In this paper, we review research into the economic consequences of voluntary and mandatory choices of accounting techniques and standards. We discuss how the predictions of extant economic consequence theories are driven by contracting and monitoring costs associated with management compensation contracts, bond covenants, regulation, and/or political visibility. We review empirical tests of economic consequence theories, categorize those tests, and discuss their strengths and weaknesses. The empirical tests reveal two systematic associations with accounting choice: size, a proxy for political visibility, and leverage, a proxy for contracting and monitoring costs of lending agreements. Interpretation of the results is difficult, due to general limitations of the tests. We conclude by suggesting some directions for future research, based on our analysis of the potential payoffs associated with different types of empirical tests.

Accounting systems, Incomplete information, Accounting techniques

Indexing historical cost accounting to has received considerable attention in the accounting literature. From a tax perspective, it is often argued that with historical cost accounting, increases effective corporate tax rates, ceteris paribus. (See Davidson and Weil [1978], Williams [1979], Bernard [1981], and Gonedes [1981].)1 A major reason is the failure of historical cost accounting to index the depreciation tax shield to inflation. But explicit indexation may not be necessary to achieve all the effects of indexation. The same effects can be attained, at least with respect to expected rates of inflation, if nominal interest rates incorporate unbiased forecasts of rates of inflation (Gonedes [1981, p. 247]).2 Davidson and Weil [1976] note that price-level adjusting the tax system would increase the depreciation tax shield, but it ... would diminish the tax-saving attribute of debt financing in a period of rising prices [1976, p. 99].

The principal finding of this paper is that the conventional pricing solution for the peak load pricing problem must be modified to be applicable to a joint facility that is utilized by heterogeneous groups of users. The paper indicates how extending the conventional model through a multidimensional approach to capacity, accounting for its physical dimensions as well as its time dimension, will require specific capacity charges to users independent of the time of consumption. Any additional congestion charges levied will not perform the conventional role of covering replacement capacity costs, but will be used to reduce current congestion costs.

This paper examines the identifiability of the coefficients of a single equation in a simultaneous equation model which is nonlinear only in the variables. The concept of identifiability in this model is motivated and developed using the closely related concept of observational equivalence. This framework is then utilized to develop necessary and sufficient conditions for identifiability when the disturbances are required to be independent of the exogenous variables. The approach recommended by Fisher is shown to yield sufficient but not necessary conditions for identifiability. For several relatively common special cases the necessary and sufficient conditions are found to simplify to the familiar rank condition for identifiability in the linear model. THE SIMULTANEOUS EQUATION MODEL that is nonlinear only in the variables has enjoyed widespread application in economics. Such models are linear in the parameters and typically seem to be linear in the variables as well, when viewing a single equation. In many models the nonlinearity in the variables arises due to endogenous variables entering in different forms in different equations (logged and unlogged form, for example). In macroeconometric models nonlinearity in the variables arises when the model includes endogenous real, nominal, and price variables, which are nonlinearly related.2 Whatever the reason for the nonlinearity in the variables, it is important to determine the conditions under which the equations of such models can be identified.

H ISPANIC American men have lower average wage rates than white non-Hispanics. In 1975 the average white non-Hispanic male wage-earner in the United States earned $5.97 an hour. Mexican men earned $4.31, 72% as much as white non-Hispanics; Puerto Rican men earned $4.52, 76% as much; and Cuban men earned $5.33, 89% as much as white non-Hispanics. By way of comparison, black men's average wages in 1975 were $4.65, 78% of the white male wage.' Several possible reasons for the Hispanics' lower wages come to mind. Among them are age and education, geographic location, immigration, language difficulties, and discrimination. For example, as shown in table 1, Mexicans and Puerto Ricans are younger, on average, than the white non-Hispanic population, and earnings tend to rise with age. Hispanics have lower average levels of education than white non-Hispanics, and wages are positively associated with education. Many Mexican Americans live in the Southwest, where prices are relatively low. Moreover, Hispanics are more likely to be recent immigrants and to lack fluency in English than white non-Hispanics, and so to be at a disadvantage in the labor market. In addition, there is a widespread belief that Hispanics suffer from employment discrimination, and cannot obtain the wages that their human capital would command if they were non-Hispanic whites. How much of the wage differentials described above are due to each of these factors, and to other inter-group differences in wage-related characteristics? In particular, how much impact does labor market discrimination have on the average Hispanic man's wage and how does this compare with discrimination against blacks? This paper provides answers to these questions. A few other efforts have been made to analyze the relative earnings of Hispanic and white nonHispanic men, using 1960 and 1970 Census data (Fogel, 1966; Poston and Alvirez, 1973; Poston, Alvirez, and Tienda, 1976; Long, 1977; and Gwartney and Long, 1978). We use more recent data from the 1976 Survey of Income and Education. This data set enables us to measure wage rates more accurately and to specify the wage function more completely than does the Census. Unlike previous analysts, in estimating the wage function we take account of possible selectivity bias due to the distinction between average wage offers and average observed wages. Thus, we hope to obtain a more accurate and up-to-date measure of labor market discrimination against Hispanic men. Section II explains the method used to separate the minority-white non-Hispanic wage differential into the portions due to differences in average characteristics and the portion due to differences in unobserved factors and discrimination, taking into account the possibility of selectivity bias in the observed wage sample. Section III describes the data used in the study and the specification of the wage equation. The breakdown of the observed wage differentials into components due to differences in participation in the wage and salary sector, local price levels, average characteristics, and discrimination are presented in section IV. Section V summarizes our findings and discusses their implications for efforts to improve the economic situation of Hispanics in the United States.

Dennis W. Carlton, The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables, The Review of Economics and Statistics, Vol. 65, No. 3 (Aug., 1983), pp. 440-449

The article focuses on the relationships between the macroeconomic performance of political administration and their popularity or vote getting ability. All of the studies that has been performed to analyze the relationships agree that votes and popularity can be explained well by models which suppose that voters judge policy makers on the basis of retrospective evaluation of past macroeconomic outcomes. While conventional popularity functions assume that voters simply punish inflation and reward output or low unemployment, voters who understand the long and short run relationships noted above would evaluate policymakers differently. Inflation in a given period is largely determined by past expectations of inflation, which cannot easily be controlled by current policy choices. The results of a study done by the author, show that data on presidential popularity are consistent with the hypothesis that voters are concerned with the future consequences of current economic policy choices and are aware of the nature of constraints imposed by economic reality.