public provision of private goods as a redistributive device in an optimum income tax model public provision of a private good can alleviate the informational problems that restrict redistribution through the tax transfer system when the identity of high and low skill persons is hidden a pareto improvement may be achieved by publicly providin

re examination of uniform commodity taxes under a non linear income tax system and its implication for production efficiency abstract this paper shows that the result of uniform commodity tax under nonlinear income taxation by atkinson and stiglitz 1976 no longer holds if the production side of an economy is taken into the consideration in particular imposing a non uniform commodity tax can pareto improve welfare even under nonlinear income taxation in addition the paper shows that if the government uses a nonlinear income tax system for income redistribution then the introduction of distortions in the public sector can pareto improve welfare contrary to the results in diamond and mirrlees 1971

on the undesirability of commodity taxation even when income taxation is not optimal abstract an important result due to atkinson and stiglitz 1976 atkinson a b stiglitz j e 1976 the design of tax structure direct versus indirect taxation journal of public economics 6 55 75 is that differential commodity taxation is not optimal in the presence of an optimal nonlinear income tax given weak separability of utility between labor and all consumption goods this article demonstrates that this conclusion holds regardless of whether the income tax is optimal in particular given any commodity tax and income tax system differential commodity taxation can be eliminated in a manner that results in a pareto improvement also differential commodity taxation can be proportionally reduced so as to generate a pareto improvement in addition for commodity tax reforms that neither eliminate nor proportionally reduce differential taxation a simple efficiency condition is offered for determining whether a pareto improvement is possible

externality correcting taxes and regulation externality correcting taxes and regulation in much of the literature on externalities taxes and direct regulation have been considered as alternative policy instruments both instruments might be imperfect in practice reflecting informational deficiencies and other limitations we analyse the use of taxes and regulation in combination to control externalities arising from individual consumption behaviour we consider the cases either where taxes are imperfectly differentiated to reflect individual differences in externalities or where some consumption escapes taxation in both cases we characterize the optimal instrument mix and we show how changing the level of direct regulation alters the optimal externality tax

increasing the capital income tax may lead to faster growth this paper shows that under rather mild conditions higher capital income taxes lead to faster growth in an overlapping generations economy with endogenous growth government expenditures are financed with labor income taxes as well as capital income taxes since capital income accrues to the old taxing it reliefs the tax burden on the young and leaves them with more income out of which to save we argue that savings are sufficiently interest inelastic so that higher savings and therefore higher growth result the basic argument is not seriously challenged by a grandfather clause for initial capital or by the old receiving some labor income as well the reasoning is similar to feldstein 1978 auerbach 1979 and in particular jones and manuelli 1992 but in contrast to the conventional wisdom about the effect of capital income taxation as say in lucas 1990

comparing the welfare effects of public and private health care subsidies in the united kingdom we use a calibrated analytical model to compare the welfare costs gross of externalities of increasing subsidies for public and private health care in the uk the model incorporates wait costs for rationed public care burdens that subsidies impose on the tax system and distributional weights for different households welfare costs are significantly higher for expanding public health care over a range of parameter scenarios both policies reduce average wait times but for public health care this is offset by new waiting costs incurred on extra treatments and the burden on the tax system is much larger for expanding public health care

fiscal policy and growth in a small open economy with elastic labour supply endogenizing labour supply leads to fundamental changes in the equilibrium structure of the ak growth model of a small open economy the balanced growth equilibrium is described by two tradeoff loci relating the equilibrium growth rate to the fraction of time devoted to leisure the implications of endogenous labour supply for fiscal policy are addressed the effects of distortionary taxes and government expenditure on the equilibrium growth leisure employment tradeoff are analysed the responses contrast with both those of a closed economy having an elastic labour supply and an open economy with fixed labour supply optimal fiscal policy is also characterized jel classification f41 f43 politique fiscale et croissance dans une petite economie ouverte quand l offre de travail est elastique l endogeneisation de l offre de travail entraine des changements fondamentaux dans la structure d equilibre du modele de croissance du type ak d une petite economie ouverte l equilibre de croissance balancee est decrit par deux lieux de relations d equivalence reliant le taux de croissance d equilibre a la fraction du temps allouee au loisir on examine les implications de cette endogen6isation de l offre de travail pour la politique fiscale on analyse les effets de taxes distorsionnantes et des depenses gouvemementales sur la relation d 6equivalence entre taux de croissance et loisir et donc emploi on obtient des reactions differentes de celles qu on obtient en economie ferm6e quand l offre de travail est elastique et en economie ouverte quand l offre de travail est fixe on proc ede alors a la definition de la politique fiscale optimale

optimal taxation and cross price effects on labor supply estimates of the optimal gas tax abstract this study estimates parameters necessary to calculate the optimal second best gasoline tax most notably the cross price elasticity between gasoline and leisure prior theoretical work indicates the importance of this elasticity but despite this almost none of the prior studies of commodity taxation and none of the studies on second best environmental regulation actually estimate it using household data we find that gasoline is a relative complement to leisure and thus that the optimal gasoline tax is significantly higher than marginal damages the opposite of the result suggested by the bulk of the prior literature indeed even if there were no externalities at all associated with gasoline the optimal tax rate would still be almost equal to the average gas tax rate in the u s following this approach to estimate cross price elasticities with leisure could strongly influence estimates of optimal rates for other important commodity or pollution taxes

industry window dressing we explore a new mechanism by which investors take correlated shortcuts and present evidence that managers using sales management take advantage of these shortcuts specifically we exploit a regulatory provision wherein a firm s primary industry is determined by the highest sales segment exploiting this regulation we provide evidence that investors classify operationally nearly identical firms as starkly different depending on their placement around this sales cutoff moreover managers appear to exploit this by manipulating sales to be just over the cutoff in favorable industries further evidence suggests that managers engage in activities to realize large tangible benefits from this opportunistic action

on the sign of the optimum marginal income tax this paper studies a central aspect of optimal income taxation as modelled in mirrlees original paper on the topic identical leisure consumption preferences qualitatively homogeneous skills in production namely whether given concave utilitarianism alone the optimal marginal income tax will be non negative a well known positive answer to this question in weak inequality form was given in the said paper which however we show requires additive separability of individual utility in the ordinal and cardinal senses our main result here is to derive the required strict positivity of the marginal tax under weak conditions slightly wider than noninferiority of consumption and leisure with preferences otherwise arbitrary

the economics of development a survey i the subject our definition of the subject will be the use of economic analysis to understand the economies of poor or developing countries this includes in particular how standards of living in the population are determined and how they change over time and further how policy can or should be used in the influence of these processes the definition contains in principle much or most of analytical methods in economics insofar as they can be put to use in the examination of the issues of interest this is as it should be but it poses a problem for a survey in a journal a comprehensive treatment is infeasible so we shall follow a different route the survey will focus on what i take to be the major themes and approaches which characterise the productive aspects of the subject there is therefore no pretence at being exhaustive the purpose is rather to highlight some of the advances many of these have been of real substance there are a number of possible purposes for a survey and it is important to be clear at the outset for whom it is intended what it is and what it is not this survey is addressed to economists and students of economics who know the tools of their trade but not necessarily how they have been applied to and fashioned for the analysis of the economics of developing countries it is a description of the ways in which problems can be productively formulated and approached in terms of examples chosen for their intrinsic importance and interest the vastness of the subject means that we have to be highly selective it does not seek to provide a summary evaluation of the current view of the appropriate response to immediate policy questions it is not a history of thought nor a research manifesto nor an attempt to adjudicate or settle the major debates where they arise naturally from the major purpose some judgements on these subjects will be offered but they do not themselves constitute the primary intent of this survey there are three lines of enquiry or sets of questions which have i suggest been distinctive of the most fruitful work in development economics they will

when ownership structure matters a review of the effects of investor horizon on corporate policies this paper surveys the literature on the impact of investor horizon on corporate policies while the desire to encourage long term investor ownership is shared among managers boards and policy makers how greater long term investor ownership benefits corporate decisions and ultimately firm performance is still under academic investigation the contribution of this paper is twofold the paper s first contribution is providing an up to date review of theoretical and empirical findings this paper introduces the groups of long term and short term investors and the related classification methodologies and investor horizon proxies used to form them it further reviews the determinants of an investor s horizon then this paper organizes the literature on the impact of investor horizon on corporate policies around three main channels the short term pressure hypothesis the monitoring hypothesis and the catering hypothesis the paper s second contribution is identifying six major challenges ahead that need to be addressed to improve the understanding of the impact of long term short term investor ownership on corporates policies these challenges represent opportunities for further research

rents and the cost and optimal design of commodity taxes this paper numerically investigates the significance of rents for both the welfare costs and the optimal design of commodity taxes using a general equilibrium model calibrated to 1986 canadian data in the data we use ricardian rents are concentrated in agriculture and utilities with market structure rents concentrated in manufacturing different types of rents have different implications for the welfare cost of taxes and hence also for appropriate tax design ricardian rents lower the cost of taxes rents supported by imperfect competition with no free entry raise the cost of taxes rents supported by regulation generate rent seeking costs and if taxed improve resource allocation model results show a markedly nonuniform optimal tax structure and a substantial influence of the treatment of rents on the pattern of optimal tax rates by commodity

pareto efficient taxation and expenditures pre and re distribution abstract this paper shows that there is a presumption that pareto efficient taxation entails a positive tax on capital when tax and expenditure policies can affect the market distribution of income in ways that cannot be directly offset those effects need to be taken into account reducing the burden imposed on distortionary redistribution the paper extends the 1976 atkinson stiglitz results to a dynamic overlapping generations model correcting a misreading of the result on the desirability of a zero capital tax that result required separability of consumption from labor and that the only unobservable differences among individuals were in fixed labor productivities in a general equilibrium model one needs to take into account the effects of policy changes on binding self selection constraints in a simple model with time separability but with non separability between consumption and leisure capital taxation depends on the complementarity substitutability of leisure during work with retirement consumption the final section constructs a simple two class model capitalists who maximize dynastic welfare and workers who save for retirement whose productivity can be enhanced by publicly provided education it derives a simple expression for the optimal capital tax which is positive so long as the social welfare function is sufficiently equalitarian and the productivity of educational expenditures is sufficiently high

indirect taxation is superfluous under separability and taste homogeneity a simple proof indirect taxation is of no use when nonlinear income taxation is available in an economy where everyone has the same taste for goods an elementary proof of this result due to atkinson and stiglitz atkinson a stiglitz j 1976 the design of tax structure direct versus indirect taxation journal of public economics 6 55 75 is provided

analysts herding when does sentiment matter abstractherding among analysts emerges when analysts give priority to their peers opinions instead of their own beliefs or information some circumstances may enhance or restrain this type of behaviour we postulate that market sentiment is one of them this article analyses the effect that investor sentiment may have on analysts herding behaviour in the u k our results suggest that easy situations such as analysing easy to value securities and releasing optimistic information at times of high market sentiment clearly reduce herding practices whereas herding clearly increases in difficult situations when analysts have to release negative information at moments of high investor sentiment

catering through nominal share prices we propose and test a catering theory of nominal stock prices the theory predicts that when investors place higher valuations on low price firms managers respond by supplying shares at lower price levels and vice versa we confirm these predictions in time series and firm level data using several measures of time varying catering incentives more generally the results provide unusually clean evidence that catering influences corporate decisions because the process of targeting nominal share prices is not well explained by alternative theories in frictionless and efficient stock markets there is no optimal nominal pershare stock price a firm s board of directors may choose to split to manage the nominal share price and number of shares outstanding but cannot change its overall market value through these means yet boards typically do manage their firms nominal share price rather than watch it passively drift with returns theories offered to explain share price management include arguments that trading costs depend on nominal prices dolley 1933 angel 1997 that splits signal inside information brennan and copeland 1988 asquith healy and palepu 1989 and ikenberry rankine and stice 1996 or that prices in certain ranges simply constitute a market norm from which there is little gain to deviating rozeff 1998 weld et al 2009 in this paper we propose a catering theory of nominal share prices we define catering as the managerial behavior of increasing the supply of a characteristic that investors appear to be paying a premium for even though that characteristic does not increase fundamental value the catering theory of nominal share prices thus posits that the supply of securities of different price ranges is partly a response to investor demand for securities of different price ranges managers increase the supply of low priced securities

which commodity taxes should supplement the income tax the analysis takes as its point of departure a continuum of consumers economy in which an optimum income tax exists and is the only tax instrument in operation the welfare effects of introducing small excise taxes to supplement the income tax are then explored essential in this context are changes in the tax distortions of work incentives it is shown that a commodity should be taxed or subsidized depending on whether it is positively or negatively related to leisure in a sense which is precisely defined the results are related to earlier contributions to the literature on direct versus indirect taxation the history of debates on the proper roles of direct and indirect taxation goes back at least to the days of gladstone as well described by atkinson 1977 the prevailing political opinion of the balance between the two types of taxes has varied over time at present the swing in a number of european countries seems to be in favour of reforms towards tax systems which rely more heavily on indirect taxation and less on income taxation in view of this long economic political record it is not surprising that the choice between income tax and commodity taxes has also become an important subject in tax theory an early contribution to the understanding of this issue was corlett and hague 1953 54 their main model considers a three good economy containing leisure and two taxed commodities there is only one consumer or a population of identical consumers labour is the only source of income producer prices are fixed the government s revenue requirement is given the starting point of the analysis is a situation in which the two commodities are taxed at uniform rates the question which is analyzed is then how the government can raise welfare by slightly differentiating the tax rates the answer which is derived is that the consumer good which is the stronger substitute for labour complement with leisure should be taxed at

on directions of commodity tax reform in the presence of a given non linear income tax schedule this paper analyzes directions of commodity tax reform in the presence of a given possibly nonlinear income tax schedule two prominent policy prescriptions are reexamined first the welfare effect of a proportional reduction of all commodity price distortions turns out to be sensitive to nonlinearity secondly the welfare implications of tax changes based on substitutability or complementarity between labor and commodities remain valid in the presence of nonlinearity within the scope of the model the authors also discuss the question raised in the classic of w j corlett and d c hague 1953 which commodity taxes should supplement the income tax

non welfarist optimal taxation and behavioral public economics research in behavioral economics has uncovered the widespread phenomenon of people making decisions against their own good intentions in these situations the government might want to intervene indeed individuals might want the government to intervene to induce behavior that is closer to what individuals wish they were doing the analysis of such corrective interventions through taxes and subsidies might be called behavioral public economics however such analysis where the government has an objective function that is different from that of individuals is not new in public economics in these cases the government is said to be non welfarist in its objectives and there is a long tradition of nonwelfarist welfare economics especially the analysis of optimal taxation and subsidy policy where the outcomes of individual behavior are evaluated using a preference function different from the one that generated the outcomes the object of this paper is to first of all present a unified view of the non welfarist optimal taxation literature and secondly to present behavioral public economics as a natural special case of this general framework

public provision commodity demand and hours of work an empirical analysis the theoretical analysis of optimal commodity taxation is advanced but there is only limited empirical evidence to guide commodity tax policies with this paper we contribute to this body of literature by empirically examining using finnish consumption data the relation between working hours consumption demand and the use of publicly provided day care when labour income is controlled for in a non parametric way we find that capital income and housing expenses are negatively associated with working hours whereas the use of childcare is positively correlated with working hours these results provide arguments for taxing capital income and housing and for subsidizing day care

fiscal policy elastic labor supply and endogenous growth abstract endogenizing labor supply leads to fundamental changes in the equilibrium structure of the ak growth model the balanced growth equilibrium can be described in terms of two tradeoff loci relating the equilibrium growth rate to the fraction of time devoted to leisure the implications of endogenous labor supply for fiscal policy are analyzed three issues are addressed first the effects of various distortionary tax changes and government expenditure changes on the equilibrium growth leisure employment tradeoff are analyzed second optimal fiscal policy is characterized finally the formal analysis is supplemented by numerical results focusing particularly on the quantitative welfare implications

life cycle savings bequest and a diminishing impact of scale on growth the present paper shows that the savings motive critically affects the size and sign of scale effects in standard endogenous growth models if the bequest motive dominates the scale effect is positive if the life cycle motive dominates the scale effect is ambiguous and may even be negative

the extensive macro labor supply elasticity integrating taxes and expenditures abstract this paper shows that accounting for certain public expenditures is crucial when comparing labor tax system efficiencies across countries to measure the extensive margin response to taxation i assemble a large cross country dataset consisting of the employment ratios the average effective tax rates the out of work benefits transfers as well as public expenditures on childcare elderly care and family policy covering all oecd countries and more than two decades when not controlling for the country and year fixed effects the extensive margin elasticities are negative once accounting for transfers the elasticities are negative or at most flat even with fixed effects once additionally accounting for public expenditures subsidies on labor complements which are robustly positively associated with the employment to population ratios i obtain either flat or positive extensive margin elasticities in the lower end of the expected range

is a minimum wage an appropriate instrument for redistribution textabstractwe analyze the redistributional dis advantages of a minimum wage over income taxation in competitive labor markets without imposing assumptions on the in efficiency of labor rationing compared to a distributionally equivalent tax change a minimum wage increase raises involuntary unemployment but also raises skill formation as some individuals avoid unemployment a minimum wage is an appropriate instrument for redistribution if and only if the public revenue gains from additional skill formation outweigh both the public revenue losses from additional unemployment and the utility losses of inefficient labor rationing we show that this critically depends on how labor rationing is distributed among workers a necessary condition for the desirability of a minimum wage increase is that the public revenue gains from higher skill formation outweigh the revenue losses from higher unemployment we write this condition in terms of measurable sufficient statistics our empirical analysis suggests that a minimum wage increase is undesirable in nearly all oecd countries a reduction in the minimum wage along with tax adjustments that keep net incomes constant would yield a pareto improvement

is commodity taxation unfair abstract in a model where agents have unequal skills and heterogeneous preferences about consumption goods and leisure this paper studies how to combine commodity taxes and non linear income tax it proposes a particular social welfare function on the basis of fairness principles it then derives a simple criterion for evaluating the social welfare consequences of various tax schedules under the proposed approach the optimal tax should have no commodity tax for some range of consumptions and income redistribution would feature high subsidies to the working poor it is also shown that even when the income tax fails to be optimal commodity taxes may not improve social welfare

optimal taxation when people do not maximize well being abstract i derive the optimal nonlinear income tax when individuals do not necessarily maximize their own well being this generates a corrective argument for taxation optimal marginal taxes are higher lower if individuals work too much too little from a well being point of view i allow for multidimensional heterogeneity and derive the optimal tax schedule in terms of measurable sufficient statistics one of these statistics measures the degree to which individuals fail to optimize their labor supply i empirically estimate this by using british life satisfaction data as a measure of well being i find that low income workers tend to work too little and high income workers too much providing a motive for lower marginal tax rates at the bottom and higher marginal tax rates at the top of the income distribution

the contributions of angus deaton angus deaton was awarded the 2015 sveriges riksbank prize in economic sciences in memory of alfred nobel for his analysis of consumption poverty and welfare this article reviews his contributions to economics

on the taxation of durable goods this paper proposes a mirrleesian theory of commodity taxation in the presence of durable goods nondurable goods should be taxed uniformly provided that the preferences over nondurable consumption are weakly separable from labor effort a uniform taxation across all goods is optimal if the utility from durable consumption is linear and the preferences are additively separable between durable goods nondurable goods and labor effort if those conditions are not met wealth effects and substitution effects justify the use of differential commodity taxes to characterize the sign of the tax differential the paper exploits a substitution euler equation that links the marginal rate of substitution between durable and nondurable consumption across time finally an application of this theory suggests that housing investment should face higher tax rates than nondurable consumption

life cycle individual thrift and the wealth of nations this paper provides a review of the theory of the determinants of individual and national thrift that has come to be known as the life cycle hypothesis lch of saving applications to some current policy issues are also discussed part i deals with the state of the art on the eve of the formulation of the lch some 30 years ago part ii sets forth the theoretical foundations of the model in its original formulation and later amendment calling attention to various implications distinctive to it and sometimes counter intuitive it also includes a review of a number of crucial empirical tests both at the individual and the aggregate level part iii reviews some applications of lch to current policy issues though only in sketchy fashion as space constraints prevent fuller discussion this abstract was borrowed from another version of this item

from the static to the dynamic some problems in the theory of taxation abstract this paper considers problems and issues that arise when we attempt to extend the static theory of taxation and production planning to a dynamic context and to combine that theory with theories of growth the reasons dynamic theory is less developed include problems with the analytical tractability of even those dynamic models which attempt to retain the basic structure of the static model furthermore difficult and interesting issues arise in a dynamic context which are either not present or are much less severe in the static theory special attention is paid to these new issues and the difficulties they pose

finite lifetimes and growth abstract in this paper we study the long run growth property of overlapping generations models it is shown that in one sector models with convex technologies the asymptotic growth rate must be zero this results because the young do not have sufficient income to purchase a large capital stock thus a policy of income redistribution to the young can generate growth even if financed by income taxation additionaly it is shown that two sector models and one sector models with nonconvex technologies are consistent with growth

the theory of reform and indian indirect taxes abstract given a set of value judgements an initial state and a model of the economy one can ask whether some feasible tax change would increase welfare we do this by defining the marginal cost in terms of welfare of raising an extra rupee from the i th good the inverse optimum problem is the calculation of non negative welfare weights on households which imply that the initial state is optimum if no such welfare weights exist then a pareto improvement is possible we illustrate the concepts and results using data from the indian economy for 1979 1980 directions of tax reform for a number of specific social welfare functions and for pareto improvements are presented

the desirability of commodity taxation under non linear income taxation and heterogeneous tastes abstract this paper revisits the atkinson stiglitz result on uselessness of commodity taxation in the presence of optimal non linear income taxation in a more general setup namely when tastes are heterogeneous this general analysis displays the key economic assumptions under which the atkinson stiglitz result is robust a small tax on a given commodity is desirable if high income earners have a relatively higher taste for this commodity or if consumption of this commodity increases with leisure an application to the case of savings suggests that even in the presence of optimal non linear earnings taxation there is a role for a supplemental capital income tax in the standard overlapping generation model

using survey data to assess the distributional effects of trade policy the author develops and applies a methodology to empirically explore the effects of trade policies on the distribution of income and poverty in developing countries he uses a methodology based on two links one connecting trade policies to prices and another connecting prices to household welfare the author applies the methodology to the study of the distributional effects of mercosur on argentine families the main finding is that mercosur benefits the average argentine household across the entire income distribution there is evidence of a pro poor bias of the regional trade agreement on average poor households gain more from the reform than middle income households whereas the effects on rich families are positive but not statistically significant prior to the reform argentine trade policy protected the rich over the poor and after the reform granted some protection to the poor as relative pre mercosur tariffs are higher on relatively skill intensive goods the tariff removals tend to benefit the poor over the rich these findings indicate that trade reforms may actually help improve the distribution of income and reduce poverty in the country

are the costs of reducing greenhouse gases from passenger vehicles negative energy models suggest that the costs of reducing carbon emissions from transportation are high relative to those for other sectors this paper discusses why taxes or equivalent permit systems to reduce passenger vehicle emissions produce large net benefits rather than costs when account is taken of a their impact on reducing other highway externalities besides carbon and b interactions with the broader fiscal system both of these considerations also strengthen the case for a tax based approach over fuel economy regulation while fiscal considerations strengthen the case for taxes over grandfathered emissions permits the paper also comments on the practical relevance of automobile fuel taxes or their policy equivalents to broader legislation intended to mitigate climate change

god save the queen and her dividends corporate payouts in the united kingdom we examine whether the decline in the number of dividend payers is purely a u s phenomenon or is part of a global trend focusing on the united kingdom a capital market comparable in maturity and sophistication to that of the united states we find that the number of u k firms paying dividends declines from 75 9 to 54 5 after controlling for firm size and profitability we find a declining propensity to pay dividends over the 1998 2002 subperiod we conclude that a shift in catering incentives appears most likely explain these recent changes in u k payout policies

the optimal gas tax for california this paper calculates the optimal gasoline tax for the state of california according to our analysis the optimal gasoline tax in california is 1 37 gal which is over three times the current california tax when excluding sales taxes the pigovian tax is the largest part of this tax comprising 0 85 gal of this the congestion externality is taxed the most heavily at 0 27 followed by oil security accident externalities local air pollution and finally global climate change the other major component a ramsey tax comprises a full 0 52 of this tax reflecting the efficiency in raising revenues from a tax on gasoline consumption due to the inelastic demand of this consumption good

a pareto improving commodity tax reform under a smooth nonlinear income tax abstract this paper analyzes the welfare effects of commodity tax reform in an economy with a nonlinear income tax and linear commodity taxes the main result is that we can find a tax reform program that improves every consumer s utility in the pareto sense unless efficiency loss in the economy is minimized under incentive compatibility the tax reform rule proposed here applies to a broad class of economies with arbitrary smooth income taxes the expenditure function approach makes our analyses clear and simple some intuition is presented on the role of commodity taxation in a mixed tax economy the relationship with previous work in optimal tax and tax reform theory is also discussed we extend our result to the case where the government spends tax revenue to provide a public good

sensitivity of optimal commodity tax rates to alternative demand functional forms an econometric case study of india this study investigates on a nine commodity disaggregation of indian budget data nss 28th round the sensitivity of optimal commodity tax rates to alternative demand systems les and rnlps optimality is used here in the very special sense of being conditional on observed expenditure and fixed consumer prices the alternative sets of tax rates agree at low levels of inequality aversion but disagree widely at rawlsian levels les is heavily rejected in favour of its one parameter generalisation rnlps the results suggest that les price elasticities should not be used in optimal tax calculations the optimal tax rates imply only a modest redistribution

poverty alleviation and tax policy abstract this paper examines public good provision and tax policy optimal non linear income taxation and linear commodity taxation when the government departs from purely welfarist objective function and seeks to minimise poverty this assumption reflects much policy discussion and may help understand some divergences of practical tax policy from lessons in optimal tax analysis in contrast to atkinson and stiglitz j public econom 6 1976 55 it may be optimal to use differentiated commodity tax rates including the taxation of savings even if preferences are separable in goods and leisure the optimal effective marginal tax rate at the bottom of the distribution may be negative suggesting that wage subsidy schemes can be optimal finally optimal provision of a public good is analysed under poverty minimisation

environmental sustainability and the greened samuelson rule the purpose of this paper is to investigate the implementation of green government spending as an effective instrument for enhancing both environmental sustainability and economic efficiency utilizing a model with two types of households examined in the optimal taxation literature this paper analyzes the impact of green spending the properties of optimal tax rates and the optimal provision of the public good we derive a modified greened version of the samuelson rule that is the optimal provision of the public good in connection with environmental sustainability our results indicate that the overall effect of green spending measured in terms of government revenue is subject to several factors such as the influence of green spending on environmental sustainability the cost of green spending pollution effects and so on to determine the optimal provision of public goods the aforementioned factors have to be taken into account for instance if the pollution effect is stronger the individual marginal effective tax rate and the commodity tax rate on the polluting good will increase to discourage the demand for consuming polluting commodities

optimal taxes and the structure of preferences if optimal tax theory is to be the basis for calculating tax rates a close understanding is required of the relationship between the structure of preferences and the configuration of optimal tax rates otherwise hypotheses chosen by the econometrician for practical convenience may completely determine the results independently of measurement this paper explores the relationship between various types of separability particularly weak and implicit separability and optimal tax rates in the various models discussed in the literature the use of distance functions and the antonelli matrix provides a significant unification of previously disparate results in the final analysis optimal tax theory should be the basis for actual calculation of tax rates although recently there have been great advances in theoretical results and in our understanding of their meaning we are still some way from a working knowledge of whether uniform commodity taxes are in practice optimal or if not which commodities should be discriminated against present theoretical formulae do not yield clear cut results except in special cases and it has recently become clear that optimal rates depend crucially on the detailed structure of consumer preferences for example atkinson and stiglitz 3 show that with an optimal nonlinear income tax discriminatory commodity taxes are only necessary to the extent that individual commodities are not weakly separable from leisure more recently deaton 6 has shown that a similar result holds for what is perhaps the most interesting of the standard models that where there are many consumers and only a linear income tax and proportional commodity taxes are allowed in this case separability between goods and leisure together with linear engel curves for goods removes the need for differential commodity taxation in consequence nothing can be learned about commodity taxes from consumer demand studies in which commodity demands are explained conditionally on total expenditure and commodity prices and which assume linear engel curves all such studies require separability from leisure as a maintained hypothesis and so are consistent with uniform commodity taxation these results suggest that the prospects for meaningful empirical calculations of tax rates are bleak econometricians estimating commodity demand and labor supply equations make generous use of separability assumptions to enable estimation at all in consequence it is likely that empirically calculated tax rates based on econometric estimates of parameters will be determined in structure not by the measurements actually made but by arbitrary untested and even unconscious hypotheses chosen by the econometrician for practical convenience to remedy this situation and as a prelude to fruitful empirical work it is necessary to have a more explicit understanding of how preference structure affects optimal tax rates such is the object of this paper three different

evaluating policy interventions with general equilibrium externalities abstract we report on the results of analytical and numerical models that describe the effects of non separable externalities or public goods on public policies with important general equilibrium consequences in the numerical exercise we calibrate a general equilibrium model with non separable air quality benefits in order to measure the excess burden and total net benefits of transportation and energy taxes in the 1995 u s economy the change in the physical level and the economic value in air quality associated with a given policy is a function of the substitution patterns between air quality and market goods that we assume the size of the deadweight loss due to pre existing distortions such as a tax on labor income is substantially affected by these substitution patterns

atkinson and stiglitz theorem in the presence of a household production sector we show that the celebrated atkinson and stiglitz 1976 result on the uniformity of the commodity tax rates when preferences are weakly separable between goods and leisure does not hold when at least one of the goods is produced within the household the result is restored if preferences are weakly separable in market goods on the one hand and leisure and household goods on the other

optimum taxation and the allocation of time abstract a theory of optimal taxation is presented building upon becker s 1965 theory of the allocation of time optimal commodity taxation is governed by factor shares in household activities any market good which requires little household time or even saves time should carry a relatively low tax rate this policy rule does not require the estimation of price elasticities and is therefore more applicable than traditional ramsey rule taxation

the importance of bequests and life cycle saving in capital accumulation a new answer as the workhorse of consumption and saving research for the past four decades the life cycle model has proved flexible and useful for examining a variety of questions in a classic paper albert ando and franco modigliani 1963 p 56 stated a key assumption of the basic model t he individual neither expects to receive nor desires to leave any inheritance although the authors contended that the absence of a bequest motive was not critical to the heart of their results the assumption set off a long standing battle over the relative importance of different motives for saving in an influential study laurence kotlikoff and laurence summers 1981 estimated that a large fraction of the u s capital stock was attributable to intergenerational transfers modigliani and his collaborators vigorously disagreed and based on their own empirical work claimed that life cycle saving was the primary source of capital accumulation modigliani 1988 subsequent work has failed to reach a consensus since this debate began an important advance in the consumption literature has been the incorporation of uncertainty in life cycle models see e g r glenn hubbard et al 1995 we argue that allowing for uncertainty resolves the controversy over the importance of life cycle and bequest saving by showing that these motives for saving are overlapping and cannot generally be distinguished a dollar saved today simultaneously serves both a precautionary life cycle function guarding against future contingencies such as health shocks or other emergencies and a bequest function because in the likely event that the dollar is not absorbed by these contingencies it will be available to bequeath to children or other worthy causes under this view households have a bequest motive but bequests are given i e the motive is operative in only some states of the world wealth is something like traveler s checks you take them along on vacation just in case but odds are they will remain uncashed and available for sundry goods after the journey is complete we first demonstrate the result using a simple model and then argue that this approach reconciles the apparent importance of bequests with households declared focus on life cycle saving finally we consider implications of our analysis

how can scandinavians tax so much american visitors to scandinavian countries are often puzzled by what they observe despite large income redistribution through distortionary taxes and transfers these are very high income countries they rank among the highest in the world in terms of income per capita as well as most other economic and social outcomes the economic and social success of scandinavia poses important questions for economics and for those arguing against large redistribution based on its supposedly detrimental effect on economic growth and welfare to form a basis for the discussion table 1 shows tax revenues and income tax rates in the three scandinavian countries denmark norway and sweden as compared to other european countries and the united states we see that the tax to gdp ratio and the tax rates on income are much higher in scandinavia than elsewhere the top marginal tax rates are about 60 70 percent in the scandinavian countries as opposed to only 43 percent in the united states the contrast is even more striking when considering the so called participation tax rate which is the effective average tax rate on labor force participation when accounting for the distortions due to income taxes payroll taxes consumption taxes and means tested transfers this tax rate is around 80 percent in the scandinavian countries implying that an average worker entering employment will be able to increase consumption by only 20 percent of earned income due to the combined effect of higher taxes and lower transfers by contrast the average worker in the united states gets to keep 63 percent of earnings when accounting for the full effect of the tax and

growth effects of taxation under altruism and low elasticity of intertemporal substitution an increase in the tax rate on capital income may raise the rate of economic growth when the elasticity of intertemporal substitution is low and intergenerational transfers are absent since the strength of the bequest motive depends on tax rates this paper provides conditions under which taxing capital income and then reducing the labour income tax is more growth enhancing than the classical policy of zero taxes on capital income and vice versa this paper analyses the effects of different taxes on the rate of economic growth we consider an economy in which public spending is a fixed fraction of the gnp and the government can obtain revenues from proportional taxes on both labour and capital income obviously the growth effects of these two instruments will depend on the assumptions made about the economic environment in the standard overlapping generations olg model with production diamond 1965 an increase in capital income taxes allows a reduction in labour income taxes and thus agents will enjoy more income when they are young since in the olg model young agents must purchase the total stock of capital installed in the next period and saving is increasing in young income higher taxes on capital income may lead to faster capital accumulation in order to complete the argument we must ensure that the associated decrease in the after tax interest rate does not lead to a reduction in saving which would outweigh the previous income effect in other words we need a sufficiently low elasticity of intertemporal substitution the argument is thus similar to the one of jones and manuelli 1992 who have already pointed out that if the technological environment makes sustained growth feasible then taxing the old agents and subsidising the young ones may increase the rate of economic growth however the situation is completely different if we consider instead an economic environment in which the life cycle considerations are absent for instance in endogenous growth models with a representative agent or dynasty and infinite life span an increase in the capital income tax rate typically translates into lower growth see for instance sato 1967 feldstein 1974 stiglitz 1978 and the more recent contributions of lucas 1990 and rebelo 1991 a way to give a unified treatment to these two alternative models is by means

funding transportation spending in metropolitan washington dc the costs of alternative revenue sources abstract this paper develops and implements an analytical framework for estimating the efficiency costs of raising additional revenue from taxes on labor property gasoline peak road use and higher transit fares for the washington dc area the model incorporates driving externalities and interactions between the different policies an economic case can be made for using congestion taxes and possibly gasoline and property taxes to raise extra revenue though it should be qualified for example the inelastic demand for driving limits the congestion benefits per dollar of revenue raised and these taxes have adverse employment effects in the same way that a tax on labor income does

optimal taxation global externalities and labor mobility this paper concerns transboundary environmental problems in the context of an optimal tax model we assume that part of the labor force is mobile across countries and that the set of tax instruments includes a nonlinear income tax and a commodity tax on the dirty good that is causing damage to the environment the purpose is to compare the globally optimal second best policy of a cooperative equilibrium with the policy implicit in a noncooperative equilibrium we show that the commodity taxes differ between equilibria because of i transboundary externalities not internalized by national governments ii interaction effects between environmental and other policies and iii labor mobility

inverse demand systems and welfare measurement in quantity space most studies of welfare or cost benefit analyses are concerned with the welfare effects of price changes 11 19 27 33 50 there are however many situations in which policy options are directly related to quantity changes the welfare effects of price changes are analyzed with the traditional demand system in which commodity quantities are determined as functions of their prices the welfare effects of quantity changes on the other hand are associated with the inverse demand system in which commodity prices are dependent on their quantities in conventional welfare analysis of price change prices are taken to be exogenous or predetermined while quantities are endogenous in contrast in welfare analysis of quantity changes quantities are exogenous while prices are endogenous price based or dual welfare measures are relevant when there are well functioning competitive markets and quantities are fully adjusted to changes in prices on the other hand quantity based or primal welfare measures are useful in situations where there are constraints on commodity quantities or when transaction costs impede consumers from fully adjusting to changes in prices the choice between priceand quantity based welfare measures is empirical and proper measurement of welfare effects requires the knowledge as to which variable price or quantity is the exogenous one for individual consumers it may be reasonable to assume that the supply of commodities is perfectly elastic and therefore prices can be taken as exogenous but this assumption may not be tenable for consumers in the aggregate or if highly aggregated economy wide data are used to estimate demand relations at the aggregate level quantities are more properly viewed as exogenous than are prices although individual consumers make their consumption decisions based on given prices the quantities of commodities are predetermined by production at the market level and prices must adjust so that the available quantities are consumed 28 1 2

parental altruism and inter vivos transfers theory and evidence this paper uses psid data on the extended family to test whether inter vivos transfers from parents to children are motivated by altruism specifically the paper tests whether an increase by one dollar in the income of parents actively making transfers to a child coupled with a one dollar reduction in that child s income results in the parents increasing their transfer to the child by one dollar this restriction on parental and child transfer income derivatives is derived for the standard altruism model augmented to include uncertainty and liquidity constraints these additional elements pin down the timing of inter vivos transfers the method used to estimate income transfer derivatives takes into account unobserved heterogeneity across families in the degree of altruism the findings strongly reject the altruism hypothesis redistributing one dollar from a recipient child to donor parents leads to less than a 13 cent increase in the parents transfer to the child far less than the one dollar increas

agricultural policies in the presence of distorting taxes this article analyzes how distortionary factor taxes affect the welfare impacts of production subsidies production quotas acreage controls subsidies for acreage reductions and cash transfers to farmers pre existing taxes substantially raise the costs of all these policies these additional costs reflect the welfare losses from financing certain policies by distortionary taxes they also reflect interactions with factor markets caused by changes in the costs of producing agricultural output previous studies ignore the latter types of effect consequently they significantly overstate the costs of production subsidies and understate the costs of production quotas acreage controls and subsidies for acreage reductions

optimal linear commodity taxation under optimal non linear income taxation abstract this paper analyzes optimal linear commodity taxes joint with non linear income taxes we provide optimal tax rules based on empirically observable elasticities earnings and commodity demands we demonstrate that commodities should be taxed subsidized if conditional on earnings doing so boosts labor supply as the critical role of commodity taxation is to alleviate distortions on labor supply caused by income taxation we extend the standard formula for optimal non linear income taxation for the presence of optimal linear commodity taxes we correct parts of the literature by showing that the optimal second best allocations derived by atkinson and stiglitz 1976 1980 cannot be supported by linear commodity taxes

when environmental and redistribution concerns collide the case of electricity pricing abstract countries worldwide face major income inequality and environmental challenges however recent social upheavals reveal the conflict of interests induced by policies designed to address these concerns one example relates to residential electricity where volumetric grid charges and taxes may impede the affordability of electricity we develop and calibrate a model that captures the social planner s trade off between inequality aversion and environmental concerns we employ panel data on 105 000 households in the swiss canton of bern from 2008 to 2013 including electricity consumption household income and tax payment characteristics the results show that with inequity aversion and no negative environmental externalities electricity consumption should be subsidised by income tax revenue with negative environmental externalities or asymmetric information between the government and the utility end user electricity prices are shifted upwards for high degrees of inequality aversion the optimal electricity end user price is below the marginal cost even in the presence of negative environmental externalities

factor shares and savings in endogenous growth in models of steady investment driven growth an individual s propensity to save depends on how much of his income is drawn from accumulated factors of production capital rather than from nonaccumulated factors when agents are heterogeneous in this respect growth oriented policies have distributional consequences and in the absence of lump sum redistribution their implementation faces political constraints if the median voter is capital poor relative to the economy s representative agent political interactions tend to slow down growth when policy acts on capital s income share and tend to accelerate it when investment subsidies are the policy instrument of choice copyright 1993 by american economic association

welfare effects of migration in societies with indirect taxes income transfers and public good provision abstract we construct a general equilibrium trade model of a two class small open host or source country when consumption tax revenue finances the provision of a public good marginal migration reduces social welfare in the source country and raises it in the host when consumption tax revenue is equally distributed among domestic households in each country then migration has an ambiguous impact on social welfare in either country when tariff revenue in either country is either equally distributed among domestic households or it is used to finance the provision of a public good then migration has an ambiguous effect on social welfare in the host country and is expected to reduce social welfare in the source

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

appearing and disappearing dividends the link to catering incentives we document a close link between fluctuations in the propensity to pay dividends and catering incentives first we use the methodology of fama and french 2001 to identify a total of four distinct trends in the propensity to pay dividends between 1963 and 2000 second we show that each of these trends lines up with a corresponding fluctuation in catering incentives the propensity to pay increases when a proxy for the stock market dividend premium is positive and decreases when it is negative the lone disconnect is attributable to nixon era controls

redistributive taxation in a simple life cycle model an overlapping generations model with rich and poor life cycle planners is developed positive aspects of redistributive capital and labor taxation are then analyzed the conditions required for feldstein s result that the long run capital labor ratio is invariant to wage taxations are discussed the utility frontier is shown to generally have a slope with an absolute value different from one in the neighborhood of a no tax equilibrium labor income is clearly a more efficient base for long run redistribution only if the economy is dynamically inefficient and the rich household benefits from an increase in the gross interest rate even in this case the labor income base may not be considered more desirable when transitional effects are considered copyright 1989 by the london school of economics and political science

factor shares in olg models of growth abstract in standard infinite horizon optimizing models of balanced growth aggregate savings are positively related to private rates of return on investment or for a given technology to the share of accumulated factors of production in aggregate income a relationship of opposite sign may however obtain in overlapping generations olg models where higher rates of return on older agents wealth imply lower disposable income for young laborers with high saving propensity this paper explores such issues in the context of a continuous time olg model deriving simple parametric restrictions conductive to results of either type and discussing how infinite horizon results may carry over to olg settings

does managerial sentiment affect accrual estimates evidence from the banking industry abstract we examine whether managerial sentiment is associated with errors in accrual estimates using public banks we find 1 managerial sentiment is negatively associated with loan loss provision estimates 2 future charge offs per dollar of provision are positively associated with sentiment when the provision is estimated and 3 the effects of sentiment are greater for firms with more uncertain charge offs results are similar for private banks suggesting accrual manipulation related to capital market incentives is unlikely to explain the results although economic fundamentals explain most of the variation in the provision we find sentiment has an incremental and economically meaningful effect