taxation government spending and labor supply a diagrammatic exposition the effects of a change in the level of taxation on labor supply are examined under the assumption that the government budget balances the government spends tax revenues either on redistributions which are assumed to have an income effect on labor supply or on other government goods which are assumed not to influence labor supply in order for a rise in the tax rate to increase the quantity of labor supplied it must be that i the labor supply function bends backward and ii sufficiently little of the increased tax revenues are redistributed the quantity of labor supplied must fall if all marginal tax revenues are redistributed

could a global marshall plan be successful an investigation using the weep simulation model abstract using the weep simulation model world economic equalization program this research examines the potential impact of a very large scale foreign development assistance program a global marshall plan on the future development of the world economy the benchmark simulations of the model indicate a dramatic reduction in world economic inequality at the cost of a very minor retardation in the economic growth of the rich countries sensitivity analysis demonstrates that with certain key exceptions these optimistic results are reasonably robust against parametric variation

income redistribution in a common labor market when households are mobile among jurisdictions income redistribution by individual jurisdictions creates fiscal externalities a model of interjurisdictional migration is used to study the nature of this redistributive externality analysis of optimal redistribution and optimal corrective subsidies from higher level governments shows that benefit levels for the recipients of income transfers and tax rates on mobile taxpayers should be equalized across jurisdictions a system of jurisdictions with a common labor market can achieve welfare improvements through coordination of domestic redistributive policy or through the intervention of a higher level government copyright 1991 by american economic association

private fiat money with many suppliers a dynamic rational expectations model of money is used to investigate whether a nash equilibrium of many firms each supplying its own brand name currency will optimally deflate their currencies in friedman s 1969 sense the optimal deflation does arise under an open loop dynamic structure but the equilibrium breaks down under a more realistic feedback control structure

on the simple economics of advertising marketing and product design we propose a framework for analyzing transformations of demand such transformations frequently stem from changes in the dispersion of consumers valuations which lead to rotations of the demand curve in many settings profits are a u shaped function of dispersion high dispersion is complemented by niche production and low dispersion is complemented by mass market supply we investigate numerous applications including product design advertising marketing and sales advice and the construction of quality differentiated product lines we also suggest a new taxonomy of advertising distinguishing between hype which shifts demand and real information which rotates demand

on the economics of private money abstract the application of laissez faire to the monetary system is a key ingredient of important proposals for monetary reform both new and old that seek to discipline government creation of money through competition this paper provides an overview of issues to be encountered in the construction of theoretical models of private monetary economies including consideration of market imperfections that have been hypothesized to arise in these systems further some descriptive history of the less regulated monetary systems of 19th century new york is undertaken with an emphasis on discussing the nature of market generated banking and monetary institutions in light of these critiques

income redistribution an international perspective many view global income inequality as a problem income redistribution from the rich countries to poor countries is often offered as a solution however such redistribution would have to be politically acceptable to voters in rich countries to occur using a constructed distribution of world income we show that even modest income redistribution efforts would impose significant costs on taxpayer voters in rich countries we conclude such income redistribution is unlikely

the marginal cost of redistribution lifetime and annual perspectives approximately 40 of federal government expenditures are spent on redistributing income from high income households to low income households 20 293 changing income redistribution policies causes distortions which affect the efficiency of resource allocation costs caused by these distortions are an important consideration in determining redistribution policies and practices previous studies such as browning and johnson 5 looked at the marginal cost of redistribution using annual income data however as is shown in this article using annual rather than lifetime income data greatly understates the marginal cost of redistribution the time period is an important consideration when calculating the marginal cost of redistribution over a lifetime a person may be a young student expecting a higher future income be retired having had a higher income in the past be changing jobs or recently divorced lifetime income includes these age and transitory differences in earnings and thus if we are concerned about the cost of decreasing inequality lifetime income is more accurate also the relevant time period partly depends on the capability of households to even out income fluctuations by spreading income from good to bad times upper income groups find it easier to spread income by borrowing or waiting until income rises again while lower income groups find it more difficult to borrow or wait if we are measuring the number of people in poverty and poor people find it difficult to spread income from good to bad periods the relevant period of time may be about a week but using a week for upper income groups would be misleading as many would appear poor but not face the difficulties of the poor if most people can average their income then the annual distribution of income is more appropriate than weekly however because of the above mentioned age and transitory differences in income annual income may also be misleading people are affected differently in different years by the tax transfer system in some years a person may receive transfers and in others pay taxes since households live their lives rather than a single year under the tax transfer system well being is more accurately described on a lifetime basis lifetime income gives a more accurate picture of households chances in life and of the degree of economic inequality in this article the annual and lifetime marginal costs of redistribution are calculated by a simulation that uses a lifetime dynamic labor supply model a linear income tax type of redistri

the evolution of a free banking system the institutional features of models of unregulated monetary systems have often been arbitrarily and implausibly assumed this paper instead provides realistic grounding for important features by constructing a logical evolutionary account of free banking sophisticated and orderly arrangements are shown to emerge from competition and the pursuit of less costly methods of payment the emergence of standardized commodity money is followed by the development in turn of basic money transfer banking easily transferable bank liubilities and clearinghouses the features of an evolved free banking system differ from those assumed in recent models of competitive payments systems

informative advertising and product match abstract this paper studies informative advertising in a variety of market structures for which some consumers are informed about two differentiated products while other consumers are uninformed we characterize a unique symmetric subgame perfect nash equilibrium in advertising and pricing and analyze the welfare properties of the equilibrium remarkably total surplus is non monotonic in advertising in a duopoly market the equilibrium level of advertising may be more or less than socially optimal we also study the effect of a trade association and compare these results with the first best solution and a multiproduct monopolist

the effect of price advertising on prices evidence in the wake of 44 liquormart the 44 liquormart decision eliminating rhode island s ban on liquor price advertising made rhode island the subject of a natural experiment for measuring the effect of advertising on prices using massachusetts prices as controls we find that advertising stores substantially cut only prices of the products that they advertise prices of other products at both advertising and nonadvertising stores do not change advertising stores cut their prices on products advertised by rivals while nonadvertising stores do not we find no reductions in price dispersion across stores newspaper advertising stores appear to draw a higher share of customers after they advertise

informative advertising with differentiated products in this paper we study the role of promotional expenditures by sellers in a model of product differentiation advertising conveys full and accurate information about the characteristics of products heterogeneous consumers who have no source of information other than advertisements seek to purchase the products that best fit their needs despite the roles played by advertising in improving the matching of products and consumers and in increasing the elasticity of demand faced by each firm we find that the market determined levels of advertising are excessive given the extent of diversity in the market we derive a promotional equilibrium based on a specific information transmission technology paying explicit attention to the structure of consumer information and its impact on firms demand curves this allows us to study the effects of changes in the advertising technology including an increased ability to target messages to specific groups of consumers on the equilibrium in the product market we find that decreased advertising costs may reduce profits by increasing the severity of price competition

quantity restrictions on advertising commercial media bias and welfare abstract we study the welfare effect of a quantity restriction on advertising in free to air television and other advertising financed media in the presence of commercial media bias broadcasters face a trade off between increasing the number of viewers by sending content that is highly valued by viewers and increasing the price of advertising by choosing advertiser friendly content a cap on advertising drives the per viewer price of ads up thus content improves for viewers therefore the cap can be welfare enhancing even when viewers are not ad averse competition among broadcasters makes it more likely that a cap on advertising improves welfare thus there is a complementarity between regulation and competition on this market we also show that a tax on advertising revenues has quite different effects than a cap on advertising quantity

advertising and economic welfare is advertising socially excessive economists have been reluctant to consider this question for there appeared to be no rigorous method of analyzing cases in which advertising influences tastes some recent studies have made fundamental contributions to this debate avinash dixit and victor norman 1978 yehuda kotowitz and frank mathewson 1979 but no consensus has emerged dixit and norman were the first to establish a rigorous methodology they evaluated social welfare sw consumer s surplus profits under preand post advertising market equilibria using pre advertising tastes for one ranking and post advertising tastes for another ranking when the sw rankings were identical dixit and normal claimed that unambiguous inferences could be drawn in general they concluded that the profitmaximizing level of advertising will be excessive under a variety of product market structures franklin fisher and john mcgowan 1979 criticized dixit and norman for including advertising in the utility function but ignoring the direct effect that advertising has on utility in their welfare analysis dixit and norman 1979 courvlered that advertising merely shifts the preference ordering over goods and that it is this preference yardstick that matters welfare conclusions about advertising can be generated less controversially within the framework suggested by george stigler and gary becker 1977 they treat utility as if it were generated by commodities which individuals produce with purchased goods time human capital and firms advertising their commodities can be interpreted similarly to what kevin lancaster 1966 calls a characteristic the terminology used herein as an example consider tennis we buy racquets and balls not to own them per se but rather to enjoy playing the game playing the game actually generates utility and this characteristic is produced by an individual s racquet balls human capital skill level and time thus preferences are ordered over characteristics not over goods advertising can lower the shadow price of a characteristic by increasing the ability of the purchased good to produce the desired characteristic this is accomplished by providing the consumer with different information or beliefs about the product than previously held suppose a perennial tennis champion states a preference for a particular brand of racquet this enhances the self image of amateur owners of that brand and increases their enjoyment of the game without changing their expenditures the per unit cost of the characteristic will decline making current owners of the racquet likely repeat customers and current shoppers more likely to choose the star s preferred brand observe that advertising has increased the demand for a market good that produces the now cheaper char

advertising in competitive markets in this paper small firms sell a homogeneous good to small consumers under conditions of free entry but consumers receive price information only through firms advertising in equilibrium every firm on the continuous price distribution buys less advertising than is socially optimal the result is robust if firms advertise in just one medium if readers of different advertising media are positively correlated excess advertising can occur in media used exclusively to advertise discount prices copyright 1991 by american economic association

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

assistance to the poor in a federal system abstract this paper explores the roles of different levels of government in assisting the poor using a model incorporating utility interdependence the paper first presents some theoretical results indicating how levels of poor relief vary with the extent of mobility of the poor under both centralized and decentralized systems of support it then provides a survey of the empirical work on migration of the poor along with a brief historical discussion of the experience under the english poor laws the concluding section turns to normative issues and contends that mobility of the poor is a basic source of inefficiency in wholly decentralized systems of support this inefficiency along with certain other equity considerations establishes a role for the central government in assistance to the poor

a simple theory of advertising as a good or bad our analysis treats advertisements and the goods advertised as complements in stable metautility functions and generates new results for advertising by building on and extending the general analysis of complements by assimilating the theory of advertising into the theory of complements we avoid the special approaches to advertising found in many studies that place obstacles in the way of understanding the effects of advertising we also use this approach to evaluate advertising from a welfare perspective whether there is excessive or too little advertising depends on several variables the effects on consumer utility the degree of competition in the market for advertised goods the induced changes in prices and outputs of advertised goods and whether advertising is sold to consumers

oligopolistic pricing with sequential consumer search n identical stores compete by choosing prices for a homogeneous good with constant marginal costs consumers search sequentially with perfect recall for the lowest price one class of consumers called shoppers have zero search costs while all other consumers have a positive search cost c there is a unique symmetric nash equilibrium price distribution with the property that it changes smoothly from marginal cost pricing when all consumers are shoppers and or c 0 and monopoly pricing when no consumers are shoppers remarkably as the number of stores increases the nash equilibrium becomes more monopolistic copyright 1989 by american economic association

advertising expenditure and consumer prices this paper studies the effect of a change in the marginal costs of advertising on advertising expenditures of firms and on consumer prices i make use of a policy change in austria that involved an increase of the taxation of advertising in parts of the country and a simultaneous decrease in other parts i show that advertising expenditures of firms move quickly in the opposite direction of the marginal costs of advertising consumer prices increase with advertising in some industries and decrease in others this effect correlates with informational differences in advertisements across industries

the rhetoric and reality of redistribution it is customary when giving a presidential address to begin by remarking on how happy you feel i have an even stronger reason for being happy than most presidents it will at long last permit me to break into the southern economic journal up to this point referees of that august institution have always rejected everything that i sent them finally however i am privileged to put an unrefereed paper in the journal and hence do not have to worry about this one being rejected the audience may feel that although it is nice for me it is hard on the journal but under the sacred traditions of the southern economic association the editors and referees can do nothing about it the blame if there is any has to be laid on me and not on the management of the journal in a way the fact that i will not face referees is important because in this paper i propose to violate a number of implicit taboos in the discussion of income redistribution indeed i propose to argue that most of the current discussion of income redistribution is drastically defective this will not only include rawls it will include what most members of the economic profession normally say on the subject and presumably what the potential referees of this paper would have thought let me very briefly survey the existing economic as opposed to the philosophic literature on the redistribution of income firstly a good many economists have said simply that economics can say nothing about the subject because somebody gains and somebody loses but we can t say whether this is a good or a bad thing with our apparatus hochman and rodgers 9 have started another tradition of dealing with income redistribution in which the government is seen as simply organizing what is essentially a voluntary transfer from the better off american citizens to the less well off american citizens why the government should be used as an instrumentality for this kind of transfer was interestingly enough first explained by milton friedman 6 191 92 such redistribution has the interesting characteristic that it does not actually involve redistribution because the people who make the gift are maximizing their own utility and hence are better off it is a case in which human preferences are so arranged that a given dollar of income benefits two people a full dollar s worth the donor gains a dollar from expending money at its best use to him i e making a gift to the poor and the poor gain the dollar in a somewhat metaphysical sense it can be said here

has government any role in money abstract recent interest in monetary reform has been sparked by the emergence of a world irredeemable paper money system in light of this interest we review the current validity of four good reasons friedman advanced in 1960 to rationalize government intervention we conclude that the forces that produced government involvement in the past will persist deregulation of financial intermediaries is desirable on grounds of market efficiency though it is an open question whether government should continue as lender of last resort we expect that the present world fiat money standard will neither degenerate into hyperinflation nor revert to a commodity standard

dynamic gains and static losses in oligopoly evidence from the beer industry i introduction more than 40 years ago arnold harberger 1954 estimated the welfare loss due to monopoly in the united states harberger s finding that the welfare loss caused by monopoly is surprisingly small sparked a lively debate that enriched the economic literature enormously the articles by david schwartzman 1960 david kamerschen 1966 frederick bell 1968 dean worcester 1973 and john siegfried and thomas tiemann 1974 constitute but a small sample out of the vast number of studies of this issue later keith cowling and dennis c mueller 1978 found some higher values of deadweight losses ten times as large as harberger s in a subsequent study i was able to lend support to harberger s results by analyzing the interactions between the minority of large firms in an industry that act as independent oligopolists and most of small firms that behave as price takers 1986 the exploration of the dynamic relationship between concentration and prices started with schumpeter 1949 who hailed the entrepreneur who can produce more cheaply make a profit that remains in his pocket until others who follow him copy his model the process eventually results in the annihilation of the surplus over costs when the new business form has become part of the circular flow 1949 133 in a related set of studies demsetz 1973 peltzman 1977 and lustgarten 1979 explored the relationship between concentration ratios and increased efficiencies in manufacturing industries and found them to be positively correlated i could lend support to this conclusion by postulating a dynamic process of cause and effect cast in a price leadership model 1984 in a recent study salinger 1990 concluded from a cross sectional study that large changes in concentration whether negative or positive are associated with price reductions the present paper builds on past research to demonstrate that while innovation may lead to increases in market share and market concentration the price increases that might be expected to follow from increased concentration are likely to be offset by the price decreases that bring the increased concentration into being 1 if so estimating deadweight losses by subtracting the static consumers losses from producers gains is misleading because it ignores intertemporal consumers gains the dynamic link among efficiency falling prices concentration and welfare losses suggests that a very useful method of evaluating an industry s contribution to welfare would be to study its economic history if today an industry is heavily concentrated an appropriate starting point for a historical study would be an earlier year when the industry was still relatively less concentrated this paper presents first a welfare theory of dynamic evolution of an industry that becomes progressively more concentrated over time second an empirical study based on the history of the beer industry that focuses on the calculus of dynamic social gains from technological change and third an examination of a small group of industries that became more heavily concentrated between 1963 and 1982 the last section sets forth the conclusions to be drawn from this research ii dynamic gains and static losses suppose a concentrated industry was unconcentrated 40 years ago the industry s firms were small but not atomistic and they sold their product in nearly perfectly competitive markets practically causing no deadweight losses the dynamic process begins when initially a group of pioneering firms invests in the development of a new technology that reduces costs and by lowering the price to consumers succeeds in increasing its market share the gain to consumers flows directly from this intertemporal decline in price the increase in the share of the innovating firms can initially mitigate the downward pressure on prices but in the long run reversing it is not likely

a laissez faire approach to monetary stability this paper develops some diverse hints for a new monetary system offered separately by fischer black eugene fama and robert e hall for reasons that will become evident though we should perhaps say payments system instead of monetary system none of the economists mentioned has actually proposed the particular system set forth here nor examined all its properties and we call it the bfh system not to implicate them but only to give credit for some component ideas and to have a convenient label l regardless of who if anyone may actually advocate the system contemplating it is instructive it illuminates by contrast some characteristics of our existing and recent systems

lifetime and annual marginal costs of redistribution in england sweden and the united states both the annual and lifetime marginal costs of redistribution in england sweden and the united states are calculated the annual marginal cost of redistribution is 2 90 in the united states 3 53 in england and 6 77 in sweden the lifetime marginal cost of redistribution is 4 46 in the united states and 7 96 in england the lifetime marginal cost of redistribution in sweden indicates that additional redistribution reduces the incomes of both the poor and nonpoor this study also shows that when there is greater income equality the marginal tax rate at which the incomes of the poor and nonpoor begin to be reduced will be at lower and lower levels copyright 1993 by mit press

swedish tax rates labor supply and tax revenues effective marginal tax rates on labor income for the representative swede have increased from roughly 50 percent in 1959 to 80 percent today the effects of this increase in the level of taxation are examined using a two sector model parameterized to correspond to the swedish economy the model contains a single household which allocates labor to either taxed essentially market or untaxed largely household uses the estimated long run effects are sufficient to explain up to 75 percent of the recent decline in the measured growth rate of the swedish gnp calculations of total tax revenues are also derived from the model these peak when the tax rate is approximately 70 percent indicating that sweden is presently on the downward sloping portion of its laffer curve

choice set heterogeneity and the role of advertising an analysis with micro and macro data abstract the authors show how to use microlevel survey data from a tracking study on brand awareness in conjunction with data on sales and advertising expenditures to improve the specification estimation and interpretation of aggregate discrete choice models of demand in a departure from the commonly made full information assumption they incorporate limited information in the form of choice sets to reflect that consumers may not be aware of all available brands at purchase time they find that both the estimated brand constants and the price coefficient are biased downward when consumer heterogeneity in choice sets is ignored these biased estimates can lead firms to make costly price setting mistakes in addition the tracking data enable the authors to identify separately two processes by which advertising influences market shares they find that advertising has a direct effect on brand awareness inclusion in choice set in addition to its effect on consumer preferences increase in utility this

income distribution within nations problems of cross national comparison in recent years a large number of cross national studies have examined the causes and consequences of income inequality within nations unfortunately few of these studies have attended very carefully to problems of measurement and definitional consistency that can seriously undermine the comparative use of currently available data on income shares this article offers a discussion of the major theoretical and practical problems that can arise in measuring and comparing patterns of income distribution across nations focusing on the completeness of income coverage the unit of analysis the time period over which income is measured the scope of population coverage the underreporting of income and the effect of public sector fiscal policies it then assesses major published sources of cross national data on the size distribution of income in light of these problems finally the article offers several suggestions for minimizing the negative consequences of measurement problems that remain in even the be

advertising restrictions and competition in the children s breakfast cereal industry abstract in this article i analyze the consequences of advertising in the children s breakfast cereal market i take advantage of the prohibition on advertising directed at children in the province of quebec to examine the nature of advertising and to determine whether the restriction hinders competition i show that prices are higher in quebec than in canadian provinces that permit advertising this finding suggests that the informative role of advertising dominates any persuasive role since the most likely explanation is that the restriction prevented firms from announcing products existence or characteristics and thus from overcoming perceived differentiation if advertising is informative restricting it should increase the market shares of older better known brands and decrease the market shares of newer and or less well known brands empirical analysis supports this prediction market shares of established brands are larger in quebec than in the rest of canada and the opposite is true for nonest

tax revenue and the marginal cost of public funds in sweden abstract we assess the welfare cost of raising a marginal unit of tax revenue in a balanced budget general equilibrium framework the calculated social cost of an increment of public funds is sensitive to both the specific type of tax increase and the type of public spending used on the margin best guess assumptions on labor supply elasticities yield marginal costs of public funds for different fiscal mixes of between 0 67 and 4 51 at prevailing tax rates in sweden alternative labor supply assumptions well within the range of current estimates substantially affect the results and can imply infinite marginal welfare costs marginal welfare costs are also sensitive to assumptions about both the income and substitution effects of labor supply

price competition and advertising in oligopoly abstract this paper studies price advertising in an oligopoly market where consumers have only local price information sellers may attract consumers from other locations by advertising their price with positive probability they advertise a low price to attract customers from distant locations with the remaining probability they post a high price and serve only local customers the random advertising equilibrium approaches the equilibrium under perfect price information when the cost of advertising becomes small

financial intermediation and price level control abstract because currency and deposits are not perfect substitutes in all transactions there are simplified financial systems in which control of the supply of currency is sufficient to control the price level most important in a currency supply approach price level control does not imply control of financial intermediation thus price level goals never have to be weighed against the availability of credit to finance real activity

oligopolistic pricing and advertising abstract n sellers advertise a homogeneous good to m buyers whose only source of information is this advertising there is a unique nash equilibrium ne in which sellers choose a common advertising level and mix over prices this ne approaches marginal cost pricing as advertising costs decrease and approaches monopoly pricing as advertising costs increase more sellers induce lower prices and less advertising per seller however the social welfare effect can be negative for some advertising technologies the ne advertising level is generically less than socially optimal journal of economic literature classification numbers d00 d4 d43 d8 d83 i00 i1 i13 m37

did the united states transmit the great depression to the rest of the world this paper challenges the commonly held belief that the great depression was transmitted from the united states to the rest of the world the well known argument by milton friedman and anna schwartz 1963 is used as the reference point i argue that their description although intuitively plausible does not correspond well with the data during the depression years and afterwards there was an extensive analysis of the international financial situation a comprehensive analysis was provided by ragnar nurkse 1944 earlier writings do not in particular indict the united states but rather also blame france and several other countries for the financial crisis recent literature that deemphasize the role of the united states include peter temin 1976 and knut borchardt 1982 friedman and schwartz do not get into any lengthy international analysis yet draw far reaching conclusions about the united states and the rest of the world this paper does not attempt to estimate the relative roles of french gold accumulations the illiquidity of loans to germany the austrian banking crisis the british devaluation etc rather the analysis is confined to evaluating whether the united states transmitted the depression to the rest of the world through the channels discussed by friedman and schwartz i the friedman schwartz argument and how it can be evaluated

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49