We study lease accounting in an international panel data set to examine how accounting outcomes vary with two features of accounting standards: the emphasis on using professional judgement to apply principles, and the presence or absence of bright-line tests. We study four countries—Australia, Canada, the UK, and the US—and companies in two lease-intensive industries—retail and transportation. Our primary study period spans the time when Australia and the UK switched from domestic to international accounting standards, and in one test, we also consider Canada’s transition to international standards. We find that neither an explicit requirement to apply a principle nor omitting bright-line tests materially increases the use of capital lease treatment among these firms. Overall, we conclude that this financial reporting outcome is relatively insensitive to these standard-setting tools.

This article provides direct empirical evidence on the relationship between technology and firms’ global sourcing strategies. Using new data on U.S. firms’ decisions to contract for manufacturing services from domestic or foreign suppliers, I show that a firm’s adoption of communication technology between 2002 and 2007 is associated with a 3.1 point increase in its probability of fragmentation. The effect of firm technology also differs significantly across industries; in 2007, it is 20% higher, relative to the mean, in industries with production specifications that are easier to codify in an electronic format. These patterns suggest that technology lowers coordination costs, though its effect is disproportionately higher for domestic rather than foreign sourcing. The larger impact on domestic fragmentation highlights its importance as an alternative to offshoring, and can be explained by complementarities between technology and worker skill. High technology firms and industries are more likely to source from high human capital countries, and the differential impact of technology across industries is strongly increasing in country human capital.

This paper analyzes participation and information aggregation in a common-value election with continuous private signals. In equilibrium, some citizens ignore their private information and abstain from voting, in deference to those with higher-quality signals. Even as the number of highly-informed peers grows large, however, citizens with only moderate expertise continue voting, so that voter participation remains at realistic levels (e.g. 50 % or 60%, for simple examples). The precise level of voter turnout, along with the margin of victory, are determined by the distribution of expertise. Improving a voter’s information makes her more willing to vote, consistent with a growing body of empirical evidence, but makes her peers more willing to abstain, providing a new explanation for various empirical patterns of voting. Equilibrium participation is optimal, even though the marginal voter may have very little (e.g. below-average) expertise, and even though non-voters’information is not utilized.

This paper helps close the gap between theory and empirical evidence in the literature on asymmetric employer learning. If an employer's private learning is reflected in a worker's wage and one employer's private information is transmitted to the next when the worker makes a job-to-job transition, then asymmetric employer learning will appear in wage regressions as learning over an employment spell. Extending previous work that assumes all learning takes place publicly, this paper develops wage regressions that test for both asymmetric employer learning and public learning. The empirical results, including tests of alternative explanations, are consistent with asymmetric employer learning's having at least as much of an effect on wages during an employment spell as does public learning. The model developed in this paper illustrates how the story suggested by the empirical work might unfold. It shows that outside firms can profitably compete with a better-informed employer through bidding wars, even when the worker is equally productive in all firms. Furthermore, this competition results in different wages for workers with the same publicly observable characteristics, a result that previous models of asymmetric learning have not produced.

This paper uses an empirical dynamic oligopoly model of the commercial aircraft industry to analyse industry pricing, industry performance, and optimal industry policy. A novel feature of the model with respect to the previous literature is that entry, exit, prices, and quantities are endogenously determined in Markov perfect equilibrium (MPE). We find that many unusual aspects of the aircraft data, such as high concentration and persistent pricing below static marginal cost, are explained by this model. We also find that the unconstrained MPE is quite efficient from a social perspective, providing only 10% less welfare on average than a social planner would obtain. Finally, we provide simulation evidence that an anti-trust policy in the form of a concentration restriction would be welfare reducing.

This paper develops a model of repeated innovation with knowledge spillovers. The model's novel feature is that firms compete on two dimensions: (1) product quality, where one firm's innovation ultimately spills over to other firms; and (2) distribution costs, where there are no spillovers across firms and where learning-by-doing on the part of incumbent firms gives them a competitive advantage over would-be entrants. Such firm-specific learning-by-doing has two important consequences: (1) it can in some circumstances dramatically reduce the long-run average level of innovation; (2) it leads to endogeneous bunching, or waves, in innovative activity.