Previous Earnings Research Articles

Unemployment Insurance Eligibility and the School-to-Work Transition in Canada and the United States

To study how the design of unemployment insurance affects people leaving school to find jobs, a model of job search in the presence of UI is developed and estimated for the US and Canada. The level of UI benefits depends upon previous earnings, a fact which creates opposing incentives for unemployed people not receiving benefits. Which of these opposing incentives dominates differs across demographic groups within each country. The major differences in the transition from school to work between Canada and the U.S. are a lower rate of job offer arrivals and a lower rate of offer rejections in Canada. Within each country, offer arrival rates differ across individuals much more than offer rejection rates. (This abstract was borrowed from another version of this item.)

The differential impact of unemployment insurance on unemployment duration by income level

While there is a vast literature on the effect of unemployment insurance on unemployment duration, in almost all of these studies the replacement ratio is the key explanatory variable. Does not contest the almost universal findings that the higher the ratio of unemployment income to that of previous earnings, the longer is unemployment duration, but finds that when pre‐unemployment income itself is considered, duration is positively related to that income. Supports the positive view of the merits of unemployment insurance. While past studies emphasize the leisure aspect, unemployment insurance incorporates the ability to improve search through the use of unemployment insurance funds. This use of funds is particularly applicable to high income recipients.

A longitudinal analysis of the young self-employed in Australia and the United States

This paper examines the pattern of self-employment in Australia and the United States. We particularly focus on the movement of young people in and out of self-employment using comparable longitudinal data from the two countries. We find that the forces that influence whether a person becomes self-employed are broadly similar: in both countries skilled manual workers, males and older workers were particularly likely to move to self-employment. We also find that previous firm size, previous union status and previous earnings are important determinants of transitions to self-employment. The main difference we observe is that additional years of schooling had a positive impact on the probability of being self-employed in the US but were not a significant influence in Australia. However, the factors influencing the probability of leaving self-employment are different across the two countries.

Unemployment insurance and the intertemporal substitution of consumption and labor supply

A central feature of modern business cycles is the procyclical pattern of consumption and labor supply. It has proved difficult, however, to construct a market-clearing model that is consistent with this fact and yet retains appealing assumptions and realistic implications. This paper demonstrates the possibility of positive comovements in contemporaneous consumption and labor supply in a model in which the unemployment insurance (UI) replacement ratio links future benefits to previous wage earnings. Specifically, in our model, an increase in the probability of future unemployment unambiguously increases present labor supply and may increase present consumption as well. One testable implication of our analysis is that the positive co-movement of consumption and labor supply is more pronounced in economies with an earnings-based UI system.

Attributes of Successful MBAs: A 20-Year Longitudinal Study

Are attributes of successful MBA (Master of Business Administration) students useful for predicting success? Can information about these attributes contribute to improved business management? This 20-year study of Stanford male MBAs identified the importance of social extroversion as a contributor to success.' Successful MBA students are more likely to end up employed in small businesses or to be self-employed. In addition, earnings of MBAs who had undergraduate degrees in engineering or who were older students do not keep pace with earnings of younger MBAs with broader backgrounds. Earnings at 20 years are best predicted by previous earnings.

The Strange Case of British Earnings-Related Unemployment Benefit

ABSTRACTThe abolition in 1982 of the Earnings-Related Supplement (ERS) to unemployment benefit, which had been introduced in 1966, left the UK with no element of income support for the unemployed linked to previous earnings. The ERS scheme represents an important case study of economic and social policy but it has been little researched hitherto. The paper examines the history of ERS, showing how the original legislation and subsequent development produced a benefit that bore little relation to schemes in other countries. Unpublished administrative data on the receipt of ERS are used to help document the scheme's failings, and the paper closes by placing ERS within the context of the development of unemployment insurance in Britain.

The Multiperiod Information Content of Accounting Earnings: Confirmations and Contradictions of Previous Earnings Reports

In this study, we propose and test the hypothesis that investors reevaluate earnings announcements in the light of postannouncement information.1 Our argument for multiperiod price reactions to earnings news is motivated by the literature linking price responses to earnings persistence.2 When earnings are announced, we assume that investors are unable to determine with certainty the persistence of an earnings

Discussion of The Multiperiod Information Content of Accounting Earnings: Confirmation and Contradictions of Previous Earnings Reports

In their study, Freeman and Tse pursue a topic which has long been a central focus of accounting researchers. They ask why it is that the stock price reaction to a given amount of earnings surprise is not an intertemporal constant.1 The earnings persistence literature (Beaver, Lambert, and Morse [1980], Kormendi and Lipe [1987], Collins and Kothari [1989], Beaver, Lambert, and Ryan [1987], and Easton and Zmijewski [1989]) suggests that the answer rests with the degree to which the trading activity of market agents reflects a consensus that any deviations from prior expectations will be permanent. This idea is perhaps most transparently illustrated in Cornell and Landsman [1989]. Using a discounted cash flow model, Cornell and Landsman argue that information provided by an earnings announcement not only gives rise to a market forecast error of current earnings, but also a revision in market forecasts regarding future-period earnings.2 If a given level of positive (negative) surprise is believed to be sustainable or permanent, then the (discounted) stream of future-period earnings can be thought of as being shifted upward (downward) relative to the stream expected before the earnings release. Conversely, if the level of surprise is believed to be entirely transitory, then the

Industry-Based Supported Employment: An Enclave Approach

Most individuals labeled severely handicapped remain unemployed in segregated institutions, activity programs, and work activity centers despite repeated demonstrations of vocational competence. This discrepancy presents a challenge to create alternatives to current services that will provide employment benefits and job security to individuals within the least restrictive environment possible. This article describes a program model that provides ongoing supported employment within a normal industrial setting to six persons previously judged to have severe handicaps. After 1 year, employees have dramatically increased earnings and productivity over previous earnings and national averages, and public costs have declined to one third the costs of alternative state programs.

The information content of security prices

The study derives a relationship between prices changes and earnings changes by expanding the information upon which earnings expectations are conditioned to include data other than prior earnings history. In particular, price is used as a surrogate for additional information available to market participants. This relationship provides an interpretation of the contemporaneous association between price changes and earnings changes previously observed by Ball and Brown (1968) and Beaver, Clarke and Wright (1979), among others. It also provides a basis for inferring from prices the earnings process and the expected future earnings as perceived by market participants. In doing so, it inverts the familiar price-earnings relationship and uses price as a predictor of earnings. The study differs from previous research which has examined the time series behavior of earnings based solely on previous earnings realizations. This approach can potentially lead to earnings forecasting models that are more accurate than the random walk with a drift that has been robust against challengers. In particular, the evidence indicates that security prices behave as if earnings are perceived to be dramatically different from a simple random walk process. Preliminary evidence also indicates that price-based forecasting models are more accurate than the random walk with a drift model.

Social Security and Social Welfare Indicators

The proportion of its total resources that a society devotes to social welfare is a useful general measure related to social policy. In fiscal 1976, the United States spent 21 percent of Gross National Product (GNP) for public social welfare programs, including health and education as well as social insurance (the largest segment) and assistance. Program developments, inflation, population growth, and the level of economic activity affect trends. The United States spends relatively less for social security than most industrial countries. Income maintenance programs now touch most families in the United States. More than 90 percent of all persons over age 65 get social security benefits. The extent of social security protection for survivors and disabled persons, the relative importance of private pensions, social security benefit replacement rates (the relation to previous earnings), and the income situation of aged persons are reviewed. There is brief reference to sickness insurance, unemployment insurance, and public assistance. Some possible directions of future change are noted. The interweaving of social welfare objectives and systems into the fabric of modern life cannot be undone. The attempt to develop clearer indicators of need and accomplishment is worth pursuing.

Doctors' Remuneration — Hospital Politics — Great Characters

THE question of the remuneration of the medical profession in the National Health Service was a matter of protracted negotiation at the start of the Service. The terms offered by the Government were based on the recommendations of the Spens Committee, which estimated the total remuneration that the profession could reasonably expect in the light of the previous earnings of general practitioners and consultants. The figures quoted by the Spens Committee were in terms of the 1939 value of money, and since the inception of the Service the only adjustments that have been made have been to bring these figures . . .

A Statistical Test of the Success of Consolidations

Nature of the study, 84. — Underlying assumptions of the study, 86. — I. Previous earnings of the representative consolidation compared with actual earnings, 90. — II. Estimated earnings of the representative consolidation compared with actual earnings, 91. — III. First-year earnings of the representative consolidation compared with later earnings, 93. — Table of fundamental data, 95.