the effective tax rate and the pretax rate of return abstract this paper presents new estimates of the taxes paid on nonfinancial corporate capital on the pretax rate of return to capital and on the effective tax rate the basic time series show that both the pretax rate of return and the effective tax rate have varied substantially in the past quarter century an explicit analysis indicates that after adjusting for different aspects of the business cycle pretax profitability was between one and 1 5 percentage points lower in the 1970s than in the 1960s the rate of profitability in the 1960s was also about one half of a percentage point greater than the profitability in the 7 years of the 1950s after the korean war changes in productivity growth in inflation in relative unit labor costs and in other variables are all associated with changes in profitability none of these variables however can explain the differences in profitability between the 1950s 1960s and 1970s looking at broad decade averages the effective tax rate and the pretax rate of return move in opposite directions lower pretax profits occuring when the tax rate is high there thus appears to have been no tendency for pretax profits to vary in a way that offsets differences in effective tax rates

do cigarette producers price discriminate by state an empirical analysis of local cigarette pricing and taxation abstract this study analyzes the interactive effects of oligopoly pricing state taxation and anti smoking regulations on retail cigarette prices by state using panel data for the 50 us states between 1960 and 1990 the results indicate that cigarette producers do price discriminate by state though the effect is not large relative to the final retail price there are two further results 1 state taxes are more than passed on a 1 cent state tax increase results in a price increase of 1 11 cents and 2 sellers offset state and local anti smoking laws with lower prices thereby blunting effects of the regulations

impact of cost shocks on consumer prices in vertically related markets the case of the french soft drink market we develop a structural econometric model of the vertical contracts between soft drink manufacturers and retailers to assess the impact of taxes or changes in production costs on consumer prices using individual data on food purchases from a representative survey of 19 000 french households in 2005 we estimate consumer demand using a random utility approach among a set of possible vertical relationships we select the model that best fits the data we evaluate the pass through rate of changes in input costs sugar or of taxes and show that the industry over shifts cost changes or excise taxes to the consumers this result challenges the belief that firms do not pass on the full extent of cost changes or excise taxes to consumers

estimating dynamic demand for cigarettes using panel data the effects of bootlegging taxation and advertising reconsidered abstracct a dynamic demand for cigarette consumption is estimated using pooled data of 46 states over the period 1963 to 1980 a price elasticity of 0 2 and an insignificant income elasticity is found using pooled estimation techniques the bootlegging effect is modeled explicitly using neighboring price the effect is found to be significant two major policy issues are analyzed in light of these new estimates 1 cigarette taxation is found to be an effective tool for generating revenues even though there may be spillover effects to neighboring states where bootlegging is significant 2 the effects of the fairness doctrine act and the advertising ban on cigarette consumption are re examined we find mild support for the effectiveness of subsidized anti smoking messages in reducing cigarette consumption and no support for the thesis that the ban on advertising helps to increase per capita consumption

the demand for smokeless tobacco among male high school students in the united states the impact of taxes prices and policies despite the deleterious effects of smokeless tobacco use very little is known about the effects of tobacco control policies on smokeless tobacco demand this paper uses data extracted from the 1995 2001 national youth risk behavior surveys yrbs augmented with tobacco taxes prices and policies to estimate smokeless tobacco demand equations among male high school students the estimates indicate that higher smokeless tobacco taxes would significantly reduce the number of male students who use smokeless tobacco and the number of days smokeless tobacco users use smokeless tobacco moreover smokeless tobacco products and cigarettes were found to be economic complements in consumption

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

measuring and testing advertising induced rotation in the demand curve advertising can rotate the demand curve if it changes the dispersion of consumers valuations we provide an elasticity form measure of the advertising induced demand curve rotation in five demand models and test for its presence in the us nonalcoholic beverage market the almost ideal demand system aids model reveals that doubling advertising spending rotates the demand curves clockwise for milk and coffee and tea with associated slope changes of 7 and 12 soft drink advertising rotates its demand curve counterclockwise our policy suggestion is that milk and soft drink firms time advertising to coincide with high and low price periods respectively

do expenditures on tobacco control decrease smoking prevalence effectiveness of tobacco control programmes in reducing smoking prevalence during 2001 to 2005 is examined tobacco control spending is found to exert no significant effects on smoking prevalence across the 50 states cigarette prices are found to lower prevalence of daily smokers but exert no effect on nondaily smoking prevalence several reasons are suggested for why these results might conflict with previous research these include that most previous studies examined two states california and massachusetts with long standing tobacco control programmes and that most studies examined periods in which many of the states in their samples did not actively fund their programmes another reason may be that unlike most previous studies this study controls for the possibility that tobacco control spending is endogenous when for example states exhibiting relatively low smoking prevalence are also states with relatively high distaste for smoking and accordingly fund tobacco control programmes more generous

testing hypotheses about firm behavior in the cigarette industry data on the effects of excise taxes are used to investigate the level of competition in the cigarette industry a lower bound on the numbers equivalent of firms in the context of the conjectural variations model is derived and estimated results point to at least a moderately high level of competition and in particular allow for the rejection of the perfect cartel model this paper relies on comparative statics results and hence circumvents recent criticisms of a study of monopoly behavior in the cigarette industry

the effectiveness of anti smoking legislation a review abstract this survey focuses on government efforts to curb the use of undesirable goods notably tobacco products we synthesize the economics literature and examine the effectiveness of government curbs on tobacco consumption through non price controls such as bans on cigarette advertising health warnings and workplace smoking bans and price measures or higher prices through higher taxes this literature review is unique in that we do not merely aim to provide a summary of the literature rather our main focus is to draw conclusions from the literature regarding the effectiveness of alternate policy measures across countries in checking smoking and to provide directions suggestions for extending the scope of government intervention to other tobacco products

litigation and the value of tobacco companies this study determines how the recent wave of litigation affected returns and systematic risk in the tobacco industry we test for changes in stock prices coinciding with litigation announcements using a difference in difference event study methodology unfavorable information concerning litigation reduced tobacco returns we find a decline in systematic risk as traditionally measured by the covariance between industry returns and returns to a diversified efficient portfolio this decline may imply a substantial decline in the cost of equity capital of at least 2 2 after the period of litigation which we attribute to common cost shocks experienced by the companies participating in the master settlement agreement combined with the oligopolistic structure of the industry

measurement of monopoly behavior an application to the cigarette industry a simple scheme is proposed to measure monopoly pricing behavior the coefficient of the tax rate term in a price equation identifies the ratio of price to marginal cost no direct measurement of costs is required so a major problem for other empirical studies of monopoly is avoided empirical results for cross section time series data support rejection of atomistic competition but also provide evidence against the operation of an effective cartel in the cigarette industry the model represents an alternative interpretation of related results in a recent paper by barzel application of the methodology to other markets is feasible

information shocks and cigarette addiction views from dynamic panels with common structural changes in this article we attempt to evaluate the impact of various information shocks on cigarette consumption in contrast to the existing studies we do not impose any break points a priori we use recently developed techniques for sample splitting in the data on us cigarette demand and find that using a time index as a transition variable can cluster cigarette demand into four distinct regimes in the past four decades a myopic to rational switch in cigarette consumption behaviour was observed in response to various anti smoking information events in particular we find strong evidence in support of the rational addiction model in the 1980s and 1990s moreover in line with the theoretical prediction our estimate of the long run elasticity is twice as large as the short run elasticity our empirical framework should improve policy makers understanding of the dynamics of cigarette consumption in response to various anti smoking campaigns and stress the role of sound policy making in improving smoking con

maintaining and testing separability in demand systems we derive a general elasticity representation of the necessary and sufficient conditions for direct weak separability of the utility function parametric restrictions required to implement the separability conditions are presented for three common demand systems the almost ideal translog and rotterdam our empirical application uses the rotterdam model to test a few separable structures within a complete u s demand system emphasizing food commodities results based on size corrected likelihood ratio tests provide support for commonly used separability assumptions about food and meat demand

who pays sales taxes evidence from french vat reforms 1987 1999 the point of this paper is to provide visual evidence of tax shifting and to measure empirically the distribution of the sales tax burden between consumers and producers for that purpose two french reforms are studied these reforms entail steep decreases of the vat rate september 1st 1987 the vat rate on car sales went down from the luxury rate of 33 33 to the full rate of 18 6 september 1st 1999 the vat rate on housing repair services went down from the full rate of 20 6 to the reduced rate of 5 5 the consumer share of the sales tax burden is 57 in the new car sales market and 77 in the housing repair services market

cigarette tax avoidance and evasion variation in state cigarette taxes provides incentives for tax avoidance through smuggling legal border crossing to low tax jurisdictions or internet purchasing when taxes rise tax paid sales of cigarettes will decline both because consumption will decrease and because tax avoidance will increase the key innovation of this paper is to compare cigarette sales data to cigarette consumption data from the behavioral risk factor surveillance system brfss i show that after subtracting percent changes in consumption residual percent changes in sales are associated with state cigarette tax changes implying the existence of tax avoidance i estimate that the tax avoidance response to tax changes is at least twice the consumption response and that tax avoidance accounted for up to 9 6 of sales between 1985 and 2001 because of the increase in tax avoidance tax paid sales data understate the level of smoking and overstate the drop in smoking i also find that the level of legal border crossing was very low relative to other forms of tax avoidance if states have strong preferences for smoking control they must pair high cigarette taxes with effective policies to curb smuggling and other forms of tax avoidance or employ alternative policies such as counter advertising and smoking restrictions

effectiveness of massachusetts comprehensive tobacco control program while massachusetts s comprehensive programme of excise taxes smoking bans and tobacco control has been argued to have significantly lowered cigarette consumption this is the first study to examine the comprehensive nature of its programme and to control for factors other than tobacco programmes themselves while examining effects on taxed cigarette sales examination indicates strong support for the hypotheses that taxed sales in massachusetts declined due to price increases changes in income and smuggling there is very limited support for the hypothesis that tobacco control spending or smoking bans contributed to falling cigarette sales possibilities are discussed that may explain why this study does not support most previous studies these include failure to control for numerous factors that probably also influenced sales that effects of tobacco control programmes might differ between states and that previous studies examined shorter time periods it is hoped that this article will foster further

estimating tax incidence market power and market conduct the european cigarette industry abstract recent theoretical work has shown that the incidence of ad valorem and specific taxes may differ and each may be over or under shifted onto consumers in the presence of imperfect competition these results are used to derive a method of estimating market power and conduct an application is made to the european cigarette industry previous empirical comparison of the incidence of ad valorem and specific taxes is limited for a group of countries with broadly similar cigarette industries there is evidence of undershifting of both taxes with the specific tax having a significantly greater impact on price the extremes of both perfect competition and monopoly can be rejected behaviour is no less competitive than the equivalent of cournot

can higher cigarette taxes improve birth outcomes abstract this study examines whether higher state cigarette taxes can be used to improve birth outcomes data on the outcomes of interest are taken from the 1989 1992 natality detail files generating a sample of roughly 10 5 million births the results suggest that smoking participation among pregnant women declines and average birth weights rise when excise taxes are increased these results can be used to form an instrumental variables estimate of the impact of smoking on birth weight this estimate is remarkably close to numbers from a random assignment clinical trial the smoking participation price elasticity is estimated to be 0 5

optimal commodity promotion when downstream markets are imperfectly competitive we investigate the optimal collection and expenditure of funds for agricultural commodity promotion in markets where the processing and distribution sectors may exhibit oligopoly and or oligopsony power the conditions that characterize optimal advertising intensity under perfect competition for funds generated from either per unit or lump sum taxes do not in general hold when marketing is imperfectly competitive simulation analyses show that imperfect competition always reduces farmers optimal advertising expenditure and that an imperfectly competitive marketing sector may capture half or more of the benefits from the funds that are expended copyright 2002 oxford university press

measuring tax incidence an application to mortgage provision in the uk this paper derives measures of the average and marginal incidence of a tax or subsidy in imperfect competition in the context of the uk housing market we argue that one form of mortgage common in the uk but not elsewhere the endowment mortgage exists primarily because of the structure of taxation in the uk we estimate the determinants of the choice of the type of mortgage and the size of mortgage conditional on the choice using data from the building societies association on 43 000 individual mortgages taken out between 1985 and 1989 the estimated parameters are an input to the incidence measures results suggest that between 70 and 80 of the additional subsidy to endowment mortgages is captured by lenders rather than borrowers

determinants of state tobacco control expenditures while centers for disease control and prevention believe that most state governments under fund tobacco control programs little is known about why large variation in spending exists between state governments this study explores reasons for spending variation through an econometric model of per capita spending on tobacco control programs that explores the effects of smoking prevalence while holding constant tobacco settlement funds state budget deficits and other factors that might also be expected to influence spending variation empirical evidence indicates no support for the hypothesis that states with high smoking prevalence spend more on tobacco control than other states this finding may be quite surprising to those working in areas of public health and clearly leads to many important policy questions regarding why the data indicate that funding does not appear to bear any relation to perceived public health problems as would be predicted if policymakers were following a rational needs approach

cigarettes and addiction information simulating the demand effects of the tobacco industry s conspiracy of silence although cigarette manufacturers were aware of the addictive properties of nicotine as early as 1962 the information did not become available to the us public until 1979 when the surgeon general disclosed it us department of health education and welfare 1979 this study simulates the impact this information would have had on the demand for cigarettes had it been released in 1962 the simulations build on past work by fenn et al 2001 who found evidence that the release of addiction information resulted in a structural shift in demand in 1979 in the present study the econometric results from fenn et al 2001 are used to compute simulated time paths for state level per capita consumption under the hypothetical scenario involving the earlier release of the addiction information using these simulated consumption paths the projected reductions in cigarette sales revenue are calculated these dollar figures provide a benchmark against which to judge the compensation amounts that the industry must

uncertainty and optimal social security systems this paper examines the annuity aspect of social security within the framework of an overlapping generations model the duration of life is assumed to be uncertain under a fully funded system demand for social security is determined by each generation so as to maximize expected lifetime utility taking into account the welfare of future generations under a pay as you go system with intergenerational transfers demand for retirement benefits by the working population takes into account taxes paid by descendants it is shown that the two modes of finance are equivalent in terms of all real aggregates effects of changes in expected lifetime and in the birth rate are analyzed starting at the optimal level a compulsory balanced increase in social security taxes and benefits is shown to increase short run savings

are alcohol tax hikes fully passed through to prices evidence from alaska on 1 october 2002 the state of alaska increased taxes on malt beverages from 0 35 per gallon to 1 07 per gallon increased taxes on wine from 0 85 per gallon to 2 50 per gallon and increased taxes on distilled spirits from 5 60 per gallon to 12 80 per gallon the net effect is that the tax on a standard serving rose from about 3 cents for beer 2 cents for wine and 4 cents for spirits to a uniform tax of 10 cents per standard serving of each type of alcohol beverage this paper uses primary data on alcoholic beverage prices in alaska to study a very basic question what was the impact of the tax hikes on prices an alcohol tax hike is often viewed as a public health policy tool to discourage excessive alcohol consumption and alcohol related problems such as drunk driving the impact of a tax hike on alcoholic beverage prices is a key link in the chain of the causality from the tax to public health economic theory and previous empirical studies mainly of taxes on goods other than alcoholic beverages do not provide very much guidance on what to expect following a tax hike it is an empirical question to answer the question i conducted telephone surveys just before and a year after the tax hike of on premise and off premise alcohol retail establishments across alaska

rising cigarette prices and rising obesity coincidence or unintended consequence economists have begun to debate if the rise in cigarette prices in the u s in recent decades has contributed to the nation s rise in obesity reaching conclusions that are surprisingly sensitive to specification i show that allowing for the effect to occur gradually over several years leads to the conclusion that a rise in cigarette prices is actually associated with a long run reduction in body mass index and obesity this result is robust to the different methodologies used in the literature i also provide evidence that indirect effects on exercise and food consumption may explain the counterintuitive result

understanding the soft budget constraint we propose a clarification of the notion of a soft budget constraint a concept widely used in the analysis of socialist transitional and market economies our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences in light of this interpretation we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics

advertising and us alcoholic beverage demand system wide estimates the effects of advertising on consumption of alcoholic beverages in the us are analysed the goal is to obtain evidence on the importance of advertising at the level of beverage demand beer wine spirits and for total consumption of alcohol per capita gallons of ethanol a three equation conditional demand system is estimated that includes own and cros beverage advertising as explanatory variables four models of the differential demand system are estimated including the rotterdam aid cbs and nbr models using annual us data for the period 1964 90 on beverage consumption prices expednitures and real advertising estimates are obtained of the complete matrix of own and cross elascities for each beverage price and advertising at the beverage level the results indicate a positive butr very small effect of advertising on beverage consumption with most of the impact due to wine advertising and non due to beer advertising there is no efect of advertising in the composite demand function for al

crowding out the role of state companies and the dynamics of industrial competitiveness in india this article examines growth patterns of government companies in india whether their presence has crowded out private entrepreneurial activity and whether there has been a decline in the competitiveness of india s industry measured as relative productive efficiency for a 45 year period from 1957 1958 to 2001 2002 there was a significant growth in the number of government companies in india that effectively crowded out the entry and growth of private enterprise this took place from the mid to late 1950s to the late 1980s and early 1990s correspondingly the amount of private equity capital invested in firms declined until the late 1980s and early 1990s when there was an upsurge of private investment activity another feature was that a small number of government companies absorbed most of the corporate sector equity investment in india the growth in the share of government companies in india that crowded out the entry and growth of private enterprises has had a significantly negative effect on india s industrial competitiveness after the introduction of reforms in 1991 there has been a significant crowding in by private enterprises displacing the government companies from their key position as holders of a very large portion of equity capital and also reversing the trend in the decline of competitiveness of indian industry as a whole copyright 2009 oxford university press

oligopoly power in the food and tobacco industries in this article we estimate and test for the degree of oligopoly power and economies of scale in forty food and tobacco industries using the new empirical industrial organization neio framework and four digit sic data lerner indices and elasticities of scale are compared throughout the entire food and tobacco industries t tests verify that all but three of these industries exert statistically significant degrees of oligopoly power and that over 82 of these industries exhibit nonconstant returns to scale the empirical results also provide estimates of the price elasticities of demand for each industry

complementarity and increasing returns in intermediate inputs abstract conventional analysis in the trade industrial organization literature suggests that when a country has some market power over an imported good some small level of protection must be welfare improving this is essentially a terms of trade argument that is reinforced if the imported goods are substitutes for domestic goods produced with increasing returns to scale goods that are initially underproduced in free trade equilibrium this paper notes that this result may not hold when 1 the imports are intermediates used in a domestic increasing returns industry and or 2 the intermediates are complements for domestic inputs produced with increasing returns we then demonstrate such an outcome with respect to mexican protection against imported auto parts using an applied general equilibrium model of the north american auto industry

excise tax avoidance the case of state cigarette taxes we conduct an applied welfare economics analysis of cigarette tax avoidance we develop an extension of the standard formula for the optimal pigouvian corrective tax to incorporate the possibility that consumers avoid the tax by making purchases in nearby lower tax jurisdictions to provide a key parameter for our formula we estimate a structural endogenous switching regression model of border crossing and cigarette prices in illustrative calculations we find that for many states after taking into account tax avoidance the optimal tax is at least 20 smaller than the standard pigouvian tax that simply internalizes external costs our empirical estimate that tax avoidance strongly responds to the price differential is the main reason for this result we also use our results to examine the benefits of replacing avoidable state excise taxes with a harder to avoid federal excise tax on cigarettes

a nearly global look at the dynamics of youth smoking initiation and cessation the role of cigarette prices this study investigates the role of cigarette prices on smoking initiation and cessation among youth in a sample of eight primarily non western low middle and high income countries with a particular focus on a subsample of 40 low and middle income countries lmics using split population duration models on longitudinally transformed individual data from the global youth tobacco survey gyts the average impact of cigarette prices in the presence of unobserved country heterogeneity and shifting cultural norms within countries is identified by the variation of cigarette prices within countries over time price increases are found to effectively reduce initiation in early youth and girls are considerably more responsive than boys the price elasticity of initiation in lmics is 0 82 for the combined gender analysis 0 46 for boys only and 1 5 for girls only there is some indication that youths in developing countries may be slightly less responsive to price changes than in high income countries no

efficient excise taxation the evidence from cigarettes we develop a model in which optimizing policy makers in adjacent government jurisdictions levy excise taxes on a commodity that has a unique point of production from which all shipments emanate from this model we derive an unusually specific predicted geographical pattern of those excise taxes in which these taxes rise at a decreasing rate as one moves outward from the point of production we compare these predictions to the observed pattern of cigarette taxes imposed by state governments in the united states and find the data to be fully consistent with our model among these predictions is the existence of a ripple effect which reduces taxes in many other jurisdictions due to low taxes at the point of production we estimate that these induced tax reductions in other states save cigarette producers and consumers a minimum of 110 million per year

the effects of excise taxes and regulations on cigarette smoking abstract we estimate a generalized linear model to examine adult and teenage cigarette demand our analysis focuses on the extent to which exice taxes and regulations restricting smoking in public places affect cigarette consumption the adult results indicate that the price elasticity of demand is unstable over time ranging from 0 06 in 1970 to 0 23 in 1985 these estimates are lower than most found in previous studies the teenage price elasticity does not differ statistically from the estimates for adults additionally regulations restricting smoking in public places have a significant effect on both adult and teenage cigarette demand

risk inflation and the stock market most explanations for the decline in share values over the past two decades have focused on the concurrent increase in inflation this paper considers an alternative explanation a substantial increase in the riskiness of capital investments we show that the variance of firms real gross marginal return on capital has increased significantly increasing the relative riskiness of investors returns on equity and that this can explain a large part of the market decline we also assess the effects of increase in the mean and variance of the inflation rate and a decline in firms expected return on capital this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

cutting through the smoke separating the effect of price on smoking initiation relapse and cessation i employ a large national representative dataset current population survey tobacco use supplements to investigate how cigarette prices affect smoking decisions a standard econometric approach is to estimate the relationship between cigarette prices and smoking participation at a point in time i extend this approach to model past year decisions to start resume or quit smoking considering reverse causality i apply an instrumental variable excise taxes for cigarette prices i include an index of state level anti smoking sentiment to control for omitted variable bias after estimating separate models for smoking initiation relapse and cessation and for different age groups i find no evidence that increasing taxes on cigarettes can prevent the onset of youth smoking neither does it effectively induce young smokers to quit however cigarette prices do play an important role to prevent relapse and encourage quitting at older ages

incidence of federal and state gasoline taxes the federal specific gasoline tax falls equally on consumers and wholesalers whereas state specific taxes fall almost entirely on consumers the consumer incidence of state taxes is greater in states that use relatively little gasoline

an empirical analysis of dynamic nonprice competition in an oligopolistic industry this article develops a dynamic model of nonprice competition in an oligopolistic industry and uses it to analyze advertising competition in the u s cigarette industry the model generalizes existing studies by allowing advertising to affect both firm market shares and the total size of the market the model also allows dynamic conjectural variations to arise from the intertemporal links created by the durability of advertising we use these dynamic conjectural variations to distinguish alternative models of competitive interaction we estimate the complete model of firm production demand and advertising choice by using data for u s cigarette producers the results indicate that firm advertising primarily affects the level of market demand with a firm s effect on rival firms market shares arising through variations in the number of brands sold empirical results on firm behavior suggest that firms act as if their advertising choices will alter the future advertising choices of rival firms in both the high tar and low tar cigarette markets

does increasing the beer tax reduce marijuana consumption previous studies suggest that alcohol and marijuana are economic substitutes so recent policies restricting the availability of alcohol have led to an increase in the amount of marijuana consumed using micro level data from the national longitudinal survey of youth nlsy to estimate individual demand equations for alcohol and marijuana this research finds that alcohol and marijuana are economic complements not substitutes further this research finds that increases in the federal tax on beer will generate a larger reduction in the unconditional demand for marijuana than for alcohol in percentage terms

reputational comparative advantage and multinational enterprise 1 introduction when cultivating a new export market or attempting to expand its share of an existing market an exporter is likely to find that it has been preceded by its reputation minus a readily identifiable brand name quality reputation may solely reflect the country of origin for example when consumers are presented with a large amount of complex product information they may use the country of origin as a heuristic in forming product impressions without considering other product attributes 1 in this article i show that this heuristic decision making process can affect a firm s quality decision and can therefore become self fulfilling hence any bias that consumers have may be well founded however it is only correct because firms respond rationally to it colombia s garment industry provides an interesting example of a self fulfilling unfavorable quality reputation in international trade as described by morawetz 1981 a single colombian garment firm took a contract for 50 000 men s suits that was beyond its capability the poor quality result so tarnished the american importer s name that other high quality importers become wary of colombian sewn garments with the payoff to high quality production reduced colombian garment firms then concentrated on low quality markets and the newly found unfavorable reputation was justified in the model constructed here consumers see only a noisy signal of the product s quality at the time of purchase therefore their posterior beliefs are based on this noisy signal and the country of origin reputations as will be made clear higher quality firms benefit more from an increase in their country s reputation so that a better reputation generates an increase in the percentage of high quality firms in this way the reputation becomes self fulfilling and ex ante identical countries can be correctly perceived as differing in their percentage of high quality producers i next introduce an economy with two sectors one sector produces more complex goods where high quality is not easily verified and is more essential to the product s performance these may be technology intensive products or they may consist of the design and marketing of the goods produced in the other sector in particular high quality production costs and the consumer s value for high quality goods is greater in this sector i show that this sector becomes more profitable as the country of origin reputation increases hence if one country s equilibrium reputation is low and the other country s equilibrium reputation is high then the pattern of specialization and international trade can be determined solely by reputational comparative advantage 2 finally i show that reputational comparative advantage can overshadow a small technological comparative disadvantage in determining the pattern of international trade given this pattern of trade and specialization based on reputational comparative advantage a high reputation firm may expend resources to establish a multinational enterprise mne in the low reputation country for example many mne products require the differing specializations of both the high and low reputation countries although differing in motivation this result accords well with more traditional models of vertical mne 3 however this impetus for mne as well as its more traditional counterparts does not explain why the mne would choose foreign direct investment fdi over a less costly licensing arrangement 4 the quality uncertainty in this model along with the difference in equilibrium reputations allows us to address this question in particular appropriable reputational rents are generated by fdi when the high reputation parent firm procures and internalizes production with a low reputation host firm this fdi breaks the low reputation equilibrium of the host firm and generates reputational rents

who pays cigarette taxes the impact of consumer price search abstract we conduct an empirical study of the impact of consumer price search on the shifting of cigarette excise taxes to consumer prices we use novel data on the prices that smokers report paying and document substantial price dispersion we find that cigarette taxes are shifted at lower rates to carton buyers and especially smokers who buy cartons of cigarettes in a state other than their state of residence we also find evidence that taxes are shifted at somewhat lower rates to the prices paid by heavier smokers and at somewhat higher rates to the prices paid by smokers of light cigarettes

social security taxation and intergenerational risk sharing the life cycle hypothesis has become the dominant mode used to analyze the effects of a social security system on private saving the labor leisure choice and social welfare as both barro and samuelson indicate a fully funded social security program in a world of certainty would drive out an equivalent amount of private saving if the interest rate is r the effects of a payment of a dollar into the social security pool while young would just offset the effects of receiving 1 r dollars as a transfer when retired papers by diamond hi and samuelson among others have examined the effects of non fully funded social security schemes in a growing economy a non fully funded program can be used to alter the private sector s saving rate and hence the capital labor ratio social security then can be used as a policy tool for achieving the or some variant of the golden rule growth path this abstract was borrowed from another version of this item

saving social security and uncertainty since alteration of the saving behavior of the present working generation may have such a significant impact on capital stock growth some concern has arisen about the effect of the social security system on saving behavior in response to this concern numerous empirical and theoretical analyses have been forthcoming most of the theoretical analyses either in the form of overlapping generations models 9 11 or simpler life cycle models 6 15 have indicated that unless specific parameter values utility functions and in some cases production functions are chosen the effect of a social security system on saving is indeterminate for example kurz 11 has shown that the introduction of a simple pay as you go social security system in an overlapping generations model in which individuals do not have a leisure choice will not have a predictable effect on the steady state level of the capital stock unless parameter values and the form of the production function are known similarly in life cycle models that include a leisure choice the effect of social security is difficult to determine although feldstein 6 shows that when the leisure choice is suppressed in such a model a social security system will have a negative impact on saving this indeterminacy has not been completely resolved by empirical work although the bulk of evidence 7 8 10 12 tends to support the view that social security has depressed saving in the past unfortunately with the exception of the work of sheshinski and weiss 16 little of the theoretical analysis deals with the effect on saving behavior of participants who are faced with uncertainty about future prices wages and social security benefits sheshinski and weiss have shown that in an overlapping generations model with uncertain lifetimes the effect of increasing the role of social security through balanced increases in benefits and contributions will actually lead to an increase in saving their analysis however does not include a leisure choice nor does it deal with other forms of uncertainty facing participants consequently we still lack more complete answers to the following basic questions will the introduction of a social security program in the presence of uncertainty

cigarette taxes and illicit trade in europe cigarettes are highly taxed in europe but at higher prices some consumers substitute more toward illicit cigarettes the illicit retail trade in cigarettes irtc includes counterfeit untaxed and smuggled cigarettes some existing literature includes claims that taxes are not an important determinant of irtc using data from the european union we find the opposite raising prices leads to substantial increases in irtc a 1 increase in tax pack is expected to increase illicit market share by 5 to 12 percentage points and increase illicit cigarette sales by 29 to 95 the results are robust to alternative specifications and data jel i18 h26 k42

fuel tax incidence and supply conditions abstract the incidence of taxes on consumers and producers plays a central role in evaluating energy tax policy yet the literature testing the main predictions of the tax incidence model is sparse in this paper we examine the pass through rate of state gasoline and diesel taxes to retail prices and importantly we estimate the dependence of pass through on factors constraining the gasoline and diesel supply chains we consider several factors that alter the elasticity of supply including within state heterogeneity in gasoline content requirements refinery capacity utilization inventory constraints and variation in the demand for untaxed uses of diesel in general we find that in periods of time when the supply chain is constrained and the constraint is plausibly unrelated to shifts in demand the pass through rate of fuel taxes declines we describe several potential implications for tax policy including tax breaks during peak driving season and during times of supply disruptions such as after major hurricanes

the us national tobacco settlement the effects of advertising and price changes on cigarette consumption this paper provides an econometric analysis of the effects of cigarette price and advertising changes stemming from the united states tobacco settlement of 1998 this is done by estimation of a demand function for cigarettes based on data from both before and after the settlement the model is estimated using monthly time series data for the period 1990 2000 results show that the increase in cigarette prices stemming from the settlement reduced per capita cigarette consumption in the usa by 8 3 however the cigarette companies also increased advertising in the years immediately preceding and following the settlement this study estimates that this increased advertising partially offsets the effects of the higher prices increasing cigarette consumption by 2 7 to 4 7 and hence blunting the effects of the price increase by 33 57

health scare excise taxes and advertising ban in the cigarette demand and supply the cigarette industry is a fascinating laboratory for industrial economists because of its concentrated market structure and history of conflicts over health and tax issues the industry has been the focal point of many economic studies most of the recent studies have concentrated on the demand side of the market for example bass schmalensee hamilton and fujii deal with the impact of advertising and the health scare on cigarette demand 4 15 10 8 barzel johnson and sumner ward assessed the importance of the excise tax or ad valorem tax on consumers cigarette demand 3 12 16 on the supply side vernon rives naylor developed an econometric model of the tobacco industry 20 which however is more concerned with the agricultural aspects of the product than the industry s market organization a careful review of the above studies suggests serious shortcomings which appear to limit their application to policy formulation or market analysis first the variables are introduced in an ad hoc fashion without reference to existing demand or supply theories second none of the above studies recognizes explicitly the interactions among the variables in the demand and the supply equations in the context of the determination of market equilibrium this paper has three objectives 1 to apply the standard neoclassical market theory to the cigarette industry 2 to identify the interactions between cigarette demand and supply using a simultaneous equations approach the first such attempt in a cigarette industry study and 3 to evaluate the effects of cigarette taxes advertising and health scare issues on the industry s output based on the empirical results obtained from the simultaneous equations analysis the judicious selection of explanatory variables careful data

the adequacy of savings this paper uses newly available data from the social security administration s retirement history survey to examine the adequacy of saving this data source is particularly rich survey data for respondents covering the ydars 1969 197 1 and 1953 have been matched with social security earnings records covering the years dating back to 1951 in addition to information on the path of lifetime earnhngs the survey contains extensive data on individual asset holdings the evidence indicates that surprisingly few couples currantly suffer significant reductions in their standard of living in their old age this appears due in large part to our compulsory savings institutions the social security and private pension systems these institutions have succeeded in redistributing the lifetime consumption of private individuals from their youth to their old age this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this i this abstract was borrowed from another version of this item

oligopoly structure and the incidence of cigarette excise taxes abstract a model of oligopoly price behavior and tax incidence for the u s cigarette industry for the period 1955 1990 is presented a cost function is estimated and shows manufacture to be subject to increasing returns to scale the mean price elasticity of demand is 0 71 the model indicates that competition among manufacturers has been decreasing since 1980 a simulation shows that an increase in the federal excise tax causes a greater increase in price and a greater decrease in consumption than does the same increase in the average of state and local tax rates

the unintended consequences of countermarketing strategies how particular antismoking measures may shift consumers to more dangerous cigarettes countermarketing or efforts to reduce consumption of certain products has become common in categories such as tobacco junk food fossil fuels and furs countermarketing has a particularly long history in the tobacco industry efforts to reduce smoking have included excise taxes that increase the cost of consumption smoke free restrictions that make consumption less convenient and antismoking advertising campaigns that highlight the dangers of tobacco use this article presents an analysis of the relative effectiveness of these different strategies we find that cigarette excise taxes are the most effective tool for reducing overall cigarette sales followed by antismoking advertising smoke free restrictions are not found to have a significant effect on cigarette sales we also investigate how these various policy tools induce product substitution this issue is of considerable importance because some countermarketing techniques may potentially shift consumers to more dangerous higher nicotine and

tax incidence with strategic firms in the soft drink market abstract because soft drink sd consumption is considered to be a contributor to the epidemic of obesity there is a growing interest in evaluating the impact on sd consumption of alternative tax policies in this paper we propose a methodology to evaluate the impact of taxation of a food market taking into account the strategic price response of both manufacturers and retailers we apply this methodology to the french sd market and simulate the impacts of ad valorem and excise taxes we find that firms behave differently when facing an ad valorem tax or an excise tax an excise tax is overshifted to consumer prices while an ad valorem tax is undershifted to consumer prices we find that an excise tax based on the sugar content of sd is the most effective at reducing sd consumption our results also indicate that ignoring strategic pricing by firms leads to misestimations of the impact of taxation by between 15 and 40 depending on the products and the tax implemented in the short term that is ignoring positive long term health effects a 9 cents l excise tax has a small negative welfare effect about 1 person year

capitalism and socialism a review of kornai s dynamism rivalry and the surplus economy understanding the nature of capitalism has been a central theme of economics the collapse of the eastern bloc and the global financial crisis spurred the reemergence of the political economy as a new frontier and the revival of interest in the nature of capitalism janos kornai s book dynamism rivalry and the surplus economy two essays on the nature of capitalism fills an important intellectual gap in understanding the dynamic nature of capitalism by comparing it with its mirror image socialism to further develop the themes contained in the book serious challenges are posed theoretically and empirically as well as in subjects such as hybrid capitalism

estimating the effect of tax reform in differentiated product oligopolistic markets abstract the incidence of taxation has been extensively discussed in the public finance literature but mainly within a competitive market setting or within a homogenous good cournot type oligopoly in a differentiated product oligopoly the effect of taxation can be more complex as the rate of taxation may affect not only the prices but also the profile and quality of products that are sold in the market in this paper we examine the effects of changing tax regimes in a differentiated product oligopoly in order to illustrate our approach we employ data from one such market the automobile market in israel

soft budget constraints and regional industrial policy reinterpreting the rise and fall of delorean the rise and fall of delorean motor cars limited has traditionally been interpreted as either the result either of john delorean s psychological flaws or as confirming the supposed limitations of activist industrial policy however when the episode is examined in greater historical detail neither of these interpretations is compelling the reinterpretation outlined here draws on institutional analysis as well as a range of archival sources much of it previously unreleased the inefficiencies within the original contractual agreement are highlighted the lack of credibility associated with this agreement was in turn traceable to the institutional environment with its associated risk reward implications under which industrial policy operated this environment had a political element it had been distorted by the troubles and the resulting fears policymakers had of a cumulative causation relationship between violence and unemployment officials in belfast against treasury opposition advocated state led entrepreneurship as a policy response

competition in japan japan registered a remarkable 6 5 percent rate of economic growth from 1955 to 1990 catching up with high income western countries in its level of economic development during the 1950s 1960s 1970s and into the 1980s japan s share of world exports rose dramatically from 2 9 percent in 1960 to 6 1 percent in 1970 8 2 percent in 1980 and a peak of 9 8 percent in 1985 porter takeuchi and sakakibara 2000 japanese firms were increasingly successful internationally in large visible industries such as automobiles semiconductors and consumer electronics the striking economic success of japan was widely attributed to a set of economic institutions and policies that encouraged collaboration and limited competition the japanese case then called into question many of the bedrock assumptions of competition thinking it seemed to show that there was a different path to economic prosperity this article begins by examining competition in japan and the supporting policies and institutions during the twentieth century many factors seem to suggest that competition in japan has been less intense but there is an awkward complication the empirical evidence about the intensity of competition in japanese industry does not support the conclusion the story clearly is more complicated we seek to reconcile the apparent differences between policy and institutional circumstances and the empirical evidence by examining the types of competition that prevail across japanese industries and the underlying causes japan indeed pursued an array of policies that limited competition but these policies were not applied throughout the economy in fact those industries in which competition

taxation regulation and addiction a demand function for cigarettes based on time series evidence this work analyzes the effects of prices taxes income and anti smoking regulations on the consumption of cigarettes in california a 25 cent per pack state tax increase in 1989 enhances the usefulness of this exercise analysis is based on monthly time series data for 1980 through 1990 results show a price elasticity of demand for cigarettes in the short run of 0 3 to 0 5 at mean data values and 0 5 to 0 6 in the long run we find at least some support for two further hypotheses that antismoking regulations reduce cigarette consumption and that consumers behave consistently with the model of rational addiction

uncertain inflation and social security indexation abstract this paper provides a theoretical analysis of the effects of the insurance feature of social security indexation on portfolio allocation and the stability of income and consumption of the retiree within the framework of a life cycle model of allocation under uncertainty the paper shows that the magnitudes of such effects depend on the importance of social security in total wealth the covariance of real portfolio returns with the inflation rate and more importantly whether there exists market failure in providing for inflation insurance

excise gap and price in the italian cigarette industry we provide evidence that tax shifts in the italian cigarette industry are not homogeneous across price categories and are associated with differences in the excise structure we take the gap betwee