housing market responses to transaction taxes evidence from notches and stimulus in the uk we investigate housing market responses to transaction taxes using administrative data on all property transactions in the u k from 2004 to 2012 combined with quasi experimental variation from tax notches and tax stimulus we present two main findings first transaction taxes are highly distortionary across a range of margins causing large distortions to the price volume and timing of property transactions secondly temporary transaction tax cuts are an enormously effective form of fiscal stimulus a temporary elimination of a 1 transaction tax increased housing market activity by 20 in the short run due to both timing and extensive responses and less than half of the stimulus effect was reversed after the tax was reintroduced due to re timing because of the complementarities between moving house and consumer spending these stimulus effects translate into extra spending per dollar of tax cut equal to about 1 we interpret our empirical findings in the context of a housing model with downpayment constraints in which leverage amplifies the effects of transaction taxes

some aspects of the taxation of capital gains abstract the analysis of the effects of capital gains taxation requires a careful modelling both of the details of the tax code and the imperfections in the capital market under the standard assumptions concerning perfect capital markets and under the standard idealizations of the tax code there are several strategies by which rational investors can avoid note only all taxes on their capital income but also all taxes on their wage income these strategies leave individuals consumption and bequests in each state of nature and at each date unchanged from what they would have been in the absence of taxes although certain detailed provisions of the tax code may limit the extent to which rational investors can avail themselves of these tax avoidance activities there are ways in a perfect capital market by which the effects of these restrictions can be ameliorated accordingly any analysis of the effects of capital taxation must focus on imperfect capital markets if individuals face limitations on the amounts which they can borrow and or if there are limitations on short sales then under some circumstances there is a locked in effect individuals do not sell securities which they would have sold in the absence of taxation but under other circumstances individuals are induced to sell securities that they otherwise would have held in order to take advantage of the asymmetric treatment of short term losses and long term gains a policy of realizing gains as soon as they become eligible for long term treatment dominates the policy of postponing the realization of capital gains provided the gains are not too large a simple general equilibrium model is constructed within which it is shown that the taxation of capital gains may increase the volatility of asset prices and lead individuals not to trade when they otherwise would while the analysis casts doubt on the significance of the welfare losses resulting from these exchange inefficiencies there are circumstances in which the tax leads to production inefficiencies e g terminating projects at other than the socially optimal date finally we argue that the focus of some recent policy debates on the short run revenue impact of a decrease in the tax rate on capital gains is misplaced even when the short run revenue impact is positive consumption may increase thus exacerbating inflationary pressures and private savings may decrease thus leading to a lower level of investment in the private sector moreover there is some presumption that the long run revenue impact is negative our analysis has some important implications for empirical research in particular it suggests that the impact of the tax is not adequately summarized by a single number such as the effective tax rate representing the average ratio of tax payments to capital gains moreover the impact of the tax cannot be assessed by looking only at reported capital gains and losses

do high taxes lock in capital gains evidence from a dual income tax system the purpose of this paper is to study whether investors willingness to realize capital gains falls when the marginal tax rate on capital gains is raised we use a rich register based panel data set covering almost 8 of the swedish population the results indicate that a 10 increase in capital gains tax rate reduces the number of realizations of capital gains with 8 7 and the realized amount given the decision to realize with 1 9 in addition we find that wealthy individuals seem to respond more to changes in capital gains tax rates than less wealthy

the importance of group coverage how tax policy shaped u s health insurance in 1954 the internal revenue service stipulated that employer contributions to the health insurance plans of their employees were to be excluded from employee taxable income today the tax subsidy is major feature of the u s health care market this paper examines the initial effects of the tax subsidy on the demand for health insurance using previously unexamined data from 1953 and 1958 results suggest that the tax subsidy increased the growth of group insurance particularly among union members and employed persons this is a critical effect because group insurance is not only less expensive than individual insurance but it is also easier to obtain and households with access to group health insurance are far more likely to purchase health insurance coverage than those without similar access by increasing access to group insurance the tax subsidy fostered an increase in the purchase of group health insurance by people who may not have purchased individual coverage and generated institutional change as it cemented an employment based system of group health insurance in the united states this abstract was borrowed from another version of this item

claim timing and ex post adverse selection many health care treatments are not urgent and may be delayed if patients so choose because insurance coverage is typically determined by the treatment date individuals may have incentives to strategically delay treatments to minimize out of pocket costs the strategic delay of treatment a particular form of moral hazard can be an important source of subsequent adverse selection in which ex ante identical individuals select insurance coverage based on their differing accumulation of previously delayed treatments this article investigates these forces empirically in the context of the missing market for dental insurance using rich claim level data my analysis reveals that approximately 40 of individuals strategically delay dental treatments when incentivized to do so and this flexibility in delaying treatment can explain why the market for dental insurance has largely unraveled more generally the counterfactual analysis suggests features such as open enrolment periods and contracting on pre existing conditions may be helpful tools in overcoming adverse selection in insurance contexts where the timing of uncertainty is not contractible

liberalising the movement of natural persons a lost decade liberalisation of international trade in services through the movement of natural persons mode 4 remains one of the least negotiated issues of trade policy among the 144 members of the world trade organisation economists believe that there is a basic convergence of economic interest between the developed and the developing world for liberalising mode 4 yet the multilateral trading system has not facilitated greater worker mobility between the labour surplus and labour scarce countries is there any economic logic as to why cross border movements of workers have not followed the pattern predicted by international trade theory or are there strong socio political barriers that have come in the way of liberalising mode 4 these are some of the questions the paper attempts to answer the paper shows that the economic arguments against the free movement of natural persons are based on the narrow perspective of the welfare of domestic workers while ignoring the benefit it brings to the economy as a whole further non economic arguments miss the point that the movement of workers under mode 4 of gats is temporary in nature and so unlikely to have any lasting social and cultural spillovers the paper gives specific illustrations from the recent past where temporary import of workers from labour surplus countries has enabled both developed and developing countries sustain their economic growth it concludes by arguing that the environment for renegotiating wto commitments under this important sector of international trade in services is better than ever before even though the current world economic slowdown may delay actual negotiations for a while copyright 2004 blackwell publishing ltd

testing the food first hypothesis a cross national study of dependency sectoral growth and food intake in less developed countries abstract previous cross national studies on dependency and economic growth in less developed countries ldcs seldom compare the impacts of different kinds of dependency their focus on economic growth also overlooks the fact that growth per se does not necessarily benefit the masses an alternative measure of the absolute living standard of the masses i e food intake is examined in this paper this study analyzes data from 73 ldcs after comparing the effects of manufacturing growth and cereal production growth on food intake this study supports the food first hypothesis derived from lappe and collins 1977 work since it demonstrates that in most ldcs even in middle income ldcs cereal production has a much stronger effect on food intake than does manufacturing growth

services provision and temporary mobility freedoms and regulation in the eu international posting of workers and mobility of self employed service suppliers lie between outright migration and trade in goods their regulation for both distributional and marketcorrecting purposes is not as difficult to harmonize as that of labour markets but personal mobility is more visible and socially intrusive than product market interactions this paper analyzes economic and legal tensions between national regulatory frameworks and international competition in these areas in both the intra eu and global contexts highlighting how interactions between the external and internal roles of the european commission may foster efficient integration of markets and policies in this and other fields

employment effects of minimum and subminimum wages panel data on state minimum wage laws using panel data on state minimum wage laws and economic conditions for the years 1973 89 the authors reevaluate existing evidence on the effects of a minimum wage on employment their estimates indicate that a 10 increase in the minimum wage causes a decline of 1 2 in employment among teenagers and a decline of 1 5 2 in employment for young adults similar to the ranges suggested by earlier time series studies the authors also find evidence that youth subminimum wage provisions enacted by state legislatures moderate the disemployment effects of minimum wages on teenagers

dying to save taxes evidence from estate tax returns on the death elasticity this paper examines data from u s federal tax returns to shed light on whether the timing of death is responsive to its tax consequences we investigate the temporal pattern of deaths around the time of changes in the estate tax system periods when living longer or dying sooner could significantly affect estate tax liability we find some evidence that there is a small death elasticity although we cannot rule out that what we have uncovered is ex post doctoring of the reported date of death

measuring permanent responses to capital gains tax changes in panel data the authors use panel data and information about differences in state tax rates to separate the effects of transitory and permanent tax rate changes on capital gains realizations behavior the estimated effect of permanent change is substantially smaller than the effect of transitory change the difference is even larger than differences between estimates from past micro data studies which have primarily measured the transitory effect and time series studies which have primarily measured the permanent effect the authors results resolve a long standing conflict between micro data and time series studies of how marginal tax rates affect capital gains realizations behavior copyright 1994 by american economic association

household debt and the tax reform act of 1986 prior to the tax reform act of 1986 tra 86 interest paid on all types of household debt was deductible from income before the payment of taxes in 1986 congress changed the law to phase out the deductibility of consumer interest over a five year period congress believed deductibility of interest provided an incentive to invest in consumer durables rather than assets which produce taxable income and therefore an incentive to consume rather than save by phasing out the present deductibility of personal interest congress intended to eliminate from the prior tax law a significant disincentive to saving joint committee on taxation jct 1987 p 263 the other goal of the provision was to raise 9 6 billion per year in tax revenue by 1991 because congress determined that encouraging home ownership is an important policy goal achieved in part by providing a deduction for residential mortgage interest it chose to retain the residential mortgage interest deduction jct 1987 pp 263 64 thus mortgage interest was fully deductible for interest paid on debt secured by a taxpayer s first or second residence up to his basis in the residence the omnibus budget reconciliation act of 1987 obra 87 changed the law so that interest paid was fully deductible on up to 1 million in acquisition debt and 100 000 in home equity debt 2 debt is categorized as acquisition debt if it is used for the purchase or improvement of a home home equity debt includes all other debt secured by a home by keeping the mortgage interest deduction congress may have provided a loophole that some taxpayers could exploit there was no restriction on the use of home equity debt and taxpayers who owned homes could borrow against their home equity to pay for the same purchases they had previously funded with consumer loans homeowners were given an incentive to shuffle their portfolios away from consumer debt into mortgage debt the widespread introduction of home equity lines of credit in the mid 1980 s which may have been spurred in part by the change in tax law provided an inexpensive and flexible method for households to make this shift 3 measuring the extent of portfolio shuffling is important for understanding whether households view mortgage and consumer debt as close substitutes clearly the substitution of mortgage debt for consumer debt undermines the goals of congress to boost saving and increase revenue moreover homeowners already have substantial tax preferences through the lack of taxes on the imputed income from housing and the preferential tax treatment of capital gains on their principal residence the ability to use deductible mortgage debt to finance consumer purchases provides homeowners another tax advantage relative to renters figure 1 plots the percentage change in putnam investments one post office square bos on ma 02109 e mail dean maki putnaminv com this paper was completed while i was on the staff of the board of governors of the federal reserve system financial support from the stanford institute for economic policy research and the lynde and harry bradley foundation is gratefully acknowledged i would like to thank john shoven orazio attanasio john pencavel tim bresnahan anne royalty doug bernheim al teplin craig furfine martha starrmccluer raphael bostic len burman julia coronado two anonymous referees seminar participants and the financial institutions research review group for helpful comments the views expressed in this paper are those of the author and do not necessarily reflect the views of putnam investments or the federal reserve board or its staff 1 in this paper consumer interest refers to interest paid on consumer loans that are not secured by a residence 2 under tra 86 interest paid on qualified educational and medical debt secured by a home was also deductible even if this debt exceeded the household s basis this provision was not renewed in obra 87 under obra 87 home equity debt also could not exceed the difference between the fair market value of the home and the amount of acquisition debt even if this difference was less than 100 000 3 of course homeowners can also increase their mortgage debt by taking out a traditional home equity loan by taking cash out when refinancing their mortgage or by taking out a larger mortgage when they durchase a home

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

trends and projections for bangladeshi food production an alternative viewpoint abstract this article analyses growth in bangladeshi food production and yields by reviewing past evidence and critically examining the contribution of james k boyce general statistical evidence is considered on whether the past growth rate is being sustained the evidence suggests that past growth is unlikely to continue data from a recent field survey in two different areas of bangladesh add weight to this view on both ecological and economic grounds it seems likely that bangladesh s ability to feed its population will continue to decline

the economic impact of medical migration an overview of the literature this paper provides an overview of the evidence and applied literature on medical migration the economic impacts of medical migration have been little researched causing a polarisation in the debate between its critics and its proponents the paucity of quantitative studies may be explained by the lack of comprehensive and consistent data investments in statistical resources on medical migration are therefore a major priority the available evidence suggests that particularly english speaking countries in sub saharan african countries and the caribbean with relatively few health workers and a high disease burden suffer most from the medical brain drain however the exodus of health workers is not the main cause of the health status crisis but rather a symptom of deeper underlying problems which often extend beyond the health sector towards the broader economic and political environment in such situations medical brain drain does pose challenges for human resource management and health service delivery the only effective and long term sustainable policy is one that addresses the underlying push and pull factors reforms have to be country led but may be supported via temporary migration schemes remittances enhancement of diaspora networks and financial aid for which a strong moral case exists

capital gains taxation and realizations evidence from interstate comparisons this paper documents the interstate variation in capital gains taxation and examines the relation between the marginal tax rate on capital gains and aggregated state level realizations between 1979 and 1990 using state level aggregated data rather than data on individual taxpayers alleviates the problem that the marginal tax rate is endogenous to the amount of capital gains realized the estimated elasticity of realizations with respect to the tax rate is 0 65 smaller than that found by most researchers using panel data this finding is robust to a variety of alternative specifications copyright 1995 by mit press

efficiency and distributional implications of global restrictions on labour mobility calculations and policy implications abstract in this paper a procedure for calculating the annual efficiency gains from various alternative changes in existing global immigration restrictions is presented along with an evaluation of impacts of wage rate changes on non migrating labour a simple methodology uses data on u s dollar gnp capita across countries to infer differences in the marginal productivity of labour both between countries and across major world trading areas two key assumptions used are that the worldwide labour supply is fixed and full employment occurs in all regions differences occuring in labour s marginal product across regions are assumed to arise because of barriers to inward mobility of labour in high wage countries when these are removed labour reallocates and efficiency gains occur while the calculations are based on contentious assumptions a striking feature is the size of the annual worldwide gains in some cases annual gains can easily exceed existing worldwide gnp generated in the presence of labour mobility restrictions while all gains do not accrue to ldc s the size of the gains nonetheless suggests that this issue may be much more important to these countries than other issues raised thus far in the north south debate the losses to labour already employed in high wage countries dramatize the incentives for labour unions in the developed world to oppose liberalization

why do rich countries prefer free trade over free migration the role of the modern welfare state abstract according to traditional trade theory heckscher ohlin free trade and free migration are equivalent measures of economic integration leading both to an equalization of factor prices this prediction is in sharp opposition to the observed preference of rich countries for free trade over free migration we provide an explanation for this inconsistency the redistribution policies in the countries social welfare in countries with a relatively small number of low skilled native workers is higher with free trade than with free migration due to redistribution of income towards immigrating workers

tax incentives and borrowing we estimate the effect of the danish 1987 tax reform which reduced the tax rate applied to interest deductions from 73 to 50 for households with high incomes but less for households with middle or low incomes using high quality panel data we find that households responded to the reduced tax subsidy by lowering interest payments and we find that the responsiveness to the tax subsidy varies by the initial level of interest payments

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

do people respond to tax incentives an analysis of the italian reform of the deductibility of home mortgage interests abstract before 1992 mortgage interests in italy were fully tax deductible up to 3500 euro 7000 for two cosigners in 1992 1994 the government implemented a series of tax reforms whose ultimate effect was to eliminate the relation between the after tax mortgage rate and the marginal tax rate using data from the 1989 2002 survey of household income and wealth we test if the elimination of incentives has affected the sensitivity of the decision to borrow and the amount borrowed with respect to the marginal tax rate regression analysis and difference in differences estimates indicate that tax considerations have not affected the demand for mortgage debt neither at the extensive nor intensive margin these results are consistent with lack of financial information and credit rationing during the sample period

effects of capital gains taxation on life cycle investment and portfolio management we examine the impact of capital income taxation both accrual forms of taxation and taxation of realized capital gains on total savings and the demand for corporate financial instruments we find that investors may hold both debt and equity in the face of effective collection of capital gains taxation even in a flat tax system we also find that the two taxes will have substantially different effects on saving and consumption behavior making it unlikely that the tax structure can be summarized by any single equivalent accrual tax rate this paper examines the impact of income taxation on the demand for various corporate financial instruments focusing on unique features due to taxation of realized capital gains we take a life cycle view of investment behavior and examine how accrual and realization taxation jointly affect an individual s allocation of intertemporal resources we shall consider the impact on his demand for debt and equity showing that taxation of realized capital gains generates an intrapersonal tax clientele effect at any one point of time an individual will strictly prefer either to buy debt or equity but that choice may be different at different ages therefore many individuals will simultaneously hold both debt and equity we also find that any attempt to measure the effective capital gains tax rate will be difficult and that existing approaches appear flawed since they do not correspond to the pattern of distortions which we find in this explicit model of asset demand and saving this analysis deviates from earlier work on capital gains taxation in several substantial dimensions whereas much of the capital gains taxation literature focuses on how capital gains tax regulations generate arbitrage opportunities in perfect capital markets the analysis used below essentially assumes effective enforcement of the intent of capital gains taxation this is desirable since contrary to the perfect capital market implication capital gains tax revenues are nontrivial therefore in examining the nature of asset demand and choice it is reasonable to assume somewhat effective collection of the capital gains tax liabilities our analysis will assume completely effective enforcement to highlight the impact of capital gains taxation it will be clear that several types of leakages will not substantially alter the qualitative conclusions

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

permanent versus transitory tax effects and the realization of capital gains recent empirical work on captial gains implies that realizations are highly sensitive to marginal tax rates because they are based on cross section data however these estimates cannot distinguish between permanent responses to tax rate changes and the timing of realizations to take advantage of the normal fluctuations in any individual s tax rates over time the purpose of this paper is to distinguish transitory from permanent tax effects by analyzing panel data for taxpayers controlling for permanent and transitory income and other variables the estimates suggest both transitory and permanent effects although the permanent tax rate effect is not significant in all cases

the probability of return migration migrants work effort and migrants performance abstract this paper demonstrates that differences in earnings between migrants and the native population may reflect differences in incentives rather than differences in characteristics the analysis indicates that in the presence of a positive probability of return migration migrants work effort is higher than that of comparable native born workers this differential may explain why even if all workers are perfectly homogeneous in skills migrants often outperform the native born workers in the receiving economy

the effect of income taxes on household income research on the distribution of income during the 1980s has identified a trend towards increasing inequality which may be the continuation and acceleration of trends spanning several decades this paper explores to what extent behavioral responses to the tax changes during the 1980s may also explain the rising inequality the 1986 tax reform act is used as a natural experiment to explore the roles played by both taxes and a variety of nontax factors our principal finding is that both tax rates and nontax factors appear to have had significant effects on relative income growth during the late 1980s

dynamic income progressive taxes and the timing of charitable contributions using an econometric model of charitable giving and a 10 year panel of tax return data i find that previous studies have underestimated the effects of permanent income and overestimated the effects of permanent changes in tax prices the significant statutory tax changes that occurred during the 1980s especially in 1986 serve to identify the key model parameters my results imply that people smooth their giving when transitory income changes but also time their giving to exploit transitory changes in tax prices the results also raise questions about how effectively the tax incentives permanently influence the level rather than just the timing of charitable giving by individuals

what happens when you tax the rich evidence from executive compensation this paper examines the responsiveness of taxable income to changes in marginal tax rates using detailed compensation data on several thousand corporate executives from 1991 to 1995 the data confirm that the higher marginal rates of 1993 led to a significant decline in taxable income indeed this small group of executives may account for as much as 20 percent of the aggregate change in wage and salary income for approximately the one million richest taxpayers over this time period one person alone can account for more than 2 percent the decline however is almost entirely a short run shift in the timing of compensation rather than a permanent reduction in taxable income the short run elasticity of taxable income with respect to the net of tax share exceeds one in this sample but the elasticity after one year is at most 0 4 and probably closer to zero breaking out the tax responsiveness of different types of compensation shows that the large short run responses come almost entirely from a large inc

sustainable development in pacific micro economies abstract this paper argues that the central economic problem for a number of very small pacific island economies is the preservation and enhancement of their status as rentier societies and the relatively high living standards vis a vis other developing countries which go with the status the thrust of most development planning in the region with its focus on sustainable expansion of productive activity is misdirected in these small countries it is not productive activity but rent entitlements which must be sustained and reproduced over time aid philately and migrant remittances are not merely supplements to local incomes they are the foundations of the modern economy insofar as conventional development projects crowd out aid and remittance entitlements their impact is immiserizing criticism is offered of a recent argument for returning to sustainable subsistence economies

the elasticity of taxable income during the 1990s new estimates and sensitivity analyses author affiliation seth h giertz sgiertz2 unl edu acknowledgment the author wishes to thank david weiner ed harris bob dennis doug hamilton tom woodward emmanuel saez chris bollinger and three anonymous referees for their comments and assistance 1 introductioneconomists have long recognized that taxation creates economic inefficiency by distorting relative prices often between leisure and all other goods in the economy even a broad based income tax can have substantial efficiency costs so long as leisure remains untaxed harberger 1964 uses this as motivation for comparing the efficiency implications of direct versus indirect taxation in so doing he shows how labor supply elasticities can be used to measure the efficiency implications of income taxation 1 harberger s analysis had a profound influence on public and labor economists spurring increased research into labor supply elasticities which were seen as proxies for the efficiency costs from taxation more than two decades after harberger economists began to emphasize the variety of other margins over which taxes can distort behavior in addition to hours worked these economists noted that these other behavioral responses may too have important implications for efficiency an important building block in the evolution of this literature was set forth by slemrod 1990 who presented a hierarchy of behavioral responses to taxation slemrod divided behavior into three categories based on their responsiveness to taxes his least responsive category real responses includes individuals changing consumption and work patterns and businesses altering investment and production decisions second in order of responsiveness is circumvention which includes both illegally evasion and legally avoidance bypassing the tax system 2 in the case of evasion income is concealed from tax authorities or factors that offset tax liabilities such as expenses and deductions are inflated beyond what is legally permitted in the case of avoidance income is shifted in order to receive more favorable tax treatment diverting income into a tax deferred retirement account is an example of avoidance 3 included in circumvention is the expenditure of time and money necessary to avoid or evade taxation third on the hierarchy and the most responsive is the timing of income receipt which includes pulling the receipt of income into the previous year or pushing it into the next in order to take advantage of more favorable tax treatment while not altering real behavior 4 slemrod further recognizes that the type of behavioral response could have implications for both tax revenue and tax incidence and in some cases efficiency predating slemrod s insights lindsey 1987 produced elasticity estimates for taxable income although what lindsey termed taxable income more closely approximates adjusted gross income agi instead of labor supply 5 lindsey s estimated elasticities were much larger than the labor supply literature would have suggested lindsey emphasized the revenue implications of the elasticity of taxable income eti but not its efficiency implications building on slemrod and lindsey feldstein 1995 produced eti estimates but went much further than lindsey in describing the behaviors that could affect taxable income he argued that many of these behaviors were not captured by labor supply elasticities furthermore feldstein posited that income taxation creates economic inefficiency not only by distorting the relative price between labor and leisure but more broadly by distorting the relative price between goods or activities that are taxed and those that are not taxed since leisure is not the only untaxed activity for example in response to taxes not only work hours but also work effort might change

taxes high income executives and the perils of revenue estimation in the new economy this paper attempts to help explain the unforecasted excess personal income tax revenues of the last several years using panel data on executive compensation in the 1990s it argues that because the gains on most stock options are treated as ordinary income for tax purposes rising stock market valuations are directly tied to non capital gains income this blurred line between capital and wage income for has affected tax revenue in three ways at least for these high income people first stock performance has directly affected the amount of ordinary income that people report by influencing their stock option exercise decisions second the presence of options gives executives more flexibility in changing the timing of their reported income and appears to make them much more sensitive to the short run timing of tax changes even accounting for the stock market changes of the period third because of the tax rules on options changing the capital gains tax rate as the u s did in the late 1990s can lead individuals to exercise their options early to convert the expected future gains into lower taxed forms the data show significant evidence of each of these effects and in all three cases executives working in the new economy and high technology sectors this abstract was borrowed from another version of this item

the impact of mortgage interest rate subsidies on household borrowing abstract the responsiveness of household borrowing to changes in the interest rate is a crucial parameter for assessing public policies aimed at promoting saving we estimate the effect on household borrowing of a reform of a program that subsidized interest rates on mortgages signed by medium and low income households the reform established a ceiling in the price of the house that could be financed with the program first we use triple difference estimators exploiting the fact that the reform should affect most the borrowing behavior of eligible individuals living in high price areas and estimate that the elasticity of the probability getting a loan to the interest rate lies between 2 8 and 1 3 second we document that after the reform the distribution of loan sizes became more concentrated at the discontinuity point of the budget constraint of eligible individuals both findings are consistent with a negative response of household borrowing to increases in interest rates

house price appreciation liquidity constraints and second mortgages abstract this paper analyzes how households use second mortgages in response to shocks to housing wealth two related questions are examined do households use home equity in response to house price appreciation are liquidity constraints important for homeowners a theoretical model shows that liquidity constrained households respond more strongly to house price changes than unconstrained households using psid i find noteworthy differences in borrowing patterns of homeowners by the ratio of wealth to income low wealth to income homeowners exhibit a strong reaction to house price appreciation whereas high wealth to income ones do not the results indicate the importance of liquidity constraints among homeowners

subsistence economies and unsustainable development and trade some simple theory three possible development patterns for subsistence economies with a restricted range of resources are explored in this paper the models may be particularly relevant to small island countries for example in the pacific ocean in the first model it is shown that neither international trade nor an advanced sector is sustainable in the long run in the type of subsistence economy envisaged both international trade and advanced sectors eventually disappear as population levels increase in the second model the possibility is explored that export opportunities may foster unsustainable development it may sustain population levels that cannot be maintained should the demand for exported goods collapse there is a high risk of such a collapse in small subsistence economies with their restricted resource basis the third case which has similarities with the previous one except that collapse comes about by exhaustion of supply rather than deterioration in demand is development made possible by the export

project appraisal the environment and sustainability for small islands the paper discusses problems of project appraisal for small island less developed nations taking account of alternative approaches to assessment knowledge problems shortages of indigenous analytical skills in evaluation and motivational issues this raises the question of the value of natural environments of small island countries to the rest of the world the view is rejected that the environments of small island countries are relatively unimportant to the rest of the world sustainability considerations have become important in project appraisal and development planning project appraisal is discussed with particular reference to small island economies taking account of alternative concepts of sustainable development and the method suggested by pearce and others to integrate sustainability into cost benefit analysis responses of aid organizations such as aidab to this new emphasis on sustainable development are discussed some projects of particular relevance to small island nations are examined from the point of view of their environmental sustainability these include motorization of fishing boats in the maldives the mariculture of giant clams in the pacific and tourist developments

the effect of individual retirement accounts on household consumption and national saving a major debate exists on whether expanding tax favoured savings accounts such as individual retirement accounts iras will increase national savings much of the empirical debate has centred on whether ira contributions before the tax reform act of 1986 represented new savings or merely reshuffled assets we find no evidence that households financed their ira contributions from reductions in consumption at least initially we find evidence that households financed their ira contributions from existing savings or from saving that would have been done anyway our results indicate that at most 9 of ira contributions represented net additions to national saving

redistributive taxation and personal bankruptcy in u s states abstract personal bankruptcy regulation and redistributive taxes and transfers vary considerably across u s states and over time our hypothesis is that both policies are imperfect substitutes in insuring consumption of risk averse agents in incomplete markets exploiting data variation over time for 18 u s states for the period 1980 2003 we find considerable support for this hypothesis redistributive taxation and bankruptcy exemptions are negatively correlated and both policies are associated with more equal consumption growth

sustainable development differing perspectives of ecologists and economists and relevance to ldcs abstract the claim is now widely that it is desirable to aim for a sustainable society for sustainable economic development and for sustainable productive systems this reflects the outlook of ecologists rather than the majority of economists although a small group of economists does see particular virtue in sustainability the outlook of ecologists is illustrated by conway s criteria for assessing the desirability of agricultural systems this approach is shown to involve several unresolved conceptual issues this leads to a discussion of the policy of a safe minimum standard as proposed by some economists and the critique of expected utility and risk benefit analysis by page and maclean and whether this might provide a bridge between the views of economists and ecologists a basis is established for considering whether sustainability of productive systems is likely to be a more important goal in less developed countries than in developed countries further examples of the stress of ecologists on the production sustainability goal are given and additional policy prescriptions for instance involving nomadism and transhumance are discussed

tax induced trading the effect of the 1986 tax reform act on stock market activity the end of favorable tax treatment for long term capital gains caused investors to reassess traditional tax induced trading strategies this study compares trading behavior in december 1986 and january 1987 with previous years our results indicate that these tax code changes had a powerful effect on trading behavior relative trading volume was considerably higher in december 1986 for long term winners but not significantly lower for long term losers results also indicate altered trading patterns based on shortterm gains in december 1986 and for long term winners in january 1987 the most sweeping revision of the united states tax code in many years became law in september 1986 one key aspect of that law was the elimination of the favorable tax treatment of long term capital gains under prior law capital gains on assets held at least six months were generally1 taxed at only forty percent of the rate applied to ordinary income under the new tax law assets sold after december 31 1986 are to be taxed with a few exceptions 2 at the same rate at which ordinary income is taxed this change represented the largest capital gains tax rate increase in at least half a century the purpose of this study is to assess the short run investor reaction to this change in the tax treatment of capital gains the nearly four month lag between the passage of the legislation and the effective date of the tax rate change gave investors ample opportunity to assess the law s consequences for their portfolios and adjust their behavior accordingly since investors are seeking to maximize the risk adjusted after tax return on their portfolio this record increase in capital gains tax rates is likely to induce significant changes in investment strategy the extreme sensitivity of capital gains realizations to the capital gains tax rate by holders of common stock has been frequently demonstrated a permanent or long term and recurring investor response is evidenced by the findings of