the chinese economy past present and future since initiating reforms in 1978 china has experienced an unprecedented rate of economic growth and development to become the second largest economy in the world after the united states yet there is so much that we do not know about the internal workings and operations of the chinese economy in part because the available english language literature is but a fraction of the scholarly work on china english speaking scholars business people analysts and policy makers are typically excluded from chinese language scholarship analysis and commentary or are often limited to executive summary type articles from business literature outlets we hope to fill at least part of the gap in the story of china past present and future with nine up to date surveys on some of the critical issues facing china which have been written by leaders in the relevant fields of scholarship

the value of explicit randomization in the tax code abstract consider individuals who draw income from the same random distribution but who differ in their risk aversion and who decide whether or not to report their income truthfully the government chooses the tax structure including a random tax option audit probabilities and penalties on detected evaders to maximize expected ex post social welfare high income individuals who do not evade then choose to pay either a given amount or draw from a random tax schedule this schedule ensures that everyone complies with more risk averse individuals choosing the deterministic schedule and less risk averse ones choosing the random tax option

agency and brokerage of real assets in competitive equilibrium brokerage contracts for many categories of real assets are characterized by a common constant commission rate payable upon sale exclusive agency and contractual asking prices for a large market in steady state these conventional contracts produce in equilibrium no agency problem between a broker and his clients each broker spends the same time or effort selling each client s asset as the broker would spend on his own assets as in standard agency problems extra effort by a broker generates first order stochastically dominant distributions of bids by potential buyers unlike standard agency problems each broker can allocate his time or effort between selling the assets of his multiple clients and searching for new clients in competition with other brokers because brokers time spent searching for new sellers is dissipative entry by brokers is excessive in equilibrium article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the undesirability of randomized income taxation under decreasing risk aversion abstract for the standard specification of the utilitarian optimal income tax problem with hidden characteristics the paper shows that randomized tax schemes are undesirable if preferences exhibit a property of weakly decreasing risk aversion according to the multidimensional risk aversion concept of hellwig hellwig m f 2004 risk aversion in the small and the large with multidimensional outcomes max planck institute for research on collective goods bonn preprint 2004 6 http www mpp rdg mpg de pdf dat 2005 23online pdf this property of decreasing risk aversion also implies that the optimal income tax schedule is unique and depends continuously on the data of the problem

commitment and costly signaling in decentralized markets i propose a search model of a decentralized market with asymmetric information in which sellers are unable to commit to asking prices announced ex ante relaxing the commitment assumption prevents sellers from using price posting as a signaling device to direct buyers search private information about the gains from trade and inefficient entry on the demand side then contribute to market illiquidity endogenous sorting among costly marketing platforms can facilitate the search process by segmenting the market to alleviate information frictions seemingly irrelevant but incentive compatible listing fees are implementable provided that the market is not already sufficiently active abstract from author

managerial incentives on the near linearity of optimal compensation contracts are examined when outcomes depend on managers choices as well as efforts as the cost of effort shrinks relative to payoffs the optimal contract converges to a linear payoff if the control space of the agent has full dimensionality but not otherwise thus when the agent can trade expected return for greater correlation with other returns it is better to ignore relative performance when the cost of effort is small when the choices include all fair gambles and hedges the linear schedule is no more expensive than any other schedule that induces effort unfair gambles are examined as well

majority voting and the welfare implications of tax avoidance abstract a benchmark result in the political economy of taxation is that majority voting over a linear income tax schedule will result in an inefficiently high tax rate whenever the median voter has a below average income the present paper examines the role of tax avoidance for this welfare result for a right skewed distribution of taxed income we show that the political distortion from majority voting is increasing in the median voter s avoidance vice versa keeping the decisive voter s avoidance constant the political inefficiency is decreasing in the average level of avoidance in the economy

dividing online and offline a case study every new method of trade offers an opportunity for economic agents to compare its costs and benefits relative to the status quo such comparison motivates sorting across market segments and reshapes the whole marketplace the internet provides an excellent example it introduces substantial search cost savings over brick and mortar retail stores but imposes new obstacles for sellers to convey quality using sports card trading as a case study we provide empirical evidence on 1 the sorting of product quality between the online and offline segments 2 the changes for retail outlets after the internet came into place and 3 how supporting industries such as professional grading and card manufacturing adapted to take advantage of the new market copyright 2007 wiley blackwell

a survey of recent research in chinese economic history in the past two decades or so the field of chinese economic history has become bigger more colourful and more diversified than ever before this article reviews the new development in scholarship in the filed of chinese economic history apart from the lingering debate on china s performance in pre modern times pre 1750 china s growth and development in the 19th and 20th centuries has attracted more scholarly attention and thus has become increasingly more important in the understanding of china

terrorism and attitudes towards minorities the effect of the theo van gogh murder on house prices in amsterdam abstract does fundamentalist islamic terrorism have an effect on the general attitudes towards muslim minorities we use the murder of theo van gogh as an event study to address this question specifically we use the hedonic market model and test for an effect on listed house prices in neighborhoods where more than 25 of the people belong to an ethnic minority from a muslim country type i relative to the other neighborhoods house prices in type i neighborhoods decreased in 10 months by about 3 with a widening gap over time our results are robust to several adjustments including using synthetic control groups finally we find evidence that segregation increased people belonging to the muslim minority were more likely to buy and less likely to sell a house in a type i neighborhood after the murder than before

the impact of commissions on home sales in greater boston buying or selling a residential property is one of the most important financial decisions for a large majority of households in the united states in 2007 68 percent of households owned their own home more than a third of national wealth was held in residential real estate and there were 6 4 million sales of existing homes according to estimates from the department of housing and urban development surveys indicate that an overwhelming majority of homes are sold with the aid of a licensed real estate agent or broker according to a report issued in 1983 in the wake of the federal trade commission s investigation of the real estate brokerage industry brokers accounted for the sale of 81 percent of single family homes the national association of realtors nar the largest professional organization of real estate agents in the united states that represents more than half of all licensed agents estimates that nationally almost 80 percent of residential real estate transactions involve a realtor for owners selling their homes this way real estate agents usually bear a large fraction of the costs of marketing a home advertising the home conducting open houses taking potential buyers on visits to the home and negotiating offers households interested in buying a home often solicit the help of an agent to make appointments to visit properties and arrange financing in exchange for their efforts agents are usually compensated with a fixed percentage commission of the sales price split between the buyer s agent and the seller s agent national association of realtors 2007 chang tai hsieh and enrico moretti 2003 if the agents are working for

conflicts between principals and agents evidence from residential brokerage abstract when a homeowner uses an agent to sell his property he may have less information than his agent and be disadvantaged in price setting and negotiating this study examines whether the percentage commission structure in real estate brokerage creates agency problems we investigate whether agents are able to use their information advantage to either sell their own property faster or for a higher price than their clients properties the empirical results confirm our theoretical predictions of agency problems as we find that agent owned houses sell no faster than client owned houses but they do sell at a price premium of approximately 4 5

testing cost inefficiency under free entry in the real estate brokerage industry this article provides an empirical framework for studying entry and cost inefficiency in the real estate brokerage industry we present a structural entry model that exploits individual level data on entry and earnings to estimate potential real estate agents revenues and reservation wages thereby recovering costs of providing brokerage service using u s census data we estimate the model and find strong evidence for cost inefficiency under free entry attributable in particular to wasteful nonprice competition we further use the estimated model to evaluate welfare implications of the rebate bans that currently persist in some u s states supplemental materials are provided online

randomness in tax enforcement abstract when there is tax evasion increased randomness about how much taxable income an auditor would assess generally leads to higher reported income and more revenue when reducing randomness is costly optimality requires some randomness in assessed taxable income even if reducing randomness is costless taxpayers may prefer some randomness when the increased revenue can be rebated so that the government s revenue stays fixed

the long side of the market and the short end of the stick bargaining power and price formation in buyers sellers and balanced markets the determinants of bargaining power and price formation in a dynamic exchange market where new traders enter randomly over time are studied when agents on the long side of the market possess the option to wait for the arrival of future partners the terms of trade in the spot market must honor the value of this option the equilibrium terms of trade are expressed in intuitive closed form equations that highlight the distinct influences of short run spot market conditions and long run market demographics i introduction few concepts in economics are as intuitive as the idea that traders on the long side of a market wind up holding the short end of the stick that is they receive little or none of the gains from trade consider for instance the classic setting in which b identical buyers each with unit demands for an indivisible homogeneous good face s identical sellers each with one unit of the good for sale it is well known that in a broad class of one shot trading games all of the surplus in this setting goes to the short side of the market in equilibrium that is if b s buyers bid the price up to their reservation value often it is only when b s that market institutions the rules of the game have any bearing on the equilibrium division of surplus this classic result is somewhat brittle because of the discontinuity in the terms of trade when moving from positive to negative levels of excess demand its logic is familiar however from bertrand competition and it is very compelling the option value to an agent frozen out of a trade in a one shot market game is his reservation payoff of zero any outcome that confers nonzero surplus to a long side agent cannot be sustained in equilibrium because all of the long side agents who would otherwise be frozen out possess a strict incentive to undercut

who profits from taxpayer confusion abstract when taxpayers are uncertain of true taxable income they must decide whether to resolve their uncertainty by seeking tax advice and then decide how much taxable income to report since tax advisors must sign their advisees tax returns the audit policy can depend on whether tax advice was sought in the optimal audit policy some taxpayers will not resolve their uncertainty and the optimal policy yields higher net revenue with uncertainty than without

do real estate brokers add value when listing services are unbundled i introduction real estate brokers typically provide sellers with bundles of services most of which are ostensibly aimed at improving the terms at which homes are sold and helping homeowners find buyers more quickly 1 traditionally access to the multiple listing service mls a pooled database of homes for sale that is owned and operated by an association of local real estate brokers has been an important component of that bundle other components of the traditional brokerage bundle that potentially affect the terms and timing of a sale include market information and recommendations pertaining to the appropriate asking price 2 promotional services preparing a home for sale circulating flyers placing advertisements holding open houses and recommending the home to individual buyers the screening of prospective buyers the facilitation and acceleration of matches between buyers and sellers 3 and assistance with negotiations 4 the object of this paper is to measure the effects of real estate brokerage services provided to sellers other than mls listings on the terms and timing of home sales it is not obvious that sellers benefit from those services on the one hand brokers offer potentially useful knowledge and expertise on the other hand because the relationship between the homeowner and the broker resembles a classical principal agent problem the broker may not deploy services in ways that promote the seller s interests while appropriately structured compensation schemes may alleviate the principal agent problem to some degree see e g the recent survey by miceli pancak and sirmans 2007 significant conflicts remain as levitt and syverson 2008 emphasize an agent has strong incentives to sell the house quickly even at a substantially lower price their empirical analysis shows that homes owned by agents sell for nearly 4 more and stay on the market roughly 9 days longer than other comparable houses similarly rutherford springer and yavas 2005 find that real estate agents receive a premium of 3 0 7 0 when selling their own condominiums in comparison to similar client owned condominiums by waiting longer to sell 5 while those studies shed light on the magnitude of agency costs i e the extent to which the deployment of brokerage services departs from the first best they do not tell us how those costs compare to the benefits flowing from a broker s knowledge and expertise consequently they do not answer the question posed at the outset of this paragraph the importance of the question addressed in this paper is most readily apparent within the context of the recent policy debate over service bundling in real estate brokerage as long as valuable mls listings are bundled with brokerage services homeowners may use brokers even if the agency costs exceed the benefits of brokers knowledge and expertise in that case unbundling would benefit homeowners and promote efficiency in practice a small but growing number of brokers now offer to place clients homes in the mls for a fixed fee 6 yet in many jurisdictions established brokers have resisted pressures to unbundle mls listings from other services in some cases they have pressed for minimum service laws that prevent agents from offering mls only options as of 2007 eight states had such laws in place 7 some states have also adopted licensing requirements that impede the entry of non traditional real estate brokers where such laws are not in force some mlss have adopted their own rules and procedures to prevent or at least discourage unbundling 8 though the internet increasingly provides alternatives to mls databases at least in some jurisdictions the u s federal trade commission observed as recently as november 2009 that t he mls is generally acknowledged to be a superior platform for matching home buyers and sellers 9 thus the practice of bundling mls listings with other real estate brokerage services handicaps homeowners who wish to sell their homes either completely independently for sale by owner or fsbo transactions or without the ancillary services of a listing broker

this old house historical restoration as a neighborhood amenity property markets do not fully price the public s value for historic homes to correct the intergenerational externality associated with historical preservation while preservation for future generations often provides the primary motivation for pigovian subsidies historical preservation or restoration policies may also have significant contemporary amenity effects this study exploits unique data on the use of rehabilitative tax credits rtcs in virginia to estimate the extent to which historic property investment generates market externalities for nearby nonhistoric properties using a difference in differences approach the results indicate that homes in close proximity to rtcs sell at a premium with only modest liquidity effects

two sided markets a progress report the paper provides a road map to the burgeoning literature on two sided markets and presents new results it identifies two sided markets with markets in which the structure and not only the level of prices charged by platforms matters the failure of the coase theorem is necessary but not sufficient for two sidedness the paper builds a model integrating usage and membership externalities that unifies two hitherto disparate strands of the literature emphasizing either form of externality and obtains new results on the mix of membership and usage charges when price setting or bargaining determine payments between end users

the needham puzzle why the industrial revolution did not originate in china one of the most intriguing issues for students of chinese history and comparative economic history is why did the industrial revolution not occur in china in the fourteenth century at that time almost every element that economists and historians usually considered to be a major contributing factor to the industrial revolution in late eighteenth century england also existed in china chinese civilization like the civilizations of mesopotamia egypt and india originated from agriculture the first unified empire qin was formed in 221 b c by 300 b c chinese society had developed into a form that had many characteristics of a market economy with most land privately owned a high degree of social division of labor fairly free movement of labor and well functioning factor and product markets this comparatively developed market economy probably created important attitudes toward profit and contributed to the swift diffusion of the best technology in the han dynasty 206 b c a d 220 the iron tipped plow moldboard and seed drill were widely used in the northern part of china where the main crops were millet and wheat the most significant improvements in chinese agriculture came with the population shift from the north to the rice growing areas south of the yangtze river that started at the beginning of the ninth century and especially after the introduction of a new variety known as champa rice from indochina at the beginning of the eleventh century 2 this variety characterized by better drought resistance and faster ripening enabled farmers to extend the agricultural frontier from the lowlands deltas basins and river valleys to the better watered hill areas and allowed production of two and even three crops a year 3

redistribution when avoidance behavior is heterogeneous abstract the optimal income taxation framework is extended to account for heterogeneity in avoidance behavior the optimal tax formulae are shown to be simply and intuitively modified to reflect the value of taxable income as an indicator of the need for transfers at a given skill level this effect is in addition to any effect implied by just considering additional margins of response to taxes alternative sources of heterogeneity and their likely consequences are discussed when the choice of administration is added to the model it is demonstrated that the optimal tax system may include some seemingly wasteful avoidance schemes even if they could be eliminated without any cost when an avoidance scheme is more heavily used by the needy it may provide additional redistribution without affecting standard incentive constraints

the optimal deterrence of tax evasion the trade off between information reporting and audits abstract despite the widespread recognition of the effectiveness of information reporting to increase tax compliance existing tax theory considers tax audits to be the only tool to prevent evasion this paper extends tax theory by modeling information reporting as an additional enforcement instrument that allows a tax authority to acquire signals about taxpayers income the paper rigorously characterizes the optimal strategy to maximize tax revenue when enforcement resources are limited it determines the optimal allocation of resources between audits and information reporting which is governed by how effectively the signals facilitate audit targeting the model demonstrates that the value of information reporting declines with audit coverage because of the corresponding decline in the value of audit targeting the optimal level of information reporting is an inverse u shaped function of the budget allocated to enforcement while the optimal audit coverage always increases with the budget this finding implies that at some point it may not be optimal to expand information reporting

trading frictions and house price dynamics we model liquidity in housing markets the model provides a simple characterization for the joint process of prices sales and inventory we compare the implications of the model to certain properties of housing markets the model can generate the large price changes and the positive correlation between prices and sales that we see in the data unlike the data prices are negatively autocorrelated and high inventory predicts price appreciation we investigate several amendments to the model informational frictions show promise

the costs of free entry an empirical study of real estate agents in greater boston this paper studies the consequences of xed commissions and low entry barriers in greater boston s real estate brokerage industry from 1998 2007 a period with substantial agent turnover we nd that entry is not associated with increased sales probabilities or reduced sales time instead it decreases the market share of experienced agents and reduces average service quality we develop a dynamic empirical model motivated by these patterns to study the extent of ineciency in the current system compared to alternatives to accommodate a large state space we approximate the value function using sieves and impose the bellman equation as an equilibrium constraint if commissions are cut in half there would be 40 fewer agents implying social savings of 23 of industry revenue and the average agent would facilitate 73 more transactions house price appreciation of 50 during our sample period accounts for a 24 increase in the number of agents and a 31 decline in average agent productivity finally improving information about past agent performance can increase productivity and generate signicant social savings

aggregation and linearity in the provision of intertemporal incentives we consider the problem of providing incentives over time for an agent with constant absolute risk aversion the optimal compensation scheme is found to be a linear function of a vector of n accounts which count the number of times that each of the n kinds of observable events occurs the number n is independent of the number of time periods so the accounts may entail substantial aggregation in a continuous time version of the problem the agent controls the drift rate of a vector of accounts that is subject to frequent small random fluctuations the solution is as if the problem were the static one in which the agent controls only the mean of a multivariate normal distribution and the principal is constrained to use a linear compensation rule if the principal can observe only coarser linear aggregates such as revenues costs or profits the optimal compensation scheme is then a linear function of those aggregates the combination of exponential utility normal distributions and linear compensation schemes makes computations and comparative statics easy to do as we illustrate we interpret our linearity results as deriving in part from the richness of the agent s strategy space which makes it possible for the agent to undermine and exploit complicated nonlinear functions of the accounting aggregates

the relative performance of real estate marketing platforms mls versus fsbomadison com we compare house sales on a for sale by owner fsbo platform to multiple listing service mls sales and find that fsbo precommission prices are no lower but that fsbo is less effective in terms of time to sell and probability of a sale we do not find direct evidence of the importance of network size as a reason for the lower effectiveness of fsbo we do find evidence of endogenous platform differentiation patient sellers use fsbo while patient buyers transact more often on the mls where they avoid patient sellers we discuss the implications for platform competition two sided markets and welfare

optimal observability in a linear income tax abstract we study the optimal observability of the tax base within the standard linear income tax problem where observability is determined by the government s investment into the accurate measurement of the tax base we characterize the optimal level of observability and derive a new expression for the optimal progressivity which in addition to the standard equity efficiency trade off accounts for the limited accuracy of an income tax system

randomization in optimal income tax schedules abstract the optimal income tax problem is one of many problems in economics for which a randomized allocation may be desirable for a two class economy we characterize optimal random tax schedules and present necessary and sufficient conditions for local randomization either to be pareto improving or to extend the constrained pareto frontier we present another sufficient condition for nonlocal randomization to be pareto improving which need not violate ex post or ex ante horizontal equity lastly an example demonstrates that the gains from randomization may be large

durable goods and conformity a consumer s demand for a durable good is governed not only by his individual preferences but also by preferences of other market participants this interdependence of preferences arises from the inevitable resale of durable goods if most people prefer goods with certain features original buyers conform and choose goods with these features even if they do not like them using a matching model we show there is always conformity in equilibrium the incentive to conform is strongest for long lived durables and for people who trade frequently if average preferences are sufficiently strong there is always too little conformity in equilibrium

utilitarianism and horizontal equity the case for random taxation this paper establishes that far from being able to derive the principle of horizontal equity from utilitarianism the principle is actually in consistent with utilitarianism in a variety of circumstances we derive conditions under which a it is optimal to impose random tax schedules ex post randomization and b it is optimal to randomize the tax schedules imposed on a set of otherwise identical individuals ex ante randomization the implications for optimal tax theory are discussed more generally it is shown that there are a number of potentially important economic situations with which the principle of horizontal equity may be inconsistent not only with utilitarianism but even with pareto optimality this abstract was borrowed from another version of this item

estimating the distortionary effects of ethnic quotas in singapore using housing transactions abstract desegregation is a key policy issue in many countries i investigate a residential desegregation program in singapore the ethnic housing quotas i show that choice restrictions imposed on apartment blocks above the quota limits constrained could have distortionary effects causing price and quantity differences for constrained versus unconstrained blocks i test these predictions by hand matching more than 500 000 names in the phonebook to ethnicities to calculate ethnic proportions at the apartment block level i can then investigate differences for constrained and unconstrained blocks close to the quota limits and test for sorting around the limits i find that price differences are between 3 and 5 quantity effects are economically significant translating to longer time on market durations selection cannot fully explain these results my results point to challenges in achieving desegregation using quantity restrictions

strategic bargaining and competitive bidding in a dynamic market equilibrium this paper extends the bargaining and matching literature such as rubinstein 1985 and gale 1986 and 1987 by considering a new matching process we assume that a central information agency exists such as job centres and newspapers in the labour market or real estate agents in the housing market which puts potential traders into direct contact with each other with agent heterogeneity equilibrium trade is characterized by existing traders on the other side since existing traders have already sampled and rejected each other two procedures of trade coexist namely strategic bilateral bargaining and a competitive bidding process depending on the number of potential matches a new trader obtains we characterize the unique symmetric markov perfect equilibrium to this stochastic trading game

optimum taxation with errors in administration abstract the paper compares the welfare levels which can be achieved by two distinct tax regimes lump sum taxation where one attempts to identify individuals and allocate transfers or subsidies on the basis of characteristics and income taxation where characteristics are not observed but personal incomes are measured and taxed where there are no errors in classifying individuals lump sum taxation is superior but where mistakes are made in the allocation of lump sum grants or subsidies income taxation may be more attractive the level of errors where the regimes are equally desirable in terms of social welfare is computed in simple models following that of feldstein 1973 where there is strong aversion to inequality then income taxation becomes preferable at quite small errors in analysing income taxation it is shown that in the feldstein model with endogenous wages the marginal tax rate in optimum income taxation on the more skilled is negative and that on the less skilled is positive in contrast to the standard results see seade 1977 with exogenous wages