Is there too much or too little research and development (R&D)? In this paper we bridge the gap between the recent growth literature and the empirical productivity literature. We derive in a growth model the relationship between the social rate of return to R&D and the coefficient estimates of the empirical literature and show that these estimates represent a lower bound. Furthermore, our analytic framework provides a direct mapping from the rate of return to the degree of underinvestment in research. Conservative estimates suggest that optimal R&D investment is at least two to four times actual investment.

ABSTRACT This paper uses commercial aircraft transactions to determine whether capital constraints cause firms to liquidate assets at discounts to fundamental values. Results indicate that financially constrained airlines receive lower prices than their unconstrained rivals when selling used narrow‐body aircraft. Capital constrained airlines are also more likely to sell used aircraft to industry outsiders, especially during market downturns. Further evidence that capital constraints affect liquidation prices is provided by airlines' asset acquisition activity. Unconstrained airlines significantly increase buying activity when aircraft prices are depressed; this pattern is not observed for financially constrained airlines.

The evaluation of alternatives during organizational decision making was investigated to uncover evaluation tactics used by decision makers and how these tactics and complexity influenced success. Evaluation tactics that relied upon subjective, judgmental, bargaining, and analytical inferences were uncovered from 317 strategic decisions. The complexity of these decisions was measured by the numbers of alternatives considered, number of criteria used, and perceived difficulty of the evaluation task to identify conditions under which the evaluation tactics were successful. The managerial implications of evaluating alternatives with the tactics that used judgmental, bargaining, analytical, and subjective inferences under different levels of complexity are discussed.

Research using U. S. manufacturing data finds that job destruction fluctuates more over time than job creation, but some new data indicate that this behavior is not shared in growing sectors, where job creation varies more. An explanation for this finding based on the interaction between (S,s)-type adjustment and trend employment growth delivers some tight predictions for the relationship between trend growth and the volatility of creation relative to destruction. Although it scores some notable successes, the simple (S,s)-based model augmented with a low-frequency trend cannot fully account for the strength of the empirical relationship between relative gross-flow volatility and trend growth across one-digit industries.

In 1990 Wisconsin began providing vouchers to a small number of low-income students to attend nonsectarian private schools. Controlling for individual fixedeffects, I compare the test scores of students selected to attend a participating private school with those of unsuccessful applicants and other students from the Milwaukee public schools. I find that students in the Milwaukee Parental Choice Program had faster math score gains than, but similar reading score gains to, the comparison groups. The results appear robust to data imputations and sample attrition, although these deficiencies of the data should be kept in mind when interpreting the results.

From 1863–1935, regulators imposed contingent liability on bank shareholders to discourage risk taking. Using data from 1900 to 1915, I find that banks subject to stricter liability rules have lower equity and asset volatility, hold a lower proportion of risky assets, and are less likely to increase their investment in risky assets when their net worth declines, consistent with the hypothesis that stricter liability discourages commercial bank risk taking. These findings provide lessons for current bank regulatory policy and show that the shape of the residual claimant's payoff function has a significant impact on managerial incentives and firm performance.

Most households persistently invest in riskless assets but not stocks, and may do so because they perceive information required for market participation to be costly relative to expected benefits. In a Consumption Capital Asset Pricing Model (CCAPM) increased risk aversion, income risk, and lower resources reduce the information expense sufficient to deter stockholding. Bivariate probit analysis using the 1983–1989 Survey of Consumer Finances shows that households with lower risk aversion, higher education, and greater wealth who were nonstockholders in 1983 had an increased conditional probability of entering by 1989, whereas 1983 stockholders with lower resources, more limited education, and greater risk aversion were more likely to be nonstockholders by 1989.

[This study investigates whether the net deferred tax liabilities disclosed under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS No. 109) provides additional value-relevant information over the disclosure required by Accounting Principles Board Opinion No. 11, Accounting for Income Taxes (APB No. 11). Evidence suggests that SFAS No. 109 data represent value-relevant information above and beyond APB No. 11. Additionally, evidence indicates that the changes made by SFAS No. 109-the separate recognition of deferred tax assets, the creation of valuation allowances for deferred tax assets and the adjustment of deferred tax accounts for enacted tax rate changes-each provide value-relevant firm data. These results suggest that SFAS No. 109 increased the value-relevance of deferred tax amounts in financial statements.]