On Blending Competitive Trade Models

Three standard models typically discussed in the theory of international trade are the Ricardian model, the Heckscher‐Ohlin model and the Specific‐Factors model. Models are often compared with each other, in an attempt to analyze which model is best or fits reality better. Instead, I suggest that these international trade models can often be blended to take account of finite changes when, as a country develops, the appropriate model to be used changes as the pattern of production changes. Trade allows countries to produce fewer commodities than it consumes, and which commodities are selected to be produced may change as the economy grows in the size of its endowment bundle and/or technology changes. At issue is not only the question of which commodities are produced, but also how many commodities are produced, especially with reference to the number of productive factors.     

Optimal Two Sector Growth Models with Three Factors

The paper is devoted to construction of optimal trajectories in the model, which balances growth trends of investments in capital and labor efficiency. The model is constructed within the framework of classical approaches of the growth theory. It is based on three production factors: capital, educated labor and useful work. GDP level is described by a production function of the Cobb–Douglas type. The utility function of the growth process is given by an integral consumption index discounted on the infinite horizon. The optimal control problem is posed to balance investments in capital and labor efficiency. The problem is solved on the basis of dynamic programming principles. A novelty of the solution consists in constructing nonlinear stabilizers constructed on the feedback principle, which leads the system from any current position to a steady state. Growth and decline trends of the simulated trajectories are studied for all components included in the model.     

Identifying fiscal policy (in)effectiveness from the differential counter‐cyclicality of government spending in the interwar period

Differences across decades in the counter‐cyclical stance of fiscal policy can identify whether the growth in government spending affects output growth and so speeds recovery from a recession. We study government‐spending reaction functions from the 1920s and 1930s for twenty countries. There are two main findings. First, surprisingly, government spending was less counter‐cyclical in the 1930s than in the 1920s. Second, the growth of government spending did not have a significant effect on output growth, so that there is little evidence that this feature of fiscal policy played a stabilizing role in the interwar period.     

Between a cap and a higher price: Modelling the price of dairy quotas under price ceiling legislation

This paper considers various policy alternatives to price ceiling legislation in the market for production quotas in the dairy farming sector in Quebec. I develop a model of farmers’ demand for quotas and estimate a structural parameter that is required for the counterfactual experiments. Using my econometric results and the modelled equilibrium price, I estimate the price of dairy quotas over the period 1993–2011. The counterfactual experiments indicate that the price of quotas could be reduced to the ceiling price through a 4.16% expansion of the aggregate supply of quotas, or through moderate trade liberalization of Canadian dairy products.     

Foreign Institutional Ownership and the Global Convergence of Financial Reporting Practices

This paper investigates whether foreign institutional investors affect the global convergence of financial reporting practices. Using several measures of reporting convergence, we show that U.S. institutional ownership is positively associated with subsequent changes in emerging market firms’ accounting comparability to their U.S. industry peers. We identify this association using an instrumental variable approach that exploits exogenous variation in U.S. institutional investment generated by the JGTRRA Act of 2003. Further, we provide evidence of a specific mechanism—the switch to a Big Four audit firm—through which U.S. institutional investors affect reporting convergence. Finally, we show that, for emerging market firms, an increase in comparability to U.S. firms is associated with an improvement in the properties of foreign analysts’ forecasts.     

Audit Firm Tenure,Non‐Audit Services,and Internal Assessments of Audit Quality

We use data from internal assessments of audit quality in a Big 4 firm to investigate the impact of audit firm tenure and auditor‐provided non‐audit services (NAS) on audit quality. We find that first‐year audits receive lower assessments of audit quality and that quality improves shortly thereafter and then declines as tenure becomes very long. Partitioning our sample between SEC registrants and private clients, we find that the decline in audit quality in the long tenure range is attributable to audits of private clients. For audits of SEC registrants, the probability of a high quality audit reaches its maximum with very long tenure. We also find that audit fees are discounted for first‐year audits but auditor effort is higher than in subsequent years. We find no association, on average, between total NAS fees and audit quality in the full sample but observe that total NAS fees are positively associated with quality for SEC registrants and negatively associated with quality for privately held clients. Our findings are important for regulatory policies related to audit firm tenure and auditor‐provided NAS.     

Earnings Metrics,Information Processing,and Price Efficiency in Laboratory Markets

An enduring issue in financial reporting is whether and how salient summary measures of firm performance (“earnings metrics”) affect market price efficiency. In laboratory markets, we test the effects of salient earnings metrics, which vary in how they combine persistent and transitory elements, on investor information search, beliefs about value, offers to trade, and market price efficiency. We find that including transitory elements in salient earnings metrics causes traders to search unnecessarily for further information about these elements and to overestimate their effect on fundamental value relative to a rational benchmark. In contrast, separately displaying persistent elements in earnings increases the accuracy of traders’ value estimates. Prices generally reflect traders’ beliefs about value, and prices are most efficient when transitory elements are excluded from earnings metrics entirely. Our study contributes to research on salience effects in financial reporting by showing that including transitory elements in salient earnings metrics causes inefficient information search and biased beliefs about value that can aggregate to affect market prices. We also contribute to research in experimental markets by showing that redundant disclosure is not always beneficial; redundant disclosure of transitory earnings elements, in particular, appears to have negative consequences for investor behavior and market efficiency.     

The Cost of Capital for Alternative Investments

Traditional risk factor models indicate that hedge funds capture pre‐fee alphas of 6% to 10% per annum over the period from 1996 to 2012. At the same time, the hedge fund return series is not reliably distinguishable from the returns of mechanical S&P 500 put‐writing strategies. We show that the high excess returns to hedge funds and put‐writing are consistent with an equilibrium in which a small subset of investors specialize in bearing downside market risks. Required rates of return in such an equilibrium can dramatically exceed those suggested by traditional models, affecting inference about the attractiveness of these investments.     

A simple template for pitching research

In this article, I propose a simple new research tool – a template designed for pitching research. The two‐page pitching template begins with four ‘preliminaries’: working title, research question, key papers and motivation. Following this is the core of the template based on a ‘3‐2‐1 countdown’, namely THREE elements – idea, data and tools; TWO questions – What's new? and So what?; and ONE bottom line – contribution. The template ends with ‘other’ considerations. Finance and accounting examples are given to illustrate application of the template.     

‘Consumer Ethics: The Role of Acculturation in U.S. Immigrant Populations’

This study examines the role of acculturation in shaping consumers’ views of ethics. Specifically, it examines the relationships between the desire to keep one’s original culture, the desire to adopt the host culture, and the four dimensions of the Muncy and Vitell (Journal of Business Research Ethics 24(4), 297, 1992) consumer ethics scale. Using two separate immigrant populations – one of former Middle-Eastern residents now living in the U.S. and the other of Asian immigrants in the U.S. – results indicate that those who want to keep their original culture are less tolerant of unethical consumer activities, while those who are more willing to adopt the host culture are more tolerant of these same consumer activities. Furthermore, the immigrants in both studies who are more tolerant of unethical consumer activities are those who are generally somewhat younger and with less formal education. The relationship between gender and consumer ethics was not significant.