Panel Data Analysis of Regional Differentials in the Registered Voter Turnout Rate and the Expected Benefits of Voting for Minorities

Voter participation rates vary widely across the 50 states. We seek to identify a source of this interstate variation, focusing upon the 2000, 2004, 2008, and 2012 general elections. Of note is that the latter two general elections featured a minority (i.e., African-American) nominee for president from one of the major political parties. Within the context of the rational voter model, we hypothesize that the presence of a minority candidate atop the ticket will boost minorities’ expected net benefits from voting, with the result that minority voter participation will be higher. Based on cross-sectional fixed-effects estimations, we find that states’ voter participation rates were unaffected by the percent of the population that was either African-American or Hispanic for the 2000 and 2004 election cycles, while states’ voter participation rates were positively related to the percent of the population that was either African-American or Hispanic for the 2008 and 2012 election cycles.     

The impact of the net percentage growth rate in the number of small firms on differential state-level employment growth rates in the US: an exploratory empirical note

This brief exploratory empirical note seeks to identify key determinants of geographic differentials in the percentage growth rate of state-level employment in the US, with the primary focus being on the percentage net growth rate in the number of small firms (i.e., those with fewer than 20 employees) in each state, where this variable serves as a de facto reflection of ‘entrepreneurship’. In the interest of identifying other key factors that influence state-level employment growth rates, the effective income tax rate in each state, quality of life elements and labour market considerations are also included in the analysis. The study period runs from the year 2000 to the year 2007, ending just prior to the ‘Great Recession’. The estimation results imply that the state-level employment growth rate in the US was an increasing function of the percentage net growth rate in the number of small firms in each state. Thus, it appears that the small firms growth rate may in fact be a significant source.     

The Valuation Effect of Accounting Standard 158 on Firms with High and Low Financial Risk

SFAS 158 mandated balance sheet disclosure of the funded status of firms’ Defined Benefit Pension Plan using the Projected Benefit Obligation (PBO) to estimate the pension liability. SFAS 158 caused a market phenomenon because the use of the PBO engendered dramatically higher estimates of pension liability and hence the perception of risk. Our work focuses on two aspects of this change in pension accounting: first, how will industry firms change their accounting strategy in light of the new rules, and second, how will firms’ stock prices be affected by the new allegedly better estimate of pension liability? Our research suggests that firms’ accounting strategies changed in that they use higher discount rates to estimate pension liability which offset the dramatic impact of using the PBO. In addition, we find that high financial risk firms’ tendencies to use higher discount rates increase with the firms’ leverage and decrease with liquidity. To test the market reaction we utilize standard event study methodology to investigate the effects of SFAS 158 on stock returns. Our findings suggest that firms with high (low) financial risk earn negative (positive) abnormal returns on and around relevant event dates preceding the implementation of SFAS 158.     

On the value relevance of SFAS No. 158

After considerable discussion and some controversy, Statement of Financial Accounting Standards No. 158 entitled, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” was implemented in 2006. An important goal of these standards was to enhance financial reporting transparency for defined benefit pension plans (FASB, 2006). This study evaluates how well SFAS No. 158 achieved its objective. In particular, we compare the respective pre and post-SFAS 158 incremental value relevance of the balance sheet and income statement for firms with defined benefit pension plans (DBPP). Results suggest that the value relevance of book value (net income) increased (decreased) for DBPP firms after the implementation of SFAS No. 158.     

Experimental evidence on the effect of earnings targets on managers' estimates in the financial statements

This paper reports on an experiment designed to provide evidence on whether external earnings targets, such as those imposed by analysts, influence managers' judgments about (and the related accuracy of) the value of assets/liabilities reported in the financial statements. Data from the experiment indicate that higher earnings targets result in managers reporting higher estimates of profitability/asset values, but also produce larger errors in estimating those amounts. The biased estimates and related errors are a result of managers being overly optimistic about their ability to generate outcomes that fully support their estimates. In addition, data indicate that managers, over-time, learn to make better estimates, but the relation between targets, estimates, and estimation errors persists. All of this occurred in a setting in which there were financial incentives to produce the most accurate estimates possible—nothing was to be gained by deliberately biasing estimates. This suggests that the earnings targets affected managers' judgment about amounts to be reported in the financial statements, and led to sub-conscious biases that produced results causing managers' estimates to be erroneously correlated with external earnings targets.     

Political competition in a model of economic growth: Some theoretical results

Summary We analyze the role of political competition on the type of economic policies that are selected in a one sector model of economic growth. We identify conditions under which neoclassical optimal growth plans occur, and conditions in which political business cycles occur. We find that the ability commit to multiperiod economic policy leads to less political stability of economic plans.Support for this research was provided in part by NSF grant #SES-9022932 to the California Institute of Technology. We are grateful to a referee for pointing out that our results could be extended to supra majority rules, as in Proposition 1.     

Incorporating fairness in generalized games of matching pennies

We examine individual behavior in generalized games of matching pennies. We have three main findings. First, individuals cooperate in these games; that is, they systematically select strategies that lead both players to obtain higher expected payoffs than in a Nash equilibrium. Second, existing models that assume altruistic preferences do not explain the cooperative behavior in these games. Third, among the main models in the extant literature, the only one that predicts the observed behavior is the quantal response equilibrium.     

Spread between the Moody’s Aaa-Rated Corporate Bond Yield and the Yield on Municipals: Co-integration Analysis

Atlantic Economic Journal - While the research linking interest rates to government deficits is extensive, the impact of other tax-related variables is uncommon. This study seeks to add to the...     

The functional form of the aggregate import demand equation : A comparison of three European economies

A more general approach than that of ‘best fit’ for choosing empirically the appropriate formulation of the aggregate import demand function for three small open European economies is presented. This approach leads to the choice of a particular form, from a class of forms, for a given specification of the aggregate import demand function. It was found that the log-linear form was preferred to the linear form. This is regarded as an interesting result, given it's economic implications for the type of economy studied in this paper, as it confirms earlier results by Khan and Ross for three different types of economy — the United States, Canada, and Japan.     

AXIOMATIZATION AND FORMALISM IN ECONOMICS

Abstract.  In this paper we address a number of issues in the historiography and methodology of the formalization of economics in the twentieth century. We argue that Debreu's approach to formalism pursuing his Bourbakist programme was based on Hilbert's version of finitism. The latter project attempted to retain its place in Cantor's 'paradise' and in so doing bequeathed serious methodological consequences. There was, however, at the turn of the twentieth century an alternative version of finitism available, that provided by Poincaré, which if adopted by economics would have led to a radically different approach to economic theorizing and modelling. We argue that these reflections must be embedded in an alternative larger methodological framework.