Asset valuation, Replacement costs, Fixed asset lives, Depreciation

Since 1975 labour slack has been unusually high in the OECD countries, and yet inflation has not diminished. The less favourable mix of unemployment and rate of change of inflation (which we call stagflation) is explained by a fall in the feasible rate of growth of real wages unmatched by a reduction in the constant term in Phillips curve. To investigate this mechanism, conventional wage and price equations are estimated for 19 countries and then used for simulation. Stagflation has been caused in roughly equal amounts by rising relative import prices and by the fall in the rate of productivity growth. In the basic model the Phillips curve is assumed not to adapt to falls in feasible real wage growth, but in a final section an adaptive wage equation is estimated, which confirms that the process of adaptation is slow.

Auditing, Extrapolation, Time-series, Cost variance

The SEC currently requires that firms disclose recent disagreements with their auditors over accounting or auditing matters when a change in auditor is reported. The effectiveness and usefulness of requirements to disclose disagreements have been questioned, and previous empirical research on the issue has been inconclusive. This study investigates the information content of disclosure of the auditor-firm disagreements. The analysis indicates a significant negative market reaction in the week that the Form 8-K is filed with the SEC. This finding is consistent with the position that the disclosure provides information useful to investors.

Internal controls, Auditing, Auditor consensus, Internal control evaluation

In a recent article, Aneuryn-Evans and Deaton propose asymptotic formulae for analysing Monte Carlo studies of the Cox statistics for testing non-nested hypotheses. This note shows the invalidity of those formulae by demonstrating that, in general, the Cox statistics do not have a singular joint asymptotic distribution.

This paper provides a theoretical synthesis of recent discussions of "learning by doing" and "investment in training" as alternative forms of human capital accumulation. These theoretical notions relate to essentially different phenomena; in particular, pace Becker and Mincer, "investment in training" does not completely encompass "learning by doing". The paper then develops a model in which human capital accumulation occurs via both "training" and "learning by doing". The joint training-learning model, since it is more general then "pure" models in which all accumulation occurs via either training or learning, avoids certain restrictive and seemingly implausible implications of either kind of "pure" model. However, the joint model also has implications that, while compatible with stylized facts about the life cycle, are sharper than those of either kind of pure model. (For example, the joint model implies that market time and earnings must rise early in the life cycle, while neither pure model without "corners" does so.) Finally, the notion of learning by doing provides a rationale for an empirical finding that has recently received attention, to the effect that the rate of depreciation of human capital is not constant, but rather depends on the extent to which it is used in market activities.