Wednesday, October 22, 2008

The X-Files, Economics Edition: Revisited

Pete Leeson and I are currently working on an economic explanation for UFO sightings across states. In a previous post over at the Freakonomics blog, we showed a strong positive correlation between UFO sightings and Bigfoot sightings. Our goal behind doing so was to show that the sightings are clearly motivated for economic reasons not because they actually exists (Why would UFOs and bigfoot visit the same state?)

We now have new preliminary results suggesting that UFO Sightings are strongly correlated with several different measures of tourism. Both state park acres and hotel expenditures are positive and significant in explaining the number of UFO sightings. This holds after controlling for income and urban population. We also find that UFO sightings are positively and significantly related to state and local government spending.

I am interested in getting feedback to see what you think. We recognize that at this point the relationship may not be causal, but I think these basic results are strongly suggestive that individuals may 'see' UFOs if there is an economic reason to do so.


Justin M Ross said...

Panel or cross section?

Claudia R. Williamson said...

This is just a cross section. I am in the process of building the panel.

Justin M Ross said...

My guess (and only a guess) is that the panel will have to be estimated with Generalized Method of Moments because the tourism independent variables in a period will be a function of the UFO dependent variable in the previous period.

Pretty awesome paper idea! I like the state & local government expenditures correlation, other than the Aliens are lobbyists ;)

Matt E. Ryan said...

There could be a bit of a snowball effect here-- once they get a few sightings, the locals spend some money to ham it up, that gets more people to show, etc.

If the goal of the local government was to benefit from that, hotel taxes would be interesting to look at. After all, areas love to tax hotel since the locals feel like they aren't paying for them. If spikes in hotel taxes followed UFO/Bigfoot sightings, that would be a fun public choice story to tell-- and if public spending followed as well, it's setting up a whole economic infrastructure for extraction via taxation of tourists.

Claudia R. Williamson said...

Those are great comments! Thanks. I will take a look at hotel taxes and see what I can find. I will keep you updated.

Anonymous said...

As per matt e. ryan's comments, you might have to use dynamic panel data analysis, i.e. Arellano-Bond estimator. It is GMM with a lag for the dependent variable.