G. O. Bierwag, George G. Kaufman, Alden L. Toevs, Single Factor Duration Models in a Discrete General Equilibrium Framework, The Journal of Finance, Vol. 37, No. 2, Papers and Proceedings of the Fortieth Annual Meeting of the American Finance Association, Washington, D.C., December 28-30, 1981 (May, 1982), pp. 325-338

Abstract ABSTRACT: Actuarial cost methods designed for funding decisions about pensions are not necessarily designed for use in accounting reports about pensions. Various actuarial cost methods are explained and illustrated, with particular attention to varying treatment in these methods of "actuarial accrued liability," formerly called "prior service cost." Some actuarial cost methods generate actuarial accrued liability, while others do not. The FASB has required pension plans to use an actuarial cost method that in many cases reports a lower present value for the pension obligation in the early years of a pension plan than had been reported by the actuarial cost method formerly used by the employer. The degree of reduction in net present value of the pension obligation is reported for a sample of companies.

Richard O. Michaud, Paul L. Davis, Valuation Model Bias and the Scale Structure of Dividend Discount Returns, The Journal of Finance, Vol. 37, No. 2, Papers and Proceedings of the Fortieth Annual Meeting of the American Finance Association, Washington, D.C., December 28-30, 1981 (May, 1982), pp. 563-573

Responses to questions given to a random sample of Michigan households are used to estimate public spending demand functions. While income and price elasticities are similar to those obtained from aggregate data, positive income elasticities appear to arise because public services are distributed in a prorich manner. A relatively small variance in spending demands among urban and suburban communities in metropolitan areas with substantial public service variety suggests that the Tiebout mechanism works. This interpretation is supported by the fact that actual spending conforms substantially to desired levels in urban areas, but less so in rural areas with little public sector choice.

Our objective is to design transfer programs that maximize some social welfare function. Following the optimal income tax formulation, we assume that a random process endows individuals with characteristics that influence welfare, such as ability to earn income, medical condition, or unmonitorable income. The goal is to maximize the utility of a randomly chosen individual. (Other individualistic social welfare functions would lead to equivalent results.) If the random characteristics were observable, a first best outcome could be achieved by making them the basis for lump sum transfers. In practice, however, we can observe only indicators of these characteristics, such as earnings, medical expenditures, or consumption patterns. The challenge for policy is to design an efficient second best transfer program based on indicators. In this paper we argue that 1) An optimal transfer program in general must sacrifice productive efficiency to target efficiency. This is done by imposing restrictions on the choices made by intended beneficiaries. 2) A program that incorporates restrictions-such as means-tested in-kind transfers, commodity-specific taxes and subsidies, and even ordeals (i.e., the imposition of deadweight costs to qualify for a transfer)-will perform better than programs that rely solely on income taxes and cash transfers.

It is found that the welfare gain per unit of revenue raised is maximized for an export tariff on technology transfer, followed by an import tariff on goods, with an export tariff on goods the poorest policy alternative. These results are derived within a monopolistic competition model, where the production of any good requires some initial research and development (R&D), and technology transfer occurs when R&D is done in one country for production of goods in the other. An intuitive explanation is presented, based on the public-good nature of R&D and also the elasticity of demand for technologies from firms.