The Handbook for Economics Lecturers

Students need to understand that they are expected to produce a quality economic analysis that is effectively communicated. For example, describing previous student projects and emphasising students’ existing skills can help them to believe that they have the potential to succeed. Providing examples such as the abstracts of projects completed in previous semesters can signal both appropriate topics and types of analysis that are acceptable. Figure 6 includes six examples of abstracts for undergraduate research projects completed as part of a senior capstone experience course. (More details about this course are provided in the first case study.) Students can be required to review the abstracts and identify why the project was acceptable for a senior thesis. A class discussion of the key components mentioned in the example abstracts sets expectations.

Figure 6: Communicating High Expectations: Models of Past Abstracts

Perceived Corruption and Foreign Investment: Are Investors Vigilant?

Corruption has emerged as an important global issue and is viewed as detrimental to any economy. Research has demonstrated that perceived corruption is negatively correlated to foreign direct investment flows. However, no research has attempted to demonstrate causality. This paper examines how yearly changes in perceived corruption affect yearly changes in foreign direct investment. Postulating that a negative relationship exists for data based on yearly levels, and for data based on yearly changes, estimates are made using up to 277 countries over four years. The results support previous findings of a negative static perceived corruption/foreign direct investment relationship. Although results indicate a negative relationship for yearly changes as well, they are not statistically significant. Deficiencies in the perceived corruption data impede conclusive findings.

Should They be Mine or Should They be Ours?

The oyster grounds of the Chesapeake Bay constitute an incredibly important resource both economically and ecologically. Oysters provide a natural filtration system for the bay's water column as well as support local watermen and the bay's communities. However, rapid depletion of the oyster populations occurred partly due to a lack of any form of restrictions on harvesting. Property rights were necessarily assigned to the grounds so that incentives may be in place to preserve the precious oysters. Both public and private oyster grounds exist throughout the bay, sometimes even side-by-side. The current study uses oyster harvest data from both Maryland and Virginia to examine which property rights structure seems to benefit the long-term production, and subsequent higher harvests, of the Chesapeake's oysters. It is hypothesised that public grounds may be a better system for production based on harvest method restrictions, impacts of disease on private grounds, the social benefits to the historic waterman culture, as well as an observed increase in the use of hand tongs in Virginia. Analyses revealed that public grounds might in fact be a more productive system for the long-run cultivation and harvest of oysters.

The Ryan White CARE Act: Understanding the Allocation of Title II Funds

The Ryan White Comprehensive AIDS Resources Emergency (CARE) Act is due for reauthorisation and amendment in September 2005. In deciding which amendments should be passed, the most hotly debated issue is on how to allocate CARE Act funds. Some argue that current funds favour only the extreme cases, i.e. 'the sick and dying'; others argue that the funds favour political agendas. This paper studies how funds are currently allocated to help shed light on whether there is any favouring, or if funds truly do assist people living with AIDS (PLWA) as they were meant to. In order to test this, this study hypothesises that there is a relationship between the allocation of funds and the levels of sickness of the AIDS population. Through regression analysis of the allocation of Title II funds and proxies for the level of sickness, this paper determines that there is indeed a relationship between the two. This implies that funding decisions do in fact assist PLWA at varying levels of illness and probably are not as much influenced by favouritism as politicians claim. The findings of this paper can be used as a basis from which to understand the validity of the points of debate over the CARE Act's amendment.

And Then There Were Four

The following paper defines the competitive state of the accounting industry. Mergers throughout the past 20 years, along with the contraction of Arthur Andersen, have raised many questions about the level of competition between the Big Four accounting firms. The Sarbanes Oxley Act of 2002 mandated that a study be conducted by the General Accounting Office (GAO) in order to gauge the competitive nature of the Big Four. The GAO study was unable to link directly consolidation to increased fees. The following analysis defines the structure, behaviour and performance of the accounting industry and proves that the market is an oligopoly. This results from the presence of barriers to entry for smaller firms, no direct price competition, increased non-price competition and obvious inefficiencies due to rises in litigation among the Big Four. Each of these leads to the assumption that only four large firms will result in increased prices in the future. The study enables an analysis of policy recommendations that discuss the options faced by the SEC. The most logical decision revolves around a long-term plan involving the consolidation of smaller firms, combined with the government subsidising their global expansion.

Is the Market for Baseball Players Really 'Insane?' An Analysis of Pay and Performance in Major League Baseball

Soon after final-offer arbitration and free-agency contracts were introduced into Major League Baseball in the late 1980s, researchers found that salaries generally aligned with marginal revenue products. Now, with a market seemingly willing to pay ever-increasing salaries for players, this paper asks whether or not teams continue to pay salaries equivalent to marginal revenue product. Using publicly available data from the 2001-3 seasons, a two-equation model estimates the impact of characteristics of play (runs, ERA, strikeout-to-walk ratio and fielding percentages) on winning percentage, and then the impact of winning percentage on revenues. The results are then applied as a case study to the Oakland Athletics to test if salaries for a team are comparable to marginal products. The answer is complex; on average, young players and players with three to six years of experience are paid less than their marginal revenue product, while hitters with more than six years of experience earn salaries generally in line with their contribution and pitchers with more than six years of experience earn salaries that exceed their marginal products.

'Why Do Environmentalist Organisations Opt for Lobbying Over Direct Market Participation?'

This paper analyses the tastes and preferences of several environmentalist organisations in regards to direct participation in the pollution permit markets. In particular, the analysis focuses on the costs and benefits of direct market participation and compares these findings with the actual practices of these organisations. Theoretical models indicate that the purchasing of pollution permits by those who are being harmed by the polluting entities represents a relatively efficient way of reducing the overall amount of pollution in some cases. However, such measures are not considered by individual consumers or consumers organised into significant groups. The majority of environmentalist organisations focus their resources not on direct participation in the market, but on lobbying legislators. A comparison is then drawn between the behaviours of these organisations and those choosing not to participate in the market for human organs. The findings in this paper reveal that this behavior is motivated by the efficiency with which these organisations can achieve their stated goals through lobbying.

High expectations presented at the beginning of the semester need to be reinforced throughout the course. One of the advantages of the research project is that it can be an effective way to help students to develop independent learning. The revise and resubmission process (described in various places throughout this chapter) models this expectation as the instructor first points out deficiencies in communication and content and provides some examples of potential solutions, and in later stages merely points out such problems encouraging students to take responsibility. With respect to one-on-one meetings, a particularly effective method includes providing the students with a homework assignment as their ticket into the meeting, requiring them to complete a significant task specific to their research project on their own prior to the meeting.