technological activity and survival of firms abstract the paper presents new evidence on the effect of technological activity on the post entry performance of firms by comparing firm survival across technical and non technical products and over stages of differing technological activity it attempts to resolve two seemingly contradictory hypotheses that uncertainty inherent in high technological activity reduces the probability of survival and that technological activity increases the probability of entrant survival the empirical results in the context of the product life cycle framework show that entering firms enjoy a higher probability of survival in stages of high technological activity and in products that are more technical in nature however the hazard function the probability of failure conditional on age is higher for technical products reflecting the adverse effects of technical uncertainty and obsolescence of incumbent knowledge

environmental controls in extractive industries diverging from the literature on optimal resource extraction to consider the effects on a competitive resource industry s extraction rate of environmental controls or taxes designed to limit residual discharge this analysis embeds environmental regulations in a dynamic model in which a mineral industry uses physical capital to extract a nonrenewable resource from a fixed stock the analysis considers only flow pollution the most important pollutant being sulfur dioxide emissions from smelting and the leaking of toxic metals into ground water from mine tailing a comparison of controls and pollution taxes finds it impossible to design a fixed emission standard that will lead to optimal industry behavior the author designs a variable standard that can be firm specific in order to encourage resource conservation 32 references 2 figures

accelerated depreciation and the efficacy of temporary fiscal policy implications for an inflationary economy abstract the effect on investment of temporary tax rate changes depends on the age profile of depreciation deductions if the depreciation allowance schedule is accelerated then temporary cuts in the corporate tax rate could reduce investment inflation causes the age profile of real depreciation deductions to become accelerated and thus could make temporary tax cuts have a contractionary effect on investment two currently proposed reforms are shown to exacerbate this effect under each of these proposals temporary tax cuts are likely to have opposite effects on investment in short lived and long lived capital thereby complicating the conduct of countercyclical fiscal policy

coalition and party formation in a legislative voting game we examine a legislative voting game where decisions are being made over both ideological and distributive dimensions and legislators preferences are separable over the two dimensions in equilibrium legislators prefer to make proposals for the two dimensions together rather than offering sequential proposals on the two dimensions separately the equilibria exhibit interaction between the ideological and distributive dimensions and in any equilibrium there is a positive probability that a proposal is made and approved which excludes the median legislator as defined over the ideological dimension in contrast with a game where no distributive decision is being made moreover in any stationary equilibrium there is more than one ideological decision that has a positive probability of being proposed and approved we show that legislators can gain from forming political parties and consider examples where predictions can be made about the composition of parties we discuss the impact of political parties on the outcome

dynamic adjustment to land taxation policy neutrality and welfare implications abstract in this paper we use a dynamic three sector model to examine the neutrality and welfare effects of land income taxes we find that 1 taxes that are neutral in long run equilibrium need not be neutral in the short run 2 short run neutrality depends upon the tax treatment of development costs and losses and 3 many of the neutrality results hold under both static and rational expectations assumptions we also find that even without externality assumptions nonneutrality in the short run does not necessarily entail a welfare cost and may be welfare enhancing when agents have less than perfect foresight

testing gibrat s law for small young and innovating firms this article analyses whether small young and innovating firms have experienced a greater employment growth than other spanish firms over the period 1990 2000 the study draws upon a sample of 1272 manufacturing firms in which only 967 of the firms survived for the entire ten year period the analyses test gibrat s law both by least squares and by utilizing the procedure proposed by heckman in which a probit survival equation is first estimated to correct for sample selection bias two estimators correcting for selection bias are utilized one that incorporates the inverse mill s ratio and the other that employs maximum likelihood methods all the results reject gibrat s law and support the proposition that small firms have grown larger additionally the results show that old firms grow less than young ones and innovating activity both process and product is a strong positive factor in the firm s survival and its employment growth

on the lock in effects of capital gains taxation abstract the most important drawback of a tax on realized capital gains is its lock in effect this paper uses a simple land development model to examine the distortion that the lock in effect generates a surprising result is that the lock in effect does not arise if the basis for the capital gains tax usually the price at which the current owner acquired the land is sufficiently high rather than delaying the sale the owner sells the land as soon as possible even if the land will be developed much later in this case the capital gains tax creates no real distortion because it does not affect the development time in particular if the basis is the price formed under perfect foresight the lock in effect never arises

effect of credit guarantee policy on survival and performance of smes in republic of korea this study evaluates the effect of credit guarantee on smes at the firm level to estimate the effect of credit guarantee we analyze relations between credit guarantee the survival of guaranteed firms and their productive performance the result indicates that credit guarantee frequency enabled guaranteed firms to achieve good performances in general on the contrary the effect of guarantee amounts is ambiguous in that there is difference between the contemporary effect and the lagged effect therefore we conclude that credit guarantee satisfied partially its goal to alleviate smes difficulty in acquiring finance and to stabilize employment

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

political selection and persistence of bad governments we study dynamic selection of governments under different political institutions with a special focus on institutional flexibility a government consists of a subset of the individuals in the society the competence level of the government in office determines collective utilities e g by determining the amount and quality of public goods and each individual derives additional utility from being part of the government e g rents from holding office we characterize the dynamic evolution of governments and determine the structure of stable governments which arise and persist in equilibrium in our model perfect democracy where current members of the government do not have veto power over changes in governments always leads to the emergence of the most competent government however any deviation from perfect democracy to any regime with incumbency veto power destroys this result there is always at least one other less competent government that is also stable and can persist forever and even the least competent government can persist forever in office we also show that there is a nonmonotonic relationship between the degree of incumbency veto power and the quality of government in contrast in the presence of stochastic shocks or changes in the environment a regime with less incumbency veto power has greater flexibility and greater probability that high competence governments will come to power this result suggests that a particular advantage of democratic regimes with a limited number of veto players may be their greater adaptability to changes rather than their performance under given conditions finally we show that royalty like dictatorships may be more successful than junta like dictatorships because in these regimes veto players are less afraid of change

economies of scale and the optimality of rotational dynamics in forestry forest harvesting is traditionally analyzed in terms of the faustmann rotation model this paper considers the identification of optimal forest harvest regimes using jump controls this approach enables the structural assumptions of clear cut technology and identical cycles in perpetuity which are imposed in a faustmann model to be relaxed jump control models permit investigation of the biological and economic conditions which favour continuous growth management regimes as opposed to clear cut harvest regimes a numerical solution approach to the jump control model is presented the link between the harvest cost function and the optimal biomass path is analyzed economies of scale are shown to generate rotational harvest as optimal policies

on the neutrality of the property tax in a recent issue of this journal there appeared an interesting controversy between bentick and thirsk on the neutrality of the property tax bentick 1979 thirsk 1979 the former argues that the property tax is nonneutral with respect to the intertemporal allocation of land whereas the latter argues that it is neutral and attributes the difference in the results to the choice of the discount rate this comment points out the following first bentick s result can be derived from thirsk s basic equation so that it is inappropriate to attribute the difference in the results to the choice of the discount rate second whether a property tax is neutral or not depends upon whether the value in use or the market value is chosen as the tax base as thirsk correctly recognizes the introduction of a property tax reduces the value of land by the amount of the present value of tax liabilities thus we obtain his equation 1 which is reproduced below

political losers as a barrier to economic development per capita income in many sub saharan african countries such as chad and niger is less than 1 30th of that of the united states most economists and social scientists suspect that this is in part due to institutional failures that stop these societies from adopting the best technologies a particularly interesting historical example comes from the diffusion of railways in the 19th century while railways are regarded as a key technology driving the industrial revolution there were large lags in their diffusion for example in 1850 the united states had 14 518 km of track britain 9 797 km and germany 5 856 km in the russian and hapsburg empires there were just 501 km and 1 357 kim respectively all data from brian r mitchell 1993 why do societies as in this example fail to adopt the best available technologies one answer is that existing powerful interest groups block the introduction of new technologies in order to protect their economic rents and societies are able to make technological advances only if they can defeat such groups economic monopolies may be one example a monopolist might wish to block the introduction of a new technology by a rival that will capture the market this idea which we call the economic losers hypothesis was discussed by simon kuznets 1968 developed at length by joel mokyr 1990 in the context of technology adoption and formalized by per krusell and jose victor rios rull 1996 and stephen l parente and edward c prescott 1997 related ideas are widely discussed in the literature on international trade policy with many formal models e g gene m grossman and elhanan helpman 1994 there are problems with this story however first despite the intuitive appeal of the idea there are relatively few instances where major economic change was blocked by economic losers mokyr 1990 emphasizes the attempts of many skilled artisans to block the introduction of new machines the most famous example is the luddites skilled weavers who were thrown out of work by mechanization interestingly however many of these groups including the luddites were ultimately unable to block economic progress equally important the economic losers hypothesis relies on the presumption that certain groups have the political power to block innovation but if so why not use this power to simply tax the gains generated by the introduction of the new technology this might be because there are limits on the nature of fiscal instruments though it seems plausible that groups with sufficient political power to block innovation would be able subsequently to lobby effectively for redistribution a more important reason however may be that the introduction of new technology and economic change more generally may simultaneously affect the distribution of political power we argue that the effect of economic change on political power is a key factor in determining whether technological advances and beneficial economic changes will be blocked in other words we propose a political loser hypothesis we argue that it is groups whose political power not economic rents is eroded who will block technological advances if agents are economic losers but have no political power they cannot impede technological progress if they have and maintain political power i e are not political losers then they have no incentive to block progress it is therefore agents who have t discussant gene grossman princeton university

on the relationship between firm size and export intensity export marketing literature supports the view that firm size is positively related to export intensity although the empirical findings have been mixed a number of theoretical arguments are used to support this proposition i e international marketing economies of scale limited managerial and financial resources of small firms decisionmaker s risk perception based on a large survey of the italian manufacturing industry the article falsifies the proposition and challenges some widely held assumptions in export marketing literature

firm growth and liquidity constraints a dynamic analysis using a large unbalanced panel data set of portuguese manufacturing firms surviving over the period from 1990 to 2001 the purpose of this paper is to examine whether liquidity constraints faced by business firms affect firm growth we use a gmm system to estimate a dynamic panel data model of firm growth that incorporates cash flow as a measure of liquidity constraints and persistence of growth the model is estimated for all size classes including micro firms our findings reveal that smaller and younger firms have higher growth cash flow sensitivities than larger and more mature firms this is consistent with the suggestion that financial constraints on firm growth may be relatively more severe for small and young firms nevertheless the same finding can be interpreted in a different way if we consider the more recent literature which interpret the higher investment cash flow sensitivity of younger and smaller firm in absence of financial market imperfection as the outcome of these firms reaction to the fact that realisation of their cash flows reveals them the direction to go in presence of uncertainty of their growth prospect besides firms that were small and young at the beginning of the sample period exhibited more persistent growth than those that were large and old finally these results have significant policy implications

budget deficits corporate income taxes and the current account this paper studies the effects of budget deficits financed by taxing corporate incomes as households are finitely lived transfers and taxes on personal incomes are discounted at a higher rate than the interest on government debt as corporations are infinitely lived taxes on corporations are discounted at the same rate as the interest on government debt thus unanticipated deficits financed by taxing corporate incomes are neutral anticipated deficits financed by taxing corporations cause a current account surplus as transfers are then discounted at a higher rate than the taxes shifting taxes from households to corporations causes a current account surplus copyright 1995 by ohio state university press

business failure of new firms an empirical analysis using a multiplicative hazards model abstract this paper investigates business failure of new firms using a multiplicative hazards model we estimate the determinants of business failure among new manufacturing firms in tokyo during the period 1986 to 1994 it is found that a new firm without sufficient capital or a sufficient size has a higher risk of business failure it is also found that the new firm tends to have more difficulty surviving in an industry characterized by a high entry rate with respect to the timing of entry the new firm that entered just before or after the collapse of the so called bubble economy has been more likely to fail furthermore we estimate a regression model based not only on age but also on calendar time by using a regression model based on calendar time it is found that the firm s age has been related to business failure

no deep pockets some stylized empirical results on firms financial constraints this paper is a survey of recent empirical work on financial constraints faced by firms it is organized as a series of stylized results which mirror what is generally understood about the severity of financial constraints and the effects that they have upon firms the review of the literature shows that a financial constraints are a widespread key concern for firms hindering their ability to carry out their optimal investment and growth trajectories and b the severity of such constraints depends on institutional and firm specific characteristics as well as on the nature of investment projects

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

age size growth and survival uk companies in the 1980s this paper examines growth and survival amongst quoted and unquoted u k companies in the period 1975 85 and compares the results with earlier u k and u s studies an examination of death rates shows that smaller companies had higher death rates but the largest and smallest companies were least vulnerable to takeover careful attention is therefore paid to problems of sample selection bias it is shown that smaller companies grew faster than larger companies that gibrat s law does not hold amongst smaller firms that age is negatively related to growth and that these results are not an artifact of sample selection bias copyright 1994 by blackwell publishing ltd

has new business creation in russia come to a halt abstract successful transformation of centrally planned economies requires not just the privatization of the existing firms but also the formation of new ones new entrants serve to correct for the central planners neglect of such sectors as services and consumer goods and their bias in favor of large firms indeed central european economies have been experiencing a rapid rate of new business creation as measured by the change in the number of small firms russia also experienced a short period of explosive growth in the number of new business however since 1994 net new business formation has stagnated this paper looks into the possible causes of this phenomenon official data on the change in the number of small businesses which serve as a proxy for net new business formation arouse justified suspicion because of the frequent changes in the definition of small enterprise like everywhere in the world some russian registered firms do not become operational and some firms that have ceased operations do not legally disband if the share of these dead souls in the total count of small firms changes over time and official statistics does not adjust its count accordingly the data may show the opposite of the actual processes this paper analyzes russian data collection procedures and other evidence and concludes that stagnation in the new business formation is a real phenomenon rather than a statistical artifact the difficulty in finding out the causes of stagnation is that empirical studies focus on the existing businesses and miss those that should have been born but were not the problems faced by the incumbents and frustrated entrants may well be different the likely causes of the end of new business creation are the increased tax and regulatory burden combined with plunder by the numerous tax and regulatory authorities other possible explanations involve the incumbents use of the authorities and or racketeers to erect barriers against new entrants

new ventures and their credit terms using uk bank data for 466 new venture loan applications we explore the determinants of interest margin the sanctioning decision and the amount borrowed when these factors are considered simultaneously collateral levels greatly influence the size of credits to new ventures a finding consistent with existing work on firm foundation rates and assets black et al economic journal 106 60 75 1996 de meza and webb the economic journal 109 153 163 1999 evans and jovanovic journal of political economy 97 4 808 827 1989 holtz eakin et al 1994 consistent with the rand journal of economics 25 334 347 diversionary models of debt firms with larger credits enjoy discounted interest margins even when we have controlled for firm size

loan guarantees costs of default and benefits to small firms abstract governments of most countries seek to encourage small and medium sized enterprise sme growth and the job creation that many believe is fostered by such growth substantive growth usually requires expansion capital it is often perceived that compared with larger firms smes face disproportionately less access to the debt capital they need for start up growth and survival consequently governments and trade associations have often intervened in credit markets by taking on the role of guarantor of loans that financial institutions advance to smes for example the small business administration in the united states provides guarantees of loans made by banks to qualifying small firms similar schemes are in effect in among other countries canada japan the u k korea and germany trade associations take on such roles in france spain and other nations loans that support the expansion of small enterprises may convey significant benefits to the borrowing firms and through job creation and retention to the rest of society however to the extent that some borrowers are unable to meet the repayment obligations of their debt guarantors also face material real costs of honoring their guarantee to the lenders loan guarantee programs are designed in a variety of ways often these programs do not appear to reflect guidance from economic theory or experience this paper draws on empirical evidence to compare costs with benefits in addition it uses the results and economic theory to provide some guidance for the design of loan guarantee programs finally the study shows that loan guarantee programs can be an effective means of supporting start up growth and survival of new and risky enterprises the work finds that substantial total and incremental job creation may be attributed to the canadian loan guarantee program the paper reviews previous attempts to conduct cost benefit analyses of loan guarantee programs it finds wide variation internationally in default rates published data suggests default rates vary from less than 5 germany to more than 40 u k the empirical analysis reported here focuses on the canadian implementation of loan guarantees the small business loans act sbla findings include 1 loan guarantees granted under the terms of the sbla provide an extremely efficient means of job creation with very low estimated costs per job 2 default rates are higher for newer firms increase with the amount of funds borrowed and vary widely by sector borrowers in the retail and accommodation and food and beverage sectors were significantly more likely to default than borrowers in other sectors and 3 the widening eligibility to larger firms and to larger loans may not be well advised and is inconsistent with the goals of the program moreover reducing the loan ceiling would arguably discourage fraudulent applications while servicing those smes most in need of early stage capital in addition analysis of the lenders motives suggests that default rates on the portfolio of guaranteed loans and therefore the costs of honoring guarantees are particularly sensitive to the level of the guarantee small reductions in the level of the guarantee for example guaranteeing 80 of principal and accrued interest instead of 85 could lead to substantial reductions in default rates debate persists in economic theory about whether or not government intervention in the credit market is warranted in spite of the findings that loan guarantees seem to make positive contributions further analysis of these issues is advised

effects of urban transportation system change on land prices in the setting of owner occupied residence abstract the purpose of this study is to analyze the impact of transportation improvement on the land development process and land price structure in an owner occupied residence setting a dynamic model of household and landowner in which the role of land as an asset is explicitly considered is presented and the process of land development and land price change after the announcement of transportation improvement is investigated during the period between the announcement and the completion of urban transportation improvement it is observed that the price of the land that is presently used for agriculture but will be developed in the future is higher than the agricultural land price

inefficiency in legislative policymaking a dynamic analysis this paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining the policy space incorporates both productive and distributive public spending and distortionary taxation the productive spending is investing in a public good that benefits all citizens e g national defense and the distributive spending is district specific transfers e g pork barrel spending investment in the public good creates a dynamic linkage across policymaking periods the analysis explores the dynamics of legislative policy choices focusing on the efficiency of the steady state level of

where do financial constraints originate from an empirical analysis of adverse selection and moral hazard in capital markets despite the voluminous and growing literature on financial constraints the origins of the constraints are hardly ever empirically analyzed this paper offers such an analysis we study in particular the empirical prevalence of adverse selection and moral hazard in capital markets using a unique survey data on finnish small and medium sized enterprises smes the survey data suggest that adverse selection is empirically more prevalent than moral hazard in the capital markets that the smes face we also find that of the variables indicating the presence of adverse selection and moral hazard the former has more explanatory power in regressions modeling the availability of external finance to the smes than the latter finally we document that our proxies for adverse selection and moral hazard are inversely related to the age of firms just like peter diamond s 1989 model predicts

information asymmetry in small and medium enterprise credit guarantee schemes evidence from japan in this article we investigate whether there is adverse selection and or moral hazard in credit guarantee schemes for small and medium enterprises smes in japan as credit guarantee corporations

r d in smes a paradox this paper has three objectives 1 to survey the relevant literature addressing the apparent paradox of research development investments carried out within small and medium enterprises 2 to provide focused summaries of the articles in this special issue 3 to draw some general conclusions in terms of policy implications

taxation and rotation age under stochastic forest stand value abstract the paper uses both the single rotation and ongoing rotation framework to study the impact of yield tax lump sum tax and tax on interest rate earnings on the privately optimal rotation period when forest stand value is stochastic and forest owners are risk averse or risk neutral under risk aversion the optimal harvesting threshold is lower and therefore the expected rotation period shorter than under risk neutrality both in the single and ongoing rotation cases whether the forest owner is risk averse or risk neutral a higher yield tax a higher lump sum tax or a higher tax on interest rate earnings raise the optimal harvesting threshold numerical results indicate that the optimal harvesting threshold increases less rapidly under risk aversion than under risk neutrality with an increase in either a yield tax or the volatility of forest stand value

the economic impact of the canada small business financing program this paper investigates the economic impact of the canada small business financing program csbfp using the 2004 edition of the survey on financing of small and medium enterprises to avoid the usual self selection problem associated with voluntary participation in such programs the financing behavior of the business and its intention to grow are used as control variables based on this analysis participation in the csbfp would have increased growth in salary employment and revenues by 12 12 and 7 percentage points respectively between 2004 and 2006 furthermore csbfp would have induced around 5 000 jobs approximately 3 8 of those created in that time span by small private businesses

new firm survival industry strategy and location abstract how important is the physical location of a new firm for its chances of survival location of a new firm whether in urban metro or rural vicinities can have important impacts on performance outcomes urban locations often contain a wealth of diverse resources but may also have a greater number of competitors rural locations may lack diversity but can enable the firm to exploit a niche with limited competition we suggest that a simple examination of new firm location will not adequately predict survival chances rather the impact on location of the new firm will be influenced by the industry in which the new firm operates and by the strategy the new firm pursues the industry of the new firm is examined by focusing on where the new firm is located in the value chain we predict that a new firm upstream in the industry value chain will have better chances of survival than new firms downstream in the industry value chain new firms with broadly focused strategies are hypothesized to have greater survival chances than new firms strategically positioned to exploit a narrow market focus and we predict that new firms in urban locations will have greater chances for survival than new firms in rural locations

housing as an asset and the effects of property taxation on the residential development process abstract a model of residential development is constructed recognizing the asset side of land and housing the equilibrium process is characterized under the perfect foresight assumption and the effects of a capital gains tax both unanticipated and anticipated and a tax on property values are examined

comparative analysis of firm demographics and survival evidence from micro level sources in oecd countries in this paper we present cross country evidence on firm size distribution firm demographic and post entry performance for 10 oecd countries we use harmonized firm level data drawn from business registers or social security records these data enable international comparisons and the identification of idiosyncratic country effects while average firm size differs across countries due to both sectoral specialization and within sector characteristics we find similar degrees of firm churning across countries in most of them about 20 of firms enter and exit most markets every year and about 20 40 of entering firms fail within the first 2 years of life however post entry growth of successful entrants is much higher in the usa than in europe which may be indicative of barriers to firm growth as opposed to barriers to entry

partial credit guarantees and firm performance evidence from colombia this paper studies the effect of government backed partial credit guarantees on firms performance in colombia these guarantees are automatically granted by the national guarantee fund ngf to firms without enough collateral to lift their credit constraints we put together a panel of firms covering the period 1997 2007 that allows us to control for observed and unobserved firm characteristics potentially affecting both the selection of firms into the program and firms performance we find that firms that gain access to credit backed by the ngf were able to grow in terms of both output and employment however we do not find any effect on productivity wages or investment

the timing and duration of development tax rate increases abstract the effects of permanent temporary anticipated and unanticipated changes in a development tax are considered in a model of land development the effect of uncertainty over the timing of the changes is also considered expectations regarding a future tax rate increase are shown to affect the direction of a change in the path of land development in a given time period while the duration of a rate increase affects the magnitude of the change uncertainty regarding the timing of an increase in the development tax rate increases the magnitude of a change in the path of land development

an economic analysis of forest taxation s impact on optimal rotation age because of the tax cutting mood of the general public current interest in forest taxation by legislators is high many states including washington oregon california montana north carolina georgia arkansas and texas have either recently revised or are considering changing their forest taxation laws the response from academicians however is mixed many articles by forest taxation specialists klemperer 1974 1976 1977a 1977b olson and haney 1980 pasour and holley 1976 sutherland and tedder 1979 tedder and sutherland 1979 and the published proceedings of a forest taxation symposium haney and gunter 1978 have appeared in recent years yet general tax economists have largely ignored the problem of forest property taxation as evidenced by aaron s recent study of property taxes in which forest taxation is not even mentioned 1975 at present a rigorous analysis of the impact of forest taxation on the optimal management of timber has yet to appear in the literature because of the profound influence of forest taxation on many state and local economies and on forest productivity it is important that the impact of the various taxation schemes be well understood during the process of revising the forest taxation laws this paper examines the economic impact of various forest taxation schemes on the optimal rotation age under the assumptions of both tax capitalization and tax shifting general tax economists should find taxation of forest property of interest for two reasons first commercial forest land in private ownership comprises more than 15 of the nation s total land area williams 1974 second the results of forest taxation studies apply readily to taxation of renewable resources in general currently the major types of taxes that can be imposed on a forest property may be divided into annual property taxes and harvest taxes the former include the unmodified property tax and the site value tax every year the unmodified property tax takes a percentage of the value of the land plus the value of the trees and the site value tax takes a percentage of the value of the land only still a third type of property tax called the timber tax takes a percentage of the value of the trees only every year although this tax is rarely used it is included in this study because of its theoretical importance harvest taxes include yield taxes and severance taxes at the time of harvest the yield tax takes a percentage of the stumpage value of timber and the severance tax imposes a charge per unit of timber volume harvested past studies of forest taxation have

dynamic effects of permanent and temporary tax policies in a q model of investment abstract this paper incorporates the tax policy analysis of hall and jorgenson into a dynamic optimizing model with adjustment costs to develop a q model of investment this framework is particularly useful for analyzing the dynamic effects on investment of permanent and temporary changes in tax policy it is shown that contrary to the conventional intertemporal substitution argument a temporary investment tax credit need not be nore expansionary than a permanent investment tax credit the role of depreciation allowances in determining the dynamic response of investment to temporary changes in the tax rate is also investigated

new firm survival new results using a hazard function a limitation of audretsch s 1991 study of new firm survival was the level of aggregation to industries this precluded linking establishment specific characteristics such as organizational structure and size to post entry performance the purpose of this paper is to relate the post entry performance of individual establishments not only to their technological and market structure environments but also to establishment specific characteristics we do this by estimating a hazard duration function for more than 12 000 individual establishments in u s manufacturing started in 1976 by tracking their subsequent performance over a ten year period we conclude that establishment specific characteristics which audretsch was not able to capture in his earlier study play an important role in shaping the exposure to risk confronting new establishments copyright 1995 by mit press

history lessons institutions factor endowments and paths of development in the new world the explanations offered for the contrasting records of long run growth and development among the societies of north and south america most often focus on institutions the traditional explanations for the sources of these differences in institutions typically highlight the significance of national heritage or religion we in contrast argue that a hemispheric perspective across the wide range of colonies established in the new world by the europeans suggests that although there were many influences factor endowments or initial conditions had profound and enduring effects on the long run paths of institutional and economic development followed by the respective economies

why do most firms die young a model is developed to explain why most firms die in the first few years of trading a risk averse entrepreneur with initial capital endowment faces a brownian motion in net worth over time to balance return profits growth and risk variance of profits she adopts a portfolio strategy choosing market positioning to achieve an optimal combination of risk and return at each instant given her financial and human capital endowments and attitude towards risk failure occurs when the firm s value falls below the opportunity cost of staying in business the resulting distribution of failure is inverse gaussian implying for specific parameter values a positively skewed failure curve of the type observed in practice in addition the model presents a novel measure of management human capital mhc which implies that high mhc entrepreneurs will have higher absolute and marginal profits growth than low mhc entrepreneurs at given levels of risk

do juntas lead to personal rule january 2009although almost half of the world s population lives under nondemocratic regimes thequestions of how policy decisions are made and how power changes hands in nondemocra cies have received relatively little attention in the political economy literature a popularview forcefully articulated by gordon tullock 1987 is that because there are no stronginstitutions ensuring consensus and regulating the election and succession of leaders non democratic regimes rapidly degenerate into personal rule where a single dictator dominatesevery aspect of decision making tullock writes empirically the junta characteristicallyshrinks to one man p 144 and continues to explain this as the result of dynamic in teractions among the members of the junta he suggests that there will typically be anaccumulation of power by one of the junta members if this upstart member succeeds hebecomes the sole ruler if he fails he is eliminated by the other members of the junta this process continues until one member is standing tullock thus concludes it can beseen that this process would tend over time to lead the junta into becoming just one manthrough the gradual exclusion of individuals who had failed in plotting or the success of anindividual who had not p 145 tullock s account like that of many others implicitly recognizes that politics in non democratic and weakly institutionalized societies should be conceptualized as one of thedynamic coalition formations there are no rules that ensure orderly transitions of powerand no checks against some members of the ruling coalition eliminating or sidelining others however formal models of dynamic coalition formation in nondemocratic societies have notbeen developed until recently in this paper we draw on our work on dynamic coalition formation daron acemoglu georgy egorov and konstantin sonin 2008a and investigate tullock s conjecture formally 1

energy vs the environment optimal development programs that explicitly account for the environmental impacts of extracting and consuming energy resources are analyzed following lee and orr 1975 we allow for the possibility of storing the resource above ground once it has been extracted when environmental disruption results from resource extraction as in the case of strip mining or there are environmental costs associated with resource consumption for example the social costs of air pollution from fuel consumption then the socially optimal rates of resource consumption and extraction depend on the severity of the environmental impact and on the prospects of storing the resource above ground

optimal taxation timber and externalities abstract the paper presents a model of the relationship between timber taxation and externalities optimal pigouvian taxation formulas are derived within this framework for common taxes a simulation model of douglas fir is used to estimate the size and direction of these effects the results show that taxation policy can have a marked impact on the production of externalities depending on tree species and land productivity

forest taxation and rotation age under private amenity valuation new results abstract this paper studies the impact of harvesting property and profit taxes on private rotation age in an ongoing rotations model where the private landowner is interested not only in the present value of harvest revenue but also in the private amenity services provided by the forest stand the main finding of the paper is that conventional wisdom about the rotation effects of forest taxes distilled from the faustmann model predominantly ceases to hold this is because forest taxes distort the relative profitability of timber and amenity production in a way that is sensitive to the precise nature of amenity valuation therefore the design of forest tax policy necessitates good knowledge of the landowner s objective function concerning the type of amenity services

coalition formation in non democracies we study the formation of a ruling coalition in non democratic societies where institutions do not enable political commitments each individual is endowed with a level of political power the ruling coalition consists of a subset of the individuals in the society and decides the distribution of resources a ruling coalition needs to contain enough powerful members to win against any alternative coalition that may challenge it and it needs to be self enforcing in the sense that none of its subcoalitions should be able to secede and become the new ruling coalition we present both an axiomatic approach that captures these notions and determines a generically unique ruling coalition and the analysis of a dynamic game of coalition formation that encompasses these ideas we establish that the subgame perfect equilibria of the coalition formation game coincide with the set of ruling coalitions resulting from the axiomatic approach a key insight of our analysis is that a coalition is made self enforcing by the failure of its winning subcoalitions to be self enforcing this is most simply illustrated by the following example with majority rule two person coalitions are generically not self enforcing and consequently three person coalitions are self enforcing unless one player is disproportionately powerful we also characterize the structure of ruling coalitions for example we determine the conditions under which ruling coalitions are robust to small changes in the distribution of power and when they are fragile we also show that when the distribution of power across individuals is relatively equal and there is majoritarian voting only certain sizes of coalitions e g with majority rule coalitions of size 1 3 7 15 etc can be the ruling coalition copyright 2008 wiley blackwell

the impact on development timing of property and profit taxation bring forward in time the conversion of land from one use to another skouras 1978 bentick 1979 mills 1981 noguchi 1982 wildasin 1982 likewise it is also now accepted that a tax on the profit derived from such conversions a development gains tax will not affect the timing of conversion provided that the true profit from conversion is correctly assessed by the taxing authorities bentick and fischer 1975 evans 1982 bentick 1988 2 the purpose of this article is to show that these conclusions are quite specific to the model that has been implicitly or explicitly constructed by the authors cited above and that this model is potentially misleading to show how the impact of taxation is model specific three models of development timing are analyzed model 1 allows ex ante only one future or urban use for land this is obviously hopelessly unrealistic but it shows the importance of implicit assumptions model 2 allows ex ante more than one future or urban use but treats one of those uses as permanent so that ex post urban development is a once only event presumably as a result of prohibitive conversion costs finally model 3 allows many future or urban uses which can be undertaken in sequence through a process of urban development and redevelopment so that both ex ante and expost there are many land uses the features common to all three models are that land is currently in a use which offers a fixed rental of r in say farming that there is at least one alternative urban use which offers a rental of r and that there are costs involved in converting land from one use to another we consider each of these models in turn

updating a credit scoring model based on new attributes without realization of actual data abstract funding small and medium sized enterprises smes to support technological innovation is critical for national competitiveness technology credit scoring models are required for the selection of appropriate funding beneficiaries typically a technology credit scoring model consists of several attributes and new models must be derived every time these attributes are updated however it is not feasible to develop new models until sufficient historical evaluation data based on these new attributes will have accumulated in order to resolve this limitation we suggest the framework to update the technology credit scoring model this framework consists of ways to construct new technology credit scoring model by comparing alternative scenarios for various relationships between existing and new attributes based on explanatory factor analysis analysis of variance and logistic regression our approach can contribute to find the optimal scenario for updating a scoring model

institutions and growth in limited access societies we build a dynamic political economy model with a two class society workers and the elite in which the elite formation the innovation rate and fiscal policy are endogenous the model generates a mapping between institutions and patterns of growth consistent with empirical evidence ex ante when facing constraints in choosing institutions the elite may delegate policy control to some of its members even though such delegation exacerbates the conflict within the elite and causes policy failures committing to such institutional arrangements prevents more harmful outcomes such as rapid entry and subsequent deterioration of the elite s economic and political power

is subsidizing entry an optimal policy public subsidies in support of new firm foundation are among the most frequently used instruments of industrial policy in the euro zone this paper analyses their effectiveness and efficiency vis a vis some features of the overall process of industry dynamics in italian manufacturing to this end the survival and growth patterns of new small firms are investigated using a unique dataset on electrical and electronic engineering in italy as regards survival our results confirm the findings of other studies namely that the hazard rates are particularly high in the early stages of firm s life cycle as far as growth is concerned the study s main finding is that gibrat s law fails to hold in the years immediately following start up when smaller firms must rush in order to achieve a size large enough to enhance their likelihood of survival conversely in later stages of firm s life cycle the law cannot be rejected these results radically question the use of subsidies as an optimal policy for the support of new entries since the subsidy brings about a major bias in the process of market selection including substitution and deadweight effects and hampers the post entry scale adjustment of newborn firms

legislative bargaining with reconsideration we present a dynamic model of legislative bargaining with an endogenously evolving default policy and a persistent agenda setter policy making proceeds until the agenda setter can no longer pass a new policy to replace an approved bill we prove existence and necessary conditions of pure strategy stationary equilibria for any finite policy space any number of players and any preference profile in equilibrium the value of proposal power is limited compared to the case that disallows reconsideration as voters are induced to protect each other s benefits to maintain their future bargaining positions the agenda setter in turn would prefer to limit his ability to reconsider the lack of commitment due to the possibility of reconsideration however enhances policy efficiency

tax neutrality in the presence of adjustment costs it is well known that expensing of capital expenditures will lead to tax neutrality with respect to investment provided that interest payments are not tax deductible brown 1948 however if interest payments are deductible then allowing firms to deduct economic depreciation will lead to a neutral tax system samuelson 1964 these neutrality results have been derived in models without costs of adjustment see also hall and jorgenson 1971 stiglitz 1973 and king 1974 however recent research in investment theory has emphasized the role of costs of adjustment lucas 1967 gould 1968 hayashi 1982 abel 1982a b using a separable adjustment cost technology in which adjustment costs depend only on the rate of investment abel 1982a b has shown that the two neutrality propositions above continue to hold however using a general nonseparable adjustment cost technology hartman 1978 showed that only one of the two neutrality propositions remains valid in the presence of adjustment costs expensing continues to lead to neutrality if interest payments are not deductible but hartman finds that economic depreciation and interest deductibility do not lead to neutrality in the presence of adjustment costs in this paper we analyze investment behavior in an adjustment cost framework and construct a neutral tax system with interest deductibility the neutral tax system allows for economic depreciation but requires some adjustments to taxable income which recognize the fact that capital can implicitly produce net revenue by reducing adjustment costs hartman found economic depreciation to be nonneutral because he did not make this necessary adjustment to taxable income and because he calculated economic depreciation incorrectly using the price of uninstalled capital rather than the value of newly installed capital in the presence of costs of adjustment true economic depreciation is calculated using the shadow price of installed capital rather than the observable market price of new uninstalled capital it has been shown by hayashi 1982 that under appropriate linear homogeneity and price taking assumptions the shadow price of capital can

the survival of new plants start up conditions and post entry evolution abstract this paper examines the longevity of entrants we find size to be an important determinant of the chances of survival this being particularly relevant to de novo entrants as compared with entry by established firms current size is also found to be a better predictor of failure than initial size moreover our findings indicate that after controlling for size differences past growth matters for survival suggesting a partial adjustment process for firm size in the post entry period finally new plants are more likely to live longer if they enter growing industries or industries with little entry activity

causal effect of credit guarantees for small and medium sized enterprises evidence from italy we evaluate the effectiveness of a partial credit guarantee program implemented in a large italian region that aimed to improve the access to credit of small and medium enterprises using unique microdata from a broad set of firms we show that the policy increased the long term loans for beneficiary firms while the total volume of bank loans was unaffected furthermore targeted firms benefited from a substantial decrease in interest rates however there is some evidence that firms are more likely to default as a consequence of the treatment conversely the results do not point to any significant effect on investments

investment and harvest strategies of the finnish forest sector under different forest tax policies a differential game approach with computer based decision aid abstract this study deals with the simultaneous solution of the investment harvest and taxation problems of the finnish forest sector these strategic questions involve competitive and contradictory interests among forestry the forest industry and society we build a computer based decision aid to support a decision maker who wants to analyze the consequences of different forest tax policies it is essential to this computational approach that only minor mathematical manipulations are needed to produce equilibrium open loop nash harvest and investment strategies moreover as a differential game approach it allows us to study the tax incidence we solve our model under three alternative tax policies lump sum unit and yield taxes