capital taxation and government debt policy with public discounting abstract this paper characterizes capital taxation and public debt policy in a quantitative macroeconomic model with an impatient government and uncertainty the government has access to linear taxes on capital and labor and to non state contingent bonds government impatience generates positive and empirically realistic long run levels of both capital taxes and public debt prior predictive analysis shows that the simulated model matches the distribution of both variables in a sample of 42 countries alongside other statistics the paper then presents econometric evidence that countries with higher political instability used as an approximation of unobservable public discount rates have both higher capital taxes and debt

return migration the european experience labour immigration contributed strongly to europe s post war economic development in contrast to migration to north america or australia these movements of labour were always seen as temporary by sending and receiving countries and at least initially also by most migrants although many migrants stayed more permanently return migration is a highly relevant feature in practice its significant role and the underlying behavioural mechanisms are not well understood however it is therefore not too surprising that most policy measures taken in the 1970s and 1980s to encourage return migration failed the paper takes the view that much can be learned from recent european history temporary immigration schemes may be helpful to moderate illegal migration and to foster east west economic relationships given the tight policies in the european union short term migration seems to be the only channel to open the door slightly the paper reviews the european history of return migration and the policy regimes in important european labour migration receiving countries it also provides new empirical evidence on the determinants of return behaviour and successful return return propensities of migrants increase with the age at entry but decrease with the number of years of residence conditional on having decided to return however the remaining years in the country decrease with years of residence and keeping years of residence constant with entry age return incentives may cause dissatisfaction and reintegration problems in the home country the results support the view that economic benefits are the larger the earlier it is clear whether migration is temporary or permanent

political instability capital taxation and growth abstract in cross country studies of economic growth average growth rates of gdp per capita tend to be negatively associated both with the size of government and with measures of political instability we show that a linear endogenous growth model with a very simple model of government spending and taxation in the presence of political instability can account for both empirical correlations in addition the model predicts that both correlations are intimately linked thus greater political instability leads to both lower growth rates and a higher share of government spending in gdp

are environmental fiscal incentives effective in inducing energy saving renovations an econometric evaluation of the french energy tax credit abstract fiscal incentives have been introduced to encourage households in many countries to undertake energy saving renovations this paper assesses the impact of an energy tax credit on i renovation rate and ii renovation expenditures using french data we exploit a sharp discontinuity corresponding to the introduction of the french tax credit in 2005 to identify the policy s effects results indicate that the tax credit has little effect on the decision to renovate increasing renovations by 1 09 ceteris paribus we find that the presence of free riding reduces the actual effect of fiscal measures however this fiscal policy does lead to an increase in renovation expenditures by 21 76 all things being equal this suggests that the energy tax credit induces households who are already determined to renovate to perform more substantial energy saving renovations we conduct a robustness check using the matching method which confirms our results

social discounting and incentive compatible fiscal policy abstract this paper considers a representative agent model of linear capital and labor income taxation in which the government cannot commit ex ante to a sequence of policies for the future in this setup if the government is more impatient than the households the capital income tax will be positive in steady state thus impatience and lack of commitment are able to generate positive capital taxes in the long run although each of these characteristics individually was not furthermore the steady state to which the economy converges is independent of initial conditions

fear unemployment and pay flexibility the paper uses newly available cross section data to study wage determination in the united kingdom in the 1980s the main results are as follows 1 fear of unemployment substantially depresses pay 2 there is some evidence of a wage ratchet whereby rates of pay are more flexible upwards than downwards 3 the unemployment elasticity of pay averages 0 1 and 4 wages are much more flexible in nonunion workplaces than they are in union workplaces copyright 1991 by royal economic society

probability models and robust policy rules abstract we consider sims s 2008 argument that robust policy making requires that policy models be treated as probability models in a welfare based setting we estimate by bayesian methods a number of variants of a new keynesian macroeconomic model and use both the model odds and posterior densities to design robust interest rate rules consisting of an inflation forecast based rule and a wage targeting one each are shown to have distinct robustness qualities and distinct implications for the probability models approach to ensure feasible policy we further impose that rules are stable determinate and lower bound compatible our results have important implications for the design evaluation and analysis of the probability models approach to robust monetary policy making

fear unemployment and migration we examine the impact on the uk economy of the flow of workers from ten east european countries after their accession to the european union we find evidence that those most susceptible to competition from these workers have seen weaker wage inflation we document that the presence of these foreign workers has increased the fear of unemployment and helped to contain wage pressure we argue that this inflow of workers has increased supply by more than it has raised demand and thus had the effect of reducing both inflationary pressures and the natural rate of unemployment the recent rise in migration to the uk from eight eu accession countries the czech republic estonia hungary latvia lithuania poland slovakia and slovenia the a8 countries which started in 2004 as well as subsequently from romania and bulgaria the a2 in 2007 has generated a good deal of controversy we will refer to these countries collectively as the a10 henceforth 1 how many of these eastern europeans are there currently in the uk which countries did they come from and when what impact has their influx had on the uk economy and what likely impacts will they have in the future

the new political economy of taxation in advanced capitalist democracies earlier versions of this paper were presented at the 1999 annual meeting of the american political science association september 1 5 atlanta ga and the 2000 annual meeting of the midwest political science association april 27 30 chicago il the authors thank steffen ganghof philip genschel mark hallerberg alex hicks william keech dennis quinn and the anonymous reviewers and editor of this journal for many helpful comments and dennis quinn for generously sharing data duane swank thanks the german marshal fund of the united states and marquette university for support of work incorporated in this paper data utilized in this paper are available from duane swank marquette edu

emigration and wages the eu enlargement experiment abstract the enlargement of the european union provides a unique opportunity to study the impact of the lifting of migration restrictions on the migrant sending countries with eu enlargement in 2004 1 2 million workers from eastern europe emigrated to the uk and ireland i use this emigration wave to show that emigration significantly changed the wage distribution in the sending country in particular between young and old workers using a novel dataset from lithuania the uk and ireland for the calibration of a structural model of labor demand i find that over the period of five years emigration increased the wages of young workers by 6 while it had no effect on the wages of old workers contrary to the immigration literature there is no significant effect of emigration on the wage distribution between high skilled and low skilled workers

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

optimal taxation without state contingent debt in an economy studied by lucas and stokey tax rates inherit the serial correlation structure of government expenditures belying barro s earlier result that taxes should be a random walk for any stochastic process of government expenditures to recover a version of barro s random walk tax smoothing outcome we modify lucas and stokey s economy to permit only risk free debt having only risk free debt confronts the ramsey planner with additional constraints on equilibrium allocations beyond one imposed by lucas and stokey s assumption of complete markets the ramsey outcome blends features of barro s model with lucas and stokey s in our model the contemporaneous effects of exogenous government expenditures on the government deficit and taxes resemble those in lucas and stokey s model but incomplete markets put a near unit root component into government debt and taxes an outcome like barro s however we show that without ad hoc limits on the government s asset holdings outcomes can diverge in importa

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

selection and network effects migration flows into oecd countries 1990 2000 abstract this paper presents empirical evidence on immigration flows into the oecd countries during the period 1990 2000 our results indicate that network effects are strong but vary between different groups of welfare states and between countries according to the type of immigration policy being applied network effects seem to be less important in the nordic countries which also seem to attract immigrants from the lowest income level source countries we do not find clear evidence that selection effects measured by migration flows being sensitive to differences in public social expenditures have had a major influence on the observed migration patterns until now this may partly be explained by restrictive migration policies which may have dampened the potential selection effects

return migration wage differentials and the optimal migration duration in simple static models migration increases with the wage differential between host and home country in a dynamic framework and if migrations are temporary the size of the migrant population in the host country depends also on the migration duration this paper analyses optimal migration durations in a model which rationalises the decision of the migrant to return to his home country despite persistently higher wages in the host country the analysis shows that if migrations are temporary the optimal migration duration may decrease if the wage differential grows larger using micro data for germany the second part of the paper provides empirical evidence which is compatible with this hypothesis

non native speakers of english in the classroom what are the effects on pupil performance there has been an increase in the number of children going to school in england who do not speak english as a first language we investigate whether this has an impact on the educational outcomes of native english speakers at the end of primary school we show that the negative correlation observed in the raw data is mainly an artefact of selection non native speakers are more likely to attend school with disadvantaged native speakers we attempt to identify a causal impact of changes in the percentage of non native speakers our results suggest zero effect and rule out negative effects

the nairu unemployment and monetary policy this paper examines the precision of conventional estimates of the nairu and the role of the nairu and unemployment in forecasting inflation the authors find that although there is a clear empirical phillips relation the nairu is imprecisely estimated forecasts of inflation are insensitive to the nairu and there are other leading indicators of inflation that are at least as good as unemployment this suggests deemphasizing the nairu in public discourse about monetary policy and instead drawing on a richer variety of leading indicators of inflation

why do migrants return to poor countries evidence from philippine migrants responses to exchange rate shocks abstract this paper distinguishes between target earnings and life cycle motivations for return migration by examining how philippine migrants return decisions respond to major unexpected exchange rate changes in their overseas locations due to the asian financial crisis overall the evidence favors the life cycle explanation more favorable exchange rate shocks lead to fewer migrant returns a10 improvement in the exchange rate reduces the 12 month return rate by 1 4 percentage points however some migrants appear motivated by target earnings considerations in households with intermediate foreign earnings favorable exchange rate shocks have the least effect on return migration but lead to increases in household investment

markov perfect capital and labor taxes abstract this paper analyzes the markov perfect equilibrium of an economy were a benevolent government that lacks the ability to commit to future policy choices uses taxes on capital and labor income to finance the provision of a public good the main finding is that the government taxes capital and subsidizes labor so that only the dynamic inefficiency of future capital taxes remains if agents preference for the public good is sufficiently high then capital is confiscated setting bounds on taxes alleviates the dynamic inefficiency inherent in capital taxation but some implementations carry a high welfare cost allowing for endogenous capital utilization makes the current capital tax distortionary and implies capital and labor tax rates that are relatively close to those measured for the u s economy

the laffer curve revisited abstract laffer curves for the us the eu 14 and individual european countries are compared using a neoclassical growth model featuring constant frisch elasticity cfe preferences new tax rate data is provided the us can maximally increase tax revenues by 30 with labor taxes and 6 with capital taxes we obtain 8 and 1 for the eu 14 there 54 of a labor tax cut and 79 of a capital tax cut are self financing the consumption tax laffer curve does not peak endogenous growth and human capital accumulation affect the results quantitatively household heterogeneity may not be important while transition matters greatly

the effects of government purchases shocks review and estimates for the eu in this article we review the theoretical consequences of government purchases shocks for both closed and open economies followed by a discussion of the empirical literature next we provide our own estimates for the eu countries we find that an increase in government purchases raises output consumption and investment and reduces the trade balance however the stimulating effect is weaker and the trade balance reduction is larger for the more open eu economies consistent with larger leakage effects further we show that government purchases shocks in large eu economies have non negligible consequences for economic activity in the main trading partners

taxing capital is a good idea the role of idiosyncratic risk in an olg model abstract we investigate an overlapping generations olg model in which agents who live for two periods receive idiosyncratic productivity shocks when they are old we show that around zero tax equilibria we can always construct a combination of a small capital tax and a lump sum transfer that are pareto improving as davila et al econometrica 2012 show a capital reduction in one period raises the welfare level of agents who are old in that period but lowers that of the young agents because it reduces their wages we show that the government can compensate for these wage losses by additionally taxing the old agents such that their welfare gains remain positive our result is unchanged when earnings are uncertain at young age

income distribution and sociopolitical instability as determinants of savings a cross sectional model the purpose of this cross national study is twofold first it introduces income distribution and sociopolitical instability as arguments in the savings function second it presents some empirical evidence in relation to their quantitative effects on savings it is shown that sociopolitical instability has profound effects on the savings ratio it is also shown that the bulk of savings is produced by the middle income class as a result a redistribution of income at the expense of the upper income class yields a constant or an increased savings ratio developing on whether such a redistribution includes the lower income class or not

a meta analytic assessment of the effect of immigration on wages in our increasingly interconnected and open world international migration is becoming an important socio economic phenomenon for many countries since the early 1980s many studies have been undertaken of the impact of immigration on host labour markets borjas 2003 noted that the estimated effect of immigration on the wage of native workers varies widely from study to study and sometimes even within the same study in addition these effects cluster around zero such a small effect is a rather surprising outcome given that in a closed competitive labour market an increase in labour supply may be expected to exert a downward pressure on wages we revisit this issue by applying meta analytic techniques to a set of eighteen papers which altogether generated 348 estimates of the percentage change in the wage of a native worker with respect to a one percentage point increase in the ratio of immigrants over native workers while many studies in our database employ us data estimates are also obtained from germany the netherlands france norway austria israel and australia our analysis shows that results vary across countries and are inter alia related to the type of modelling approach technical issues such as publication bias and quality of the estimates are addressed as well

the attitudinal legacy of communist labor relations this study of workers attitudes compares data from international social survey programme issp surveys for former communist countries in europe with issp data for western countries over the perio

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

estimating a wage curve for britain 1973 90 following a w phillips s 1958 original work on the united kingdom applied research on unemployment and wages has been dominated by the analysis of highly aggregated time series data sets however it has proved difficult with such methods to uncover statistically reliable models this paper adopts a different approach it uses macroeconomic data on 175 000 british workers from 1973 to 1990 to provide evidence for the existence of a negatively sloped relationship linking the level of pay to the local rate of unemployment the paper casts doubt on standard ideas in macroeconomics regional economics and labor economics copyright 1994 by royal economic society