Risk sharing within the United States: What do financial markets and fiscal federalism accomplish?

Article Abstract:

We measure income uncertainty at the level of U.S. states, and the extent to which it has been reduced through risksharing, using a method recently developed by Athanasoulis and van Wincoop (2000). Risk is measured as the standard deviation of state-specific income growth uncertainty, measured by using the error term of a regression of income growth on variables in the information set. Risk sharing is measured by the extent to which this standard deviation has been reduced through financial markets and federal fiscal policy. The advantage of this measure over the existing risk sharing literature is that the interpretation does not depend on many auxiliary assumptions. Our findings on the extent of risk sharing are insensitive to the only assumption we need to make, the variables that are in the information set. We find that the standard deviation of state-specific income growth uncertainty is reduced by less than half through financial markets and federal fiscal policy. We show that the extent of risk sharing would be much higher if agents held better diversified portfolios across the states.

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The effects of worker heterogeneity on duration dependence: Low-back claims in workers compensation

Article Abstract:

We estimate models of workers compensation claim duration for a sample of Canadian workers with serious low-back injuries. The models extend recent duration research by allowing worker characteristics to affect duration dependence through the nonlocation parameters of the duration distribution. We compare results for modified Weibull models and piecewise-constant hazard rate models of duration dependence. The results show that workers' responses to elapsed claim duration vary significantly with their characteristics and with economic incentives to return to work. Further, allowing for heterogeneity in duration dependence effects can dramatically change the coefficient estimates of the variables that determine the location parameter of the duration distribution.

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Econometric issues in estimating consumer preferences from stated preference data: A case study of the value of automobile travel time

Article Abstract:

This paper explores a number of methodological issues related to the econometric analysis of stated preference data in the context of estimating the value of automobile travel time. Estimates of parameters and the willingness to pay (WTP) to save time are obtained using conventional ordered probit and rank-ordered logit models and an innovation called mixed logit. We find that the average WTP is low and does not exhibit much variation among motorists. Although our findings using data on respondents' rankings of alternatives are robust, we find that caution should be used in estimating stated preferences based on respondents' ratings.

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