This study examines the strategic use of corporate philanthropy programs to achieve financial reporting objectives. Corporate-sponsored foundations allow managers to maintain stable levels of giving to charitable causes while providing substantial discretion as to the amount of contribution expense recorded on the income statement in any given period. I find that firms reporting small earnings increases make income-increasing discretionary foundation funding choices. This result is associated with firms that have strong equity market incentives to manage earnings. The evidence presented in this paper is consistent with firms using their charitable foundations as off-balance sheet reserves.

Increased awareness of the importance of non-bank financial infrastructures has brought increased concern about the potential for bailouts and the resultant moral hazard problem. This paper examines the question with regard to derivatives central counterparties. We consider the layers of protection that derivatives central clearing parties (CCPs) have established in the absence of an expectation of regulatory rescue. We then provide a model of the tension between the desire for ex post rescue of a systemically important financial infrastructure and the desire to maintain ex ante discipline on the infrastructure. The model illustrates the factors that should lead to relaxation or tightening of the financial regulator's discretion for rescue. We consider examples of failures of derivatives CCPs in order to highlight the importance of these considerations.

Dealers enter nonbinding expressions of interest during the Nasdaq preopening to promote price discovery and ease stock inventory management when the market opens. But does this practice of “indicating ahead” constitute best execution for an individual customer? Arguments in favor of the practice rely on the notion that best execution is a general condition as opposed to a concept applicable on a trade-by-trade basis. Some customers must sacrifice in individual instances to improve the functioning of the overall market. But the practice of indicating ahead violates the dealer agent's duty of loyalty to her individual customer. Moreover, the dealer's financial self-interest is best served by indicating ahead. Journal of Economic Literature Classification Numbers: G10, G18, K22.

The standard Principal–Agent (PA) model assumes that the principal can control the agent's consumption profile. In an intertemporal setting, however, Rogerson (1985, Econometrica53, 69–76) shows that given the optimal PA contract, the agent has an unmet precautionary demand for savings. Thus the standard PA model is invalid if the agent has access to credit markets. In this paper we generalize the standard PA model to allow for saving and borrowing by the agent. We show that the impact of such access critically depends upon the treatment of default. If default is not permitted, efficiency is strictly reduced by the introduction of credit markets, and the equilibrium level of borrowing or saving is indeterminate in the model. If default is allowed, however, the optimal contract depends upon the level of bankruptcy protection in the economy, which is described by a minimum level of wage income. We show that there is an optimal intermediate range of bankruptcy protection. Within this range, allowing default increases efficiency in the economy relative to the case of no default. Also, the model predicts specific levels of consumer debt, interest rates, and default rates as functions of the level of bankruptcy protection level. Journal of Economic Literature Classification Numbers: D80, G21, G28, J30.

The national origin of an individual's human capital is a crucial determinant of its value. Education and labor market experience acquired abroad are significantly less valued than human capital obtained domestically. This difference can fully explain the earnings disadvantage of immigrants relative to comparable natives in Israel. Variation in the return to foreign schooling across origin countries may reflect differences in its quality and compatibility with the host labor market. The return to foreign experience is generally insignificant. Acquiring additional education following immigration appears to confer a compound benefit by raising the return to education acquired abroad.

Using Canadian data, I investigate the relationships among sectoral mobility, unemployment spells, and total unemployment. Recent North American evidence suggests that incidence shifts toward high wage-high tenure workers may increase equilibrium unemployment through decreasing sectoral mobility and increasing spells. Using a multiple spell transition model, I find that, while shifts toward such workers may have these effects, composition changes that lead to higher mobility can also increase unemployment. A further investigation into the relative roles of mobility and spell lengths in driving total unemployment indicates that the influence of the former is comparatively small.

This study tests the efficiency wage hypothesis by estimating wage and quit equations with data from the Employment Opportunity Pilot Project survey of firms. An efficiency wage model is derived that predicts effects of turnover costs and unemployment on wages as functions of first and second derivatives from the quit equation. The model is tested by examining the relationships between the coefficients in the wage and quit equations; the results are generally favorable to efficiency wage theory. Other important findings are that firm characteristics raising workers' productivity tend to raise wages and that a rise in turnover costs reduces quits.

This article investigates cyclicality in real wages between 1969 and 1982, using Panel Study of Income Dynamics data. There is little evidence that movements in and out of the labor market induced aggregate wage cyclicality during these years. However, cyclicality in the movement of workers between heterogeneous labor-market sectors affected aggregate wage cyclicality. While sector location is important, sector selectivity is not correlated with wages. Yet, even within sectors, cyclicality is present in real wages over this time period and is the result of cyclicality in overall wage levels, as well as in the coefficients associated with particular worker characteristics.

This paper explores the differential nature of labor-supply decisions regarding weeks of work per year and hours of work per week among female household heads. A model of labor supply that separates the weeks/hours decision is presented and estimated, allowing for simultaneity in the weeks/hours decision, as well as for the presence of either fixed costs or weeks and hours constraints. The results indicate that not only are weeks and hours decisions separate from the labormarket participation decision, but they are also quite different from each other, although they appear to be simultaneously determined.

According to Lazear, workers and firms enter into long-term implicit contracts that discourage shirking and malfeasance by shifting compensation to the end of the contract. Such "delayed payment" contracts are less likely to occur in jobs in which it is comparatively simple to monitor worker effort. This paper uses data from the National Longitudinal Survey and the Dictionary of Occupational Titles to test that hypothesis. In particular, it tests whether jobs that involve repetitive tasks tend to be characterized by an absence of pensions, mandatory retirement, long job tenures, and high wages for older workers.