endogenous market structures and the gains from foreign direct investment abstract this paper discusses the gains from liberalizing foreign direct investment fdi in a two country setting with endogenous market structure we investigate two different scenarios in the first scenario headquarters costs are large in the foreign country so that the industry is located in the domestic country only in this case multinational and national firms may coexist and market concentration may make fdi welfare improving for the foreign country and welfare reducing for the domestic country in the second scenario headquarters costs are symmetric and firms will be located in both countries here profitable fdi activities lead to mutual welfare gains irrespective of market structure effects

welfare dominance an application to commodity taxation in this paper the authors propose a method to identify commodity tax changes that will be favored by all individuals who can agree on certain weak assumptions with regard to the social welfare function the method is based on an extension of the criterion of second degree stochastic dominance and is illustrated using data from israel copyright 1991 by american economic association

fdi and taxation a meta study despite the continuing political interest in the usefulness of tax competition and tax coordination as well as the wealth of theoretical analyses it still remains open whether or when tax competition is harmful moreover the influence of tax differentials on multinationals decisions is still insufficiently analyzed thus economists have increasingly resorted to empirical analysis in order to gain insights on the elasticity of fdi with respect to company taxation as a result the empirical literature on taxation and international capital flows has grown to a similar abundance during the last 25 years as the respective theoretical literature its heterogeneity leads to a rising need for concise reviews on the existing empirical evidence in this paper we extend former meta analyses on fdi and taxation in three ways first we add the most recent publications unconsidered in meta analyses up to date second we apply a different methodology by using a broad set of meta regression estimators and explicitly discuss which one is most suitable for application to our meta data third we address some important issues in research on fdi and taxation to the clarification of which meta analysis can make valuable contributions these issues are mainly the influence of variables which might moderate effects of tax differentials e g public spending the implications of using aggregate fdi data as opposed to firm level information on measured tax effects the implications of bilateral effective tax rates and the possible presence of publication bias in primary research

inheritance law and investment in family firms entrepreneurs may be legally bound to bequeath a minimal stake to noncontrolling heirs the size of this stake can reduce investment in family firms by reducing the future income they can pledge to external financiers using a purpose built indicator of the permissiveness of inheritance law and data for 10 004 firms from 38 countries in 1990 2006 we find that stricter inheritance law is associated with lower investment in family firms but does not affect investment in nonfamily firms moreover as the model predicts inheritance law affects investment only in family firms that experience a succession jel g31 g32

dalton improving indirect tax reform a tax reform is dalton improving if it improves social welfare for all possible social welfare functions that conform to hugh dalton s principle of transfers according to this principle there exists a prior social ranking of households and a transfer is approved if it it distributes from high ranking rich to low ranking poor households without altering the ranking itself in this paper the authors develop a procedure for identifying marginal dalton improving reforms in the context of indirect taxation the methodology is illustrated using data on excise taxes in the united kingdom copyright 1995 by american economic association

endogenous market structures in international trade natura facit saltum abstract almost all of the large literature on international trade with imperfect competition assumes exogenous market structures the purpose of this paper is to develop a simple model that generates alternative market structures as nash equilibria for different parameterizations of the basic model equilibrium market structure is a function of the underlying technology familiar configurations such as a duopoly competing in exports or a single multinational producing in both markets arise as special cases small tax policy changes can produce large welfare effects as the equilibrium market structure shifts implying discontinuous jumps in prices quantities and profits

estate and gift taxes and incentives for inter vivos giving in the us abstract this paper describes the current estate and gift tax rules that apply to intergenerational transfers in the us it summarizes the incentives for inter vivos giving gifts from a donor to a recipient while the donor is alive as a strategy for reducing estate tax liability it shows that the current level of intergenerational transfers is much lower than the level that would be implied by simple models of dynastic utility maximization moreover even among elderly households with net worth in excess of 2 5 million roughly four times the net worth at which us households became liable for estate tax in 1995 only about 45 take advantage of the opportunity for tax free inter vivos giving cross sectional regressions using the 1995 survey of consumer finances suggest that transfers rise with household net worth possibly reflecting the impact of progressive estate taxes households with a preponderance of their net worth in illiquid forms such as a private business are less likely to make transfers than their equally wealthy counterparts with more liquid wealth those with substantial unrealized capital gains for whom the benefits of basis step up at death under the income tax are greatest are less likely to make large inter vivos transfers than similarly wealthy households with higher basis assets

imperfect competition general equilibrium and unemployment abstract we analyze whether different learning abilities of firms with respect to general equilibrium effects lead to different levels of unemployment we consider a general equilibrium model where firms in one sector compete a la cournot and a real wage rigidity leads to unemployment if firms consider only partial equilibrium effects when choosing quantities the observation of general equilibrium feedback effects will lead to repeated quantity adjustments until a steady state is reached when labor is mobile across industries unemployment in the steady state is higher than when all general equilibrium effects are incorporated at once the opposite result is true if labor is immobile

welfare analysis of tax reforms using household data abstract this paper discusses a methodology for calculating the distribution of gains and losses from a policy change using data for a large sample of households estimates are based on the equivalent income function which is money metric utility defined over observable variables this enables calculations to be standardised and a computer program to compute the statistics presented in the paper is available for a general demand system equivalent income is related to measures of deadweight loss and standard errors are computed for each of the welfare measures an application to u k data for 5 895 households is given which simulates a reform that involves eliminating housing subsidies

strategic taxation of the multinational enterprise a new argument for double taxation abstract this paper analyzes the social welfare effects of multinational enterprise taxation by home and host governments in a general equilibrium model direct foreign investment arises to employ a firm specific asset abroad either a tax credit or deduction for foreign taxes paid results in the host fully taxing locally earned economic profits welfare endogenous market structure and profit results are identical in tax credit and deduction regimes because it lowers host government taxation in the subgame perfect equilibrium double taxation of foreign earned profits emerges as a weakly dominant strategy for the source government

competition in regional environmental policies when plant locations are endogenous abstract a two region model is presented in which an imperfectly competitive firm produces a good with increasing returns at the plant level production of the good causes local pollution the firm decides whether to maintain plants in both regions serve both regions from a single plant or shut down if the disutility of pollution is high enough the two regions will compete by increasing their environmental taxes standards until the polluting firm is driven from the market alternatively if the disutility from pollution is not as great the regions will usually compete by undercutting each other s pollution tax rates

privatization policy in an international oligopoly this paper studies privatization policy in an international oligopoly the argument that equal treatment of foreign investors will be detrimental to domestic welfare by shifting profits from domestic to foreign firms is shown to be less relevant in privatization auctions than in greenfield fdi models since these profi ts hifts are partly paid for by the foreign firms in the bidding competition effects of local equity requirements trade and investment policies are also studied it is for instance shown that small local equity requirements are likely to be beneficial but large ones are counterproductive by preventing welfare enhancing foreign acquisitions

trade and trade policy with imperfect competition the case of identical products and free entry abstract this paper analyses intra industry trade between economies containing an imperfectly competitive industry in which firms produce a homogeneous output production is subject to increasing returns to scale and there is free entry and exit of firms trade is shown to unambiguously increase welfare by reducing the degree of monopoly in each market and increasing firm size the effects of differences in technology and endowments on the pattern of trade and welfare are examined import tariffs are shown to raise welfare in the country employing the tariff and the welfare implications of various types of industry subsidy are examined

trade policy with increasing returns and imperfect competition contradictory results from competing assumptions abstract a number of recent papers derive different results about the effects of trade and industrial policy on imperfectly competitive industries this paper sets out a single model within which policy under different market structures can be examined we consider the four types of market structure generated by oligopoly versus free entry and segmented markets versus integrated markets we conclude that the effects of policy are greater when markets are segmented than when they are integrated and that if transport costs are small policy is more potent when the number of firms is fixed than when there is free entry

behavioral responses to inheritance tax evidence from notches in france abstract for the first time we exploit quasi experimental variation to investigate the impact of inheritance taxation on wealth accumulation using bunching and difference in differences methods we directly estimate several behavioral responses during lifetime rather than relying solely on observations at death our empirical findings shed new light upon wealth accumulation and bequest motives taken together the small responses to inheritance tax estimated cannot be supported by the desire to retain control over wealth

welfare dominance and the design of excise taxation in the cote d ivoire governments in developing countries are continuously searching for new and improved tax bases existing methods of taxation in these countries frequently fall short of meeting acceptable criteria of efficiency equity and administrative ease this paper argues that there is a compelling fiscal rationale for encouraging greater reliance on taxing the consumption of electrical and telephone et services greater emphasis on this selective commodity tax base would contribute to the achievement of taxpayer equity and would be administratively easy to impose in addition the efficiency characteristics of this form of taxation may also add to the attractiveness of the et base

the foreign trade and sectoral impact of truck road pricing for cross border trade truck road pricing is on the brink of beingintroduced in a number of european countries the experience gained from switzerland thefirst country worldwide to implement such adistant dependent pricing scheme has provedinvaluable nevertheless significant questionsstill remain the present paper attempts toprovide some clarity by analysing the welfareand sectoral impact resulting from theintroduction of truck road pricing with respectto foreign trade it is shown that this impactcan be separated into four effects the pureterms of trade effect the tax revenue effect the transit tax revenue effect and the resourcegain effect resources set free by a reductionin transport activity a cge simulation ofeach of these effects identifies theirquantitative implications out of the foureffects the pure terms of trade effect turnsout to dominate at both the sectoral andaggregate level it triggers a trade inducedwelfare loss the tax revenue effect and lessso the transit revenue effect mitigate thisloss for a full road transport costinternalization a trade induced welfare loss isquantified for austria at 1 3 sensitivity ofthis and other aggregate variables is high withrespect to household reaction to transport taxrevenue refunding the trade induced welfareloss of variable size as explored in thisarticle counterbalances a fraction of thewelfare gain due to internalization

the estate tax and the demise of the family business abstract this paper uses data from san francisco probate records to estimate if and to what extent the estate tax forces the sale of family businesses and farms this question cannot be addressed with estate tax return data farmers and small business owners frequently complain that the estate tax makes it difficult to pass their operations on to their heirs if there are insufficient liquid assets in the entrepreneur s estate the heirs may be forced to sell the enterprise in order to pay the estate tax using variation in tax liability from state and federal tax changes in 1982 i estimate the effect of the estate tax on business sales estimates from models using cross year tax variation and a difference in difference strategy provide some evidence for a positive effect of the estate tax on sales although it is difficult to link this to explicit measures of liquidity need

is the relationship between gold and the u s dollar always negative the role of macroeconomic uncertainty abstractthe main work of this article is to access the role of macroeconomic uncertainty in effecting the correlation between gold and the dollar the empirical analysis is divided into two parts firstly we examine the impact of macroeconomic uncertainty on short and long correlation between gold and the dollar secondly we analyse the explanatory power of economic uncertainty for the abnormal market relation between gold and the dollar with a threshold model in particular we investigate impacts of economic uncertainty sourced from different economies the empirical results indicate that economic uncertainty generates direct impacts on the correlation between gold and the dollar moreover our results emphasize that uncertainty sourced from different economies have different impacts on the dynamics between gold and the dollar this article also presents the relative contribution of gold and the dollar shocks to the likelihood of being in the high uncertainty regime these results have implications fo

the mismatch between life insurance holdings and financial vulnerabilities evidence from the health and retirement study using data on older workers from the 1992 health and retirement survey along with an elaborate life cycle planning model the authors quantify the effect of each individual s death on the financial status of his or her survivors and the degree to which life insurance holdings moderate these consequences the average change in living standard that would result from a spouse s death is small both in absolute terms and relative to the decline that would occur without insurance however this average obscures a startling mismatch between insurance holdings and underlying vulnerabilities for many of the most vulnerable the amounts purchased are surprisingly small and for many of the least vulnerable the amounts are surprisingly large as a result uninsured vulnerabilities are quite widespread the magnitude of these vulnerabilities as well as the proclivity to address any given degree of vulnerability by purchasing life insurance vary systematically with individual and household characteristics

asymmetric demand information and foreign direct investment we examine the fdi versus exports decision of firms competing in an oligopolistic quantitysetting market under demand uncertainty and asymmetric information compared to a firm that chooses to export a firm that chooses to set up a plant in the host market has superior information about local market demand in addition to the well known tension between the fixed set up costs of investment the additional variable costs of exports and oligopoly sizes the incentive to invest abroad is explained by the strategic learning effect fdi may be observed even if trade costs are zero the analysis is robust to price competition and to the possibility that a foreign firm can engage in both fdi and exports

strategic trade policy when firms can invest abroad when are tariffs and quotas equivalent abstract this paper investigates the equivalence of tariffs and quotas when the market in question is imperfectly competitive and open to direct foreign investment the absence of a foreign supply response under a quota so critical to the analysis of the differential impact of tariffs and quotas under imperfect competition is called into question by the potential occurence of direct foreign investment the paper proves the equivalence of optimal tariffs and quotas when the markets are oligopolistic and open to direct foreign investment

bequest and tax planning evidence from estate tax returns i study bequest and wealth accumulation behavior of the wealthy subject to the estate tax shortly before death the onset of a terminal illness leads to a very significant reduction in the value of estates reported on tax returns fifteen to twenty percent with illness lasting months to years and about five to ten percent in the case of illness reported as lasting days to weeks i provide evidence suggesting that these findings cannot be explained by real shocks to net worth such as medical expenses or lost income but instead reflect deathbed estate planning the results suggest that wealthy individuals actively care about disposition of their estates but that this preference is dominated by the desire to hold on to their wealth while alive

institutional and legal context in natural experiments the case of state antitakeover laws we argue and demonstrate empirically that a firm s institutional and legal context has first order effects in tests that use state antitakeover laws for identification a priori the size and direction of a law s effect on a firm s takeover protection depends on i other state antitakeover laws ii preexisting firm level takeover defenses and iii the legal regime as reflected by important court decisions in addition iv state antitakeover laws are not exogenous for many easily identifiable firms we show that the inferences from nine prior studies related to nine different outcome variables change substantially when we include controls for these considerations

regional tax coordination and foreign direct investment this paper analyses the effects of a regionally coordinated profit tax or location subsidy in a model with three active countries one of which is not part of the union and a globally mobile firm we show that regional coordination can lead to two types of welfare gain first for investments that would take place in the union in the absence of coordination a coordinated tax increase can transfer location rents from the firm to the union second by internalising all of the union s benefits from foreign direct investment a coordinated tax reduction can attract more welfare enhancing investment than when member states act in isolation depending on which motive dominates tax levels may thus rise or fall under regional coordination

trade structure transboundary pollution and multilateral trade liberalization the effects on environmental taxes and welfare this paper considers a trade situation where the production activities of potentially heterogeneous countries generate pollution which can cross borders and harm the well being of all the countries involved in each of those countries the policy maker levies pollution taxes on the polluting firms and a tariff on imports in order to correct that distortion the purpose of the paper is to investigate the effect of a reduction in the tariff on equilibrium pollution taxes and welfare the existing literature has investigated this problem for trade between two identical countries this paper analyzes the problem in the more realistic context where countries are not necessarily identical and trade can be multilateral it becomes possible to show what bias is introduced when those two realities are neglected i find that a tariff reduction can actually lower output it can also lower welfare even if pollution is purely local

multinational firms technology and location this thesis consists of four essays its main theme is the location of production in multinational firms subsidizing away exports a note on strategic trade policy investigates how strategic

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

competing destinations gravity model an application to the geographic distribution of fdi the competing destinations formulation of the gravity model ensues from the fact that unlike the classical version this approach explicitly acknowledges the interdependence of the flows between a set of alternative locations i e country recipients are competing for foreign direct investment fdi this article examines empirically a range of theoretical hypotheses about the determinants of fdi location in a panel data regression framework the results of the estimation of a gravity model lend support to the proximity concentration and internalization hypotheses also the fact that fdi has been found to be decreasing in the competition posed by alternative locations is suggestive of the superiority of the competing destinations version of the gravity equation over its classical formulation

economies of scale and market structure in international grain trade a large body of literature has examined international grain trade in imperfectly competitive models the article develops a two stage duopoly model that considers a private trader and a state trading enterprise ste competing on a foreign market the key difference between the private trader and the ste is their international organization while the ste makes use of external agents to export the private firm may choose to internalize international transactions the game is solved for different modes of competition and under both assumptions of homogeneous and differentiated products in order to assess how these assumptions affect the outcome of the game the results of the game are examined by using numerical examples the analysis shows that external shocks on export markets may result in a change of market structure and consequently of market shares these effects depend on the initial market structure furthermore the degree of product differentiation and the assumed mode of competition significantly affect the relative values of transaction and fixed costs at which the market structure changes

market entry and foreign direct investment abstract the welfare economics of foreign direct investment fdi are addressed in a model of two countries and two periods in the first period firms enter markets as national firms in the second period fdi is possible the paper demonstrates that fdi reduces market entry in the first period and equilibrium profits in the second period compared to a trade regime without any fdi prices are higher in the first period but lower in the second period fdi unambiguously improves the sum of discounted consumer surplus if demand functions are linear or log linear and entry is free in the first period

up the average cost curve inefficient entry and the new protectionism abstract a two country model is developed in which each country produces one good with increasing returns the goods being perfect or imperfect substitutes with cournot nash behavior and free entry certain restrictive trade policies have effects opposite to their favorable effect under noentry assumptions import tariffs and export subsidies lead to inefficient entry that raises rather than decreases the average production cost of and price charge by the domestic industry with negative welfare consequences we argue that these predictions of our model are closely consistent with extensive canadian data on entry exit and firms responses to trade liberalization

saving taxes through foreign plant ownership this paper analyzes to which extent foreign plant ownership involves lower tax payments than domestic plant ownership we employ a model of endogenous foreign subsidiary ownership to derive a set of empirically testable hypotheses about the differential taxation of foreign and domestically owned subsidiaries we assess these hypotheses in a data set of 33 577 european foreign and domestically owned manufacturing plants we identify a significant tax saving of endogenous foreign owner ship on average foreign owners pay 594 euros per employee or about 56 percent less than domestic owners of similar subsidiaries this effect is larger in thinner markets with fewer plants in markets with a greater relative presence of foreign owners and for foreign owners of larger plants

new protectionism and multinational companies abstract this paper examines the welfare effects of eliminating non tariff barriers ntbs when firms expand abroad via export or direct investment di two broad categories of ntbs are considered according to whether they discriminate only against the foreign exporter type i or also against the local subsidiary of the foreign owned firm type ii it is shown that the welfare impact of market integration depends upon its influence on firms international strategies and that such influence is a function of the type of measure removed the elimination of ntbs type i may lead to a fall in consumer surplus and a rise in producer surplus due to a shift from di to export instead when ntbs type ii are removed consumers are likely to gain more than suggested by traditional analysis as firms may shift from export to di these results are then applied to explain the welfare implications of the rise in intra eu di recorded during the late 1980s and early 1990s

measuring income tax evasion using bank credit evidence from greece we document that in semiformal economies banks lend to tax evading individuals based on the bank s assessment of the individual s true income this observation leads to a novel approach to estimate tax evasion we use microdata on household credit from a greek bank and replicate the bank underwriting model to infer the banks estimate of individuals true income we estimate that 43 45 of self employed income goes unreported and thus untaxed for 2009 this implies 28 2 billion of unreported income implying forgone tax revenues of over 11 billion or 30 of the deficit our method innovation allows for estimating the industry distribution of tax evasion in settings where uncovering the incidence of hidden cash transactions is difficult using other methods primary tax evading industries are professional services medicine law engineering education and media we conclude with evidence that contemplates the importance of institutions paper trail and political willpower for the persistence of tax evasion jel codes g21 h22 h24 h26 p37

credit constraints competition and meritocracy this paper studies a simple model of the talent ownership mismatch or failure of meritocracy brought about by credit market imperfections that prevent the transfer of control over productive assets from the untalented rich to the talented poor we present two main insights first there may be multiple equilibria in the degree of meritocracy second the severity of the misallocation of talent depends on the degree of concentration on the good market hence reforms that improve the workings of the credit market such as better enforcement of contracts and reforms that reduce concentration such as deregulation are to some degree substitutes in bringing about greater meritocracy we also examine which reform strategy is more likely to enhance efficiency without violating political constraints jel g3 o10 o47

the boundaries of the firm revisited why do firms exist what is their function and what determines their scope these remain the central questions in the economics of organization they are also central questions for business executives and corporate strategists the worldwide volume of corporate mergers and acquisitions exceeded 1 6 trillion in 1997 it is hard to imagine that so much time effort and investment bankers fees would be spent on adjusting firm boundaries unless there was some underlying economic gain indeed the exceptional levels of merger and acquisition activity over the past two decades are a strong indication that economically significant forces do determine organizational boundaries the study of firm boundaries originated with the famous essay by coase 1937 who raised the question of why we observe so much economic activity inside formal organizations if as economists commonly argue markets are such powerful and effective mechanisms for allocating scarce resources coase s answer was in terms of the costs of transacting in a world of imperfect information when the transaction costs of market exchange are high it may be less costly to coordinate production through a formal organization than through a market in large part thanks to the work of williamson 1975 1985 recent decades have seen a resurgence of interest in coase s fundamental insight that firm boundaries can be explained by efficiency considerations our understanding of firm boundaries has been sharpened by identifying more precisely the nature and sources of transaction costs in different circumstances in the process the focus of

food subsidies and poverty alleviation this paper formulates the problem of the optimal pattern of food subsidies in a general setting where the objective is to minimize a class of poverty indices within the framework of the mo dern public finance theory taking explicit account of the budget con straint and preferences and technologies the authors derive rules fo r retargetting food subsidies to reduce poverty many operational rul es of thumb appear as special cases of the general results the analy sis thus provides not only the microfoundations of these operational rules but also their appropriate generalizations when the conditions under which they arise are not fulfilled copyright 1988 by royal economic society

decomposition of s concentration curves for any given order of inverse stochastic dominance standard concentration curves are decomposed into three components called contribution curves those compo nents correspond to within group inequalities between group inequalities and transvari ational inequalities we prove for all orders that contribution curve dominance implies systematically welfare improving tax reforms and conversely accordingly as welfare ex pansions may be costly in terms of particular inequalities we propose targeted fiscal reforms jel classification d63 h20

evidence on the role of cash flow for investment abstract recent work in macroeconomics argues that imperfections in capital markets may lead to business cycle fluctuations by propagating relatively modest shocks evidence for such a mechanism also known as the financial accelerator consists largely of firm level studies showing that cash flow is an important predictor of investment but this evidence is often viewed with skepticism because cash flow is also a good indicator of investment opportunities in this paper we develop a framework for estimating the extent to which the predictive power of cash flow can be attributed to its role as a fundamental versus its role in alleviating credit frictions for firms with access to commercial paper and bond markets we find that the perfect capital markets model of investment can fully account for the role of cash flow for firms with only limited access to capital markets as indicated by lack of participation in public debt markets however investment appears to be excessively sensitive to fluctuations in cash flow these results thus clarify the role of cash flow in investment equations and provide support for the existence of a financial accelerator

the effectiveness of laws against bribery abroad this paper analyzes the effectiveness of laws against bribery abroad in inducing foreign investors to reduce their investments in corrupt countries the laws are designed to reduce the supply of bribes by foreign investors by increasing the costs of bribing abroad such increase in costs will make foreign investors more sensitive to corruption and induce them to reduce their investments in corrupt countries however the paper argues that these laws need to be implemented and coordinated in multiple countries to become effective otherwise investors in a country will have incentives to bypass them when competitors from other countries are not bound by similar legal constrains the empirical analysis shows that investors from countries that implemented the oecd convention on combating bribery of foreign public officials in international business transactions of 1997 reduced their investments in corrupt countries investors from the us which were bound by the foreign corrupt practices act of 1977 also reduced investments in corrupt countries but only after the oecd anti bribery convention was in place

a controversial proposal concerning inequality measurement abstract an axiom system on a policy maker s preferences is proposed and shown to characterize the class of linear inequality measures a measure for the policy maker s degree of equality mindedness is then developed the essay concludes with an exploration of the interplay between the policy maker s preferences and the prevailing tax structure the controversial aspect lies in an attempt to use the tax structure to retrieve the policy maker s preferences through the principle of equal sacrifice

environmental policy when market structure and plant locations are endogenous abstract a two region two firm model is developed in which firms choose the number and the regional locations of their plants both firms pollute and market structure is endogenous to environmental policy there are increasing returns at the plant level imperfect competition between the home and the foreign firm and transport costs between the two markets at critical levels of environmental policy variables small policy changes cause large discrete jumps in a region s pollution and welfare as a firm closes or opens a plant or shifts production to from a foreign branch plant the implications for optimal environmental policy differ significantly from those suggested by traditional pigouvian marginal analysis

should continued family firms face lower taxes than other estates abstract taxes on estates and inheritances may induce heirs to discontinue family firms because firm dissolution incurs transaction costs a preferential tax treatment of transferred family businesses seems to be desirable from a macroeconomic viewpoint the support of dynastic succession however entails also a cost on the economy if firm continuation by less able heirs prevents entry into entrepreneurship here we investigate analytically and quantitatively the trade off between transaction costs saved and creative destruction prevented we find that a unique general equilibrium exists at which depending on the institutional setup low ability heirs either abandon type 1 or continue type 2 a family business a calibration of the model with german data suggests that preferential tax treatment of family firms has severe negative consequences on macroeconomic performance if it causes a threshold crossing from type 1 to type 2 equilibrium it also reveals that the descendants of less able entrepreneurs who were caused by continuation friendly tax policy to keep a family business always lose relative to their status in an economy without such a policy

inside the family firm the role of families in succession decisions and performance this paper uses a unique dataset from denmark to investigate the impact of family characteristics in corporate decision making and the consequences of these decisions on firm performance we focus on the decision to appoint either a family or an external chief executive officer ceo the paper uses variation in ceo succession decisions that result from the gender of a departing ceo s first born child this is a plausible instrumental variable iv as male firstchild firms are more likely to pass on control to a family ceo relative to female first child firms but the gender of a first child is unlikely to affect firms outcomes we find that family successions have a large negative causal impact on firm performance operating profitability on assets falls by at least four percentage points around ceo transitions our iv estimates are significantly larger than those obtained using ordinary least squares furthermore we show that family ceo underperformance is particularly large for firms in high growth industries and for relatively large firms overall the empirical results demonstrate that professional non family ceos provide extremely valuable services to the organizations they head

the effect of succession taxes on family firm investment evidence from a natural experiment this paper provides causal evidence on the impact of succession taxes on firm investment decisions and transfer of control using a 2002 policy change in greece that substantially reduced the tax on intrafamily transfers of businesses i show that succession taxes lead to a more than 40 decline in investment around family successions slow sales growth and a depletion of cash reserves furthermore succession taxes strongly affect the decision to sell or retain the firm within the family i conclude by discussing implications of my findings for firms in the united states and europe

how do foreign patent rights affect u s exports affiliate sales and licenses abstract this paper analyzes how foreign patent rights fprs affect us exports affiliate sales and licenses our approach is distinctive in three ways we apply ownership location and internalization concepts to link fprs with servicing decisions we account for the simultaneity of servicing decisions we estimate the relative effects of fprs on exports affiliate sales and licenses empirical findings show strong fprs increase us affiliate sales and licenses particularly across countries with strong imitative abilities further fprs have a larger effect on us knowledge transferred outside the country and firm relative to knowledge located inside the country and internalized inside the firm

household inequality entrepreneurial dynamism and corporate financing economic theories provide conflicting hypotheses on how wealth inequality affects entrepreneurial dynamism to empirically investigate its impact we construct local measures of household wealth inequality based on financial rents home equity and 1880 farmland we identify its effects on entrepreneurship by instrumenting it with land distribution under the 1862 homestead act or us states removal of death taxes wealth inequality decreases firm entry and exit and the proportion of high tech businesses across metropolitan statistical areas there is also less redistribution into public goods supportive of entrepreneurship such as schooling and the judiciary income per capita consequently grows more slowly

strategic investments and the development of multinationals a model of multinational behavior is presented in which either the existence or absence of multinationals can be a nash equilibrium outcome the key determinant is the relationship between plant scale economies a force for geographic centralization and multiplant economies plus transport costs leading to multinationality the model predicts that multinational enterprise production arises when firm specific and transportation costs are large relative to plant scale economies the latter are both a technological and a strategic variable in the entry decision copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

tax competition in imperfectly competitive markets abstract the literature on strategic trade policy has shown that in imperfectly competitive markets governments have an incentive to subsidize exports of their own firms yet the consequence of the departure from laissez faire is a wasteful subsidy race in contrast this paper shows that even in imperfectly competitive markets there is a strong tendency for laissez faire to prevail the driving force is the firms willingness to exploit tax or subsidy differentials by relocating production a small tax differential induces firms to change their place of production the change in market structure has a negligible effect on the oligopoly equilibrium but a non negligible impact on government revenues when tax policy is non discriminatory governments gain lose by attracting all firms when production is taxed subsidized hence laissez faire is the only equilibrium since from the point of view of the two producing countries laissez faire nondiscrimination pareto dominates the intervention equilibrium discrimination nondiscrimination is a simple device to result in a mutual beneficial outcome

transfer principles in income redistribution abstract dalton s principle of transfer for income redistribution says that society will be better off when a unit of income in transferred from a richer to a poorer individual this paper investigates the conjunction of a natural extension of dalton s principle which says that any combination of a socially desirable transfer with its inverse at uniformly higher levels of income will have positive social benefit and a traditional utilitarian egalitarian formulation of social welfare the transfer principles involved in the extension of dalton s rule correspond to stochastic dominance relations between income distributions with a common mean and lead to the conclusion that when and g are income distributions the social welfare of is larger than that of g if e ax x ax g x for all positive a this conclusion is intimately connected with a measure of income inequality studied by kolm