ECO Graduate Student Conference Papers

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    Research and development: The easy way to reduce income inequality
    (Wichita State University, 2021-04-02) Featherstone, Monica; Cheng, Jen-Chi
    Increasing awareness of income inequality has provoked discussions of the detriment to society and what can or should be done about it. This paper uncovers a focus area where resources can be used to decrease income inequality. A cross-sectional regression of 61 countries shows a significant positive correlation between increased spending on research and development and decreased inequality or every additional 1% of GDP spent on R&D, income inequality, as measured by the Gini coefficient, decreases by 2.72%. The sample set includes countries along the developmental spectrum, showing that even more advanced economies can benefit from spending on R&D. The possibility exists that R&D, which is fueled by education, also corresponds with a continued path of upward mobility.
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    Discrimination patterns through mortgage loan originations in the U.S.
    (Wichita State University, 2021-04-02) Garcés, Lucas; Miles, William
    Are there any discrimination patterns in mortgage lending based on race and ethnicity across the U.S.? The main objective of this study is to examine whether the probability of loan application rejection differs across minority and non-minority borrowers to shed light on whether discriminatory patterns exist in mortgage lending decisions. Across more than 16 million first-lien mortgage applications in the U.S. for a 10-year period, we found that an applicant belonging to a minority group has a predicted probability to receive a rejected loan origination of 23.3% whereas a majority group applicant is rejected with a 13.7% probability. The estimated difference in the probability of denial is 9.6% for minorities compared to majorities.
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    Splitting up: What happens when a company splits their stock?
    (Wichita State University, 2021-04-02) McTigue, Brian; Cheng, Jen-Chi
    Stock splits have evolved over the past decades as the methods of investing have changed. These changes in methods revolve mostly around how individuals buy stock and how the stock purchasing process plays out. Because of this evolution, companies now have different reasons to split than they did before which causes them to reevaluate when they need to split their stock or if they need to split their stock. These differing reasons then trickle down to investors and how they view and evaluate companies. Some companies that may have been before viewed as potential candidates to split may lose this status and therefore be invested in differently. The goal of this paper will be to find how these shifts in methods of investing have affected what happens when a company splits its stock and to figure out how investors can take advantage of these tendencies.
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    Government and public debt in South Asia: Borrow now, worry later?
    (Wichita State University, 2021-04-02) Acharya, Ashruta; Cheng, Jen-Chi
    Debt levels worldwide have reached an alarming level especially in the wake of the pandemic and public and private efforts to revive economies by spending more. As the debt-to-GDP ratios of many developed countries exceed the well-known threshold of 90%, developing countries can be expected to follow suit. Using a panel dataset, this study explores the impact of debt levels of South Asian countries on economic growth to provide context for the expected rise in debt levels. The study finds that at the current levels of GDP, included countries observe a statistically significant and negative relationship between debt servicing and GDP, but a statistically insignificant relationship between GDP and the levels of debts itself. Based on the findings, South Asian countries can, therefore, keep borrowing at current or increasing levels and not expect to see any drastic consequences in terms of economic growth.
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    On the effectiveness of devaluation to overcome tariff barriers to trade
    (Wichita State University, 2020-05-01) Engelland, Bryce; Cheng, Jen-Chi
    The Sino-American trade war has brought renewed research into the subject of international trade disputes, as well as a display of tactics rarely seen outside of the theoretical. Notably, during the summer of 2019 China seemingly threatened to overcome U.S. tariffs by intentionally devaluing its currency. This paper investigates the theoretical viability and consequences of a country depreciating their currency in order to overcome a tariff barrier to trade. Utilizing a simulated international economy with eight fictional nations of varying sizes and construction, it gauges the effectiveness of currency devaluations against tariff barriers to trade in a global commodity market. The results of the simulation paint a simple but important series of conclusions. First, under reasonable circumstances devaluation can be used to overcome a tariff barrier to trade. Secondly, whereas tariffs can (under certain conditions) increase in effectiveness if countries band together to implement them in multitude, the effectiveness of currency devaluation decreases as more countries employ it. Finally, each tactic (be it tariffs or devaluation) come at the expense of the consumer. If consumer surplus is taken as a proxy for the standard of living, then a decline in the wellbeing of a country's citizens is nearly universal under the utilization of the analyzed methods.
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