Poor heath, large acute and long-term care medical expenses and spousal death are significant drivers of impoverishment among retirees. We document these facts and build a rich overlapping generations model that reproduces them. We use the model to assess the incentive and welfare effects of U.S. Social Security and means-tested social insurance programs, such as Medicaid and food stamp programs, for the aged. We find that U.S. means-tested social insurance programs for retirees provide significant welfare benefits for all newborn. Moreover, when means-tested social insurance benefits are of the scale in the U.S., all newborn prefer that Social Security be removed. Finally, we find that the current scale of means-tested social insurance in the U.S. is about right in the following sense. If we condition on the current Social Security program, the benefits of increasing means-tested social insurance are small or negative.

Much of the complexity of the collective bargaining process can be conceptually reduced to the choice by a union of some point along a given derived-demand curve for labor. Many union actions often labeled ,restrictive or featherbedding do not, however, easily fit into this framework. Instead they appear to result in a wage-employment combination which lies entirely off the derived-demand curve for labor. They involve either fixing the total amount of employment or fixing the laborcapital (or labor-output) ratio, in addition to setting the wage rate.' Unions have also used more subtle measures, essentially taxes on output or capital, which can have a similar effect to direct controls.2 Analytically, these actions bear a close resemblance to vertical integration, tying arrangements, or other forms of vertical control by firms with market power over a product which can be used in variable proportions as an input in a downstream production process.' For example, suppose that a powerful union in a competitive product industry wishes to increase the earnings per hour of its members, but is unwilling to force up the wage rate because of the output and substitution effects on employment. Vertical control can be used to reverse the substitution effect. Since formal vertical integration by unions is rare, assume the union imposes a tax or royalty on the final product. If the union wishes to increase earnings per worker with no change in employment, it can raise the royalty rate while simultaneously reducing the wage rate. The fall in the quantity of labor demanded due to the effect of the higher royalty rate on output can thus be balanced by the increase in labor demanded due to the effect of a lower wage-rental ratio on the labor-output ratio. Assuming that the elasticity of demand for the product eventually becomes greater than unity, this balancing act can continue until some finite maximum level of earnings per worker (from wages and royalties) is reached. The crucial requirement for the process to work, of course, is that the elasticity of substitution between labor and other inputs be greater than zero, since in the absence of a substitution effect there is no difference between the effects of a tax on labor and a tax on output. This incentive for vertical control by *Assistant professor of economics, Washington University, St. Louis. I would like to thank Charles Berry, Edward Kalachek, Robert Parks, and Lee Benham for helpful comments. I Examples include requiring a minimum number of musicians per theater orchestra; minimum crew sizes and absolute cmployment levels in railroading; and work rules in Pacific Coast longshoring which, until the 1960 Mechanization and Modernization Agreement, required firms to employ a fixed quantity of labor inputs or required that labor be used in fixed proportions to other inputs or outputs. For numerous other examples, see Lloyd Ulman, pp. 53666. 2The United Mine Workers finances its Welfare and Retirement Fund by a royalty on each ton of coal produced in unionl mines; the Mechanization and Modernization Fund in West Coast longshoring is financed on a tonnage basis while the unemployment fund on the East Coast is financed by a royalty on containers proportional to the degree of anticipated labor displacement; airline pilots are paid according to a complex formula which closely resembles a tax on either output or capital: and the Teamsters Union has negotiated mileage-rate differentials based on truck size and cargo capacity, and a royalty payment on the transport of highway trailers on railroad flatcars. Unions may desire such arrangements for several reasons. For example, the airline pilot wage structure has resulted in large benefits to seniority and has facilitated bargaining in an industry with rapid productivity increases. In addition, tying wages to particular equipment may have enabled price discrimination by the union. Some union practices also regularize employment or spread the same amount of work over a larger number of employees. Nevertheless, all these measures can be used to achieve a wage-employment combination off and to the right of the derived-demand schedule for labor. 3For an analysis of vertical control by firms, see the author ( 1974).

This study investigates whether differences in accounting standards across countries create information costs that inhibit firms from investing in foreign markets. Using the frequency and dollar magnitude of cross‐border mergers and acquisitions (M&As) from 32 countries over the period 1998–2004, we find that the aggregate volume of M&A activity across country pairs is larger for pairs of countries with similar Generally Accepted Accounting Principles ( GAAP ), and that this increased volume of M&A activity is driven by target countries that also have strong enforcement. We also find that the 2005 mandatory adoption of International Financial Reporting Standard ( IFRS ) attracted more cross‐border M&As among IFRS ‐adopting countries, and that this increase in M&A activity within the IFRS countries is more pronounced for country pairs with low similarity in GAAP in the pre‐ IFRS adoption period. Overall, our results highlight the role of accounting standards and enforcement in shaping cross‐border M&A activity.

Each year, the NCAA basketball tournament (March Madness) is a daytime distraction for millions of people, providing a largely exogenous shock to investor attention. We investigate whether March Madness influences the market response to earnings by diverting investor attention away from earnings news. We find that the price reaction to earnings news released during March Madness is muted. This result generally holds across several samples and additional analyses. We also find that the result is more muted for low institutional ownership firms, consistent with the effect being driven by less‐sophisticated investors. Furthermore, we find that it takes the market 30 to 60 days to correct for the distraction effect. Overall, we provide a unique test of the theory of limited attention by documenting that extraneous events can have a significant impact on the pricing of earnings.

I have benefited from comments and criticisms of an earlier draft by Irma Adelman, Peter Balacs, Ronald Dore, Edgar Edwards, Unni Eradi, Michael Faber, Anne Gordon, Keith Griffin, Jill Rubery, Seev Hirsch, Ernest Stern, Frances Stewart, Hugh Stretton, B. R. Virmani, Gordon Winston and Howard Wriggins. To these, and to a research seminar at Queen Elizabeth House, I am very grateful. I am also grateful to the Economic Development Institute of the World Bank and its Director, Mr. Andrew Kamarck, for having provided the facilities and stimulating atmosphere for the early stages of a considerably larger paper, commissioned by Mr. Ernest Stern, of which this paper forms a part. I am grateful to Mr. Stern and the World Bank for permitting me to use the material here.

This paper proposes a sealed-bid mechanism for facilitating the siting process of noxious facilities such as prisons, trash disposal plants, and incinerators for hazardous waste. These facilities have created such opposition by communities that the acronyms NIMBY (not-in my backyard) or LULU (local undesirable land use) are now in common usage to describe the public's reaction to them. The noxious facility siting problem arises because there are economies of scale associated with having only one plant to serve the needs of a wide region. The community that hosts the plant absorbs all of the environmental costs, while the rest of the region enjoys the benefits of the facility. One reason that these facilities have been so strongly opposed by communities is that they generate relatively little new employment and provide limited additional taxes in relation to their perceived negative impact (D. Morell and C. Magorian, 1982). Some compensation arrangement is thus needed to share the gains from the winners to the potential loser. This paper discusses a sealed-bid auction mechanism for selecting a location for the facility so that all communities feel they are better off than under the status quo.

policies have been in effect in the United States more than half the time. The Kennedy-Johnson wage-price guideposts lasted almost six years, although they were tattered and torn by the time they were abandoned in 1967. The Nixon Administration's Economic Stabilization Program (ESP)-the only peacetime mandatory controls program in the United States-lasted four years, although the second half of the program (Phases III and IV) was a period of decontrol. The Carter Administration's Pay and Price Standards Program lasted a little more than two years, although the second year was

Passive institutional investors are an increasingly important component of U.S. stock ownership. To examine whether and by which mechanisms passive investors influence firms' governance, we exploit variation in ownership by passive mutual funds associated with stock assignments to the Russell 1000 and 2000 indexes. Our findings suggest that passive mutual funds influence firms' governance choices, resulting in more independent directors, removal of takeover defenses, and more equal voting rights. Passive investors appear to exert influence through their large voting blocs, and consistent with the observed governance differences increasing firm value, passive ownership is associated with improvements in firms’ longer-term performance.

The nature of the dependence between discontinuities in prices and contemporaneous discontinuities in volatility (co-jumps) has been reported by many as being elusive, in terms of sign, magnitude, and statistical significance. Using a novel identification strategy in continuous time relying on trade-level information for spot variance estimation, as well as infinitesimal cross-moments, we document that a sizeable proportion of discontinuous changes in prices are associated with strongly anti-correlated, contemporaneous, discontinuous changes in volatility. Assuming a possibly nonmonotonic pricing kernel, we illustrate the equilibrium implications of price and volatility co-jumps for return and variance risk premia.