IMPROVING THE ANALYTICAL AND DATA FRAMEWORK OF THE GOVERNMENT SECTOR FOR NATIONAL GOALS ACCOUNTING*

Provision of “market goods” follows the decision rules of traditional microeconomics; pricing and resource allocation for such goods tend towards Pareto optimality. The provision of “collective goods,” by contrast, depends on political (or quasi-political) collective decision processes; beneficiaries often receive a share of collective goods free of charge or well below average or marginal (private or social) costs. No inherent tendency towards optimality may be presumed and separate analysis of collective goods becomes an essential part of national goals accounting. The national-income-accounts (NIA) distinction between personal consumption expenditures (PCE) and government purchases of goods and services corresponds roughly to a division between market goods bought by the consumer and a major category of “collective goods” (i.e. “public goods” provided by government). However, a significant proportion of PCE represents “collective goods” paid for by government, business, or nonprofit organizations and provided on behalf of the consumer, whereas a part of NIA government purchases represents services paid for by the consumer (i.e. “market goods”). This article develops operationally meaningful distinctions among “market goods,”“collective goods,” and “tied aid” (a mixed category with market-good and collective-good characteristics). These distinctions are determined by the nature of the decision processes–rather than by the characteristics of the beneficiary or the supplier. This classification is related to the national income accounts and major discrepancies are pinpointed. The blurring of the distinction among market goods, collective goods and tied aid is found to be most consequential in the NIA treatment of “education” and “medical care” services. NIA data for these two services are restructured for national goals accounting purposes in order to illustrate both the quantitative importance and the empirical feasibility of classifying benefits by their respective decision processes.     

Earnings Management During Antidumping Investigations in Europe: Sample‐Wide and Cross‐Sectional Evidence

This paper examines earnings management by EU firms that initiate an antidumping investigation. We first document economically and statistically significant income‐decreasing earnings management around the initiation of an antidumping investigation. We show that earnings management increases when accounting data directly affect the magnitude of the tariffs imposed in the trade investigation. We also find that earnings management decreases as the number of petitioning firms increases or as the distance between petitioning firms increases, suggesting free‐rider and coordination problems. We find that earnings management increases when the petition is directed at a country that imports more goods from the petitioning firm's home country, suggesting that retaliation threats affect incentives. We document that raising equity or debt financing moderates income‐decreasing earnings management, consistent with the idea that sample firms trade off capital market and regulatory considerations. Our results indicate that contemporary research methods can detect accruals‐based earnings management in settings in which the incentives for earnings management can be clearly identified.     

Cities as the Industrial Districts of Housebuilding

In North America the housebuilding industry is ubiquitous and locally autonomous. In Ontario during the 1990s, 81% of urban single‐family homes were erected by locally based builders, a proportion that varied with urban isolation. Urban areas may be regarded as the industrial districts of home builders: numerous small, specialized firms interact frequently within a rich, embedded market network; subcontracting is the norm; networks and firm boundaries are fluid. The theory of industrial districts offers a useful vocabulary for analysing the neglected building industry. Analytically, the building industry offers unequalled opportunities to explore the dynamics of industrial districts, and how economic globalization meets local limits.     

Bank Leverage Limits and Regulatory Arbitrage: Old Question-New Evidence

Banks are regulated more than most firms, making them good subjects to study regulatory arbitrage (avoidance). Their latest arbitrage opportunity may be the new leverage rule covering the largest U.S. banks; leverage rules require equal capital against assets with unequal risks, so banks can effectively relax the leverage constraint by increasing asset risk. Consistent with that conjecture, we find that banks covered by the new rule shifted to riskier, higher yielding securities relative to control banks. The shift began almost precisely when the rule was finalized in 2014, well before it took effect in 2018. Security level analysis suggests banks actively added riskier securities, rather than merely shedding safer ones. Despite the risk shifting, overall bank risk did not increase, evidently because the banks most constrained by the new leverage rule significantly increased leverage capital ratios.     

Downsizing Effects on Survivors: Layoffs,Offshoring, and Outsourcing

In a representative sample of 13,683 U.S. employees, we compared survivors of layoffs, offshoring, outsourcing, and their combinations to a group who experienced no downsizing. Survivors of layoffs perceived lower organizational performance, job security, affective attachment, calculative attachment, and had higher turnover intentions. Offshoring survivors perceived lower performance, fairness, and affective attachment, but outsourcing survivors generally did not have more negative outcomes than the no‐downsizing group. Layoffs generally had more negative outcomes than other downsizing forms.     

DISCOUNTS FOR CASH IN RETAIL GASOLINE MARKETING

Before introducing cash discounting in retail gasoline markets, major oil companies offered proprietary credit cards as an unpriced service to their customers. This paper analyzes the origins of cash discounting in order to determine why oil companies introduced explicit pricing of the credit service in 1982 only to begin discouraging it by the end of the decade. Sharp increases in nominal interest rates and in the real price of gasoline between 1978–1982 spurred a rapid rise in the cost of financing accounts receivable. This increasing cost in part drove the initial decision to discount. By 1990 the discounting trend reversed as the costs of processing credit transactions and of the float associated with non-revolving accounts receivable fell.
Using station data from Delaware in 1983 and Washington in 1989, the paper also provides two separate estimations of the subsidy to credit buyers by cash buyers.     

Half a Century of Public Software Institutions: Open Source as a Solution to Hold‐Up Problem

We argue that the intrinsic inefficiency of proprietary software has historically created a space for alternative institutions that provide software as a public good. We discuss several sources of such inefficiency, focusing on one that has not been described in the literature: the underinvestment due to fear of hold‐up. An inefficient hold‐up occurs when a user of software must make complementary investments, when the return on such investments depends on future cooperation of the software vendor, and when contracting about a future relationship with the software vendor is not feasible. We also consider how the nature of the production function of software makes software cheaper to develop when the code is open to the end users. Our framework explains why open source dominates certain sectors of the software industry (e.g., programming languages), while being almost non existent in some other sectors (e.g., computer games). We then use our discussion of efficiency to examine the history of institutions for provision of public software from the early collaborative projects of the 1950s to the modern “open source” software institutions. We look at how such institutions have created a sustainable coalition for provision of software as a public good by organizing diverse individual incentives, both altruistic and profit‐seeking, providing open source products of tremendous commercial importance, which have come to dominate certain segments of the software industry.     

CROSSING THE BORDER AND MIGRATION DURATION

Policies to deter illegal entry and reduce the number of undocumented immigrants have a complex impact on migration patterns, border crossings, and duration. However, studies generally assume the method of crossing into the United States is exogenous with respect to migration duration. Using data from the Mexican Migration Project, this paper finds that the migrant's decision to hire a coyote (smuggler) to cross the border is endogenous with respect to duration. Instrumental variable estimates provide evidence that migrants who incur the cost of hiring a coyote have longer migration durations as they need to work longer in the United States. The migrants most likely to hire coyotes have less education, little migration experience, and/or come from rural communities. Results suggest that continuing to increase guest worker programs could actually decrease the number of Mexican immigrants in the United States by eliminating the need for coyotes which would reduce migration durations. This would better utilize the immigrant population in the United States by encouraging immigrants to stay while employed and to migrate home when unemployed, with the knowledge they can later return. Reducing coyote use would also reduce income flowing to Mexican cartels which have profited from human smuggling. (JEL O15, J61, J64)