The Journal of Economics

Volume XXV, No. 2, 1999


AN EMPIRICAL ANALYSIS OF INCOME INEQUALITY, EDUCATION EXPENDITURES, AND GROWTH

Kevin Sylwester 

Why does income inequality lower economic growth as reported in Clarke (1995)?  This paper considers public education expenditures as a potential link from income inequality to economic growth.  I find that countries with a higher degree of income inequality devote more resources to public education.  Although the effect of past education expenditures upon growth is positive, the contemporaneous effect upon growth is negative. With a large cost of supporting a public education system; these findings may explain the lack of a large, positive effect from the growth of human capital upon economic growth as reported in the empirical literature.  (O4, O2)



UNCOVERED INTEREST PARITY AND LONG-RUN MONEY DEMAND IN CANADA AND THE U.S.

Margie A. Tieslau  and  Robert H. Rasche

This paper presents substantial evidence in support of the existence of long-run money demand functions and uncovered interest parity in Canada and the U.S. using quarterly data from 1950 to 1996.  We also uncover evidence of cross-country influences running not only from the U.S. to Canada, but, also, from Canada to the U.S.  Our approach offers advantages over other attempts to assess these phenomena by analyzing them as part of a system and by allowing for differing short- and long-run dynamics in the system. (E41, C32)



THE INFLATION-INTEREST RATE NEXUS: FISHER REVISITED

Dipak Ghosh, Swarna D. Dutt and Leland V. Gustafson

In this study we re-examine the validity of the Fisher hypothesis under both the fixed and floating exchange rate periods for Canada and the United States.  First the non-stationarity of inflation and interest rate series is examined, followed by an examination of the structure of cointegration between them.  This is conducted using the null of cointegration approach which is more powerful than classical tests and can distinguish between unit and near unit root processes.  The Fisher hypothesis is accepted for Canada, but the evidence in favor of the Fisher hypothesis for the United States is mixed. (F41, F42)



COST EFFICIENCY AND EMPLOYEE LAYOFFS IN THE BANKING INDUSTRY

Zahid Iqbal, George Yorke, and Aigbe Akhigbe

This paper investigates cost efficiency of banks that laid off employees. Using a stochastic frontier method, we find that these banks are more cost efficient before the layoffs when compared to a group of nonlayoff banks. Their cost efficiency, however, declines during the layoff period and does not appear to improve within two years following the layoffs. Our results are not consistent with the general notion that bank layoffs improve cost efficiency. (G21, G34, C13)



AN EMPIRICAL INVESTIGATION OF THE JOINT EFFICIENCY OF THE U.S. STOCK AND FOREIGN EXCHANGE MARKETS

Tammy A. Rapp,  Michael E. Parker and Michael D. Phillips

The stock market and foreign exchange rate markets are interrelated due to the similar fundamentals which determine the movement in the two respective markets.  Applying the efficient market hypothesis, these two markets should be jointly efficient.  If the markets are jointly efficient, then no long term comovement should exist between a stock market index and a foreign exchange rate index.  The existence of a long term relation is tested by use of cointegration tests and common serial correlation feature tests.  If no cointegration exists and if no common serial correlation feature exists, then we would not be rejecting joint efficiency of the two markets.  Using the S&P 500 stock index, the Wilshire 5000 index, and the NASDAQ index to proxy stock market indexes and using a trade weighted foreign exchange rate index for the United States, the empirical results of the cointegration and common feature tests support the joint efficiency of the two markets. (G14, G15, F3)



DETERMINANTS OF FACULTY EARLY RETIREMENT DECISIONS

Bahman Bahrami

This paper uses data from a random national sample of faculty, ages 56 and older and examines factors influencing faculty members' early retirement decisions.  A variety of factors, such as age, uncapping of the retirement age, other sources of income, early retirement incentives, social security income, preference for leisure, teaching effectiveness, presence of spouse, and types of degree offered by institutions have a significant influence on faculty members' early decisions to retire.  An understanding of these factors and their effects on faculty early retirement decisions can help administrators and other officials in their human resource planning process. (J26,J22)



MEASURING THE COSTS OF HIGH SCHOOL DROPOUTS ON THE REGION OF SOUTHERN ILLINOIS

Brian W. Sloboda

This paper presents an empirical study of  the costs of high school dropouts on the region of southern Illinois.  The region has experienced the problem of lagging economic development in comparison with its northern Illinois counterparts. A multiple regression model and a nonparametric regression model are used to examine the impact of high-school dropouts on the region.    Given the results of these methods, the results will be compared to determine which approach provides the best empirical approach to this problem.  (C14, J0)