TAX REFORM

After brief individual presentations, panelists discuss among themselves and with the audience a broad spectrum of issues regarding various taxes and tax reform proposals. The discussion includes such issues as privatizing Social Security and Medicare, eliminating income tax withholding, and the merits and demerits of income taxes, consumption taxes, value added taxes, sales taxes, and taxes on resources that have an inelastic supply. One panelist relates his recent experiences using his tools as an economist to deal with tax and related issues as a current member of the Canadian Parliament. Another cites practical problems of implementing tax reform from his long experience advising governments, especially in Latin America. A major focus of the exchange of views is on public choice problems involved in passing and implementing a so-called flat tax. However, the discussion also deals with economic efficiency and equity considerations and with nearly all other types of taxes. The discussion includes not only the impact on the country within which tax reform occurs, but international implications, as well.     

Modeling Structural and Temporal Variation in the Market's Valuation of Banking Firms

Hidden capital exists whenever the accounting measure of a firm's net worth diverges from its economic value. Such unbooked capital has on-balance-sheet and off-balance-sheet sources. This paper develops a model to estimate both forms of hidden capital and to test hypotheses about their determinants. In effect, the analysis expands the two-index model by endogenizing the market and interest-rate sensitivities of any stock and decomposing each sensitivity into on-balance-sheet and off-balance-sheet elements. For a sample of banks during 1975–1985, the model finds considerable variation in both forms of hidden capital.     

Publishing in the Majors: A Comparison of Accounting,Finance, Management,and Marketing*

Business schools evaluate publication records, especially for the promotion and tenure decision, by comparing the quality and quantity of a candidate's research with those of peers within the same discipline (intradisciplinary) and with those of academics from other business disciplines (interdisciplinary). A recently developed analytical model of the research review process provides theory about the norms used by editors and referees in deciding whether to publish research papers. The model predicts that interdisciplinary differences exist in quality norms, which could result in disparity among business disciplines in the number of top‐tier articles published. I examine the period from 1980 to 1999 and, consistent with the theory, find that significant differences exist in the number of articles and proportion of doctoral faculty who published in the “major” journals in accounting, finance, management, and marketing. Most notably, the proportion of doctoral faculty publishing a major article is 1.4 to 2.4 times greater in the other business disciplines than in accounting (depending on the set of journals). The theory also predicts an upward drift over time in the quality norms used by referees. Consistent with a drift, the number of articles published has declined substantially in marketing and, to a lesser extent, in the other business disciplines.     

Affirmative Action in a Changing Legal and Economic Environment

This study examines the effects of changing legal and economic pressure on a large manufacturing firm in the 1980s and shows that the firm was able to pursue two potentially contradictory goals: equal employment opportunity compliance and product market competitiveness. The firm's institutionalized affirmative action commitment and diverse local labor market shaped innovations in production and employment practices in a way that encouraged meeting both goals rather than trading off one for the other.     

DANGERS OF CAPITAL FORBEARANCE: THE CASE OF THE FSLIC AND "ZOMBIE" S&Ls

This paper portrays Federal Savings and Loan Insurance Corporation (FSLIC) forbearance and congressional unwillingness to increase the FSLIC's human or capital resources to the size necessary to handle developing economic insolvencies as a joint policy crime that has served to bifurcate the savings and loan industry into the living and the living dead. As agents for the taxpayer, Congress and the FSLIC have assumed too much discretion and have chosen to exercise that discretion myopically. An agent has a duty to represent its principal's economic interests more effectively than this. The FSLIC's policy touchstone should be to negotiate and enforce the same kind of covenant provisions that a prudent private guarantor would require.