Inferring Transactions from Financial Statements*

In this paper, we embed the double entry accounting structure in a simple belief revision (estimation) problem. We ask the following question: Presented with a set of financial statements (and priors), what is the reader's “best guess” of the underlying transactions that generated these statements? Two properties of accounting information facilitate a particularly simple closed form solution to this estimation problem. First, accounting information is the outcome of a linear aggregation process. Second, the aggregation rule is double entry.     

Is Bt Cotton a Pro‐Poor Technology? A Review and Critique of the Empirical Record

Policy makers, journalists and other commentators have hailed genetically modified (GM) crops as a ‘pro‐poor’ success in the developing world. Their confidence appears to be justified by the encouraging conclusions reached by academic studies on the performance and impacts of GM crops, which seem to provide convincing evidence of substantial benefits for smallholders in developing countries. However, a detailed, critical examination of studies on transgenic, insect‐resistant cotton in China, India and South Africa demonstrates that the technology's impacts have been evaluated and represented in selective and misleading ways. The performance and impacts of GM crops have in fact been highly variable, socio‐economically differentiated and contingent on a range of agronomic, socio‐economic and institutional factors. The shortcomings of the GM crop‐impacts literature have done a disservice to public and policy debates about GM crops in international development and impeded the development of sound, evidence‐based policy.     

Taxes and the Efficiency-Rent Extraction Trade-off

This paper presents an adverse selection model in which progressive taxation enhances productive efficiency by encouraging a principal (buyer) to be less aggressive in contracting with an agent (seller). Wary of padded cost budgets, the buyer employs a hurdle‐rate procurement policy. With a low cost hurdle, the buyer keeps greater profits when transactions are undertaken but trade occurs less often. While the hurdle is unaffected by a flat tax, a progressive tax tilts the buyer's preference: the buyer's benefit from a lower hurdle becomes less pronounced, since the marginal increase in his profits is muted in after‐tax terms. The result is increased trade and the possibility of Pareto improvements.     

Announcements

Driver, B. L., Brown, Perry J., &; Peterson, George L. (Eds.). Benefits of Leisure. 1991. State College, PA: Venture Publishing. ISBN 9–10251–48–7. 483 pp. Hardcover $31.95.

Stebbins, Robert A. 1992. Amateurs, Professionals, and Serious Leisure. Montreal: McGill‐Queen's University Press. ISBN 0–7735–0991–1. 171 pp. Hardcover $34.95.

Kraus, Richard, &; Shank, John. (1992). Therapeutic Recreation Service: Principles and Practices (4th ed.). Dubuque, IA: William C. Brown. ISBN 0–697–11026–5. 397 pp. Hardcover $48.43.     

DOES THE KYOTO PROTOCOL COST TOO MUCH AND CREATE UNBREAKABLE BARRIERS FOR ECONOMIC GROWTH?

We look to the literature on short-term cost models, long-term models based on endogenous growth, and long-term models that assume induced technical change, in order to demonstrate the current understanding of costs, which is the focus of the debate on abating climate change. Using these insights as well as other results—like the role of ancillary benefits and the lack of a relationship between decarbonization and economic growth—our contribution to this debate will be to help policy makers understand how economic analyses are conducted and how they should be used in the subsequent political discussions. (JEL Q52, Q54, Q58 )