financial contracting theory meets the real world an empirical analysis of venture capital contracts we compare the characteristics of real world financial contracts to their counterparts in financial contracting theory we do so by studying the actual contracts between venture capitalists vcs and entrepreneurs the distinguishing characteristic of vc financings is that they allow vcs to separately allocate cash flow rights board rights voting rights liquidation rights and other control rights we describe and measure these rights we then interpret our results in relation to existing financial contracting theories we also describe the interrelation and the evolution across financing rounds of the different rights query 1 query 2

no price like home global house prices 1870 2012 how have house prices evolved in the long run this paper presents annual house price indices for 14 advanced economies since 1870 based on extensive data collection we are able to show for the first time that house prices in most industrial economies stayed constant in real terms from the 19th to the mid 20th century but rose sharply in recent decades land prices not construction costs hold the key to understanding the trajectory of house prices in the long run residential land prices have surged in the second half of the 20th century but did not increase meaningfully before we argue that before world war ii dramatic reductions in transport costs expanded the supply of land and suppressed land prices since the mid 20th century comparably large land augmenting reductions in transport costs no longer occurred increased regulations on land use further inhibited the utilization of additional land while rising expenditure shares for housing services increased demand

children of war the long run effects of large scale physical destruction and warfare on children this paper provides causal evidence on the long term consequences of large scale physical destruction on educational attainment health status and labor market outcomes of children i exploit the plausibly exogenous region by cohort variation in the intensity of world war two wwii destruction as a unique quasi experiment i find that exposure to destruction had long lasting detrimental effects on the human capital formation health and labor market outcomes of germans who were at school age during wwii an important channel for the effect of destruction on educational attainment is the destruction of schools whereas malnutrition is partly behind the estimated impact on health

conservatism and debt abstract despite the unquestionable influence of conservatism disagreement remains about what economic demands lead to financial reporting conservatism research examining lenders demands for reporting conservatism has been questioned for ignoring conservative contract modifications we document that these modifications exist but are not ubiquitous we find contract modifications are more likely when agency costs are higher and litigation tax and equity demands for conservatism are lower however we find a positive association between unexplained reporting conservatism and contract modifications suggesting contractual modifications alone do not fulfill lenders demands for conservatism

discussion of accounting standards and debt covenants has the balance sheet approach led to a decline in the use of balance sheet covenants abstract demerjian this issue argues that a shift by u s standard setters towards the balance sheet approach reduces the usefulness of balance sheet numbers for contracting consistent with this argument he provides evidence of a decline in the use of balance sheet based covenants in debt contracts a useful finding nevertheless i argue that the evolution of standard setting is more complex than this argument implies and evaluate the economic basis of demerjian s arguments for how debt contracts respond to changes in accounting rules one conclusion that emerges is that there are still some important open issues regarding the economic determinants of debt contracts

the great mortgaging housing finance crises and business cycles this paper unveils a new resource for macroeconomic research a long run dataset covering disaggregated bank credit for 17 advanced economies since 1870 the new data show that the share of mortgages on banks balance sheets doubled in the course of the twentieth century driven by a sharp rise of mortgage lending to households household debt to asset ratios have risen substantially in many countries financial stability risks have been increasingly linked to real estate lending booms which are typically followed by deeper recessions and slower recoveries housing finance has come to play a central role in the modern macroeconomy

health behavior health knowledge and schooling the positive correlation between schooling and good health is well documented one explanation is that schooling helps people choose healthier life styles by improving their knowledge of the relationship between health behaviors and health outcomes that is schooling improves the household s allocative efficiency in producing health this empirical study uses direct measures of health knowledge to test this explanation part of the relationship between schooling and the consumption of cigarettes alcohol and exercise is explained by differences in health knowledge however most of schooling s effects on health behavior remain after differences in knowledge are controlled for

fast food consumption and the ban on advertising targeting children the quebec experience abstract amid growing concerns about childhood obesity and the associated health risks several countries are considering banning fast food advertising targeting children in this article the authors study the effect of such a ban in the canadian province of quebec using household expenditure survey data from 1984 to 1992 authors examine whether expenditure on fast food is lower in those groups affected by the ban than in those that are not the authors use a triple difference indifference methodology by appropriately defining treatment and control groups and find that the ban s effectiveness is not a result of the decrease in fast food expenditures per week but rather of the decrease in purchase propensity by 13 per week overall the authors estimate that the ban reduced fast food consumption by us 88 million per year the study suggests that advertising bans can be effective provided media markets do not overlap

capital is back wealth income ratios in rich countries 1700 2010 how do aggregate wealth to income ratios evolve in the long run and why we address this question using 1970 2010 national balance sheets recently compiled in the top eight developed economies for the united states united kingdom germany and france we are able to extend our analysis as far back as 1700 we find in every country a gradual rise of wealth income ratios in recent decades from about 200 300 in 1970 to 400 600 in 2010 in effect today s ratios appear to be returning to the high values observed in europe in the eighteenth and nineteenth centuries 600 700 this can be explained by a long run asset price recovery itself driven by changes in capital policies since the world wars and by the slowdown of productivity and population growth in line with the s g harrod domar solow formula that is for a given net saving

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

the choice of call provision terms evidence of the existence of agency costs of debt an examination of the provisions of bond issues reveals that most bonds prohibit firms from calling the issue during the initial years after which time the bond can be called at the option of the firm a substantial number of firms however also reserve the right to call the issue during this initial period for purposes other than refinancing at a lower coupon rate the additional flexibility which accompanies the option of early redemption can be used to reduce the agency costs of debt associated with future investment opportunities informational asymmetry and the risk incentive problem using a sample of newly issued bonds statistical tests are performed to show that there are in fact differences between firms which do and do not reserve the right of early redemption this paper shows that these differences provide empirical evidence which is consistent with the hypothesis that firms use the option of early redemption to reduce agency costs one of the decisions which a firm must make when it floats a bond issue concerns the use of a call provision if a call provision is included in the bond then the terms of the call provision must be specified such as the years to the first call the initial call price the call price in subsequent years and the circumstances under which a call provision can be used previous work in the area of call provisions focused on fluctuations in interest rates as the reason for their existence it was shown by krause 12 however that in an efficient capital market any call provision decision based on interest rate uncertainty is irrelevant recent work in agency theory has shown that the existing contractual relationships between bondholders and stockholders may not be a zero sum game under these circumstances such financing decisions as capital structure debt maturity and call provisions may not be irrelevant an examination of the call provisions of currently outstanding bond issues reveals an institutional feature which is often overlooked many bonds have a standard call provision which restricts the firm from calling the issue for a stated number of years followed by a period during which firms have the option to call the bond at a stated call price another group of bond issues however contain a two tiered type of call provision which allows the corporation to call the bond for purposes other than refinancing at a lower coupon rate during the initial years of the life of the bond after this initial period the firm has the option of calling the bond issue for any purpose

implications for gaap from an analysis of positive research in accounting based on extant literature we review the positive theory of gaap the theory predicts that gaap s principal focus is on control performance measurement and stewardship and that verifiability and conservatism are critical features of a gaap shaped by market forces we recognize the advantage of using fair values in circumstances where these are based on observable prices in liquid secondary markets but caution against expanding fair values to financial reporting more generally we conclude that rather than converging u s gaap with ifrs competition between the fasb and the iasb would allow gaap to better respond to market forces

who pays for obesity adult obesity is a growing problem from 1962 to 2006 obesity prevalence nearly tripled to 35 1 percent of adults the rising prevalence of obesity is not limited to a particular socioeconomic group and is not unique to the united states should this widespread obesity epidemic be a cause for alarm from a personal health perspective the answer is an emphatic yes but when it comes to justifications of public policy for reducing obesity the analysis becomes more complex a common starting point is the assertion that those who are obese impose higher health costs on the rest of the population a statement which is then taken to justify public policy interventions but the question of who pays for obesity is an empirical one and it involves analysis of how obese people fare in labor markets and health insurance markets we will argue that the existing literature on these topics suggests that obese people on average do bear the costs and benefits of their eating and exercise habits we begin by estimating the lifetime costs of obesity we then discuss the extent to which private health insurance pools together obese and thin whether health insurance causes obesity and whether being fat might actually cause positive externalities for those who are not obese if public policy to reduce obesity is not justified on the grounds of external costs imposed on others then the remaining potential justification would need to be on the basis of helping people to address problems of ignorance or self control that lead to obesity in the conclusion we offer a few thoughts about some complexities of such a justification

economics of food energy density and adolescent body weight foods increase body weight if the price of obtaining a calorie from dense food is lower than that of less dense food estimates of the determinants of adolescent bmi suggest that the price of high density food is negatively related to bmi whereas the price of low density food is positively related restaurant availability is not associated with weight but increases in supermarket density predict lower weight quantile regressions show that most of the changes in body weight occur in the top quintile of the conditional distribution of bmi

a model of the demand for longevity and the value of life extension we specify a demand function for longevity or quantity of life along with corresponding demand functions for indicators of quality of life and a value of health and life extension function we show that the demand for health must be derived in conjunction with that for longevity and the related consumption plan and that all choices depend on initial individual endowments and terminal conditions our comparative dynamics predictions indicate that optimal health and longevity are increasing functions of endowed wealth rather than necessarily current income that improvements in opportunities to produce health can accentuate the differences between endowed health and attained longevity levels and that the value individuals ascribe to their health may be increasing over a good portion of their life cycle we use this model to analyze observed empirical variations in levels and trends of life expectancy and in exposure to health risks across different population groups

collateral loan quality and bank risk abstract most commercial loans are made on a secured basis yet little is known about the relationship between collateral and credit risk several theoretical studies find that when borrowers have private information about risk the lowest risk borrowers tend to pledge collateral in contrast conventional wisdom holds that when risk is observable the highest risk borrowers tend to pledge collateral an additional issue is whether secured loans as opposed to secured borrowers tend to be safer or riskier than unsecured loans empirical evidence presented here strongly suggests that collateral is most often associated with riskier borrowers riskier loans and riskier banks

maternal labour supply and childhood obesity in canada evidence from the nlscy this paper investigates the socioeconomic factors affecting childhood overweight and obesity in canada using data from the national longitudinal survey of children and youth in particular i attempt to address the issue of whether an increase in the mother s work intensity is associated with an increase in the risk of the child s becoming overweight or obese i also attempt to evaluate the causality of this relationship and the mechanisms that might facilitate this link the results suggest that an increase in the mother s work intensity when she first returned to work in the period after the child s birth and before the child started school is associated with an increase in the risk of the child s becoming overweight or obese later in childhood conditional on the mother returning to work in the period between the child s birth and the start of school for the child a 10 hour increase in the number of hours worked per week when the mother first returned to work is associated with an increase in the probability that the child later becomes overweight or obese that is in the range of 2 5 to 4 percentage points ce memoire analyse les facteurs socio economiques qui affectent l exces de poids et l obesite des enfants au canada a l aide des donnees de l elnej en particulier on se demande si un accroissement de l intensite de travail de la mere est associea l accroissement de poids et a l obesite de l enfant on etudie le lien de causalite et les mecanismes qui sous tendent ce lien les resultats montrent qu un accroissement de l intensite de travail de la mere quand elle retourne au travail dans la periode apres la naissance de l enfant et avant qu il ne commence ses classes est associea la probabilite d exces de poids et d obesite plus tard un accroissement de 10 heures dans le nombre d heures travaillees par semaine est associea une probabilite de 2 5 a 4 points de pourcentage que l enfant va avoir des problemes de poids ou d obesite

the deficit gamble the historical behavior of interest rates and growth rates in u s data suggests that the government can with a high probability run temporary budget deficits and then roll over the resulting government debt forever the purpose of this paper is to document this finding and to examine its implications using a standard overlapping generations model of capital accumulation the authors show that whenever a perpetual rollover of debt succeeds policy can make every generation better off this conclusion does not imply that deficits are good policy for an attempt to roll over debt forever might fail but the adverse effects of deficits rather than being inevitable occur with only a small probability

negotiated accounting rules in private financial contracts abstract this paper explores how private contracts tailor gaap and whether tailoring reflects the characteristics of the contracting parties the analysis reveals that contracts of bank and insurance lenders are different with bank agreements closer to public debt tailoring is one of several characteristics associated with insurance lending agreements the extensive tailoring of gaap income in insurance contracts enforces dividend and payout restrictions that are consistent with the interest of long term insurance lenders in contrast bank lenders deal with borrowers default risk by negotiating shorter maturities security sinking funds and loan syndication

parental behavior and the value of children s health a health production approach data on individual children and on sibling pairs are used to examine how family resource allocations affect children s health and to estimate willingness to pay for reduced acute illness in children results highlight the importance of accounting for the endogeneity of child health and suggest that children with greater stocks of health capital whose parents invest in preventive and remedial medical care experience fewer days of illness estimated willingness to pay to avoid one day of illness induced school loss is about 100 to 150 a range broadly consistent with limited prior evidence but sub stantially more than unit values applied in recent policy analyses all else equal willingness to pay is higher among single parents and for uninsured children and the estimated income elasticity is only 0 14 implied aggregate benefits of reductions in children s sick time associated with air pollution control may be substantial

permanent versus transitory components of annual earnings and estimation error in earnings response coefficients abstract previous research has generally estimated unexpected earnings as the change relative to the previous year assuming that shocks to annual earnings are purely permanent in the presence of transitory components of annual earnings we predict that using earnings changes as a proxy for unexpected earnings causes earnings response coefficients to be understated and the estimation error to be negatively cross sectionally correlated with persistence the negative correlation causes the association between earnings response coefficients and persistence to be overstated we use the ima 1 1 model to capture transitory components of annual earnings and obtain results that are consistent with our predictions

the role of accruals in asymmetrically timely gain and loss recognition we investigate the role of accrual accounting in the asymmetrically timely recognition incorporation in reported earnings of gains and losses timely recognition requires accruals when it precedes complete realization of the gains and losses in cash we show that nonlinear accruals models incorporating the asymmetry in gain and loss recognition timelier loss recognition or conditional conservatism offer a substantial specification improvement explaining substantially more variation in accruals than equivalent linear specifications conversely conventional linear accruals models by omitting the loss recognition asymmetry exhibit substantial attenuation bias and offer a comparatively poor specification of the accounting accrual process linear specifications also understate the ability of current earnings to predict future cash flows these findings have implications for our understanding of accrual accounting and conservatism as well as for researchers estimating discretionary accruals earnings management and earnings quality

international dimensions of obesity and overweight related problems an economics perspective obesity is a growing concern new world health organization who figures indicate that obesity is spreading around the world as a global epidemic according to the who there are more people suffering from overweight related problems than malnutrition globally there are more than 1 billion adults who are overweight and at least 300 million of them are clinically obese while 800 million suffer from malnutrition who 2004 the economic costs due to obesity can be burdensome currently in the united states medical costs associated with obesity and smoking account for about 9 each of all health expenditures finkelstein fiebelkorn and wang u s obesity attributable medical expenditures reached 75 billion in 2003 obesity however is important not only from an economic perspective but also from a social perspective the social consequences of obesity are serious and multiple studies have shown that obesity affects in a negative and statistically significant way personal and working relations earnings and wages particularly for females cawley overall obesity is a complex phenomenon several recent economic studies have explored the role of different cultural and sociodemographic factors on obesity rates leaving genetics aside obesity is caused by the consumption of too many calories and or low expenditures of calories i e low physical activity consequently most published economic research provided a justification for the increased growth of obesity rates by analyzing several factors that may contribute to this imbalance of caloric consumption and usage see chou grossman and saffer cutler glaeser and shapiro lakdawalla and philipson philipson and posner there are mainly two arguments that could justify the growth of overweight problems around the world some researchers argue that obesity growth is mainly due to a higher intake of calories while others state that obesity is mainly caused by a lower expenditure of caloies in daily activities in line with the calorie consumption argument cutler glaeser and shapiro stated that americans have become more obese over the past twenty five years primarily due to the consumption of more calories analyzing changes in food consumption between the mid 1970s and the mid 1990s for

a century of global equity market correlations in this paper we use a unique long run dataset of regulatory constraints on capital account openness to explain stock market correlations since stock returns themselves are highly volatile any examination of what drives correlations needs to focus on long runs of data this is particularly true since some of the short term changes in co movements appear to reverse themselves delroy hunter 2005 we argue that changes in the co movement of indices have not been random rather they are mainly driven by greater freedom to move funds from one country to another in related work geert bekaert and campbell harvey 2000 show that equity correlations increase after liberalization of capital markets using a number of case studies from emerging countries we examine this pattern systematically for the last century and find it to be most pronounced in the recent past we compare the importance of capital account openness with one main alternative explanation the growing synchronization of economic fundamentals we conclude that greater openness has been the single most important cause of growing correlations during the last quarter of a century though increasingly correlated economic fundamentals also matter in the conclusion we offer some thoughts on why the effects of greater openness appear to be so much stronger today than they were during the last era of globalization before 1914 this abstract was borrowed from another version of this item

the investment opportunity set and accounting procedure choice abstract this paper provides evidence on the cross sectional relation between firms investment opportunities their debt and compensation contracts their size and financial leverage and their accounting procedure choices this evidence is important because previous studies hypothesize that the link between firms investment opportunities and their accounting choices helps explain extant results on the size debt equity and bonus plan hypotheses however while i find that firms investment opportunities do affect the nature of their contracts i also find that the traditional explanations for accounting choice are important after controlling for the effects of the investment opportunity set

the impact of seniority and security covenants on bond yields a note theoretical research on the rational pricing of covenants in corporate bonds has examined seniority and security covenants black and cox 1 and ho and singer 8 use the option pricing model to show that senior debt should have a higher price than subordinated debt recent studies by smith and warner 10 11 and warner 13 document the widespread use of security covenants and argue that security reduces yield despite the broad concensus that seniority security covenants should reduce bond yields ceteris paribus empirical tests have failed to provide strong support for this view rather prior studies 2 3 have shown that security may actually increase the yield to maturity on debt the research cited relied on multivariate statistical techniques to examine various factors affecting yields or prices within specific rating categories contrary findings regarding security were attributed to differences in risk among bonds in the same rating category the present note is a refinement of past empirical studies by relying on a different test design we alleviate difficulties inherent in bond ratings specifically we study matched pairs of nonconvertible bonds issued by the same company that have similar features except for seniority security covenants our results support the view that seniority security covenants are rationally priced the next section discusses our test design and data and section ii summarizes our findings

effect of large scale social interactions on body weight i estimate models of endogenous social interactions in body weight at the county and state levels the results show that dispersion in body weight across time and space in the u s is not clearly excessive and that much of this variation can be attributed to observable individual and regional characteristics models exploiting variants of methods proposed by glaeser et al 2003 fixed effects instrumental variable and split sample instrumental variable methods to address endogeneity suggest that there are not large social multipliers on body weight outcomes the evidence suggests there may be small multipliers on bmi obesity and morbid obesity there is no evidence that underweight is subject to a social multiplier the results are sensitive to specification

labor market search endogenous disasters and the equity premium puzzle abstract the present paper investigates i the endogenous disaster mechanism in a textbook search and matching model when calibrated with a constant flow value of unemployment that is close to average labor productivity and ii its contribution to solve the equity premium puzzle i offer a simple explanation for the core of the disaster mechanism the lower bound say xkink on the annuitized costs the firm incurs from investing in a match lies sufficiently close to the body of productivity s distribution if labor productivity drops close to or even below xkink for consecutive periods the firm s annuitized share in expected future productivity of a worker can either only barely or even no longer at all break even the annuitized lower bound of the costs the firm faces vacancies become unprofitable and the economy quickly enters a downward spiral the core of the mechanism relies critically on an unreasonably high and constant flow value of unemployment disasters disappear entirely for slightly smaller or procyclical values and the effects cannot be compensated by empirically plausible adjustments of the model s remaining parameters while the model can generate a sizeable equity premium combined with a small risk free rate if the flow value of unemployment is large and constant and if the coefficient of relative risk aversion and the elasticity of intertemporal substitution are both high premia again collapse by an order of magnitude in the versions of the model without disasters

institutional differences and international private debt markets a test using mandatory ifrs adoption institutional differences between countries result in additional information risks between borrowers and lenders in cross border private loans this study examines the effect of these information risks on the structure of optimal debt contracts in international cross border versus domestic private debt markets using mandatory ifrs adoption as an indicator for institutional changes that reduced differences between countries i compare attributes of international versus domestic loans before and after ifrs adoption i find that in the pre ifrs period international loans are associated with a higher credit spread a weaker relationship between the bank and the borrower a more diffuse loan syndicate and less reliance on accounting based covenants than domestic loans these results are consistent with incremental information risks in international debt markets that make it more costly for lenders to screen and monitor borrower credit quality resulting in a more arm s length relationship between borrowers and lenders many of these associations attenuate after ifrs adoption suggesting that the pre ifrs differences in contract terms are driven by incremental information risks related to institutional differences between countries my findings imply that incremental information risks result in a different optimal contract in international debt contracts compared to domestic debt contracts

performance pricing in bank debt contracts abstract performance pricing links bank debt interest rate spreads to a borrower s performance via two options interest decreasing performance pricing reduces spreads if credit quality improves it is more common when prepayment is more likely or costly and when adverse selection costs are higher and is less common when multiple performance measures better predict credit quality interest increasing performance pricing increases spreads if credit quality deteriorates it is more common when lenders reduce interest rates to add this provision when downgrades are more likely and when moral hazard costs are higher we find lower spreads for contracts with interest increasing performance pricing

household food expenditures parental time allocation and childhood overweight an integrated two stage collective model with an empirical application and test this article develops a two stage collective household production model for household food expenditures parental time allocation and childhood overweight the model fills four gaps in the literature i the black box treatment of intrahousehold decision making ii exclusion of the child s decision input iii exclusion of noneconomic variables and iv absence of theory supported instrument identification the traditional unitary household production model with children is a special case of the model developed using a unique data set the unitary model is rejected there are important differences in the policy implications to be drawn from both models based on the data set used

accounting information in financial contracting the incomplete contract theory perspective this paper reviews theoretical and empirical work on financial contracting that is relevant to accounting researchers its primary objective is to discuss how the use of accounting information in contracts enhances contracting efficiency and to suggest avenues for future research we argue that incomplete contract theory broadens our understanding of both the role accounting information plays in contracting and the mechanisms through which efficiency gains are achieved by discussing its rich theoretical implications we expect incomplete contract theory to prove useful in motivating future research and in offering directions to advance our knowledge of how accounting information affects contract efficiency

measuring the natural rate of interest international trends and determinants abstract u s estimates of the natural rate of interest the real short term interest rate that would prevail absent transitory disturbances have declined dramatically since the start of the global financial crisis for example estimates using the laubach williams 2003 model indicate the natural rate in the united states fell to close to zero during the crisis and has remained there into 2016 explanations for this decline include shifts in demographics a slowdown in trend productivity growth and global factors affecting real interest rates this paper applies the laubach williams methodology to the united states and three other advanced economies canada the euro area and the united kingdom we find that large declines in trend gdp growth and natural rates of interest have occurred over the past 25 years in all four economies these country by country estimates are found to display a substantial amount of comovement over time suggesting an important role for global factors in shaping trend growth and natural rates of interest

measuring the probability of financial covenant violation in private debt contracts we measure the probability that a borrower will violate financial covenants in private debt contracts we analyze hand coded data and specify standard covenant definitions using compustat data that minimize measurement error for all individual dealscan covenants we use these definitions to create a measure of aggregate probability of violation which can be used across all covenants in a loan or among covenant subsets of interest we provide evidence that our aggregate probability measure is superior to alternatives used in prior literature

fast food restaurant advertising on television and its influence on childhood obesity childhood obesity is an escalating problem around the world that is especially detrimental as its effects carry on into adulthood to estimate the effects of television fast food restaurant advertising on children and adolescents with respect to being overweight this paper employs the 1979 child young adult national longitudinal survey of youth and the 1997 national longitudinal survey of youth to estimate the effects of television fast food restaurant advertising on children and adolescents with respect to being overweight a ban on these advertisements would reduce the number of overweight children ages 3 11 in a fixed population by 18 percent and would reduce the number of overweight adolescents ages 12 18 by 14 percent the elimination of the tax deductibility of this type of advertising would produce smaller declines of between 5 and 7 percent in these outcomes but would impose lower costs on children and adults who consume fast food in moderation because positive information about restaurants that supply this type of food would not be completely banned from television

negotiated measurement rules in debt contracts this paper investigates contractual definitions of net income and net worth and the cross sectional variation in definitions of net income in a large sample of private debt contracts to shed light on the debt contracting demand for accounting numbers the descriptive evidence indicates that removing transitory earnings is one principal concern in the measurement of earnings but not in the measurement of net worth in the extreme contracts are never written on comprehensive income as an earnings concept whereas accumulated other comprehensive income is included in net worth in most contracts in contrast conservative adjustment in the sense of including certain types of negative earnings but not the corresponding positive earnings does not seem to be a primary consideration in measuring net income and net worth cross sectionally i find that net income is more likely to be defined differently from the gaap when net income plays a more important role in a contract when the loan maturity is longer and when transitory earnings are less useful for debt contracting collectively the evidence shows that debt contracting parties choose contracting variables in a manner consistent with efficient contracting and that transitory earnings are relatively less useful in measuring firm performance for debt contracting

demographics and the natural interest rate in the euro area abstract we investigate the impact of demographics on the natural rate of interest nri in the euro area with a particular focus on the role played by economic openness migrations and pension system design to this end we construct a life cycle model and calibrate it to match the life cycle profiles from hfcs data we show that population aging contributes significantly to the decline in the nri explaining about two thirds of its secular decline between 1985 and 2030 openness to international capital flows has not been important in driving the ea real interest rate as aging in europe has been similar to that in the rest of the world so far of two possible pension reforms only an increase in the retirement age can revert the downward trend on the equilibrium interest rate while a fall in the replacement rate would make the decline in nri even deeper the demographic pressure on the eurozone nri can be alleviated by increased immigration but only to a small extent and with a substantial lag

is there a daily discount rate evidence from the food stamp nutrition cycle abstract quasi hyperbolic discounting predicts impatience over short run tradeoffs i present a direct non laboratory test of this implication using data on the nutritional intake of food stamp recipients caloric intake declines by 10 to 15 percent over the food stamp month implying a significant preference for immediate consumption these findings constitute a rejection of the permanent income hypothesis and are extremely difficult to reconcile with exponential discounting the data support an explanation based on time preference and reject several alternative explanations including highly elastic intertemporal substitution i explore implications for the optimal timing of transfer payments under alternative assumptions about preferences

performance measures in earnings based financial covenants in debt contracts this paper examines how performance measures are defined in major earnings based financial covenants in loan contracts to shed light on the economic rationales underlying the contractual use of performance measures i find an earnings based covenant is typically based on a performance measure close to earnings before interest tax amortization and depreciation expenses ebitda however my empirical analyses show that ebitda is less useful in explaining credit risk than earnings before interest and tax expenses ebit and even the bottom line net income thus measuring credit risk cannot fully explain the choice of accounting performance measures in earnings based covenants i conjecture that contracting parties choose an ebitda related measure instead of a measure calculated after depreciation and amortization expenses e g ebit to make the performance measure less sensitive to investment activities which can be controlled through other contractual terms such as a restriction on capital expenditure and provide empirical evidence consistent with this conjecture

the social multiplier aggregate data is often used to make inferences about individual level behavior if there are social interactions in which one person s actions influence his neighbor s incentives or information then these inferences are inappropriate the presence of positive social interactions or strategic complementarities implies the existence of a social multiplier where aggregate relationships will overstate individual elasticities we present a brief model and then estimate the size of the social multiplier in three areas the impact of education on wages the impact of demographics on crime and group membership among dartmouth roommates in these contexts there is a significant social multiplier jel ho jo co

comparative national balance sheets a study of twenty countries 1688 1978 raymond w goldsmith has combined his experience good sense and flair with figures to construct this groundbreaking comparative study of the balance sheets of twenty of the largest nations a pioneer in the field of national accounts goldsmith now presents a work that will be a valuable tool in tracking the economic progress of and between nations the majority of the balance sheets were created especially for this project their components gleaned from fragmentary and heterogeneous data there are approximately 3 500 entries each measuring the value of one type of tangible or financial asset or liability at a given date goldsmith s estimates are keyed to fifteen benchmark dates in the economic progress of the cited nations and for twelve nations he was able to construct balance sheets dating back to the nineteenth century or earlier combined worldwide balance sheet are included for 1950 and 1978 comparative national balance sheets will provide an essential basis for the quantitative analysis of the long term financial development of these nations in addition to national balance sheets for all large countries except brazil and china sectoral balance sheets for france germany great britain india japan and the united states in the postwar period are also included

the causes of childhood obesity a survey childhood obesity rates are rapidly rising in many countries since it is highly likely that obesity will persist into adulthood current rates undermine the health and future of people in developed as well as developing countries this public health epidemic carries significant economic social as well as individual level consequences and has become a research topic of significant interest for various disciplines including economics we survey the literature in economics and related disciplines associated with the causes of childhood obesity and synthesize the results to provide a better understanding of the explanations for the rising childhood obesity rates this is an important step in crafting effective policies to combat global childhood obesity trends

social interactions and the contemporaneous determinants of individuals weight obesity and overweight are central issues in the public health debate in most developed countries in this debate some of the socio economic determinants of obesity and overweight are still relatively unexplored this paper presents an empirical examination of the possible influence of social interactions on contemporaneous obesity and over underweight a joint estimation model for obesity and self image is applied to a sample for spain taken from the european union household panel for 1998 the results suggest that obesity might be in part a social phenomenon connected to individuals social life

the effects of soft drink taxes on child and adolescent consumption and weight outcomes abstract childhood and adolescent obesity is associated with serious adverse lifetime health consequences and its prevalence has increased rapidly soft drink consumption has also expanded rapidly so much so that soft drinks are currently the largest single contributors to energy intake in this paper we investigate the potential for soft drink taxes to combat rising levels of child and adolescent obesity through a reduction in consumption our results based on state soft drink sales and excise tax information between 1989 and 2006 and the national health examination and nutrition survey suggest that soft drink taxation as currently practiced in the united states leads to a moderate reduction in soft drink consumption by children and adolescents however we show that this reduction in soda consumption is completely offset by increases in consumption of other high calorie drinks

distributional national accounts methods and estimates for the united states this article combines tax survey and national accounts data to estimate the distribution of national income in the united states since 1913 our distributional national accounts capture 100 of national income allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth we estimate the distribution of both pretax and posttax income making it possible to provide a comprehensive view of how government redistribution affects inequality average pretax real national income per adult has increased 60 from 1980 to 2014 but we find that it has stagnated for the bottom 50 of the distribution at about 16 000 a year the pretax income of the middle class adults between the median and the 90th percentile has grown 40 since 1980 faster than what tax and survey data suggest due in particular to the rise of tax exempt fringe benefits income has boomed at the top the upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000 the government has offset only a small fraction of the increase in inequality the reduction of the gender gap in earnings has mitigated the increase in inequality among adults but the share of women falls steeply as one moves up the labor income distribution and is only 11 in the top 0 1 in 2014

do liquidation values affect financial contracts evidence from commercial loan contracts and zoning regulation we examine the impact of asset liquidation value on debt contracting using a unique set of commercial property loan contracts we employ commercial zoning regulation to capture the flexibility of a property s permitted uses as a measure of an asset s redeployability or value in its next best use within a census tract more redeployable assets receive larger loans with longer maturities and durations lower interest rates and fewer creditors controlling for the property s type sale price and earnings to price ratio these results are consistent with incomplete contracting and transaction cost theories of liquidation value and financial structure

schooling health knowledge and obesity the connection between schooling and health is well documented an important empirical issue that needs to be examined however is whether schooling s effects are due to individual health knowledge differences this empirical study examines this issue with an increasingly important health indicator obesity since provision of health knowledge is a major tool of public agencies promoting health this empirical study uses a new direct measure of health knowledge to test this hypothesis the results show that knowledge is inversely related to the probability that an individual is obese schooling s effects on relative weight and the probability of being obese are explained by differences in knowledge this result may imply that schooling s effect on the allocative efficiency of the household production of health is the main reason schooling is linked to health behaviour the result also may imply that the most effective method of health education is to highlight the disease element of poor dietary habits a

welfare enhancing technological change and the growth of obesity the theory explores how technological change can produce obesity as an unintended consequence of economic development which reduces food prices and the strenuousness of work the empirical analysis presents a specific example of how food price declines can improve health and well being even in a developed country

the rate of return on everything 1870 2015 what is the aggregate real rate of return in the economy is it higher than the growth rate of the economy and if so by how much is there a tendency for returns to fall in the long run which particular assets have the highest long run returns we answer these questions on the basis of a new and comprehensive data set for all major asset classes including housing the annual data on total returns for equity housing bonds and bills cover 16 advanced economies from 1870 to 2015 and our new evidence reveals many new findings and puzzles

the importance of accounting changes in debt contracts the cost of flexibility in covenant calculations abstract in this paper we examine how the exclusion of voluntary and mandatory accounting changes from the calculation of covenant compliance affects the interest rate charged on the loan after controlling for self selection bias and other factors known to affect loan spreads we find that the rate charged is 84 basis points lower when voluntary accounting changes are excluded and 71 basis points lower when mandatory accounting changes are excluded our results suggest that borrowers are willing to pay substantially higher interest rates to retain accounting flexibility that may help them avoid covenant violations and to avoid duplicate record keeping costs