Abstract: We investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries. At an aggregate level, firm leverage is fairly similar across the G-7 countries. We find that factors identified by previous studies as correlated in the cross-section with firm leverage in the United States, are similarly correlated in other countries as well. However, a deeper examination of the U.S. and foreign evidence suggests that the theoretical underpinnings of the observed correlations are still largely unresolved.

Abstract: We present a consumption†based model that explains a wide variety of dynamic asset pricing phenomena, including the procyclical variation of stock prices, the long†horizon predictability of excess stock returns, and the countercyclical variation of stock market volatility. The model captures much of the history of stock prices from consumption data. It explains the short†and long†run equity premium puzzles despite a low and constant risk†free rate. The results are essentially the same whether we model stocks as a claim to the consumption stream or as a claim to volatile dividends poorly corelated with consumption. The model is driven by an independently and identically distributed consumption growth process and adds a slow †moving external habit to the standard power utility function. These features generate slow countercyclical variation in risk premia. The model posits a fundamentally novel description of risk premia. Investors fear stocks primarily because they do poorly in recessions unrelated to the risks of long†run average consumption growth.

Abstract: Shared decision-making is increasingly advocated as an ideal model of treatment decision-making in the medical encounter. To date, the concept has been rather poorly and loosely defined. This paper attempts to provide greater conceptual clarity about shared treatment decision-making, identify some key characteristics of this model, and discuss measurement issues. The particular decision-making context that we focus on is potentially life threatening illnesses, where there are important decisions to be made at key points in the disease process, and several treatment options exist with different possible outcomes and substantial uncertainty. We suggest as key characteristics of shared decision-making (1) that at least two participants-physician and patient be involved; (2) that both parties share information; (3) that both parties take steps to build a consensus about the preferred treatment; and (4) that an agreement is reached on the treatment to implement. Some challenges to measuring shared decision-making are discussed as well as potential benefits of a shared decision-making model for both physicians and patients.

Abstract: We propose a conditional measure of capital market integration that allows us to characterize both the cross-section and time-series of expected returns in developed and emerging markets. Our measure, which arises from a conditional regime-switching model, allows us to describe expected returns in countries that are segmented from world capital markets in one part of the sample and become integrated later in the sample. Our results suggest that a number of emerging markets exhibit time-varying integration. Interestingly, some markets appear to be more integrated than one might expect based on prior knowledge of investment restrictions. Other markets appear segmented even though foreigners have relatively free access to their capital markets.

Abstract: This paper discusses the prevalence of Silicon Valley-style localizations of individual manufacturing industries in the United States Several models in which firms choose locations by throwing darts at a map are used to test whether the degree of localization is greater than would be expected to arise randomly and to motivate a new index of geographic concentration The proposed index controls for differences in the size distribution of plants and for differences in the size of the geographic areas for which data is available As a consequence, comparisons of the degree of geographic concentration across industries can be made with more confidence We reaffirm previous observations in finding that almost all industries are localized, although the degree of localization appears to be slight in about half of the industries in our sample We explore the nature of agglomerative forces in describing patterns of concentration, the geographic scope of localization, and the extent to which agglomerations involve plants in similar as opposed to identical industries

Abstract: The emergence of new equity markets in Europe, Latin America, Asia, the Mideast and Africa provides a new menu of opportunities for investors. These markets exhibit high expected returns as well as high volatility. Importantly, the low correlations with developed countries' equity markets significantly reduces the unconditional portfolio risk of a world investor. However, standard global asset pricing models, which assume complete integration of capital markets, fail to explain the cross-section of average returns in emerging countries. An analysis of the predictability of the returns reveals that emerging market returns are more likely than developed countries to be influenced by local information.

Abstract: Microdata studies of household saving often find a significant group in the population with virtually no wealth, raising concerns about heterogeneity in motives for saving. In particular, this heterogeneity has been interpreted as evidence against the life-cycle model of saving. This paper argues that a life-cycle model can replicate observed patterns in household wealth accumulation after accounting explicitly for precautionary saving and asset-based means- tested social insurance. We demonstrate theoretically that social insurance programs with means tests based on assets discourage saving by households with low expected lifetime income. In addition, we evaluate the model using a dynamic programming model with four state variables. Assuming common preference parameters across lifetime- income groups, we are able to replicate the empirical pattern that low-income households are more likely than high-income households to hold virtually no wealth. Low wealth accumulation can be explained as a utility-maximizing response to asset-based means-tested welfare programs.

Abstract: This paper develops procedures for inference about the moments of smooth functions of out of sample predictions and prediction errors, when there is a long time series of predictions and realizations, and each prediction is based on regression parameters estimated from a long time series. The aim is to provide tools for inference about predictive accuracy and efficiency, and, more generally, about predictive ability. The paper allows for nonlinear models and estimators, as well as for possible dependence of predictions and prediction errors on estimated regression parameters. Simulations indicate that the procedures work well.

Abstract: Recent theories of economic geography suggest that firms in the same industry may be drawn to the same locations because proximity generates positive externalities or 'agglomeration effects' Under this view, chance events and government inducements can have a lasting influence on the geographical pattern of manufacturing However, most evidence on the causes and magnitude of industry localization has been based on stories, rather than statistics This paper examines the location choices of 751 Japanese manufacturing plants built in the US since 1980 Conditional logit estimates support the hypothesis that industry-level agglomeration benefits play an important role in location decisions

Abstract: This paper proposes a method for computing tax rates using national accounts and revenue statistics. Using this method we construct time-series of tax rates for large industrial countries. The method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases. This method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework. These tax rates compare favorably with existing estimates of marginal tax rates, and highlight important international differences in tax policy.

Abstract: Many scholars are concerned with why the U.S. and Canada have been so much more successful over time than other New World economies. Since all New World societies enjoyed high levels of product per capita early in their histories, the divergence in paths can be traced back to the achievement of sustained economic growth by the U.S. and Canada during the 18th to early 19th centuries. This paper highlights the relevance of differences in the degree of inequality in wealth, human capital, and political power in accounting for the variation in the records of growth, and suggest that the roots of inequality lay in differences in the initial factor endowments of the respective colonies The large concentration of Native Americans, and the suitability of cultiva- ting sugar and other crops were key in generating extreme inequality. This encouraged the evolution of societies where small elites of European descent held highly disproportionate shares of the wealth, human capital and political power, and dominated the population economically and politically. Absent from the nearly all-inclusive list of New World colonies with these conditions were the British settlements in the northern part of the North American continent. Next, we discuss the tendencies of government policies to maintain these conditions along the respective economy's path of development. Finally, we explore the effects of inequality on the evolution of institutions conducive to participation in the commercial economy, markets and technological change during this specific era, and suggest that their greater equality in wealth, human capital, and political capital and power may have predisposed the U.S. and Canada toward earlier realization of sustained economic growth.

Abstract: In recent years there has been great interest in the possibility of substituting environmentally motivated or 'green' taxes for ordinary income taxes. Some have suggested that such revenue-neutral reforms might offer a 'double dividend:' not only (1) improve the environment but also (2) reduce certain costs of the tax system. This paper articulates different notions of 'double dividend' and examines the theoretical and empirical evidence for each. It also draws connections between the double dividend issue and principles of optimal environmetal taxation in a second-best setting. A weak double dividend claim is that returning tax revenues through cuts in distortionary taxes leads to cost savings relative to the case where revenues are returned lump sum. This claim is easily defended on theoretical grounds and (thankfully) receives wide support from numerical simulations.The stronger versions contend that revenue-neutral swaps of environmental taxes for ordinary distortionary taxes involve zero or negative gross costs.Analyses numerical results tend to cast doubt on the strong double dividend claim.Yet the theoretical case against the strong form is not air-tight, and numerical dividend claim is dividend claim is rejected (upheld) are related to the conditions where the second-best optimal environmental tax is less than (greater than) the marginal environmental damages.The difficulty of establishing a strong double dividend claim heightens the importance of attending to and evaluating the (environmental) benefits from environmental taxes.

Abstract: This book examines the consequences of misspecifications ranging from the fundamental to the nonexistent for the interpretation of likelihood-based methods of statistical estimation and interference. Professor White first explores the underlying motivation for maximum-likelihood estimation, treats the interpretation of the maximum-likelihood estimator (MLE) for misspecified probability models, and gives the conditions under which parameters of interest can be consistently estimated despite misspecification, and the consequences of misspecification, for hypothesis testing in estimating the asymptotic covariance matrix of the parameters. Although the theory presented in the book is motivated by econometric problems, its applicability is by no means restricted to economics. Subject to defined limitations, the theory applies to any scientific context in which statistical analysis is conducted using approximate models.

Abstract: Preface and Introduction Living in the Global The Local Embeddedness of Transnational Corporations Global Agro-Food Complexes and the Refashioning of Rural Europe The Uneven Landscapes of Innovation Poles: Local Embeddedness and Global Networks Growth Regions Under Duress: Renewal Strategies in Baden Wurttemberg and Emilia-Romagna Flexible Districts, Flexible Regions? The Institutional and Cultural Limits to Districts in an Era of Technological Paradigm Shifts Regulating Labour: The Social Regulation and Reproduciton of Local Labour Markets The Disembedded Regional Economy: The Transformation of East German Industrial Complexes into Western Enclaves Institutional Change, Cultural Transformation, and Economic Regeneration: Myths and Realities from Europe's Old Industrial Areas Local and Regional Broadcasting in the New Media Order Global-Local Social Conflicts: Examples from Southern Europe Holding Down the Global

Abstract: We study the competition between two political parties for seats in a parliament. The parliament will set two types of policies: ideological and non-ideological. The parties have fixed positions on the ideological issues, but choose their non-ideological platforms to attract voters and campaign contributions. In this context, we ask: How do the equilibrium contributions from special interest groups influence the platforms of the parties? We show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups. The party that is expected to win a majority of seats caters more to the special interests.

Abstract: In this paper we develop alternative ways to compare asset pricing models when it is understood that their implied stochastic discount factors do not price all portfolios correctly. Unlike comparisons based on x2 statistics associated with null hypothesis that models are correct, our measures of model performance do not reward variability of discount factor proxies. One of our measures is designed to exploit fully the implications of arbitrage-free pricing of derivative claims. We demonstrate empirically the usefulness of methods in assessing some alternative stochastic factor models that have been proposed in asset pricing literature.

Abstract: Most explanations of Korea's and Taiwan's economic growth since the early 1960s place heavy emphasis on export orientation. However, it is difficult to see how export orientation could have played a significant causal role in these countries' growth. The measured increase in the relative profitability of exports during the 1960s is too insignificant to account for the phenomenal export boom that ensued. Moreover, exports were initially too small to have a significant effect on aggregate economic performance. A more plausible story focuses on the investment boom that took place in both countries. In the early 1960s both economies had an extremely well- educated labor force relative to their physical capital stock, rendering the latent return to capital quite high. By subsidizing and coordinating investment decisions, government policy managed to engineer a significant increase in the private return to capital. An exceptional degree of equality in income and wealth helped by rendering government intervention effective and keeping it free of rent seeking. The outward orientation of the economy was the result of the increase in demand for imported capital goods.

Abstract: This paper examines the impact of public infrastructure on industrial location when increasing returns are present. Poor infrastructure implies costs of Samuelson's `iceberg' form and alter trade both within and between countries. Trade integration implies that firms tend to locate in countries with better infrastructure so that regional policies that affect the level of public infrastructure influence economic geography. The effectiveness of such policies decreases when infrastructure improves, however, because a high level of infrastructure and strong economies of scale magnify the concentration effects of differentials in infrastructure, market size and capital-labour ratios. Infrastructure policies that facilitate intra-regional trade in the poor country lead to regional convergence but policies that facilitate intra-regional trade lead to regional divergence. We also analyse the incentives for countries to inhibit industrial relocation.

Abstract: This study considers the time series behavior of the U.S. real interest rate from 1961 to 1986. We provide a statistical characterization of the series using the methodology of Hamilton (1989), by allowing three possible regimes affecting both the mean and variance of the series. The results suggest that the ex-post real interest rate is essentially random around a mean that is different for the periods 1961-1973, 1973-1980 and 1980-1986. The variance of the process is also different in these episodes being higher in both the 1973-1980 and 1980-1986 sub-periods. The inflation rate series is also analyzed using a three regime framework and again our results show interesting patterns with shifts in both mean and variance. Various model selection tests are run and both an ex-ante real interest rate and an expected inflation series are constructed. Finally, we make clear how our results can explain some recent findings in the literature. Cette etude s'interesse au comportement des series du taux d'interet reel americain de 1961 a 1986. En utilisant la methodologie d'Hamilton (1989), la modelisation statistique des series se fait en postulant trois regimes possibles affectant la moyenne et la variance de celles-ci. Les resultats suggerent que le taux d'interet reel ex-post est essentiellement un processus non correle et centre sur une moyenne qui differe sur les periodes 1961-1973, 1973-1980 et 1980-1986. La variance du processus est aussi differente pour chacune de ces periodes, etant plus elevee dans les sous periodes 1973-1980 et 1980-1986. Les series du taux d'inflation sont aussi analysees a la lumiere de ce modele a trois regimes et les resultats traduisent encore un comportement interessant de celles-ci, avec des changements dans la moyenne et la variance. Differents tests de specification sont utilises et des series, a la fois du taux d'interet reel ex-ante et de l'inflation anticipee, sont construites. Enfin, il est montre comment ces resultats peuvent expliquer certaines conclusion recentes de la litterature.

Abstract: The widely held view that larger families tend to be poorer in developing countries has influenced research and policies. But the basis for this"stylized fact"is questionable, the authors argue. Widely cited evidence of a strong negative correlation between size and consumption per person is unconvincing, given that even poor households face economies of size in consumption. The authors find that the correlation between poverty and household size vanishes in Pakistan when the size elasticity of the cost of living is about 0.6. This turns out to be the elasticity implied by a modified version of the food-share method of setting scales. By contrast, some measures of child nutritional status indicate an elasticity closer to unity. Consideration of the weight attached to child versus adult welfare may help resolve the nonrobustness of demographic profiles of poverty. The authors show that the incidence of severe child stunting is more elastic to household size than their Engel curve estimate suggests, although the latter is still a fair predictor of child wasting. A consideration of the purpose of measuring poverty - notably the extent to which it is used to inform policies aimed at promoting child welfare - may go some way toward resolving the issues.

Abstract: Conventional wisdom in banking suggests a higher capital-asset ratio (CAR) is associated with a lower after-tax return on equity (ROE). Despite the arguments in favor of this hypothesis, data on U.S. banks in the mid- to late-1980s tell a very different story. Bank values of CAR and ROE are positively related, and this relationship is both statistically and economically significant. The positive relationship between CAR and ROE holds both cross-sectionally and over time, holds when lags are included, and becomes even stronger when an extensive set of control variables is added to the regres-ions. The author regresses CAR and ROE on three years of lagged CAR and ROE and a number of control variables. The model suggests positive causation in the Granger sense to run in both directions between capital and earnings, consistent with the hypothesis that banks retain some of their marginal earnings in the form of equity increases. The evidence suggests that higher capital is followed by higher earnings over the next few years primarily through reduced interest rates on uninsured purchased funds. These findings are strongest for banks with low capital and high portfolio risk who decreased their portfolio risks as well as increased their capital positions relative to what they otherwise would have been. These results are consistent with the hypotheses that, because of factors making banks riskier in the 1980s, some banks may have had greater than optimal risk of bankruptcy and the associated deadweight liquidation costs, and as a result paid very high risk premiums on uninsured funds and suffered lower earnings. Those banks with increased expected bankruptcy costs that reacted by increasing capital quickly appear to have paid lower uninsured debt rates and had higher earnings than those that did not react this way. The tests generally do not support the signalling hypothesis - bank management signals private information that future prospects are "good" by increasing capital. The tests also show that the positive Granger-causality from capital to earnings of the 1980 does not apply to the 1990-1992 time period. The data suggest that banks may have "overshot" their optimal capital in the early 1990s because of regulatory changes, decline in bank risk, or unexpected high earnings that raised capital above optimal levels.

Abstract: In this paper we show that some of the predictions of models of consumer intertemporal optimization are not inconsistent with the patterns of non-durable expenditure observed in US household-level data Our results and our approach are new in several respects First, we use the only US micro data set which has direct and complete information on household consumption The microeconomic data sets used in most of the consumption literature so far contained either very limited information on consumption (like the PSID) or none at all, in which case consumption had to be obtained indirectly from income and changes in assets Second, we propose a flexible and novel specification of preferences which is easily estimable and allows a general treatment jof multiple commodities We show that aggregation over commodities can be important, both theoretically and in practice Third, we present empirical results that show that it is possible to find a reasonably simple specification of preferences, which controls for the effects of changes in demographics and labor supply behavior over the life cycle and which is not rejected by the available data On our preferred specification, we obtain sharp estimates of key behavioral parameters (including the elasticity of intertemporal substitution) and no rejections of theoretical restrictions Our results contrast sharply with most of the previous evidence, which has typically been interpreted as rejection of the theory We show that previous rejections can be explained by the simplifying assumptions made to derive empirically tractable equations We also show that results obtained using food consumption or aggregate data can be extremely misleading

Abstract: Accounting as Social and Institutional Practice is the first major collection of critical and socio-historical analyses of accounting. It gathers together work by scholars of international renown on the social and institutional nature of accounting to address the conditions and consequences of accounting practice. Challenging conventional views that accounting is a technical practice, and that it comprises little more than bookkeeping, this collection demonstrates the importance of analysing the multiple arenas in which accounting emerges and operates. As accounting continues to gain in importance in so many spheres of social life, an understanding of the conditions and consequences of this calculative technology is vital. Its relevance extends far beyond the discipline of accounting. This book will be of considerable interest for specialists in organisational analysis, sociologists, and political scientists, as well as the general reader interested in understanding the increasing significance of accounting in contemporary society.

Abstract: Using the Mirrlees optimal income tax model with quasi-linear preferences, the paper examines conditions for marginal tax rates to be rising at high income levels and declining in an interval containing the modal skill. It examines conditions for the marginal tax rate to be higher at a low skill level than at the high skill level with the same density--an argument only holding for skill levels above a cutoff where resources of a worker are marginally of the same value as resources of the government. Data on earnings rates are presented. Copyright 1998 by American Economic Association.(This abstract was borrowed from another version of this item.)

Abstract: CONTENTS: Preliminary remarks; Brownian motion, poisson process, alpha-stable Levy motion; Computer simulation of alpha-stable random variables; Stochastic integration; Spectral representations of stationary processes; Computer approximations of continuous time processes; Examples of alpha-stable stochastic modelling; Convergence of approximate methods; Chaotic behaviour of stationary processes; Hierarchy of chaos for stable and ID stationary processes. Appendix - A guide to simulation.

Abstract: We develop a dynamic model of learning and wage determination. Education may convey initial information about ability, but subsequent performance observations also are informative. Although the role of schooling in the labor market's inference process declines as performance observations accumulate, the estimated effect of schooling on the level of wages is predicted to be independent of labor-market experience. The model also predicts that time-invariant variables correlated with ability but unobserved by employers should be increasingly correlated with wages as experience increases and that wage residuals should be a martingale. We present evidence from the National Longitudinal Survey of Youth that is generally consistent with the model's predictions, but a chi-squared goodness-of-fit test does reject the martingale prediction for wage residuals even after accounting for classical measurement error. We investigate alternative specifications and find that a modification of the learning model that allows for worker ability to evolve as an AR1 process fits the data quite well.

Abstract: We present several modifications of the Poisson and negative binomial models for count data to accommodate cases in which the number of zeros in the data exceed what would typically be predicted by either model. The excess zeros can masquerade as overdispersion. We present a new test procedure for distinguishing between zero inflation and overdispersion. We also develop a model for sample selection which is analogous to the Heckman style specification for continuous choice models. An application is presented to a data set on consumer loan behavior in which both of these phenomena are clearly present.

Abstract: The problems of exchange rate misalignments and the resulting payments imbalances have plagued the world economy for decades. At the Louvre Accord of 1987 the Group of Five industrial countries adopted a system of reference ranges for exchange rate management, influenced by proposals of C. Fred Bergsten and John Williamson for a target zone system. The reference range approach has, however, been operated only intermittently and half-heartedly, and questions continue to be raised in policy and scholarly circles about the design and operation of a full-fledged target zone regime. This collection of essays by leading international economists explores one crucial issue in the design of a target zone system: the problem of calculating the fundamental equilibrium exchange rate (FEER). Williamson contributes an overview of the policy and analytic issues and a second essay on his own calculations. Other contributors discuss the conceptual and empirical issues involved in their own approaches to estimating equilibrium rates. Stanley Black provides a concluding appraisal of the state of the art.