social interaction co worker altruism and incentives social interaction with colleagues is an important job attribute for many workers to attract and retain workers managers therefore need to think about how to create and preserve high quality co worker relationships this paper develops a principal multi agent model where agents do not only engage in productive activities but also in social interaction with their colleagues which in turn creates co worker altruism we study how financial incentives for productive activities can improve or damage the work climate we show that both team incentives and relative incentives can help to create a good work climate

corruption and government size a disaggregated analysis using annual state level data over 1983 1987 this paper examines the effect of government size on corruption by public officials by including both demand and supply side incentives for engaging in corrupt practices our objectives are twofold first we assess the relationship between the incidence of corruption and overall measures of the size of the federal government and the state local sector in each state second we explore what kinds of government activities are more likely to be successful in deterring abuse of public office our results are generally supportive of becker s crime and punishment model regarding the primary focus of the paper our results show that government size in particular spending by state governments does indeed have a strong positive influence on corruption

why hasn t tax competition triggered a race to the bottom some quantitative lessons from the eu abstract the integration of european financial markets in the early 1980s created an environment of near perfect capital mobility across countries that had harmonized indirect taxes but maintained large differences in factor taxes the years that followed witnessed several rounds of competition in capital taxes with puzzling results instead of the dreaded race to the bottom in capital taxes the uk lowered its capital tax to a rate closer to those of france germany and italy while capital taxes changed slightly in these countries the uk increased its labor tax marginally but the other countries increased theirs sharply this paper shows that these results are consistent with the quantitative predictions of a dynamic neoclassical general equilibrium model of tax competition that incorporates the key international externalities of tax policy operating via relative prices wealth distribution and fiscal solvency tax competition is modeled as a one shot game over time invariant capital taxes with dynamic payoffs relative to a status quo calibrated to european data the calibration is preceded by an empirical analysis that shows that the relationship linking taxes to labor supply and the investment rate in the model are in line with empirical evidence and that domestic taxes seem to respond to foreign taxes the solutions of the games show that when countries compete over capital taxes adjusting labor taxes to maintain fiscal solvency there is no race to the bottom and the nash equilibrium is close to observed taxes in contrast if consumption taxes adjust to maintain fiscal solvency competition over capital taxes triggers a race to the bottom but this outcome entails large welfare gains surprisingly the gains from coordination are small in all of these experiments

peer pressure and partnerships partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie but in organizations of any significant size the free rider effects would seem to choke off

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

decentralization and international tax competition abstract this paper models tax competition between two countries that are divided into regions in the first stage of the game the strategy variable for each country is the division of a continuum of public goods between central and regional government provision in the second stage the central and regional governments choose their tax rates on capital a country s decentralization level serves as a strategic tool through its influence on the mix of horizontal and vertical externalities that exists under tax competition in contrast to standard tax competition models decentralizing the provision of public goods may improve welfare

fiscal competition and the pattern of public spending much attention has been given to the impact of fiscal competition on the level of public expenditure but relatively little to the impact on its composition using a broadly familiar and reasonably rich model of fiscal competition in the presence of mobile capital this paper establishes a systematic bias in public spending patterns starting from the non cooperative equilibrium and holding tax rates constant welfare would be improved by a coordinated reduction in the provision of local public inputs and a corresponding increase in the public provision of local public goods benefiting immobile consumers c 1997 elsevier science s a

tax competition among u s states racing to the bottom or riding on a seesaw abstract dramatic declines in capital tax rates among u s states and european countries have been linked by many commentators to tax competition an inevitable race to the bottom and underprovision of local public goods this paper analyzes the reaction of capital tax policy in a given u s state to changes in capital tax policy by other states our study is undertaken with a novel panel data set covering the 48 contiguous u s states for the period 1965 to 2006 and is guided by the theory of strategic tax competition the latter suggests that capital tax policy is a function of foreign out of state tax policy preferences for government services and home state and foreign state economic and demographic conditions the slope of the reaction function the equilibrium response of home state to foreign state tax policy is negative contrary to casual evidence and many prior empirical studies of fiscal reaction functions this result which stands in contrast to most published findings is due to two critical elements that allow for delayed responses to foreign tax changes and responses to aggregate shocks omitting either of these elements leads to a misspecified model and a positively sloped reaction function our results suggest that the secular decline in capital tax rates at least among u s states reflects synchronous responses among states to common shocks rather than competitive responses to foreign state tax policy while striking given prior empirical findings these results are fully consistent with the implications of the theoretical model developed in this paper and presented elsewhere in the literature rather than racing to the bottom our findings suggest that states are riding on a seesaw consequently tax competition may lead to an increase in the provision of local public goods and policies aimed at restricting tax competition to stem the tide of declining capital taxation are likely to be ineffective

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

profitability and profit sharing claims that profit sharing is a purely distributive wealth confiscation scheme without incentive effects due to free rider problems are based on neglect of cooperation and interaction in the workforce when these activities are difficult to monitor directly group incentives such as profit sharing can increase efficiency and maintain a superior nashequilibrium with strictly individual optimization with simultaneous wls tobit estimates we find here strong effects of profit sharing and worker ownership shares on residual owners return on capital in medium sized metal working firms in west germany complementing earlier results on productivity

international tax competition and the deficit bias i analyze the dynamic effects of tax competition on public budget deficits i find that stronger tax competition leads to a fiscal deficit bias at the early stages of financial liberalization when countries differ in terms of capital mobility further liberalization leads to external imbalances and diverging fiscal deficits while corporate tax rates converge consistent with theory i find that stronger tax competition increases deficits in a sample of oecd countries controlling for tax revenues and other standard determinants of fiscal deficits jel e62 f62

corruption is bad for growth even in the united states we estimate the impact of corruption on growth of output per worker in u s states we improve on existing studies of the cost of corruption by using a better specified empirical model focusing on a study population that is less likely to be affected by parameter heterogeneity and controlling for endogeneity using political variables to instrument for corruption we find that corruption plays a significant and causal role in lowering growth and investment across the states

corruption product market competition and institutional quality empirical evidence from the u s states this article argues that the effect of corruption on competition is dependent on the institutional environment when institutions are relatively efficient observed corruption is likely to be associated with relatively less competition conversely in areas with low quality institutions e g excessively burdensome regulations corruption may lead to relatively more competition i employ unique data on competition corruption and institutional quality across u s states from 1997 to 2009 and report that a higher level of corruption is associated with relatively more competition in states with low levels of institutional quality however as institutional quality improves the effect of corruption worsens thus institutional quality is a fundamental determinant of the corruption competition relationship improving institutional quality while at the same time reducing corruption will increase competition and likely improve economic outcomes jel d73 o17 l26

social norms of work ethic and incentives in organizations abstract in this paper i model the relation between the dissemination of social norms of work effort work ethic in a given society and the choice of incentives by firms and i motivate it by presenting evidence from three different datasets that suggests that work ethic is correlated with the intensity of firms incentives when the effort choices of different agents in a firm are complementary having hard working coworkers makes an agent more productive therefore in equilibrium she will work harder foreseeing that a work ethic is more useful to hard working agents parents will be more willing to transmit it in societies in which the probability that their offspring will have coworkers with strong work ethic is higher i then expand the model to incorporate the firm technology choice allowing firms to decide between complementary and separable production processes in societies with wide dissemination of work ethic firms will want effort to be complementary as in modern production processes while the opposite is true when the dissemination of work ethic is narrow finally i investigate the comparative dynamics of the model

sorting in the labor market do gregarious workers flock to interactive jobs this paper tests a central implication of the theory of equalizing differences that workers sort into jobs with different attributes based on their preferences we present evidence from four new time use data sets for the united states and france suggesting that workers who are more gregarious as revealed by their behavior when they are not working tend to be employed in jobs that involve more social interactions we also find that workers report substantially higher levels of job satisfaction and net affect while at work if their jobs entail frequent interactions with coworkers and other desirable working conditions

future rent seeking and current public savings abstract the conventional wisdom is that politicians rent seeking motives increase public debt and deficits this is because myopic politicians face political risk and prefer to extract political rents as early as possible in this paper we study the determination of government debt and deficits in a dynamic political economy model we show that this conventional wisdom relies on economic volatility being low relative to political uncertainty if economic volatility is high relative to political uncertainty then a rent seeking government actually over saves and over taxes along the equilibrium path relative to a benevolent government this result emerges because of the option value of rent seeking a rent seeking government over values future funds because of the possibility of using them for future rents instead of cutting taxes in the event of a future boom when marginal utility of private consumption is low this over saving bias is temporary since in the long run the rent seeking government over borrows relative to the benevolent government as it eventually squanders the funds it has accumulated we find that both the under saving and over saving bias of the government can be solved by a rule of capping deficits

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

evolutionary efficacy of a pay for performance scheme with motivated agents the paper studies the short run and long run effects of the introduction of a team oriented pay for performance p4p payment scheme when agents may differ in their degree of intrinsic motivation toward the job suppose that new potential employees were able to assess the expected pay offs of current workers then they may modify their approach to work in order to follow the employee type that earned the highest expected pay off we show that the definition of the scheme needs to take into consideration the effects produced on the evolution of the motivation of new generations in particular the desirability and success of a p4p scheme strongly depend on the way incentives are allocated to the members of a team on the power of the quality related financial incentive and on the economic and social context in which the scheme is introduced the analysis is in part motivated by the introduction in uk in 2004 of a p4p scheme for family practitioners in the uk quality and outcomes framework qof and of a new system of assessing the quality of academic research completed in 2014 research excellence framework ref

working in public and private firms abstract we develop a theoretical framework for comparing incentives labor productivity and the allocation of effort in public versus private enterprises we incorporate socializing an activity which yields utility for workers and affects a firm s output into a multitask model of work organization we establish the two following results first the optimal workers compensation policy displays a larger incentive intensity in the private firm than in the public firm second labor productivity in the private firm may be higher or lower than in the public firm both results fit well with the findings of empirical work

does tax competition really promote growth abstract this paper considers the relationship between tax competition and growth in an endogenous growth model where there are stochastic shocks to productivity and capital taxes fund a public good which may be for final consumption or an infrastructure input absent stochastic shocks decentralized tax setting two or more jurisdictions maximizes the rate of growth as the constant returns to scale present with endogenous growth implies extreme tax competition stochastic shocks imply that households face a portfolio choice problem which dampens down tax competition and may raise taxes above the centralized level growth can be lower with decentralization our results also predict a negative relationship between output volatility and growth with decentralization

competition and corruption in an agency relationship abstract the paper reconsiders the relationship between competition and corruption in a model where corruption has solid informational foundations and where the regulatory response to the possibility of corruption is taken into account it is shown that the effect of greater competition on corruption depends on the complementarity or substitutability of the two instruments available to decrease information rents namely low powered incentives and greater competition the paper concludes with a brief empirical exploration of the relationship between competitiveness and corruption on african data

competing in taxes and investment under fiscal equalization the paper considers a model of federation with two heterogeneous regions that try to attract the capital by competing in capital income taxes and public investment that enhance the productivity of capital regions choices determine allocation of capital across the regions and their revenues under a tax sharing scheme this framework allows for the examination of different approaches to fiscal equalization schemes boadway r flatters f 1982 efficiency and equalization payments in a federal system of government a synthesis and extension of recent results canadian journal of economics 15 613 633 weingast b r 2006 second generation fiscal federalism implication for decentralized democratic governance and economic development working paper hoover institution stanford university we show that tax competition distorts downwards public investments and that the equalization grants discourage public investments with a little effect on equilibrium taxes however the equalization schemes remain beneficial not only for the federation and under a low degree of regional asymmetry also for each region c 2008 elsevier b v all rights reserved

a political theory of government debt and deficits in a neo ricardian framework in the presence of different abilities and therefore different bequests some individuals are bequest constrained even in a neo ricardian world such individuals vote for taxes on future generations through the issuance of bonds thereby increasing their current consumption this produces some crowding out of capital reduces wage rates and increases the interest rate as a consequence even unconstrained individuals are no longer indifferent to the size of government debt the paper derives conditions that are conducive to larger debt and deficits when each of the living generations determines current taxes social security benefits and the national debt by majority rule copyright 1989 by american economic association

policy cooperation among benevolent governments may be undesirable this paper presents a simple counterexample to the belief that policy cooperation among benevolent governments is desirable it also explains circumstances under which such counterexamples are possible and relates them to the literature on time inconsistency since the work of hamada 1976 investigating the effects of increasing policy cooperation among countries has been a major topic in international economics a standard conclusion of this work is that increasing policy cooperation among countries is desirable in a seminal paper rogoff 1985 has challenged this view using a simple monetary model rogoff shows that cooperation among policy makers can lead to a lower level of welfare than noncooperation does rogoff s result has caused much consternation among those who advocate policy cooperation and his work has been criticized along several dimensions for example some authors including canzoneri and henderson 1988 have noted that a key assumption in rogoff s model is that the objective function of each country s policy maker does not coincide with the objective function of its residents indeed if in his model policy makers maximize the welfare of their country s residents the counterexample is overturned and cooperation strictly dominates noncooperation this feature leads some to interpret rogoff s result as simply saying that if policy makers form a coalition against the private sector they may be worse off than if they do not others such as neck and dockner 1988 have claimed that rogoff s result depends on private agents acting strategically under this interpretation rogoff s result is relevant to say economies with a large trade union but not to economies with a large number of competitive private agents in a somewhat different vein persson 1988 and especially devereux 1986a b have questioned the significance of welfare comparisons across different institutional regimes in a model without a solid foundation for the behavioural relationships this paper presents a simple model in which governments are benevolent but cooperation is still undesirable the model is a two country version of fischer s 1980 optimal tax model in it private agents are competitive in that each agent takes both prices and government policies as uninfluenced by his actions and each government maximizes the welfare of its country s residents in the paper the two different regimes cooperative and noncooperative

workplace productivity and bonus preferences why do men with low productivity prefer individual pay this paper examines the relationship between workers productivity and preferred bonus scheme the data are from a company where agents work in teams and receive a bonus that depends on individual and team performance standard agency theory predicts that workers with productivity below the team average prefer a team bonus while high productivity agents prefer an individual bonus risk aversion may temper the taste for individual pay this model predicts the observed relationship between productivity and bonus preferences very well there is however one pattern that it cannot explain many low performers especially men prefer individual bonuses

gift exchange incentives and heterogeneous workers by incorporating reciprocity in an otherwise standard principal agent model i investigate the relation between monetary gift exchange and incentive pay while allowing for worker heterogeneity i assume that some but not all workers care more for their principal when they are convinced that the principal cares for them the principal can be egoistic or altruistic absent worker heterogeneity an altruistic principal signals his altruism by offering relatively weak incentives and a relatively high expected total compensation however the latter is not always required to credibly signal altruism furthermore since some workers do not reciprocate the principal s altruism the principal may find it optimal to write a contract that simultaneously signals his altruism and screens reciprocal worker types such a contract is characterised by excessively strong incentives and a relatively high expected total compensation

worker characteristics and wage differentials evidence from a gift exchange experiment there is ample empirical evidence indicating that a substantial fraction of the population exhibits social preferences recent work also shows that social preferences influence the effectiveness of incentives in labor relations hence when making contracting decisions employers should take into account that workers are heterogenous with respect to both their productivity and their social preferences this paper presents causal evidence that they do in a real effort experiment we elicit measures of workers productivity and trustworthiness and make this information available to potential employers our data show that employers pay significant wage premia for both traits firms make highest profits with trustworthy workers in particular with highly productive and trustworthy workers we also document differences in the strength of gift exchange across worker types in particular output and profit levels of trustworthy workers are less dispersed than those of not trustworthy workers jel code c910 j410 d860

pay equality and industrial politics personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers but it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme however when workers rewards are based on relative comparisons salary compression reduces uncooperative behavior that is detrimental to the firm relative comparisons imply that some reference group must be selected the major result is that within the relevant groups some wage compression is efficient

corruption competition and democracy abstract this paper presents a model of the interaction between corrupt government officials and industrial firms to show that corruption is antithetical to competition it is hypothesized that a government agent that controls access to a formal market has a self interest in demanding a bribe payment that serves to limit the number of firms this corrupt official will also be subject to a detection technology that is a function of the amount of the bribe payment and the number of firms that pay it under quite normal assumptions about the shape of the graph of the detection function multiple equilibria can arise where one equilibrium is characterized by high corruption and low competition and another is characterized by low corruption and high competition some suggestive empirical evidence is presented that supports the main hypothesis that competition and corruption are negatively related

why a stubborn conservative would run a deficit policy with time inconsistent preferences a conservative government in favor of a low level of public consumption knows that it will be replaced by a government in favor of a larger level of public consumption we show that the resulting level of public consumption is in between the levels the two governments would choose if each were in power both in the present and in the future in particular we show that if the conservative government is more stubborn in a particular sense than the succeeding government the conservative government will borrow more than it would had it remained in power in the future

growth in the shadow of expropriation we propose a tractable variant of the open economy neoclassical growth model that emphasizes political economy and contracting frictions the political economy frictions involve a preference for immediate spending while the contracting friction is a lack of commitment regarding foreign debt and expropriation we show that the political economy frictions slow an economy s convergence to the steady state due to the endogenous evolution of capital taxation the model rationalizes why openness has different implications for growth depending on the political environment why institutions such as the treatment of capital income evolve over time why governments in countries that grow rapidly accumulate net foreign assets rather than liabilities and why foreign aid may not affect growth

a dynamic theory of public spending taxation and debt this paper presents a dynamic political economy theory of public spending taxation and debt policy choices are made by a legislature consisting of representatives elected by geographically defined districts the legislature can raise revenues via a distortionary income tax and by borrowing these revenues can be used tofinance a national public good and district specific transfers interpreted as pork barrel spending the value of the public good is stochastic reflecting shocks such as wars or natural disasters in equilibrium policy making cycles between two distinct regimes business as usual in which legislators bargain over the allocation of pork and responsible policy making in which policies maximize the collective good transitions between the two regimes are brought about by shocks in the value of the public good in the long run equilibrium tax rates are too high and too volatile public good provision is too low and debt levels are too high in some environments a balanced budget requirement can improve citizen welfare

on the merit of equal pay performance manipulation and incentive setting abstract work performance is often difficult to assess thus leaving room for manipulation of commonly used metrics we created a laboratory workplace in which we can precisely assess both work performance along with manipulation activities using two independent experiments we show that whenever pay for performance is used manipulation is pervasive leading to both a waste of organizational resources and a weakening of incentives by contrast paying organizational members equally effectively deters manipulation attempts leading to higher organizational production

corruption and product market competition an empirical investigation abstract we analyze the relationship between product market competition and corruption the existing literature typically views corruption as extortion of pre existing rents this perspective suggests that competition usually reduces corruption although generally the sign of this relationship is ambiguous shleifer and vishny 1993 however show that cost reducing corruption is promoted by product market competition that is the effect of competition on corruption depends of the nature of corruption unlike the existing empirical studies that employ cross country data and general measures of corruption we test the competition corruption relationship using firm level information our approach overcomes significant estimation difficulties that result from relying on cross country data for instance we include country fixed effects and we deal with potential endogeneities by instrumenting competition with us capital labor ratios for the appropriate industries contrary to the existing empirical work we show that stronger product market competition is associated mostly with greater corruption of the cost reducing variety

international coordination of fiscal deficits abstract nearly all existing studies of international coordination of fiscal deficits focus on aggregate demand aspects of the problem in contrast this paper adopts a dynamic general equilibrium perspective and emphasizes the public finance side of fiscal deficits in a world with international capital mobility the fiscal deficit of any single government affects world interest rates and therefore influences intertemporal resource allocation in all countries the paper shows that these international externalities may result in inefficiently large fiscal deficits high interest rates and low levels of welfare if international policy coordination is absent

top incomes in the long run of history a recent literature has constructed top income shares time series over the long run for more than twenty countries using income tax statistics top incomes represent a small share of the population but a very significant share of total income and total taxes paid hence aggregate economic growth per capita and gini inequality indexes are sensitive to excluding or including top incomes we discuss the estimation methods and issues that arise when constructing top income share series including income definition and comparability over time and across countries tax avoidance and tax evasion we provide a summary of the key empirical findings most countries experience a dramatic drop in top income shares in the first part of the twentieth century in general due to shocks to top capital incomes during the wars and depression shocks top income shares do not recover in the immediate postwar decades however over the last thirty years top income shares have increased substantially in english speaking countries and in india and china but not in continental european countries or japan this increase is due in part to an unprecedented surge in top wage incomes as a result wage income comprises a larger fraction of top incomes than in the past finally we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open

fiscal competition and public debt the existing theoretical literature on fiscal competition has to a large extent ignored the role of government debt as a determinant of taxes and productive public spending we develop a simple model of fiscal competition with government borrowing if a default on government debt is no option initial debt levels play no role in fiscal competition this neutrality result is overturned when a default is possible a government that is constrained in its borrowing due to a possible default responds optimally by lowering spending on durable public infrastructure which in turn induces more aggressive tax setting a rise in exogenous firm mobility reinforces the link between legacy debt and fiscal competition our model may help explain the observation that highly indebted countries in europe have decreased corporate tax rates over proportionally our model may also be useful for evaluating decentralization reforms in which the power to tax firms is devolved to lower levels of overnments which differ in their initial debt levels

do countries compete over corporate tax rates this paper tests whether oecd countries compete with each other over corporate taxes in order to attract investment we develop two models with firm mobility countries compete only over the statutory tax rate or the effective average tax rate while with capital mobility countries compete only over the effective marginal tax rate we estimate the parameters of reaction functions using data from 21 countries between 1983 99 we find evidence that countries compete over all three measures but particularly over the statutory tax rate and the effective average tax rate this is consistent with a belief amongst governments that location choices by multinational firms are discrete we also find evidence of concave reaction functions consistent with the model outlined in the paper

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

output and wages with inequality averse agents we analyze a two task work environment with risk neutral but inequality averse individuals for the agent employed in task 2 eort is verifiable while in task 1 it is not accordingly agent 1 receives an incentive contract which due to his wealth constraint leads to a rent that the other agent resents we show that greater inequality aversion unambiguously decreases total output and therefore average labor productivity more specifically inequality aversion reduces eort wage

intention based reciprocity and the hidden costs of control abstract empirical research suggests that despite strengthening conventional incentives to put in effort exerting control might reduce worker performance the present paper shows that intention based reciprocity can explain such hidden costs of control if individuals differ in their propensity for reciprocity and preferences are private information not being controlled might then be considered to be kind because not everybody reciprocates not being controlled with high effort this argument contrasts existing theoretical wisdom on the hidden costs of control that is almost exclusively based on signaling

incentives to motivate abstract we present a model in which a motivator can take costly actions or what we call motivational effort in order to reduce the effort costs of a worker and analyze the optimal combination of motivational effort and monetary incentives we distinguish two cases first the firm owner chooses the intensity of motivation and bears the motivational costs second another agent of the firm chooses the motivational actions and incurs the associated costs in the latter case the firm must not only incentivize the worker to work hard but also the motivator to motivate the worker we characterize and discuss the conditions under which monetary incentives and motivational effort are substitutes or complements and show that motivational effort may exceed the efficient level

friends or foes optimal incentives for reciprocal agents abstract widely used performance based contracts put positive or negative externalities on co workers these externalities have been proven to shape an organization s working climate especially when workers exhibit social preferences however it is a priori unclear whether a more friendly or a more competitive working environment should be encouraged in this paper we develop a theoretical model in which a self interested principal has to motivate a set of agents to work hard agents are symmetric potentially risk averse and exhibit reciprocity concerns towards each other we show that the principal reduces the cost of achieving high effort provision by designing a psychological gift exchange game thereby replacing monetary with psychological incentives we find that the optimal incentive scheme depends on the interplay between the agents attitudes towards risks and their preferences for reciprocity in particular the optimal scheme implements i a relative performance compensation scheme which induces an exchange of unkindness if agents are relatively little risk averse and ii a joint performance compensation scheme which induces an exchange of kindness if agents are sufficiently risk averse our findings can explain some puzzling empirical results

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

dynamic fiscal competition a political economy theory abstract i develop a political economy theory of dynamic fiscal competition via public spending and debt with internationally mobile capital strategic policies generate two cross border externalities that voters in each country fail to internalize 1 an increase in public spending that bolsters capital accumulation but also 2 a race to the top in public debt which crowds out capital the relative size of these two externalities varies with the number of financially integrated countries and interacts with the domestic political conflict between young and old voters despite residence based taxation capital tax rates are lower under strategic policies than under coordination furthermore they may decline with financial integration strategic policies lead to lower long run output and welfare relative to coordination but are preferred by subsequent generations of voters if the number of financially integrated countries is low or the political weight of the young is high

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

is it is or is it ain t my obligation regional debt in a fiscal federation this article studies the repayment of regional debt in a multiregion economy with a central authority who pays the obligation issued by a region with commitment the central government will use its economy wide taxation power in support of its objective to smooth distortionary taxes and consumption across regions absent commitment this tool of the central government may be exploited to induce it to bail out regional government deficits we characterize the conditions under which bailouts occur and their welfare implications in particular we show when the gains from a federation may outweigh the welfare costs of a bailout we use these insights to comment on actual fiscal relations in three quite different federations the united states the european union and argentina

social interactions and product quality the value of pooling in cooperative entrepreneurial networks why do cooperatives often pay a pooled price despite the free riding incentives it entails in this paper we highlight that a cooperative is an enterprise owned by a network of entrepreneurial members by taking explicitly into account the social interactions among entrepreneurial members and the impact of social ties on members product quality provisions we identify the circumstances when pooling is efficient it is shown that social interactions mitigate the free riding effect of pooling and that the amount of members social interactions depends upon and increases with the cooperative s pooling ratio we show that the complete pooling policy is not only economically efficient but also socially advantageous when the context of the cooperative is conducive to frequent social interactions among members