This paper uses a national survey of 3,119 individuals to examine the effect of lung cancer risk perceptions on smoking activity. Both smokers and nonsmokers greatly overestimated the lung cancer risk of cigarette smoking, and the extent of the overestimation is much greater than the extent of underestimation. These risk perceptions in turn significantly reduce the probability of smoking, as suggested by an economic model of risky consumption decisions. Cigarette excise taxes in effect endow individuals with additional risk perceptions comparable to their current assessed lung cancer risks. Copyright 1990 by University of Chicago Press.

A model of neighborhood turnover drawn from Bond and Coulson (1989) is proposed. The type of turnover process that is obtained is shown to depend mainly on the hedonic bid functions for housing and neighborhood quality. A demand system of four hedonic attributes is estimated. The main results are that the traditional model of filtering by age of unit does not occur and that filtering by housing size does. Tipping due to changes in median neighborhood income is also quite possible. Tipping through changes in racial composition appears less likely. Copyright 1990 by MIT Press.

In a recent article in this Review (Kuhn, 1987), Peter Kuhn seeks to assess the relative importance of statistical and other types of evidence in determining women's perceived level of discrimination. The author's point of departure is what he characterizes as a surprising relationship. He finds a robust, but statistically insignificant, negative correlation between the conventional measure of salary discrimination (statistical in Kuhn's terminology) facing a female worker and the probability that the worker will report discrimination on a confidential survey. In other words, workers facing higher levels of measured salary discrimination are less likely to perceive discrimination. Kuhn explains this finding by hypothesizing the existence of some other evidence (4nonstatistical evidence), which, in addition to the salary differential, leads women to recognize and report sex discrimination in their employment. If the quantity of nonstatistical evidence is low, according to Kuhn, women may not report discrimination even if the statistically measured salary differential is large. Kuhn assumes that the quantity of nonstatistical evidence, which is observed by the worker, but not the researcher, is a function of the worker's observed human capital characteristics. Finally, Kuhn evaluates the effect of the nonstatistical evidence using the worker's observed characteristics as a proxy for the unobserved nonstatistical evidence. According to Kuhn's findings, the unobserved variable is a more important determinant of the worker's decision to report discrimination than is the level of statistically measured wage discrimination. Kuhn uses these results to question the importance of recent Supreme Court decisions allowing statistical measures of discrimination to be admitted into evidence in civil sex discrimination suits. As he concludes that such evidence is not the primary factor influencing workers' reporting behavior, allowing these measures to be presented in court should not lead to a large increase in litigation. In this comment, we argue that Kuhn's result, that workers facing a high level of measured discrimination are less likely to report the discrimination, may be explained by incorporating the quality of information, employers' preferences, and the costs of discrimination into the model. We derive conditions under which the negative correlation between measured and reported salary discrimination may be seen as the result of a rational balancing by employers of the benefits and costs of discrimination. Briefly, employers are more likely to discriminate when employees have less accurate information and the probability of reporting, and hence detection, is low. We also offer statistical evidence from the academic labor market to illustrate this alternative hypothesis.

ABSTRACT This study re‐examines the earlier finding of Alderson and Chen (1986a) that financial markets do not consider excess pension assets in determining share prices and that significant increases in shareholder wealth occur when an overfunded pension plan is terminated. The results document that specific event‐time contamination (corporate restructuring announcements) provides the driving force for all the earlier findings.

In this paper we evaluate the impact of the Tax Reform Act of 1986 on U.S. economic growth. We first calculate effective tax rates on income from capital employed in corporate, noncorporate, and household sectors. We then project the future growth of the U.S. economy with and without the 1986 tax reform. We find that much of the potential gain in welfare was dissipated through failure to index the income tax base for inflation. The most promising avenue for future reform is to include income from household assets in the tax base, while reducing tax rates on business income.

ABSTRACT In a sample of 326 US acquisitions between 1975 and 1987, three types of acquisitions have systematically lower and predominantly negative announcement period returns to bidding firms. The returns to bidding shareholders are lower when their firm diversifies, when it buys a rapidly growing target, and when its managers performed poorly before the acquisition. These results suggest that managerial objectives may drive acquisitions that reduce bidding firms' values.

Taylor's series and logarithmic estimates of health state-dependent utility functions both imply that job injuries reduce one's utility and marginal utility of income, thus rejecting the monetary loss equivalent formulation. Injury valuations have unitary income elasticity, and the valuation of nonincremental risk changes and effects of base risks follow economic predictions. Copyright 1990 by American Economic Association.