monetary policy coordination under fixed and floating exchange rates this paper studies monetary policy coordination in a familiar fixed price perfect capital mobility multicountry model it is shown that under fixed exchange rates countries can coordinate their policies and reach pareto efficient outcomes with rules closely related to the nash based mechanisms that have been designed to overcome free riding in standard public good economies the coordination rules defined in this paper do not make countries lose the control of their own policies it is also shown that nash implementation of pareto efficient states with similar rules is in general not possible under floating exchange rates copyright 1990 by royal economic society

securitization of taxes implicit in payg pensions to preserve solvency a pay as you go payg pension system needs to adjust contribution rates and pension promises over time currently it is not possible to hedge in the financial market against politically determined uncertainty as regards these parameters i consider a policy reform whereby property rights are established on the implicit lifetime tax levied by payg finance and are assigned to the pension institution these property rights are well defined if the reform also features rule based allocation of aggregate risk in the form of defined contribution or defined benefit schemes i show that a payg pension system may indeed be instantly restructured so as to minimize political risk and allow financial market diversification of risk a side benefit is securitization of human capital flows which are not traded in existing financial markets the new securities if traded in appropriately competitive financial markets are complementary to the notional account reforms of the 1990s however fiscal instability can increase if securitization is implemented in the absence of initial solvency and credible adoption of rule based methods to allocate aggregate risk salvador valdes prieto

do better schools matter parental valuation of elementary education the evaluation of numerous school reforms requires an understanding of the value of better schools given the difficulty of calculating the relationship between school quality and student outcomes i turn to another method and use house prices to infer the value parents place on school quality i look within school districts at houses located on attendance district boundaries houses then differ only by the elementary school the child attends i thereby effectively remove the variation in neighborhoods taxes and school spending i find that parents are willing to pay 2 5 percent more for a 5 percent increase in test scores this finding is robust to a number of sensitivity checks

do unemployed workers benefit from enterprise zones the french experience this paper presents an impact evaluation of the french enterprise zone program which was initiated in 1997 to help unemployed workers find employment by granting a significant wage tax exemption about one third of total labor costs to firms hiring at least 20 of their labor force locally drawing from a unique geo referenced dataset of unemployment spells in the paris region over an extensive period of time 1993 2003 we are able to measure the direct effect of the program on unemployment duration distinguishing between short and medium term effects this is done by implementing an original two stage empirical strategy using individual data in the first stage and aggregate data and conditional linear matching techniques in the second stage we show that although the enterprise zone program tended to pick winners it is likely to be cost ineffective it had a small but significant effect on the rate at which unemployed workers find a job which is increased by a modest 3 this effect is localized and significant only in the short run i e at best during the 3 years that follow the start of the policy

short run impacts of a severance tax change evidence from alaska energy states face a fundamental tradeoff when increasing severance tax rates potential gains in tax revenues versus potential losses in exploration development and production activity despite the significant implications of this tradeoff there is very little empirical evidence on the short run responsiveness of extraction related activities to changes in severance taxes we conduct a comparative case study to evaluate the short term impact of a severance tax increase on oil related activities and development in alaska in 2007 the introduction of alaska s clear and equitable share aces more than tripled the tax liability for much of the oil already under production in alaska we construct a synthetic alaska from a set of u s energy states with the purpose of estimating the counterfactual evolution of oil production exploration and development wells gross state product and employment in the absence of aces overall our results indicate that there is no discernible difference in the outcome variables of interest between alaska and its synthetic control after the implementation of aces suggesting that aces had a minimal effect on alaskan oil related activity and development in the short run

state investment tax incentives a zero sum game abstract over the past four decades state investment tax incentives have proliferated this emergence of state investment tax credits itc and other investment tax incentives raises two important questions 1 are these tax incentives effective in achieving their stated objective to increase investment within the state 2 to the extent these incentives raise investment within the state how much of this increase is due to investment drawn away from other states to begin to answer these questions we construct a detailed panel dataset for 48 states for 20 years the dataset contains series on output and capital their relative prices and establishment counts the effects of tax variables on capital formation and establishments are measured by the jorgensonian user cost of capital that depends in a nonlinear manner on federal and state tax variables cross jurisdictional differences in state investment tax credits and state corporate tax rates entering the user cost combined with a panel that is long in the time dimension are key to identifying the effectiveness of state investment incentives two models are estimated the capital demand model is motivated by the first order condition for a profit maximizing firm and relates at the state level the capital output ratio to the relative user cost of capital the twin counties model exploits both the spatial breaks discontinuities in tax policy at state borders and our panel dataset to relate at the county level the relative user cost to the location of manufacturing establishments using the capital demand model we find that own state capital formation is substantially increased by tax induced reductions in the own state price of capital and more interestingly substantially decreased by tax induced reductions in the price of capital in competitive states similarly using our twin counties model we find that county manufacturing establishment counts around state borders are higher on the side of the border with the lower price of capital but the difference is economically small suggesting that establishments are much less mobile than overall capital extensions of the capital demand model also reveal that state capital tax policy appears to be a zero sum game among the states in that an equiproportionate increase in own state and competitive states user costs tends to have no effect on own state capital formation

what mean impacts miss distributional effects of welfare reform experiments labor supply theory predicts systematic heterogeneity in the impact of recent welfare reforms on earnings transfers and income yet most welfare reform research focuses on mean impacts we investigate the importance of heterogeneity using random assignment data from connecticut s jobs first waiver which features key elements of post 1996 welfare programs estimated quantile treatment effects exhibit the substantial heterogeneity predicted by labor supply theory thus mean impacts miss a great deal looking separately at samples of dropouts and other women does not improve the performance of mean impacts we conclude that welfare reform s effects are likely both more varied and more extensive than has been recognized

competition in interregional taxation the case of western coal markets for many products are dominated by small group of states or countries with a natural advantage in the marketplace because of some initial endowment of resources favorable climate or location the purpose of this paper is to explore how such markets involving a few political jurisdictions interact noncooperatively we examine how such a market might be structured and operate and the extent of monopoly rent that can be extracted in the absence of collusion we answer these questions for an empirically estimated model of western u s coal in which two states montana and wyoming dominate production we demonstrate that in this market the amount of rent that can be extracted is greatly reduced through competition relative to a cartel nevertheless even with two producing states competing against each other significant rents can be captured significant enough to refute the contention that little rent can accrue without a cartel

the effects of tax increment financing on economic development abstract local governments attempt to influence business location decisions and economic development through use of the property tax tax increment financing tif earmarks property tax revenues that result from growth in assessed valuation the tif revenues are to be used for economic development projects but may also be diverted for other purposes using data for the chicago metropolitan area that includes information on property value growth before and after tif adoption we find evidence that cities that adopt tif grow more slowly than those that do not we test for and reject sample selection bias as an explanation of this finding

did women s suffrage change the size and scope of government this paper examines the growth of government during this century as a result of giving women the right to vote using cross sectional time series data for 1870 1940 we examine state government expenditures and revenue as well as voting by u s house and senate state delegations and the passage of a wide range of different state laws suffrage coincided with immediate increases in state government expenditures and revenue and more liberal voting patterns for federal representatives and these effects continued growing over time as more women took advantage of the franchise contrary to many recent suggestions the gender gap is not something that has arisen since the 1970s and it helps explain why american government started growing when it did

chronic disease burden and the interaction of education fertility and growth abstract this study considers the eradication of hookworm disease from the american south circa 1910 as a test of the quantity quality q q framework of fertility eradication was principally a shock to the price of quality because of three factors hookworm i depresses the return to human capital investment ii had a very low case fatality rate and iii had negligible prevalence among adults consistent with the q q model we find a significant decline in fertility associated with eradication

taxation depletion and welfare a simulation study of the u s petroleum resource abstract exhaustible resources in the united states are subject to taxes on property value production and corporate income as applied in practice each tax can cause high grading the elimination of incentives to explore develop and produce marginal resources and each can tilt the time path of production toward the present or the future the potential for such tax induced distortions has been shown in the theoretical literature due to the dynamic nature of resource exploitation and the resulting complexity of models developed to study it however purely theoretical exercises have been unable to provide detailed results of a sort that could help guide tax policy the present paper develops a simulation model of the u s petroleum resource and uses it to study the effects of taxation on exploration and production the model is partial equilibrium in scope and views the industry as a present value maximizing representative firm given expectations on the future time path of price and a function that relates reserve additions to exploratory effort the industry chooses time paths for exploration and production parameters of relevant functions are estimated with data for u s petroleum operations in the onshore region of the lower 48 states the simulated outcomes indicate that property and production severance taxes cause substantial deadweight losses a tax on corporate income from extraction imposes a very small deadweight loss and the property tax significantly biases utilization of the resource away from the future and toward the present

us state and local oil and gas revenue sources and uses us state and local governments generate revenues from oil and gas production through a variety of mechanisms in this paper we quantify four leading sources 1 state taxes levied on the value or volume of oil and gas produced 2 local property taxes levied on the value of oil and gas property 3 oil and gas lease revenues from state lands and 4 oil and gas lease revenues from federal lands we measure these revenues against the total value of oil and gas produced in the top 16 oil and gas producing states using fiscal year 2013 as a benchmark on average state and local governments collect roughly 10 of oil and gas revenue ranging from a low of roughly 1 to a high of nearly 40 not including income taxes we also assess the use of these revenues finding that there is substantial variation among states the largest shares of revenue flow to state governments current expenditures and education followed by local governments some states also allocate a portion of oil and gas revenues to trust funds endowing future government operations and or education expenditures

tax policy and urban development evidence from the indiana enterprise zone program abstract this paper analyzes the effect of the indiana enterprise zone ez program on local employment and investment using a panel of local taxing jurisdictions as in other ez programs indiana s incentives favor capital relative to labor but the target of the capital incentive is unusual the stock of inventories using various estimation methods i estimate that zone designation initially reduces the value of depreciable personal property by about 13 percent but also reduces unemployment claims in the zone and surrounding community by 19 percent the value of inventories in indiana zones is 8 percent higher than it would be without the program

do capitalization effects for public goods reveal the public s willingness to pay this article develops a welfare theoretic framework for interpreting evidence on the impacts of public programs on housing markets we extend rosen s hedonic model to explain how housing prices capitalize exogenous shocks to public goods and externalities the model predicts that trading between heterogeneous buyers and sellers will drive a wedge between these capitalization effects and welfare changes we test this hypothesis in the context of changes in measures of school quality in five metropolitan areas results from boundary discontinuity designs suggest that capitalization effects understate parents willingness to pay for public school improvements by as much as 75

policy bargains and the problem of model selection abstract parameter uncertainty and disagreements about model specification pose a particular difficulty for economic policy design frankel and rockett argue that if model uncertainty is not explicitly taken into account policy coordination is as likely to decrease welfare as increase it this paper therefore looks at the scope for reducing errors by making strategic model choices part of the overall policy selection procedure it shows that alternative definitions of the policy bargain produces decisions which are robust against disagreements about the correct model while alternative choices of model produce policies which are robust against model uncertainty hence fixed i e model free policy rules are no substitute for making strategic model choices

the simultaneous use of rival models in policy optimisation an important problem in macroeconomic policy design that has hitherto received little attention is the uncertainty of model structure by that we mean that more than one model fits the data reasonably well however each model is based on a different school of economic thought and thus has a different structure hence our analysis is based on non nested models when statistical inference cannot reject one model in favour of the other in this paper we discuss a way in which policy optimisation can be used to derive policies that are compatible with more than one model structure this is accomplished by extending an optimisation algorithm for a single nonlinear model of the economy to handle simultaneously more than one model and objective function the algorithm is designed to be efficient and relatively modest in its storage requirements a minimax extension is also considered for optimal policies robust to model choice when any one of the models turns out to represent the real economy two large scale nonlinear models of the uk economy are used simultaneously to obtain policies which are optimal with respect to a combined cost function this cost function is a combination of the cost functions associated with the individual models the models used are the h m treasury model and the model of the national institute of economic and social research

do low income housing subsidies increase the occupied housing stock abstract a necessary condition for justifying a policy such as subsidized low income housing either via tenant based rental assistance or construction of public or private projects is that it has a real effect on market outcomes in this paper we examine one aspect of the real effect of subsidized housing does it increase the housing stock if subsidized housing raises the quantity of occupied housing per capita either more people are finding housing or they are being housed less densely on the other hand if subsidized housing merely crowds out equivalent quality low income housing that otherwise would have been provided by the private sector the housing policy may have little real effect on housing consumption using both census place and msa level data from the decennial census and from the department of housing and urban development we ask whether housing markets with more subsidized housing also have more total housing after accounting for housing demand we find that government financed units raise the total number of units in a market although on average one government subsidized unit adds only one third to one half of a unit to the total housing stock there is less crowd out in more populous markets and more crowd out in places where there is less excess demand for subsidized housing as measured by the number of government financed units per eligible person tenant based housing programs such as section 8 certificates and vouchers seem to be more effective than project based programs at targeting subsidized housing units to people who otherwise would not have their own

industrial policy evaluation in the presence of spillovers the shortage of studies on spatial spillovers of capital subsidy policies is rather surprising considering that such policies are usually designed to generate spatial externalities we propose a new framework that allows positive agglomeration effects to be contrasted with the negative cross sectional substitution and the crowding out effect the global evaluation of the att and the spillover parameters shifts the spotlight from the policy effect on subsidised firms to the global effect of capital subsidy policies on the targeted territory the empirical evaluation of a policy in italy mainly directed towards small and medium sized firms shows that the impact on investments turnover and employment is positive and large but is negative on tfp however the employment growth is partially determined to the detriment of the untreated firms

stochastic control for economic models past present and the paths ahead abstract on the 30th anniversary of a meeting between engineers and economists at princeton university to discuss the potential application of stochastic control methods to economics this paper provides a review of past present and paths ahead the events surrounding some of the key developments of the past are described along with a discussion of the present state of the research and of paths for future research the paper is structured around the primary methods for solving quadratic linear economic stochastic control models namely open loop classical control handcrafted feedback rules optimal feedback min max control optimal feedback rules with parameter uncertainty and dual control the paper also includes a discussion of software developments in economic stochastic control modeling

changes in labor force participation in the united states the labor force participation rate in the united states increased almost continuously for two and a half decades after the mid 1960s pausing only briefly during economic downturns the pace of growth slowed considerably during the 1990s however and after reaching a record high of 67 3 percent in the first quarter of 2000 participation had declined by 1 5 percentage points by 2005 this paper reviews the social and demographic trends that contributed to the movements in the labor force participation rate in the second half of the twentieth century it also examines the manner in which developments in the 2000s reflect a break from past trends and considers implications for the future

relocation of public sector workers evaluating a place based policy this paper investigates the local labor market impact of a uk relocation initiative the 2004 lyons review the review resulted in the dispersal of about 25 000 civil service jobs out of london and the south east towards other uk destinations this study aims to detect whether the inflow of public sector jobs crowded out private sector activity or stimulated the local provision of jobs in the private sector focusing on short term effects i find that the relocation initiative raised private sector employment in receiving areas and changed the sectoral distribution of local employment towards services i also find evidence of displacement i e a tendency for private businesses to locate closer to a relocation site moving out of areas at 1 2km and 2 3km distances into areas at 0 1km distance these agglomeration effects appear highly localized the largest policy impact is found in areas that received the relocated jobs with spillover effects reducing sharply over distance

the effects of location based tax policies on the distribution of household income evidence from the federal empowerment zone program abstract location based tax policies are redistributive as evidenced by their placement in distressed areas however the previous literature has focused on mean effects which can mask important effects that the program has on the distribution of households therefore we extend the literature by studying changes in the entire household income distribution in the context of the federal empowerment zone ez program we do not find evidence that the impoverished residents benefited from the program our findings are consistent with the areas becoming more attractive to high income households the improvements in the areas were concentrated in those portions of each zone that were relatively better off prior to ez designation the results confirm the prior literature findings that the areas on average became more attractive but also suggest that the benefits of the program likely did not accrue to the lower income residents of the ez areas

local economic development agglomeration economies and the big push 100 years of evidence from the tennessee valley authority we study the long run eects of one of the most ambitious place based economic development policies in u s history the tennessee valley authority using a rich panel dataset of counties we conduct an evaluation of the dynamic eects of the tva on local economies in the seventy years following the program s inception we nd that the tva led to short run gains in agricultural employment that were eventually reversed while impacts on manufacturing employment continued to intensify well after the program s subsidies had lapsed a pattern consistent with the presence of strong agglomeration economies in the manufacturing sector economists have long cautioned that the local gains created by place based policies may be oset by losses elsewhere yielding ambiguous eects on the u s as a whole building on the framework in glaeser and gottlieb 2008 we develop a novel approach to assessing the aggregate consequences of shifting the spatial distribution of manufacturing employment our ndings suggest the aggregate productivity gains associated with relocating manufacturing activity to the tva region were probably minimal

public subsidies tfp and efficiency a tale of complex relationships this paper evaluates the impact of subsidies on the different components of tfp for granted firms long term growth the impact of capital subsidies is captured by a quasi experimental method multiple rdd exploiting the conditions for a local random experiment created by an italian industrial policy results show that capital subsidies negatively affect tfp growth in the short term and signals of positive effects appear only after 3 4 years this positive medium long term impact comes especially through technological change and not through scale impact change as may have been expected

the effectiveness of investment subsidies evidence from a regression discontinuity design this paper analyzes the effects of an investment subsidy program for small and medium sized enterprises in flanders from 2004 to 2009 the subsidies were awarded according to a ranking system that favored young growing and productive firms with a strong cash flow granting subsidies to the highest scoring firms until the depletion of funds the nature of this allocation system creates a sharp cutoff in granting the subsidy according to the score allowing us to estimate the causal impact of the subsidies using a regression discontinuity design we find a positive effect on firm level investment employment output and productivity for the firms that were granted the subsidy but only for the small firms however the effect is small relative to the cost of the subsidy

stable implementation of lindahl allocations abstract the resource allocation mechanisms using nash equilibrium as the solution concept in economies with incomplete information rely on the assumption that agent s disequilibrium messages converge to a nash equilibrium the mechanisms implementing lindahl allocations are however extremely unstable under the most used process to represent disequilibrium behaviour in games of incomplete information the cournot process we provide a new mechanism overcoming the instability difficulty in the case of quasi linear preferences

robust monetary policy with competing reference models abstract the existing literature on robust monetary policy rules has largely focused on the case in which the policymaker has a single reference model while the true economy lies within a specified neighborhood of the reference model in this paper we show that such rules may perform very poorly in the more general case in which non nested models represent competing perspectives about controversial issues such as expectations formation and inflation persistence using bayesian and minimax strategies we then consider whether any simple rule can provide robust performance across such divergent representations of the economy we find that a robust outcome is attainable only in cases where the objective function places substantial weight on stabilizing both output and inflation in contrast we are unable to find a robust policy rule when the sole policy objective is to stabilize inflation we analyze these results using a new diagnostic approach namely by quantifying the fault tolerance of each model economy with respect to deviations from optimal policy

a quantitative description of state level taxation of oil and gas production in the continental u s abstract we provide a quantitative description of state level taxation of oil and gas production in the continental u s for 2004 2013 aggregate revenues from production taxes nearly doubled in real terms over the period reaching 10 3 billion and accounting for 20 of tax receipts in the top ten revenue states the average state had a tax rate of 3 6 nationally the average dollar of production was taxed at 4 2 the oil specific rate estimated for the study period is 2 4 per barrel or 5 5 per ton of carbon lastly state level tax rates are two thirds higher in states excluding oil and gas wells from local property taxes suggesting that the policies are substitutes for one another

robust min max portfolio strategies for rival forecast and risk scenarios we consider an extension of the markowitz mean variance optimization framework to multiple return and risk scenarios it is well known that asset return forecasts and risk estimates are inherently inaccurate the method proposed provides a means for considering rival representations of the future the optimal portfolio is computed simultaneously with the worst case to take account of all rival scenarios this is a min max strategy which is essentially equivalent to a robust pooling of the scenarios robustness is ensured by the noninferiority of min max for example a basic worst case optimal return is guaranteed in view of multiple return scenarios if robustness happens to have too high a cost guided by the min max pooling it is also possible to explore other pooling alternatives a min max algorithm is used to solve the problem and illustrate the robust character of min max with return and risk scenarios we study the properties of the min max risk return frontier and compare with the potentially suboptimal worst case where the investment strategy and the worst case are computed separately 2000 elsevier science b v all rights reserved jel classixcation c44 c61 c63 g11

evaluating the econometric evaluations of training programs with experimental data this paper takes the results of an employment and training program thatwas run as a field experiment in which the participants were randomlyassigned into a treatment or a control group and compares these results to the estimates that might have been produced by an econometrician who evaluated the program using the same econometric procedures that have been used in the program evaluation literature this comparison shows that many of these econometric procedures fail toreplicate the experimentally determined results and suggests that researchers should be aware of the potential for specification errorsin other nonexperimental evaluations copyright 1986 by american economic association

severance taxes and market structure in an exhaustible resource industry abstract this paper compares the effects of a severance tax on profit maximizing competitive and monopolistic firms which explore and produce an exhaustible resource the producers response to the tax are studied and the deadweight losses from the tax are calculated time paths of exploratory effort extraction and price are computed severance taxes lead both producers to reduce production and exploration and cause a shift in the time path for prices the deadweight losses from the tax are low especially in competition the losses in the monopoly case are relatively higher with the tax burden falling mainly on the monopolistic producer

valuation of expectations a hedonic study of shale gas development and new york s moratorium abstract this paper examines the local impacts of shale gas development sgd we use a hedonic framework and exploit a discrete change in expectations about sgd caused by the new york state moratorium on hydraulic fracturing our research design combines difference in differences and border discontinuity as well as underlying shale geology on properties in pennsylvania and new york results suggest that new york properties that were most likely to experience both the financial benefits and environmental consequences of sgd dropped in value 23 as a result of the moratorium which under certain assumptions indicates a large and positive net valuation of sgd

minimum wage shocks employment flows and labor market frictions we provide the first estimates of the effects of minimum wages on employment flows in the u s labor market identifying the impact using policy discontinuities at state borders we find that minimum wages have a sizable negative effect on employment flows but not stocks separations and accessions fall among affected workers we interpret our findings using a job ladder model in which minimum wage increases can reduce job to job transitions we find that a standard calibration of the model generates predicted relative magnitudes of the employment stock and flow elasticities that are very close to our reduced form estimates

replacing churches and mason lodges tax exemptions and rural development this paper analyzes a tax credit program targeted at rural areas in france including temporary and permanent wage subsidies on different types of jobs we find no impact of the program on employment and wages pointing to the absence of labor demand response comparison with a contemporaneous urban scheme suggests ways that the incentives of the rural program could be targeted more effectively

monetary intervention mitigated banking panics during the great depression quasi experimental evidence from a federal reserve district border 1929 1933 the federal reserve act divided mississippi between the 6th atlanta and 8th st louis districts during the great depression these districts policies differed atlanta championed monetary activism and the extension of aid to ailing banks st louis eschewed expansionary initiatives during a banking crisis in 1930 atlanta expedited lending to banks in need st louis did not outcomes differed across districts in atlanta banks survived at higher rates lending continued at higher levels commerce contracted less and recovery began earlier these patterns indicate that central bank intervention influenced bank health credit availability and business activity

the effects of low income housing tax credit developments on neighborhoods abstract this paper evaluates the impacts of new housing developments funded with the low income housing tax credit lihtc the largest federal project based housing program in the u s on the neighborhoods in which they are built a discontinuity in the formula determining the magnitude of tax credits as a function of neighborhood characteristics generates pseudo random assignment in the number of low income housing units built in similar sets of census tracts tracts where projects are awarded 30 higher tax credits receive approximately six more low income housing units on a base of seven units per tract these additional new low income developments cause homeowner turnover to rise raise property values in declining areas and reduce incomes in gentrifying areas in neighborhoods near the 30th percentile of the income distribution lihtc units significantly crowd out nearby new rental construction in gentrifying areas but do not displace new construction in stable or declining areas

do subsidies to private capital boost firms growth a multiple regression discontinuity design approach there is still little consensus among economists on the effectiveness of business support policies the evaluation of such policies requires a reliable identification procedure that is hardly achieved in empirical studies we analyse the impact of a policy instrument law 488 92 l488 the main italian regional policy that allocates subsidies to private firms by a multiple ranking system thanks to the peculiar l488 selection process that creates the conditions for a local random experiment we are able to assess the effectiveness of these types of incentives for a relevant subgroup of firms we propose a nonparametric multiple rankings regression discontinuity design that exploits the sharp discontinuities in the l488 rankings and extends the regression discontinuity design rdd approach to a context where the treatment is assigned by multiple rankings with different cut off points we find that the impact of the subsidies on employment investment and turnover is positive and statistically significant while the effect on productivity is mostly negligible the new subsidised capital is additional but non complementary with the owner financed investment the results are robust to different specifications and not due to intertemporal substitution

crowd out effects of place based subsidized rental housing new evidence from the lihtc program abstract since its inception in 1987 the low income housing tax credit lihtc program has ballooned into the largest ever source of subsidized construction of low income housing in the united states accounting for one third of all recent multi family rental construction this paper examines the crowd out effects of this increasingly important source of low moderate income housing to do so we analyze the impact of lihtc construction at three different levels of geography msa county and 10 mile radius circles this allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors political variables are also used as instruments to further facilitate identification in all of our models iv estimates yield substantially greater crowd out than ols confirming the endogenous attraction of lihtc development to areas ripe for new construction our most robust iv estimates indicate that nearly 100 of lihtc development is offset by a reduction in the number of newly built unsubsidized rental units although the confidence band around this point estimate allows for less dramatic assessments additional estimates suggest that lihtc development has a much more moderate impact on construction of owner occupied housing but these estimates are imprecise overall while lihtc development may well affect the location of low moderate income rental housing opportunities our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small

the effects of minimum wages on the distribution of family incomes a nonparametric analysis an oft stated goal of the minimum wage is to raise incomes of poor or low income families we present nonparametric estimates of the effects of minimum wages on the distribution of family income relative to needs in the united states although minimum wages increase the incomes of some poor families the evidence indicates that their overall net effect is if anything to increase the proportions of families with incomes below or near the poverty line it would appear that reductions in the proportions of families that are poor or near poor should not be counted among the potential benefits of minimum wages

insurance policies for monetary policy in the euro area in this paper we aim to design a monetary policy for the euro area that is robust to the high degree of model uncertainty at the start of monetary union and allows for learning about model probabilities using the data that has become available since then to this end we compare and ultimately combine bayesian and worst case analysis using four reference models developed at the ecb and estimated with pre emu synthetic data we start by computing the cost of insurance against model uncertainty that is the relative performance of worst case or minimax policy versus bayesian policy we find that maximum insurance across this range of models can be obtained at moderate costs costs are measured in terms of lower expected performance relative to a bayesian policy with flat priors further scrutiny however highlights three shortcomings of this worst case insurance policy i prior beliefs that would rationalize the minimax policy from a bayesian perspective indicate that such insurance is strongly oriented towards the model with highest baseline losses ii the minimax policy is not as tolerant towards small perturbations of policy parameters as the bayesian policy and iii the minimax policy offers no avenue for incorporating posterior model probabilities derived from data available since monetary union thus we propose preferences for robust policy design that reflect a mixture of the bayesian and minimax approaches these preferences referred to as intermediate ambiguity aversion incorporate model probabilities while still giving extra weight to the worst uncertain outcomes we show how the incoming emu data may then be used to update model probabilities and investigate the implications for policy design

oil production responses to price changes an empirical application of the competitive model to opec and non opec countries abstract falling oil prices over the last decade accompanied by over production by some opec members and the growth of non opec supply warrant further empirical investigation of the competitive model to ascertain production behavior a supply function based on a modification of griffin s model is estimated using data from 1973 1997 the sample period unlike griffin s however includes phases of price increase 1970s and price decrease 1980s 1990s thus providing a better framework for examining production behavior using the competitive model the opec results do not support the competitive hypothesis instead a negative and significant price elasticity of supply is obtained this result offers partial support for the target revenue theory for most of the non opec members the estimates support the competitive model opec s loss of market share and the drop in the share of oil based energy should signal adjustments in price and quantity based on a competitive world market for crude oil

unpacking the impacts of the low income housing tax credit program on nearby property values most existing research on the impacts of the low income housing tax credit lihtc on neighbouring property values is limited in terms of providing causal attribution and uncovering nuances in the role of housing market and neighbourhood composition this article addresses these shortcomings by investigating the impacts of the lihtc program in charlotte north carolina and cleveland ohio levels and trends in housing prices before and after lihtc developments in neighbourhoods are examined based on parcel level housing sales data from 1996 to 2007 the adjusted interrupted time series difference in differences aits did model is used to clarify the causal direction of impacts of lihtc developments the results show that lihtc developments have negative impacts in charlotte while having upgrading effects in cleveland also these impacts vary across neighbourhoods income heterogeneity thus care should be taken when siting lihtc developments to minimise negative impacts and enhance its use for communi

jurisdictional tax competition and the division of nonrenewable resource rents this paper presents a model of nonrenewable resource extraction across multiple jurisdictions which engage in strategic tax competition the model incorporates rents due to both resource scarcity and capital scarcity as well as intra region ricardian rents regions set taxes on nonrenewable resource production strategically to balance tax revenues and local benefits from investment conditional on other regions tax rates a representative extraction firm then allocates production capital across regions and time to maximize the present value of profits generally we find that the division of resource rent between firms and regional governments ultimately depends on the relative scarcity of natural and production capital relative costs across space and the value regional governments place on economic activity this theoretical result provides policymakers with information on the determinants of optimal tax rates and motivates future empirical research on the factors influencing the division of resource rent in practice

strategy and market structure in western coal taxation this paper analyzes the potential market power of western states in setting coal severance taxes and the emphasis placed by these states on the development of their coal resources vs obtaining tax revenues three market structures are analyzed one involves a western regional cartel setting taxes collectively the other cases are noncooperative tax equilibria with montana and wyoming competing against each other we conclude that the western states seem to be primarily concerned with revenue collection and are very efficient extractors of economic rent

public debts and fiscal politics how to decide the phenomenal growth in our public deficits over the past twenty years is a matter of public and professional concern see symposium 1989 while this concern may indeed be well founded particularly given current deficit levels public deficits are not always bad certainly in times of deep recessions short term deficit financing can stimulate aggregate demand increase national income and reduce unemployment in a keynesian fashion see richard startz 1989 second long term deficit financing may be needed to sustain a long term path of optimal consumption see peter diamond 1965 third public deficits including pay as yougo social security can offer welfare gains for significant subsets of consumers who have been liquidity constrained r glenn hubbard and kenneth judd 1986 who have been unable to purchase indexed private annuities alan blinder 1988 or who have been unable to sufficiently diversify their investment portfolios away from human capital robert merton 1983 finally robert barro 1979 has argued that public deficits may be an important policy instrument to insure intertemporal welfare maximization when public expenditures are stochastic and public taxes are economically inefficient taxes can be smoothed to reduce the lifetime excess burden of public financing the concern today is not that we have deficits but rather that we may be overdoing a good thing if this is the issue then we need to ask why and what can be done about it this is my agenda here i the political economy of recent deficits

estimating a dynamic spatial equilibrium model to evaluate the welfare implications of regional adjustment processes the decline of the rust belt this article develops and estimates a new dynamic spatial equilibrium model to study the regional transition dynamics and its impact on individual and aggregate welfare the model consists of a multiregion multisector economy comprised of overlapping generations of individuals with heterogeneous skills and mobility costs the empirical findings suggest that a large fraction of the decline of the rust belt can be attributed to the reduction in its region specific comparative advantage in the goods producing sector this decline generated significant differences in welfare across regions policy experiments show that such inequality can be significantly reduced through place based policies

supply side subsidies to improve food access and dietary outcomes evidence from the new markets tax credit in an effort to improve diet and health outcomes policymakers have increasingly turned to supply side subsidies aimed at encouraging investment by supermarkets and other food retailers in low income areas this article examines whether the us federal government s new markets tax credit nmtc has affected the entry of retail food establishments and in turn food shopping and purchasing patterns in low income communities to identify the impacts of the programme we take advantage of a discontinuity in nmtc funding generated by the formula used to determine the eligibility of census tracts for investment under the programme we find that the nmtc program has had modest but positive impacts on supermarket entry in low income communities based on household level scanner data there are no detectable effects on households food purchasing patterns in affected neighbourhoods at least in the short run

optimally derived fixed rules and indicators abstract monetary targets have come to be regarded as inadequate for the conduct of short term monetary policy both among theoreticians and practitioners of policy in this paper two approaches are put forward analysed and evaluated for improving the performance of monetary targets according to the first approach simple rules for monetary targets are derived within an optimisation framework these rules related to ultimate targets are simple so that they can be announced and are flexible so that they are subject to revision when the economy drifts away from its course due to unexpected shocks the second approach is based on indicators and complements monetary targets with exchange rate targets through a simple feedback law for determining interest rate policy the advantage of this feedback law is that it provides the mechanism through which policy is to be revised in response to shocks if such a feedback law is announced private economic agents have the means of distinguishing discretionary and arbitrary changes of policy from those which are needed to bring the economy back to the announced and committed course this approach is used to analyse and extend the suggestions in the house of commons report on international monetary arrangements the common ground between the two approaches is an optimisation framework with respect to the parameters of either the fixed simple rules or the simple feedback laws this is discussed in section 1 the approach of deriving simple fixed rules is illustrated in a monetarist model in which there is a link between private sector expectations and the credible announcement of monetary targets the model is explained in section 2 and simple fixed rules are discussed in section 3 the performance of simple rules for monetary targets is evaluated in terms of a minimax strategy with model uncertainty between the monetarist model and a keynesian model without the assumption of announcement effects this is discussed in section 4 optimal feedback laws are derived and analysed in section 5 the parameter sensitivity of these feedback laws with respect to the model and the objective function as well as their behaviour under shocks is also examined

on optimality and time consistency when expectations are rational abstract this paper explores the implications of time inconsistency for optimal economic policy making it is found that if policy makers determine policy on the assumption that expectations are adaptive when in fact they are rational economic policy can be destabilising this adds support to reservations which kydland and prescott 1977 have raised about the appropriateness of standard optimal control methods a method is proposed which is a modification of standard optimal control techniques and which allows for the endogeneity of expectations when this method is used to determine policy there is no indication that policy is destabilising

mothers and sons preference formation and female labor force dynamics this paper argues that the growing presence of a new type of man one brought up in a family in which the mother worked has been a significant factor in the increase in female labor force participation over time we present cross sectional evidence showing that the wives of men whose mothers worked are themselves significantly more likely to work we use variation in the importance of world war ii as a shock to women s labor force participation as proxied by variation in the male draft rate across u s states to provide evidence in support of the intergenerational consequences of our propagation mechanism

antisocial security the puzzle of beggar thy children policies the u s social security program has irrevocably transferred substantial wealth from workers to their ostensibly altruistic parents after some alternative explanations for this paradox are addressed a formal model is developed to show that a majority of rational voters who care about their descendants can support the preservation of current benefits for themselves but accept the prospect of social security s future retrenchment incorporating elements of tabellini s 2000 positive theory of social security and benabou and ok s 2001 analysis of income mobility the model identifies specific forces affecting this time varying individual support for social security these forces are embodied in three hypotheses related to income mobility relative income level and age an ordered logit analysis of cumulative anes data supports these hypotheses

assessing the incidence and efficiency of a prominent place based policy abstract this paper empirically assesses the incidence and efficiency of round i of the federal urban empowerment zone ez program using confidential microdata from the decennial census and the longitudinal business database using rejected and future applicants to the ez program as controls we find that ez designation substantially increased employment in zone neighborhoods and generated wage increases for local workers without corresponding increases in population or the local cost of living the results suggest the efficiency costs of first round ezs were relatively modest jel h26 h77 j31 r23 r58

exploration information and regulation in an exhaustible mineral industry abstract the paper presents a model of exploration and production in an uncertain environment exploration provides a by product of information that helps predict future finds more accurately when this information is not equally valued at the margin by society and industry socially inefficient levels of exploration are chosen by industry in this event government intervention may be warranted a regulator could control future prices to encourage industry to select socially preferred levels of production and exploration alternatively by making public varying amounts of exploration information incentives to industry could be adjusted conditions where such regulation might yield sufficient gains to society to offset regulatory costs are considered

nature or nurture learning and the geography of female labor force participation one of the most dramatic economic transformations of the past century has been the entry of women into the labor force while many theories explain why this change took place we investigate the process of transition itself we argue that local information transmission generates changes in participation that are geographically heterogeneous locally correlated and smooth in the aggregate just like those observed in our data in our model women learn about the efiects of maternal employment on children by observing nearby employed women when few women participate in the labor force data is scarce and participation rises slowly as information accumulates in some regions the efiects of maternal employment become less uncertain and more women in that region participate learning accelerates labor force participation rises faster and regional participation rates diverge eventually information difiuses throughout the economy beliefs converge to the truth participation attens out and regions become more similar again to investigate the empirical relevance of our theory we use a new county level data set to compare our calibrated model to the time series and geographic patterns of participation

on the optimal structure of government subsidies for enterprise zones and other locational development programs abstract government locational development programs often reward businesses for decisions they would have made or that are going to be quickly reversed this paper presents a model to determine the amount and structure of government locational subsidies that minimize this problem we model the firm s decision to switch locations as an option whose value depends on stochastic operating costs the costs to switch locations and subsidies offered by the government the government maximizes the expected benefit from the operation of the firm within its preferred location by choosing a subsidy package that explicitly and endogenously recognizes the firm s switching option

leakage in regional environmental policy the case of the regional greenhouse gas initiative abstract subglobal and subnational greenhouse gas policies are often thought to be less effective than comprehensive policies as production and emissions of trade exposed industries may move from the regulated to the unregulated regions a process referred to as leakage leakage negates some emission reductions from the regulated regions we use detailed electricity generation and transmission data to show that this is the case for the regional greenhouse gas initiative rggi a co2 cap and trade program for the electricity sector in select northeastern u s states more specifically our results indicate that rggi induced a reduction in coal fired generation in rggi states and an increase in ngcc generation in rggi surrounding regions this finding suggests that the pollution haven hypothesis holds for state level variation in environmental policy even when compliance costs are low

more power to the pill the impact of contraceptive freedom on women s life cycle labor supply the release of enovid in 1960 the first birth control pill afforded u s women unprecedented freedom to plan childbearing and their careers this paper uses plausibly exogenous variation in state consent laws to evaluate the causal impact of the pill on the timing of first births and extent and intensity of women s labor force participation the results suggest that legal access to the pill before age 21 significantly reduced the likelihood of a first birth before age 22 increased the number of women in the paid labor force and raised the number of annual hours worked

persistence in industrial policy impacts evidence from depression era mississippi this paper studies the effects of a large scale industrial policy implemented in 1930s mississippi on contemporaneous and modern day labor market outcomes attracted by unprecedented government incentives under mississippi s balance agriculture with industry bawi program 13 large manufacturing plants established operations in the state between 1936 and 1940 using difference in differences and synthetic control matching techniques i find that counties that received these plants experienced an over 15 increase in female labor force participation on average in the short run moreover these effects persisted decades into the future well after many of the original companies shut down i also find suggestive evidence of an increase in educational attainment among women in counties where bawi investment occurred the results highlight the potential for even transitory government interventions to have long lived effects on labor markets

the superiority of contingent rules over fixed rules in models with rational expectations the paper investigates the robustness of the proposition that in stochastic models contingent or feddback rules dominate fiped or openloop rules four arguments in favour of fixed rules are considere 1 the presence of an incompetent op malevolent policy maker 2 a trade off between flexibility and simplicity or credibility 3 the new classical proposition that only unanticipated stabilization policy has real effects 4 the time inconsistency of optimal plans in non causal models that is models in which the current state of the economy depends on expectations of future states the main conclusion is that the rational expectations revolution represented by arguments 3 and 4 does not affect the potential superiority of time inconsistent closed loop policies over time inconsistent open loop policies the case against conditionality in the design of policy must therefore rest on argument 1 or 2 which predate the new classical macroeconomics

government programs can improve local labor markets evidence from state enterprise zones federal empowerment zones and federal enterprise communities 1 abstract federal and state governments spend well over a billion dollars a year on programs that encourage employment development in disadvantaged labor markets through the use of subsidies and tax credits in this paper we use an estimation approach that is valid under relatively weak assumptions to measure the impact of state enterprise zones entzs federal empowerment zones empzs and federal enterprise community entc programs on local labor markets we find that all three programs have positive statistically significant impacts on local labor markets in terms of the unemployment rate the poverty rate the fraction with wage and salary income and employment further the effects of empz and entc designation are considerably larger than the impact of entz designation we find that our estimates are robust to allowing for a regression to the mean effect we also find that there are positive but statistically insignificant spillover effects to neighboring census tracts of each of these programs thus our positive estimates of these program impacts do not simply represent a transfer from the nearest non treated census tract to the treated census tract our results are noteworthy for several reasons first our study is the first to jointly look at these three programs thus allowing policy makers to compare the impacts of these programs second our paper along with a concurrent study by neumark and kolko 2008 is the first to carry out the estimation accounting for overlap between the programs third our estimation strategy is valid under weaker assumptions than those made in many previous studies we consider three comparison groups and let the data determine the appropriate group fourth in spite of our conservative estimation strategy by looking at national effects with disaggregated data we show that entz designation generally has a positive effect on the local labor market while most previous research on entzs much of which used more geographically aggregated data to look at state specific effects did not find any significant impacts fifth we note that there is little or no previous work on entcs overall our results strongly support the efficacy of these labor market interventions

evaluating the employment impact of a mandatory job search program this paper exploits area based piloting and age related eligibility rules to identify treatment effects of a labor market program the new deal for young people in the u k a central focus is on substitution displacement effects and on equilibrium wage effects the program includes extensive job assistance and wage subsidies to employers we find that the impact of the program significantly raised transitions to employment by about 5 percentage points the impact is robust to a wide variety of nonexperimental estimators however we present some evidence that this effect may not be as large in the longer run jel j18 j23 j38

a model of the operation and development of a national oil company we present a model of the exploration and development activities of a national oil company noc which uses similar technology to a private firm to extract a depletable resource however unlike the private firm the noc may have a wider range of objectives than maximizing the present value of profits specifically we assume an objective function that balances firm profitability against a political desire to favor domestic consumer surplus and domestic employment we find that the non commercial objectives faced by a noc tend to reinforce each other in their effects on profitability the timing of cash flows and employment

tax avoidance and business location in a state border model abstract previous studies have struggled to demonstrate that higher taxes deter business activity we revisit this issue by estimating the effect of changes over time in cross border differences in state tax conditions on the tendency for new establishments to favor one side of a state border over the other identification is enhanced by taking account of previously overlooked reciprocal agreements that require workers to pay income tax to their state of residence as opposed to their state of employment when reciprocal agreements are in force higher personal income tax rates lure companies from across the border while corporate income tax and sales tax rates have the opposite effect where reciprocal agreements are not in place the results are largely reversed these patterns are amplified in heavily developed locations and differ in anticipated ways by industry and corporate non corporate status of the establishment overall results strengthen the view that state level tax policies do affect the location decisions of entrepreneurs and new business activity but not in a way that lends itself to a one size fits all summary

identifying the local economic development effects of million dollar facilities presented on february 22 2013 from 12 35 pm 2 00 pm in the architecture east building room 217 on the georgia tech campus

hotelling under pressure we show that oil production from existing wells in texas does not respond to oil prices while drilling activity and costs respond strongly to explain these facts we reformulate hotelling s class

empowerment for whom the impact of community renewal tax incentives on jobs and businesses some postulate that spatially targeted grants and tax cuts stimulate jobs and establishment openings and reduce closures in distressed urban neighbourhoods the scholarly literature is mixed and mostly argues that at best these programmes have no impact and at worst raise land rents spurring gentrification the usa designated three rounds of renewal communities empowerment zones or enterprise communities rc ez ec to receive wage credits or grants while others have estimated the impact of round i ez ecs this article estimates the impact of more recent rounds in tennessee and california on job and businesses using propensity score matching data are presented by rc ez for retail very small and minority establishments jobs increased in rc ezs compared with control areas during the wage credit period in general establishment openings rose for small establishments but fell for retail closures overall fell future place based initiatives should be strategic about industry mix and minority establishments

teaching new markets old tricks the effects of subsidized investment on low income neighborhoods abstract this paper examines the effects of investment subsidized by the federal government s new markets tax credit nmtc program which provides tax incentives to encourage private investment in low income neighborhoods i identify the impacts of the program by taking advantage of a discontinuity in the rule determining the eligibility of census tracts for nmtc subsidized investment using this discontinuity as a source of quasi experimental variation in commercial development across tracts i find that subsidized investment has modest positive effects on neighborhood conditions in low income communities though spillovers appear to be small and crowd out incomplete the results suggest that some of the observed impacts on neighborhoods are attributable to changes in the composition of residents as opposed to improvements in the welfare of existing residents

targeted business incentives and local labor markets this paper uses a regression discontinuity design to examine the effects of geographically targeted business incentives on local labor markets unlike elsewhere in the united states enterprise zone ez designations in texas are determined in part by a cutoff rule based on census block group poverty rates exploiting this discontinuity as a source of quasi experimental variation in investment and hiring incentives across areas i find that ez designation has a positive effect on resident employment increasing opportunities mainly in lower paying industries while business sitings spurred by the program are more geographically diffuse ez designation is associated with increases in home values

a credible approach for measuring inframarginal participation in energy efficiency programs abstract economists have long argued that many recipients of energy efficiency subsidies may be non additional getting paid to do what they would have done anyway demonstrating this empirically has been difficult however because of endogeneity concerns and other challenges in this paper we use a regression discontinuity analysis to examine participation in a large scale residential energy efficiency program comparing behavior just on either side of several eligibility thresholds we find that program participation increases with larger subsidy amounts but that most households would have participated even with much lower subsidy amounts the large fraction of inframarginal participants means that the larger subsidy amounts are almost certainly not cost effective moreover the results imply that about half of all participants would have adopted the energy efficient technology even with no subsidy whatsoever

spatially variable taxation and resource extraction the impact of state oil taxes on drilling in the us abstract we estimate the responsiveness of nonrenewable resource firms to taxes on output using spatially explicit data from the oil sector in the united states using a model of resource firm capital allocation over space we show that responses to spatially varying taxes differ from responses to equivalent changes in the common output price a larger response to tax rates occurs because the tax change only affects the returns to drilling in a single state whereas a price change affects both the returns to drilling in a state and the opportunity cost of not drilling in other states econometrically we estimate the effect of severance taxes on oil drilling we find that the response to a one dollar increase in tax per unit of production has an effect at least eight times as large as the effect of an equivalent decrease in output price the tax response is inelastic implying that an increase in state tax rate would increase revenue we do not find evidence of spillovers between states in the local areas near state borders

the unintended effects of place based programs fertility and health effects of urban empowerment zones abstract whether place based welfare programs affect fertility and health outcomes is an understudied question i estimate the health impacts of the empowerment zone ez program a federal program that gave sizeable grants and tax breaks to certain high poverty census tracts in selected cities using difference in differences methods i find that the ez program decreased fertility rates by 11 percent and improved birth outcomes compositional changes in fertility likely cannot explain changes in infant health recent research on the later life impacts of low birth weight suggest that the health impacts of this program may have substantial long term benefits

sunshine as disinfectant the effect of state freedom of information act laws on public corruption abstract we assess the effect of freedom of information act foia laws on public corruption in the united states specifically we investigate the impact of switching from a weak to a strong state level foia law on corruption convictions of state and local government officials the evidence suggests that strengthening foia laws has two offsetting effects reducing corruption and increasing the probability that corrupt acts are detected the conflation of these two effects led prior work to find little impact of foia on corruption we find that conviction rates approximately double after the switch which suggests an increase in detection probabilities however conviction rates decline from this new elevated level as the time since the switch from weak to strong foia increases this decline is consistent with officials reducing the rate at which they commit corrupt acts by about 20 these changes are more pronounced in states with more intense media coverage for those that had more substantial changes in their foia laws for foia laws which include strong liabilities for officials who contravene them for local officials and for more serious crimes conviction rates of federal officials who are not subject to the policy show no concomitant change

the performance of forecast based monetary policy rules under model uncertainty we investigate the performance of forecast based monetary policy rules using five macroeconomic models that reflect a wide range of views on aggregate dynamics we identify the key characteristics of rules that are robust to model uncertainty such rules respond to the one year ahead inflation forecast and to the current output gap and incorporate a substantial degree of policy inertia in contrast rules with longer forecast horizons are less robust and are prone to generating indeterminacy in light of these results we identify a robust benchmark rule that performs very well in all five models over a wide range of policy preferences

firm location decisions regional grants and agglomeration externalities we examine whether discretionary government grants influence where domestic and multinational firms locate new plants and how the presence of agglomeration externalities interacts with these policy instruments we find that a region s existing industrial structure has an effect on the location of new entrants grants do have a small effect in attracting plants to specific geographic areas but importantly we find that firms are less responsive to government subsidies in areas where there are fewer existing plants in their industry this suggests that these subsidies are less effective in influencing firms location decisions in the face of countervailing co location benefits