Current discussions of wage norms begin with George Perry's analysis (1980). He argued that the rate of wage change appeared to shift in discrete steps. Although his study concerned aggregate wage adjustments, the union sector has long been identified as the primary source of wage rigidity and hence of wage norms. The stylized explanation for the rigidity of any market price in the efficient contracting literature is the presence of high transaction costs. High transaction costs emanate from the internal rather than the external labor market. These costs make it inefficient to update wages continuously to changing market conditions. Alternatively stated, wage rigidity or norms is a Nash equilibrium for firms under ordinary circumstances (see Costas Azariadis, 1985). The equilibrium position is maintained until the transaction costs of making the change are less than the costs of maintaining the old regime. Once the regime changes, however, the new regime or equilibrium can be a discrete rather than a marginal change from the prior regime. The regime in the unionized sector today is one of concession bargaining. Although concessions have been concentrated in those sectors that have experienced competition in a setting of deregulation and increased international trade, increased competition is more likely to be a consequence of earlier relative wage and cost changes than an exogenous cause of concessions today.' In fact, the common thread that binds together the industries that have exhibited concession bargaining is that they have emerged from a prior regime of significant and prolonged increases in union wage premiums. Indeed, as shown by Peter Linneman and myself, the increases in union wage premiums have caused a statistically significant and quantitatively large decrease in union employment. Concession bargains thus represent a shift in regimes as the parties attempt to deal with the effects of the prior regime of increasing premiums. There is little doubt that the increase in union premiums was related to the supply shocks of the 1970's; that is, while nonunionized wages declined in response to these shocks, union real wages continued to increase. In this sense, the puzzle is why the unionized sector did not shift to lower wage norms during the 1970's and not the presence of concessions today. The expansion of union wage premiums over the past decade cannot be explained by the traditional model of union-nonunion wage differentials. That model states that premiums remain steady over time unless changes occur in the underlying labor demand elasticities (i.e., the Hicks-Marshall conditions change) or the unions' tastes (reflecting the wages-employment tradeoff). Labor markets, however, have become more rather than less competitive in the 1970's as a consequence of deregulation and increasing international trade. In disequilibrium, variation in the union wage premium can occur due to the fixedcontracting periou'. Indeed, union wage rigidity is typically explained by the existence of 3-year contracts that permit only incomplete wage adjustments during the contract period. In this paper, the extent of union wage rigidity is shown to be related to contracting lags, but the lags are not identified with contract expiration and renegotiation dates. Rather, the lags and the resulting wage rigid* Professor of Economics, Law, and Management, University of Pennsylvania, Philadelphia, PA 19104. Costas Azariadis, David Hall, Clyde Summers, Lea Vandervelde, and Susan Wachter provided many helpful suggestions, and Rodrigo Quintanilla and Nancy Zurich provided valuable research assistance. The research was supported by the Institute for Law and Economics, University of Pennsylvania. 'See Peter Linneman and myself (1986) for a discussion of the endogeneity of increased international competition and, to a lesser extent, deregulation.

Prior studies have ranked doctoral programs in accounting on the basis of various input and output criteria. This study ranks doctoral programs on the basis of the publication productivity of their graduates. The primary advantage of this study over prior studies is that it adjusts the publication productivity measures of the schools to reflect differences in the number of doctoral alumni as well as the age of the doctoral program.

Reviews two books. "Principles of Accounting," 3rd ed., by Paul H. Walgenbach, Norman E. Dittrich and Ernest I. Hanson; "Financial Accounting: An Introduction," 4th ed., by Paul H. Walgenbach, Ernest I. Hanson and Norman E. Dittrich.

[Prior studies have ranked doctoral programs in accounting on the basis of various input and output criteria. This study ranks doctoral programs on the basis of the publication productivity of their graduates. The primary advantage of this study over prior studies is that it adjusts the publication productivity measures of the schools to reflect differences in the number of doctoral alumni as well as the age of the doctoral program.]

At least since the early 1970's, it has been apparent that the cyclical variations in inflation summarized by the short-run Phillips curve are only one part of the inflation problem that confronts modern industrial economies. Another part is the relative persistence of an established rate of inflation. There is a good deal that we do not understand about this persistence. But I find the most useful way to model it is to start with the concept of a relatively stable wage norm, by which I mean a norm for the rate of wage increase. The model distinguishes sharply between the cycle and the trend in inflation, with the wage norm determining the trend. The variations in inflation of the typical business cycle take place around the existing wage norm and generate the empirical short-run Phillips curve. The wage norm itself is affected little if at all by the typical business cycle. Historically the wage norm has been shifted by prolonged departures from typical business cycles or by other extreme economic developments. Figuring out more precisely what it takes to shift wage norms, or what might keep them from shifting, is a central challenge for understanding inflation better. Before turning to its implications, let me sketch the behavioral underpinnings of the wage norm model and the empirical evidence about wage norms. The norm rate of wage increase has no allocational significance and describes the trend of nominal wages independent of real aggregate demand or relative demand effects. In this respect, it is like the anticipated rate of inflation in many familiar models. Wages are not determined in an auction-like labor market that clears over any reasonable interval of time. Rather they are established by wage-setting firms with a profit-maximizing interest in their long-run relation with their employees, in some cases in a bargaining situation with unions. Under both the implicit and explicit contracts that thus dominate wage setting, keeping up with the norm is the neutral standard for firms. An individual firm that raises wages in line with the norm neither improves nor worsens its relative position as an employer. A firm that wants to expand employment will, typically, offer a higher wage than would be required just to keep up with the norm. Relative wages and relative employment levels are thus codetermined in this process. When most firms want to expand employment, as in a cyclical upturn, the same behavior is part of the process producing the modest cyclical rise in inflation that we observe as the short-run Phillips curve. Thus the onset of cyclical inflation is not a sign that capital and labor resources are being overutilized. Nor is it a sign that inflation is on an accelerating path or even that wage norms are shifting up. In analyzing U.S. postwar data, I have found the wage norm shifted up substantially by the end of the 1960's and down again, though not by as much, by the end of the 1980-82 recession (see my 1983 paper). The first episode was a period with a historic expansion that ended with several years of very low unemployment rates. The second was a recession of unusual length and severity that ended with the highest unemployment rates since the 1930's. There is also evidence of a small shift down in the wage norm after the weak economic performance of 1957-61, which featured two recessions with only an aborted recovery in between. I also found evidence for Germany, the United Kingdom, and Japan of upward shifts in wage norms in manufacturing industries after the 1960's and downward shifts in the early 1980's (see my 1986 paper). All these episodes suggest the kinds of extreme cyclical developments that have shifted wage norms in the postwar period. *The Brookings Institution, 1775 Massachusetts Avenue, NW, Washington, D.C. 20036. In preparing this paper, I benefited from discussions with Charles Schnl t7.e

This paper examines the hypothesis that managers reduce reported earnings during labor union contract negotiations relative to earnings released before and after contracts are negotiated. Analyzing earnings around labor negotiations provides evidence regarding when managers manipulate accounting earnings and, hence, information regarding the costs and benefits of managing earnings. We find no evidence of lower than expected earnings during negotiations. Time series of quarterly and annual unexpected earnings, using several measures of expected earnings, are examined around labor talks for a sample of 105 unionized companies over the period 1968-1981. Both random and matched samples of firms not engaged in labor negotiations also are chosen. The time series of earnings during labor talks for the unionized sample is indistinguishable from that of the random and matched samples. An analysis of these firms' quarterly earnings time-series properties and their abnormal stock returns suggests that in this sample period unionized firms had less incentive to reduce earnings because they already were performing poorly.

Reviews the book "A Common Body of Professional Knowledge for Internal Auditors: A Research Study," by Michael J. Barrett, Gerald W. Lee, S. Paul Roy and Leticia Verastegui.