the production process in a competitive economy comment in his recent paper in this review samuel bowles 1985 argues that involuntary unemployment in a competitive capitalist economy is an outcome of the marxian notion of class conflict between the firm capitalist and workers the purpose of this comment is not to question the marxian framework but simply to argue that the model and examples in bowles though very interesting do not in any cogent way reflect class conflict let me list the major points made by bowles in the context of a competitive capitalist economy 1 involuntary unemployment leading to reserve army of the unemployed is a reflection of class conflict 2 capitalist technology may be profit maximizing but inefficient and 3 discrimination among identical workers may be profit maximizing i will focus primarily on the first observation which is the heart of the paper the other two can be deduced from the first

taxes housing and capital accumulation in a two sector growing economy abstract it is sometimes argued that the favorable tax treatment afforded to housing may lead to an oversupply of housing at the expense of capital this issue is examined in the context of a growing two sector economy in the basic model where the rate of time preference is constant and labor is instantaneously sectorally mobile the long run response of the capital stock to a tax on housing depends upon the relative capital intensities of the two sectors while the long run relative asset price of housing remains unchanged the robustness of these propositions to changes in the model are considered taxes on capital are also analyzed

wage employment contracts this paper studies the efficient agreements about the dependence of workers earnings on employment when the employment level is controlled by firms the firms superior information about profitability conditions is responsible for this form of contract governance under plausible assumptions such agreements will cause employment to diverge from efficiency as a byproduct of their attempt to mitigate risk it is shown that if leisure is a normal good and firms are risk neutral employment is always above the efficient level such a one period implicit contracting model cannot therefore be used to explain unemployment as a rational byproduct of risk sharing between workers and a risk neutral firm under conditions of asymmetric information

involuntary unemployment and implicit contracts this paper provides an explanation of involuntary umemployment arising as a consequence of asymmetric information between firms and workers involuntary unemployment is defined as a situation where ex post gains to trade exist a model of labor contracts is developed where the allocations are not ex post optimal it is shown that inferiority of leisure is a necessary and sufficient condition for the existence of involuntary unemployment

the marginal cost of public funds and tax reform in africa abstract in this paper we propose estimates of the marginal cost of public funds mcf in 38 african countries we develop a simple general equilibrium model that can handle taxes on five major tax classes and can be calibrated with little more than national accounts data a key feature of our model is the explicit recognition of the informal economy our base case estimate of the average mcf from marginal increases in all five tax instruments is 1 2 focusing on the lowest cost tax instruments in each country commonly the vat but not always the average mcf is 1 1 finally extending the tax base to include sections of the informal economy by removing some tax exemptions offers the potential for a low mcf source of public funds and a lowering of mcfs on other tax instruments

distortionary taxes and the provision of public goods economists have long been concerned with finding an efficient level of public expenditure the classic statement of the problem was given by paul samuelson 1954 an optimal level of expenditure is where the sum of the marginal rates of substitution between the public good and a reference good equals the marginal rate of transformation between the public good and the reference good mrs mrt however samuelson s formula assumes that all of the revenue needed to finance public goods can be raised with lump sum taxes since this is not generally possible the formula must be modified to account for the distortionary effects of the tax system an appropriate modification is to multiply the cost side of the equation by a term that is commonly called the marginal cost of public funds mcf in the case of samuelson s formula where government is entirely financed with lump sum taxes the mcf would be exactly 1 0 in the traditional view of economists distortionary taxes cause the mcf to be greater than one thus raising the cost of providing public goods in this paper we discuss some cases where the mcf may be less than one we will illustrate this possibility using numerical examples for labor taxes

progressive taxation and the social marginal cost of public funds abstract this paper describes the calculation of the social marginal cost of public funds smcf for a progressive tax system which distorts individuals labour supply decisions a formula for the smcf indicates that the income and substitution effects of the labour supply response are weighted by the changes in individuals average and marginal tax rates respectively other well known formulas for the smcf are shown to be special cases of this formula the difference between this formula and the mayshar 1991 formula is shown to be due to different but equally valid ways of computing the change in the average tax rate the condition under which a marginal tax rate increase may lead to a reduction in revenues is derived

foreign influence control and indirect ownership implications for productivity spillovers how does the presence of controlled foreign firms affect the productivity of domestic firms in the same industry we revisit the historical distinction between control and influence by the foreign owner and define controlled foreign firms as those with a foreign ultimate owner holding 50 or more of voting shares connecting insights from new internalization theory with knowledge based views of the mne we posit that controlled foreign firms will generate larger productivity spillovers than non controlled foreign firms we use a firm level panel dataset of 575 844 manufacturing firms 2 343 495 observations across 20 european countries to test our proposition we pay careful attention to how firms are categorized as foreign taking into account both direct and indirect ownership links allowing for indirect ownership turns out to be pivotal there are just as many indirectly controlled foreign firms as foreign firms captured with direct ownership data we find positive horizontal spillovers from controlled foreign firms and zero spillovers from non controlled foreign firms interestingly the strongest positive spillovers come from the indirectly controlled foreign firms the implications of our study extend beyond productivity spillovers to areas such as cross border m as joint ventures mne strategies of legitimation and corporate groups

progressive taxation as social insurance and as a median voter outcome an empirical assessment progressive taxation with a balanced government budget functions as social insurance since individuals with low realized incomes receive a net subsidy from the public sector we calculate the level of taxes that optimally trades off benefits due to such insurance with costs arising from distorted labor supply incentives given the best available evidence on parameter values this optimal rate is roughly 15 percentage points less than the aggregate marginal rate on earned income in sweden as of 1979 we also assess the median voter hypothesis by calculating the rate preferred by the median voter this rate turns out to be about 50 percentage points lower than the actual rate progressive taxation which redistributes income that is a negative income tax can function as insurance since individuals who are unlucky and have low realized incomes are compensated via a net redistribution from the public sector given risk aversion this social insurance is valuable at the same time the provision of insurance generates moral hazard in the form of distorted factor supply incentives thus an optimal pattern of taxation should balance the insurance effects and distortions caused by greater tax progressivity this paper is concerned with the magnitudes of tax rates and progressivity implied by this optimal taxation tradeoff the topic is of particular interest in view of the high tax rates in a number of northern european countries one wonders whether these actual rates may be close to or perhaps even beyond the rates that would optimally balance social insur

consumption path following a tax increase implications for the analysis of the welfare cost of taxation abstract the consumption path following a capital income tax increase is analyzed to demonstrate that short run increases in consumption dominate future declines in consumption for a considerable time it takes 25 years before a tax increase resutls in a loss of welfare

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

social trust in subnational regions and foreign subsidiary performance evidence from foreign investments in china recent research suggests that subnational regions can explain the variation in foreign subsidiary performance however most studies either treat subnational regions as a whole or focus on formal institutions at the subnational level this study examines how general social trust an important dimension of informal institutions at the subnational level affects foreign subsidiary performance in a sample of 17 886 foreign investments in china in 2012 we find that the level of social trust in subnational regions has a positive effect on the performance of foreign subsidiaries reducing the liability of outsidership faced by foreign subsidiaries our results also show that this positive effect is contingent on local embeddedness of the foreign subsidiaries our findings highlight the importance of incorporating informal institutions at the subnational level in examining strategies and strategy outcomes

cultural industries in international business research progress and prospect cultural industries systems of organizations that produce and distribute cultural goods with substantive symbolic aesthetic or artistic value represent an important exciting and complex context that receives growing scholarly attention as the first review of management research on cultural industries this paper aims to provide a systematic synthesis of current research summarizing distinctive characteristics of cultural industries and highlighting research gaps we also illustrate how the unique nature dynamics and evolution of cultural industries provide opportunities to broaden international business theories in four research themes i e internationalization strategy cross border innovation social inclusion in the global economy and emerging market research

income redistribution an international perspective many view global income inequality as a problem income redistribution from the rich countries to poor countries is often offered as a solution however such redistribution would have to be politically acceptable to voters in rich countries to occur using a constructed distribution of world income we show that even modest income redistribution efforts would impose significant costs on taxpayer voters in rich countries we conclude such income redistribution is unlikely

status effects public goods provision and excess burden abstract most studies of the optimal provision of public goods or the excess burden from taxation assume that individual utility is independent of other individuals consumption this paper investigates public good provision and excess burden in a model that allows for interdependence in consumption in the form of status relative consumption effects in the presence of such effects consumption and labor taxes no longer are pure distortionary taxes but have a corrective tax element that addresses an externality from consumption as a result the marginal excess burden of consumption taxes is lower than in the absence of status effects and will be negative if the consumption tax rate is below the pigouvian rate correspondingly when consumption or labor tax rates are below the pigouvian rate the second best level of public goods provision is above the first best level contrary to findings from models without status effects for plausible functional forms and parameters relating to status effects the marginal excess burden from existing u s labor taxes is substantially lower than in most prior studies and is negative in some cases

tax effects versus budget effects on labor supply this paper analyzes the effects on labor supply of parallel changes in taxes and public spending of various types a number of important recent developments in the labor supply behavior of households are highlighted by such a study of various types of budget effects rather than isolated tax effects this comes out in particular when considering cross substitution effects on labor supply of changes in public spending on goods and services or of the subsidization of goods and services provided by private markets moreover the income effects of tax changes are often mitigated or possibly even removed by the income effects of the accompanying expenditure changes

asset stock accumulation and sustainability of competitive advantage given incomplete factor markets appropriate time paths of flow variables must be chosen to build required stocks of assets that is critical resources are accumulated rather than acquired in strategic factor markets barney barney j 1986 strategic factor markets expectations luck and business strategy management sci october 1231 1241 sustainability of a firm s asset position hinges on how easily assets can be substituted or imitated imitability is linked to the characteristics of the asset accumulation process time compression diseconomies asset mass efficiencies inter connectedness asset erosion and causal ambiguity

marginal tax reform externalities and income distribution the paper examines welfare improving and revenue neutral directions marginal policy reforms for an economy with nonidentical individuals and an externality that has a feedback effect on the consumption of taxed goods it considers three types of policy instruments the indirect taxes the uniform poll transfer and public abatement this extends the framework set up by ahmad and stern 1984 bovenberg and de mooij 1994 and schob 1996 the theoretical model is illustrated for a specific externality namely congestion caused by peak car transport

taxation with costly administration the concept of a tax technology is used here as providing a unified framework for analyzing both administrative activity by tax authorities and tax resisting activity by taxpayers this framework provides a simple formalization of adam smith s four components of tax costs administration substitution active noncompliance and passive compliance the model is used to derive policy implications concerning the proper measurement of the cost of public funds and concerning the criterion for optimal administration

the marginal cost of funds in the presence of environmental externalities the marginal cost of funds mcf is useful for measuring the cost of taxation in cost benefit and tax reform analysis in this paper we present general equilibrium estimates of the mcf in an economy with environmental externalities we find that excluding such effects can yield quite misleading results the inclusion of externalities opens up a significantly larger potential for tax reform and the ranking of taxes is strikingly changed the estimate of the average base case mcf is reduced we also indicate double dividends in the norwegian economy

welfare effects of alternative forms of public spending the paper analyzes welfare effects in a second best world of public spending of three different types transfer payments public consumption and public investment it is shown how these effects d

economists and the welfare state abstract this paper constrasts the views of the welfare state of economists in the 1940s and 1950s with those of the current generation it is argued that economists as a profession in particular in the scandinavian countries have changed from being strong spokesmen for the welfare state to becoming much more critical the reasons for this are sought both in the expansion of the public sector in recent decades and in the development of economic theory in the areas of public finance insurance and incentives and public choice an attempt is made to evaluate the importance of the empirical and theoretical developments for the changing views of the welfare state

marginal cost of public funds for different tax instruments and government expenditures the marginal cost of public funds that is the size of the direct and indirect excess burden costs for marginal tax revenues is examined in this paper for an open economy with a savings response and using swedish 1979 data the marginal cost of public funds spent on transfer payments is estimated to vary from 1 47 for a distributionally neutral tax on labor and capital to 7 20 for a more progressive tax where average and marginal labor taxes increase by the same rates for changes in the most important tax instrument the marginal cost of public funds varies from 0 98 for expenditures on infrastructure to 2 27 for transfer payments

the optimal taxation of asset income when government consumption is endogenous theory estimation and welfare this paper derives the ramsey optimal policy for taxing asset income in a model where government expenditure is a function of net output or the inputs that produce it extending judd 1999 i demonstrate that the canonical result that the optimal tax on capital income is zero in the medium to long term is a special case of a more general model employing a vector error correction model to estimate the relationship between government consumption and net output or the factor inputs that generate it for the united states between 1948q1 to 2015q4 i demonstrate that this special case is empirically implausible and show how a cointegrating vector can be used to determine the optimal tax schedule i simulate a version of the model using the empirical estimates to measure the welfare implications of changing the tax rate on asset income and contrast these results with those generated in a version of the model where government consumption is purely exogenous the shifting pattern of welfare measurements con rms the theoretical results i calculate that the prevailing effective tax rate on net asset income in the us between 1970 and 2014 averaged 0 449 hence abolishing the tax completely does generate welfare improvements though only by the equivalent of between 1 103 and 1 616 percent permanent increase in consumption well under half the implied welfare benefit when the endogeneity of the government consumption is ignored the maximum welfare improvement from shifting part of the burden of tax from capital to labor is the equivalent of a permanent increase in consumption of between only 1 491 and 1 858 and is attained when the tax rate on asset income is lowered to between 0 148 and 0 186 allowing the tax rate to vary over time raises the maximum welfare bene t to 1 865 all the results are very robust to a wide range of elasticities of labor supply

the evolving value of foreign partnerships in transitioning economies through studying joint ventures during the early 1993 and late phases 2001 of hungary s economic transition to market economy we demonstrate how institutional and economic transformation alter

redistribution and the marginal cost of public funds abstract discussions of the marginal cost of public funds with distortionary taxation are often cast in the framework of a one consumer economy while the main justification of distortionary taxes is that they are needed for redistribution this paper analyzes the issue in a model with heterogeneous consumers and a linear income tax focusing on the tradeoff between labour market distortions and the redistribution from high wage to low wage workers in an optimal tax system the mcf will be the same for all sources of funds and under certain assumptions less than one without optimality the mcf will in general differ between different sources of finance

the effect of taxation on human capital this study finds a significant negative effect of proportional income taxation on human capital of the few earlier studies to address this issue most suggested a negligible effect of taxation on investment in human capital this earlier conclusion is shown to be incorrect by using a model that is more general in several respects than the models used previously

on reforming the welfare system abstract using a simulation model for a small open economy quebec 1986 various negative income tax nit and workfare schemes are compared from the point of view of efficiency and equity the main finding is that there exist workfare schemes that are superior both to the quebec regime of 1986 and to a nit characterized by a 100 percent implicit tax rate however these workfare schemes are dominated by some nit programs this suggests that it may be necessary to have work requirements that vary across socio demographic classes for a workfare plan to be superior to any nit combining workfare with an nit could also be the prescription

labour supply tax evasion and the marginal cost of public funds an empirical investigation abstract in this paper we extend the concept of marginal cost of public funds itmcf to incorporate tax evasion in the labour market mcf values are also computed from various tax reforms applied to the province of quebec canada 1985 for this purpose a utility based labour supply model that allows for both regular and irregular work activities is used at the benchmark situation the mcf associated with an increase in marginal income tax rates ranges between 1 39 and 1 53 depending upon whether we consider rationing or not moreover the presence of the irregular sector accounts for between 0 02 and 0 05 of this mcf although small in magnitude the impact of the irregular sector increases rapidly with the level of marginal tax rates

optimal technology policy under asymmetric information in a research joint venture abstract we analyze the optimal technology policy to solve a free riding problem between the members of an rjv assuming that government intervention is subject to an additional adverse selection problem caused by its inability to distinguish the value of the potential innovation although subsidies and monitoring may be equivalent policy tools to solve firms free riding problem they imply different social losses if the government is not able to distinguish perfectly the value of the potential innovation the advantage of monitoring tools relative to subsidies is proved to depend on which type of information the government can obtain about firms r d performance

the boundaries of multinational enterprises and the theory of international trade this paper begins with a review of empirical evidence on multinational firms conceptual underpinnings of a theory are developed relying in particular on the notion of knowledge capital as a mobile joint input into geographically separated production facilities this idea is embedded in a simple two country general equilibrium model that supports multinational production in equilibrium under conditions consistent with the empirical evidence the final section examines internalization and shows why certain properties of knowledge capital also imply a preference for transferring technologies internally within the firm rather than through arm s length markets

the algerian retrenchment system a financial and economic evaluation the government of algeria has adopted a new retrenchment system to facilitate labor shedding in a public sector characterized by redundant workers and in an environment of already high unemployment this article assesses the financial viability of the retrenchment system and the inherent welfare costs and benefits associated with layoffs a financial flows model tracks the unemployment insurance fund s revenue and expenditure flows during the projected five year adjustment period it finds that even in the presence of massive retrenchment 21 percent of formal sector employment the fund accumulates reserves equivalent to nearly 2 percent of gross domestic product because many displaced workers will end up in the informal sector the resulting productivity gains or losses depend crucially on the initial level of productivity in the public sector at the same time retrenchment entails unambiguous benefits by reducing subsidies to state owned enterprises thereby generating efficiency gains considering these two effects together the welfare model estimates that retrenching 13 percent of the formal sector will generate annual net welfare gains ranging from costs of 358 million to gains of 774 million

second best road taxes in polycentric networks with distorted labor markets this paper examines the interaction of road taxes with spatially invariant labor taxation in a polycentric network it derives analytical expressions for the network counterparts of the traditional double dividend effects i e pigouvian tax interaction and revenue recycling effects and computes them under different policy regimes the analysis reveals a series of conditions under which a system of cordons around the major nodes of a network might be more efficient than marginal external cost pricing with a high elasticity of labor supply and limited public transport coverage it is shown that the pigouvian tax rule might reduce welfare even when the generated revenue is used to finance labor tax cuts

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

when and where does foreign direct investment generate positive spillovers a meta analysis local firms may attract productivity spillovers from foreign investors yet these vary with local firms awareness capability and motivation to react to foreign entry in consequence spillovers vary across countries at different levels of economic development we apply competitive dynamics theory to analyze these contextual moderators of spillovers and test hypotheses thus derived in a meta analysis of the empirical literature on spillovers our analysis suggests a curvilinear relationship between spillovers and the host country s level of development in terms of income institutional framework and human capital

fdi spillovers over time in an emerging market the roles of entry tenure and barriers to imitation in this study we examine how foreign direct investment fdi spillovers to domestic firms in an emerging market occur over time from the organizational learning perspective we propose that as entry tenure of foreign firms in an industry increases domestic firms can learn from the foreign firms over time and improve their productivity we further build upon the competitor imitation argument to propose that this effect will be stronger when barriers to imitation faced by the domestic firms are lower based upon a comprehensive panel dataset on manufacturing firms in china in 1998 2007 our findings strongly support these arguments we find that entry tenure of foreign firms in an industry has a positive relationship with the productivity of individual domestic firms in the same industry albeit at a diminishing rate we also find that this positive relationship is stronger when the foreign firms have lower export intensity lower intangible asset intensity and have followed a more rhythmic i e less irregular entry pattern situations characterizing lower barriers to imitation

short run politicians and long run tax revenue an empirical assessment a life cycle growth model fit to the u s economy is used to calculate the tax rate that would maximize steady state tax revenue the rate that would be set by a short run politician interested in maximizing current period receipts is also calculated in the current period the capital stock is fixed but labor is a variable factor following the intuition of buchanan and lee 1982 it might be suspected that this fixity of capital would lead the short run politician to set taxes above the steady state revenue maximizing level however such a conclusion does not hold for the cases considered in this study

foreign direct investment and host country productivity the american automotive component industry in the 1980s although several studies have shown that inward foreign direct investment fdi often leads to greater host country productivity researchers have yet to determine the relative importance of direct technology transfer and competitive pressure to assess the relative importance of the two channels we examine the us auto component industry between 1979 and 1991 during this period japanese automobile assemblers began to produce vehicles in north america and began to purchase inputs from us auto component manufacturers those us manufacturers that sold components to japanese transplants would be the direct recipients of any technologies transferred from the japanese although we find that the direct investment by japanese assemblers was associated with overall productivity improvement in the us auto component industry we find little evidence of direct technology transfer the productivity growth of us suppliers affiliated with japanese assemblers was no greater than that of other non affiliated us suppliers further we find that the japanese assemblers tended to purchase components from less productive us suppliers and moreover that low productivity suppliers that sold goods to japanese assemblers had a higher survival rate than low productivity suppliers that did not sell to japanese firms the results suggest that increased competitive pressure in the auto sector was the main cause of overall productivity improvement at least during the initial stages of fdi of the 1980s

risk and farm operator labour supply this study uses a large increase in us federal crop insurance subsidies as a natural experiment to identify the importance of risk for farm operator labour supply subsidy increases induced greater crop insurance coverage which in turn reduced farmers financial risks crop insurance participation data are merged with farm level census of agriculture data from 1992 and 1997 to compare how individuals off farm labour supply changed in response to the policy induced change in insurance coverage the empirical approach controls for unobserved heterogeneity and accounts for the censored nature of the data it is found that greater insurance coverage reduces the off farm labour supply of operators who produced at least 100 000 of output and increased the labour supply of small farm operators who produced less than 25 000 of output

the dynamics of the liability of foreignness a global study of survival in financial services we study the impact of foreignness on survival in interbank currency trading worldwide over the period 1974 93 in particular we develop hypotheses on the behavior of the liability of foreignness over time and on the consequences of evolving sources of firm level competitive advantage on this liability we test these hypotheses on the population of 2667 market making trading rooms located in 47 countries worldwide that either existed in 1974 or entered the industry between 1974 and 1993 the results show that there is a liability of foreignness and that it changes over time further strategic and organizational factors such as the adoption of technology by these firms and their mode of internal control significantly influenced survival as did location related factors such as the intensity of local and foreign competition 1997 by john wiley sons ltd

the welfare costs of deficit finance we analyze the welfare consequences of deficit finance in a general equilibrium model fit to the us economy current spending may be financed with current and or future distortionary taxes the economy is open to international capital flows the welfare costs of financing marginal current spending are substantial and are sensitive to the timing of the required taxes postponing a tax on labor income is advantageous but postponing a tax on asset income is not ricardian equivalence poorly approximates the economy we consider

employment with asymmetric information in an economy without informational and other distortions entrepreneurs and workers can write labor contracts that support a pareto optimal allocation of resources this paper is an attempt to characterize contracts when enterpreneurs are better informed about the state of nature than are their workers asymmetric information generally results in a suboptimal allocation of both risk and worker effort in particular if consumption and leisure are perfect substitutes employment will be less than fully pareto optimal in all but the most favorable states of nature

the effects of taxes on aggregate labor a cross country general equilibrium study at empirically reasonable labor supply elasticities equilibrium models of public finance predict that greater taxes in a country should lead to lower aggregate labor we examine data from a cross section of 22 oecd economies for such a relationship the approach is to

is the relationship between inward fdi and spillover effects linear an empirical examination of the case of china this paper finds evidence for the coexistence within chinese manufacturing industry of both curvilinear and linear relationships between inward foreign direct investment fdi and the productivity of locally owned enterprises loes this complexity of spillover effects challenges the laissez faire view that all inward fdi into all types of domestic industry is equally valuable in terms of productivity spillover benefits our findings suggest that inward fdi into china leads either to spillovers that decline beyond a critical point or to effects that continue linearly depending on the ownership of foreign investors and the technological characteristics of the industry concerned our analysis yields original insights into the complex pattern of spillover effects from fdi into china and deeper understanding of its possible causes

dynamic hours of work functions for husbands wives and single females hours of work equations are derived from the constrained maximization of a utility function that is not separable over time and that varies with a household s demographic structure these equations are fitted to observations on wage rates nonlabor income and other variables for husbands wives and unmarried women the dependence of each household s current work and consumption behavior upon its work and consumption behavior in the past is examined closely and different interpretations of the relationship are confronted with the data

lifetime and annual marginal costs of redistribution in england sweden and the united states both the annual and lifetime marginal costs of redistribution in england sweden and the united states are calculated the annual marginal cost of redistribution is 2 90 in the united states 3 53 in england and 6 77 in sweden the lifetime marginal cost of redistribution is 4 46 in the united states and 7 96 in england the lifetime marginal cost of redistribution in sweden indicates that additional redistribution reduces the incomes of both the poor and nonpoor this study also shows that when there is greater income equality the marginal tax rate at which the incomes of the poor and nonpoor begin to be reduced will be at lower and lower levels copyright 1993 by mit press

optimal dynamic carbon taxes in a climate economy model with distortionary fiscal policy how should carbon be taxed as a part of fiscal policy the literature on optimal carbon pricing often abstracts from other taxes however when governments raise revenues with distortionary taxes carbon levies have fiscal impacts while they raise revenues directly they may shrink the bases of other taxes e g by decreasing employment this article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate economy model with distortionary fiscal policy first this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income this link arises because carbon emissions destroy natural capital they accumulate in the atmosphere and decrease future output consequently this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments second this article characterizes optimal climate policy in sub optimal fiscal settings where income taxes are constrained to remain at their observed levels third this article presents a detailed calibration that builds on the seminal dice approach but adds features essential for a setting with distortionary taxes such as a differentiation between climate change production impacts e g on agriculture and direct utility impacts e g on biodiversity existence value the central quantitative finding is that optimal carbon tax schedules are 8 24 lower when there are distortionary taxes compared to the setting with lump sum taxes considered in the literature

taxation base in developing countries abstract informal sectors are larger in developing countries than in rich countries this is a result of higher fixed costs of entry into the formal economy in developing countries we show that raising barriers to entry is consistent with a deliberate government policy for raising tax revenue by generating market power and hence rents for the permitted entrants market entry fees foster the emergence of large taxpayers the rents can be readily confiscated by the government through entry fees and taxes on profits at a low administrative cost the relevance of the theory is assessed with a sample of 64 countries empirical analysis supports the results of the paper

the impact of regional and institutional factors on labor productive performance evidence from the township and village enterprise sector in china this paper investigates the determinants of township and village enterprise tve labour productivity in china examining behaviour at both the national and regional levels the results suggest that human capital the real wage level foreign intensity export intensity capital investment and firm size are the most important factors affecting labour productivity at the national level but their relative importance varies significantly between the regions the results also indicate that government privatization reforms had a major impact on labour productivity in the tve sector across the regions

deadweight losses and the saving response to a deficit deadweight losses and the saving response to a deficit several recent empirical studies have challenged the conventional wisdom that deficits cause a higher interest rate many economists are however critical of the seemingly implied theoretical justification that every individual fully recognizes the size of the deficit and the extent to which it increases future tax liabilities this paper demosntrates that far weaker information assumptions are needed to obtain an aggregate savings response equal to the deficit a reallocation of deadweight losses causes ricardians to save more than their share of the deficit to keep consumption unaffected allowing for a substantial fractrion of keynesians who save less than their share 1 introduction the saving behavior in the ricardian equivalence theorem is often criticized for relying on perfect foresight e g buchanan 1976 and evans 1985 85 even david ricardo himself rejected what is nowadays termed the ricardian equivalence theorem on grounds that people are not sufficiently aware of future tax liabilities see o driscoll 1977 this paper demonstrates that the saving response obtained by the ricardian equivalence theorem saving oing up by the deficit with a constant interest rate can be obtained with weaker rationality assumptions when deadweight losses associated with nonlump sum taxation are accounted for deadweight losses have been overlooked in the deficit debate possibly because the deadweight loss estimates in the public finance literature were rather small up until a few years ago the first mention of deadweight losses we have found is the brief theoretical discussion of transactions costs in collecting taxes and issuing debt in barro 1974 1109 deficits and welfare is an issue currently debated but the question posed is usually the reverse of the one asked here while we analyze how welfare losses affect the macro consequences of a deficit recent studies have focused on whether deficits increase or decrease welfare for instance both chan 1983 and barsky et al 1986 have studied whether deficits are desirable or not though analyzing how uncertainty of present and future after tax income are affected 1 futher a recent article by hansson and stuart 1987 estimated the losses from labor and capital taxes in a current and a future time period to evaluate the welfare consequences of a reallocation of taxes over time the theoretical argument made in this paper might be viewed as an obvious elaboration of the ricardian equivalence theorem nevertheless given current parameter estimates of deadweight losses the argument turns out to be very important quantitatively a simple illustration will demonstrate that far from everyone perhaps less than half of the population needs to have rational foresight about the deficit in order for a deficit to generate a one to one response in saving ii the behavior of ricardian individuals the effect of taxes altering efficiency and deadweight losses in each of the two time periods the standard ricardian equivalence theorem is arrived at assuming lump sum taxation with no deadweight losses accompanying taxation according to the theorem a deficit has the equivalent effect of current taxation because people anticipate the future tax liability incurred with the deficit these ricardian individuals have no reason to alter their labor supply the production techniques or their consumption pattern all that a deficit therefore results in is an increase in savings that is exactly equal to the deficit how would the analysis change if nonlump sum taxations is allowed for and associated with deadweight losses one shoudl have to analyze which particular tax is cut today and which is raised tomorow when the deficit is generated and how both affect the desired levels of labor suplly consumption etc today and in the future

tax revenue and the marginal cost of public funds in sweden abstract we assess the welfare cost of raising a marginal unit of tax revenue in a balanced budget general equilibrium framework the calculated social cost of an increment of public funds is sensitive to both the specific type of tax increase and the type of public spending used on the margin best guess assumptions on labor supply elasticities yield marginal costs of public funds for different fiscal mixes of between 0 67 and 4 51 at prevailing tax rates in sweden alternative labor supply assumptions well within the range of current estimates substantially affect the results and can imply infinite marginal welfare costs marginal welfare costs are also sensitive to assumptions about both the income and substitution effects of labor supply

the welfare cost of unemployment in quebec harberger s triangle meets okun s gap using duality theory under rationing the authors derive a measure of the aggr egate welfare cost of cyclical unemployment which takes into account the value of additional nonmarket activities promoted by unemploymen t this measure is then applied to the quebec economy using benchmar k general equilibrium data for 1980 comparisons are made between the results obtained from the author s welfare measure and from the redu ction in gnp as measured by okun gap according to their simulations the overestimating bias of the cost of cyclical unemployment in que bec as measured by okun gap varies between 3 and 20 percent depend ing on the assumptions used the bias is more important however whe n a permanent increase in the unemployment rate is simulated

strategic alignment and performance of market seeking mncs in china this study explores the environment strategy performance relation of foreign firms especially those with a market seeking mandate in china the results indicate that the analyzer orientation is best suited to the turbulent chinese market which has been undergoing an economic transition in recent years there is also a significant difference in financial performance among market seeking mncs depending on strategic orientations with the analyzer orientation producing the highest performance the prospector and the defender orientations lead to poor financial performance because of the mismatch with china s market which is highly dynamic and complex our findings reiterate the importance of understanding local market traits and opportunities and developing proper strategic configurations for market seeking mnc subsidiaries especially in an emerging economy like china copyright 2001 john wiley sons ltd

the welfare cost of capital income taxation in a growing economy the welfare cost of capital income taxation is analyzed in a general equilibrium framework where the private sector is represented by a competitive household endowed with perfect foresight and an infinite life the value of the welfare cost depends essentially on the elasticity of substitution between capital and labor in the production function numerical estimates are presented for different values of the parameters of the model the welfare gain obtained by the abolition of the capital income tax is smaller when the private sector is not endowed with perfect foresight it is reduced by about 40 percent when expectations are myopic the allocation efficiency cost of the corporate tax dwarfs the intertemporal welfare cost

accounting for sources of fdi technology spillovers evidence from china using a set of panel data of 11 324 firms in china from 1996 to 1999 the paper finds that positive technology spillovers from fies to domestic firms occur through tangible assets rather than intangible assets through domestically consumed products rather than exported products through traditional products rather than new products and through fies employing unskilled workers rather than fies employing skilled workers fies are found to generate negative spillovers through exports and through employment of skilled workers

on the marginal cost of public funds and the optimal provision of public goods abstract this paper argues that in models with heterogeneous agents the concept of the marginal cost of public funds mcpf will only be useful if it is compared with an analogous concept for the benefit side the mcpf does not assume a unique value and is not particularly illuminating in and out of itself also gone is the benchmark status of mcpf 1 turning to the provision of public goods using a mechanism design approach the paper constructs a two stage proof for kaplow s kaplow l 1996 the optimal supply of public goods and the distortionary cost of taxation national tax journal 49 513 533 proposition concerning the irrelevance of labor supply and distributional concerns in public good provision this highlights the two fundamental ingredients for his result first the provision of public goods per se when it satisfies the samuelson s rule is only potentially pareto improving second the actual pareto improvement will materialize when or if one reforms the income tax structure if the reform is not forthcoming the decision on public goods provision must rely on redistributional concerns finally the paper generalizes broadway and keen s boadway r keen m 1993 public goods self selection and optimal income taxation international economic review 34 463 478 result to a model with many types of agents many private goods and without making any assumptions regarding which self selection constraints are or are not binding

marginal welfare cost calculations differential analysis vs balanced budget analysis abstract in a differential analysis tax revenue collections are held constant in a balanced budget analysis the spending level is changed and the level of distortionary taxation is changed correspondingly here income effects are important and efficiency calculations depend chiefly on uncompensated elasticities unless government exhaustive expenditure is assumed to substitute closely for cash a small scale computational general equilibrium model is constructed and differential and balanced budget experiments are performed results show that marginal welfare costs calculated from balanced budget experiments can be negative when labor supply functions are backward bending interactions among parameter values and efficiency costs are explored

capitalist worker conflict and involuntary unemployment we study a simple model of the determination of the level of employment in which a capitalist decides how many workers to hire and then bargains over the wage with those whom he hires if the capitalist hires all the available workers his position is weak since in the event of a strike he is unable to hire strike breakers for this reason he chooses to leave some workers involuntarily unemployed an increase in unemployment benefits which raises the cost of hiring strike breakers affects the bargaining power of both capitalist and workers under some conditions it leads to a reduction in unemployment casual observation suggests that in every advanced capitalist economy a significant portion of the workforce is persistently unemployed yet in the dominant formal model of such an economy walrasian equilibrium theory such a situation is never a point of rest of the system beginning with clower 1965 and leijonhufvud 1968 on the one hand and with dreze 1975 on the other there has recently been a number of attempts to modify this theory in such a way that there can be unemployment in equilibrium all these attempts non walrasian models retain from walrasian equilibrium theory the view of a capitalist economy as a system of markets which passively mediates the conflicting desires of the individuals in the economy in the walrasian equilibrium analysis this mediation is successful while in the non walrasian models it is not however in both cases the basic image is of an economy in which the individuals interact passively rather than antagonistically both approaches also begin with an exchange economy in some cases the analysis can be extended to incorporate production but it is never the case that the way production is organized is of any consequence it makes no difference whether capital hires labour or labour hires capital to this extent these models do not incorporate a distinguishing feature of a capitalist economy here we study a very simple model in which the struggle over the distribution of output is the centre of attention and in which the fact that capital hires labour rather than vice versa is essential the model views a capitalist economy not as a system for allocating resources but as a way of organizing production which involves a particular set of power relations between its members our premise is that such a viewpoint illuminates some aspects of the phenomenon of unemployment which are otherwise obscured in the model we construct unemployment arises not because the system is incapable of performing the task of coordination but because the capitalists who can decide how many workers to hire are in a better position to secure a large fraction of the output if some workers remain unemployed this sort of reasoning is certainly not new marx s argument concerning the reserve army of the unemployed is perhaps similar though apparently it has not previously been formalized at the basis of our model is the bargaining process between a capitalist and the workers he chooses to employ there are other models of unemployment which are based on such a bargaining process

r d intensity and international joint venture performance in an emerging market moderating effects of market focus and ownership structure in this study we examine the contingent relationship between r d intensity and performance of international joint ventures ijvs in an emerging market context based on teece s 1986 arguments regarding the appropriability of innovation we identify two types of appropriability hazard related to ijvs r d activities in this context local market related and local partner related hazards we argue that a positive relationship between r d intensity and ijv performance is more likely to occur if these appropriability hazard can be mitigated results using a sample of manufacturing ijvs in china provide support for these arguments we find that r d intensity is positively related to performance in export market focused ijvs but not in local market focused ijvs in addition using a configuration approach we find that r d intensity is positively related to performance in ijvs that have an export market focus and in which the multinational companies mncs have a majority ownership but not in other market focus ownership structure configurations these findings contribute to our knowledge of r d activities of mncs overseas subsidiaries

transport taxes with multiple trip purposes a congestible urban transport system is considered in which cars and buses are used for commuting and non commuting trips commuting is a strict complement to taxable labour supply the optimal tax structure for raising a given amount of government revenue is examined for the cases where differentiation of transport tolls between trip purposes is and is not possible an application to belgian urban environments shows that optimal toll differentiation produces significant efficiency improvements without differentiation reforming transport taxes generates substantial gains only when the labour tax can be reduced

the international ramifications of tax reforms supply side economics in a global economy this paper studies tax reforms in a dynamic model of a global economy calibrated to current u s and european tax policies world capital markets add consumption smoothing and income redistribution effects that alter closed economy predictions in the absence of taxes on foreign interest welfare gains of eliminating u s income taxes are enlarged by up to 34 percent at the expense of european losses caused by transitional declines in consumption and leisure and a permanent capital outflow in contrast if foreign interest is taxed the same tax reform reduces u s welfare 0 7 percent and increases european welfare 1 8 percent copyright 1998 by american economic association