ON THE INTERNAL REVENUE SERVICE'S SERVICE AND ENFORCEMENT

Built on the seminal work of Graetz et al. (1986), this study considers a model of tax compliance in which the Internal Revenue Service (IRS) services as well as audits taxpayers as in the real world. Taxpayers are uncertain about whether their incomes are eligible for deduction/exemption, and may seek advice from the taxpayer service provided by the IRS to mitigate the uncertainty. We show: (1) while the society's preferred quality of taxpayer service is likely to be sufficiently high, the IRS's preferred quality of taxpayer service is only at an intermediate level; and (2) the conflict between the society and the IRS tends to be intensified as the cost of tax audits becomes lower. Evidence in support of our results is addressed. We also extend our model to addressing the issue of corruption in tax administration and to considering a dynamic model. (JEL D82, H26, K42)     

Exact calculation of power and sample size in bioequivalence studies using two one‐sided tests

The number of subjects in a pharmacokinetic two‐period two‐treatment crossover bioequivalence study is typically small, most often less than 60. The most common approach to testing for bioequivalence is the two one‐sided tests procedure. No explicit mathematical formula for the power function in the context of the two one‐sided tests procedure exists in the statistical literature, although the exact power based on Owen's special case of bivariate noncentral t‐distribution has been tabulated and graphed. Several approximations have previously been published for the probability of rejection in the two one‐sided tests procedure for crossover bioequivalence studies. These approximations and associated sample size formulas are reviewed in this article and compared for various parameter combinations with exact power formulas derived here, which are computed analytically as univariate integrals and which have been validated by Monte Carlo simulations. The exact formulas for power and sample size are shown to improve markedly in realistic parameter settings over the previous approximations. Copyright © 2014 John Wiley & Sons, Ltd.     

Letter to the editor by the authors of Exact Calculation of Power and Sample Size in Bioequivalence Studies Using Two One‐sided Tests,Pharmaceutical Statistics,DOI: 10.1002/pst.1666

This article reflects the views of the authors and should not be construed to be those of the US Food and Drug Administration. Copyright © 2015 John Wiley & Sons, Ltd.     

Hedging Barrier Options in GARCH Models with Transaction Costs

This study proposes a modified strike‐spread method for hedging barrier options in generalized autoregressive conditional heteroskedasticity (GARCH) models with transaction costs. A simulation study was conducted to investigate the hedging performance of the proposed method in comparison with several well‐known static methods for hedging barrier options. An accurate, easy‐to‐implement and fast scheme for generating the first passage time under the GARCH framework which enhances the accuracy and efficiency of the simulation is also proposed. Simulation results and an empirical study using real data indicate that the proposed approach has a promising performance for hedging barrier options in GARCH models when transaction costs are taken into consideration.     

On False Discovery and Non‐discovery Proportions of the Dynamic Adaptive Procedure

This paper studies the asymptotic behaviour of the false discovery and non‐discovery proportions of the dynamic adaptive procedure under some dependence structure. A Bahadur‐type representation of the cut point in simultaneously performing a large scale of tests is presented. The asymptotic bias decompositions of the false discovery and non‐discovery proportions are given under some dependence structure. In addition to existing literatures, we find that the randomness due to the dynamic selection of the tuning parameter in estimating the true null rate serves as a source of the approximation error in the Bahadur representation and enters into the asymptotic bias term of the false discovery proportion and those of the false non‐discovery proportion. The theory explains to some extent why some seemingly attractive dynamic adaptive procedures do not outperform the competing fixed adaptive procedures substantially in some situations. Simulations justify our theory and findings.     

When Costs Are Unequal and Unknown: A Subtree Grafting Approach for Unbalanced Data Classification*

In binary classifications, a decision tree learned from unbalanced data typically creates an important challenge related to the high misclassification rate of the minority class. Assigning different misclassification costs can address this problem, though usually at the cost of accuracy for the majority class. This effect can be particularly hazardous if the costs cannot be specified precisely. When the costs are unknown or difficult to determine, decision makers may prefer a classifier with more balanced accuracy for both classes rather than a standard or cost‐sensitively learned one. In the context of learning trees, this research therefore proposes a new tree induction approach called subtree grafting (STG). On the basis of a real bank data set and several other data sets, we test the proposed STG method and find that our proposed approach provides a successful compromise between standard and cost‐sensitive trees.     

A Transaction Cost Approach to Outsourcing by Households

Below‐replacement fertility and late marriage reflect, in part, the incompatibility of women's family and paid work roles. The outsourcing of childcare and housework to market and state service providers offers a strategy for reconciling work–family conflicts. By referring to the household as an organizational unit, I use the transaction cost approach (TCA) of organizational economics to discuss the factors that facilitate or impede outsourcing by households. In my analysis the frequency, specificity, and uncertainty level of the transaction, as well as normative and social beliefs, can facilitate or impede the household's decision to outsource. Monetary considerations, preferences, and government policies might moderate the effect of the transaction cost on this decision. The analysis further demonstrates that gender is an important factor, because transaction costs are often not distributed equally within households.     

WHAT IT TAKES TO BE A GRANDPARENT IN A NEW COUNTRY: THE LIVED EXPERIENCE AND EMOTIONAL WELL‐BEING OF AUSTRALIAN‐VIETNAMESE GRANDPARENTS

This study attempts to understand the lived experience and emotional well‐being of Australian‐Vietnamese grandparenthood. Thirty‐six grandparents participated in four focus group interviews while three grandparents took part in individual in‐depth interviews where the experiences of the grandparents were further clarified. The findings reveal that Vietnamese grandparents encounter many changes in their lives and their relationships with their children and grandchildren in their new homeland. However, many still seem to play important roles in the family, creating a vital bridge to grandchildren. According to our participants, the grandparents' most important roles are the maintenance of good emotional relationships and support, and the construction of harmony and continuity in their modified extended families. To be able to assume these roles, grandparents need to actively explore and consider accepting new values. For many, a successful grandparenthood brings happiness to the family, positively influences grandparents' life satisfaction and emotional well‐being, and this in turn enhances their quality of life.     

Women's Wages: Cohort Differences in Returns to Education and Training Over Time*

Objective. This article examines the effects of education and work‐related training on wage‐growth trajectories for two cohorts of women as they aged from their early 20s and 30s into their early 30 s and 40 s. I test whether occupational training compensates for an earlier lack of education, thereby decreasing earnings inequality over time within cohorts. Because the broader economic context may influence the relationship between wages, education, and training, I test the assumption that the experiences of a given cohort may be generalized to others. Methods. Following NLS Young Women between 1977 and 1987 and NLSY79 Women between 1988 and 1998, growth‐curve analyses test whether returns to investments in human capital vary over time, across and within cohorts. Results. Women who did not update their skills over time experienced stagnation or declines in real wages, leading to growing wage inequality within education levels. However, women without a high school degree who engaged in on‐the‐job training experienced the greatest returns to training, thus reducing the initial education‐based wage gap. Conclusion. Education and training in adulthood can deflect the accumulation of disadvantage, but can also solidify an already uneven distribution of resources across social strata.