the role of capital and labour in shaping the environmental effects of fiscal stimulus abstract although the macroeconomic consequences of short term fiscal stimulation packages have been thoroughly analysed in the literature still relatively little is known about their environmental effects we discuss an important channel through which short run expansionary fiscal policy influences greenhouse gas emissions we show that fiscal policy exerts its impact not only by increasing general level of economic activity but also by changing the composition of factors of production capital and labour using the dynamic stochastic general equilibrium model of economy we demonstrate that fiscal expansion results in a shift from capital intensive to more labour intensive technologies our panel study proves that the latter tends to be associated with lower emissions of greenhouse gases per unit of production hence our analysis demonstrates that an extensive use of fiscal stimulus during recessions can significantly reduce the environmental burden of the additional units of gdp

combining buy in penalties with commissions at auction houses most auction sellers consign property to auction houses rather than holding the auction themselves in addition to charging sellers a commission on property that sells in the auction many auction houses also specify buy in penalties in auction contracts this is an amount the seller must pay the auction house if the property fails to sell at auction an important managerial question for auction houses is whether and when buy in penalties can increase revenues of the auction house seller or both and what combinations of commission and buy in penalty to use we show that auctions which combine buy in penalties with lower commissions pareto dominate auctions that use only commissions this strategy motivates the seller to set a lower reserve which creates a surplus in auction revenues that can go to one or both parties this strategy is pareto dominant even if the auction house and the seller are uncertain about the number of bidders at the auction or the auction house is uncertain about the seller s own valuation for the property at the time the buy in penalty commission and reserve are contractually set we also discuss the incentive issues raised by this strategy

dalton improving indirect tax reform a tax reform is dalton improving if it improves social welfare for all possible social welfare functions that conform to hugh dalton s principle of transfers according to this principle there exists a prior social ranking of households and a transfer is approved if it it distributes from high ranking rich to low ranking poor households without altering the ranking itself in this paper the authors develop a procedure for identifying marginal dalton improving reforms in the context of indirect taxation the methodology is illustrated using data on excise taxes in the united kingdom copyright 1995 by american economic association

debt deleveraging and the liquidity trap a fisher minsky koo approach in this paper we present a simple new keynesian style model of debt driven slumps that is situations in which an overhang of debt on the part of some agents who are forced into rapid deleveraging is depressing aggregate demand making some agents debt constrained is a surprisingly powerful assumption fisherian debt deflation the possibility of a liquidity trap the paradox of thrift a keynesiantype multiplier and a rationale for expansionary fiscal policy all emerge naturally from the model we argue that this approach sheds considerable light both on current economic difficulties and on historical episodes including japan s lost decade now in its 18th year and the great depression itself

the optimum quantity of debt abstract we find that the welfare gains to being at the optimum quantity of debt rather than the current us level are small and therefore concerns regarding the high level of debt in the us economy may be misplaced this finding is based on a model of a large number of infinitely lived households whose saving behavior is influenced by precautionary saving motives and borrowing constraints this model incorporates a different role for government debt than is found in standard models and it captures different cost benefit trade offs on the benefit side government debt enhances the liquidity of households by providing an additional means of smoothing consumption and by effectively loosening borrowing constraints on the cost side the implied taxes have adverse wealth distribution and incentive effects in addition government debt crowds out capital via higher interest rates and lowers per capita consumption

the fiscal multiplier in a liquidity constrained new keynesian economy we study the effects of fiscal policy on the macroeconomy using a liquidity constrained new keynesian model in which government bonds are liquid and private financial assets are only partially liquid we find that the fiscal multipliers in this economic environment are large enough for fiscal policy to be highly effective in this model a bond financed fiscal expansion can stimulate output because higher public borrowing improves liquidity by increasing the proportion of liquid assets in private sector wealth

auction guarantees for works of art abstract this paper addresses the question of whether auction guarantees change the bidding environment and whether they cause a change in price once the value of an item is taken into account we analyze both the cases of third party guarantees and in house guarantees we use two datasets one of christie s and sotheby s contemporary and impressionist evening sales from january 2010 to february 2012 and another larger dataset consisting of all items auctioned at christie s from 2001 to may 2011 while more expensive items are more likely to have guarantees we find little empirical evidence to suggest an effect on price from the guarantee itself once the value of the item is taken into account

nash s theory of cooperative games as a predictor of the outcomes of buyer seller negotiations an experiment in media purchasing the authors report an experimental investigation of the ability of nash s theory of cooperative games to predict the outcomes of buyer seller negotiations using the purchase of media time as an ex

public debt and redistribution with borrowing constraints we build a model with financial imperfections and heterogeneous agents and analyse the effects of two types of fiscal policy revenue neutral intratemporal redistribution and debt financed tax cuts which we interpret as intertemporal redistribution under flexible prices the two policies are either neutral or display effects that are at odds with the empirical evidence with sticky prices ricardian equivalence always fails a robin hood revenue neutral redistribution to borrowers is expansionary on aggregate activity a uniform debt financed tax cut has a positive present value multiplier on consumption stemming from intertemporal substitution by the savers who hold the public debt

sticky price models of the business cycle can the contract multiplier solve the persistence problem we construct a quantitative equilibrium model with firms setting prices in a staggered fashion and use it to ask whether monetary shocks can generate business cycle fluctuations these fluctuations include persistent movements in output along with the other defining features of business cycles like volatile investment and smooth consumption we assume that prices are exogenously sticky for a short time persistent output fluctuations require endogenous price stickiness in the sense that firms choose not to change prices much when they can do so we find that for a wide range of parameter values the amount of endogenous stickiness is small thus we find that in a standard quantitative model staggered price setting alone does not generate business cycle fluctuations

fiscal multipliers under an interest rate peg of deterministic versus stochastic duration this paper revisits the size of the fiscal multiplier the experiment is a fiscal expansion under the assumption of a pegged nominal rate of interest we demonstrate that a quantitatively important issue is the articulation of the exit from the policy experiment if the monetary fiscal expansion is stochastic with a mean duration of t periods the fiscal multiplier can be unboundedly large however if the monetary fiscal expansion is for a fixed t periods the multiplier is much smaller our explanation rests on a jensen s inequality type argument the deterministic multiplier is convex in duration and the stochastic multiplier is a weighted average of the deterministic multipliers the quantitative difference in the two multipliers also arises in a model with capital and in the baseline nonlinear model however the differences between the two is less pronounced in the nonlinear models

liquidity assets and business cycles abstract the objective here is to evaluate the quantitative importance of financial frictions in business cycles the analysis shows that a negative financial shock can cause aggregate investment employment and consumption to fall with output despite this realistic comovement among macro quantities a negative financial shock generates an equity price boom as the shock tightens firms financing constraint this counterfactual response of the equity price is robust to a wide range of variations in how financial frictions are modeled and whether financial shocks affect asset liquidity or firms collateral constraints some possible resolutions to this puzzle are discussed

the theory of reform and indian indirect taxes abstract given a set of value judgements an initial state and a model of the economy one can ask whether some feasible tax change would increase welfare we do this by defining the marginal cost in terms of welfare of raising an extra rupee from the i th good the inverse optimum problem is the calculation of non negative welfare weights on households which imply that the initial state is optimum if no such welfare weights exist then a pareto improvement is possible we illustrate the concepts and results using data from the indian economy for 1979 1980 directions of tax reform for a number of specific social welfare functions and for pareto improvements are presented

fiscal policy in an expectations driven liquidity trap we study the effects of fiscal policy interventions in a liquidity trap in a model with nominal rigidities and an interest rate rule in a liquidity trap caused by a self fulfilling state of low confidence higher government spending has deflationary effects that reduce the spending multiplier when the zero lower bound is binding instead cuts in marginal labor tax rates are inflationary and become more expansionary when the zero lower bound is binding these findings contradict popular views about the effects of fiscal policy in a liquidity trap

can government purchases stimulate the economy this essay briefly reviews the state of knowledge about the government spending multiplier drawing on theoretical work aggregate empirical estimates from the united states as well as cross locality estimates i assess the likely range of multiplier values for the experiment most relevant to the stimulus package debate a temporary deficit financed increase in government purchases i conclude that the multiplier for this type of spending is probably between 0 8 and 1 5 jel e23 e62 h50

the ability of nash s theory of cooperative games to predict the outcomes of buyer seller negotiations a dyad level test this research develops and implements a dyad level procedure for testing whether the outcomes of buyer seller negotiations correspond to settlements prescribed by nash s theory of cooperative games the procedure entails a multivariate statistical test in which some parameters are estimated by simulation while others are provided directly from the assessment of negotiator utility functions by means of conjoint analysis the procedure is applied to an experiment in which subjects participated in a realistic role playing exercise that replicated the purchase of television advertising time results indicate that at the 0 01 significance level 57 8 of the dyads can be rejected as not having achieved nash solutions these results and their implications for marketing practitioners as well as future research are discussed

dalton improving tax reform when households differ in ability and needs abstract in a previous paper we suggested a method for identifying tax reforms that adhere to dalton s principle of transfers approving a small enough transfer from rich to poor however even the weak requirement from that method namely prescribing a uni dimensional ordinal ranking of households by how deserving they are of a marginal income transfer is con fining here we extend the approach by formulating a two dimensional criterion for a dalton improving tax reform when there is social approval for transfers when other things are equal from the more able to the less able and from less needy households to more needy ones the possibility of applying this extended criterion in practice and a comparison with other criteria is carried out using the example of u k excise taxes

guarantees in auctions the auction house as negotiator and managerial decision maker the multimillion dollar price guarantees that an auction house can offer for paintings have already had a large impact on auction house profits and place new demands on the auctioneer s decision making and negotiating skills yet auctioneers have not been studied as independent entities and decision makers to create a price guarantee the auction house and the seller must negotiate both the guarantee amount and the extra commission the seller pays if the auction price exceeds the guarantee we present a normative model of negotiations and find the frontier of guarantee and commission that is the nash bargaining solution we also determine the optimal reserve that the auctioneer should place on guaranteed property we find that guarantees decrease the auction house s expected revenue compared to a conventional auction but do allow it to attract business which might otherwise be lost guarantees benefit sellers increasing the expected value and lowering the variance of their auction revenue the auctioneer s optimal strategy depends not only on the distribution of the artwork s auction price but also the price it will bring if it fails to sell at auction in the latter case the auction house must pay the seller the guarantee and then sell the artwork which it now owns in a private secondary market where buyers regard the property as damaged goods and lower their offers although all points on the frontier produce equal expected revenue several frequently used decision making rules suggest that both parties may prefer a guarantee arrangement where the seller pays no additional commission and the guarantee has the lowest value on the frontier

optimal bundling strategies in multiobject auctions of complements or substitutes we consider a problem at the interface of auctions and bundling our revenue maximizing seller seeking to auction one unit each of two complements or substitutes in the best of three formats the auction of the bundle separate auctions of the individual items and a combinatorial auction we draw on an analytical model to address the following questions i which of the auctioning strategies is optimal under the second price sealed bid format ii what is the optimal strategy for the bidders iii when the objects are asymmetrically valued e g super bowl ticket versus souvenir what is the optimal auctioning sequence under the pure components strategy our results suggest that separate auctions of the two objects are superior to the auction of the bundle for most substitutes and even moderate complements when there are at least four bidders the auction of the pure bundle is better suited for strong complements or with too few bidders when the combinatorial auction is an available option it weakly dominates the auction of the pure bundle but has domains of inferiority relative to the separate auctions when the objects are asymmetric in value it is optimal to auction the higher valued object first

heterogeneous impact of the seguro popular program on the utilization of obstetrical services in mexico 2001 2006 a multinomial probit model with a discrete endogenous variable objective we evaluated the impact of seguro popular sp a program introduced in 2001 in mexico primarily to finance health care for the poor we focused on the effect of household enrollment in sp on pregnant women s access to obstetrical services an important outcome measure of both maternal and infant health

analysis of the distributional impact of out of pocket health payments evidence from a public health insurance program for the poor in mexico many governments have health programs focused on improving health among the poor and these have an impact on out of pocket health payments made by individuals therefore one of the objectives of these programs is to reach the poorest and reduce their out of pocket expenditure in this paper we propose the distributional poverty impact approach to measure the poverty impact of out of pocket health payments of different health financing policies this approach is comparable to the impoverishment methodology proposed by wagstaff and van doorslaer 2003 that compares poverty indices before and after out of pocket health payments in order to escape the specification of a particular poverty index we use the marginal dominance approach that uses non intersecting curves and can rank poverty reducing health financing policies we present an empirical application of the out of pocket health payments for an innovative social financing policy implemented in mexico named seguro popular the paper finds evidence that seguro popular program has a better distributional poverty impact when families face illness when compared to other poverty reducing policies the empirical dominance approach uses data from mexico in 2006 and considers international poverty standards of 2 per person per day

food subsidies and poverty alleviation this paper formulates the problem of the optimal pattern of food subsidies in a general setting where the objective is to minimize a class of poverty indices within the framework of the mo dern public finance theory taking explicit account of the budget con straint and preferences and technologies the authors derive rules fo r retargetting food subsidies to reduce poverty many operational rul es of thumb appear as special cases of the general results the analy sis thus provides not only the microfoundations of these operational rules but also their appropriate generalizations when the conditions under which they arise are not fulfilled copyright 1988 by royal economic society

erratumauction guarantees for works of art this paper addresses the question of whether auction guarantees change the bidding environment and whether they cause a change in price once the value of an item is taken into account we analyze both the cases of third party guarantees and in house guarantees we use two datasets one of christie s and sotheby s contemporary and impressionist evening sales from january 2010 to february 2012 and another larger dataset consisting of all items auctioned at christie s from 2001 to may 2011 while more expensive items are more likely to have guarantees we find little empirical evidence to suggest an effect on price from the guarantee itself once the value of the item is taken into account

effects of participative pricing on consumers cognitions and actions a goal theoretic perspective using a goal theoretic approach we examine how goal related mind sets influence consumers reactions to participative pricing mechanisms where consumers participate in price determination e g auctions relative to economically equivalent fixed price offers we show that the congruence between individuals notions of high perceived control over shopping situations and participative price environments produces an implementation oriented mind set that influences cognitions and intentions in the absence of such congruence we can independently create implemental mind sets that replace the natural deliberative thinking of consumers contemplating a purchase demonstrating the subtle yet powerful role mind sets play in dictating thought and action is a unique contribution of this research

poverty dominant program reforms the role of targeting and allocation rules we propose simple graphical methods to identify poverty reducing marginal reforms of transfer programs the methods are based on program dominance curves that display cumulative program benefits weighted by powers of poverty gaps these curves can be decomposed simply as sums of targeting dominance curves and allocation dominance ones and can serve to verify whether the assessment of marginal program reforms is sensitive to the choice of poverty lines and poverty measures as well as to differences across programs in revenue sources and incentive effects

is there a fiscal free lunch in a liquidity trap this paper uses a dsge model to examine the eects of an expansion in government spending in a liquidity trap the spending multiplier can be much larger than in the normal situation if the liquidity trap is very persistent and scal stimulus can be rapidly implemented moreover the budgetary costs may be minimal as the large response of output boosts tax revenues allowing for something close to a scal free lunch however we caution that the multiplier may be much smaller under plausible implementation lags for many types of public spending and or if the liquidity trap lasts less than two years in addition because the marginal impact of scal expansion decreases in the scale of the outlay it is crucial to distinguish between average and marginal multipliers

fiscal shocks and their consequences this paper investigates the response of hours worked and real wages to fiscal policy shocks in the post world war ii us we identify these shocks with exogenous changes in military purchases and argue that they lead to a persistent increase in government purchases and tax rates on capital and labor income and a persistent rise in aggregate hours worked as well as declines in real wages the shocks are also associated with short lived rises in aggregate investment and small movements in private consumption we describe and implement a methodology for assessing whether standard neoclassical models can account for the consequences of a fiscal policy shock simple versions of the neoclassical model can account for the qualitative effects of a fiscal shock once we allow for habit formation and investment adjustment costs the model can also account reasonably well for the quantitative effects of a fiscal shock

modeling competitive bidding a critical essay in analyzing bidding modeling matters this paper is a critical analysis of the models available to aid competitive bidding decision making bidding strategy and auction design in real transactions after an introductory overview this paper describes the contexts in which auctions arise reviews the mainstream theory of single isolated auctions and discusses the important work involved in enrichment of this theory in doing so it indicates results that have been obtained and the sort of changes in analytical approach that are needed to tackle other critical enrichments the paper summarizes briefly what is known about the direct use of models by bidders and auction designers a general theme of this paper is that enriched models are needed to bring bidding theory closer to direct applicability in decision making

new keynesian versus old keynesian government spending multipliers renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy because of modelling uncertainty it is essential that policy evaluations be robust to alternative assumptions we find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust government spending multipliers in an alternative empirically estimated and widely cited new keynesian model are much smaller than in these old keynesian models the estimated stimulus is extremely small with gdp and employment effects only one sixth as large and with private sector employment impacts likely to be even smaller we investigate the sensitivity of our findings with regard to the response of monetary policy the zero bound on nominal interest rates and the inclusion of an empirically relevant degree of rule of thumb behaviour in the new keynesian model in addition we relate our findings using estimated structural macroeconomic models to the recent literature using reduced form regression techniques

consumption dominance curves testing for the impact of indirect tax reforms on poverty abstract a new tool is presented to test for the robustness of the impact on poverty of marginal tax reforms for pairs of commodities consumption dominance curves exist for every order of stochastic dominance an illustration is provided with bolivian data