Visible Hand

Kevin Lewis

June 16, 2010

Border Bias: The Belief that State Borders can Protect Against Disasters

Arul Mishra & Himanshu Mishra
Psychological Science, forthcoming

In this research we document a bias in which people underestimate the severity of a disaster when it spreads from a different state but not when it originates in the same state, despite both the affected locations being equidistant from them. We term this the border bias. Using research on categorization, we propose that people consider locations within a state to be part of the same superordinate category but out-of-state locations to be part of a different superordinate category. The border bias occurs because people apply state-based categorization to events that are not governed by such human-made boundaries. Such a belief results in the state border being considered a physical barrier that can keep disasters at bay. We demonstrate the bias for different types of disaster and test the underlying process across three studies.


The Curse of Natural Resources: An Empirical Investigation of U.S. Counties

Alex James & David Aadland
Resource and Energy Economics, forthcoming

Research consistently shows that natural resource dependence tends to be associated with lower economic growth. However, the studies typically focus on differences across nations or states. We fill a gap in the literature by testing the so-called resource curse at a more disaggregated county level. Our results show clear evidence that resource-dependent counties exhibit more anemic economic growth, even after controlling for state-specific effects, socio-demographic differences, initial income, and spatial correlation. A case study analysis of Maine and Wyoming, and the counties within, highlight the growth effects of specializing in natural resource extraction.


The Impact of Climate Change Information: New Evidence from the Stock Market

Timothy Beatty & Jay Shimshack
Tulane University Working Paper, June 2009

On June 19, 2007, a non-profit organization released ratings of companies' plans for measuring, reporting, and reducing their greenhouse gas emissions. We explore the capital market impacts of this information event. In contrast to much of the related literature, our study examines climate change information and a well-defined and plausibly exogenous event. We find that climate information had an economically important and statistically significant impact on capital market returns. Poorly rated firms suffered market penalties. In contrast, we find no benefit for firms receiving good ratings.


Wars, Presidents, and Popularity: The Political Cost(s) of War Re-Examined

Benny Geys
Public Opinion Quarterly, Summer 2010, Pages 357-374

Extensive research demonstrates that war casualties depress incumbent popularity. The present study argues that one should also account for financial costs of wars, since a) such costs are substantial; b) such costs are publicly observed and understood; and c) fiscal policy affects incumbents' approval ratings. Empirical evidence using U.S. data for the period between 1948 and 2008 supports this theoretical claim: pecuniary costs of warfare either directly affect presidential popularity (e.g., in the Korean War) or their inclusion affects the predicted political cost of war casualties (e.g., in the Korean and Iraq/Afghanistan wars). Interestingly, the adverse effect of war spending is strongest under favorable economic conditions (i.e., low unemployment).


Military Spending and GDP Growth: Is there a General Causal Relationship?

Betul Dicle & Mehmet Dicle
Journal of Comparative Policy Analysis, June 2010, Pages 311-345

The existence of a causal relationship between GDP growth and military spending has been a long-lasting debate. Earlier studies report mixed findings employing cross-sectional, pooled or fixed effects panel data. Recent studies employing causality tests also find mixed results. In this study, it is argued that structural changes in data (i.e. significant economic or military events) play an important role and should not be ignored. Also, treatment of stationarity around mean and around time trends needs special attention. Structural changes, if ignored, have the potential to cause bias in long-run tests through VECM. Mistreatment of trend stationarity may result in spurious results. With a sample of 65 countries, for the 1975-2004 period, a Granger-type causal relationship between military spending and GDP growth is analyzed with special emphasis on structural change and stationarity around time trends. While trend stationarity is a common trait of the variables, there are structural changes in the variables' time trends. Considering the bias towards rejecting stationarity in the presence of structural changes, the Zivot-Andrews unit root test is employed. A causal relationship is reported between military spending and GDP growth for 54 (of the 65) countries. For the overall sample, panel data Granger causality estimations provide evidence for a bi-directional positive causal relationship.


Criticism and outstanding leadership: An evaluation of leader reactions and critical outcomes

Dawn Eubanks, Alison Antes, Tamara Friedrich, Jared Caughron, Lauren Blackwell, Katrina Bedell-Avers & Michael Mumford
Leadership Quarterly, June 2010, Pages 365-388

Outstanding political leaders are frequently called upon to make high-stakes decisions. Because of the controversial and highly visible nature of these issues, they often face intense criticism. Leaders' responses to criticisms not only affect follower reactions, but also the successful resolution of the contested issue. The present study examines leader and follower reactions to different types of criticisms. A historiometric approach was used to examine biographies containing criticisms of 120 world leaders and to explore leader behaviors in response to criticisms. Specifically, leader response strategies and their success in terms of follower reactions and resolution of the criticism were examined. The results indicated that collaborative or confrontational leader response strategies proved most effective in terms of the leader's ability to continue forward with a particular agenda item and to gather support of those around him or her. Conversely, avoidant, diverting attention, and persuasive response strategies proved less effective.


Attitudes towards CO2 taxation - is there an Al Gore effect?

Asa Lofgren & Katarina Nordblom
Applied Economics Letters, June 2010, Pages 845-848

Fuel taxes are one of the most powerful climate policies. Yet, these taxes have not been given very much attention in the global debate regarding climate policy, compared with other instruments, such as tradable emission permits. This article shows, however, that the immense media coverage during fall 2006 significantly affected people's attitudes towards the CO2 tax on gasoline. We conducted a survey where we asked for people's opinions about the CO2 tax in September and in December 2006, i.e. before and after the release of Al Gore's 'An Inconvenient Truth' and the Stern Review. We found that the attitude towards the level of the CO2 tax was significantly changed after these events; people became much more positive towards the tax. This signals that using the CO2 tax as an important climate policy becomes more politically feasible and legitimate when more attention is drawn to climate change problems.


Mercury Advisories and Household Health Trade-offs

Jay Shimshack
Journal of Health Economics, forthcoming

The conventional economic wisdom is that improving consumer information will enhance welfare. Yet, some scientists speculate that the Food and Drug Administration's prominent mercury in fish advisory may have harmed public health. Lower mercury intakes reduce neurological toxicity risks. However, since seafood is the predominant dietary source of healthful omega-3 fatty acids, reduced fish consumption may have significant offsetting health impacts. We explore this risk trade-off using a rich panel of household-level seafood consumption data. To control for confounding factors, we use a non-parametric changes-in-changes approach. We find strong evidence that while the advisory reduced mercury loadings, it did so at the expense of substantial reductions in healthful omega-3 s. We find this response pattern even for consumers with low fish consumption. Using advisory response patterns as inputs into a prominent risk assessment model, the central estimate is that net benefits from the advisory were negative.


Oil, Automobiles, and the U.S. Economy: How Much have Things Really Changed?

Valerie Ramey & Daniel Vine
NBER Working Paper, June 2010

This paper studies the impact of oil shocks on the U.S. economy-and on the motor vehicle industry in particular-and re-examines whether the relationship has changed over time. We find remarkable stability in the response of aggregate real variables to oil shocks once we account for the extra costs imposed on the economy in the 1970s by price controls and a complex system of entitlements that led to some rationing and shortages. To investigate further why the response of real variables to oil shocks has not declined over time, we focus on the motor vehicle industry, which is considered the most important channel through which oil shocks affect the economy. We find that, contrary to common perceptions, the share of motor vehicles in total U.S. goods production has shown little decline over time. Moreover, within the motor vehicle industry, the effects of oil shocks on the mix of vehicle sold and on capacity utilization appear to have been proportional in recent decades to the effects observed in the 1970s.


Examining Intergovernmental and Interorganizational Response to Catastrophic Disasters: Toward a Network-Centered Approach

Naim Kapucu, Tolga Arslan & Matthew Lloyd Collins
Administration & Society, April 2010, Pages 222-247

This research focused on the interorganizational and intergovernmental response to Hurricanes Katrina and Rita in 2005. The study used the concepts from the network and partnerships literature and used current techniques of network analysis. The study found that the use of intergovernmental and interorganizational response to coordinate complex operations in multiorganizational environments of catastrophic disasters was not successful in responding to both Hurricane Katrina and Rita in 2005. The research suggests that more investment should be made in community capacity building at the local and state levels for successful and effective partnerships in responding to catastrophic disasters. In this research, the local and state levels are shown to be faster in response and future research should focus on local, state, and federal resources coordination in response to catastrophic disasters.


How Policy Conditions the Impact of Presidential Speeches on Legislative Success

Matthew Eshbaugh-Soha
Social Science Quarterly, June 2010, Pages 415-435

Objective: Although the impact of the president's rhetoric on public opinion remains unfound, it appears to increase the president's success in Congress. This article argues that instead of moving public opinion, presidential speeches act as informational cues for legislators and holds that the impact of the president's public speeches in Congress is conditional on the salience and complexity of the policy voted on by Congress.

Method: I use probit methodology to examine the effect of presidential rhetoric on the likelihood of presidential success on House roll-call votes from 1989-2000. An interactive model assesses the conditioning impact a policy's salience and complexity have on the relationship between presidential rhetoric and legislative success.

Results: Presidential rhetoric increases the president's legislative success on votes pertaining to policies that are both salient and complex. Conclusion: Presidential rhetoric matters to the president's relationship with Congress, despite the limited impact it appears to have on public opinion.


Reframing the Casualties Hypothesis: (Mis)Perceptions of Troop Loss and Public Opinion about War

Teresa Myers & Andrew Hayes
International Journal of Public Opinion Research, Summer 2010, Pages 256-275

The casualties hypothesis predicts that as the casualties suffered by a nation mount during a military intervention, public opinion will turn against the intervention and its people will demand troop withdrawal. We use the U.S. war in Iraq as a context for testing the perceived casualties hypothesis, which predicts that public beliefs about the actual number of casualties account for public opinion about a military intervention independent of the number of casualties actually suffered. Using data from several thousand respondents to telephone surveys conducted by the Pew Research Center for the People and the Press in 2005 and 2006 as well as data on the number of U.S. casualties suffered as of the interview date, we find that relative to correct estimators and underestimators, respondents who believed the U.S. had suffered more casualties than had really occurred were most supportive of withdrawing troops from the conflict. Attention to the news predicted accuracy in one's beliefs about the number of casualties, but not opinion about the intervention (when accounting for perceptions of the number of casualties suffered), suggesting that accuracy of one's knowledge mediates the effect of attention to the news on public opinion. Ancillary analyses answer the question as to who is paying attention to the news about the war and who is more likely to have accurate knowledge of casualties.


The impact of positivity and transparency on trust in leaders and their perceived effectiveness

Steven Norman, Bruce Avolio & Fred Luthans
Leadership Quarterly, June 2010, Pages 350-364

A critical challenge facing today's organizational leaders is gaining their followers' trust and having them view leaders as effective in addressing turmoil and change. Using a downsizing scenario as the context, this field experiment examined how a leader's positivity and transparency impacted followers' perceived trust, defined in terms of willingness to be vulnerable, and effectiveness of their leader. To test the hypotheses, 304 participants were randomly assigned to one of the four conditions of high (low) leader positivity × high (low) leader transparency. Results of our mixed methods study indicated both the leader's level of positivity and transparency impacted followers' perceived trust and evaluations of leader effectiveness. Besides limitations and suggestions for future research, we conclude with the practical implications that positive, transparent leaders may have on building trust and perceived effectiveness among their followers.

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