test for economies of scale, economies of scope, and relative cost efficiencies. The results suggest that small-sized hospitals experience economies of scale, while large and medium sized institutions do not. The empirical findings show that Florida hospitals enjoy significant scope economies, regardless of size. Lastly, the evidence suggests that there is a link between hospital size and relative cost efficiency. The results of the study imply that state policy makers should be focused on increasing hospital scale for smaller institutions while facilitating the expansion of multiproduct production for larger hospitals. The third and final essay employs a two staged approach in analyzing the efficiency of hospitals in the state of Florida. In the first stage, the Banker, Charnes, and Cooper model of Data Envelopment Analysis is employed in order to derive overall technical efficiency scores for each non-specialty hospital in the state. Additionally, input slacks are calculated and reported in order to identify the factors of production that each hospital may be over utilizing. In the second stage, we employ a Tobit regression model in order to analyze the effects a number of structural, managerial, and environmental factors may have on a hospital’s efficiency. The results indicated that most non-specialty hospitals in the state are operating away from the efficient production frontier. The results also indicate that the structural make up, managerial choices, and level of competition Florida hospitals face have an impact on their overall technical efficiency.

Essays on the political economy of trade policy and economic *development

This dissertation studies the political economy of trade policy in a developing country, namely Turkey, under different economic and political regimes. The research analyzes the effects of these different regimes on the import structure, the trade policy and the industrialization process in Turkey and derives implications for aggregate welfare. ^ In the second chapter, the effects of trade liberalization policies on import demand are examined. Using disaggregated industry-level data, import demand elasticities for various sectors have been computed, analyzed under different economic regimes, and compared with those of developed countries. The results are statistically significant and reliable, and conform to the predictions of economic theory. Estimation of these elasticities is also a necessary ingredient for the third chapter of the dissertation. ^ The third chapter examines the predictions of the state-of-the-art “Protection For Sale” model of Grossman and Helpman (1994). Employing advanced econometric methods and a unique data set, strong support is found for the fundamental predictions of the model in the context of Turkey. Specifically, the government is found to attach a much higher weight to social welfare than to political contributions. This weight is higher under the democratic regime than under the dictatorship, a result potentially of interest to all researchers in the area of political economy. ^ The fourth chapter looks at the effects of industry concentration and import price shocks on protection, promotion and the choice of policy instruments in Turkey. In this context, it examines and finds support for the predictions of some well-known models in the literature. ^

Essays on Exchange Rate Economics

Exchange rate economics has achieved substantial development in the past few decades. Despite extensive research, a large number of unresolved problems remain in the exchange rate debate. This dissertation studied three puzzling issues aiming to improve our understanding of exchange rate behavior. Chapter Two used advanced econometric techniques to model and forecast exchange rate dynamics. Chapter Three and Chapter Four studied issues related to exchange rates using the theory of New Open Economy Macroeconomics. Chapter Two empirically examined the short-run forecastability of nominal exchange rates. It analyzed important empirical regularities in daily exchange rates. Through a series of hypothesis tests, a best-fitting fractionally integrated GARCH model with skewed student-t error distribution was identified. The forecasting performance of the model was compared with that of a random walk model. Results supported the contention that nominal exchange rates seem to be unpredictable over the short run in the sense that the best-fitting model cannot beat the random walk model in forecasting exchange rate movements. Chapter Three assessed the ability of dynamic general-equilibrium sticky-price monetary models to generate volatile foreign exchange risk premia. It developed a tractable two-country model where agents face a cash-in-advance constraint and set prices to the local market; the exogenous money supply process exhibits time-varying volatility. The model yielded approximate closed form solutions for risk premia and real exchange rates. Numerical results provided quantitative evidence that volatile risk premia can endogenously arise in a new open economy macroeconomic model. Thus, the model had potential to rationalize the Uncovered Interest Parity Puzzle. Chapter Four sought to resolve the consumption-real exchange rate anomaly, which refers to the inability of most international macro models to generate negative cross-correlations between real exchange rates and relative consumption across two countries as observed in the data. While maintaining the assumption of complete asset markets, this chapter introduced endogenously segmented asset markets into a dynamic sticky-price monetary model. Simulation results showed that such a model could replicate the stylized fact that real exchange rates tend to move in an opposite direction with respect to relative consumption.

Three essays on the economics of defense contracting, output and income inequality

This dissertation analyzes both the economics of the defense contracting process and the impact of total dollar obligations on the economies of U.S. states. Using various econometric techniques, I will estimate relationships across individual contracts, state level output, and income inequality. I will achieve this primarily through the use of a dataset on individual contract obligations. ^ The first essay will catalog the distribution of contracts and isolate aspects of the process that contribute to contract dollar obligations. Accordingly, this study describes several characteristics about individual defense contracts, from 1966-2006: (i) the distribution of contract dollar obligations is extremely rightward skewed, (ii) contracts are unevenly distributed in a geographic sense across the United States, (iii) increased duration of a contract by 10 percent is associated with an increase in costs by 4 percent, (iv) competition does not seem to affect dollar obligations in a substantial way, (v) contract pre-payment financing increases the obligation of contracts from anywhere from 62 to 380 percent over non-financed contracts. ^ The second essay will turn to an aggregate focus, and look the impact of defense spending on state economic output. The analysis in chapter two attempts to estimate the state level fiscal multiplier, deploying Difference-in-Differences estimation as an attempt to filter out potential endogeneity bias. Interstate variation in procurement spending facilitates utilization of a natural experiment scenario, focusing on the spike in relative spending in 1982. The state level relative multiplier estimate here is 1.19, and captures the short run, impact effect of the 1982 spending spike. ^ Finally I will look at the relationship between defense contracting and income inequality. Military spending has typically been observed to have a negative relationship with income inequality. The third chapter examines the existence of this relationship, combining data on defense procurement with data on income inequality at the state level, in a longitudinal analysis across the United States. While the estimates do not suggest a significant relationship exists for the income share of the top ten percent of households, there is a significant positive relationship for the income share of top one percent households for an increase in defense procurement.^

A Study of Stock Market Fluctuations and their Relations to Business Conditions

Most research on stock prices is based on the present value model or the more general consumption-based model. When applied to real economic data, both of them are found unable to account for both the stock price level and its volatility. Three essays here attempt to both build a more realistic model, and to check whether there is still room for bubbles in explaining fluctuations in stock prices. In the second chapter, several innovations are simultaneously incorporated into the traditional present value model in order to produce more accurate model-based fundamental prices. These innovations comprise replacing with broad dividends the more narrow traditional dividends that are more commonly used, a nonlinear artificial neural network (ANN) forecasting procedure for these broad dividends instead of the more common linear forecasting models for narrow traditional dividends, and a stochastic discount rate in place of the constant discount rate. Empirical results show that the model described above predicts fundamental prices better, compared with alternative models using linear forecasting process, narrow dividends, or a constant discount factor. Nonetheless, actual prices are still largely detached from fundamental prices. The bubble-like deviations are found to coincide with business cycles. The third chapter examines possible cointegration of stock prices with fundamentals and non-fundamentals. The output gap is introduced to form the non-fundamental part of stock prices. I use a trivariate Vector Autoregression (TVAR) model and a single equation model to run cointegration tests between these three variables. Neither of the cointegration tests shows strong evidence of explosive behavior in the DJIA and S&P 500 data. Then, I applied a sup augmented Dickey-Fuller test to check for the existence of periodically collapsing bubbles in stock prices. Such bubbles are found in S&P data during the late 1990s. Employing econometric tests from the third chapter, I continue in the fourth chapter to examine whether bubbles exist in stock prices of conventional economic sectors on the New York Stock Exchange. The ‘old economy’ as a whole is not found to have bubbles. But, periodically collapsing bubbles are found in Material and Telecommunication Services sectors, and the Real Estate industry group.

Three Essays on the Economics of Defense Contracting, Output and Income Inequality

This dissertation analyzes both the economics of the defense contracting process and the impact of total dollar obligations on the economies of U.S. states. Using various econometric techniques, I will estimate relationships across individual contracts, state level output, and income inequality. I will achieve this primarily through the use of a dataset on individual contract obligations. The first essay will catalog the distribution of contracts and isolate aspects of the process that contribute to contract dollar obligations. Accordingly, this study describes several characteristics about individual defense contracts, from 1966-2006: (i) the distribution of contract dollar obligations is extremely rightward skewed, (ii) contracts are unevenly distributed in a geographic sense across the United States, (iii) increased duration of a contract by 10 percent is associated with an increase in costs by 4 percent, (iv) competition does not seem to affect dollar obligations in a substantial way, (v) contract pre-payment financing increases the obligation of contracts from anywhere from 62 to 380 percent over non-financed contracts. The second essay will turn to an aggregate focus, and look the impact of defense spending on state economic output. The analysis in chapter two attempts to estimate the state level fiscal multiplier, deploying Difference-in-Differences estimation as an attempt to filter out potential endogeneity bias. Interstate variation in procurement spending facilitates utilization of a natural experiment scenario, focusing on the spike in relative spending in 1982. The state level relative multiplier estimate here is 1.19, and captures the short run, impact effect of the 1982 spending spike. Finally I will look at the relationship between defense contracting and income inequality. Military spending has typically been observed to have a negative relationship with income inequality. The third chapter examines the existence of this relationship, combining data on defense procurement with data on income inequality at the state level, in a longitudinal analysis across the United States. While the estimates do not suggest a significant relationship exists for the income share of the top ten percent of households, there is a significant positive relationship for the income share of top one percent households for an increase in defense procurement.

Three Essays on Taxation, Growth and Consumption

The purpose of this dissertation is to examine three distributional issues in macroeconomics. First I explore the effects fiscal federalism on economic growth across regions in China. Using the comprehensive official data set of China for 31 regions from 1952 until 1999, I investigate a number of indicators used by the literature to measure federalism and find robust support for only one such measure: the ratio of local total revenue to local tax revenue. Using a difference-in-difference approach and exploiting the two-year gap in the implementation of a tax reform across different regions of China, I also identify a positive relationship between fiscal federalism and regional economic growth. The second paper hypothesizes that an inequitable distribution of income negatively affects the rule of law in resource-rich economies and provides robust evidence in support of this hypothesis. By investigating a data set that contains 193 countries and using econometric methodologies such as the fixed effects estimator and the generalized method of moments estimator, I find that resource-abundance improves the quality of institutions, as long as income and wealth disparity remains below a certain threshold. When inequality moves beyond this threshold, the positive effects of the resource-abundance level on institutions diminish quickly and turn negative eventually. This paper, thus, provides robust evidence about the endogeneity of institutions and the role income and wealth inequality plays in the determination of long-run growth rates. The third paper sets up a dynamic general equilibrium model with heterogeneous agents to investigate the causal channels which run from a concern for international status to long-run economic growth. The simulation results show that the initial distribution of income and wealth play an important role in whether agents gain or lose from globalization.