ex day behavior with dividend preference and limitations to short term arbitrage the case of swedish lottery bonds abstract swedish lottery bonds offer a unique opportunity to study ex day effects in an environment where cash distributions are tax advantaged relative to capital gains thus in the lottery bond market we observe a reversal of the preference for capital gains that researchers have cited as an explanation for the ex day behavior of u s equities further in this market there are barriers to short term arbitrage when prices do reflect the tax preferences of individual investors we find the bonds are priced around the ex day to reflect differential tax rates on income and capital gains consistent with the prevailing tax regimes the bonds consistently experience negative returns over the coupon payment period and in fact often sell at negative yields prior to the cash distribution as one would expect given tax motivated trading between high tax investors who buy prior to the distribution and low tax investors who buy after the distribution

new evidence of the impact of dividend taxation and on the identity of the marginal investor this paper examines the impact of a major change in dividend taxation introduced in the united kingdom in july 1997 the reform was structured in such a way that the immediate impact fell almost entirely on the largest investor class in the united kingdom namely pension funds we find significant changes in the valuation of dividend income after the reform in particular for high yielding companies these results provide strong support for the hypothesis that taxation affects the valua tion of companies and that pension funds were the effective marginal investors for high yielding companies

political institutions and central bank independence a cross country analysis using three quantitative measures of central bank independence we apply ols and tsls regression methods to investigate the possible correlation between political liberty political instability and central bank independence for a sample of western democracies and highly democratic developing countries we show that cukierman s legal independence index is positively correlated with political freedom and regime political stability it is negatively correlated with party political stability for a sample of developing countries that excludes dictatorships we show that a special index of legal central bank autonomy is positively associated with political freedom and political stability finally we observe that for the same sample of nations the turnover index of central bank independence is not sensitive to our political variables

semiparametric estimation and consumer demand this paper considers the implementation of semiparametric methods in the empirical analysis of consumer demand the application is to the estimation of the engel curve relationship and uses the british family expenditure survey household composition is modelled using an extended partially linear framework this is shown to provide a useful method for pooling non parametric engel curves across households of different demographic composition c 1998 john wiley sons ltd

central bank independence a political economy approach1 the article uses a political economy approach to examine critically the conventional arguments for central bank independence and to make the terms of debate more precise it assesses the advisability and feasibility of greater autonomy in relation to the constellations of political forces in specific societies and concludes by suggesting how in the context of developing societies an accommodation of interests might be reached to support a more autonomous but not fully independent central bank

toward a theory of regulation for developing countries following jean jacques laffont s lead the efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction however recent reforms aimed at improving the performance of these sectors have had limited success evidence suggests that in many instances this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries this article surveys more recent theoretical work focusing on problems with regulation in these countries at the heart of the survey is the work of jean jacques laffont who in the last decade of his life set about developing a theoretical framework for regulation in developing countries we consider the implications of his work which focused on the key institutional limitations faced in developing countries we then discuss where experience suggests that there are important omissions from this modeling bringing in extensions and alternative approaches pursued by other authors we conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak overall we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries

long term drivers of taxation in francophone west africa 1893 2010 abstract which factors have driven fiscal revenue in sub saharan africa in the long run we address this question by studying quantitatively the long term relationship between fiscal outcomes economic expansion and external dependency in four francophone west african countries benin cote d ivoire niger and senegal between 1893 and 2010 using panel co integration modelling we find a long term relationship between on the one hand tax revenue and local economic development proxied by international trade and on the other hand tax revenue and developments of the economy and taxation in the former colonizing power france the results indicate that economic expansion has been a significant factor in driving the long term development of tax revenue in west africa just as it was in historical europe but also point to the historical vulnerability and external dependency of the fiscal systems of the four west african countries we suggest that the wider implication of these results is that they point to the importance of deepening our understanding of how domestic contexts interact with external economic and institutional external forces to shape african fiscal systems in contrast to factors such as inter state warfare that are ubiquitous in narratives of historical european taxation and state development

infrastructure and public utilities privatization in developing countries should governments in developing countries promote private ownership and deregulated prices in noncompetitive sectors or should they run publicly owned firms and regulate prices at the expense of rents to insiders a theoretical model is used to answer these normative questions the analysis focuses on the tradeoff between fiscal benefits and consumer surplus during privatization of noncompetitive sectors privatization transfers control rights to private interests and eliminates public subsidies yielding benefits to taxpayers at the cost of increased prices for consumers in developing countries where budget constraints are tight privatization and price liberalization may be optimal for low profitability industries but suboptimal for more profitable industries and once a market has room for more than one firm governments may prefer to regulate the industry without a credible regulatory agency regulation is achieved through public ownership

ex dividend day stock price behavior the case of the 1986 tax reform act this paper analyzes the behavior of stock prices around ex dividend days after the implementation of the 1986 tax reform act that dramatically reduced the difference between the tax treatment of realized long term capital gains and dividend income in 1987 and completely eliminated the differential in 1988 we show that this tax change had no effect on the ex dividend stock price behavior which is consistent with the hypothesis that long term individual investors have no significant effect on ex day stock prices during this time period the results indicate that the activity of short term traders and corporate traders dominates the price determination on the ex day

time variation of ex dividend day stock returns and corporate dividend capture a reexamination this paper documents some empirical facts about ex day abnormal returns to high dividend yield stocks that are potentially subject to corporate dividend capture we find that average abnormal ex dividend day returns are uniformly negative in each year after the introduction of negotiated commission rates and that time variation in ex day returns during the negotiated commission rates era is consistent with corporate tax based dividend capture ex day returns are more negative when the tax advantage to corporate dividend capture is greatest and more positive when increases in transaction costs and risk reduce incentives to engage in corporate tax based dividend capture copyright the american finance association 2000

political influence on the central bank international evidence political influence on the central bank is measured bere by looking at the probability that a central bank governor will be replaced shortly after a political change of government the governor changes about half the time witbin six months of a nonconstitutional or other radical change of government a military coup or a restoration of democracy the governor is much less likely to change within six months following a routine change in the head of government about one fourth of the time in developing countries and one tenth in industrial countries these indicators vary across countries and correlate statistically with inflation and its variability and with real growth and real interest rates differences in the vulnerability of the central bank to political instability in political instability itself and in central bank turnover in nonpolitical periods seem to be a major part of the explanation for why developing countries have on average higher and more variable inflation than industrial countries do

non linearities and equivalence scales this paper focuses on the estimation and testing of equivalence scales in the context of a demand system with nonline ar logarithmic expenditure effects in its budget share equations the authors show that such nonlinearity enables one to identify the scal es without demographic separability restrictions on preferences and to avoid false rejection of the hypothesis that the scales are independ ent of the base utility level the empirical analysis is based on micro data drawn from the u k family expenditure survey copyright 1993 by royal economic society

equivalence scales in a rank 3 demand system abstract in the context of a rank 3 demand system equivalence scales measuring the cost of demographic characteristics independently of the base utility level can be identified from cross section data without demographic separability restrictions although this can also be achieved with a rank 2 demand system that contains a nonlinear log expenditure term in its budget shares tests performed in a nested framework suggest that the rank 3 demand system approach is empirically superior the informative structure of the rank 3 demand system is used to estimate a detailed pattern of demographic costs including the cost of single parenthood and economies of scale within the family

the value of dividend imputation tax credits in australia abstract a dividend imputation tax system provides shareholders with a credit for corporate tax paid that can be used to offset personal tax on dividend income this paper shows how to infer the value of imputation tax credits from the prices of derivative securities that are unique to australian retail markets we also test whether a tax law amendment that was designed to prevent the trading of imputation credits affected their economic value before the amendment tax credits were worth up to 50 of face value in large high yielding companies but subsequently it is difficult to detect any value at all

contemporaneous and intertemporal child costs equivalent expenditure vs equivalent income scales abstract parents may provide for their children by drawing on savings or borrowing as well as by reducing current consumption this means that child costs may be partly paid from reducing consumption in periods when the children themselves are not in the family static comparisons of consumption costs between households with and without children are therefore affected by the extent to which parents are willing and able to meet child costs through intertemporal transfers this paper analyses the implications of this argument for the estimation of adult equivalent scales and provides empirical illustrations using individual household data

ex dividend returns the mexican puzzle abstract we study ex dividend returns in mexico where an imputation system entitles individual investors to a net dividend tax credit based on taxation we expect ex day abnormal returns to be negative or at most zero in mexico however they are significantly positive because ex day returns are positive even for stocks restricted to mexican nationals they are not attributable to foreign stockholders tax considerations none of the market microstructure based hypothesis in the literature can explain these positive ex day returns ex day returns in mexico are a puzzle

variation in central bank independence across countries some provisional empirical evidence in this paper seven hypotheses to explain variation in central bank independence across countries are tested the predictions based upon the theory that delegation of authority by politicians to the central bank is used as a commitment device are not supported central bank independence is not higher the larger the employment motivated inflationary bias the higher political instability or the larger the government debt central bank independence is positively related to historical inflation experience and negatively with political instability we do only find limited support for the view that countries with a universal banking system and countries whose central banks do not regulate financial institutions have more independent central banks

the ex dividend day behavior of stock prices the case of japan we provide a comprehensive empirical analysis of stock price behavior around the ex dividend day in japan we find that prices rise on the ex day and that dividend related tax effects appear to be secondary returns around ex dividend days are dominated by the proximity of many ex days to the fiscal year end excess returns of 1 percent which are independent of any dividend related considerations are higher than round trip transaction costs on medium sized transactions prices seem to imply selling pressure before and buying pressure at the start of the new fiscal year these trading patterns appear to be motivated by intercorporate manipulative trading around the end of the firms fiscal year which are unrelated to dividends article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

reduction of constraints on arbitrage trading and market efficiency an examination of ex day returns in hong kong after introduction of electronic settlement previous research documents positive ex dividend day returns in excess of one percent in the unique institutional setting of hong kong where neither dividends nor capital gains are taxed short term arbitrage trades around the ex day were hampered by physical settlement procedures after the recent switch to an electronic settlement system which enables such trades ex day abnormal returns have declined to an insignificant 0 17 percent this drop is more pronounced for high yield stocks which are more likely to attract dividend capture trading the evidence points to the crucial role of short term traders in ensuring the pricing efficiency of financial markets the role of short term traders in financial markets is a matter of considerable controversy the debate on this issue has heightened in the wake of the recent asian currency crisis which some governments blamed on the activities of short term traders critics contend that short term traders engage in speculation leading to excessive and debilitating volatility in market prices others argue that short term traders perform a useful role by increasing valuable liquidity berkman and eleswarapu 1998 report that regulatory changes on the bombay stock exchange curbing short term trading had a measurably adverse impact on asset values supporters of short term traders also argue that these traders make a key contribution to the efficiency of financial markets by constantly scouring the markets for arbitrage opportunities this study examines the impact of the

market valuation of tax timing options evidence from capital gains distributions we examine a distribution that is taxed as a capital gain rather than as a dividend since the distribution induces a realized capital gain while the price change is an unrealized gain ex day return behavior provides evidence of the value of tax timing capital gains we show that investors are compensated 7c in unrealized gains for each dollar of realized capital gains that is 1 of realized capital gains is equivalent to 93c of unrealized gains an investor with a tax rate on realized gains of 15 has an effective tax rate on unrealized capital gains of 8 6 capital gains taxes can be deferred until assets are sold this feature provides the investor who purchases a security with an option regarding the timing of the realization of capital gains and losses this option can be used to lower one s expected tax liability even if capital gains tax rates remain constant for different holding periods an investor who delays the realization of a gain effectively enjoys compound returns on the postponed taxes if capital losses are tax deductible or partially tax deductible tax timing is even more valuable since investors can follow the strategy of selling stocks with capital losses early while postponing the sale of winners recent evidence lends support to the contention that some investors respond to this tax timing option for example odean 1998 shows that u s investors are more likely to sell losers in december than other months similarly grinblatt and keloharju 2002 show that at the end of the tax year finnish investors are more likely to realize losses than gains this type of tax motivated trade seems to affect market returns as shown by poterba and weisbenner 2001 who demonstrate that end of year tax loss selling is related to return variation in the month of january

foreign and domestic investors and tax induced ex dividend day trading abstract this paper reports evidence on the consequences of differential tax treatment for domestic and foreign owners in a market with a high degree of foreign ownership for certain stocks the helsinki stock exchange hse we find that ex dividend day ratios vary with the degree of foreign ownership and detect significantly abnormal ex dividend day trading volumes the average ex dividend price drops for high yield high foreign ownership stocks are likely to lie outside no arbitrage boundaries for domestic taxable investors an investigation of short selling through a derivatives instrument also reveals significant excess trading volumes in ex dividend months the tax heterogeneity of the company s ownership structure seems to play a role in explaining deviations from dividend neutrality more deviations are observed for companies with a more homogeneous ownership structure in terms of taxation

demographics and demand evaluation of alternative functional forms abstract we evaluate the role of functional form of demographics in demand analysis by proposing the gql unstructured demographically transformed model which nests the barten gorman demographically modified model and popular rank 3 and rank 2 demand systems we use uk individual data and find that the equivalence of the unstructured and barten gorman forms and identification of meaningful equivalence scales depend on the degree of flexibility of the demand system in demographic price and income effects

from the static to the dynamic some problems in the theory of taxation abstract this paper considers problems and issues that arise when we attempt to extend the static theory of taxation and production planning to a dynamic context and to combine that theory with theories of growth the reasons dynamic theory is less developed include problems with the analytical tractability of even those dynamic models which attempt to retain the basic structure of the static model furthermore difficult and interesting issues arise in a dynamic context which are either not present or are much less severe in the static theory special attention is paid to these new issues and the difficulties they pose

why do stock prices drop by less than the value of the dividend evidence from a country without taxes abstract it is well documented that stock prices on ex dividend days drop by less than the value of the dividend on average this has commonly been attributed to the effect of tax clienteles we examine data from the hong kong stock market where neither dividends nor capital gains are taxed as in the u s the average stock price drop is less than the value of the dividend specifically the average dividend for the period 1980 1993 is hk 0 12 and the average price drop is hk 0 06 we are able to account for this both theoretically and empirically through market microstructure arguments

marginal stockholder tax effects and ex dividend day price behavior evidence from taxable versus nontaxable closed end funds almost all research on the movement of stock prices on ex dividend days has found that prices decline by less than the dividend though this is consistent with tax effects several papers have argued that this phenomenon could be caused by market microstructure effects in this paper we make use of a natural experiment that provides support for the tax explanations of ex dividend behavior some closed end funds have taxable and some have nontaxable dividend distributions both types are subject to taxes on capital gains the implication of this for ex dividendday price behavior is very different between these two types of funds if taxes matter this paper demonstrates that the direction of ex dividendday price behavior is consistent with a tax explanation and that ex dividend day price behavior changes as theory would suggest with changes in the tax law

reconsidering the principal components of central bank independence the more the merrier we use principal component analysis to reassess the link between different attributes of central bank independence and inflation performance we suggest that coding problems may account for the fact that almost none of the attributes included in the cukierman index has a systematic plausible relationship with inflation the multi faceted cukierman index also seems to be out performed by a much narrower index focusing solely on policy independence these findings point to the importance of using public choice analysis to isolate the real problem here namely finding specific central bank structures that effectively insulate central bankers from political pressures

tax induced trading of equity securities evidence from the adr market we examine ex dividend date trading of american depositary receipts adrs using a sample of 1 043 dividends over the period 1988 to 1995 adr dividends are often subject to foreign withholding taxes creating incentives for certain investors to avoid the distribution adrs exhibit negative abnormal ex dividend day returns and their prices behave consistently with their related withholding taxes abnormal trading volume for taxable issues exceeds 130 percent and 300 percent of normal volume on the cum and ex dates respectively abnormal volume is an increasing function of foreign withholding tax rates and decreasing function of transactions costs this abnormal exdate trading activity is consistent with tax motivated trading this paper provides empirical evidence from a sample of american depositary receipts adrs that foreign taxes on dividend income are positively associated with abnormal ex dividend day trading activity researchers have long been interested in the question of whether taxes affect investor behavior around ex dividend days such work has implications for corporate financial and distribution policies and for government tax policies adrs provide a unique setting in which to examine the effects of taxes on investor trading behavior because of the unique features of the foreign withholding taxes that apply to them a number of studies have attempted to isolate the determinants of ex dividend day pricing and trading activity of u s equities and there is considerable evidence of tax induced investor behavior around the ex dividend day for common

aid nontraded goods and the transfer paradox in small countries this paper constructs a model of the transfer paradox for a small open economy with nontraded goods it demonstrates that increased production of nontraded goods can change their domestic price so as to offset the otherwise beneficial effect of aid and under certain conditions to create a transfer paradox even in a small country the model is estimated with time series data for 44 aid dependent countries for the period 1970 90 the results support the model and show that the nontraded goods expansion effect is more likely to cause immiserization than harry g johnson s 1967 tariff distorting export displacement effect

the market valuation of cash dividends abstract this paper re examines the case of citizens utilities a firm with one class of common stock which pays stock dividends and one which pays taxable cash dividends john long s 1978 study of the two shares relative prices suggests that investors may prefer cash dividends to equal sized stock dividends this paper finds that the cash dividend share s ex day price decline is less than their dividend payment stock dividend shares fall by nearly their full dividend the disparity between ex day dividend valuation and the observed prices of the two shares is inconsistent with some explanations of the demand for cash dividends

household equivalence scales and welfare comparisons abstract the ratio of cost functions of different households facing the same prices and attaining the same utility level is a true cost of demographic characteristics index this index is independent of a base level of income or utility ib if and only if it equals a ratio of household equivalence scales that are themselves ib applied cost index and equivalence scales specifications are usually ib this paper describes the general restrictions on cost functions and social welfare functions required for ib scales and for their use in welfare analysis

lost in translation delayed ex dividend price adjustments of hong kong adrs abstract previous research documents that hong kong stocks have a full ex dividend price adjustment consistent with dividends and capital gains being tax free we examine ex dividend price behavior of hong kong adrs to assess the impact of differing tax environments in us and hong kong these adrs typically go ex dividend before their underlying stock they experience significant abnormal returns of 1 16 on their ex day the average ex day price drop is only 30 of the dividend however adr prices drop when the underlying stock goes ex dividend subsequently the cumulative adr price drop is equal to the dividend thus the adr ex dividend adjustment resembles that of the underlying stock consistent with home country tax laws governing adr price behavior neither liquidity nor transaction costs can explain the anomalous delayed ex dividend adjustment of adrs

dividends taxes and common stock prices the ex dividend day behavior of common stock prices before the income tax this study examines the ex dividend day behavior of common stock prices before the enactment of the federal income tax on ex dividend days during the pre tax period stock prices fell on average by the full amount of the dividend the data are consistent with the hypothesis that i investors in the pre tax period value dividends and capital gains as perfect substitutes and ii the differential taxation of dividends and capital gains has since caused investors to discount the value of taxable cash dividends in relation to capital gains

tax induced trading around ex dividend days abstract this paper investigates trading volume around ex dividend days for taxable distributions cash dividends it is found that trading volume increases significantly around the ex dividend day this increase is more pronounced for high yield actively traded stocks and after brokerage commissions became negotiable the results are consistent with the hypothesis that short term traders have an impact on ex day price behavior at least for taxable distributions for non taxable distributions stock splits and stock dividends we find negative abnormal volume around ex day

estimating border tax evasion in mozambique abstract the relationship between border tax rates and evasion is examined for mozambique using the methodology developed by fisman and wei 2004 we find that high tax rates are associated with high levels of under reporting of import values and that tax rates have a strong and positive effect on tax evasion results also strongly confirm the presence of fraudulent classification of merchandise into lower taxed product categories finally analysis of the revenue implications of lower trade taxes finds that the revenue curve is quite flat but remains upward sloping with respect to the tax rate when only evasion is considered

income tax compliance in india an empirical analysis abstract aggregate data are used to study determinants of income tax revenues and taxpayer compliance in india during 1965 1966 to 1992 1993 the estimates show that both revenues collected and compliance were significantly affected by tax structure marginal tax rates and exemption limit in addition inflation as well as declining assessment intensity had a significant negative effect while traditional enforcement tools searches penalties and prosecution activity had only a limited effect best practice enforcement assessment and tax structure policies could have yielded at most a 90 revenue increase leaving india s income tax performance below the average of countries with similar gdp per capita thorough reform of tax administration is therefore needed to raise income tax collection in india to international standards

seigniorage delegation and common currency why monetary unions may fail we provide a parable that can explain why monetary unions havehistorically been dissolved following political separation using a simple model of government finance in a commoncurrency area it is shown that delegation to an inflationary central banker is an optimal policy whencountries struggle for seigniorage revenues whether delegatescoordinate monetary policy or not furthermore a commoncentral bank in which representatives coordinate monetarypolicy will reach an outcome that is pareto inferior to thatproduced by a non cooperative seigniorage war accordingly without political dialogue regarding the designation of therepresentatives a monetary union can fail

the spinoff and merger ex date effects this article shows that some of the wealth gains from financial decisions involving changes in security form occur on predictable ex dates for a sample of 113 spinoffs during 1964 to 90 we document an average excess return of 3 0 percent on ex dates roughly the same magnitude as the average announcement date return we conjecture that the spinoff ex date return arises because the parent and subsidiary stocks attract different investors who prefer to buy the separated shares after the ex date we also document that on average the target shareholders in stock for stock mergers earn an excess return of 1 5 percent on merger ex dates recent years have witnessed a large increase in restructuring programs that include divestitures for example kaplan and weisbach 1992 report that 44 percent of a sample of large acquisitions completed in the 1970s and early 1980s had already been divested by the end of the 1980s most divestitures are accomplished by selling an unwanted subsidiary or division to another company or a group of investors for cash based on a casual survey of transactions reported in the mergers and acquisitions magazine this divestiture form is commonly known as a selloff in many cases however the parent company relinquishes control of a subsidiary by simply distributing the subsidiary shares as a nontaxable stock dividend to current stockholders this latter divestiture form is known as a spinoff and has been gaining

tick size nyse rule 118 and ex dividend day stock price behavior abstract bali and hite 1998 and dubofsky 1992 propose models in which market microstructure effects play a role in the ex dividend day price drop anomaly bali and hite suggest that the anomaly is caused solely by price discreteness while dubofsky suggests that nyse rule 118 is also involved we test these models by examining cum to ex day price drops during the one eighth one sixteenth and decimal tick size regimes while the evidence is qualitatively consistent with dubofsky s predictions neither model is satisfactory in a quantitative sense one of our main empirical findings is that no significant decline was evident in the magnitude of the ex day anomaly after the tick size reduction

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

globalization pressures and the state the worldwide spread of central bank independence the authors examine the impact of globalization on state structures in the specific instance of the central bank following the world system world society and neoinstitutional perspectives in sociology they assume that states are in cultural political and economic competition with each other thereby seeking to maintain their position and status frequently by adopting organizational forms or practices that make them isomorphic with their environment the authors predict that countries boost the independence of their central bank from the political power as their exposure to foreign trade investment and multilateral lending increases they also model the cross national dynamic process of diffusion of central bank independence by examining the impact of cohesive and role equivalent trade relationships between countries they find support for their hypotheses with information on 71 countries between 1990 and 2000

ex dividend price behavior of common stocks this study examines common stock prices around ex dividend dates such price data usually contain a mixture of observations some with and some without arbitrageurs and or dividend capturers active our theory predicts that such mixing will result in a nonlinear relation between percentage price drop and dividend yield not the commonly assumed linear relation this prediction and another important prediction of theory are supported empirically in a variety of tests marginal price drop is not significantly different from the dividend amount thus over the last several decades one for one marginal price drop has been an excellent average rule of thumb article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

children and household economic behavior this paper looks at some of the methodological issues that arise in modeling the effects of children on household behavior and presents some estimates for selected areas for our purposes household behavior will be taken to refer to household decisions on labor supply the allocation of expenditure to different periods and the decision as to what to do with the difference between income and expenditure i shall be concerned mainly with the effects of dependent children and i restrict attention largely to western societies excerpt

a microstructure analysis of ex dividend stock price behavior before and after the 1984 and 1986 tax reform acts this article extends ex dividend research by explicitly modeling trading at bid and ask quotations this refinement distinguishes between buying and selling for long term investors and short term dividend capture traders it also explicitly incorporates the bid ask spread and eliminates some potential measurement errors that may bias returns marginal conditions are tested during 1983 and 1988 periods that span the 1984 and 1986 tax reform acts results for long term investors are consistent with the elimination of favorable capital gains tax rates at observed prices tax neutral short term traders cannot profit corporate dividend capture traders face profit opportunities during 1983 that disappear by 1988 copyright 1996 by university of chicago press

dividend capture in nasdaq stocks abstract we examine the importance of dividend capture trading in nasdaq stocks by testing for cross sectional relations between ex day abnormal returns and bid ask spreads throughout we find that ex day returns and spreads are positively related the relation increases across dividend yield quintiles and is strongest in high yield stocks the relation does not appear in a sample of non ex dividend days these findings indicate that dividend capture trading affects the ex day returns of at least some particularly high yield nasdaq stocks and that dividend capture trading is important for understanding ex dividend day returns

public goods hidden income and tax evasion some nonstandard results from the warm glow model abstract a large literature explores crowd out in situations where public goods are jointly provided work in this area typically depicts a tax system where individuals take taxes as given but in some settings such as those in developing economies efforts to evade or avoid taxes may be widespread using the canonical warm glow model this paper considers joint public good provision in a setting where individuals can evade taxes by hiding their income the model s implications change significantly in this setting with hidden income stronger warm glow will lead to greater crowd out not less using research on crowd out and inter family transfers i present suggestive evidence that the model s results may help to reconcile divergent estimates of crowd out in the literature

estimates of semiparametric equivalence scales within the semiparametric framework introduced by pendakur 1999 we introduce a new loss function to estimate equivalence scales this loss function uses all available information from the total expenditures of both the reference and nonreference households and as such it produces more reliable estimates using canadian family expenditure data for 1996 we apply this loss function to obtain equivalence scale estimates for a variety of expenditure share categories such as food fuel and clothing copyright 2006 john wiley sons ltd

tax morale in latin america in the tax compliance literature there is a lack of empirical evidence on the degree of tax morale in developing countries as a novelty this paper focuses thus on latin america analysing tax morale as a dependent variable and searching for factors that systematically affect tax morale working with the two data sets latinobarometro and world values survey our findings indicate that there is a significant correlation between tax morale and the size of shadow economy furthermore people who said they knew have heard about practised tax avoidance have a significantly lower tax morale than others looking at individuals perception of reasons for tax evasion we found that the tax burden lacking honesty and corruption are seen as the main factors we observed a significantly lower tax morale in south america mexico than in the central american caribbean area furthermore trust in the president and the officials the belief that other individuals obey the law and a pro democratic attitude have a significant positive effect on tax morale

on the impossibility of central bank independence four decades of time and intellectual inconsistency the intellectual justification for modern central banking time inconsistency celebrated its fortieth anniversary in 2017 alongside the cambridge journal of economics however the key progeny of the time inconsistency literature central bank independence has fundamental flaws that have been thus far neglected in mainstream research in the first instance the argument for independence relies on a utilitarian rather than institutional analysis one that neglects the genesis of central banks and their relation to other institutions within a country second central bank independence neglects the complex interdependencies of the global monetary and financial system applying an institutional lens to the concept of central bank independence i conclude that independence fails under the reality of globalization as much as it does in a domestic context with central banks reliant on all manner of political institutions they are never really independent operationally or in terms of policy

political and monetary institutions and public financial policies in the industrial countries institutions and policies vittorio grilli donato masciandaro and guido tabellini why do countries as similar as the industrialized oecd countries go through such different experience in terms of public deficits and debts or in terms of inflation the answer cannot come from macroeconomic policy responses to different disturbances nor from the principles of optimal taxation but rather from politics this article focuses on the role that particular institutions exert in providing constraints and incentives which shape the actions of policymakers the electoral process and political traditions affect the ability of governments to deal with deficits and mounting debts what seems to matter most it is found is the effect of the durability of governments governments with short horizons act myopically and never quite tackle the hard choices such governments typically exist in countries with an electoral system favouring many small political parties central bank independence promotes low inflation with no apparent costs in terms of real economic performance irrespective of the political institutions in fact there is no link between monetary and fiscal discipline these findings carry powerful implications for countries facing high indebtedness or stubborn inflation but also for the construction of the european economic and monetary union

the effects of stock splits on bid ask spreads this paper examines the effects of stock splits on bid ask spreads for nyse listed companies percentage spreads increase after splits representing a liquidity cost to investors these spread increases are directly related to decreases in share prices following splits and can explain part but not all of the observed increase in return variability after splits the evidence thus suggests a liquidity cost of stock splits that must be weighed against any other perceived benefits of splits such a liquidity cost may validate that stock splits are a signal of favorable information about the firm stock splits have long been a prominent feature in u s financial markets five to ten percent of all amex and nyse firms split in a typical year lakonishok and lev 1987 two potentially conflicting explanations for splits are frequently given first most managers believe baker and gallagher 1980 that splits return share prices to some optimal trading range and improve shareholder liquidity the second explanation is that splits are a costly signal of favorable future prospects for the firm for instance brennan and copeland 1988a show that if stock splits increase liquidity costs to investors such splits can serve as valid signals most empirical studies of the liquidity effects of splits use trading volume copeland 1979 lamoureux and poon 1987 and murray 1985 all conclude that shareholder liquidity decreases after a split based on finding dollar trading volume decreases after splits on the other hand lakonishok and lev 1987 find abnormally high volume in the year preceding a split and abstracting from this abnormal volume that splits are not associated with a change in trading volume the use of volume to measure liquidity is largely motivated by empirical findings of a negative relationship between volume and the bid ask spread e g demsetz 1968 benston and hagerman 1974 and tinic 1972 among others this spread is a direct measure of the cost of liquidity when liquidity is defined hicks 1946 as the ease or rapidity with which a financial instrument can be exchanged for currency despite the importance of the bid ask spread as a liquidity measure only two studies provide evidence on splits and bid ask spreads and they yield conflicting conclusions copeland 1979 studies 162 otc firms for the period 1968 1976 and finds a statistically significant increase in percentage spreads comparing days before and after the ex date murray 1985 studies 100 otc splitting firms for the period 1972 1976 and finds no evidence of a change in percentage spreads relative to a control group

the state interest groups and structural adjustment in zimbabwe zimbabwe is currently undergoing structural adjustment despite 25 years of protection the manufacturing sector has lobbied for reform agriculture is divided between commercial farmers who favour economic liberalisation and small scale farmers who do not the fact that pressure for policy change was exerted by key interest groups contrasts with a large body of theory that emphasises the need for state autonomy if economic liberalisation is to take place an inductive approach to interest groups changing definitions of self interest and an emphasis on political process and institutions is necessary in order to understand societal bases of support and resistance to economic reform in zimbabwe

taxes and bribery the role of wage incentives this paper presents a simple model to evaluate alternative payment schemes for tax inspectors in the presence of corruption we consider problems of both moral hazard which arises because taking bribes cannot be observed without costly monitoring and adverse selection since not all potential tax inspectors can be identified as being honest or dishonest we identify three wage regimes first one could pay the same wage that a tax inspector could earn elsewhere his reservation wage second one could pay a wage which solves the moral hazard problem i e deters bribery this we call an efficiency wage by analogy with recent models examined i n macro economics third the government could pay a wage below the reservation wage at which only the dishonest become tax inspectors the capitulation wage we make precise the conditions under which each yields the greatest amount o f tax revenues net o f administrative costs many countries in the developing world are undergoing structural adjustment programmes which require fundamental fiscal changes outside agencies advise restoration of budget balance a task which involves expenditure cuts and tax increases the treatment of public employee pay scales often poses a particular dilemma i n this process wages and salaries are a significant component of government expenditures and one important question concerns the extent to which wages rather than employment cuts should be used to save money there is sometimes a reluctance to advocate wage cuts stemming in part from a feeling that this might impair the performance of the public sector hence tanzi 1990 argues that a policy of wage cutting is likely to increase the inefficiency of public sector employees especially at a time when the public sector is expected to play a larger role in restructuring the economy p 16 in the context of tax collection the issue is particularly pressing given the need to raise more tax revenues a reduction in efficiency in this branch of the government i s likely t o mean that fewer returns are processed and when individuals living standards are squeezed their incentive to accept bribes in lieu o f collecting taxes i s increased o n this count i t i s even sometimes suggested that wages of tax inspectors should be increased to aid the effort to the comments of henry bienen john hey and two anonymous referees have been helpful in revising this paper the authors are also grateful t o the john m olin program for the study o f economic organization and public policy at princeton university and the pew charitable trusts for financial support mclaren also acknowledges support from the international finance section of princeton university none of the above should be implicated in any way see for example goode 1984 chapter 1 3 and gould and amaro reyes 1983

preference heterogeneity and the rank of demand systems this article examines the effect of preference heterogeneity on nonparametric and parametric tests of the rank of demand systems using samples of households drawn from the u k family expenditure survey we find that preference heterogeneity increases the rank of demand systems when the effects of household characteristics on demand are removed by semiparametric techniques a rank 3 demand system appears to be an adequate empirical specification for all samples

taxes and corporate policies evidence from a quasi natural experiment we document important interactions between tax incentives and corporate policies using a quasi natural experiment provided by a surprise announcement that imposed corporate taxes on a group of canadian publicly traded firms the announcement caused a dramatic decrease in value prospective tax shields partially offset the losses adding 4 6 to firm value on average and vary with the tax status of the marginal investor further firms adjust leverage payout cash holdings and investment in response to changing tax incentives overall the event study and time series evidence supports the view that taxes are important for corporate decision making

quadratic engel curves and consumer demand this paper presents a model of consumer demand that is consistent with the observed expenditure patterns of individual consumers in a long time series of expenditure surveys and is also able to provide a detailed welfare analysis of shifts in relative prices a nonparametric analysis of consumer expenditure patterns suggests that engel curves require quadratic terms in the logarithm of expenditure while popular models of demand such as the translog or the almost ideal demand systems do allow flexible price responses within a theoretically coherent structure they have expenditure share engel curves that are linear in the logarithm of total expenditure we derive the complete class of integrable quadratic logarithmic expenditure share systems a specification from this class is estimated on a large pooled data set of u k households models that fail to account for engel curvature are found ro generate important distortions in the patterns of welfare losses associated with a tax increase

ex dividend day trading who how and why evidence from the finnish market abstract this study examines the ex dividend day trading behavior of all investors in the finnish stock market consistent with dynamic dividend clientele theories investors with a preference for dividend income buy shares cum dividend and sell ex dividend the reverse is true for investors with the opposite preference investors also engage in overnight arbitrage earning on average a 2 overnight return on their invested capital trades at the investor level reveal that idiosyncratic risk is an important determinant in the choice of stock for short term ex day trading furthermore transaction costs and dividend yield jointly determine whether the volume of short term trading activity is nonzero