We present a bargaining model of union contract negotiations, in which the union decides between two threats: the union can strike, or it can continue to work under the expired contract. The model makes predictions about the level of dispute activity and the form disputes take. Strike incidence increases as the strike threat becomes more attractive, because of low unemployment or a real wage drop. We test these predictions by estimating logistic models of dispute incidence and dispute composition for negotiations from 1970 to 1989. We find support for the model's key predictions, but these associations are weaker after 1981.

We analyze the response of small versus large manufacturing firms to monetary policy. The goal is to obtain evidence on the importance of financial propagation mechanisms for aggregate activity. We find that small firms account for a significantly disproportionate share of the manufacturing decline that follows tightening of monetary policy. They play a surprisingly prominent role in the slowdown of inventory demand. Large firms initially borrow to accumulate inventories. After a brief period, small firms quickly shed inventories. We attempt to sort financial from nonfinancial explanations with evidence on asymmetries and on balance sheet effects on inventory demand across size classes.

The adoption of liability limitation provisions (LLPs) is associated with insignificant stock price reactions for all firms, but with positive stock price reactions for poorly performing firms. This result is consistent with the hypothesis that the net benefit of LLPs is larger for financially troubled firms than for other firms because outside directors are valuable to the distressed firm and LLPs substantially affect experts' expected costs of serving as directors of troubled firms.

This paper explores the determinants of pension funding in the public sector. We formulate and test several hypotheses about the determinants of public employer pension funding practices, using a new data set describing financial and other characteristics of state, local, and teacher plans. The data show that, on average, public sector pension plans were relatively well-funded during the late 1980s. There were, however, wide variations in funding practices in our sample. Our analysis of these variations suggests that past funding practice tends to be perpetuated, that unionized employers are less likely to fully fund future pension obligations, and that funding is sensitive to fiscal pressure.

Prior analyses of prices of the NYSE and other exchanges find that transitory price volatility is greater at the open of trading than at the close. We extend this line of research by using 40 years of hourly Dow Jones 65 composite price index data to estimate transitory volatility throughout the trading day. Our results indicate that transitory volatility steadily declines during the trading day. We find a similar intraday decline in transitory volatility for a 2½-year sample of the individual firms in the Dow Jones 30 Industrials Index. The results are consistent with the hypothesis that trading aids price formation and do not support the argument that particular trading mechanisms are the source of greater volatility at the open of trading.

[Prior analyses of prices of the NYSE and other exchanges find that transitory price volatility is greater at the open of trading than at the close. We extend this line of research by using 40 years of hourly Dow Jones 65 Composite price index data to estimate transitory volatility throughout the trading day. Our results indicate that transitory volatility steadily declines during the trading day. We find a similar intraday decline in transitory volatility for a 21/2-year sample of the individual firms in the Dow Jones 30 Industrials Index. The results are consistent with the hypothesis that trading aids price formation and do not support the argument that particular trading mechanisms are the source of greater volatility at the open of trading.]

This paper employs a dynamic Ricardian trade model to provide a decomposition of the gains from trade into 'once-off' and continuing categories. In one version of the model, trade is always welfare enhancing; in the other, once-off losses may occur alongside dynamic gains. In both versions, the magnitude of once-off and continuing effects are related to absolute and relative country size, similarity in production structures, rates of time preference, and the productivity of R&D. Copyright 1994 by The Review of Economic Studies Limited.

This article reconciles a disparity between one of Hughes and Kao's (1991) predictions on the effects of firm disclosures regarding future benefits of R&D spending and evidence of reductions in R&D spending pursuant to SFAS No. 2 reported by Horowitz and Kolodny (1980) and others. By assuming Bertrand price competition in place of Cournot quantity competition, it is shown that equilibrium R&D expenditures by risk‐averse duopolists will be lower when firm disclosures are uninformative about R&D outcomes than when they are informative. This result is especially useful in that price competition appears to be descriptive of competition in high technology industries. Résumé. Les auteurs réussissent à concilier l'une des prédictions de Hughes et Kao (1991) portant sur l'incidence de l'information présentée par l'entreprise au sujet des avantages futurs des dépenses de R‐D, et l'évidence de la réduction des dépenses de R‐D depuis l'entrée en vigueur du SFAS n***o 2, dont font état Horowitz et Kolodny (1980) ainsi que d'autres chercheurs. En substituant l'hypothèse de Bertrand relative à la concurrence axée sur le prix à celle de Cournot relative à la concurrence axée sur la quantité, les auteurs démontrent que les dépenses de R‐D au point d'équilibre engagées par des entreprises en situation de duopole qui présentent une aversion pour le risque sont plus faibles lorsque l'information présentée ne renseigne pas sur les résultats découlant des dépenses de R‐D que lorsque l'information présentée renseigne sur ces résultats. Cette conclusion est particulièrement utile du fait que le prix semble bien être l'objet de la concurrence que se livrent les entreprises des secteurs de haute technologie.

[The objective of this study is to examine the effect of the default risk of debt on the relation between accounting earnings and stock returns. Recent research suggests that measurements of equity beta do not capture all dimensions of riskiness of equity. The default risk of debt may help explain how accounting earnings are linked to stock returns because the default risk of debt may capture some elements of riskiness of equity that are not captured by equity beta. We document empirically that the coefficient relating unexpected changes in earnings to abnormal stock returns (the earnings response coefficient or ERC) is negatively related to the default risk of debt as measured by bond ratings.]