We examine data from the mid-1980s to 2003 to investigate whether stock prices set on the Tokyo Stock Exchange for Japanese firms react more strongly to changes in credit ratings of global rating agencies than of local agencies. This offers a strong test of relative influence of the two groups of rating agencies. We hypothesize that global raters will have more influence, but given that the two global agencies, Moody’s and Standard and Poors, are headquartered in the United States, analysis of stocks of Japanese firms listed on US exchanges would confound the results to the extent there is a home bias for raters. We find that global agencies are more influential than the two major local raters, Japan Rating and Investment Information and Japan Credit Rating Agency, for rating downgrades. Thus for credit downgrades, global raters are more influential than local ones even in the local market. Consistent with previous research, we find that upgrades are benign events, and this holds true for global as well as local agencies.

This article reexamines the negative seniority‐earnings relationship for academic economists. The empirical results show that the anomalous negative seniority effect found in earlier academic market studies holds in the absence of direct measures of research productivity. The negative effect, however, eventually disappears as more comprehensive measures of publishing, citations, and other productivity measures are included in the wage equation to control for the quantity and quality of faculty productivity. Faculty with greater seniority appear to be rewarded relatively less simply because many have been relatively less productive than their colleagues with less seniority at similar stages in their careers.

We investigate the impact of increasing bank concentration on bank loan contracts in a lightly regulated environment that allows us to abstract from possible confounding effects of regulation and focus on the “pure” effects of competition on bank lending. We study over 30,000 British bank loans over the period 1885 to 1925. Borrowers in counties with high bank concentration received smaller loans and posted more collateral than borrowers in other counties. In high concentration counties, the quality of loan applicants improved, suggesting that banks restricted credit, not that the quality of loan applicants had worsened. Received February 4, 2016; editorial decision December 20, 2016 by Editor Philip Strahan.

[This study investigates the influence of both the state corporate income tax rate and the form of the income tax base structure on foreign investment in manufacturing assets. An econometric model of foreign investment is derived from a supply-oriented theory of regional investment. That is, the decision to develop productive capacity in one region as opposed to another is due to regional advantages. Empirical results suggest that tax structures that use the unitary method of accounting have a substantial impact on the amounts of foreign investment. On the other hand, business income tax rates appear to have little impact.]

[Little is known about the speed and accuracy of aggregate taxpayer response to an income tax law change. Using a multiple time series model, it was found that individuals and corporations quickly and relatively accurately adjust their income tax prepayments in response to a tax increase.]

The compensating variation was defined by J. R. Hicks (1942) as the amount one would have to deduct from a person's income to make him just as well off after a change in prices and income as he had been in the initial situation. If the compensating variation is positive, the individual is better off under the new situation. Since the compensating variation furnishes a uniquely defined numerical (cardinal) indicator of welfare improvement, it provides an implicit ranking of alternative prospective situations not only relative to the initial situation, but also relative to each other. In practice this appears to be how this and other tools of cost-benefit analysis are actually used: one is interested in knowing not only whether a particular bridge, or a particular excise tax, will lead to an improvement in welfare, but which out of a set of alternative bridges or alternative tax systems will improve welfare the most.1 In this paper we analyze conditions under which the compensating variation can be validly used in this generalized sense; these turn out to be precisely the same as conditions previously derived (see our 1976 paper) for the valid use of consumer' s surplus as a welfare measure. In our final section we analyze the problem of deriving the generalized equivalent and compensating variations (either exactly or approximately) from observable demand functions, by means of generalizations of, or alternatives to, consumer's surplus.

Using Pareto optimality (in the HicksKaldor sense) as their criterion throughotut, Kenneth Arrow and Robert Lind argue in the June 1970, issue of this Review that 1) for public investments the cost of risk-bearing should be regarded as zero because this cost is spread over a large number of persons; 2) consequently, public investment should displace private investment if the expected rate of return exceeds the expected return to private investment minus an adjustment for the cost of risk-bearing; 3) furthermore, project costs borne publicly or benefits accruing to government should be discounted at relatively low rates (because the cost of risk-bearing, is low if spread among large numbers of persons), but project costs borne privately or benefits accruing to private individuals should be discounted at relatively high rates. Arrow and Lind are abstracting from other factors, e.g., externalities, public good characteristics, or ideological preferences for either state or private activity, that might also affect the choice between public and private investments. We wish to emphasize anew the fundamental defect in anv proof that a policy yields a Hicks-Kaldor improvement. We are not referring to the objection to the Hicks-Kaldor criterion-the fact that without actual compensation there will be a redistribution to which one may attach negative value. (Arrow and others have stressed that for this reason one cannot say that a Hicks-Kaldor change is a gain in welfare.)' We are referring rather to the fact that, without actual purchase of everyone's consent, one lacks information about whether the gains exceed the cost, i.e., about whether it would in fact be possible to make some better off without makingr anyone worse off.2 One may judge that a policy, such as public investment, would be a Hicks-Kaldor improvement because he believes the relevant tradeoffs in individuals' preference surfaces are such as to make the gains exceed the costs (as seen by each individual for himself). But he cannot show others that this is so: a Hicks-Kaldor improvement is by definition a change such that one can never demonstrate that it is a Hicks-Kaldor improvement! The Arrow-Lind argument is in difficulty this score because of the alternatives it considers, a public investment financed by taxes versus a private investment. In the latter case, individuals invest voluntarily, taking into account their marginal time preferences as well as their risk preferences. In a public investment financed by taxes, people are forced to invest. One has no observable data on whether all of these individuals would be willing to invest rather than consume, or data on how much thev would have to be paid to invest voluntarily.3 Some of them might much prefer to consume, given the circumstances assumed by Arrow and Lind: At the margin, different

We investigate the occurrence of bubble-crash pricing patterns in laboratory financial markets with a mixture of experienced and inexperienced traders. We find that even with a minority of experienced traders, bubbles are substantially abated.