Tax Expense Momentum

We investigate the joint hypothesis that (1) tax expense contains information about core profitability that is incremental to reported earnings and (2) that information is reflected in stock prices with a delay. We find that seasonally differenced quarterly tax expense, our proxy for tax expense surprise, is related positively to future returns. This anomaly is separate from previously documented pricing anomalies based on financial and tax variables. Additional investigation reveals that tax expense surprise is related positively to changes in future quarterly earnings and tax expense, and both those future changes are related positively to future returns. While the returns to investing in predictable future earnings changes has been documented before, these results suggest that predicting changes in future tax expense also generates incremental future returns.     

Prices or Knowledge? What Drives Demand for Financial Services in Emerging Markets?

Financial development is critical for growth, but its microdeterminants are not well understood. We test leading theories of low demand for financial services in emerging markets, combining novel survey evidence from Indonesia and India with a field experiment. We find a strong correlation between financial literacy and behavior. However, a financial education program has modest effects, increasing demand for bank accounts only for those with limited education or financial literacy. In contrast, small subsidies greatly increase demand. A follow‐up survey confirms these findings, demonstrating that newly opened accounts remain open and in use 2 years after the intervention.     

Why Are Quit Rates Lower Among Defense Contractors?

This paper presents empirical evidence of lower quit rates at small manufacturers with defense contracts and examines whether this is associated with differences in their human resource policies and organizational practices and strategies. We take advantage of an original data set to compare labor quits, workforce skills, and occupational structure between defense‐contracting and noncontracting small manufacturers in eastern Pennsylvania. We find that the remarkably large defense contractor advantage in quit rates—7 percentage points—is almost totally explained by differences in skills, operational strategies, and workforce management and training practices, suggesting a mediation effect through these HR practices. Defense‐contracting status emerges as an important overlooked variable in HRM studies.     

THE ECONOMICS AND POLITICS OF INDUSTRIAL POLICY: SOME LESSONS FROM THE U.S. AND ABROAD

The accelerating United States trade deficit has again focused widespread political attention on industrial policy issues. However, given the breadth and complexity of the industrial policy issues, we can be confident that strengthening the U.S. international trade position will not be sufficient to quell concern over this area of economic policy.     

Academic Workers and Union Membership: An Inevitable Dilution of Solidarity?

The growth of service employment and new forms of work has supposedly fostered the diffusion of individual orientations at the expense of traditional forms of union solidarity. These developments suggest that academics are likely to manifest an individualist orientation and a weak attachment to trade union membership. Based on a survey of unionized employees in a university setting, we examine whether there are differences in union attachment and solidarity between professionals and other occupational groups.     

KINKED DEMAND CURVE THEORY AND THE MICRO FOUNDATIONS OF KEYNESIAN INVOLUNTARY UNEMPLOYMENT

This paper presents a macroeconomic model in which firms have kinked demand schedules owing to asymmetries in the dissemination of price information amongst consumers. It is then shown that nominal wage reductions may be unable to increase employment, let along secure full employment. The necessary condition is that the lower branch of the kinked marginal revenue schedule be negative. In this case, prices are unresponsive to nominal wage declines, and there is no Pigou effect from lower nominal wages.