the democratic political economy of progressive income taxation why do both left and right political parties typically propose progressive income taxation schemes in political competition analysis of this problem has been hindered by the two dimensionality of the issue space to give parties a choice over a domain that contains both progressive and regressive income tax policies requires an issue space that is at least two dimensional nash equilibrium in pure strategies of the standard two party game whose players have complete preferences over a two dimensional policy space generically fails to exist i introduce a new equilibrium concept for political games based on the fact of factional conflict within parties each party is supposed to consist of reformists militants and opportunists each faction has a complete preference order on policy space but together they can only agree on a partial order nash equilibria of the two party game where the policy space consists of all quadratic income tax functions and each party is represented by its partial order exist and it is shown that in such equilibria both parties propose progressive income taxation

price pass through and the minimum wage this paper tests a textbook consequence of competitive markets that an industry wide increase in the price of labor is passed on to consumers through an increase in prices using several data sources on restaurant prices i explore the price impact of minimum wage hikes in canada and the united states particular attention is paid to the timing of these price responses to gauge the stickiness of minimum wage cost shocks i find that restaurant prices generally rise with changes in the wage bill and that this response is concentrated in the quarter surrounding the month during which the legislation is enacted

labor migration and risk aversion in less developed countries in this paper we question the pioneering work of todaro which states that rural to urban labor migration in less developed countries ldcs is an individual response to a higher urban expected income we demonstrate that rural to urban labor migration is perfectly rational even if urban expected income is lower than rural income we achieve this under a set of fairly stringent conditions an individual decision making entity a one period planning horizon and global risk aversion we obtain the result that a small chance of reaping a high reward is sufficient to trigger rural to urban labor migration

exchange rate pass through and credit constraints abstract the macroeconomic evidence of the short term impact of exchange rates on exports and prices is notoriously weak this paper examines the microfoundations of this disconnect i study the response of firms export and price setting decisions to fluctuations in exchange rates and credit conditions using firm level survey data financially constrained firms pass through exchange rate changes to prices at almost twice the rate of unconstrained firms similarly their export volumes are about twice as sensitive to exchange rate fluctuations the effect of borrowing constraints is particularly strong during the recent financial crisis

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

job destruction and propagation of shocks this paper considers propagation of aggregate shocks in a dynamic general equilibrium model with labor market matching and endogenous job destruction cyclical fluctuations in the job destruction rate magnify the output effects of shocks as well as making them much more persistent interactions between capital adjustment and the job destruction rate play an important role in generating persistence propagation effects are shown to be quantitatively substantial when the model is calibrated using job flow data incorporating costly capital adjustment leads to significantly greater propagation

remittances and household consumption instability in developing countries this paper analyzes the impact of remittances on household consumption instability in a large panel of developing countries there are four main results first remittances significantly reduce household consumption instability second remittances play an insurance role by dampening the effects of various sources of consumption instability in developing countries natural disasters agricultural shocks discretionary fiscal policy systemic financial and banking crises and exchange rate instability third the stabilizing role played by remittances is stronger in less financially developed countries fourth the overall stabilizing effect of remittances is mitigated when remittances exceed 6 of gdp

the effects of partisan alignment on the allocation of intergovernmental transfers differences in differences estimates for spain abstract in this paper we test the hypothesis that municipalities aligned with upper tier grantor governments i e controlled by the same party will receive more grants than those that are unaligned we use a rich spanish database which provides information on grants received by nearly 900 municipalities during the period 1993 2003 from three different upper tier governments i e central regional and upper local since three elections were held at each tier during this period we have enough within municipality variation in partisan alignment to provide differences in differences estimates of the effects of alignment on the amount of grants coming from each source moreover the fact that a municipality may simultaneously receive grants from aligned and unaligned grantors allows us to use a triple differences estimator which consists of estimating the effects of changing alignment status on the change in grants coming from the aligned grantors relative to the change in grants coming from the unaligned ones the results suggest that partisan alignment has a sizeable positive effect on the amount of grants received by municipalities for example with majority governments at the two layers aligned municipalities receive over 40 more grants than unaligned ones

voting over income taxation abstract a major problem of the positive theory of income taxation is to explain why statutory income tax schedules in practice are marginal rate progressive while it is commonly believed that this is but a simple consequence of the fact that the number of relatively poor voters exceeds that of richer voters in general putting this contention in a voting equilibrium context is not a trivial task we do this here in the context of nonlinear taxation and attempt to provide a formal argument in support of this heuristic claim we first establish the existence of mixed strategy equilibria and identify certain cases in which marginal rate progressive taxes are chosen almost surely by the political parties unfortunately we also find that if the tax policy space is not artificially constrained the support of at least one equilibrium cannot be contained within the set of marginal rate progressive taxes

symmetric pass through of tariffs and exchange rates under imperfect competition an empirical test abstract this paper examines the effect of tariffs and exchange rates on u s prices of japanese cars trucks and motorcycles in particular we test whether the long run pass through of tariffs and exchange rates are identical the symmetry hypothesis we find that this hypothesis is easily accepted in our sample we also find that the pass through relation varies across products ranging from about 0 6 for trucks to unity for motorcycles these coefficients have very different implications for trade policy we explain the results based on demand cost and institutional conditions in each industry

the law of one price a case study we use retail transaction prices for a multinational retailer to examine the extent and permanence of violations of the law of one price for identical products we find typical deviations of 20 50 percent with some evidence for convergence over time such differences might be due to differences in local costs if so relative prices of similar products round versus square mirrors should be equal across countries in fact relative prices vary significantly across very similar goods within a product group the finding suggests that differences in local distribution costs local taxes and probably tariffs do not explain the price pattern leaving strategic pricing or other factors resulting in varying markups as alternative explanations jel classification f41 l11

a theory of remittances as an implicit family loan arrangement abstract the idea of an implicit and informal loan agreement between family members to explain migrants remittances is not new but its implications have not been fully explored in the theoretical literature many empirically testable propositions may be derived from this hypothesis when trying to explain why emigrants remit what the time profile of remittances is how it depends on the intent to stay on the expected length of stay and on interest rates what use people make of remittances and how the home family consumption behavior is affected by the economic prospects in the receiving country furthermore this theory yields many interesting policy prescriptions for less developed countries wishing to maximize the remittance flow from emigrants

the incentive effect of fiscal equalization transfers on tax policy abstract a theoretical analysis considers the impact of a typical system of redistributive fiscal equalization transfers on the tax effort of local jurisdictions more specifically it shows that the marginal contribution rate i e the rate at which an increase in the tax base reduces those transfers might be positively associated with the local tax rate while the volume of grants received is likely to be inversely related to the tax rate these predictions are tested in an empirical analysis of the tax policy of german municipalities in order to identify the incentive effect the analysis exploits discontinuities in the rules of the fiscal equalization system as well as policy changes the empirical results support the existence of an incentive effect suggesting that the high marginal contribution rates induce the municipalities to set significantly higher business tax rates compared with a situation without fiscal equalization

price discrimination by u s and german exporters the insensitivity of the u s trade balance to the sharp depreciation of the dollar in the past three years has revived interest in the relationship between exchange rates and the trade balance a central issue in most analyses of the relation between the current account and the exchange rate concerns the price adjustment process the simple integrated competitive market model predicts that local currency prices should change in proportion to the nominal exchange rate for a country too small to influence world prices the relationship between local currency import prices and exchange rates has been referred to as the pass through relationship in the empirical literature in international economics if the proportional relationship between import prices and exchange rates holds pass through is said to be complete accounts of recent u s experience cite the failure of dollar prices of imported goods to rise in proportion to exchange rates i e incomplete pass through as an important factor in explaining the persistence of the trade deficit unfortunately observations on pass through alone provide limited insight into the behavior of markets since incomplete pass through is consistent with at least two fundamentally different paradigms one is the standard competitive model of trade in which the law of one price holds but exchange rate fluctuations are associated with large changes in import demand due to other factors for example if dollar appreciation is correlated with increases in world demand and industry marginal cost is increasing then pass through will be less than complete the other is an imperfectly competitive model in which exporters are capable of price discriminating across destination markets a phenomenon paul krugman 1987 has labeled pricing to market in this model incomplete pass through is typically associated with fluctuations in the markup of price over marginal cost on exports 2 these fluctuations in markups are believed to be countryspecific they do not reflect the behavior of prices to other export destinations both models are plausible explanations of recent u s experience unfortunately it is impossible to distinguish between these competing models using only information on import prices and exchange rates for a single country in order to distinguish between the competing models an empirical analysis of goods prices and exchange rates must be capable of measuring either marginal cost or the markup over marginal cost either of these tasks poses formidable empirical problems much of the empirical literature in industrial organization has been concerned with precisely these issues since markups are an important measure of the competitiveness of industries

expectations learning and business cycle fluctuations this paper explores an alternative theory based on learning dynamics in the con text of an otherwise standard stochastic growth model we consider an environment in which households and firms have an incomplete model of the macroeconomy knowing only their own objectives constraints and beliefs agents are optimizing have a completely specified belief system but do not know the equilibrium map ping between primitive disturbances the aggregate state of the economy and mar ket clearing prices by extrapolating from historical patterns in observed data they approximate this mapping to forecast variables that are exogenous to their decision problems such as the rental rate of capital and the real wage this belief structure has the property that beliefs affect the true data generating process of the economy which in turn affects belief formation the economy is therefore self referential shifts in beliefs about future returns to labor and capital affect current market clear ing prices which in turn can reinforce beliefs in this environment current prices can become less informative about future economic conditions generating fluctuations in real activity this kind of mechanism driving business cycle fluctuations is found in early writ ings on macroeconomic dynamics for example alfred c pigou 1927 on page 122 writes

redistributing income under proportional representation although majoritarian decision rules are the norm in legislatures relatively few democracies use simple majority rule at the electoral stage adopting instead some form of multiparty proportional representation moreover aggregate data suggest that average income tax rates are higher and distributions of posttax income flatter in countries with proportional representation than in those with majority rule while there are other differences between these countries this paper explores how variations in the political system per se influence equilibrium redistributive tax rates and income distributions a three party proportional representation model is developed in which taxes are determined through legislative bargaining among successful electoral parties and the economic decision for individuals is occupational choice political economic equilibria for this model and for a two party winner take all majoritarian system are derived and compared

price reactions to new competition a study of us luxury car market 1986 1997 abstract this paper examines the questions of whether the incumbent responds to entry and which firms respond to entry in an industry by using a data sample of the us luxury car market during the period of 1986 and 1997 the statistical analysis finds that the incumbent s response varies across firms but some group of firms responds to entry similarly in particular this paper finds that the german exporters of luxury cars respond significantly to the entry of a japanese rival in the us market similarly by reducing their prices and mark ups the extent to which they respond to entry become greater as the japanese firm s market share increases the statistical test accepts the hypothesis of the equality of coefficients among the german firms but rejects the hypothesis when both the german and british firms are included in the sample

remittances liquidity constraints and human capital investments in ecuador summary over the last decade ecuador has experienced a strong increase in financial transfers from migrated workers this paper investigates how remittances via trans national networks affect human capital investments through relaxing resource constraints and facilitate households in consumption smoothing by reducing vulnerability to economic shocks our results show that remittances increase school enrollment and decrease incidence of child work especially for girls and in rural areas furthermore we find that aggregate shocks are associated with increased work activities while remittances are used to finance education when households are faced with these shocks 2008 elsevier ltd all rights reserved

firm outsourcing decisions evidence from u s foreign trade zones deborah l swenson this article examines the operations of firms located in u s foreign trade subzones to study the responsiveness of outsourcing to international cost changes i find that firms reduce their reliance on foreign inputs when dollar depreciation increases the relative price of imported inputs the effect is pervasive across industries and is economically significant in addition firms that rely more heavily on imported intermediate inputs reduce their overall shipments when dollar depreciation elevates their imported input costs however the magnitude of the shipments effect is economically small suggesting that firms respond to exchange rate movements by adjusting their operations on other dimensions jel f23 f1 i introduction during the nafta debates u s industry argued that it would be placed at a competitive disadvantage if it failed to gain access to mexican parts that benefited from tariff reductions in the absence of such benefits it was argued that u s firms might even move their production off shore at the same time u s trade unions expressed great concern that jobs and high levels of economic activity would be lost if nafta caused a rise in the outsourcing of intermediate inputs although these countervailing concerns have attracted much attention very little is known about the responsiveness of firm outsourcing to relative price changes or about its secondary effects on firm shipments since outsourcing decisions are made at the firm level and appropriate data is rarely available to researchers this article seeks to address this void by analyzing a data set that provides information on these purchasing and shipment decisions recent aggregate evidence indicates that firms are purchasing an increasing portion of their intermediate inputs from their foreign affiliates or from unrelated parties located abroad 1 it is argued that advances in transportation and communications have facilitated the trend toward the dispersion of production activities while the aggregate trends are striking little research has focused on individual firm decisions one exception is brainard and riker s 1997 examination of multinational firms employment choices as they respond to international wage changes brainard and riker conclude that the degree of firm substitution among a firm s numerous foreign affiliates is much higher than that between parent firms and their foreign affiliates which is relatively small this labor market evidence suggests that foreign affiliate labor is not easily substituted for home labor and that the two may even be complements 2 in contrast a higher degree of substitutability is implied by work including feenstra a nd hanson 1996 and irwin 1996 for the united states or campa and goldberg 1997 for the united states united kingdom japan and canada which documents that the usage of imported intermediate inputs has increased in almost all cases since the 1970s 3 this article studies the issue of input sourcing flexibility and its consequences by examining individual firm decisions the analysis is based on the activities of a set of firms located in u s foreign trade subzones i focus on this subset of firms since the u s foreign trade subzones program provides a unique opportunity to examine firm level decisions regarding inputs and shipments the reporting requirements of the foreign trade zones program enable us to view aspects of firm sourcing decisions that are usually unobservable i use two estimation methods to measure the general substitutability of inputs and outsourcing flexibility first i develop a constant elasticity of substitution ces model of input demand i then use nonlinear least squares techniques to estimate the underlying demand parameters implied by the structural equations i then perform a tobit analysis of firm sourcing decisions the benefit of the second form of analysis is that it allows me to study additional determinants of outsourcing and it does not require strong assumptions about the functional form of the production function

motivations to remit evidence from botswana in this article a theory of motivations to send remittances is described and tested with data from botswana altruism is one of the motivations tested and found to be an insufficient explanation for remittances among migrants in botswana a refinement of the model stipulates a modified altruism or enlightened self interest in this model the relationship between the migrant and family is tempered by an implicit understanding of mutual benefit the household strategy may be to encourage some members to migrate as a means of spreading risk and sharing gains the household strategy is similar to an insurance policy where migration is to places where market potential is high the risks incurred might be high the example is given of migration during a drought in botswana migrant remittances were greater in households with more cattle or households with more to lose drought alone was not statistically related to remittances increases in remittances were related to increased levels of education it is suggested that repayment was the motive for parents investment in migrants education migrants gains are identified as the potential for an inheritance the security of channeling investments through a trusted family member and security in having a home to return to it is pointed out that the altruism and family remittances from urban migration were strategies that bridged the simple dynamic of either urban development or rural development impacting on family welfare it is suggested that household models of economy adopt some measure to express the relationship of household wealth to remittances from urban migrants

workers remittances and the real exchange rate a paradox of gifts abstract we test the impact of workers remittances on the real exchange rate using a panel of 13 latin american and caribbean countries the analysis reveals that workers remittances have the potential to inflict economic costs on the export sector of receiving countries by reducing its international competitiveness our findings raise concerns parallel to those raised by dutch disease or resource boom models where resource discoveries result in real exchange rate appreciation and shifting of resources from the traded to the nontraded sectors of the economy

exchange rates and market power evidence from the petrochemical industry abstract this paper takes a microeconometric approach to the study of exchange rate pass through in imperfectly competitive markets we provide evidence for the hypothesis that incomplete exchange rate pass through can be attributed to non competitive conduct by foreign firms a unique feature of our approach is the use of highly disaggregated industry data which is compatible with the behavioral assumptions of a homogeneous product oligopoly model we employ a panel data set consisting of location and product specific price and cost data for 29 traded petrochemicals for the us germany and japan during 1982 to 1993 our empirical estimates indicate that german and japanese firms exercised statistically significant market power in the us petrochemical market during our sample period

do international migration and remittances reduce poverty in developing countries summary few studies have examined the impact of international migration and remittances on poverty in the developing world this paper fills this lacuna by constructing and analyzing a new data set on international migration remittances inequality and poverty from 71 developing countries the results show that both international migration and remittances significantly reduce the level depth and severity of poverty in the developing world after instrumenting for the possible endogeneity of international migration and controlling for various factors results suggest that on average a 10 increase in the share of international migrants in a country s population will lead to a 2 1 decline in the share of people living on less than 1 00 per person per day after instrumenting for the possible endogeneity of international remittances a similar 10 increase in per capita official international remittances will lead to a 3 5 decline in the share of people living in poverty

incomplete exchange rate pass through and imperfect competition the effect of local production extent to which product prices respond to exchange rate induced changes in costs this research has revealed that the percentage change in the prices of imported goods is smaller than the percentage change in exchange rates of the exporting country and that price responses differ across destinations a phenomenon termed pricing to market this finding may indicate market imperfections in international trade for example those that may arise in the case of segmented markets alternatively these empirical facts may reflect the sale of products whose production occurs in multiple locations when firms are able to shift their production across borders or alter their location of sourcing their costs will not change one for one with home country exchange rate movements and therefore their prices are unlikely to change one for one with exchange rate movements however this possibility has not been addressed empirically in the literature on pricing to market this study contributes to the literature by estimating exchangerate pass through while controlling for local production in the destination market we focus on the u s automobile market and the pricing of u s and japanese firms in particular for several reasons first we have product level information on pricing and content and there is substantial variation in destination country production across products and over time second existing studies have found evidence of pricing to market and incomplete exchange rate passthrough in automobile markets providing a useful comparison for our results and making this an appropriate market in which to study the effect of local production on exchange rate passthrough consistent with other studies we find that japanese firms partially pass through japanese cost changes to their u s customers in addition we find that this partial pass through characterizes not only japanese cost shocks but cost shocks that these japanese firms experience in their u s production this finding persists in a sample that includes both u s and japanese firms automobile firms generally do not pass through cost shocks in their entirety our data also show that those japanese auto

price convergence in the european car market this article examines price convergence in the european union eu car market over the period 1995 to 2005 we find that there is a clear evidence of price convergence among the eu15 countries but not before 1999 moreover countries of the economic and monetary union emu started convergence previously to the eu15 as a whole finally exchange rate changes have significantly contributed to price dispersion over time across countries the results provide significant evidence that trade liberalization and the emu have enhanced the process of regional integration in the european automobile industry even though there is room for further measures to promote integration

cost pass through in the u s automobile market we study cost pass through in the u s automobile market using a framework that incorporates the effects of cost changes on input decisions we find that accounting for firms factor market decisions significantly increases measured cost pass through although we reject the hypothesis of full cost pass through and constant markups in addition our evidence suggests that cost shocks common to all manufacturers have a greater effect on prices than do model specific cost shocks finally we examine how pass through varies with manufacturer nationality finding that u s firm cost pass through exceeds that of european and asian firms

pricing to market in european automobile exports to oecd countries a panel data approach this paper investigates pricing to market behaviour using data for european auto exports the empirical analysis uses forward instead of spot exchange rates cross country and cross product analyses reveal that pricing behaviour depends mainly on the class of product while the country of origin and destination appears as less important furthermore the data do not usually reject the hypothesis of a symmetric response of export prices to depreciations and appreciations of the exporter s currency finally although the point estimates confirm the combined influence of the business cycle and the direction of the exchange rate movements on pricing to market in most cases formal tests seldom provide statistical significance for this result

motives for private transfers over the life cycle an analytical framework and evidence for peru abstract this paper tests for the motives for private income transfers we consider two motives altruism and exchange the question of private transfer motives is important because such motivation can influence the effects of public income transfers on the distribution of income using a household survey for peru we find that transfer amounts received increase with recipient pre transfer income which contradicts a key prediction of the strong form of the altruism hypothesis but is consistent with exchange we also find that capital market imperfections are likely to be an important cause of private transfers and that social security benefits crowd out the incidence of private transfers

antidumping investigations and the pass through of antidumping duties and exchange rates comment well in excess of 100 percent based on their understanding of the us antidumping calculation however the hypothesis is based on an incorrect understanding of the antidumping calculation under us law when corrected for this error the hypothesis would lead to a prediction of simple 100 percent pass through at most dumping refers to selling a product in an export market at less than its normal value a benchmark that is most commonly based on sales in the domestic market of the same product antidumping laws set tariffs to offset the amount of dumping the excess of normal value over export price in us practice a dumping complaint is brought on behalf of an industry against rival imports with the cases defined by product and by country a successful case results in the potential imposition of antidumping duties over and above any normal tariffs an unsuccessful case results in no duties being imposed american antidumping law and practice have the somewhat unusual characteristic that anti dumping duties are estimated and used to set duty deposits for a forward looking period in an initial investigation then are recalculated and actually assessed for the same period now back ward looking in a later review with some variation the later review is typically completed about two years after the initial investigation the review sets a new deposit rate and a second review determines the actual assessment rate retrospectively this can be repeated indefinitely the ini tial duty estimate resulting in a deposit rate allows companies to modify their pricing behavior so as to affect the actual dumping duties that are later assessed blonigen and haynes exploit this characteristic of the us administration of its antidump ing law to examine the effects of the imposition of antidumping duties on the pass through to us pricing the dumping investigation and resulting deposit rate provide information that the company can use in its subsequent sales in order to reduce or eliminate its dumping liability in the eventual review by comparing the antidumping deposit rates with eventual us pricing the degree of pass through of antidumping deposits can be estimated and the effects on exchange rate pass through of a potential antidumping dumping duty can be studied here i focus on the factual underpinnings that lead to blonigen and haynes s pricing model rather than the empirical results that model predicts that the method by which the us department of commerce usdoc calculates ad duties will lead to pass through of estimated antidump ing duties at twice the level of those estimated duties if companies wish to eliminate the eventual dumping duties by studying the outcomes of a series of ad cases concerning steel from canada they conclude that pass through of estimated duties exceeds 160 percent broadly consistent with

beneficiaries from federal transfers to municipalities the case of israel in this paper we have shown which variables affect the size of grants given by the government to cities in israel we have also shown that aside from demographic variables which alone account for a very large portion of the variance there is also a political residual effect where cities with mayors who are members of the in political party fared better than other cities this effect is felt mainly through the general and not the earmarked portion of the grant and was more prevalent when the likud was in power than when labor ruled

party politics and fiscal discipline in a federation evidence from the states of india theoretical and empirical analysis suggests that federations are prone to fiscal indiscipline because of intergovernmental bargaining over the allocation of national resources what role do political parties play in mediating this bargain if the national government is dominated by a single political party does the party discipline those states where its affiliates are in power if the national government consists of a coalition of political parties do states ruled by coalition partners bargain for higher deficits this article provides evidence on these questions from india a large federation in the developing world that serves as a valuable laboratory for this purpose the authors find that those state governments that belong to the same party as that leading the national government run higher than average deficits correspondingly states governed by rival political parties have lower deficits even if these parties are members of a coalition government at the center

the political economy of intergovernmental grants evidence from a maturing democracy we evaluate the impact of political forces in the allocation of intergovernmental grants in portugal as it matured from a young to an established democracy using a large and unexplored dataset we show that political variables condition the granting system and that their importance changed over time while tactical manipulation in the distribution of grants among municipalities seems to exist only in the early years of democracy opportunistic effects are stronger in the latter years we argue that the latter effect is due to a change in the political environment and to the electorate s lack of information on intergovernmental grants

the new economics of labor migration this paper reviews selected theoretical and empirical developments in the field of labor migration economics the migration behavior of individuals differs in accordance with their perceived relative deprivation those who are relatively more deprived tend to have stronger incentive to migrate than those who are relatively less deprived moreover a reference group characterized by more income inequality is likely to generate more relative deprivation highly skilled workers are also more likely to migrate migration decisions are often made jointly by the migrant and nonmigrant with a contractual arrangement regarding the sharing of costs and returns the exchange of commitments to share income provides coinsurance of particular interest are the determinants of the speed of adoption of migration as an innovation and the characteristics associated with the delay in the adoption of innovation new econometric techniques including techniques for the analysis of qualitative dependent variables techniques that correct for sample selection bias and those for the analysis of longitudinal data have substantially benefited empirical research in this area new methods that can correct for the biased estimate of the wages particular individuals would receive at 2 or more locations at the same point in time allow researchers to test locational decsion making models estimates of these structural models of labor migration support the hypothesis that individuals respond to income incentives in making the decsion to migrate further research is needed on the pazzling observation that migrant workers earn less than native born workers with similar characteristics during the 1st few years after migration but more thereafter other topics that need further research include the macroeconomic effects of migration the microeconomic and macroeconomic relationships between aging and labor migration and the migration behavior of dual earner families

a survey of the effects of the minimum wage on prices abstract it is well established in the literature that minimum wage increases compress the wage distribution firms respond to these higher labour costs by reducing employment reducing profits or raising prices while there are hundreds of studies on the employment effect of the minimum wage there are merely a handful of studies on its profit effects and only a couple of dozen studies on its price effects furthermore a comprehensive survey on minimum wage price effects is not available in the literature given the policy relevance of this neglected issue in this paper we summarize and critically compare the available evidence on the effects of minimum wages on prices

ideology tactics and efficiency in redistributive politics we model the electoral politics of redistribution when voters and parties care about inequality in addition to their private concerns for consumption and votes respectively ideological concerns about income redistribution lead each party to adopt a general proportional income tax adjusted to appeal to the ideological leanings of high clout groups with disproportionately many swing voters which the parties also ply with pork barrel projects our results relate to director s law which says that redistributive politics favors middle classes at the expense of both rich and poor

long run price effects of exchange rate changes in finnish pulp and paper exports this paper presents long run exchange rate elasticities of finnish newsprint and pulp export prices in the united kingdom uk and germany over the period 1980 94 the elasticities were estimated for a markup pricing model using johansen s cointegration method the magnitudes of the elasticity estimates obtained by imposing price homogeneity indicate that pass through of exchange rate changes to export prices has been incomplete in both markets for newsprint the pass through elasticity was 0 60 in the uk and 0 46 in germany which means that about one half of the changes in the exchange rates is reflected in prices as expressed in the destination countries currencies and about a half in prices measured in finnish markka instead in pulp exports the pass through elasticities differed from each other between the two destination countries more clearly than in newsprint exports indicating a different pricing behaviour of finnish pulp exporters in the uk and germany when exchange rate changes pass throug

electoral goals and center state transfers a theoretical model and empirical evidence from india we construct a model of redistributive politics where the central government is opportunistic and uses its discretion to make transfers to state governments on the basis of political considerations these considerations are the alignment between the incumbent parties at the central and state levels and whether a state is a swing state or not a testable prediction from the model is that a state that is both swing and aligned with the central government is especially likely to receive higher transfers we test this prediction using indian data for 14 states from 1974 75 to 1996 97 we find that a state which is both aligned and swing in the last state election is estimated to receive 16 higher transfers than a state which is unaligned and non swing

the impact of remittances on investment and poverty in ghana summary this paper analyzes the impact of internal remittances from ghana and international remittances from african or other countries on investment and poverty in ghana it has three findings first when compared to what they would have spent without the receipt of remittances households receiving remittances spend less at the margin on food second households receiving remittances spend more at the margin on three investment goods education housing and health third the receipt of remittances greatly reduces likelihood of household poverty these findings support the growing view that remittances can reduce poverty and increase investment in developing countries

pricing to market behaviour in european car markets abstract this paper investigates ptm behaviour in european car markets for a period of great interest 1993 98 taking into account the role of invoicing currency the results indicate that local currency price stability is a strong and pervasive phenomenon across products independently of the invoicing currency the paper offers robustness checks tests and arguments that justify the interpretation of this finding at least in part as evidence of ptm it implies the existence of market segmentation and price discrimination despite the completion of the single market programme on 1 january 1993

on the political and fiscal determinants of income redistribution under federalism and democracy evidence from germany several recent studies suggest that transfers from central to regional governments are motivated by political considerations in this paper we examine if this is also the case for transfers from regional to central governments in the context of the german fiscal equalization system we examine the factors that contribute to differences in tax revenues across german states the evidence indicates that both fiscal incentives and political factors can explain these differences although in germany the former are more important moreover accounting for fiscal institutions has important consequences for the empirical assessment of political influences on taxation overall we find that the political affiliation of the state governor is an important factor in explaining differences in state tax revenues thus the right wing party cdu csu is effective in relaxing the tax burden at the state level in contrast partisan alignment between the state government and the federal government loses its importance once fiscal conditions enter the empirical model

will skill based immigration policies lead to lower remittances an analysis of the relations between education sponsorship and remittances as more and more developed countries adopt policies that favour highly educated immigrants the impact of such policies on developing countries remains unclear some researchers have argued that mi

the political costs of tax increases and expenditure reductions evidence from state legislative turnover this paper estimates the political costs of increasing taxes and cutting expenditures for members of a legislature it is found that both costs are individually significant but that they are not significantly different this coincides with the first order condition for maximization of the probability of reelection republican legislatures have a higher political cost for taxes thus the party s relative bias toward smaller government is founded in stronger constituent preferences against taxes not for lower spending additionally by being ideologically conservative republicans lower the political costs of taxes while by being more liberal democrats lower the cost of cutting expenditures

fiscal transfers and fiscal sustainability we examine whether the u s and german state governments pursue sustainable fiscal policies taking into account fiscal transfers using panel data techniques we investigate whether the debt to gdp ratio had a positive influence on the primary surplus bohn model we show that including excluding fiscal transfers changes the results if fiscal transfers are not included in the primary surplus the test results do not indicate that the u s and german state governments pursued sustainable fiscal policies our results also suggest that fiscal transfers were positively related to debt these findings indicate that intergovernmental transfers have implicitly subsidized debts

migration and cross border financial flows migration facilitates the flow of information between countries thereby reducing informational frictions that potentially hamper cross country financial flows using a gravity model migration is found to be highly correlated with financial flows from the migrant s host country to her home country the correlation is strongest where information problems are more acute e g between culturally more distant countries for asset types that are more informational sensitive and for the type of migrants that are most able to enhance the flow of information on their home countries namely skilled migrants these differential effects are interpreted as evidence for the role of migration in reducing information frictions between countries

how sticky is sticky enough a distributional and impulse response analysis of new keynesian dsge models in this paper we add to the literature on the assessment of how well data simulated from new keynesian dynamic stochastic general equilibrium dsge models reproduce the dynamic features of historical data in particular we evaluate sticky price sticky price with dynamic indexation and sticky information models using impulse response and correlation measures and via implementation of a distribution based approach for comparing possibly misspecified dsge models using simulated and historical inflation and output gap data one of our main findings is that for a standard level of stickiness i e annual price or information adjustment the sticky price model with indexation dominates other models we also find that when a lower level of information and price stickiness is used i e bi annual adjustment there is much less to choose between the models see bils and klenow 2004 for evidence in favor of lower levels of stickiness this finding is due to the fact that simulated and historical densities are much closer under bi annual adjustment

migrants intentions to return home and capital transfers a study of tongans and samoans in australia this article examines the attributes of migrants from the pacific island states of tonga and samoa living in australia to assess the extent to which return migrants could contribute to the human and physical capital stock of the migrant sending countries it also examines the impact of intention to return on remittances and asset accumulation the study finds that very few migrants plan to return home and very little evidence that those who plan to return embody significant human capital education experience and skills intention to return may be important nevertheless since those who plan to return remit significantly more than those that do not and also accumulate far more physical capital at home than those that do not intend to return

a model of political competition with citizen candidates the authors develop a model of electoral competition in which citizens choose whether or not to run as candidates a winner implements her favorite policy the equilibrium number of candidates depends negatively on the cost of running and positively on the benefits of winning for some parameter values all equilibria under plurality rule have exactly two candidates whose positions are distinct two candidate elections are more likely under plurality rule than under a runoff system the candidates positions are less differentiated under a runoff system there exist equilibria under both systems in which some candidates have no chance of winning