partisanship tax policy and corporate profit shifting in a globalized world economy political science scholarship has found mixed evidence on the impact of partisanship on the taxation of firms in this article i show that although left leaning governments set tax rates at higher

how should control theory be used to calculate a time consistent government policy we study different solutions to a simple one dimensional linear quadratic game with a large number of private agents and a government a time consistent solution is defined as a solution to the hamilton jacobi bellman equation i e as a policy for which the government has noprecommitment capability this solution is compared to a policy where the government has an instantaneous pre commitment i e an equilibrium in which the government has a period by period leadership in both cases we show how control theory should be applied to calculate the equilibrium and how to relate these equilibria to the differential game literature

a note on the tiebout tullock hypothesis the period 1975 1980 numerous earlier studies have for the most part found empirical support for the tiebout tullock hypothesis for the periods of the 1950s and 1960s the present study draws on more recent data including the 1980 census of the population to find additional new support for the tiebout tullock hypothesis apparently there is strong evidence to indicate that for the period 1975 1980 geographic differentials in state and local government tax and expenditure policies significantly influenced geographic mobility migration these findings should be of special importance and interest to policymakers in view of the fact that internal migration is the single most important determinant of population and labor force redistribution in the united states

interprovincial migration and local public goods the objective of this paper is to test whether fiscally induced migration occurs in canada that is whether interprovincial migration flows are influenced by government tax and expenditure policies in order to do so a multinominal logit model of migration is developed in which individuals choose to live in the province where their utility would be highest the model is estimated using aggregate data for the period 1962 81 the results indicate that migration is influenced by provincial government spending trough the magnitude and direction of the effect differs with the type of government spending the implication of these results is that intergovernmental transfer payments and provincial natural resource revenues also have the potential to influence migration flows in canada summary in fre excerpt

economic growth strategies the effects of ideological partisanship on interest rates and business taxation in the united states we reformulate the partisanship thesis in light of four claims leveled against it the reformulated version ideological partisanship is based upon the theory that similar rates of economic growth may follow from the different use of policy instruments owing to their role as determinants of investment and growth interest rates business taxation rates and the redistribution of the tax burden between capital gains and earned income are examined we advance models that take into account other views of politics beside the partisan one and test for political influences the united states is characterized by very pronounced partisan differences in national economic policy with democratic administrations seeking to promote growth through a consumption driven while republican administrations promote an investment driven strategy democratic administrations also seek to shift the tax burden toward corporations and owners of capital these findings are examined in light of the comparative political economy literature we conclude that the forms and institutional foundations of left partisan policies differ among democratic capitalist countries

business political power the case of taxation we examine contending views about the forms and mechanisms of business power in u s politics by estimating time series models explaining taxation and redistribution taxation and redistribution constitute strong cases for theories about business and class power since all firms have an interest in reducing taxation we find that changes in corporate taxation and in redistribution between capital gains income and earned income and between corporate taxation and individual taxation are strongly influenced by political partisanship with democratic administrations increasing the tax burden on firms and their owners how far corporations engage in electoral financing measured through the establishment of corporate political action committees is also influential the models show some evidence consistent with the understanding of class power conceptualized by bowles gordon and weisskopf and the presence of election cycle effects but inconsistent with implications arising from the structural dependence of the state on capital and asset concentration in the largest corporations as a mechanism of class power

a fractionally cointegrated var analysis of economic voting and political support we use a fractionally cointegrated vector autoregressive model to examine the relationship between canadian political support and macroeconomic conditions this model is well suited for the analysis because it allows multiple fractional time series and admits simple asymptotic inference for the model parameters and tests of the hypotheses of interest in the long run equilibrium we find that support for the progressive conservative party was higher during periods of high interest rates and low unemployment while support for the liberal party was higher during periods of low interest rates and high unemployment we also test and reject the notion that party support is driven only by relative to the united states economic performance indeed our findings suggest that us macroeconomic variables do not enter the long run equilibrium of canadian economic voting political opinion poll support at all resume une application du modele vecteur autoregressif fractionnellement cointegre sur le vote economique et le support politique on utilise un modele du type vecteur autoregressif fractionnellement cointegre pour examiner la relation entre le support politique canadien et les conditions macroeconomiques le modele est bien adapte a l analyse parce qu il permet l usage de multiples series chronologiques fragmentees et une inference asymptotique simple des parametres du modele ainsi que des tests d hypothese pertinents en equilibre a long terme on decouvre que le support pour le parti progressiste conservateur a ete plus eleve au cours des periodes de hauts taux d interet et bas taux de chomage alors que le support pour le parti liberal a ete plus eleve au cours des periodes de bas taux d interet et de hauts taux de chomage on met au test l hypothese qu on rejette d ailleurs que la notion que le support politique est enclenche seulement par la performance economique du canada par rapport a celle des etats unis en fait les resultats suggerent que les variables macroeconomiques americaines n ont pas du tout d impact sur l equilibre a long terme du vote economique canadien support dans les sondages d opinion politique

the implications of competition among jurisdictions does tiebout need politics the paper investigates whether compensation among local jurisdiction is by itself sufficient to ensure efficient provision of local public goods jurisdictions have fixed boundaries and each has an entrenched government with the power to tax and supply the public good residents can move costlessly among jurisdictions it is shown that competition among numerous jurisdictions is not sificient to guarantee public sector efficiency though residents can vote with their feet land is immobile hence governments can unsurp some land rents for their own ends increasing the number of jurisdictions limits but cannot completely eliminate the ability to exercise discretionary governmental power

the expenditure effects of restricting competition in local public service industries the case of special districts the purpose of this paper has been to extend the type of positive economic analysis of the urban public economy that has been initiated by wagner and martin 1978 wagner and weber 1975 ostrom et al 1976 and others the hypothesis was tested that restricting the growth of single purpose special districts renders local service industries more monopolistic and should therefore increase local public expenditure levels evidence brought forth indicates that the effect of such restrictions imposed in two states california and oregon was to increase general per capita expenditures ceteris paribus per capita expenditures on water supply and fire protection two services frequently provided by special districts were also seen to increase dramatically after controlling for other supply and demand determinants of local public expenditures thus the empirical test of the last section supports the monopoly enhancing view of special district growth restrictions and leads us to reject the alternative reformist hypothesis that consolidating or annexing special districts will lead to improved hierarchical organization of local government and diminish the cost of providing local public services

an alternate test of the tiebout hypothesis this paper has presented an indirect test of the tiebout hypothesis that does not require explicit consideration of the interaction between the markets for housing and local public services the results suggest that at least in the case of elementary and secondary education when allowed to choose from a selection of jurisdictions individuals locate so as to minimize the allocative inefficiency that results from collective provision of local services

jurisdictional homogeneity and the tiebout hypothesis abstract in this paper an alternative to the capitalization approach to testing the tiebout model is presented the tiebout foot voting mechanism suggests that households will sort and stratify into approximately homogeneous local public goods jurisdictions at a point in time the efficiency of the sort will be positively related to the number of existing jurisdictions using a measure of homogeneity introduced by theil the relationship between stratification homogeneity within jurisdiction and number of jurisdictions is tested for a sample of school districts within 33 smsas the tiebout stratification hypothesis is confirmed

migration and income redistribution responsibilities this study examines whether afdc benefits determine or discourage state to state migration flows in the united states a pooled cross section time series model is developed to estimate afdc benefits in a state and recipients and whether benefits in one state affect benefits in other states a second model using data from the 1980 census and the panel study of income dynamics estimates migration of afdc recipients and the level of benefits in in migration and out migration states both models indicate that small but statistically significant amounts of migration occur which may be quite important but only in the long run movers although small in number are much more likely to move to a state with higher benefits states perceive this migration as important indicating that states should have less control and the federal government more control over income redistribution

the effect of welfare and wage levels on the location decisions of female headed households abstract this paper develops and estimates a model designed to calculate the impact of welfare benefit levels wages and tax rates on the location choices of female headed households the empirical model assumes that women simultaneously choose both where they will live and whether or not they will participate in the welfare system based on their expected income and expected hours of work for each location participation possibility these income and hours expectations depend in turn on the welfare benefits wage and tax rates facing each household in each location it is found that both regional welfare levels and wage rates have a significant effect on the location decisions of this population the probability of a typical female headed household with little outside income leaving an area with low welfare payments and low wages can be as much as 12 points higher over a 4 year period than the probability of leaving a high welfare high wage area

unobservable effects and business performance while unobservable factors such as corporate culture access to scarce resources management skill and luck can be postulated to be principal determinants of business success their effects are all but ignored in studies of business performance this study making use of the pims data base reports empirical evidence indicating that failure to control for unobservable factors influencing profitability both biases and exaggerates the effect of strategic factors indeed the influence of unobservable factors is so pervasive as to invalidate many of the conclusions drawn from studies failing to control for their effects

the keynesian and political determinants of unbalanced budgets u s fiscal policy from eisenhower to reagan the political business cycle proposition that politicians manipulate fiscal policy for political advantage is largely untested more often than not such manipulation is only assumed to occur on the basis of observed movements in inflation and unemployment and the few direct tests of the manipulation hypothesis are characterized by limited consideration of the full possibilities for political influence inadequate control for nonpolitical stabilization policy and inconsistent results this paper constructs several models of political fiscal policy incorporates them into a simple model of keynesian stabilization policy and tests the combined models using u s budget surplus deficit data from fy54 to fy83 the results provide little support for either the electoral motivation or partisan differences interpretations of the political business cycle the implications of these findings for the political business cycle literature long term economic management and deficit directed proposals for institutional reform are discussed

expectation calculation and macroeconomic dynamics the authors establish a framework wherein agents make expectation revision decisions subject to a specified calculation technology and preferences over forecast errors the technology endows agents with correctly specified economic models but the cost of expectation calculation using these models leads to gradual and incomplete adjustment to long run rational expectation equilibrium the rational expectations hypothesis emerges as a special case of the equilibrium paths obtained in the authors framework in a natural rate model of monetary policy calculation technology gives rise to long run nonneutrality and hysteresis effects and incomplete adjustment of forecast rules causes output fluctuations to be amplified copyright 1992 by american economic association

a downsian spatial model with party activism a unidimensional spatial model is proposed in this article although its formal structure parallels the spatial model of electoral competition this model examines the decisions of individuals as they choose whether or not to become activists in one of two political parties an individual calculus of participation is developed that is similar to the spatial interpretation of the calculus of voting this calculus is then generalized by examining conditions that may hold for aggregate activism probabilities and the relationship between the two forms is investigated some results are then presented which concern the distributions of activists in the two parties these results in general conform to the existence of party cleavages in which there are two stable equilibrium distributions of activists such that the two parties activists are relatively cohesive internally and relatively distinctive externally finally some suggestions are offered about how this model can be combined with the spatial model of candidate competition to provide a more complete model of elections

political parties world demand and unemployment domestic and international sources of economic activity this article replicates and extends earlier work on the politics of macroeconomic policy by considering political effects on unemployment in 14 western industrial nations between 1960 and 1983 changes of party control of government display broadly the expected effects namely that unemployment falls under left wing governments and rises under right wing governments however the principal conclusions of this article are that partisan effects on unemployment in open economies that is economies heavily dependent on trade with other countries can only be satisfactorily estimated relative to the constraint imposed by the level of world economic activity and that in addition to politicians strategic incentives political institutions and economic regime constraints also determine whether partisan effects on unemployment will be sustained transitory or absent with respect to the latter on the whole no effects are found where no such effects were promised by the new government before taking office where one party or dominant partner coalitions form the effect on unemployment is transitory whereas where broad coalitions form it is sustained or absent finally ceteris paribus any partisan effects are more likely where governments secure parliamentary majorities

animal spirits the effect of economic expectations on economic output the public is characterized as able forecasters of future economic performance they engage in rational expectations empirical evidence exists to bolster the claim this article considers the possibility that the public does more than predict economic output they may engage in a self fulfilling prophecy where belief about the future economy translates into personal financial behaviour e g consumption and investment that actually drives economic performance after controlling for rational expectations with elite forecasts leading indicators and past economic performance it is shown that between 5 and one third of the variance in economic output can be explained by prospective economic sentiment this result has broad implications for electoral behaviour research

on the existence of a political monetary cycle this paper examines electoral influence on monetary policy as measured by ml money growth i find a significant four year electoral cycle in money growth even when controlling for the influence of interest rates income and budget deficits further the residual electoral cycle produces the income and inflation movements associated with the political business cycle when it is used in simulations of simple reduced form macro models the paper concludes by discussing the difficulties in rationalizing cyclical monetary policy with rational expectations

optimal policy business cycles the effectiveness of economic policies depends on the nature of expectations under adaptive expectations the philipps curve allows a governement to surprise agents under rational expectations there is less room for economic policies we assume that only an endogenously determined proportion of agents form rational expectations and show that this leads the government to optimal policies which result in a policy cycle with real effects c 1998 elsevier science b v all rights reserved

a near rational model of the business cycle with wage and price inertia this paper presents a model in which insignificantly suboptimal behavior causes aggregate demand shocks to have significant real effects the individual loss to agents with inertial price wage behavior is second order in terms of the parameter describing the shock while the effect on real economic variables is first order thus significant changes in business activity can be generated by anticipated money supply changes provided that some agents are willing to engage in nonmaximizing behavior which results in small losses

the effect of the social welfare system on metropolitan migration in the us by income group gender and family structure this research paper addresses some important issues regarding out migration from and in migration to metropolitan areas in the u s particularly the effect of the social welfare system on migration decisions the primary focus is on migration by income group poor versus non poor with a secondary focus on how gender and family status relate to migration the results provide only very weak support for the hypothesis that social welfare benefits influence out migration decisions only of non poor female headed households but moderate support for the effect of such benefits on in migration decisions especially of low income and female headed households excerpt

how constraining is capital mobility the partisan hypothesis in an open economy a growing literature argues that international financial integration has eliminated the possibility for distinct partisan macroeconomic strategies i test this hypothesis by reformulating the partisan hypothesis in an open economy context and conducting pooled timeseries analysis of budget balances real interest rates and capital controls for fourteen oecd countries between 1970 and 1994 the analysis provides little evidence that financial integration has eliminated distinct partisan macroeconomic policies under fixed exchange rates leftist governments run larger deficits than rightist governments and use capital controls to reduce interest rate premia under floating exchange rates leftist governments pursue looser monetary policies than rightist governments while partisan distinctions do weaken in the 1990s in countries with fixed exchange rates this is attributed to the recession of the early 1990s and to important institutional changes in the european union international financial integration therefore does not prevent governments from pursuing distinct partisan macroeconomic policies

searching for leviathan comment and extension in a recent article wallace oates 1985 investigated whether fiscal decentralization tended to act as a constraining influence on the overall size of the public sector this hypothesis has been advanced by several alternative theories of government behavior including richard musgrave s 1959 model of how the distribution function of government would be carried out by subnational governments geoffrey brennan and james buchanan s 1980 leviathan model and the more traditional public choice model for example walter hettich and stanley winer 1984 all contend that the decentralization of tax and spending decisions introduces competition among governmental units seeking to attract citizens and other mobile resources and thereby constrains taxing power oates analyzed two data sets one pertaining to the state and local sector in the united states and the other consisting of a sample of 43 countries and found little empirical support for the decentralization hypothesis the purpose of this paper is to reconsider his analysis in the case of state and local governments specifically it will be argued that oates s measures of decentralization may be inappropriate to test the hypothesis furthermore by taking into account the structure or composition of local governmental jurisdictions within a state empirical support of the decentralization hypothesis can be marshaled for general purpose local governments such as counties and municipalities i measuring fiscal decentralization among the states

fragmentation and the growth of local government an assumption of the post world war ii metropolitan reform movement was that fragmentation of metropolitan regions into multiple local governments was wasteful and inefficient increasing the cost and size of government more recently polycentrists have argued that the competition between multiple governments in metropolitan regions can in factreduce the growth in government by providing a competitive check on the excessive demands of local bureaucrats for more resources in this article i explore the effects of fragmentation on growth in the size of suburban municipal government budgets and in the number of services offered competition inherent in more fragmented metropolitan regions is shown to slow the expansion in local government expenditures and service levels

economic competition and political competition an empirical note this paper has examined the proposition that more concentrated or consolidated metropolitan areas will produce public goods less efficiently than if there were a greater degree of interjurisdictional competition the empirical evidence garnered in section 3 suggests that interjurisdictional competition does tend to reduce the cost of providing local public services and consequently local government expenditure levels

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

on the preservation of deterministic cycles when some agents perceive them to be random fluctuations some recent equilibrium models give rise to complex but deterministic fluctuations we modify the hypothesis of universal perfect foresight by injecting into the economy a nonnegligible fraction of less informed agents who optimize their expected utility with respect to the statistical distribution of prices in the deterministic dynamics for the standard overlapping generations model with money the samuelson case it is proved that if the fraction of consumers with limited knowledge is sufficiently high then all equilibrium cycles of period k 2 disappear the global properties of the case of 2 cycles are studied in detail a brief analysis of the classical case is also given

competitive equilibrium cycles recently there has been a surge of interest in endogenous business cycles that arise in competitive laissez faire economies in the context of standard overlapping generations economies conditions for the existence of equilibrium cycles have been given by grandmont 1983 and by benhabib and day 1982 models of the economy with extrinsic uncertainty or sunspots that have been developed by shell 1977 and by cass and shell 1983 see also balasko 1983 can also lead to equilibrium cycles

income distribution in the united states political action has affected postwar income distribution in the united states mainly through policy induced variations in macroeconomic activity and government transfer benefits in proportion to total income we present a small dynamic model of the connections among the partisan balance of power macroeconomic fluctuations transfer spending trends and income distribution outcomes the model is based on the premise that the parties have different distributional goals and it is designed to identify how shifts in party control of the presidency and the strength of the parties in congress have affected the distribution of after tax after transfer income by influencing cyclical economic performance and the flow of resources to transfer programs we therefore extend the partisan theory of macroeconomic policy to the domain of income distribution outcomes

the unemployment rate consequences of partisan monetary policies economists and political scientists have identified several ways in which political motivations and institutional arrangements can affect macroeconomic policymaking one way is described by the political business cycle model 42 37 in which vote seeking politicians manipulate the path of the economy to secure unsustainably favorable conditions at election times variants of this model have been widely tested with limited success a second channel for political impacts comes through partisan policy changes brought about by electoral turnover the pathbreaking work in this literature includes the contributions of hibbs 30 31 32 33 and beck 11 these works have focused on the empirical issue of how unemployment rates vary under democratic and republican presidents in the u s and have found strong support for the proposition that unemployment rates decline under democratic administrations a third phenomenon has been studied primarily by economists and concerns the credibility problem faced by a central bank selecting money growth rates models of the credibility problem 8 21 describe a setting in which the central bank and the public interact by respectively choosing actual and expected money growth rates in a variant of the prisoners dilemma this interaction can result in excessive inflation

overlapping jurisdictions substitutes or complements this paper presents a simple model of the demand relationship between the activities undertaken by overlapping governments and uses the framework to estimate the relationship between municipal and county expenditures the empirical results reveal a complementary relationship between county and city general expenditures any public sector expansion effects of monopoly power at the county level will therefore be reinforced by greater municipal spending further expanding the total size of the local public sector on the other hand changes in county police and roads expenditures appear to have no strong stable impact on municipal police and roads expenditures respectively providing no reinforcing or offsetting municipal spending responses to decisions at the county level

limited rationality and strategic complements the implications for macroeconomics this paper considers the implications of heterogeneity in information processing abilities for macroeconomic models that exhibit strategic complements the latter is the same concept that has received much attention in the recent macro literature under the headings keynesian coordination problems and positive trading externalities we consider environments in which agents vary in terms of their ability to form expectations and ask whether it is the sophisticated agents or the naive agents who have a disproportionately large effect on macroeconomic equilibrium we find that if macroeconomic interaction exhibits strategic complementarity then it is the naive agents who have a disproportionate impact

capitalization of property tax differentials within and among municipalities usa most studies evaluating the effect on housing prices of regulatory programs for controlling urban growth use econometric methods hedonic price models without considering the research design aspects of the task this article examines the strengths and

centralization and government competition this paper examines the relationship between government size and fiscal centralization with specific focus on the separate influences of centralism and fragmentation on the size of public sector in the united states the empirical findings at the national level provide support to the hypothesis that fiscal decentralization leads to a smaller government the findings at the state and local levels however show no empirical relationship between government size and the degree of centralization

political parties and the supply side of the economy the provision of physical and human capital in advanced economies 1960 90 theory partisan tenure of government in contrast to institutionalist and structural approaches is used to explain the nature of governmental strategies to affect the supply side of the economy the provision of the input factors capital and labor hypotheses supply side economic strategies are a function of the party in office left wing governments spend heavily in physical and human capital formation to raise the productivity of factors and the competitiveness of the economy rightwing governments rely instead on private agents to maximize economic growth the organization of the domestic political economy and the international economy which place heavy limits on the capacity of parties to affect the conduct of macroeconomic policies hardly constrain the choice of supply side economic strategies methods regression analysis of data for levels of public spending on gross fixed capital formation and on education in oecd nations from 1960 to 1990 results supply side policies conform to partisan preferences throughout the period examined the institutional configuration of the economy affected policies jointly with government partisanship until the oil shock but not afterwards economic openness does not constrain the choice of supply side policies

economically rational expectations equilibrium abstract at the economically rational expectations equilibrium introduced in this paper agents choose between costly rational expectations and costless adaptive expectations we show that the sequence of economically rational expectations equilibria converges to the rational expectations equilibrium and that all agents will ultimately choose adaptive expectations

partisan cycles in congressional elections and the macroeconomy in the postwar united states the president s party has always done worse in the midterm congressional elections than in the previous congressional election republican administrations exhibit below average and democratic administrations above average economic growth in the first half of each term whereas in the latter halves the two see equal growth our rational expectations model is consistent with these two regularities in presidential elections voters choose between two polarized candidates they then use midterm elections to counterbalance the president s policies by strengthening the opposition in congress since presidents of different parties are associated with different policies our model predicts a spurious correlation between the state of the economy and elections our predictions contrast with those of retrospective voting models in which voters reward the incumbent if the economy is doing well before the election our model performs empirically at least as well as and often better than alternative models

taxation corporate financial policy and the cost of capital the cost of capital plays an important role in the allocation of resources among competing uses in a decentralized market system the purpose of this paper is to organize and present what is known and what is hypothesized about the effects of taxation on the incentive to invest via the cost of capital taking full account of important issues that arise independently from the question of taxation included in the analysis is a discussion of empirical findings about the interaction of inflation and taxation in influencing the incentive to invest and a treatment of taxation and uncertainty this abstract was borrowed from another version of this item

fiscal migration and the london boroughs an amended version of the aronson schwartz model and a more detailed econometric model are used to test the proposition that population movements within the london metropolitan area are related to the value for money provided by local authorities both approaches reveal evidence of a significant relationship which has a variety of implications for policy towards local government finance

free trade fair trade strategic trade and protectionism in the u s congress 1987 88 what conditions led the one hundredth congress of the united states to enact fair trade and strategic trade policies into law during 1987 88 political partisanship is an important force with democrats supporting and republicans opposing all types of trade intervention otherwise the coalitions of support for and opposition to the various trade policies differ particularly in the senate in that body international business is associated with support for fair trade policies and with opposition to classical protectionism while domestic u s business is associated with support for classical protectionism liberalism is strongly associated with support for fair and strategic trade policies but is not associated with classical protectionism in the house of representatives the long standing protectionist coalition remains an influence few forces in support of free trade remain in u s politics changing international market conditions rapidly affect the making of u s trade policy

structural dependence of the state on capital a central claim of both marxist and neoclassical political theory is that under capitalism all governments must respect and protect the essential claims of those who own the productive wealth of society this is the theory of structural dependence of the state on capital using a formal model the internal logic and the robustness of the theory is examined we conclude that in a static sense the theory is false virtually any distribution of consumption between wage earners and owners of capital is compatible with continual private investment once an appropriate set of taxes and transfers is in place yet the state may be structurally dependent in a dynamic sense policies that once in place redistribute income without reducing investment do reduce investment during the period in which they are anticipated but not yet implemented

elections and the fed is there a political monetary cycle to understand the political causes of macroeconomic policy it is necessary to examine the institutions that actually make such policy and the incentives those institutions face an explanation of the political causes of united states monetary policy must treat the various institutions that are influential in the monetary policy process which are at a minimum the federal reserve fed and the executive including the president the treasury department and other advisors in the executive office of the president the reelection motive has proven useful in modeling presidential incentives in this article i investigate whether electoral incentives associated with the theory of the political business cycle pbc can help to explain the behavior of the fed over the last quarter century the political business cycle has had a curious hold on modern political economy while the empirical evidence in favor of the cycle is far from overwhelming its theoretical importance leads to continuing empirical

beyond demand and supply curves in macroeconomics this paper surveys recent issues in macroeconomics from the viewpoint of dynamic economic theory the need to look beyond demand and supply curves and the insights that come from doing so are emphasized examples of issues in debt management and fiscal policy are analyzed

tax policy and investment in major u s macroeconomic econometric models abstract in an analysis of six major u s quarterly models the predicted results of tax incentives for investment are found to vary widely differences are traced to critical specifications in investment equations when appropriately revised investment equations are reestimated the role of tax parameters is much reduced particularly among the high outliers and the variance among the models is narrowed decidedly full model simulations of revised equations suggest that current and proposed incentives such as the investment tax credit and accelerated depreciation are not cost effective increases in investment approximate only half of static tax losses and budget deficits widen

policy motivation and party differences in a dynamic spatial model of party competition we present a model of party competition that produces more realistic patterns of results than those often emphasized in the literature reversing downs 1957 we assume that parties win elections in order to formulate policies rather than formulate policies in order to win elections voters are modeled first as having perfect information about candidate positions and then under conditions of uncertainty in simulation experiments we show that policy motivation and voter uncertainty can bring about persistent and predictable party differences in sequential majority rule elections as the degree of voter certainty decreases parties diverge towards their optima whereas increases in voter certainty draw parties towards cycles in which party positions vary but predictable issue stances are maintained on the average

tests of the rational expectations hypothesis this paper reviews evidence on the structure of anticipation from a number of empirical studies jack muth s rational expectations hypothesis is compared with a variety of alternative models including ferber s law the implicit expectations model of edwin mills and muth s new errors in the variables model the cumulative evidence is of such strength as to compel the suspension of belief in the concept of rational expectations this implies that it is a mistake to proceed under the maintained hypothesis that expectations are rational instead it is necessary to test the sensitivity of empirical and theoretical results to alternative assumptions about the structure by which anticipations are generated copyright 1986 by american economic association

explaining the spatial variation in homeownership rates results for german regions lerbs o w and oberst c a explaining the spatial variation in homeownership rates results for german regions regional studies this paper employs cross sectional data on ninety six german regions to investigate the interregional variability of homeownership rates among the explanatory variables the analysis includes important regional housing market indicators as well as regional socio demographic composition urbanization and labour market performance an estimation strategy is chosen which accounts for different forms of spatial dependence between the regional units it is found that regional differences in the relative price of owning versus renting and the affordability of owner occupied housing play a key role in explaining why homeownership rates vary so substantially across the country the results indicate significant neighbourhood effects for several variables