Experience Stern | Faculty & Research

Outlook Business (India)
Copyright (c) 2011. Outlook Publishing (India) Pvt. Ltd.

Research on real estate rates and the decision to have children, ethnic lending by VCs and gun trafficking.

—Compiled by Michael Correya

Source: NBER

Title: State Gun Policy and Cross-State Externalities: Evidence from Crime Gun Tracing

Gun laws is a reason for debate in the US since the 1980s and a study proves that weak regulation increases the risk of trafficking. This has been shown by Brian G Knight of NBER. Using gun tracing data in crimes, the research paper threw up three findings. First, states with lax gun laws tend to import firearms from states with tough gun laws. Second, states with weak gun laws attract firearms more from neighbouring states than distant states. And finally, states near other states with weak gun laws have more criminals with access to guns. The findings can have an impact on the policy for gun laws in a country. For example, the weak gun laws may indicate that the federal government should step in with a set of stronger gun laws like the ones in New York. This would eliminate the demand for trafficking of guns into New York state.

Gunning For Crime

Source: Social Science Research Network

Title: Would the Social Planner Let Bags Fly Free?

Should airlines charge for baggage transportation? This was the basis of a research study by Gad Allon and Martin Lariviere of Northwestern University-Kellogg School of Management and Achal Bassamboo of Northwestern University-Department of Managerial Economics and Decision Sciences. Studying the pros and cons of bundling these two services for a single price or unbundling them and pricing the ancillary price separately showed that changing consumer behaviour to reduce the firm’s costs and segmentation could prove to be a commercial success. Segmentation implies that there are two segments of travellers—business and leisure—that used the ancillary service differently. So, it could be that airlines charge the business traveller more for a service they are less likely to use and leisure travellers less for a service they may use more. As a result, airlines charge baggage fees more as a way to influence consumer behaviour than as a way to segment consumers.

Extra Baggage

Source: Social Science Research Network

Title: Can Birds of a Feather Fly Together? Evidence for the Economic Payoffs of Ethnic Homophily

Research has shown that venture capital (VC) funds are more willing to invest in companies with executives that share the same ethnicity as the partners of the VC fund. Deepak Hegde of New York University-Leonard N Stern School of Business and Justin Tumlinson of Ifo Institute at the University of Munich studied 22,000 US-based VCs and 98,000 top-level executives of the startup companies they invested in from 1991 to 2010. This homophily (love for ethnically similar individuals) exists for the initial rounds of funding and in ethnic groups that demonstrate ‘collectivist’ tendencies like the Japanese, Korean and Chinese. A company that shares one senior executive with the same ethnicity of the partners of the VC fund will probably double the expected internal rate of return for the VC fund.

Sticking Together

Source: NBER

Title: House Prices and Birth Rates: The Impact of the Real Estate Market on the Decision to Have a Baby

A change in housing prices affects people’s decisions to have a baby. A 10% increase in house prices will lead to a 4% increase in births among owners and a 4% rise in births among non-owners. Lisa J Dettling and Melissa Schettini Kearney of National Bureau of Economic Research (NBER) found that this trend affects both potential first-time home-owners and current owners who might upgrade to a larger house on the addition of a child. Fluctuations in real estate prices are a significant factor in a couple’s decision to have a child. A closer look at the effect of a 10% rise in home prices shows that it leads to a 2% hike in births among whites, a 0.5% rise in births among blacks and a 1.7% increase in births among white Hispanics.