The efficiency wage model (EWM) has been advanced as an explanation for large and persistent wage differentials. The shirking version of the EWM assumes a trade-off between self-supervision and external supervision. The turnover version assumes turnover is costly to the firm. Variation across firms in the cost of monitoring/shirking or turnover then is hypothesized to account for wage variations across firms for homogeneous workers. Using a new sample of firm data, this paper presents empirical evidence of the trade-off of wage premiums for supervisory intensity and turnover. Little evidence is found to support either version of the EWM.

Cost allocation, Noncontrollable cost allocation, Collusion, Performance evaluation

Our paper simulates the likely effects of a comparable-worth wage-adjustment policy in the state and local sector on female employment in the sector. The simulation is based on estimates of within-occupation male/female substitution and across-occupation occupational employment substitution that we obtain using data from the 1980 Census of Population.

Auditing, Auditor size, Audit fees, Audit partnerships

This paper argues that capital-energy complementarity is a short-run phenomenon reflecting the fixed ex post nature of factor employment in a putty-clay technology. When an empirical specification is employed that measures firms' ex ante choice of technique, capital and energy are found to be long-run substitutes. However, further analysis of the standard translog and putty-clay models with nonnested hypothesis tests reveals that neither specification is an adequate representation of technology. The results suggest that there is a dynamic adjustment process in the data that is not fully captured in either model.

Raymond S. Hartman, Product Quality and Market Efficiency: The Effect of Product Recalls on Resale Prices and Firm Valuation, The Review of Economics and Statistics, Vol. 69, No. 2 (May, 1987), pp. 367-372

Investment decisions and outlays are often made sequentially. For example, the rate at which construction proceeds is usually flexible and can be adjusted with the arrival of new information. Traditional discounted cash flow methods which treat the pattern of investment as fixed ignore this flexibility and understate the value of the project. This paper uses contingent claims analysis to derive optimal decision rules and to value such investments. We determine the effects of time to build, opportunity cost and uncertainty on the investment decision. For reasonable parameter values, we show how a simple NPV rule can lead to gross errors.

This paper empirically assesses the degree to which current cost data as required by Financial Accounting Standards Statement No. 33 might implicitly be used by equity market participants. Studies to date, focusing on income measures, documented little or no effect of the data on prices. We argue here that income was the wrong focus. Instead, because current costs can be used to construct quantity indexes and hence measure real productive growth of the firm, the focus should be on the test of association between real productivity (obtained by use of current cost data) and stock returns rather than between income measures and stock returns. Therefore, this paper tests for whether growth measure (of real productive output) which can be obtained by utilizing current cost information and which cannot be obtained without such information, can explain cross‐sectional variation in security returns beyond measures based on historical costs. Returns should be more highly associated with current cost based measures of real productive growth than with similar measures based on historical cost, if the current cost data have value. Like the time‐series macroeconomic analysis done by Fama (1981), our cross‐sectional microeconomic analysis relying on current cost accounting data suggests that security returns are positively related to real productive activity. Moreover, the tests seem to suggest that current cost data, on the margin, reflect productive activity information that may not be already contained in historical cost accounting data. Résumé. Cet article évalue de façon empirique jusqu'à quel point les données au coût actuel requises en vertu de l'énoncé no. 33 (Financial Accounting Standards Statement No. 33) pourraient implicitement être utilisées par les participants au marché des actions. Les études antérieures, portant sur des mesures de bénéfice, ont conclu à peu ou pas d'effet sur les cours imputable à ces données. Nous soutenons ici que le bénéfice ne constituait pas le bon centre d'intérêt. Au lieu de cela, du fait que les coûts actuels peuvent être utilisés afin d'élaborer des indices de quantité et, de là, mesurer la croissance de la productivité réelle de la firme, le centre d'intérêt devrait plutôt tourner autour d'un test du lien entre la productivité réelle (obtenue par l'utilisation des données au coût actuel) et les rendements des actions plutôt qu'entre des mesures de bénéfice et le rendement des actions. Dès lors, cet article examine si une mesure de croissance (de la productivité réelle) pouvant être obtenue à partir de l'information au coût actuel et qui ne peut être dégagée sans une telle information, peut expliquer davantage les variations (en coupe transversale) des rendements des titres que ne le font des mesures fondées sur les coûts d'origine. La relation entre les rendements et les mesures de productivité réelle fondées sur le coût actuel devrait être plus robuste que celle entre des mesures similaires fondées sur le coût d'origine, si tant est que les données au coût actuel présentent une valeur. À l'instar de l'analyse macroéconomique de séries chronologiques effectuée par Fama (1981), notre analyse microéconomique en coupe transversale fondée sur des données au coût actuel semble indiquer que les rendements des titres sont reliés positivement à l'activité productive réelle. En outre, les tests laissent supposer qu'à la marge, les données au coût actuel reflètent une information d'activité productive qui, actuellement, pourrait ne pas être véhiculée par les données comptables exprimées au coût d'origine.

Tim S. Campbell, William A. Kracaw, Optimal Managerial Incentive Contracts and the Value of Corporate Insurance, The Journal of Financial and Quantitative Analysis, Vol. 22, No. 3 (Sep., 1987), pp. 315-328

Reviews the book 'Positive Accounting Theory,' by Ross L. Watts and Jerold L. Zimmerman.