high water marks high risk appetites convex compensation long horizons and portfolio choice we study the portfolio choice of hedge fund managers who are compensated by high water mark contracts we find that even risk neutral managers do not place unbounded weights on risky assets despite option like contracts instead they place a constant fraction of funds in a mean variance efficient portfolio and the rest in the riskless asset acting as would constant relative risk aversion crra investors this result is a direct consequence of the in de finite horizon of the contract we show that the risk seeking incentives of option like contracts rely on combining finite horizons and convex compensation schemes rather than on convexity alone

the value of tax shields is equal to the present value of tax shields abstract fernandez 2004b the value of tax shields is not equal to the present value of tax shields journal of financial economics 73 145 165 argues that the present value effect of the tax saving on debt cannot be calculated as simply the present value of the tax shields associated with interest this contradicts standard results in the literature it implies that even though the capital market is complete value additivity is violated as a consequence adjusted present value formulae of a standard sort cannot be used also fernandez s argument implies that the value of the tax saving differs from conventional estimates by a considerable amount we reconcile fernandez s results with standard valuation formulae for the tax saving from debt we show that as one would expect the value of the debt tax saving is the present value of the tax savings from interest the apparent violation of value additivity in the fernandez paper comes from mixing the miles and ezzell and miller and modigliani leverage policies

the value of tax shields is not equal to the present value of tax shields abstract the value of tax shields is the difference between the present values of two different cash flows each with their own risk the present value of taxes for the unlevered company and the present value of taxes for the levered company for constant growth companies the value of tax shields in a world with no leverage cost is the present value of the debt times the tax rate times the unlevered cost of equity discounted at the unlevered cost of equity this result arises as the difference of two present values and does not mean that the appropriate discount for tax shields is the unlevered cost of equity

the economics of iron deficiency abstract this paper examines the evidence for a causal relationship between iron deficiency and a variety of functional consequences with economic implications motor and mental impairment in children and low work productivity in adults to the extent that we can be confident that iron deficiency does cause a consequence with economic implications this effect is quantified in economic terms illustrative calculations for 10 developing countries suggest that the median value of annual physical productivity losses due to iron deficiency is around 2 32 per capita or 0 57 of gdp median total losses physical and cognitive combined are 16 78 per capita 4 05 of gdp using a cost of 1 33 per case of anemia prevented from one of the few effectiveness studies of national fortification allows us to calculate the benefit cost ratio for long term iron fortification programs the median value is 6 1 for the 10 countries examined and rises to 36 1 including the discounted future benefits attributable to cognitive improvements this paper improves on previous work by including a much more thorough survey of the quantitative magnitudes involved and by incorporating effects of iron deficiency on cognition however more research is needed to verify the accuracy of the assumptions needed for this type of analysis

are those paid more really more productive the case of experience this study uses computerized personnel microdata on the white male managerial and professional employees at a major u s corporation to address the following question can the additional earnings which are associated with more labor market experience at a point in time really be explained by higher productivity at the same point in time our answer to this question based on both cross sectional and longitudinal information is that performance plays a substantially smaller role in explaining cross sectional experience earnings differentials and earnings growth than is claimed by those who have adopted the human capital explanation of the experience earnings profile this response depends critically on our assumption that the performance ratings which supervisors give to their white male managerial and professional subordinates adequately reflect the subordinates relative productivity in the year of assessment we present a great deal of evidence which strongly supports this assumption

distinguished fellow mincering labor economics jacob mincer has helped set the research agenda and professional style in labor economics for over 30 years his research helped uncover the empirical content of human capital theory where he used those ideas to study the determinants of earnings and the sources and nature of earnings inequality he was also a pioneer in studying labor force participation decisions of married women for the past decade jacob has set his characteristic stamp on the empirical study of job mobility the following brief survey is meant to convey some of the flavor of jacob mincer s work and why it has been so influential in labor economics

agricultural graduate earnings the impacts of college career and gender survey data were used to identify determinants of starting and current salaries of agricultural graduates from kansas state university from 1976 97 salaries were significantly influenced by major field advanced degrees job location gender and family variables motivation for accepting a job and job mobility salary structures were estimated separately for male and female alumni women earned less than men after controlling for observed differences between the two groups decomposition of the salary differential revealed that gender salary differences were primarily due to differences between sexes in starting salaries field of study job experience and higher returns to married men careers of agricultural alumni have changed rapidly over the past several decades as the food economy has entered the information age goodman employers of agricultural graduates have increased their emphasis on computer people and teamwork related skills litzenberg and schneider andelt barrett and bosshamer given the major changes in the career expectations and experiences of agricultural alumni up to date information on salaries and career experiences is a vital ingredient for sound forward looking college and career decisions the purpose of this study is to identify and quantify the determinants of both starting and current august 1997 salaries of agricultural alumni with the use of a large survey sample of twenty two graduating classes 1976 to 1997 from the college of agriculture at kansas state university ksu this recent and extensive sample provides new insight on how starting salaries have changed over time and how sal

an exclusive country club the effects of the gatt on trade 1950 94 using data on bilateral trade flows from both before and after world war ii this article examines the impact of the general agreement on tariffs and trade on trade between its members and on the system of interwar trade blocs it shows that the distribution of the benefits produced by the gatt was much more highly skewed than conventional wisdom assumes the article also shows that the gold commonwealth reichsmark and exchange control blocs exerted positive and significant effects on trade after 1945 the authors attribute these effects to the bargaining protocol that governed successive rounds of gatt negotiations the signature element of the postwar trade regime

understanding the family gap in pay for women with children as the gender gap in pay between women and men has been narrowing the family gap in pay between mothers and nonmothers has been widening one reason may be the institutional structure in the united states which has emphasized equal pay and opportunity policies but not family policies in contrast to other countries that have implemented both the authors now have evidence on the links between one such family policy and women s pay recent research suggests that maternity leave coverage by raising women s retention after childbirth also raises women s levels of work experience job tenure and pay

the institutional roots of american trade policy politics coalitions and international trade the 1934 reciprocal trade agreements act rtaa changed the structure of the making of u s trade policy and made possible a dramatic reduction in tariffs the authors demonstrate that the key institutional innovation in the rtaa was its mandate to lower tariffs through reciprocal agreements with foreign nations the expansion of exports under the rtaa enhanced political support for increasingly lower u s tariffs evidence that export interests were positively associated with congressional votes for free trade supports this view

power politics and international trade r recent literature attributes the relative scarcity of open international markets to the prisoner s dilemma structure of state preferences with respect to trade we argue that the prisoner s dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system namely their security externalities we consider these external effects explicitly doing so leads us to two conclusions 1 free trade is more likely within rather than across political military alliances and 2 alliances are more likely to evolve into free trade coalitions if they are embedded in bipolar systems than in multipolar systems using data drawn from an 80 year period beginning in 1905 we test these hypotheses the results of the analysis make it clear that alliances do have a direct statistically significant and large impact on bilateral trade flows and that this relationship is stronger in bipolar rather than in multipolar systems in the early 1970s students of international relations began what would become a long and heated debate about the political correlates of open international markets recently however an important element of consensus has begun to emerge most contributors to this debate now seem to agree that the prisoner s dilemma structure of state preferences with respect to trade explains the relative dearth of open international markets here we argue that what has become the standard prisoner s dilemma representation neglects the most critical aspect of free trade agreements in the anarchic international system namely their security externalities we consider these external effects explicitly in order to do so we construct and analyze a simple game theoretic model the results of this analysis demonstrate that tariff games between allies differ systematically from those played between actual or potential adversaries these differences imply that free trade is more likely within rather than across political military alliances however our analysis also suggests that the evolutionary prospects of alliances vary those that are the products of bipolar systems are more likely to evolve into free trade coalitions than are their multipolar counterparts less credible exit threats and clearer responsibilities for alliance stability explain the advantage of a bipolar system we test this argument using data drawn from an 80 year period beginning in 1905 the empirical analysis supports our argument it demonstrates that alliances have a direct statistically significant and large effect upon bilateral trade moreover it shows that on average alliances have a much stronger effect on trade in a bipolar than in a multipolar world 2

splitting up value a critical review of residual income theories this paper deals with the notion of residual income which may be defined as the surplus profit that residues after a capital charge opportunity cost has been covered while the origins of the notion trace back to the 19th century in depth theoretical investigations and widespread real life applications are relatively recent and concern an interdisciplinary field connecting management accounting corporate finance and financial mathematics peasnell 1981 1982 peccati 1987 1989 1991 stewart 1991 ohlson 1995 arnold and davies 2000 young and o byrne 2001 martin petty and rich 2003 this paper presents both a historical outline of its birth and development and an overview of the main recent contributions regarding capital budgeting decisions production and sales decisions implementation of optimal portfolios forecasts of asset prices and calculation of intrinsic values a most recent theory the systemic value added approach also named lost capital paradigm provides a dierent denition of residual income consistent with arbitrage theory en folded in keynes s 1936 notion of user cost and forerun by pressacco and stucchi 1997 the theory has been formally introduced in magni 2000a b c 2001a b 2003 where its properties are thoroughly investigated as well as its relations with the standard theory two different lost capital metrics have been considered for value based management purposes by drukarczyk and schueler 2000 and young and o byrne 2001 this work illustrates the main properties of the two theories and their relations and provides a minimal guide to construction of performance metrics in the two approaches

residual income and value creation an investigation into the lost capital paradigm this paper presents a new way of measuring residual income originally introduced by magni 2000a 2000b 2003 contrary to the standard residual income the capital charge is equal to the capital lost by investors the lost capital may be viewed as a the foregone capital b the capital implicitly infused into the business c the outstanding capital of a shadow project d the claimholders credit relations of the lost capital with book values and market values are studied as well as relations of the lost capital residual income with the classical standard paradigm many appealing properties are derived among which a property of earnings aggregation different concepts and results provided by different authors in such different fields as economic theory management accounting and corporate finance are considered o hanlon and peasnell s 2002 unrecovered capital and excess value created ohlson s 2005 abnormal earnings growth o byrne s 1997 eva improvement miller and modigliani s 1961 investment opportunities approach to valuation keynes s 1936 user cost drukarczyk and schueler s 2000 net economic income fernandez s 2002 created shareholder value anthony s 1975 profit they are all conveniently reinterpreted within the theoretical domain of the lost capital paradigm and conjoined in a unified view the results found make this new theoretical approach a good candidate for firm valuation incentive compensation capital budgeting decision making

the trend in the male female wage gap in the united states despite the rise in the feminist movement the enactment of equal opportunity legislation and the rapid increase in women s labor force participation a substantial sex differential in wages has persisted in the united states for at least 4 decades measured by hourly earnings of year round workers this wage gap was 31 in 1955 widened to a 35 37 range by the 1960s and early 1970s and then narrowed to 33 by 1982 this paper examines the extent to which changes in the characteristics of men and women in the labor force and other factors can account for the observed pattern the main finding is that increases in women s labor force participation were initially associated with a declining skill level of employed women relative to employed men where skill is measured by years of schooling and job tenure more recently the work experience of employed women has been increasing which helps account for the recent narrowing trend in the wage gap during the 1970s the wage gap probably woul have narrowed m

the episodic and unpredictable nature of imf lending an empirical analysis having had excess lending capacity at the beginning of 2008 by the end of the year international monetary fund imf lending had increased and in anticipation of a further increase in the demand for fund assistance arguments were being put forward for a substantial increase in imf resources analysis of imf lending over a protracted period of time reveals considerable volatility using both bivariate and multiple regression estimation this paper investigates the determinants of imf lending and examines the extent to which it is predictable although some significant relationships are discovered many of them are unstable and time variant this makes it difficult to predict imf lending with any degree of confidence the paper goes on to examine briefly the policy implications of unpredictability it is critical of the ways in which the problem has been handled in the past and it offers what it argues is a preferable solution

life after debt postgraduation consequences of federal student loans we estimate the causal effect of student loans on postgraduation labor market outcomes exploiting a kink in the formula determining eligibility for need based student loans using a representative sample of students graduating with a bachelor s degree in 1993 we find that student debt has nonnegative effects on earnings this result holds with differing levels of statistical significance across a battery of different empirical designs 1 ordinary least squares 2 partially linear and 3 regression kink we find similar results for the 2008 graduating cohort jel i22 i26 j32 j33

monetary returns to bachelors and masters degrees in agricultural economics characteristics of agricultural economics alumni from the university of georgia were discussed and a general linear model was developed to explain differences in bachelors and masters alumni salaries graduate education work experience resource mobility gender family background and high school size were found to influence alumni salaries returns to a masters degree were computed along with capital recovery periods assistantship levels cost of borrowed and human capital and nonmonetary benefits were relevant in decisions to attend graduate school some costs and benefits of graduate education were found to be subjective to vary across individuals and to be influenced by prevailing economic conditions

time allocation decisions associated with job market preparation undergraduate perceptions versus market realities a survey of agribusiness firms identifies characteristics associated with above average starting salary offers in the allied fields of agribusiness agricultural economics business and economics a complementary survey is made of students at texas a m university and university of georgia results show that firms value work experience and leadership experience more than students do whereas students value raising grade point average and interview preparation more than do firms students seeking a firm s maximum starting salary offer will need to enhance academic performance with substantial work experience and leadership experience copyright 2002 oxford university press

the debt tax shield in general equilibrium abstract we study the general equilibrium effects of the corporate debt tax shield in an endowment economy with a redistributive tax system that taxes firm profits and household income and redistributes tax revenues in an attempt to harmonize households lifetime consumption opportunities in general equilibrium the debt tax shield not only affects corporate capital structure and valuation but also causes poorer households to consume more and save less at a younger age without the debt tax shield the same welfare improvements for poorer households are achievable with significantly lower tax rates

politics institutions and trade lessons of the interwar era recent studies cast doubt on the value added of international trade agreements and institutions using a new data set that consists of about 35 000 observations on the trade of fifty four nations between 1919 and 1938 we examine whether this skepticism also applies to the infamous interwar trade blocs traditional historical accounts attribute to them a large drop in international trade and a rise in the political tensions that would later erupt in world war ii in this study we show that no bloc raised trade among its members as a whole or decreased trade between members and nonmembers however our findings are not wholly consistent with the skepticism recent studies express we argue that conflicts of interest among the great powers encouraged the emergence of the bloc system and also gave rise to intrabloc trade shifts consistent with the political interests of their great power hubs the political military alliances these conflicts created also reduced trade between their signatories and we argue more generally that the causal chain runs from politics to trade as a result measuring only the effect of agreements and institutions on aggregate trade between their members can generate inaccurate estimates of their value added

trade blocs currency blocs and the reorientation of world trade in the 1930s we analyze the impact of commercial and financial policies on the reorientation of trade in the 1930s we report evidence that commercial policies attenuated prior connections between income growth and trade and that exchange rate instability marginally discouraged international trade in contrast the tendency toward regionalization commonly ascribed to the formation of trade and currency blocs was already evident to a considerable extent prior to the regional policy initiatives of the 1930s this reorientation is more properly attributed to ongoing historical forces such as commercial and financial links between countries forged over many years

bargaining enforcement and international cooperation neoliberals and their neorealist critics have debated the relative importance of two main obstacles to international cooperation problems of cheating and enforcement and problems of relative gains by contrast i argue that problems of international cooperation have a common strategic structure in which a third distinct obstacle plays a crucial role almost regardless of the issue area states must first resolve the bargaining problem of agreeing on terms before they can implement and begin to enforce an agreement furthermore the bargaining and enforcement problems interact using a game model i show that if states must bargain to determine the deal to be enforced the shadow of the future cuts two ways a high expectation of continued interactions may make enforcing the agreement easier but it can also give states an incentive to bargain harder delaying agreement in hopes of getting a better deal empirical evidence from trade and arms control negotiations suggests that this mechanism may help to explain the costly standoffs that are often observed in international politics and are problematic for received neoliberal theories

why the gender gap in wages narrowed in the 1980s since 1976 the gender gap in wages on average declined by about 1 per year this article focuses on identifying the factors underlying this trend three data sets are analyzed the current population survey the panel study of income dynamics and the national longitudinal survey we find that convergence in measurable work related characteristics schooling and work experience explains one third to one half the narrowing the remainder is attributable to a relative increase in women s returns to experience as well as to declining wages in blue collar work and other factors

the demand for international regimes international regimes can be understood as results of rational behavior by the actors principally states that create them regimes are demanded in part because they facilitate the making of agreements by providing information and reducing transactions costs in world politics increased interdependence among issues greater issue density will lead to increased demand for regimes insofar as regimes succeed in providing high quality information through such processes as the construction of generally accepted norms or the development of transgovernmental relations they create demand for their own continuance even if the structural conditions such as hegemony under which they were first supplied change analysis of the demand for international regimes thus helps us to understand lags between structural change and regime change as well as to assess the significance of transgovernmental policy networks several assertions of structural theory seem problematic in light of this analysis hegemony may not be a necessary condition for stable international regimes past patterns of institutionalized cooperation may be able to compensate to some extent for increasing fragmentation of power

does flexibility promote cooperation an application to the global trade regime do flexibility provisions in international agreements clauses allow ing for legal suspension of concessions without abrogating the treaty promote coop eration recent work emphasizes that provisions for relaxing treaty commitments can ironically make states more likely to form agreements and make deeper conces sions when doing so this argument has particularly been applied to the global trade regime the general agreement on tariffs and trade gatt and its successor the world trade organization wto yet the field has not produced much evidence bearing on this claim our article applies this claim to the global trade regime and its chief flexibility provision antidumping in contrast to prior work this article explic itly models the endogeneity and selection processes envisioned by the theory we find that states joining the wto are more likely to adopt domestic antidumping mech anisms likewise corrected for endogeneity states able to take advantage of the regime s principal flexibility provision by having a domestic antidumping mecha nism in place are significantly more likely to 1 join the wto 2 agree to more tightly binding tariff commitments and 3 implement lower applied tariffs as well

corporate valuation around the world the effects of governance growth and openness abstract the purpose of this paper is to provide a comprehensive analysis of corporate valuation around the world specifically we i document and compare corporate valuation around the world and ii identify the key factors that drive cross country differences in valuation in doing so we utilize the country level tobin s q ctq computed as the ratio of the aggregate market value to book value of all assets held by all public firms domiciled in a country which amounts to the tobin s q for the market portfolio of the country the key findings of the paper are first ctq varies greatly across countries ranging from 0 73 for venezuela to 2 11 for finland with the international mean of 1 30 during our sample period 1999 2004 despite the steady integration of the world economy in recent years corporate valuation remains starkly different across countries second apart from the effect of corporate governance cross country differences in corporate valuation are significantly driven by the growth options of countries represented by the r d intensities capital expenditures and gdp growth in addition the degree of capital market openness has a significant independent effect on valuation third our regression analyses show that ctq varies directly with shareholder rights enforcement of insider trading laws gdp growth r d intensity and the degree of capital market openness the key findings remain robust to the inclusion of inflation and industry effects

the design of optimal education policies this paper studies the education policy chosen by a utilitarian government in the model households differ in their income and in their children s ability income is observed by the government but ability is private information households can use private education but cannot borrow to finance it the government can finance education with income tax but at the cost of blunting the individuals incentive to exert labour market effort the optimal education policy we derive is elitist it increases the spread between the educational achievement of the bright and the less bright individuals compared to private provision it is also such that the education received by less bright individuals depends positively on their parental income finally the optimal education policy is input regressive in the sense of arrow 1971 quarterly journal of economics 38 175 208 households with higher income and brighter children contribute less in tuition fees towards the cost of the education system than households with lower income and less bright children

test scores educational opportunities and individual choice abstract a model combining student preferences for college with university admissions decisions is estimated to provide information on the role of test scores in the determination of post secondary educational opportunities in the u s in contrast to implications of much of the recent criticism of tests and their use we find that scholastic aptitude test scores are more strongly related to student application and choice of college quality than to college admissions decisions in addition although there is a substantial correlation between test scores and high school performance we find that both post secondary school preferences and ultimate opportunities are related as much to performance in high school as to test scores themselves although sat scores certainly exclude some persons from schools our findings indicate that they do not represent an overriding constraint on the college opportunities of high school graduates

show me the money the value of college graduate attributes as expressed by employers and perceived by students employers of agricultural undergraduates are presented with hypothetical job candidates with different attributes and salaries and are asked which candidate if any they would hire the employer choices are then used to estimate the additional salary they will pay for undergraduates with certain attributes students are administered similar surveys where they indicate which hypothetical candidate they think will be hired which can be used to estimate students perceived salary increase associated with each attribute employers stated values are then compared to students perceived values to identify any misperceptions regarding the monetary return of select attributes

does it pay to attend an elite private college cross cohort evidence on the effects of college type on earnings although a substantial and rising labor market premium is associated with college attendance in general little is known about how this premium varies across institutions of different types and across time in this paper we explicitly model high school students choice of college type characterized by selectivity and control based on individual and family characteristics including ability and parental economic status and an estimate of the net costs of attendance we estimate selectivity corrected outcome equations using data from both the national longitudinal study of the high school class of 1972 and high school and beyond which permit us to determine the effects of college quality on wages and earnings and how this effect varies across time even after controlling for selection effects strong evidence emerges of a significant economic return to attending an elite private institution and some evidence suggests this premium has increased over time

the market for agricultural economists discussion the three papers on the market for agricultural economists present a rather wide array of thinking on the subject it is good and necessary for the profession to be concerned about the demand for and supply of agricultural economists at both the ph d and master s levels our graduate programs must be market driven to be successful as such these programs will recognize the changing nature of the market and respond with a supply of young professionals who can find a productive place in the market the demand for agricultural economists has become very broad and diverse over the years the various segments of that market can be broken down as follows a academic this is the largest segment of demand and includes our traditional efforts

incorporating financing related determinants of value in the discounted cash flow model abstract the paper discusses how some of the main types of interaction between financing and value can be incorporated in the discounted cash flow model of valuation including effects arising from taxes transactions costs disclosure information asymmetry and agency problems it explains whether a given effect should appear in a project s cash flows in its cost of capital or as an upfront adjustment to value most of the effects imply that the principle of value additivity does not hold

the slicing approach to valuing tax shields abstract the literature develops the theoretical rationale for the value of tax shields vts on the following misguided basis it uses required rate of return on assets or wacc as the discount rate for capitalization it uses expected rate of return on assets roa or roi as a proxy for wacc and it is not aware of 1 the influence of the difference between expected rate of return on equity and required rate of return on equity rroe on vts 2 the fact that rroe is equity normal profit which is not measurable 3 the economic content of the weight attached to the vts capacity and 4 the co definition of tax shield and leverage return this paper takes tax shields and leverage return as a system and provides a knife interest rate roi cost price to slice the vts capacity into earned vts and unearned vts earned vts is vts unearned vts is the value of leverage return because leverage return is tax payable

empirical age earnings profiles the human capital earnings function in which earnings are expressed as a quadratic in potential experience is probably the most widely accepted empirical specification in economics in spite of its widespread acceptance the human capital earnings function provides a very poor approximation of the true empirical relationship between earnings and experience the standard formulation understates early career earnings growth by about 30 50 and overstates midcareer growth by 20 50 however simple alternative specifications that fit the data are available

employers discriminatory behavior and the estimation of wage discrimination this paper considers the linkage of empirical estimates of wage discrimination between two groups introduced by oaxaca 1973 to a theoretical model of employers discriminatory behavior it is shown that conditional on different assumptions about employers discriminatory tastes oaxaca s estimators of wage discrimination can be derived that the approach is more generally useful is demonstrated by deriving an alternative estimator of wage discrimination based on the assumption that within each type of labor e g unskilled skilled the utility function capturing employers discriminatory tastes is homogeneous of degree zero with respect to labor inputs from each of the two groups the estimators are compared empirically in an application to male female wage differentials

does trade still follow the flag t he economic ties between any two nations are frequently affected by a warming or cooling of bilateral diplomatic relations but there is little to be found in modern economics or political science that helps us understand the connections between international politics and commerce the notion that international economics could be studied in isolation from its political underpinnings or consequences would have been quite alien to mercantilist thinkers in the eighteenth century or to the critics or advocates of imperialism in the nineteenth that economics and politics were inextricably intertwined was taken as a matter of course indeed trade follows the flag was central to these people s understanding of world politics and international economics intellectual trends over the past century radically changed this worldview the ascendancy of liberalism in economic thought brought with it a compartmentalization of disciplines that may now be eroding but we are left with theories of international politics and economics that are very weakly bridged the objective of this study is to map one of the many connections between international politics and commercial ties specifically i seek to identify and measure the effect of changes in state to state diplomatic relations on trade flows between those nations theoretical underpinnings of my effort are in the tradition of public choice political economy frey 1984 because i treat importers as rational utility maximizers and their behavior as determined by preferences pursued within a context of specified constraints the model i put forward is wholly consistent with contemporary neoclassical trade theory but i extend the economists notion of welfare and contend that importers take account not only of the price and quantity of goods and services but of the place of origin of these products and the political relationship between the importing and the exporting nation they do so essentially for traditional security reasons that is importers are motivated to manage their trade relations in ways that minimize risks of disruption in supply or the possibility of hurting friends or

evidence on discrimination in employment codes of color codes of gender there is substantial racial and gender disparity in the american economy as we will demonstrate discriminatory treatment within the labor market is a major cause of this inequality the evidence is ubiquitous careful research studies that estimate wage and employment regressions help wanted advertisements audit and correspondence studies and discrimination suits that are often reported by the news media yet there appear to have been periods of substantial reductions in economic disparity and discrimination for example donohue and heckman provide evidence that racial discrimination declined during 1965 1975 1 gottschalk has produced statistical estimates that indicate that discrimination against black males dropped most sharply between 1965 and 1975 and that discrimination against women declined during the interval 1973 1994 2 but some unanswered questions remain why did the movement toward racial equality stagnate and eventually decline after the mid 1970s what factors are most responsible for the remaining gender inequality what is the role of the competitive process in the elimination or reproduction of discrimination in employment

trends and characteristics of ph d degrees in agricultural economics in the united states the purpose of this paper is to discuss the trends that have occurred in the number of and some of the characteristics of recipients of ph d degrees in agricultural economics in the united states in recent years it includes an updating of work i initiated five years ago schrimper 1981a b c 1982 the latest information used in the previous work included degrees awarded through 1980 this paper is based on an additional three years of information this allows a detailed examination of changes over the last nine years as well as comparison with the earlier tabulations also information for three more institutions arizona rhode island and yale has been included as previously the major source of information is listings of ph d recipients for the previous year in the may issues of this journal the cooperation of several individuals contacted to obtain missing information and answer questions about data for various years is gratefully acknowledged without their help the information would have been incomplete and comparisons over time would have been meaningless the latest data available for developing this paper was the list of 1983 graduates even this information is somewhat dated however since it reflects admission financial assistance and enrollment decisions made at least five years ago the first part of this paper summarizes changes that have occurred in total output of ph d degrees in agricultural economics as well as distributional adjustments among regions individual institutions and between domestic and foreign students the second part focuses on some characteristics of domestic students who received ph d degrees in agricultural economics it contains information about where individuals received their undergraduate training and geographical and institutional migration for graduate training similar types of information about foreign ph d students is included in the third section of the paper finally a short summary and conclusions section is provided

corporate debt management and the value of the firm three alternative characterizations of corporate debt management policy which have had wide currency in the literature are examined they are shown to give rise to substantial differences in their predictions of total firm value this study concludes that of the three the one that assumes that management periodically rebalances the firm s debt levels in response to evolving new information on expected future operating cash flows is the most logically consistent on that basis a reinterpretation of the available empirical evidence on the tax effect of debt is indicated

global communications and national power life on the pareto frontier regime analysis has focused on issues of market failure the resolution of which depends upon knowledge and institution building global communications regimes however have been concerned either with issues of pure coordination or with coordination problems with distributional consequences outcomes have been decided by the underlying distribution of national power in those areas where power was asymmetrically distributed and there was no agreement on basic principles and norms radio broadcasting and remote sensing no regime was formed in those areas where distributional issues could not be unilaterally resolved allocation of the radio spectrum and telecommunications regimes were created although both principles and rules changed with alterations in national power capabilities

individual attributes and self selection of higher education college attendance versus college completion abstract we have estimated a joint discrete continuous utility maximization model of college attendance and college completion special attention is given to the possibility that test scores and other individual attributes are poor predictors of who will succeed in college and thus may not promote optimal investment decisions and may indeed unjustly limit the educational opportunities of some youth we find that 1 college attendance decisions are strongly commensurate with college completion persons who are unlikely to attend college would be very likely to drop out of even their first choice colleges were they to attend college human capital investment decisions are strongly mirrored by the likelihood that they will pay off 2 contrary to much of the recent criticism of the predictive validity of test scores we find that their informational content is substantial after controlling for high school class rank for example the probability of dropping out of the first choice college varies greatly with sat scores 3 individual self selection related to both measured and unmeasured attributes is the dominant determinant of college attendance

non discriminatory discrimination special and differential treatment under the gatt for developing countries developing countries have long been strong supporters of a non discriminatory rule based multilateral system on the grounds that as economically small units they would otherwise be subject to bilateral pressure from larger powers at the same time they have equally been committed to special and differential s d treatment for themselves under gatt rules their approach has been to argue that trade problems of developing countries are special from those of developed countries balance of payments problems viewed by them as endemic to low income countries make liberalisation difficult and import substitution strategies suggest that liberalisation is anyway undesirable poor export prospects export pessimism imply they need different treatment from developed countries in order to grow that is trade preferences in developed country markets special and differential also became a bloc wide strategy jointly pursued reflecting the premise that developing countries are jointly and simultaneously special and differential in their trade problems this is however changing in the uruguay round developing countries have shown themselves remarkably adept at moving away from the earlier somewhat passive bloc wide s d approach in a surprising range of negotiating groups countries have actively pursued country over bloc wide interests and in an active way involving a willingness to take on new gatt disciplines while s d is far from having been abandoned as a principle of the trading system the approach seems to be one of protecting and preserving what is there rather than pushing for further enhancement the reasons for these changes are as always multi faceted strong growth performance in the more outward oriented developing countries korea and other nics has weakened the intellectual commitment to import substitution what exactly s d has yielded developing countries in concrete trade policy terms has also been queried and over the years the differences between developing countries large small middle income least developed industrialised commodity exports agricultural importers exporters and others have grown to the point that in the uruguay round a grand coalition of all developing countries does not exist in any active sense

differential and more favorable treatment of developing countries and the international trading system this article argues that differential and more favourable treatment of developing countries in the general agreement on tariffs and trade gatt has been a logical consequence of their own inward looking policies and the gatt s implicit mercantilism the latter implying that liberalization being costly should not be demanded of relatively poor countries time has however reduced both the appeal of the protectionist model of development and the willingness of developed countries to accord differential treatment the upshot has been pressure on more advanced developing countries to graduate and a growing literature recommending fuller and more equal participation of developing countries in the gatt the case for fuller and more equal participation is not self evident it needs to be assessed on its merits in terms of the prospects for improved market access abroad and more efficient policy at home the analysis indicates that the potential benefits should not be oversold on balance however the most advanced developing countries would probably gain from active and more equal participation in both gatt and the multilateral trade negotiations while the remaining developing countries would benefit from graduation by the more advanced iv contracting parties agree that the principle of differential and more favourable treatment embodied in part iv and other relevant provisions of the general agreement and in the decision of contracting parties of november 28 1979 on differential and more favourable treatment reciprocity and fuller participation of developing countries applies to the negotiations in the implementation of standstill and rollback particular care should be given to avoiding disruptive effects to the trade of less developed contracting parties v the developed countries do not expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other martin wolf is director of studies at the trade policy research centre london the views expressed do not represent those of the staff and council of the trade policy research centre and result partially from a research program on the participation of the developing countries in the international trading system particularly important are two papers prepared under the program by hudec forthcoming and riedel forthcoming the issues addressed in this article have also been considered in a previous paper by the author 1984 pp 201 29 the author is grateful to participants at the bangkok conference for their comments and especially to jagdish n bhagwati muchkund dubey anthony lane and vincent cable copyright 1987 by the international bank for reconstruction and development the world bank

currency unions and trade how large is the treatment effect currency unions and trade what can the data say the impact of a common currency on trade can be grossly mismeasured if countries that belong to currency unions are systematically different from those that do not and if the relationship between trade and its observable determinants is complex i argue that such complications are plausible and likely to distort the empirical results of a recent economic policy paper by andrew rose issue 30 2000 pp 7 45 using techniques designed to be robust in this situation i find that the effects of common currency on international trade are considerably less dramatic and much less precisely estimated torsten persson i have always maintained that the measured effect of a single currency on trade appears implausibly large but i am not convinced by torsten persson s diagnosis and proposed solution i apply a variety of estimation techniques to a new larger data set where many more instances of currency union creation and abandonment make it possible to rely on time series as well as cross sectional evidence the results are similar to my earlier ones the effect of a single currency on trade is large andrew rose

debt valuation renegotiation and optimal dividend policy the valuation of debt and equity reorganization boundaries and firm s optimal dividend policies are studied in a framework where we model strategic interactions between debt holders and equity holders in a game theoretic setting which can accommodate varying bargaining powers to the two claimants two formulations of reorganization are presented debt equity swaps and strategic debt service resulting from negotiated debt service reductions we study the effects of bond covenants on payout policies and distinguish liquidity induced defaults from strategic defaults we derive optimal equity issuance and payout policies the debt capacity of the firm and the optimal capital structure are characterized

does education raise productivity or just reflect it education has an important effect on wages but it not clear whether this is because education raises productivity or because education is simply a signal of ability we implement a number of existing tests for discriminating between these two explanations and find that they do not support the signalling hypothesis however we have severe reservations about these results and we propose an alternative test based on changes in education incentives caused by changes in the minimum school leaving age in the 1970s using this idea we find that uk data appear to strongly support the human capital explanation an important issue in the economics of education is that an individual s education has an effect on wages paid in the labour market for example blundell et al 2003 uses detailed education and subsequent earnings information for a cohort of male individuals born in 1958 to estimate that the returns to a uk degree typically of 3 year duration relative to graduating from high school at 18 with 2 a level qualifications a necessary but not sufficient condition for admission to university is a 24 wage premium human capital explanations pioneered by becker 1962 and schultz 1963 suggest that the correlation between education and wages is due to education enhancing productivity however earnings may rise in response to education not because of any effect on productivity but simply because education may act as a signal of productivity employers believing that education is correlated with productivity will screen workers for their education and pay higher wages to the more educated the employers beliefs will be confirmed by their experience if it is the case that high productivity individuals signal this by choosing high levels of education it will be optimal for individuals to behave in this way if the cost of acquiring education is less for high productivity individuals than it is for low productivity individuals thus under reasonable conditions the market will be characterised by a separating equilibrium where higher productivity individuals choose higher levels of education than lower productivity workers and earn correspondingly higher wages the theory is largely due to spence 1973 1979 and the subsequent empirical literature was reviewed by groot and oosterbeek 1994 riley 2001 provides an excellent modern survey chevalier harmon and walker are fellows of iza in bonn and are affiliated with the institute for the study of social change issc in dublin this paper is part of the issc policy evaluation programme chevalier and walker are also affiliated with the centre for the economics of education at the london school of economics lse the support of all of these bodies for facilitating our collaboration is acknowledged harmon is grateful to university college london for their hospitality during his nuffield foundation new career development fellowship in the social sciences comments from steve machin and three anonymous referees greatly improved the exposition of this paper we are also grateful to richard blundell and to seminar participants at the lse and the tinbergen institute in amsterdam for their comments and to vincent o sullivan for excellent research assistance the usual disclaimer applies

divided government and u s trade policy theory and evidence if different parties control the u s congress and white house the united states may maintain higher import protection than otherwise this proposition follows from a distributive politics model in which congress can choose to delegate trade policymaking to the president when the congressional majority party faces a president of the other party the former has an incentive to delegate to but to constrain the president by requiring congressional approval of trade proposals by up or down vote this constraint forces the president to provide higher protection in order to assemble a congressional majority evidence confirms that 1 the institutional constraints placed on the president s trade policymaking authority are strengthened in times of divided government and loosened under unified government and 2 u s trade policy was significantly more protectionist under divided than under unified government during the period 1949 90

cost of capital spot rate or forward rate abstractin this study we intend to reveal some problems with the classic valuation method the weighted average cost of capital wacc method we first address a fundamental question about wacc that is should wacc be interpreted as a spot rate a forward rate or any kind of average of either of them we show that the nature of wacc is the expected forward rate we next demonstrate that without understanding this nature we may misinterpret the famous mm formula and mm proposition ii as well as develop incorrect valuation framework our findings provide insightful implications to academia and practitioners for the proper interpretation and implementation of the wacc method

the magic bullet the rtaa institutional reform and trade liberalization the reciprocal trade agreements act rtaa of 1934 has long been heralded as a simple institutional reform with revolutionary consequences namely by changing the trade policymaking process in the united states the rtaa is held responsible for the dramatic liberalization in u s policy beginning in the 1930s and 1940s this article takes issue with this conventional wisdom i argue that the standard accounts which emphasize the importance of delegation for overcoming logrolling in congress or for facilitating reciprocity in international trade negotiations fail to provide an adequate explanation for just how the institutional innovation was achieved and sustained in the face of protectionist opposition i suggest instead that trade liberalization was driven by exogenous changes in party constituencies and societal preferences that had crucial effects on congressional votes to extend the rtaa authority and liberalize trade after 1945 the preservation of the rtaa program was symptomatic rather than causal as a consequence it may well be abandoned in the future the evolution of u s trade policy has been and will continue to be powerfully shaped by changes in the preferences of societal groups and in the positions taken by parties on the trade issue

commitment and satisfaction in the classroom and on the field evidence from a division i liberal arts college within higher education there has been a persistent concern that student athlete commitments to their athletic activities are detrimental to their academic studies we collect data on student athl

reformulating tax shield valuation a note standard financial theory in the absence of agency costs and personal taxes implies that each dollar of debt contributes to the value of the firm in proportion to the firm s tax rate to derive this result incremental debt is assumed permanent this paper shows that when the firm acts to maintain a constant market value leverage ratio the marginal value of debt financing is much lower than the corporate tax rate since hamada s 2 unlevering procedure for observed equity betas was derived under the assumption of permanent debt we derive an unlevering procedure consistent with the assumption of a constant leverage ratio implicit in the modigliani miller 4 hypothesis regarding the effect of leverage changes on firm value is that the firm maintains a constant level of debt the purpose of this paper is to examine the implications for tax shield valuation of maintaining a constant market value leverage ratio instead of a constant debt level assuming a constant leverage ratio instead of a constant debt level does not imply any change in the normative implications of capital structure theory however we show that when the firm s financing strategy is to maintain a constant market value leverage ratio the marginal value of a change in debt level resulting from a change in this leverage ratio is much lower than the corporate tax rate we also derive the relationship between the firm s equity beta and its unlevered beta under the assumption of a constant leverage ratio

temporal analysis of income earned by former agriculture students earnings profiles of students formerly enrolled in a college of agriculture were analyzed in the context of labor market information analysis of covariance was used to estimate models explaining how salary determinants changed during the alumni s careers gender education year of job market entry profit sharing and personal emphasis on earnings were found to be significant determinants of starting incomes starting incomes were found to be a prime determinant of later year salaries along with experience on the immediate job profit sharing oral and technical skills marital status and place of residence labor market information was found to vary in quality across participants and have a limited shelf life

does the jack of all trades hold the winning hand comparing the role of specialized versus general skills in the returns to an agricultural degree this paper examines the roles of specialized versus general skills in explaining variation in the returns to an agriculture degree among graduates working both inside and outside the agricultural industry the focus on returns by sector of employment is motivated by our finding that most agricultural graduates are employed in non agricultural jobs in that study a sample of alumni graduating from a large midwestern public university between 1982 and 2006 shows that alumni with majors more specialized in agriculture earned a premium from working in the agriculture industry but this advantage has diminished over time agricultural graduates with more general training earn more outside than inside agriculture higher ability graduates in more industry focused curricula tend to sort into the agricultural industry while higher ability graduates in broader curricula tend to choose jobs outside of agriculture all graduates are more likely to accept agricultural employment when the farm economy is strong but agricultural graduates who enter agricultural jobs when the farm economy is weak suffer lifetime earnings reductions these findings suggest that greater levels of specialization may limit a graduate s ability to adjust to changing economic circumstances agriculture degree programs could benefit from curriculum innovations that focus on developing more generalized skills

earnings schooling ability and cognitive skills conventional estimates now available for a large number of countries generally indicate that the social returns to education are positive large and competitive with returns to investment in physical capital that such estimates are good guides for public resource allocation has however been questioned the heart of the problem lies in the interpretation of the positive relationship between the education and the earnings of workers whether as the conventional estimates assume the coefficient of the education variable in the earnings function measures the effect on the productivity of workers of human capital acquired in school it has been hypothesized that education in part or instead represents screening for native ability and motivation or credentialism and that as a consequence conventional measures of the social benefit of education are substantially upward biased 2 in this paper we attempt to distinguish the influence on earnings of cognitive achievement native ability and years of education as a means of adjudicating the human capital screening and credentialist hypotheses our econometric analysis is based on two rigorously comparable micro data sets from kenya and tanzania generated by surveys of the urban wage labor force specifically for this study these data sets contain the usual variables found in earnings function estimates of the benefits of schooling individual earnings years of education and years of employment experience in addition they contain two variables measures of the worker s cognitive skills and of his or her reasoning ability not previously found in studies of developing countries and only rarely found in studies of the education earnings relationship in developed countries 3 with these variables we can estimate the direct effects on earnings of cognitive skills ability and years of schooling by using them to estimate educational production functions and educational attainment functions and linking these functions with the earnings function in a recursive framework we can also assess the various indirect effects on earnings of ability and years of schooling having data sets from two countries very similar with respect to size resource endowments structure of production and employment and level of development means that not only can we subject our results to the usual statistical tests but we can also assess their replicability both kenya and tanzania have nearly achieved the objective of universal primary education while university enrollments remain at less than 1 percent of the relevant age group the important policy issues re boissiere development research department the world bank 1818 h street washington d c 20433 knight institute of economics and statistics oxford university sabot williams college williamstown ma 01267 we are grateful to the educational testing service of princeton for the design of tests used in this study and to j armitage j behrman j hausman d hendry d jamison and an anonymous referee for their insights and advice helpful comments were also received from participants in seminars at oxford and yale universities the views presented here are our own they should not be interpreted as reflecting those of the world bank george psacharopoulos 1973 1981 contains a listing of 44 countries in which rate of return studies had been conducted and of the estimates obtained 2for instance kenneth arrow 1973 mark blaug 1976 samuel bowles and herbert gintis 1976 john riley 1979 michael spence 1976 and lester thurow 1975 3for attempts to control for ability and or for cognitive achievement in studies for the united states see jere behrman et al 1980 gary chamberlain and zvi griliches 1977 griliches and william mason 1972 michael olneck 1977 paul taubman and terence wales 1974 taubman 1975 and david wise 1975 see also the survey articles by griliches 1977 1979 in most instances the data refer to special subgroups in the population and clear distinction cannot be made between natural ability and cognitive skills acquired in school

work power and earnings of women and men numerous studies have established that part of the very substantial male female earnings gap is explained by differences in the amount of human capital workers have accumulated see for example jacob mincer and haim ofek 1983 institutional factors have also been found to play a role in determining wages david gordon et al 1982 occupation further helped to explain the remaining gap but several researchers have shown that introducing dimensions of work authority by taking into account the individual s position in the work hierarchy explains more of the variation in earnings than does occupation martha hill 1980 last two recent studies ferber and spaeth 1984 spaeth 1985 also included control over monetary resources this variable added substantially to the explanatory power of earnings regressions even after human capital variables institutional factors and several other measures of work authority had been entered like the other studies ferber and spaeth also found that reward structures for men and women are quite different suggesting the possible existence of discrimination the question whether women may also be at a disadvantage in achieving control over monetary resources was not investigated when hill examined the process of achievement of work authority she found substantial differences between male and female workers in this paper we examine whether the same is true for attaining financial control i data and analysis

baseball specific human capital why good but not great players are more likely to coach in the major leagues the career choice of retiring athletes provides an interesting example of a midcareer transition conditioned on specific human capital previous research examines the determination of earnings in professional sports 3 5 14 but does not consider how skills developed during an athlete s playing years affect subsequent opportunities in this paper i test the hypothesis that skills specific to baseball increase the probability a player will choose to coach the empirical work confirms the importance of baseball specific human capital in the decision to coach and provides some of the first formal evidence that the opportunities of star players differ distinctly from players that are marginally less talented in the theoretical section i develop a random utility model in which a retiring player chooses between coaching and non coaching careers on the basis of potential earnings and a random taste component earnings in either career are determined by a vector of career attributes that embody the player s productivity in each if the random taste component is normally distributed the probability a player chooses a coaching career can be estimated using probit the empirical results support the predictions of the model that baseball specific human capital is positively correlated with the probability of a player coaching and that star players are unlikely to coach because their marginal skill advantage is not baseball specific in particular the findings imply that players with long but unexceptional careers are more likely to coach in the major leagues an extension of the empirical model is applied to the issue of discrimination the insignificance of a black dummy variable suggests that black players have the same probability of coaching as comparably skilled white players however a more complex interactive specification suggests that relatively poor opportunities for black stars outside the game leads to their crowding out those black players who if they were white would most likely coach

value and capacity of tax shields an analysis of the slicing approach abstract correctly valuing tax shields has been a challenge in corporate valuation a recent study by liu 2009 introduces the slicing approach to separating the tax shield into the earned and unearned parts liu also shows that the mm results are wrong and claims that the slicing approach has finally resolved the issue of pricing tax shields thereby bringing closure to the topic however through careful analysis we refute liu s main claims and restore the mm results there are still open questions and the topic is not completely resolved as claimed in liu 2009

college selectivity and earnings this article shows that college performance and selectivity have significant effects on earnings it suggests that work that does not include college performance overstates the effect of college se