Wants and Working Wives: Household Demand and Saving in Australia*

Household survey data are used to compare the consumption and savings behaviour of families in which both husband and wife work with the behaviour when only the husband is employed. Other household characteristics allowed for are age, socio-economic class and family size. A linear systems model is used and attention is focused on alternative methods of estimating the parameters of the Klein-Rubin utility function. The preferred method involves the use of information from time-series studies in estimating the ‘subsistence’ parameters.     

Effect of World Fertility Scenarios on International Living Standards

This paper applies a two good, multi‐region Ramsey‐Solow model of the world economy to determine the impact that alternative world fertility rates would have on international capital markets and living standards. Notable features of the model include: relative consumption demands and relative employment efficiencies that vary by age, traded and non‐traded goods, vintage technology, outward‐looking reference consumption, a proportion of non‐optimising rule‐of‐thumb consumers and imperfect capital mobility due to asymmetric information. The model suggests that projected demographic change will imply a flow of international capital from the ageing regions to the younger regions; and that the world interest rate will fall. The lower world interest rate will cause a loss in living standards for ageing regions, the lenders, and a gain for the younger regions, who are borrowers.     

Tax Clienteles and Asset Pricing

Taxation of asset returns can create various clientele effects. If every agent is marginal on all assets, no clientele effects arise. If some (but not every) agent is marginal on all assets, there arises a clientele effect in quantities but none in prices. If no agent is marginal on all assets, there arise clientele effects in both quantities and prices. In the first two cases, standard asset pricing and martingale results extend to analogous aftertax results. In the third case, linear asset pricing works only on subsets of assets, and the standard martingale results become after-tax supermartingale results.     

Yes,The APT Is Testable

The Arbitrage Pricing Theory (APT) has been proposed as an alternative to the mean-variance Capital Asset Pricing Model (CAPM). This paper considers the testability of the APT and points out the irrelevance for testing of the approximation error. We refute Shanken's objections, including his assertion that Roll's critique of the CAPM is applicable to the APT. We also explain the testability of the APT on subsets, and we explore the relationship between the APT and the CAPM.     

Corporate Scandals and Regulation

Are regulatory interventions delayed reactions to market failures or can regulators proactively pre‐empt corporate misbehavior? From a public interest view, we would expect “effective” regulation to ex ante mitigate agency conflicts between corporate insiders and outsiders, and prevent corporate misbehavior from occurring or quickly rectify transgressions. However, regulators are also self‐interested and may be captured, uninformed, or ideological, and become less effective as a result. In this registered report, we develop a historical time series of corporate (accounting) scandals and (accounting) regulations for a panel of 26 countries from 1800 to 2015. An analysis of the lead‐lag relations at both the global and individual country level yields the following insights: (1) Corporate scandals are an antecedent to regulation over long stretches of time, suggesting that regulators are typically less flexible and informed than firms. (2) Regulation is positively related to the incidence of future scandals, suggesting that regulators are not fully effective, that explicit rules are required to identify scandalous corporate actions, or that new regulations have unintended consequences. (3) There exist systematic differences in these lead‐lag relations across countries and over time, suggesting that the effectiveness of regulation is shaped by fundamental country characteristics like market development and legal tradition.     

An Exception to the Law of Demand*

The authors challenge the usual tenet of a downward sloping demand curve. Further, they explore differences between actual and perceived prices, quantities, and quality. Implications for economic theory are suggested.     

MEASURING THE TRUE HARM FROM PRICE‐FIXING TO BOTH DIRECT AND INDIRECT PURCHASERS*

Legal actions by direct and indirect purchasers to recover damages from price‐fixing, common in the United States for years, are now appearing in a number of other countries. Traditional measures of damages are flawed as measures of the true harm suffered and will often significantly understate that true harm. This paper provides measures of the degree of understatement of the true harm when traditional approaches are used and shows how the size of the error depends on the degree of competitiveness of downstream markets. The paper also provides measures of distribution of the true harm between direct and indirect purchasers.     

The Measurement of Comparability in Accounting Research

Indices of harmony such as the H, C, I and T indices have been developed and used in the accounting literature to quantify the level of comparability of company accounts. This has led to advances in definitions of comparability as well as empirically quantifying the extent of comparability between actual company accounts. These are important because the general concept of comparability is considered desirable, as highlighted by its inclusion as one of four qualitative characteristics in the framework of the International Accounting Standard Board (IASB). This paper rebuts criticisms of harmony indices in the accounting literature by arguing these criticisms either: (a) apply to old indices but not to newer ones, (b) apply to most empirical accounting research, (c) are based on incorrect or irrelevant assertions, or (d) relate to alternative definitions of harmony. This assists the use and interpretation of harmony indices and advances our understanding of what comparability means. New indices within the T index framework are also proposed by directly comparing company accounts and therefore avoiding the previous requirement to define ‘accounting methods’. A new index R is also proposed to capture international harmony between countries when within‐country uniformity is absent.     

Passive Industry Interests in a Large Polity

We seek to explain the puzzle of passive industry interests. Taking the formation decision as given, we focus on the ability of a political action committee (PAC) to elicit voluntary donations for campaign giving. We show that, when the number of stakeholders is large and uncertain, PACs behave counteractively. That is, a single PAC that does not oppose the government's prior preference raises resources whenever an opponent poses a credible threat to secure policy favors. By implication money never actually changes hands, prompting the suggestion that counteractive behavior may lie behind the well‐documented, and consistently low, levels of PAC disbursements.