collusion facilitating and collusion breaking power of simultaneous ascending and descending price auctions this article demonstrates that a robust tacit collusion evolves quickly in a collusion incubator environment but is destroyed by the simultaneous descending price auction theories of collusion producing behavior along with the detail of the states on which strategies are conditioned lead to a deeper understanding of how tacit collusion evolves and its necessary conditions these theories explain how the descending price auction destroys the collusion the experiments proceed by conducting simultaneous ascending price auctions in the collusion incubator then once the tacit collusion developed changing to the descending auction the change moved prices from collusive levels to near competitive levels

are future taxes discounted in this paper i examine empirically the question of whether or not the public recognizes the future taxes implied by current deficitfinanced expenditures as discussed by barro 1 it seems that such recognition does not occur but that by a new hypothesis presented here the aggregate economy behaves much as if it did this alternative hypothesis relies on the widely accepted efficient markets and permanent income hypotheses and it requires considerably less sophistication and information on the part of the average economic agent than does barro s hypothesis

multiple object auctions with budget constrained bidders in the last few years governments in many parts of the world have aggressively sought to privatize socially held assets this wave of privatization has included the sale of industrial enterprises in the former soviet union and eastern europe the sale of public transportation systems in britain and scandinavia and the sale of radio spectra in the u s both the enormity and the importance of these sales have naturally led to an examination of how best to accomplish this task auctions have been proposed and have frequently been used as time honoured convenient and attractive mechanisms for such sales this in turn has led to a revival of interest in the theory of auctions particularly those involving multiple objects the magnitude of these privatization sales has meant that in many instances it is realistic to consider that buyers may run up against liquidity or borrowing constraints the presence of these financial constraints introduces important differences into traditional auction theory for instance pitchik and schotter 1986 and che and gale 1996 1998 have shown that when bidders are subject to such constraints the conclusion of the celebrated revenue equivalence theorem no longer holds when multiple objects are auctioned in the presence of budget constraints it may be advantageous for a bidder to bid aggressively on one object with a view to raising the price paid by his rival and depleting his budget so that the second object may then be obtained at a lower price in effect a bidder may wish to raise a rival s costs in one market in order to gain advantage in another thus unlike in traditional auction theory a particular bidder s payoff is affected by the price paid by a rival bidder it is important to note that this effect comes into play only when several objects are sold

the market value of outstanding government debt 1919 1975 abstract several new series on the market value of outstanding government debt are reported and their methods of construction described the new series on federal debt are compared with other existing estimates and are shown to be markedly superior to them

do better schools matter parental valuation of elementary education the evaluation of numerous school reforms requires an understanding of the value of better schools given the difficulty of calculating the relationship between school quality and student outcomes i turn to another method and use house prices to infer the value parents place on school quality i look within school districts at houses located on attendance district boundaries houses then differ only by the elementary school the child attends i thereby effectively remove the variation in neighborhoods taxes and school spending i find that parents are willing to pay 2 5 percent more for a 5 percent increase in test scores this finding is robust to a number of sensitivity checks

the effect of collusion on efficiency in experimental auctions abstract this paper examines the effect of collusion on allocative efficiency in a second price sealed bid auction in which bidders valuations have both private and common value components we present a theoretical model which shows that explicit collusion improves average efficiency furthermore a reduction in common value signal variance increases the efficiency of allocations when a cartel is present we test for the presence of these patterns in a laboratory experiment subjects can choose whether to compete or to form a cartel colluding bidders can communicate and make side payments using a knockout auction our results show that a large majority of bidders joins a cartel and collusion has a negative impact on efficiency

the winner s curse experiments with buyers and with sellers this paper explores the winner s curse phenomena as it was studied experimentally by kagel and levin experiments with the winner s curse are complicated by the fact that subjects can lose money and the experimenter has only a limited means of collecting it from them thus subjects enjoy only limited liability which has theoretical implications for behavior in the kagel and levin experiments subjects were removed from the bidders competition after losses reached a predetermined value this experimental procedure has unknown implications for the results so ambiguity exists about whether the winner s curse was actually observed in this study their results were replicated in an environment in which subjects were not removed the case in which competitors are sellers is also studied bankruptcy cannot be a problem in sellers competition in both cases the winner s curse is observed thus the limited liability cannot be an explanation for the phenomenon reported by kagel and levin in addition the paper examines the bidding behavior of all individuals and shows that this behavior does not fit any of the tested theories either on the aggregate or individual level the winner s curse did not disappear over time during the conduct of the research

state investment tax incentives a zero sum game abstract over the past four decades state investment tax incentives have proliferated this emergence of state investment tax credits itc and other investment tax incentives raises two important questions 1 are these tax incentives effective in achieving their stated objective to increase investment within the state 2 to the extent these incentives raise investment within the state how much of this increase is due to investment drawn away from other states to begin to answer these questions we construct a detailed panel dataset for 48 states for 20 years the dataset contains series on output and capital their relative prices and establishment counts the effects of tax variables on capital formation and establishments are measured by the jorgensonian user cost of capital that depends in a nonlinear manner on federal and state tax variables cross jurisdictional differences in state investment tax credits and state corporate tax rates entering the user cost combined with a panel that is long in the time dimension are key to identifying the effectiveness of state investment incentives two models are estimated the capital demand model is motivated by the first order condition for a profit maximizing firm and relates at the state level the capital output ratio to the relative user cost of capital the twin counties model exploits both the spatial breaks discontinuities in tax policy at state borders and our panel dataset to relate at the county level the relative user cost to the location of manufacturing establishments using the capital demand model we find that own state capital formation is substantially increased by tax induced reductions in the own state price of capital and more interestingly substantially decreased by tax induced reductions in the price of capital in competitive states similarly using our twin counties model we find that county manufacturing establishment counts around state borders are higher on the side of the border with the lower price of capital but the difference is economically small suggesting that establishments are much less mobile than overall capital extensions of the capital demand model also reveal that state capital tax policy appears to be a zero sum game among the states in that an equiproportionate increase in own state and competitive states user costs tends to have no effect on own state capital formation

new tests of the life cycle and tax discounting hypotheses abstract we first test a version of the permanent income consumption function recently suggested by barro the results support the theory except that consumption expenditures show sensitivity to transitory income next we use the consumption model to test the tax discounting hypothesis which is strongly supported this support for tax discounting disagrees with results from some earlier studies using more traditional specifications of the consumption function however we show that when certain obviously inadequate estimation procedures are corrected the traditional models also support tax discounting this uniform support for tax discounting suggests that the sensitivity of consumption to transitory income is not due to liquidity constraints

an experimental investigation of the patterns of international trade this study is the first attempt to create and study a laboratory economy with some of the prominent features of an international economic system the concept of multiple countries in which each country has its own technology preferences and resource endowments is introduced and operationalized the questions posed in the study are related to the law of comparative advantage factor price equalization terms of trade efficiency in production and exchange as guided by multiple and interacting markets and the effects of tariffs on international transactions the study builds on previous work in the experimental study of general equilibrium phenomena

how efficient is the substitution of debt for taxes in influencing demand a 52 country macro theoretic model is developed in order to test the ricardian view that debt and tax finance are equivalent the alternative traditional view is that government expenditures financed by tax revenue affect the economy in profoundly different ways than expenditures financed by bond issuance a rigorous testing of the model indicates that a present value preserving transfer of income from future generations affects the consumption of the current generations in a positive for solvent countries or negative for debt ridden countries way an explanation for this divergence in consumer s behaviour is attempted via the concept of debt illusion

collusion via signalling in simultaneous ascending bid auctions with heterogeneous objects with and without complementarities collusive equilibria exist in simultaneous ascending bid auctions with multiple objects even with large complementarities in the buyers utility functions the bidders collude by dividing the objects among themselves while keeping the prices low in the most collusive equilibrium the complementarities are never realized the scope for collusion however narrows as the ratio between the number of bidders and the number of objects increases

information effects in uniform price multi unit dutch auctions we design a multi unit descending price dutch auction mechanism that has applications for resource allocation and pricing problems we address specific auction design choices by theoretically and experimentally determining optimal information disclosure along two dimensions bidders are either informed of the number of bidders in the auction or know that it is one of two possible sizes they also either know the number of units remaining for sale or are unaware of how many units have been taken by other bidders we find that revealing group size decreases bids and therefore revenue if units remaining are not shown when group size is unknown the price also falls if the number of units remaining is revealed the most efficient and largest revenue outcome occurs when bidders are not provided information on either group size or units remaining these laboratory results conform to some directional predictions from our theory although overbidding is common

a study of collusion in first price auctions this paper examines the bidding for school milk contracts in florida and texas during the 1980s in both states firms were convicted of bid rigging the data and legal evidence suggest that the cartels in the two states allocate contracts in different ways one cartel divides the market among members while the other cartel also uses side payments to compensate members for refraining from bidding we show that both forms of cartel agreements are almost optimal provided the number of contracts is sufficiently large in the auction the cartel bidder may face competition from non cartel bidders the presence of an optimal cartel induces an asymmetry in the auction the selected cartel bidder is bidding as a representative of a group and has on average a lower cost than a non cartel bidder the data support the predicted equilibrium bidding behaviour in asymmetric auctions in accordance with optimal cartels

collusion and equilibrium selection in auctions we study bidder collusion and test the power of payoff dominance as an equilibrium selection principle in experimental multi object ascending auctions in these institutions low price collusive equilibria exist along with competitive payoff inferior equilibria achieving payoff superior collusive outcomes requires complex strategies that depending on the environment may involve signalling market splitting and bid rotation we provide the first systematic evidence of successful bidder collusion in such complex environments without communication the results demonstrate that in repeated settings bidders are often able to coordinate on payoff superior outcomes with the choice of collusive strategies varying systematically with the environment auctions for timber cars oil drilling rights and spectrum bandwidth are just a few examples of markets where multiple heterogeneous lots are offered for sale simultaneously in multi object ascending auctions the applied issue of collusion and the theoretical issue of equilibrium selection are closely linked in these auctions bidders can profit by splitting the markets by acting as local monopsonists for a disjoint subset of the objects the bidders lower the price they must pay as opposed to the sealed bid auction the ascending auction format provides bidders with the opportunity to coordinate tacitly on dividing markets and to punish non collusive bidding thus low price collusive equilibria co exist along with high price competitive equilibria even in a non repeated setting brusco and lopomo 2002 if there are complementarities in bidder values across objects and auctions are repeated bidders may further benefit by splitting the markets over time and taking turns in buying packages at low prices these opportunities make the multi object ascending auction an ideal institution for the study of equilibrium selection assuming that communication between the bidders is limited to the bidding any splitting of the markets must be tacitly coordinated in the early stages of the auction thus achieving payoff superior collusive outcomes requires complex strategies that depending on the environment may involve signalling market splitting and bid rotation while such tacit coordination is possible in theory it is an empirical question of whether it may be achieved in practice

a test that discriminates between two models of the dutch first auction non isomorphism abstract previous experiments reject the hypothesis that the dutch and first auctions are isomorphic two alternatives to the standard normal form analysis of the dutch auction are formalized 1 bidders violate bayes rule 2 bidders experience a utility of suspense that is additive with the utility of monetary reward paired comparisons of bidding behavior between groups in which the treatment is to triple the payoff of the baseline group yields no significant effect of this treatment we therefore reject the utility of suspense model

government debt government spending and private sector behavior reply roger kormendi 1983 presents apparently strong evidence that in contrast to the standard view consumption is not reduced by taxes but is reduced by government expenditure he interprets his results as supporting a consolidated approach to private sector behavior in which consumers effectively internalize the government budget constraint specifically he claims that consumers regard government spending as the true measure of the government s claim on private resources and so do not respond to changes in taxes given spending this is basically the approach advocated by robert barro 1974 and known also as the ricardian equivalence proposition hereafter rep kormendi s results appears to contradict other empirical work based on the life cycle hypothesis for example martin feldstein 1982 modigliani 1984a sterling 1985 although results similar to his have been reported see david aschauer 1985 john seater and roberto mariano 1985 and the references in kormendi in our view kormendi s analysis is seriously flawed his heuristic derivation of the consumption function leads him to a specification of the aggregate consumption function which is not consistent with the life cycle hypothesis lch or with rep and to questionable methods of estimation once his conceptual and methodological errors are corrected his formulation and more generally the rep hypothesis are found to receive little empirical support in the next section we rely on the lch to derive an aggregate consumption function which shows explicitly how government expenditure and taxes should effect private consumption this derivation helps to bring out the observable implications of rep which are shown to be equivalent to a limiting form of the lch in which the planning horizon is infinite it also serves to clarify the appropriate specification of the variables appearing in the consumption function next section ii reports our empirical estimates and tests section iii compares our results with kormendi s finally section iv reports the results of endeavors to improve the specification of fiscal variables notably by distinguishing between permanent and transitory tax changes

consumption saving and fiscal policy when this year s nobel laureate robert solow and ely lecturer alan blinder teamed their impressive talents several years ago to ask does fiscal policy matter the answer they gave was a resounding yes working in a then sophisticated neo keynesian is lm tradition blinder and solow presented a parsimonious macroeconomic model and some statistical and historical evidence suggesting that changes in the weighted standardized government surplus did indeed substantially affect real economic activity the profession was pretty much convinced that the permanent income hypothesis pih or life cycle hypothesis lch almost provided a sufficient framework for analyzing consumption and saving and hence the effects of fiscal policy curiously the large keynesian effect of a tax induced rise in current disposable income was reconciled with the very small effect predicted by the longerhorizon models with more of a whimper than a bang since then the profession has moved some distance from complete acceptance of the life cycle and permanent income hypotheses and perhaps even further from the traditional consumption function specification in vogue at that time indeed robert barro 1974 rekindled the notion that a tax fordebt swap would have no real effects an avalanche of analytical and empirical research has sharpened our understanding of the issues involved the econometric difficulties in estimating the relevant parameters and even the care necessary in defining what is meant when one asks whether fiscal policy has any real economic effects surprisingly despite numerous caveats new and improved data and estimation techniques and improved perspectives offered by analytical insights not yet prevalent when blinder and solow wrote their paper my conclusion is that their answer is essentially correct fiscal policy does matter both for short run stabilization purposes and for long run capital accumulation i believe the preponderance of the evidence strongly supports this view although the empirical research suggests that the impact of say tax cuts on consumption is perhaps only one third as large as the typical keynesian estimate of two decades ago but much larger than the neutrality predicted by ricardian equivalence or the very small effect predicted by the pih or lch

the capital gains and losses on u s government debt 1942 1987 the capital gains and losses on u s treasury securities are calculated and reported on a quarterly basis over the 1942 87 period these data are then used to calculate an adjusted measure of the federal budget deficit for the years 1975 87 whereas the rising trend in interest rates over the 1975 81 period substantially reduced the federal deficit this study shows that the reversal of that trend over the 1981 86 period contributed even more greatly to an increase in the deficit also calculated and reported are holding period rates of return on overall marketable treasury debt providing a contrast to existing interest rate series copyright 1989 by mit press

is the dollar high because of large budget deficits abstract it is widely believed that the u s dollar has been high in recent years because of large u s budget deficits using three statistical techniques this paper shows that the belief has no empirical support ricardian equivalence may explain the lack of a positive association between the budget deficit and the dollar s exchange rate

testing ricardian equivalence a reconsideration empirical evidence on the determinants of private consumption in 52 countries over the period 1979 88 indicates that in contrast to the ricardian equivalence proposition a significant relationship exists between consumption and the variable the ratio of tax revenue to changes in government debt which measures the extent of substituting debt for tax financing the results obtained from estimating euler equations for the representative individual s stochastic dynamic optimization problem are favourable to the proposition that the choice between current taxation and debt issuance to finance a given government expenditure stream is relevant to the determination of the level of aggregate demand

ricardian equivalence rational expectations and the permanent income hypothesis the ricardian equivalence proposition and the permanent income hypothesis are tested in an intertemporal consumption model with rational expectations the representative consumer incorporates the government budget constraint an alternative hypothesis of incomplete tax discounting is nested within this model a deterministic time trend is rejected for the variables of the model variables exhibit instead a stochastic trend the permanent income model is not rejected by annual u s data i e no excess sensitivity is found the evidence with respect to ricardian equivalence is mixed the empirical study employs theorems from the cointegration literature and specifically addresses issues of nonstationary regressors copyright 1990 by ohio state university press

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

the effect of government spending on the current account output and expenditures evidence from latin america abstract this paper examines the linkages between government expenditures and current account balances in several latin american economies over the period 1974 1984 in theory these linkages critically depend on private sector responses to changes in government expenditures on both the demand and supply sides the analysis provides evidence that the negative current account government expenditure linkage is much stronger in the event of a temporary shock to government expenditures than in the event of a permanent shock the source of this differential response appears to be primarily on the expenditure side suggesting that private sectors in latin america incorporate the present discounted value rather than simply the current value of government expenditures into their expenditure decisions

output effects of government purchases the theoretical analysis focuses on the distinction between temporary and permanent movements in government purchases under plausible conditions the temporary case involves an output response that is positive less than one to one with the change in government purchases and larger than that generated by an equal sized but permanent shift in purchase the equilibrium real rate of return rise in the temporary case but changes little in the permanent one defense purchases are divided empirically into permanent and temporary components by considering the role of temporary wars no temporary shifts in nondefense purchases were isolated empirical results verify an expansionary output effect for temporary purchases that exceeds that of permanent purchases the results for some other expectational hypotheses are found to be generally supportive of the theory

tax policy and urban development evidence from the indiana enterprise zone program abstract this paper analyzes the effect of the indiana enterprise zone ez program on local employment and investment using a panel of local taxing jurisdictions as in other ez programs indiana s incentives favor capital relative to labor but the target of the capital incentive is unusual the stock of inventories using various estimation methods i estimate that zone designation initially reduces the value of depreciable personal property by about 13 percent but also reduces unemployment claims in the zone and surrounding community by 19 percent the value of inventories in indiana zones is 8 percent higher than it would be without the program

temporary and permanent government spending in an open economy some evidence for the united kingdom abstract this paper investigates the effects of government spending changes on a small open economy in an intertemporal substitution framework if agents internalize the government s budget constraint temporary and permanent spending have different implications for wealth and consequently different effects on output and the balance of trade estimation of these effects isolates the different channels through which government spending can influence economic activity main findings for the united kingdom are that government spending i crowds out private spending ii is directly productive and iii when rising permanently leads to a negative wealth effect which induces a large rise in work effort

rational expectations and the effects of government debt abstract this paper incorporates the effects of government debt into a standard rational expectations macroeconomic model due to limited current information even when the most extreme propositions about fiscal neutrality are true there are output and interest rate effects of unanticipated changes in government debt therefore the observation of a positive correlation between government deficits and output or interest rates does not imply that government bonds are net wealth

an empirical analysis of the macroeconomic effects of government debt evidence from canada 1989 an empirical analysis of the macroeconomic effects of government debt evidence from canada applied economics vol 21 no 1 pp 113 124

do low income housing subsidies increase the occupied housing stock abstract a necessary condition for justifying a policy such as subsidized low income housing either via tenant based rental assistance or construction of public or private projects is that it has a real effect on market outcomes in this paper we examine one aspect of the real effect of subsidized housing does it increase the housing stock if subsidized housing raises the quantity of occupied housing per capita either more people are finding housing or they are being housed less densely on the other hand if subsidized housing merely crowds out equivalent quality low income housing that otherwise would have been provided by the private sector the housing policy may have little real effect on housing consumption using both census place and msa level data from the decennial census and from the department of housing and urban development we ask whether housing markets with more subsidized housing also have more total housing after accounting for housing demand we find that government financed units raise the total number of units in a market although on average one government subsidized unit adds only one third to one half of a unit to the total housing stock there is less crowd out in more populous markets and more crowd out in places where there is less excess demand for subsidized housing as measured by the number of government financed units per eligible person tenant based housing programs such as section 8 certificates and vouchers seem to be more effective than project based programs at targeting subsidized housing units to people who otherwise would not have their own

tacit collusion in auctions and conditions for its facilitation and prevention equilibrium selection in laboratory experimental markets the paper studies bidder behavior in simultaneous continuous ascending price auctions we design and implement a collusion incubator environment based on a type of public symmetrically folded and item aligned preferences tacit collusion develops quickly and reliably within the environment once tacit collusion developed it proved remarkably robust to institutional changes that weakened it as an equilibrium of a game theoretic model the only successful remedy was a non public change in the preference of participants that destroyed the symmetrically folded and item aligned patterns of preferences creating head to head competition between two agents reminiscent of the concept of a maverick

relocation of public sector workers evaluating a place based policy this paper investigates the local labor market impact of a uk relocation initiative the 2004 lyons review the review resulted in the dispersal of about 25 000 civil service jobs out of london and the south east towards other uk destinations this study aims to detect whether the inflow of public sector jobs crowded out private sector activity or stimulated the local provision of jobs in the private sector focusing on short term effects i find that the relocation initiative raised private sector employment in receiving areas and changed the sectoral distribution of local employment towards services i also find evidence of displacement i e a tendency for private businesses to locate closer to a relocation site moving out of areas at 1 2km and 2 3km distances into areas at 0 1km distance these agglomeration effects appear highly localized the largest policy impact is found in areas that received the relocated jobs with spillover effects reducing sharply over distance

social security and private saving new time series evidence in an important article in the journal of political economy martin feldstein 1974 estimated that the introduction of the social security system had reduced personal saving by 50 percent with serious consequences for capital formation and output his conclusion was based on a consumer expenditure function estimated with u s time series data and incorporating a social security wealth variable of his construction this paper presents new evidence that casts considerable doubt on feldstein s conclusion first the social security wealth variable used by feldstein was seriously flawed as a result of a computer programming error simply correcting this error substantially changes the estimated effect of social security on saving second the statistical evidence depends upon assumptions which are embedded in the construction of the social security wealth variable assumptions that are not demonstrably preferable and are in some cases inferior to alternative assumptions these assumptions relate first to how individuals form their expectations about the social security benefits they expect to receive and the social security taxes they expect to pay and second to estimates of the number of workers dependent wives and surviving

information and conspiracy in sealed bid auctions abstract this paper examines the allocative properties of the sealed bid institution when different aspects of the available information to bidders are considered specifically we examine a the effect on price determination in repeated sealed bid auctions of post auction revelation of losing bids and b the effect on price determination when conspiratorial discussions are allowed

the deficit interest rate link empirical evidence for canada this paper explores whether a positive relationship exists between interest rates nominal or real and deficits as postulated by a conventional macroeconomic model mundell fleming using spectral and time series techniques annual and quarterly data for canada and a variety of definitions for the deficit and government spending variables no empirical link between deficits and interest rates could be detected it is suggested therefore that the evidence is inconsistent with themundell fleming model which predicts a positive association between interest rates and deficits a possible explantion for the observed empirical results may be found in the ricardian equivalence theorem

government deficits and aggregate demand abstract the evidence presented in this paper indicates that changes in government spending transfers and taxes can have substantial effects on aggregate demand the estimates also indicate that the promise of future social security benefits significantly reduces private saving each the basic implications of the so called ricardian equivalence theorem is contradicted by the data the results are consistent with the more general view of the effects of fiscal actions and fiscal expectations that is described in the paper

seller beware supply and demand reduction and price manipulation in multiple unit uniform price auctions we experimentally compare under revelation of supply and demand across alternative variations of ascending and descending two sided price clock auctions we find that buyers reduce demand more when the price is ascending but sellers behavior is consistent across clock directions as a result the clock price rule has empirical effects on efficiency even though it is theoretically neutral

consumers are not ricardian evidence from nineteen countries i introduction in conventional macroeconomic analysis government debt affects the economy because households view it as net wealth the larger the government debt is the wealthier households feel and the more they consume in principle however households need not view government debt as net wealth david ricardo pointed out that they might conceivably treat the future taxes servicing the government debt as exactly offsetting it 1 robert barro 1974 has shown that maximizing households will actually do so if they accurately anticipate future taxes if they face perfect capital markets and if they have effectively infinite horizons ricardian equivalence is said to hold if households do treat future servicing taxes as an exact offset to the government debt many empirical papers on consumption have investigated whether ricardian equivalence is consistent with observation kochin 1974 barro 1978 tanner 1979 seater 1982 kormendi 1983 aschauer 1985 seater and mariano 1985 kormendi and meguire 1986 1990 leiderman and razin 1988 evans 1988 and evans and hasan 1993 have reported evidence consistent with ricardian equivalence by contrast blinder and deaton 1985 feldstein 1978 1982 boskin and kotlikoff 1985 modigliani and sterling 1986 1990 and feldstein and elmendorf 1990 have reported evidence inconsistent with ricardian equivalence unfortunately most of these studies do not estimate regression equations that derive from well specified theoretical models nesting both ricardian equivalence and an alternative theory in which budget deficits and current taxes are not equivalent consequently their results are often hard to interpret moreover these studies consider the data for only one country typically the united states as a result the tests that are performed may not have much power to distinguish an economy for which ricardian equivalence would be a good approximation from one for which it would be a bad approximation olivier blanchard 1985 has provided one of the few models in the literature that tractably nests ricardian equivalence and an alternative in which households view government debt as net wealth depending upon whether a crucial parameter is zero or positive households have infinite horizons internalize all future generations and exhibit ricardian behavior or have finite horizons are at least somewhat disconnected from future generations and exhibit non ricardian behavior that strengthens as the parameter becomes larger the model has testable implications that this paper examines using annual data for nineteen countries when the data for the countries are pooled the tests have sufficient power not only to reject ricardian equivalence in favor of blanchard s alternative but also to yield a precise estimate of the deviation from ricardian equivalence this estimated deviation is approximately what one would expect if capital and insurance markets were perfect and households did not have altruistic bequest motives the deviation is however also economically unimportant for many purposes the rest of the paper is organized as follows section ii lays out blanchard s model and derives the testable implications of ricardian equivalence section iii tests these implications section iv summarizes the findings of the paper and interprets them ii empirical implications of ricardian equivalence in the stochastic variant of blanchard s model formulated in this section the economy is inhabited by a constant population of households that have finite horizons and face perfect capital and insurance markets 2 each household has a finite horizon because it has a probability p of dying each period and being replaced by another household from which it is entirely disconnected with the population normalized to unity the number of households born 0 1 2 periods earlier is always p p 1 p p 1 p sup

the tax versus debt controversy in a multivariate cointegrating system the empirical literature is replete with evidence that budget deficits and government debt affect traditional view or do not appreciably affect ricardian equivalence private consumption however the validity of the relative empirical estimates can be questioned to the extent that they do not adequately distinguish among countries with varying levels of indebtedness the present paper attempts to address this problem by using johansen s cointegration technique and by sorting the sample countries into groups according to the ratio of debt to gdp the empirical evidence generated finds support for the debt illusion hypothesis as a means of expounding variations in consumers behaviour among countries with varying degrees of indebtedness

collusion in private value ascending price auctions we investigate the effects of bid improvement rules and bidder value asymmetry on bidder collusion in experimental ascending price auctions without communication we find that the strict bid improvement rule and private values are not always sufficient to break collusion among well motivated bidders collusion still occurs as long as bidder gains from collusion are high

government debt government spending and private sector behavior a current period tax reduction financed by issuing government debt shifts the timing of tax collection from the current period to the future if the future taxes implied by government debt are not fully perceived and discounted by the private sector there will be a net wealth effect that increases private sector consumption thus reducing capital accumulation and growth if on the other hand the implied future taxes are perceived and discounted by the private sector the current period tax reduction will be used to increase private saving to pay for the future taxes and government debt will be absorbed without any real effects on the economy the effects of government spending financed by current period taxation also depend upon private sector perceptions 2 if the benefits of government spending are ignored private sector consumption will decrease in accordance with the reduction in permanent disposable income to the extent that government spending is on consumption type goods that are perceived as substitutes for privately provided consumption goods there will be a relatively greater reduction in private sector consumption to the extent that government spending is on investment type goods yielding future goods and services that are perceived as substitutes for future privately provided consumption goods there will be a relatively smaller reduction in private sector consumption the standard approach to modeling private sector consumption saving behavior involves a rather asymmetric set of assumptions as to how the private sector perceives the various elements of government fiscal policy 3 current period taxes are assumed to be fully perceived but current period government spending is implicitly assumed to be completely ignored by the private sector in considering permanent personal disposable income the private sector is assumed to be forward looking in its assessment of income and taxation the stock of government debt is nevertheless included as part of the stock of private wealth the implicit assumption associate professor of economics graduate school of business university of chicago 1101 east 58th street chicago il 60637 i thank eugene fama levis kochin michael mussa paul evans and an anonymous referee for helpful comments i am particularly grateful to daniel benjamin for contributing many hours of discussion and laura lahaye who was a research assistant and valuable adviser on earlier drafts the theoretical debate on the burden of the debt has been long standing gerald o driscoll 1977 documents ricardo s nineteenth century position robert barro 1974 reopened the debate by introducing the fundamental issue of intergenerational transfers also discussed in merton miller and charles upton 1974 the empirical side of the debate was initiated by levis kochin s 1974 attempt to test for the effects of deficits on consumption and by martin feldstein s 1974 attempt to test for the effects of social security wealth on consumption other empirical contributions include jess yawitz and laurence meyer 1976 myself 1978 and j earnest tanner 1978 1979 with respect to the effects of government deficits and debt and barro 1978 michael darby 1979 and dean leimer and selig lesnoy 1982 with respect to social security wealth see also interesting recent papers by john seater 1982 who generates detailed tests of the effects of deficits and debt on consumption charles plosser 1982 who explores the effects of government spending and debt shocks on interest rates and feldstein 1982 who attempts tests similar to some in this paper see fn 29 2martin bailey s 1962 1971 development of the effects of government spending on private consumption and aggregate economic activity is the seminal contribution paul david and john scadding 1974 extend bailey s ideas and provide some supporting empirical evidence more recently willem buiter 1977 and myself 1978 developed models based on bailey s earlier work barro 1981 has an interesting paper on related issues see also david aschauer 1982 3the standard approach incorporates fiscal policy through the concept of personal disposable income and by including the stock of government debt as part of personal wealth see for example the empirical specification of albert ando and franco modigliani 1963 which has been the basis of most empirical consumption studies since and feldstein 1974 for one of the more influential papers based on the ando modigliani specification

the effects of low income housing tax credit developments on neighborhoods abstract this paper evaluates the impacts of new housing developments funded with the low income housing tax credit lihtc the largest federal project based housing program in the u s on the neighborhoods in which they are built a discontinuity in the formula determining the magnitude of tax credits as a function of neighborhood characteristics generates pseudo random assignment in the number of low income housing units built in similar sets of census tracts tracts where projects are awarded 30 higher tax credits receive approximately six more low income housing units on a base of seven units per tract these additional new low income developments cause homeowner turnover to rise raise property values in declining areas and reduce incomes in gentrifying areas in neighborhoods near the 30th percentile of the income distribution lihtc units significantly crowd out nearby new rental construction in gentrifying areas but do not displace new construction in stable or declining areas

crowd out effects of place based subsidized rental housing new evidence from the lihtc program abstract since its inception in 1987 the low income housing tax credit lihtc program has ballooned into the largest ever source of subsidized construction of low income housing in the united states accounting for one third of all recent multi family rental construction this paper examines the crowd out effects of this increasingly important source of low moderate income housing to do so we analyze the impact of lihtc construction at three different levels of geography msa county and 10 mile radius circles this allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors political variables are also used as instruments to further facilitate identification in all of our models iv estimates yield substantially greater crowd out than ols confirming the endogenous attraction of lihtc development to areas ripe for new construction our most robust iv estimates indicate that nearly 100 of lihtc development is offset by a reduction in the number of newly built unsubsidized rental units although the confidence band around this point estimate allows for less dramatic assessments additional estimates suggest that lihtc development has a much more moderate impact on construction of owner occupied housing but these estimates are imprecise overall while lihtc development may well affect the location of low moderate income rental housing opportunities our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small

does the public sector obey the rational expectations permanent income hypothesis a multi country study of the time series properties of government expenditures 1989 does the public sector obey the rational expectations permanent income hypothesis a multi country study of the time series properties of government expenditures applied economics vol 21 no 9 pp 1257 1266

auction institutional design theory and behavior of simultaneous multiple unit generalizations of the dutch and english auctions historically english and dutch auctions have been used for the exchange of single objects such as works of art or single lots of a good such as produce fish or cut flowers where these institutions have been used for the exchange of multiple units such as the australian wool auction using english rules successive lots of the good are sometimes sold sequentially at auction in some but not all instances this is because the goods are not identical even though the various lots may be close substitutes see penny burns 1985 where the goods are accepted universally as being homogeneous as in the securities markets multiple units are often commonly auctioned simultaneously in the securities industry orders are batched for simultaneous execution in multiple unit auctions in what are referred to as call markets that is the security is called for auction at a particular point in time this type of market is used on the stock exchanges of austria belgium france germany and israel some of these are verbal and some are sealed bid auctions although the u s organized exchanges are predominantly continuous rather than call markets except that call markets are used each day to open trading in each listed security there is a growing number of exceptions such as the proliferation since 1984 of auction preferred stock goldman sachs and co october 1984 and money market preferred stock lehman brothers july 1984 we now have dutch auction rate transferable securities called darts stated rate auction preferred stock or straps and many more after the initial subscription offering of this type of security the market is called every 49 days to reset the preferred dividend rate using a multiple unit auction the exchange of shares and the dividend determination is based on the array of stated dividend rates at which existing holders and potential new holders are willing to sell and or buy corresponding quantities the dividend rate and exchange of shares every 49 days is executed using the uniform price or competitive sealed bid mechanism vernon l smith et al 1980 the discussion to follow will be confined to this sealed bid form of the call market call markets provide temporal consolidation of trade orders or other forms of expressing the desire to buy and sell by comparison with continuous trading call markets offer both advantages and disadvantages robert a schwartz 1988 pp 442 6 the cited advantages include low cost of operating the exchange information aggregation and presumed pricing efficiency price stability individual trades which are thought to have a small impact on price reduced price uncertainty and finally nondiscriminatory pricing however there are offsetting disadvantages 1 the market is inaccessible except at the time of call 2 no bid offer contract or price information is available until the results of the call are announced and 3 there is transaction uncertainty because a submitted bid offer may be too low high to execute inside the supply demand cross these conditions are only partially alleviated if there is a secondary market between calls these disadvantages may be significant in september 1988 the wall street journal published an article on the failure of a call market for the auction rate preferred stock economic science laboratory university of arizona tucson arizona this material is based upon work supported by the national science foundation under grant no ses 8320121

combinatorial clock auctions price direction and performance abstract the lack of price guidance towards efficiency relevant packages in ascending combinatorial clock auctions acca can lead to a low efficiency allocation of goods we propose a descending price combinatorial clock auction dcca with a newly devised pricing strategy to improve on this problem using agent based simulations we document that the dcca provides significant improvements over the acca and we are able to understand in which environments these improvements are likely to be the strongest we test these predictions in the laboratory with human subjects and find evidence that the dcca generates improvements in auction efficiency and revenue

is the ricardian equivalence proposition an aerie fairy theory for europe using a theoretical model based on dynamic optimizing agents we test empirically the ricardian equivalence proposition rep for the eu 15 countries the theoretical setting allows us to obtain estimates of the structural parameters of the model and to test directly the hypothesis implied by the rep using recently developed end of sample cointegration breakdown tests we find evidence of a change in the fiscal behaviour of individuals during the last decade after the introduction of a fiscal rule namely the maastricht criteria for most countries in the sample the results concerning the direction of change are mixed

supply side subsidies to improve food access and dietary outcomes evidence from the new markets tax credit in an effort to improve diet and health outcomes policymakers have increasingly turned to supply side subsidies aimed at encouraging investment by supermarkets and other food retailers in low income areas this article examines whether the us federal government s new markets tax credit nmtc has affected the entry of retail food establishments and in turn food shopping and purchasing patterns in low income communities to identify the impacts of the programme we take advantage of a discontinuity in nmtc funding generated by the formula used to determine the eligibility of census tracts for investment under the programme we find that the nmtc program has had modest but positive impacts on supermarket entry in low income communities based on household level scanner data there are no detectable effects on households food purchasing patterns in affected neighbourhoods at least in the short run

ricardian equivalence empirical evidence from developing economies abstract the strong underlying assumptions of the barro ricardo equivalence proposition rep raise doubts on its validity especially for developing countries this paper attempts to analyze the validity of the rep and the sources of deviation from rep for a large sample of developing countries although the results are of a mixed nature they suggest that the presence of liquidity constrained individuals may be the source of deviation from the rep the analysis also indicates that public spending is a poor substitute for private consumption and hence implies that temporary increases in public spending may have some expansionary effect on aggregate demand

the market value of government of canada debt a comment on the importance of correct valuation of non marketable debt previous attempts to provide market value estimates for both u s and canadian government debt have included nonmarketable debt items specifically savings bonds as part of total marketable debt inclusion of nonmarketable debt items as part of marketable debt presents a significant valuation problem this article demonstrates that previous studies on the market value of canadian government debt used valuation methodologies that significantly underestimated the value of nonmarketable debt a more accurate valuation methodology is provided

common pool resources with free mobility i introduction to date most of the experimental research on common pool resources cpr has been concerned with the overexploitation problem within one community several studies as in casari and plott 2003 visser 2006 and fehr and gachter 2000 emphasize that mutual monitoring and sanctions against excessive use and free riding can be welfare improving in cpr and public good settings furthermore ostrom 1990 and others highlight the importance of clearly defined boundaries for successful self governance in the commons however in and out population migration may be a significant factor in resource use across communities examples include international fisheries or pastureland under extensive grazing the purpose of this study is to consider the effect of migratory pressure on such mobile commons in this article we relax the assumption of no entry and study how an agent s free mobility between communities affects resource use population migration is free in the tiebout 1956 sense we assume that agents mobility is costless our work differs from previous research in that it addresses the mobility issue by looking at multiple localities each with a cpr under either sanctions or open access regime we compare resource extraction behavior under different resource use regimes sanctions vs no sanctions using laboratory experiments conducted in two countries the united states and mongolia examples of commons with multiple locations are widespread in national and world economies extensive livestock production prevalent in mongolia kyrgyzstan niger and mali relies on low forage value grassland which requires movement of herders over large territories subsuming many localities similarly fisheries around international waters involve resource use problems across many localities or even countries for instance pink salmon in the north east pacific is harvested in canadian american and russian waters some localities may have regulations such as sanctions to promote the efficient use of the resource whereas others are still unregulated the alaskan salmon fisheries in chignik were governed at certain times by a cooperative fleet that shared catch equally among members and at other times by an independent fleet in such a way that unregulated fishermen were free to join cooperatives as studied in deacon parker and costello 2008 in new england users move among separately managed resources such as groundfish shellfish and baitfish within single political jurisdictions to reflect the high mobility aspect of such settings we extend the existing experimental laboratory research on cpr to allow for two communities in which citizens are free to choose the place to extract the resource in each community there is a territory with resources for harvesting activity we consider two possible community management regimes for each locality a unregulated community with no rules toward the grazing activity and b decentralized sanctioning mechanism as studied in casari and plot 2003 we consider this sanctioning system as an example of an institution that has a historical precedence and that has been shown to restore the efficiency of the common properties in closed communities the research questions are how does free mobility affect the performance of the sanctioning system if one locality is regulated and the other is not would the sanctioning institution withstand the migratory pressure from the unregulated locality how does the difference in a management regime affect agents decisions on which locality to join we address these questions in an experimental two community cpr framework where participants make decisions regarding the location to harvest and the harvesting level moreover we compare the setting with exogenously imposed institutions to a setting where the institutions in each locality are chosen by majority voting this comparison allows us to consider differences between representative democracy and direct democracy

fiscal policy and the term structure abstract this paper investigates the empirical association between deficits in interest rates it extends the results in plosser 1982 to include the more recent experience the association between a measure of ex ante real rates and deficits is also considered the results largely corroborate the previous results first little or no association between real or nominal interest rates and deficits is found second output and to a lesser extent military spending are found to have a significant association with interest rates

government debt economic activity and transmission of economic disturbances this paper analyzes the effects of government debt on output and the trade bala nce in a two country rational expectations model of the world economy it is shown that perceived changes in government debt do not affect the level of economic activity but unperceived changes in the home country s government debt are correlated positively with its output and negatively with its trade balance unperceived increases in the foreign country s government debt however have a positive impact on the home country s output and the trade balance empirical evidence from the u s is consistent with most of the implications of the model copyright 1987 by ohio state university press

assessing the incidence and efficiency of a prominent place based policy abstract this paper empirically assesses the incidence and efficiency of round i of the federal urban empowerment zone ez program using confidential microdata from the decennial census and the longitudinal business database using rejected and future applicants to the ez program as controls we find that ez designation substantially increased employment in zone neighborhoods and generated wage increases for local workers without corresponding increases in population or the local cost of living the results suggest the efficiency costs of first round ezs were relatively modest jel h26 h77 j31 r23 r58

the opportunity for conspiracy in restraint of trade an experimental study a study is a limited exploration into the relationship between the opportunity for conspiracy in restraint of trade and the resulting market performance laboratory experimental methods are applied to separate competing theories the competitive model predicts well relative to cartel models nevertheless when measurements are taken relative to the performance of markets where conspiracies are not possible the effects of attempted conspiracies can be determined

the ricardian equivalence hypothesis abstract this paper analyzes the effects of government debt and provides a test of the ricardian equivalence hypothesis for the canadian economy the empirical evidence for the period 1964 ii 1984 iv indicates that the ricardian equivalence hypothesis cannot be rejected

collusion and the choice of auction auctions are used in many different markets including the leasing of a substantial fraction of the natural resources in the united states the procedures used in the auctions conducted by the federal government have been a continuing source of controversy one of the concerns has been the possibility of collusion among bidders this article shows that cartels are stable if the seller uses open ascending bid oral auctions but not if he uses sealed high bid auctions this may help to explain the frequent use of sealed high bid auctions

the market value and maturity structure of government of canada debt 1967 83 the market value and maturity structure of outstanding government of canada debt are calculated at monthly frequency for the 1967 to 1983 period the data are disaggregated into general public chartered bank and government holdings the time series behaviour of market value and par value measures are examined to determine whether par value is a reasonable approximation for market value market value data are also used to construct an alternative measure of the deficit flow which is compared with conventional measures of the deficit la valeur au marche et la structure d echeances de la dette du gouvernement du canada 1967 83 la valeur au marche et la structure d echeances de la dette du gouvernement du canada sont calculees par les auteurs pour chaque mois au cours de la periode de 1967 a 1983 on a ventile les resultats en portions detenues par le grand public par les banques a charte et par le gouvernement les auteurs examinent ensuite la chronique des mesures de valeurs au march6 et de valeurs au pair afin de determiner si la valeur au pair est une bonne approximation de la valeur au marche on se sert alors des donnees precisant la valeur au marche pour construire un indicateur de rechange du d6ficit qu on peut alors comparer aux mesures conventionnelles du deficit

budget deficit persistence and the twin deficits hypothesis abstract this paper gauges the twin deficits hypothesis i e a positive causal relationship between the external and budget deficits this relationship is measured by the responses of the external deficit to changes in the budget deficit induced by blanchard s model these responses are positively affected by the birth rate and by the degree of persistence of the budget deficit empirical results for the canadian and us economies reveal that although the relevant birth rates are small the great persistence of the budget deficits yields responses that are numerically large and statistically positive this contrasts with previous tests of the twin deficits hypothesis which have never formally taken into account the stochastic properties of the budget deficit

persistence in industrial policy impacts evidence from depression era mississippi this paper studies the effects of a large scale industrial policy implemented in 1930s mississippi on contemporaneous and modern day labor market outcomes attracted by unprecedented government incentives under mississippi s balance agriculture with industry bawi program 13 large manufacturing plants established operations in the state between 1936 and 1940 using difference in differences and synthetic control matching techniques i find that counties that received these plants experienced an over 15 increase in female labor force participation on average in the short run moreover these effects persisted decades into the future well after many of the original companies shut down i also find suggestive evidence of an increase in educational attainment among women in counties where bawi investment occurred the results highlight the potential for even transitory government interventions to have long lived effects on labor markets

are consumers ricardian evidence for the united states this paper derives three empirical implications of a well specified model of consumer behavior a model that nests both ricardian equivalence and an alternative non ricardian theory ricardian equivalence is then tested against this alternative the tests reveal that ricardian equivalence cannot be rejected

do budget deficits raise nominal interest rates evidence from six countries abstract it is widely believed that budget deficits raise nominal interest rates this paper shows that the belief has no empirical support for six countries ricardian equivalence may explain the lack of a positive association between budget deficits and nominal interest rates

government debt government spending and private sector behavior reply and update the preceding articles by martin feldstein and douglas elmendorf and by franco modigliani and arlhe sterling give us a welcome opportunity to return to the effects of fiscal policy on private consumption at stake in this debate we believe is a potential paradigm change from what kormendi 1983 termed the standard approach which bases private consumption on disposable personal income to what he termed the consolidated approach which bases consumption on aggregate income government spending and transfer payments each with separate effects the standard approach excludes ricardian equivalence a priori the consolidated approach not only incorporates ricardian equivalence but in its augmented form allows one to nest the various hypotheses associated with the two approaches feldstein and elmendorf argue that kormendi s 1983 results and implicitly those of kormendi and meguire 1986 which reject the standard approach in favor of the consolidated ricardian alternative are not robust to the exclusion of data from world war ii and other specification changes modigliani and sterling argue that accounting for temporary taxes reverses our rebuttal of their 1986 comment we first take up the challenge of feldstein and elmendorf before turning to modigliani and sterling we then assess the validity of our preference for estimating in differences by testing whether consumption income and the fiscal variables are cointegrated finally we summarize what can be learned from the debate i feldstein and elmendorf

government programs can improve local labor markets evidence from state enterprise zones federal empowerment zones and federal enterprise communities 1 abstract federal and state governments spend well over a billion dollars a year on programs that encourage employment development in disadvantaged labor markets through the use of subsidies and tax credits in this paper we use an estimation approach that is valid under relatively weak assumptions to measure the impact of state enterprise zones entzs federal empowerment zones empzs and federal enterprise community entc programs on local labor markets we find that all three programs have positive statistically significant impacts on local labor markets in terms of the unemployment rate the poverty rate the fraction with wage and salary income and employment further the effects of empz and entc designation are considerably larger than the impact of entz designation we find that our estimates are robust to allowing for a regression to the mean effect we also find that there are positive but statistically insignificant spillover effects to neighboring census tracts of each of these programs thus our positive estimates of these program impacts do not simply represent a transfer from the nearest non treated census tract to the treated census tract our results are noteworthy for several reasons first our study is the first to jointly look at these three programs thus allowing policy makers to compare the impacts of these programs second our paper along with a concurrent study by neumark and kolko 2008 is the first to carry out the estimation accounting for overlap between the programs third our estimation strategy is valid under weaker assumptions than those made in many previous studies we consider three comparison groups and let the data determine the appropriate group fourth in spite of our conservative estimation strategy by looking at national effects with disaggregated data we show that entz designation generally has a positive effect on the local labor market while most previous research on entzs much of which used more geographically aggregated data to look at state specific effects did not find any significant impacts fifth we note that there is little or no previous work on entcs overall our results strongly support the efficacy of these labor market interventions

persistent deficits and the market value of government debt summary this paper investigates whether postwar canadian public financial policy satisfies a borrowing constraint direct tests of the present value relation suggested by this constraint shed light on the sustainability of current policy we examine monthly data on canadian federal government finances using tests for cointegration the finding is that the joint behaviour of real debt and real surpluses is inconsistent with intertemporal budget balance for the government one interpretation of this finding is that the government is systematically paying real returns to bondholders by issuing further debt alternatively bondholders may expect the government to finance future interest payments from a source other than primary surpluses e g the sale of physical assets much empirical macroeconomics is concerned with the effects of public financial policies numerous studies have examined whether such policies affect interest rates inflation or national income and its components these examinations raise the question of the efficacy of government budget deficits they generally assume that a borrowing constraint holds in the public finances some positive theories of public debt creation also make this assumption examples include barro s 1979 history of us federal deficits and sargent s 1986 rationalizations of recent us budgetary policy lucas and stokey s 1983 discussion of optimal taxation also involves this assumption hansen roberds and sargent 1987 outline the testable implications of present value budget balance and hamilton and flavin 1986 investigate the feasibility of recurring deficits by directly testing the us federal government s borrowing constraint such tests seem natural given both the recent boom is testing more complicated first order difference equations in macroeconomics and the widespread discussion of current deficits this paper tests the present value borrowing constraint using recently constructed data on the market value of outstanding canadian federal government debt we use monthly rather than annual as in hamilton and flavin data and conduct tests of univariate integration and of bivariate cointegration to investigate the joint time series properties of debt and deficits one finding is that real debt and real surpluses are integrated processes evidence of their cointegration is mixed and point estimates of the cointegrating vector suggest that the expected real rate of return on debt is negative moreover the surplus measured to include interest payments as government spending is nonstationary these findings are inconsistent

on the construction of marginal federal personal and social security tax rates in the u s abstract in this article i correct and extend my earlier series on marginal federal personal income tax rates i also construct a measure of the marginal social security tax rate and add this to the income tax rate to obtain a measure of the effective marginal tax rate on income due to federal taxes finally i compare my series on marginal income tax rates and its method of construction with those of barro and sahasakul

teaching new markets old tricks the effects of subsidized investment on low income neighborhoods abstract this paper examines the effects of investment subsidized by the federal government s new markets tax credit nmtc program which provides tax incentives to encourage private investment in low income neighborhoods i identify the impacts of the program by taking advantage of a discontinuity in the rule determining the eligibility of census tracts for nmtc subsidized investment using this discontinuity as a source of quasi experimental variation in commercial development across tracts i find that subsidized investment has modest positive effects on neighborhood conditions in low income communities though spillovers appear to be small and crowd out incomplete the results suggest that some of the observed impacts on neighborhoods are attributable to changes in the composition of residents as opposed to improvements in the welfare of existing residents

side communication yields efficiency of ascending auctions the two items case we analyze an ascending auction with anonymous item prices when there are two items that are substitutes this popular auction format entails increased opportunities for bidders to coordinate bids as the bidding process is longer and since bidders see the other bids and can respond to various signaling this has happened in many real auctions e g in the netherlands 3g telecom auction and in the fcc auctions in the us

an empirical analysis on the substitutability between private consumption and government purchases abstract this paper estimates substitutability of government purchases for private consumption using an optimal consumption model the utility function features several types of nonseparabilities the paper finds that gmm estimates are affected by the specification of nonseparability between private consumption and government purchases by the restriction of time separability and by the measurement of real interest rates

targeted business incentives and local labor markets this paper uses a regression discontinuity design to examine the effects of geographically targeted business incentives on local labor markets unlike elsewhere in the united states enterprise zone ez designations in texas are determined in part by a cutoff rule based on census block group poverty rates exploiting this discontinuity as a source of quasi experimental variation in investment and hiring incentives across areas i find that ez designation has a positive effect on resident employment increasing opportunities mainly in lower paying industries while business sitings spurred by the program are more geographically diffuse ez designation is associated with increases in home values

collusive practices in repeated english auctions experimental evidence on bidding rings the repeated meeting of buyers at english auctions where multiple units are sold is a common occurrence the art auctions at sotheby s christie s and other prestigious auction houses are attended by a regular group of institutional buyers more mundanely the same taxicab buyers meet at vehicle auctions for used police cars jon p nelson 1995 commission order buyers attend the same livestock and agricultural commodity auctions these buyers may be agents for multiple meat processors u s department of agriculture grain inspection packers and stockyards administration 2001 the 1946 american tobacco antitrust case american tobacco co et al v united states 328 u s 781 1946 is a well known account of how buyers of tobacco operated to hold down the price of auctioned leaf tobacco at various sites buyers for the big three cigarette manufacturers had developed facilitating practices that helped them purchase raw tobacco at relatively low prices these buyers voluntarily restricted themselves to attend the same auctions buyers were aware of the amount of leaf and the tobacco grades available at auction sites they had instructions from the cigarette makers on the highest bid prices they could pay and communication among these buyers seemed evident from a coordinated practice of buying low grade tobacco that was not used by the makers in the sale of livestock cattle producers have claimed that packer buyers act to hold down cattle prices at the auction site there are a few large processors who give their agents buy orders these orders along with further communication between the processor and agent instruct the agent on the number of cattle to purchase during a given week and provide a schedule of prices they can pay for varying types of cattle some agents represent more than one processor or packer and therefore have multiple buy orders agents repeatedly meet each other at regional cattle auctions they may not be the only buyers but they are the largest purchasers of slaughter cattle brought to market and at most auction sites have substantial monopsony power this paper documents the impacts of several practices that may facilitate low sale prices when multiple units are sold at repeated english auctions laboratory english auction markets are created the number of symmetric buyers attending the auction is either six or two with total demand in these two environments held constant the six buyer market is intended to represent a relatively competitive environment while auctions with two buyers represent rivalry with substantial monopsony power held by each agent we use these two market environments to study how selected treatments or facilitating influences affect the behavior of buying agents the six buyer market generally is viewed as a control for comparison to the dominant twobuyer environment but very collusive behavior may be observed in the six buyer auctions depending upon market practices phillips department of economics and finance university of wyoming p o box 3985 laramie wy 82071 e mail owenphil uwyo edu menkhaus department of agricultural and applied economics university of wyoming p o box 3354 laramie wy 82071 e mail menkhaus uwyo edu coatney u s department of agriculture grain inspection packers and stockyards administration competition branch aurora co 80011 e mail kalyn t coatney usda gov this work has been supported by the u s department of agriculture under grant numbers usdagipsnc5418 and usdag00354009126 the findings and conclusions expressed in this paper are those of the authors and do not necessarily reflect the views of the funding agency 1 these are regional auctions houses where slaughter cattle primarily cull cows and fed steers and heifers and feeder cattle are sold cull cows are animals taken out of a herd and slaughtered because of age inability to produce calves or reduced milk production concerns regarding slaughter cow possessors sharing common purchasing agents have been raised in assessment of the cattle and hog industries calendar year 2000 u s department of agriculture grain inspection packers and stockyards administration june 2001

low revenue equilibria in simultaneous ascending bid auctions low revenue equilibria allow participants in an auction to obtain goods at prices lower than would prevail in a competitive market these outcomes are generated as perfect equilibria of ascending bid multiunit auctions we show that these equilibria are possible under mild conditions conditions that are likely to prevail in many situations where auction formats have recently been adopted we argue that these equilibria could explain the low revenues of some recent auctions and discuss potential remedies to eliminate low revenue equilibria

public goods merit goods and the relation between private and government consumption in this paper we investigate the relation between public and private consumption by constructing a general government spending data set by function for 12 european countries in particular we split government consumption into two categories the 1rst category public goods includes defence public order and justice the second category merit goods includes health education and other services that could have been provided privately equations from a relatively general permanent income model are estimated by gmm the estimates are fairly robust in showing that public goods substitute while merit goods complement private consumption however the relation between merit goods and private goods turns out to be stronger than that between public goods and private goods thus in the aggregate government and private consumption are complements c