willingness to pay for quality improvements comparative statics and interpretation of contingent valuation results this paper extends variation function theory by examining the effects of changes in prices quality and income on willingness to pay for quality change comparative static effects are found for both on site users and nonusers of the resource these results are used to interpret contingent valuation empirical models for example the substitution and complementary relationships between trips to natural resource sites can be identified this paper also suggests tests for comparison of contingent valuation with recreation demand models and other tests of validity

the theory of mixed demand functions abstract the properties of samuelson s mixed demand functions which express demand as a function of a mixed set of prices and quantities are derived by analyzing compensated or substitution effects and uncompensated effects the relationships between mixed demand functions and conditional or rationed demands are examined this provides insights on the behavioral implications of consumer theory for alternative demand specifications

deriving a flexible mixed demand system the normalized quadratic model this article deals with the specification of a locally flexible and theory consistent system of mixed demand functions a framework that allows for a rich set of possibilities about what is assumed as exogenous in a demand model a coherent mixed demand system is derived by using the restricted expenditure function typically studied in the related area of rationed demands the method is implemented by a new normalized quadratic nq parameterization of the restricted expenditure function the resulting nq mixed demand system is illustrated with an application to a nine good model of the italian demand for vegetables

consumer demand and the life cycle allocation of household expenditures the purpose of this paper is to estimate the parameters of household preferences that determine the allocation of goods within the period and over the life cycle using micro data in doing so the authors are able to identify important effects of demographics labor market status and other household characteristics on the intertemporal allocation of expenditure they test the validity of the life cycle model using excess sensitivity tests and find that controlling for demographics and labor market status variables can largely explain the excess sensitivity of consumption to anticipated changes in income

the impact of subsidies on x efficiency in ldc industry theory and an empirical test the x inefficiency costs of protection and industrial concentration have been topics of considerable interest in the literature on economic development balassa 1975 and bergsman 1974 for example have argued that protection by increasing x inefficiency generates a major welfare cost which is not captured by traditional costs of protection calculations and white 1976 has examined the relationship between inappropriate factor intensities which he associates with xinefficiency and industrial concentration the common theme which emerges from each of these studies is that public policy can have a major impact on economic performance not only by influencing factor proportions but also by influencing the intensity with which a non measurable input x efficiency is employed despite the intuitive appeal of the x efficiency concept there have been very few empirical tests of this hypothesis this partly reflects the imprecise nature of the basic concept but also the lack of adequate micro economic data x efficiency clearly relates to efficiency within firms so that the most appropriate tests would rely on data on firm level efficiency in this paper we propose a direct test of the x efficiency hypothesis using firm level data we build on previous work by corden 1970 1974 and martin 1978 who showed how to model x efficiency effects using the concept of managerial leisure we extend these simple models of managerial behavior emphasizing the role of the external managerial labor market the model is then used to explore the relationship between changes in public policy managerial effort and x inefficiency certain predictions of the model are tested using cross section data from a survey of firms in two subsidized industries in ghana efficiency indices are computed on the basis of a translog frontier production function variations in relative efficiency are then correlated with several explanatory variables including the presence or absence of subsidy payments to the firm subsidized firms in both industries are found to exhibit higher relative levels of x inefficiency

combining contingent valuation and travel cost data for the valuation of non market goods the travel cost method tcm has long been used to infer the economic value of nonmarket resources and public goods more recently contingent valuation cvm survey methods have gained popularity for eliciting these values here cvm survey responses are combined with tcm data on actual market behavior to estimate jointly both the parameters of the underlying utility function and its corresponding ordinary demand function this is a prototypical empirical example of a new modeling strategy variants of which should prove useful in many applications especially where reliance on a single valuation method is undesirable

differential consumer demand systems it is shown in this paper that several well known systems like the rotterdam model and the almost ideal demand system can be seen as different parametrizations of the budget share differential equation using a third parametrization a new system called the cbs system is developed and discussed special attention is given to the relative price version of the system and in particular to the special case of preference independence some estimates for the netherlands based on time series for 1953 1981 using various approaches are presented

farm price responsiveness and the choice of functional form abstract the estimated responsiveness of farmers to changes in the prices of output or inputs is in general very sensitive to the econometric model used using cross section survey data for farms in marginal rice growing districts in west malaysia price elasticities based on estimated input demand equations derived from a quadratic restricted profit function were found to be superior to those derived from translog or cobb douglas production functions or from a translog restricted profit function the cobb douglas production function is restrictive and should be used sparingly restricted profit functions are only believable if the available price data are of high quality

shifting mne taxation from national to global profits a radical reform long overdue the current separate accounting taxation of corporations gives governments the right to tax the national incomes of firms operating within their borders however multinational and increasingly digital business models beg the question what is national taxable income we argue that a radical rethink of the corporate taxation moving away from a separate taxation of national corporate income to a taxation of global corporate income allocated via formula apportionment is long overdue global corporate income as a basis for taxation is supported both by recent theoretical developments and corroborating empirical evidence with the eu and emerging economies including china already considering its adoption nor is it new as we relate formula apportionment of global corporate income was used a century ago before commercial and political interests promoted separate accounting thereby providing both precedent and experience to inform its re adoption

specification tests for mixed demand systems with an emphasis on combining contingent valuation and revealed data abstract in a world characterized by r unrationed goods i e market goods and n r rationed goods such as most environmental goods necessary and sufficient conditions for the existence of an underlying rational preference structure are derived based on a system of mixed demand functions with complete information with incomplete information the case of a partial demand system is addressed and a test for separability is proposed the implications for testing rationality in a world characterized by combined rp and sp individual data are examined for data consistency testable conditions are derived

the choice of apportionment factors under formula apportionment thispaperinvestigatesthechoiceofapportionmentfactorsunderacorporatetaxsystemofformulaapportionment in contrast to perceived wisdom we show that the apportionment formula contains both mobile capital and immobile labor factors regardless of whether the formula is determined decentrally by jurisdictions or centrally by a central planner the central planner uses the formula as a corrective instrument to internalize fiscal externalities we calibrate the model to the european union and show that replacing the current system of separate accounting by formula apportionment would substantially increase tax revenue and welfare under both centralized and decentralized formula choices

evaluating the impact of reforming the food subsidy program in egypt a mixed demand approach abstract food subsidy is one of the policies considered to protect consumer welfare against food price increases in particular when the insufficient local production has to be complemented by food imports with volatile prices egypt has experienced several food crises the latest in 2008 which put an halt to attempts to reform in depth the system of food subsidies because of social unrest in this paper we use a mixed demand approach to analyze the consumption structure of egyptian households our model specification takes into consideration the characteristics of the egyptian food subsidy system where some food items have predetermined quotas while others are associated with predetermined subsidized prices price income and quota elasticities are estimated from the egyptian family expenditure survey and welfare change measures are derived by income class simulations of various options to eliminate subsidies on selected food items are conducted we estimate the negative welfare impact of the reforms especially in the context of increasing food prices by comparing welfare effects of policy options by income quartiles and by household category rural urban

company tax reform with a water s edge this paper analyzes the effects of switching from a corporate tax system based on separate accounting sa towards a system in which two countries form a formula apportionment fa union while a third country sticks to sa water s edge our analysis draws a positive picture on the water s edge regulation in the short run for given tax rates the transition from sa to fa is likely to reduce profit shifting from the fa union to non fa tax havens in a long run tax competition analysis we find a negative water s edge externality under fa that tends to be less detrimental than the profit shifting externality under sa and may offset other externalities under fa

allowing firms to choose between separate accounting and formula apportionment taxation this paper analyzes the effect on firm behavior and national tax revenues of allowing multinational firms to choose to be taxed under separate accounting rules or an apportionment formula separate accounting always generates more profitable output and conditional labor demand distortions from tax differentials while either method can generate a more profitable income shifting distortion both low cost and high cost firms can prefer separate accounting while medium cost firms prefer formula apportionment with symmetric countries a firm s preferred method generates greater tax revenues in the country with the lower tax rate with asymmetric countries a firm s preferred method need no longer generate greater tax revenues in the lower tax rate country due to the fact that countries and firms now value tax base distortions differently with this misalignment of preferences some firms can choose the preferred method of both countries at fixed tax rates

a system of demand equations satisfying effectively global regularity conditions a parametric specification of an indirect utility function in terms oaf expenditure and two unit cost functions is proposed specification of these unit cost functions in terms of regular functions leads to the notion of an effectively globally regular system of demand equations that is a system of demand equations that is regular over a cone in expenditure price space and for which the regular region includes all points in any given sample and all values of nominal expenditure and prices generating higher values of real expenditure than the sample minimum this general model nests a number of popular demand systems such as the linear expenditure system as special cases an empirical application illustrates some of these ideas copyright 1996 by mit press

formula apportionment vs separate accounting a private information perspective abstract in 2002 the european commission recommended that member countries use formula apportionment procedures to tax multinational companies this departure from the standard separate accounting transfer pricing approach is an attempt to reduce the costs and distortions associated with auditing transfer prices unfortunately apportionment formulas create their own economic distortions and contrary to popular belief they do not eliminate distortions due to asymmetric information between the multinational and the national tax authorities in this paper i explicitly model the role of private information in two tax competition games one in which tax liabilities are calculated under formula apportionment and one in which tax liabilities are calculated under separate accounting and transfer prices are audited switching to a formula apportionment system affects the after tax profit of multinationals and the tax revenues paid by both domestic and foreign firms the direction and magnitude of the changes depend on the accuracy of the auditing technology and non monotonically on multinational costs the switch will have different effects on the tax receipts from domestic and foreign firms

flexible specification of mixed demand systems common flexible functional forms are not very useful for modeling mixed demand systems because derivation of mixed demands requires closed forms for both direct and indirect utility functions in this paper we study the alternative of using a direct approximation to mixed demands we develop a new approach to slutsky relations for mixed demand functions allowing formulation of a rotterdam mixed demand model the resulting mixed demand system is illustrated with an application to meat demand in canada

tax revenue losses through cross border loss offset an insurmountable hurdle for formula apportionment abstract this paper analyzes the relevance of firm losses for tax revenues and welfare when switching from separate accounting to a system of tax base consolidation with formula apportionment we find that a system change unambiguously decreases tax revenues in the short run in which neither firms nor governments can adjust their behavior due to the cross border loss offset inherent in formula apportionment in the medium run in which only firms can adjust their strategies tax revenues are still lower under formula apportionment if the probability of incurring losses or the costs of profit shifting are sufficiently small however in the long run where firms and governments can adjust their behavior a switch from separate accounting to formula apportionment is beneficial under the aforementioned conditions furthermore we show that a higher weight on input shares in the apportionment formula may mitigate tax competition and thus increase tax revenues because contrary to output factors input factors provide a backstop against a shortfall of tax revenues due to loss making subsidiaries

property rights and x efficiency comment louis de alessi s paper 1983 begins in an ecumenical spirit and suggests that property rights theory and the x efficiency approach have not drawn on each other s contributions i share that spirit there is much to learn from a variety of approaches but as de alessi proceeds the ecumenical spirit withers the last three sections argue to the effect that general neoclassical theory i e property rights theory obtains the same results as x efficiency theory but has a superior methodology de alessi s paper puts me in the position of a reluctant dualist his approach resembles an intellectual takeover bid since it argues 1 that neoclassical theory is flawed 2 that the property rights approach has corrected the flaws and 3 by implication that it supercedes other micro approaches 2 the concepts of property rights transaction costs and adjustment costs and their motivational implications are certainly useful i see no reason to argue against them or against property rights theory but i believe that there is more to the explanation of inefficiency thus i will stress the special nature of the x efficiency approach examine our differences and attempt to correct some of de alessi s misinterpretations nevertheless i believe that de alessi s article renders an important service since it gives a succinct summary of property rights theory and explains its significance the main differences between us lie in the basic presupposition behind the two approaches in answering the motivation question property rights theory seems to say that property rights are the only motivating force and that people act to fully maximize wealth given the limits of their property rights when they do so their activities are efficient the x efficiency approach raises a different type of question namely it asks within the firm and outside of the exchange relationship what are the motivating forces that determine effort and productivity including the motivating forces leading to maximizing or less than maximizing behavior property rights are of course a motivating force however it is one of many not the only motivating force nor in many instances is it the most important one determining effort it is important to highlight these differences because different modes of analysis determine not only results but what the analyst looks for and possibly finds the value of a theory depends in part on the research it generates another difference lies in the interest in inefficiency it is not clear whether de alessi cares about inefficiency the postulate of maximization of utility by all individuals and the explicit assertion by de alessi that the equilibrium solution associated with a given set of constraints is efficient p 73 gives the impression that inefficiency is assumed away clearly the x efficiency approach sees inefficiency as a major problem only if one employs an approach that at least recognizes within it the possibility of inefficiency can one have empirical results which indicate an approximation to efficiency inefficiency must be a variable if we are to be able to find meaningful empirical instances which are efficient compared to the neoclassical approach the property rights approach seems to dissect the firm into component individuals and their implicit contracts after dissection the property rights approach assumes that the ordinary utility maximization rules still apply professor of economics and population department of economics harvard university 204 littauer center cambridge ma 02138 i am indebted to h barkai j dean r frantz e helpman j medoff and j rothenberg for valuable comments they are not responsible for errors or viewpoints the labels property rights theory and general neoclassical theory will be used interchangeably 2to stake his claim de alessi might have considered at least some other alternative approaches such as the work of oliver williamson 1970 and that of richard nelson and sidney winters 1982

towards a more general version of the almost ideal demand system abstract this note proposes a generalization of the almost ideal demand system two independent parameters provide more flexibility to the shape of the engel curves and to the form of the price effects

income shifting investment and tax competition theory and evidence from provincial taxation in canada abstract we study corporate income taxation when firms operating in multiple jurisdictions can shift income using tax planning strategies because income of corporate groups is not consolidated for tax purposes in canada firms may use financial techniques such as lending among affiliates to reduce subnational corporate taxes a simple theoretical model shows how income shifting affects real investment government revenues and tax base elasticities depending on whether firms must allocate income to provinces or not we then analyze data from administrative tax records to compare the behavior of corporate subsidiaries that may engage in income shifting to comparable firms that must use the statutory allocation formula to determine their taxable income in each province the evidence suggests that income shifting has pronounced effects on provincial tax bases according to our preferred estimate the elasticity of taxable income with respect to tax rates for income shifting firms is 4 9 compared with 2 3 for other comparable firms

incorporating generalized marginal budget shares in a mixed demand system this article extends a rotterdam type of mixed demand system by replacing its constant marginal budget shares with the ones derived from originally defined and specified mixed engel curves that take a generalized functional form using the box cox transformation an empirical illustration is given for japanese demand for fresh and processed fruits and vegetables the results show that the rotterdam parameterization of marginal budget shares which corresponds to those in linear mixed engel curves is preferred by the data and that improper assumptions of the form of mixed engel curves underlying a mixed demand system can bias its elasticities

willingness to pay for quality improvements should revealed and stated preference data be combined abstract in this article we propose theoretically consistent welfare measurement of use and nonuse values for an improvement in environmental quality with revealed and stated preference data an analytical model based on the comparative static analysis of the variation function that describes the relationship between recreation demand and dichotomous choice contingent valuation models is estimated our results show that revealed and stated data should not be combined under the same assumed preference structure unless the two decisions imply the same change in behavior induced by the quality change in addition our results indicate scope effects in willingness to pay measures estimated with stated preference data

corporate income taxation of multinationals in a general equilibrium model abstract this paper contributes to the discussion on separate accounting versus formula apportionment in the corporate income taxation of multinational enterprises the innovation is that we consider a general equilibrium tax competition model with an endogenous interest rate in contrast to previous studies we show that tax rates are inefficiently low not only under separate accounting but also under formula apportionment moreover we identify a wide range of empirically relevant cases where formula apportionment is superior to separate accounting independent of the magnitude of the concealment cost of profit shifting the reason for the change in results is that one country s tax rate affects other countries additionally via changes in the interest rate

company taxation and tax spillovers separate accounting versus formula apportionment it is observed in the real world that taxes matter for location decisions and that multinationals shift profits by transfer pricing the us and canada use so called formula apportionment fa to tax corporate income and the eu is debating a switch from separate accounting sa to fa this paper develops a theoretical model that compares basic properties of fa to sa the focal point of the analysis is how changes in tax rates affect capital formation input choice and transfer pricing as well as on spillovers on tax revenue in other countries the analysis shows that a move from sa to fa will not eliminate such spillovers and will in cases identified in the paper actually aggravate them

why the european union should adopt formula apportionment with a sales factor using a two country tax competition model with a multinational enterprise mne this paper addresses the question of whether the european union should replace separate accounting sa in corporate income taxation by formula apportionment fa and if so which apportionment factors should be used our main result is that fa with a sales factor may mitigate or even eliminate fiscal externalities caused by the countries tax policy hence our analysis provides a microfoundation for the sales apportionment factor in an empirical calibration to the eu 15 we show that the transition from sa to fa with a sales only formula raises average tax rates by 2 and average tax revenues by 1 billion euros or 0 1 of gdp these effects result in an increase of welfare

the use of conditional cost functions to generate estimable mixed demand systems mixed demand systems have been virtually ignored in empirical work solely because derivation of these systems requires closed forms for both direct and indirect utility functions this article proposes the alternative of using a conditional cost function to generate empirical mixed demand models this approach allows the estimation of mixed demand systems which are explicit in an unobservable variable utility but may lack a closed form representation in terms of observable variables such as prices quantities and expenditure results indicate that this approach is operationally feasible which opens up a wider range of mixed demand specifications in static analyses