Bounded dividends, earnings and fundamental stock values

This paper applies a model of fundamental share prices based on a bounded dividends process, with earnings as the upper bound, to assess the deviations of actual prices for over- and under-valuations. The fundamental model extends the traditional present value of future dividends analysis to allow for the effect of an earnings-dividends trade-off effect. The simple fundamental model includes a closed form share price solution which may be calibrated to generate fundamental values from which to assess actual prices for over or under valuations. The properties of the model are explored with a simulation example. The empirical example is based on S&P data and the analysis provides evidence of persistent over-valuations since the late 1990’s. Expressed another way, the analysis highlights the role of factors, other than dividends and earnings in the determination of actual asset prices since the late 1990s.     

Motherhood and women's earnings in Anglo-American,Continental European,and Nordic Countries

Abstract

The earnings of mothers make up an important, but difficult to quantify, component of parental expenditures on children. This paper compares the long-term earnings of women with children, women without children, and men. The study conducts separate analyses for less educated, moderately educated, and highly educated people in eight Anglo-American, Continental European, and Nordic countries. The study finds that, for the most part, these countries cluster into three groups, with mothers in the Continental European group experiencing the largest earnings differentials, mothers in the Nordic group experiencing the smallest, and mothers in the Anglo-American countries occupying the middle position.     

An analysis of Japanese earnings forecast revisions with application to seasoned equity offerings

Using the bootstrap method, we explore the characteristics of revisions in Japanese earnings forecast data. We find that forecast revisions exhibit a downward trend over time as the actual earnings announcement date approaches, and are serially correlated with three significant lags. Using these characteristics we develop a model to estimate abnormal forecast revisions, and illustrate the model's use with a sample of Japanese companies announcing seasoned equity offerings (SEOs). In contrast to results obtained by studies using American data, our findings indicate significant positive upward revisions when Japanese firms announce an SEO.     

Married women's labor supply and economic development: Evidence from Sri Lankan household data

Women's labor supply in Sri Lanka has increased steadily since the early 1990s following economic reforms, but remains well below the level predicted by national income, a feature shared by a number of Asian and Latin American countries that have undergone similar reforms and economic growth. To understand the microeconomic determinants of women's work in Sri Lanka's growing economy, this paper estimates a binary‐choice model of married women's labor supply using household survey data spanning a 23‐year period. Decomposition and cohort analysis reveal that women have been drawn into the workforce through falling fertility rates, rising tertiary education, and declining income effects among younger generations, but other factors have undermined this positive trend. Educational attainment reduces married women's labor supply except at the tertiary level, consistent with social stigmas associated with married women in non‐white‐collar employment. The strict sectoral segregation of married women by education level supports this hypothesis. In addition, growth has been concentrated in low‐skilled sectors with self‐employment more prevalent, reducing employment prospects of educated women and prompting their labor force withdrawal. This suggests it is the structure of economic development, rather than speed, that matters for women's labor force activity.     

Explaining the deteriorating entry earnings of Canada's immigrant cohorts, 1966 – 2000

Abstract.  Using the 1981, 1986, 1991, 1996, and 2001 Canadian Censuses, we explore causes of the deterioration in entry earnings of successive cohorts of immigrant men and women. Roughly one‐third of the deterioration is explained by compositional shifts in language ability and region of birth. We find no evidence of a decline in the returns to foreign education for either immigrant men or immigrant women but a definite deterioration in the returns to foreign labour market experience, most strongly among men from non‐traditional source countries. We can explain roughly two‐thirds of the male and one‐half of the female deterioration without any reference to entry labour market conditions. When we also account for entry conditions, our results suggest Canada's immigrants of the late 1990s would otherwise have enjoyed entry earnings equal to or higher than their counterparts of the 1960s.     

Measuring the extent of earnings discrimination: an update

Ordinary least squares (OLS) regression and data from the March 1990 Current Population Survey are used to estimate yearly earnings averages for white males, white females, black males and black females. In order to test for the possible existence or gender and/or race discrimination, earnings estimates are decomposed, using the tradional Oaxaca (1973) and Blinder (1973) methodology. In comparing these results with those from Carlson and Swartz (1988, using 1979 data), we find that overall and unexplained residual differences have declined quite substantially, but that they still favour white males. We then incorporate an extension of the traditional methodology (Jackson and Lindley, 1989) which allows for testing for the significance of enexplained residuals, and for jointly testing for the significance of residual effect components, the constant and coefficient effects. These results call into question the unambiguous conclusion that earnings differentials uniformly favour white males. Strong support is found for the Jackson–Lindley contention that significant and positive residuals may have have offsetting signs. More specifically, where males appear to receive an entry level premium, as measured by constant effect differentials, but other groups appear to receive favourable treatment as measured by response rates to changes in independent variables (the coefficient effect). This result suggests that efforts may be underway to ‘make up’ for the entry level white male premium.     

A longitudinal analysis of earnings change in Canada

Abstract.  We use tax‐based longitudinal microdata for 1982–99 to (i) examine how earnings distributions have shifted, (ii) identify changes in earnings mobility patterns, and (iii) replicate and update Beaudry and Green's cohort analysis of age‐earnings profiles. We find: (i) increased polarization of men's earnings and marked decline in real earnings of workers aged 20–4; (ii) general decline in men's earnings mobility, while women's mobility has increased for young and prime‐age workers; and (iii) upward drift in earnings profiles of 1960s–1970s entry cohorts and downward shifts for 1980s–1990s cohorts (largely confirming Beaudry and Green's findings), but suggestive of steepening profiles for the 1990s cohorts. JEL classification code : J31,O33     

Empirical earnings functions for Iran

Some recent studies have debated the appropriateness of semi-log earnings function in approximating actual earnings profiles. This study contributes further to this debate by estimating four specifications of earnings function, namely, semi-log quadratic, semi-log cubic, quadratic and cubic with cross section data for 4035 full-time urban male earners in Iran for 1993. The analysis shows that the semi-log quadratic earnings function fits the actual empirical earnings profiles very poorly. The quadratic earnings function provides a much better approximation to the actual earnings. Measures of out-of-sample prediction errors also show the superiority of quadratic function over others.     

Is the new immigration less skilled than the old?

This paper analyzes trends in the skills of immigrants to the US in the post-World War II period. Changes in the supply, demand, and institutional factors determining immigration are analyzed for their implications for immigrant skills. During the past 4 decades immigration has shifted from being predominantly European and Canadian in origin to being predominantly Asian and Latin American, and there have been changes in the criteria for rationing immigration visas. Immigrant skills can be analyzed within the context of a model of the supply of immigrants and the US demand for immigrants. Of the Asian immigrants subject to numerical limitation, the proportion who were occupational preference principals declined from 18.2% in 1970, to 11.9% in 1975, to 8.1% in 1981. A growing stock of the foreign-born population who are illegal aliens may lower immigrant quality; for low-skilled workers in neighboring low-income countries the economic incentives for illegal migration are very large. Immigrants from the UK have the highest annual earnings, with Canadian, other European, South Asian, East Asian, and other American immigrants having successively lower earnings. The Mexicans and the Vietnamese have the lowest earnings. Over the period 1950 to 1980, US immigration changed from primarily drawing immigrants from countries whose nationals have high relative earnings in the US primarily drawing immigrants from countries whose nationals do less well. Recent immigrants are less favorably selected on the basis of their level of schooling. The analysis of the relative earnings of immigrants during the 1970s using 3 data files shows there has been little change for white immigrants, an ambiguous pattern for Mexican immgrants, perhaps a small decline for Cuban immigrants, and a small rise for Asian immigrants. Overall, without returning to rationing by country of origin, public policy could raise immigrant skill levels by changing the balance between kinship and the individual's skills in the rationing of visas.     

Technological change,occupational tasks and declining immigrant outcomes: Implications for earnings and income inequality in Canada

The earnings and occupational task requirements of immigrants to Canada are analyzed. The growing education levels of immigrants in the 1990s have not led to a large improvement in earnings as one might expect if growing computerization and the resulting technological change was leading to a rising return to non‐routine cognitive skills and a greater wage return to university education. Controlling for education, we find a pronounced cross‐arrival cohort decline in earnings that coincided with cross‐cohort declines in cognitive occupational task requirements and cross‐cohort increases in manual occupational task requirements. The immigrant earnings outcomes had only a small effect on overall Canadian earnings inequality.     

Marriage,cohabitation and women's response to changes in the male wage structure

Using microdata and grouped data that cover the period 1996 to 2006, we assess the extent to which cohabiting women adjust their labour supply to a lesser extent, if any, than married women in response to changes in male wages. Both microdata regressions and grouping estimators unambiguously indicate that cohabiting women respond less to variation in male wages than married women. However, the magnitude of the difference is not sizeable. We also assess the magnitude of married men's and cohabiting men's own wage elasticities and find that they do not differ much. Combined with the fact that male earnings account for roughly two-thirds of family earnings, these two findings explain why the impact of changes in male wages on family earnings is very similar for married couples and cohabiting couples: in both cases, a 10% decline in male wages appears to induce roughly a 6% drop in family earnings.     

Economic transition,gender bias,and the distribution of earnings in China*

Market‐oriented economic reform, which accelerated after 1992, has brought substantial changes to the Chinese economy. This dramatic economic transition was raised two important questions: ‘How are women faring in the transition from a planned economy to a market economy?’ and ‘Are some women faring relatively better than other women’? We use data from the Chinese Household Income Projects for the years 1988 and 1995, a standard earnings equation, and quantile regressions to estimate and decompose the earnings gap. Our findings suggest that while the earnings gap has increased, the fraction of the gap ‘unexplained’ by differences in human capital variables such as education and experience has declined over time. This result is particularly pronounced for low earning women.     

Panel estimates of the earnings gap in Norway: do female immigrants experience a double earnings penalty?

This study explores the possibility that being both a ‘female’ and an ‘immigrant’ will impose an earnings disadvantage on immigrant women in Norway. Well-known techniques are used to decompose the earnings gap between Norwegian men and immigrant women into portions attributable to productivity differentials, portions attributable to a gender effect, and portions attributable to an ethnic effect. The analysis supports the following conclusions: First, there is evidence of a double negative effect on female immigrant earnings. Second, gender effect is more important than ethnic effect. Finally, the discrimination estimates are robust to the alternative methods used in decomposing Norwegian men-immigrant women earnings gap.     

Female earnings and the divorce rate: a simultaneous equations model

Economists have contributed a great deal of research, both theoretical and empirical, to the study of marital formation and dissolution. Many empirical examinations of marriage and divorce rates exist based on Becker's seminal contributions to the literature. All of these divorce studies are single equation models, with female earnings assumed exogenous. As discussed by Becker (1981), however, causality may run in the opposite direction as well: the divorce rate may influence female earnings. This paper estimates a simultaneous equations model in which divorce rates and female earnings are the jointly endogenous variables. Data are by state, for 1960, 1970, 1980 and 1990. The state-wide divorce rate equation is an extension of Waters and Ressler (1999), and the specification of a state-wide earnings equation follows standard human capital theory. The specification of joint endogeneity between female earnings and the divorce rate allows valid inferences to be made regarding the effect of female earnings on divorce for the first time. Most previous single equation studies of divorce have found that increases in female earnings significantly increase divorce rates. A simultaneous equations model will allow inferences to be made regarding the possibility of joint determination, which may cause a reevaluation of previous results.     

The Occupational Segregation of African American Women: Its Evolution from 1940 to 2010

Based on detailed occupation titles and making use of measures that do not require pair-wise comparisons, this paper shows that the occupational segregation of African American women declined dramatically in 1940–80, decreased slightly in 1980–2000, and remained stagnant in 2000–10. This paper quantifies the well-being losses that African American women derive from their occupational sorting. The reduction of segregation was indeed accompanied by well-being improvements, especially in the 1960s and 1970s. Regarding the role that education has played, this study highlights that it was only from 1990 onward that African American women with either some college or university degrees had lower segregation (as compared with their peers) than those with lower education. Nevertheless, the well-being loss that African American women with university degrees derived in 2010 for being segregated from their peers in education was not too different from that of African American women with lower education.     

Education,occupation and earnings: A recursive approach for France

The purpose of this paper is to examine the relationship between education, occupation and earnings with an emphasis on the role of occupation in the determination of the effect of education on earnings. At the same time, several forms of human capital and other exogeneous variables are examined. The model is a recursive nature, and it was applied for French individual data. The result tells that despite very strong relationship between education and occupation, and between occupation and earnings, the relative significance of these relationships is greatly modified by different occupations (or classes). It was found also that men and women are considerably different not only as for the relationship between education, occupation and earnings, but also for several exogenous variables.     

Career length: Effects of curvature of earnings profiles,earnings shocks,taxes, and social security

The same high labor supply elasticity that characterizes a representative family model with indivisible labor and employment lotteries also emerges without lotteries when self-insuring individuals choose interior solutions for their career lengths. Off corners, the more elastic is an earnings profile to accumulated working time, the longer is a workerʼs career. Negative (positive) unanticipated earnings shocks reduce (increase) the career length of a worker holding positive assets, while the effects are the opposite for a worker with negative assets. By inducing a worker to retire at an official retirement age, government provided social security can attenuate responses of career lengths to earnings profile slopes, earnings shocks, and taxes.     

The effect of commute time on racial earnings inequality: a case study of the Houston metropolitan statistical area

Data from the United States Census confirm a substantial increase in the racial earnings gap between 1980 and 1990. This paper examines data on whites and non-white wage and salary incomes in Houston TX for 1980 and 1990. Data on time travelled to work is used to simulate what would be the impact of shorter commute times on earnings inequality. The central finding is that a reduction in travel time from residence to work would cause a very small reduction in racial earnings and income inequality. This suggests that advances in urban transportation policy alone are not sufficient to solve the problem of racial earnings inequality.     

Comparison of cosmetic earnings management for the developed markets and emerging markets: Some empirical evidence from the United States and Taiwan

This study examines the effect of the implementation of corporate governance regulations on cosmetic earnings management in developed and emerging markets respectively. Using Benford's Law, the analysis employs 84,870 positive earnings observations for all publicly listed US and Taiwan companies from 1990 to 2011.The empirical results show that, regardless of developed markets and emerging markets, the phenomenon of cosmetic earnings management exists. In contrast to developed markets, corporate managers of emerging markets have stronger incentives to manipulate earnings. More importantly, it was found that the degree of earnings management is significantly less after implementing corporate governance regulations both in developed and emerging markets. This result suggests that the implementation of corporate governance regulations plays an important role in reducing the earnings manipulative behavior. The findings of the study add more evidence to the ongoing debate about the effectiveness of corporate governance regulations in preventing earnings management.     

Quality of higher education and earnings: evidence from Finland using field-of-study-level quality measures

Using administrative data from Finland, this paper empirically examines the relationship between university graduates’ early career earnings and three measures of university quality: the number of teachers per student, the number of publications per researcher and the number of applicants per admitted student. A distinction to previous studies is made by paying special attention to field-of-study heterogeneity: the quality measures are allowed to vary by a student’s field, while the heterogeneity of earnings and individuals across fields is accounted for in the analysis. For the most part, the results indicate that the relationship between institution quality and earnings is rather weak; however, certain significant quality effects are also found. In particular, the teachers/student ratio is found to be positively associated with the earnings of women and graduates from the humanities. Overall, the results indicate considerable heterogeneity in quality effects across genders and fields.