specialized supply firms property rights and firm boundaries the proper specification of intellectual property rights iprs is a delicate and controversial matter in this paper we consider one specialized context in which iprs can add to efficiency we build on contributions of both firm capabilities scholars e g teece pisano et al and property rights economists e g hart to show that iprs can affect efficiency by influencing the location of technological innovation using a simple set up where the key choice is whether a technology intensive input will be supplied by an independent firm or produced in house we analyze how the choice is affected by the strength of iprs and by the existence and nature of information spillovers specifically we show that when the supply relationship is likely to produce new information of value to the supplier stronger property rights favor independent suppliers over vertical integration an important implication of our model backed by empirical case studies is that strong iprs therefore encourage investments in specialized firms with strong firm capabilities in the area of innovative input supply iprs therefore may play a role along with multiple other factors in the location of firm boundaries in some cases this contribution to the viability of small specialized firms with their superior ability to innovate in some cases must be taken into account in evaluating recent criticisms of over fragmented ipr ownership i e the anticommons problem it also contributes to an understanding of iprs in the post chandlerian economy where smaller specialized firms play a prominent role copyright 2004 oxford university press

public good differentiation and the intensity of tax competition we show that in a setting where tax competition promotes efficiency variation in the extent to which firms can use public goods to reduce costs brings about a reduction in the intensity of tax competition this in turn brings about a loss of efficiency in this environment a minimum tax counters the reduction in the intensity of tax competition thereby enhancing efficiency split the difference tax harmonization also potentially enhances efficiency but would not be agreed upon by governments because it lowers the payoff to at least one of them this paper also presents an explanation for how traditionally high tax countries have continued to set taxes at a relatively high rate even as markets have become more integrated

why do households without children support local public schools linking house price capitalization to school spending while residents receive similar benefits from many local government programs only about one third of all households have children in public schools we argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools we identify a proxy for the extent of capitalization the supply of land available for new development and show that towns in massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock towns with little available land also spend more on schools we extend these results using data from school districts in 46 states showing that per pupil spending is positively related to the percentage of developed land this positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home our findings support models in which capitalization encourages the provision of durable local public goods and provides an additional reason why some elderly support local school spending

competition in regional environmental policies when plant locations are endogenous abstract a two region model is presented in which an imperfectly competitive firm produces a good with increasing returns at the plant level production of the good causes local pollution the firm decides whether to maintain plants in both regions serve both regions from a single plant or shut down if the disutility of pollution is high enough the two regions will compete by increasing their environmental taxes standards until the polluting firm is driven from the market alternatively if the disutility from pollution is not as great the regions will usually compete by undercutting each other s pollution tax rates

capitalization and the theory of local public finance the tiebout literature is incomplete this paper argues because it has not fully accounted for the capitalization of local fiscal variables into house values the paper explains why capitalization arises why it persists in long run equilibrium how it affects both residential location and the outcome of local voting and why it interferes with the efficiency of a system of local governments the analysis which is based on the main tiebout assumptions plus a property tax combines a model of household bids in a housing market with a median voter model of local public service determination

insurance fraud and optimal claims settlement strategies abstract we examine the optimal claims settlement strategy for a liability insurer when claimants can permanently misrepresent their losses by engaging in costly claims falsification in this environment claims auditing is not a possible deterrent to fraud and the settlement strategy consists of an indemnification profile that relates the insurance payment to the claimed amount of loss the optimal indemnification profile is shown to involve systematic underpayment of claims at the margin as a means to deter loss exaggeration with the extent of underpayment limited by expected litigation costs and potential bad faith claims the key testable implication of the theory is that the extent of underpayment should be greater for classes of claims for which loss exaggeration is easier empirical analysis of insurance settlements for bodily injury liability in automobile accidents confirms this prediction this suggests that liability insurers optimally choose claims payment strategies to lessen a claimant s i

enforcement costs and the optimal magnitude and probability of fines whenever the government uses fines to control harmful activities it incurs certain costs in connection with the enforcement process this article will show how these costs affect the optimal magnitude of fines and the optimal degree of enforcement effort that is the optimal probability of detection of those who commit harmful acts we will distinguish between two types of enforcement costs fixed enforcement costs are costs that do not depend on the number of individuals who commit harmful acts these costs would include for example the expenses borne by a pollution control agency in testing water quality in a lake variable enforcement costs are costs that do depend on the number of individuals who commit harmful acts such as the costs of prosecuting and penalizing polluters in our basic model we assume that the fixed enforcement costs are the costs of maintaining the probability of detection at a certain level and that the variable enforcement costs are the costs of fining individuals the main conclusions of this article may be summarized as follows the optimalfine equals the harm properly inflatedfor the chance of not being detected plus the variable enforcement cost of imposing the fine if the fine is of this magnitude the expected fine will equal the harm caused by the harmful act plus the expected increase in enforcement costs occasioned by it for instance suppose that the probability of detecting a

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

the impact of proposition 13 on house prices in northern california a test of the interjurisdictional capitalization hypothesis it wen institute of business and university of california economic research berkeley center for real estate and urban economics wobkingipaper series these papers are preliminary ature their purpose 39 limul discussion comme h re they are not to be 39 or quoted ny publication without express permission of the author working paper no 80 11 the impact of proposition 13 on house prices in northern california a test of the interjurisdictional capitalization hypothesis by kenneth t rosen

learning the ropes general experience task specific experience and the output of police officers abstract we estimate the role that law enforcement officer experience has on the probability of punishment using a unique data set of tickets issued by the idaho state police linked to human resource records all else equal officers issue fewer tickets earlier in their career than later in their career quasi exogenous shocks to an officer s task specific experience generated by law changes cause a temporary reduction in the frequency with which a subset of troopers use those laws creating disparities in the likelihood that individual citizens are cited for law violations the reduction in ticketing in response to a law change is largest for newer troopers and law changes later in a trooper s career have a smaller effect on his use of that law

smooth transition models and arbitrage consistency slow adjustment of real exchange rate towards equilibrium in linear models has long puzzled researchers stimulating the adoption of nonlinear models the exponential smooth transition model has been particularly successful providing faster adjustment speeds this paper discusses some of its theoretical limitations for example that expectations are adaptive we propose a new nonlinear model conceptually superior to the estar model since it is consistent with rational expectations one of its advantages is that it can be solved and estimated by nonlinear least squares using monthly post 1973 real exchange rate data we show that the model implies even faster speeds of adjustment

fiscal capacity tax effort and optimal equalization grants in this paper we address the question how should the tax burden in a feder ation be distributed across the different jurisdictions so that the social cost of providing government services is minimized using optimal tax theory we derive formulas for the optimal equalization grants that equalize the social marginal cost of raising revenue across all provinces we show how the optimal equalization grants are related to a measure of tax effort based on the marginal cost of public funds and a measure of fiscal capacity that takes into account the elasticity of the tax base and its substitutability with other tax bases

appropriating signs and meaning the elusive economics of trademark this paper deals with economic analysis of trademark its presence in markets is originally connected with the problem of information asymmetries and the need to provide information for assisting exchanges so as to avert the market failure brought about by adverse selection however this information conveying function is also accompanied by a differentiation effect arising from the power of persuasion that signs can exert on individuals the exploitation of differentiation has given rise to the practice of branding which ties markets and consumption to the realms of meaning and experience branding is so all pervasive in today s economy as to have somehow transfigured it so that the role of persuasion is now pre eminent nonetheless the mainstream economic theory tends to resist acknowledging this change which would to a large extent call into question well established hypotheses and theoretical tools the general response has therefore been to assume that the informational role of trademark predominates and to use this hypothesis to construct models welfare evaluations and policy prescriptions that bear little or no relation to the actual markets the opposing approach in the shadow of the nelson s and arrow s seminal papers on economics of information is recognising the idiosyncratic character of information and therefore drawing conclusions and devising solutions that while still based upon the welfare criterion also incorporate a wider awareness and a deeper representation of the scenario under study the present work attempts to move in this direction showing how different disciplines can provide some key epistemological tools for enabling economists to effectively evaluate the welfare outcomes of the introduction and progressive alteration of a particular intellectual property right within the realm of signs and meanings

regulation and capitalization of environmental amenities evidence from the toxic release inventory in massachusetts environmental regulation in the united states has undergone a slow evolution from command and control strategies towards market based regulations one such innovation is the toxics release inventory tri a regulation that requires polluting e rms to publicly disclose information about their toxic emissions the basic tenet of this regulation is that it corrects for informational asymmetries between polluters and households allowing communities to pressure polluters to decrease their emissions policy makers have judged the tri a tremendous success as national releases declined by 43 between 1988 and 1999 yet many of the fundamental problems which are known to lead to the classic failure of the coase theorem such as high transaction costs and dife culties in organizing cast doubt on the effectiveness of disclosure rules alone to lead to an efe cient outcome in the caseof pollution we use an event study methodology with high quality data on house prices and other local attributes to assess the extent to which the public values changes in toxic releases and thus the success of tri our major e ndings include 1 declines in toxic releases appear unrelated to any political economy variables that might lead to public activism 2 initial information released under tri had no signie cant effect on the distribution of house prices and 3 house prices show no signie cant impact of declines in reportedtoxic releases over time standard errors aresmall enoughthat we can reject the hypothesis that large declines in toxic releases lead to more than a 0 5 increase in house prices these results also hold when we control for differences in the availability of information on tri and the possible effect of expectations our e ndings cast doubt on the ability of the public to process complex information on hazardous emissions and support the coase theorem in that right to know lawssuch as tri may not be the most effective form of environmental regulation

applying regression discontinuity designs to american political development students of american political development apd have long been interested in questions related to the development of state capacity in the united states the apparent macro level nature of those questions may appear to discourage the pursuit of micro level causal inferences yet attention to causal inference is not necessarily incompatible with inquiry into macro level phenomena this article explores the application of a specific causal inference strategy namely regression discontinuity design rdd to three questions of interest to apd scholars of state capacity first the article illustrates the use of a geographic rdd to estimate the causal impacts of a reconstruction era federal civil rights statute during the period prior to the development of significant federal state capacity second it explores the possible causes of the late 19th century decline in the use of monetary rewards to motivate civil servants by using a population based rdd to estimate the causal impacts of financial incentives on law enforcement effort and civilian compliance third it illustrates an opportunity to test claims about the impacts of the growth of the carceral state by applying a resource constraint rdd to estimate the causal impacts of law enforcement effort on a variety of outcomes

optimal departures from marginal cost pricing focuses on departures from marginal cost pricing optimal allocation or resources level of tax revenue that will be collected by the government theorems developed for resource allocation ebsco

the paradox of openness appropriability external search and collaboration a b s t r a c t to innovate firms often need to draw from and collaborate with a large number of actors from outside their organization at the same time firms need also to be focused on capturing the returns from their innovative ideas this gives rise to a paradox of openness the creation of innovations often requires openness but the commercialization of innovations requires protection based on econometric analysis of data from a uk innovation survey we find a concave relationship between firms breadth of external search and formal collaboration for innovation and the strength of the firms appropriability strategies we show that this concave relationship is stronger for breadth of formal collaboration than for external search there is also partial evidence suggesting that the relationship is less pronounced for both external search and formal collaboration if firms do not draw ideas from or collaborate with competitors we explore the implications of these findings for the literature on open innovation and innovation strategy 2013 the authors published by elsevier b v all rights reserved

the forward premium puzzle in the interwar period and deviations from covered interest parity we revisit the forward premium puzzle in the interwar period and find that as the deviation from covered interest rate parity increases the coefficient on the forward premium in the standard fama regression tends towards zero

the effect of property tax limitation measures on local government fiscal behavior abstract previous evidence on the effects of tax and expenditure limitation measures has not been conclusive difficulties arise in characterizing differences in fiscal institutions across states and estimating behavior in the absence of limitation measures a recently enacted tax limitation measure limits the growth in local property taxes in some illinois jurisdictions but not in others such differential treatment of otherwise similar jurisdictions provides a natural experiment for estimating the impact of the tax cap on local government fiscal behavior we find that the cap has been effective in that the fiscal behavior of capped jurisdictions differs from that of never capped jurisdictions

the spatial effects of wage or property tax differentials and local government choice between tax instruments abstract this paper considers the spatial effects on wages employment and business capital as functions of location of a localized differential in source based wage tax rates or business property tax rates between for example a central city and the surrounding suburbs a simple model is used in which business production uses only labor and capital inputs consumers have fixed residential locations but may commute to work wage and property tax differentials have effects that are similar in some ways but different in other ways if given a choice a local government would choose to set its business property tax rate equal to zero and use only a wage tax

covered interest arbitrage and market turbulence the covered interest parity theorem states that the covered interest differential between two similar assets denominated in different currencies should be zero this paper utilizes high quality data recorded by the dealers at the bank of england to test covered interest parity during certain historical periods in which there is known to have been turbulence as well as during a relatively calm control period the data is high frequency and allowance is made for the bid offer spread brokerage costs and other considerations the results have three main implications firstly profitable arbitrage opportunities do occasionally occur and sometimes persist during turbulent periods secondly the degree of efficiency of the relevant markets appears to have increased over time thirdly there appears to be a maturity effect whereby the existence and size of profitable arbitrage opportunities appear to be positive functions of the length of maturity a rationalization of this phenomenon is offered in terms of the existence of credit limits copyright 1989 by royal economic society

competitive tax theory in open economies constrained inefficiency and a pigovian remedy abstract in an economy with multiple governments each is constrained to raise revenue for public expenditures using distortionary taxes on a directly mobile tax base a government is said to be competitive if the total cost of its decisions including the excess burden is perceived to be internalized the competitive equilibrium allocations are not constrained efficient in general there is another set of distortionary taxes and associated public expenditures for which all individuals in the economy are better off it is shown that the source of the failure can be interpreted as a missing market and the form of the best decentralized remedy is derived

optimal fiscal policy for a state or local government abstract state and local government services are enjoyed by and taxes borne by two groups residents and non residents this paper addresses the question if state and local governments maximize their residents welfare and cannot distinguish between individual residents and non residents but know the aggregate characteristics of the two groups what set of taxes subsidies and public goods should they choose some of the results obtained are i even when all commodities are taxable and equity is ignored the existence of non resident consumption makes uniform taxation non optimal ii in some cases whether a commodity should be taxed or subsidized is independent of its own price elasticity iii central cities may be subsidized by suburban residents and iv the ability of state and local governments to redistribute is inversely proportional to the openness of the economy

budget spillovers and fiscal policy interdependence evidence from the states abstract this paper formalizes and tests the notion that states expenditures depend on the spending of similarly situated states we find that even after allowing for fixed state effects year effects and common random shocks among neighbors a state government s level of per capita expenditure is positively and significantly affected by the expenditure levels of its neighbors ceteris paribus a one dollar increase in a state s neighbors expenditures increases its own expenditure by over 70 cents

ideas for rent an overview of markets for technology this article surveys some of the recent literature on technology markets and summarizes its main issues and insights we structure our analysis in three parts the supply and demand of technology the factors that condition the formation and growth of technology markets industry structure and dynamic issues in addition we summarize some of the studies that have tried to document the size and growth of these markets we find that the literature has focused mainly on the supply of technology but several other aspects of these markets remain under studied including the demand for external technology the role of uncertainty in technology markets and the dynamic interaction between industry structure and the market for technology understanding these will illuminate whether markets for technology will continue to grow or remained confined to pockets of the economy copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

a test for allocative efficiency in the local public sector abstract this paper develops a test for pareto efficiency in the local public sectorusing the analytical result that aggregate property value is maximized at the public output level which satisfies the samuelson condition for efficiency by using cross section data it is possible to deduce whether a representative community provides its public goods in a property value maximizing and hence efficient fashion the empirical results show no systematic tendency to either under or over provide public goods in a sample of massachusetts communities

political economy at any speed what determines traffic citations can speeding tickets be explained solely by a driver s excessive speed or could they be seen as serving as supplemental local revenue or reflecting officer preferences theory suggests that the levels of enforcement and punishment for traffic violations are based on the degree of infringe ment by the offending party and the marginal returns to local safety gary s becker 1968 isaac ehrlich 1996 a mitchell polinsky and steven shavell 1992 this view neglects other potential objectives for the police police officers are agents of the local or state government these prin cipals may be concerned about total revenues raised and about voter satisfaction furthermore officers may have personal preferences with regards to characteristics such as race or gender which may motivate differential issuance of traffic tickets the imposition of traffic fines to increase revenues is reminiscent of william a niskanen s 1971 long standing hypothesis that bureaucrats maximize their agency s budget evidence has been scarce however and the hypothesis has been called into question because bureaucrats may not receive any direct benefit when their agency s budget size is enlarged ronald n johnson and gary d libecap 1994 the budget maximizing hypothesis however has not been applied to the behavior of police officers engaged in the enforcement of traffic laws although anecdotal evidence abounds1 more frequent and larger fines may lead to favorable employee evaluations and contribute to a larger budget for the police department higher officer salaries and improved amenities as police officers monitoring superiors are elected officials those officials may also encourage police officers to disproportionately raise revenues from nonvoters as opposed to local voting citizens

the impact of mass shootings on gun policy abstract there have been dozens of high profile mass shootings in recent decades this paper presents three main findings about the impact of mass shootings on gun policy first mass shootings evoke large policy responses a single mass shooting leads to a 15 increase in the number of firearm bills introduced within a state in the year after a mass shooting this effect increases with the extent of media coverage second mass shootings account for a small portion of all gun deaths but have an outsized influence relative to other homicides third when looking at bills that were actually enacted into law the impact of mass shootings depends on the party in power the annual number of laws that loosen gun restrictions doubles in the year following a mass shooting in states with republican controlled legislatures we find no significant effect of mass shootings on laws enacted when there is a democrat controlled legislature nor do we find a significant effect of mass shootings on the enactment of laws that tighten gun restrictions

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

local income taxation in an urban area abstract this paper indicates the response of a metropolitan area to the levying of a local income tax the analysis is focused on a central city and its surrounding suburbs but allows for migration to and from the metropolitan area of primary interest are the spatial effects of local income taxation and the associated welfare costs derived from additional transportation expenditures the analysis indicates the forms of compensation to central city high income households for the fiscal deficit they bear changes in wage rates and land rentals are derived and the question of full capitalization is considered

on the contractual governance of research collaborations allocating control and intellectual property rights in the shadow of potential termination abstract this paper investigates the governance design problem of a large company that wants to engage a small and cashless firm into a research collaboration this analysis reflects the frequently observed collaborations between pharma companies and biotechs and an actual research contract is assessed to link theory to practice the governance form refers to the allocation of control rights over the research process and property rights over research output s as determined by the initial contract yet this contract is incomplete the parties negotiate at a later stage from bargaining positions that depend on the initial choice of the governance but they also contemplate the possibility that the collaboration will be terminated by means of a simple model that captures the core aspects of the contractual environment i answer a key research question how should governance be designed in the shadow of potential termination to provide the research firm with the incentives to invest in the collaboration first it is in the company s interest to choose a governance form that eliminates the possibility of termination and stabilizes the collaboration whenever possible second if the collaboration cannot be stabilized the company faces a trade off between reducing the probability of termination and providing incentives which is ultimately resolved by making the collaboration highly unstable third property rights and control are substitutes in the governance design if the company collects more property rights it must relinquish more control rights

technological flows and choice of joint ventures in technology alliances abstract this paper analyses the influence of technological flows in the choice of joint ventures as a governance form of technology alliances using a theoretical framework based on transaction costs economics and the economics of intellectual property rights we argue that the formation of a joint venture is only necessary in situations for which technological flows make the monitoring of alliance activities and the distribution of cooperation rents difficult our hypotheses have been confirmed using a sample of technology alliances created by companies from the european union between 1992 and 1999

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

patents and patent policy a patent is the legal right of an inventor to exclude others from making or using a particular invention this right is sometimes termed an intellectual property right and is viewed as an incentive for innovation this article surveys the evidence on patent effectiveness in encouraging innovation and reviews the current controversies in patent policy

designing tax policy in federalist economies an overview abstract the emerging economic federations of the european union russia and south africa along with the established federations in australia canada and the united states confront the task of designing the institutions for federal fiscal policy this paper reviews the literature on the design of tax policy in federalist economies we conclude that taxation by lower level governments can lead to significant economic inefficiencies and inequities the usual assignment view of federalis recommends central government policies for example resident based taxation or grants in aid to correct these failures these recommendations assume that the central government will act as a benevolent social planner the political economy view of federalism suggests that this assumption is in error and that additional federalist institutions must be considered alternative legislative structures and constitutional rules are considered

the optimal property tax with mobile nonresidential capital abstract implications of the dynamic nature of mobile nonresidential capital for community fiscal behavior are examined using the median voter framework the representative voter s control rule calls for the community to lower its current public service demand in order to retain or attract taxable capital the model predicts a positive short run and a negative long run income effect on public good demand incorporating intergovernmental aid into the model asymmetry between effects of the unconditional aid and of the voter income is demonstrated

the welfare effects of intergovernmental grants in an economy with distortionary local taxes a simple general equilibrium analysis this paper examines the welfare impact of intergovernmental transfers when recipient governments use distortionary taxes both lump sum and matching grants are investigated a distortionary factor depending on local demand and supply elasticities and the local tax rate on the taxed commodity determines the real income change to a jurisdiction per dollar transferred matching grants are dominated by lump sum grants when these can be set optimally for each recipient if grant policy must be uniform positive or negative matching rates are desired if equity adjusted distortionary factors are positively negatively correlated with local public service levels

crime punishment and the market for offenses crime is a subject of intense emotions conflicting ideologies however economists have generally explained it as a reflection of individual choice and equilibrating market forces two major themes of the literature are outlined the evolution of a market model to explain the diversity of crime across time and space and the debate about the usefulness of positive versus negative incentives systematic analyses generally indicate that crime is affected on the margin by both positive and negative incentives there are serious limitations to the effectiveness of incapacitation and rehabilitation and optimal enforcement strategies involve trade offs between narrow efficiency and equity considerations

to comply or not to comply pollution standard setting under costly monitoring and sanctioning in this paper we characterize optimal regulatory policies composed of a pollution standard a probability of inspection and a fine for non compliance in a context where both monitoring and sanctioning are socially costly and the penalty may include gravity and non gravity components at the regulator s discretion under given penalties the optimal policy entails compliance with the standard as long as a quite intuitive condition is met non compliant policies may include standards even below the pollution levels that minimize the sum of abatement costs and external damages interestingly the appropriate structure of the penalty under non compliance is highly progressive while the best possible shape of the fine under compliance is linear if the regulator is entitled to choose the structure of the fine linear penalties are socially preferred and the optimal policy induces compliance

an estimate of the accuracy of hedonic real estate valuations using the orange county bankruptcy it has become standard practice to estimate the value of amenities such as environmental cleanliness local school quality and crime using hedonic valuations typically changes in real estate prices the accuracy of hedonic valuations depends critically on whether real estate prices adjust appropriately which is difficult to verify the 1994 orange county ca bankruptcy offers a test of the accuracy of hedonic real estate valuations orange county s failed investment strategy resulted in unexpected county losses of 1 7 billion in response the aggregate value of orange county real estate dropped by between 1 65 and 3 70 billion

property tax limits local fiscal behavior and property values evidence from massachusetts under proposition abstract this paper examines the impact of a specific property tax limit proposition 2 1 2 in massachusetts on the fiscal behavior of cities and towns in massachusetts and the capitalization of that behavior into property values proposition 2 1 2 places a cap on the effective property tax rate at 2 5 and limits nominal annual growth in property tax revenues to 2 5 unless residents pass a referendum allowing a greater increase the study analyzes the 1990 1994 period a time when massachusetts municipalities faced significant fiscal stress because of a 30 cut in real state aid and a demographically driven increase in school enrollments the findings include the following 1 proposition 2 1 2 significantly constrained local spending in some communities with most of its impact on school spending 2 constrained communities realized gains in property values to the degree that they were able to increase school spending despite the limitation and 3 changes in non school spending had little impact on property values

optimal fiscal limits with overrides abstract this paper studies optimal fiscal limits in the context of a simple political economy model a politician chooses the level of taxation for a representative citizen but is biased in favor of higher taxes a constitutional designer sets a tax limit before the citizen s preferred level of taxation is fully known the politician is allowed to override the limit with the citizen s approval the paper solves for the optimal limit and explains how it is impacted by the possibility of overrides the paper also shows that the citizen s welfare can be enhanced if the designer imposes a limit on the politician s override proposals

redistribution by insurance market regulation analyzing a ban on gender based retirement annuities we illustrate how equilibrium screening models can be used to evaluate the economic consequences of insurance market regulation we calibrate and solve a model of the united kingdom s compulsory annuity market and examine the impact of gender based pricing restrictions we find that the endogenous adjustment of annuity contract menus in response to such restrictions can undo up to half of the redistribution from men to women that would occur with exogenous social security like annuity contracts our findings indicate the importance of endogenous contract responses and illustrate the feasibility of employing theoretical insurance market equilibrium models for quantitative policy analysis

taxation and the tiebout model the differential effects of head taxes taxes on land rents and property taxes on the theory of state and local public finance is the seminal paper by charles tiebout 1956 tiebout constructed a multijurisdictional model in which independent local governments offer a wide variety of expenditure and tax policies and perfectly mobile consumers reveal their preferences for local public goods through their choice of residential community he argued that under such circumstances local public service provision would be efficient the tiebout model has formed the basis of a vast number of subsequent articles in the state and local public finance literature and has also been very influential in urban and regional economics the efficiency properties of various tiebout type models of local public good provision have been examined and the role of politics in these models has been debated at length in this literature of more direct relevance to this paper however is the fact that although tiebout had little to say directly about taxation simply assuming the existence of head taxes subsequent analyses have used adaptations of this model to examine the effects of local head taxes land taxes and property taxes it is the literature on the efficiency and distributional effects of alternative local taxes that is the subject of this survey 1

fiscal decentralization and spillover effects of local government public spending the case of italy abstractfiscal decentralization and spillover effects of local government public spending the case of italy regional studies this paper investigates the presence of spatial interdependencies in the regional public expenditure decision process and the impact of fiscal decentralization on its determinants the analysis refers to the constitutional reform concluded in italy in 2001 that redefined the legislative powers of the regions and their sectoral competence the results highlight the opportunistic behaviour of regional governments in sectors where they can benefit from neighbours public expenditure spillovers other findings comprise the presence of congestion and mobility effects a shift in demand to the private sector except for education and the mobility of individuals towards richer regions

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

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

expenditure spillovers and fiscal interactions empirical evidence from local governments in spain abstract the paper presents a framework for measuring spillovers resulting from local expenditure policies we identify and test for two different types of expenditure spillovers i benefit spillovers arising from the provision of local public goods and ii crowding spillovers arising from the crowding of facilities by residents in neighboring jurisdictions benefit spillovers are accounted for by assuming that the representative resident enjoys the consumption of a local public good in both his own community and in those surrounding it crowding spillovers are included by considering that a locality s consumption level is influenced by the population living in the surrounding localities we estimate a reaction function with interactions between local governments occurring not only between expenditure levels but also between neighbors populations and expenditures the equation is estimated using data on more than 2500 spanish local governments for the year 1999 the results show that both types of spillovers are relevant

property taxes and property values evidence from proposition 212 abstract we examine the effect of proposition 2 1 2 on revenues and housing prices in massachusetts communities that were initially constrained by the law saw large increases in state aid and the use of fees we use these initial constraints as instruments for changes in other components of revenue while treating the change in the property tax as exogenously determined by proposition 2 1 2 our results strongly suggest that communities that were able to increase their property taxes more rapidly saw greater increases in their housing values in the period following passage of the law

other people s taxes nonresident voters and statewide limitation of local government abstract why would voters resort to a statewide tax limitation to force change in their own local government this paper develops and tests the hypothesis that property tax limitations succeeded because they allowed voters to lower tax rates in other communities statewide limitations effectively extend the voting franchise to individuals who have no standing in local elections voters may have preferences for tax and expenditure levels in other jurisdictions because they receive rents from employment in those jurisdictions because they directly own taxable assets in those jurisdictions or because changes in other jurisdictions might influence their own residential location choice empirical tests of this hypothesis focus on the massachusetts experience with proposition 2 documentclass aastex usepackage amsbsy usepackage amsfonts usepackage amssymb usepackage bm usepackage mathrsfs usepackage pifont usepackage stmaryrd usepackage textcomp usepackage portland xspace usepackage amsmat

regulating externalities through testing abstract testing for compliance with regulation of a negative externality is analyzed in a strategic framework the outcome is described where the number tested and the penalties for observed noncompliance are each controlled by different agencies or by different levels within the regulatory agency and where the number tested cannot be precommitted comparative statics results are provided and the equilibrium is compared with the welfare optimum for different objectives of those doing the testing it is shown that the actual enforcement decision can sometimes be optimally delegated even if those doing the enforcement have objectives different from minimizing expected social cost

tax competition tax exporting and higher government choice of tax instruments for local governments abstract this paper presents a theoretical model with tax exporting due to external ownership of a fraction of the land in each local jurisdiction there are n local jurisdictions in a metropolitan area n 1 and many metropolitan areas in a world economy the paper examines the usage of business property taxes and source based wage taxes by local jurisdictions first in the presence of and then in the absence of residence based lump sum taxes and how this depends on and n the paper then examines the choice of a world national or state government as to whether to allow local metropolitan or sub metropolitan governments to use business property taxes wage taxes or both assuming that the local governments choose the actual tax rates

covered interest parity a high frequency high quality data study profitable deviations from covered interest parity cip represent riskless arbitrage opportunities and so indicate market ineffic iency previous empirical work on cip uses noncontemporaneously sampl ed data and reports mixed results this paper uses high frequency te n minute high quality data gathered personally by the author in th e london foreign exchange market to test the cip condition the resu lts overwhelmingly support the market efficiency hypothesis copyright 1987 by the review of economic studies limited

covered interest rate arbitrage in the interwar period and the keynes einzig conjecture keynes 1923 conjectured that deviations from covered interest rate parity would not be arbitraged unless a profit of at least a half of one percent on an annualized basis was available and that larger deviations would still be moderately persistent because of less than perfect elasticity of supply of arbitrage funds this two part conjecture was given further emphasis by other writers on this period notably einzig 1937 we apply nonlinear econometric techniques to a previously unexploited weekly data base for the 1920s london and new york markets and find strong support for the conjecture

the paradox of openness revisited collaborative innovation and patenting by uk innovators we revisit the paradox of openness in the literature which consists of two conflicting views on the link between patenting and open innovation the spillover prevention and the organizational openness views we use the data from the survey of innovation and patent use and the community innovation survey cis6 in the uk to assess the empirical support for the distinct predictions of these theories we argue that both patenting and external sourcing openness are jointly determined decisions made by firms their relationship is contingent upon whether the firms are technically superior to their rivals and lead in the market or not leading firms are more vulnerable to unintended knowledge spillovers during collaboration as compared to followers and consequently the increase in patenting due to openness is higher for leaders than for followers we develop a simple framework that allows us to formally derive the empirical implications of this hypothesis and test it by estimating whether the reduced form relationship between patenting and collaboration is stronger for leaders than for followers

political costs and fiscal benefits the political economy of residential property value assessment under proposition 212 we use a 15 year panel of property value assessment data from 351 massachusetts municipalities appraised values grow more slowly in municipalities with elected assessors when municipalities pass via referenda large increases in the cap on tax revenues value assessments grow faster under appointed assessors and slower under elected assessors appraisals grow slower when alternative revenue sources are available

collateral damage for r d manufacturers how patent sharks operate in markets for technology patent sharks small firms that exploit information asymmetries in markets for technology to gain patent based competitive advantages challenge established theory by which i markets for technology benefit large firms and ii intellectual property rights systems strictly support markets for technology empirically linking the sharks different assault strategies to the patents they deploy we illustrate that patent sharks will likely be an enduring phenomenon in markets for technology we discuss policy and strategy implications copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

the regulatory choice of noncompliance in emissions trading programs this paper addresses the following question to achieve a fixed aggregate emissions target cost effectively should emissions trading programs be designed and implemented to achieve full compliance or does allowing a certain amount of noncompliance reduce the costs of reaching the emissions target the total costs of achieving the target consist of aggregate abatement costs monitoring costs and the expected costs of collecting penalties from noncompliant firms under common assumptions i show that allowing noncompliance is cost effective only if violations are enforced with an increasing marginal penalty however one can design a policy that induces full compliance with a constant marginal penalty that meets the aggregate emissions target with lower expected costs this last result does not depend on setting an arbitrarily high constant marginal penalty in fact the marginal penalty need not be higher than the equilibrium marginal penalty under the policy with the increasing marginal penalty and can actually be lower finally tying the marginal penalty directly to the permit price allows the policy objective to be achieved without any knowledge of firms abatement costs

estimating permanent and transitory income elasticities of education spending from panel data abstract we use a twenty one year panel of data to examine the role of past income and aid and expectations of future income in regressions explaining state and local education spending we show that simple estimates of the elasticity of spending with respect to financial resources are not robust to specification changes because the variables are non stationary over time causing inconsistent estimation of model parameters estimation in first differences or equivalently in growth rates solves the time series problems and produces robust estimates of the model s parameters we then show that current spending by states responds to changes in expected future income this explains why using fixed effects in simpler models reduces estimated income elasticities fixed effects partially capture permanent income effects on spending estimates of lagged income are significant when used in models that do not explicitly model the expectations process but present and past aid both have no effect on education spending models with structural assumptions about expected income produce estimates very similar to simpler models which include lagged information on income as a control variable we conclude with recommendations for estimating models when only cross section data or only short panels are available

the incidence of classified property taxes in a three sector model with an imperfectly mobile population abstract this paper analyzes the incidence of a classified property tax imposing different effective tax rates on residential commercial and industrial property as compared to a uniform property tax taxing capital and land in all sectors at the same rate our model includes three sectors commercial industrial and residential and three factors of production land labor and capital capital is assumed to be perfectly mobile but we consider varying degrees of labor mobility allowing the possibility that part of a classified property tax may be shifted to workers through lower wages

mispriced equity regulated rates for auto insurance in massachusetts from the santa monica freeway to the new jersey turnpike drivers are unhappy about the cost of automobile insurance and are asking government to do something about it california voters approved proposition 103 in 1988 it requires that all rates be approved by the state insurance commissioner attempts to reduce rates by 20 percent and dramatically limits the criteria that can be used to rate drivers for premium purposes new jersey enacted an insurance reform law that seeks to charge insurers for a deficit burdened state underwriting pool and prohibits the use of age sex and marital status in rating drivers for premiums other states enacting or considering significant rate rollbacks or reform since 1988 include arizona florida michigan nevada and pennsylvania this article describes the current consequences of similar policies adopted in massachusetts more than a decade ago the experience suggests that recent moves by other states in the same direction will ultimately prove quite expensive as the proportion of high cost drivers increases and as insurers lose the incentive to write policies and control costs the trend away from insurance premiums based on expected cost also reduces incentive effects for drivers since insurance premiums provide a link between tort judgments and consumer decisions

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

state and local tax competition in a spatial model with sales taxes and residential property taxes abstract this paper presents a theoretical model with a uniformly populated line that is divided into local jurisdictions and or states if one level of government imposes sales and residential property taxes and if the spatial extent of each taxing jurisdiction is positive and finite then in nash equilibrium the sales tax rate is less than residential property tax rate housing consumption is suboptimal and the public good is underprovided in each jurisdiction if a very large state or country is divided into local jurisdictions and if both levels of government choose tax rates endogenously then under some assumptions there is an efficient outcome

pigouvian taxation with administrative costs abstract this paper examines how the optimal pigouvian tax should be adjusted to reflect adminisrative costs several cases are examined depending on whether the administrative costs are fixed per firm taxed or are a function of the amount of tax collected and on whether such costs are borne by the government or by the taxed firm in some cases the presence of administrative costs leads to an optimal tax greater than the external cost while in other cases it leads to a tax less than the external cost

enforcement and price controls in emissions trading this paper examines how enforcement affects the structure and performance of emissions trading programs with price controls under uncertainty about firms abatement costs the analysis highlights how an enforcement strategy can cause abatement cost risk to be transmitted to enforcement costs via the price of permits when this occurs accommodating the effect of abatement cost risk with an optimal policy results in higher expected emissions and lower expected permit price than their second best optimal values however it is possible to design an enforcement strategy that shields enforcement costs from abatement cost risk by tying sanctions directly to permit prices this enforcement strategy stabilizes enforcement effort the optimal permit supply and price controls are independent of enforcement costs and the policy produces the second best optimal outcome

local property taxation with external land ownership abstract when housing in a local jurisdiction is produced using perfectly mobile capital and land owned by non residents a property tax on housing results in tax exporting this paper examines how property tax poll subsidy policies are determined in the presence of tax exporting and shows that the optimal property tax is the optimal tariff when residents are homogeneous when residents have different incomes and are mobile across jurisdictions the majority voting equilibrium property tax poll subsidy policy depends on factors such as tax exporting intrajurisdictional redistribution and congestion if the effect of intrajurisdictional redistribution is negligible for the median voter household mobility may result in a property tax poll subsidy policy that induces emigration of rich households

estimating welfare in insurance markets using variation in prices we provide a graphical illustration of how standard consumer and producer theory can be used to quantify the welfare loss associated with inefficient pricing in insurance markets with selection we then show how this welfare loss can be estimated empirically using identifying variation in the price of insurance such variation together with quantity data allows us to estimate the demand for insurance the same variation together with cost data allows us to estimate how insurers costs vary as market participants endogenously respond to price the slope of this estimated cost curve provides a direct test for both the existence and the nature of selection and the combination of demand and cost curves can be used to estimate welfare we illustrate our approach by applying it to data on employerprovided health insurance from one specific company we detect adverse selection but estimate that the quantitative welfare implications associated with inefficient pricing in our particular application are small in both absolute and relative terms

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

optimal property taxation in the presence of interregional capital mobility abstract a single region s optimal property tax policy is examined in a model with interregional capital mobility in this model property taxation is used to finance local public expenditures different tax rates may be imposed on property used to produce goods which are traded between regions and property used to produce nontraded goods e g residential property the key determinants of the difference between the optimal tax rates are identified and it is argued that there exists a bias towards relatively low tax rates on property used to produce traded goods the role of labor mobility is also investigated

capitalization and community size abstract studies often show taxes and public services capitalized into house prices but no one has tested whether the rate of capitalization depends on community size the theoretical model of w h hoyt 1999 regional science and urban economics 29 155 171 predicts that capitalization occurs but that the rate of capitalization is weaker in large communities hoyt s model is tested empirically using a house price hedonic framework the tax capitalization results are less clear but the school quality and crime results firmly support the model s predictions using both school districts and municipalities to measure communities larger communities weaken the rate of capitalization

congestion and tax competition in a parallel network the purpose of this paper is to study the effects of tolling road use on a parallel road network where each link can be tolled by a different government using both theoreticaland numericalmo dels the paper analyses the potential tax competition between countries that each maximise the surplus of local users plus tax revenues in controlling local and transit transport three types of tolling systems are considered i toll discrimination between local traffic and transit ii only uniform tolls on local and transit transport are acceptable iii tolls on local users only the results suggest that the welfare effects of introducing transit tolls are large but that differentiation of tolls between local and transit transport as compared to uniform tolls does not yield large welfare differences also the welfare effects of toll cooperation between countries are relatively small in comparison with the welfare gains of non cooperative tolling of transit the numerical model further illustrates the effects of different transit shares and explicitly considers the role of asymmetries between countries higher transit shares strongly raise the transit toll and slightly decrease local tolls with asymmetric demands the welfare gains of introducing differentiated tolling rise strongly for the country with lower local demand

collaborative promotion of technology standards and the impact on innovation industry structure and organizational capabilities evidence from modern patent pools this study explores the impact of modern patent pools inter organizational collaborative arrangements for promoting the adoption of technology standards on the rate of follow on innovations based on pooled technologies the vertical structure of associated industries and organizational capabilities of noncollaborating firms on one hand the formation of modern pools can boost follow on innovation by lowering the search negotiation and licensing costs associated with pooled standards on the other hand modern pools may decrease the incentives to invest in follow on innovations because of cannibalization risks and grant back provisions to the extent that modern pools succeed in establishing a dominant standard their collaborative nature and their reliance on markets for technology can reduce technological uncertainty and appropriation hazards hence triggering vertical disintegration in related industries moreover by establishing a dominant standard modern pools can effectively diminish the relati

optimal pollution standards and non compliance in a dynamic framework in this paper we present a stackelberg differential game to study the dynamic interaction between a polluting firm and a regulator who sets pollution limits overtime at each time the firm settles emissions taking into account the fine for non compliance with the pollution limit and balances current costs of investments in a capital stock which allows for future emission reductions we derive two main results first we show that the optimal pollution limit decreases as the capital stock increases while both emissions and the level of non compliance decrease second we find that offering fine discounts in exchange for firm s capital investment is socially desirable we numerically obtain the optimal value of such discount which crucially depends on the severity of the fine in the limiting scenario with a very large severity of the fine the optimal discount implies that no penalties are levied since the firm shows adequate adaptation progress through capital investment

how effective are non monetary instruments for safe driving panel data evidence on the effect of the demerit point system in denmark using unusually rich longitudinal traffic offense data this paper exploits a reform that introduced a point recording scheme in denmark to estimate the behavioral responses of drivers to a non monetary penalty based on demerit points we find that drivers exhibit substantial behavioral responses to each demerit point assigned to their driving license we also find that drivers effort and hence response increases with the number of demerit points accumulated depending on the number of demerit points accumulated drivers with one or more demerit points reduced their frequency of traffic offenses by 9 34 percent this article is protected by copyright all rights reserved

the value of u s patents by owner and patent characteristics abstract this paper uses renewal data to estimate the value of u s patents controlling for patent and owner characteristics estimates of u s patent value are substantially larger than estimates for european patents however the ratio of u s patent value to r d for firms is only about 3 contrary to a common assertion patents issued to small patentees are much less valuable than those issued to large corporations litigated patents are more valuable as are highly cited patents however patent citations explain little variance in value suggesting limits to their use as a measure of patent quality

the dynamic adjustment of local government budgets does spain behave differently the aim of this article is to analyse whether spanish municipalities adjust in response to budget shocks and if so which elements of the budget they are more likely to adjust the methodology we use to answer these questions is a vector error correction model vecm estimated with data from a panel of spanish municipalities during the period 1988 to 2006 our results confirm that spanish municipalities do indeed make adjustments in response to fiscal shocks i e the deficit is stationary in the long run we compare our results with those obtained for us and germany to evaluate if the viability of local finance depends on the institutional arrangement and to analyse how it affects the adjustment patterns we observe that grants have a more important role in the adjustment process in environments where either they have an equalization objective or where there is no clear rule that determines their distribution this fact can generate a moral hazard problem governments tend to spend more due to the exp

is it tax competition or tax exporting abstract this paper extends the basic tax competition model to a framework in which jurisdictions have market power over the price of the output produced within their borders if firms within the jurisdiction are competitive the jurisdiction can play the role of monopoly rent collector by using taxes to restrict the level of output it is shown that the basic tax competition model can be thought of as a special case of this more general framework in this framework the opportunity to export the tax burden can partially or fully offset the well known effects identified by the tax competition model