excise taxes with multiproduct transactions i examine excise taxes levied on multiproduct retailers excise taxes reduce equilibrium output and decrease equilibrium product variety in the short run but taxes can raise output per product in the long run and induce entry excise taxes are overshifted into prices in a wide range of cases including under linear and concave demand conditions and excise taxes shift less than one for one into prices only when demand is highly convex multiproduct transactions substantively alter the efficiency of ad valorem and specific forms of excise taxes and affect the comparison of relative tax performance over short run and long run time horizons jel h25 h32 l11 l13 l81

nash equilibria in models of fiscal competition abstract this paper analyzes nash equilibria in a simple model of an economy with jurisdictions engaging in fiscal competition small number nash equilibria in which tax rates are the strategic variables are shown not to coincide with nash equilibria in which public expenditure levels are the strategic variables

voluntary export restraints antidumping procedure and domestic politics a voluntary export restraint ver is preferred to a tariff by a government concerned about electoral returns when the influence of industry profits is large relative to the losses to consumers from higher prices if the foreign firm is uncertain of these pressures the antidumping code facilitates the complete transfer of the relevant information and generates a ver rather than a tariff in equilibrium the choice across instruments is determined by the political attributes domestic and foreign profits rise with the antidumping generated ver and the ver lowers the volume of trade by more than the expected duty copyright 1996 by american economic association

the efficiency of indirect taxes under imperfect competition abstract this paper considers the relative efficiency of ad valorem and unit taxes in imperfectly competitive markets we provide a simple proof that ad valorem taxes are welfare superior to unit taxes in the short run when production costs are identical across firms the proof covers differentiated products and a wide range of market conduct cost asymmetries strengthen the case for ad valorem taxation under cournot competition but unit taxation may be welfare superior under bertrand competition with product differentiation ad valorem taxation is superior with free entry under cournot competition but not necessarily under price competition when consumers value variety

endogenous trade policy under foreign direct investment abstract using bernheim and whinston 1986 common agency game we endogenize trade policy in a duopoly composed of a domestic firm and a foreign firm where both firms influence the domestic government s trade policy via their contributions the foreign firm can jump over trade restrictions by undertaking foreign direct investment fdi in the domestic market the government prefers a voluntary export restraint ver to a tariff for two reasons first a ver leads to higher contributions from the foreign firm than a tariff second a ver provides a higher level of protection to the domestic firm without generating fdi by the foreign firm

a pareto comparison of ad valorem and unit taxes in noncompetitive environments abstract a literature that began with wicksell 1896 has shown that an ad valorem tax is welfare superior to an equal yield unit tax in both monopoly and oligopoly markets this paper proves a stronger result for any unit tax imposed on a monopoly there exists an ad valorem tax that pareto dominates it that produces larger profit tax revenue and consumer surplus the paper then considers whether this pareto result generalizes to all cournot nash oligopolies the paper shows that pareto dominance holds in such markets whenever the tax level exceeds a critical value that depends on various market parameters

causality between exports productivity and financial support in european union agriculture morley b and morgan w causality between exports productivity and financial support in european union agriculture regional studies the aim of this paper is to investigate the causal relationship between exports and productivity and exports and agricultural support within the european union using the autoregressive distributed lag ardl approach to co integration and error correction models evidence is found of exports within the european union being determined by support in ireland and france as well as gains in productivity contributing to export growth in germany and the uk this finding may help explain why some countries within the european union such as france have large agricultural trade surpluses whilst others run large deficits morley b et morgan w les rapports de causalite entre les exportations la productivite et le soutien financier dans l agriculture de l eu regional studies cet article cherche a examiner les rapports de causalite entre les exportations et la productivite et

demand and distance evidence on cross border shopping while many studies have documented deviations from the law of one price in international settings evidence is scarce on the extent to which consumers take advantage of price differentials and engage in cross border shopping we use data from 287 swedish municipalities to estimate how responsive alcohol sales are to foreign prices and relate the sensitivity to the location s distance to the border typical results suggest that the elasticity with respect to the foreign price is around 0 4 in the border region moving 200 400 kilometers inland reduces it to 0 2 0 1 given that cross country price differences for alcohol and other products are often caused by taxes our evidence has implications for the debate on tax competition harmonization

welfare ranking ad valorem and specific tariffs under monopolistic competition actual trade and tariff policy prefers ad valorem tariffs to specific tariffs yet in this paper we show that in a setting of monopolistic competition realizing a given restriction on imports via a specific tariff would generate more consumer utility than obtaining the same restriction via an ad valorem tariff jel classification f12 un classement en terme de bien etre des droits de douane ad valorem et specifiques quand on est en regime de concurrence monopolistique les politiques commerciales en vigueur pref rent les droits de douane ad valorem aux droits de douane specifiques or ce memoire montre que dans un contexte de concurrence monopolistique reduire les importations par le truchement d un droit de douane specifique genere plus d utilite pour le consommateur que les memes restrictions obtenues par le truchement d un droit de douane ad valorem

the comparison between ad valorem and specific taxation under imperfect competition abstract this paper compares ad valorem and specific taxation in two models of oligopoly with and without free entry predominantly ad valorem taxation implies a relatively low consumer price high tax revenue and when entry is precluded low profits ad valorem taxation dominates specific taxation from the welfare perspective the set of circumstances under which with free entry specific taxation raises welfare is a strict subset of that in which ad valorem taxation is welfare improving and in both models the maximisation of consumer welfare subject to a binding revenue constraint requires maximum reliance on ad valorem taxation

interjurisdictional capital mobility fiscal externality and a corrective subsidy abstract recent studies emphasize that local property taxation may result in inefficiently small amounts of local public spending this paper shows that the inefficiency can be traced to a fiscal externality when one jurisdiction increases its taxes it causes a flow of capital to other jurisdictions that increases their tax revenues the inefficiency can be corrected with a subsidy that internalizes the externality key empirical parameters determining the magnitude of the externality are identified illustrative calculations indicate that subsidy rates on the order of 40 might be required to achieve efficiency

a spatial model of tax competition with multiple tax instruments abstract this paper presents a model of tax competition with two local jurisdictions in each metropolitan area located along a line segment and many metropolitan areas in the world economy the residents in each local jurisdiction are allowed to commute at a constant cost per mile to work in the other jurisdiction if a lump sum tax can be used then other taxes are not used if source based wage and business capital taxes can both be used then only the former is used in this case or if only a business capital tax can be used the local public good is underprovided

on pareto improving commodity tax changes under fiscal competition this paper shows that when a noncooperative fiscal equilibrium of the mintz tulkens 1986 model of tax competition is inefficient pareto improving changes are positive for the taxes of both regions under concavity of the regions welfare functions it also identifies a class of such equilibria that are always efficient

capital market information and industrial performance the role of west german banks in orthodox theory external capital markets play a dual role supplying various forms of investment finance and disciplining firms which are inefficient or fail to pursue profit goals an extensive literature speaks of the efficiency of external capital markets meaning that firms can make production investment decisions and investors can choose among the securities that represent ownership of firms activities under the assumption that security prices at any time fully reflect all available information fama i970 1 however this concept of efficiency is purely technical it depends critically on what information is available and we know there are problems of appropriability and failure in information markets deriving ultimately from certain peculiarities of information as a commodity arrow i962 thus another growing literature focusses on problems of achieving equilibrium in markets where agents are imperfectly or asymmetrically informed amongst other things this literature shows that informational failures of the kind in question can lead to capital rationing in loan and credit markets and the use of strict collateral requirements as screening devices jaffee and russell i976 stiglitz and weiss i98i cable and turner i983 these may then be expected to affect the efficiency of individual firms and the system as a whole capital shortage implies that some profitable investment opportunities are foregone and production choices may also be distorted by the need to satisfy additional financial constraints contrived to elicit signals of creditworthiness of the firms undertaking them similarly the disciplining role of external capital markets can be impaired by information impactedness williamson i975 and the costs of mobilising and giving effect to shareholders preferences thus in the principal agent framework developed by jensen and meckling i976 and fama i980 the degree of constraint on managerial pursuit of non profit goals as posited by managerial theorists depends on the transactions costs of stock owner intervention the result is an optimal degree of departure from cost minimising profit maximising behaviour determined by the level of transactions costs institutional factors which affect the way information is distributed amongst agents can therefore have an important bearing on allocative and technical efficiency and the west german system of industrial finance provides an in

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

tax evasion fiscal competition and economic integration abstract this paper examines the implications of tax evasion for fiscal competition and tax harmonization policies in an economic union first for symmetric countries it proves that the equilibrium values of the tax and audit rates are less than optimal tax harmonization alone will also lead to a less than optimal audit rate second for asymmetric countries the paper shows that integration may turn an honest country into an evading one it argues that tax harmonization alone may be a bad policy in that it can make both countries worse off it may also cause an otherwise honest country to turn to evasion

did j p morgan s men add liquidity corporate investment cash flow and financial structure at the turn of the twentieth century this article presents evidence suggesting that the relationship that existed between the partnership of j p morgan and its client firms partially resolved the latter s external financing problems by diminishing the principal agent and asymmetric information problems i estimate and compare investment regression equations for a sample of morgan affiliated companies and a control group of nonaffiliated companies the econometric results seem to indicate that companies not affiliated to the house of morgan were liquidity constrained

a simple model of commodity taxation and cross border shopping this paper sets up a simple model in which two countries differing in geographical extent engage in commodity tax competition originating in opportunities for cross border shopping the non cooperative tax equilibrium and various coordination initiatives are examined in the benchmark model and in two model extensions incorporating i costs of transportation for goods and ii border inspection among the more surprising results are the following with i pure profits accrue to sellers near the border but subjecting them to tax may lower the country s total tax revenue with ii the volume of cross border shopping may well increase jel classification h20 h87 h26

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

a spatial tax harmonization model abstract policies to harmonize value added tax rates are controversial in the european union this paper formulates a multi country model over a one dimensional space as a non cooperative nash game in which each country aims at maximizing its tax revenue subject to the constraint that its tax rate lies within a given common band then we examine the effects of changes in the common band on tax rates tax revenues and the number of cross border shoppers at nash equilibrium we also analyze the effects of geographical variation in country size and location

unit tax versus ad valorem tax a tax competition model with cross border shopping abstract within the framework of spatial tax competition with cross border shopping we examine the choice of tax method between ad valorem tax and unit specific tax this study shows that governments endogenously choose the ad valorem tax method not because of a classic welfare reason but because it is a good strategy to compete for mobile consumers another key finding is that while governments are committed to the ad valorem tax method the choice leads to inferior outcome tax cutting competition becomes more serious when countries adopt ad valorem tax and competition in ad valorem tax results in smaller tax revenue than competition in unit tax

interstate commodity tax differentials and the distribution of residents abstract this paper considers the manner in which an unequal distribution of consumers affects the commodity tax policies of neighboring jurisdictions the paper uses a spatial model in which the residents of two states are distributed non uniformly and employs a variety of assumptions about the behavior of governments and firms throughout the paper shows that at a nash equilibrium in tax levels the sparsely populated state imposes a lower tax than does its densely populated neighbor the paper also demonstrates how equilibrium state taxes differ depending on whether firms employ marginal cost or profit maximizing pricing

commodity tax competition under destination and origin principles abstract this paper studies the effect of switching from the destination to the origin principle of taxation on non cooperative commodity tax equilibrium when taxes are constrained to be uniform across commodities the switch has no effect when differentiated taxes are allowed the effects of the switch depend on whether countries are small or large in both cases the switch imposes the requirement that taxes must be uniform across commodities within each country in the second case there are two further effects of the switch i negative spillover effects from tax policy are introduced ii incentives to manipulate the terms of trade are changed the switch does not necessarily lead to a fall in all tax rates

does bank affiliation mitigate liquidity constraints evidence from germany s universal banks in the pre world war i period this paper compares two similar samples of mining and steel corporations in pre world war i germany one sample consists of corporations that were affiliated to one or more of the german universal banks and the second sample consists of companies that had to rely on other sources of finance statistical analysis conducted in the framework of a linear fixed effects model indicates that the non affiliated companies were liquidity constrained the paper also sets out the corporate control structure as laid down in the trade law reform of 1884 and traces the origins of the current german dual board system as well as the origins of several other aspects of the institutions that tied the german banking system to industrial concerns

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

endogenous choice of trade policy instruments abstract recently developed theories of endogenous trade policy formation have attempted to explain tariffs as the result of economic interest seeking by individuals or groups this note demonstrates that tariffs will not emerge as a policy choice if income is redistributed solely through trade policy induced factor price changes a production tax cum subsidy will be adopted as both gainers and losers are better off than with a tariff

unit versus ad valorem taxes monopoly in general equilibrium abstract we show that if a monopoly sector is imbedded in a general equilibrium framework and profits are taxed at one hundred percent then unit specific taxation and ad valorem taxation are equivalent on the set of pareto optima

long term financial contracts can mitigate the adverse selection problem in project financing this paper shows that long term contracts can be used in competitive financial markets to separate entrepreneurs of different abilities in equilibrium poor entrepreneurs are financed with a sequence of standard debt contracts good entrepreneurs are financed with a modified contract in which the terms of the second part of the contract are contingent upon whether default is observed at the first date sorting is achieved through the contingent term in the contract in equilibrium good entrepreneurs will typically pay high interest rates to start with followed by relatively lower rates later if they are successful the solution in the paper is contrasted with the use of collateral incomplete information plays an important role in explaining the existence and form of enduring relationships when agents have private information and cannot precommit to future actions and announcements there may be a role for multiperiod contracts see townsend 1982 and hart and holmstrom 1986 such contracts tie future contractual terms to current behaviour moreover these contracts can be self enforcing simply relying upon the self interest of agents to see them through this paper shows that long term relationships may help overcome adverse selection problems the basic idea is very simple entrepreneurs have different probabilities of completing successive projects successfully observation of the returns cannot reveal the type of project however repeated observation of returns does give information about the type of project by the law of large numbers even if there are only two observations at successive dates it may be possible to separate types by making the terms of the contract at the second date conditional upon whether default is observed at the first we consider an entrepreneur who is risk neutral and who has a project at each of two successive dates the projects may require outside finance from banks risk neutral banks offer two period credit contracts to the entrepreneur we assume that there are two types of entrepreneur one with a high probability of completing projects successfully and a second with a low probability the probability of success is private information to the entrepreneur it is not known by the bank the problem of generalising the analysis to more entrepreneur types is discussed in the conclusion in section 2 of the paper it is shown that in this setting an adverse selection problem may arise we consider a sequence of standard debt contracts which specify a fixed payment at each date the important point to note here is that with

cross border shopping from small to large countries abstract contrary to predictions of theoretical models there are many examples in the real world of cross border shopping from small to large countries we demonstrate that a sufficient wedge between marginal costs of public funds in small and large countries can explain this phenomenon

on revenue and welfare dominance of ad valorem taxes in two sided markets abstract a benchmark result in public economics is that it is possible to increase both tax revenue and welfare by making a monopoly subject to ad valorem taxes rather than unit taxes we show that such revenue and welfare dominance does not hold in two sided markets

jeux sans frontieres tax competition and tax coordination when countries differ in size closer international integration is putting increasing pressure on existing national tax structures this paper uses a simple two country model to address a range of consequent policy concerns focusing particularly on the role of country size differences in size exacerbate the inefficiency from noncooperative behavior harming both countries the smaller country loses from harmonization to any tax rate between those set in the noncooperative equilibrium but both countries gain from the imposition of a minimum tax anywhere in that range the fully optimal response to freer cross border trade however may be to do nothing jel h20 h77

specific and ad valorem tariffs are not equivalent in trade wars abstract this note argues that when two countries choose optimal tariffs in a trade war specific tariffs are not equivalent to ad valorem tariffs even if all markets are competitive in particular it shows that if a country s trading partner switches from a specific tariff to an ad valorem tariff that yields the same revenue at the initial trade point the former country has an incentive to lower its tariff when two identical countries choose the types and magnitudes of tariffs in a two stage game they will choose ad valorem tariffs making the trade war less severe

spatial competition between jurisdictions which tax perfectly competitive retail or production centers abstract this paper examines the taxes that jurisdictions choose to impose on perfectly competitive retail centers or production centers within their boundaries retail centers are located on a line and jurisdictions are segments of the line a jurisdiction maximizes the sum of tax revenues and residents consumer surplus the tax chosen by a jurisdiction is a function of the spacing between retail centers the locations of interjurisdictional boundaries and the taxes imposed by neighboring jurisdictions an exporting jurisdiction chooses a positive tax an importing jurisdiction chooses a zero tax even if neighboring jurisdictions have taxes or subsidies if all jurisdictions with retail centers use endogenous fiscal policy then each imposes a positive or zero tax

why does liquidity matter in investment equations that liquidity variables affect investment spending is widely accepted despite important recent empirical work questions remain concerning the interpretation of liquidity variables in investment equations and the sources and economic importance of finance constraints these questions are addressed by estimating a variety of econometric models that exploit distinctive canadian institutional features to identify firms that face relatively severe information problems the initial econometric evidence confirms the existence of finance constraints and identifies their source as the problems faced by firms in credibly communicating private information to outsiders this conclusion is robust to biases from the capitalization of finance constraints into asset prices scale economies or imperfect competition which are accounted for directly in the econometric specifications copyright 1995 by ohio state university press

multinational firms political competition and international trade policy this paper considers how the presence of multinational firms influences international trade policy that is determined as the outcome of political competition multinational firms have plants to protect in all policy jurisdictions and hence are more protectionist than national firms that at least have an interest in free trade in export markets nonetheless because of changed incentives for firms to provide political support for free trade and protectionist candidates an increased multinational presence via either merger or direct foreign investment has a liberalizing influence on trade policy copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association