efficient and durable decision rules with incomplete information we compare six concepts of efficiency for economies with incomplete information depending on the stage at which individuals welfare is evaluated and on whether incentive constraints are recognized an example is shown in which an incentive efficient decision rule may be unanimously rejected by the individuals in the economy we define durable decision rules which can resist such unanimous rejection and show that efficient durable decision rules exist

tax policy uncertainty and corporate investment abstract the anticipatory effects of a corporate tax reform of the tax cut cum base broadening variety are analyzed in a dynamic stochastic adjustment model of firm behavior focusing on the case where the firm is uncertain both about the timing and the contents of the expected reform the value of the firm is solved prior to and after the reform the existence of investment spurts prior to the implementation of the tax reform is established rigorous results are derived under constant returns and the effects of diminishing returns are explained the expectation of a future tax cut causes the firm to accelerate optimal investment while the expectation of a reduction in the tax base the rate of fiscal depreciation has the opposite effect for a firm which updates information timing uncertainty interacts with the expectation effect moreover increased timing uncertainty may accelerate or decelerate investment as an optimal response to an expected tax cut futhermore for reasonable assumptions it is shown that a rate cut cum base broadening tax reform of the type implemented in several oecd countries in the 1980s and 1990s cannot be revenue neutral

capital allocation how the us compares with other major industrialized nations data for the seven major industrialized nations spanning two decades provide evidence that capital formation as a percentage of gross domestic product differs significantly among the major industrialized nations comparatively the us ranks among the leaders in residential structures and among the lowest in commercial structures however us private sector allocation of capital to machinery and equipment appears to be in line with other major trading nations the rate of capital cost recovery appears to affect the amount of capital allocated to commercial structures but not to residential structures or machinery and equipment likewise changes in the capital cost recovery provisions under the economic recovery tax act of 1981 seem to have led to an increase in capital allocated to commercial structures and to a marginal increase in capital allocated to machinery and equipment

taxes and transaction costs in asset market equilibrium abstract this paper examines the effects of capital taxation in an imperfect capital market in which acquiring risky assets incurs costs individual portfolio choice has two distinct aspects the extensive choice of which assets to hold in the portfolio and the intensive choice of what fraction of wealth to invest in each asset held the traditional assumption of zero transaction costs obscures the extensive choice this paper shows that if trading in assets is costly capital taxes have extensive effects as well as the intensive effects previously studied

wealth and portfolio composition theory and evidence we examine a survey of 6010 u s households and estimate a model for household portfolio allocation we extend the conventional portfolio choice model in order to capture the observed incompleteness of household portfolios we show that the empirical specification of the joint discrete and continuous choice that characterizes household portfolio behavior is a switching regressions model with endogenous switching we go on to examine the impact of taxes on portfolio composition using detailed survey data to calculate precisely the marginal tax rate facing each household finally we estimate wealth elasticities of demand for a range of assets and liabilities

belief based refinements in signalling games abstract there are many economic problems which when modelled as games of incomplete information give rise to many sequential equilibria severely limiting the usefulness of the model there has recently been a large literature devoted to refining the set of equilibria in order to reduce this multiplicity by restricting the set of admissible disequilibrium beliefs this paper argues that the logical foundations of some refinements and the equilibria they focus on are problematic and further proposes an alternative refinement that avoids the difficulties we also provide an existence theorem covering a broad class of signalling games often studied in economics journal of economic literature classification numbers c72 c70 d82

the principal agent relationship with an informed principal ii common values in many circumstances a principal may have relevant private information when she proposes a contract to an agent we analyze such a principal agent relationship as a noncooperative game the principal proposes a contract which is accepted or rejected by the agent who for most of our analysis has no private information the contract is executed if accepted otherwise the reservation allocation takes effect this allocation may be determined by a pre existing contract which the principal by her proposal is attempting to renegotiate or it may simply be the no trade point in this paper we assume that the principal s information directly affects the agent s payoff before solving the game we discuss pareto efficiency with asymmetric information we define an incentive compatible allocation to be weakly interim efficient wie if there exists no alternative incentive compatible allocation that both parties prefer for all possible beliefs that the agent might have about the principal s private information type we show that any wie allocation is interim efficient ie for some beliefs the rothschild stiglitz wilson rsw allocation relative to the reservation allocation l is the allocation that maximizes the payoff of each type of principal within the class of incentive compatible allocations that guarantee the agent at least the utility he gets from a irrespective of his beliefs about the principal s type the equilibrium set of the contract proposal game consists of the allocations that weakly pareto dominate the rsw allocation thus there is a unique equilibrium outcome if and only if the latter is ie and the equilibrium outcome is the rsw allocation itself after characterizing the equilibrium allocations we study those that are renegotiation proof when either the principal or the agent leads the renegotiation we then compare our contract proposal game which is a signaling model with its screening counterpart we conclude by extending our results to the case in which the agent as well as the principal has private information under the assumption of quasi linear preferences

can revenue maximizing export taxes yield higher welfare than welfare maximizing export taxes abstract in this paper we show that commodity exporting countries may obtain a higher welfare under revenue maximizing export taxes than under welfare maximizing export taxes this result cannot be obtained in the traditional two country models

tax asymmetries the cost of capital and investment some evidence from united kingdom panel data a measure of the cost of capital is developed that incorporates the dynamic effects of tax changes and tax asymmetries estimates of the cost of capital are made using an unbalanced panel of 1987 u k quoted companies over the period 1971 to 1984 there is wide cross sectional variation in the cost of capital the measure is used in estimating an equation where this cross sectional variation is found to be a significant determinant of the level of company investment copyright 1989 by royal economic society

how effective are fiscal incentives for r d a review of the evidence this paper surveys the econometric evidence on the effectiveness of fiscal incentives for r d we describe the effects of tax systems in oecd countries on the user cost of r d the current position changes over time and across different firms in different countries we describe and criticize the methodologies used to evaluate the effect of the tax system on

incentives in principal agent relationships this article identifies some of the major issues that have been examined in the literature on incentives the article begins by discussing the frictions that lie at the heart of incentive problems next the principal s optimal response to these frictions is explored taking as given the characteristics of the agents with whom the principal interacts in a nonrepeated setting the design of individualized contracts contests and tournaments is analyzed then the principal s task of selecting the best agent is addressed and repeated agency relationships are considered

how should capital be taxed this survey discusses how capital should be taxed in advanced economies we review the theoretical optimal tax literature survey empirical studies on the distribution of capital and the distortion

differential income taxation and household asset allocation this article empirically investigates the effects of differential income taxation on households portfolio choice and asset allocation applying a two stage budgeting model of asset demand to german survey data the model is structured into the discrete and the continuous asset choice cross sectional variation in marginal tax rates appropriately instrumented as well as over time variation from a major tax reform are used to identify the tax effects households with higher tax rates are found to have relatively greater demand for tax privileged assets such as nonowner occupied housing mortgage repayments building society deposits stocks insurances and consumer credits than households with lower tax rates demand at higher tax rates is lower for owner occupied housing bank deposits and bonds

stockholding behavior of u s households evidence from the 1983 1989 survey of consumer finances most households persistently invest in riskless assets but not stocks and may do so because they perceive information required for market participation to be costly relative to expected benefits in a consumption capital asset pricing model ccapm increased risk aversion income risk and lower resources reduce the information expense sufficient to deter stockholding bivariate probit analysis using the 1983 1989 survey of consumer finances shows that households with lower risk aversion higher education and greater wealth who were nonstockholders in 1983 had an increased conditional probability of entering by 1989 whereas 1983 stockholders with lower resources more limited education and greater risk aversion were more likely to be nonstockholders by 1989

commodity exports and the adding up problem in ldcs trade investment and lending policy abstract this paper argues that previous analyses have generally failed to fully incorporate two important aspects of commodity policy 1 a the spillover effect of policy change in one producing country on the welfare of other producing countries and 2 b the policy response of the other producing countries taking spillover effects and strategic considerations into account leads to a more restrictive trade investment and lending policy than would result from maximizing welfare on a country by country basis this paper examines what trade and investment policy commodity producing countries should pursue and what advice and lending policy should be pursued by the multilateral lending organizations

growth effect of taxes in an endogenous growth model to what extent do taxes affect economic growth abstract this paper presents an endogenous growth model comprising of financial human and physical capital and incorporating major features of a general tax system technology and preference parameter values in the model are chosen to fit the actual growth experiences of the united states and a rapidly growing east asian nic using the calibrated model i assess the role of differences in taxes and other variables in explaining the difference in growth rates the main findings are i the difference in tax systems across countries explains a significant proportion around 30 of the difference in growth rates ii the difference in preferences explains at most 4 and iii differences in labor income tax debt equity ratio and inflation can be important in explaining the growth difference further i evaluate the contribution of the monetary factor to the growth rate gap and the growth effect of us tax reforms e g revenue neutral changes in relative tax structure

informed principal problem with moral hazard risk neutrality and no limited liability abstract we consider a principal agent moral hazard problem with risk neutral parties and no limited liability in which the principal has private information the principal s private information creates signaling considerations that may distort the implemented outcome these distortions can explain e g efficiency wages beaudry 1994 and muted incentives inderst 2001 we show that in a large class of environments these distortions vanish if the principal is allowed to offer sufficiently rich contracts

incentive schemes as a signaling device abstract this paper considers a model of moral hazard where the principal has private information for instance in an organizational setting the firm may be better informed about the profitability of a sales area for which it seeks to employ a new sales representative we show how this information asymmetry may lead to a game of signaling which can mute incentives

precautionary motives and portfolio decisions theory predicts that under certain restrictions on preferences prudent consumers will allocate relatively more funds to riskless assets when there is uninsurable background risk this paper analyzes empirically the relevance of precautionary motives for the structure of household wealth to this end a new and rich data source from the netherlands is exploited the question of primary concern is what impact if any does the presence of income uncertainty have on the structure of dutch households portfolios we employ various semi parametric estimators both for cross sections and for panel data to assess the response of households portfolios to uninsurable background risk we find some but not unanimous support for the view that portfolios become less risky as income uncertainty increases

comparing allocations under asymmetric information coase theorem revisited abstract this paper investigates the robustness of coase theorem under asymmetric information we identify the conditions under which the same allocation is attained as an equilibrium in a bilateral trade model no matter which informed or uninformed party has the bargaining power to make a contract offer

evaluating the minimum asset tax on corporations an option pricing approach abstract king fullerton methodology cannot assess the minimum asset tax because it cannot handle uncertainty we present an alternative based on option pricing and show how carryover rules depreciation conventions and uncertainty affect the mat burden using brazilian data we show a because of the high intersectoral variance of returns on capital the mat does not reduce sectoral distortions b while high variance raises the mat burden high risk firms are not hit harder by the mat high risk firms also have a high rate of return which reduces the impact of the mat

saving accounts versus stocks and bonds in household portfolio allocation we study the structure of household portfolios of financial wealth by analyzing both the determinants of total financial wealth and the choice between risky stocks and bonds and riskfree assets saving accounts the econometric specification is a generalized trivariate tobit model estimated on a cross section of 3 077 households in the netherlands in 1988 we account for endogeneity of financial wealth and for selectivity due to nonreporting results show that the level of financial wealth and the marginal tax rate are major determinants of the allocation between riskfree and risky assets

a portrait of the individual investor abstract behavioral finance models often rely on a concept of noise traders who are prone to judgment and decision making errors what do noise traders do we review prior research and present new survey evidence on the behavior of small individual investors who manage their own equity portfolios many people 1 discover naive patterns in past price movements 2 share popular models of value 3 are not properly diversified and 4 trade in suboptimal ways

on the role of commitment in a principal agent relationship with an informed principal abstract in many circumstances a principal who has private information when contracting with an agent may perform some further action simultaneously with or after the agent s choice of an action we analyze such a principal agent relationship with an informed principal as a noncooperative game and distinguish two extensive form games first the principal can commit to his subsequent action at the time of contracting second the principal s announcement for his action is not binding at the time of performance we show that commitment by the principal leads to separation and no commitment leads to pooling journal of economic literatureclassification numbers c72 d82

the taxation of corporate investment income in canada an analysis of marginal effective tax rates this paper reports estimates of marginal effective tax rates on corporate investment income in canada taking into account sales taxes as well as corporation personal and business property taxes marginal effective tax rates are found to vary widely depending upon the type of asset acquired the industry in which the asset is used the manner in which the investment is financed and the tax status of the investor supplying the funds an examination of the sensitivity of these estimates to various tax arbitrage assumptions reveals the pattern of marginal effective tax rates to be similar irrespective of the arbitrage assumption used l imposition des revenus dinvestissement des societes au canada une analyse des taux marginaux effectifs ce memoire evalue les taux marginaux effectifs d imposition des revenus d investissement des societes au canada en tenant compte des taxes de vente aussi bien que des impots personnels et des impots sur les profits et sur les actifs des societes i1 appert que les taux marginaux effectifs d imposition varient grandement selon le type d actif acquis l industrie dans laquelle cet actif est utilise la faqon dont cet

welfare and optimum dynamic taxation of consumption and income abstract this paper estimates that the us could attain large welfare gains by implementing an optimal ramsey tax policy that taxes consumption and income it is also found that the welfare implications associated with taxing consumption are quantitatively more important than those associated with dynamically taxing income indeed replacing income taxes with a constant consumption tax leads to a welfare gain that is only slightly lower than that attained by a dynamic policy that taxes consumption and income in computing these welfare gains careful attention is given to the dynamic path of tax rates and the transitional dynamics associated with how the economy responds to a new tax policy

personal taxation pension wealth and portfolio composition this paper emphasizes the roles played by personal taxation and pension wealth in portfolio choice and composition a theoretical discussion of the impacts of taxation and participation in social security and private pension systems on individual wealth allocation is followed by empirical evidence based on u s cross section data both effects prove to be significant anticipated social security and private pension benefits exert a measurable influence on household portfolio allocation their omission from an asset demand model may lead to a misinterpretation of the impact of taxation on portfolio composition

why sweden s welfare state needed reform according to professor walter korpi the swedish economy would be in better shape if leading politicians had paid less attention to the advice from an influential group of swedish academic economists allegedly hostile to the welfare state their claim that high taxes and extensive social security programmes have strong adverse effects on aggregate economic performance rested on a politically biased reading of comparative international data in purporting to show that sweden had fallen behind other comparable countries the sclerosis diagnosis they set the stage for cutbacks in the welfare state and a major tax reform involving substantially lower marginal tax rates apart from creating inequality at a negligible gain in efficiency the very same reforms may also explain why sweden ran into a macroeconomic tailspin in the early i 990s rather than an instructive case study of the ultimate consequences of a long term obsession with income equality and social protection the exceptional economic crisis can be traced to severe macroeconomic policy blunders the views of professor korpi are quite familiar for anyone that has followed the swedish debate over the last decade supporters of the welfare state applaud professor korpi for revealing the ideological bias underlying the evidence presented in support of the sclerosis diagnosis some swedish economists rather thank of him as a modern day don quixote eager to pick a fight with imaginary villains being a swede and a professor of economics i can hardly claim the status of an impartial observer i certainly believe that harberger triangles convey information and i am convinced that most of the recently implemented reforms make sense nevertheless i believe that professor korpi raises important issues many of the accusations made against the welfare state in sweden and elsewhere rest on evidence which does not survive normal academic scrutiny in their capacity as policy advisors academic economists far from always live up to the standards of the seminar room speculation and sweeping generalisations are poor substitutes for facts and empirical investigations like professor korpi i doubt that very important insights on the harmfulness of the welfare state can be gained from comparative aggregate data over the period i970 90 swedish economic growth was below the oecd average at the same time the public sector was very large however

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

signaling quality with increased incentives previous work on informed principal problems with moral hazard suggested that the principal should signal project quality by retaining a larger share of the project and hence lowering incentives for the agent we show that this view is incomplete if project quality and effort are complements and effort is more valuable for high quality projects a principal with a high quality project may separate from a principal with a low quality project by increasing incentives for the agent this holds with a risk neutral agent who is protected by limited liability as well as with a risk averse agent and unlimited liability a dynamic version of our model in which the agent learns project quality in later periods provides an explanation for the use of initially reduced royalty rates in business format franchising contracts

the social opportunity cost of capital in the presence of labour market distortions this paper examines the conditions under which the social opportunity cost of capital in a tax distorted economy is equal to the gross of tax return to capital plus the excess of the market over the shadow wage bill whenever public investment serves as an unpriced or underpriced input in the private sector s production process only part of the excess of the market over the shadow wage bill should be attributed to private sector capital in addition whenever some of the benefits of public investment are appropriated by owners of capital the gross of tax return to capital will tend to overstate the genuine marginal product of capital the overall implication is that the social discount rate may be less than the gross of tax rate of return to capital in the private sector even if public investment crowds out private investment dollar for dollar

transaction costs and the pricing of assets the existence of transaction costs explains why investors do not fully diversify their portfolios this paper examines the implications of such limited diversification oi equilibrium asset prices in the framework of the capital asset pricing model in the pricing equation obtained here an asset s risk premium depends on a weighted average of its covariance with the market and its own variance the absence of transaction costs in the sharpe lintner capital asset pricing model capm is often claimed to be only a minor idealization which hardly affects the substantive implications of the model this paper aims to demonstrate that this is not the case incorporating transaction costs into the capm leads to a major reformulation of its basic asset pricing equation in contrast with the capm formula

capital income taxation and risk taking in a small open economy abstract how do capital income taxes affect household portfolio choice and growth we approach this question within the context of a stochastic model of a small open economy in which taxes on income from domestic capital equity and foreign bonds affect household portfolio choice welfare and the growth rate of the economy the theoretical and numerical analysis demonstrates the important role that risk plays in determining the mean and variability of growth as well as the conditions under which a higher tax rate can be welfare improving to shed more light on the complex theoretical interaction between taxes and risk taking we estimate a reduced form multinomial probit model of household portfolio choice using the method of simulated moments the empirical evidence is in stark contrast to the conventional wisdom we find that higher taxes make it less likely that the household will hold risky assets

marginal taxes and the asset portfolios of swedish households this paper focuses on the effects of marginal tax rates wealth income and a set of socioeconomic and demographic variables on the portfolio composition of households using detailed micro data on 2 000 swedish households in particular efforts are made to disentangle the effects of marginal tax rates on the portfolio behavior of households some econometric problems involved when estimating asset demand equations in the presence of incomplete portfolios are briefly discussed a final section examines the overall effect of marginal tax rates on asset demands by applying estimated discrete and continuous portfolio equations to compute different tax elasticities

tax arbitrage and labor supply we examine how tax avoidance in the form of trade in well functioning asset markets affects the basic labor supply model we show that tax arbitrage has dramatic implications for positive normative and econometric analysis of how taxes affect work incentives

the value of information in a principal agent model with moral hazard the ex post contracting case abstract in a principal agent model with moral hazard a signal about the principal s technology the stochastic mapping from the agent s action to the outcome is observed before the contract is offered the signal is either uninformative null information informative and observed only by the principal private information or also observed by the agent public information we show that from an ex ante standpoint before the signal is observed i the agent prefers private to both null and public information ii the principal sometimes prefers null to both private and public information and iii when the principal prefers public to null information she prefers public to private information whereas the agent prefers private to public information in this last situation we also show that iv for any separating equilibrium with private information there exists a contract with public information that both strictly prefer

informed principal moral hazard and the value of a more informative technology we analyze a principal agent model with moral hazard in which the principal has private information about the technology we characterize perfect bayesian equilibria of the contracting game that possess the following properties i a principal with a more informative technology ends up earning less profits than a principal with a less informative one does ii compared to the complete information case the actions implemented by the privately informed principal can be distorted iii the agent can end up being better off when the principal has private information

the ineffectiveness of effective tax rates on business investment a critique of feldstein s fisher schultz lecture abstract in his fisher schultz lecture martin feldstein 1982 examined the effects of non neutral tax rules on business investment by estimating three econometric models and he concluded that the rising rate of inflation has because of the structure of existing u s tax rules substantially discouraged investment in the past 15 years in a detailed examination of feldstein s effective tax rate model and a less extensive review of his other formulations neoclassical and return over cost we advance a number of important and independent criticisms and find that these three models fail to support feldstein s conclusion that taxes have exerted a significantly depressing effect on net investment during the recent inflation episode

taxation and the portfolio structure of spanish households using a sample of 5962 spanish households from the survey of household finances eff undertaken by the bank of spain this article describes the structure of their portfolio and estimates both a probit model and a tobit model to test how taxation affects respectively the decision to invest in each asset and the relative importance of each asset within the household portfolio the influence of taxation is measured using the average marginal personal income tax rate of the household the estimations performed show that the marginal tax rate is significant and displays the sign expected to explain both the holding of tax favourable assets and their weight in the household portfolio

signalling and renegotiation in contractual relationships this paper examines how the possibility of renegotiation affects contractual outcomes in signaling games when an infinite number of rounds of renegotiations are allowed before contracts are executed the main results of the paper are 1 contracts may still contain distortions 2 the popular efficient separating equilibrium outcome is never an equilibrium outcome with renegotiation 3 incentive compatibility constraints can be generalized to incorporate renegotiation 4 equilibrium outcomes can be separating and nevertheless depend on the uninformed player s prior and 5 renegotiation in signaling games may lead to outcomes similar to equilibrium outcomes of screening games in which multiple contract purchases are allowed copyright 1993 by the econometric society

new findings on firm investment and monetary transmission in the euro area in this paper we present comparable results on the determinants of firms investment and their link to monetary policy the results have been obtained by the eurosystem monetary transmission network this network has produced a series of papers in which the use of micro data permits estimating and quantifying the relevance of two channels of monetary policy transmission the interest rate and the broad credit channel the research findings provide evidence of an operative interest rate channel in all countries examined moreover the results indicate that variables which proxy firms financial conditions play a role firms characterised by weaker balance sheets show higher liquidity sensitivity

warranties as signals under consumer moral hazard this article examines the use of prices and warranties as signals of product quality to consumers who choose how to maintain their purchases the seller s incentives are strongly affected by the interaction of quality and maintenance in determining product reliability two different assumptions about this interaction are made a separating equilibrium in which high quality is signalled with a low warranty and low price is shown to be possible in both cases

taxation and inflation a new explanation for capital flows abstract in a world of mobile capital the current system of taxation implies that the after tax cost of capital and return to saving in each country are negatively correlated with the rate of inflation thus a country s net foreign asset position ought to be negatively correlated with its long run inflation rate the magnitude of these effects is shown to be potentially large for oecd countries cross section and time series regressions confirm that inflation rates are good predictors of net foreign assets the existing distribution of net foreign assets may therefore largely reflect tax distortions

the portfolio composition of asset holdings in the united kingdom an extensive literature has developed on theoretical aspects of portfolio selection one basic model which often serves as a convenient benchmark assumes that individuals choose their portfolio to maximise expected utility in a world of perfect information perfect capital markets and no taxes or transaction costs if these individuals exhibit constant relative risk aversion the optimal asset combination will be one in which the proportion of wealth invested in each type of asset is independent of total wealth the asset proportions are also independent of age if the analysis is extended to a lifecycle framework with an additively separable intertemporal utility function once the stringent preconditions of this benchmark model are relaxed it becomes progressively more difficult to derive any firm predictions regarding the structure of asset portfolios the recognition of such factors as transaction costs indivisibilities capital market imperfections and the vagaries of tax systems as well as the possibility that relative risk aversion may not be constant makes it unlikely that asset proportions will show stability across wealth and age groups but portfolio theory is generally ambiguous about how the pattern of asset holdings is affected 2 it follows that the further analysis of portfolio behaviour needs to be primarily empirically orientated unfortunately data on the asset holdings of individuals or households are notoriously poor in comparison with other important economic variables information is available from sample surveys but there are usually problems with the limited asset coverage suspect valuations and biases arising from the non randomness of response rates furthermore the sample sizes are generally low against these deficiencies has to be set the fact that the surveys contain a range of other economic variables and demographic characteristics whose relationship with asset holdings can be investigated projector and weiss i966 report asset shares for a sample of 2 557 households in the united states and these data have been subsequently used by feldstein i976 to examine the impact of the tax structures on asset holdings using another source uhler and cragg i97i present results on portfolio composition for 965 households focusing in particular on the holdings of money balances exploiting yet

incomplete contracts and signaling this article presents a principal agent model in which asymmetric information leads to contractual incompleteness i show that in the presence of transactions costs incompleteness may act as a signal of the principal s type two types of transactions costs are considered those incurred ex ante drafting costs and those incurred ex post enforcement or verification costs i prove that in the presence of either of these costs asymmetric information leads to more contractual incompleteness than full information does

why kill the golden goose a political economy model of export taxation why do governments tax exports at rates that are ultimately self defeating an answer may lie in the time inconsistent nature of a low tax policy using a dynamic model of export taxation i show that the sustainability of a low tax policy depends on three variables the ratio of sunk costs to total costs how heavily future export revenue is discounted and expected future export earnings using data on taxation leadership duration and profitability i test this theory for 32 countries and six crops from sub saharan africa these three variables are statistically and economically relevant predictors of tax regime

taxation and household portfolio composition us evidence from the 1980s and 1990s abstract this paper explores the relationship between household marginal income tax rates the set of financial assets that households own and the portfolio shares accounted for by each of these assets it analyzes data from the 1983 1989 1992 1995 and 1998 surveys of consumer finances and develops a new algorithm for imputing federal marginal tax rates to households in these surveys the empirical findings suggest that marginal tax rates have important effects on asset allocation decisions the probability that a household owns tax advantaged assets such as tax exempt bonds or assets held in tax deferred accounts is positively related to its tax rate on ordinary income in addition the portfolio share invested in corporate stock which is taxed less heavily than interest bearing assets is increasing in the household s ordinary income tax rate holdings of heavily taxed assets such as interest bearing accounts decline as a share of wealth as a household s marginal tax rate increases

ownership of stocks and mutual funds a panel data analysis this paper analyzes the ownership dynamics of stocks and mutual funds using representative household panel data the dutch center savings survey 1993 1998 a bivariate dynamic binary choice model is introduced allowing for interactions between the two types of assets we find that unobserved heterogeneity and state dependence play a large role for both types of assets the positive relation between ownership of one type in one period and the other type in the next period is explained by correlated unobserved heterogeneity a negative state dependence effect of lagged ownership of stocks on ownership of mutual funds is found which can be explained by the costs of shifting funds across the two forms of stockholding

marginal tax rates and tax favoured pension savings of the self employed evidence from sweden in recent years the study of how individuals respond to policies that aim at promoting pension savings has emerged as a vital area of economic research this paper adds to this body of literature by estimating the tax price elasticity of contributions to tax favoured pension savings accounts on a population of self employed individuals i exploit a unique total database over the swedish population that covers the years 19992005 using instrumental variables i obtain a tax price elasticity estimate of 0 51 and an income elasticity estimate of 0 13 whereas ordinary least squares ols produces estimates that conflict with consumer theory