twice as likely as whites to be unemployed, almost irregardless of the level of overall economic activity. Among the various explanations given for the black-white unemployment rate differential are racial discrimination, differences in the level of educational attainment, differences in the quality of education, differences in the minimum wage acceptable for employment, and differences in job search patterns and job retention. Using data for a low unemployment period (1969-70), my analysis indicates that among inner-city residents of New York City a racial disparity existed in unemployment experience and that while factors such as schooling, age, previous training, and other demographic characteristics mattered, they accounted for less than twofifths of the variations in unemployment experience. My results also indicate that the distinction between the number of spells of unemployment and the length of unemployment is an important one, and that the experience of blacks and whites differ substantially by either measure.

More than in any particular method of inquiry, I think the hallmark of science is to be found in a constructively skeptical attitude toward knowledge.' The more fundamental are the concepts and assumptions of a science, the easier it is to take them for granted and to abandon this skepticism. In this spirit, Ronald Heiner (1985) is correct in emphasizing that the obtained from the study of the performance of experimental markets is only as secure as the classical preference model used to induce prespecified value structures on the agents in such markets. If the purpose of an experiment is to test a theory (for example, and demand), and the theory is not falsified by the test, this in no way supports any premise of the theory which was also a premise of the experimental design. When we falsify a theory, the implication is that one or more of its assumptions about the behavior of economic agents (maximization of expected utility, commonly shared (homogeneous) expectations, risk aversion, zero subjective costs of transacting, etc.) is in question, and the immediate task is to modify the suspected behavioral assumptions of the original theory. Other assumptions-such as that agents have well-defined preferences, or know the probability distribution from which other agent values were drawn-are not brought into question by the experiment because the experimental design reproduced (or should have) the environment posited by the theory being tested. When testing formal market theories in this way, we should always be aware of the fact that we are studying behavior within the context of our representations of the economic environment. If any of these representations is wrong, then our studies have only increased our self-knowledge, not our knowledge of things (natural economic processes). If we are to increase our knowledge of things, then our ultimate aim should aspire to more than discovering that the behavioral *Department of Economics, University of Arizona, Tucson, AZ 85721. 1 The principal contribution of Popper's falsificationist methodology is, I believe, the influential attempt to develop a formal logic of skeptical inquiry. That the attempt has failed, in the sense that it has produced no defensible codified set of procedures that yield a science of scientific method (happily it would appear that all such attempts will fail), should not detract from the disciplinary value of the falsificationist perspective in approaching scientific questions. Its value to the experimentalist is to force him to ask How can I design an experiment with the property that the set of potentially observable outcomes can be partitioned into those that are consistent with one (or a given) theory and those that are consistent with other theory(ies) (or inconsistent with the given theory)? That experimental life is such that his effort is about as likely to fail as to succeed by no means detracts from the value of the exercise. Its value to the theorist (if he will just forgo the career-advancing primeval incentive to publish yet another technically tractable extension of the existing theory literature) is to force him to ask How can I model this question so as to suggest (as Martin Shubik would say) a do-able experiment, and so as to yield observable implications that do not exhaust the set of possible outcomes? That this effort will often fail does not detract from the value of the exercise. Having said this I would not want to leave the impression that experiments that are fishing expeditions in the laboratory to see what will happen are of no value; seeing what happens can be essential in defining an analyticalempirical research program. Similarly, when a theorist builds (as Buz Brock would say) castles in the air, this is not necessarily useless, for it may lead to more operational forms of theory. We should impute some nonzero probability to the proposition that Feyerabend's anything goes posture is right. But at this stage I think it has become pretty obvious where our professional weaknesses are concentrated. Economists, while spouting the rhetoric (Donald McClosky, 1983) of the falsificationist, are in fact verificationist to the core. We all do it. We take a proposition, conjecture, or theory, then search for supportive historical or empirical examples. As everyone ought to know, seek and ye are likely to find, whether one is a Keynesian or a supply sider. What is not sufficiently appreciated is that this verificationist grubbing is a prescientific exercise in which one asks whether there is any supporting evidence, and how difficult it is to find; if there is none or if it is pretty hard to uncover, it suggests abandonment in the prescientific womb.

Efficient contracting predicts that ex ante severance pay contracts are offered to chief executive officers (CEOs) as protection against downside risk and to encourage investment in risky projects with a positive net present value (NPV). Consistent with this prediction, we find that ex ante contracted severance pay is positively associated with proxies for a CEO’s risk of dismissal and costs the CEO would incur from dismissal. Additionally, we show that the contracted severance payment amount is positively associated with CEO risk taking and the extent to which a CEO invests in projects that have a positive NPV. Overall, our findings imply that ex ante severance pay contracts are consistent with efficient contracting.

Nearly 40% of IPO firms redact information from their SEC registration filings. These firms exhibit characteristics consistent with the need to shield proprietary information from potential rivals. They experience greater underpricing, but pre-IPO insiders reduce underpricing-related wealth transfers by selling proportionately less of the firm's shares at the IPO, raising more equity financing in later seasoned equity offerings, and selling their own holdings at a relatively slow pace. The information environment of redacting firms reflects proportionately more private information than that of non-redacting firms post-IPO, but this difference abates by the fourth year. Consistent with the view that redacted proprietary information provides competitive advantages, redacting firms exhibit superior financial performance post-IPO. The results illustrate tradeoffs in balancing a firm's needs to protect proprietary information with its capital needs, investor needs for information to price securities, and pre-IPO owner liquidity needs.

We address whether SOX 404(b) internal control audits under two auditing standards regimes and SOX 404(a) management assessments are associated with improved internal control system quality, an important and largely unstudied potential benefit. In 2013, the PCAOB disclosed that 15 percent of inspected control audits were ineffective, suggesting that the current control auditing standard may not be sufficient to induce implementation of high-quality control systems. We use an indirect measure of internal control system quality—future unaudited accruals quality—to proxy for internal control quality because sustained internal control improvements should be exhibited in future quarterly financial reports unaltered by contemporaneous financial statement audits. We find that internal control audits initially provided internal control quality benefits. After the 2007 auditing standards change, internal control quality deteriorated for ICFR audited versus unaudited firms. Finally, we find limited evidence that management assessments affect internal control quality. Results indicate that recent PCAOB concerns may have merit. Data Availability: Data are publicly available from the sources identified in the text.

What is the role of a country's financial system in determining technology adoption? To examine this, a dynamic contract model is embedded into a general equilibrium setting with competitive intermediation. The terms of finance are dictated by an intermediary's ability to monitor and control a firm's cash flow, in conjunction with the structure of the technology that the firm adopts. It is not always profitable to finance promising technologies. A quantitative illustration is presented where financial frictions induce entrepreneurs in India and Mexico to adopt less‐promising ventures than in the United States, despite lower input prices.

This paper incorporates the foreign interest in the determination of a country's international trade policy into a model of political competition between candidates contesting elective office. We envisage foreign and domestic producer interests as expressing political support for a candidate via campaign contributions, and candidates as making trade policy pronouncements to maximize political support from producer interests. Tariffs are divisive, but VERs are consistent with conciliatory policy positions yielding mutual gain to foreign and domestic interests. No candidate has an interest in formulating a trade policy position using a tariff if a VER is a policy option. Protection in the developed countries has in recent years often taken the form of bilaterally negotiated voluntary export restraints (VERs) rather than the more traditional unilaterally imposed import restrictions.' The use of voluntary export restraints has been paralleled by interest in the theoretical literature. The effects of VERs have been compared with tariffs and quotas, and VERs have been examined in a political-economy framework with a view to identifying the gainers and losers from this form of restric

Numerous studies have emerged over the past decade dealing with the employment effects of minimum wage legislation (for example, see Jacob Mincer and Edward Gramlich). These studies uniformly show that some amount of disemployment results from the imposition of a minimum wage above a wage that would prevail in the absence of such legislation; though there is considerable dispute concerning the magnitude of the effect. In addition, most if not all of the recent studies indicate a greater employment sensitivity to changes in the minimum wage on the part of teenagers, nonwhites, and the low-skilled, generally, than is true for other groups. Job losses due to higher minimum wages may contribute to high unemployment rates among youth in general, and minority youth in particular. This paper presents no direct evidence on the impact of the minimum wage on teenage unemployment. Its results do suggest, however, that previous studies of the impact of the minimum wage on employment loss were probably biased towards overstatement of the effect of the minimum wage. In the case of nonwhite teenagers, the results presented here indicate that over the period 1954 to 1979, cyclical factors affected nonwhite teenage employment to a far greater extent than did changes in the minimum wage.