pigou meets mirrlees on the irrelevance of tax distortions for the second best pigouvian tax this paper extends the mirrlees 1971 model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities using general utility structures and exploring both linear and non linear taxes it is demonstrated that the optimal second best tax on an externality generating good should not be corrected for the marginal cost of public funds since it equals one in the optimal tax system in the optimum distortions of income taxes are equal to marginal redistributional gains if the government does not have access to a non distortionary marginal source of finance the marginal cost of public funds can be either larger or smaller than one depending on subjective preferences for income redistribution the optimal second best corrective tax is then either higher or lower than the pigouvian level the findings in this paper generalize and amend prior results based on representative agent models shedding new light on the weak double dividend hypothesis and on the welfare gains of recycling revenue from environmental taxes

a status based model of market competition this article explores the significance of status processes for generating and reproducing hierarchy among producers in a market it develops a conception of a market as a status order in which each

on the distribution and dynamics of health care costs using data from the health and retirement survey and the assets and health dynamics of the oldest old survey we estimate the stochastic process that determines both the distribution and dynamics of health care costs we find that the data generating process for log health costs is well represented as the sum of a white noise process and a highly persistent ar 1 process we also find that the innovations to this process can be modelled with a normal distribution that has been adjusted to capture the risk of catastrophic health care costs simulating this model we find that in any given year 0 1 of households receive a health cost shock with a present value of at least 125 000 copyright 2004 john wiley sons ltd

precautionary savings and the self employed this work focuses on the impact of uncertainty on savings under bequest form specifically we estimate whether and to what extent income variability does have an effect on post mortem savings we approximate the post mortem savings with the closest dedicated savings which is savings in term insurance a lump sum inherited at the death of the subscriber furthermore we test whether the intensity of the income variance or the riskiness of the job type such as self employment matters more in the choice our results show that self employment status is one of the most relevant variables affecting term insurance ownership

on the long run evolution of inheritance france 1820 2050 this paper attempts to document and account for the long run evolution of inheritance we find that in a country like france the annual flow of inheritance was about 20 25 of national income between 1820 and 1910 down to less than 5 in 1950 and back up to about 15 by 2010 a simple theoretical model of wealth accumulation growth and inheritance can fully account for the observed u shaped pattern and levels using this model we find that under plausible assumptions the annual bequest flow might reach about 20 25 of national income by 2050 this corresponds to a capitalized bequest share in total wealth accumulation well above 100 our findings illustrate the fact that when the growth rate g is small and when the rate of return to private wealth r is permanently and substantially larger than the growth rate say r 4 5 vs g 1 2 which was the case in the 19th century and early 20th century and is likely to happen again in the 21st century then past wealth and inheritance are bound to play a key role for aggregate wealth accumulation and the structure of lifetime inequality contrarily to a widely spread view modern economic growth did not kill inheritance

the effect of minimum wage laws on the distribution of employment theory and evidence abstract recent research casts doubt on the view that minimum wage laws reduce employment we show that in a simple model of bilateral search with heterogeneous workers a minimum wage law increases employment however the increased competition from higher productivity workers makes lower productivity workers worse off without making higher productivity workers better off we provide evidence that minimum wage laws shift employment from adults to teenagers and students this raises concerns about the distributional consequences of minimum wages even when they increase employment

the optimal timing of unemployment benefits theory and evidence from sweden this paper provides a simple yet robust framework to evaluate the time profile of benefits paid during an unemployment spell we derive sufficient statistics formulae capturing the marginal insurance value and incentive costs of unemployment benefits paid at different times during a spell our approach allows us to revisit separate arguments for inclining or declining profiles put forward in the theoretical literature and to identify welfare improving changes in the benefit profile that account for all relevant arguments jointly for the empirical implementation we use administrative data on unemployment linked to data on consumption income and wealth in sweden first we exploit duration dependent kinks in the replacement rate and find that if anything the moral hazard cost of benefits is larger when paid earlier in the spell second we find that the drop in consumption affecting the insurance value of benefits is large from the start of the spell but further increases throughout the spell in trading off insurance and incentives our analysis suggests that the at benefit profile in sweden has been too generous overall however both from the insurance and the incentives side we find no evidence to support the introduction of a declining tilt in the profile

minimum wage policy with optimal taxes and unemployment abstract using a search model i derive a formula that links the welfare gains from the minimum wage to its effect on low skilled labor force participation and employment this formula shows that the minimum wage is welfare improving if pushing the low skilled labor market tightness downwards brings it closer to its efficient level i estimate the causal effect of the minimum wage on low skilled labor force participation and employment using federal and state minimum wage variation i discuss the policy implications of my estimates when viewed through the lens of the marginal welfare gain formula

unraveling the process of creative destruction complementary assets and incumbent survival in the typesetter industry when radical technological change transforms an industry established firms sometimes fail drastically and are displaced by new entrants yet other times survive and prosper drawing upon an unusually rich data set that covers the technological and competitive history of the typesetter industry from 1886 to 1990 this paper uses a combination of quantitative and qualitative analysis to unravel this process of creative destruction it argues that the ultimate commercial performance of incumbents vs new entrants is driven by the balance and interaction of three factors investment technical capabilities and appropriability through specialized complementary assets in this industry specialized complementary assets played a crucial role in buffering incumbents from the effects of competence destruction and an analysis that examined investment or technical capabilities in isolation would have led to misleading results this work thus highlights the importance of considering multiple perspectives when examining the competitive implications of technological change 1997 by john wiley sons ltd

networks as the pipes and prisms of the market1 this article draws an analytical distinction between two types of market uncertainty egocentric which refers to a focal actor s uncertainty regarding the best way to convert a set of inputs to an output desired by a potential exchange partner and altercentric which denotes the uncertainty confronted by a focal actor s exchange partners regarding the quality of the output that the focal actor brings to the market given this distinction the article considers how the value of structural holes and market status vary with these two types of uncertainty the article proposes that the value of structural holes increases with egocentric uncertainty but not with altercentric uncertainty in contrast the value of status increases with altercentric uncertainty but declines with egocentric uncertainty thus actors with networks rich in structural holes should sort into markets or market segments that are high in egocentric uncertainty high status actors should sort into markets that are low in egocentric

getting them to think outside the circle corporate governance ceos external advice networks and firm performance this article contributes to the social networks literature by examining how corporate governance factors influence ceos external advice seeking behaviors we incorporate insights from social netwo

the effects of fiscal policies when incomes are uncertain a contradiction to ricardian equivalence this paper shows that when future earnings are uncertain the substitution of deficit fin ance for tax finance or the introduction of an unfunded social secur ity program can raise consumption even if all bequests reflect inter generational altruism an operative bequest motive therefore need not imply ricardian equivalence this conclusion follows from the result derived in the paper that the uncertainty of future income makes t he existence of a future bequest uncertain to the prospective donor copyright 1988 by american economic association

a minimum wage can be welfare improving and employment enhancing abstract we examine whether minimum wages can fulfill a useful role as part of an optimal tax transfer scheme the government cannot observe household abilities only their incomes and is constrained to ensure that those working are at least as well off as those not working a minimum wage combined with the institutional features of typical welfare systems allows the incentive constraint to be severed at the ability level associated with the minimum wage if such a scheme can be enforced the government can increase the amount of redistribution from those working to those not working and possibly lower the number of unemployed

towards an attention based view of the firm the central argument is that firm behavior is the result of how firms channel and distribute the attention of their decision makers what decision makers do depends on what issues and answers they focus their attention on what issues and answers they focus on depends on the specific situation and on how the firm s rules resources and relationships distribute various issues answers and decision makers into specific communications and procedures the paper develops these theoretical principles into a model of firm behavior and presents its implications for explaining firm behavior and adaptation 1997 by john wiley sons ltd

taxes redistribution and the minimum wage a theoretical analysis this paper considers a simple general equilibrium model that contains two types of workers with differing levels of ability and a social welfare maximizing government the paper shows that social welfare can sometimes be increased by supplementing an optimal linear income tax with a minimum wage but that social welfare can never be increased by supplementing an optimal nonlinear income tax with a minimum wage

business group affiliation and firm search behavior in india responsiveness and focus of attention this paper investigates the effects of organizational form on problemistic search we contrast how indian firms affiliated with business groups and unaffiliated firms evaluate performance and react by adjusting their internal technology search and external market search we propose that compared with unaffiliated firms business group affiliated bg affiliated firms are more externally oriented in setting aspiration levels and more likely to respond to low performance in the market domain we find support for an external orientation of bg affiliated firms and find that group affiliation determines the responsiveness to performance feedback in different search domains the findings suggest a need to add considerations of organizational form and governance to the theory of organizational search

a role based ecology of technological change this article considers what factors determine whether an innovation becomes a foundation for future technological developments rather than a dea end the authors introduce the concept of the technological niche which includes a focal innovation the innovations on which the focal innovations builds the innovations that build upon the focal innovation and the technological ties among the innovations within the niche using patents and patent citations to measure characteristics of innovation niches within the semiconductor industry the authors show that the size of the niche and the status of the actors within the niche have a positive effect on the likelihood that subsequent innovations will build upon the focal innovation competitive intensity within the niche has a negative effect on this likelihood

minimum wage effects on labor market outcomes under search matching and endogenous contact rates building upon a continuous time model of search with nash bargaining in a stationary environment we analyze the effect of changes in minimum wages on labor market outcomes and welfare although minimum wage increases may or may not lead to increases in unemployment in our model they can be welfare improving to labor market participants on both the supply and demand sides of the labor market we discuss identification of the model using current population survey data on accepted wages and unemployment durations and show that by incorporating a limited amount of information from the demand side of the market it is possible to obtain credible and precise estimates of all primitive parameters we show that the optimal minimum wage in 1996 depends critically on whether or not contact rates can be considered to be exogenous and we note that the limited variation in minimum wages makes testing this assumption problematic

discontinuities and senior management assessing the role of recognition in pharmaceutical firm response to biotechnology despite an increasing emphasis on the role of senior management cognition in shaping organizational action there have been few attempts to link top management mental models to strategic choice in the face of discontinuous innovation this paper uses 23 years of data covering 15 major pharmaceutical firms to explore the degree to which each firm s response to the revolution in biotechnology was shaped by the senior team s recognition of biotechnology s importance controlling for a number of important alternative explanations we show that recognition may be an important predictor of action suggesting that cognition at the most senior level can play a critical role in shaping established firms response to discontinuities copyright 2003 oxford university press

does home production replace consumption spending evidence from shocks in housing wealth in the great recession becker s theory of home production suggests substitutability between consumption spending and home production using panel data with detailed information on spending and time use we analyze househ

minimum wages in an equilibrium search model with diminishing returns to labor in production this article analyzes a minimum wage in a market with imperfect information and job search it establishes that employment effects of a minimum wage do not generally indicate welfare effects it shows that researchers interested in welfare consequences should ask two questions first is the existing minimum wage binding second do some firms that would be bound by a new minimum wage presently experience labor shortages if the answers to these questions are no and yes respectively this article supports the conclusion that a higher minimum wage is welfare improving regardless of its effect on the unemployment rate

the role of intergenerational transfers and life cycle saving in the accumulation of wealth he purpose of this paper is to review what economists know at present about the following question how large a portion of the existing wealth is the result of a bequest motive that is of accumulation for the specific purpose of leaving bequests i will also endeavor to clarify why an answer to this question is of interest in the early keynesian period when the study of national saving first attracted wide interest relatively little attention was paid to what led people to save though it was generally understood that the main systematic reason was to leave bequests j m keynes in the famous chapter 9 of the general theory of employment interest and money 1936 had listed seven distinct motives for saving besides the leaving of bequests but five of these which include to increase one s future income or to insure one s independence and power implied that all or nearly all the accumulation would finally wind up as bequeathed wealth this in turn meant that most private wealth originated through bequests that is it either had been received through bequests or was destined to be bequeathed and indeed how else could society accumulate wealth however keynes 1936 p 107 also mentioned two further motives precaution that is to build up a reserve against unforeseen contingencies and foresight that is to provide for an anticipated future relation between the income and the needs of the individual or his family different from that which exists in the present as for example in relation to old age family education or the maintenance of dependents these motives in contrast to most of the previous ones have the

optimal control of externalities in the presence of income taxation a substantial literature examines second best environmental policy focusing particularly on how the pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription it is demonstrated however that simple first best rules unmodified for labor supply distortion or distribution are correct in a natural basic formulation of the problem specifically setting all commodity taxes equal to marginal harms and subsidies equal to marginal benefits can generate a pareto improvement likewise a marginal reform in the direction of the first best can yield a pareto improvement qualifications and explanations for differences from previous work are also presented

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

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

unbundling the structure of inertia resource versus routine rigidity i work to unbundle the structure of inertia into two distinct categories resource rigidity failure to change resource investment patterns and routine rigidity failure to change organizational p

subjective life horizon and portfolio choice abstract using data from a u s household survey we examine the empirical relation between subjective life horizon i e the self reported expectation of remaining life span and portfolio choice we find that equity portfolio shares are higher for investors with longer horizons controlling for gender specific age effects socio economic characteristics health and optimism our result is robust to accounting for the endogeneity of equity market participation or instrumenting subjective life horizon with parental survival finally we show that the effect of a shortening horizon on portfolio allocation is stronger for households without bequest motives

optimal income taxation with endogenous participation and search unemployment we characterize optimal redistributive taxation when individuals are heterogeneous in their skills and their values of non market activities search matching frictions on the labor markets create unemployment wages labor demand and participation are endogenous average tax rates are increasing at the optimum this shifts wages below their laissez faire value and distorts labor demand upwards the marginal tax rate is positive at the top of the skill distribution even when the latter is bounded these results are analytically shown under a maximin objective when the elasticity of participation is decreasing in the skill level and are numerically confirmed under a more general objective under the maximin above approximately 20 000 per year our model recommends higher marginal tax rates than a comparable competitive setting

optimal labour taxation and search abstract this paper explores the optimal role of the tax system in alleviating labour market imperfections and raising revenue for this purpose the standard search model of the labour market is extended by introducing scarce entrepreneurial talent and arbitrage between the supply and demand sides of the labour market we study how these extensions affect the following two major implications of the standard model 1 only the ad valorem component of the wage tax should be employed to raise revenue 2 the optimal tax system should not distort labour market tightness

the minimum wage and the great recession evidence of effects on the employment and income trajectories of low skilled workers abstract we estimate the minimum wage s effects on low skilled individuals employment and income trajectories following the great recession our approach exploits two dimensions of the data we analyze first we compare individuals in states that were fully bound by the 2007 to 2009 increases in the federal minimum wage to individuals in states that were not second we use variation in the minimum wage s bite across skill groups to separate our samples into target and within state control groups using the 2008 panel of the survey of income and program participation we find that binding minimum wage increases had significant negative effects on the employment and income growth of targeted workers although there are important limitations to our research designs our estimates are robust to adopting a range of alternative strategies to construct our analysis samples and to account for variation in the great recession s underlying severity across states in aggregate our estimates suggest that this period s minimum wage increases reduced aggregate employment rates by at least half of a percentage point in states that were bound by the federal minimum wage increases because our estimates are large relative to what one would infer from past research we emphasize the relevance of the historical episode we analyze

minimum wage legislation as a second best policy mass unemployment is a striking phenomenon of the present economic situation of european market economies although the profession of economists has been criticized for not providing satisfactory cures it has produced a number of different explanations either complementary or contradictory for the occurrence of mass unemployment in this paper we examine the argument that unemployment is the consequence of minimum wage legislation which is socially desirable the observation of current wage legislations suggests that the above argument is broadly at least partly accepted by policy makers curiously enough a defence of this argument meeting the rigorous requirements of modern theory seems to be missing symmetrically attacks against minimum wage legislation often rely upon reasonings of dubious relevance i e the obvious remark that unemployment is a waste with first best efficiency criteria the present paper proposes a second best analysis where second best stems from informational asymmetries which prevent the implementation of lump sum transfers needed for a first best redistribution policy the question under scrutiny can be reformulated in a more precise way as follows does a second best optimal redistribution policy lead to minimum wage legislation and unemployment our elements of answer are gathered in 3 sections in section 2 the principles of the analysis of the desirability of quantity controls and existing results are recalled in section 3 the analysis of section 2 is specified to a simple prototype model for the study of linear income taxation in section 4

optimal control of externalities in the presence of income taxation optimal control of externalities a substantial literature examines second best environmental policy focusing particularly on how the pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription it is demonstrated however that simple first best rules unmodified for labor supply distortion or distribution are correct in a natural basic formulation of the problem specifically setting all commodity taxes equal to marginal harms and subsidies equal to marginal benefits can generate a pareto improvement likewise a marginal reform in the direction of the first best can yield a pareto improvement for other reforms a simple efficiency test characterizing when a pareto improvement is possible is offered qualifications and explanations for the substantial departure from results in previous work are also elaborated

medicaid insurance in old age the old age provisions of the medicaid program were designed to insure retirees against medical expenses we estimate a structural model of savings and medical spending and use it to compute the distribution of lifetime medicaid transfers and medicaid valuations across currently single retirees compensating variation calculations indicate that current retirees value medicaid insurance at more than its actuarial cost but that most would value an expansion of the current medicaid program at less than its cost these findings suggest that for current single retirees the medicaid program may be of the approximately right size

revisiting the minimum wage employment debate throwing out the baby with the bathwater we revisit the minimum wage employment debate which is as old as the department of labor in particular we assess new studies claiming that the standard panel data approach used in much of the new minimum wage research is flawed because it fails to account for spatial heterogeneity these new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the united states have not reduced employment we explore the ability of these research designs to isolate reliable identifying information and test the untested assumptions in this new research about the construction of better control groups our evidence points to serious problems with these research designs we conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage

the effect of minimum wages on low wage jobs we estimate the eect of minimum wages on low wage jobs using 138 prominent state level minimum wage changes between 1979 and 2016 in the u s using a dierence in dierences approach we first estimate the eect of the minimum wage increase on employment changes by wage bins throughout the hourly wage distribution we then focus on the bottom part of the wage distribution and compare the number of excess jobs paying at or slightly above the new minimum wage to the missing jobs paying below it to infer the employment eect we find that the overall number of low wage jobs remained essentially unchanged over the five years following the increase at the same time the direct eect of the minimum wage on average earnings was amplified by modest wage spillovers at the bottom of the wage distribution our estimates by detailed demographic groups show that the lack of job loss is not explained by labor labor substitution at the bottom of the wage distribution we also find no evidence of disemployment when we consider higher levels of minimum wages however we do find some evidence of reduced employment in tradable sectors we also show how decomposing the overall employment eect by wage bins allows a transparent way of assessing the plausibility of estimates

minimum wage shocks employment flows and labor market frictions we provide the first estimates of the effects of minimum wages on employment flows in the u s labor market identifying the impact using policy discontinuities at state borders we find that minimum wages have a sizable negative effect on employment flows but not stocks separations and accessions fall among affected workers we interpret our findings using a job ladder model in which minimum wage increases can reduce job to job transitions we find that a standard calibration of the model generates predicted relative magnitudes of the employment stock and flow elasticities that are very close to our reduced form estimates

on the optimality of a minimum wage new insights from optimal tax theory we build a theoretical model to study whether a minimum wage can be welfare improving if it is implemented in conjunction with an optimized nonlinear income tax we consider this issue in a framework where search frictions on the labor market generate unemployment workers differ in productivity the government does not observe workers productivity but only their wages hence the redistributive policy solves an adverse selection problem we show that a minimum wage is optimal if the bargaining power of the workers is relatively low however if the government controls the bargaining power then it is preferable to set a sufficiently high bargaining power

is the internet a us invention an economic and technological history of computer networking abstract although the inventions embodied in the internet originated in a diverse set of industrial economies the us was consistently the source of critical innovations and an early adopter of new applications why did other nations including several that made important inventive contributions to the internet not play a larger role in its development particularly in the creation of new business organizations governance institutions and applications we argue that the role of the us national innovation system in the creation of the internet echoes several key themes of us technological development before 1940 the presence of a large domestic market a set of antitrust and regulatory policies that weakened the power of incumbent telecommunications firms and a diverse private public research community that was willing to work with both domestic and foreign inventions were important preconditions for us leadership in computer networking innovation

to love or to pay savings and health care in older age this paper develops a dynamic structural lifecycle model to study how heterogeneous health and medical spending shocks affect the savings behavior of the elderly individuals are allowed to respond to health shocks in two ways they can directly pay for their health care expenses self insure or they can rely on health insurance contracts there are two possible insurance options one through formal contracts and another through informal care provided by family formal contracts may be affected by asymmetric information problems whereas informal insurance depends on social ties cohesion and on bequeathable wealth i estimate the model on share data using simulated method of moments for four levels of wealth in a sample of single retired europeans counterfactual experiments show that health medical spending and health insurance are indeed the main drivers of the slow wealth decumulation in old age i also find that social cohesion rises with age declines with wealth and is higher in mediterranean countries than in central european and scandinavian countries finally high social cohesion appears typically associated with increased life expectancy

using elasticities to derive optimal income tax rates this paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates a simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution in the general non linear income tax problem this method using elasticities shows precisely how the different economic effects come into play and which are the key relevant parameters in the optimal income tax formulas of mirrlees the optimal non linear tax rate formulas are expressed in terms of elasticities and the shape of the income distribution these formulas are implemented numerically using empirical earning distributions and a range of realistic elasticity parameters

dynamic asset allocation when bequests are luxury goods abstract luxury bequests impart systematic effects of age to an investor s optimal allocation the expected percentage allocation to equities rises throughout retirement when bequests are luxuries the marginal utility of bequests declines more slowly than the marginal utility of consumption this is essentially lower risk aversion as a retiree approaches death her expected remaining lifetime utility is increasingly composed of bequest utility and thus generates progressively lower risk aversion a retiree responds by increasingly favoring the higher return risky asset compared to standard preferences luxury bequests elevate a retiree s average exposure to the risky asset but the difference is small in early retirement

who pays for the minimum wage this paper analyzes the eects of a large 60 and persistent increase in the minimum wage instituted in hungary in 2001 we propose a new approach to estimating the employment eects of a minimum wage increase that exploits information on the distribution of wages before and after the policy change we infer the number of jobs destroyed by comparing the number of pre reform jobs below the new minimum wage to the excess number of jobs paying at and above the new minimum wage our estimates imply that the higher minimum wage had at most a small negative eect on employment and so the main eect was pushing up wages we then use data on a large panel of firms to evaluate the economic incidence of the minimum wage increase contrary to theoretical models that attribute the small employment eects of minimum wage changes to monopsonistic wage setting we find no evidence that the rise in the minimum wage led to lower profitability among low wage employers instead we find that the costs of the minimum wage were largely passed through to consumers

dying to save taxes evidence from estate tax returns on the death elasticity this paper examines data from u s federal tax returns to shed light on whether the timing of death is responsive to its tax consequences we investigate the temporal pattern of deaths around the time of changes in the estate tax system periods when living longer or dying sooner could significantly affect estate tax liability we find some evidence that there is a small death elasticity although we cannot rule out that what we have uncovered is ex post doctoring of the reported date of death

inter vivos transfers and bequests in three oecd countries reforms reducing the generosity of pensions have distributional effects on future generations if individuals care about their descendants welfare but only affect elderly individuals if bequests are the unintentional result of precautionary savings and safety net programmes such as unemployment insurance may displace sources of private help such as that provided by living parents to their children in need this paper provides comparable measures of how expected bequests and transfers vary with cumulated parental earnings in the united states west germany and the united kingdom the strength of bequest motives is empirically very weak in the available data private inter vivos transfers which appear to depend on the recipients economic situation are partly crowded out by public unemployment insurance programmes together involuntary bequests and intentional inter vivos transfers appear to be an important channel of intergenerational inequality transmission and strengthen substantially the relationship between an individual s and his parents economic status ernesto villanueva

minimum wage legislation and unemployment insurance as instruments for redistribution the use of minimum wages and unemployment insurance as instruments for redistributing income is analyzed the government is assumed to be able to implement an optimal income tax in an economy consisting of two types of individuals who differ in ability the effect of introducing a minimum wage which induces involuntary unemployment will be to improve social welfare under weak conditions circumstances under which combining unemployment insurance with the minimum wage will be welfare improving are also considered

inertia and incentives bridging organizational economics and organizational theory organizational theorists have long acknowledged the importance of the formal and informal incentives facing a firm s employees stressing that the political economy of a firm plays a major role in shaping organizational life and firm behavior yet the detailed study of incentive systems has traditionally been left in the hands of organizational economists with most organizational theorists focusing their attention on critical problems in culture network structure framing and so on in essence the social context in which economics and incentive systems are embedded we argue that this separation of domains is problematic the economics literature for example is unable to explain why organizations should find it difficult to change incentive structures in the face of environmental change while the organizational literature focuses heavily on the role of inertia as sources of organizational rigidity drawing on recent research on incentives in organizational economics and on cognition in organizational theory we build a framework for the analysis of incentives that highlights the ways in which incentives and cognition while being analytically distinct concepts are phenomenologically deeply intertwined we suggest that incentives and cognition coevolve so that organizational competencies or routines are as much about building knowledge of what should be rewarded as they are about what should be done we argue that this recognition has important implications for our understanding of organizational inertia in the face of environmental change and that it opens up important new areas for further research

optimal minimum wage policy in competitive labor markets this paper provides a theoretical analysis of optimal minimum wage policy in a perfectly competitive labor market and obtains two key results first we show that a binding minimum wage while leading to unemployment is nevertheless desirable if the government values redistribution toward low wage workers and if unemployment induced by the minimum wage hits the lowest surplus workers first importantly this result remains true in the presence of optimal nonlinear taxes and transfers in that context a binding minimum wage enhances the effectiveness of transfers to low skilled workers as it prevents low skilled wages from falling through incidence effects second when labor supply re sponses are along the extensive margin only the co existence of a minimum wage with a positive tax rate on low skilled work is always second best pareto ineffcient a pareto improving policy consists of reducing the pre tax minimum wage while keeping constant the post tax minimum wage by increasing transfers to low skilled workers and financing this reform by increasing taxes on higher paid workers overall our results imply that the minimum wage and subsidies for low skilled workers are complementary policies pa

complementarity status similarity and social capital as drivers of alliance formation using data on u s investment banking firms syndication in underwriting corporate stock offerings during the 1980s this study explores the factors that drive alliance formation between two specific firms we compare resource complementarity status similarity and social capital as a basis of alliance formation the findings indicate that the likelihood of investment banks alliance formation is positively related to the complementarity of their capabilities as well as their status similarity social capital arising from banks direct and indirect collaborative experiences also plays a very important role in alliance formation the number of deals given by a lead bank to a potential partner over the past three years has an inverted u shaped relationship to the probability that the lead bank will invite the potential partner to form an alliance our findings indicate that status similarity and social capital have a stronger effect on alliance formation in initial public offering deals than in secondary offering deals as the former are more uncertain than the latter using these findings we discuss the role of complementarity status similarity and social capital in alliance formation copyright 2000 john wiley sons ltd

getting to know you a theory of strategic group identity this paper develops a theory of strategic group identity that explains how strategic groups emerge in an industry and how they can affect firm behaviors and outcomes in so doing it provides a theoretical basis for the existence of strategic groups we argue that managers cognitively partition their industry environment to reduce uncertainty and to cope with bounded rationality social learning theory and social identification theory are used to describe how cognitive groups coalesce into meaningful substructures and how a group level identity emerges we describe the ways in which macro level factors condition the development of groups and their identities we introduce the notion of a strong identity which characterizes any group sufficiently recognized and attended to by members to affect individual action groups with weak identities are no more than transient agglomerations of firms and do not exist in any meaningful sense these ideas are developed into propositions that describe the conditions under which groups with strong identities are likely to emerge a second set of propositions describes their transformation over time identity strength is linked to both positive and negative outcomes in a final set of propositions we show how strategic groups with strong identities can affect firm performance resolving a longstanding problem which has plagued strategic groups research and conclude by suggesting some approaches for measurement and future research 1997 by john wiley sons ltd

recent immigrants as labor market arbitrageurs evidence from the minimum wage this paper investigates the local labor supply effects of changes to the minimum wage by examining the response of low skilled immigrants location decisions canonical models emphasize the importance of labor mobility when evaluating the employment effects of the minimum wage yet few studies address this outcome directly low skilled immigrant populations shift toward labor markets with stagnant minimum wages and this result is robust to a number of alternative interpretations this mobility provides behavior based evidence in favor of a non trivial negative employment effect of the minimum wage further it reduces the estimated demand elasticity using teens employment losses among native teens are substantially larger in states that have historically attracted few immigrant residents

venture capital and the birth of the local area networking industry abstract venture capital has played an important role in funding the development of a number of us high technology industries economists and business scholars utilizing models based in traditional economics have studied venture capital from the perspective of investment decision making these models provide significant insights and yet they do not explain the actual operation of venture capital this case study of the creation of lan industry utilizes a synthesis of the dominant design and social constructionist perspectives to create a more nuanced explanation of how the practice of venture capitalists operates to create firms and industries

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

production versus revenue efficiency with limited tax capacity theory and evidence from pakistan to fight evasion many developing countries use production inefficient tax policies this includes minimum tax schemes whereby firms are taxed on either profits or turnover depending on which tax liability is larger such schemes create nonstandard kink points which allow for eliciting evasion responses to switches between profit and turnover taxes using a bunching approach using administrative data on corporations in pakistan we estimate that turnover taxes reduce evasion by up to 60 70 percent of corporate income incorporating this in a calibrated optimal tax model we find that switching from profit to turnover taxation increases revenue by 74 percent without reducing aggregate profits

do lower minimum wages for young workers raise their employment evidence from a danish discontinuity we estimate the impact of youth minimum wages on youth employment by exploiting a large discontinuity in danish minimum wage rules at age 18 using monthly payroll records for the danish population the hourly wage jumps up by 40 percent at the discontinuity employment falls by 33 percent and total input of hours decreases by 45 percent leaving the aggregate wage payment almost unchanged we show theoretically how the discontinuity may be exploited to evaluate policy changes the relevant elasticity for evaluating the effect on youth employment of changes in their minimum wage is in the range 0 6 1 1

inheritances intergenerational transfers and the accumulation of health research on inheritances has largely focused on the motives of the bequeathing regardless of the motivations of the giving generation prior to death wealth is transferred and this additional money may have an impact on the receiving generation in particular inheritances may be correlated with individuals health for several reasons first there may be a causal effect inheritances provide additional financial resources allowing recipients to purchase inputs to health and health care a large literature on socioeconomic status ses and health investigates the effect of financial resources on health second inheritances may signal the overall strength of a dynasty this dynastic strength would manifest itself in both better health and more ability to leave a bequest inheritances could be associated with better health because parents who will eventually bequeath wealth to their children may have disproportionately higher ses which improves the health outcomes of the children third bequests and a bequest motive may signal a stronger interest in one s child this reminder to the child could improve his emotional well being this paper

credible research designs for minimum wage studies a response to neumark salas and wascher the authors assess the critique by neumark salas and wascher 2014 of minimum wage studies that found small effects on teen employment data from 1979 to 2014 contradict nsw the authors show th

participation recruitment selection and the minimum wage this paper reexamines the efficiency of participation with heterogeneous workers in a search matching model with bargained wages and free entry assuming that firms hire their best applicants we state that participation is insufficient whatever workers bargaining strengths the reason for this is that when holding a job the marginal participant should receive the entire output as a consequence introducing a small minimum wage raises participation job creation and employment therefore the aggregate income of the economy is enhanced

are micro and macro labor supply elasticities consistent a review of evidence on the intensive and extensive margins we evaluate whether state of the art macro models featuring indivisible labor are consistent with modern quasi experimental micro evidence by synthesizing evidence on both the intensive and extensive margins we find that micro estimates are consistent with macro estimates of the steady state hicksian elasticities relevant for cross country comparisons on both the extensive and intensive margins however micro estimates of intertemporal substitution frisch elasticities are an order of magnitude smaller than the values needed to explain business cycle fluctuations in aggregate hours by preferences the key puzzle to be resolved is why micro and macro estimates of the frisch extensive margin elasticity are so different

minimum wages and spatial equilibrium theory and evidence this paper introduces a spatial equilibrium model that relates earnings employment and internal migration responses to minimum wage increases population moves to or away from regions that increa

unemployed but optimistic optimal insurance design with biased beliefs biased perceptions of risks change the perceived value of insurance and the per ceived returns to avoiding these risks i show empirically that unemployed workers overestimate how quickly they will nd work but underestimate the return to their search eorts i analyze the consequences for the optimal design of unemployment insurance with biased beliefs contracts equalizing the marginal smoothing ben e t and the moral hazard cost of insurance are suboptimal social and private insurance diverge a paternalistic social planner corrects the moral hazard cost for the distortion in the insured s eort choice while private insurers focus on the perceived rather than the true smoothing bene ts when unemployed workers are optimistic privatizing unemployment insurance may result in ine ciently low or rapidly decreasing unemployment bene ts

do matching frictions explain unemployment not in bad times this paper models unemployment as the result of matching frictions and job rationing job rationing is a shortage of jobs arising naturally in an economic equilibrium from the combination of some wage rigidity and diminishing marginal returns to labor during recessions job rationing is acute driving the rise in unemployment whereas matching frictions contribute little to unemployment intuitively in recessions jobs are lacking the labor market is slack recruiting is easy and inexpensive so matching frictions do not matter much in a calibrated model cyclical fluctuations in the composition of unemployment are quantitatively large

bequest and tax planning evidence from estate tax returns i study bequest and wealth accumulation behavior of the wealthy subject to the estate tax shortly before death the onset of a terminal illness leads to a very significant reduction in the value of estates reported on tax returns fifteen to twenty percent with illness lasting months to years and about five to ten percent in the case of illness reported as lasting days to weeks i provide evidence suggesting that these findings cannot be explained by real shocks to net worth such as medical expenses or lost income but instead reflect deathbed estate planning the results suggest that wealthy individuals actively care about disposition of their estates but that this preference is dominated by the desire to hold on to their wealth while alive

intergenerational transfers and savings in recent years the role of intergenerational transfers in the process of wealth accumulation has been the subject of substantial empirical and theoretical analysis the key question stimulating this research is what is the main explanation for savings is it primarily accumulation for retirement as claimed by albert ando richard brumberg and franco modigliani in their celebrated life cycle model of savings is it primarily intentional accumulation for intergenerational transfers or is it primarily precautionary savings much of which may be bequeathed because of imperfections in annuity markets this paper examines a range of findings on the importance of intergenerational transfers the strong conclusion that emerges from this evidence is that intergenerational transfers play a very important if not a key role in aggregate wealth accumulation while intergenerational transfers figure very large in savings the precise motivation for such transfers is unclear intergenerational altruism might appear the most likely candidate but at least sane stylized facts such as the equal allocation of bequests among children are strongly at adds with the altruism model other explanations involving imperfect insurance arrangements or payments for child services do not appear capable of explaining the substantial amounts of transfers actually observed sorting cut the relative contributions of different models to intergenerational transfers and the precise role of intergenerational transfers in the process of wealth accumulation remains an intriguing and exciting enterprise this abstract was borrowed from another version of this item

inheritance and wealth inequality evidence from population registers we use new population wide register data on inheritances and wealth in sweden to estimate the causal impact of inheritances on wealth inequality we find that inheritances reduce relative wealth inequality e g the gini coefficient falls by 5 10 percent but that absolute dispersion increases examining different parts of the wealth distribution we find that the top decile s wealth share decreases substantially whereas the wealth share of the bottom half increases from a negative to a positive share in essence wealthier heirs inherit larger amounts but less wealthy heirs inherit more relative to their pre inheritance wealth we also find that post inheritance behavioral adjustments mitigate the equalizing effect of inheritances because less wealthy heirs consume larger shares of their inheritances moreover we find that the swedish inheritance tax reduced the equalizing inheritance effect but that the redistribution of tax revenues could reverse this result finally we show that inheritances increase wealth mobility

top management s attention to discontinuous technological change corporate venture capital as an alert mechanism technological discontinuities pose serious challenges to top managers attention these discontinuities which often occur at the fringes of an industry are usually driven by innovative and often venture capital backed start ups creating new products and transforming existing industries in ways that are difficult for incumbent managers to understand against the backdrop of their existing cognitive schemata however failing to appreciate and embrace successful technological discontinuities might endanger incumbents very existence extending the attention based view we explore whether and how interorganizational relationships guide top managers attention either to or away from technological discontinuities we propose that homophilous relationships e g alliances with industry peers should exhibit a negative relationship with incumbents timely attention to technological discontinuities whereas heterophilous relationships e g with venture capitalists as a result of coinvestments should exhibit a positive relationship furthermore we hypothesize that the status of the partners strengthens the effect of homophilous and heterophilous relationships with the timely attention of top managers to technological discontinuities based on a longitudinal study of the incumbents in four information and communications technology industry sectors we find that heterophilous ties through corporate venture capital cvc coinvesting with high status venture capital firms exhibit a strong positive relationship with timely attention cvc when it connects senior management to high status venture capitalists through coinvestments has a special role in directing top managers attention to technological discontinuities and ensuing business opportunities implications for the understanding of the role of interorganizational ties as structural determinants of top managers attention are discussed

moral hazard vs liquidity and optimal unemployment insurance this paper presents new evidence on why unemployment insurance ui benefits affect search behavior and develops a simple method of calculating the welfare gains from ui using this evidence i show that 60 percent of the increase in unemployment durations caused by ui benefits is due to a liquidity effect rather than distortions on marginal incentives to search moral hazard by combining two empirical strategies first i find that increases in benefits have much larger effects on durations for liquidity constrained households second lump sum severance payments increase durations substantially among constrained households i derive a formula for the optimal benefit level that depends only on the reduced form liquidity and moral hazard elasticities the formula implies that the optimal ui benefit level exceeds 50 percent of the wage the exact identification approach to welfare analysis proposed here yields robust optimal policy results because it does not require structural estimation of primitives

long term care utility and late in life saving older wealth holders spend down assets much more slowly than predicted by classic life cycle models this paper introduces health dependent utility into a model with incomplete markets in which pre

optimal taxation in the extensive model abstract we study optimal taxation under extensive preferences the agents utilities are constant for positive actions up to a maximal productivity level utilities may be discontinuous at the origin reflecting fixed costs of participation allowing for general distributions of work opportunity costs and productivity and for income effects we characterize optimal incentive compatible tax schedules we then give sufficient conditions for society to desire redistribution when these conditions hold upward distortions of the financial incentives to work can only occur for low skilled workers such upwards distortions are indeed always present when the fixed participation costs are pecuniary

the role of intergenerational transfers in aggregate capital accumulation this paper uses historical u s data to directly estimate the contribution of intergenerational transfers to aggregate capital accumulation the evidence presented indicates that intergenerational transfers account for the vast majority of aggregate u s capital formation only a negligible fraction of actual capital accumulation can be traced to life cycle or hump savings a major difference between this study and previous investigations of this issue is the use of more accurate longitudinal age earnings and age consumption profiles these profiles are simply too flat to generate substantial life cycle savings this paper suggests the importance of and need for substantially greater research and data collection on intergenerational transfers life cycle models of savings that emphasize savings for retirement as the dominant form of capital accumulation should give way to models that illuminate the determinants of intergenerational transfers

optimal income transfer programs intensive versus extensive labor supply responses this paper analyzes optimal income transfers for low incomes labor supply responses are modeled along the intensive margin intensity of work on the job and along the extensive margin participation into the labor force when behavioral responses are concentrated along the intensive margin the optimal transfer program is a classical negative income tax program with a substantial guaranteed income support and a large phasing out tax rate however when behavioral responses are concentrated along the extensive margin the optimal transfer program is similar to the earned income tax credit with negative marginal tax rates at low income levels and a small guaranteed income carefully calibrated numerical simulations are provided

cognition capabilities and incentives assessing firm response to the fiber optic revolution this study examines how ceo cognition organizational capabilities and organizational incentives interacted to shape firm strategy during the fiber optic revolution i tested for these factors as

when does corporate venture capital investment create firm value abstract over the past decade billions of dollars have been invested by established companies in entrepreneurial ventures what is often referred to as corporate venture capital yet there is little systematic evidence that corporate venture capital investment creates value to investing firms scholars have suggested that established firms face underlying challenges when investing corporate venture capital namely structural deficiencies inherent in corporate venture capital may inhibit financial gains however firm value may still be created as a result of other benefits from investing primarily providing a window onto novel technology in this paper we propose that corporate venture capital investment will create greater firm value when firms explicitly pursue corporate venture capital to harness novel technology using a panel of cvc investments we present evidence consistent with our proposition the findings are robust to various specifications and remain unchanged even after controlling for unobserved heterogeneity in investing firms our results have important implications for corporate venture capital in particular and technology strategy in general

do the rich save more a new view based on intergenerational transfers do richer people have higher saving rates the short run and long run consumption functions have different answers to this important question which results in an important consumption puzzle that was a focus of macroeconomic research in the 1950s and 1960s in a recent empirical contribution dynan skinner and zeldes 2004 revive this old question and make this consumption puzzle more intriguing by showing that the average propensity to consume decreases not only with current income but also with lifetime income this paper provides a model that helps resolve this puzzle from an intergenerational perspective

corporate venture capitalists autonomy obstacles and performance abstract this report presents the results of a formal study of the corporate venture capital community in the united states and is based upon responses to a questionnaire completed by 52 corporate venture capitalists cvcs the central question addressed in this study involves which approach to corporate venture capital is most likely to produce successful results this question was addressed via cluster analysis which segregated the cvc community into two broad classes pilots which are marked by substantial organizational independence and copilots which are highly dependent on corporate management with respect to venture funding and decision authority pilots achieve equal or higher levels of performance and are plagued by far fewer obstacles than their highly dependent counterparts the results suggest the following 1 the corporate venture fund should be established as an independent entity and should have access to a committed separate pool of funds this will enable cvcs to respond aggressively to and manage investment opportunities with minimal corporate interference such an independent entity will defuse justifiable concerns on the part of entrepreneurs related to such interference 2 the fund should be managed by skilled venture professionals who may be drawn from the independent venture community or the small but growing pool of experienced cvcs corporate executives may comprise a part of the management team 3 if the corporate venture fund hopes to attract top quality managers it must be prepared to offer compensation and authority commensurate with their skill level in short corporate venture capitalists should be treated like independent venture capitalists by organizing the fund as an independent entity the political problem associated with establishing compensation levels above those of the corporation can be minimized 4 all cvcs should establish a primary focus on the realization of financial objectives i e return on investment strategic benefit objectives are not necessarily ill advised so long as they do not interfere with sound financial decision making when they do the corporate venture capital process is likely to become less effective for instance a corporate venture fund should only confine itself to investing in a few industries if there are sufficient high grade investment opportunities within those industries to ensure adequate deal flow the venture fund should not be pressured investments that appear exciting from a corporate perspective for technological or marketing reasons but are not financially attractive may well drain resources rather than produce opportunities 5 venture proposals failing on financial criteria might be referred to other parts of the corporation with the purpose of exploring an alternate relationship e g a development contract or joint venture if this is appealing to the corporation a mechanism such as a corporate liaison or reporting system might be established to facilitate the flow of information 6 a corporation should be willing to make a complete commitment of talent and capital if it establishes its own corporate venture fund the corporation should then be willing to accept a limited role if the corporation is unable to accept a limited role with respect to its own fund it may be best for it to participate as an investor in a traditional fund where such limitations will be enforced however this latter approach may significantly dilute or eliminate potential for strategic benefits

donor policy rules and aid effectiveness abstract the present paper examines the macroeconomic impact of aid by introducing endogenous aid allocations into a neoclassical growth framework on this basis it is shown that donor policies can have important implications for the trajectory of recipients gdp per capita depending on specific donor policy choices aid disbursements may lead to faster transitional growth stagnation or cyclical growth moreover the analysis also suggests that donor policies may be part of the reason why foreign aid is not found to be uniformly effective in raising long run productivity across recipients

the impact of minimum wages on labour market transitions we investigate dierences in labour market transition rates in high versus low minimum wage regimes using canadian data spanning 1979 to 2008 the data include consistent questions on job tenure and reason for job separation for the whole period over the same time frame there were over 140 minimum wage changes in canada we nd that higher minimum wages are associated with lower hiring rates but also with lower job separation rates importantly the reduced separation rates are due mainly to reductions in layos occur in the rst 6 months of a job and are present for unskilled workers of all ages our estimates imply that a 10 increase in the minimum wage generates a 3 9 reduction in the layo rate we present a search and matching model that ts with these patterns and test its implications overall our results imply

aspirations habit formation and bequest motive we analyze how the presence of endogenous preferences affects the altruistic bequest motive from parents to children we will show that the existence of habits raises the threshold value of the intergenerational discount factor above which altruistic bequests are positive while aspiration formation could push this value down therefore the dynamic inefficiency of the economy with no altruism is not sufficient to prevent the bequest motive from being operative under aspiration formation we also discuss the implications of public debt when the bequest motive is inoperative and preferences exhibit habit and aspiration formation

intergenerational transfers and the accumulation of wealth h t ouseholds acquire wealth from two sources they save out of income they have earned and they receive transfers from other people the first method of wealth accumulation goes under the name of life cycle saving in which people save during their working lives and dissave after retirement the second involves either an inter vivos transfer that is a transfer between living people or a bequest a transfer that occurs at the death of the donor while inter vivos transfers and bequests will arise in dynastic models where preferences include a taste for the well being of one s descendents few empirical life cycle models reflect these concerns indeed a sharp debate has arisen over the ability of the simple life cycle model to explain observed wealth accumulation understanding the relative sizes of these sources of wealth accumulation affects a variety of issues for example the effects of government debt social insurance public transfer programs estate taxes and incentives for charitable giving depend to some extent on the magnitude and nature of private saving and transfers of wealth analyses of the inequality of wealth may depend on whether most of wealth is earned or received as transfers appropriate policies for encouraging private saving may look rather different depending on whether most saving is to be consumed later in life or passed along to the next generation finally evidence on transfer patterns relates to more fundamental