commodity tax harmonization and the location of industry we study the positive implications of commodity taxation and tax harmonization under the destination and origin principles when firms are monopolistic competitors facing variable demand elasticity and segmented markets our emphasis is on the international location of firms in the presence of market size asymmetries and trade costs under the destination principle an increase in the tax rate of a country always causes some firms to relocate to the other this effect may be reversed under the origin principle when economic integration is deep enough under tax harmonization the choice of a common tax principle is irrelevant for the market outcomes and for the global tax revenues it affects however the distribution of revenues between small and large countries c 2006 elsevier b v all rights reserved

competing through information provision this paper studies the symmetric equilibria of a two buyer two seller model of directed search in which sellers commit to information provision more informed buyers have better differentiated private valuations and extract higher rents from trade when sellers cannot commit to sale mechanisms information provision is higher under competition than under monopoly in contrast when sellers commit to both information provision and sale mechanisms i identify simple conditions under which sellers post auctions and provide full information in every equilibrium ensuring that all equilibrium outcomes are constrained efficient sellers capture the efficiency gains from increased information and compete only over non distortionary rents offered to buyers

the credibility of policy announcements greek evidence this paper by using error correction ec methodology along with chow stability tests examines whether three cases of policy announcements in greece over the 1975 1995 period have been considered credible or not by the public focusing on the phillips curve trade off the empirical findings reveal that two out of three policy announcements are characterized as credible by private agents

limits of exact equilibria for capacity constrained sellers with costly search abstract this paper studies finite versions of competitive matching models in which sellers announce prices and buyers understand the relationship between price and probability of trade two equilibrium concepts are studied for finite games subgame perfect equilibrium and rational expectations equilibrium it is shown that the distribution of prices offered by sellers under both equilibrium concepts converges weakly to the same competitive equilibrium distribution of prices furthermore the payoffs that sellers face in both kinds of equilibrium have the market utility property in the limit journal of economic literature classification numbers c78 d41 d45

does competition for capital discipline governments decentralization globalization and public policy competition among countries or regions within them to attract mobile capital is often thought to discipline their governments motivating them to invest more in infrastructure reduce waste and corruption and spend less on non productive public goods the result should be convergence on business friendly policies we argue that this requires an assumption units start out very similar that is often unrealistic if units are heterogeneous in natural resources geographical location inherited human capital or infrastructure capital mobility often weakens discipline on the poorlyendowed units this may help explain disappointing results of liberalizing capital flows within russia and sub saharan africa jel f36 h73 h87

rules and discretion with noncoordinated monetary and fiscal policies the time inconsistency of optimal monetary policy is due to the effects of tax distortions thus the issue of how to improve upon the time consistent suboptimal monetary policy is related to that of the coordination of monetary and fiscal policy we present a model with three players the central bark the fiscal authority and wage setters in which distortionary taxes are explicitly modelled we show that binding commitments to monetary rules are not necessarily welfare improving if monetary and fiscal policy are not coordinated we also examine the effects of different degrees of independence of the central bank

information content of wages and monetary policy we examine whether it is sufficient for central banks to observe and forecast nominal variables only analyzing the interplay of wage setting unions and a central bank we show that although central banks may not gain more information by directly acquiring data about indicators of real shocks in the economy such activities are nevertheless beneficial for central banks and yield lower social losses moreover the extent of research activities by central banks should depend on the process of union formation

wage vacancy contracts and coordination frictions abstract we consider a directed search model with risk averse workers and risk neutral entrepreneurs who can set up firms that post wage vacancy contracts i e contracts where firms can make payments to more than one applicant and where the payments can be different for each applicant and be contingent on the number of applicants we establish that the type of contracts the literature focuses on are not offered if firms can post wage vacancy contracts we show that there exists an equilibrium satisfying a monotonic expected utility property which is efficient furthermore we investigate the role of wage vacancy contracts on welfare and competition

tax competition and tax co ordination under destination and origin principles a synthesis this paper proposes a general framework for analysing commodity tax competition under destination and origin principles based on three possible tax spillovers the consumer price spillover the producer price terms of trade spillover and rent spillovers a model is presented which can be extended to accommodate all three spillovers using this model many of the results in the existing literature can be derived compared and extended

competitive search equilibrium in this paper i construct an equilibrium for markets with frictions which is competitive in the sense that all agents are price takers and maximize utility subject to a set of market parameters i show that the equilibrium allocation is socially optimal i also show how the competitive search equilibrium can be achieved if employers with vacancies can advertise publicly the wages they pay

the comparison between destination and origin principles under imperfect competition abstract especially but not only in the european union closer economic integration is putting increasing pressure on the destination principle under which goods entering international trade are normally taxed this has raised the possibility of switching to the origin principle which dispenses with problematic border tax adjustments this paper compares destination and origin principles under conditions of imperfect competition previous analyses which have considered only the competitive case have led to a qualified presumption in favour of the destination principle a series of results are established here for both cooperative and non cooperative tax setting which challenge that presumption under imperfect competition

tax principles and tax harmonization under imperfect competition a cautionary example this paper shows that under imperfect competition the welfare effects of indirect tax harmonization may depend crucially on whether taxes are levied by the destination or the origin principle in a standard model of imperfect competition while harmonization always makes at least one country better off and may be pareto improving when taxes are levied under the destination principle which currently applies in the european union harmonization of origin based taxes as recently proposed by the european commission is certain to be pareto worsening when the preferences in the two countries are identical and is likely to be so even when they differ

a theory of interregional tax competition a general equilibrium model is constructed to study tax competition where local governments compete for capital by holding down property tax rates and public expenditure levels an exact definition of tax competition is provided and both the existence and nonexistence of tax competition are shown to be theoretically possible it is argued however that tax competition must occur under empirically reasonable conditions inefficiency in public production is also explicitly modeled the amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms

efficient competition through cheap talk the case of competing auctions we consider a large market where auctioneers with private reservation values compete for bidders by announcing cheap talk messages if auctioneers run efficient first price auctions then there always exists an equilibrium in which each auctioneer truthfully reveals her type the equilibrium is constrained efficient assigning more bidders to auctioneers with larger gains from trade the choice of the trading mechanism is crucial for the result most notably the use of second price auctions equivalently ex post bidding leads to the nonexistence of any informative equilibrium we examine the robustness of our finding in various dimensions including finite markets and equilibrium selection

can reputation resolve the monetary policy credibility problem abstract this paper addresses three problems with reputational equilibria in the barro gordon monetary policy game the multiplicity of equilibria the coordination problem and a chisel prone credibility problem a chisel proof credibility condition ensures that in response to a small deviation from the low inflation rate by the central bank it never pays for the private sector to acquiesce if the private sector can coordinate then a low but nonzero inflation outcome can be supported as a subgameperfect and chisel proof credible noncooperative equilibrium for an atomistic private sector the result can still hold in a game between successive monetary administrations

good jobs versus bad jobs this article develops a model of noncompetitive labor markets in which high wage good and low wage bad jobs coexist minimum wages and unemployment benefits shift the composition of employment toward high wage jobs because the composition of jobs in the laissez faire equilibrium is inefficiently biased toward low wage jobs these labor market regulations increase average labor productivity and may improve welfare

search direction and wage dispersion in a directed search model we allow the unemployed and the vacancies to choose whether to send or receive wage offers this determines the market structure there are several equilibria but a unique evolutionary stable one wage offers are made under incomplete information about the number of offers and the equilibrium strategies involve mixing this results in wage dispersion we show that if the unemployment vacancy ratio is close to unity the stable equilibrium consists of two submarkets with opposite search directions otherwise the long side of the market sends offers the stable equilibrium is efficient given the frictions

how will emu affect inflation and unemployment in europe this paper explores how european monetary union will change the wage setting behavior of national labor unions we derive the impact of national inflation aversion and labor militancy on the performance of national labor markets under different monetary arrangements a common central bank raises inflation and unemployment if it acts as conservatively as national central banks however unemployment falls in countries that previously tied their monetary policy to the bundesbank we also examine the composition of emu and the influence of national labor market legislation jel classification e24 f02 f33

directed search with multiple job applications we develop an equilibrium directed search model of the labor market where workers can simultaneously apply for multiple jobs the main result is that all equilibria exhibit wage dispersion despite the fact that workers and firms are homogeneous wage dispersion is driven by the simultaneity of application choice risk neutral workers apply for both safe and risky jobs the former yield a high probability of a job oer but for low pay and act as a fallback option the latter provide with higher potential payo but are harder to get furthermore the density of posted wages is decreasing consistent with stylized facts unlike most directed search models the equilibria are not constrained ecient

income taxes and the destination of movers to multistate msas abstract we examine how differences in state income tax rates as well as other state and local taxes and public service expenditures influence the choice of state of residence for households federal tax filers moving into multistate metropolitan areas msas using data from the irs on the migration of taxpayers msas that are on borders provide a spatial discontinuity discrete differences in state tax rates within a single labor market these msas allow residents to live in one state and work in another state we find that differences in state income tax rates have a significant impact on the relative rate of migration to the states within an msa however contrary to what would be expected this impact is only significant in msas in which the filing state is based on employment states without reciprocity and not for those states in which the filing state is the state of residence states with reciprocity in msas where states do not have reciprocity agreements a difference of ten percent in tax rates leads to a 4 1 percent difference in the relative rate of incoming taxpayers analogously we find that a ten percent difference in state tax rates in these msas results in a 3 3 percent difference in the rate of tax base inflow agi our results suggest that one reason that differences in state income taxes appear to have more impact in multistate msas without reciprocity is that only relatively large differences in state income tax rates have any impact on migration and these differences are much more pronounced in msas without reciprocity

patient mobility and health care quality when regions and patients differ in income we study the effects of cross border patient mobility on health care quality and welfare when income varies across and within regions we use a salop model with a high middle and low income region in each region a policy maker chooses health care quality to maximise the utility of its residents when health care costs are financed by general income taxation in equilibrium regions with higher income offer better quality which creates an incentive for patient mobility from lower to higher income regions assuming a prospective payment scheme based on drg pricing we find that lower non monetary administrative mobility costs have i no effect on quality or welfare in the high income region ii a negative effect on quality but a positive effect on welfare for the middle income region and iii ambiguous effects on quality and welfare for the low income region lower monetary mobility costs copayments might reduce welfare in both the middle and low income region thus health policies that stimulate cross border patient mobility can be counterproductive when regions differ in income

lobbies delegation and the under investment problem in regulation abstract a time inconsistency problem in regulation often results in under investment especially where there are high sunk costs in network industries such as electricity gas telecommunications and water this paper provides a new perspective on this hold up problem facing the price regulation of a firm with market power where full commitment to a price regime is not possible we compare a political equilibrium based on a voting model with lobbying with a delegation equilibrium where a government can delegate to a particular type of pro or anti industry regulator our analysis suggests two possible ways in which we may observe price regulation that encourages socially optimal investment in the absence of externally imposed regulatory commitment first there is less than total transparency in which voters receive an optimal amount of information and second the decisions on price are delegated to a sufficiently but not excessively pro industry regulator

equilibrium wage dispersion and interindustry wage differentials this paper develops a search theoretic explanation of interindustry wage differentials given coordination problems in the labor market the probability of filling a vacancy is an increasing function of the wage offered in equilibrium firms that find vacancies more costly will offer higher wages the model thus explains the persistence of interindustry wage differentials and their correlation with industry average capital labor ratio and profitability additionally the model predicts that high wage firms will receive more applications per job opening and that wages in the labor market will behave as strategic complements

revenue sharing and information exchange under non discriminatory taxation the international exchange of tax information and its merits compared to withholding taxes is the central topic in current debates in international tax policy the purpose of this paper is to characterize and compare the tax regimes that emerge with and without information exchange under the assumption that countries are unable to differentiate between the taxes they apply to residents and non residents it focuses in particular on the role of asymmetries in country size capturing a key feature of tax havens and on the impact and potential desirability of schemes to share the revenue raised by withholding as under the new eu savings tax arrangements or more innovatively as a consequence of information exchange it is shown that irrespective of country size difference pareto efficiency requires that all revenue collected from nonresidents be transferred to the residence country which would require taking the eu practice even further from the norm but is currently the norm in relation to information exchange a withholding scheme with revenue fully reallocated in this way pareto dominates information sharing whatever the allocation under the latter comparing schemes in which there is no revenue sharing however shows that information exchange pareto dominates simple withholding

bertrand equilibrium with capacity constraints and restricted mobility this paper considers price competition among firms when there are capacity constraints and buyers have limited ability to visit firms a natural method of allocating buyers among firms arises in the equilibrium of the buyers search game sufficient conditions are given under which the buyers equilibrium varies continuously with the prices charged by firms capacity constraints are used to guarantee that this ensures existence of mixed strategy equilibria for the pricing game played by sellers we show that natural pure strategy equilibria arise when the game is made large in appropriate ways since bertrand s criticism of cournot it has been known that models where sellers compete with prices may have undesirable properties when the commodities traded are homogenous in the simplest models with constant marginal costs price may be driven down to the competitive level even when there are only two firms more problematic if sellers are subject to capacity constraints nash in prices equilibrium may not exist at all these problems all arise because of a discontinuity in firms profit functions that arises when the prices of two or more firms are equal there have been many attempts to resolve this problem the simplest is to constrain sellers prices to be equal and to force them to compete in quantities this is the basis of most of the literature on monopolistic competi

unemployment vs mismatch of talents reconsidering unemployment benefits we develop an equilibrium search matching model with risk neutral agents and two sided ex ante heterogeneity unemployment insurance has the standard effect of reducing employment but also helps workers to get a suitable job we show through calibrations how the mere difference on unemployment insurance when countries experience a common skilled biased technological shock may result in differences in unemployment productivity growth and wage inequality these results are consistent with the contrasting performance of the labour market in europe and the united states in the last twenty five years the model is used to address some political economy issues

on pareto improving commodity tax changes under fiscal competition this paper shows that when a noncooperative fiscal equilibrium of the mintz tulkens 1986 model of tax competition is inefficient pareto improving changes are positive for the taxes of both regions under concavity of the regions welfare functions it also identifies a class of such equilibria that are always efficient

the political economy of regional integration projects at borders where poor and rich meet the role of cross border shopping and community sorting abstract at borders between poor and rich countries huge service price differentials could be exploited to mutual benefit offering better paid job opportunities to the poor as well as better shopping opportunities to the rich however cross border shopping is often limited by the substantial transaction costs of crossing the border moreover countries and regions frequently fail to cut these transaction costs even when they have the opportunity to do so we provide a politico economic analysis of cross border integration projects more specifically we show how the political outcome depends on i intra country mobility ii decision making and housing ownership regimes and iii federal grants and international border regulations our analysis builds on two key characteristics in which individuals differ interregional mobility and intercultural ability

frictional assignment i efficiency abstract this paper examines the two sided matching problem where the agents on each side of the market are heterogeneous and the matching process is time consuming this is cast in a labor market setting where workers of different skills match with different machine qualities i characterize the efficient allocation and then show that it can be decentralized by a market mechanism the efficient assignment is not always positively assortative despite the fact that machine qualities and skills are complementary in production to decentralize the efficient allocation the market mechanism requires the firms to post wages and commit each machine quality to a particular skill implications on wage inequality are briefly examined journal of economic literature classification numbers j31 e24 j64

international tax coordination regionalism versus globalism tax competition for mobile capital can undermine the attempts of governments to redistribute income from rich to poor i study whether international tax coordination can alleviate this problem using a general equilibrium model synthesizing recent contributions to the tax competition literature the model highlights the crucial distinction between global tax coordination and regional coordination with high capital mobility between the tax union and the rest of the world the welfare gain from regional capital income tax coordination is only a small fraction of the gain from global coordination even if the tax union is large relative to the world economy

reforming an asymmetric union on the virtues of dual tier capital taxation the tax competition for mobile capital in particular the reluctance of small countries to agree on measures of tax coordination has ongoing political and economic fallouts within europe we analyse the effects of introducing a two tier structure of capital taxation where the asymmetric member states of a union choose a common federal tax rate in the first stage and then non cooperatively set local tax rates in the second stage we show that this mechanism effectively reduces competition for mobile capital between the members of the union moreover it distributes the gains across the heterogeneous states in a way that yields a strict pareto improvement over a one tier system of purely local tax choices we also discuss the effects of diverging capital endowments within the union and capital flows to third countries

taxing an independent scotland if scotland were to become independent it would gain considerably more control over its tax system than it currently enjoys in this paper we consider the consequences of independence for the optimal design of a new scottish tax system an analysis which would also be of some relevance for considering the consequences for tax design of independence of other smaller nations scotland is different from the rest of the uk in some ways that are important for tax system design incomes are more equally distributed for example that is one reason why the progressive income tax currently raises less per head in scotland than in the rest of the uk it also suggests that there is less to be gained in terms of redistribution from sharply progressive taxation independence would create additional complexity for individuals and firms working or trading across borders it could also put downward pressure on tax rates and our analysis suggests that optimal tax rates in an independent scotland are likely to be lower than optimal rates in the uk as a whole at the same time the context of a substan tial budget deficit will continue to put upward pressure on tax rates

policy competition for foreign direct investment between asymmetric countries the present paper analyses policy competition for foreign direct investment between countries of different size and different market structure we demonstrate how policy competition affects the location decision of the foreign investor and derive welfare implications the key variables in our analysis are intra regional trade costs differences in market size and minimum wages

state and local tax competition in a spatial model with sales taxes and residential property taxes abstract this paper presents a theoretical model with a uniformly populated line that is divided into local jurisdictions and or states if one level of government imposes sales and residential property taxes and if the spatial extent of each taxing jurisdiction is positive and finite then in nash equilibrium the sales tax rate is less than residential property tax rate housing consumption is suboptimal and the public good is underprovided in each jurisdiction if a very large state or country is divided into local jurisdictions and if both levels of government choose tax rates endogenously then under some assumptions there is an efficient outcome

sorting versus screening search frictions and competing mechanisms in a market where sellers compete by posting trading mechanisms we allow for a general search technology and show that its features crucially affect the equilibrium mechanism price posting prevails when meetings are rival i e when a meeting by one buyer reduces another buyer s meeting probability under price posting buyers reveal their type by sorting ex ante only if the meeting technology is sufficiently non rival price posting is not an equilibrium multiple buyer types then visit the same sellers who screen ex post through auctions

efficiency of simultaneous search this paper presents an equilibrium labor search model in which workers can simultaneously apply to multiple firms to increase their search intensity they observe firms wage postings before choosing where to apply owing to coordination frictions a firm may not receive any applications otherwise it is able to hire unless all its applicants have better offers it is shown that the equilibrium converges to the efficient walrasian outcome as application costs vanish even for nonnegligible application costs the entry of firms the search intensity and the number of filled vacancies are constrained efficient wage dispersion is essential for constrained efficiency

commodity tax competition between member states of a federation equilibrium and efficiency we first describe regional market equilibria whereupon consumers of each region allocate their purchases of private goods between domestic and nondomestic ones according to the structure of relative prices taxes and transportation costs next regional optimal tax levels and public good quantities are derived the tax of the other region being held constant fiscal competition arises from the ability of one region in choosing its tax to alter the tax base of the other

tax compliance and fiscal externalities evidence from u s diesel taxation abstract fiscal externalities across jurisdictions can arise from tax evasion and avoidance while the tax competition literature has generally focused on base shifting and the resulting positive fiscal externalities we show theoretically and empirically that negative fiscal externalities can dominate when the tax base is apportioned across jurisdictions this can lead to a negative relationship between jurisdiction size and the desired tax rate interstate truckers in the united states owe state diesel taxes based on diesel consumption which is apportioned based on the miles driven in each state we find that own state diesel sales fall when the diesel tax rates of other states rise suggesting that tax base evasion is the predominant source of externalities we then estimate a tax reaction specification finding that the own state tax rate is negatively correlated with the tax rates set in other states and with state size both consistent with the sign of the estimated fiscal externality

market power and efficiency in a search model we build a theoretical model to study the welfare effects and resulting policy implications of firms market power in a frictional labor market our environment has two main characteristics wages play a role in allocating labor across firms and there is a finite number of agents we find that the decentralized equilibrium is inefficient and that the firms market power results in the misallocation of workers from the high to the low productivity firms a minimum wage forces the low productivity firms to increase their wage leading them to hire even more often thereby exacerbating the inefficiencies moderate unemployment benefits can increase welfare because they limit firms market power by improving the workers outside option

liquidity and insurance for the unemployed we study the optimal design of unemployment insurance for workers sampling job opportunities over time we focus on the optimal timing of benefits and the desirability of allowing workers to freely access a riskless asset when workers have constant absolute risk aversion preferences it is optimal to use a very simple policy a constant benefit during unemployment a constant tax during employment that does not depend on the duration of the spell and free access to savings using a riskless asset away from this benchmark for constant relative risk aversion preferences the welfare gains of more elaborate policies are minuscule our results highlight two largely distinct roles for policy toward the unemployed a ensuring workers have sufficient liquidity to smooth their consumption and b providing unemployment benefits that serve as insurance against the uncertain duration of unemployment spells

the case for a populist central banker abstract we present a general equilibrium optimizing model in which we study the joint effects of centralization of wage setting and central bank conservatism on economic performance several striking conclusions emerge in relatively centralized labor markets employment and output are decreasing and inflation is intially increasing and then decreasing in the degree of central bank conservatism a radical populist central banker who cares not at all about inflation alternatively who is not conservative maximizes social welfare economic performance is not u shaped in the degree of centralization of the labor market in contrast to conventional wisdom

oligopsony and monopsonistic competition in labor markets we argue that models of oligopsony or monopsonistic competition provide insights and explanation for many empirical phenomena in labor markets using a simple model with job differentiation and preference heterogeneity we illustrate how such models can be employed to explain the existence of wage dispersion the persistence of labor market discrimination market failures in the provision of training and the anomalous employment effects of minimum wages

commodity taxation and parallel imports we examine the interaction between commodity taxes and parallel imports in a two country model with imperfect competition while governments determine non cooperatively their commodity tax rate the volume of parallel imports is determined endogenously by the retailing sector we compare the positive and normative implications of having commodity taxes based on destination or origin principle we show that as the volume of parallel imports increases non cooperative origin taxes converge while destination taxes diverge moreover origin taxes are more similar and lead to higher aggregate welfare levels than destination taxes

the simple analytics of tobacco taxation with illegal supply this paper examines the impact of tobacco excise taxes where legal and illegal supplies coexist the government s objective is to minimize cigarettes smoked in the economy or to maximize revenue or to minimize illegal activity it reacts to a competitive illegal supply in an adjoining jurisdiction a model of consumer choice is used to demonstrate how demand response to tax changes can yield counterintuitive results while the model mimics the canadian market similar situations characterize the us and european markets a novel element of the paper is the treatment of externalities on the supply side rather than the demand side resume analytique simple des taxes sur le tabac quand il y a offre illegale ce memoire examine l impact des taxes sur la vente de tabac quand des offres legale et illegale coexistent l objectif du gouvernement est de minimiser les cigarettes fumees dans l economie ou de maximiser le revenu fiscal ou de minimiser l activite illegale il doit prendre en compte l offre concurrentielle illegale dans une juridiction contigue on utilise un modele de choix du consommateur pour montrer comment la reaction de la demande aux changements dans les taxes peut engendrer des resultats contre intuitifs bien que le modele soit concu pour le marche canadien on trouve des situations avec des caracteristiques similaires dans les marches americain et europeens un element novateur du memoire est sa prise en compte des externalites du cote de l offre plutot que du cote de la demande

quantifying and sustaining welfare gains from monetary commitment abstract our objectives are to quantify the stabilization welfare gains from commitment to examine how commitment to an optimal rule can be sustained as an equilibrium to find a simple interest rate rule that approximates the optimal commitment one we utilize an empirical micro founded euro area dsge model a quadratic approximation of household utility as the welfare criterion employing a nominal interest rate lower bound in contrast to previous studies we find significant commitment stabilization gains of around a 0 4 0 5 equivalent permanent consumption increase and with higher price stickiness gains over 2 we find that a simple optimized commitment rule responding to inflation and the real wage mimics the optimal one

commitment in utility regulation a model of reputation and policy applications abstract this paper builds a dynamic model of utility regulation where a government cannot commit to a time inconsistent policy of not expropriating investment by allowing the government s type to change over time i explore how reputation concerns may generate partial commitment restricting attention to equilibria that are strongly renegotiation proof i show that there is a unique perfect bayesian equilibrium this contains episodes of investment and good behaviour followed by periods of expropriation and non investment i then apply the model to consider how the power of the incentive scheme and decentralization may influence the properties of this equilibrium in the case of the power of incentives the model suggests that price caps may worsen commitment in developing countries but not in developed ones similarly the model suggests that decentralisation is likely to have a significant effect on commitment but that this effect will depend on the general ability of the government to commit overall we conclude that the effect of such policies on commitment will be different across countries depending on the institutional environment

ex ante price offers in matching games non steady states a matching problem is considered in which sellers can publicly commit to a trading price that differs from the price at which buyers expect to trade elsewhere in the market when demand and supply are nearly equal the equilibrium ex ante price offer lies below the price associated with the nash bargaining split this relationship reverses when the level of excess demand is large sellers always have an incentive to make ex ante offers when prices elsewhere are determined by nash bargaining this can be interpreted to mean that nash bargaining is an unstable pricing institution copyright 1991 by the econometric society

estimating incentive and welfare effects of nonstationary unemployment benefits the distribution of unemployment duration in our equilibrium matching model with spell dependent unemployment benefits displays time varying exit rates building on semi markov processes we translate these rates into an expression for the aggregate unemployment rate structural estimation using german microdata allows us to discuss the effects of an unemployment benefit reform hartz iv the reform reduced unemployment by less than 0 1 percentage points contrary to general beliefs the net wage for most skill and regional groups increased taking the insurance effect of unemployment benefits into account however the reform is welfare reducing for 76 of workers

the assignment of workers to jobs in an economy with coordination frictions this paper studies the assignment of heterogeneous workers to heterogeneous jobs owing to the anonymity of a large labor market workers use mixed strategies when applying for jobs this randomness generates coordination frictions two workers may apply for a particular job whereas an identical job gets no applications the model generates assortative matching with a positive but imperfect correlation between matched workers and firms types it predicts that a worker s wage is increasing in her job s productivity and a firm s profit is increasing in its employees productivity the model also yields a version of the welfare theorems

nash equilibrium tariffs for the united states and canada the roles of country size scale economies and capital mobility a theoretical analysis of optimal nash equilibrium tariff rates is presented a numerical general equilibrium model is then used to find nash equilibrium tariff rates for the united states and canada the nash equilibrium tariffs are small relative to partial equilibrium estimates 18 percent for the united states and 6 percent for canada the united states is essentially indifferent between the nash equilibrium and free trade while canada is better off at the latter by 4 billion empirical results support theoretical predictions that the optimal tariff is smaller when the country is smaller there are scale economies and free entry and capital is internationally mobile

who benefits from partial tax coordination in this paper we investigate whether partial tax coordination is beneficial to countries within and outside a tax union in which countries are supposed to compete in taxes and infrastructure our results demonstrate that a subgroup of countries agreeing on a common tax rate can harm both member and nonmember states this is in contrast to the classical findings that partial tax harmonisation is pareto improving when a minimum tax rate is imposed within a tax union we demonstrate that it does not necessarily improve the welfare of the member countries moreover both the high tax and low tax countries can be worse off this conclusion is at odds with the classical result that a high tax country benefits from the imposition of a lower tax bound

pricing and matching with frictions suppose that n buyers each want one unit and m sellers each have one or more units of a good sellers post prices and then buyers choose sellers in symmetric equilibrium similar sellers all post one price and buyers randomize hence more or fewer buyers may arrive than a seller can accommodate we call this frictions we solve for prices and the endogenous matching function for finite n and m and consider the limit as n and m grow the matching function displays decreasing returns but converges to constant returns we argue that the standard matching function in the literature is misspecified and discuss implications for the beveridge curve

endogenous timing in the presence of non monotonicities the aim of this paper is to generalize the endogenous timing game proposed by hamilton and slutsky games and economic behavior 1990 2 pp 29 46 by allowing the payoff or the marginal payoff of a player to become non monotonic with respect to the strategy of the opponent we propose a taxonomy of the subgame perfect nash equilibria based on the characteristics of the payoff functions proposed by eaton canadian journal of economics 2004 37 pp 805 29 we determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous move nash equilibrium is commitment robust and discuss its pareto efficiency

the spatial incidence of local retail taxation this paper examines the effects of local retail taxation in two simple models of spatial competition suppose that a suburb or central city imposes an excise tax or subsidy on a particular commodity such as gasoline liquor restaurant meals or groceries or imposes a general sales tax that affects many commodities simultaneously to what extent does this lead to higher prices within the jurisdiction and in neighboring jurisdictions section ii presents the basic model of spatial competition that forms a component of the fixed locations model of section iii and the entry model of section iv infinitely many stores are located along an infinite line and demand density is completely inelastic and uniform along the line the main endogenous variables of interest are the prices charged by the different stores throughout the paper a nash equilibrium in prices is assumed section iii presents the fixed locations model in which the tax is imposed after stores have already established themselves store locations are fixed due to location specific sunk costs if a suburb containing a single store imposes an excise tax on a commodity the store that is taxed and its first second and third nearest neighbors on each side increase their prices by 57 7 percent 15 5 percent 4 2 percent and 1 1 percent of the tax respectively this result is independent of the spacing of the stores and independent of whether or not they are evenly spaced if a suburb containing several stores imposes an excise tax the changes in price follow directly by adding the effects of taxes on several adjacent stores if a central city taxes all stores on the right half line the results are given by 12 the taxed and untaxed stores closest to the boundary

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

destination based vs origin based commodity taxation in large open economies with unemployment we construct a perfectly competitive model of two symmetric countries producing tradable commodities and a public consumption good destination or origin based taxes are levied on the consumption of the tradable goods in both countries a fixed wage leads to involuntary unemployment we derive the nash equilibrium consumption taxes under the two taxation principles with endogenous world prices and compare them to i the cooperative rates and ii the rates when world prices are fixed we demonstrate that with endogenous world prices the induced terms of trade effects cancel out under the destination principle but they prevail under the origin principle of taxation nash equilibrium destination based taxes are inefficiently low when the exporting sector in each country is non labour intensive the nash equilibrium origin based taxes can be either higher or lower than the corresponding cooperative rates

fiscal policy coordination and emu a dynamic game approach abstract this paper examines the case for fiscal policy coordination in a european economic and monetary union emu a two bloc model with two market structures is examined emu producing a single homogeneous good in both blocs emu1 and a two good emu emu2 where each bloc produces a single home good the european central bank sets monetary policy so as to achieve credibly low inflation rates we find that for emu2 as relative prices can change countries have an incentive to improve their terms of trade leading to an inefficient noncooperative outcome which can be avoided by cooperation

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

how to make the metropolitan area work neither big government nor laissez faire we study how political boundaries and tax competition among jurisdictions interact with the labor and land markets to determine the economic structure and performance of metropolitan areas contrary to general belief institutional fragmentation and cross border commuting need not be welfare decreasing but the size of the central city matters for welfare under tax competition the central business district is too small tax competition also prevents public policy enhancing global productivity to produce their full impact although our results support the idea of decentralizing the supply of local public services by independent jurisdictions they also highlight the need of coordinating tax policies

self fulfilling currency crises and central bank independence we develop a model of a fixed exchange rate peg arrangement derived from the barro gordon model of rules versus discretion it is shown that the fixed peg is vulnerable to self fulfilling currency crises in which the unemployment rate increases the credibility of the rule decreases but paradoxically the reputation of the policy maker improves delegating monetary policy to an independent central banker does not prevent this type of crisis from arising and can even make it more costly

efficient unemployment insurance this paper constructs a tractable general equilibrium model of search with risk aversion an increase in risk aversion reduces wages unemployment and investment unemployment insurance has the opposite effect insured workers seek high wage jobs with high unemployment risk an economy with risk neutral workers achieves maximal output without any unemployment insurance but an economy with risk averse workers requires a positive level of unemployment insurance to maximize output therefore moderate unemployment insurance not only improves risk sharing but also increases output

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

eu regional policy and tax competition the european union eu provides coordination and financing of trans european transport infrastructures i e roads and railways which link the eu member states and reduce the cost of transport and mobility this raises the question of whether eu involvement in this area is justified by inefficiencies of national infrastructure policies moreover an often expressed concern is that policies enhancing mobility may boost tax competition we analyze these questions using a model where countries compete for the location of profitable firms we show that a coordination of investment in transport cost reducing infrastructures within union countries enhances welfare and mitigates tax competition in contrast with regard to union periphery infrastructure the union has an interest in a coordinated reduction of investment expenditures here the effects on tax competition are ambiguous our results provide a rationale for eu level regional policy that supports the development of intra union infrastructure

a three input model of the spatial effects of a central city wage tax abstract this paper considers the short run and long run spatial effects on wages employment and business capital as functions of location of a localized increase in wage tax rates the model is most applicable to a central city that has a higher wage tax rate than the surrounding suburbs the inclusion of land as a third input in production significantly reduces the long run effects of a central city wage tax on employment near the central city boundary as compared with a model in which labor and capital are the only two inputs the short run effects are significantly less than the long run effects

it s about time implications of the period length in an equilibrium search model empirical evidence suggests that transitions between employment states are highly clustered around the first day of each workweek or month i analyze the effect of this phenomenon by presenting an equilibrium search model in which the period length is a parameter determining the degree of clustering infinitesimally short periods result in a continuous time model with bilateral meetings whereas longer time periods introduce the possibility of recall or simultaneity of job offers in this environment i show that the period length has a profound effect on equilibrium outcomes including the unemployment rate unemployment duration and the cross sectional wage distribution