Reviews the book "Federal Taxation of Estates, Gifts, and Trusts," by Ted D. Englebrecht, Michael L. Moore and Anna C. Fowler.

D RAMATIC changes in the division of labor compensation between wage and nonwage payments have occurred since World War II. Voluntary employer contributions to private pension and welfare funds have risen from 1.2% of wage and salary compensation in 1947 to 8.3% in 1979, with half the increase taking place since 1969 (see table 1). Major changes in the composition of the fringe benefit package have also taken place during this period. Employer contributions to group health insurance plans have risen from 24% of total fringe benefits in 1947 to 40%o in 1979. If this growth continues, group health insurance will replace pension and profit-sharing plans as the largest fringe benefit expenditure by employers. These trends in the compensation mix have long been noted by researchers and various factors have been offered as explanations, including the favorable tax treatment of fringe benefits, demographic changes such as increased life expectancy, and unionization (Rice, 1966; Ture, 1976; Mabry, 1973; Freeman, 1978). However, most explanations have not been subjected to rigorous empirical testing and the few results that have been published are both questionable and dated. For example, Rice (1966) estimated that changes in the tax rate structure had little influence on the relative increase in fringe benefits from World War II to 1963.' More recent studies (Schiller and Weiss, 1979, 1980) have examined a specific fringe benefit the private pension plan for its impact on turnover and its role as an 'equalizing difference, but these studies have not analyzed the determinants of the compensation mix. This paper discusses the theoretical determinants of the division of labor compensation between fringe benefits and cash income and empirically estimates their importance. It concentrates on the impact of taxation on the compensation mix for several reasons. First, the assumption that rising tax rates encourage individuals to substitute fringe benefits for cash income underlies estimates of the welfare cost of tax preferences (Browning, 1979). Second, proposals to fully tax employee fringe benefits under a comprehensive9' income tax have surfaced in recent years (Nolan, 1977; Clotfelter, 1979). Finally, current federal tax policy is calling for large tax rate reductions to increase supply incentives. Unlike the determinants of the compensation mix that change slowly over time, such as life expectancy, tax rate changes can occur rapidly through legislative action. Reducing tax rates might enlarge the tax base by increasing the fraction of labor income received as taxable cash wages and salaries. Section II outlines the tax treatment of various forms of labor compensation, and in section III other factors thought to influence the choice between wage and nonwage compensation are discussed. Empirical analyses of the compensation mix are presented in section IV. A brief summary and implications of the major findings for the future growth of fringe benefits follow in section V.

A LTHOUGH many early models of job search assumed that job seekers were unemployed, economists have come to recognize the importance of on-the-job search.' Mattila (1974), for example, found that roughly 60% of quitters experienced no unemployment between jobs, implying that the majority of voluntary job changers engaged in on-the-job search. The choice of search mode (i.e., employed vs. unemployed search) has been modelled in the theoretical search literature (Barron and McCafferty, 1977; Burdett, 1978); however, there have been no attempts to estimate empirically the determinants of this choice.2 Some researchers have, however, examined the resulting wages associated with these two types of search and found a greater wage return to employed than to unemployed search (Mattila, 1969; Black, 1980). However, because voluntarily unemployed search involves forgoing income (Burdett, 1978), while employed search does not (abstracting from voluntary reductions in hours), incomemaximizing job seekers would never quit to search unless the expected net return to unemployed search exceeded that for employed search. Thus, the previously mentioned empirical findings at first glance might appear to contradict the assumption of income maximization by job seekers, because some workers do quit into unemployment.3 In this paper, it is argued that previous attempts to compare the returns of employed and unemployed job search suffer from a selectivity problem. Specifically, searchers who accept offers without experiencing any unemployment are likely to have unobservable variables (such as informal job contacts and ability) which will raise the relative return to employed search compared to that of voluntarily unemployed job seekers,4 providing an explanation for higher wages for on-the-job searchers than for unemployed searchers. This paper estimates the relative wage effects of employed and unemployed search and the determinants of the choice of search mode (i.e., employed vs. unemployed search). Unlike earlier work (Mattila, 1969; Black, 1980), the previously mentioned selectivity problems are accounted for. This is the first attempt to estimate the determinants of choice of search mode.5 Without adjusting for selectivity bias (as regards employed vs. unemployed search), it is found that employed search is associated with greater expected wage offers than unemployed search, controlling for measurable personal characteristics. However, accounting for selectivity, the expected wage offer given unemployed search is greater than that given employed search. Finally, the greater is the difference between the expected offer given unemployed and that given employed search, the more likely one is to choose unemployed search. These findings suggest that quitting to search unemployed may be a wealth-maximizing decision. Received for publication November 5, 1980. Revision accepted for publication August 17, 1981. * University of Illinois at Urbana-Champaign and Arizona State University, respectively. Professor Low is partially supported by a Faculty Grant from the Graduate College at Arizona State University. The authors thank Francine Blau, Wallace Hendricks and two anonymous referees for comments and suggestions. I For a summary of this literature, see Lippman and McCall (1976). 2 Barron and McCafferty ( 1977) do estimate an aggregate time-series model of the log of the proportion of quits entering unemployment as a function of the vacancy rate (proxied by the help wanted advertising index). However, such a model ignores search that does not lead to quits and does not include variables beyond the vacancy rate that influence an individual's choice of search mode. I It is also possible that the forgone earnings due to unemployed search could in principle be less than the possible savings in direct search costs due to unemployed search (relative to employed search)-see Burdett (1978); in this case, a lower wage return to unemployed search could imply that quitting was based on income considerations. Further, individuals may have quit for nonwage reasons. 4 Black ( 1980) found that, other things equal, those who planned to seek new employment but did not quit had significantly lower wage growth than those who did not plan to search and did not quit. This finding strongly suggests the likelihood of a selectivity bias (Black, 1980, p. 227). ' Black's (1976, 1980) data (the Michigan Panel Study of Income Dynamics-PSID) for his work on employed search did not allow him to distinguish employed and unemployed search.

The purpose of this paper is to reexamine Reinganum's study which indicates that abnormal returns could not be earned unexpected quarterly earnings information, and to document precisely the response of stock prices to earnings announcements. This study, using a very large sample of stocks and daily returns, represents the most complete and detailed analysis of quarterly earnings reports that has been performed to date. Our results are contrary to those of Reinganum and show that abnormal returns could have been earned almost any time during the 1970's. Our analysis also indicates that risk adjustments matter little in this type of work. Finally, we find that roughly 50% of the adjustment of stock returns to unexpected quarterly earnings occurs over a 90-day period after the earnings are announced.

This paper evaluates whether the primary and secondary dissemination of earnings forecast revisions by security analysts is reflected in security prices. Security prices were used to determine the profitability (before the cost of search) of trading strategies based on the nonpublic knowledge of forecast revisions. For a sample of 288 weekly earnings forecast revisions, the results were consistent with the hypothesis that early knowledge of forecast revisions could be used to form profitable trading strategies. Furthermore, the secondary dissemination of forecasts continued to have information content at the point of disclosure. These results are inconsistent with the strong form, but consistent with the semi-strong form, of market efficiency. Furthermore, the information contemporaneously available from public sources did not generate equivalently profitable trading rules, indicating that forecast revisions were not deducible from other publicly available information. Finally, some general public policy implications concerning mandatory disclosure of forecasts were drawn.