inequality and endogenous trade policy outcomes abstract an enduring puzzle in international economics is why trade interventions are biased in favor of import competing rather than export sectors and therefore restrict trade in this paper we show that if the government s objective reflects a concern for inequality then trade policy generally exhibits an anti trade bias importantly under neutral assumptions the mechanism that we analyze generates the anti trade bias independently of whether factors are specific or mobile across sectors the mechanism also generates an anti trade bias between large countries even after they sign reciprocal trade agreements that eliminate any terms of trade motivation for the use of trade protection

depreciation rules and value invariance with extractive firms the application of samuelson s theorem on value invariance to the case of intertemporally optimizing firms is shown to require a judiciously chosen economic depreciation formula which depends on both current stock and current flow variables in order to prevent the firms from changing their actions in the face of the tax regime we illustrate by deriving depreciation rules which achieve non distortingness of actions and value invariance for resource extracting firms

import penetration and the politics of trade protection abstract in this paper we reconsider a key empirical prediction generated by an important class of political economy models of trade policy namely that trade protection should be higher in sectors characterized by lower import penetration we call this the standard prediction the existing empirical evidence offers little support for this prediction in this paper we argue that the standard prediction depends critically on the assumptions that trade taxes are the only policy instruments and that the government has access to non distortionary taxation we analyze a model in which the government can use quotas and vers in addition to trade taxes and raising public funds may be costly under a simple sufficient condition our model predicts that the protection level increases with import penetration both in sectors that are protected with tariffs and in sectors that are protected with quantitative restrictions

academic earmarks and the returns to lobbying abstract in this paper we estimate the returns to lobbying by universities to motivate our empirical work we develop a simple theoretical model of university lobbying for academic earmarks our statistical analysis shows that universities represented by a house appropriations committee hac or senate appropriations committee sac member spend less money on lobbying than those that are not represented in addition using instrumental variables estimations we show that universities without hac or sac representation may receive some benefit to lobbying for earmarks although in many estimations this benefit is not statistically different from zero however for universities with hac or sac representation a 10 percent increase in lobbying yields an additional 2 8 percent or 3 5 percent increase in earmarks respectively this suggests that there are large returns to lobbying for academic earmarks if a university is represented by a member of one the hac or sac but little or no return if not

decentralized income redistribution reconsidered decentralized income redistribution reconsidered i introduction which is the appropriate level of government to undertake income redistribution this issue is receiving renewed attention from economists examining how migration and labor supply responses affect the costs of transfer payments at the state or federal level in a recent paper brown and oates 1987 use a formal public choice model to show that the possibility of migration of transfer recipients between states leads to suboptimal transfer levels even when taxpayers care only about transfer recipients within their own states with benefit spillovers across states their argument for federal responsibility for redistribution is presumably even stronger gramlich 1985 also argues that migration is large enough to lead to suboptimal levels of transfers at the state level because states with low benefit levels will be able to export their poor increasing the cost of redistribution to high benefit states gramlich s conclusion is based on the empirical work in gramlich and laren which finds that the migration effect is very strong though only in the very long run 1984 510 the implicit argument is that migration raises the cost of redistribution at the state level compared to the federal level 1 however neither brown and oates nor gramlich consider labor supply responses that is hours and participation in their analyses on the other hand several recent papers have attempted to estimate the cost of redistribution at the national level incorporating labor supply responses to taxes and transfers but not interjurisdictional migration 2 some empirical evidence is available which is consistent with either migration or labor supply effects for example helms 1985 uses time series cross section data on state expenditure and tax policies and finds that while spending on public services schools highways etc increases personal income increased state transfer payments financed by state taxes significantly reduce total state personal income this reduction could be caused by either migration or labor supply responses to taxes and transfers indeed helms s estimates indicate a very large response to transfer spending one more dollar of transfers reduces state personal income in the long run by 14 83 helms concludes states which seek to devote substantial tax revenues to transfer payments will experience significantly reduced growth prospects which limits the scope for redistribution at the state and local levels 1985 581 a concise summary of the standard argument concerning federalism and redistribution might be as follows 1 interstate migration of taxpayers and transfer recipients raises the taxpayer cost of income redistribution at the state level above the cost at the federal level 2 state wide redistribution confers spillover benefits to residents of other states 3 therefore as compared with a national system decentralized responsibility for income redistribution yields a less redistribution because its cost is higher and b less than the socially optimal amount of redistribution because of externalities my 1988 paper shows that step 1 of the above argument is not necessarily true because the migration effect which previous authors have stressed can be offset by a tax exporting effect by which residents of one state shift some of the fiscal cost of redistribution to residents of other states both the income effect and the substitution effect of increased redistribution will reduce the labor supply and hence earnings of transfer recipients the labor supply and earnings of taxpayers may also fall if substitution effects are strong enough the tax exporting effect arises if taxes and transfers on net reduce total earnings in a state since the state s federal tax obligations depend on its earnings

a general equilibrium model of congressional voting in this paper we specify a model in which congressmen constituents and campaign contributors simultaneously decide on behavior constituents and contributors desire to influence the voting behavior of congressmen congressmen on the other hand want to be elected and vote accordingly we empirically test this model using roll call voting on eight bills dealing with economic regulation and find support for the model our results indicate that part of the voting behavior of congressmen may be explained by noneconomic factors we also find that unions and businesses as campaign contributors are sometimes influential unions are more often influential than is business ideological factors are also important in explaining voting

plata o plomo bribe and punishment in a theory of political influence we present a model where groups attempt to influence policies using both bribes plata spanish for silver and the threat of punishment plomo spanish for lead we then use it to make predictions about the quality of a country s public officials and to understand the role of institutions granting politicians with immunity from legal prosecution the use of punishment lowers the returns from public office and reduces the incentives of high ability citizens to enter public life cheaper plomo and more resources subject to official discretion are associated with more frequent corruption and less able politicians this predicts that violence in a country will typically go together with corruption and worse politicians moreover the possibility of punishment changes the nature of the influence game so that even cheaper plata can lower the ability of public officials protecting officials from accusations of corruption immunity will decrease the frequency of corruption if the judiciary is weak and may increase the quality of politicians these predictions cannot emerge from a traditional model where only bribes are used the positive evils and dangers of the representative as of every other form of government may be reduced to two heads first general ignorance and incapacity or to speak more moderately insufficient mental qualifications in the controlling body secondly the danger of its being under the influence of interests not identical with the general welfare of the community

migration and income redistribution responsibilities this study examines whether afdc benefits determine or discourage state to state migration flows in the united states a pooled cross section time series model is developed to estimate afdc benefits in a state and recipients and whether benefits in one state affect benefits in other states a second model using data from the 1980 census and the panel study of income dynamics estimates migration of afdc recipients and the level of benefits in in migration and out migration states both models indicate that small but statistically significant amounts of migration occur which may be quite important but only in the long run movers although small in number are much more likely to move to a state with higher benefits states perceive this migration as important indicating that states should have less control and the federal government more control over income redistribution

the effect of welfare and wage levels on the location decisions of female headed households abstract this paper develops and estimates a model designed to calculate the impact of welfare benefit levels wages and tax rates on the location choices of female headed households the empirical model assumes that women simultaneously choose both where they will live and whether or not they will participate in the welfare system based on their expected income and expected hours of work for each location participation possibility these income and hours expectations depend in turn on the welfare benefits wage and tax rates facing each household in each location it is found that both regional welfare levels and wage rates have a significant effect on the location decisions of this population the probability of a typical female headed household with little outside income leaving an area with low welfare payments and low wages can be as much as 12 points higher over a 4 year period than the probability of leaving a high welfare high wage area

efficient local charity with self selection how is charitable giving within a city influenced by the prospect of donor and recipient migration the theoretical literature on charitable contributions in a closed economy has mainly argued that the market level of private giving will tend to be lower than optimal wherever there exists a local fiscal externality between donors and recipients interjurisdictional models of voluntary redistribution on the other hand abstract from altruism to explore the interjurisdictional fiscal externality resulting from the failure of one community to account for the migration impacts of its actions on other communities this paper integrates and extends both literatures by allowing for local altruism among the mobile residents of a system of local economies within a single community mobility thus introduces adverse selection considerations for each donor via the migration of both recipients and other donors moreover any change in the local transfer level influences both equilibrium wages and donor behavior system wide

commercial policy with altruistic voters in public discussions of policy evidence that import competing sectors earn low or falling incomes is often used to argue for protection this paper rationalizes the apparent effectiveness of this argument in both direct and indirect democracies in direct democracies a small degree of voter altruism leads to protection in the specific factors model when the import competing sector earns little similarly voter altruism creates an incentive in representative democracies for self interested parties to present evidence to legislators on the income of import competing factors this leads to a theory in which campaign contributions buy access to legislators rather than buy votes

lobbying and international cooperation in tariff setting abstract this paper develops a theory of tariff protection that incorporates cooperative behavior and lobbying governments use import tariffs or subsidies to maximize a weighted sum of lobbying contributions and general welfare governments do not use export taxes or subsidies and thus balance the interests of export and import competing lobbies in setting tariff levels in a symmetric model cooperation between governments is sustained by threats of punishment in future periods unless governments place too much weight on the future the result is a cooperative tariff otherwise the result is a reciprocal import subsidy

interest group politics in a federation the optimal degree of decentralization depends on the importance of inter state externalities of local policies we show that inter state externalities are determined by the spatial distribution of interest groups within the country interest groups who have multi state scope internalize inter state externalities to a larger extent than the lobbyists with interests within a single state we use variation in the geographic boundaries of politically powerful industrial interests to estimate the effect of inter state externalities on firm performance using firm level panel data from a peripheralized federation russia in 1996 2003 we show that controlling for firm fixed effects the performance of firms substantially improves with an increase in the number of neighboring regions under influence of multi regional business groups compared to the number influenced by local business groups our findings have implications for the literatures on federalism and on international trade as trade restrictions are a common source of inter state externalities

assistance to the poor in a federal system abstract this paper explores the roles of different levels of government in assisting the poor using a model incorporating utility interdependence the paper first presents some theoretical results indicating how levels of poor relief vary with the extent of mobility of the poor under both centralized and decentralized systems of support it then provides a survey of the empirical work on migration of the poor along with a brief historical discussion of the experience under the english poor laws the concluding section turns to normative issues and contends that mobility of the poor is a basic source of inefficiency in wholly decentralized systems of support this inefficiency along with certain other equity considerations establishes a role for the central government in assistance to the poor

vertical fiscal externalities in a federation abstract we examine vertical fiscal externalities in a model where a state government provides a productivity enhancing public input and both the state and the central government tax wages and profits previous literature has emphasized the negative tax externality that occurs when two levels of government impose distortionary taxes on the same tax base we show that an increase in the state government s tax rate on wage income can increase federal revenues if the federal government imposes an ad valorem tax on employees wages and the demand for labour is inelastic we also show that an increase in the provision of the public input can either increase or reduce federal tax revenues leading to either under or over provision of the public input by the state government

the impact of international trade on democracy a long run perspective the likely endogeneity between democracy and trade is addressed with an instrumental variables strategy in this article about whether international trade fosters democracy the authors use a measure of natural openness to obtain estimates of the causal impact of openness on democratization in three separate samples spanning the last 130 years a positive impact of openness on democracy is apparent in the data over the long run the post world war ii results suggest that with a rise in trade with other countries equal to a one standard deviation increase countries such as indonesia russia and venezuela could eventually become as democratic as the u s great britain or france there is some variation in the impact of openness by region that may be because trade seems to have a positive impact only when the capital to labor ratio is sufficiently high this is consistent with the idea that openness promotes democracy when it strengthens the economic fortunes of the middle class

altruism the samaritan s dilemma and government transfer policy this paper shows that altruism provides an efficiency rationale for public provision of insurance to the poor the framework is one in which there are rich altruists and risk averse poor who face some possibility of loss the government represents the rich and makes transfers on their behalf with unconditional transfers the poor may forgo insurance and rely on private charity to bail them out in the event of loss this reliance on private charity has adverse efficiency effects these may be avoided if the government makes in kind transfers of insurance copyright 1995 by american economic association

the effects of grants in aid on state and local expenditures abstract this paper develops econometric methods to estimate the effect of the piecewise linear budget constraints created by grant formulas in which the subsidy rate is not constant over expenditures e g closed end grants the methods are applied to the afdc program the results show that because of the kinked nature of the grant formula 1 the present federal formula actually increases cross state inequality in afdc benefits 2 several subsidy rates in the formula actually reduce benefits and 3 the so called flypaper effect disappears

social security as trade among living generations we model u s social security that is legislated endogeneously by living generations specifically we consider the effects of social security on resource allocation and pareto optimality examining which generations gain from social security and whether some generations lose because saving and transfer decisions are made sequentially in the real world we use an infinite horizon overlapping generations framework in which life cycle saving and transfers to the old are determined by living agents we focus on the case in which agents are altruistic but place sufficiently greater weight on own comsumption than on the consumption of agents in other generations so that starting from a steady state without social security living agents would gain utility if consumption were shifted marginally to them from later generations excerpt

are contributors rational untangling strategies of political action committees empirical public choice literature and casual observation suggest that the behavior of political action committees is remarkably unsophisticated meaning that pacs give to those legislators who would support their interests anyway thus it is suggested that contributor behavior deviates from rational behavior which is a cornerstone of economic analysis in this paper a switching regression model is estimated that allows for strategies of pacs to vary for different contribution recipients i analyze the behavior of farm pacs over three election cycles in contrast to previous findings i find that contributor behavior is not inconsistent with rational behavior contributors who attempt to influence the voting behavior of members of congress give the most money to legislators whose constituency interest suggests that they are likely to be undecided on how to vote and pacs give less money to legislators who represent districts with larger farm populations because those legislators are likely to vote in con

social preferences self interest and the demand for redistribution preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self interest people may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control therefore beliefs about the causes of income may affect demand for redistribution alternatively the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income and self interest is not properly controlled for they may also measure incentive cost concerns using social survey data i find that self interest cannot explain the effect of these beliefs on redistributive preferences 2001 elsevier science b v all rights reserved

the effect of state and local taxes on economic growth a time series cross section approach results based on pooled time series and cross section data are presented which indicate that state and local tax increases significantly retard economic growth when the revenue is used to fund transfer payments however when the revenue is used instead to finance improved public services such as education highways and public health and safety the favorable impact on location and production decisions provided by the enhanced services may more than counterbalance the disincentive effects of the associated taxes these findings underscore the importance of considering the incentives provided by a state s expenditures as well as by its taxes i n the past several years a number of states have implemented limitations on taxes or expenditures while others have raised tax rates in response to the revenue shortfalls of the early 1980s although much of the ongoing debate over state fiscal structures revolves around expressed preferences over tax expenditure combinations per se the question of how state and local taxes may affect economic growth is often central to the discussion nonetheless the empirical evidence remains sparse previous studies can be divided into two broad categories assessments of the magnitudes of tax costs and statistical analyses of the relationship between tax rates and growth cost studies have tended to minimize the role of taxes in business location decisions either because state and local taxes are a relatively small component of total costs for most businesses or because interstate tax differences are small relative to other cost differences between states although these results suggest that the role played by taxes is a minor one describing how large the tax disparities may be is not the same as ascertaining their economic effect of the statistical studies many including bloom 1955 thompson and mattila 1959 and carlton 1979 1983 find no relationship between taxes and growth however kleine 1977 grieson 1980 and generally grieson et al 1977 report negative correlations romans and subrahmanyam 1979 find growth to be negatively related to the fraction of revenues devoted to transfer payments and a variable which they claim measures personal tax progressivity but positively related to business taxes with the exception of carlton who estimates models of the birth and size of firms within metropolitan areas and the grieson et al 1977 and grieson 1980 studies which consider taxes in new york city and philadelphia these authors use data from a single cross section of states more recently newman 1983 and plaut and pluta 1983 both use cross sectional data from two time periods the former finding negative effects of corporate tax rates and the latter yielding mixed results in this study we utilize a time series from 1965 through 1979 of cross sections of 48 states exploiting the richness of this data set we are able to allow for otherwise unexplained differences between states which could be expected to bias results based on a single cross section moreover this much larger sample provides the statistical power necessary to disentangle the separate effects of different categories of taxes public expenditures and transfer payments a distinguishing feature of this paper is that we explicitly recognize the government budget constraint linking these fiscal variables and the deficit or surplus in addition we have taken account of the effects of labor force characteristics by including variables for wage rates unionization and population density our results indicate that tax increases significantly retard economic growth when the revenue is used to fund transfer payments as a result programs of income redistribution are more effectively undertaken at the federal than at the state and local level on the other hand when the revenue is received for publication april 30 1984 revision accepted for publication january 22 1985 university of california davis i am indebted to the institute of governmental affairs at the university of california davis for financial support to adrienne kandel for invaluable research assistance and to two referees for their helpful comments 1 see williams 1967 morgan and brownlee 1974 vasquez and deseve 1977 and the advisory commission on intergovernmental relations 1981 see also due 1961 for a survey of the early literature including a discussion of the findings and limitations of survey results on this topic 574 1 copyright 1985 this content downloaded from 157 55 39 35 on mon 29 aug 2016 04 45 38 utc all use subject to http about jstor org terms state and local taxes and economic growth 575 used instead to finance enhanced public services such as highways education and public health and safety the favorable impact on location and production decisions provided by the improved services may more than counterbalance the disincentive effects of the concomitant taxes these findings underscore the importance of considering the incentives provided by a state s expenditures as well as by its taxes we begin by sketching a model which provides the basis for the analysis and discussing appropriate estimation techniques then in section ii we describe the data used and our hypotheses the econometric results are presented in section iii followed by brief concluding remarks in the final

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

nonmarket transfers and altruism abstract we examine altruistically motivated consumption transfers in an effort to account for nonmarket transfers we find that altruistic linkages lead to autonomous negotiation free transfers and that such transfers positively respond to stronger altruism we also find that given fairly natural assumptions concerning the altruism parameters mutual altruism does not necessarily result in group social harmony even though its rise narrows the conflict range in spite of enhanced transfers prompted by such a rise both parties may end up worse off these results help explain why in some social environments a shift toward market oriented transfers and exchanges may be quicker than in others as the disadvantages decline in utility associated with intragroup altruistic linkages outweigh the advantages