FOREIGN TAKEOVERS AND NEW INVESTMENTS IN THE UNITED STATES

This study is unique in several respects. First, it reviews the characteristics of the top 10 industries targeted for foreign direct investment (FDI) activity in the United States between 1979 and 1987. It analyzes both overall FDI activity and new plant and expansion FDI activity. The study summarizes and tests alternative hypotheses regarding the determinants of FDI in the United States by all countries, by the United Kingdom, by the European Community, by Japan, and by Canada.
Large and growing product markets in an expanding economy have attracted FDI in the United States. Exchange rate movements have prompted opportunistic decisions to invest in U.S. production facilities. Investors' superior management skills appear to have prompted takeovers, while efforts to realize technological advantages of new physical capital and of relatively large operating plants have fostered plant and expansion investments.
Evidence exists that a desire to circumvent current—but not potential—trade restrictions has motivated foreign direct investment. FDI activities are not associated with concentrated or heavily unionized industries. Highly protected industries have attracted heavier equity FDI by Japan and heavier new plant FDI by all sources and Canada. No evidence exists that FDI in the United States by Japan or anyone else is targeted to undercut union-dominated firms or to arrest the spread of protectionist trade policies.     

Household Wealth and Macroeconomic Activity: 2008–2013

This paper provides estimates of the effects of the fall in financial and housing wealth in 2008–09 on overall macroeconomic activity. When the wealth losses are run through a structural macroeconometric model, it is estimated that the fall in wealth contributed about 2.1 percentage points to the rise in the unemployment rate in 2009 and about 3.3 points in 2010. The contribution to the fall in real GDP was 4.5% and 5.4% in the 2 years. These estimates account for most—but not all—of the recessionary increase in unemployment. The remaining increase in unemployment may have resulted more directly from financial stresses, but little evidence is found for this in this study.     

ESTIMATED MACROECONOMIC EFFECTS OF THE U.S. STIMULUS BILL

This paper uses a multicountry macroeconometric model to estimate the macroeconomic effects of the U.S. stimulus bill passed in February 2009. The analysis has the advantage of taking into account many endogenous effects. Real U.S. output is estimated to be $554 billion larger when summed over the 12‐year period 2009:1–2020:4 (0.29% of the total sum of output). The average number of jobs is 509 thousand larger (0.37%). There is some redistribution of output and employment away from 2012 to 2015. At the end of 2020, the federal government debt is larger by $637 billion in real terms (the debt/GDP ratio is larger by 3.19 percentage points), which may increase the risk of negative asset‐market reactions. (JEL E17)     

The Effects of State Risk and Controllability Filters on Compensation Contract and Effort Choice

Surveys of business firms in the U.S.A. indicate that standard-based compensation contracts are common in practice. Analytical studies of this form of contract have suggested that under conditions of state risk, an employee's contract and effort choice are significantly affected by how pay relates to measured performance, and whether the compensation contract filters out the effects on measured performance of factors beyond the employee's control. This paper reports the results of a laboratory experiment indicating that in the presence of state risk, an individual's choice of compensation contract depends jointly on these two contract attributes and his/her risk preference as well as performance capability. The findings also indicate that actual effort is a function of the realized state, the presence/absence of a controllability filter, and the level at which the individual had expected to perform at the time of his/her contract selection. When an adverse state was realized, subjects without a controllability filter still exerted the level of effort that they had expected at contract selection, even though their marginal return to effort had been substantially reduced. On the other hand, when the controllability filter was absent, subjects who had a favourable realized state increased their effort in response to the increased marginal return to effort.     

Public Expenditure,Environment, and Economic Growth

This paper attempts to develop a model of endogenous growth with special consideration to the role of productive public expenditure in the presence of congestion effect of private capital and environmental pollution. We analyze the properties of the optimal fiscal policy in the steady‐state equilibrium when the level of production of the final good is the source of emission. Government allocates its income tax revenue between pollution abatement expenditure and productive public expenditure. In the steady‐state equilibrium, optimum ratio of productive public expenditure to national income is less than the competitive output share of the public input; and this ratio varies inversely with the magnitude of the emission‐output coefficient. The steady‐state equilibrium appears to be a saddle point; and the market economy growth rate is not necessarily less than the socially efficient growth rate in the steady‐state equilibrium.     

The Future Role of Government in Industrial Relations

The future role of government in industrial relations depends on the choices made by employers, workers, and especially governments. Technological change and internationalization have reduced the viability of both Keynesian economics and the mass production system, once integrally related to the industrial relations systems of industrialized democracies after the 1930s. Economic success will require new policies and high-performance systems more appropriate for a global, knowledge-intensive economic environment     

The Role of Accruals in Asymmetrically Timely Gain and Loss Recognition

We investigate the role of accrual accounting in the asymmetrically timely recognition (incorporation in reported earnings) of gains and losses. Timely recognition requires accruals when it precedes complete realization of the gains and losses in cash. We show that nonlinear accruals models incorporating the asymmetry in gain and loss recognition (timelier loss recognition, or conditional conservatism) offer a substantial specification improvement, explaining substantially more variation in accruals than equivalent linear specifications. Conversely, conventional linear accruals models, by omitting the loss recognition asymmetry, exhibit substantial attenuation bias and offer a comparatively poor specification of the accounting accrual process. Linear specifications also understate the ability of current earnings to predict future cash flows. These findings have implications for our understanding of accrual accounting and conservatism, as well as for researchers estimating discretionary accruals, earnings management, and earnings quality.