Journal of Economic Insight (Print ISSN 2572-7362; Online ISSN 2639-6858) is published bi-annually by the Missouri Valley Economic Association and is printed in Cedar Falls, Iowa. The Journal is a general interest journal that publishes high quality, original research across a broad array of topics. Contributions can be both empirical and theoretical in nature but should offer additional insights into contemporary economic issues. Formerly named The Journal of Economics, MVEA.
This paper presents the first recent systematic analysis of the returns to education in Arkansas using 2024 Current Population Survey data. Across methods (Mincerian earnings function and full-discounting methods, Heckman’s two-step procedure, Binder-Oaxaca, and quantile regression), education remains a profitable investment, with average returns of 7.5 percent per additional year of schooling and higher returns for women (8.6 percent) than for men (7.5 percent). University education yields even greater rewards—8.9 percent overall, 8.1 percent for men, and 10.8 percent for women—with full-discounting estimates placing private returns at 10.3 percent and “social” returns at 5.6 percent. Unlike national trends, Arkansas’s returns have declined since the pandemic, a shift that could dampen incentives for further study. However, the strong and consistent returns, especially for women, suggest that expanding access to and quality of higher education can be a powerful driver of earnings growth, workforce development, and long-term economic prosperity.
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COVID Impact on the College Wage Premium and the Rate of Return to Schooling in the Midwest
This paper examines the impact of the COVID-19 recession on the college wage premium and the rate of return to schooling across twenty industries in twelve Midwestern states. Using data from the American Community Survey (2010–2023), the analysis finds that the pandemic had persistent negative effects on both measures. Compared to pre-COVID levels, the college wage premium and rate of return to schooling declined during the COVID-19 and post-COVID periods, with significant variation across industries. The results also indicate a mix of long-lasting, temporary, lagged, and recovery-driven reversals effects of the pandemic, depending on the industry.
Optimal Board Size and University Governance
We argue that there is an optimal size for University boards of trustees. This is due to the confluence of two opposing factors. First, university boards face decreasing marginal benefits to expanding their size. Second, because of the classic “free-rider problem”, they also have increasing marginal costs. These two traits together imply that there is an optimal number of trustees in a University’s board. We look at a large sample of US universities from 2014-2022 to examine this hypothesis and find a well-defined optimal size for University boards: universities with between 50 and 60 board members (and only one or two internal or “non-independent” members) exhibit the healthiest financial performance.
While the potential for bi-directionality in the crime-unemployment relationship has been noted as a cause for concern by many researchers, no prior studies have empirically established the presence of bi-directionality. To address such concerns, we jointly estimate both directions of the crime-unemployment relationship using dynamic panel methods in a simultaneous equations framework in conjunction with a 26-year, county-level panel from California. We find evidence that not only does higher unemployment lead to higher crime as is well known, but that crime may also affect unemployment with higher levels of offending leading to unemployment reductions.
Sex in Cinema: On the Demand for Female Nudity in Film
Sex sells in cinema—or does it? This paper measures the impact of the usual factors that influence box office success, with a focus on the potential contributions of female nudity. In addition to making contributions to the general literature on movie revenues, we contribute to the sparse literature on nudity and revenues—and find that female nudity is only related to box office success in two genres: horror (negatively) and drama (positively). We also introduce another metric for box office success which has a significant impact on the usual dependent variables in the literature.
How Economics Explains the World: A Short History of Humanity
How Economics Explains the World: A Short History of Humanity. ANDREW LEIGH. New York, NY: Mariner Books, 2024. Pp, 228. $26.00.
The Impact of Medicaid Expansion on Rural to Urban Migration
The Affordable Care Act’s Medicaid expansion provision allows states to expand coverage to able-bodied adults earning up to 138 percent of the Federal Poverty Level. Initially, only twenty-four states chose to expand Medicaid, with another fifteen states expanding coverage since 2014. Hospitals in rural areas have advocated for expansion, arguing that expansion benefits both rural Medicaid recipients and the entire community as decreased health insurance coverage makes it more difficult for providers to profitably serve their communities. This paper finds that under Medicaid expansion, rural residents are less likely to migrate to urban areas. This effect was larger for younger and more educated residents and those with children. The results hold when the sample is limited to those with private health insurance coverage, further suggesting that the impact comes through a healthcare amenity effect. Educated urban residents in expansion states are also more likely to move to rural areas.
Ockham’s Razor and Economic Growth: How Long Can Fast Economic Growth Last?
Economies can grow very fast, but only for so long. How long is that? Guided by Ockham’s Razor, the simplest way to answer the question is to investigate the economic performances of the past. Using GDP per capita (PPP-adjusted, 2017 USD) data from the Gapminder Foundation for 195 countries from 1800 to 2022, this study examines episodes of fast economic growth through absolute and relative growth rates, and performance across different development stages. The results suggest that maintaining high growth rates over long periods is exceedingly rare. Historically, extremely rapid growth (>8% annually) has persisted for at most 50 years, and moderately high growth (4–8% annually) for up to 70 years. Eventually, all countries converge toward lower long-run averages, typically around 1–2% annually. These historical patterns provide a transparent benchmark for understanding the limits of fast growth, especially for today’s emerging economies approaching high-income status.
Does Stake Size Matter? Testing for Differences in Involuntary Responses in High-Risk and Low-Risk Environments
Using a laboratory experiment, we explore physiological responses to high and low-stakes to investigate how subjects react to risk and stake magnitude. Sub- jects are linked to devices measuring electrodermal activity and heart rate. Subjects are endowed with ten dollars and participate in a lottery that increases or decreases their earnings, with equal probability. There are two treatments: low stakes and high stakes. We find that heart rate is largely unaffected but skin conductance increases significantly once subjects are informed of the lottery, with the effect being larger in the high-stakes treatment. Being told the outcome of the lottery reduced skin conductance in both treatments, but not statistically significant. Our findings indicate that while stake size influences physiological arousal, the effects are modest. The results highlight the value of incorporating low-cost biometric measures into economic experiments and contribute to a better understanding of how risk shapes involuntary responses.
Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism.
Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism. GLORY M. LIU. Princeton University Press. 2023.
Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity
Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity. DARON ACEMOGLU AND SIMON JOHNSON. PublicAffairs, 2023. Pp. 560, $32.00.
Microeconomic determinants of domestic tourism expenditure in India: Evidence from two-part model
Using a nationally representative household survey from India, we examine individuals' domestic leisure tourism participation and trip expenditure decisions together. We control a large set of explanatory variables broadly classified as economic, socio-demographic, and trip-related characteristics. We use two-part (hurdle) model to allow explanatory variables to have differential effects on each decision. We find that education is an important determinant for both decisions. Moreover, trip-related characteristics (party size, stay length, accommodation type, travel mode, and destination) are also important determinants of trip expenditure in addition to economic and socio-demographic characteristics. The unconditional quantile regression results show the heterogeneity in the impacts of many variables across the trip expenditure distribution. The differences in trip expenditure across age groups are primarily in the upper half of the trip expenditure distribution. A trip arranged under a tour package leads to an increase in trip expenditure at the higher quantiles of the trip expenditure distribution.
Impacts of Cross-Country Infrastructure on Bilateral Trade: Evidence from New Silk Road Railways
New Silk Road Railways have provided cross-continental rail freight services between China and Eurasian countries since 2011. We examine the impact of being connected to Silk Road railways on 20 destination countries’ bilateral trade with China before the 2020 Pandemic. To address the issue of endogenous placement of railways, we utilize the generalized synthetic control method. We find that railway connections do not have significant impacts on either the gross import or gross export of destination countries. The results are robust to alternative methods, across product categories, and different grouping of destination countries based on whether they share a boundary with China.
Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy
Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy. THERESA GHILARDUCCI. Chicago, IL: University of Chicago Press, 2024. Pp. 260. $25.00.
Shock Values: Prices and Inflation in American Democracy
Shock Values: Prices and Inflation in American Democracy. CAROLA BINDER. Chicago, IL: University of Chicago Press, 2024. Pp. 1, 346. $35.00.
Divided We Fall: Why Consensus Matters. ALICE M. RIVLIN, SHERI RIVLIN, ALLEN RIVLIN. Washing, D.C.: Brookings Institution Press, 2022. Pp. xx, 412.
Does Firm Performance Impact Perquisite Usage? Evidence From Flights of Corporate Jets
This paper studies the connection between firm performance and the utilization of perquisites, focusing on the impact of equity returns and the fluctuations of financial ratios on corporate jet flight activity. Our regression analysis shows that prior equity performance significantly influences flight activity to external locations of large firms in the sample. The findings suggest that the nonpecuniary benefits of corporate jet travel are a contributing factor to agency costs, particularly in instances related to firm size and the destination of the trips. These insights contribute to a deeper understanding of the complex factors influencing corporate decision-making and governance practices.
Heterogeneous Effects of Economic Hardships on Recreational Fishing Trips
Recreational fishing is a leisure, yet sustenance providing, activity which suggests a complex relationship between the demand for the activity and economic hardship. We use random effects panel regression models and NOAA Marine Recreational Information Program data to evaluate the relationship between the demand for recreational fishing trips and economic hardships. Our results show heterogeneous effects of economic hardships on the demand for fishing trips across fishing modes and by economic indicator. In particular, unemployment rate has both current and prolonged effects on the demand for charter boat fishing trips, labor-force participation rate has current and lagged effects across private-boat and shore fishing trips, and gas prices and contractionary periods have a positive relationship with the demand for private-boat and shore fishing trips. These results highlight the heterogeneous outcomes different types of fishing will face during times of economic hardship. Understanding these impacts is important for planning purposes for business owners and natural resource managers, alike.
Revisiting U.S. House Price Convergence: Evidence from State and Metropolitan Area Panels
This study re-examines the long-run behavior of house prices across all U.S. states and the 100 largest metropolitan areas, employing a regression-based convergence test and clustering procedure proposed by Phillips and Sul (2007, 2009). The analysis spans the period from 1991Q1 to 2023Q2. The results reveal that U.S. house prices do not converge to a common steady state, suggesting heterogeneous housing price dynamics across states and metropolitan areas. Both states and metropolitan areas form multiple convergence clubs, which do not correspond to the conventional U.S. Census regions. This finding implies that geographically neighboring states and cities do not necessarily exhibit shared house price dynamics.
This paper explores the place that managerial economics courses hold within MBA programs and the content of the most popular textbooks on the market. Using newly collected data from business school websites, I show that about half of MBA programs require managerial economics. I identify the books used by these courses and ascertain to what extent there is consensus among the authors in the field about what topics make up a managerial economics course. I compare the books and offer guidance on which books would be appropriate for which kinds of courses.
An Examination of the Money Line Market for National Football League Games
We examine market efficiency of the opening and closing money lines (wager on the winner of a game) for National Football League (NFL) games from 2007 through 2016. A simple analysis shows that inefficiencies exist in the opening and closing NFL money line market. Inefficiencies in the closing money lines suggests that the money line market fails to completely adjust and eliminate some of these inefficiencies. Further, the market adjustments suggest that bookmakers may take advantage of bettors’ biases to earn profits in excess of their commission. The results here support the existence of a reverse favorite-longshot bias, where bettors tend to overbet the favorite and underbet the underdog. These inefficiencies, however, are unpredictable and vary by season. Finally, utilizing game-specific factors, it appears that the presence of precipitation creates opportunities to earn profits when betting on the favorite.
The Effect of Ethnic and Religious Diversity on Charitable Giving by Tax Itemizers
The starting point for the present paper is that charitable giving might well be related to ethnic and religious diversity or heterogeneity in a metro area. Such heterogeneity was measured in two ways. The first method was a Herfindahl-Hirschman index, the probability that two persons are from different groups. The second method was to use a polarization index developed by Montalvo and Reynal-Querol (2005). The data was for charitable giving for metro areas in the United States for 2012; only the charitable giving for income tax itemizers was available. There was no evidence of a relationship between diversity and charitable giving for the complete data set. However, when four subsamples based on income groups are considered, diversity matters. Briefly, the coefficients for religious diversity were more often significant than for ethnic diversity; the coefficients for polarization more often significant than for the Herfindahl-Hirschman index.
The Impact of Fiscal Policy on Housing in the U.S.
Theory and empirical evidence have provided contradictory predictions and findings on the impact of government spending on housing investment and home values. Previous empirical studies have employed vector-autoregressions. Given the deficiencies of VARs, we utilize local linear projections. In addition, we directly compare the impact of government spending on both housing investment (residential investment, permits, sales, housing starts) and non-residential investment. We find fiscal expansion leads to unambiguously greater crowding out of housing activity than for non-housing investment. Moreover, housing is more sensitive to monetary policy than non-residential investment. Thus, housing appears more sensitive to policy shocks than non-housing capital spending. In contrast to housing investment, home prices, while reacting negatively to government spending shocks, don’t exhibit the magnitude of the reaction of housing, or even non-housing investment. This likely reflects the sticky nature of house prices, with falling purchases leading to greater “time on market” more than falling prices.
This paper examines both the supply of and demand for a good produced by firms in a nonprofit setting. The objective is to see if the standard positive slope for supply and negative slope for demand need hold. In a set-ting where quality becomes a choice variable, it is possible to have a negatively sloped supply. Similarly for demand, when quality is part of the choice, it is possible that demand is positively sloped. I do not expect both conditions to hold in the same market. (I29, L21, L30)
Understanding the Gender Wage Gap Among City Managers
We examine the gender wage gap among city managers, a high-skilled, male dominated occupation, using original data from employment contracts in Florida. The Oaxaca-Blinder wage decomposition results indicate a gen-der wage differential among city managers of approximately 0.06-0.11 log points, or 6.3-11.7%. Approximately 80% of the wage differential is explained by differences in observed characteristics, leaving 20% of the gap unexplained. This translates to an unexplained wage premium of 1.5 to 3.8% for men. The wage differential is highest among first time managers and is virtually eliminated for those with prior experience as a city manager. The results are encouraging but also highlight the potential role of pay transparency pol-icies and the importance of increasing women’s representa-tion in the field. (J16, J31, J71, H83)
Geography of Unemployment in the Midwest During the COVID-19 Pandemic: A Spatial Analysis
Unemployment surged across the U.S. following the onset of the COVID-19 pandemic. We analyze the spatial pattern of county-level unemployment in the Midwest during the second quarter (Q2) of 2020 when it peaked, followed by the fourth quarter (Q4) of 2020 when local economies began to recover. We find clustering, with most counties in the Eastern section of the Midwest showing unemployment in the 75th quantile of the distribution (hardest-hit counties). In contrast, counties in the Western section mostly showed unemployment in the 25th quantile (least-hit counties). Our spatial lag regression analysis of the unemployment change between Q2 and pre-COVID (Q1) finds a higher increase in unemployment in counties with a high COVID-19 Community Vulnerability Index (CCVI). In addition, counties that relied on Leisure & Hospitality, and Manufacturing, and had a mask mandate, showed a larger increase in unemployment in Q2 and persisted through Q4 albeit to a lesser degree. (C21, E24, R12)
The Accounting Rate of Return and Economic Growth
The fundamental theorem of accounting (FTA) (Fellingham and Lin (2020) and Fellingham, Lin and Schroeder (2022)) states that, under some realistic assumptions, the accounting rate of return on assets is equal to information. Ross and Ziebart (2023) show several empirical implications of the fundamental theorem of accounting regarding the meaningfulness of the accounting rate of return to market participants. The implications collectively provide evidence that accounting rates of return are the more meaningful information source to market participants than stock market rates of return. These findings motivate this study which uses quarterly data and finds that current aggregate U.S. accounting rates of return can explain current and predict future GDP growth rates of the U.S. economy. (E02, D44, G10, G17, M41)
Impact of Non-Normality of Returns on the Informational Efficiency of Stock Prices
Equity returns are typically assumed to be drawn from a normal distribution. However, empirical research suggests that this assumption does not generally hold true. Such deviations from normality allow investors to either prefer or avoid higher moments, which can lead to potential inefficiency in stock prices. This study extends the literature by testing whether deviations from normality inhibit the efficiency of stock prices. We find that both positive and negative skewness impedes price efficiency. We also find that excess kurtosis is associated with informationally inefficient prices. (G11, G12, G14)
The Use of Student Fixed Effects in Explaining Grade Outcomes: Estimating Revealed Grit
We develop a method of estimating an empirical measure of student grit, which we call ’revealed grit,’ that does not depend on self-reported data as with other measures in the literature. Fixed effects regression methods are used to model student letter grade in a college course as a function of the student’s demonstrated cognitive performance, sociodemographic variables, academic rank, relative high school performance, subject matter of the college course, instructor, advisor, and an individual student effect, which we interpret as an empirical measure of grit. We also demonstrate that revealed grit can be predicted using secondary education data. (A21, A22, I21, I23)
A Monetary and Fiscal History of the United States: 1961-2021.
A Monetary and Fiscal History of the United States: 1961-2021. ALAN S. BLINDER. Princeton: NJ: Princeton University Press, 2022. Pp. vi, 432. $39.95.