EconSouth (Third Quarter 2006)

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Volume 8, Number 3
Third Quarter 2006


The Energy Debate: Is Ethanol the Answer?

The Gulf Coast’s Tourism Comeback: Playing for Even Higher Stakes?

Hurricanes Spawn
Insurance Rate Increases

Katrina Update: One Year After


Fed @ Issue


Q & A

State of the States

Research Notes & News

Southeastern Economic Indicators




Research Notes and News

Research Notes and News highlights recently published research as well as other news from the Federal Reserve Bank of Atlanta.

Program facilitates fund transfers between United States, Mexico
The Atlanta Fed and the Federal Reserve System is joining with Bansefi, a development bank owned by the Mexican government, to educate U.S. financial institutions about a new Web site that allows banks to open accounts online for people receiving money transfers in Mexico.

The Beneficiary Account Registration, or BAR, Web site is designed to provide an incentive for Mexican consumers in the United States to look to U.S. financial institutions participating in Directo a México for their banking and money transfer needs. The BAR site is a component of the Directo a México marketing campaign that promotes the FedACH International Mexico Service.

The site will also help increase the number of people in Mexico who can receive remittances from relatives in the United States through the banking system. The BAR site will introduce those remittance receivers to the financial system by allowing U.S. financial institution to preregister an account for the receivers at more than 500 locations in Mexico. On Oct. 25, the Atlanta Fed, the Federal Reserve System, and Bansefi will host the second of two online seminars to present an overview and live demonstration of Directo a México and the BAR Web site. Registration is at

Examining labor force participation decisions over the business cycle
Historically, the unemployment rate has risen rapidly during periods of economic weakness but declined more slowly during the subsequent recovery. Although these trends have been well documented, the role that individual labor force decisions play in generating this asymmetric unemployment rate pattern is less understood.

In a recent working paper, Julie Hotchkiss and John Robertson look at how people’s decisions whether to actively seek employment affect the unemployment rate through their impact on the rate of labor force participation (LFP). Using Current Population Survey data from the Bureau of Labor Statistics for men and women aged 25 to 54 over the period 1994–2004, the authors tested whether the local labor market conditions affect participation decisions and, if so, whether the response is different when local conditions have improved than when they have worsened.

The authors find that individual LFP decisions do respond to changes in local labor market conditions. But while college-educated men respond essentially the same to changes in labor market conditions regardless of whether those conditions are improving or weakening, women and the less educated respond asymmetrically.

The authors predict that over time, to the extent that women become more attached to the labor market, their LFP decisions will more closely emulate men’s, with the result being greater symmetry and greater variation in the U.S. aggregate unemployment rate series. However, the analysis of younger (18–24 years old) and older age groups (55–74 years old) also suggests that as the population ages, other things being equal, the aggregate unemployment rate will likely become less variable because older workers’ labor supply decisions are generally more responsive than others’ to changes in labor market conditions.
Working Paper 2006-8

July 2006

Pursuing social change through shareholder proposals
Traditional economic wisdom holds that a corporation’s sole goal should be to maximize shareholder wealth. But some investors believe that firms should also act as agents for social change. Activist investors use their shareholder rights to place socially responsible resolutions on corporate proxy statements to be voted on by all shareholders.

This article examines the controversy behind corporate social responsibility (CSR) and identifies and categorizes activist investors, their objectives, and the firms they target. Using data from the Investor Responsibility Research Center (IRRC) on 2,829 CSR shareholder proposals from 1992 to 2002, the author finds that religious organizations and individuals made the largest number of proposals, but in 2000 proposals by socially responsible mutual funds began to outnumber those by individuals. The three most common proposal topics were international conduct, environmental issues, and antidiscrimination.

Of the 566 different corporations targeted, 73 were targeted 10 times or more. Larger, economically powerful firms—especially those that value consumer goodwill and have the “name” to aid in social change—were most often targeted.

Because a withdrawn resolution usually signals an action by the corporation—dialogue, agreement to resolution, or some other compromise—the author argues that withdrawn proposals can be used as a measure of activism’s success. The IRRC data and her own extensive research on the outcome of withdrawn proposals support this argument.
Economic Review
Third Quarter 2006