investment and coordination in oligopolistic industries we examine investment by firms in 24 chemical product industries to determine whether firms invest preemptively to achieve persistent increases in market share or whether there is evidence of behavior to maintain market share the data indicate that investment reduces the probability that rival firms will expand capacity but the effect is temporary large firms tend to maintain market share while smaller firms tend to invest simultaneously with rivals the role of preemptive investment is limited to that of permitting a firm to invest with a lower probability of redundant investment by rivals preemption does not allow a persistent increase in market share but instead acts as a means by which firms may coordinate capacity investment to help avoid episodes of industry overcapacity

collective bargaining arrangements closed shops and relative pay this paper uses establishment level data to examine the impact on union nonunion pay differentials of the industrial relations setting in which bargaining takes place the pre entry closed shop is found to be of prime importance for the pay of both skilled and semiskilled manual workers for skilled workers and for semiskilled workers in larger establishments the differentials are found to be insignificantly different from zero in the absence of a pre entry closed shop copyright 1987 by royal economic society

bubbles and experience an experiment we investigate the occurrence of bubble crash pricing patterns in laboratory financial markets with a mixture of experienced and inexperienced traders we find that even with a minority of experienced traders bubbles are substantially abated

decision maker preferences for international legal cooperation why do some decision makers prefer big multilateral agreements while others prefer cooperation in small clubs does enforcement encourage or deter institutional cooperation we use experiments drawn from behavioral economics and cognitive psychology along with a substantive survey focused on international trade to illustrate how two behavioral traits patience and strategic reasoning of individuals who play key roles in negotiating and ratifying an international treaty shape their preferences for how treaties are designed and whether they are ratified patient subjects were more likely to prefer treaties with larger numbers of countries and larger long term benefits as were subjects with the skill to anticipate how others will respond over multiple iterations of strategic games the presence of an enforcement mechanism increased subjects willingness to ratify treaties however strategic reasoning had double the effect of adding enforcement to a trade agreement more strategic subjects were particularly likely to favor ratifying the agreement we report these results for a sample of 509 university students and also show how similar patterns are revealed in a unique sample of ninety two actual us policy elites under some conditions certain types of university student convenience samples can be useful for revealing elite dominated policy preferences different types of people in the same situation may prefer to approach decision making tasks and reason through trade offs in materially different ways

relative earnings and individual union membership in the united kingdom considerable attention has been focused in recent years on the empirical analysis of the effect of trade unions on the structure of earnings such empirical investigation usually entails measurement of the union non union differential in wages or earnings at the level of the individual this involves comparison of the earnings of union members with estimates of what their earnings would be were they not union members or equivalently examination of differences in earnings between individuals comparable with regard to all other relevant characteristics who differ in their union membership alone in the united kingdom all previous attempts at estimation of this differential have used aggregate data at either the industry or occupation level 1 the conventional methodology involves regression of the logarithm of the average wage on either the proportion of workers who are union members or the proportion covered by a collective agreement together with a vector of industry characteristics that are deemed to determine the non union wage however several problems are immediately apparent with this methodology first the model ignores the possibility of variation in the differential across industries which has potentially serious consequences second the vector of other characteristics customarily used is somewhat limited and raises doubts concerning the adequacy of the standardization for what might loosely be termed labour quality third only a sub sample of industries is ever used owing to lack of data those industries excluded are generally smaller in terms of employment that those included if the differential varies with the size of the industry a further bias will be induced all of these problems are either removed or lessened by the use of individual level data for an analysis of their impact at the industry level see geroski and stewart 1981 2 as a result it is now widely accepted that the appropriate way to measure such differentials is to use micro data sets at the level of the individual worker until recently suitable data have not been available for the united kingdom and hence such analysis was not possible this paper presents the first estimates for the united kingdom based on individual level data if the value of the union non union differential were the same for all workers in the unionized sector analysis at the industry level and the individual level would produce similar results however the marshallian laws of derived demand suggest that this will not be the case despite this clear prediction of variation in the differential there has been little systematic investigation of the variation this paper also presents such an analysis since variation in the differential across industries results in aggregation bias in industry level studies such an analysis is of considerable relevance to the evaluation of the evidence from such studies as well as being of interest in its own right the paper is laid out as follows section i presents a method of estimating the union non union differential at the individual level while section ii

wealth concentration over the path of development sweden 1873 2006 we study wealth concentration in sweden over 130 years from the beginning of industrialization until the present day our series are based on new evidence from estate and wealth tax data foreign and domestic family firm wealth and pension wealth estimates we find that swedish wealth concentration was high in the agrarian state and changed little during early industrialization from world war i until about 1950 the richest percentile lost ground to high income earners in the rest of the top wealth decile this equalization continued postwar the entire top decile lost out relative to the rest of the population around 1980 wealth compression stopped and inequality increased we approximate the effects of international flows and find that the recent increase in wealth inequality is probably larger than what official estimates suggest

fighting multiple tax havens this paper develops a competition theory framework that evaluates an important aspect of the oecd s harmful tax practices initiative against tax havens we show that the sequential nature of the process is harmful and more costly than a big bang multilateral agreement the sequentiality may even prevent the process from being completed successfully closing down a subset of tax havens reduces competition among the havens that remain active this makes their tax haven business more profitable and shifts a larger share of rents to these remaining tax havens making them more reluctant to give up their tax haven business moreover the outcome of this process reducing the number of tax havens but not eliminating them altogether may reduce welfare in the oecd

entry its deterrence and its accommodation a study of the u s photographic film industry this work set in the new empirical industrial organization framework bresnahan 1987 examines firm level demand based and cost based explanations for entry and accommodation strategies in the u s photographic film industry i first estimate preentry and postentry market structures then using the estimated demand cost and market conduct parameters i show how entry by fuji photo or lack thereof by others is a function of two market structures i also show how market structure and conduct and changes in them over the pre and postentry periods are in turn functions of entry its deterrence and it accommodation

tax motivated transfer pricing and us intrafirm trade prices abstract this paper analyzes monthly data on us international trade prices between 1997 and 1999 in order to investigate the impact of tax influences on intrafirm trade prices results indicate that there is substantial evidence of tax motivated transfer pricing in us intrafirm trade prices there is a strong and statistically significant relationship between countries tax rates and the prices of intrafirm transactions controlling for other variables that affect trade prices as country tax rates are lower us intrafirm export prices are lower and us intrafirm import prices are higher this finding is consistent with theoretical predictions regarding tax motivated income shifting behavior

taxing top ceo incomes we use a firm ceo assignment framework to model the market for ceo effective labor in the model s equilibrium more talented ceos match with and supply more effort to larger firms taxation of ceo incomes affects the equilibrium pricing of ceo effective labor and hence spills over and affects firm profits absent the ability to tax profits or a direct concern for firm owners a standard prescription for high marginal income taxes emerges however given such an ability or concern the optimal marginal tax rates are much lower

an experimental investigation of the patterns of international trade this study is the first attempt to create and study a laboratory economy with some of the prominent features of an international economic system the concept of multiple countries in which each country has its own technology preferences and resource endowments is introduced and operationalized the questions posed in the study are related to the law of comparative advantage factor price equalization terms of trade efficiency in production and exchange as guided by multiple and interacting markets and the effects of tariffs on international transactions the study builds on previous work in the experimental study of general equilibrium phenomena

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

capital tax reform and the real economy the effects of the 2003 dividend tax cut this paper tests whether the 2003 dividend tax cut one of the largest reforms ever to a us capital tax rate stimulated corporate investment and increased labor earnings using a quasi experimental design and us corporate tax returns from years 1996 2008 i estimate that the tax cut caused zero change in corporate investment and employee compensation economically the statistical precision challenges leading estimates of the cost of capital elasticity of investment or undermines models in which dividend tax reforms affect the cost of capital either way it may be difficult to implement an alternative dividend tax cut that has substantially larger near term effects jel c72 c78 c91

long run competition in capacity short run competition in price and the cournot model in this article we investigate the nature of equilibrium in markets in which firms choose the scale of operation before they make pricing decisions we analyze a duopoly model in which firms choose their capacities before engaging in bertrand like price competition we demonstrate that the cournot outcome is unlikely to emerge in such markets and that the equilibrium tends to be more competitive than the cournot model would predict in addition our results indicate a tendency toward asymmetric firm sizes and price dispersion that results from the mixed strategies firms use in equilibrium

international corporate tax avoidance a review of the channels magnitudes and blind spots this paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations it surveys evidence on main channels of corporate tax avoidance including transfer mispricing international debt shifting treaty shopping tax deferral and corporate inversions moreover it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting we find that the literature suggests that for the most recent year a 1 percentage point lower corporate tax rate compared to other countries will expand before tax income by 1 5 percent an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time the literature on tax avoidance still has several unresolved puzzles and blind spots that require further research

capital is back wealth income ratios in rich countries 1700 2010 how do aggregate wealth to income ratios evolve in the long run and why we address this question using 1970 2010 national balance sheets recently compiled in the top eight developed economies for the united states united kingdom germany and france we are able to extend our analysis as far back as 1700 we find in every country a gradual rise of wealth income ratios in recent decades from about 200 300 in 1970 to 400 600 in 2010 in effect today s ratios appear to be returning to the high values observed in europe in the eighteenth and nineteenth centuries 600 700 this can be explained by a long run asset price recovery itself driven by changes in capital policies since the world wars and by the slowdown of productivity and population growth in line with the s g harrod domar solow formula that is for a given net saving

taxing across borders tracking personal wealth and corporate profits globalization is making it increasingly easy for corporations to shift profits to low tax countries modern technology has also made it simpler for wealthy individuals to move funds to undeclared bank accounts in offshore tax havens both issues have featured prominently in the news and global economic debates since the financial crisis but the arguments tend to be based on relatively little empirical evidence measuring the costs of tax havens to foreign governments is fraught with difficulties however balance of payments data and corporate filings show that us companies are shifting profits to bermuda luxembourg and similar countries on a large and growing scale about 20 percent of all us corporate profits are now booked in such havens a tenfold increase since the 1980s this profit shifting is typically done within the letter of the law and thus would be best described as tax avoidance rather than fraud i attempt to quantify its cost for government coffers by taking a fresh look at the most recent macroeconomic evidence and combining it in a systematic manner over the last 15 years the effective corporate tax rate of us companies has declined from 30 to 20 percent and about two thirds of this decline can be attributed to increased profit shifting to low tax jurisdictions wealthy individuals too use tax havens sometimes legally to benefit from banking services not available in their home country and sometimes illegally to evade taxes a number of changes have sought with some success to curb that form of tax evasion over the last years yet the available evidence from switzerland and

the missing wealth of nations are europe and the u s net debtors or net creditors this paper shows that official statistics substantially underestimate the net foreign asset positions of rich countries because they fail to capture most of the assets held by households in offshore tax havens drawing on systematic anomalies in portfolio investment positions and a unique swiss dataset i find that 8 of the global financial wealth of households is held in tax havens 6 of which goes unrecorded on the basis of plausible assumptions accounting for unrecorded assets turns the eurozone officially the world s second largest net debtor into a net creditor it also reduces the u s net debt significantly the results shed new light on global imbalances and challenge the widespread view that after a decade of poor to rich capital flows external assets are now in poor countries and debts in rich countries i provide concrete proposals to improve international investment statistics

quantity precommitment in an experimental oligopoly market abstract the paper describes an experiment designed to test if the equilibrium in a market characterized by capacity precommitment followed by price competition as in the kreps and scheinkman model conforms with the outcome predicted by that model which is that capacities coincide with cournot output levels sessions were run with capacity precommitment in inexperienced and experienced triopoly markets the conclusion is that with inexperienced subjects capacity choices are more rivalistic than the model suggests but in line with those of the cournot experiments by fouraker and siegel with experienced subjects capacities are quite close to the prediction of the kreps and scheinkman model

in praise of tax havens international tax planning and foreign direct investment abstract the multinationalization of corporate investment in recent years has given rise to a number of international tax avoidance schemes that may be eroding tax revenues in industrialized countries but which may also reduce tax burdens on mobile capital and so facilitate investment both the welfare effects of and the optimal response to international tax planning are therefore ambiguous evaluating these factors in a simple general equilibrium model we find that citizens of high tax countries benefit from some tax planning paradoxically if tax rates are not too high an increase in tax planning activity causes a rise in optimal corporate tax rates and a decline in multinational investment thus fears of a race to the bottom in corporate tax rates may be misplaced

bertrand edgeworth competition demand uncertainty and asymmetric outcomes abstract we analyze investment and pricing incentives in a symmetric bertrand edgeworth framework with uncertain demand firms choose production capacities before observing demand prices are chosen after demand is observed if the extent of demand variation exceeds a threshold level then a symmetric equilibrium in pure strategies for capacities does not exist a smaller firm has no incentive ex ante to expand its capacity because capacity expansion would reduce its expected revenue in the event that demand is lower than expected output prices are predicted to have positive variance when demand is low and zero variance when demand is high journal of economic literature classification numbers d43 l13

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

advance production and cournot outcomes an experimental investigation abstract an experiment designed to assess the effects of advance production decisions on posted offer market performance is reported six of the twelve triopolies were conducted under standard posted offer rules in the remaining markets sellers made binding production commitments prior to posting prices an alteration that shifts the unique stage game nash equilibrium from the competitive to the cournot outcome as predicted advance production decisions raised prices and lowered output nevertheless stable cournot outcomes were never observed

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

the trade union wage gap in britain some new estimates abstract new estimates of the union non union wage gap in britain derived from household data are reported the results about 12 for manual and about 4 for non manual workers expand upon the tentative conclusions of the few earlier similar british studies

postentry investment and market structure in the chemical processing industries this article analyzes the investment response of incumbents to new entry in 39 chemical product industries the behavior of incumbents in highly concentrated industries differed from that of incumbents in low concentration industries in concentrated industries incumbents increased their rate of investment following entry but reduced investment to accommodate capacity expansions made by other incumbents this asymmetric response did not arise in less concentrated industries significant excess capacity existed in concentrated industries following entry but there is little evidence that incumbents built such capacity as a deterrent before entry thus the results support mobility deterrence theories rather than the conventional excess capacity deterrence argument

tax motivated transfer mispricing in south africa direct evidence using transaction data abstract this paper provides the first direct systematic evidence of profit shifting through transfer mispricing in a developing country using south african transaction level customs data i directly test for transfer price deviations from arm s length pricing i find that multinational firms in south africa manipulate transfer prices in order to shift taxable profits to low tax countries the estimated tax loss relating to imported goods alone is 0 5 of corporate tax payments my estimates do not support the common belief that transfer mispricing in south africa is more severe than in advanced economies i find that an oecd recommended reform had no long term impact on transfer mispricing but argue that the method used in this paper provides a cost efficient way to curb transfer mispricing

specification induced uncertainty in the estimation of trade union wage differentials from industry level data at a more specific level the paper is concerned with the estimation of union non union wage differentials from industry level data for the uk manufacturing sector metcalf 1977 reviewing the evidence from such industry level studies concludes that they suggest that a figure of 20 per cent may not be dreadfully in error for the average earnings differential received by manual workers who are covered by a collective agreement a more recent study at the individual level for union membership stewart 1983 suggests that a figure of below 10 per cent may be more appropriate however metcalf s summary figure remains representative of the industrylevel evidence this paper concentrates on two particular problems inherent in these industry level studies and in studies in other areas using such cross section data the first of these concerns the potential industry specificity of parameter values in the case of union wage differentials the marshallian laws of derived demand provide theoretical grounds for expecting the differential to vary across industries failure to take proper account of this will in general result in biased estimation even of the average differential in addition interpreting the estimated average differential as if it were that to be found in a typical industry may be a highly misleading representation of the impact of collective bargaining on the wage structure section i of this paper is concerned with this inter industry variation in the differetial and in particular with modelling how the differential varies with the extent of coverage in the industry our finding is that there is a large inter industry variation in the differential with the average being made up of a large differential in a small group of industries and a much smaller and insignificant differential in the majority of industries in such circumstances the estimated average differential is not representative of that prevailing in either group

how do incumbents respond to the threat of entry evidence from the major airlines this paper examines how incumbents respond to the threat of entry of competitors as distinguished from their response to competitors actual entry it uses a case study from the passenger airline industry specifically the evolution of southwest airlines route network to identify particular routes where the probability of future entry rises abruptly when southwest begins operating in airports on both sides of a route but not the route itself this dramatically raises the chance they will start flying that route in the near future we examine the pricing of the incumbents on threatened routes in the period surrounding such events we find that incumbents cut fares significantly when threatened by southwest s entry into their routes this is true even after controlling in several ways for airport specific operating costs the response of incumbents seems to be limited only to the threatened route itself and not to routes out of nearby competitor airports where southwest does not operate e g fares drop on routes from chicago midway but not chicago o hare the largest responses appear to be restricted to routes that were concentrated beforehand incumbents do experience short run increases in their passenger loads concurrent with these fare cuts this is consistent with theories implying incumbents will try to generate some longer term loyalty among current customers before the entry of a new competitor we examine evidence relating this demand building motive to frequent flyer programs and find suggestive evidence in favor of this notion there is only weak evidence that incumbents increase capacity on the routes

learning to play cournot duopoly strategies abstract the paper reports results from experiments designed to determine whether subjects can learn to play cournot duopoly strategies and whether their out of equilibrium play is consistent with the predictions of learning models the experiments include duopolies with constant and with decreasing marginal costs and with theoretically stable and unstable equilibria after a few periods subjects do play stable interior equilibria but they do not play stable boundary equilibria nor unstable interior equilibria subjects out of equilibrium play is inconsistent with the predictions of the learning models

income misattribution under formula apportionment abstract alternatives to the current system of separate tax accounting such as the proposed common consolidated corporate tax base in europe would apportion a firm s worldwide profits using formulas based on the location of employment capital or sales this paper offers a new method of evaluating the accuracy of these apportionment rules and the ownership distortions they create evidence from european company accounts indicates that apportionment formulas significantly misattribute income since employment and other factors on which they are based do a very poor job of explaining a firm s profits for example the magnitude of property employment and sales explains less than 22 of the variation in profits between firms and the prediction estimates from using such a formula exceed half of predicted profits 64 of the time and exceed twice predicted income 11 of the time as a result the use of formulas rewards or punishes international mergers and divestitures by reallocating taxable income between operations in jurisdictions with differing tax rates the associated ownership distortion is minimized by choosing factor weights to minimize weighted squared prediction errors for which based on the european evidence labor inputs should play little if any role in allocation formulas but even a distortion minimizing formula creates large incentives for inefficient ownership reallocation due to the enormous variation in profitability that is unexplained by formulary factors implying that significant resource allocation costs would accompany european adoption of formulary apportionment methods

putting distribution back at the center of economics reflections on capital in the twenty first century when a lengthy book is widely discussed in academic circles and the popular media it is probably inevitable that the arguments of the book will be simplified in the telling and retelling in the case of my book capital in the twenty first century 2014 a common simplification of the main theme is that because the rate of return on capital r exceeds the growth rate of the economy g the inequality of wealth is destined to increase indefinitely over time in my view the magnitude of the gap between r and g is indeed one of the important forces that can explain historical magnitudes and variations in wealth inequality however i do not view r g as the only or even the primary tool for considering changes in income and wealth in the 20th century or for forecasting the path of income and wealth inequality in the 21st century in this essay i will take up several themes from my book that have perhaps become attenuated or garbled in the ongoing discussions of the book and will seek to re explain and re frame these themes first i stress the key role played in my book by the interaction between beliefs systems institutions and the dynamics of inequality second i briefly describe my multidimensional approach to the history of capital and inequality third i review the relationship and differing causes between wealth inequality and income inequality fourth i turn to the specific role of r g in the dynamics of wealth inequality specifically a larger r g gap will amplify the steady state inequality of a wealth distribution that arises out of a given mixture of shocks fifth i consider some of the scenarios that affect how r g might evolve in the 21st century including rising international tax competition a growth slowdown and differential access by the wealthy to higher returns on capital finally i seek to clarify what is distinctive in my historical and political economy approach to institutions and inequality dynamics and the complementarity with other approaches

overconfidence and excess entry an experimental approach psychological studies show that most people are overconfident about their own relative abilities and unreasonably optimistic about their futures e g shelly e taylor and j d brown 1988 neil d weinstein 1980 when assessing their position in a distribution of peers on almost any positive trait like driving ability ola svenson 1981 income prospects or longevity a vast majority of people say they are above the average although of course only half can be if the trait is symmetrically distributed this paper explores whether optimistic biases could plausibly and predictably influence economic behavior in one particular setting entry into competitive games or markets many empirical studies show that most new businesses fail within a few years for example using plant level data from the u s census of manufacturers spanning 1963 1982 timothy dunne et al 1988 estimated that 61 5 percent of all entrants exited within five years and 79 6 percent exited within 10 years most of these exits are failures see also dunne et al 1989a 1989b d shapiro and r s khemani 1987

union membership collective bargaining coverage and the trade union mark up for britain abstract this paper estimates the union mark up using british general household survey data the wage gap is decomposed both for the mean and the variance of the earnings distribution the results indicate that the union mark up is larger than previously estimated and that structural effects account for a major part of the differences that are found in the earnings distributions of covered union members covered non unionists and uncovered non unionists

about capital in the twenty first century in this article i present three key facts about income and wealth inequality in the long run emerging from my book capital in the twenty first century and seek to sharpen and refocus the discussion about those trends in particular i clarify the role played by r g in my analysis of wealth inequality i also discuss some of the implications for optimal taxation and the relation between capital income ratios and capital shares

the earnings function under test abstract earnings functions of the well known mincer type based on data from five samples of german male full time workers are estimated and tested the hypotheses of normally distributed homoscedastic errors and a correctly specified functional form are nearly always rejected

imperfect tax competition for profits asymmetric equilibrium and beneficial tax havens abstract we present a model of tax competition for real investment and profits and show that the presence of tax havens in some cases increases the tax revenue of countries in the first part of the paper we argue that tax competition for profits is likely to be imperfect in the sense that the jurisdiction with the lowest tax rate does not necessarily attract all shifted profits under this assumption tax competition between a large number of identical countries may lead to either a symmetric equilibrium with no profit shifting or an asymmetric equilibrium where firms shift profits from high tax to low tax countries in the second part of the paper we introduce tax havens starting from a symmetric equilibrium tax havens unambiguously reduce the tax revenue of countries due to a leakage effect tax havens attract tax base from countries and a competition effect the optimal response to the increased tax sensitivity of tax bases involves a reduction of tax rates starting from an asymmetric equilibrium however tax havens also raise the tax revenue of countries through a crowding effect tax havens make it less attractive to compete for profits and thus induce low tax countries to become high tax countries we demonstrate that the latter effect may dominate the former effects so that countries on balance benefit from the presence of tax havens

distributional national accounts methods and estimates for the united states this article combines tax survey and national accounts data to estimate the distribution of national income in the united states since 1913 our distributional national accounts capture 100 of national income allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth we estimate the distribution of both pretax and posttax income making it possible to provide a comprehensive view of how government redistribution affects inequality average pretax real national income per adult has increased 60 from 1980 to 2014 but we find that it has stagnated for the bottom 50 of the distribution at about 16 000 a year the pretax income of the middle class adults between the median and the 90th percentile has grown 40 since 1980 faster than what tax and survey data suggest due in particular to the rise of tax exempt fringe benefits income has boomed at the top the upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000 the government has offset only a small fraction of the increase in inequality the reduction of the gender gap in earnings has mitigated the increase in inequality among adults but the share of women falls steeply as one moves up the labor income distribution and is only 11 in the top 0 1 in 2014

wealth inequality in the united states since 1913 evidence from capitalized income tax data this paper combines income tax returns with flow of funds data to estimate the distribution of household wealth in the united states since 1913 we estimate wealth by capitalizing the incomes reported by individual taxpayers accounting for assets that do not generate taxable income we successfully test our capitalization method in three micro datasets where we can observe both income and wealth the survey of consumer finance linked estate and income tax returns and foundations tax records wealth concentration has followed a u shaped evolution over the last 100 years it was high in the beginning of the twentieth century fell from 1929 to 1978 and has continuously increased since then the rise of wealth inequality is almost entirely due to the rise of the top 0 1 wealth share from 7 in 1979 to 22 in 2012 a level almost as high as in 1929 the bottom 90 wealth share rst increased up to the mid 1980s and then steadily declined the increase in wealth concentration is due to the surge of top incomes combined with an increase in saving rate inequality top wealth holders are younger today than in the 1960s and earn a higher fraction of total labor income in the economy we explain how our ndings can be reconciled with survey of consumer finances and estate tax data

double tax discrimination to attract fdi and fight profit shifting the role of cfc rules abstract governments worldwide use targeted tax policies to trade off the gains from increased fdi against the cost of excessive profit shifting by multinational firms we show that nationally optimal tax systems generally incorporate both thin capitalization rules which tax discriminate between purely national and multinational firms and controlled foreign company cfc rules which discriminate between home based and foreign based multinationals in the non cooperative policy equilibrium both thin capitalization rules and cfc rules are set more lenient than if tax policies were chosen cooperatively implying an excessive tax discrimination in favor of multinationals we also analyze the effects of reduced transaction costs for fdi and reduced costs for debt shifting on the optimal policy mix our results correspond to the observed developments of anti avoidance rules in oecd countries

aggressive tax avoidance by managers of multinational companies as a violation of their moral duty to obey the law a kantian rationale managers of multinational companies often favour an aggressive tax avoidance strategy that pushes the legal limits onto the advantage of shareholders and the disadvantage of the spirit of democratically legitimized tax laws the public and media debate whether such aggressive behaviour is immoral aggressive tax avoidance is a subset of the aggressive legal interpretations potentially observable in all fields which places little weight on the will of a democratically legitimized legislation a thorough ethical analysis based on the deontological approach of kant demonstrates that aggressive tax avoidance as a special case of operating on the edge of legal boundaries is potentially immoral applying the kantian contradiction of conception or will test shows that this maxim might not be conceived or willed as a general law of nature if all natural or legal persons aggressively interpret laws on all subjects and in every imaginable situation then central principles of the system of law we all rely upon would be severely compromised therefore aggressive tax avoidance by managers of multinational companies may violate the managers moral duty to obey not only the letter but also the intention or spirit of the law the validity of the argumentation depends critically on the formulation and interpretation of the respective maxims and on assumptions about the legal system preserving central elements of kantian philosophy the article demonstrates the complexity of a philosophical argumentation which tries to justify the moral intuitions that underpin the common negative evaluation of aggressive legal strategies in business

tax competition with parasitic tax havens we develop a tax competition framework in which some jurisdictions called tax havens are parasitic on the revenues of other countries the havens use real resources to help companies camouflage their home country tax avoidance and countries use resources in an attempt to limit the transfer of tax revenues to the havens the equilibrium price for this service depends on the demand and supply for such protection recognizing that taxes on wage income are also evaded we solve for the equilibrium tax rates on mobile capital and immobile labor and we demonstrate that the full or partial elimination of tax havens would improve welfare in non haven countries in part because countries would be induced to increase their tax rates which they have set at inefficiently low levels in an attempt to attract mobile capital we also demonstrate that the smaller countries choose to become tax havens and we show that the abolishment of a sufficiently small number of the relatively large havens leaves all countries better off including the remaining havens