a bright future can be ours macroeconomic policy for non eurozone western countries radical changes in macroeconomic policy could produce a brighter future the neoclassical myth that a free market economy inevitably moves to an equilibrium position determined solely by supply side factors must be rejected and replaced by the insight that the position of an economy in the longer run is path dependent fiscal policy in recessions should be biased towards increasing physical and human capital which will improve the productivity of an economy raising living standards and hence taxable capacity thus enabling future public debt to be reduced if this is desirable monetary policy should play a very minor role in aggregate demand policy with interest rate settings largely used to help achieve long term income distribution goals all this is fundamental to geoff harcourt s vision of macroeconomic policy and this paper spells out how this vision can be implemented in 2012 in western countries not hamstrung by euro zone rules and regulations

an aggregate consumption function for canada a cointegration approach this study utilizes cointegration theory and error correction models ecms to specify a candidate dynamiac formulation of the aggregate consumption function using quarterly canadian date the variables entering the long run equlibrium relationship are tested for unit roots using a variety of techniques such as the dickey fuller the augemented dickey fuller and the phillips perron test profedures the engle and granger cointegration test and the fully modified consistent and efficient estimator of phillips and hansen are used to estimate the cointegration relationship johansen s maximum likelihood approach is also used to determine the rank of the cointegrating matrix the error correction model which appears to be a tentatively adequate conditional characterization of the date generating process revelas that disposable income wealth government expenditures relative prices and liquidity constraints proxied by the unemployment rate are important variables non nested tests are carried out against

capital taxation and accumulation in a life cycle growth model almost all of the serious economic work on savings decisions within the past decade has relied on some variant of the life cycle hypothesis in which savings arise out of individual choices of an optimum lifetime consumption path this paper reexamines the incidence and welfare consequences of capital income taxes within a realistic life cycle model the results suggest that the elimination of capital income taxation would have very substantial economic effects for example a complete shift to consumption taxation might raise steady state output by as much as 18 percent and consumption by 16 percent the long run welfare gain from such a shift would for plausible parameter values exceed 150 billion annually stated somewhat differently shifting to consumption taxation would raise the lifetime utility of the representative consumer by the equivalent of about six years income in the new steady state these estimates dwarf estimates of the static welfare cost of taxation and significantly exceed even extreme previous estimates of the dynamic loss this study departs from earlier analyses of the effects of taxes on capital income in several respects probably the most important difference between this treatment and most preceding ones lies in the assumptions about the interest elasticity of saving it is shown below that the common two period formulation of saving decisions yields quite misleading results a more realistic model of life cycle savings demonstrates that for a wide variety of plausible parameter values savings are very interest elastic this implies that shifting away from capital income taxation would significantly increase capital formation making possible long run increases in consumption many studies of the welfare effects of capital income taxation have ignored the general equilibrium effects of increased capital formation in an economy with life cycle savings there is no presumption that the undistorted growth path corresponds to any sort of social optimum as peter diamond has shown life cycle savings can lead to a steady state capital intensity either greater or less than the golden rule level more generally it is clear that there is no reason to believe that a life cycle economy will maximize any particular intertemporal social welfare function a fundamental tenet of welfare evaluation is that preexisting distortions must be considered in evaluating the consequences of tax changes the results presented in this paper take explicit account of the nonoptimal character of the no tax steady state this explains in large part why such a sizeable welfare effect of capital taxes is found in an economy far from the golden rule level of capital intensity there are substantial gains in steady state consumption achievable through increased capital formation section i of the paper examines the aggregate savings function in a continuous time life cycle framework the second section clarifies the differences between wage and consumption taxes an aggregate production function is added to complete the model in the third section the effects of changes in capital taxes on both steady state incidence and welfare are considered within a general equilibrium framework the final section of the paper discusses some implications of the results and suggests areas which appear to warrant further study assistant professor of economics massachusetts institute of technology and research analyst national bureau of economic research i am grateful to alan auerbach martin feldstein laurence kotlikoff to the participants in the nber workshop on business taxation and to the harvard public finance seminar for useful discussions james poterba and james buchal performed the numerical calculations

increasing the capital income tax may lead to faster growth this paper shows that under rather mild conditions higher capital income taxes lead to faster growth in an overlapping generations economy with endogenous growth government expenditures are financed with labor income taxes as well as capital income taxes since capital income accrues to the old taxing it reliefs the tax burden on the young and leaves them with more income out of which to save we argue that savings are sufficiently interest inelastic so that higher savings and therefore higher growth result the basic argument is not seriously challenged by a grandfather clause for initial capital or by the old receiving some labor income as well the reasoning is similar to feldstein 1978 auerbach 1979 and in particular jones and manuelli 1992 but in contrast to the conventional wisdom about the effect of capital income taxation as say in lucas 1990

a credible approach for measuring inframarginal participation in energy efficiency programs abstract economists have long argued that many recipients of energy efficiency subsidies may be non additional getting paid to do what they would have done anyway demonstrating this empirically has been difficult however because of endogeneity concerns and other challenges in this paper we use a regression discontinuity analysis to examine participation in a large scale residential energy efficiency program comparing behavior just on either side of several eligibility thresholds we find that program participation increases with larger subsidy amounts but that most households would have participated even with much lower subsidy amounts the large fraction of inframarginal participants means that the larger subsidy amounts are almost certainly not cost effective moreover the results imply that about half of all participants would have adopted the energy efficient technology even with no subsidy whatsoever

why have private savings rates in the united states and canada diverged abstract one of the central questions in macroeconomics for many years has been whether government policy can affect private saving rates and if so to what extent and through what channels the question has remained controversial because as with other macroeconomic questions experiments to check divergent hypotheses cannot be deliberately performed so economists must rely upon the often dubious evidence from the limited experiments with which nature and history have endowed us this paper discusses the results of an exceptionally good natural experiment that has been provided by canada and the u s over the past thirty five years after moving in tandem for almost twenty five years american and canadian private saving rates have diverged dramatically over the last decade the primary conclusion emerging from our analysis of this phenomenon is that tax policies can have a potent impact on private savings behavior differences in tax structures and in the interactions of taxation and inflation appear to be important factors explaining the divergent behavior of the american and canadian private savings rates recognizing the importance of asset revaluations caused partially but not entirely by tax effects also helps to explain the different behavior of u s and canadian savings there may also be a relationship between government deficits and the private savings differential

the illusory effects of saving incentives on saving the authors evaluate research on how tax based saving incentives iras and 401 k s affect saving previous research overstates the impact of the incentives on saving by failing to account for several issues households with saving incentives have stronger tastes for saving than others saving incentives have interacted with debt nonfinancial assets financial markets and pensions and saving incentives represent pretax balances whereas taxable accounts represent posttax balances accounting for these issues essentially eliminates the impact of saving incentives on saving the authors conclude that little if any of the contributions to existing saving incentives have raised saving

do tax incentives for saving in pension accounts cause debt accumulation evidence from danish register data abstract this paper applies a quasi experimental research design on a danish 2010 policy that reduced tax incentives for saving in annuity pension schemes to show significant substitution of savings from retirement accounts to gross debt repayments we find that for every 1 danish currency unit reduction in retirement savings 31 cents goes to debt repayments taking into account all types of savings we find full crowding out consistent with previous findings we document that the effect is driven by a minority about 23 percent who actively rebalance their savings

perspectives on the u s current account deficit and sustainability this essay considers the underpinnings of the large u s current account deficit it then tackles the question of whether the u s current account deficit is sustainable a current account deficit is sustainable at a point in time if neither it nor the associated foreign capital inflows nor the negative net international investment position are large enough to induce significant changes in economic variables such as consumption or investment or interest rates or exchange rates even if the current account deficit is sustainable by this definition today its trajectory could still be creating future risks for the u s and global economy

how retirement saving programs increase saving this paper summarizes the authors work on the effect of ira and 401 k contributions on net personal saving they consider many different nonparametric approaches to controlling for heterogeneity in individual saving behavior and conclude that the weight of the available evidence suggests that contributions to both iras and 401 k s largely represent new saving the authors devote particular attention to reconciling their results with the findings in other studies that reach different conclusions sometimes using the same databases that the authors analyze methodological limitations that undermine the reliability of results in other studies explain many of these disparities

buffer stock saving in retirement accounts abstract we use a dynamic programming model to explore the possibility and extent of precautionary saving in tax sheltered accounts such as the 401 k the main policy experiment examines the behavior of saving for different levels of unemployment insurance ui which is a perfect substitute for precautionary saving against job loss our results indicate that increasing the generosity of ui crowds out 401 k contributions made by younger workers who save primarily for precautionary reasons at the aggregate level we find that 401 k s increase national saving and that the magnitude of the effect depends on the generosity of ui

savings in times of demographic change lessons from the german experience pension reforms in many developed countries make individuals shoulder a bigger share of longevity and income risks the desired response is that individuals accumulate private assets for retirement whether this actually takes place is of paramount relevance for scientists and policy makers we take germany as an example twenty years of pension reform have transformed the monolithic german pension system into a multi pillar system formerly generous public pension benefits are gradually being reduced while substantial incentives are granted to occupational and private saving schemes has this transition worked out we survey the reform steps and household s reactions how did individuals adjust their labor market behavior how did private and occupational pension plans take off how do behavioral adjustments vary in the population most germans adapted to the new situation both actual and expected retirement decisions changedand the share of households without supplementary pensions decreased from 73 to 39 in little more than a decade this is a remarkable success nonetheless households with low education low income and less financial education did neither adjust their retirement behavior nor pick up supplementary pension plans and are thus likely to face difficulties in bridging the gap arising in future pension income

labor versus capital in trade policy the role of ideology and inequality abstract trade policy depends on the extent to which the government wants to redistribute income as well as on a country s overall factor endowments and their distribution while the government s desire to redistribute income itself is dependent on asset distribution it is to a large extent also driven by the partisan nature of the government i e whether it is pro labor or pro capital using cross country data on factor endowments inequality and government orientation we find that conditional on inequality left wing pro labor governments will adopt more protectionist trade policies in capital rich countries but adopt more pro trade policies in labor rich economies than right wing pro capital ones also holding government orientation constant higher inequality is associated with higher protection in capital abundant countries while it is associated with lower protection in labor abundant countries these results are consistent with the simultaneous presence of both inequality as well as ideology as determinants of protection within a two factor two sector heckscher ohlin framework overall various statistical tests support an umbrella model that combines both the ideology and inequality models over each of the individual models

have iras increased u s saving evidence from consumer expenditure surveys the vast majority of individual retirement account contributions represent net new saving based on evidence from the quarterly consumer expenditure surveys ces the results are based on analysis of the relationship between ira contributions and other financial asset saving the data show almost no substitution of iras for other saving estimates are based on a flexible constrained optimization model with the ira limit the principal constraint the implications of this model for saving in the absence of the ira option match very closely the actual non ira financial asset saving behavior prior to 1982 ira saving does not show up as other financial asset saving in the pre ira period

do capitalization effects for public goods reveal the public s willingness to pay this article develops a welfare theoretic framework for interpreting evidence on the impacts of public programs on housing markets we extend rosen s hedonic model to explain how housing prices capitalize exogenous shocks to public goods and externalities the model predicts that trading between heterogeneous buyers and sellers will drive a wedge between these capitalization effects and welfare changes we test this hypothesis in the context of changes in measures of school quality in five metropolitan areas results from boundary discontinuity designs suggest that capitalization effects understate parents willingness to pay for public school improvements by as much as 75

do labor standards affect comparative advantage in developing countries abstract this paper focuses on the question of whether labor standards can affect comparative advantage in unskilled labor intensive goods in developing countries and thereby influence trade flows using a heckscher ohlin framework the effects of low labor standards depend on the type of standard forced and child labor lead to an increase in the endowment of unskilled labor and hence improve comparative advantage in unskilled labor intensive goods the opposite occurs with discrimination against females and with basic trade union rights the outcome is ambiguous the empirical results confirm the theoretical outcome but also show that weaker union rights are associated with a stronger comparative advantage

effects of tax reform on labor supply investment and saving the u s tax system received two major overhauls during the 1980s the tax cuts of 1981 and the tax reform act of 1986 supporters of both reforms argued that major changes in tax policy could boost saving investment labor supply and entrepreneurship eventually it was argued such changes could reverse the slowdown in economic growth that began in the early 1970s and spur improvements in american living standards the aim of this paper is to assess whether the goals of increased labor supply and capital formation were achieved

information and ira participation the influence of tax preparers abstract the steep drop off in the number of individual retirement account ira contributors after 1986 has led to suggestions that taxpayers misunderstood and over reacted to the restrictions on deductible contributions imposed by the tax reform act of 1986 tax panel data is used to investigate the role of taxpayer misunderstanding in the drop off in ira contributors after 1986 the hiring of a tax preparer is the transmission mechanism for knowledge of the deductibility rules after 1986 the results suggest that more information and promotion of iras would have increased the probability of contributing to an ira in 1987 for high income taxpayers but would have decreased this probability for middle income taxpayers taxpayer confusion over the deductibility restrictions appears to have been resolved by 1988 therefore taxpayer misunderstanding did not play a major role in the steep drop off in the number of ira contributors after 1986

the budgetary and welfare effects of tax deferred retirement saving accounts abstract the present paper analyzes the budgetary macroeconomic and welfare effects of tax deferred retirement saving accounts similar to u s 401 k plans in a dynamic general equilibrium overlapping generations economy with heterogeneous households because of the initial deferral of tax payments the short run budgetary cost of tax deferred accounts is significantly higher than the long run cost therefore the budget neutral introduction of tax deferred accounts would make current and near future households worse off although it would increase national wealth and total output in the long run if the government spread the short run cost to future households by increasing debt the policy change could make all age cohorts on average as well off as the economy without tax deferred accounts due to increased government debt and debt service costs however national wealth and total output would decrease in the long run thus introducing tax deferred accounts would not increase national wealth and improve social welfare at the same time this is partly because the policy change is regressive and reduces the risk sharing effect of the current income tax system

do low income housing subsidies increase the occupied housing stock abstract a necessary condition for justifying a policy such as subsidized low income housing either via tenant based rental assistance or construction of public or private projects is that it has a real effect on market outcomes in this paper we examine one aspect of the real effect of subsidized housing does it increase the housing stock if subsidized housing raises the quantity of occupied housing per capita either more people are finding housing or they are being housed less densely on the other hand if subsidized housing merely crowds out equivalent quality low income housing that otherwise would have been provided by the private sector the housing policy may have little real effect on housing consumption using both census place and msa level data from the decennial census and from the department of housing and urban development we ask whether housing markets with more subsidized housing also have more total housing after accounting for housing demand we find that government financed units raise the total number of units in a market although on average one government subsidized unit adds only one third to one half of a unit to the total housing stock there is less crowd out in more populous markets and more crowd out in places where there is less excess demand for subsidized housing as measured by the number of government financed units per eligible person tenant based housing programs such as section 8 certificates and vouchers seem to be more effective than project based programs at targeting subsidized housing units to people who otherwise would not have their own

the ricardian approach to budget deficits persistent budget deficits have increased economists interest in theories and evidence about fiscal policy this paper develops the ricardian approach and contrasts it with standard models the discussion considers from major theoretical objections to ricardian equivalence finite lifetimes imperfect capital markets uncertainty about future taxes and incomes and the distorting effects of taxation the paper then considers empirical evidence on interest rates consumption and saving and current account deficits the conclusion is that the ricardian approach is a useful first order approximation and that this approach will probably become the benchmark model for assessing fiscal policy this abstract was borrowed from another version of this item

how do contribution limits affect contributions to tax preferred savings accounts abstract contributions to tax preferred savings accounts are typically constrained by a contribution limit these limits influence contributions not only for taxpayers currently constrained by the limit but also for those contributing less than the limit i develop a simple life cycle model in which taxpayers exhibit use it or lose it contribution behavior this connects current contributions to future contribution limits and implies that an increase in contribution limits can decrease contributions empirical evidence from microdata provides support for the model using variation from canadian limit reforms i find that larger future contribution room is associated with smaller contributions

do 401 k contributions crowd out other personal saving during the late 1980s contributions to 401 k plans eclipsed contributions to individual retirement accounts iras as the leading form of tax deferred individual retirement saving in the united states in this paper we describe patterns of participation in 401 k plans contrast these patterns with ira participation and evaluate the net impact of 401 k contributions on personal saving we find that 401 k participation conditional on eligibility exceeds 60 at all income levels in contrast ira participation at the height of that program rose sharply with income we use two methods to evaluate the net saving effect of 401 k contributions on personal saving we compare the financial assets of families who are eligible for 401 k saving with the assets of those who are not eligible and we consider the change over time in the assets of like groups of savers we find little evidence that 401 k contributions substitute for other forms of personal saving including ira contributions

tax reform and retirement saving incentives take up of stakeholder pensions in the uk in april 2001 the uk government introduced stakeholder pensions a new private pension arrangement the reform also changed the structure of tax relieved pension contribution ceilings increasing their generosity for lower earners we examine the impact of these changes on private pension coverage using individual level data we use a difference in differences strategy with an estimator that is modified to allow for dichotomous outcomes contrary to the conventional wisdom that the stakeholder pension reforms had little or no impact on saving behaviour our results indicate that the change to the contribution ceilings affected private pension coverage rates among lower earners especially among women

globalization and the right to free association and collective bargaining an empirical analysis summary economies that are more open to trade and foreign direct investment fdi face greater competitive pressure than closed ones globalization critics are concerned that this pressure induces countries to lower labor standards in order to remain competitive and retain or attract foreign investment defenders of globalization counter that countries that are more closely integrated into global markets are likely to have higher rather than lower standards this article tests the effect of globalization on a specific labor right which forms part of what are commonly regarded as core or fundamental labor standards employing a new measure of free association and collective bargaining rights we find that countries that are more open to trade have fewer rights violations than more closed ones this effect holds in a global sample as well as in a developing country sub sample and holds also when potential feedback effects are controlled via instrumental variable regression the extent of an economy s penetration by fdi has no statistically significant impact globalization might not be beneficial for outcome related labor standards but it is likely to promote the process related standard of a right to free association and collective bargaining

the impact of pension schemes on saving in israel israeli micro and macro data indicate that consumption smoothing is limited and thus pension savings increase private and national savings since private savings rates are to a great extent unequal across different income groups saving is almost exclusively concentrated in the upper two quintiles

savings the policy debate in europe thre issues dominate the public policy debate over savings in continental europe first can private savings substitute for public pensions in the provision of retirement income given that the current generosity of pay as you go financed pensions is hardly sustainable in the light of population ageing and if so which policy steps have to be taken to alleviate this transition second does the evolution of a new financial landscape in europe necessitate policy response in terms of taxation and regulation specifically considering the increase in pension funds and third closely related to the other two issues is there too much or too little saving in an ageing europe do we need to subsidise saving more or less than we currently do the paper reviews economic theory and empirical evidence on these intertwinded issues most importantly it identifies many gaps in our theoretical and empirical knowledge that caution us against overly strong policy recommendations

procrastination and obedience in this lecture i shall focus on situations involving repeated decisions with time inconsistent behavior although each choice may be close to maximizing and therefore result in only small losses the cumulative effect of a series of repeated errors may be quite large thus in my examples decision makers are quite close to the intelligent well informed individuals usually assumed in economic analysis but cumulatively they make seriously wrong decisions that do not occur in standard textbook economics this lecture discusses and illustrates several pathological modes of individual and group behavior procrastination in decision making undue obedience to authority membership of seemingly normal individuals in deviant cult groups and escalation of commitment to courses of action that are clearly unwise in each case individuals choose a series of current actions without fully appreciating how those actions will affect future perceptions and behavior the standard assumption of rational forwardlooking utility maximizing is violated the nonindependence of errors in decision making in the series of decisions can be explained with the concept from cognitive psychology of undue salience or vividness for example present benefits and costs may have undue salience relative to future costs

the role of registered retirement savings plans in a life cycle model in this paper a distinction is made between two types of personal saving one of which is tax deductible and another which is not and the role of each is examined within the framework of a life cycle model more precisely the model shows how tax deductible rrsp saving enables the individual to do his own lifetime income averaging for tax purposes in order to generate the lifetime profile of taxable income which minimizes the discounted value of tax payments the use of rrsps for this purpose however does not usually result in income averaging in the conventional sense since it is not necessarily optimal for a person to equalize taxable income over each period of his lifetime by contrast non tax deductible saving permits the individual to choose his optimal lifetime consumption path and bequests le ro le des regimes enregistres d epargne retraite dans un modele d optimisation sur tout le cycle de vie dans ce m6moire l auteur distingue deux types d 6pargne personnelle l une d6ductible aux fins de l impot sur le revenu et l autre non le role de chacune est analyse dans le contexte d un modele d optimisation sur tout le cycle de vie plus pr6cis6ment le modele montre comment l 6pargne via les r6gimes enregistr6s d 6pargne retraite permet a l individu d 6taler son revenu total dans le temps aux fins d imp6t afin de construire un profil de revenu imposable qui minimise la valeur pr6sente des impots pay6s l utilisation des r6gimes enregistr6s d 6pargne retraite h cette fin n engendre pas necessairement un 6talement conventionnel du revenu puisqu il se peut fort bien qu il ne soit pas optimal pour l individu d 6galiser son revenu imposable pour chaque p6riode de sa vie d autre part l 6pargne qui n est pas d6ductible aux fins d impot sur le revenu permet h l individu de choisir le sentier optimal de consommation et de legs sur tout le cycle de vie

the economic case for international labour standards this paper explores the economic case for international labour standards granting workers rights of free association and collective bargaining confers both static and dynamic economic efficiencies static efficiencies refer to one time gains from improvements in economic practice dynamic efficiencies refer to gains from improvements to the growth path resulting from a shift away from a low road development path to a high road path these efficiencies raise wages employment and output in developing countries and they can also benefit workers in developed countries labour standards are an institutional mechanism for raising the quality of growth in both developing and developed countries in this sense they are a win win institution

the interest rate neutrality of fiscal deficits testing for ricardian equivalence and capital inflow abstract this paper examines the extent to which the ricardian equivalence theorem as restated by barro 1974 and the capital inflow hypothesis of dwyer 1985 provide valid explanations of the observed interest rate neutrality of fiscal policy in open economies a theoretical open economy macromodel is specified and subsequently tested on a multi country dataset which spans the recent period of floating exchange rates on balance the empirical results favour the capital inflow hypothesis which emphasizes the importance of international financial integration in facilitating the financing of public deficits by the savings of agents who reside across political frontiers

estimation and testing of the union wage effect using panel data we present estimates of the union wage effect controlling for unmeasured individual effects and subject the conventional fixed effects model to specification tests for psid men the union wage effect is 5 8 after controlling for person effects as opposed to 20 in cross section omnibus tests based on an unrestricted reduced form and instrumental variables tests based on differencing are consistent with conventional models tests based on comparing those who enter and leave union coverage provide evidence against the usual model we find evidence for interactions between union status and other variables even after controlling for person effects

do individual retirement accounts increase savings do iras increase savings or are they merely a windfall for otherwise well off taxpayers a major objective of universal iras was to encourage saving for retirement a spirited debate has ensued over the use of ira tax deductions as a means of promoting private savings the crucial policy issue is not whether ira contributions were substantial they clearly were representing about 30 percent of personal savings from 1982 to 1986 rather the important question is the source of ira contributions iras can be financed out of 1 tax savings themselves 2 shifting existing assets into iras 3 borrowing 4 diverting new savings into iras or 5 reducing consumption the key question is how much of ira savings comes from reduced consumption for overall savings to increase private savings must increase by more than the tax savings conventional economic theory and evidence strongly suggests that iras were not effective savings incentives the challenge to this view rests largely on studies which have appealed to a variety of psychological factors not normally incorporated in economic analysis this paper reviews both types of analysis and concludes that the conventional view remains sound thus a dollar devoted to deficit reduction is likely to be a safer bet for increasing savings than a dollar devoted to ira benefits

taxation with representation abstract in this paper a framework is developed for the joint analysis of tax preparation mode and tax non compliance estimation is performed using micro level audit data from the internal revenue service although tha availability of tax practitioners undoubtedly reduces many of the informational and computational barriers to tax compliance the results indicate that their use particularly the use of cpas and attorneys is associated with increased tax non compliance which may have negative implications for both tax equity and tax efficiency

the effects of low income housing tax credit developments on neighborhoods abstract this paper evaluates the impacts of new housing developments funded with the low income housing tax credit lihtc the largest federal project based housing program in the u s on the neighborhoods in which they are built a discontinuity in the formula determining the magnitude of tax credits as a function of neighborhood characteristics generates pseudo random assignment in the number of low income housing units built in similar sets of census tracts tracts where projects are awarded 30 higher tax credits receive approximately six more low income housing units on a base of seven units per tract these additional new low income developments cause homeowner turnover to rise raise property values in declining areas and reduce incomes in gentrifying areas in neighborhoods near the 30th percentile of the income distribution lihtc units significantly crowd out nearby new rental construction in gentrifying areas but do not displace new construction in stable or declining areas

empirical evidence on the strength of the monetary transmission mechanism in canada an aggregate approach abstract this paper examines the transmission of monetary policy in canada it emphasizes the transmission through interest rates and the exchange rate rather than through changes in monetary aggregates and provides empirical evidence on the strength of these channels using a highly aggregated structural model implications of these structural equations for the dynamic effects of monetary policy are explored through a simulation analysis

crowd out effects of place based subsidized rental housing new evidence from the lihtc program abstract since its inception in 1987 the low income housing tax credit lihtc program has ballooned into the largest ever source of subsidized construction of low income housing in the united states accounting for one third of all recent multi family rental construction this paper examines the crowd out effects of this increasingly important source of low moderate income housing to do so we analyze the impact of lihtc construction at three different levels of geography msa county and 10 mile radius circles this allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors political variables are also used as instruments to further facilitate identification in all of our models iv estimates yield substantially greater crowd out than ols confirming the endogenous attraction of lihtc development to areas ripe for new construction our most robust iv estimates indicate that nearly 100 of lihtc development is offset by a reduction in the number of newly built unsubsidized rental units although the confidence band around this point estimate allows for less dramatic assessments additional estimates suggest that lihtc development has a much more moderate impact on construction of owner occupied housing but these estimates are imprecise overall while lihtc development may well affect the location of low moderate income rental housing opportunities our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small

taxation and household saving in open economies evidence from the nordic countries household saving behavior in the nordic countries is studied by trying to figure out the effects of tax factors on its level and fluctuations by and large the lower level of the household saving ratio in the nordic countries relative to the rest of the oecd can be accounted for by higher income taxation a lower unemployment rate as well as by demographics and the growth effect as regards fluctuations in the household saving ratio quarterly data from denmark finland norway and sweden over the period 1972 91 suggest that it is positively affected by real income growth and the inflation rate and negatively by real housing prices or real housing wealth copyright 1994 by the editors of the scandinavian journal of economics

unpacking the impacts of the low income housing tax credit program on nearby property values most existing research on the impacts of the low income housing tax credit lihtc on neighbouring property values is limited in terms of providing causal attribution and uncovering nuances in the role of housing market and neighbourhood composition this article addresses these shortcomings by investigating the impacts of the lihtc program in charlotte north carolina and cleveland ohio levels and trends in housing prices before and after lihtc developments in neighbourhoods are examined based on parcel level housing sales data from 1996 to 2007 the adjusted interrupted time series difference in differences aits did model is used to clarify the causal direction of impacts of lihtc developments the results show that lihtc developments have negative impacts in charlotte while having upgrading effects in cleveland also these impacts vary across neighbourhoods income heterogeneity thus care should be taken when siting lihtc developments to minimise negative impacts and enhance its use for communi

could international labour rights play a role in us trade during its last complete business cycle from 2001 to 2007 the usa experienced unsustainably high trade deficits policymakers are considering a number of measures to avoid a recurrence of such large external imbalances one such measure is the promotion of better labour rights around the world proponents argue that higher labour standards would boost us exports by increasing income growth abroad and reduce us imports by shrinking international price differences opponents of such a policy move argue that it is disguised protectionism that will impede trade and harm living standards in the usa and abroad in this paper i combine us trade data with data on international labour standards and other relevant economic variables to study any links between labour rights abroad and us trade the results suggest that the usa would have benefited from more exports if there had been better worker rights around the world but that labour rights would not have had any measurable impact on us imports that is the promotion of better worker rights around the world could contribute to smaller external imbalances without impeding international trade flows

why are there nimbys an owner occupied home is an un usual asset because it cannot be diversi ed among locations and because it is the onlysizable asset that most owners possess among the unin sured risks of homeownership is devaluation by nearby changes in land use opponents of land use change are called nimbys not in my back yard this article submits that nimbyism is a rational response to the uninsured risks of home ownership it explores the possibilities and draw backs of providing an insurance market to cover such risks it concludes that some progress is being made towards developing such markets jel r52 residents who strenuously oppose devel opment of land in their immediate area are often called nimbys the acronymic per soni cation of the expression not in my backyard the oppositionof neighbors is an importantproblemin americanland use reg ulation itcanfrustrate the implementationof carefully planned residential development locally desired industrial development and placement of the necessary nuisances of ur ban life such as power plants and land lls downs 1994 fischel 1991 nelson 1999 portney 1991 rephann forthcoming nimbys sometimes appear to be irratio nal in theiroppositionto projects in the sense that they express far fetched anxieties or doggedly ght projects whose expected neighborhood effects seem small or even be nign i submit in this note that such anxieties might not be irrational if we consider that most nimbys are homeowners and that homeowners cannot insure their major and often only asset against devaluation by neighborhood effects nimbyism mightbet ter be viewed as a risk averse strategy i con clude with a few notes about how an insur ance market might be developed to head off

the effects of pensions on household wealth a reevaluation of theory and evidence this paper examines the extent to which households offset pension wealth with reductions in other wealth systematic econometric biases imply that the estimated offsets in previous empirical studies are smaller than the true offset and may even have the wrong sign new empirical estimates that do not correct for the biases generate little offset between pensions and other wealth estimates that correct for the biases show substantially more offset a smaller impact of pensions on overall saving than in most previous studies the estimates also indicate that the effects of pensions on wealth vary significantly across households

progressive income taxes and the substitution effect of rrsps within a progressive income tax system registered retirement saving plans rrsps generate a substitution effect that decreases saving the key point made here is that when an rrsp is introduced to a system that taxes capital income the rate of return on marginal saving within the rrsp is driven to equality with the rate of return on non rrsp saving since rrsp contributions redistribute taxable income across periods they also have the effect of increasing future marginal income tax rates which lowers the after tax return to saving this result stands in contrast to the conventional view from the public finance literature

iras and household saving this paper examines the effects of individual retirement accounts iras on private and national saving the authors construct a formal model of dynamic utility maximization that generates closed form equations for ira and other saving their empirical estimates indicate that raising the annual ira contribution limit between 1983 and 1986 would have resulted in little if any increase in national saving results from sensitivity analysis imply substantially smaller effects on national saving than most previous researchers have estimated the authors results are consistent with new evidence they present indicating considerable potential among ira holders to shift taxable forms of saving into iras copyright 1994 by american economic association

the effects of tax based saving incentives on government revenue and national saving this paper shows that previous analyses of ira type plans that seek to encourage household saving have miscalculated their effect on tax revenue and therefore on national saving by ignoring their favorable impact on corporate tax payments recognizing the important effects of ira plans on corporate tax revenue changes previous conclusions about the revenue loss in a fundamental way the revenue loss associated with iras either is much smaller than has generally been estimated or is actually a revenue gain

teaching new markets old tricks the effects of subsidized investment on low income neighborhoods abstract this paper examines the effects of investment subsidized by the federal government s new markets tax credit nmtc program which provides tax incentives to encourage private investment in low income neighborhoods i identify the impacts of the program by taking advantage of a discontinuity in the rule determining the eligibility of census tracts for nmtc subsidized investment using this discontinuity as a source of quasi experimental variation in commercial development across tracts i find that subsidized investment has modest positive effects on neighborhood conditions in low income communities though spillovers appear to be small and crowd out incomplete the results suggest that some of the observed impacts on neighborhoods are attributable to changes in the composition of residents as opposed to improvements in the welfare of existing residents

assessing the effectiveness of saving incentives concluding that iras and 401 k s do increase saving this text provides a fresh cost benefit approach for analyzing the success of savings incentives it compares the new savings to the government tax revenue lost through contributions to iras and 401 k s

the effect of individual retirement accounts on household consumption and national saving a major debate exists on whether expanding tax favoured savings accounts such as individual retirement accounts iras will increase national savings much of the empirical debate has centred on whether ira contributions before the tax reform act of 1986 represented new savings or merely reshuffled assets we find no evidence that households financed their ira contributions from reductions in consumption at least initially we find evidence that households financed their ira contributions from existing savings or from saving that would have been done anyway our results indicate that at most 9 of ira contributions represented net additions to national saving

active vs passive decisions and crowd out in retirement savings accounts evidence from denmark using 41 million observations on savings for the population of denmark we show that the effects of retirement savings policies on wealth accumulation depend on whether they change savings rates by active or passive choice subsidies for retirement accounts which rely on individuals to take an action to raise savings primarily induce individuals to shift assets from taxable accounts to retirement accounts we estimate that each 1 of government expenditure on subsidies increases total saving by only 1 cent in contrast policies that raise retirement contributions if individuals take no action such as automatic employer contributions to retirement accounts increase wealth accumulation substantially we estimate that approximately 15 of individuals are active savers who respond to tax subsidies primarily by shifting assets across accounts 85 of individuals are passive savers who are unresponsive to subsidies but are instead heavily influenced by automatic contributions made on their behalf active savers tend to be wealthier and more financially sophisticated we conclude that automatic contributions are more effective at increasing savings rates than subsidies for three reasons i subsidies induce relatively few individuals to respond ii they generate substantial crowd out conditional on response and iii they do not increase the savings of passive individuals who are least prepared for retirement jel codes h2 h3

targeted business incentives and local labor markets this paper uses a regression discontinuity design to examine the effects of geographically targeted business incentives on local labor markets unlike elsewhere in the united states enterprise zone ez designations in texas are determined in part by a cutoff rule based on census block group poverty rates exploiting this discontinuity as a source of quasi experimental variation in investment and hiring incentives across areas i find that ez designation has a positive effect on resident employment increasing opportunities mainly in lower paying industries while business sitings spurred by the program are more geographically diffuse ez designation is associated with increases in home values

determinants of household saving in taiwan growth demography and public policy this article examines the determinants of household saving in the process of economic development in the light of the taiwanese experience during the period 1952 99 the methodology involves the estimation of a saving rate function derived within the life cycle framework it is found that the household saving rate rises with both the level and the rate of growth of household disposable income the real deposit rate has a significant positive impact but the magnitude of the impact is modest public saving seems to crowd out private saving but less than proportionately while both old and young dependency in population have a negative impact on the saving rate the magnitude of the impact of the former is far greater than that of the latter increased availability of social security provisions and enhanced credit availability also seem to reduce saving as regards methodological implications the study casts doubt on the usual practice of lumping together public corporate and household savings in savin

did tax flattening affect rrsp contributions in 1988 marginal personal income tax rates changed in canada for some individuals by reasonably substantial amounts in this note a large sample of tax filer data is examined and the conclusion is drawn that when attention is paid to the possible confounding of marginal tax rate and non linear income effects there is no convincing evidence that the tax rate changes affected contributions to registered retirement saving plans rrsps est ce que l aplatissement des taux d imposition influence les contributions au reer en 1988 les taux marginaux d imposition du revenu personnel ont change au canada et pour certaines personnes ces changements ont ete substantiels cette note examine un grand echantillon de rapports d impots et en arrive a la conclusion que quand on prend en compte le melange possible des effets du taux marginal d imposition et des effets de revenu non lineaires il n y a pas de resultats qui montrent de facon probante que les changements dans les taux d imposition ont influence les contributions au reer