effects of cost changes on oligopolists profits this paper considers cost changes affecting all firms in a constantreturns to scale cournot oligopoly cost increases may paradoxically benefit some or even all firms whether a firm benefits or is harmed depends only on whether its market share exceeds a threshold level s on whether industry costs increase or decrease on the number of firms and on the elasticity of the demand curve s slope or equivalently the fraction of cost changes that are passed on conditions where industry structure alone determines the effect of cost changes on firms profits and conditions where cost increases necessarily harm some firms are developed this paper considers the effects of a change in cost on outputs and profits in an industry composed of firms with constant returns to scale these effects are easy to see in the extreme cases of monopoly and perfect competition but

excise taxes with multiproduct transactions i examine excise taxes levied on multiproduct retailers excise taxes reduce equilibrium output and decrease equilibrium product variety in the short run but taxes can raise output per product in the long run and induce entry excise taxes are overshifted into prices in a wide range of cases including under linear and concave demand conditions and excise taxes shift less than one for one into prices only when demand is highly convex multiproduct transactions substantively alter the efficiency of ad valorem and specific forms of excise taxes and affect the comparison of relative tax performance over short run and long run time horizons jel h25 h32 l11 l13 l81

can self control explain avoiding free money evidence from interest free student loans abstract this paper uses insights from behavioral economics to explain a particularly surprising borrowing phenomenon one in six undergraduate students offered interest free loans turns them down models of impulse control predict that students may optimally reject subsidized loans to avoid excessive consumption during school using the national postsecondary student aid study we investigate students take up decisions and identify a group of students for whom the loans create an especially tempting liquidity increase students who would receive the loan in cash are significantly more likely to turn it down suggesting that consumers choose to limit their liquidity in economically meaningful situations

financial aid debt management and socioeconomic outcomes post college effects of merit based aid abstract prior research has demonstrated that financial aid can influence both college enrollments and completions but less is known about its post college consequences this study is the first to link college and financial aid information to credit bureau data later in life enabling us to examine the impacts of grant aid on homeownership neighborhood characteristics and credit outcomes we use a regression discontinuity rd strategy to identify causal effects of the wv promise scholarship a broad based state merit aid program up to 10 years after college entry the rd is imperfect because our sample is limited to college students and the scholarship program increased enrollment but there is little evidence of selection on observables at the threshold we find that scholarship recipients near the test score cutoff for eligibility are more likely to earn a graduate degree are more likely to own a home and live in higher income neighborhoods effects on annual earnings and credit outcomes are similarly positive but imprecise these positive effects are primarily due to substantial reductions in time to degree rather than to reduced student debt upon graduation

business political power the case of taxation we examine contending views about the forms and mechanisms of business power in u s politics by estimating time series models explaining taxation and redistribution taxation and redistribution constitute strong cases for theories about business and class power since all firms have an interest in reducing taxation we find that changes in corporate taxation and in redistribution between capital gains income and earned income and between corporate taxation and individual taxation are strongly influenced by political partisanship with democratic administrations increasing the tax burden on firms and their owners how far corporations engage in electoral financing measured through the establishment of corporate political action committees is also influential the models show some evidence consistent with the understanding of class power conceptualized by bowles gordon and weisskopf and the presence of election cycle effects but inconsistent with implications arising from the structural dependence of the state on capital and asset concentration in the largest corporations as a mechanism of class power

constrained after college student loans and early career occupational choices abstract in the early 2000s a highly selective university introduced a no loans policy under which the loan component of financial aid awards was replaced with grants we use this natural experiment to identify the causal effect of student debt on employment outcomes in the standard life cycle model young people make optimal educational investment decisions if they are able to finance these investments by borrowing against future earnings the presence of debt has only income effects on investment decisions we find that debt causes graduates to choose substantially higher salary jobs and reduces the probability that students choose low paid public interest jobs we also find some evidence that debt affects students academic decisions during college our estimates suggest that recent college graduates are not life cycle agents two potential explanations are that young workers are credit constrained or that they are averse to holding debt we find suggestive evidence that debt reduces students donations to the institution in the years after they graduate and increases the likelihood that a graduate will default on a pledge made during her senior year we argue this result is more likely consistent with credit constraints than with debt aversion

does the market deliver the right technology abstract we show that the market does not systematically deliver the right technology under monopolistic competition i firms might rush on large scale technology pushing to the exit many desirable varieties produced by small firms ii firms might shun large scale technology though that technology would benefit the society through lower prices iii a bias towards small scale technology in some stage of development and a bias towards large scale technology in another stage is also a possibility

power and the control of capital this essay reviews three recent books on the political economy of finance in postcolonial asia and latin america and suggests a framework for examining the relationship between political power and varying patterns of control over investment resources the stress is on the constraints different controllers of capital can impose on state leaders the conditions under which policymakers can subvert these constraints and how conflicts within the state over the trajectory of policy are mediated by who or what supplies critical investment resources and the institutional channels through which the resources flow

on vertical control in monopolistic competition abstract this paper demonstrates that vertical restraints are profitably imposed by a manufacturer or wholesaler who has some market power and whose product is sold in a monopolistically competitive downstream market simple conditions are developed under which a price floor resale price maintenance or a price ceiling is profitable and under which private incentive for a restraint is sufficient for its social desirability where demand elasticities are constant observed vertical price floors are always welfare improving but profitable price ceilings may decrease welfare in the special case of the ces aggregate surplus specification with competitive conjectures price ceilings are profitable and welfare decreasing

limits on authoritarian imposition of policy failed ecuadoran military populism in comparative perspective does regime type affect policy outcomes do authoritarian regimes have greater policy discretion than democratic regimes the empirical evidence is ambiguous using two cases of failed military populism in ecuador the author argues that two authoritarian characteristics lack of participation in decision making and nonmobilization frustrated implementation of import substitution policies ironically groups expected to benefit most industrialists and urban workers provided the principal opposition although the regime needed their cooperation to implement policy neither group had assurance that its interests were protected thus political alliances require more than an exchange of policies for support regimes must make their commitments credible by permitting the participation in decision making and mobilization of groups whose cooperation is needed for policy implementation this conclusion is supported by a comparison to peru where a military regime encountered similar obstacles and argentina where

heterogeneous human capital occupational choice and male female earnings differences human capital models have mainly focused on the rate of return to investment in a homogeneous stock of capital yet individuals have different initial attributes that determine comparative advantage in producing different types of human capital we find that mathematical ability is an important determinant of field choice for college students and that differences in earnings across fields are largely explained as a return to the use of scarce quantitative abilities in the production of each type of human capital the model successfully accounts for the observed male female differences in earnings and occupational choices of recent college graduates

the path of price changes in vertical integration the paper examines the path of final good price changes when a monopoly supplier of an intermediate good vertically integrates into a competitive constant returns final good industry i show that the price rises while the monopolist is taking over the downstream industry and then falls after downstream monopolization is complete the relationship of these results to the existing literature on full forward integration is established

aggregation and social choice a mean voter theorem a celebrated result of black 1948a demonstrates the existence of a simple majority winner when preferences are single peaked the social choice follows the preferences of the median voter the median voter s most preferred outcome beats any alternative however this conclusion does not extend to elections in which candidates differ in more than one dimension this paper provides a multi dimensional analog of the median voter result we provide conditions under which the mean voter s most preferred outcome is unbeatable according to a 64 majority rule the conditions supporting this result represent a significant generalization of caplin and nalebuff 1988 the proof of our mean voter result uses a mathematical aggregation theorem due to prekopa 1971 1973 and borell 1975 this theorem has broad applications in economics an application to the distribution of income is described at the end of this paper results on imperfect competition are presented in the companion paper caplin and nalebuff 1991

state revenue extraction from different income groups variations in tax progressivity in the united states 1916 to 1986 we examine the conditions that affected the progressivity of the individual income tax in the united states between 1916 and 1986 a multivariate time series analysis shows how macroeconomic conditions state imperatives the organizational capacities of social classes and political conditions have affected the progressivity and the symbolic component of the income tax progressivity is measured by the difference between the effective tax rates paid by moderate income and very high income families the symbolic component of this tax is measured by the difference between the nominal tax rate and effective income tax rate paid by very high income families the results reveal that changes in tax progressivity are due largely to macroeconomic and state fiscal conditions such as unemployment economic development and budget deficits although the organizational capacities of social classes and political conditions such as labor organization and political participation also have effects changes in progressivity are due primarily to adjustments in the rates paid by very high income families however the impacts of these conditions on tax progressivity changed somewhat when the federal income tax was transformed into a mass tax during world war il finally political conditions have a relatively greater effect on the symbolic component of the income tax than on progressivity overall this analysis supports a structural theory of the state in which the influences of politics and social classes on revenue extraction are circumscribed by macroeconomic and state fiscal conditions

the effect of attending the flagship state university on earnings a discontinuity based approach abstract this paper examines the effect of attending the flagship state university on the earnings of 28 to 33 year olds by combining confidential admissions records from a large state university with earnings data collected through the state s unemployment insurance program to distinguish the effect of attending the flagship state university from the effects of confounding factors correlated with the university s admission decision or the applicant s enrollment decision i exploit a large discontinuity in the probability of enrollment at the admission cutoff the results indicate that attending the most selective state university causes earnings to be approximately 20 higher for white men

the effects of state mandated financial education on college financing behaviors students entering college have limited financial experience while making complex borrowing decisions this paper examines a policy lever that may improve these decisions high school personal finance graduation requirements we use a difference in difference strategy to determine their effects on financial aid decisions of incoming freshmen at 4 year institutions our results suggest financial education shifts students from high cost to low cost financing the requirements increase aid applications and acceptance of federal loans while decreasing the likelihood of holding credit card balances students from less affluent family backgrounds reduce their likelihoods of working and borrowers from more affluent backgrounds reduce private loan amounts

the politics of finance how capital sways african central banks abstractwhile there is a large literature on the politics of central banking its insights are difficult to translate to sub saharan africa this article addresses gaps in this literature by considering how the interests of those who control financial resources sway african central banks case studies of kenya nigeria and uganda demonstrate that variation in the sources of capital on which countries rely to finance investment helps to account for the pattern of variation in central bank policy stances the analysis further develops and probes arguments about power derived from the control of capital in the context of developing countries

does the organization of capital matter employers and active labor market policy at the national and firm levels does the organization of business matter for social policy development in the advanced capitalist democracies conventional welfare state analysis has given this significant question scant attention we argue however that the representational power of business coordination across business interest units and integration of associations in corporatist policy making forums or what we call the social corporatist organization of business should result in greater support and participation by employers in social policy formation and implementation we test our arguments with models both of 1980 98 pooled time series data on withinand across country variation in spending on active labor market programs and of extensive firm level survey data from denmark and the united kingdom we find that the centralization and coordination of employers as well as the integration of employer organizations in corporatist policy making forums are strongly associated with shares of national income devoted to active labor market policy we find moreover that the degree of employer organization conditions active labor market policy responses to de industrialization and increases in general unemployment at the firm level membership in an employer association has a significant positive effect on employer participation in active labor market programs in corporatist denmark but not in the pluralist united kingdom

optimal student loans and graduate tax under moral hazard and adverse selection we characterize the set of second best optimal menus of student loan contracts in a simple economy with risky labour market outcomes adverse selection moral hazard and risk aversion the model combines student loans with an elementary optimal income tax problem the second best optima provide incomplete insurance because of moral hazard they typically involve cross subsidies between students generically optimal loan repayments cannot be decomposed as the sum of an income tax depending only on earnings and a loan repayment depending only on education therefore optimal loan repayments must be income contingent or the income tax must comprise a graduate tax the interaction of adverse selection and moral hazard i e self selection

cooperation and political economic performance in affluent democratic capitalism research on comparative political economic performance has traditionally followed two separate tracks one concerned with collective economic gain growth and efficiency and the other focused on distribution and redistribution cooperative institutions offer a key to understanding cross national variation among the affluent capitalist democracies in both facets of political economic performance these institutions cluster along two dimensions neocorporatism and firm level cooperation pooled time series analysis for 18 nations over 1960 89 suggests that 1 neocorporatism is a major source of distributive redistributive policies and outcomes and of several sources of collective gain 2 firm level cooperation is a key contributor to economic growth

free entry and social efficiency under vertical oligopoly we analyze a successive vertical oligopoly model that incorporates vertical relationships between industries and demonstrate that free entry in an industry that produces a homogeneous product can lead to a socially insufficient number of firms this is in contrast with the proevious findings that under cournot oligopoloy with fixed set up costs level of entry in the free entry equilibrium is socially excessive it has often been argued that this result can provide a justification for apparently anticompetitive entry regulations our finding yields an important policy implication that such a justification is not necessarily valid when vertical relationships ar taken into account

central banks at war war is expensive troops must be equipped and weapons must be procured when the enormous borrowing requirements of war make the sovereigns credibility problem more difficult central banks enhance a government s ability to borrow by being the sole direct purchaser of government debt the central bank increases the effective punishment that can be imposed on the government for defaulting on the marginal lender this increases lenders confidence that the government will be punished in case of default making lenders willing to purchase the debt at a lower rate of interest the sovereign dependent on the low borrowing costs offered by the central bank has an incentive to retain the bank data covering the nineteenth and early twentieth centuries reveal that possessing a central bank lowers the sovereign s borrowing costs particularly during times of war

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

the nature of credit constraints and human capital we develop a human capital model with borrowing constraints explicitly derived from government student loan gsl programs and private lending under limited commitment the model helps explain the persistent strong positive correlation between ability and schooling in the u s as well as the rising importance of family income for college attendance it also explains the increasing share of undergraduates borrowing the gsl maximum and the rise in student borrowing from private lenders our framework ofiers new insights regarding the interaction of government and private lending as well as the responsiveness of private credit to economic and policy changes

vertical integration in a monopolistically competitive industry abstract this paper considers forward vertical integration by a monopolist producer of an intermediate good when the downstream industry is monopolistically competitive alternative methods of vertical control are considered in addition to the usual input mark up these include franchise fees royalties and resale price maintenance it is found that these methods in combination achieve perfect or near perfect replication of the outcome under full vertical integration the case where downstream products are differentiated by location in a circular space is studied in detail and alternative outcomes are ranked according to their social desirability

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

policy watch income contingent college loans we consider the recently proposed income contingent loan icl in which congress would establish a national trust fund from which students could borrow money to finance the cost of attending college students would repay these loans by contributing a fixed proportion of their subsequent income for a specified number of years one key issue is whether proposed income contingent loan plans will be self financing that is will the value of loan repayments cover the initial cost of providing the loan what about adverse selection and how should income be defined for purposes of an income contingent loan plan in essence the typical income contingent loan proposal involves three parameters the amount of the loan the period over which income is taxed and the rate at which income is taxed at what level must the tax rate be set for an icl plan to be self financing we present several illustrative calculations that might be useful to those who wish to evaluate various proposals and present some conclusions

the rise in student loan defaults abstract we examine the rise in student loan defaults in the great recession by linking administrative student loan data at the individual borrower level to student loan borrowers individual tax records a blinder oaxaca style decomposition shows that shifts in the composition of student loan borrowers and the massive collapse in home prices during the great recession can each account for approximately 30 of the rise in student loan defaults falling home prices affect student loan defaults by impairing individuals labor earnings especially for low income jobs by contrast when comparing the default sensitivities of homeowners and renters we find no evidence that falling home prices affect student loan defaults through a home equity based liquidity channel the income based repayment ibr program introduced by the federal government in the wake of the great recession reduced both student loan defaults and their sensitivity to home price fluctuations thus providing student loan borrowers with valuable insurance against negative shocks

the political economy of financial internationalization in the developing world in the last decade a growing number of developing countries have opened their financial systems by liberalizing capital flows and the rules governing the international operations of financial intermediaries one explanation of this rush toward greater financial internationalization is that increasing interdependence generates domestic and foreign political pressures for capital account liberalization while we find evidence for that hypothesis we find that the proximate cause in developing countries more frequently is found in balance of payments crises politicians perceive that financial openness in the face of crisis can increase capital inflows by indicating to foreign investors that they will be able to liquidate their investments and by signaling government intentions to maintain fiscal and monetary discipline the argument is explored through case studies of chile indonesia mexico and south korea

explaining capital account liberalization in latin america a transitional cost approach in the past three decades governments around the world have lowered barriers to international capital flows this movement is widely attributed to the forces of globalization as developed nations moved toward relative convergence on international financial openness yet developing nations with much to gain from openness to foreign investment moved only hesitantly and inconsistently in this direction analysis of two decades of capital account liberalization in latin america and the oecd reveals that nations in latin america with weaker domestic financial sectors face higher risks of transitional dislocations following liberalization and move less aggressively toward openness in the oecd by contrast financial weakness is associated with greater movements toward capital account opening as transitional costs are lower and governments are better equipped to ameliorate them examination of the transitional costs of liberalization thus helps to explain how market pressures may impede rather than promote market oriented reform in latin america

excess entry vertical integration and welfare this article provides a systematic analysis of the welfare effects of vertical integration by a monopolist input supplier into a monopolistically competitive downstream industry we give sufficient conditions on consumer preferences that lead to pareto improving vertical integration and demonstrate a close relationship between assumptions on preference for variety excess entry in monopolistically competitive markets and the welfare effects of vertical integration excess entry in downstream markets tends to give rise to pareto improving vertical integration we extend the analysis to vertical oligopoly and access price regulation

concentration product variety and entry for merger evidence from new product introductions in the u s food industry competing theories in industrial organization predict that more concentrated industries will lead to a smaller and more efficient variety of products or alternately a larger and less efficient array of products this paper presents an empirical study of these competing implications that estimates the impact of market concentration on new product introductions in a panel of nine food processing industries over 1983 to 2004 controlling for industry level unobservables using fixed effects and endogeneity of industry market structure we find that industry concentration promotes the introduction of new products preliminary evidence also suggests that new product introductions spur subsequent food industry mergers both conclusions are consistent with the entry for merger theory of product variety wherein small firms introduce new products in anticipation of profitable future mergers with concentrated firms

credit constraints and demand for higher education evidence from financial deregulation abstract we use staggered banking deregulation across states in the united states to examine the impact of the resulting increased credit supply on college enrollment from the 1970s to the early 1990s our research design produces estimates that are not confounded by wealth effects due to changes in income or housing wealth we find that lifting banking restrictions raises college enrollment by about 2 6 percentage points 4 9 we rule out alternative interpretations by examining results for different income groups and bankrupt households we also find similar effects for two year or four year college completion and supporting evidence in household educational borrowing

resale price maintenance and forward integration into a monopolistically competitive industry in this paper we adopt the ces model of product differentiation for the downstream stage of the industry with an upstream monopolist we first show that resale price maintenance is equivalent to forward integration and that both increase profits then we demonstrate that forward integration by an upstream monopolist will reduce welfare for the industry prices fall with forward integration but the integrating firm contracts the number of downstream subsidiaries so drastically that the reduced diversity more than offsets the gains from lower prices

the making of policy institutionalized or not this paper develops a framework for analyzing different policymaking styles their causes and their consequences in latin america finding that lower institutionalization and greater use of alternative political technologies apts are more likely the lower the cost of using these technologies the higher the potential damage they can cause the lower the wealth of the economy and the more asymmetric the distribution of de jure political power moreover strategic complementarity exists in the use of alternative political technologies for instance bribes by the rich and protests by the poor are likely to be countervailing forces and will both occur in polities with weaker political institutions

student loans do college students borrow too much or not enough total student loan debt rose to over 800 billion in june 2010 overtaking total credit card debt outstanding for the first time by the time this article sees print the continually updated student loan debt clock will show an accumulated total of roughly 1 trillion borrowing to finance educational expenditures has been increasing more than quadrupling in real dollars since the early 1990s the sheer magnitude of these figures has led to increased public commentary on the level of student borrowing the authors move the discussion of student loans away from anecdote by establishing a framework for considering the use of student loans in the optimal financing of collegiate investments from a financial perspective enrolling in college is equivalent to signing up for a lottery with large expected gains indeed the figures presented here suggest that college is on average a better investment today than it was a generation ago but it is also a lottery with significant probabilities of both larger positive and smaller or even negative returns the authors look to available albeit limited evidence to assess which types of students are likely to be borrowing too much or too little

transaction cost economics and cross national patterns of industrial conflict a comparative institutional analysis at the core of a capitalist system is an implied coalition between labor and capital built upon a system of exchange and compromise without capital the material condition upon which labor s interests are realized would be impossible likewise without labor s consent to exchange wages for future investment capital could not procure the profits and savings necessary for its reproduction and transformation organizing stable and cost efficient class coalitions has long been recognized as not merely an economic priority but a political challenge yet some democracies have met this challenge more successfully than others for the student of comparative political economy an enduring question remains why the present study is an attempt to provide an answer that complements and integrates the more common macroand microanalytic studies of industrial conflict it is argued here that a useful approach is to explicate some of the major microeconomic dynamics that condition exchanges between labor and capital and to demonstrate how institutional devices designed to accommodate political representation and conflict resolution facilitate or impede the process of class compromise by employing the logic of transaction cost economics the analysis highlights the comparative institutional elements fundamental to economizing on the costs of exchange shaping consensus within a political economy s industrial relations system the resulting transaction cost efficiency model of industrial conflict specifies the ex ante cost factors price margin of transaction and the institutional control of bounded rationality and the ex post cost factors legislative polarized pluralism executive hegemony and the frequency of general elections central to the process of building and sustaining class coalitions the model is tested on data drawn from 19 democracies covering the years 1965 83 use of simulation models reveals the relative trade offs associated with different patterns of ex ante and ex post cost structures

campaign contributions as a commitment device we explore the idea that the influence of interest groups in elections may have positive economic effects since the investment decisions of firms determine economic growth and employment voters have a common interest in making their governments commit to policies that encourage private investments however governments may renege on promises for economic stability and choose excessively leftist policies campaign contributions by firms tend to restrain the scope for such opportunism and provide a commitment device this is achieved if firms after the policy is chosen contribute to the governing party or to its rivals

capital mobility and coalitional politics authoritarian regimes and economic adjustment in southeast asia this article investigates the coalitional bases of authoritarian rule to explain striking variation in adjustment policy to the asian financial crisis in indonesia and malaysia given currency depreciation with financial sector fragility holders of mobile assets prefer to maintain an open capital account while owners of fixed assets and labor favor restrictions of capital mobility to facilitate expansionary macroeconomic policies differences in adjustment policy across the two countries reflect differences in the political coalitions supporting the authoritarian regimes these findings illuminate the nature of political conflict during financial crises and show how a nuanced view of the coalitions supporting authoritarian rule can yield powerful insights into the political economy of authoritarianism and economic adjustment in a global economy

priceless the nonpecuniary benefits of schooling copyright 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 by the american economic association permission to make digital or hard copies of part or all of american economic association publications for personal or classroom use is granted without fee provided that copies are not distributed for profit or direct commercial advantage and that copies show this notice on the first page or initial screen of a display along with the full citation including the name of the author copyrights for components of this work owned by others than aea must be honored abstracting with credit is permitted the author has the right to republish post on servers redistribute to lists and use any component of this work in other works for others to do so requires prior specific permission and or a fee permissions may be requested from the american economic association administrative office by going to the contact us form and choosing copyright permissions request from the menu copyright 2016 aea

the structure of class conflict in democratic capitalist societies the article presents a theory of class conflict between workers and capitalists who pursue their material interests under a form of societal organization that combines private ownership of instruments of production with representative political institutions there exist economic and political conditions under which both classes would simultaneously choose courses of action that constitute a class compromise workers consent to the institution of profit and capitalists to democratic institutions through which workers can effectively press claims for material gains when these conditions hold and a compromise is in force the role of the state consists in institutionalizing coordinating and enforcing the terms of a compromise that represents the preferences of workers as well as capitalists the combination of private ownership of the instruments of production with representative political institutions based on widespread suffrage constitutes a compromise between workers who consent to the private appropriation of profit by owners of capital and capitalists who accept the democratic institutions through which workers can make effective claims for an improvement of their material conditions this form of societal organization was con

taxation corporate financial policy and the cost of capital the cost of capital plays an important role in the allocation of resources among competing uses in a decentralized market system the purpose of this paper is to organize and present what is known and what is hypothesized about the effects of taxation on the incentive to invest via the cost of capital taking full account of important issues that arise independently from the question of taxation included in the analysis is a discussion of empirical findings about the interaction of inflation and taxation in influencing the incentive to invest and a treatment of taxation and uncertainty this abstract was borrowed from another version of this item

politics and the structural dependence of the state in democratic capitalist nations i explore empirically a central claim of the structural dependence thesis namely that capitalists ability to disinvest fundamentally conditions policy choices in democratic capitalist systems utilizing time series data for 16 affluent democracies from 1965 to 1984 i find that indeed low rates of business investment are associated with reductions in corporate tax burdens and that these reductions are more pronounced in periods of economic crisis moreover low rates of capital formation engender cuts in personal income taxes during periods of economic stress however i also find that the magnitude of responsiveness of taxation to low rates of investment is relatively small and that analyses of the political context of investment and taxation indicate that governments have choices the responsiveness of corporate tax burdens to capital formation may under some governments be part of a policy mix designed to maintain adequate investment and to address the demands of core constituencies

oligopolistic competition and the optimal provision of products this paper considers the theory of market versus optimal product diversity in the light of two recent advances in oligopoly theory the first is the development of discrete choice models to describe heterogeneous consumer tastes and the application of such models to oligopolistic competition the second advance is the proof that logconcavity of the consumer taste density guarantees the existence of a price equilibrium we analyze an oligopoly model with price competition and free entry taking explicit account of the integer constraint under the chamberlinian symmetry assumption that tastes are i i d we first show that logconcavity of the taste density implies there is excessive market provision of variety when each consumer buys one unit of the product from one of the firms we then show that this result extends to price sensitive individual demands by proving that the equilibrium number of firms is at least as great as that which would be provided at the second best social optimum subject to a zero profit constraint for firms our results call into question previous findings for representative consumer models that left open the possibility of insufficient product diversity

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

structural dependence of the state on capital a central claim of both marxist and neoclassical political theory is that under capitalism all governments must respect and protect the essential claims of those who own the productive wealth of society this is the theory of structural dependence of the state on capital using a formal model the internal logic and the robustness of the theory is examined we conclude that in a static sense the theory is false virtually any distribution of consumption between wage earners and owners of capital is compatible with continual private investment once an appropriate set of taxes and transfers is in place yet the state may be structurally dependent in a dynamic sense policies that once in place redistribute income without reducing investment do reduce investment during the period in which they are anticipated but not yet implemented

changes in college skills and the rise in the college wage premium the college wage premium for new labor market entrants rose sharply during the 1980s we ask how much of this change arose from changes in the skill level of the typical college graduate we find that skills attained prior to college as measured by standardized test scores and high school grades had no effect on the change in the college wage premium for men in contrast the returns to math ability rose considerably for women failing to account for math skills thus substantially overstates the growth in the female college wage premium skills acquired in college as reflected in the distribution of students across majors had important effects on the relative wages of men the trend away from low skill subjects such as education and toward high skill subjects such as engineering accounts for one fourth of the rise in the male college wage premium

estimating the variance of wages in the presence of selection and unobserved heterogeneity abstract identification of potential wage distributions by education is important to the study of the causal links between education inequality and uncertainty potential wage inequality within an educational group that is the variance in wages if all workers had the same education exceeds the observed statistics because self selected education truncates wage distributions decomposing potential wage inequality into heterogeneity known to the agent making the educational choice and uncertainty unknown to the agent suggests that wage uncertainty does not necessarily rise with education it is unobserved heterogeneity not uncertainty that explains the observed relationship between college graduation and higher wage inequality

the great recession and credit trends across income groups abstract in this paper we document trends in credit use across income groups in the period surrounding the great recession we investigate trends in access to different credit markets including mortgages home equity automobiles and student loans we disentangle growth rates of new market entrants from the aggregates and analyze overall as well as within county growth rate differentials across income strata our findings may provide insight into the financial well being of different income groups in the context of the great recession

the origins of financial openness a study of current and capital account liberalization theory we assess the determinants of the national regulation of international finance or the comparative degree of national financial openness or closure hypotheses partisanship interacts with a nation s factor endowments to account in part for different international financial policies by governments of the same partisan hue methods we offer a quantitative measure of international financial openness or current and capital account regulation for 21 member countries of the organization for economic cooperation and development for 1950 88 we use regression analysis employing panel corrected standard errors to discover the determinants of financial openness results our main finding is that political partisanship substantially explains openness but does so in complex ways differences in both political institutional arrangements and types of political economy also account for part of the differences in international financial regulation

globalization taxation and burden shifting in latin america most researchers interested in the relationship between global markets and public policy focus on advanced industrial democracies in contrast we examine competing hypotheses as to globalization s effect on governments by expanding the scope of the discussion to include developing nations more specifically we investigate the relationship between international market integration and the evolving burden of taxation on capital as well as the subsequent response of markets to shifts in tax policy in latin america since the late 1970s consistent with our theoretical expectations we find that global market forces are more constraining vis a vis tax policy in latin america than in the world s wealthiest nations despite these market based pressures however national politics continue to influence tax policy in latin america in a manner consistent with findings on advanced industrial democracies as such developing nations continue to have some room to manipulate policy though within the context of a more strictly neoliberal context than their counterparts in advanced industrial democracies

leading the left to the right populist coalitions and economic reform abstract democratic political parties with a history of commitment to statist economic policies face internal stresses when they come to power and preside over programs of wholesale economic liberalization how do such parties and coalitions avoid splintering and manage to maintain electoral support examining the recent experiences of argentina and mexico edward gibson suggests that one can understand these achievements by treating each party as a combination of two separate components performing distinct functions a metropolitan policy component and a peripheral or rural electoral component his framework travels well beyond latin america and helps illuminate the different politics underlying three recent waves of economic liberalization in sri lanka

entry deterrence by non horizontal merger we study when and how pure non horizontal mergers whether cross product or vertical can deter new entry organizational mergers implicitly commit firms to more aggressive price competition because heightened competition deters entry mergers can occur in equilibrium even when absent entry considerations they do not we show that in order to prevent a flood of entrants mergers arise even when a marginal merger costs incumbent firms more than does a marginal entrant

invested interests the politics of national economic policies in a world of global finance capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history this article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking it begins by emphasizing that while financial markets are highly integrated within the developed world many investments are still quite specific with respect to firm sector or location it then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups over the long run increased capital mobility tends to favor owners of capital over other groups in the shorter run owners and workers in specific sectors in capital exporting countries bear much of the burden of adjusting to increased capital mobility these patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration the article then demonstrates that capital mobility also affects the politics of other economic policies most centrally it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument in this context it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability similarly it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one these divisions have important implications for such economic policies as european monetary and currency union the dollar yen exchange rate and international macroeconomic policy coordination