resource allocation affluence and deadweight loss when relative consumption matters abstract we explore the link between affluence and well being using a simple general equilibrium model with a pure veblen good individuals derive utility from the pure veblen good based solely on how much they consume relative to others in equilibrium consumption of the pure veblen good is the same for everyone so the veblen good contributes nothing to utility hence resources devoted to the veblen good provide us with a measure of deadweight loss we ask under what preference conditions does the proportion of productive capacity devoted to the pure veblen good increase as an economy becomes more affluent in a relatively general preference framework we derive a sufficient condition for which the veblen good crowds out standard forms of consumption and leisure resulting in an inverse relationship between affluence and utility with additional structure on the model we are able to fully characterize the behavior of deadweight loss and utility as an economy becomes more affluent

if we knew ability how would we tax individuals abstract the suggestion to tax people on earnings capacity instead of earnings has been around for a long time and is attractive in terms of economic efficiency in this paper we reflect on the feasibility of such a system and give an exploratory empirical implementation we apply the leyden welfare function of income a survey based measure of an individual s welfare associated with income to derive implications for ability taxation under the assumption that iq and schooling reflect earnings capacity we derive the tax functions using different criteria to distribute the utility loss due to taxation

status effects and environmental externalities abstract this paper examines a static competitive economy where the production of a consumption good generates pollution that adversely affects human welfare preferences are defined over consumption leisure pollution and economic status each person s status increases with her own consumption but decreases with the average consumption of society the achievement of a pareto efficient resource allocation requires a consumption tax to offset the incentive to overconsume in the pursuit of enhanced status in contrast with standard prescriptions the efficient pollution tax generally exceeds the sum of individuals marginal willingness to pay for pollution abatement these findings remain unaltered when preferences are modified to incorporate altruistic concern for others well being altruism however suggests a potential role for government intervention to achieve a desirable i e pareto efficient distribution of welfare between individuals

efficient black markets abstract this paper investigates analytically the welfare effects of black market activities that firms undertake to evade taxes the desirability of a black market is linked to the attributes of the goods supplied by black market firms the analysis identifies cases where a black market reduces increases the distortionary impact of taxation on the allocation of resources across the goods that the government is attempting to tax leading to a welfare gain loss

an analysis of the laffer curve the laffer curve shows the relationship between tax revenue and the personal income tax rate with tax revenue being a presumably concave function of the tax rate and equal to zero at tax rates of zero percent and 100 percent if the personal income tax rate is reduced then tax revenue will decrease increase if the economy is on the positively negatively sloped section of the laffer curve this paper derives a sufficient condition for the economy to be on the positively sloped section of the laffer curve in light of the current knowledge of the elasticities of supply of labor and supply of saving it is difficult to escape the conclusion that a decrease in u s personal income tax rates will decrease tax revenue

persistent demi regs and robust tendencies critical realism and the singer prebisch thesis debate about whether the terms of trade for primary products relative to manufactures have a tendency to deteriorate has been ongoing for half a century the phenomenon itself provides an example of a persistent contrastive demi regularity this is viewed as the result of a robust tendency understood as an enduring and pervasive characteristic effect generated by a powerful and stable underlying causal mechanism on this basis the key problem for primary products lies in the biological limits on consumption to which may be added capitalism specific tendencies affecting processes of production and distribution the paper concludes by arguing that the relevant holistic generic tendency under capitalism involves a long term contraction in the primary product share of world trade copyright 2002 oxford university press

nature of transfers income tax function and empirical estimation of elasticity of taxable income for brazil abstractthis article aims to estimate the elasticity of taxable income eti taking into account the nature of transfers and their use as a redistribution package involving cash and in kind transfers to households in brazil our contributions are twofold first we provide a simple model with balanced budget government that reveals the role played by cash and in kind transfers on the labour supply and income tax revenues thereof next in order to estimate eti in the presence of cash and in kind transfers brazilian population surveys pesquisa nacional por amostra de domicilios pnad are used to explore a limited tax reform that was implemented between 1997 and 1998 this reform only affected the higher income tax bracket our findings suggest that in kind cash transfers are positively negatively associated with reported taxable income and precise estimation of eti requires estimates of both types of transfers last we estimate the eti for brazil in the range from 0 4 to 1 3 not different fro

long run prices of primary commodities and oil prices acutely volatile movements in primary commodity prices have drawn considerable interest from empirical researchers exports of these commodities account for the bulk of export earnings of developing countries the traditional demand based framework was unable to explain the marked deterioration in these prices during the 1980s this paper tries to ascertain the role played by real oil prices in explaining the extremely volatile movements in real prices of primary commodities by taking into account oil price shocks over the period 1973 1996 using monthly data real primary commodity prices and real oil prices are cointegrated additionally the error in the cointegrating relation stimulates real commodity price adjustment not real oil price adjustment

the social basis of interdependent preferences abstract most economists are sympathetic to the idea that concerns for relative position are an important aspect of many economic problems there has traditionally been a reluctance to include such concerns primarily because models that included them often allow such a broad range of behavior that there are few if any restrictions on equilibrium behavior and hence such models would have little or no predictive power in this paper we discuss how reduced form models may naturally give rise to utility functions that depend in part on relative standing there are several advantages of modelling concern for relative standing in reduced form utility functions even when there is no similar concern in the deep preferences it provides structure and constraints on the way that relative standing affects utility and further it can yield testable implications about the way that changes in the underlying environment affect the concern for relative standing we discuss the advantages and disadvantages of modelling social concerns in this way and provide examples that illustrate how concerns for relative standing can affect savings investment and labor choice decisions

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

politics deficits and the laffer curve even if there were only a positively sloped tax rate tax revenue relationship or if a negatively sloped region were not in the relevant tax rate range the existence of a lagged private sector response to tax rate change that exceeds the relevant time horizon for political decision makers is conducive to the existence of a budget deficit bias given the existence of a negatively sloped region of the laffer curve especially if it begins at reasonably low tax rates determined attempts to eliminate or just reduce deficits can become self defeating particularly if there is a structural deficit 3 moreover once the economy is on the downward sloping portion of the laffer curve a combination of political expediency uncertainty about the shape of the curve and a common belief that tax rate increases reduce deficits all can conspire to keep the budget trapped in deficit finally given the existence of inflation and a marginally progressive income tax deficit growth may be less if there is indexation of income tax rates to inflation contrary to conventional wisdom

status seeking and material affluence evaluating the hirsch hypothesis abstract when individuals hold a preference for high relative consumption competition to achieve social status can lead to inefficiently high levels of production and consumption contributing to natural resource depletion and environmental degradation in the 1970s fred hirsch argued that an increasing portion of expenditure is allocated to status seeking as average income rises this paper critiques this hypothesis from two points of view first we note examples from the historical and anthropological literatures suggesting that status seeking is often important in societies with relatively low incomes second we consider a set of analytical models that focus on the economic consequences of status seeking when social status is defined in terms of the algebraic difference between an individual s consumption of a status good and the average consumption level in society hirsch s hypothesis holds true and growth in the level of productivity and output can lead to declines in human welfare if on the other hand status is linked to the ratio of individual and average consumption hirsch s hypothesis is valid only if social status and non status goods are poor substitutes the paper also considers two cases in which social status is defined in terms of the amount of time people devote to status oriented activities under this assumption productivity growth leaves time use unchanged though the value of time devoted to status signaling increases in proportion to total expenditure

on the possibility of an inverse relationship between tax rates and government revenues abstract when arthur laffer and other supply side advocates plot total tax revenue as a function of a particular tax rate they draw an upward sloping segment called the normal range followed by a downward sloping segment called the prohibitive range a brief literature review indicates that tax rates on the prohibitive range in theoretical and empirical models have been the result of particularly high tax rates high elasticity parameters or both the labor tax rate which maximizes total revenue for example will depend on the assumed labor supply elasticity this paper introduces a new curve which summarizes the tax rate and elasticity combinations that result in maximum revenues separating the normal area from the prohibitive area a general purpose empirical u s general equilibrium model is used to plot the laffer curve for several elasticities and to plot the newly introduced curve using the labor tax example results indicate that the u s could conceivably be operating in the prohibitive area but that the tax wedge or labor supply elasticity would have to be much higher than most estimates would suggest

entrepreneurship social mobility and income redistribution in south india development economists have been preoccupied with the problem of increasing the size of the gnp pie to the relative neglect of its distribution despite the recent disenchantment with the viewpoint that all classes share in the benefits of industrial growth empirical data on the distribution of income business opportunity and economic power are in short supply many of the studies on entrepreneurship and economic development when they are not apologetics for ruthless capitalist exploitation as paul baran suggests extol the achievements of the capitalist entrepreneur without examining class origins and monopoly advantage joseph schumpeter sees entrepreneurs irrespective of class origin as heroic figures with the dream and will to found a private kingdom to conquer adversity to achieve success for its own sake and to experience the joy of creation for gustav papanek 1967 the private entrepreneur who is frugal diligent far sighted remarkably able and willing to take political risks is in large part responsible for the success of pakistan in achieving rapid industrialization

general equilibrium analysis of black and white markets a computational approach abstract this paper explores the inter relationship between black and white markets and presents a formulation in which equilibrium conditions hold separately for each type of market for each product with linking conditions across market types using a traditional goods and factor general equilibrium model the simultaneous operation of price controls on white markets and surveillance with penalties for those caught trading on black markets is modelled a numerical example of such an economy is presented using data for india and equilibria under coexistence are reported

marginal cost of public funds for different tax instruments and government expenditures the marginal cost of public funds that is the size of the direct and indirect excess burden costs for marginal tax revenues is examined in this paper for an open economy with a savings response and using swedish 1979 data the marginal cost of public funds spent on transfer payments is estimated to vary from 1 47 for a distributionally neutral tax on labor and capital to 7 20 for a more progressive tax where average and marginal labor taxes increase by the same rates for changes in the most important tax instrument the marginal cost of public funds varies from 0 98 for expenditures on infrastructure to 2 27 for transfer payments

the social contingency of wants abstract economic models typically assume that individual wants are determined by forces exogenous to the economic system social psychology and consumer research in contrast support the view that the perceived benefits of goods and services are strongly affected by endogenously determined social norms we present a selective overview of the literature on the relationship between consumption and well being exploring the ways in which informal arguments from social science might be linked to formal models of economic behavior we find that the fixed preferences hypothesis leads to the systematic undervaluation of environmental services and the underprovisioning of environmental goods

social status and economic performance a survey abstract this survey combines ideas and results from sociology and economics recognizing that economic decisions are often shaped by social concerns and influences based on the sociological literature we define social status and describe its measurement we then describe the role of social status in economic analysis of saving and consumption wages and economic growth we review recent work on status determination in equilibrium including evolutionary models we conclude with some remarks on the need for further interaction between sociology and economics

social organization status and savings behavior abstract we develop a model of status seeking in the presence of incomplete information and derive its implications for aggregate savings status seeking endogenously takes the form of conspicuous consumption its impact on savings depends on the scheduling of the contests for status over the life cycle if individuals engage in conspicuous consumption when old aggregate savings are increased we also study the role of social segmentation while social segmentation reduces the inequality across status seekers and fuels social rivalry under complete information we show that under incomplete information social segmentation weakens the incentive to strive for greater status

labour supply tax evasion and the marginal cost of public funds an empirical investigation abstract in this paper we extend the concept of marginal cost of public funds itmcf to incorporate tax evasion in the labour market mcf values are also computed from various tax reforms applied to the province of quebec canada 1985 for this purpose a utility based labour supply model that allows for both regular and irregular work activities is used at the benchmark situation the mcf associated with an increase in marginal income tax rates ranges between 1 39 and 1 53 depending upon whether we consider rationing or not moreover the presence of the irregular sector accounts for between 0 02 and 0 05 of this mcf although small in magnitude the impact of the irregular sector increases rapidly with the level of marginal tax rates

international labor economics i argue for increased reliance on non u s data and policy evaluations to understand basic labor market parameters and to predict the effects of changes in u s labor market policies foreign experiences generate exogenous shocks to labor costs that create unusual opportunities to measure impacts on labor demand foreign policies often provide more variation in the underlying parameters in systems that are often structured like their american counterparts foreign data sets are often larger and better suited to inferring behavior an empirical examination shows the effect of author s location data set and journal on the research s subsequent impact

welfare and optimum dynamic taxation of consumption and income abstract this paper estimates that the us could attain large welfare gains by implementing an optimal ramsey tax policy that taxes consumption and income it is also found that the welfare implications associated with taxing consumption are quantitatively more important than those associated with dynamically taxing income indeed replacing income taxes with a constant consumption tax leads to a welfare gain that is only slightly lower than that attained by a dynamic policy that taxes consumption and income in computing these welfare gains careful attention is given to the dynamic path of tax rates and the transitional dynamics associated with how the economy responds to a new tax policy

the extensive macro labor supply elasticity integrating taxes and expenditures abstract this paper shows that accounting for certain public expenditures is crucial when comparing labor tax system efficiencies across countries to measure the extensive margin response to taxation i assemble a large cross country dataset consisting of the employment ratios the average effective tax rates the out of work benefits transfers as well as public expenditures on childcare elderly care and family policy covering all oecd countries and more than two decades when not controlling for the country and year fixed effects the extensive margin elasticities are negative once accounting for transfers the elasticities are negative or at most flat even with fixed effects once additionally accounting for public expenditures subsidies on labor complements which are robustly positively associated with the employment to population ratios i obtain either flat or positive extensive margin elasticities in the lower end of the expected range

tax evasion and the marginal cost of public funds tax evasion and deadweight loss have similar implications for the rules of public finance the optimal mix of taxes can be derived from the minimization of the sum of aggregate deadweight loss and aggregate cost of tax evasion similarly the marginal cost of public funds includes allowances for marginal deadweight loss and marginal cost of tax evasion per dollar of public revenue acquired

the tragedy of the commons in a fishery when relative performance matters this paper presents a simple model of a common access fishery where fishermen care about relative performance as well as absolute profits our model captures the idea that status which depends on relative performance in a community influences a person s well being in our main specification relative performance depends on the absolute difference in after tax profits we show that overharvesting resulting from the tragedy of the commons problem is exacerbated by the desire for higher relative performance leading to a smaller steady state fish stock and smaller steady state profit for all the fishermen we also consider alternative specifications where status depends on the absolute difference in harvests or relative difference in profits or where there is heterogeneity in the degree to which status matters or allowing for the possibility of extinction in all these specifications status further reduces the steady state fish stock we examine taxes and an individual quota as policy alternatives and find support for using the direct quantity method to implement the socially efficient stock level

income tax evasion an intersectoral analysis abstract this paper develops an intersectoral model of income tax evasion with general equilibrium effects key elements of the model are imperfectly substitutable outputs from the compliant and evading sectors and workers with heterogeneous evasion costs the model allows for biased public expenditures a wide range of behavioural responses and both legitimate and criminal activities evading tax as well as tax avoidance activities qualitative and quantitative assessments are undertaken for the effects of tax rate changes on evasion activity relative output prices and real tax revenues this approach offers useful findings for taxation policy and is amenable to further analytical extensions

efficient status seeking externalities and the evolution of status games abstract status seeking games are games in which an individual s utility is determined by his relative expenditure on status seeking activities rather than his absolute consumption there are a number of parallels between status seeking and rent seeking activities for example a tendency for pareto excessive private investment however many status seeking activities differ from rent seeking activities insofar as they generate significant benefits to individuals not actively involved in the game given an array of more or less productive status seeking games it is likely that relatively efficient status conferring mechanisms will tend to displace less efficient ones

tax analysis in a real business cycle model on measuring harberger triangles and okun gaps abstract a tax distorted real business cycle model is parameterized calibrated and solved numerically in an attempt to measure the size of harberger triangles relative to okun gaps in particular the model constructed is used to study quantitatively the impact of various distortional government tax and subsidy schemes it is shown that the government can use tax policy to stabilize cyclical fluctuations and this is done for the economy being studied the benefits of implementing such a stabilization policy are calculated and compared with the size of the welfare gains realized from reducing various tax distortions

is more always better a survey on positional concerns abstract we use survey data to provide some empirical information about concerns regarding relative standing respondents chose between a world where they have more of a good than others and one where everyone s endowment of the good is higher but the respondent has less than others questions asked about education attractiveness and intelligence for one s child and oneself income vacation time approval and disapproval from a supervisor and papers to write half of the respondents preferred to have 50 less real income but high relative income concerns about position were strongest for attractiveness and supervisor s praise and weakest for vacation time

distortionary taxation and labor supply this paper examines empirically the effects of distortionary taxation on labor supply using a general equilibrium framework the long term relations predicted by the model are derived and tested using data from canada united states germany and japan in all these countries labor tax changes are found to be persistent and to have played an important role in the observed downward trend in hours worked

manufactured exports of developing countries and their terms of trade since 1965 abstract during the last 40 years since the prebisch singer terms of trade deterioration hypothesis was first proposed the commodity composition of exports of developing countries has undergone a major change in the direction of dominance of manufactures in their nonfuel exports with strong growth in the volume of their manufactured exports but this did not allow developing countries to escape unequal exchange relations with the industrial countries their barter terms of trade in manufactures showed signs of weakness rather than improvement and clearly failed to reflect the respective productivity trends leading to deterioration in factoral terms of trade

the long run determinants of north south terms of trade and some recent empirical evidence abstract this paper reviews some recent evidence of the long run decline in the terms of trade of primary commodities versus manufactures in the context of north south trade this evidence is evaluated in the light of competing explanations of the sources of the observed long run trends in the context of a model of north south trade which includes a general resource labor and capital in the north and specific factors in a dual economy model of the south changes in factor supply sectoral and factoral bias in technical change biased demand conditions changes in the pattern of protection and institutional elements all play a role in determining the evolution of commodity and factor prices the lewis hypothesis of sectoral bias in the pattern of technical change towards temperate agriculture in the north and against tropical agriculture in the south is then reexamined in the light of the recent empirical evidence on terms of trade movements and some sketchy evidence presented on the patterns of bias in technical change in the north and the south the evidence is not consistent with an absolute technical change bias towards temperate agriculture in the north rather the rate of technical change in temperate agriculture is now comparable to that experienced in manufactures so that engel curve effects now assert the major downward pressure on the long run terms of trade between temperate agriculture commodities and manufactures overriding the effects of diminishing returns to natural resources as northern population expands the empirical evidence onbiased technical change in the south is much more sketchy and the evidence on various components of north south terms of trade is more varied

on the cultural transmission of preferences for social status abstract we study the formation of preferences for social status as the result of intergenerational transmission of cultural traits we characterize the behavior of parents with preferences for status in terms of socialization of their children to this particular cultural trait we show that degenerate distributions of the population whereby agents have either all status preferences or all non status preferences are dynamically unstable moreover under some conditions there exists a unique stationary distribution which is non degenerate in which both status and non status preferences co exist in the population and this distribution is locally stable finally we study the dependence of the stable stationary distribution of status preferences on institutional technological and policy parameters which affect agents economic conditions

the terms of trade experience of britain since the nineteenth century the terms of trade of britain exhibited a declining trend in the first half of the nineteenth century but after two decades of transitional confusion they started to move upwards the explanation lies in the fact that the reversal of the trend corresponded to a change in the structure of british export trade from the dominance of traditional textile products towards other manufactures unlike the traditional textile products these other manufactures had little indigenous counterpart in the agrarian countries with which britain had expanding trade relations so while cost reduction through technical progress led to a rapid fall in the prices of cotton textiles under stiff competition at home and abroad producers in the newer sectors did not have to respond much to this type of cost reducing technical progress that spread to these sectors in the latter period thus as prebisch and singer argued the classical scheme of distribution of the gains from technical progress through trade that was supposed to

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

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

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

the welfare cost of the underground economy this paper estimates the welfare cost of taxes that create an incentive for resources to flow to the underground or untaxed sector in the united states using a general equilibrium model of the american economy the welfare cost is found to be large and growing in absolute and relative terms over time in 1980 the welfare cost may be as much as 220 billion or over 9 percent of output even conservative estimates place the loss at nearly 100 billion it also is found that small reductions in tax rates substantially reduce the welfare cost

keeping up with the joneses abstract the paper is concerned with the dynamics of a two players status game there is a nash equilibrium in status seeking activities and one can show that chaotic adjustment pathe are possible for particular parameter constellations

the long run behavior of the relative price of primary commodities statistical evidence and policy implications abstract this paper is concerned with both the statistical and policy issues surrounding the long run behavior of the ratio of primary commodities prices to those of manufactured goods seen as a measure of the barter terms of trade between primary producers and the producers of manufacturers the statistical evidence reported is found to offer support for the secular deterioration hypothesis the policy implications of this finding for less developed countries are explored

the economics of taxpayer compliance there is now a great deal of evidence suggesting that tax evasion is fairly widespread throughout european and north american economies estimates of the so called black economy indicate that perhaps 10 per cent of economic activity in these countries has been driven underground in the attempt to evade payment of tax for a detailed survey see pyle 1989 chs 2 4

the welfare cost of capital income taxation in a growing economy the welfare cost of capital income taxation is analyzed in a general equilibrium framework where the private sector is represented by a competitive household endowed with perfect foresight and an infinite life the value of the welfare cost depends essentially on the elasticity of substitution between capital and labor in the production function numerical estimates are presented for different values of the parameters of the model the welfare gain obtained by the abolition of the capital income tax is smaller when the private sector is not endowed with perfect foresight it is reduced by about 40 percent when expectations are myopic the allocation efficiency cost of the corporate tax dwarfs the intertemporal welfare cost

the revenue effects of the kennedy and reagan tax cuts some time series estimates univariate time series models are estimated for sample periods ending with the enactment of major tax reductions in 1964 and 1981 these models are used to forecast government revenue for the period following the tax cut and the pattern of forecast errors is examined unforecast revenue is negative and large relative to its standard error following the 1981 tax cuts but is close to zero following the 1964 cuts this disparity occurs because national output behaved differently in the two cases suggesting that short run movements in output are dominated by factors other than tax rate changes

the parallel market of illegal aliens a computational approach abstract this paper develops the notion of illegal aliens as a parallel market in coexistence with the regular market of legal labor in the presence of both price controls on legal labor by minimum wage legislation and quantity controls on illegal aliens by immigration laws illegal aliens involve not only rural urban migration but also tax evasion and deportation costs we develop an analytical equilibrium structure which links markets for legal labor and illegal aliens illustrate how much an equilibrium can be computed and explore some implications of the linkage using united states data

sweden s laffer curve taxation and the unobserved economy recent research on the unobserved economy suggests that the phenomenon has important implications for both macroeconomic policy and public finance attention is focused on the public finance implications by developing a simple macromodel from which it is possible to derive a laffer curve the model reveals that the shape and position of the laffer curve depend upon the strength of supply side effects the progressivity of the tax system and the size of the unobserved economy using alternative parameterizations of each of these effects it is possible to obtain rough empirical estimates of the laffer curve for sweden i introduction supply side economics the laffer curve and the unobserved economy are subjects which have captured the interest of economists in their effort to understand and design cures for the growing macroeconomic and public finance malaise which appears to be affecting many of the world s most developed economies high rates of unemployment and inflation combined with slower rates of real growth and ever widening government deficits have focused economists attention on the interrelated issues of macroeconomic stabilization and public finance policy the questions raised by the supply side laffer curve and unobserved economy literature focus on the effects of tax rates on economic performance and the ability of governments to sustain the ambitious social welfare programs established in the past decade while there is much controversy about what the laffer curve looks like and where various economies are on their curves it is generally accepted that the dependence of tax revenues on tax rates is too oversimplified in

endogenous fiscal policies environmental quality and status seeking behavior abstract this paper analyzes endogenous fiscal policy in an endogenous growth model where agents care about social status and environmental quality the quest for a higher status is assimilated to a preference for capital wealth the government uses income tax to finance infrastructure and environmental protection we find that accounting for preferences for social status and environmental quality may lead to an allocation of tax revenue in favor of a cleanup effort to the detriment of infrastructure economic growth is not necessarily and negatively affected by this allocation as it is partly explained by an excessive accumulation of capital wealth due to the quest of status status seeking can however harm economic growth and environmental quality when its motive is important enough finally we show that economic growth may be consistent with environmental preservation but is not necessarily welfare improving as in the case of absence of status seeking behavior

environmental policy when pollutive consumption is sensitive to advertising norms versus status a theoretical model is developed to analyse optimal environmental policy when consumer preferences are endogenous it captures that pollutive consumption is sensitive to consumption by others and commercial advertising this is conceptualized through a consumption norm an increase in this norm means that consumers will become dissatisfied with a given consumption level and try to raise it which will cause an increase in pollution the model is particularly relevant for the study of conspicuous consumption which generally is subject to concentrated advertising efforts while it generates considerable pollution the model can accommodate the cases of an externality created by advertising being positive or negative we also show that using different functional specifications for the norm function one can address either conformity or status seeking we derive optimal rules for a pollution tax a subsidy or tax on advertising and information provision by the government the results not only contribute to more realism in environmental policy theory but also extend public policy with new instruments

the statistical debate on the net barter terms of trade between primary commodities and manufactures a comment and some additional evidence i950 p s hypothesis according to this hypothesis the net barter terms of trade nbtt between primary products and manufactures have over the longrun exhibited a downward trend spraos presented a detailed and thorough analysis of both the adequacy of the various statistical series available to proxy the nbtt s behaviour over the long run and the wide range of conceptual including quality problems involved in such an exercise on the basis of his analysis spraos concluded that the balance of the evidence for the seventy year period ending with the outbreak of world war ii supported the p s hypothesis of a secular deterioration in the nbtt it should however be noted that the evidence also suggested that the particular series cho sen for analysis by prebisch i950 himself did appear to exaggerate possibly to a large extent the rate of deterioration however when the analysis was extended to include the post world war ii period spraos found that while the deteriorating tendency cannot be decisively refuted it is open to doubt when the record up to the i970s is taken into account i980 p i26 as we shall see in this paper closer scrutiny reveals a statistical problem with spraos s analysis and the purpose of this paper is to show that once appropriate action is taken to overcome this problem some quite strong evidence in support of the p s hypothesis emerges the paper is organised as follows section i briefly discusses spraos s methodology and section ii discusses an econometric issue arising from this analysis section iii presents our empirical evidence while section iv summarises the main findings of the paper

unipolarity status competition and great power war most scholars hold that the consequences of unipolarity for great power conflict are indeterminate and that a power shift resulting in a return to bipolarity or multipolarity will not raise the specter of great power war this article calls into question the core assumptions underlying the consensus 1 that people are mainly motivated by the instrumental pursuit of tangible ends such as physical security and material prosperity and 2 that major powers satisfaction with the status quo is relatively independent of the distribution of capabilities in fact it is known that people are motivated powerfully by a noninstrumental concern for relative status and there is strong empirical evidence linking the salience of those concerns to distributions of resources if the status of states depends in some measure on their relative capabilities and if states derive utility from status then different distributions of capabilities may affect levels of satisfaction just as different income distributions may affect levels of status competition in domestic settings building on research in psychology and sociology the author argues that even capabilities distributions among major powers foster ambiguous status hierarchies which generate more dissatisfaction and clashes over the status quo and the more stratified the distribution of capabilities the less likely such status competition is unipolarity thus augurs for great power peace and a shift back to bipolarity or multipolarity raises the probability of war even among great powers with little material cause to fight

on adaptation and the demand for health the purpose of this paper is to analyse the impacts of adaptation to failing health this is done by integrating adaptation processes in a grossman type of pure consumption model model simulations show that adaptation affects the health variables by lowering the incentives to invest in health as well as smoothing the optimal health stock path over the life cycle whether or not the risk of mortality is an object of choice has important effects when studying adaptation as well as for the joint development of the health variables

tax evasion and the demand for currency in norway and sweden is there a hidden relationship variables associated with the level of hidden economic activity are examined in terms of their effects on the demand for currency in norway and sweden aggregate time series of marginal tax rates are compiled for this purpose no such effects are evident for norway while in the case of sweden the demand for currency was found to be significantly related to marginal tax rates these estimates are then used as a basis for deriving an estimate of the size of the hidden economy in sweden an analysis of the assumptions underlying this procedure shows that the uncertainty involved in applying the currency approach to measuring the size of the hidden economy is so great as to make it hazardous to rely on such estimates

the sufficiency strategy would rich world frugality lower environmental impact abstract one alleged weapon against unsustainable environmental impact is for the wealthy to consume less this sufficiency strategy is to complement the efficiency strategy of lowering ratios of resource inputs to economic outputs the former would reduce the affluence factor in i pat the latter the technology factor that the latter strategy suffers from a consumption rebound is widely recognized this paper identifies a similar rebound when the affluence factor is autonomously lowered the lower initial demand lowers prices which in turn stimulates new demand by others the strategy moreover addresses only the rich raising questions of its theoretical maximum efficacy its proponents usually conflate frugality with the north south dichotomy and intra generational with inter generational equity moreover there are difficulties with the supporting arguments that frugality is good for one s own sake as well as for the environment and that the rich should lead the way to living more lightly personal behaviour change is furthermore not a substitute for international political efforts finally since all changes in right side factors of the i pat equation change other right side factors such indirect attacks on impact should be abandoned in favor of supply and emissions quotas