an efficiency theorem for incompletely known preferences there are n agents who have von neumann morgenstern utility functions on a finite set of alternatives a each agent i s utility function is known to lie in the nonempty convex relatively open set ui suppose l is a lottery on a that is undominated meaning that there is no other lottery that is guaranteed to pareto dominate l no matter what the true utility functions are then there exist utility functions ui ui for which l is pareto efficient this result includes the ordinal efficiency welfare theorem as a special case

the effects of taxation price control and government contracts in oligopoly and monopolistic competition abstract many government contracts with or policies towards oligopolistic sectors essentially involve private firms selling a given proportion or quantity of output to the government at a fixed price p r with the remainder being sold on the open market often this is combined with consumer rationing examples include cement and sugar in india and health housing and defence in many countries the paper investigates the effects of these schemes including sales and excise taxation on prices output and household welfare under oligopoly and monopolistic competition less government control reduced may raise prices and tax shifting can be above or below 100 percent

cross border shopping and the optimum commodity tax in a competitive and a monopoly market using a partial equilibrium model optimality rules for a commodity tax are derived for an economy that is exposed to cross border shopping in a competitive market the conventional inverse elasticity rule is shown to be valid with the qualification that it is the elasticity of domestic rather than total demand that matters with a foreign monopoly the inverse elasticity is modified by a tax shifting effect when the supplier is a multinational firm price repercussions abroad should be taken into account the implications for domestic taxation of the prices and taxes set abroad are also examined

uncertainty and risk in financial markets this paper considers a general equilibrium model in which the distinction between uncertainty and risk is formalized by assuming agents have incomplete preferences over statecontingent consumption bundles as in bewley 1986 without completeness individual decision making depends on a set of probability distributions over the state space a bundle is preferred to another if and only if it has larger expected utility for all probabilities in this set when preferences are complete this set is a singleton and the model reduces to standard expected utility in this setting we characterize pareto optima and equilibria and show that the presence of uncertainty generates robust indeterminacies in equilibrium prices and allocations for any specification of initial endowments we derive comparative statics results linking the degree of uncertainty with changes in equilibria despite the presence of robust indeterminacies we show that equilibrium prices and allocations vary continuously with underlying fundamentals equilibria in a standard risk economy are thus robust to adding small degrees of uncertainty finally we give conditions under which some assets are not traded due to uncertainty aversion

pareto optima and equilibria when preferences are incompletely known an exchange economy in which agents have convex incomplete preferences defined by families of concave utility functions is considered sufficient conditions for the set of efficient allocations and equilibria to coincide with the set of efficient allocations and equilibria that result when each agent has a utility in her family are provided welfare theorems in an incomplete preferences framework therefore hold under these conditions and efficient allocations and equilibria are characterized by first order conditions

intertemporal equilibria with knightian uncertainty we study a dynamic and infinite dimensional model with incomplete multiple prior preferences in interior efficient allocations agents share a common risk adjusted prior and subjective interest rate interior efficient allocations and equilibria coincide with those of economies with subjective expected utility and priors from the agents multiple prior sets a specific model with neither risk nor uncertainty at the aggregate level is considered risk is always fully insured for small levels of ambiguity there exists an equilibrium with inertia where agents also insure fully against knightian uncertainty when the level of ambiguity exceeds a critical threshold full insurance no longer prevails and there exist equilibria with inertia where agents do not insure against uncertainty at all we also show that equilibria with inertia are indeterminate

distributional analysis of portfolio choice trading in a market is compared with receiving some particular consu mption bundle given increasing state independent preferences and complete markets the analysis focuses on the distribution price of t he particular bundle the distributional price is the price of the ch eapest utility equivalent bundle sold in the market the distribution al price is determined by the distribution functions of the outside b undle and the state price density simple portfolio performance measu res illustrate the value of the approach unlike capm based measures these measures are valid even when superior information is the sourc e of superior performance copyright 1988 by the university of chicago

the impact of fuel tourism on retailers diesel price in spanish neighbouring regions since 1986 car fuel consumption in spain has been subject to the special hydrocarbons tax and the value added tax in addition since 2002 regional governments have been able to apply a regional excise duty on hydrocarbons this article analyses the impact that such a regional tax has on the retailer s diesel price at the border of the province of lugo in the region of galicia and the province of leon in the region of castile leon only the former region has the regional tax evidence shows that variations in the price of diesel at the border of lugo are of the same sign but of lower intensity than at the border of leon the price price elasticity is 0 8060 these results suggest that service stations located in regions with higher excise duties use their price policy to lessen the negative effects generated for fuel tourism

a spatial tax harmonization model abstract policies to harmonize value added tax rates are controversial in the european union this paper formulates a multi country model over a one dimensional space as a non cooperative nash game in which each country aims at maximizing its tax revenue subject to the constraint that its tax rate lies within a given common band then we examine the effects of changes in the common band on tax rates tax revenues and the number of cross border shoppers at nash equilibrium we also analyze the effects of geographical variation in country size and location

on the duality between prior beliefs and trading demands in an abstract model with asymmetric information we show that there is a duality relationship between the prior beliefs and trading demands of bets for any given individual then we aggregate all the agents to obtain a second duality relationship between common prior beliefs and trading possibilities we easily derive from these relationships the no trade theorem and its converse general efficiency results can be obtained moreover our framework is sufficiently general to cover special cases proved previously for example econometrica 62 1994 1327 discussion paper 83 center for rationality and interactive decision theory the hebrew university of jerusalem 1995 j econom theory 91 2000 127 gameseconom behav 24 1998 172 yet our argumentsare both simple and intuitive r 2003 published by elsevier science usa

paternalism and tax competition when consumers make mistakes the government may wish to use paternalistic taxation as a corrective measure we analyse the extent to which tax competition undermines the feasibility of paternalistic taxation we show that the paternalistic component of a tax on a harmful good is reduced when there is cross border shopping but it does not disappear altogether in a model with tax competition between two countries only one of which has a paternalistic objective we show that a minimum tax rate requirement can be pareto improving despite the divergence in policy objectives tax harmonization however reduces welfare in the non paternalistic country

how much do distortions affect growth abstract this paper presents a simple endogenous growth model with two types of capital which can display sizeable long run growth effects of distortionary policies the model applies to many different types of distortions of relative prices common in developing countries such as differential taxes and tariffs black market exchange rates and price controls the model shows that a subsidy to one type of capital financed by a tax on another capital good lowers growth a measure of the variance of relative prices of investment goods across sectors has a negative and statistically significant effect on growth

liquidity and valuation in an uncertain world abstract during the 2007 2009 financial crisis there was little or no trading in a variety of financial assets even though bid and ask prices existed for many of these assets we develop a model in which this illiquidity arises from uncertainty and we argue that this new form of illiquidity makes bid and ask prices unsuitable as metrics for establishing fair value for these assets we show how the extreme uncertainty that traders face can be characterized by incomplete preferences over portfolios and we use bewley s 2002 model of decision making under uncertainty to derive equilibrium quotes and the nonexistence of trading at these quotes we then suggest alternatives for valuing assets in illiquid markets

commodity tax competition under destination and origin principles abstract this paper studies the effect of switching from the destination to the origin principle of taxation on non cooperative commodity tax equilibrium when taxes are constrained to be uniform across commodities the switch has no effect when differentiated taxes are allowed the effects of the switch depend on whether countries are small or large in both cases the switch imposes the requirement that taxes must be uniform across commodities within each country in the second case there are two further effects of the switch i negative spillover effects from tax policy are introduced ii incentives to manipulate the terms of trade are changed the switch does not necessarily lead to a fall in all tax rates

prices taxes and automotive fuel cross border shopping abstract the aim of the present paper is to determine whether differences in automotive fuel prices among neighboring autonomous communities i e spanish political administrative regions affect the decisions taken by individuals regarding the region in which to purchase fuel in particular the intention is to discover if price increases in certain autonomous communities as a result of the application of the regional tranche of the hydrocarbon retail sales tax hrst has affected fuel purchases in neighboring communities in order to achieve the above mentioned objectives the monthly purchases of automotive diesel in aragon between january 2001 and march 2007 is estimated from the fuel price in aragon the relation between prices in each of the bordering communities and aragon weighted by density of traffic the number of vehicles registered in that community and three dummy variables representative of the implementation of the regional tranche of the hrst in madrid catalonia and valencia the paper finds empirical evidence to demonstrate a positive effect of the relative prices in the neighboring communities and vehicle registrations and also a negative effect of prices in aragon upon the acquisition of diesel in this region in the case of catalonia some evidence suggests that the price effect may have been strengthened following the introduction of the regional tranche of the hrst in august 2004

efficient trading strategies in the presence of market frictions we provide a price characterization of efficient contingent claims that is chosen by at least a rational agent in multiperiod economies with market frictions frictions include market incompleteness transaction costs short selling and borrowing costs we characterize the inefficiency cost of a trading strategy its required investment minus the largest amount necessary to obtain the same utility level and we propose a measure of portfolio performance we show that arbitrage bounds cannot be tightened based on efficiency without restricting preferences or endowments we observe common investment strategies becoming inefficient with market frictions and others rationalized by them in this article we characterize efficient contingent claims to future consumption consumption bundles in multiperiod economies with uncertainty taking a wide range of market frictions into account 1 such as dynamic market

government consumption and growth i introduction interest in formulating and testing growth models has surged in recent years following the seminal articles of romer 1986 and lucas 1988 the theoretical growth literature has primarily sought to endogenize the trend growth rate which had been treated as an exogenous parameter in the earlier vintage of growth models formulated by solow 1956 and cass 1965 inter alia although the goal of endogenizing trend growth rates is surely desirable it is still important to test whether trend growth rates are indeed better characterized as exogenous or endogenous many papers have attempted to do so unfortunately virtually all of them have used ordinary least squares to fit cross sectional regressions relating the average growth rate of per capita output over some period to its initial value and other country characteristics 1 my 1996a paper shows that this method produces seriously biased estimates and unreliable inferences this paper makes two contributions first using a simple stochastic growth model that nests both exogenous and endogenous growth it shows that the growth rate of output per capita should be mean stationary if growth is exogenous and should be difference stationary if growth is endogenous and any difference stationary variable affects investment specifically if the share of output devoted to government consumption is difference stationary the growth rate should be mean stationary or difference stationary depending on whether growth is exogenous or endogenous furthermore the growth rate should be negatively related to the share of output devoted to exhaustive government consumption if and only if growth is endogenous the second contribution is to test whether growth is exogenous or endogenous data for 92 countries over the period 1960 to 1989 strongly support the mean stationarity of the growth rate of per capita output and are consistent with the difference stationarity of the share of output devoted to government consumption moreover the growth rate is not significantly related to the government share these two findings support the exogeneity of growth finally the relationship is precisely estimated to be weak if not nonexistent hence even if growth is endogenous the degree of endogeneity is likely to be small 2 the rest of the paper is organized as follows section ii formulates a simple stochastic growth model for demonstrating the basic theoretical results section iii investigates whether growth rates are mean stationary and whether shares of output devoted to government consumption are difference stationary section iv examines whether and how growth rates and government shares are related to each other finally section v summarizes the paper and offers a few conclusions ii theoretical discussion this section lays out a simple and tractable stochastic growth model that nests both exogenous and endogenous growth the model is special in many ways because several restrictive assumptions are made for the sake of tractability nevertheless results similar to the ones derived below should hold in a wide class of models consider a closed economy inhabited by a government and a household that lives in periods t 0 1 2 the sole activity of the government is exhaustively consuming g which is financed by a proportional tax on gross output y at the rate tau its budget constraint is therefore 1 g sub t tau sub t y sub t i assume that government consumption is set so that 2 g sub t ln 1 g sub t y sub t is a driftless difference stationary process the household is endowed with one unit of labor which it supplies completely inelastically each period a positive initial capital stock and a technology 3 mathematical expression omitted 0 less than alpha less than or equal to 1 t 0 1 2

subjective beliefs and ex ante trade we study a definition of subjective beliefs applicable to preferences that allow for the perception of ambiguity and provide a characterization of such beliefs in terms of market behavior using this definition we derive necessary and sufficient conditions for the efficiency of ex ante trade and show that these conditions follow from the fundamental welfare theorems when aggregate uncertainty is absent our results show that full insurance is efficient if and only if agents share some common subjective beliefs our results hold for a general class of convex preferences which contains many functional forms used in applications involving ambiguity and ambiguity aversion we show how our results can be articulated in the language of these functional forms confirming results existing in the literature generating new results and providing a useful tool for applications

ramsey tax rules for economies with imperfect competition abstract this paper derives optimal commodity tax rules for a general equilibrium model with imperfect competition to achieve this functions are constructed that describe the effects of taxation upon the equilibrium prices and profit levels of imperfectly competitive industries the use of these functions allows existing tax rules to be generalised to accommodate imperfect competition

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

jeux sans frontieres tax competition and tax coordination when countries differ in size closer international integration is putting increasing pressure on existing national tax structures this paper uses a simple two country model to address a range of consequent policy concerns focusing particularly on the role of country size differences in size exacerbate the inefficiency from noncooperative behavior harming both countries the smaller country loses from harmonization to any tax rate between those set in the noncooperative equilibrium but both countries gain from the imposition of a minimum tax anywhere in that range the fully optimal response to freer cross border trade however may be to do nothing jel h20 h77