econometric developments in agricultural and resource economics the first 100 years this article reviews the major contributions of agricultural and resource economists in the area of econometrics over the past 100 years early on a number of agricultural economists were in on the ground floor in terms of developing new econometric methods over time as the economics profession became more empirically oriented agricultural and resource economists increasingly assumed the role of early adopters of new econometric methods even so agricultural and resource economists continue to make useful modifications to econometric techniques in order to adapt the methods to the unique nature of the problems and applications that we study

the effect of capital gains taxation on home sales evidence from the taxpayer relief act of 1997 the taxpayer relief act of 1997 tra97 significantly changed the tax treatment of housing capital gains in the united states before 1997 homeowners were subject to capital gains taxation when they sold their houses unless they purchased replacement homes of equal or greater value since 1997 homeowners can exclude capital gains of 500 000 or 250 000 for single filers when they sell their houses such dramatic changes provide a good opportunity to study the lock in effect of capital gains taxation on home sales using 1982 2008 transaction data on single family houses in 16 affluent towns within the boston metropolitan area i find that tra97 reversed the lock in effect of capital gains taxes on houses with low and moderate capital gains specifically the semiannual sales rate of houses with positive gains up to 500 000 increased by 0 40 0 62 percentage points after tra97 representing a 19 24 percent increase from the pre tra97 baseline sales rate in contrast i do not find tra97 to have a significant effect on houses with gains above 500 000 moreover the short term effect of tra97 is much larger than the long term effect suggesting that many previously locked in homeowners took advantage of the exclusions immediately after tra97 in addition i exploit the 2001 and 2003 legislative changes in the capital gains tax rate to estimate the tax elasticity of home sales during the post tra97 period the estimation results suggest that a 10 000 increase in capital gains taxes reduces the semiannual home sales rate by about 0 1 0 2 percentage points or 6 13 percent from the post tra97 average sales rate

dynamic investment and financing under personal taxation this paper examines the effects of capital gains taxation on firms investment and financing decisions we develop a real options model in which the timing of investment the decision to default and the firm s capital structure are endogenously and jointly determined our analysis demonstrates that the asymmetric taxation of capital gains and losses fosters investment by eroding the option value of waiting it also shows that firms controlled by taxable investors employ more equity financing the higher the firm s stock price and the worse the firm s historical performance using a large sample of u s industrial firms that are owned by taxable investors between 1970 and 2008 we present new evidence on corporate investment and financing policies which is supportive of the model s predictions

variance of agricultural prices industrial prices and money the relative uncertainty of agricultural prices and industrial prices with respect to the uncertainty of growth in the money supply are investigated utilizing multivariate arch and garch analysis the conditional variances of agricultural prices were shown to dwarf the variances of industrial prices and the money supply the relatively greater sensitivity of the conditional variance of agricultural prices to changes in the variance of the money supply than industrial prices found in this analysis provides a further perspective on the uncertainty confronting farmers including the impacts of the monetary policy shock that precipitated the farm financial crisis in the early 1980s

on the welfare effects of a duty free zone abstract the analysis extends and corrects the results of an earlier paper by hamada two problems are analyzed 1 how is location of production affected by opening up of a free zone taking into account different kinds of trade barriers and zones implications for production consumption and welfare in a number of different cases are analyzed 2 what are the effects of capital inflow either into the zone or into the host country our results show that both types of capital inflow diminish welfare and welfare diminishes comparatively more when imported into the zone repatriated income as well as its composition is explicitly incorporated

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

monetary impacts on prices in the short and long run some evidence from new zealand this paper presents support for long run monetary neutrality based on evidence that individual time series for money manufacturing prices and agricultural prices are nonstationary but cointegrated with a stationary proportional long run relationship among their levels dynamic simulations from a vector error correction model with this restriction imposed show that monetary shocks shift relative prices in favor of agriculture in the short run and permanently raise nominal prices manufacturing price shocks have similar long run effects but initially place agriculture in a cost price squeeze while agricultural price shocks are transitory and have little impact on the other series

on passive money there are two ways in which the quantity of money may be included in a general equilibrium system as a datum whose value is fixed exogenously or as an unknown whose value is determined by the equilibrium system itself let them be called active money and passive money respectively current monetary theory uses the first approach the ricardo walraskeynes tradition in general equilibrium models is clearly of the activemoney variety this is also true of the more contemporary versions such as patinkin s well known system 1965 apart from the main stream of thought however a number of analyses exist which imply passive money the gold standard model as it is usually expounded belongs to this class the price of gold in terms of money is given while the stock of money is endogenously determined by the set of equilibrium conditions the form in which the quantity of money adapts to its equilibrium level differs according to the institutional mechanism convergence is assured through monetization and demonetization of gold in the pure goldcurrency system and through convertibility of notes into gold and vice versa in the gold standard system with paper money in either case the money supply is allowed to conform to its equilibrium volume this kind of monetary system in which the money price of a certain product or commodity is a datum and the quantity of money a dependent magnitude may be denoted in general as a commodity standard

tariffs capital export and immiserizing growth abstract the purpose of this paper is to show how the brecher diaz 1977 and minabe 1974 propositions on the capital inflow from a tariff apply symmetrically to capital outflow that is when the home country continues to import the labor intensive goods while remaining incompletely specialized the capital outflow must reduce the home country s real income this will be so when the net return to home capital is greater than the home value of its marginal product at internal prices but less than the home value of its marginal product at world prices

does anticipated information impose a cost on risk averse investors a test of the hirshleifer effect this paper theoretically and empirically investigates how the risk of future adverse price changes created by the anticipated arrival of information influences risk averse investors trading decisions in institutionally imperfect capital markets specifically i examine how the selling activity of individual investors immediately following an earnings announcement is influenced by the tradeoff between risk sharing benefits of immediate trade and explicit transaction costs imposed on such trades consistent with my theoretically derived predictions i find that investors current trading decisions are less sensitive to the incremental transaction costs created by short term capital gains taxes on trading profits as both the duration and intensity of the risk of future adverse price changes increase this evidence is consistent with an incremental cost to investors that results from the revelation of precise information which is commonly referred to as the hirshleifer effect

livelihoods and poverty the role of migration a critical review of the migration literature this review of the literature concludes that development studies have paid insufficient attention to labour migration and makes a plea to integrate analyses of migration within those of agricultural and rural development it emphasises that population mobility is much more common than is often assumed and that this has been so throughout human history in fact available material suggests that it is as likely that population mobility has decreased as that it has increased a review of empirical studies shows that it may not be possible to generalise about the characteristics of migrants or about the effects of migration on broader development inequality or poverty the review concludes that given the importance of migration for the rural livelihoods of many people policies should be supportive of population mobility and possibilities should be explored to enhance the positive effects of migration

informal sector regulatory compliance and leakage abstract the paper models a vertically related formal and informal sector and endogenizes the size and regulatory compliance status of the informal sector when the formal sector can circumvent costly regulations by outsourcing polluting intermediate goods from the informal sector stricter regulations increase when the composition effect of regulation dominates its scale effect or decrease total pollution and may even have a non monotonic impact we identify conditions under which a partially compliant informal sector acts as a source of leakage and examine implications for optimal enforcement policy further we show that price discrimination by the formal sector when it purchases the intermediate goods from the informal sector can worsen regulatory compliance by the informal sector and lead to more pollution

effects of foreign investment in the presence of unemployment abstract in this paper we present a simple model of unemployment in the presence of foreign investment in the traded sector more foreign investment increases employment in the nontraded sector but may or may not increase employment in the traded sector the effect on total employment is also ambiguous in a two country framework with foreign investment itself a variable we show that foreign investment should most likely be subsidized rather than taxed moreover the employment maximizing tax on foreign investment is shown to be less than the optimum tax

the effects of taxation on the selling of corporate stock and the realization of capital gains this study provides the first econometric analysis of the effect of taxation on the realization of capital gains the analysis thus extends and complements the earlier study by feldstein and yitzhaki 1978 of the effect of taxation on the selling of corporate stock the present analysis using a large new body of data obtained from individual tax returns supports the earlier finding that corporate stock sales are quite sensitive to tax rates and then shows that the effect on the realization of capital gains is even stronger

tax on foreign capital income and wage subsidy to the urban sector in the harris todaro model abstract we consider endogenous foreign capital inflow in the different versions of harris todaro model wage subsidies are financed by taxing the foreign capital income which is otherwise repatriated their effects on unemployment and national income are analysed

capital gains tax rates and the cost of capital for small business evidence from the ipo market abstract we examine the issue prices of small initial public offerings around the 1993 tax law change that reduced the capital gains tax on qualified small business stock we compare the actual issue price of new stock with a benchmark price that is not affected by the change in capital gains tax we find that after controlling for ipo underpricing the issue prices of qualifying small business stock after the tax rate change are significantly higher than the issue prices before the change a control sample of nonqualifying firms shows no significant difference in issue prices

capital gains taxes and asset prices capitalization or lock in this paper demonstrates that the equilibrium impact of capital gains taxes reflects both the capitalization effect i e capital gains taxes decrease demand and the lock in effect i e capital gains taxes decrease supply depending on time periods and stock characteristics either effect may dominate using the taxpayer relief act of 1997 as our event we find evidence supporting a dominant capitalization effect in the week following news that sharply increased the probability of a reduction in the capital gains tax rate and a dominant lock in effect in the week after the rate reduction became effective this paper jointly tests two effects of capital gains taxation on equity trading a demand side capitalization effect and a supply side lock in effect while previous studies have tested these effects separately to the best of our knowledge this is the first study to evaluate them jointly and empirically document the relative dominance of each effect surrounding a change in a tax rate employing an equilibrium approach we show that these effects net tax impact on asset prices is ambiguous evaluating returns and trading volume around the 1997 reduction in the capital gains tax rate we find evidence that the capitalization and the lock in effects jointly affect trading in particular the capitalization effect dominates the lock in effect in the week following an increase in the probability of a reduction in the capital gains tax rate as buyers respond to information that future capital gains tax rates will be lower the lock in effect however dominates the capitalization effect after the rate reduction actually becomes effective taxation is one of the most prevalent market frictions in financial markets affecting investors decisions and distorting the valuation of assets capital gains taxes in particular play an important role in determining an investor s trading strategies and can ultimately affect asset prices because investors

forecasting vector autoregressions with bayesian priors the paper explores the justification for and application of bayesian priors in forecasting a vector autoregression a nonsymmetric random walk prior outperforms three alternative time series representations in forecasting five series of the u s hog market

capital gains taxation and stock market activity evidence from ipos prior to the tax reform act of 1986 tra 86 long term capital gains were taxed at a lower rate than short term gains presenting investors with an opportunity to increase their after tax return by delaying the sale of appreciated assets until after they qualified for long term status and selling depreciated assets prior to long term qualification using a sample of initial public offerings i find that stocks that appreciated prior to long term qualification exhibit increased volume and decreased returns just after their qualification date while stocks that depreciated prior to long term qualification exhibit these effects just prior to their qualification date it is generally acknowledged that capital gains taxes influence investor behavior slemrod 1982 dyl 1979 chaplinsky and seyhun 1990 and others agree that individuals rationally respond to specific provisions of the tax code in attempting to reduce the tax liability of investment income recently this view has entered the public policy debate concerning the effective date of a proposed capital gains tax cut for example the wall street journal reported that congress has considered making proposed capital gains tax cuts retroactive to avoid possible market disruptions that might come from investors delaying transactions in anticipation of a future effective date wsj february 19 1997 despite the consensus view that capital gains taxes influence investment behavior specific distortions in behavior are difficult to document empirically one reason for the lack of evidence regarding the distortionary effect of capital gains taxes is that it is extremely difficult for researchers to determine the initial cost and the date of purchase of an asset without that information it is impossible for the investigator to know when an investor is trading a longterm or short term asset and whether he is realizing a gain or a loss one class of assets for which it is possible to obtain this information is initial public offerings of common stock ipos by definition ipos are not available for purchase prior to their offer date on the offer date shares are

foreign investment in the presence of an informal sector in the context of a segmented economy in which the urban unemployed subsist in informalsector activities earl grinols has recently questioned conventional wisdom whereby foreign investment with repatriated earnings is necessarily immiserizing for the host country in this paper we extend grinols s analysis and place it in a broader context permitting richer conceptions of informal sector activities our principal finding is that the original insight is surprisingly robust once heckscher ohlin samuelson factor intensities are suitably modified and interpreted our models may also have independent interest for other work on the informal sector

tax motivated trading by individual investors we study the stock trades of a large number of individual investors to investigate how tax incentives affect the realization of capital gains and losses we compare investors realization behavior in their taxable and tax deferred accounts and thereby identify the effect of taxes on trading decisions we reach four conclusions first we find clear evidence of a lock in effect for capital gains in taxable accounts relative to tax deferred accounts we find evidence of the disposition effect the tendency for investors to hold losses and sell gains in both types of accounts and especially at short holding periods the lock in effect is stronger for large stock transactions than for small ones second we find tax loss selling throughout the calendar year though it is most pronounced in december tax loss trading is more pronounced among investors who have realized capital gains elsewhere in the portfolio during the year third we observe substantial heterogeneity in individual investors propensity to trade controlling for this heterogeneity however does not alter the relation between a stock s past performance and the realization decision finally we find that relatively few investors repurchase stocks that they have sold at a loss even after the 30 day wash sale holding period has expired

rural urban migation informal sector and development policies a theoretical analysis abstract a theoretical model of rural urban migration has been developed with special reference to the informal sector the wage rate and employment in the informal sector are determined endogenously the paper shows the simultaneous existence of open unemployment and informal sector in the urban area in migration equilibrium the effects of alternative subsidy policies on unemployment and welfare of the workers are studied

optimal portfolio choice with wash sale constraints abstract we analytically solve the portfolio choice problem in the presence of wash sale constraints in a two period model with one risky asset our results show that wash sale constraints can heavily affect portfolio choice of investors with unrealized losses the trading behavior of such investors is to a large extent driven by the desire to realize those losses either immediately by sharply decreasing the holding of assets carrying unrealized losses or indirectly by increasing such holdings in order to prepare for a decrease in a future period to earn the tax rebate payment our findings are robust to increasing the number of trading dates and introducing a second risky asset and a correlation structure

taxing away m a capital gains taxation and acquisition activity abstract capital gains taxation distorts the market for corporate control by imposing a cost on selling shareholders in acquisitions this lock in effect increases premiums required for deal completion preventing some m as from taking place at all we estimate the effect of capital gains taxation on the quantity of realized m a deals and compute the deadweight loss related to taxing these transactions we find that a one percentage point increase in the capital gains tax rate reduces acquisition activity by around 1 annually for the united states this implies unrealized synergy gains of 9 3 billion each year due to capital gains taxes

identifying monetary impacts on agricultural prices in var models since the mid 1970s a number of studies have used vector autoregressive var models to evaluate the magnitude and timing of macroeconomic impacts on agriculture use of the var method has been viewed as a way to obtain empirical evidence about these impacts that might not emerge from more traditional overidentified and less dynamic econometric models the hope has been that by placing minimal restrictions on var models the true structure of the economic relationships under investigation can be observed while the aim is laudable critics of var models have argued that it has had the unfortunate consequence of obscuring some important structural identification issues and seeming to promise that something can be obtained for nothing cooley and leroy leamer they point out that identifying restrictions are required to give economically interpretable meaning to the results of any simultaneous equation model sem in standard practice identification of var models is obtained implicitly by choice of a choleski decomposition of the covariance matrix of one step ahead forecast errors which is equivalent to imposing a recursive structure for the economy of concern is that the recursive structure may not be believable further as bernanke has observed examination of ad hoc variants of the recursive order implies a strange set of prior beliefs in which the analyst holds strongly that the system is recursive but is not sure in what order the variables should be arranged in response to these concerns several recent papers have pointed out that identification of var models does not have to rely on the assumption that the contemporaneous structure is recursive bernanke sims rather the distinguishing features of a var model are first that identification rests on the assumption that distinct mutually orthogonal behavior shocks drive the economy and second that lagged relationships among the endogenous and exogenous variables if any are left entirely unrestricted given these features a var model must be identified solely by restrictions placed on the contemporaneous interactions among the variables but the identifying restrictions do not have to preclude simultaneity in this paper we elaborate on the structural interpretation of var models and use this analysis to examine monetary impacts on agricultural prices we discuss the identification problem and the implications of a recursive structure we illustrate our points with respect to the three variable model of money industrial prices and agricultural prices that has been used in several articles to evaluate the effects of monetary shocks on price dynamics bessler devadoss and meyers we then introduce a somewhat richer behavioral model of the macroeconomy and its effects a simultaneous model is shown to offer a more believable identification of monetary policy and other macroeconomic shocks than a recursive model and monetary impacts on agricultural prices are assessed

effects of fiscal policies on us agriculture according to the macro rational expectation mre hypothesis only unanticipated macroeconomic policy has impacts on real economic variables and anticipated policy changes have no real impacts this study analysis the effects of the anticipated and unanticipated components of fiscal policy on the us farm real gnp by testing the neutrality and rationality propositions of the mre hypothesis the test results show that both the rationality and neutrality propositions are rejected the empirical findings indicate that the anticipated fiscal policy does have significant effects on farm output examination of a specific sector sheds light on the nature of the market and helps ascertain the resons for the non neutrality

credit constraints interest rates and agricultural prices although there are some earlier contributions the paper by schuh the exchange rate and u s agriculture touched off a controversy within the agricultural economics profession that has yet to be resolved in its original form the controversy centered around whether or not exchange rates had a significant effect on u s agricultural prices exports and farm income later the argument seems to have moved one step further back along the logical line to a question of whether or not monetary phenomena can have real effects thus to some extent agricultural economists interested in this issue have polarized themselves into two camps that closely resemble what for lack of a better term might be called keynesians and non keynesians this paper is not an attempt to settle this dispute indeed if observations based on developments in macroeconomics offer any guide i think that the dispute is based upon such fundamentally different perceptions of the world that no single paper or series of papers will ever settle the issue rather in this paper i want to discuss what i perceive to be one of the key issues in this debate are agricultural prices more flexible than nonagricultural prices my choice of this topic is somewhat personal and i choose it mainly because i feel that if monetary variables are going to have real effects these effects can only be short run in nature and are best explained by differential price adjustments the argument is simple suppose you have two goods a and b and suppose that good a is priced administratively a la gardiner means while good b s price is perfectly flexible now suppose further that the money supply is artificially inflated in the current instances the price of a will not adjust instantaneously while the price of b is free to adjust if the price of b does adjust as a result of an increase in the money s pply then manipulation of the money supply has caused a real change since the price ratio between a and b changes in this case therefore we can also expect other real changes in the economy but such effects should be only short run in nature the real effects set in motion by the relative price change should ultimately be self correcting under the usual ceteris paribus assumptions since even administered prices have to adjust in the long run to maintain entrepreneurial profitability however even if such issues of relative flexibility are not a central element in the discussion that is germane to the present paper and the associated controversy the general belief that agricultural prices are more flexible than nonagricultural prices is firmly rooted in the stylized facts of agricultural economics moreover the high degree of instability of agricultural prices is often given as the primary argument for extensive government interference in the agricultural economy in what follows i will first offer a brief survey of some of the studies of the effects of monetary phenomena on u s agricultural prices exports and incomes in this part of the paper i specifically exclude papers of what i think of as the is inflation neutral with

investment tax incentives prices and the supply of capital goods using data on the prices of capital goods this paper shows that much of the benefit of investment tax incentives does not go to investing firms but rather to capital suppliers through higher prices the reduction in the cost of capital from a 10 percent investment tax credit increases equipment prices 3 5 7 0 percent this lasts several years and is largest for assets with large order backlogs low import competition or with a large fraction of buyers able to use investment subsidies capital goods workers wages rise too instrumental variables estimates of the short run supply elasticity are around 1 and can explain the traditionally small estimates of investment demand elasticities in absolute value the demand elasticity implied here exceeds 1

capitalization of capital gains taxes evidence from stock price reactions to the 1997 rate reduction abstract we empirically document that stock prices moved inversely with dividend yields during the may 1997 week when the white house and congress agreed on a budget accord that included a reduction in the capital gains tax rate the findings are consistent with equity prices capitalizing expected capital gains taxes two scenarios are possible first to the extent returns are expected to be taxed as capital gains a reduction in the expected capital gains tax rate enhances market value second to the extent individuals hold a stock a reduction in the expected personal capital gains tax rate increases market value

dividend taxes and international portfolio choice this paper investigates how dividend taxes influence portfolio choices using the response to the distinctive treatment of a subset of foreign dividends in the jobs and growth tax relief reconciliation act jgtrra of 2003 an open economy after tax capital asset pricing model is used to derive the hypothesis that jgtrra should lead to a portfolio reallocation by us investors towards equities in tax favored countries a difference in difference analysis that compares us equity holdings in affected and unaffected countries finds a substantial portfolio reallocation towards the former this effect cannot be explained by several potential alternative hypotheses including differential changes to the preferences of american investors differential changes in investment opportunities differential time trends in investment changed tax evasion behavior or changes in stock prices associated or contemporaneous with jgtrra

the effects of changes in capital gains taxes on land sales empirical evidence from finland we estimate the landowner response to and fiscal effects of a temporary reduction in capital gains taxes imposed on land sales the underlying normative decision rules are first derived and solved numerically using stochastic dynamic programming the landowner preferences and willingness to sell land are then estimated in the reduced form using survey data from finland the results suggest that the timing of land sales and land sales quantities respond significantly to tax incentives certain temporary tax waiver programs could maintain the current tax revenues with fewer trade distorting effects on the land market

the effect of capital gains taxes on the initial pricing and underpricing of ipos we investigate the extent to which capitalization of expected capital gains taxes and the lock in effect induced by the capital gains tax rate differential simultaneously impact the pricing and underpricing of initial public offerings ipos using a large sample of ipos from 1987 to 2010 we estimate regressions of offer prices and first day underpricing on tax rates supporting tax capitalization ipo offer prices decrease in long term capital gains taxes supporting lock in ipo underpricing increases in the long term and short term tax rate differential these effects are consistent with capital gains taxes simultaneously reducing ipo proceeds and exacerbating ipo underpricing

informal sector and informal capital market in a small open less developed economy abstract a three sector static model of a small open economy has been developed with special consideration to the urban informal sector and the informal capital market informal capital is mobile between the rural sector and the urban informal sector policy effects in this model appear to be different from those analysed in other three sector models

effects of global liquidity on commodity and food prices summary this article investigates the relationship between global liquidity and commodity and food prices applying a global cointegrated vector autoregressive model we use different measures of global liquidity and various indices of commodity and food prices for the period 1980 2011 our results support the hypothesis that there is a positive long run relation between global liquidity and the development of food and commodity prices and that food and commodity prices adjust significantly to this cointegrating relation global liquidity in contrast does not adjust it drives the relationship

inflation and the distribution of price changes across markets a causal analysis recent advances in time series methodology are applied to the investigation of causal relationships between monthly changes in the consumer price index and changes in its dispersion across different consumption categories this dispersion is associated with the degree to which relative prices are changing past inflation rates seem useful in forecasting changes in relative prices but not vice versa there is also a significant contemporaneous correlation between these series hence it is concluded that fluctuations in the inflation rate help cause fluctuations in relative prices but not vice versa unless the entire effect occurs within a month the analysis also serves to illustrate a new way to implement the granger causality concept

intertemporal tax discontinuities we define an intertemporal tax discontinuity itd as a circumstance in which different tax rates are applied to gains realized at one point in time versus some other point in time we study the effects of itds on market behaviors at the time of disclosures of firm performance assuming that all investors who trade firm equities are subject to tax the results of our paper suggest that relative to an economy in which itds are absent itds may dampen trading volume and amplify price changes at the time of disclosure

optimal stock trading with personal taxes implications for prices and the abnormal january returns abstract the tax law confers upon the investor a timing option to realize capital losses and defer capital gains with the tax rate on long term gains and losses being about half the short term rate the law provides a second timing option to realize losses short term and gains long term if at all our theory and simulation over the 1962 1977 period establish that taxable investors should realize long term gains in high variance stocks and repurchase stock in order to realize potential future losses short term tax trading does not explain the small firm anomaly but predicts a seasonal pattern in trading volume which maps into a seasonal pattern in stock prices the january anomaly only if investors are irrational or ignorant of the price seasonality

migration trade unions and the informal sector a note on calvo tends to be very sticky a feature which renders some of the standard policies for reducing urban unemployment or underemployment totally ineffective in particular it is observed that in the calvo model a first best optimum cannot be obtained without the imposition of some migration barriers in this note we attempt to generalize the calvo model by incorporating the following new features first we distinguish between the two components of the urban sector the modern formal part and the traditional informal part secondly the individuals are assumed to migrate from the rural to the urban sector in response to a differential in expected utility rather than in expectedincome thereby highlighting the role of risk aversion in individual migration decisions finally following the new literature on trade union behavior 2 the present model posits a utilitarian objective function for the trade union a formulation which is considered an improvement over the one put forward by calvo an important conclusion of the present exercise which sharply contrasts calvo s conclusion is that the government by setting its policies correctly can achieve a first best optimum for the economy this difference in result is due obviously to the differences in specification in particular of the objective function of the trade union

causality of u s agricultural prices and the money supply further empirical evidence empirical evidence presented in this study indicates that the results of causality tests of u s agricultural prices and the money supply are sensitive to the lag selection relying on the minimum final prediction error causality testing technique a unidirectional causal flow is established from the monetary base to retail level agricultural prices no such flow is found to exist from m2 to retail agricultural prices when farm level agricultural prices are investigated no causal flow exists from any of the measures of the money supply to farm prices

the possibility of welfare gains with capital inflows in a small tariff ridden economy capital inflows with full repatriation give rise to welfare improvement possibilities in a small tariff distorted economy when imperfect competition and increasing returns are allowed for in one sector of a two sector model this is in contrast to the brecher alejandro proposition that capital inflows with full repatriation are necessarily immiserizing for a small tariff ridden economy we find that welfare gains chances are greater a the higher the expenditure share of the capital intensive differentiated good b the lower the substitutability between brands and c the lower the share of tariff revenue in national income

the dynamic responses of crop and livestock prices to money supply shocks a bayesian analysis using long run identifying restrictions the impact of monetary policy on agriculture has been much debated this study examines the dynamic responses of u s agricultural prices to money supply shocks using three innovations first the variables responses are identified by long run money neutrality restrictions instead of the more common contemporaneous ordering second a bayesian approach to model uncertainty is used to add robustness to the estimation process third agricultural prices are disaggregated into crop and livestock components the empirical results find that both agricultural sectors benefit in the short run from positive money supply shocks with agricultural prices increasing relative to the general price level

implications of the macroeconomic outlook for agriculture this paper analyzes the implications for agriculture of the macroeconomic scenarios put forth by bosworth and lawrence a substantial body of work in recent years has developed both the theoretical framework and empirical evidence on the channels of influence between the macroeconomy and agriculture the aaea sponsored preconference workshop this year entitled value of large scale aggregate models for economic policy analysis manifests the profession s interest in quantifying the effects that macroeconomic factors have upon the economic performance and financial health of agriculture this paper draws upon the findings of previous work in general terms but more specifically we present the agricultural implications of two alternative macroeconomic environments implied by an existing macroeconomic model which emphasizes agriculture s interface with the macroeconomy the second section of this paper reviews the major findings of the literature on transmission mechanisms linking agriculture with the general economy the third section provides key details of how agriculture fares under bosworth and lawrence s outlook for the general economy through 1990 including the implications for farm prices cash receipts wealth and financial stress the fourth section discusses the consequences of one potential deviation from bosworth and lawrence s out

unemployment and foreign capital the relative opportunity costs of domestic labour and welfare the consequences of increased foreign capital for an economy with unemployment are analyzed under different assumptions that influence the relative oportunity costs of domestic labor the investigation suggests that the implications of the literature on the welfare effect of increased foreign capital are misleading the paper shows that welfare gains result from increased foreign capital if the opportunity costs of labor are sufficiently low relative to the wages earned by laborers employed by new foreign capital a number of cases where this occurs are presented the findings of the paper suggest that cases where increased foreign capital must be welfare harming represent extreme parameterizations in the set of possibilities copyright 1991 by the london school of economics and political science

on modelling the informal sector abstract a recent plea by robert hackenberg to develop new conceptual models in order to take full account of the new realities of the urban informal sector and rid the field from divergent connotations is questioned it seems that existing models easily lend themselves to analysis of the formal informal sector interactions and that divergent conditions necessarily lead to contradictions thus the existing arsenal of models cannot be held responsible for analysis paralysis new research on the informal sector rather than aiming at ultra generalizations should concentrate on issues such as identification of the determining factors of the urban production technologies and the nature of linkages and elasticity of substitution between formal and informal production

capital gains taxes and equity trading empirical evidence individual investors have an incentive to defer selling appreciated stock until it qualifies for tax favored long term capital gains treatment shackelford and verrecchia 2002 show that these incentives can affect equity trading around public disclosures this article provides some empirical support for their theory with evidence of price increases and equity constrictions around announcements of quarterly earnings and additions to the s p 500 index we find share returns rise and trading volume falls with the incremental taxes saved by deferring the sale of appreciated property the price increases however are temporary reversing in subsequent trading days the results are consistent with buyers believing the compensation to sell before long term qualification through higher prices is less costly than holding an inappropriately weighted portfolio this finding that personal capital gains taxes affect equity trading adds to a growing literature that challenges longstanding assumptions that firm value is independent of shareholders and their taxes

a reconsideration of the welfare economics of a free trade zone abstract this paper presents a model of a free trade zone which incorporates the fact that such zones are often established by government subsidies designed to promote non traditional exports in our model the condition is derived under which the establishment of a free trade zone can increase welfare regardless of the relative factor intensity of a zone based industry however the relative factor intensity of a free trade zone plays a crucial role in determining the change in welfare following economic growth and foreign investment

optimal consumption and investment with capital gains taxes this article characterizes optimal dynamic consumption and portfolio decisions in the presence of capital gains taxes and short sale restrictions the optimal decisions are a function of the investor s age initial portfolio holdings and tax basis our results capture the trade off between the diversification benefits and tax costs of trading over an investor s lifetime the incentive to rediversify the portfolio is inversely related to the size of the embedded gain and investor s age contrary to standard financial advice the optimal equity holding increases well into an investor s lifetime in our model due to the forgiveness of capital gains taxes at death taxes play an important role in the decision making process of individuals concerning their consumption and investment plans the taxation of returns on financial assets alters the benefits of saving for future consumption and thus affects the trade off between current consumption and investment moreover the ability of investors to defer the taxation of capital gains alters the relative valuation of stocks and bonds and thus affects the optimal portfolio composition of investors the deferral feature of capital gains taxes also affects the trade off investors face regarding taxes and diversification investors would like to maintain an optimally diversified portfolio over time

the effects of macroeconomic factors on south african agriculture significant research efforts have been devoted to understanding the effects of macroeconomic factors on the agriculture sector analysing the sources of volatility in the industry is critical for designing appropriate policies to stabilize agricultural markets reduce poverty and increase economic growth agriculture is a competitive sector with prices that are more flexible than those in nonagricultural sectors this article uses annual data over the 1957 2004 period and a vector error correction model in investigating the dynamic effects of exchange rates money supply and other macroeconomic variables on the agricultural sector in south africa overall real exchange rates interest rates inflation and money supply m3 shocks have significant and persistent impacts on agricultural output prices received by farmers and farm input prices m3 and interest rate shocks tend to put agriculture in a cost price squeeze agricultural price movements are a source of macroeconomic instability in the country r

interrelationships between monetary instruments and agricultural commodity trade during the last decade agricultural economists have devoted increasing attention to the macroeconomic aspects of agricultural problems indeed a recent presidential address to the american agricultural economics association tweeten centered on the macroeconomics of agriculture given the currency of the monetary approach to macroeconomics it is not surprising therefore that there is also a growing interest in the effects of monetary instruments and monetary phenomena on agricultural commodity trade in this paper i shall discuss what i feel are some of the most pertinent issues that researchers must address in this area before we proceed too far with our discussion it is important to define what i mean by a monetary instrument perhaps arbitrarily i reserve the term monetary instrument for those macroeconomic variables which are primarily determined within domestic or international monetary markets obvious examples are the level of the money supply interest rates and exchange rates i justify the term instrument by noting that as far as the agricultural sector is concerned these variables are by and large predetermined for example the levels of the money supply and interest rates in the united states are to a large extent determined by the policy of the federal reserve similarly the price of the currency the exchange rateis ultimately determined by the demand and the supply for the currency and thus at least partially by governmental policy the first step in any attempt to outline research needs and goals is an identification of what has been done in the past although the literature on the macroeconomics of agriculture is farily large and rapidly expanding eckstein and heien lamm schuh 1976 and tweeten are important examples relatively li tl attention has been given to the effect of monetary instruments on agricultural trade what attention has been given to this area of resea ch has revolved mainly around the role of exchange rates in determining agricultural exports and prices thus it is logical to start our discussion with a brief survey of the literature on exchange rates and agriculture

on the job search in a labor market model a comment abstract using a three sector model of the labor market built by fields 1989 this note shows that when the demand for goods produced in the traditional sector increases with modern sector employment modern sector enlargement may reduce the level of urban unemployment

relative agricultural prices and monetary policy an imperfect information rational expectations model of relative price determination is presented this model provides an econometric specification for testing for a causal relationship between money and the relative prices of agricultural commodities test results indicate that variations in the growth rate of the nominal money supply whether anticipated or unanticipated have not been an important influence on the average level of prices received by farmers relative to other prices in the economy over the period 1951 85

dynamic asset pricing effects and incidence of realization based capital gains taxes abstract many analyses of capital gains taxation assume that realization based taxes are economically similar to accrual based taxes in equilibrium however the distinctive implications of realization taxes for asset trading through the lock in effect are associated with distinctive dynamic asset pricing effects asset prices are increased by the current realization tax to partly offset the sale disincentive that the tax would otherwise impose the resulting division of the tax burden between buyers and sellers of assets is similar to traditional public finance models of excise tax incidence in product markets

cross base tax elasticity of capital gains abstractthis paper studies the cross base tax elasticity of capital gains realizations to labour income taxes when capital gains are taxed at a separate proportional tax rate using a longitudinal panel of over 265 000 individuals in sweden this paper shows in a regression kink design that labour income taxes affect capital gains realizations in two ways an increase in the marginal labour income tax rate increases the likelihood of realizing capital gains and the amount of realized capital gains one implication of this result is that labour income taxes have a lock out effect but that the magnitude of this effect is smaller than the lock in effect of the actual capital gains tax

the informational role of commodity prices in formulating monetary policy a reexamination abstract this paper reexamines the issue of whether commodity prices provide useful information for formulating monetary policy through the application of a recent development in time series methodology developed by toda and yamamoto j econometrics 66 1995 225 250 we found that commodity prices signal the future direction of the economy

rural urban migration in economic development abstract this paper provides a review of the theoretical literature on rural urban migration in contemporary ldcs the paper begins with a brief discussion of the lewis model before going on to discuss the todaro and the harris todaro models and the large literature which these models have spawned the question of job search in the context of migration and the role of family members in migration decisions are considered next the paper then takes a closer look at the informal sector and also sets out alternative migration functions to the ones usually employed in the literature the paper concludes with a brief note on some of the important implications arising from our study

capital gains taxation and the cost of capital evidence from unanticipated cross border transfers of tax base abstract in a cross border takeover the tax base associated with future capital gains is transferred from target shareholders to acquirer shareholders cross country differences in capital gains tax rates enable us to estimate the discount in target valuation on account of future capital gains we estimate that a 1 percentage point increase in the capital gains tax rate reduces the value of equity by around 0 3 which suggests that the capital gains tax significantly raises firms cost of capital furthermore we find that the implied capital gains tax burden is higher at times of high economic growth and low stock market valuation

tariffs foreign capital and immiserizing growth with urban unemployment and specific factors of production abstract in this note we show that a recent observation of brecher alejandro as regards tariff induced capital inflows essentially extends to a setting with urban unemployment three factors of production and a variety of labor market conditions in the urban sector

welfare consequence of capital inflow for a small tariff protected economy abstract capital inflow is generally immiserizing when the capital intensive import competing sector is tariff protected and profits are repatriated in full in this paper we construct a model with increasing returns embedded in a monopolistically competitive market to show that capital inflow might lead to higher factor income and interestingly enough growth of import competing sector might lead to still higher imports thus two distinct possible channels are identified through which welfare might improve

effects of international shocks and domestic macroeconomic policies upon brazilian agriculture abstract an identified vector autoregressive model is used to analyze the transmission of external commodity shocks to the brazilian economy the effects of the interaction between domestic macroeconomic monetary and exchange rate policies and external shocks to agricultural commodity raw material and food prices and crude oil price upon domestic agriculture industry terms of trade are estimated

foreign capital inflows and welfare in an economy with imperfect competition abstract this paper examines the resource allocational and welfare effects of exogenous inflows of foreign capital in a general equilibrium model with oligopolistic competition and unemployment although the welfare impact for the short run is ambiguous and dependent upon the strength of excess profits and scale economies relative to unemployment in manufacturing in the long run additional inflows of foreign capital always improve national welfare with capital mobility hence attracting foreign capital remains a sound policy for economies characterized by imperfect competition scale economies and regional unemployment

relative prices and money a vector autoregression on brazilian data recent data on brazilian agricultural prices industrial prices and money supply are analyzed in a vector autoregression the empirical findings show strong one way granger type causality from money supply to agricultural prices while feedback is observed between industrial prices and money supply under the usual monetarist ordering of contemporaneous innovation covariance agricultural prices do not adjust faster than industrial prices to a shock in the money supply

a theoretical analysis of the informal sector abstract in this paper we present a theoretical framework of an economy which has an informal sector the differences between the formal and the informal sector together with their linkages form the basis of our analysis we show that the informal sector can expand in terms of output and employment even when the formal sector contracts

commodity price dynamics and anticipated shocks in this paper we address the robustness of overshooting hypothesis in agricultural prices we find that agricultural prices may undershoot their long run level if the economy experiences an anticipated monetary shock rather than an unanticipated monetary shock we also find that agricultural prices definitely display undershooting if the price of manufactures adjusts instantaneously rather than sluggishly

macroeconomic impacts on bulgarian agriculture during transition an unstable and erratic macroeconomy in an economy in transition might be expected to affect agricultural performance this is tested for bulgaria between 1992 and 1997 using impulse response functions from a vector autoregressive var model despite data limitations it is found that shocks to the foreign exchange rate and interest rate feed into farm prices and agricultural exports but equilibrium will be re established within 5 years agricultural policies may not be sufficient to counteract the wider macroeconomic forces

neutrality of inflation in the agricultural sector abstract the paper considers the effect of inflation on the relative prices of products traded in auction markets prices of us agricultural products are used for the period 1951 1981 since agricultural products are widely traded the real forces of supply and demand specific to agriculture are represented by foreign agricultural prices the exchange rate is entered as a separate variable influencing domestic agricultural prices trade between the usa and the ten countries included in the federal reserve board s trade weighted dollar is considered the empirical results are consistent with the hypothesis that inflation did not alter relative agricultural prices when the real forces of supply and demand and the exchange rate are held constant

labor market distortions the structure of protection and direct foreign investment abstract this paper analyzes the welfare effects of direct foreign investment in a general model that allows for labor market distortions trade in both intermediate inputs and final goods export subsidies and protection in the form of either tariffs or quotas it is shown that contrary to the conventional wisdom there is not in general any strong connection between the orientation of the trade regime sectoral capital intensity rankings and the desirability of attracting foreign investment

relative prices and money further results for the united states empirical results support the hypothesis that agricultural prices respond faster than manufactured product prices to a change in money supply in the united states sims vector autoregression var technique was applied in examining this hypothesis the monte carlo integration method was used to test the significance of the impulse responses generated by the var technique

informality in the process of development and growth informality is a term used to describe the collection of firms workers and activities that operate outside the legal and regulatory systems it is widespread in the majority of developing countries in a typical developing economy the informal sector produces about 35 per cent of gdp and employs 70 per cent of the labour force this paper studies informality in the context of economic development by presenting a model and projections that link informality regulations migration and economic growth this analytical framework highlights the trade offs between formality and informality the relationship between the different types of informality and the connection between them and the forces of labour capital and productivity growth the paper models the behaviour of the informal sector based on the following fundamental asymmetry formal firms confront higher labour costs while informal firms face higher capital costs and lower productivity using mandated minimum wages as the policy induced distortion the model first studies the static allocation of formal and informal capital and labour in a modern economy second it opens the possibility of labour migration from a rudimentary economy with ample supply of labour e g rural areas or less advanced neighbouring countries third the model analyses the dynamic behaviour of the formal and informal sectors considering how they affect and are affected by economic growth and labour migration then the paper presents projections for the size of labour informality in the modern and rudimentary economies in the next two decades for a large group of countries representing all regions of the world the projections are based on the calibration and simulation of the model and serve to discuss its usefulness and limitations

foreign capital income inequality and welfare in a harris todaro model abstract the effects of an inflow of foreign capital on social welfare are analysed in a mobile capital harris todaro economy in which all income earned by foreign capital is repatriated and in which there is no tariff we consider the welfare measure of sen 1974 which incorporates the gini coefficient of the income distribution it is shown that an inflow of foreign capital worsens the income distribution and lowers social welfare according to sen s measure even in the absence of a tariff if the manufacturing sector is capital intensive relative to the agricultural sector in employment adjusted terms

capital gains taxation and funding for start ups abstract we examine how capital gains taxes affect investment in private start up i e pre ipo firms using data on capital raised in individual funding rounds we estimate the effect of the 2010 sbja which implemented a full exemption from federal capital gains tax on the sale of qualified shares because of the resulting higher expected after tax returns we hypothesize and find evidence consistent with this capital gains tax reduction increasing the amount of investment in start up firms per funding round by about 12 the effect is stronger in start up firms that are likely to have greater administrative capacity we estimate that about one third of the tax benefit is captured by investors

relationships between corruption political orientation and income inequality evidence from latin america abstractthis research sheds light on the analysis of the impact of corruption and political orientation on income distribution in latin america although it has been theoretically demonstrated that corruption worsens the income distribution the empirical evidence has yielded ambiguous results based on biased estimates not considering a measurement error in the estimation of inequality this article fills this gap by correcting the previous measurement error bias in the fixed effects estimation additionally political orientation and its relationship with income inequality are also investigated the sample covers 18 latin american countries between 1996 and 2012 results reveal that corruption increases income inequality