Bank Competition: Measurement,Decision‐Making,and Risk‐Taking

This paper investigates whether greater competition increases or decreases individual bank and banking system risk. Using a new text‐based measure of competition, and an instrumental variables analysis that exploits exogenous variation in bank deregulation, we provide robust evidence that greater competition increases both individual bank risk and a bank's contribution to system‐wide risk. Specifically, we find that higher competition is associated with lower underwriting standards, less timely loan loss recognition, and a shift toward noninterest revenue. Further, we find that higher competition is associated with higher stand‐alone risk of individual banks, greater sensitivity of a bank's downside equity risk to system‐wide distress, and a greater contribution by individual banks to downside risk of the banking sector.     

ASSESSING THE WELFARE IMPACT OF TAX REFORM: A CASE STUDY OF THE 2001 U.S. TAX CUT

This paper implements a relatively simple methodological approach to estimate the impact on family welfare of a specific tax reform. The measured impact can differ greatly from simple marginal tax rate comparisons, and conclusions about the distribution of the welfare impact can vary depending on the basis of comparison. For example, absolute welfare gains from the 2001 U.S. tax reform were concentrated among the highest and lowest income families, whereas welfare gains measured as a share of pre‐tax income are found to be nearly monotonically declining in income.     

Growth in Australian Cities

This paper is an empirical investigation of the determinants of city growth in Australia from 1981 to 1991. Our basic goal is to explain the population and labour force growth of a cross-section of cities in the time period using variables representing the initial characteristics of cities. While we find that city growth is negatively correlated with initial size, government sector employment and a city's level of specialization, we also find it to be positively correlated with various measures for the degree of human capital investment in the city. Our results, while simple and non-structural, mirror the conclusions of studies in the US indicating the importance of studying city level growth in order to understand economy-wide growth.     

A ROBUST ESTIMATION OF THE EFFECTS OF TAXATION ON CHARITABLE CONTRIBUTIONS

In contrast to earlier studies, recent research finds that charitable contributions are tax-price inelastic, suggesting that the itemized deduction for contributions loses more tax revenue than it increases in contributions. The estimates from parametric methods are similar to those in earlier studies that find that charity appears to be elastic with respect to the tax price. Because specification tests raise doubts about the consistency of these methods, the authors use a two-stage semi-parametric method and find that contributions are price inelastic. Contributions to social welfare organizations, however, are price elastic; their deductibility loses less in revenues than is contributed. (JEL C14 , C34 )     

FABRIC SPECIALITY STORES: CONSUMER DISSATISFACTION WITH SELECTED IN-STORE ATTRIBUTES

This consumer dissatisfaction study focused on selected in-store attributes of the fabric speciality store. The procedure was to select fifteen fabric speciality stores at random in the Phoenix area and distribute thirty questionnaires to customers at each store. The 264 returns were analysed by examining the respondents' comments about the fabric speciality store most often shopped in, the respondents' ratings of the statements concerning the average fabric speciality store's attributes and the complaints the respondents made to fabric speciality stores. The fabric speciality store attributes found to be both important and dissatisfying included: salesperson's helpfulness, variety of fabrics, quality of fabrics, salesperson's product knowledge and fabric price.     

Before an Analyst Becomes an Analyst: Does Industry Experience Matter?

Using hand‐collected biographical information on financial analysts from 1983 to 2011, we find that analysts making forecasts on firms in industries related to their preanalyst experience have better forecast accuracy, evoke stronger market reactions to earning revisions, and are more likely to be named Institutional Investor all‐stars. Plausibly exogenous losses of analysts with related industry experience have real financial market implications—changes in firms’ information asymmetry and price reactions are significantly larger than those of other analysts. Overall, industry expertise acquired from preanalyst work experience is valuable to analysts, consistent with the emphasis placed on their industry knowledge by institutional investors.     

INFLATION HISTORY AND THE SACRIFICE RATIO: EPISODE-SPECIFIC EVIDENCE

This article examines whether episode-specific analysis can show a negative relationship between inflation and the slope of the Phillips curve that has been found in cross-country analysis. While the relationship between inflation and the Phillips curve slope is widely accepted from cross-country analysis, it has remained unproven in previous episode-specific studies. By defining inflation history as a weighted average of past inflation, this study finds a negative effect of inflation history on the sacrifice ratio, which is what is expected from the cross-country analysis. The negative relationship does not disappear even after including other conventional determinants of the sacrifice ratio. ( JEL E52, E31)     

JOB SEPARATION OUTCOMES OF WELFARE HIRES: INSIGHT FROM LINKED PERSONNEL AND STATE ADMINISTRATIVE DATA

This article makes use of a unique personnel data set and state administrative data to follow welfare and nonwelfare hires that separate from similar jobs with the same firm. Welfare hires are more likely to be on welfare after separation but are equally likely as similarly low–skilled nonwelfare hires to transition to another job after separation. Among those with a new job, welfare hires experience a significantly lower wage gain, suggesting that welfare hires would benefit (even more than nonwelfare hires) from focused assistance with job search and transition skills. ( JEL H53, J62, C35)     

Using Financial Accounting Data to Examine the Effect of Foreign Operations Located in Tax Havens and Other Countries on U.S. Multinational Firms' Tax Rates

This paper investigates the effect tax havens and other foreign jurisdictions have on the income tax rates of multinational firms based in the United States. We develop a new regression methodology using financial accounting data to estimate the average worldwide, federal, and foreign tax rates on worldwide, federal, and foreign pretax book income for a large sample of U.S. firms with and without tax haven operations. We find that on average U.S. firms that disclosed material operations in at least one tax haven country have a worldwide tax burden on worldwide income that is approximately 1.5 percentage points lower than firms without operations in at least one tax haven country. Our results also show that U.S. firms face a 4.4% current federal tax rate on foreign income whether or not they have tax haven operations. Finally, we find that U.S. firms with operations in some tax haven countries have higher federal tax rates on foreign income than other firms. This result suggests that in some cases, tax haven operations may increase U.S. tax collections at the expense of foreign country tax collections.