accuracy of response in labor market surveys evidence and implications this paper examines the extent of response errors in labor market survey data and explores the implications of such errors for economic analysis explicitly examined are responses to questions on industry occupation union status hours worked and wages analyses are based on two sources 1 a special supplement to the january 1977 current population survey that obtained data from workers and their employers and 2 an exact match of workers and their employers interviewed in the employment opportunity pilot project survey the dual nature of these surveys provides a basis for analyzing the effect of response error on a variety of economic analyses including the trade off between wages and risk the wage impact of unionism and the sensitivity of wage determination models to alternative responses to earnings questions

investor valuation of the abandonment option abstract we investigate whether investors price the option to abandon a firm at its exit value theory prices this real option as an american put with both a stochastic strike price exit value and a stochastic value of the underlying security the value of cash flows the empirical implications are that firm value increases in exit value after controlling for expected going concern cash flows and that more generalizable assets produce more abandonment option value using discounted earnings forecasts to proxy for expected cash flows and prior literature to categorize asset generalizability we find strong support for the predictions of abandonment option theory

a discussion of assessing the relative informativeness and permanence of pro forma earnings and gaap operating earnings abstract by analyzing a carefully constructed earnings announcements sample that discloses a pro forma earnings number bhattacharya et al j account econom 36 1 3 2003 contribute to recent research documenting increasing differences between earnings as defined by generally accepted accounting principles gaap and alternative earnings definitions followed by capital markets the paper provides interesting descriptive data on pro forma earnings per share relative to both gaap earnings per share and actual earnings per share as tracked by i b e s also the authors conduct tests of the relative informativeness and persistence of these three earnings measures econometric and data limitations inhibit the inferences that can be drawn from some of these tests

trouble in the tails what we know about earnings nonresponse thirty years after lillard smith and welch earnings nonresponse in household surveys is widespread yet there is limited knowledge of how nonresponse biases earnings measures we examine the consequences of nonresponse on earnings gaps and

decomposing trends in income volatility the wild ride at the top and bottom we use 2 year panels from the current population survey to provide a detailed accounting of family income volatility from 1980 to 2009 volatility doubled overall and the increase was most pronounced among the top 1 of the income distribution but in any given year the level of volatility among the bottom 10 exceeds that of the top the increased volatility comes from higher instability of head and spouse earnings other nonlabor income and from reduced covariance between these income sources with the tax system this suggests that current tax policy is less effective in mitigating income shocks than previous decades jel j31 i30

changes versus levels in earnings as explanatory variables for returns some theoretical considerations this paper considers theoretical aspects of the specification of an earnings variable to explain contemporaneous returns the traditional approach in market based accounting research centers on changes in earnings deflated by beginning of period price as the benchmark explanatory variable for returns the reasons for using this variable appear to follow a three step argument first unexpected earnings determine the theoretically correct concept of the earnings variable second the change in earnings approximates unexpected earnings because current earnings approximate expected earnings i e the random walk hypothesis applies 1 third the beginning of period price deflates the earnings change variable to make it dimensionally consistent with returns 2 while this argument seems overly heuristic we are unaware of a generally acceptable analysis that provides a more compelling argument this lack of rigor has recently become an issue because

what do we really know about wages the importance of nonreporting and census imputation in the most frequently used microdata sets over a quarter of all respondents now refuse to answer some questions about their incomes the census bureau has dealt with this problem which has been increasing in severity over time by imputing incomes of non respondents their imputation procedure called the hot deck essentially matches nonrespondents with demographically similar donors in this paper we evaluate the census imputation methodology and raise some questions first the census procedure is tied to commonality of events in the population rather than the more appropriate informational content of regressors clearly the census procedure severely understates income in certain occupations because it is based on the apparently invalid assumption that income does not affect reporting propensities it most likely understates average incomes as well

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

match bias from earnings imputation in the current population survey the case of imperfect matching this article examines match bias arising from earnings imputation wage equation parameters are estimated from mixed samples of workers reporting and not reporting earnings the latter assigned earnings of donors regressions including attributes not used as imputation match criteria e g union are severely biased match bias also arises with attributes used as match criteria but matched imperfectly imperfect matching on schooling age flattens earnings profiles within education age groups and creates jumps across groups assuming conditional missing at random a general analytic expression correcting match bias is derived and compared to alternatives reweighting a respondent only sample proves an attractive approach

is earnings nonresponse ignorable abstract earnings nonresponse in the current population survey is roughly 30 in the monthly surveys and 20 in the march survey if nonresponse is ignorable unbiased estimates can be achieved by omitting nonrespondents little is known about whether cps nonresponse is ignorable using sample frame measures to identify selection we find clear cut evidence among men but limited evidence among women for negative selection into response wage equation slope coefficients are affected little by selection but because of intercept shifts wages for men and to a lesser extent women are understated as are gender gaps selection is least severe among household heads

fair value accounting effects on banks earnings volatility regulatory capital and value of contractual cash flows abstract we investigate fair value accounting critics assertions by restating earnings and regulatory capital to reflect banks disclosed investment securities fair values we find 1 fair value based earnings are more volatile than historical cost earnings but share prices do not reflect the incremental volatility 2 banks violate regulatory capital requirements more frequently under under fair value than historical cost accounting fair value based violations help predict regulatory capital violations but share prices do not reflect this potential increased regulatory risk only historical cost violations are market information events 3 share prices reflect interest rates changes even though investment securities contractual cash flows are fixed

is comprehensive income superior to net income as a measure of firm performance abstract with the exception of financial firms we find no evidence that comprehensive income is more strongly associated with returns market value or better predicts future cash flows income than net income moreover the only component of comprehensive income that improves the association between income and returns is the marketable securities adjustment our results do not support the claim that comprehensive income is a better measure of firm performance than net income our results also raise questions about the appropriateness of items included in sfas 130 comprehensive income as well as the need for mandating uniform comprehensive income disclosures for all industries

earnings as an explanatory variable for returns in this paper we investigate whether the level of earnings divided by price at the beginning of the stock return period is relevant for evaluating earnings returns associations the primary model motivating this research relies on the idea that book value owners equity and market value are both stock variables indicating the wealth of the firm s equity holders the related flow variables after adjusting for dividends are respectively earnings divided by price at the beginning of the return period a p 1 and market returns it then follows that earnings divided by beginning of period price should be associated with stock returns although models based on a relation between market value and book value are used occasionally in the accounting research literature see for example landsman 1986 harris and ohlson 1987 and barth

bias corrected estimates of ged returns using three sources of data this article examines the direct economic return to general educational development ged certification for both native and immigrant high school dropouts one data source the current population survey cps is plagued by nonresponse and allocation bias from the hot deck procedure that biases the estimated return to the ged upward correcting for allocation bias and ability bias there is no direct economic return to ged certification an apparent return to ged certification with age found in the raw cps data is due to dropouts becoming more skilled over time these results apply to both native born and immigrant populations

fair value disclosures by bank holding companies abstract this paper examines the value relevance of fair value data disclosed under sfas 107 by banks for 1992 and 1993 collectively the evidence suggests differences between fair and book values of financial instruments are associated with market to book ratios however fair value disclosures for financial instruments other than securities are value relevant only in limited settings in addition only in 1992 are fair value variables associated with market to book ratios after incorporating existing historical cost information further analysis suggests the weaker 1993 results are not necessarily due to increased measurement error in fair value numbers

applying reverse regression techniques in earnings return analyses abstract measurement error in unexpected earnings is recognized as a source of bias in examinations of the relation between earnings and returns reverse regression procedures are commonly used as a means of coping with this bias this study examines the properties of reverse regression procedures in multi interacted variable settings with a specific focus on the earnings response coefficient erc analysis of collins and kothari j account econom 11 1989 143 it shows that both conventional reverse regression techniques and novel techniques employed by collins and kothari are not robust it also demonstrates how reverse regression techniques can be successfully employed in such settings using non interacted variable designs

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

the relation between earnings and cash flows abstract a model of earnings cash flows and accruals is developed assuming a random walk sales process variable and fixed costs and that the only accruals are accounts receivable and payable and inventory the model implies earnings better predict future operating cash flows than current operating cash flows and the difference varies with the operating cash cycle also the model is used to predict serial and cross correlations of each firm s series the implications and predictions are tested on a 1337 firm sample over 1963 1992 both earnings and cash flow forecast implications and correlation predictions are generally consistent with the data

missing wages how to test for biased estimates in wage functions this paper investigates how to test for nonresponse selection bias in wage functions induced by missing income information we suggest an easy to implement approach which requires information on interviewer ids and the interview date rather than hard to get interviewer characteristics

does it matter who responded to the survey trends in the u s gender earnings gap revisited studies have shown a decreasing trend in the u s gender earnings gap since the 1980s the authors work with a framework established by blau and kahn 1997 jole 2006 ilrr who used the michigan panel of income dynamics psid to decompose that gap into observable and unobservable components in order to determine which contributing factors are gender specific and which can be attributed to the wage structure they extend the blau and kahn framework to consider measurement error due to the use of proxy representative respondents of the survey s earnings variable first they find a trend toward more females in the gender composition of the household respondents and second they estimate the impact of that change on blau and kahn s decomposition they determine that some of the changes in the gender earnings gap could actually be attributed to whether the surverys were self or proxy responded that is the actual reduction in the gender pay gap may be smaller than what the estimates without taking into account the measurement error might indicate the authors suggest the need for a careful validation study to ascertain the extent of the spurious measurement error effects

the employment and wage effects of oil price changes a sectoral analysis in this paper we use micro panel data to examine the effects of oil price changes on employment and real wages at the aggregate and industry levels we also measure differences in the employment and wage responses for workers differentiated on the basis of skill level we find that oil price increases result in a substantial decline in real wages for all workers but raise the relative wage of skilled workers the use of panel data econometric techniques to control for unobserved heterogeneity is essential to uncover this result which is completely hidden in ols estimates while the short run effect of an oil price increase on aggregate employment is negative the long run effect is in fact positive we find that changes in oil prices induce changes in employment shares and relative wages across industries however we find little evidence that oil price changes cause labor to consistently flow into those sectors with relative wage increases copyright 1996 by mit press

match bias in wage gap estimates due to earnings imputation about 30 of workers in the current population survey have earnings imputed wage gap estimates are biased toward zero when the attribute being studied e g union status is not a criterion used to match donors to nonrespondents an expression for match bias is derived in which attenuation equals the sum of match error rates attenuation can be approximated by the proportion with imputed earnings union wage gap estimates with match bias removed are presented for 1973 2001 estimates for recent years are biased downward 5 percentage points bias in gap estimates accompanying other non match criteria public sector industry etc is examined

stock market valuation of gains and losses on commercial banks investment securities an empirical analysis abstract prior studies document an insignificant effect of unrealized gains losses urgl and a negative effect of realized gains losses sgl on bank stock returns we argue that these results may reflect the omission of changes in value of other net assets resulting from interest rate changes we find that after controlling for effects of other on balance sheet net assets both urgl and sgl have significant positive effects on bank returns in normal periods but the sgl effect is significantly lower in periods of low capital and earnings these findings are relevant to the market value accounting debate