Research Notes

Inter-Regional Price Convergence and Market Integration in Russia

KONSTANTIN GLUSCHENKOInstitute of Economics and Industrial EngineeringVRussia

A spatial pattern of goods market integration in Russia is analyzed. For each region ofthe country, this pattern suggests whether it is integrated with the national market, andif not, whether it moves towards integration. To model the movement towards in-tegration (i.e., long-run intermarket price convergence), an autoregression with a non-linear, asymptotically subsiding trend is applied; statistics for testing it for unit root arederived. If a price differential time series does not satisfy this model, the series is testedfor market integration, using the conventional AR(1) model. Time series of the cost of astaples basket across 75 regions of Russia for 1994Y2000 with monthly frequency areused for the empirical analysis. With the use of this methodology, 36% of all coveredRussian regions are found to be integrated with the national market, 44% of them arenon-integrated but are tending to integration with the national market, and 20% ofregions are non-integrated and having no such trend. It is found that s-convergence ofregional prices takes place, implying that, despite the presence of regions not tending tointegration, the predominant trend is the improvement in market integration. (JEL C32,P22, R10, R15)

Temporal Aggregation Effects in Gasoline Price Pass-Throughin the U.S. Gulf Coast Region

MICHAEL YE*, JOHN ZYREN**, JOANNE SHORE**, AND MICHAEL BURDETTE***St. Mary’s College of Maryland and **U.S. Department of EnergyVU.S.A.

It is commonly believed that a trade-off exists between more information and morenoise in high-frequency data. In this paper, we generated weekly and monthlyaggregated spot and retail price series from daily gasoline prices in the U.S. Gulf Coastregion. Temporal aggregation effects in price pass-through from spot to retail wereinvestigated using those daily, weekly, and monthly series from the middle of 2002through 2004.

Unit root and cointegration tests show the existence of a unit root in all of the priceseries and of a single cointegrating relationship between spot and retail price at eachof the three frequencies. Retail prices are modeled in first differences, with an errorcorrection term to reflect the long-run relationship. Potential asymmetric responses ofretail price to changes in spot price were captured by breaking the short- and long-runrelationships into separate positive and negative movements.

First, we found that asymmetry in wholesale to retail price pass-through exists at alldata frequencies. Second, there is little if any information loss when aggregating daily into

International Advances in Economic Research (2005)11:483–485 * IAES 2005DOI: 10.1007/s11294-005-2286-4

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weekly data. Finally, temporal aggregation bias appears when using monthly aggregates.In addition, the findings of this paper will help validate retail price forecasting models.(JEL Q40, C50)

Endogenous Factor-Commodity Price Structure by Factor Endowments

BAOPING GUOUniversity of Northern VirginiaVU.S.A.

This study demonstrates that the absolute factor price and commodity prices in theHeckscherYOhlin model after trade can be determined by exogenous factor endowmentsunder the assumption of the identical demand tastes or the identical homothetic preference.

Under the assumption of identical demand taste, the terms of trade can be given bya = (x2

Fjx2

H) / (x1Hjx1

F), where xih is output i in country h. By the full-employment

condition, it can be further written as a = [aK1(LHj LF) j aL1(KH

j KF)] / [ak2(LHj

LF) j aL2(KHj KF)], where L is labor and K is capital. Suppose that equalized

commodity prices are p1* = a and p2* = 1, where superscript * indicates the price aftertrade, the endogenous labor wage rate is w* = (aK2 a j aK1) / (aK2 aL1 j aK1aL2), and thecapital rental rate is r* = (jaL2 a + aL1) / (aK2 aL1 j aK1aL2), which can be given by thefactor endowments directly by the endogenous terms of trade.

The study shows that if any factor rises in a country, then the price of the goodintensive in the country’s abundant factor will fall, while the payment for the abun-dant factor in the country will fall and the payment for the non-abundant factor inthe country will rise. This is just the joint result of the Rybczynski theorem and theStolperYSamuelson theorem linked by the endogenous terms of trade, which explainsthe simultaneous effects of changes of quantities of factor endowments both on thechanges of output and on the changes of price. (JEL F10, F20)

Evaluating the Incidence of Social Security Privatizationon African Americans

FERDINAND C. NWAFORFlorida A&M UniversityVU.S.A.

Social Security was formulated on a BPay as you go basis.’’ Thus, current workers_contributions fund retired workers benefits. As baby-boomers begin to retire, the ratio ofcontribution to benefit would decline significantly. In response, some advocates of reform havebeen proposing privatization of the Social Security system. Specifically, for African Americanswhose retirement incomes are highly dependent on Social Security incomes, the question ofhow to fix the system is a paramount concern. To this end, this study investigates the poten-tial implications of Social Security privatization with respect to African Americans and themajority (white) population. Using data from various sources, particularly, the U.S. Bureau ofCensus Current Population Survey (CPS) and the Survey of Consumer Finances (SCF), thisstudy concludes via a descriptive case study approach that the benefits (advantages) of thecurrent Social Security program outweigh the costs (disadvantages). In contrast, the costs ofSocial Security privatization far exceed the benefits in the case of African Americans com-parative to the majority population. (JEL I30)

484 RESEARCH NOTES

Nursing Home Quality in New York State: A New Look

PATRICIA R. LOUBEAU AND MARY HELEN MCSWEENEYFELDIona CollegeVU.S.A.

Levels of nursing home staffing, particularly hours by nursing staff, have continuallybeen identified as an important characteristic of nursing home quality. Research into thelink between nurse staffing hours and quality of care in nursing homes has producedinconsistent and contradictory results [Davis, 1991; Dellefield, 2000; Kovner, Mezey &Harrington, 2000; Sovie, 1996]. Our study of 184 nursing homes in New York State(seven counties) showed no relationship between nursing home staffing levels andquality variables. Quality was measured by three separate variables: the rating thefacility received from the New York State Department of Health during its last facilityinspection, the total number of state health code deficiencies, and a composite level ofharm variable. This finding remained constant if the staffing variable was measured interms of Registered Nurse care, Licensed Practical Nurse care, Certified NursingAssistant care, or total nursing staff hours per resident per day.

This may be consistent with the classic excess demand theory for nursing home bedsin these New York State counties. Under this theory, large numbers of Medicaid re-imbursed nursing home beds in states with CON laws (like New York State) impose abinding bed constraint within the market for nursing home care and create a lack ofquality competition for Medicaid recipients. This situation, in turn, greatly reduces thefinancial incentives for nursing home administrators to improve quality of nursing homecare as measured by traditional variables, such as levels of nursing staff. (JEL D6, I00)

Characterizing Depreciation in the Automobile Industry by Brand

NEIL TERRY, ANNE MACY, AND PETER RENWest Texas A&M UniversityVU.S.A.

The purchase of an automobile is a significant expenditure for most households.Reliability, safety, initial price, and name brand all impact the value and depreciationrate of an automobile. This research evaluates the depreciation rate of 15 automobilebrands for the years 2000Y2004 by employing a nonparametric multiple comparison test.The results yield five tiers of statistically different depreciation rates by automobilebrand controlling for high, middle, and low cost offerings in each brand_s fleet of familysedans (e.g., Toyota offers Avalon, Camry, and Corolla). Tier one automobile brands withrespect to depreciation are Honda and Lexus with an average annual depreciation rate of13.4Y14.1%. Tier two automobiles are Volkswagen and Toyota with an average annualdepreciation rate of 16.5Y16.8%. Tier three automobiles are Nissan, Mercedes, BMW,Hyundai, and Mercury with an average depreciation rate of 18.9Y21.2%. Tier fourautomobile brands with respect to depreciation are Chevrolet, Chrysler, and Saturn withaverage annual depreciation rates of 25.4Y27.5%. Tier five automobiles are Dodge, Ford,and Buick with an average annual depreciation rate of 31.1Y32.6%. (JEL L15)

RESEARCH NOTES 485