This survey assesses evidence on the linkage between environmental regulation and competitiveness, and finds little support for the conventional wisdom that environmental regulations have large adverse effects on competitiveness. Studies examining the effects of environmental regulations on net exports, overall trade flows, and plant-location decisions have produced estimates that are small, statistically insignificant, or not robust. We also find no systematic evidence supporting the revisionist hypothesis that environmental regulations stimulate innovation and improved competitiveness. Overall, the evidence suggests that the truth regarding the relationship between environmental protection and international competitiveness lies in between the extremes of the current debate.

We examine daily prices of eight goods at seventeen retail stores collected in Ann Arbor, Michigan, over a four-month period from November 1 to February 28. We focus on weekly and seasonal price patterns, and on the frequency of price markdowns or “sales.” There were frequent markdowns in the intensive shopping period prior to Christmas, and a tendency for such sales to occur on weekends. We interpret these findings as evidence that a significant number of markdowns are timed to occur when shopping intensity is exogenously high. We complement the imperfect information-based motives for sales in the literature by contributing an additional element based on the role of bulk shopping and increasing returns in the shopping technology.

We examine the reduced-form relationship between per capita income and various environmental indicators. Our study covers four types of indicators: urban air pollution, the state of the oxygen regime in river basins, fecal contamination of river basins, and contamination of river basins by heavy metals. We find no evidence that environmental quality deteriorates steadily with economic growth. Rather, for most indicators, economic growth brings an initial phase of deterioration followed by a subsequent phase of improvement. The turning points for the different pollutants vary, but in most cases they come before a country reaches a per capita income of $8000.

Competing Vertical Structures: Preconmitment and Renegotiation

Implementation methods mandated by the FASB allow firms to report equity-increasing changes as income and equity-decreasing changes as adjustments to stockholders' equity. These findings are consistent with the argument that the FASB, to reduce its political costs, attempts to minimize firms' costs of implementation. We find that the FASB permits flexibility in timing of adoption of mandated changes. Firms experiencing lower changes in return on assets (ROA) before adoption and expecting higher adoption income effects accelerate implementation. Early adopters select the year of adoption when their change in ROA is lowest and their change in leverage is highest.

The authors present three distinct approaches to perfect and proper equilibria for infinite normal form games. In the first two approaches, players 'tremble' in the infinite game playing full support approximate best responses to others' strategies. In the strong approach, a tremble assigns high probability to the set of pure best responses; in the weak approach, it assigns high probability to a neighborhood of this set. The third, limit-of-finite approach applies traditional refinements to sequences of successively larger finite games. Overall, the strong approach to equilibrium refinement most fully respects the structure of infinite games.

In this paper we construct measures of tax incidence over the life-cycle and compare these measures to traditional measures based on annual data. We show that annual measures of the incidence of taxes on consumption goods may differ from life-cycle measures for three reasons. First, annual measures of income reflect transitory components which should have smaller effects on consumption than permanent changes in income. Second, income measured in a single period differs from lifetime income due to age-related differences in earnings. Third, consumption of certain items follows life-cycle patterns independent of changes in income. Surprisingly, we find that these effects cause almost no change in the assessment of the incidence of taxes applying to the consumption of cigarettes. For alcohol, however, we find that a tax on its consumption is slightly less regressive when measured with respect to lifetime income than when measured with respect to annual income.

Résumé. Les travaux antérieurs qui ont porté sur la formulation d'hypothèses démontrent que les vérificateurs ont tendance, dans la formulation de leurs hypothèses initiales, à attribuer les fluctuations imprévues aux erreurs qui se produisent fréquemment dans les états financiers. L'on ne s'interroge cependant pas, dans ces travaux, sur la nature de l'incidence des hypothèses initiales sur la performance subséquente dans le diagnostic de l'erreur véritable. Les auteurs avancent que l'hypothèse formulée au départ et la capacité des vérificateurs de passer par la suite à une hypothèse différente interfèrent. Si, par exemple, l'hypothèse initiale était inexacte, il serait difficile pour les vérificateurs de changer d'hypothèse dans le diagnostic de l'erreur véritable. Plus encore, le fait d'invoquer initialement une erreur fréquente exacerberait cette difficulté. L'on a demandé aux vérificateurs‐sujets de produire une hypothèse initiale relative à l'erreur après avoir pris connaissance d'un modèle de fluctuations dans lequel les ventes et les comptes clients étaient surévalués. Une fois formulée leur hypothèse initiale, la moitié des sujets recevaient de l'information supplémentaire révélant l'existence d'une erreur très fréquente (dans la démarcation des ventes) et l'autre moitié recevaient de l'information révélant l'existence d'une erreur peu fréquente (celle de la double comptabilisation d'une même vente). Conformément à leurs prévisions, les auteurs constatent que le fait, pour les vérificateurs, d'invoquer initialement l'erreur très fréquente (soit la démarcation des ventes) par rapport à une autre erreur moins fréquente avait par la suite une incidence sur leur performance dans le diagnostic des erreurs véritables. Plus précisément, les vérificateurs qui invoquaient l'erreur très fréquente dans leur hypothèse initiale obtenaient les meilleurs résultats lorsque cette erreur était l'erreur véritable, mais ils obtenaient les résultats les moins bons lorsque l'erreur peu fréquente se trouvait être l'erreur véritable. Les vérificateurs qui invoquaient une erreur moins fréquente dans leur hypothèse initiale affichaient, pour leur part, une performance relativement bonne (c'est‐à‐dire se situant entre la performance la meilleure et la performance la moins bonne), aussi bien lorsque l'erreur véritable était fréquente que lorsqu'elle était peu fréquente. Les auteurs analysent les conséquences de ces résultats sur l'efficience et l'efficacité de la vérification.

Previous work on hypothesis generation demonstrates that auditors tend to generate frequently occurring financial statement errors as their initial hypotheses to explain unexpected fluctuations. However, such work does not examine how the initially generated hypothesis affects subsequent performance at identifying an actual error. We hypothesized that the initially generated hypothesis would interfere with an auditor's ability to subsequently switch to a different hypothesis. Thus, if the initial hypothesis were incorrect, auditors would find it difficult to switch hypotheses in order to identify an actual error. Moreover, initially generating a frequent error would exacerbate this difficulty. Auditor‐subjects were asked to generate an initial error hypothesis after seeing a pattern of fluctuations in which sales and accounts receivable were overstated. After they generated their initial hypothesis, half of the subjects were provided with additional information that was consistent with a very frequent error (sales cutoff) and the other half were provided with information consistent with an infrequent error (sales recorded twice). As expected, we found that initially generating the very frequent error (i.e., sales cutoff) versus some other less frequent error affected auditors' subsequent performance at identifying actual errors. Specifically, auditors who generated the very frequent error as their initial hypothesis performed best when it was the actual error, but performed worst when the infrequent error was the actual error. In contrast, auditors who generated a less frequent error as their initial hypothesis performed moderately well (i.e., between best and worst) both when the actual error was frequent and when it was infrequent. The implications of these results for audit efficiency and effectiveness are discussed.