Knowledge that Transforms

[Unemployment statistics are not published by the Soviet government which claims unemployment was "liquidated" in the early 1930s. An unemployment rate for the Soviet urban population during the late 1970s is calculated from a survey of 2793 former Soviet citizens. Unemployment incidence, multiple spells, and unemployment duration by demographic characteristics are compared with U.S. patterns. Similar unemployment rates for Soviet men and women and a positive relation between education and unemployment are found.]

This paper shows that when earnings are uncertain the substitution of deficit finance for tax finance or the introduction of an unfunded Social Security program will raise consumption even if all bequests reflect intergenerational altruism. Thus, contrary to the theory developed by a number of writers, an operative bequest motive need not imply Ricardian equivalence. Since there is no uncertainty in the present analysis about the date of each individual's death, this conclusion does not depend on imperfections in annuity markets or on the existence of nonlump-sum taxes or other distortions. Rather it follows from the result derived below that, when future earnings are uncertain, bequests are uncertain and that consumption therefore rises more in response to an increase in current disposable income than to an equal present value increase in the disposable income of the next generation.

[We present a model suggesting that innovative output is influenced by R&D and market structure characteristics. Based on a new and direct measure of innovation, we find that (1) the total number of innovations is negatively related to concentration and unionization, and positively related to R&D, skilled labor, and the degree to which large firms comprise the industry; and (2) these determinants have disparate effects on large and small firms.]

Using Tobin's q as a measure of performance, we seek to estimate the relative importance of industry, focus, and share effects in determining firm performance. Our methods are analogous to those of Richard Schmalensee and, like him, we find that industry effects account for the majority of the explained variance. However, we also find that firm effects exist in the form of focus effects, that is, narrowly diversified firms do better than widely diversified firms. We interpret this finding as consistent with profit maximization by firms with different factor endowments.

Many Keynesian macroeconomic models are based on the assumption that firms change prices at different times. This paper presents an explanation for this "staggered" price setting. We develop a model in which firms have imperfect knowledge of the current state of the economy and gain information by observing the prices set by others. This gives each firm an incentive to set its price shortly after other firms set theirs. Staggering can be the equilibrium outcome. In addition, the information gains can make staggering socially optimal even though it increases aggregate fluctuations.

[Prior audit fee studies have examined the private sector audit market. This research extends prior research by developing a model of audit fees for municipalities. Many of the determinants used in this model are based on (or extensions of) determinants used in private sector audit fee models. Empirical tests using regression analysis indicate a significant portion of the variance in municipal audit fees is explained by the model. Using a framework adopted from Simunic [1980] for analyzing private sector audit markets, statistical results suggest that the municipal audit market is competitive.]

[In many accounting and finance research studies it is hypothesized that the news release under study has valuation implications. Results often indicate that the distribution of risk adjusted residual common stock returns, conditional on the occurrence of a wide variety of specific news event types, differs in one or more moments from the distribution of returns when such events are absent. This paper demonstrates that the distribution of Wall Street Journal news-conditional residual returns differs from the distribution of returns when such news is absent. A "news-conditional" model of the process generating security returns is proposed as an alternative to models typically used in previous event studies. Standardized prediction errors and squared standardized prediction errors from the news-conditional model are compared with those generated by conventional procedures.]