the market value of reducing cancer risk hedonic housing prices with changing information 1 introduction market evidence on the value of a statistical life invariably consists of cross sectional evidence on risks and prices or wages at a point in time if information about the level of risk changes over time and people incorporate this information in a rational manner there will be a corresponding price response on the basis of these temporal changes one can estimate the market price risk tradeoff eliminating many confounding time invariant effects that cannot be controlled for using cross sectional data this paper examines the market response to the release of government information about the level of risk at hazardous waste sites and provides insight into the rationality of this response studies based on experimental evidence and survey data often find that individual beliefs may deviate from objective risk levels 1 people often overestimate highly publicized risks and mortality risks in the case of hazardous waste risks bias in risk beliefs often leads to considerable public reaction and pressure for site cleanups which may be an inefficient outcome by using market data one can examine whether this intense public reaction carries over to contexts in which private money is at stake government agencies frequently use information provision as a regulatory device particularly since the advent of the right to know movement of the 1980s examples of information provision efforts include the food and drug administration s requirement that many prescription drugs indude information inserts the department of housing and urban development s requirement that sellers of houses built before 1950 inform buyers about the presence of lead based paints and the environmental protection agency s epa requirement that manufacturing facilities report their annual releases of chemicals above a threshold amount for a list of over 600 substances such regulations imply a belief that citizens can learn from information about risk and rationally adjust their prior beliefs towards the objective risk level in light of the information this article provides market evidence to bolster the results of some survey studies of information transfer that suggest that individuals revise their risk beliefs in response to new information 2 the u s federal policy dealing with hazardous waste sites is known as the superfund program the most hazardous sites are targeted for cleanup and placed on a government priority roster called the national priorities list npl extension of the classic theory of compensating differentials to the housing market implies that environmental disamenities such as hazardous waste sites will reduce housing prices rosen 1974 the negative impact of hazardous waste sites on the housing prices of nearby residences is well documented for example in a previous study gayer hamilton and viscusi 2000 we used an analysis that focused on the sale of 16 928 houses from 1988 to 1993 that surround superfund sites in greater grand rapids michigan we found that before the epa released its risk report a reduction in the cancer risk from neighborhood superfund sites by the mean level of risk would increase the average value of a house by 238 in 1996 dollars 3 to estimate this willingness of residents to pay to avoid cancer risks before the release of the epa s risk report we assumed that residents prior beliefs were equal to the objectively measured risks suggested by the report thus this analysis was based on the very strong informational assumption that residents could in effect predict the results of the epa s site specific risk assessments before the release of the report the price risk tradeoff implied a value of a statistical cancer case of 51 million once the epa released its risk information the implied value of a statistical cancer case was 4 million these results suggest that after the release of the epa s risk report revealed preferences for avoiding superfund risks were consistent with surveys of the value of a statistical life in the labor market

on taxation in a two sector endogenous growth model with endogenous labor supply abstract this paper studies the effects of taxation on long run growth in a two sector endogenous growth model with i physical capital as an input in the education sector and ii leisure as an additional argument in the utility function income taxation the same rate applies for capital and labor income reduces the growth rate the same is true if only labor income is taxed however if only capital income is taxed the positive effect of an increase in total non leisure time may dominate the direct negative effect implying that capital taxation increases the long run growth rate

private values of risk tradeoffs at superfund sites housing market evidence on learning about risk this paper incorporates a bayesian learning model into a hedonic framework to estimate the value that residents place on avoiding cancer risks from hazardous waste sites we show that residents are

search efficiency skill transferability and immigrant relative unemployment rates in australia 1990 search efficiency skill transferability and immigrant relative unemployment rates in australia applied economics vol 22 no 2 pp 249 260

consumption vs income taxes when private human capital investments are imperfectly observable abstract this paper considers optimal taxation in an endogenous growth model where private education investments are imperfectly observable consumption taxation is better than labor income taxation for public provision of goods unless educational investment is completely unobservable if subsidies are feasible for observed education investment the consumption tax rate is independent of the degree of observability but the subsidy rate is higher the lower is the observability if subsidies are not feasible the consumption tax rate is lower the more limited is the observability optimal tax rates for goods that provide consumption and education investment simultaneously are below normal rates for observed pure consumption growth and welfare are positively related to independent of the degree of observability without with subsidies

supply uncertainty option price and indirect benefit estimation both the original and many of the subsequent explanations of the concept of option price have been motivated by an assumption of an uncertain supply of the commodity involved 1 consequently it is surprising to find that all of the definitions of option price compare two states of the world which each have known or certain supply conditions paying the option price does not eliminate supply uncertainty as it has been described rather it changes the individual s conditions of access to the good or service from a certainty of no access to a certainty of complete access risk enters the problem only because these analyses assume the individual does not know whether he or she will desire access at the time the payment must be made since the analysis is in terms of planned consumption the reason for this demand uncertainty is sometimes explained by the fact that the consumption must take place in the future when other factors influencing demand may have changed 2 bishop 1982 appears to have been the first to draw attention to this omission of supply uncertainty and proposed a framework without demand uncertainty to demonstrate that there are conditions when option value i e the difference between option price and the expected consumer surplus would be unambiguously positive 3 while there have been a number of theo

migration theories and evidence an assessment abstract this paper presents a critical survey of theories of migration their welfare and policy implications and their empirical relevance we also develop some extensions to the theory beginning with the harris and todaro ht model in particular the ht model is extended to examine risk averse behaviour within families where the migration of members of families serves to diversify risk the welfare implications of the individual migration decision and government intervention in the form of employment subsidies are examined recent evidence on international migration is presented it is shown that migration does not flow automatically in response to wage differentials characteristics of migrants and the process of self selection are found to be important determinants of the rate of migration

on the ineffectiveness of tax policy in altering long run growth harberger s superneutrality conjecture abstract in 1964 harberger conjectured that although theory predicts that changes in tax rates affect investment and growth in the long run in practice tax policy is an ineffective instrument to influence growth this paper provides theoretical and empirical evidence in favor of this view the growth effects of tax policy in the class of endogenous growth models driven by human capital accumulation are examined and numerical simulations of these models confirm the results harberger predicted cross country panel regressions estimated using a new method for measuring effective tax rates produce significant investment effects from taxes that are consistent with negligible growth effects these results are robust to the introduction of other growth determinants

wealth taxation and economic growth abstract this paper investigates the effect of wealth taxation on economic growth using an endogenous growth model with the altruistic bequest motive we introduce intragenerational productivity differentials of human capital formation resulting in differences of growth rates among individuals the economy is divided into two groups those who leave bequests to physical capital investment and those who leave bequests to human capital investment an increase in taxes on life cycle savings will reduce the intragenerational growth differences while the effect of taxation on bequests wage income or consumption on intragenerational growth differences is ambiguous

progressive taxes equity and human capital accumulation in an endogenous growth model with overlapping generations abstract this paper explores the trade off between efficiency and intra and intergenerational equity in an endogenous growth model of an open economy with overlapping generations and human capital accumulation we demonstrate that progressive taxes hurt long run growth and exacerbate distortions associated with intergenerational spillovers however by raising saving these taxes strengthen the net foreign asset position

on the taxation of human and physical capital in models of endogenous growth abstract this paper studies the effects of factor income taxation and of subsidies to human capital accumulation in models of endogenous growth it examines in particular how these effects depend on the specification of the leisure activity and on the technology and tax treatment of the sector producing human capital it shows that the negative effects of factor income taxes on economic growth are stronger when the human capital sector is a market good under these circumstances a subsidy to human capital accumulation can offset the direct growth effects of labor taxation making it akin to a consumption tax the paper then briefly discusses the normative implications of the analysis for the optimal taxation of factor incomes

job search methods and their success a comparison of immigrants and natives in the uk a major issue in the immigration debate concerns whether immigrants take jobs away from natives in this article we present new evidence on the job search methods used by immigrants and their relative success in gaining employment in the uk we find that 1 immigrant job search is less successful than that of natives 2 immigrants are as likely to gain employment through informal methods as via verifiable routes 3 the probability of success increases with years since migration the finding that immigrants do not effectively compete for jobs may help explain why immigration has little impact on native employment

hedonic valuation of the perceived risks of nuclear power plants we use the 2011 fukushima accident to evaluate the impact of the perceived risks of nuclear power plants on apartment rents in switzerland using online advertisements over 12 years and a difference in differences approach we find a 2 3 price discount after the accident for apartments near nuclear power plants

long run growth and welfare effects of public policies with distortionary taxation abstract in a one sector growth model with infrastructure investment we study the impact of fiscal policies on growth the government collects taxes on labor income and profits the government uses these revenues to purchase infrastructure investment provide utility enhancing government services and to provide transfer payments to the households we show that the balanced growth rate is an increasing function of the percent of government revenues that goes to infrastructure we find that the growth maximizing mix of taxes depends on the elasticity of substitution between inputs in particular with distortionary taxes the growth maximizing tax rate on capital is higher the lower the elasticity of substitution between private physical capital and public capital in addition the growth maximizing size of the government is higher when the elasticity of substitution between public and private inputs is low we also investigate welfare effects of other public expenditures as well depending on the elasticity of substitution in production the welfare implications of different public policies can be substantial

tax structure and growth in a model with human capital abstract the effect of the tax structure on the long run growth rate of income and consumption is analyzed where tax structure refers to the mix of taxes on physical and human capital which satisfy an exogenously given government budget constraint the factor used intensively in the consumption good sector relative to the capital goods sector as a whole is taxed more highly in a growth maximizing tax structure an endogenous labor supply the tax treatment of depreciation and the effect of replacing the income tax with a consumption tax are all considered

on indeterminacy and growth under progressive taxation and productive government spending we examine the theoretical interrelations between equilibrium in determinacy and economic growth in a one sector representative agent model of endogenous growth with progressive taxation of income and productive flow of public spending we analytically show that if the demand side effect of government purchases is weaker the economy exhibits an indeterminate balanced growth equilibrium and belief driven growth fluctuations when the tax schedule is sufficiently progressive or regressive if the supply side effect of public expenditures is weaker indeterminacy and sunspots arise under progressive income taxation in sharp contrast to traditional keynesian type stabilization policies our analysis finds that raising the tax progressivity may destabilize an endogenously growing economy with fluctuations driven by agents self fulfilling expectations sur l indetermination et la croissance quand la fiscalite est progressive et les depenses gouvernementales productives on examine les interrelations theoriques entre l in determination de l equilibre et la croissance economique dans un modele de croissance endogene un secteur agent representatif quand la fiscalite sur le revenu est progressive et le flux de depenses publiques productif on montre analytiquement que si l effet du cote de la demande des achats gouvernementaux est relativement plus faible cela se traduit par un equilibre de croissance balancee indeterminee et des fluctuations de la croissance alimentees par les croyances quand la cedule de taxation est suffisamment progressive ou regressive si l effet du cote de l offre des depenses publiques est relativement plus faible l indetermination et les fluctuations emergent quand la fiscalite sur le revenu est progressive contrairement aux analyses traditionnelles de type keynesien des politiques de stabilisation ces analyses montrent qu augmenter la progresssivite de la fiscalite peut destabiliser une economie avec croissance endogene quand les fluctuations sont alimentees par les anticipations auto realisees des agents canadian economics association

time consistent taxation in a dynastic family model with human and physical capital and a balanced government budget this paper analyzes optimal time consistent taxation in a dynastic family model with human and physical capital and with a balanced government budget when tax revenue is used for publicly provided consumption or lump sum transfers leisure would be higher than its social optimum pareto optimal taxation requires taxing capital income more heavily than labour income and subsidizing investment at the same rate of the tax also it requires either subsidizing labour at the same rate as a consumption tax or subsidizing consumption at the same rate as a labour income tax and hence it is not a practical guide to policy further a consumption tax or equivalently a uniform income tax with investment subsidies at the same rate can be improved on by taxing capital income more heavily than labour income ce memoire analyse la fiscalite optimale et consistante dans le temps dans un modele de famille dynastique avec capital humain et physique et un budget gouvernemental equilibre quand le revenu fiscal est utilise pour financer la consommation publique ou pour des transferts forfaitaires le niveau de loisir sera plus eleve que l optimum social la fiscalite optimale paretienne exige qu on taxe le revenu du capital plus fortement que celui du travail et qu on subventionne l investissement au meme taux que la taxe elle exige aussi soit qu on subventionne le travail au meme taux que la taxe a la comsommation soit qu on subventionne la consommation au meme taux que l impot sur le revenu du travail et donc ce n est pas un guide pratique pour la politique de plus un regime de taxe sur la consommation ou de maniere equivalente d impot uniforme sur le revenu avec subvention a l investissement au meme taux peut etre ameliore en taxant le revenu du capital plus fortement que celui du travail

dynamic effects of permanent and temporary tax policies in a q model of investment abstract this paper incorporates the tax policy analysis of hall and jorgenson into a dynamic optimizing model with adjustment costs to develop a q model of investment this framework is particularly useful for analyzing the dynamic effects on investment of permanent and temporary changes in tax policy it is shown that contrary to the conventional intertemporal substitution argument a temporary investment tax credit need not be nore expansionary than a permanent investment tax credit the role of depreciation allowances in determining the dynamic response of investment to temporary changes in the tax rate is also investigated

factor income taxation and growth under asymmetric information abstract this paper studies the growth effects of factor income taxation on capital and labor in an endogenous growth model with overlapping generations capital accumulation in our model takes place through credit financed investments in a market with asymmetric information between lenders and borrowers we show that in the presence of asymmetric information capital income taxation worsens the adverse selection problem in the credit market which in turn introduces an additional adverse effect on growth in so doing our analysis provides a new argument in favor of a lower higher capital labor income taxation in funding public expenditures

viewscapes and flood hazard coastal housing market response to amenities and risk coastal amenities and risk are so highly correlated that separate identification within the hedonic framework is potentially challenging in this study we construct a three dimensional measure of ocean view viewscape accounting for natural topography and built obstruction that varies independent of risk classification to disentangle these spatially integrated housing characteristics a spatial autoregressive hedonic model is developed to provide consistent estimates of the willingness to pay for coastal amenities and risk our findings suggest that incorporating the gis based view measures can be successful in isolating risk factors from spatial amenities

assimilation changes in cohort quality and the earnings of immigrants this paper reexamines the empirical basis for two facts that seem to be found in most cross section studies of immigrant earnings 1 the earnings of immigrants grow rapidly as they assimilate into the united states and 2 this rapid growth leads to many immigrants overtaking the earnings of the natives within 10 15 years after immigration using the 1970 and 1980 u s censuses this paper studies the earnings growth experienced by specific immigrant cohorts during the period 1970 80 it is found that within cohort growth is significantly smaller than the growth predicted by cross section regressions for most immigrant groups this differential is consistent with the hypothesis that there has been a secular decline in the quality of immigrants admitted to the united states

budget balance welfare and the growth rate dynamic scoring of the long run government budget this paper determines conditions under which a reduction in the role of government either through a tax cut alone or together with accompanying expenditure cuts will improve long run government fiscal balance for a ceteris paribus cut in the income tax rate to improve long run government balance the intertemporal elasticity of substitution must exceed unity a tax cut balanced by an expenditure cut is likely to improve the long run balance even if it does not improve the short run balance the relationship between improving the long run fiscal balance and economic welfare is also analyzed

taxation and growth with overlapping generations abstract this paper examines the growth effects of wage and interest income taxation in an endogenous growth model which is characterized by diminishing point in time returns in human capital producing technology and overlapping generations of two period lived individuals we show that the greater the long term learning time of individuals the more individuals inherit human capital from the previous generation we demonstrate that a flat rate wage tax stimulates economic growth while interest income taxation does not necessarily foster such growth intergenerational redistribution induces individuals to change both physical and human capital accumulation affecting the growth rate through changes in factor prices

can natural experiments measure behavioral responses to environmental risks efforts to measure people s responses to spatially delineated risks confront the potential for correlation between these risks and other unobserved characteristics of these locations the possibility of correlation arises in part because individuals observe other locational attributes that can be expected to influence the hedonic equilibrium one response to this problem is to use events from nature to exploit both temporal and spatial variation in the behavioral responses of interest this paper evaluates the use of hurricanes as a source of new risk information to households in coastal counties potentially subject to the effects of these storms we study the extent to which housing prices before and after hurricane andrew a hurricane with unprecedented property loss reveal how floridians responded to the risk information provided by the storm two counties are selected one without and another with damage from the hurricane to evaluate the plausibility of using quasi random experiments for locations not directly affected by natural events we compare lee county s results to those of dade county where the majority of the damage occurred our findings suggest after controlling for ex post storm damage and changes in insurance markets there is a reasonably high level of consistency in a repeat sales model s ability to estimate the effects of the risk information conveyed by the storm for both counties

optimal taxation in a growth model with public consumption and home production in a neoclassical growth model with public consumption we show the following pareto optimal tax rules the government should tax leisure and private consumption at the same rate and subsidize net investment at the same rate it taxes net capital income also it should tax capital income more heavily than labor income in an extension for home production the additional rule is to tax investment for home production at the same rate of the tax on private market consumption these tax and subsidy rates should be constant over time except the initial tax rate on capital income

changes in implicit flood risk premiums empirical evidence from the housing market abstract hedonic valuation models have shown that sales prices can capitalize property risk factors such as flood zone properties facing lower risk sell at a premium all else being equal previous research has indicated that price differentials reflecting risk of flooding become much larger in the wake of a storm we re examine these findings for pitt county north carolina using multiple storm events within a difference in differences framework and we compare flood zone price differentials for a more recent sample of property sales prior to hurricane fran in 1996 we detect no market risk premium for the presence in a flood zone but we find significant price differentials after major flooding events amounting to a 5 7 decrease after hurricane fran and 8 8 decrease after hurricane floyd results from a separate model that examines more recent data covering a period without significant storm related flood impacts indicate a significant risk premium ranging between 6 0 and 20 2 for homes sold in the flood zone but this effect is diminishing over time essentially disappearing about 5 or 6 years after hurricane floyd the lack of a persistent effect suggests that buyers and sellers risk perceptions may change with the prevalence of hazard events and that homebuyers are unaware of flood risks and insurance requirements when bidding on properties

environmental hazards and residential property values evidence from a major pipeline event this study uses a hedonic price model to estimate the effect of proximity to a major fuel pipeline on housing prices both before and after a high profile accident using data for bellingham washington the site of a 1999 rupture and explosion we find no significant effect of proximity to the pipeline prior to the accident following the accident we find a substantial price effect however the effect decays rapidly with distance from the pipeline and also diminishes over time results suggest that for this type of environmental hazard an adverse event leads to an increase in perceived risk

market failure in information the national flood insurance program the national flood insurance program nfip was established in 1968 and requires mandatory flood insurance for property owners who have federally backed mortgages krutilla 1966 noted that a compulsory national flood insurance program could greatly improve the economic efficiency of flood plain occupancy in the united states however in order to realize the efficiency gains suggested by krutilla property owners must have sufficient information about flood risk and insurance premiums to make well informed home purchase decisions using survey data from boulder colorado we find significant evidence of market failure in information in the nfip program the majority of survey respondents all of whom live in a special flood hazard area report they did not fully understand the degree of flood risk or the cost of insuring against this risk when negotiating the purchase of their property

redistribution and education subsidies are siamese twins abstract we develop models of optimal linear and non linear income taxation with endogenous human capital formation to explore optimal education subsidies optimal subsidies on education ensure efficiency in human capital accumulation and thus play an important role in alleviating the tax distortions on learning induced by redistributive policies if the government cannot verify all investments in human capital education policy offsets some but not all tax induced distortions on learning non pecuniary educational costs benefits may increase decrease subsidies on education especially if they are complementary to work effort

growth effects of shifting from a graduated rate tax system to a flat tax i introduction recently the debate concerning fundamental u s tax reform has led to a number of proposals that involve a shift toward a consumption based system 1 one such proposal is the so called flat tax of hall and rabushka 1995 the flat tax would apply a single tax rate to all labor income above a given threshold and to all capital income after fully expensing investment expenditures hall and rabushka 1995 argue that the adoption of their proposal would provide an enormous boost to the u s economy by dramatically improving incentives to engage in productive activities and would save taxpayers hundreds of billions of dollars in compliance and administration costs 2 in this article we develop a quantitative general equilibrium model to assess the growth effects of adopting a flat tax plan similar to the one proposed by hall and rabushka 1995 the model captures many of the features of the current u s tax code such as graduated personal tax rates a standard personal deduction separate tax rates applied to personal and business income double taxation of business income and differential tax treatment of physical and human capital under appropriate parameter settings the model can exhibit either endogenous or exogenous long run growth our choice of functional forms facilitates a closed form solution to the model this allows us to characterize explicitly the economy s transition path following the reform a central issue in the debate over fundamental tax reform is the effect that such a reform would have on economic growth the present analysis builds on the work of stokey and rebelo 1995 who use an endogenous growth framework to identify the key model features and parameters that are important for determining the quantitative impacts of distortionary taxes on long run growth 3 our study differs from theirs and the bulk of the dynamic tax literature in one fundamental respect here we evaluate the growth effects of shifting from a graduatedrate tax system to a flat rate system stokey and rebelo 1995 consider only flat rate systems in which the marginal tax rate is equal to the average tax rate we approximate the graduated rate tax system in the u s economy by an empirical tax rate function that allows the personal tax rate to depend positively on household taxable income in equilibrium household decisions are influenced by both the level and slope of the tax schedule to implement the flat tax reform we shift the parameters of the tax rate function to flatten the marginal tax schedule while maintaining revenue neutrality our methodology treats the hall rabushka proposal as one that in effect moves a representative household from one tax rate schedule to another we view this setup as a reasonable approximation to gauge the growth effects of tax reform at the macro level a more elaborate setup would of course allow for household heterogeneity at a given point in time in this regard we note that caucutt et al 2003 have recently examined the growth effects of graduated rate taxes in a two period overlapping generations model that includes both skilled and unskilled agents in their model a flatter tax schedule increases the fraction of skilled agents in the economy the share of total output devoted to education rises accordingly and the economy s long run growth rate is observed to increase the quantitative implications of their model are difficult to compare to ours however because their two period framework implies a very long time horizon between household decisions about 30 years moreover their model abstracts from many of the features of the u s tax code that we include here in addition to examining the consequences of flattening the marginal tax schedule we investigate the growth effects attributable to other parts of the flat tax proposal such as allowing full investment expensing eliminating the double taxation of business income and increasing the standard personal deduction

economic valuation of environmental quality using property auction data a structural estimation approach this study proposes a method to economically evaluate environmental quality using property auction data our approach is consistent with microeconomic auction theory and can directly estimate the value function from the data a task that is often difficult when using conventional revealed preference methods such as the hedonic approach we use a method of simulated moments to estimate the value function which in turn is used to calculate the economic value of environmental quality changes we apply this method to data on foreclosure property auctions in tokyo in order to economically evaluate hypothetical improvements in neighborhood fire risks

dynamic laffer curves abstract in an endogenous growth model with human capital accumulation we discuss the possibility of welfare improving changes on the fiscal policy stance in some actual economies first we characterize the extent to which the initial fall in revenues produced by a permanent tax cut can be compensated by an increase in the tax base due to a dynamic laffer curve effect showing that there is in fact a non trivial margin for substituting debt for taxes on labor and capital income second we show that the largest feasible reduction in labor income tax rates may easily produce a higher welfare gain than the largest feasible reduction in capital income tax rates two qualifications a feasible tax cuts exist only for a relatively high elasticity of intertemporal substitution of consumption and b the preference for the largest feasible tax cut on labor income rather than that on capital income reverses for a low appreciation for leisure relative to consumption in the preferences of the representative agent