Peer Effects and Social Networks in Education

We develop a model that shows that, at the Nash equilibrium, the outcome of each individual embedded in a network is proportional to his/her Katz–Bonacich centrality measure. This measure takes into account both direct and indirect friends of each individual, but puts less weight to his/her distant friends. We then bring the model to the data using a very detailed dataset of adolescent friendship networks. We show that, after controlling for observable individual characteristics and unobservable network specific factors, a standard deviation increase in the Katz–Bonacich centrality increases the pupil school performance by more than 7% of one standard deviation.     

Performance Measurement under Asymmetric Information and Investment Constraints

The fact that investment policies are often restricted appears to have been neglected in the performance measurement literature. This paper, using a standard information model, shows how the introduction of constraints on the proportion of assets to be invested in the market affects the expected portfolio returns and the value of a portfolio manager's performance. The results are related to the classical Treynor and Mazuy (1966) conjectures about characteristic lines.     

Professionalization in Action: Accountants' Attempt at Building a Network of Support for the WebTrust Seal of Assurance*

This paper examines the attempts by the North American accounting institutes to develop a new market in e‐commerce assurance based on their claims to professional expertise through the WebTrust project. Employing actor‐network theory in an in‐depth longitudinal field study, we investigate how WebTrust was originally developed and promoted as a seal of business‐to‐consumer assurance, which largely failed to generate support in the marketplace. Proponents were subsequently able to generate more interest in the eyes of managers of online organizations by reshaping WebTrust as a flexible set of principles and criteria for systems advice and business‐to‐business assurance. Our analysis suggests that attempts to expand the accounting profession's domain of expertise reflect a trial‐and‐error process where the outcome achieved may be far from the vision that motivated the institutes into undertaking the project in the first place. We further show that the initial network of support for such projects can be quite fragile and dynamic as various actors reposition themselves around the shifting meanings attributed to the project.     

Effects of Capital Gains Taxation on Life-Cycle Investment and Portfolio Management

We examine the impact of capital income taxation, both accrual forms of taxation and taxation of realized capital gains, on total savings and the demand for corporate financial instruments. We find that investors may hold both debt and equity in the face of effective collection of capital gains taxation even in a flat tax system. We also find that the two taxes will have substantially different effects on saving and consumption behavior, making it unlikely that the tax structure can be summarized by any single equivalent accrual tax rate.     

LOCAL LABOR MARKETS,JOB MATCHING,AND URBAN LOCATION*

We present a new way of modeling local labor markets by linking the space of workers' skills and the physical space of cities. The key lesson of our analysis is that firms exploit workers in these two spaces by setting wages that are below the competitive level. The degree of monopsony power depends on the elasticity of the firm's labor pool, which is inversely related to the costs workers incur in commuting and acquiring skills. Our analysis thus shows how socioeconomic ghettos emerge as workers with poor skill matches are also those who incur the highest commuting costs.     

Sharing the Cost of a Public Good without Subsidies

We study the construction of a social ordering function for the case of a public good financed by contributions from the population. We extend the analysis of Maniquet and Sprumont (2004) to the case when cost shares cannot be negative, i.e., agents cannot receive subsidies from others. We adapt the Maniquet–Sprumont defense of public good welfare egalitarianism to this context. Weakening their Free Lunch Aversion axiom and adding a continuity requirement allows us to characterize the public good welfare maximin social ordering function.     

CAP Forum on Enron: Professional Insecurity and the Erosion of Accountancy's Jurisdictional Boundaries*

This study examines attitudes about professionalism in accounting shortly before the debacles of Enron and Andersen. Interviews with experienced Canadian chartered accountants (CAs) conducted mostly in late 2000 and early 2001 indicate significant doubts about the notion of auditor independence and a relatively high degree of uncertainty about the future of the profession. Accountants also expressed significant difficulties in describing the basic features of what it means to be a professional accountant. On the basis of these observations, we introduce and detail the construct of “professional insecurity". Relying on Giddens's theoretical developments on the role of trust and systems of expertise in today's society, we reflect on the significance and implications of the professional insecurity of CAs, particularly its impact on accountancy's ability to hold on to its jurisdictional boundaries. Our thesis is that the difficulties that accountants experienced in their day‐today lives in sustaining a coherent sense of self‐identity were particularly stressful to them given people's fundamental need for coherence, and this significantly affected the capacity of their profession to hold jurisdiction.