political cycles in oecd economies this paper studies whether the dynamic behaviour of gnp growth unemployment and inflation is systematically affected by the timing of elections and of changes of governments the sample include the last three decades in 18 oecd economies we explicitly test the implication of several models of political cycles both of the opportunistic and of the partisan type also we confront the implication of recent rational models with more traditional approaches our results can be summarized as follows a the political business cycle hypothesis as formulated in nordhaus 1975 on output and unemployment is generally rejected by the data b inflation tends to increase immediately after elections perhaps as a result of pre electoral expansionary monetary and fiscal policies c we find evidence of temporary partisan differences in output and unemployment and of long run partisan differences in the inflation rate as implied by the rational partisan theory by alesina 1987 d we find virtually no evidence of permanent partisan differences in output growth and unemployment

an examination of ethical influences on the work of tax practitioners as a contribution to the continuing debate about tax practitioner ethics this paper explores the main streams of western ethical thought that are relevant to tax practitioners work most typically deontology and consequentialism although virtue ethics and distributive justice are also considered it then goes on to consider the impact of such ethical influences on the professional ethical codes of conduct that govern tax practitioners work with specific reference to the uk and ireland and attempts to unravel the complex work and ethical environment of the practice of tax in terms of tax compliance and tax avoidance the paper then examines the prior studies on tax practitioners and ethics and the type of dilemmas that practitioners face in the context of their work the paper proceeds to examine empirically the extent to which tax practitioners take a consequentialist versus a deontological approach in their reasoning about moral dilemmas this is carried out by an innovative use of the defining issues test

europe vs america institutional hysteresis in a simple normative model we show how the differences in us and european institutions can arise in a normative model the paper focuses on the labor market and the government s decision to set unemployment benefits in response to an unemployment shock the government balances insurance considerations with the tax burden of benefits and the possibility that they introduce adverse incentive effects whereby benefits increase unemployment it is found that when an adverse shock occurs benefits should be increased most when the adverse incentive effects of benefits are largest adjustment costs of changing benefits introduce hysteresis and can help explain why post oil shock benefits remained high in europe but not in the us desirable features of the model are that we obtain an asymmetry out of a symmetric environment and that the mechanism yielding hysteresis is both simple requires the third derivative of the utility function to be non negative and self correcting empirical evidence concerning the role of corporatism is discussed

the choice between market failures and corruption because government intervention transfers resources from one party to another it creates room for corruption as corruption often undermines the purpose of the intervention governments will try to prevent it they may create rents for bureaucrats induce a misallocation of resources and increase the size of the bureaucracy since preventing all corruption is excessively costly second best intervention may involve a certain fraction of bureaucrats accepting bribes when corruption is harder to prevent there may be both more bureaucrats and higher public sector wages also the optimal degree of government intervention may be nonmonotonic in the level of income

corruption a review as is increasingly recognised in academic literature and by international organisations corruption acts as a major deterrent to growth and development the aim of this survey is to organise and summarise existing theoretical and empirical work on corruption with a view to identifying opportunities for further research the paper begins with a brief overview of key definitions of corruption and then turns to a review of the factors that favour or deter the growth of corruption together with a brief look at related models this is followed by an examination of the consequences of corruption for society and the consideration of measures that might help to reduce corruption the paper ends with suggestions for future research and includes summaries of data sources and key variables for use in this research

the italian recession of 1993 aggregate implications of microeconomic evidence we use household level data covering a ten year period 1984 to 1993 to investigate the likely determinants of the italian recession of 1993 the first year after wwii when private consumption fell consumption fell most for working age households and for the self employed our evidence is consistent with the response to permanent negative shocks due to the major pension reform of 1992 and the introduction of stricter tax compliance measures for the self employed this is still true when we control for the role played by job losses and the collapse of the retail sector that characterized the early 1990s

beliefs about the determinants of success and employment protection abstract we show that part of the international variation in employment laws is due to different beliefs about the impact of hard work as opposed to luck and connections on success in societies where a greater proportion of people relate their life prospects to chance and connections stronger employment protection is in place the prevalence of such beliefs is likely to hamper labor market reforms

unemployment labor market reform and monetary union monetary union such as the economic and monetary union in europe emu may affect incentives for labor market reform and thus equilibrium unemployment through several mechanisms if an inflation bias exists there is usually a stronger incentive to reduce equilibrium unemployment through national reform outside rather than inside the emu absent such a bias emu membership could lead to more reform one reason is that reform may increase wage flexibility which can substitute for monetary policy in the emu another reason could be a precautionary motive for low equilibrium unemployment to reduce the utility cost of increased macroeconomic variability in the emu

corruption and infrastructure at the country and regional level abstractthis paper examines the relationship between corruption and infrastructure at both the country and regional level using the world bank s enterprise surveys data a statistically significant and considerable relationship is established between the measure of corruption in the macro data and the measures of transportation and electricity infrastructure countries with more corruption tend to have worse infrastructure at the regional level the key result is unchanged the magnitude and significance of this result is shown to vary by global region two stage least squares results using distance from the equator as an instrument at the macro level support the simple ordinary least squares ols finally it is shown that within country variation in corruption has a significant effect on regional infrastructure

reward structures and the allocation of talent as relative rewards that different professions receive are a key factor in the allocation of talent what determines the reward structure of a society is an important question this paper develops an equilibrium model of the allocation of talent between productive and unproductive activities such as rent seeking the existence of rent seeking creates a negative externality on productive agents and implies that relative rewards are endogenously determined the same externality can also lead to the existence of multiple equilibria each with different reward structures in a dynamic setting allocations of past generations as well as expectations of future allocations influence current rewards and the society may get trapped in a rent seeking steady state equilibrium the paper also discusses how the non pecuniary reward structure can be influenced by equilibrium selection and a historical example that suggests the presence of a causal link from the allocation of talent to non pecuniary rewards

threshold effects of human capital schooling and economic growth abstract empirical growth studies have often found average years of schooling to be unrelated with economic growth this note shows that the significant positive effect of schooling can only be realized after an economy crosses a threshold level of development

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

on compliance with ethical standards in tax return preparation the statements on responsibilities in tax practice srtps provide guidance to the cpa when making decisions in tax practice many of these decisions are ethical in nature and have implications for tax compliance in this study a survey methodology is used to test whether the srtps affect decisions that cpas make the findings suggest that a clear majority of cpas follow the srtps when making ethical decisions relating to tax return preparation and that cpas follow the srtps more often than unlicensed preparers on half the issues tested however a statistically significant number of cpas do not follow the srtps and cpas do not follow the srtps any more often than unlicensed tax preparers on three issues

the consequences of rigid wages in search models the standard theory of equilibrium unemployment the mortensen pissarides search and matching model cannot explain the magnitude of the business cycle fluctuations in two of its central elements unemployment and vacancies modifying the model to make the present value of wages unresponsive to current labor market conditions amplifies fluctuations in unemployment and vacancies by an order of magnitude significantly improving the performance of the model despite this the welfare consequences of such rigid wages is negligible jel e24 e32 j30 j41 j63 j64

a positive theory of the earnings relationship of unemployment benefits in a wage bargaining model a stronger earnings relationship of unemployment benefits may reduce wages therefore the benefit structure significantly influences profits and trade union utility raising the question as to how the benefit structure is determined in the political process we consider a government that chooses the earnings relationship in order to maximize its political support our model predicts a strong earnings relationship under right wing governments and a weak relationship when unions are influential using panel data for 19 oecd countries we find support for these theoretical predictions moreover we show that the earnings relationship varies negatively with openness

threshold effects of corruption theory and evidence summary we examine the impact of corruption on the quality of public infrastructure we propose a model in which private vendors supply governments with inputs necessary for the production of public goods asymmetric information between the two parties creates opportunities for vendors to earn profits these profits can be re distributed to government bureaucrats without impacting on the contractual form as long as firms do not operate at a loss thus corruption adversely affects the provision of public goods only when it crosses a threshold these results are examined in a sample of up to 125 countries consistent with our theory we find strong evidence of a corruption threshold

the political geography of the eurocrisis the european union provided a mixed response to the 2008 financial crisis on the one hand it refused to pursue fiscal integration through a common budget on the other it introduced significant transfers between countries that were designed to produce financial stabilization the authors analyze this response as the outcome of democratic constraints on eu leaders given the eu s current institutional structure citizens preferences pose a binding constraint on what leaders can do as these preferences limit the scope of risk pooling among members and the degree of political tolerance for different courses of action the authors show that citizens preferences reflect differences in the geography of income production regimes and institutional organization the heterogeneity of constituencies redistribution preferences combined with a diverse economic geography helps to explain why political constraints on national governments prevent them from engaging in further fiscal integration by contrast externalities among member states shift the preferences of citizens who may experience negative effects and make international redistribution politically feasible the authors analyze these two mechanisms and present novel empirical results on the determinants of preferences for fiscal integration and international redistribution in the aftermath of the eurocrisis

the internationalisation of public welfare policy with increasing globalisation of knowledge there are increased opportunities to learn from the experience of policy interventions elsewhere this paper presents evidence on the extent of international convergence in public policy with particular focus on labour welfare savings and retirement policy questions addressed in this framework include to what extent is policy diffusion or convergence a real and relevant phenomenon what role have economists played in the transfer of policy across national domains has policy transfer led to better public policy are there any practical limitations to policy convergence

from labor to finance understanding the failure of socialist economic policies in spain this article seeks to explain the spanish socialist party s psoe s failure to reverse spain s dismal employment record during the course of its long government tenure from 1982 until 1996 most efforts to explain spain s position at the extreme of the unemployment spectrum in europe follow the prevalent tendency in the comparative political economy literature by giving causal primacy to labor market institutions this article challenges this labor market centered view by arguing that the failure of the socialist government s economic policy strategy is to be found in the interaction of two other factors the biased course of financial liberalization and the perverse effects of the psoe s macroeconomic policy strategy on inflation and on the process of social concertation national wage bargaining the article also seeks to explain the psoe s choices in these policy areas

small system modelling of real wages inflation unemployment and output per capita in italy 1970 1994 the relationships between real wages output per capita inflation and unemployment in italy between 1970 and 1994 are modelled using a cointegrated vector autoregression there is evidence of a change in the underlying equilibria and in the dynamic evolution of the variables probably associated with the substantial changes in many sectors of the italian economy after 1979 alternative ways to model structural change in the italian labour market are considered in adopting a split sample approach the results favour an hysteresis interpretation of unemployment

a politico economic analysis of minimum wages and wage subsidies abstract this paper constructs a political economy model in which minimum wages are determined according to majority voting using the minimum wage scheme as the status quo we show that the replacement of minimum wages by wage subsidies is not likely to receive political support unless it is supplemented by increased taxation of profits after tax profits are also likely to increase

educational policies in a long run perspective in this paper we study the effects of educational reforms on school attainment we construct a dataset of relevant reforms that occurred at the national level over the last century and match individual information from 24 european countries to the most likely set up faced when individual educational choices were undertaken our identification strategy relies on temporal and geographical variations in the institutional arrangements controlling for time country fixed effects as well as for country specific time trend by characterizing each group of reforms for their impact on mean years of education educational inequality and intergenerational persistence we show an ideal policy menu which has been available to policymakers we distinguish between groups of policies that are either inclusive or selective depending on their diminishing or augmenting impact on inequality and persistence finally we correlate these reform measures to political coalitions prevailing in parliament finding support for the idea that left wing parties support reforms that are inclusive while right wing parties prefer selective ones michela braga daniele checchi and elena meschi

organizational influences on individual ethical behavior in public accounting a framework is presented for studying ethical conduct in public accounting practice four levels of analysis are distinguished individual local office multi office firm and professional institute several propositions are derived from the framework and discussed 1 the effects of ethical vs unethical behavior on an accountant s prospects for advancement are asymmetrical in nature 2 the way individuals perceive or frame the decision problem at hand will make an ethical response more or less likely 3 the economic incentives present in competitive markets influence the work goals of firms and offices and lead to ethical dilemmas for individuals and 4 initiatives at the firm or institute level aimed at compliance with professional ethical standards will by themselves have little effect on individual ethical behavior research into ethical behavior of practitioners will capture self conscious and biased responses unless it is designed so as to permit indirect observation and recording of spontaneous comments to assure valid research findings practitioners should be interviewed and their motives assessed indirectly a longitudinal approach is recommended beginning with students who are choosing an accounting career two types of questions for use in these interviews are described

corruption and development a review of issues in this paper we start with a discussion of some of the different denotations of the problem of corruption we then consider the ways in which the damaging consequences of corruption operate in a developing economy while not ignoring its possible redeeming features in some cases we pursue the question of why corruption is perceptibly so different in different societies and also persistent finally we examine the feasible policy issues that arise in this context

the determination of unemployment benefits while much empirical research exists on labor market consequences of unemployment benefits there is remarkably little evidence on the forces determining benefits we present a simple model where workers desire insurance against unemployment risk and benefits increase the unemployment rate we then conduct one of the first empirical analyses of the determinants of the parameters of the benefit system using data for developed countries for 1971 89 controlling for year and country fixed effects and the government s political color we find evidence that the level of benefits falls when the unemployment rate is high this is consistent with wright s tax effect

vacancy durations a model for employer s search this paper investigates a dutch data set on vacancy durations and numbers of applicants to enquire employers search strategies a nonsequential search process assumes that most vacancies are filled from a pool of applicants which is formed shortly after the posting of the vacancy the time spent on recruiting applicants and the duration of the selection process are estimated with a proportional hazard model via the arrival and attrition rates of applicants

unemployment and the labour management conspiracy we study a model in which management and a union bargain sequentially first choosing a rule that will later determine the level of employment and then choosing a wage the government then chooses an output or an employment subsidy an exogenous natural turnover rate in the unionized sector creates unemployment whenever the union wage exceeds the competitive wage government intervention can increase both the equilibrium amount of unemployment and worsen the intersectoral allocation of labour because of the induced change in the endogenous wage unemployment weakens but does not eliminate the possibility of a labour management conspiracy

exploring the political economy of labour market institutions labour markets how reforms took place many economists argue that the european unemployment problem relates to large labour market rigidities this paper argues that many of those inflexibilities and the underlying institutional regulations can be understood as the outcome of political influence by incumbent employees this is because many policies that increase unemployment actually benefit these insiders an empirical investigation of the determinants of labour market institutions demonstrates that the observations are consistent with this view the findings imply 1 higher exposure of the employed to unemployment facilitates a reduction in the level of employment protection 2 unemployment benefits are lower the more employment reacts to wages 3 a higher level of unemployment and the existence of a right wing government slow down the growth rate of the minimum wage giles saint paul

recognizing ethical issues an examination of practicing industry accountants and accounting students it has long been recognized that accountants practicing in business settings have a dual role 1 as employees they are bound to the organization and 2 as professionals they are bound by the profession s code of ethical conduct westra journal of business ethics 5 2 119 128 1986 these two roles highlight the need to recognize and consider both the ethical and economic implications of their decisions practicing industry accountants are commonly involved in a broad range of their firm s business practices and decision making and are increasingly exposed to the commercial aspects of their companies also during their education they were trained on their professional responsibilities however in general this education was not recent and may not have been reinforced by contrast accounting students have been recently and repeatedly exposed to and have knowledge about their professional responsibilities as an accountant but limited if any exposure to the commercial aspects of business consequently our first hypothesis predicts that the ethical sensitivity of practicing industry accountants will be lower than that of accounting students we find limited support for this hypothesis second we also examine company reward structure and predict that ethical sensitivity will be lower for those in a company with a reward structure narrowly focused only on financial goals as compared to those in a company with a broad reward structure e g including rewards for both financial and non financial goals third we predict that the difference in ethical sensitivity levels between those in a company with a narrow reward structure as compared to those in a company with a broad financial reward structure will be higher for practicing industry accountants compared to accounting students results from our study generally support these last two predictions ethical sensitivity is lower for those in a company with a reward structure narrowly focused only on financial goals as compared to those in a company with a broad reward structure suggesting that companies may be able to increase ethical awareness in their organizations by including non financial goals in their reward structures

the political economy of public employment programs abstract what are the welfare implications of a political equilibrium where the choice of active labor market programs almps have to please the employed majority this issue is examined in an equilibrium model featuring matching frictions and worker firm wage bargaining it turns out that the welfare consequences depend on the nature of almps and the political weight attributed to firm interests if firm values carry little political weight and programs contribute to wage pressure the employed will opt for excessive program activity

social policy by popular demand why are unemployment benefits more generous in some countries this article argues that citizens trade off the redistributive and insuring effect of social insurance as a result the distribution of risk in a society has important consequences via popular demand for social policy making at the microlevel the article shows that in addition to income the risk of unemployment is a key predictor of individual level preferences for unemployment benefits based on the microlevel findings the article argues that at the macrolevel the homogeneity of the risk pool is an important determinant of benefit generosity the more equally unemployment risk is distributed the higher unemployment replacement rates are empirical testing at both levels finds support for this account of social policy by popular demand

the choice of insurance in the labor market employment protection and unemployment benefits are considered the most prominent insurance devices for workers to protect themselves against the risk of unemployment it occurs that societies either choose a high level of employment protection relative to unemployment benefits or vice versa this paper explains where countries locate on this trade off it is argued that higher coverage of voters out of the labor force with intra household transfers yields a politico economic equilibrium with relatively high employment protection and relatively low unemployment benefits cross country data and survey data on voters preferences are presented that corroborate the outcomes of the model

labor market reforms and the monetary policy environment abstract do labor market reforms initiated in periods of loose monetary policy yield different outcomes from those that were introduced in periods when monetary tightening prevailed the answer to this question is a firm yes we document the vital role of accommodative monetary policy for an increase in unemployment benefits spending on active labor market policies and labor market deregulation to boost growth and reduce unemployment it was found that if interest rates cannot be reduced then unemployment benefits should be lowered a more rigid labor market it was further found can deliver expansionary effects especially during the crisis period

a multidimensional analysis of tax practitioners ethical judgments this study investigates professional tax practitioners ethical judgments and behavioral intentions in cases involving client pressure to adopt aggressive reporting positions an issue that has been identified as the most difficult ethical moral problem facing public accounting practitioners the multidimensional ethics scale mes was used to measure the extent to which a hypothetical behavior was consistent with five ethical philosophies moral equity contractualism utilitarianism relativism and egoism responses from a sample of 67 tax professionals supported the existence of all dimensions of the mes other than egoism regressions of ethical judgments and behavioral intentions on the mes dimensions indicate that ethical decision making is most heavily influenced by the moral equity dimension followed by the contractualism dimension in contrast the utilitarianism and relativism dimensions were only related to ethical judgments and behavioral intentions in isolated instances

unemployment insurance in theory and practice a hallmark of modern labor economics is the close interplay between the development of theory data sources and econometric testing the evolution of the economic analysis of unemployment insurance provides a good illustration new theoretical approaches in particular job search theory have inspired a large amount of empirical research some of it methodologically innovative and most of it highly relevant for economic policy the paper presents a broad survey and an assessment of the economic analysis of unemployment insurance as it has evolved since the 1970s

the role of labor markets for euro area monetary policy in this paper we explore the role of labor markets for monetary policy in the euro area in a new keynesian model in which labor markets are characterized by search and matching frictions we first investigate to which extent a more flexible labor market would alter the business cycle behavior and the transmission of monetary policy we find that while a lower degree of wage rigidity makes monetary policy more effective i e a monetary policy shock transmits faster onto inflation the importance of other labor market rigidities for the transmission of shocks is rather limited second having estimated the model by bayesian techniques we analyze to which extent labor market shocks such as disturbances in the vacancy posting process shocks to the separation rate and variations in bargaining power are important determinants of business cycle fluctuations our results point primarily towards disturbances in the bargaining process as a significant contributor to inflation and output fluctuations in sum the paper supports current central bank practice which appears to put considerable effort into monitoring euro area wage dynamics and which appears to treat some of the other labor market information as less important for monetary policy

the rise in unemployment a multi country study one of the most remarkable features of recent economic history has been the remorseless rise in unemployment throughout the industrialized countries however while the trend to higher unemployment is universal the experience of individual countries also differs widely the increase is especially marked within the european community where unemployment rates rival those reached in the interwar years by contrast in the scandinavian countries and japan unemployment is lower and has risen very much less experience in the united states lies somewhere between these extremes and in the last few years unemployment there has fallen sharply

a non walrasian labor market in a monetary model of the business cycle abstract this paper investigates to what extent a new keynesian monetary model with the addition of a microfounded non walrasian labor market solely based on union bargaining is able to replicate key aspects of the business cycle the presence of a representative union offers an explanation for two features of the cycle first it generates an endogenous mechanism which produces persistent responses to both supply and demand shocks second labor unionization reduces the elasticity of marginal costs to output this leads to lower inflation volatility model simulations show that the unionized framework can better reproduce european business cycle data than can a model with a competitive labor market

before it gets better the short term employment costs of regulatory reforms the article exploits long time series of industry level data in a group of oecd countries to analyze the short term labor market effects of reforms that lower barriers to entry and dismissal costs estimates show that both policies induce non negligible transitory employment losses the strength of these effects varies depending on the underlying industry and labor market structure and on cyclical conditions the employment cost of deregulation is higher in economic downturns and negligible in good times these findings prove robust to a set of specification and sensitivity checks and are confirmed after standard reverse causality and falsification tests

the redistributive roles of unemployment insurance and the dynamics of voting abstract public unemployment insurance is analyzed as the majority voting equilibrium policy of a dynamic stochastic economy abstracting from incentive effects we focus on redistribution some results are because of the distribution of heterogeneous employment opportunities public insurance may be democratically chosen even if complete private markets exist and because of the dynamics even when agents are intrinsically homogeneous the equilibrium benefit level or duration benefit schedule deviates from what has been described as optimal in the literature the effects of differences in the average frequency or duration of unemployment on equilibrium taxes and benefits are investigated with some unanticipated results

wage size relation and the structure of work force composition in italian manufacturing firms in this paper we study the impact of firms productivity and scale of activity on the cost of labour for italian manufacturing firms investigating how the work force composition affects the total expenditures for wages our analysis reveals that once productivity differences among firms are accounted for size still retains a positive effect on cost of labour we show that the source of this phenomenon is the relatively higher proportion of non production workers in bigger firms which results in a cost of labour for white collar workers that increases with increasing firm size copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

aggressive tax avoidance a conundrum for stakeholders governments and morality this is the conundrum that gives rise to the issue of tax avoidance although governments always seem to lack sufficient funds to support the needs of society tax codes are often written that offer a way out of paying taxes for some but not all constituents the ways out are referred to as loopholes that allow taxpayers to avoid taxes this paper first defines the basic terms of tax avoidance and tax evasion and then offers an ethical review of the morality of aggressive tax avoidance aggressive tax avoidance is then addressed in relationship a corporate entity s tone at the top the conclusion is drawn that use of the letter of the law to avoid payment of taxes sorely needed by governments for the good faith provision of public goods and services is ethically unacceptable several suggestions for change are provided including a new financial statement disclosure and the possibility of a published corporate ethics report

crossing the river a comparative perspective on italian employment dynamics crossing the river a comparative perspective on italian employment dynamics this paper studies the unprecedented job destruction which occurred throughout europe during the recession of the early 1990s it raises the question whether changes in the institutional structure of various countries labour markets may have deepened the normal effects of the recession institutional legal and sociopolitical safety nets were used to protect many european employees from technological and demand shocks throughout the 1970s and early 1980s important steps have since been taken to deregulate industrial relations european labour markets may currently be in the middle of the river they already experience the negative employment aspects of an american labour market without yet enjoying its benefits based on a study of several countries the article concludes that the social costs of deregulation will be smallest if the intended destination of the transition is reached credibly and without hesitation policy makers must point decisively towards a well defined riverbank rather than leaving the labour market in the middle of the stream giuseppe bertola and andrea ichino

vested interests in a positive theory of stagnation and growth we study a positive theory of stagnation and growth aimed at understanding the large variations in growth outcomes across actual economies the theory points to the fundamental role played by vested interests in determining policies which are key to the growth process some agents seek to prevent the adoption of new technologies we develop a model of technology adoption and show how technological innovation may sow the seeds of its own destruction in particular we find that the equilibrium is characterized by a long cycle of stagnation and growth over this cycle incumbents are phased out of the economy will new innovation occur in formalizing our theory we make a methodological contribution by characterizing dynamic voting equilibria when voters must forecast the effects of different current policies on future prices and policy outcomes

emergence and persistence of inefficient states we present a theory of the emergence and persistence of inefficient states based on patronage politics the society consists of rich and poor the rich are initially in power but expect to transition to democracy which will choose redistributive policies taxation requires the employment of bureaucrats by choosing an inefficient state structure the rich may be able to use patronage and capture democratic politics so reducing the amount of redistribution in democracy moreover the inefficient state creates its own constituency and tends to persist over time intuitively an inefficient state structure creates more rents for bureaucrats than would an efficient one when the poor come to power in democracy they will reform the structure of the state to make it more efficient so that higher taxes can be collected at lower cost and with lower rents for bureaucrats anticipating this when the society starts out with an inefficient organization of the state bureaucrats support the rich who set lower taxes but also provide rents to bureaucrats we obtain that the rich bureaucrats coalition may also expand the size of bureaucracy excessively so as to generate enough political support the model shows that an equilibrium with an inefficient state is more likely to arise when there is greater income inequality when bureaucratic rents take intermediate values and when individuals are sufficiently forward looking jel p16 h11 h26 h41

ethics in tax practice a study of the effect of practitioner firm size while much of the empirical accounting literature suggests that if differences do exist big four employees are more ethical than non big four employees this trend has not been evident in the recent media coverage of big four tax practitioners acting for multinationals accused of aggressive tax avoidance behaviour however there has been little exploration in the literature to date specifically of the relationship between firm size and ethics in tax practice we aim here to address this gap initially exploring tax practitioners perceptions of the impact of firm size on ethics in tax practice using interview data in order to identify the salient issues involved we then proceed to assess quantitatively whether employer firm size has an impact on the ethical reasoning of tax practitioners using a tax context specific adaptation of a well known and validated psychometric instrument the defining issues test

fiscal adjustments do labor and product market institutions matter this paper investigates the role played by labor and product market institutions in determining the likelihood of initiating and of successfully concluding a fiscal adjustment using data for 16 oecd countries over the period 1970 to 2000 we find that a less generous unemployment benefit system rather than temporary caps on spending e g wage freezes contributes to the success of fiscal consolidation weaker forms of bargaining coordination and centralization facilitate the fiscal adjustment effort on the other hand product market deregulation and more flexible employment protection legislation do not contribute positively to fiscal consolidation