In labor market equilibrium, sectoral differences in "natural" rates of unemployment generate a conformable distribution of wage differentials that compensate workers for bearing unemployment risk. This paper offers new empirical evidence on the determinants of this equilibrium. The analysis consists of two stages. First, I estimate a three-state model of employment and unemployment that identifies the determinants of individuals' rates of entering and leaving unemployment spells. Sectoral, demographic, and policy-induced differences in unemployment probabilities evolve naturally from this framework. Second, I estimate the impact of these differences on the distribution of wages. An important finding is the powerful impact of the unemployment insurance (UK) system both on unemployment and on equalizing wage differences. The evidence is strong that the availability of UK increases unemployment, while simultaneously reducing the magnitude of compensating wage differentials. Most of the effect of UK on unemployment is due to an increased probability of entering spells of unemployment, mainly temporary layoffs, though the duration of spells is also affected. Neglect of the role of UK as a substitute for wages partially accounts for the small compensating differentials estimated in previous research. In the absence of UK, each point of anticipated unemployment raises an individual's wage by about 2.5%.

Auditing, Auditor independence, Management Advisory Services, ASR No. 250

Municipal bond rating, Socioeconomic variables, Accounting numbers

This paper adds to recent evidence on market inefficiency in processing information in earnings reports. It documents that short positions taken in sample stocks which did not report earnings by the date expected during the sample period, 1971–1976, would have been abnormally profitable, before transaction costs. This is because late reports, on average, revealed bad news which was not anticipated in market prices prior to the report date. The magnitude of the average abnormal returns is in the order of 1.0% over 20 days but is larger for smaller firms in the sample and positively related to the length of the reporting delay. The paper also documents that long positions taken in stocks reporting early with good news would have generated abnormal returns of approximately 1.0% on average over a 20-day holding period.

The paper considers a bilateral monopoly with uncertainty and asymmetric information, and characterizes necessary and sufficient conditions for the existence of contracts that are efficient and incentive compatible. These contracts can be implemented by a truthful sequential revelation mechanism. Alternatively, they can be interpreted as specifying a class of payment schedules, designating the seller to choose a schedule from this class, and the buyer to pick a point on the chosen schedule. Requirements contracting is similar.

Richard H. Bernhard, Risk-Adjusted Values, Timing of Uncertainty Resolution, and the Measurement of Project Worth, The Journal of Financial and Quantitative Analysis, Vol. 19, No. 1 (Mar., 1984), pp. 83-99

Under the U. S. tax law, taxable income differs systematically from economic income when there is inflation. For example, nominal interest payments and nominal capital gains are taxable or tax deductible, and depreciation allowances are based on historic rather than replacement costs. Therefore, even fully anticipated inflation can have real effects. The purpose of this paper is to investigate to what degree an increase in the inflation rate, given these differences between taxable and economic income under existing tax law, ought to change corporate investment and financial policy, and cause capital gains or losses to existing owners of corporate equity.

This paper demonstrates that, contrary to a widely held opinion, the determination of the goals of unions is fully amenable to empirical analysis. A characterization of the wage and employment-setting process in unionized markets is adopted, and its qualitative implications examined. The first-order condition for this model is fitted to time series data on the newspaper industry from ten cities. The International Typographical Union's objective function reveals very restricted opportunities for substituting wages for employment in response to a change in the slope of the employer's labor demand function. Larger union locals place greater emphasis on wages versus employment than smaller union locals.

This paper examines one of the few cases of seemingly redundant securities: sets of three government bonds with the same maturity date. Within the bounds on relative bond prices established by tax-exempt investors in a market with proportional transaction costs, the taxation of capital gains on the basis of realization has a significant impact on relative prices. The empirical evidence supports the tax option effect discussed by Constantinides and Ingersoll, but does not generally support the segmented tax-clientele equilibrium discussed by Schaefer.