MODELING THE INCIDENCE OF SELF‐EMPLOYMENT: INDIVIDUAL AND EMPLOYMENT TYPE HETEROGENEITY

Modeling the incidence of self‐employment has traditionally proved problematic. Although the supply‐side characteristics of the self‐employed are well documented, we argue that the literature has neglected demand‐side aspects. We explore the determinants of self‐employment using the U.S. Survey of Consumer Finances. We present results from an econometric framework that allows us to model, separately and simultaneously, the influences of individual heterogeneity (i.e., supply‐side factors) and employment type heterogeneity (i.e., demand‐side factors) on the probability of self‐employment. Our findings suggest that while individual characteristics are important determinants of self‐employment, there are factors specific to the type of employment that influence self‐employment. (JEL J23, J33, C25, C10)     

HOW MUCH DO STUDENTS MATTER? APPLYING THE OAXACA DECOMPOSITION TO EXPLAIN DETERMINANTS OF ADEQUATE YEARLY PROGRESS

The federal government and many state governments have recently passed legislation that punishes school districts for not showing consistent improvement in standardized test scores. This article measures the extent to which school performance reflects student characteristics. After splitting schools in the state of Washington based on adequate yearly progress, the authors find that an overwhelming percentage of the difference between high- and low-performing schools is explained by characteristics beyond the control of school administrators. Thus legislation designed to penalize poorly performing schools may hurt students who are most in need of academic aid. (JEL I2 )     

THE IMPACT OF TRADE AND INVESTMENT AGREEMENTS ON AUSTRALIA'S INWARD FDI FLOWS

International trade and investment agreements are one of the primary instruments of global financial liberalisation. They are enacted to enhance the flows of foreign direct investment (FDI) between signatories by reducing regulatory barriers to investment; promoting stable host investment environments; and guaranteeing investors against non‐commercial risk. As a net capital importer, Australia has sought to attract FDI through participation in such accords since the early 1980s. This paper examines the determinants of Australia's inward FDI flows—focussing specifically on the effects of trade and investment agreements. Using panel data, we find that both bilateral trade and bilateral and multilateral investment agreements attract FDI flows into Australia, thereby indicating that the policy of enticing FDI through participation in these accords is quite possibly effective.     

Fair Value Accounting and Debt Contracting: Evidence from Adoption of SFAS 159

We examine how fair value accounting affects debt contract design, specifically the use and definition of financial covenants in private loan contracts. Using SFAS 159 adoption as our setting, we find that a small but significant proportion of loans (14.5%) modify covenant definitions to exclude the effects of SFAS 159 fair values. Only a limited number of these modifications exclude assets elected at fair value (less than 7%), while all exclude liabilities elected at fair value. Notably, we document that covenant definition modification is unassociated with ex ante fair value elections. We find that covenant definition modification positively varies with common incentive problems attributed to fair value accounting and negatively varies with benefits attributed to fair value accounting. Our results suggest that fair value accounting is not uniformly detrimental for debt contracting and fair value adjustments are included when they are most likely to improve performance measurement.     

Job Security Provisions and Employment: Revised Estimates

This article provides estimates of the effect of statutory severance pay and notice on four labor market outcome indicators, closely following Lazear (1990) but correcting for errors in his dependent variables and covariates. Although we corroborate the directional influence of severance pay for three of the indicators, there is little to suggest that its contribution to rising unemployment is material. Also contrary to Lazear, longer notice appears to be associated with broadly favorable outcomes.     

Explaining Financial Management Behavior for Koreans Living in the United States

Using a cross‐cultural conceptualization with a targeted sample of Americans and Koreans, it was noted that Koreans exhibited more responsible financial management behavior than Americans after controlling for locus of control, financial knowledge, and income interactions. Overall, financial knowledge was positively related to responsible financial behavior. No direct effects on financial management behavior were noted for locus of control or household income. Locus of control was found to mediate the effect of financial knowledge on financial behavior for Koreans. Being Korean did moderate between financial knowledge and financial behavior.     

Insider Trading in the OTC Market

In this paper, we examine the profitability of insider trading in firms whose securities trade in the OTC/NASDAQ market. Although the evidence suggests timing and forecasting ability on the part of insiders, high transaction costs (especially bid-ask spreads) appear to eliminate the potential for positive abnormal returns from active trading. By implication, outside investors who mimic the trading of insiders are also precluded from earning abnormal profits. In addition, we provide evidence on the determinants of insiders' profits. The data suggest that insiders closer to the firm trade on more valuable information than insiders removed from the firm.