are preferences for fiscal discipline endogenous differences in voters fiscal preferencesare examined taking advantage of theexceptional swiss institutional setting empirical evidence suggests thatpreferences are determined by strictlycultural patterns cultural area measuredby language thus fiscal preferences canbe considered as being largely exogenous this implies that except for specialcases it is not possible to find simpleproxy variables for fiscal preferences anad hoc index of fiscal preferencesought to be built up when the introductionof this variable is required forcomprehensive explanatory models of fiscaldiscipline or for other related studies

defensive strategies in the quality ladders abstract this paper analyses the potentially defensive behaviour of patent race winners and the ensuing effect on aggregate r d effort we propose a quality ladder model where leaders strategically acquire a technology advantage and are able to innovate in this context product market regulation by affecting this strategic behaviour may have either a positive or negative effect on aggregate r d intensity the negative effect is likely to pertain in liberal markets whereas the positive influence arises in more regulated environments and can be stronger for larger jumps in innovation these steady state equilibrium outcomes are consistent with the puzzling patterns in data from manufacturing industries in 14 oecd countries over the 1987 2003 period

rethinking the brain drain abstract when productivity is fostered by both the individual s human capital and by the average level of human capital in the economy individuals underinvest in human capital a strictly positive probability of migration to a richer country by raising both the level of human capital formed by optimizing individuals in the home country and the average level of human capital of nonmigrants in the country can enhance welfare and nudge the economy toward the social optimum under a well controlled restrictive migration policy the welfare of all workers is higher than in the absence of this policy

a brain gain with a brain drain abstract we study human capital depletion and formation in an economy open to out migration as opposed to an economy which is closed under the assumption of asymmetric information the enlarged opportunities and the associated different structure of incentives can give rise to a brain gain in conjunction with a brain drain migration by high skill members of its workforce notwithstanding the home country can end up with a higher average level of human capital per worker

income taxation and international mobility today millions of people work in countries where they are not citizens income taxation and international mobility addresses the novel theoretical and practical problems that this growing phenomenon of international personal mobility creates for the design of a country s tax system and takes up questions that have grown largely out of the extensive debate over jagdish bhagwati s proposal in the early 1970s to tax the brain drain the contributors who include many of the leading theorists of international economics and public finance look at how the difficult question of how horizontal equity is to be defined between nationals at home and abroad or between nationals abroad and foreign citizens abroad and tackle such questions as should a country exercise income tax jurisdiction over its citizens abroad if so in what way is it practical to do so the issues that these questions raise are complex lying on the interface of politics sociology and economics income taxation and international mobility breaks significant new ground by analyzing these questions and building on the modern theory of optimal income taxation to examine the consequences of the possibility of outmigration on the appropriate exercise and design of income tax jurisdiction on those who live outside their native country theoretical analyses are presented in six chapters by the editors and by james mirrlees william baumol and koichi hamada the well known tax law expert richard pomp examines the philippines experience in taxing citizens abroad the editors provide a substantial introduction that synthesizes the book s major analytical approaches and conclusions and richard musgrave provides an insightful view of the issues in his foreword

do fiscal rules dampen the political business cycle this paper develops and tests the theory that fiscal rules limit politicians ability to manipulate the budget for electoral gain using panel data from the american states i find evidence suggesting that stringent balanced budget rules dampen the political business cycle that is while spending rises before and falls after elections in states that can carry deficits into the next fiscal year this pattern does not exist in states with strict no carry rules neither binding gubernatorial term limits nor the partisan composition of government appear to significantly affect the magnitude of the political business cycle

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

research and development with asymmetric firm sizes this article presents a theoretical model of research and development r d competition among firms the goal of the model is to simultaneously explain two empirical observations pertaining to the persistence of dominantfirms small firms make a disproportionate share of major innovations while largefirms tend to spend more in absolute terms on r d than smallfirms do in the model here firms choose investment levels and r d project riskiness in equilibrium a large firm invests more than a smaller firm but by choosing safer r d projects makes fewer major innovations

growth with non drastic innovations and the persistence of leadership abstract in a model of endogenous growth with improvements in the quality of products i provide a new explanation of the persistence of leadership by assuming that innovations are non drastic and that the current leader has a move advantage in the next patent race under these circumstances the value of being leader exceeds temporary monopoly profit since the leader reaps an extra profit in the next patent race despite free entry by outsiders this will increase the incentive to innovate and hence the rate of growth which is higher than in the leapfrogging model however the welfare comparison of the leapfrogging and persistent leadership equilibria is ambiguous

product market regulation innovation and distance to frontier this article contributes to the literature on competition and innovation it tests the impact of market regulation on innovation conditional to the closeness to the technological frontier with a panel of 15 industries for 17 oecd countries over the period 1979 2003 one of the main conclusions of this literature is that of a negative impact of regulation growing in intensity with the proximity to the frontier a simple model of innovation and growth shows that one should not necessarily expect this result empirical tests on a variety of pecifications show that the impact of regulation can be positive when industries are close to the technological frontier we argue that this result is in fact line with previous evidence

balanced budget rules distortionary taxes and aggregate instability a traditional argument against a balanced budget fiscal policy rule is that it amplifies business cycles by stimulating aggregate demand during booms via tax cuts and higher public expenditures and by reducing demand during recessions through a corresponding fiscal contraction this paper suggests an additional source of instability that may arise from this type of fiscal policy rule it shows that within the standard neoclassical growth model a balanced budget rule can make expectations of higher tax rates self fulfilling if the fiscal authority relies heavily on changes in labor income taxes to eliminate short run fiscal imbalances calibrated versions of the model show that indeterminacy occurs for income tax rates that are empirically plausible for the u s economy and other group of seven countries

losses and gains to developing countries from the migration of educated workers this paper synthesizes and extends recent research on the new economics of the brain drain in a unified framework the paper shows that while recently identified adverse repercussions of the brain drain exacerbate the long recognized negative impact of the brain drain longer term consequences turn the brain drain into the harbinger of powerful gains these gains have been studied already in recent research or merit attention in future research

do state balanced budget requirements matter testing two explanatory frameworks balanced budget requirements bbrs affect all aspects of financial operations previous studies relied on characterizations that highlight a constitutional statutory distinction hou and smith public budgeting finance 26 3 22 45 2006 instead propose a political technical construct this article uses probit estimation six measures of balance and long panels to test which framework offers more explanatory power the findings suggest that bbrs matter to varying degrees technical requirements exert bigger effects than political ones the effects are more obvious on narrower than broader measures of balance and in the later phases of the budget cycle and the political technical construct offers more explanatory power than the constitutional statutory distinction

brain drain taxes for non benevolent governments abstract this paper investigates the welfare effects of brain drain taxes levied by non benevolent governments whereby a country collects a tax from skilled emigrants but potentially wastes a sizable portion of the revenue using a model in which taxes are chosen to maximize expected political rents i show that the availability of a brain drain tax increases a weighted sum of citizen utilities however the government s optimal brain drain tax is found to be higher than the level that maximizes this weighted sum in another model a brain drain tax is found to be desirable when governments use public good expenditures to compete for mobile residents

a cultural theory of expenditure growth and un balanced budgets abstract why does public spending grow because the literature tells us nations are rich because they are poor because their economies are open because their economies are closed because there is consensus because there is conflict if all roads lead to rome i suggest that may be because it is the destination not the detours that matter so i ask a different question which political cultures shared values legitimating social practices would reject ever greater governmental growth and which ones would perpetuate it my hypothesis is that the size of government in any given society is a function consequence if you prefer of its combination of political cultures the theory also explains the tendencies of political regimes to balance or unbalance their budgets

law focal points and fiscal discipline in the united states and the european union many studies suggest that strict balanced budget rules can restrain sovereign debt and lower sovereign borrowing costs even if those rules are never enforced in court why might public officials adhere to a rule that is practically never enforced in court existing literature points to a legal deterrence logic in which the threat of judicial enforcement deters sovereigns from violating the rules in the first place by contrast we argue that balanced budget rules work by coordinating decentralized punishment of sovereigns by bond markets rather than by posing a credible threat of judicial enforcement therefore the clarity of the focal point provided by the rule rather than the strength of its judicial enforcement mechanisms determines its effectiveness we develop a formal model that captures the logic of our argument and we assess this model using data on u s states we then consider implications of our argument for the impact of the balanced budget rules recently imposed on eurozone states in the fiscal compact treaty

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

a voluntary brain drain tax abstract a major roadblock to the implementation of bhagwati s proposal to allow developing countries to tax skilled emigrants residing in developed countries the brain drain is the administrative problems associated with collecting this tax in the absence of developed country cooperation this paper provides a partial solution to these problems involving the tax treatment of emigrants who return to their countries of origin the tax system is structured so that returning emigrants who previously paid the brain drain tax face lower tax payments than those who evaded the brain drain tax given the expected value of this tax benefit emigrants are willing to pay the brain drain tax in the basic model a source country s optimal tax system includes this brain drain tax and does not distort migration decisions

intellectual property rights in a quality ladder model with persistent leadership this paper analyzes the effects of intellectual property rights in a quality ladder model of endogenous growth in which incumbent firms preemptively innovate in order to keep their position of leadership unlike in models with leapfrogging granting forward protection and imposing a non obviousness requirement reduces growth in the main case where entrants and incumbents have free access to the same r d technology infinite protection against imitation granted independently of the size of the lead maximizes growth if entrants have to engage in costly catch up before they can undertake frontier r d growth is maximal for a finite expected length of protection against imitation

international migration and educated unemployment this paper provides a novel explanation of educated unemployment which is a salient feature of the labor markets in a number of developing countries in a simple job search framework we show that educated unemployment is caused by the prospect of international migration that is by the possibility of a brain drain in addition the analysis shows that a developing country may end up with more educated workers despite the brain drain and educated unemployment

competition market selection and growth we study the effect of the competitive selection process on the economy s rate of growth in an extension of standard quality ladder models of endogenous growth we allow for the possibility that in each period several asymmetric firms representing an endogenously determined number of past innovators may be simultaneously active in an industry stronger competitive pressure then has conflicting effects on the incentive to innovate lowering prices but also selecting the more efficient firms we show that the market selection effect of competition always increases the incentive to innovate and find circumstances in which it can outweigh the traditional negative effect of lower prices

bohn s test of fiscal sustainability of the american state governments the dramatic fall in state revenues during the great recession and the resultant large budget deficits accentuated concerns about state fiscal sustainability i employ a model based approach proposed by bohn 1998 to test for sustainability in this approach a positive and significant reaction of the ratio of primary surplus ratio s to lagged debt constitutes a sufficient condition for sustainability based on a panel of 48 contiguous states 1961 2008 and several model specifications i find robust evidence in favor of sustainability further analysis suggests that the adjustment of the components of s to debt is asymmetric with the revenue side bearing a heavier burden than the spending side the response of s is also found to be asymmetric with respect to the level of debt finally the magnitude of the response is larger in states with a higher degree of fiscal stringency in general and own revenue and no deficit carryover provisions in particular

the costs and benefits of balanced budget rules lessons from a political economy model of fiscal policy this paper analyzes the impact of a balanced budget rule that requires that legislators do not run deficits in the political economy model of battaglini and coate 2008 the main finding is that the rule leads to a gradual reduction in the level of public debt legislators reduce debt in periods when the demand for public goods is relatively low they do so because the rule by restricting future fiscal policies raises the expected costs of carrying debt whether the rule increases citizen welfare depends on a comparison of the benefits of a lower debt burden with the costs of greater volatility in taxes and less responsive public good provision a quantitative version of the model is developed in which costs and benefits can be evaluated a welfare loss results if the debt level when the rule is imposed lies in the support of the long run distribution associated with the unconstrained equilibrium

the fiscal impact of high skilled emigration flows of indians to the u s abstract what are the fiscal consequences of high skilled emigration for source countries this paper develops methodologies for inferring these consequences and applies them to the recent sizable emigration of high skilled workers from india to the u s this wave of emigration from india to the u s is shown to be unusually concentrated amongst the prime age work force the highly educated and high earners in order to calculate the fiscal losses associated with these emigrants estimates of their counterfactual earnings distributions are generated using two distinct methods and integrated with a model of the indian fiscal system to calculate fiscal consequences conservative estimates indicate that the annual net fiscal impact to india of high skilled emigration to the u s is one half of 1 of gross national income or 2 5 of total fiscal revenues the sensitivity of these results to the method of predicting counterfactual incomes and the implications of these estimates for other developing countries is discussed in detail

innovation by heterogeneous leaders we develop a schumpeterian growth model in which leaders and followers conduct research and development rd this result is consistent with the actual behaviors of some previous leader firms such as sony and eastman kodak moreover we show that subsidizing the r d of followers can promote the aggregate r d of leaders because promotion of followers r d decreases increases the number of leaders with larger smaller quality leads and smaller larger r d investments

a multisectoral general equilibrium model of schumpeterian growth and fluctuations abstract this paper builds a dynamic multisectoral general equilibrium model of schumpeterian growth and fluctuations based on the endogenous introduction of new products the set of technological opportunities determines the degree of product quality upgrading and consists of breakthroughs and improvements the latter exhibiting diminishing returns if the degree of diminishing returns to technological improvements is low then there is no steady state equilibrium but cycles of breakthroughs and improvements we analyze two symmetric stable patterns of innovation which generate endogenous cycles and growth there is a negative correlation between the duration of each cycle and the long run growth trend