Student Research Conference: Academic Year 1995-1996
Gwen Alexander did her honors research with Dr. Pamela Lowry on Exchange Rate Variability and its Effect on Trade: A Case Study of the CFA Franc Zone.
ABSTRACT: The volatility of a nation's exchange rate relative to its trading partners creates a risk for merchants. If we assume risk-averse merchants, volatility should decrease the volume of international trade. This paper addresses the effect of exchange rate variability over a period of 20 years on the imports of the CFA Franc Zone, a monetary union in West and Central Africa. Using the percent change in the Real Exchange Rate Index as a measure of variability, a generalized difference equation shows that exchange rate variability does negatively affect the imports of the Franc Zone.
Susan E. Brown did her honors research with Dr. Robert Leekley on Automobile Leasing Versus Installment Loan Credit: A Comparative Analysis.
ABSTRACT: The percentage of new cars and trucks that are leased in the United States has increased from 10% in 1986 to 30% in 1995. Reinforced by increased advertising, media attention and popular magazine articles, this tremendous surge in leasing is expected to continue. In fact, automobile market analysts predict that leasing will account for 40% of all car sales by 1998. Using an economic model of consumer choice focusing on preferences and relative prices, this paper aims to determine the factors which may lead consumers to lease a vehicle as opposed to purchasing one using traditional installment loan credit. Preference factors including liquidity, risk and automobile use patterns are addressed. One reason consumers choose leasing over traditional installment loan credit is affordability; leasing usually requires a lower down payment and lower monthly payments. A financial analysis combines the components of a set of lease contract conditions and installment loan conditions to calculate a lease "hurdle rate" which allows for the comparison of relative prices for a given vehicle. The lease "hurdle rate" considers the initial cash savings and periodic cash savings realized in leasing as well as the residual value of the vehicle and the term of the contract. From the "hurdle rate" and investment market conditions, consumers can determine which financing option is more advantageous--leasing or purchasing on installment loan credit. In addition, factors such as tax laws, inflation and disclosure laws are evaluated with respect to their contributions to the long-term increase in leasing.
C. David Rudd did his honors research with Dr. Pamela Lowry on An Empirical Analysis of Dutch Disease: Developing and Developed Countries.
ABSTRACT: Dutch Disease occurs when a country discovers a substantial natural resource deposit and begins a large-scale exportation of it. As a result, the country's currency appreciates, thereby reducing the competitiveness of the country's traditional export sector. Therefore, this tradable goods sector contracts, leading to structural changes and unemployment in the economy. Neary and Van Wijnbergen (1986) develop the theoretical underpinnings by identifying the two components of Dutch Disease--the Spending Effect and the Resource-Movement Effect. Using these theoretical components, the paper attempts to account for the decline in the Netherlands' manufacturing sector and Nigeria's and Indonesia's agriculture sectors. This paper uses ordinary least squares (OLS) analysis and time-series data from 1960-1990. It is shown that Dutch Disease contributed to the contraction of these countries' traditional export industries. However, the results also indicate the importance of several non-Dutch Disease factors. Finally, the paper discusses several policy implications.
Angela Smith did her honors research with Dr. Michael Seeborg on Predicting the Probability of Divorce Among Young Married Women.
ABSTRACT: Over recent decades, we have witnessed drastic changes in American family structure. This has been due in large part to the rapid rise in divorce rates. Previous studies, such as those performed by Gary Becker (1991) and Manser and Brown (1980) have applied economic models to divorce and other family structure decisions. Building on the utility maximization analysis of Manser and Brown, as adapted by John Ermisch (1993), this study uses a logit regression model to predict divorce decisions for an all female sample of respondents, ages 28 to 36. Data are extracted from the National Longitudinal Survey of Youth for the purposes of this study. Economic theory predicts that the probability of divorce is directly related to one's opportunity cost of being married. Using a woman's potential wage rate as a proxy for the economic portion of this opportunity cost, the author of the present study hypothesizes that the probability of a woman seeking divorce will increase with increases in her potential wage rate, holding actual wages and other income constant.
William J. Takahashi did his honors research with Dr. Margaret Chapman on Immigrant Wage Differentials in the United States Labor Market.
ABSTRACT: Amidst the contemporary political and social debate over immigration levels in the United States, many have begun to inquire about the determinants of "successful" immigration. Current economic theory suggests the importance of human capital in determining the success of immigrant assimilation into the United States labor market. Based on the work of George Borjas and Barry Chiswick, this paper develops a model which not only analyzes the effects of traditional human capital investments such as education and work experience on immigrant wages, but also attempts to address cultural and ethnic differences among immigrants. The differences in these cultural "stocks" of human capital are hypothesized to be embodied in the immigrant's language, race, political heritage and economic socialization. Using a large sample of immigrants from the National Longitudinal Survey of Youth and applying OLS regression methods to determine the relationship between human capital and immigrant wages, this paper attempts to answer the question of which personal investments and characteristics account for immigrant wage differentials. The results conclusively report existing economic theory regarding traditional human capital investments as significant factors in determining successful immigrant assimilation.