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No. 2013_1
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- T.D. Stanley and Hristos Doucouliagos
- Neither Fixed nor Random: Weighted Least Squares Meta-Analysis
We offer what might be regarded as an alternative approach to the conventional ‘fixed-effects’ and ‘random-effects’ meta-analysis (MA), weighted least squares meta-regression analysis (WLS-MRA). Although WLS has been well known for many decades, and its properties are well established, its implications for meta-analysis have yet to be fully explored or appreciated. Our simulations demonstrate that WLS-MRA is preferable to both fixed- and random-effects MA whether or not there is ‘excess’ heterogeneity. We show how a generalization of fixed-effects weighted averages is an improvement over random-effects in those exact cases for which random-effects meta-analysis is designed.
- Keywords: meta-analysis, meta-regression, weighted least squares, fixed-effects, random-effects
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No. 2012_9
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- Nejat Anbarci and Ching-jen Sun
- Asymmetric Nash Bargaining Solutions:
A Simple Nash Program
This article proposes a simple Nash program. Both our axiomatic characterization
and our noncooperative procedure consider each distinct asymmetric and symmetric
Nash solution. Our noncooperative procedure is a generalization of the simplest
known sequential Nash demand game analyzed by Rubinstein, Safra and Thomson
(1992). We then provide the simplest known axiomatic characterization of the class
of asymmetric Nash solutions, in which we use only Nash’s crucial Independence
of Irrelevant Alternatives axiom and an asymmetric modification of the well-known
Midpoint Domination axiom.
- JEL-Codes: C78; D74
- Keywords: Asymmetric Nash bargaining solutions, Nash program, axiomatic characterization, noncooperative foundations, economics of search.
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No. 2012_8
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- Rajesh Kumar Rai and Helen Scarborough
- Non-market Valuation in Developing Countries: Estimating Benefits of Managing Invasive Plants Using Choice a Choice Experiment
There are limitations associated with the application of non-market valuation techniques, including choice experiments, in subsistence economies. In part, this is due to the concern that using money as a mode of contribution may not capture the potential contribution of low-income households. To address this limitation, respondents in this study were provided with the option of contributing towards the management of invasive plants in labour terms if they were unwilling to contribute in monetary terms. The results show that the existing practice of using dollar values to estimate willingness to contribute may disproportionately exclude the concerns of some groups within the community. The analysis also indicates that allowing respondents to express their willingness to contribution in labour increases their participation in environmental decision-making processes and hence, increases the estimated value of forest ecosystem services. This study contributes to the limited empirical literature on the development of non-market valuation surveys, including CEs, in low-income countries in general and rural areas in particular.
- Keywords: Choice experiments, Willingness to contribute, low-income communities, mode of contribution
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No. 2012_7
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- Nejat Anbarci and Ching-jen Sun
- Robustness of Intermediate Agreements and
Bargaining Solutions
Most real-life bargaining is resolved gradually. During this process parties reach intermediate agreements. These intermediate agreements serve as
disagreement points in subsequent rounds. We identify robustness criteria
which are satisfied by three prominent bargaining solutions, the Nash, Proportional (and as a special case to the Egalitarian solution) and Discrete
Raiffa solutions. We show that the .robustness of intermediate agreements.
plus additional well-known and plausible axioms, provide novel axiomatizations of the above-mentioned solutions. Hence, we provide a unified frame-work for comparing these solutions’ bargaining theories.
- JEL-Codes: C78; D74
- Keywords: Nash’s bargaining problem, robustness, intermediate agreements, the Discrete Raiffa solution, the Nash solution, Proportional solutions.
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No. 2012_6
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- Nejat Anbarci and Nick Feltovich
- How responsive are people to changes in their
bargaining position? Earned bargaining power
and the 50–50 norm
Previous research has shown that individuals do not respond to changes in their bargaining
position to the extent predicted by standard bargaining theories. Most of these
results have come from experiments with bargaining power allocated exogenously, so that
individuals may perceive it as having been “unearned” and thus be reluctant to exploit it.
Also, equal splits of the “cake” (the amount bargained over) have typically been equilibrium outcomes,
leading to a powerful tendency toward 50-50 splits. We conduct a bargaining
experiment in which subjects earn their bargaining power through a real–effort task.
Treatments are based on the Nash demand game (NDG) and a related unstructured bargaining
game (UBG). Subjects bargain over a fixed amount of money, with disagreement
payments determined entirely by the number of units of the real–effort task successfully
completed. Task parameters are set to allow disagreement payoffs above half the cake
size, in which case 50–50 splits are not individually rational, and thus not consistent with
equilibrium.
We find that subjects are least responsive to changes in own and opponent disagreement
payoffs in the NDG with both disagreement payments below half the cake size.
Responsiveness is higher in the UBG, and in the NDG when one disagreement payment
is more than half the cake size, but in both cases it is still less than predicted. It is only
in the UBG when a disagreement payment is more than half the cake size that responsiveness
to disagreement payoffs reaches the predicted level. Our results imply that even
when real–life bargaining position is determined by past behaviour rather than luck, the
extent to which actual bargaining corresponds to theoretical predictions will depend on (1)
the institutions within which bargaining takes place, and (2) the distribution of bargaining
power; in particular, whether the 50–50 norm yields a viable outcome.
- JEL-Codes: C78, C72, D81.
- Keywords: Nash demand game, unstructured bargaining, real effort, disagreement, experiment.
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No. 2012_5
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- Janto Haman, Hristos Doucouliagos and Michael Graham
- Agency Problem II and Convergence in CEO Pay
Convergence in CEO pay occurs when pay differentials narrow over time. We analyze and compare differences in the rate of convergence in CEO pay of Australian listed firms with high shareholding concentration (HSC) and without, for the period 1992 to 2009. We find zero and negative pay-for-performance and pay-for-firm size associations in HSC firms, indicating entrenchment and suboptimal CEO contract design. In contrast, positive pay-for-performance effects exist in non-HSC firms. The rate of convergence in CEO pay is higher in HSC firms. While there is relatively strong investor protection, our findings indicate that Australian HSC firms face high private benefits of control and one avenue for extracting these benefits is through a higher rate of convergence in CEO pay.
- JEL-Codes: G30; J33, M52
- Keywords: Agency Problem II; CEO Pay; Convergence; Shareholding Concentration
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No. 2012_4
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- Hristos Doucouliagos and Martin Paldam
- The robust result in meta-analysis of aid effectiveness:
A response to Mekasha and Tarp
Our study, Doucouliagos and Paldam (2008), has recently been critically discussed by Mekasha and Tarp (2011). In this paper we show that contrary to what they state, their study validates our basic analysis: Both papers confirm that the literature has shown that aid is of little economic importance in generating growth. M&T find some random coding errors with virtually no effect on the basic results. Furthermore, we discuss some methodological disagreements and show that their choice of the random effects model is not appropriate for the problem at hand, and that the way they use multiple MRAs contradicts the robust results reached at the basic analysis.
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No. 2012_3
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- Hristos Doucouliagos, Michael Graham and Janto Haman
- Dynamics and Convergence in Chief Executive
Officer Pay
This study investigates dynamics and convergence in CEO pay in Australia’s largest corporations over an 18
year period. Utilizing dynamic panel estimators, we find that CEO pay is driven by dynamic adjustments, firm
size, board size, CEO tenure and firm performance. The largest pay-performance effect emerges for long-term
incentive pay. We also show that by ignoring dynamics, prior studies may have understated the size of payperformance
effects. Analysis of convergence shows a clear pattern of catch up among firms making CEO pay
more equitable over time. The analysis points to efficiency in CEO remuneration contracts rather than
managerial entrenchment.
- JEL-Codes: G30; J33, M52
- Keywords: CEO Pay; Dynamic Panel Data Analysis; Pay for Performance; Convergence
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No. 2012_2
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- Nejat Anbarci and Nick Feltovich
- How responsive are people to changes in their bargaining position?
Earned bargaining power and the 50–50 norm
Previous research has shown that individuals do not respond to changes in their bargaining position to the
extent predicted by standard bargaining theories. Most of these results come from experiments with bargaining
power allocated exogenously, so that individuals may perceive it as having been “unearned” and thus be reluctant to exploit it. Typically these experiments also allowed equal splits of the “cake” (the amount bargained over) as equilibrium outcomes, leading to a powerful tendency toward 50-50 splits. We conduct a bargaining experiment in which subjects earn their bargaining power through a real–effort task. Treatments are based on the Nash demand game (NDG) and an unstructured bargaining game (UBG). Subjects bargain over a fixed amount of money, with disagreement payments determined entirely by the number of units of the real–effort task successfully completed. Task parameters are set to allow disagreement payoffs above half the cake size, in which case 50–50 splits are not individually rational, and thus not consistent with equilibrium.
We find that subjects are least responsive to changes in own and opponent disagreement payoffs in the NDG
with both disagreement payments below half the cake size. Responsiveness is higher in the UBG, and in the NDG when one disagreement payment is more than half the cake size, but in both cases it is still less than predicted. It is only in the UBG when a disagreement payment is more than half the cake size that responsiveness to disagreement payoffs reaches the predicted level. Our results imply that even when real–life bargaining position is determined by past behaviour rather than luck, the extent to which actual bargaining corresponds to theoretical predictions will depend on (1) the institutions within which bargaining takes place, and (2) the distribution of bargaining power; in particular, whether the 50–50 norm is a viable outcome.
- JEL-Codes: C78, C72, D81
- Keywords: Nash demand game, unstructured bargaining, real effort, disagreement, experiment
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No. 2011_6
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- M S McKenzie
- The Macroeconomics of Sovereign Wealth Funds
The dramatic growth in sovereign wealth funds (SWFs) has implications which are still emerging for national economies and globally. This paper considers why SWFs have become key international financial institutions for some countries, particularly developing ones. This adds to the literature on second best development strategies (Hausmann and Rodrik 2003), here applying it to SWFs. A macroeconomic approach is taken towards the phenomenon of reserves accumulation and motives for SWFs. These are evaluated in terms of balance of payments positions and inferred trade and exchange policies. The role of SWFs in promoting country growth and international stability is considered in view of the global financial crisis (GFC).
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No. 2011_5
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- Hristos Doucouliagos
- How Large is Large?
Preliminary and relative guidelines for interpreting partial correlations in
economics
An essential part of empirical economics research is the identification of the size of an
empirical effect. Partial correlations offer a convenient statistically based measure of the
strength of an economic relationship. A key question arises in their interpretation: When is a
partial correlation large? This paper draws upon the observed distribution of 22,000 partial
correlations from a diverse group of economics fields. The median absolute partial
correlation from these fields is 0.173, which under Cohen’s (1988) conventional guidelines
for zero order correlations is a small to moderate effect. The paper develops new guidelines
for key qualitative categories (small, medium and large). According to the new guidelines,
partial correlations that are larger than ± 0.33 can be deemed to be large. This is considerably
different to Cohen’s guideline of ±0.50 for zero order correlations. Researchers and meta-analysts should exercise caution when applying Cohen’s guidelines to describe the
importance of partial correlations in economics.
- JEL-Codes: C01; C50
- Keywords: partial correlations; guidelines; empirical economics; meta-analysis
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No. 2011_4
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- T.D. Stanley and Hristos Doucouliagos
- Meta-Regression Approximations to Reduce Publication Selection Bias
Publication selection bias represents a serious challenge to the integrity of all empirical
sciences. We develop meta-regression approximations that are shown to reduce this bias
and outperform conventional meta-analytic methods. Our approach is derived from
Taylor polynomial approximations to the conditional mean of a truncated distribution.
Monte Carlo simulations demonstrate how a new hybrid estimator provides a practical
solution. These meta-regression methods are applied to several policy-relevant areas of
research including: antidepressant effectiveness, the value of a statistical life and the
employment effect of minimum wages and alter what we think we know.
- Keywords: meta-regression; publication selection bias; systematic reviews, truncation
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No. 2011_3
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- Sarah J. Carrington and Jakob B. Madsen
- HOUSE PRICES, CREDIT AND WILLINGNESS TO LEND
This paper establishes a Tobin’s q model in which house prices fluctuate around their long run equilibrium due to fluctuations in credit availability and income. It is shown that house prices are positively related to credit in the short run, however, negatively related to the availability of credit in the long run. Using survey data on banks’ willingness to lend and data on disintermediation for the US it is shown that the availability of credit is the principal variable driving house prices around their long run equilibrium. Shocks to interest rates and income have only secondary effects on house price fluctuations.
- JEL-Codes: E44; E51
- Keywords: Willingness to lend, Tobin’s q. House prices
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No. 2011_2
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- Hristos Doucouliagos, T.D. Stanley and Margaret Giles
- Are Estimates of the Value of a Statistical Life Exaggerated?
The magnitude of the value of a statistical life (VSL) is critical to the evaluation of many health and safety initiatives. To date, the large and rigorous VSL research literature has not explicitly accommodated publication selectivity bias (i.e., the reduced probability that insignificant or negative VSL values are reported). This study demonstrates that doing so is essential. For studies that employ hedonic wage equations to estimate VSL, correction for selection bias reduces the average value of a statistical life by seventy to eighty percent. Our meta-regression analysis also identifies several sources for the wide heterogeneity found among reported VSL estimates.
- JEL-Codes: J17, J18, J31, C12, I10, D61
- Keywords: Value of statistical life; meta-regression analysis; selectivity bias
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No. 2011_1
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- Prasad S Bhattacharya and Dimitrios D Thomakos
- Improving forecasting performance by window and model averaging
This study presents extensive results on the benefits of rolling window and model averaging. Building on the recent work on rolling window averaging by Pesaran et al (2010, 2009) and on exchange rate forecasting by Molodtsova and Papell (2009), we explore whether rolling window averaging can be considered beneficial on a priori grounds. We investigate whether rolling window averaging can improve the performance of model averaging, especially when ‘simpler’ models are used. The analysis provides strong support for rolling window averaging, outperforming the best window forecasts more than 50% of the time across all rolling windows. Furthermore, rolling window averaging smoothes out the forecast path, improves robustness, and minimizes the pitfalls associated with potential structural breaks.
- JEL-Codes: C22, C53, F31, F47, E31
- Keywords: Exchange rate forecasting, inflation forecasting, output growth forecasting, rolling window, model averaging, short horizon, robustness.
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No. 2010_18
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- Hristos Doucouliagos and John Hall
- Park Visitation, Constraints, and Satisfaction: A Meta-Analysis
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No. 2010_17
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- Mehmet Ulubasoglu, Debdulal Mallick, Mokhtarul Wadud, Phillip Hone and Henry Haszler
- Food Demand Elasticities in Australia
Many aspects of economic policy formulation and strategic industry planning in the food sector require estimates of food demand elasticities. Despite this central place in economic policy, there is a dearth of recent elasticity estimates of Australian food demand. This is a major problem because the use of dated elasticity estimates in policy analysis could lead to misleading results. This study presents disaggregated food demand elasticities for Australia using data drawn from the latest two national Household Expenditure Surveys covering the period 1998/99 and 2003/04. Adopting an Almost Ideal Demand System approach, a food demand system is estimated for 15 food categories, which cover a significant portion of the food items in households’ shopping lists. Own-price, cross-price and expenditure elasticity estimates have been derived for all categories. Elasticities for households with Australian-born heads are also computed. The parameters reported measure longer run responsiveness at the household level and represent the first integrated set of food demand elasticities based on a highly disaggregated food demand system estimated for Australia. The underlying food demand elasticities obtained in this study all accord with economic intuition and theory. Importantly, but not surprisingly, some of these elasticities differ, in a policy relevant sense, from the estimates found in earlier studies.
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No. 2010_16
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- Hristos Doucouliagos and Patrice Laroche
- Unions, Innovation, and Technology Adoption:
New insights from the cross-country evidence
There is currently no consensus regarding the effect of unions on technology. We apply meta-regression
analysis to the extant econometric studies and find that unions depress investment
in new technology. However, this adverse effect has been declining over time and is
moderated by country differences in industrial relations and regulations: The adverse effect
appears to increase with labor market flexibility. Unions also have an adverse effect on
technology adoption. The paper considers both the direct and indirect effects of unions and
shows that their effect on technology is larger than their effect on profitability and physical
capital. The size of the union effect on technology is compared to the effects of human
capital, industry concentration, firm size, growth, profitability, and physical capital.
- JEL-Codes: J51, O31, O33
- Keywords: unions, R&D, innovation, technology adoption, regulation, meta-regression analysis
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No. 2010_15
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- Margaret McKenzie
- Microeconomic reform and productivity in Australia – boom or blip
Increased aggregate productivity growth in the 1990s has been taken to indicate support for the success of microeconomic reform policy in Australia. The Productivity Commission / Australian Bureau of Statistics key estimates of peak to peak market sector multifactor productivity growth since the mid 1960s are examined in this paper. The peak to peak market sector measures are compared with five year averages. Series are reconstructed for the whole economy, and simple regression estimates obtained. The findings lend support to a spike in the measure in the 1990s rather than sustained increase and highlight the sensitivity of the estimates to cyclical and unknown factors.
- JEL-Codes: C22, E61, L50, O47
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No. 2010_13
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- Paresh Kumar Narayan, Seema Narayan and Xinwei Zheng
- Gold and Oil Futures Markets: Are Markets Efficient?
In this paper we examine the long-run relationship between gold and oil spot and futures markets. We draw on the conceptual framework that when oil price rises, it creates inflationary pressures, which instigate investments in gold as a hedge against inflation. We test for the long-run relationship between gold and oil futures prices at different maturity and unravel evidence of cointegration. This implies that: (a) investors use the gold market as a hedge against inflation, and (b) the oil market can be used to predict the gold market prices and vice versa, thus these two markets are jointly inefficient, at least for the sample period considered in this study.
- Keywords: Gold; Oil; Spot and Futures Markets; Inflation; Cointegration
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