The design of the New York City (NYC) high school match involved trade-offs among efficiency, stability, and strategy-proofness that raise new theoretical questions. We analyze a model with indifferences—ties—in school preferences. Simulations with field data and the theory favor breaking indifferences the same way at every school—single tiebreaking—in a student-proposing deferred acceptance mechanism. Any inefficiency associated with a realized tiebreaking cannot be removed without harming student incentives. Finally, we empirically document the extent of potential efficiency loss associated with strategy-proofness and stability, and direct attention to some open questions.

mechanism to match over 90,000 entering students to public high schools each year. This paper makes a very preliminary report on the design process and the first year of operation, in academic year 2003-04, for students entering high school in Fall 2004. In the first year, only about 3,000 students had to be assigned to a school for which they had not indicated a preference, which is only 10 % of the number of such assignments the previous year. New York City has the largest public school system in the country, with over a million students. In 1969 the system was decentralized into over thirty community school districts. In the 1990s, the city began to take more centralized control, and in 2002, a newly reorganized NYCDOE began to reform many aspects of the school system. In May 2003, Dr. Jeremy Lack, then the NYCDOE Director of Strategic Planning, contacted one of us for advice on designing a new high school matching process. The NYCDOE was aware of the matching process for American physicians, the National Resident Matching Program (Roth 1984; Roth and Peranson 1999). They wanted to know if it could be appropriately adapted to the city’s schools. The three authors of the present paper (and, at several crucial junctures, also Tayfun Sönmez) advised (and often convinced) Dr.

The Net Effect of an Alcohol Tax Increase on Death Rates in Middle Age by Philip J. Cook, Jan Ostermann and Frank A. Sloan. Published in volume 95, issue 2, pages 278-281 of American Economic Review, May 2005

We present a method for decomposing wholesale electricity payments into production costs, inframarginal competitive rents, and payments resulting from the exercise of market power. Using data from June 1998 to October 2000 in California, we find significant departures from competitive pricing during the high-demand summer months and near-competitive pricing during the lower-demand months of the first two years. In summer 2000, wholesale electricity expenditures were $8.98 billion up from $2.04 billion in summer 1999. We find that 21 percent of this increase was due to production costs, 20 percent to competitive rents, and 59 percent to market power.

The Big 4 auditors are inspected annually by the Public Company Accounting Oversight Board (PCAOB), with the summarized findings (labeled “audit deficiencies”) being publicly available on its website. Although the PCAOB claims that its inspection findings and process are designed to increase audit quality, there is limited empirical evidence to support this claim. We examine whether changes in revenue-deficient audit engagements are associated with subsequent year changes in client revenue quality. A revenue-deficient audit engagement is an inspected engagement that has at least one revenue-related audit deficiency. To infer audit quality, we link year-over-year changes in revenue-deficient audit engagements to the subsequent year’s change in engagement-level revenue quality—a common financial reporting quality proxy. We predict that audit firms will react asymmetrically to changes in revenue-deficient audit engagements: increases will prompt audit quality improving actions, but decreases will not. Our results support our prediction.

Agents often inflate measured performance by distorting operating decisions (e.g., real earnings management) and/or reporting decisions (e.g., accruals management). Across four studies, we find that public judgments of distortion’s acceptability largely reflect assessments of how harmful and norm-violating the distortion is. Judgments of operating distortion primarily reflect assessments of harm, whereas judgments of reporting distortion primarily reflect assessments of norm violation. These results are consistent with the Theory of Dyadic Morality (Gray, Waytz, and Young 2012; Schein and Gray 2018). We also find that those who perceive an accounting system as more unfairly withholding an agent’s bonus assess distortion (especially reporting distortion) to be less norm-violating. Those who perceive the performance measure as less appropriate for capturing the value of performance to stakeholders assess distortion (especially operating distortion) to be more harmful. Assessments of distortions’ harm and norm violation explain a substantial portion of the variation in acceptability judgments.

In this study, we examine whether sell-side security analysts gain access to value-relevant information through political connections. We measure analysts' political connections based on political contributions at the brokerage-house level. We argue that if brokerages are able to obtain private information through their political connections, then analysts at politically connected brokerages should issue more profitable stock recommendations, and this increased profitability should be more pronounced for politically sensitive stocks. Our evidence is consistent with these predictions. Analyses of recommendations issued surrounding the Affordable Care Act further support our main inferences. Moreover, our findings hold after we employ numerous tests to address correlated omitted variables and endogeneity. Collectively, these results suggest that brokerages obtain value-relevant, nonpublic information from their political connections.

We investigate the relation between corporate tax payments and corporate social responsibility. Because existing theory and empirical studies find inconsistent evidence on the relation between these constructs, we investigate whether the two activities act as complements or substitutes. We estimate the relation between measures of corporate social responsibility and (1) the amount of corporate taxes paid, and (2) the amount invested in tax lobbying activities using both ordinary least squares and a system of simultaneous equations. We find consistent evidence that corporate social responsibility is negatively related to five-year cash effective tax rates and positively related to tax lobbying expenditures. Our evidence suggests that, on average, corporate social responsibility and tax payments act as substitutes. Data Availability: Data are available from sources identified in the paper.

Firms frequently attempt to increase profits by replacing some existing workers with new lower-wage workers. However, this strategy may be ineffective in an incomplete-contract environment because the new workers may provide lower effort in response to their lower wages, and hiring new lower-wage workers may damage the remaining original workers' reciprocal relationship with the firm. We conduct an experiment to examine this issue and find that when new lower-wage workers become available, firms hire them to replace original higher-wage workers and pay the new workers lower wages. However, these lower wages do not improve firm profit because the decision to hire new lower-wage workers causes both the new and remaining workers to provide lower effort. Moreover, hiring lower-wage workers reduces new workers' payoffs and, thus, decreases social welfare. These unintended consequences suggest that firms should consider both the wage savings and the potential costs when deciding whether to replace some workers with new lower-wage workers. We discuss the implications of our findings for contract design, hiring practices, and managerial accountants.

We examine whether three tax system characteristics—required book-tax conformity, worldwide versus territorial approach, and perceived strength of enforcement—impact corporate tax avoidance across countries after controlling for firm-specific factors previously shown to be associated with tax avoidance (i.e., performance, size, operating costs, leverage, growth, the presence of multinational operations, and industry) and for other cross-country factors (i.e., statutory corporate tax rates, earnings volatility, and institutional factors). We find that, on average, firms avoid taxes less when required book-tax conformity is higher, a worldwide approach is used, and tax enforcement is perceived to be stronger. However, the relations between tax avoidance and all three tax systems characteristics are contextual and depend on the extent to which management compensation comes from variable pay, including bonuses, stock awards, and stock options. Data Availability: Data are available from sources identified in the text.