Lifetime Earnings and Inequality*

It is argued that for many purposes the measurement of inequality should be based on income measured over a longer period than a single year. However, samples of individual earnings over a long period are extremely rare, and there are no data on complete lifetime earnings. This survey examines the wide variety of attempts that have been made to estimate inequality using a longer accounting period Emphasis is placed on the problems of extending the accounting period, rather than the properties of particular statistical measures of inequality.     

International Accounting Standards for Line-of-Business Reporting and Oligopoly Competition*

Abstract. This article presents a model in which the impact of international accounting standards on product market competition can be assessed. Formulating the choice of disclosure rules as the first stage in a multistage game between countries and representative incumbent and entrant firms, we establish conditions under which an enforceable international standard to require line-of-business (LOB) reporting could lead to strict improvement in the expected national welfare of participating countries over the equilibrium that would otherwise be attained. Additional results consider the effects of changes in certain model assumptions and the addition of tariffs as further trade policy instruments. Résumé. Les auteurs proposent un modèle permettant d'évaluer l'incidence des normes comptables internationales sur la concurrence, sur les marchés de produits. Ils posent d'abord le choix des règles de présentation de l'information comme étant la première étape d'un jeu à multiples épisodes entre les pays et entre les sociétés en place représentatives du secteur et les nouvelles venues. Ils établissent ensuite les conditions dans lesquelles l'application possible d'une norme internationale exigeant la publication d'information sectorielle pourrait mener à une stricte amélioration de la prospérité nationale attendue des pays participants, au-delà du niveau d'équilibre qui serait autrement atteint. Les auteurs s'intéressent entre autres, dans leurs travaux, aux répercussions de la modification de certaines hypothèses du modèle et de l'introduction des tarifs douaniers à titre d'instruments de la politique d'échange.     

High‐Performance Work System and Organizational Turnover in East and Southeast Asian Countries1

In this paper, we examine the impact of high‐performance work systems (HPWSs) on both voluntary and involuntary organizational turnover rates. Most research on this topic has been done in the United States. Given the global competitive pressures confronting many of the countries of East and Southeast Asia, companies in this region are seeking to become more flexible and often adapt HPWSs practices. We explore the impact of HPWSs in both locally owned companies and subsidiaries of multinational corporations in Korea, Taiwan, Singapore, and Thailand. These countries have significantly different national cultures from the United States and most other Western countries and HPWSs effects in relation to turnover might vary from the studies based in the United States. Our findings are, however, somewhat consistent with U.S.‐based studies. In fact, HPWSs were found to be more effective in reducing turnover in locally owned companies than in subsidiaries of Western and Japanese multinational companies.     

Risky Debt,Investment Incentives,and Reputation in a Sequential Equilibrium

The agency relationship of corporate insiders and bondholders is modeled as a dynamic game with asymmetric information. The incentive effect of risky debt on the investment policy of a levered firm is studied in this context. In a sequential equilibrium of the model, a concept of reputation arises endogenously resulting in a partial resolution of the classic agency problem of underinvestment. The incentive of the firm to underinvest is curtailed by anticipation of favorable rating of its bonds by the market. This anticipated pricing of debt is consistent with rational expectations pricing by a competitive bond market and is realized in equilibrium. Some empirical implications of the model for bond rating, debt covenants, and bond price response to investment announcements are explored.     

Strategy-Proofness and the Tops-Only Property

A social choice function satisfies the tops‐only property if the chosen alternative only depends on each person's report of his most‐preferred alternatives on the range of this function. On many domains, strategy‐proofness implies the tops‐only property provided that the range of the social choice function satisfies some regularity condition. The existing proofs of this result are model specific. In this paper, a general proof strategy is proposed for showing that a strategy‐proof social choice function satisfies the tops‐only property when everyone has the same set of admissible preferences.     

The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives

The “annuity puzzle,” conveying the apparently low interest of retirees in longevity insurance, is central to household finance. Two possible explanations are “public care aversion” (PCA), retiree aversion to simultaneously running out of wealth and being in need of long‐term care, and an intentional bequest motive. To disentangle the relative importance of PCA and bequest motive, we estimate a structural model of the retirement phase using a novel survey instrument that includes hypothetical questions. We identify PCA as very significant and find bequest motives that spread deep into the middle class. Our results highlight potential interest in annuities that make allowance for long‐term care expenses.     

The market for American state government bonds in Britain and the United States, 1830–431

In the 1830s the British and American economies were hit by a series of shared macroeconomic shocks. This paper investigates the role of markets for America's State bonds in Britain and the USA during and between the crises in 1837, 1839, and 1842.There is strong evidence that the crises in 1839 and 1842 originated in the USA and spread to Britain. There is also strong evidence that credit markets for American state bonds were tighter in the USA than in London between 1839 and 1842. The idea that the depression that began in 1839 in the USA was triggered by credit conditions in Britain and transmitted via the market for state credit, finds no support here.     

Capital Market Experience for Financial Accounting Students*

Abstract. In this paper we present an innovative teaching tool for introductory financial accounting students that promotes active learning using methods at the frontier of market research. We describe the implementation of an asset market where students assume the role of traders in order to learn the role of information in price formation. We discuss the pedagogical questions which are addressed in the design of this market, and we relate the responses to questionnaires distributed to students at the end of the quarter. When we control for prior grade point averages (GPAs) of students, we find that those who participate in the market had better classroom performance. Résumé. Les auteurs présentent ici un instrument pédagogique innovateur, à l'intention des étudiants des cours d'introduction à la comptabilité financière, favorisant l'apprentissage dynamique grâce à l'utilisation de méthodes voisinant de près l'étude de marché. Ils décrivent la mise en place d'un marché de biens où les étudiants assument les fonctions de négociateurs en vue d'apprendre quel est le rôle de l'information dans la formation des prix. Ils analysent les questions pédagogiques que soulève la conception de ce marché et font état des réponses des étudiants aux questionnaires qui leur sont distribués à la fin du trimestre. Lorsqu'ils contrôlent les notes moyennes antérieures des étudiants, les auteurs constatent que ceux qui ont participé au marché font preuve d'un rendement supérieur en classe.