estimates of effective marginal tax rates on factor incomes this chapter describes a method of calculating summary measures of effective factor income tax rates in the united states using readily available data the numbers resulting from application of this method in a study are reported in the chapter and some of their possible uses are discussed the estimated factor income tax rates behave over time in a manner quite consistent with the behavior of other broad measures of federal tax policy the postwar movement in the tax rate on income from labor relative to that on income from capital or more accurately the relevant components of these tax rates provides suggestive support for the miller scholes hypothesis that the federal personal income tax has been moving in the direction of a pure consumption tax the tax rates reported in the chapter are consistent with other studies that show a decrease since the 1950s in rates of taxation at the corporate level of income from corporate held capital they are also consistent with the view that rates of taxation of such income at the noncorporate level have risen but not quite sufficiently to offset the decline in the corporate tax burden

estimating the tax advantage of corporate debt this paper presents estimates of the effective tax value of incremental interest deductions for corporations taking into account that they may not be able to utilize all their interest deductions fully because of either insufficient taxable income or the availability of nondebt tax shields after describing particular features of the tax code which may drive a wedge between statutory and effective tax rates for debt finance we present estimates using the treasury corporate tax model of effective tax rates for a variety of industry groupings our estimates suggest that the after tax cost of debt varies widely across industries the magnitude of the effective tax advantage to debt finance has important implications for corporate financial behavior one issue which has been examined extensively in the corporate finance literature is whether the value of the firm is affected by the firm s leverage ratio in a recent contribution deangelo and masulis 3 have shown that financing decisions can affect the value of the firm if the effective tax advantage to debt finance varies among firms or is reduced by the presence of nondebt tax shields such as investment tax credits and depreciation deductions the effective tax advantage to debt is also an important determinant of leverage related costs gordon and malkiel 5 have recently used the statutory tax rate to estimate expected bankruptcy costs induced by the corporate tax when the firm is assumed to balance the marginal tax advantage to debt with marginal expected bankruptcy costs if however the effective tax rate for interest deductions falls short of the statutory rate the magnitude of these costs may be overstated this paper presents detailed estimates of the marginal effective tax advantage to debt finance our estimates based on data in the treasury 1978 corporate master statistical file and on simulations done with the treasury corporate tax model quantify the impact of increasing interest deductions without changing other items on the corporation s income statement 1 we simulate the impact of a change in a firm s capital structure holding its investment and production decisions constant this is an appropriate procedure for estimating the marginal

effects of indirect taxation in a mixed oligopoly abstract in a mixed oligopoly an increase in tax ad valorem or specific does not change total output but increases the output of the public firm and the tax revenue also privatization may increase both tax revenue and welfare

tax distortions and global climate policy abstract we consider the efficiency implications of policies to reduce global carbon emissions in a world with pre existing tax distortions we first note that the weak double dividend the proposition that the welfare improvement from a tax reform where environmental taxes are used to lower distorting taxes must be greater than the welfare improvement from a reform where the environmental taxes are returned in a lump sum fashion need not hold in a world with multiple distortions we then present a large scale computable general equilibrium model of the world economy with distortionary taxation we use this model to evaluate a number of policies to reduce carbon emissions we find that the weak double dividend is not obtained in a number of european countries results also demonstrate the point that the interplay between carbon policies and pre existing taxes can differ markedly across countries thus one must be cautious in extrapolating the results from a country specific analysis to other countries

supply side interventions and redistribution we evaluate the eect on welfare of shifting the burden of capi tal income taxes to labor taxes in a dynamic equilibrium model with heterogeneous agents and constant tax rates we calibrate and simu late the economy we nd that lowering capital taxes has two eects i it increases e ciency in terms of aggregate production and ii it redistributes wealth in favor of those agents with a low wage wealth ratio when the parameters of the model are calibrated to match the distribution of income in terms of the wage wealth ratio the redis tributive eect dominates and agents with a high wage wealth ratio would experience a large loss in utility if capital income taxes were eliminated

sustainable cities do political factors determine the quality of life abstract the implementation of urban sustainability practices is affected by political obstacles and diverse political ideologies may defend different city models sustainable policy design could also be affected by several factors that cause the deflection of resources initially allocated to other groups that are contrary to the concerns pursued and have the power to veto sustainable plans by exerting pressure on the party in power in this sense the aim of this paper is to show the impact that political factors have on cities sustainability and the effect of both on cities economic development to do so we used the 78 spanish cities with a population over 100 000 studied by merco spanish corporate reputation monitor as regards their levels of sustainability for the fiscal years 2008 and 2009 both relationships have been tested empirically through two dependence models using linear regression techniques the results obtained show that political competition improves cities sustainability while a leftist ideology has an inverse impact on the other hand a significant direct relationship has been observed between urban sustainability and municipal economic activity

the effect of fiscal policy on the short run relation between nominal interest rates and inflation this paper presents a simple empirical model of the relation between the inflation rate and the nominal interest rate we show that previous results found in the literature may be attributed to specification error and that there are natural explanations for the observed signs of previous fisher equation estimates our results show that fiscal policy shocks may generate short run negative correlations between changes in inflation and changes in the nominal interest rates these results illustrate the difficulty in discussing the relation between inflation and nominal interest rates without conditioning the analysis with specific assumptions on the course of the economy

does neoclassical theory account for the effects of big fiscal shocks evidence from world war ii much debate surrounds the usefulness of the neoclassical growth model for assessing the macroeconomic impact of fiscal shocks we test the theory using data from world war ii which is by far the largest fiscal shock in the history of the united states we take observed changes in fiscal policy during the war as inputs into a parameterized dynamic general equilibrium model and compare the values of all variables in the model to the actual values of these variables in the data our main finding is that the theory quantitatively accounts for macroeconomic activity during this big fiscal shock

optimal fiscal policy in a business cycle model this paper develops the quantitative implications of optimal fiscal policy in a business cycle model in a stationary equilibrium the ex ante tax rate on capital income is approximately zero there is an equivalence class of ex post capital income tax rates and bond policies that support a given allocation within this class the optimal ex post capital tax rates can range from close to independently and identically distributed to close to a random walk the tax rate on labor income fluctuates very little and inherits the persistence properties of the exogenous shocks thus there is no presumption that optimal labor tax rates follow a random walk most of the welfare gains realized by switching from a tax system like that of the united states to the ramsey system come from an initial period of high taxation on capital income

growth effects of flat rate taxes recent estimates of the potential growth effects of tax reform vary wildly ranging from zero to eight percentage points using an endogenous growth model we assess which model features and parameter values are important for determining the quantitative impact of tax reform we find that the critical parameters are factor shares depreciation rates the elasticity of intertemporal substitution and the elasticity of labor supply the elasticities of substitution in production on the other hand are relatively unimportant the quantitative estimates in several recent papers are compared with each other and with some of the evidence from u s experience we find that robert lucas s conclusion that tax reform would have little or no effect on the u s growth rate is theoretically robust and consistent with the evidence

the marginal income tax rate schedule from 1930 to 1990 abstract although it is well known that marginal income tax rates vary with income few economists have studied the effect on real gdp of the distribution of marginal income tax rates this omission is probably because data on the distribution do not exist we remedy this shortcoming by providing a computer program that calculates marginal income tax rates for all income levels for the years 1930 to 1990 we conduct a preliminary empirical investigation into the effect of taxes on economic growth we find that lowering taxes significantly raises economic growth and that changing the tax rate schedule also has significant effects on economic growth

keynes and the confidence faeries budgetary constraints were never the primary object of policy for john maynard keynes they were constraints not objectives however keynes identified the psychological channels through which budgetary discipline and other policy conventions might influence investment he even accepted that in rare circumstances the psychological factors might overwhelm direct policy interventions unfortunately the polarisation of the current debate means traditional keynesians are unlikely to search out this aspect of his work and the confidence faeries are unlikely to read any of keynes s work this article draws attention to this aspect of his work

measuring marginal income tax rates for individuals in canada averages and distributions over time average marginal tax rates amtrs and the dispersion of marginal tax rates across income groups for canada over 1947 91 are reported federal amtrs fluctuated with little trend from 1947 to the mid 1960s rose to the mid 1970s fell and then rose from the early 1980s through to 1991 federal plus provincial amtrs trended upward after 1949 increasing fastest from the mid 1960s to the mid 1970s relative dispersion of mtrs shows a strong downward trend over the sample period this compression has been due partly to a decline in top mtrs but the main influence has been the steady increase in the portion of the population and of income subject to tax the amtr time series is quite volatile difference stationarity is not rejected

declining share of small firms in u s output causes and consequences jang ting guo i introduction according to the small business administration s sba calculations as shown in table 1 the contribution of small firms to u s national income was 58 in 1958 which then declined steadily to 51 in 1982 and stabilized around this value until 1992 the latest year for which the figures are available 1 this decline is quite puzzling in light of recent changes in technological factors market competition and government policies that were supposed to benefit small businesses 2 in this article we construct a dynamic general equilibrium model with two production sectors representing large and small firms to examine possible causes and welfare implications of this declining trend of small firms output contribution in the u s economy moreover this study brings into focus the role of government policies such as the justice department s anti trust efforts and the tiering programs whereby many regulations impose lighter requirements on smaller firms in order to maintain their viability 3 recently there have been several developments that can be considered beneficial towards the emergence of small firms shephard 1982 has estimated that since 1958 government deregulatory efforts have raised the level of competition in the u s economy by eliminating entry barriers and lowering transaction costs these factors in turn have contributed to the viability of small firms in the marketplace furthermore the emergence of new computer based technologies in the last two decades has improved the quality and flexibility of small scale production relative to standardized mass production techniques since they reduce the fixed capital or fixed cost requirements see shephard 1982 piore and sable 1984 carlsson 1989b and carlsson audretsch and acs 1994 4 another factor that improves the viability of small firms is their higher innovation rate as documented by acs and audretsch 1990 the shift of consumers taste from standardized mass produced goods towards stylized and personalized prod ucts also promotes small firm growth given their flexible production structure small firms have become important suppliers for these new goods and services see carlsson 1989a in light of these favorable developments one would expect to observe the number of small firms as well as their share in national income to rise in the u s economy however this has not been borne out by the data regarding small firms output share this article examines this issue in a dynamic general equilibrium framework extending romer s 1987 model of specialization we develop an infinite horizon representative agent model with two production sectors that are made up of large and small firms respectively the two sectors differ from each other with respect to the level of fixed set up costs and returns to scale parameters of their production functions each sector has an intermediate good segment in which monopolistically competitive firms operate using fully mobile capital and labor inputs the number of these intermediate firms is determined endogenously from the condition of free entry and exit a final good is produced in each sector from the set of available intermediate goods in a perfec tly competitive environment these two final goods are then aggregated into a single output gdp that can be consumed or invested by the representative household in a symmetric perfect foresight equilibrium these features result in an unequal number of large and small firms which can then be used to analyze the effects of technological changes and government policies the sectoral structure of our model in which gdp is produced by combining outputs of large and small firms is different from a typical two sector model with distinct consumption and investment goods in fact our two sector economy with identical factor intensities behaves exactly like a standard one sector model in which the representative household allocates resources across the two sectors to equate marginal products to factor prices

the democratic advantage institutional foundations of financial power in international competition despite their presumed liabilities institutions associated with democracy serve as a source of power in prolonged international competition by increasing the financial resources that states can bring to bear the theory of sovereign debt suggests that a state s ability to raise money through public borrowing is enhanced when debtholders have mechanisms for sanctioning state leaders in the event of default institutions associated with liberal government provide such mechanisms all other things being equal states that possess these institutions enjoy superior access to credit and lower interest rates than do states in which the sovereign has more discretion to default unilaterally liberal states can not only raise more money from a given economic base but can also pursue tax smoothing policies that minimize economic distortions the ability to finance competition in a manner that is consistent with long term economic growth generates a significant advantage in prolonged rivalries these claims are explored by analyzing the anglo french rivalry 1688 1815 and the cold war

the effect of environmental regulation on optimal plant size and factor shares the method for measuring the effects of environmental regulation on the size distribution of industrial plants and the distribution of factor shares described in this paper focuses on the 20 industries with highest per unit pollution abatement costs and the 20 with the lowest costs the study finds that compliance with environmental laws has not only reduced the number of plants in the affected industries but has placed a greater burden on small rather than on large plants besides redistributing within industry market shares environmental regulation has increased the use of capital relative to labor although the disproportionate burden placed on small plants in the high abatement cost industries may have been unintended it is likely that large firms will be less vocal opponents of environmental regulation than are small firms 22 references 12 tables

some indirect evidence on effective capital gains tax rates this paper presents estimates of effective marginal tax rates on capital gains excluding housing between 1960 and 1978 in the united states concern that the inflation of the 1970s may have worked through the tax system to reduce incentives to produce and save has focused attention on the effective marginal tax rates that apply to various sources of income joines 1981 sheds light on this issue by calculating the historical effective marginal tax rates on factor incomes for the united states part of the recent debate however has focused specifically on capital gains taxes and the desirability of reducing them to enhance incentives for saving and investment the effective marginal tax rate on capital gains henceforth emtg may be the most difficult rate to measure in addition to the usual problems of how to attribute deductions exclusions and tax credits further adjustment must be made because investors pay taxes only when they realize their capital gains 1 the expected emtg this paper reports estimates of effective marginal tax rates on capital gains by comparing reported capital gains with total capital gains on an annual basis the estimates show that the effective marginal tax rates on capital gains fluctuated between 3 4 and 6 6 between 1960 and 1978 and that capital gains are held on average between 24 and 31 years before they are reported

on the macroeconomic and welfare effects of illegal immigration abstract this paper uses a dynamic general equilibrium model with labor market frictions to explore the economic consequences of illegal immigration in the baseline model native workers and illegal foreign workers compete for jobs in the same market but serve as imperfect substitutes in production the calibrated model generates a u shaped relationship between long run domestic consumption and the population share of illegal immigrants after taking into account both consumption and leisure i found that an increase in illegal immigration can generate significant welfare gains for the natives the baseline model is then extended to include heterogeneous workers in the domestic population

the comparison between ad valorem and specific taxation under imperfect competition abstract this paper compares ad valorem and specific taxation in two models of oligopoly with and without free entry predominantly ad valorem taxation implies a relatively low consumer price high tax revenue and when entry is precluded low profits ad valorem taxation dominates specific taxation from the welfare perspective the set of circumstances under which with free entry specific taxation raises welfare is a strict subset of that in which ad valorem taxation is welfare improving and in both models the maximisation of consumer welfare subject to a binding revenue constraint requires maximum reliance on ad valorem taxation

input tariffs duty drawbacks and tariff reforms abstract this paper provides a systematic analysis of the effects of input tariffs and duty drawbacks on welfare the paper arrives at two broad conclusions first tariffs on inputs unaccompanied by duty drawbacks on exports have an ambiguous effect on welfare second increases in tariffs on inputs complemented by full duty drawbacks are welfare improving up to a point provided goods exhibit substitutability in production as well as consumption the latter conclusion is reinforced by the presence of a revenue constraint

on the theory of piecemeal tariff reform the case of pure imported intermediate inputs what is the effect of a tariff reduction that applies only to a subset of commodities subject to tariffs this important question was addressed systematically for the first time by james meade 1955 ch 13 in his classic work trade and welfare after a careful analysis meade concluded t here is more likely to be a gain in economic welfare if the rate of duty is high on the primary imports which will come in in increased volume and is low on the secondary imports which will come in in reduced volume p 208 this result was proved formally by trent j bertrand and jaroslav vanek 1971 who demonstrated that in a small open economy if the highest tariff rate is reduced to the next highest one welfare will rise provided the import demand for the good with the highest tariff exhibits gross substitutability with respect to all other goods 2 subsequently following a different strand of the literature as exemplified in john green 1961 tatsuo hatta 1973 1977 and peter lloyd 1974 independently proved similar results in terms of hicksian substitutability 3 in deriving their results bertrand and vanek allowed for the use of final goods as intermediate inputs i e interindustry flows 4 however neither they nor the subsequent writers including hatta and lloyd allowed for the existence of pure imported intermediate inputs that are not produced domestically therefore a natural question is whether the piecemeal policy prescription derived by them remains valid in the presence of pure imported intermediates this question is particularly important for developing countries for two reasons first by far the bulk of the imports of developing countries are intermediate and capital goods according to the world bank during the period 1975 1985 50 percent of developing countries imports were accounted for by intermediate inputs and an additional 30 percent were capital goods a sizable proportion of both capital and intermediate goods are neither produced nor directly consumed in these countries second the meade bertrand vanekhatta lloyd result has been the cornerstone of trade policy reform in many developing countries especially during the last decade in most countries trade reform has been based on the so called concertina approach under which the highest tariffs are reduced to the next highest ones and then to the next highest ones and so on thus lopez professor department of agricultural and resource economics university of maryland college park md 20742 and consultant trade policy division world bank 1818 h street n w washington dc 20433 panagariya senior economist trade policy division world bank 1818 h street n w washington dc 20433 and professor department of economics university of maryland college park md 20742 the findings interpretations and conclusions in this paper are entirely those of the authors they do not necessarily represent the views of the world bank its executive directors or the countries they represent the authors are indebted to two referees and tatsuo hatta for valuable comments on an earlier draft iin this quotation primary imports refers to the goods on which tariffs are reduced while secondary imports refers to other importables subject to tariffs 2robert lipsey and kelvin lancaster 1956 had proved the basic result of bertrand and vanek in a one factor three good model with a cobb douglas utility function 3more recently takashi fukushima 1979 has proved the validity of the hatta lloyd result when the highest tariff is shared by several commodities while rodney falvey 1988 has done the same in the presence of quantitative restrictions on imports 4although hatta 1973 1977 did not allow explicitly for interindustry flows his results can also be shown to be valid in the presence of such flows

determinants of corporate social disclosure in spanish local governments this paper contributes to previous country level analyses of non financial reporting in the public sector by studying public transparency in relation to sustainability as well as by assessing the determinants of sustainability disclosure practices in spanish municipalities we have carried out a content analysis of the websites of 102 spanish local governments subsequently we have employed different statistical techniques biplots and dependence models to analyse the extent of disclosure and to determine the impact of certain contextual and political factors on transparency in matters of sustainability when compared to the amount of information that is revealed concerning financial issues disclosure practices regarding social and environmental information are rather scarce we have also observed that several political factors more specifically the presence of conservative governments and political rivalry may become genuine barriers to municipal transparency based on these findings we can make two policy recommendations first it seems necessary to establish national policies laws or recommendations that generate similar levels of transparency among local governments in order to avoid social dilemmas in this sense similar accountability processes limit non sustainable behaviours playing a similar role to that of markets for the private sector second accountability processes should focus on the addition of information concerning social and environmental actions and on informing of the effects of municipalities on them going beyond the strictly economic dimension

postwar british economic growth and the legacy of keynes the policies used by britain to finance world war ii represented a dramatic departure from the policies used to finance earlier wars and were very different from the policies used by the united states during the war following keynes s recommendations britain taxed capital income at a much higher rate than the united states during the war and for much of the postwar period we analyze quantitatively the policies designed by keneys using an endogenous growth model and the ncoclassical growth model we also evaluate the implications of tax smoothing policies we find that the welfare costs of keynes s policies were very high relative to a tax smoothing policy and argue that britain s poor macroeconomic performance in the early postwar period is a consequence of the high tax rates levied on capital income

trade liberalization and domestic monopoly a welfare analysis this paper uses a partial equilibrium analysis to show that a partial trade liberalization may reduce a country s welfare due to a loss in monopolistic rent if it is carried out by a quota the quota can be set by either the foreign or domestic government it is considered as a voluntary export restraint if it is set by the foreign government the quota rents in the case of a voluntary export restraint are captured by the foreign agent therefore the reduction in the domestic country s welfare is more likely in this case rather than in the case of the quota set by the domestic government copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the macroeconomic effects of distortionary taxation abstract prescott 1986 estimates that technology shocks account for 75 of the fluctuations in the postwar u s economy this paper reestimates the contribution of technological change for a standard business cycle model that includes a public sector and fiscal disturbances i find that a significant fraction of the variance of aggregate consumption investment output capital stock and hours of work can be explained by disturbances in labor and capital tax rates and government consumption i also use the model to quantify the welfare costs of capital and labor taxation for both the time series and welfare calculations maximum likelihood estimates of taste technology and policy parameters are used

government spending interest rates prices and budget deficits in the united kingdom 1701 1918 abstract the british data from the early 1700s through wwi provide an unmatched opportunity for studying temporary changes in government purchases temporary increases which appeared mainly as wartime spending raised long term interest rates but significantly increased the growth rates of money and prices only during suspensions of the gold standard 1797 1821 and 1914 1918 temporary changes in military spending accounted for the bulk of budget deficits over the sample of more than 200 years i found only two major non war deficits one associated with compensation payments to slaveowners in 1835 1936 and the other with a dispute over the income tax in 1909 1910 interest rates did not react much to these exogenous deficits

on the revenue implications of trade liberalization under imperfect competition abstract in a recent paper mujumder mujumder s 2004 revenue implications of trade liberalization under imperfect competition economics letters 82 83 89 argued that only if the industry is a monopoly we could be certain that the government could use profit tax to make up any shortfall in tariff revenue and also make the consumers and producers better off we show that this result is not robust when the products are differentiated we find that there always exists degree of product differentiation such that the government can achieve this goal for any finite number of firms so the picture is not so dismal as shown by mujumder

macroeconomic conditions in the u s and congressional voting on environmental policy 1970 2008 using the environmental scorecard ratings of congressmen and senators published annually by the league of conservation voters we explore empirically whether political support for pro environment legislation aggregated across each legislative body is sensitive over time to changing economic conditions that is whether there is a political trade off between economic conditions and the environment using lcv scorecard ratings from 1970 to 2008 we find evidence consistent across both the house and senate that political support for the environment is related to per capita income but this general tendency can be decomposed into sharp differences by party

on fiscal multipliers estimates from a medium scale dsge model this paper contributes to the debate on fiscal multipliers in the context of a structural model i estimate a micro founded dynamic stochastic general equilibrium model that features a rich fiscal policy block and a transmission mechanism for government spending shocks using bayesian techniques for us data

environmental regulation whose self interests are being protected special interest can explain why environmental policy limits economic activity in areas where air quality is above minumum standards locational competition among region helped create a policy that raised factor mobility cost from slower to faster growing regions analysis of votes shows greater support for this policy was received from northern urban constituencies and the greatest opposition came from the south and the west pollution abatement costs per unit of output are higher in areas with higher not lower air quality

win win indirect tax reform abstract the literature on tariffs and that on commodity taxes have established sufficient conditions under which tariff or commodity tax reform improves welfare since less developed countries need to raise certain revenue from indirect taxation we consider a policy reform within the complete indirect tax structure i e an increase in consumption taxes combined with a decrease in tariffs that improves welfare and raises government revenue we demonstrate that when uniform reductions in trade taxes accompany offsetting increases in consumption taxes so that consumer prices remain constant welfare improves and government revenue increases if the initial position provides a net subsidy to producers

the role of tax bases and collections costs in the determination of income tax rates seigniorage and inflation a growing theoretical literature on optimal taxation predicts that governments will set the tax rates on money holdings and on more traditional tax bases to minimize the deadweight losses of collecting government revenue under the presumption that relative collection costs and tax bases have not changed significantly over time the empirical time series seigniorage literature has focused on the theory s tax smoothing implication finding only weak support we show that changes in collections costs and tax bases played an important role in the determination of tax composition and find stronger support for tax smoothing when this is taken into account

heterogeneity and long run changes in aggregate hours and the labor wedge abstract from 1961 to 2007 u s aggregate hours worked increased and the labor wedge measured as the discrepancy between a representative household s marginal rate of substitution and the marginal product of labor declined substantially the labor wedge is negatively related to hours and is often attributed to labor income taxes however u s labor income taxes increased since 1961 we examine a model with gender and marital status heterogeneity which accounts for the trends in the u s hours and the labor wedge apart from taxes the model s labor wedge reflects non distortionary cross sectional differences in households hours worked and productivity we provide evidence that household heterogeneity is important for long run changes in labor wedges and hours in other oecd economies

trade liberalization and tax reform strategies the case of the korean oil industry abstract the decline in government revenues due to tariff reductions has become a major concern for most developing countries including korea this paper focuses on the korean oil industry to examine which post trade liberalization tax reform strategy is optimal depending on the government s priority between social welfare and government revenue we find that the important factors for choosing an optimal tax reform policy are price elasticity of demand and market competition based on a price inelastic demand and the low competitive market for korea s oil industry if the goal of a tax reform policy is to increase social welfare the recommended strategy is to raise the consumption tax by a scale of less than the sum of tariff cuts times the crude oil price and oil import tax cuts this strategy would also reduce inflation but it could be detrimental to government revenue however if the policy s goal is the preservation of government revenue the recommended strategy is to raise the consumption tax by a scale equal to the sum of tariff cuts times the crude oil price at the pre tax reform and oil import tax cuts this strategy does not change either government revenue or social welfare

tax revenue and or trade liberalization abstract with the public finances of many developing and emerging market countries still heavily dependent on trade tax revenues further trade liberalization may be hindered unless they are able to develop alternative sources of revenue against a background of and to inform heightened theoretical controversy as to the appropriate balance between trade and other taxes not least the vat this paper uses panel data for 117 countries over 32 years cleaned for a variety of problems in standard data sources to address a central question of fact have countries recovered from domestic taxes the revenues they have lost from past episodes of trade liberalization for high income countries the answer is clearly yes for middle income countries there are robust signs of strong replacement both concurrently with the revenue loss and essentially dollar for dollar in the long run signs of significant recovery by low income countries are flimsier however and their experiences appear to have varied widely the picture that emerges for low income countries is thus that replacement has been and become higher than previous studies have suggested but sufficiently incomplete in many cases to give cause for concern

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

what do british historical data tell us about government spending multipliers british data from the early 1700s through world war i reflect the results of numerous high quality natural experiments of government spending britain frequently participated in wars increasing military spending massively wartime distortions were relatively limited because the government generally adopted tax smoothing policy and rarely implemented interventions government spending multiplier estimates are low or negative and significantly below unity this paper finds no evidence that the multiplier was higher in the slack state than in the normal state jel e32 e62

fiscal shocks and their consequences this paper investigates the response of hours worked and real wages to fiscal policy shocks in the post world war ii us we identify these shocks with exogenous changes in military purchases and argue that they lead to a persistent increase in government purchases and tax rates on capital and labor income and a persistent rise in aggregate hours worked as well as declines in real wages the shocks are also associated with short lived rises in aggregate investment and small movements in private consumption we describe and implement a methodology for assessing whether standard neoclassical models can account for the consequences of a fiscal policy shock simple versions of the neoclassical model can account for the qualitative effects of a fiscal shock once we allow for habit formation and investment adjustment costs the model can also account reasonably well for the quantitative effects of a fiscal shock

using theory for measurement an analysis of the cyclical behavior of home production abstract a significant amount of economic activity takes place within the home unfortunately it is difficult to assess the cyclical properties of home production because the available data are too sporadic using a real business cycle rbc model we construct quarterly data on three variables that are unobservable at a quarterly frequency hours worked in the home sector hours spent in leisure and the consumption of home produced goods three results emerge leisure is countercyclical while nonmarket hours are acyclical hours spent in home production have declined significantly since the 1970s fluctuations in market output are a good measure of fluctuations in individual utility as long as home and market consumption are either extreme complements or extreme substitutes in the production of utility

revenue implications of trade liberalization under imperfect competition abstract this paper shows that only where the industry in question is a monopoly can we unequivocally assert that exclusive reliance by the government on the less distortionary profit tax is sufficient to make up any shortfall in tariff revenue and ensure higher welfare for both consumers and producers

the macroeconomic effects of war finance in the united states world war ii and the korean war during world war ii government expenditures were financed primarily by issuing debt during the korean war expenditures were financed almost exclusively by higher taxes reflecting president truman s preference for balanced budgets this paper evaluates quantitatively the economic effects of the different policies used to finance these two wars counterfactual experiments are used to explore the implications of financing world war ii like the korean war and financing the korean war like world war ii the author finds that using a korean war policy during world war ii would have resulted in much lower output and welfare relative to the actual policy copyright 1997 by american economic association

politics of environmental law political ideology elitism or urban rural interests this paper examines a number of demographic aspects in congressional districts and states that played important roles in a series of congressional votes on environmental issues in 2000 these characteristics include urbanization or population density education income race and employment our findings are mixed while we find some evidence at least in senate votes that population density is a positive predictor of pro environment votes we also find that things commensurate with the environmental kuznets curve such as income education and lifestyle also play an important role in environmental voting

real business cycle models past present and future in this paper i review the contribution of real business cycles models to our understanding of economic fluctuations and discuss open issues in business cycle research this abstract was borrowed from another version of this item

measuring the average marginal tax rate from the individual income tax the economic effects of taxation depend on the configuration of marginal tax rates we consider here the appropriate measure of a marginal tax rate for the federal individual income tax which has a graduated rate structure and allows for numerous legal and illegal deductions from total income our conclusion is that the explicit marginal rate from the tax schedule is the right concept for many purposes hence we construct approximately weighted averages of these marginal tax rates for 1916 80 when weighted by adjusted gross income the arithmetic average of marginal tax rates is 5 in 1920 2 in 1930 6 in 1940 20 in 1950 23 in 1960 24 in 1970 and 30 in 1980 we also discuss the dispersion of marginal tax rates as well as the behavior of average tax rates and deductions from taxable income one noteworthy result concerns the fraction of adjusted gross income that accrues to families that face a marginal tax rate of at least 35 this fraction quadruples from 1964 to 1980 this abstract was borrowed from another version of this item

the effects of inflation and income taxes on interest rates some new evidence this paper reexamines the empirical relation between inflation and interest rates concentrating on the tax effect proposed by darby and feldstein using the random walk intercept model relative responses of taxable yields and tax exempt yields to expected infla tion are estimated the results show that for the sample period 1953 1982 the nominal yields on treasury bills rise at a rate greater than one for one with expected inflation while the nominal yields on default free municipal bonds rise approximately one for one with expected inflation thus the tax adjusted fisher hypothesis by darby and feldstein is empirically supported the components of treasury bills are also extracted and their variances are compared it is shown that variation of expected inflation is not overwhelmingly larger than that of the after tax real rate therefore on an after tax basis changes in the real rate explain a substantial portion of changes in the nominal rate of interest

government spending and capital accumulation with endogenous time preference this paper extends s djajic 1987 to allow for an endogenous rate of time preference and reexamines djajic s experiment how the optimal rates of private consumption and capital accumulation will respond to an unanticipated temporary expansion in government spending the key factors determining the adjustment patterns are the difference between the marginal utility of private consumption and that of public spending the timing of policy reversion and the relationship between private and public consumption in household utility if private and public consumption are edgeworth independent whether investment increases with the length of fiscal expansion depends on whether the marginal utility of private consumption exceeds that of public consumption

trade liberalization in oligopolistic industries the quota case abstract this paper analyzes the short and long run effects on domestic price and output of partially liberalizing quota restrictions in a general model of oligopolistic interactions it is shown that perverse outcomes are possible in a number of cases including that of rational conjectures a larger quota may result in an increase in domestic output in the short run and a higher price in the long run the relationship between oligopolistic conjectures and the number of firms in the industry is critical in determining the long run outcome