administrative reform as credible commitment the impact of autonomy on revenue authority performance in latin america abstract during the past decade diverse developing countries have introduced radical reforms in their collection of taxes in more than 15 countries traditional tax departments have been granted the status of semi autonomous revenue authorities aras this paper investigates the design and impact of aras in latin america arguing that politicians create aras in order to signal a credible commitment to taxpayers that tax administration will be more effective fair and competent using survey data from corporate taxpayers and tax professionals in bolivia mexico peru and venezuela the paper presents econometric analyses and performance indicators that support the hypothesis that there is a link between perceptions of credibility performance and agency autonomy

monetary policy and uncertainty in an empirical small open economy model this paper explores optimal policy design in an estimated model of three small open economies australia canada and new zealand within a class of generalized taylor rules we show that to stabilize a weighted objective of output consumer price in ation and nominal interest variation optimal policy does not respond to the nominal exchange this is despite the presence of local currency pricing and due in large part to observed exchange rate disconnect in these economies optimal policies that account for the uncertainty of model estimates as captured by the parameters posterior distrbution similarly exhibit a lack of exchange rate response in contrast to brainard 1967 the presence of parameter uncertainty can lead to more or less aggressive policy responses depending on the model at hand

irving fisher on the international transmission of booms and depressions through monetary standards the role of monetary standards in the international transmission of economic fluctuations particularly the role of the gold standard in the depression has attracted considerable recent attention for instance from choudhri and kochin 1980 hamilton 1988 temin 1989 1993 eichengreen 1992 and bernanke 1995 however this literature has overlooked a pioneering precursor irving fisher are booms and depressions transmitted internationally through monetary standards 1935 which has also been neglected in the literature on fisher i examine fisher s contribution in the context of later research on the topic and explore the place of fisher 1935 in fisher s work

issue by issue negotiations the role of information and time preference abstract the alternating offers bargaining game with two pies and incomplete information has a bargaining sequential equilibrium where the strong type of the informed player restricts his offer to one pie leaving it to the other player to make an offer on the second pie an offer on both pies comes only from the weak type of informed player hence an issue by issue negotiation agenda may arise from signaling considerations journal of economic literatureclassification number c78

applications of behavioural economics to tax evasion the paper reviews recent models that have applied the techniques of behavioural economics to the analysis of the tax compliance choice of an individual taxpayer the construction of these models is motivated by the failure of the yitzhaki version of the allingham sandmo model to predict correctly the proportion of taxpayers who will evade and the effect of an increase in the tax rate upon the chosen level of evasion recent approaches have applied non expected utility theory to the compliance decision and have addressed social interaction the models we describe are able to match the observed extent of evasion and correctly predict the tax effect but do not have the parsimony or precision of the yitzhaki model

on the duration of agreements a model of optimal contracts between two infinitely lived parties a borrower and lender is presented and analyzed the objective is to explain the phenomenon of finite length multi period contracts it is shown how costly information acquisition can account for multi period contracts which are of bounded length comparative statics results on how contract length responds to exogenous parameters such as the cost of information acquisition are also derived copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

bargaining with imperfect enforcement the game theoretic bargaining literature insists on a noncooperative bargaining procedure but implicitly assumes cooperative implementation of agreements in reality courts cannot implement agreements costlessly and parties often prefer to use noncooperative implementation we present a bargaining model which incorporates the idea that agreements may be enforced noncooperatively we show that this has a substantial impact in limiting the inequality of agreements and results in a nonmonotonicity of the discount rate the model also explains why some parties may have incentives to deliberately write incomplete contracts as a way to enhance their bargaining power

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

simple contracts renegotiation under asymmetric information and the hold up problem abstract in this article it is demonstrated that voluntary bargaining over a collective decision under asymmetric information may well lead to ex post efficiency if the default decision is non trivial it is argued that the default decision may be interpreted as a simple contract that the parties have written ex ante this result is used in order to show that simple unconditional contracts which are renegotiated may allow the hold up problem to be solved even if the parties valuations are private information

two sided uncertainty and up or out contracts a bilateral moral hazard problem provides a rationale for up or out employment contracts the employer sets a wage higher than opportunity cost to induce the worker to invest in firm specific capital if the individual does not make the grade it is in the firm s interest ex post to fire him had the initial arrangement not included provisions for firing individuals the firm would underreport the value of the employee wrecking the incentive scheme the basic model permits both firm and worker to be risk neutral therefore it admits a straightforward multiperiod extension which we also investigate

tax evasion and heuristics a research note abstract the paper examines the heuristics which taxpayers use in making tax evasion decisions the following propositions are tested in an experiment using students first the taxpaper s own level of evasion will be positively related to what he perceives as the levels of evasion by others second taxpayers who have been audited are more likely to assess the probability of audit as higher and therefore decrease their levels of evasion the experimental results fail to support the first proposition but do support the second suggesting the presence of an availability effect

deflation and depression is there an empirical link are deflation and depression empirically linked no concludes a broad historical study of inflation and real output growth rates deflation and depression do seem to have been linked during the 1930s but in the rest of the data for 17 countries and more than 100 years there is virtually no evidence of such a link

endogenous incomplete contracts a bargaining approach in this paper we argue that by modelling the contracting process as a bargaining game one can endogenize the choice between complete and incomplete contracts this point is demonstrated within a stylized model in which agents can allocate an endowment stream either via a once for all bargain over the entire stream a long term contract or through a series of bargaining rounds a short term contract within this structure short term contracts arise as equilibrium outcomes under very general conditions because a short term contract implies reduced bargaining costs for one of the agents in essence reduced transaction costs produce a short term contract jel classification l14 c78

inflation and tax evasion an empirical analysis this paper contains an analysis of the effect of inflation on aggregate tax evasion in the united states over the period 1947 81 it is found that tax evasion in both absolute and relative terms is positively related to the inflation rate further the results indicate that aggregate evasion has risen in both absolute and relative terms with increases in the marginal tax rate but has fallen with increases in the detection probability the penalty rate and the wage share of income finally evasion has risen in absolute terms but has fallen in relative terms when real true income has risen

representative evidence on lying costs abstract a central assumption in economics is that people misreport their private information if this is to their material benefit several recent models depart from this assumption and posit that some people do not lie or at least do not lie maximally these models invoke many different underlying motives including intrinsic lying costs altruism efficiency concerns or conditional cooperation to provide an empirically validated microfoundation for these models it is crucial to understand the relevance of the different potential motives we measure the extent of lying costs among a representative sample of the german population by calling them at home in our setup participants have a clear monetary incentive to misreport misreporting cannot be detected reputational concerns are negligible and altruism efficiency concerns or conditional cooperation cannot play a role yet we find that aggregate reporting behavior is close to the expected truthful distribution suggesting that lying costs are large and widespread further lab experiments show that this result is not driven by the mode of communication

the informal sector in developed and less developed countries a literature survey the main goal of this study is two fold 1 to provide ageneral overview of the contributions to the literature on theinformal sector with a special focus on the public choiceapproach and 2 to compare these contributions across twoinstitutionally different types of countries developed andless developed developing and transition countries thepaper focuses on the criteria used to define the informalsector the relationship between the formal and informaleconomy tax evasion and public choice analysis it isstressed throughout this paper that the distinction betweenthe two types of countries is of key importance

efficient informal trade theory and experimental evidence from the cape town taxi market informal sectors in developing countries are often thought of as responses to rigid and cumbersome market regulations in this paper i study informal trade as a first best outcome in the model i propose rigid regulations can be necessary to achieve efficiency even though they are always sidestepped the key assumption is that the regulations define the trading parties fall back position in case the informal bargaining process breaks down i set up a field experiment to test the model s mechanisms in the cape town market for metered taxis consistent with the model i find that sidestepping the regulations increase cost efficiency taxis take the shortest route the price is however unaffected suggesting informal bargaining leads to a pareto improvement

renegotiation design with unverifiable information this paper considers a buyer seller relationship with observable but unverifiable investments and or random utility parameters in such situations it is known that contract renegotiation may prevent the implementation of first best outcomes in this paper we show however that efficient investments and optimal risk sharing can typically be achieved provided the initial contract is able to monitor the ex post renegotiation process specifically we focus on the following two features of renegotiation design first default options in case renegotiation breaks down second the allocation of all bargaining power to either contracting party moreover we show that these two features can be obtained in standard rubinstein bargaining games through contractual provisions such as specific performance clauses and penalties for delay or equivalently financial hostages refundable without interest

culture compliance and confidentiality taxpayer behavior in the united states and italy the experimental economics center and the department of economics of the andrew young school of policy studies georgia state university atlanta ga and the center for experimental economics at fondazione university ca foscari italy

viewpoint innovations in the theory and practice of redistribution policy we present a survey of key results from second best optimal redistribution theory and their implications for tax transfer policy the core results include the corlett hague theorem the deaton conditions the production efficiency theorem the atkinson stiglitz theorem and the mirrlees saez characterization of the optimal non linear income tax system these have been augmented in recent years by optimal participation tax rates the implications of involuntary unemployment the use of unconventional instruments such as minimum wages in kind transfer and workfare and the optimal taxation of capital income and bequests l auteur presente un survol des principaux resultats theoriques de la redistribution optimale de second ordre et de leurs implications pour les politiques d imposition et de transferts les resultats fondamentaux incluent le theoreme de corlett hague les conditions de deaton les theoremes d efficacite en production le theoreme d atkinson stiglitz ainsi que la caracterisation du systeme optimal d imposition non lineaire du revenu a la mirrlees saez ces derniers resultats ont ete enrichis au cours des dernieres annees par certains autres portant sur les taux d imposition decoulant des allocations conditionnelles les implications du chomage involontaire l usage d instruments non conventionnels tels que le salaire minimum les transferts en nature le workfare ainsi que l imposition optimale des revenus du capital et des legs ces resultats sont exposes et leurs implications pour les politiques d imposition et de transferts sont discutees

on the design of stable joint ventures abstract an analytical model is developed to study the problem of designing stable joint ventures aimed at jointly developing and supplying a new technology the analysis focuses on the extent to which traditional motives for joint ventures like cost sharing synergy effects or technological spillovers may shape the incentives for firms to cheat on the arrangement and hence despite larger cooperative benefits endanger the formation of a stable agreement the cheating firm although supplying the contractually specified inputs to the venture manages to keep its knowhow proprietary while benefiting from the loyal partner s know how through spillovers from the venture only if know how can be kept sufficiently proprietary within the venture will synergy effects stimulate the formation of a stable joint venture increasing the profitability of cooperation while at the same time stifling the incentives to cheat but if know how becomes difficult to appropriate synergy effects may increase the incentives to cheat resulting in no agreement at least when both parties have perfect foresight

individual morality and reputation costs as deterrents to tax evasion abstract empirical evidence suggests some taxpayers never evade evasion increases with the tax rate and evasion decisions are interdependent these findings are not easily explained by the existing theory which models evasion as an independently made amoral gamble this paper uses nonpecuniary costs of evasion to reconcile theory with evidence once individuals are assumed to differ by an honesty characteristic taxpayers dichotomise into groups the more honest of which responds to a tax change as the evidence suggests a further extension is to introduce an endogenous reputation cost this suggests a positive relationship between the number of evaders and the tax rate

limited information estimation and evaluation of dsge models we advance the proposition that dynamic stochastic general equilibrium dsge models should not only be estimated and evaluated with full information methods these require that the complete system of equations be specified properly some limited information analysis which focuses upon specific equations is therefore likely to be a useful complement to full system analysis two major problems occur when implementing limited information methods these are the presence of forward looking expectations in the system as well as unobservable non stationary variables we present methods for dealing with both of these difficulties and illustrate the interaction between full and limited information methods using a well known model copyright 2009 john wiley sons ltd

rent shifting and the order of negotiations abstract when two sellers negotiate terms of trade with a common buyer the order in which the negotiations occur can affect the buyer s payoff this suggests that the buyer may have preferences over which seller to negotiate with first we find that when the efficient outcome calls for the buyer to purchase from only one seller the buyer weakly prefers to negotiate first with the inefficient seller and when the efficient outcome calls for the buyer to purchase from both sellers the buyer prefers to negotiate first with the seller that has less bargaining power or offers a smaller stand alone surplus all else being equal these conclusions hold whether or not penalty clauses are feasible

the importance of the agenda in bargaining abstract this paper discusses a multi issue bargaining game in which the players set up an agenda and negotiate on the issues sequentially according to this agenda we demonstrate that the agenda might play an important role in the bargaining and discuss the relationship between the agenda and the final outcome of the bargaining game assuming that players have conflicting evaluations regarding the importance of the issues under negotiation we identify the type of agenda each player prefers we also show that in such cases the outcome of the bargaining game need not to be efficient by demonstrating the strategic use of the agenda the paper explains the phenomenon of bargaining on the agenda

incomplete written contracts undescribable states of nature this paper extends the classic two armed bandit problem to a many agent setting in which n players each face the same experimentation problem the difference with the single agent problem is that agents can now learn from the experiments of others thus experiementation produces a public good and a free rider problem in experimentation naturally arises more interestingly future experimentation by others encourages current individual experimentation the paper provides an analysis of the set of markov equilibria in terms of the free rider effect and the encouragement effect

income distribution and equilibrium multiplicity in a stigma based model of tax evasion abstract this paper incorporates continuous income distribution into the stigma based model of tax compliance the paper investigates the effect of income distribution on the existence of multiple equilibria and characterizes the conditions under which multiple equilibria emerge precisely multiple equilibria exist if taxpayer incomes are sufficiently homogeneous because the social coordination effect dominates the individual characteristics effect numerical simulations show that the main proposition is robust to allowing two step audit policies on the part of the tax agency under the presumption that the best or good equilibrium is selected whenever there are multiple equilibria as a byproduct the effect of various forms of tax reforms on the optimal two step audit policy the equilibrium compliance and fiscal revenue is analyzed

the dynamics of incentive contracts the paper studies a simple two period principal agent model in which the principal updates the incentive scheme after observing the agent s first period performance the agent has superior information about his ability the principal offers a first period incentive scheme and observes some measure of the agent s first period performance cost or profit which depends on the agent s ability and unobservable first period effort the relationship is entirely run by short term contracts in the second period the principal updates the incentive scheme and the agent is free to accept the new incentive scheme or to quit the strategies are required to be perfect and updating of the principal s beliefs about the agent s ability follows bayes rule the central theme of the paper is that the ratchet effect leads to much pooling in the first period first for any first period incentive scheme there exists no separating equilibrium second when the uncertainty about the agent s ability is small the optimal scheme must involve a large amount of pooling the paper also gives necessary and sufficient conditions for the existence of partition equilibria and looks at the effect of cost uncertainty

accounting information in financial contracting the incomplete contract theory perspective this paper reviews theoretical and empirical work on financial contracting that is relevant to accounting researchers its primary objective is to discuss how the use of accounting information in contracts enhances contracting efficiency and to suggest avenues for future research we argue that incomplete contract theory broadens our understanding of both the role accounting information plays in contracting and the mechanisms through which efficiency gains are achieved by discussing its rich theoretical implications we expect incomplete contract theory to prove useful in motivating future research and in offering directions to advance our knowledge of how accounting information affects contract efficiency

long term relationships governed by short term contracts this paper studies the effects of contract duration on the incentive to invest in a relationship when its parties are rational and have perfect information and contracts are complete ex cept that short term contracts specify only current period actions t hen short term contracting distorts investment decisions only when t he efficient plan involves mainly sunk cost investment and the relati onship plays a consumption smoothing role there is a general but no t universal tendency to underinvest copyright 1988 by american economic association

short term contracts and long term agency relationships abstract long term contracts are valuable only if optimal contracting requires commitment to a plan today that would not otherwise be adopted tomorrow we show that commitments are unnecessary and hence short term contracts are sufficient if 1 all public information can be used in contracting 2 the agent can acess a bank on equal terms with the principal 3 recontracting takes place with common knowledge about technology and preferences and 4 the frontier of expected utility payoffs generated by the set of incentive compatible contracts is downward sloping at all times

first things first the agenda formation problem for multi issue committees abstract the paper focuses on sequential bargaining procedures in which parties are allowed to differ in several respects we first highlight the strategic effects in the bargaining game and the often conflicting incentives that players need to take into account in forming their preferences over agendas we then show that there is a pareto superior agenda among the issue by issue procedures this consists in setting the most important issue first unless this is difficult urgent in the sense that there is probability of game breakdown after a rejection in the negotiations over this issue in this case parties prefer to negotiate over the easy issue first

non cooperative bargaining and union formation we study a union formation decision problem when workers consist of two groups distinguished by different productivities workers may form either a joint union or two separate unions the whole decision process is modelled as an extensive form bargaining game workers form a joint union when the sizes or productivities of the groups are similar in the first case there is a wage differential which is more less than proportional to the productivity difference if the size of the more productive is smaller larger than that of the less productive in the second case there is no wage differential in this paper we study a union formation decision problem when workers consist of two groups distinguished by different productivities they may form either a joint union or two separate unions depending on the relative size and productivity of the two groups the whole decision process is modelled as an extensive form bargaining game in which the two groups of workers bargain with each other as well as with a firm the labour market is sharply distinguished from the goods market by the widespread practice of collective bargaining usually several groups of workers with different characteristics for example skill level or geographical location are represented as a single unit and or several employers form a single bargaining unit against a giant union this multiplicity of bargaining units creates a complicated bargaining structure and makes the outcome hard to analyse the purpose of this paper is to provide a model which captures this complexity and at the same time clarifies the underlying structure of bargaining power although economists have been aware of the multiplicity problem for a long time it has been received little rigorous theoretical treatment until recently davidson 1985 examined the possible gains that can be obtained by trade unions through joint bargaining in an oligopolistic industry there is a positive externality due to the fact that a higher wage rate in one firm generates a larger demand hence a higher wage in competing firms when a joint union is organized these externalities are internalized to the benefit of workers horn and wolinsky 1985 investigated the equilibrium pattern of unionization in an industry where a firm employs two types of workers they found that workers tend to form a single union when the two types are substitutes in the sense that the incremental contribution of one group to the firm s revenue is decreasing with respect to the size of the other group since workers bargaining power comes from the loss that they can

tax structure and government expenditures with tax equity concerns abstract we augment a standard tax model by concerns about tax equity people get upset when labour is taxed more heavily than capital even the slightest concern for tax equity invalidates the common tenet that capital remains tax exempt in small open economies this holds for exogenous as well as for endogenous government expenditures and irrespective of whether concerns with tax equity only cause emotional discomfort or also impact on work incentives if concerns with tax equity get more intense the economy may choose higher taxes on labour and move to the downward sloped part of its laffer curve for endogenous government spending stronger concerns with tax equity may lead to a larger size of the public sector

randomization in coalition contracts this article analyzes a much debated clause in the coalition contract between spd and fdp in rheinland pfalz two parties write a contract based on which decisions under incomplete information have to be made at a later point in time it is shown that a complex complete contract can achieve the first best outcome however a simple incomplete contract can implement the first best outcome only if use of seemingly inefficient randomization is made

the design of contracts and remedies for breach in the first part of this article hypothetical contracts providing for all possible uncertain contingencies are considered in the next part contracts providing for only some contingencies are examined and are shown to be advantageous due both to difficulties that could arise in making and enforcing contingent terms and to the presence of implicit substitutes for them in the following major part of the article two of these substitutes for contingent terms are analyzed remedies for breach and the opportunity for renegotiation the existence of both is demonstrated to induce parties to behave approximately as they would under detailed contracts

nominal wage stickiness and aggregate supply in the great depression building on earlier work by eichengreen and sachs we use data for 22 countries to study the role of wage stickiness in propagating the great depression recent research suggests that monetary shocks transmitted internationally by the gold standard were a major cause of the depression accordingly we use money supplies and other aggregate demand shifters as instruments to identify aggregate supply relationships we find that nominal wages adjusted quite slowly to falling prices and that the resulting increases in real wages depressed output these findings leave open the question of why wages were so inertial in the face of extreme labor market conditions

the game of negotiations ordering issues and implementing agreements abstract we use a two issue bargaining model with asymmetric information to study agent choice of how to structure bargaining we uncover the settings in which different agenda structures are chosen in equilibrium how the order in which issues are bargained over matters and what impact the rules for implementing agreements have if agreements are implemented as they are reached easy issues are negotiated first and hard issues later if agreements are implemented only after all issues are settled then it is size that matters with large issues settled first all parties prefer the former rules of implementation to the latter

a silver lifeboat not silver fetters why and how the silver standard insulated china from the 1929 great depression summary we use counterfactual simulations based on an estimated dynamic stochastic general equilibrium model to demonstrate why china was affected less than other major countries during the first two years of the great depression we show that being on a silver standard insulated china from the adverse consequences of the great depression by saving the country both from a tightening of monetary conditions and from a detrimental internal deflation without the insulation of the silver standard china might have suffered from a cumulative output loss of between 11 and 23 and its inflation might have become deflation copyright 2015 john wiley sons ltd

the impact of public transfer expenditures on tax evasion an experimental approach abstract this paper outlines the methodology and results of an experiment undertaken to analyze primarily the impact of public sector transfer payments on tax evasion behaviour apart from the use of transfer payments further explanatory variables used were income expected auditing probability and perceived tax burden the influence of these variables on both the propensity to evade taxes and the extent of taxes evaded are investigated in an attempt to add more realism some innovative changes to the experimental approach were incorporated

producer opportunism in retailing contracts this paper analyzes the role of ex post producer opportunism on the optimal design of vertical restraints it considers vertical contracts as starting points of ex post renegotiation it shows that the alleged room for franchisor opportunism that seems quite important in franchising contracts can be seen as an insurance device when part of the goal of the contract is to provide a stable payoff to the franchisee this conclusion holds for various opportunistic strategies direct eviction of initial retailers excessive entry of new retailers on the market or resale price maintenance used to encourage voluntary exit of initial retailers

limited contract enforcement and strategic renegotiation this paper presents a strategic theory of contract renegotiation in this theory suboptimal contracts are put in place initially to protect one party against undesirable a ctions by another party and are renegotiated once the danger is past the authors develop a model to establish the cases in which simple contracts cannot achieve desirable outcomes so that only a complicated contract or renegotiation will serve unlike most previous accounts of contract renegotiation this theory does not rely on exogenous uncertainty to motivate renegotiation copyright 1988 by american economic association

efficient reliance and damage measures for breach of contract this article considers a situation where the buyer or the seller of a good must engage in expenditures on specific capital before the exchange either to prepare to use the product or to prepare to sell it it is assumed that postbreach bargaining is possible and carried out in a cooperative fashion and that buyers and sellers form expectations about the outcome of such bargaining in a specific way without enforceable contracts the potential appropriability of specific rents results in inefficiently low levels of investment three damage measures commonly used to enforce contracts are shown to produce inefficiently high levels of investment and to be pareto ranked from best to worst as follows specific performance expectation damages and reliance damages

an empirical test for tax evasion this paper develops a methodology that uses microeconomic data from individual tax returns to test for the presence of tax evasion the test is then applied to a large sample of taxpayers drawn from the u s treasury tax file for 1977 the frequency of evasion indicated by the test is significantly greater than zero and within the wide range that other evidence suggests is the extent of evasion the associations between evasion and characteristics of the taxpayer such as marginal tax rate income age and marital status are also investigated and compared to the findings of earlier studies

walking inside the potential tax evader s mind tax morale does matter we conduct an empirical study on the determinants of the psychological costs of tax evasion also known as tax morale as a preliminary step we build a model of tax evasion including non monetary considerations show the relationship between tax compliance and tax morale in the empirical analysis of tax morale we find using a binomial logit model that the justification of tax evasion can be explained by the presence of grievance in absolute terms those who feel that taxes are too high those who feel that public funds are wasted and those who accept underground economic activities and grievances in relative terms the suspected level of others tax evasion the sense of duty and the level of solidarity are also relevant factors but to a lesser extent

income tax evasion labour supply and the equity efficiency tradeoff abstract this paper is an attempt to incorporate tax evasion into the analysis of optimum income taxation a model of variable labour supply with tax evasion is used to derive supply functions for labour in regular and irregular markets given taxpayer behaviour the government chooses tax rates penalties and the probability of detection to maximize a utilitarian social welfare function the results consist in the derivation of a formula for the optimum marginal tax rate and a characterization of the factors determining the choice between the penalty rate and the probability of detection as instruments for the control of tax evasion

tax evasion and orders of risk aversion abstract the classic allingham and sandmo s journal of public economics 1 1972 323 338 portfolio choice approach to income tax evasion has been increasingly criticised because it requires an excess degree of risk aversion to explain the observed rate of tax compliance in this paper we argue that there may not necessarily be excess risk aversion and that the evidence can be explained by the distinction between orders of risk aversion as defined by segal and spivak journal of economic theory 51 1990 111 125 and considered in regard to the same problem of anomalous excess risk aversion in financial and insurance markets

silver points silver flows and the measure of chinese financial integration abstract to what degree were chinese financial markets integrated with the rest of the world prior to the 1949 revolution and to what extent was the chinese foreign exchange market efficient during this period we estimate silver points for the shanghai market from 1905 to 1933 to answer these questions our inferred measures are small in value favorably match measured costs of the silver trade derived from contemporary accounts and fare well in the comparison to estimates of trans atlantic gold points this leads to the conclusion that the degree of chinese financial market integration was substantial however during and immediately after world war i our estimates of the silver points increased appreciably foreshadowing the collapse of china s linkages to world financial markets beginning in the 1930s

tax evasion is not a gamble a report on two experiments abstract a tax evasion experiment and an equivalent gambling experiment indicate that contrary to the standard model of evasion tax evasion and gambling are quite different although the standard model provides a good basis for analysis of evasion

priors from general equilibrium models for vars abstract this paper uses a simple new keynesian dynamic stochastic general equilibrium model as a prior for a vector autoregression shows that the resulting model is competitive with standard benchmarks in terms of forecasting and can be used for policy analysis jel classification c11 c32 c53 key words bayesian analysis dsge models forecasting vector autoregressions 1 introduction dynamic stochastic general equilibrium dsge models are popular nowadays in macroeconomics they are taught in virtually every economics ph d program and represent a predominant share of publications in the field yet when it comes to policy making these models are scarcely used at least from a quantitative point of view the main quantitative workhorse for policy making at the federal reserve system is frb us a macro econometric model built in the cowles foundation tradition a style of macroeconomics that is no longer taught in many ph d programs 1 in their decision process fed policy makers rely heavily on forecasting they want to know the expected path of inflation in the next few quarters and by how much a 50 basis point increase in the federal funds rate would affect that path frb us offers answers to these questions answers that many macroeconomists would regard with suspicion given both the lucas 1976 critique and the fact that in general the restrictions imposed by cowles foundation models are at odds with dynamic general equilibrium macroeconomics sims 1980 general equilibrium models on the other hand have a hard time providing alternative answers the fact that these models are perceived to do badly in terms of forecasting as they are scarcely parameterized is perhaps one of the reasons why they are not at the forefront of policy making while progress is being made in the development of dsge models that deliver acceptable forecasts e g smets and wouters 2003 this paper proposes an approach that combines a stylized general equilibrium model with a vector autoregression var to obtain a specification that both forecasts well and is usable for policy analysis specifically the approach involves using prior information coming from a dsge model in the estimation of a vector autoregression loosely speaking this prior can be thought of as the result of the following exercise i simulate time series data from the dsge model ii fit a var to these data in practice we replace the sample moments of the simulated data by population moments computed from the dsge model solution since the dsge model depends on unknown structural parameters we use a hierarchical prior in our analysis by placing a distribution on the dsge model parameters a tightness parameter controls the weight of the dsge model prior relative to the weight of the actual sample markov chain monte carlo methods are used to generate draws from the joint posterior distribution of the var and dsge model parameters the paper shows that the approach makes even a fairly stylized new keynesian dsge model competitive with standard benchmarks in terms of forecasting real output growth inflation and the nominal interest rate the three variables that are of most interest to policy makers 2 up to this point our procedure borrows from the work of dejong ingram and whiteman 1993 and ingram and whiteman 1994 who are the first to use priors from dsge models for vars ingram and whiteman showed that prior information from the bare bones stochastic growth model of king plosser and rebelo 1988 is helpful in forecasting real economic activity such as output consumption investment and hours worked in addition to documenting the forecasting performance of a trivariate var with a prior derived from a monetary dsge model this paper makes two contributions that significantly extend the earlier work first we show formally how posterior inference for the var parameters can be translated into posterior inference for dsge model parameters

happiness and tax morale an empirical analysis abstract this paper presents empirical evidence that tax morale taxpayers intrinsic motivation to pay taxes constitutes a new determinant of happiness even after controlling for several demographic and socioeconomic factors using data on italian households for 2004 we assess the strength of tax morale by relying on single items as well as composite multi item indices our main result that fiscal honesty generates a higher hedonic payoff than cheating is in line with harbaugh et al 2007 s neuroeconomic finding further it sheds light on the well known puzzle of compliance that is the fact that many individuals pay taxes even when expected penalty and audit probability are extremely low tax compliance is less puzzling once we show that not only it is materially costly but also provides sizeable non pecuniary benefits that make it rewarding in itself

money in an estimated business cycle model of the euro area this article examines the role of money in a small scale dynamic general equilibrium model of the euro zone estimated by maximum likelihood the model allows for both intertemporal and intratemporal non separability in preferences we find first that real balances do not affect the marginal utility of consumption second money demand shocks mainly help to forecast real balances while real shocks explain the bulk of price output and interest rates fluctuations third the calculation of the natural rate of interest reveals that the evolution of the interest rate is mostly accounted for by the real sources of fluctuations

on the fit of new keynesian models this article provides new tools for the evaluation of dynamic stochastic general equilibrium dsge models and applies them to a large scale new keynesian model we approximate the dsge model by a vector autoregression and then systematically relax the implied cross equation restrictions and document how the model fit changes we also compare the dsge model s impulse responses to structural shocks with those obtained after relaxing its restrictions we find that the degree of misspecification in this large scale dsge model is no longer so large as to prevent its use in day to day policy analysis yet is not small enough to be ignored

a fairness approach to income tax evasion abstract the tax that a taxpayer wishes to evade is determined on the basis of his perception of the fairness of his fiscal treatment with respect to both governmental supply of public goods and the perceived behaviour of other taxpayers the coercive powers of the state and the taxpayer s attitude toward risk determine the extent to which this desired level is undertaken in practice this approach is able to produce implications for the relationship between public expenditure tax rates and tax evasion which are more consistent with empirical evidence than the results of the conventional portfolio choice approach