THE GREAT OVERESTIMATION: TAX DATA AND INEQUALITY MEASUREMENTS IN THE UNITED STATES, 1913–1943

Historical measures of income inequality in the United States must grapple with the challenge of data quality. We examine one such problem affecting the well-known estimates of income inequality produced by Piketty and Saez (2003) using the records of the Internal Revenue Service (IRS). Prior to 1943, incomes were self-reported. Combined with lax enforcement on the part of the IRS, self-reporting of incomes could provide a misleading portrait of the income distribution. To test the accuracy of IRS records, we compare them to independently tabulated state income tax returns between 1919 and 1945 from states with more comprehensive and rigorously enforced tax collection procedures. State income tax records show lower overall levels of income inequality than IRS records. However, we still find that top income concentrations declined across the period between 1929 and World War II. These findings attest to the sensitivity of distributional estimation to the reporting selectivity and economic quality of underlying tax data, suggesting that the existing IRS-derived series systematically overstates top-income concentration in the interwar period. (JEL H2, N32, D31, E01)     

Economic Evaluation of Scale Dependent Technology Investments

We study the effect of financial risk on the economic evaluation of a project with capacity decisions. Capacity decisions have an important effect on the project̂s value through the up‐front investment, the associated operating cost, and constraints on output. However, increased scale also affects the financial risk of the project through its effect on the operating leverage of the investment. Although it has long been recognized in the finance literature that operating leverage affects project risk, this result has not been incorporated in the operations management literature when evaluating projects. We study the decision problem of a firm that must choose project scale. Future cash flow uncertainty is introduced by uncertain future market prices. The firm's capacity decision affects the firm's potential sales, its expected price for output, and its costs. We study the firm's profit maximizing scale decision using the CAPM model for risk adjustment. Our results include that project risk, as measured by the required rate of return, is related to the inverse of the expected profit per unit sold. We also show that project risk is related to the scale choice. In contrast, in traditional discounted cash flow analysis (DCF), a fixed prescribed rate is used to evaluate the project and choose its scale. When a fixed rate is used with DCF, a manager will ignore the effect of scale on risk and choose suboptimal capacity that reduces project value. S/he will also misestimate project value. Use of DCF for choosing scale is studied for two special cases. It is shown that if the manager is directed to use a prescribed discount rate that induces the optimal scale decision, then the manager will greatly undervalue the project. In contrast, if the discount rate is set to the risk of the optimally‐scaled project, the manager will undersize the project by a small amount, and slightly undervalue the project with the economic impact of the error being small. These results underline the importance of understanding the source of financial risk in projects where risk is endogenous to the project design.     

More social than capital: Social capital accumulation through social network exchange among legal and unauthorized Mexican migrants

Social capital is frequently used to explain many policy related outcomes, but research has not adequately explained how it is accumulated. It is unclear whether the economic or social characteristics of others in a social network motivate social capital accumulation. This lack of understanding has called some to question social capital's efficacy. Employing data from a survey of randomly selected foreign-born Mexicans in Los Angeles County, the influence of social and economic characteristics of a migrant's social network members are estimated. Results suggest a negative association with social capital accumulation for Mexican migrants with a social network member outside their neighborhood. Having married social network members is positively associated for legal Mexicans, while having network members who work in occupations requiring more social skills is positively associated for unauthorized Mexicans accumulating social capital. Measures of human and financial capital are not associated with the probability of developing social capital.     

Case Management for Community Practice

This article concerns an approach to supervision for statutory youth casework. The model involves caseworkers recording a video of their meetings with their clients and sending it to an external supervisor. The supervisor selects video clips. They then hold an online meeting where they review the clips, and the supervisor gives feedback based on a standardized model. The caseworker then uses the feedback in their future practice and the cycle is repeated. 16 statutory youth caseworkers and 6 supervisors from three municipalities in Denmark participated in semi-structured interviews regarding their experiences with the video supervision and feedback model. The interviews focused on facilitating and inhibiting factors with regard to the use of the model. A thematic analysis was conducted. Communication regarding the law, giving clients space to find their voice, and paying heed to how each relationship was progressing were emphasized as central focus points. Advice had to be concrete and achievable and come from supervisors with statutory experience. Participants highlighted the significance of viewing practice directly via video footage. Film clips used for feedback needed to be short and well chosen. The technology, logistics and infrastructure, including management support, were important. Findings were used to develop the model.     

Residency differentials in Mormon fertility

Although one of the most consistent findings of recent fertility studies is the convergence of the religious differentials in fertility, few data have been analysed to discover Mormon fertility trends and differentials. This paper, based on data obtained on 1,001 Mormon couples, is concerned with describing the effects that the dispersion of Mormon families from the Mormon centre in Utah to surrounding areas with various social conditions is having on the fertility of the re-located Mormon families. Data presented clearly show that such families do, on the average, have a lower fertility than do their Mormon contemporaries residing in the homogeneous Mormon society in Utah. They probably compromise their religious obligations to have children with the contradicting demands of their new environment. Their loyalty to these religious beliefs, however, is confirmed by data which show that they tend to have larger families in their new environments than do their non-Mormon neighbours.