efficiency and equalization payments in a federal system of government a synthesis and extensions of recent results this paper investigates the rationale for a system of equalization transfers in a federal system of government the existing sources of inefficiency of resource allocation in economies with more than one level of government are synthesized in the framework of a simple decentralized multiprovince model with mobile factors of production the sources of inefficiency arise first because migrants respond at the margin to incorrect signals owing to the phenomena of rent sharing and fiscal exterality and second because of global rather than local inefficiencies the model is then extended to consider the role of the federal government in providing intergovernmental transfers in the face of such inefficiencies in addition to synthesizing the sources of inefficiency in federal models the equity arguments for equalization are briefly recounted efficacite et paiements de perequation dans un systeme federal de gouvernement synthese et extensions de certains resultats recents ce memoire examine la logique qui soustend un systeme de paiements de perequation dans un systeme fdderal de gouverement les auteurs utilisent un modele simple d un systeme multi provincial decentralise avec des facteurs de production mobiles pour definir les sources d inefficacite dans l allocation des ressources dans les dconomies qui possedent plus d un niveau de gouvernement ces inefficacites proviennent de ce que d abord ceux qui se deplacent le font en reponse a la marge a des signaux incorrects engendres par le partage de la rente sur la base de la residence et par les phenomenes d exteralites fiscales elles sont aussi le resultat d inefficacites globales plutot que locales dans le cadre de ce modele les auteurs analysent le role du gouvernement federal effectuant des transferts inter gouverementaux pour corriger ces inefficacites en plus de presenter une synthese des sources d inefficacite dans les regimes federaux les auteurs font un bref rappel en passant a l ensemble des arguments fondes sur l equite qu on utilise pour rationaliser les paiements de perequation this paper is a linear combination of two papers presented at the may 1982 meetings of the canadian economics association in halifax entitled the case for equalization payments by the authors and recent developments in the theory of regional economic policy in canada by boadway the authors are grateful for comments by the discussants jim johnson and baxter macdonald and by jack mintz brian scarfe gerard belanger david sewell tom courchene and the referees we are especially heavily indebted to dan usher for many stimulating comments and suggestions while the work was in progress some of the above persons will undoubtedly disagree with the emphasis we have chosen to put on various aspects of the analysis for policy purposes support for some of this work has been provided by the economic council of canada and is gratefully acknowledged canadian journal of economics revue canadienne d economique xv no 4 november novembre 1982 printed in canada imprimd au canada 0008 4085 82 0000 0613 01 50 1982 canadian economics association this content downloaded from 207 46 13 127 on wed 12 oct 2016 04 27 47 utc all use subject to http about jstor org terms 614 robin boadway and frank flatters

on strategic community development this paper examines strategic behavior of developers who through offering different congested public good packages and revenue fiscal schemes compete for residents who are differentiated by income there is an endogenous determination of numbers and sizes of communities developers have an incentive to strongly differentiate their public good offerings in terms of pricing strategies developers exhibit sharply contrasting behaviors in low income communities housing consumption is subsidized once lots are priced in high income communities housing consumption is generally taxed

reassessment of the tiebout model abstract the tiebout model has been the reference point for the classical approach to fiscal federalism its emphasis on mobility benefit taxation and the advantages of fiscal competition have informed fiscal federalism since the seminal contributions of musgrave and oates this paper reviews the influence that the tiebout model has had on fiscal federalism and argues that while its insights remain relevant for local government it is far from compelling as a positive description of or a normative prescription for fiscal federalism at the state level some aspects of alternative approaches are presented which lead to different perspectives than tiebout inspired ones

macroeconomic forecasts and microeconomic forecasters in the presence of principal agent problems published macroeconomic forecasts by professional economists may not measure expectations forecasters may use their forecasts in order to manipulate beliefs about their ability i test a cross sectional implication of models of reputation and information revelation i find that as forecasters become older and more established they produce more radical forecasts since these more radical forecasts are in general less accurate ex post forecast accuracy grows significantly worse as forecasters become older and more established these findings are consistent with reputational factors at work in professional macroeconomic forecasts

strategic behavior of federal open market committee board members evidence from members forecasts abstract in this paper we use panel data to test whether federal open market committee fomc board members forecasts are rational rationality is rejected in the sense that forecasts by members are heavily dependent on previous own forecasts and last consensus made in fomc furthermore we reveal the strategic behavior of fomc board members forecasts by governors who always have voting rights agree much with the previous consensus of fomc members forecasts in contrast non governors who rotate voting rights exaggerate their forecasts they aggressively deviate their forecasts from previous consensus the former is herding behavior and the latter is anti herding behavior our results imply that individual members behave strategically governors want to present policy consistent forecasts to the congress and non governors utilize their forecasts to influence decision making in fomc

new microfoundations for the aggregate matching function empirical studies of the aggregate labor market matching function have favored a cobb douglas functional form for which there are no microfoundations in the existing literature i present a new model for the matching process based on a telephone line poisson queuing process which unlike other microeconomic approaches can be integrated directly into standard theoretical search models this implies a ces matching function approximately cobb douglas when search costs are approximately linear the model allows empirical estimates of matching function parameters to be interpreted in terms of the costs and benefits of search

a theory of interregional tax competition a general equilibrium model is constructed to study tax competition where local governments compete for capital by holding down property tax rates and public expenditure levels an exact definition of tax competition is provided and both the existence and nonexistence of tax competition are shown to be theoretically possible it is argued however that tax competition must occur under empirically reasonable conditions inefficiency in public production is also explicitly modeled the amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms

migration between home country and diaspora an economic analysis this paper investigates the distribution of a population group between a home country and diaspora given sequential decision making regarding migration at the individual level the home country is attractive to the members of the group yet their presence there requires a fixed amount of public spending e g on defense the per capita tax burden depends then on the size of the domestic population reflecting a case of fiscal externality this results in an inefficient distribution of the group between the home country and the diaspora encouraging immigration to the home country is an interest not only of those individuals who are currently in the home country but also of those residing in the diaspora however only when the burden of public spending in the home country is large enough do the latter volunteer to bear part of it even then in general this part is smaller than socially optimal

incentive equivalence with fixed migration costs abstract if migration between communities is costless and if policy makers in each community anticipate the migration response to policy changes then the interests of the two communities are perfectly aligned decentralization is efficient this incentive equivalence is well known however the first order approach used in virtually all the literature may obscure the fact that no convexity assumptions need be made about technology or tastes this fact underscores the relevance of incentive equivalence even when there are scale economies in the public sector here the consequences of positive migration costs for this incentive equivalence are considered in contrast with much of the literature migration costs are assumed the same for everyone this formulation differs from the more common attachment to home assumption of heterogeneous migration costs conditional on the direction of migration interests of different communities are still perfectly aligned but natives of different communities may prefer different directions of migration weakening incentive equivalence if local policy makers have the power to induce large changes in migration flows however incentive equivalence fails only if economies of scale in population are important so that communities may be under populated

on price taking equilibria in club economies with nonanonymous crowding abstract competitive equilibrium in a coalition production economy or a club economy typically does not exist when there is free entry for two reasons first there may be an integer problem as is familiar from club theory with anonymous crowding second optimal groups may have different compositions from the population and then even if there is no integer problem it may be impossible to partition the population into optimal groups i define a notion of approximate equilibrium and show that such an equilibrium always exists in a sufficiently large economy i focus on the optimal size of the economy rather than of clubs

imperfectly mobile households and durable local public goods does the capitalization mechanism work abstract a complication in the decision making of local governments is that a community s residents may move before the future benefits associated with current tax and expenditure policies are fully realized it has been argued that the capitalization of these benefits into current property values can induce local governments to behave efficiently this paper drops two assumptions behind the capitalization hypothesis perfect labor mobility and the absence of uncertainty about the future benefits it is shown that these benefits may be overcapitalized or undercapitalized depending on a critical aspect of the uncertainty consequently there is underinvestment in some projects but overinvestment in others

forecasting efficiency concepts and applications this article introduces the concept of forecast efficiency in which the forecast contains all information available at the time of the forecast empirical tests investigate weak efficiency where the information set is all past forecasts and where all forecast revisions and errors should be uncorrelated with past forecast revisions tests of macroeconomic energy consumption and oil price forecasts find a significant autocorrelation of forecast revisions with fifty of fifty one tests showing positive correlation of forecast revisions as opposed to zero correlation consistent with forecast efficiency copyright 1987 by mit press

rent seeking and tax competition abstract regional or local governments often appear to favour the interests of those who own land in the region here the implications of this sort of policy making are modelled formally people are assumed perfectly mobile between regions but are assumed to own land only in the region of their birth the nash equilibrium is shown to be efficient if and only if no migration of capital or labour is needed to achieve efficiency otherwise tax competition leads to too little migration voluntary inter regional transfers will never arise in equilibrium despite the inefficiency of the nash equilibrium when there is migration a higher level of government cannot alter the equilibrium if regional governments choose policies simultaneously after the federal government has committed to its policies

competitive equilibrium and the core in club economies with anonymous crowding in club economies with anonymous crowding competitive equilibrium states of the economy are efficient and coincide with the core when there is only one private good anonymous admission prices permit consumers with different tastes to share facilities consumers might do so when their demands for facility size and crowding coincide in which case sharing is efficient thus similarity of demands is the relevant consideration for efficiently grouping consumers with different tastes

financial markets forecasts revisited are they rational stubborn or jumpy this paper evaluates professional forecasters behavior using a panel data of individual forecasts we find that i professional forecasts are behavioral and ii there exists a stock bond dissonance the forecasting behavior seems to be stubborn in the stock market but jumpy in the bond market even in the same country forecasting behavior is quite different by market

redistribution within and across the regions of a federation the authors reconsider the literature on redistribution within a federation with mobile agents they conclude that redistribution is a function best assigned to the national government local governments with diverse preferences for redistribution distort individual migration decisions the authors also examine the fiscal externality literature which has made an efficiency argument for interregional transfers they show that if local governments have the same preferences for redistribution the nash equilibrium is efficient if preferences are diverse the authors show that nationally imposed interregional transfers do not address the source of the inefficiency nevertheless interregional transfers are shown to be a part of decentralized behavior

using survey data to correct the bias in policy expectations extracted from fed funds futures many studies estimate risk premiums on federal funds futures to extract monetary policy expectations by assuming that average forecast errors of the expectations are zero or that survey forecasts are good proxies for the expectations these assumptions however may fail due to an unanticipated declining trend in the federal funds rate and to survey respondents strategic behavior consequently the premiums estimated under these assumptions may be biased we propose a new method to estimate the premiums and find that the premiums have been often negative since 2000 which is generally consistent with the negative betas observed in the 2000s

optimality free mobility and the regional authority in a federation abstract this paper examines the efficiency properties of a federation characterized by strategically competing regions and freely mobile homogeneous individuals analyses of this economy have concluded that achieving a pareto optimal will require intervention by a national authority this paper makes one basic point the nash equilibrium of regional authority behavior is pareto optimal the implication is that there is no role for a national authority in either providing interregional transfers or correcting for decentralized provision of public goods the nash equilibrium involves samuelson public goods provision and regions purchasing preferred population distributions with optimal interregional transfers

training migration and regional income disparities abstract it is assumed that there are two regions that production requires both skilled and unskilled labour and that one region is innately more productive than the other workers who differ in their migration or training costs make individually rational decisions in equilibrium the ratio of skilled workers to unskilled workers is always higher in the more productive region average incomes differ between regions because regional differences in wage rates are reinforced by regional differences in the structure of employment the model is also used to analyse the effects of policies intended to equalize the distribution of income

population mobility and transboundary environmental problems abstract a standard result in the literature on environmental economics is that efficient environmental policies regulating transboundary pollution will be adopted only if there is interjurisdictional coordination efficient policies can be adopted as a result of interregional treaties or mandated by a central authority the present paper demonstrates that if there is perfect population mobility between the regions affected by the transboundary pollution the efficient outcome is a nash equilibrium of the policy game between regional authorities this is true independently of what policies are available to the regional authorities however there may be more than one nash equilibrium so that policy coordination may be necessary in order to achieve the best equilibrium

futures prices as risk adjusted forecasts of monetary policy many researchers have used federal funds futures rates as measures of financial markets expectations of future monetary policy however to the extent that federal funds futures reflect risk premia these measures require some adjustment in this paper we document that excess returns on federal funds futures have been positive on average and strongly countercyclical in particular excess returns are surprisingly well predicted by macroeconomic indicators such as employment growth and financial business cycle indicators such as treasury yield spreads and corporate bond spreads excess returns on eurodollar futures display similar patterns we document that simply ignoring these risk premia significantly biases forecasts of the future path of monetary policy we also show that risk premia matter for some futures based measures of monetary policy shocks used in the literature

uncertain income and redistribution in a federal system abstract this paper considers income redistribution in a federal system where regions experience random shocks federal redistribution serves as insurance against jurisdiction specific shocks but provides a uniform assistance to the poor and cannot suit individual jurisdictions demands for redistribution consequently whether the federal government should redistribute depends on the advantage of pooling the risk and the disadvantage of compromising different preferences for redistribution with mobile individuals federal redistribution loses its advantage because migration ensures the equalization of factor incomes between regions and because even local redistribution serves as insurance however local redistribution creates fiscal externalities and distorts the allocation of labor

equilibrium wage dispersion and interindustry wage differentials this paper develops a search theoretic explanation of interindustry wage differentials given coordination problems in the labor market the probability of filling a vacancy is an increasing function of the wage offered in equilibrium firms that find vacancies more costly will offer higher wages the model thus explains the persistence of interindustry wage differentials and their correlation with industry average capital labor ratio and profitability additionally the model predicts that high wage firms will receive more applications per job opening and that wages in the labor market will behave as strategic complements

a sequential study of migration and job search this paper designs a multiarmed bandit mab sequential model for the analysis of the migration job search process the implications either are compatible with well known migration behavior or when novel are also plausible for example regions with large wage variability attract migrants and regions with large nonpecuniary returns increase both in migration and out migration a major advantage of this approach is the relative ease with which martingale estimators can be derived from the martingale structure of the model these martingale methods are exemplified for the return migration phenomenon

should land and capital be taxed at a uniform rate if jurisdictions are allowed to tax land and capital separately they tax only land because capital taxation distorts the allocation of mobile capital to exploit absentee owners however jurisdictions tax land beyond the efficient level as absentee ownership increases throughout the economy land taxation results in greater inefficiency to alleviate the inefficiency of overtaxing land the higher level government intervenes to require jurisdictions to tax both capital and land at a uniform rate because the desire to attract capital lowers the tax rate uniform taxation of land and capital or property taxation thus may be more efficient than separate taxation jel classification h21 h71 est ce que la terre et le capital devraient etre taxes d une maniere uniforme si on permettait aux diverses juridictions de taxer capital et terre separement elles taxeraient seulement la terre parce que la fiscalite imposee au capital cree des distorsions dans l allocation du capital mobile mais pour exploiter les proprietaires absents les diverses juridictions imposent un fardeau fiscal sur la terre qui va au dela de ce que l efficacite commande a proportion que la propriete absente se developpe dans l economie la fiscalite imposee a la terre devient source de plus en plus grande inefficacite pour reduire cette inefficacite attribuable a la sur taxation de la terre le niveau senior de gouvernement intervient pour forcer les juridictions juniors a taxer capital et terre au meme taux parce que le desir d attirer le capital reduit le taux de taxation il se peut donc que la taxation uniforme de la terre et du capital ou de la taxation sur la propriete soit plus efficace que des taux d imposition differents

federalism equalization and risk aversion abstract what causes a group of countries to agree to form a federation other alternative arrangements which often are chosen instead are to form a unitary state or to remain autonomous federations usually allow for considerable freedom of movement among constituent regions they also provide a fairly limited redistribution of any rents earned in these regions these two features together imply that residents of poor regions can share in the rents in rich regions by migration this fiscal migration may waste resources why not simply share the rents equally among residents of all regions such a unitary arrangement although efficient would not appeal to residents of a country which is likely to be the best off region in a federation complete autonomy may expose residents of the separate countries to considerable idiosyncratic risk here i demonstrate that federation may be chosen by a group of countries even though it is a more wasteful arrangement than either other alternative if asymmetries among countries and the degree of risk aversion are large federal states also often implement transfers among the regions these transfers can be viewed as substitutes for fiscal migration i also show that the possibility of transfers even without any commitment to specifics makes federalism a more attractive option a federal constitution which requires transfers in excess of what would be made voluntarily may make federalism more attractive still

risk sharing in a federation with population mobility and long horizons in this paper risk sharing among individuals within and across regions in a federation with population mobility and infinite horizons is considered it is shown that the regional authorities will not fully exploit gains from interregional risk sharing when population mobility is imperfect in the nash equilibrium there is complete risk sharing among the individuals within each region however which corresponds to the policies of the central authority regional authorities who care about their reputation may be able to commit to an efficient allocation it is possible that improvements in the degree of mobility will make such commitments less likely jel classification h77 e61 and f36 le partage du risque dans une federation ou la population est mobile et l horizon temporel long ce memoire examine le partage du risque entre personnes a l interieur des regions et entre regions dans une federation ou il y a mobilite de la population et horizon temporel infini on montre que les autorites regionales n exploiteront pas pleinement les gains en provenance d un partage inter regional du risque quand la mobilite de la population est imparfaite cependant dans un equilibre a la nash il y a partage complet du risque entre les individus de chaque region ce qui correspond aux politiques des autorites centrales les autorites regionales qui tiennent a leur reputation peuvent etre capables de s engager a une allocation efficace il est possible que les ameliorations dans le degre de mobilite rendent ces engagements moins probables

why are professional forecasters biased agency versus behavioral explanations professional forecasters may not simply aim to minimize expected squared forecast errors in models with repeated forecasts the pattern of forecasts reveals valuable information about the forecasters even before the outcome is realized rational forecasters will compromise between minimizing errors and mimicking prediction patterns typical of able forecasters simple models based on this argument imply that forecasts are biased in the direction of forecasts typical of able forecasters our models of strategic bias are rejected empirically as forecasts are biased in directions typical of forecasters with large mean squared forecast errors this observation is consistent with behavioral explanations of forecast bias

a model of competing jurisdictions with locally polluting environments and mobile populations in this model we consider a federation consisting oftwo geographically separated regional states withlocal taxing authority the residents of thefederation are identical in preferences and haveexplicit tolerance to pollution pollution is local innature and is a by product of production implying amore highly populated region would generate morepollution local authorities in the regions can andwill in the interest of local residents engage ingame theoretical taxation strategies the model isused to illustrate that nash equilibrium can resultwherein the two regions have different levels ofenvironmental quality the resulting nash conditionsimply for instance that residents of the cleanregion will subsidize those in the other region tostay in the more polluted environment in order foreach to accomplish their preferred consumption andenvironmental quality pair

pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility abstract we examine the non cooperative provision of a pure public good by regional governments in a federation similar to the european union where regional governments are stackelberg leaders and the central government is a stackelberg follower a federation with decentralized leadership the center makes interregional income transfers after it observes the contributions to the pure public good imperfectly mobile workers react to regional and central governments policies by establishing residence in their most preferred region despite the degree of labor mobility we show that the pure public good and interregional transfers are generally allocated efficiently in a federation with decentralized leadership

federal fiscal constitutions risk sharing and redistribution the paper studies the political and economic determinants of regional public transfers specifically it focuses on how such transfers are shaped by alternative fiscal constitutions where a constitution is an allocation of fiscal instruments across different levels of governments plus a procedure for the collective choice of these instruments realistic restrictions on fiscal instruments introduce a tradeoff between risk sharing and redistribution different constitutions produce very different results in particular a federal social insurance scheme chosen by voting provides overinsurance whereas an intergovernmental transfer scheme chosen by bargaining provides underinsurance

vertical versus horizontal tax externalities an empirical test abstract we study taxation externalities in federations of benevolent governments where different hierarchical government levels tax the same base one can observe two types of externalities a horizontal externality working among governments of the same level and leading to tax rates that are too low compared to the social optimum and a vertical externality working between different levels of government and leading to suboptimally high tax rates building on the model of keen and kotsogiannis keen michael j kotsogiannis christos 2002 does federalism lead to excessively high taxes american economic review 92 1 363 370 we derive a discriminating hypothesis to distinguish vertical and horizontal tax externalities based on measurable variables this test is applied to a panel data set on local taxes in a sample of swiss municipalities that feature direct democratic fiscal decision making so as to maximize the correspondence with the benevolent governments of the theory we find that vertical externalities dominate they are thus an observed empirical phenomenon as well as a notable extension to the theory of tax competition

firm to firm labor flows and the aggregate matching function a network based test using employer employee matched records the assumption of aggregate matching functions in labor markets is tested using a network configuration model for directed multigraphs we use employer employee matched records of the universe of employees and firms in finland and find that aggregate matching functions even at the level of submarkets cannot explain the vast majority of the observed patterns of labor flows between firms our findings suggest the need for theoretical frameworks that take into account the structure of labor market frictions

commodity tax competition between member states of a federation equilibrium and efficiency we first describe regional market equilibria whereupon consumers of each region allocate their purchases of private goods between domestic and nondomestic ones according to the structure of relative prices taxes and transportation costs next regional optimal tax levels and public good quantities are derived the tax of the other region being held constant fiscal competition arises from the ability of one region in choosing its tax to alter the tax base of the other

job contact networks abstract many workers hear about or obtain their jobs through friends and relatives the aim of this paper is twofold first we relate both individual and aggregate labor market outcomes to the network structure of personal contacts second we study strategic network formation to this purpose we develop a model specifying at the individual level both the decision to form contacts with other agents and the process by which information about jobs is obtained and transmitted we show that equilibrium networks always exist and that only moderate levels of network asymmetry can be sustained at equilibrium also we establish a general non monotonicity result on information flow and unemployment with respect to network size in symmetric networks

ex ante free mobility ex post immobility and time consistency in a federal system abstract this paper examines regional population distribution when there is an interregional transfer policy without commitment we introduce explicitly the following time structure of actions individuals assumed to be identical make decisions on locational choices freely ex ante but are immobile ex post the fiscal policies of the local governments and the central government are implemented after individuals migration decisions the basic result is that locally stable no commitment equilibria are single community equilibria when there is a pure local public good we then illustrate the possibility for the interregional transfer policy to reduce the efficiency of population distribution

interregional spillovers in the presence of perfect and imperfect household mobility abstract when households are immobile across regions the decentralized provision of public goods that generate interregional benefit spillovers is inefficiently low we analyze this problem in an environment of interregional household migration and obtain the following results if households are perfectly mobile across regions then the decentralized provision of public goods generating spillovers is socially efficient there is no need for central government intervention if households are attached to particular regions for cultural or nationalistic reasons however at least one of two regions undersupplies the public good central government intervention can enhance efficiency

pigou tiebout property taxation and the underprovision of local public goods abstract pigou s proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper a simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services the case where public services are an intermediate producer good is also considered

migration with fiscal externalities abstract this paper analyses the distribution of a country s population among regions when migration involves fiscal externalities the main question addressed is whether a decentralized decision making of regional governments can produce an optimal population distribution as recently asserted or a centralized intervention is indispensable as argued before in the literature in analysing this issue it is assumed that migration is costly and accordingly the problem is modelled in a dynamic setup it turns out that while with costless mobility the fiscal externality is fully internalized by voluntary interregional transfers with costly mobility centrally coordinated transfers still remain indispensable for achieving the socially optimal allocation

controlling migration in an open labor market a direct immigration policy is no longer feasiblefor a single region in a common labor market within apolitical economy approach this paper focuses on the question ofwhether migration can be controlled through the composition ofgovernment expenditures taking into account both capital and laborincome it turns out that the median voter s income is u shaped in thenumber of immigrants therefore the government can eitherprovide less of the goods preferred by foreigners in order to minimizeimmigration or carry out an active immigration policy byshifting its expenditures towards those publicly provided goods thepaper identifies the factors that determine the government schoice between the two strategies

on models with an uncongestible public good and a continuum of consumers abstract this short note shows that models with an uncongestible or mildly congestible public good and a non atomic continuum of consumers have an interesting but unfortunate property only an infinite level of public good provision in the continuum economy can be approximated by feasible public good levels in a sequence of economies with finite populations we discuss the theoretical and practical problems this creates for familiar models that employ a continuum of consumers and a finite level of an uncongestible public good

majority choice of tax systems in single and multi jurisdictional economies abstract we examine majority choice of tax instruments in an economy with heterogeneous households in our framework majority voting equilibrium exists despite the multidimensional policy choice set we examine single and multi jurisdictional economies we identify five competing incentives that influence choice of tax instruments equilibria generally entail a mixture of tax types with multiple jurisdictions strong reliance on head taxation in rich communities arises to deter poorer households from immigrating in spite of local incentives to use alternative tax instruments to redistribute wealth if relocation costs preclude inter community mobility the equilibrium tax system is fundamentally affected with redistribution incentives then dominating choice of instruments and tax rates limiting or eliminating head taxation fundamentally alters stratification public good provision levels and tax systems

frictional unemployment on labor flow networks abstract we develop an alternative theory to the aggregate matching function in which workers search for jobs through a network of firms the labor flow network the lack of an edge between two companies indicates the impossibility of labor flows between them due to high frictions in equilibrium firms hiring behavior correlates through the network generating highly disaggregated local unemployment hence aggregation depends on the topology of the network in non trivial ways this theory provides new micro foundations for the beveridge curve wage dispersion and the employer size premium we apply our model to employer employee matched records and find that network topologies with pareto distributed connections cause disproportionately large changes on aggregate unemployment under high labor supply elasticity

the timing of regional development abstract consider a country composed of regions of different qualities or endowments of amenities and natural resources for production and consumption initially only the highest quality regions are occupied as national population grows successively lower quality regions are occupied the equilibrium timing of occupation of uninhabited regions differs from the optimal timing typically being too late policies which would result in better timing are analyzed

daily changes in fed funds futures prices this paper explores the properties of daily changes in the prices for near term fed funds futures contracts the paper finds these contracts to be excellent predictors of the fed funds rate and shows that the claim of a nonzero term premium in the short horizon contracts is more sensitive to outliers than previous research appears to have recognized i find some statistically significant evidence of serial correlation in the daily changes but this accounts for only a tiny part of the 1 day movements and there is essentially zero predictability for horizons longer than 1 day settlement futures prices for each day appear to incorporate the information embodied in that day s term structure of longer horizon treasury securities previous employment growth makes a statistically significant contribution to predicting futures price changes though again this could only account for a tiny part of the daily variance the paper concludes that futures prices provide a very useful measure of the daily changes in the market s expectation of near term changes in fed policy

attachment to home and efficient purchases of population in a fiscal externality economy abstract this paper examines the efficiency properties of an economy characterized by strategically competing regions and individuals with varying degrees of attachment to home in an otherwise standard fiscal externality setting regional authorities may make interregional transfers in purchasing preferred populations however there is a range of distributions of resources over which neither region makes transfers nevertheless all equilibrium allocations resulting from the nash behavior of regional authorities including those that involve no transfers are efficient therefore in contrast to the standard conclusions of the fiscal externality literature there is no efficiency role for a central authority

the provision of local public goods and factors in the presence of firm and household mobility abstract this paper studies the efficiency properties of allocations when firms and households are mobile and when local governments provide local public goods and local public factors the analysis differentiates between immobile land owners and perfectly mobile workers and concludes that an efficient allocation is obtained if there is no outflow of land rents to absentee owners if rents flow out only local public goods are supplied in accordance with the samuelson rule the provision of local public factors is inefficiently low however and jurisdictions tax mobile firms and mobile households inefficiently high in order to restrict the outflow of rents an optimal intervention scheme is derived in this case we also analyze the distortions that result when the non availability of local head taxes makes it impossible to internalize crowding costs

imperfect mobility and local government behaviour in an overlapping generations model abstract this paper reconsiders the implications of land value maximizing local governments in an overlapping generations model with imperfect mobility specifically residents develop an attachment to place or location specific capital once they reside in a town for a single time period the analysis shows that attempts by governments to capture the resulting rents from less mobile individuals create inefficient migration leave all workers worse off in an ex ante sense and place relatively high burdens on those workers who have high migration costs public good levels are also inefficiently chosen

bargaining between benevolent jurisdictions or when delegation induces inefficiencies this paper considers the problem of bargaining between benevolent jurisdictions about local public goods and head taxes it is shown that delegation to benevolent jurisdictions will in general induce distortions away from efficiency where efficiency means an efficient provision of local public goods and an efficient distribution of consumers this distortion is caused by 1 the divergence between social and jurisdictional objectives and 2 the impossibility for jurisdictions to realize side payments without modifying either the provision of local public goods or the distribution of consumers

market based measures of monetary policy expectations a number of recent articles have used different financial market instruments to measure near term expectations of the federal funds rate and the high frequency changes in these instruments around federal open market committee announcements to measure monetary policy shocks this article evaluates the empirical success of a variety of financial market instruments in predicting the future path of monetary policy all of the instruments we consider provide forecasts that are clearly superior to those of standard time series models at all of the horizons considered among financial market instruments we find that federal funds futures dominate all the other securities in forecasting monetary policy at horizons out to six months for longer horizons the predictive power of many of the instruments we consider is very similar in addition we present evidence that monetary policy shocks computed using the current month federal funds futures contract are influenced by changes in the timing of policy actions tha

interregional interactions and population mobility the institutional level at which policies should be determined is an important issue that has been extensively treated in the economics literature in particular the literature has discussed to what extent decentralization of policy decisions give an inefficient outcome with a homogeneous population and perfect population mobility as it conventionally is modeled the following result is derived for a very general class of economies with interregional interactions a socially efficient outcome is a nash equilibrium of the game of decentralized and uncoordinated policy setting however if decisions about migration take a longer time to make than decisions of policy changes the general result above no longer holds with this decision sequence decentralization may give an inefficient outcome also in situations where the decentralized outcome is efficient in the absence of population mobility

regional insurance and migration a dynamic model of migration is developed to study whether labor mobility can hedge people against region specific shocks making private or public insurance redundant the model adopts a novel timing for migration which is argued to be the time frame suitable for analyzing risk sharing issues it also innovates on the existing literature by solving individual migration through convexification of the set of actions the results show that the role of migration as an insurance mechanism is small labor mobility cannot fully remove income differentials between regions it is also shown that a fiscal stabilization scheme is in general optimal moreover any pure risk sharing mechanism has no influence on migration flows