winners and losers in housing markets this paper is a quantitatively oriented theoretical study into the interaction between housing prices aggregate production and household behaviour over a lifetime we develop a life cycle model of a production economy in which land and capital are used to build residential and commercial structures we find that in an economy where the share of land in the value of structures is large housing prices react more to an exogenous change in expected productivity or the world interest rate causing large redistribution effects between net buyers and net sellers of houses changing the financing constraint however has limited effects on housing prices

resolving new keynesian anomalies with wealth in the utility function at the zero lower bound the new keynesian model predicts that output and inflation collapse to implausibly low levels and that government spending and forward guidance have implausibly large effects to resolve these anomalies we introduce wealth into the utility function the justification is that wealth is a marker of social status and people value status since people partly save to accrue social status the euler equation is modified as a result when the marginal utility of wealth is sufficiently large the dynamical system representing the zero lower bound equilibrium transforms from a saddle to a source which resolves all the anomalies

managing without growth abstract there are three main arguments why developed countries should consider managing without growth 1 continued economic growth worldwide is not an option owing to environmental and resource constraints and so developed countries should leave room for growth in developing countries where the benefits of growth are evident 2 in developed countries growth has become uneconomic in the sense that it detracts more from well being than it adds and 3 economic growth in developed countries is neither necessary nor sufficient for meeting specific policy objectives such as full employment no poverty and protection of the environment this paper explores various growth scenarios for canada over the medium range to 2020 using lowgrow a dynamic simulation model after describing lowgrow a scenario is presented that shows conditions under which the rate of unemployment in canada could be reduced to historically low levels poverty eliminated and greenhouse gas emissions reduced to comply with canada s commitment under the kyoto protocol without relying on economic growth this is not to say that zero growth should itself become a policy objective rather that the dependence on and defence of economic growth should not be an obstacle to fulfilling more specific welfare enhancing objectives of full employment eliminating poverty and protecting the environment the paper concludes with some policy implications for managing without growth followed by an annex which provides a technical description of lowgrow

underemployment and normal leisure abstract a combined worksharing layoff wage severance pay contract is shown to imply inter alia that normal leisure and underemployment do coexist provided the elasticity of substitution between employment and hours is sufficiently low as defined rigorously in the text

unionization and input flexibility in u s manufacturing 1973 1996 input flexibility as measured by the ability of firms to vary input demand in the face of changes in input prices is an important dimension of labor market flexibility using a new dataset the authors analyze the impact of unionization on input flexibility in u s manufacturing from 1973 to 1996 a period in which production was arguably becoming more flexible due to deep changes in the u s industrial relations system and in the broad macroeconomic environment the authors quantify the effects of unionization on input flexibility by estimating elasticities of substitution between a broad range of labor and non labor inputs controlling for unionization the pattern that emerges is more complex than that suggested by other research in particular low unionization apparently is associated with greater flexibility in the use of labor inputs but less flexibility in the use of non labor inputs

union wage hours and earnings differentials in the construction industry full information maximum likelihood is used to estimate union wage hours and earnings markups construction union wage markups are positive 58 2 at the sample means since union hours markups are negative 4 0 for most demographic groups union earnings markups 51 1 are smaller than the wage markups all exogenous variables are allowed to interact with the endogenous union dummy variable which allows us to test whether markups vary across demographic groups whether increased local unionization has a positive spillover effect in the nonunion sector and whether increased local unemployment equally affects wages and hours in increased local unemployment equally affects wages and hours in the two sectors

optimal capital income taxation with incomplete markets borrowing constraints and constant discounting for a wide class of infinitely lived agent models chamley has shown that the optimal capital income tax rate is zero in the long run lucas has argued that for the u s economy there is a significant welfare gain from switching to this policy this paper shows that for the bewley class of models with incomplete insurance markets and borrowing constraints the optimal tax rate on capital income is positive even in the long run therefore cutting the capital income tax to zero may well lead to welfare losses

long run welfare under externalities in consumption leisure and production a case for happy degrowth vs unhappy growth in this paper we contribute to the debate on the relationship between growth and well being by examining an endogenous growth model where we allow for externalities in consumption leisure and production we analyze three regimes a decentralized economy where each household makes isolated choices without considering their external effects a planned economy where a myopic planner fails to recognize both leisure and consumption externalities but recognizes production externalities and a planned economy with a fully informed planner we first compare the balanced growth paths under the three regimes and then we numerically investigate the transition to the optimal balanced growth path we provide a number of findings first in a decentralized economy growth or labor or both are greater than in the regime with a fully informed planner and hence are sub optimal from a welfare standpoint second a myopic intervention which overlooks consumption and leisure externalities leads to more growth and labor than in both the decentralized and the fully informed regime third we provide a case for happy degrowth a transition to the optimal balanced growth path that is associated with downscaling of production a reduction in private consumption and an ongoing increase in leisure and well being

are effort bargaining models consistent with the facts an assessment of the early 1980s recent research has attempted to explain the impact of changes in union bargaining of the uk productivity miracle of the 1980s a central part of these explaniations is the concept of effort or working conditions as an observable component of negotiations after reviewing the evidence this paper shiows that in models where effort and wages are jointly negotiated in an environmenit of weakenitig union power a positive effort wage association as observed in the early 1980s in the uk emerges only unider quite special assumptions we show that the stylized facts are better explained by a model where effort and wages are bargained over sequentially

optimal taxation in models of endogenous growth we study the problem of optimal taxation in three infinite horizon representative agent endogenous growth models the first model is a convex model in which physical and human capital are perfectly symmetric our second model incorporates elastic labor supply through a lucas style technology analysis of these two models points out the danger of assuming that government expenditures are exogenous in our third model we include government expenditures as a productive input in capital formation showing that the limiting tax rate on capital is no longer zero in numerical simulations we find similar effects on growth and welfare in all three models

wealth taxation and wealth accumulation theory and evidence from denmark using administrative wealth records from denmark we study the effects of wealth taxes on wealth accumulation denmark used to impose one of the world s highest marginal tax rates on wealth but this tax was greatly reduced starting in 1989 and later abolished due to the specific design of the wealth tax the 1989 reform provides a compelling quasi experiment for understanding behavioral responses among the wealthiest segments of the population we find clear reduced form effects of wealth taxes in the short and medium run with larger effects on the very wealthy than on the moderately wealthy we develop a simple life cycle model with utility of residual wealth bequests allowing us to interpret the evidence in terms of structural primitives we calibrate the model to the quasi experimental moments and simulate the model forward to estimate the long run effect of wealth taxes on wealth accumulation our simulations show that the long run elasticity of taxable wealth with respect to the net of tax return is sizable at the top of the distribution

using elasticities to derive optimal income tax rates this paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates a simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution in the general non linear income tax problem this method using elasticities shows precisely how the different economic effects come into play and which are the key relevant parameters in the optimal income tax formulas of mirrlees the optimal non linear tax rate formulas are expressed in terms of elasticities and the shape of the income distribution these formulas are implemented numerically using empirical earning distributions and a range of realistic elasticity parameters

status intertemporal choice and risk taking this paper takes the position that an individual s concern for relative status is expressed in her preferences we embed this hypothesis in an otherwise conventional model of economic growth and examine its consequences the model generates two kinds of equilibrium in the first all individuals always follow a deterministic consumption and investment strategy such a strategy must be linear in output is independent of payo s and technology and only depends on the discount factor this sort of equilibrium exists when the individual cares only about status and the individual production function is convex in investment in contrast the other kind of equilibrium involves convergence to a steady state in which there is persistent and endogenously generated gambling this kind of equilibrium exists in more plausible circumstances the individual has a utility function that may depend on consumption per se as well as implied status and individual production functions are concave we characterize the unique steady state in such a situation and prove that any dynamic equilibrium path must converge to it risk taking arises not from the presumption of a utility function with strictly convex segments as in friedman savage but naturally from a view of utility as depending on relative status our steady state is broadly consistent with the stylized facts that individuals both insure downside risk and to gamble over upside risk and generates similar patterns of risk taking and avoidance across environments with quite di erent overall wealth levels finally in contrast to friedman 1953 endogenous risk taking here is generally pareto ine cient

how should capital be taxed this survey discusses how capital should be taxed in advanced economies we review the theoretical optimal tax literature survey empirical studies on the distribution of capital and the distortion

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

wealth inequality and intergenerational links previous work has had difficulty generating household saving behaviour that makes the distribution of wealth much more concentrated than that of labour earnings and that makes the richest households hold onto large amounts of wealth even during very old age i construct a quantitative general equilibrium overlapping generations model in which parents and children are linked by accidental and voluntary bequests and by earnings ability i show that voluntary bequests can explain the emergence of large estates while accidental bequests alone cannot and that adding earnings persistence within families increases wealth concentration even more i also show that the introduction of a bequest motive generates lifetime savings profiles more consistent with the data

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

an integration of trade union models in a sequential bargaining framework this paper aims to embed two popular models of trade union behavior the monopoly model and the efficient bargaining model in a more general framework it does this by analyzing sequential bargaining models where wages are determined before employment and the power of the union in the two stages of the bargain differs as well as finding that the monopoly and efficient bargain models are special cases of this model a new class of models is also discovered this framework is used to analyze the relationship between union pow er and efficiency the empirical analysis of trade unions and the effects of trade union legislation copyright 1987 by royal economic society

on the long run evolution of inheritance france 1820 2050 this paper attempts to document and account for the long run evolution of inheritance we find that in a country like france the annual flow of inheritance was about 20 25 of national income between 1820 and 1910 down to less than 5 in 1950 and back up to about 15 by 2010 a simple theoretical model of wealth accumulation growth and inheritance can fully account for the observed u shaped pattern and levels using this model we find that under plausible assumptions the annual bequest flow might reach about 20 25 of national income by 2050 this corresponds to a capitalized bequest share in total wealth accumulation well above 100 our findings illustrate the fact that when the growth rate g is small and when the rate of return to private wealth r is permanently and substantially larger than the growth rate say r 4 5 vs g 1 2 which was the case in the 19th century and early 20th century and is likely to happen again in the 21st century then past wealth and inheritance are bound to play a key role for aggregate wealth accumulation and the structure of lifetime inequality contrarily to a widely spread view modern economic growth did not kill inheritance

choosing the joneses endogenous goals and reference standards a growing economic literature stresses the importance of relative comparisons e g for savings and consumption or happiness in this literature it is usually assumed that reference standards against which people compare themselves are exogenously given in contrast findings from social psychology suggest that people play an active role in determining their reference standards we introduce a social comparison model where people choose their reference standards to serve motives of self improvement and self enhancement the model predicts that reference standards increase in individuals abilities and that people thus tend to compare themselves to similar others the results of a questionnaire study confirm the prediction of the model

hours of work and trade unionism this article is concerned with hours worked per employee in unionized labor markets first the determination of hours is examined in the context of various bargaining models and in the process these models are nested in a general framework then cross section and time series data are drawn on to quantify the effects of unionism on hours worked the time series data from 1920 to 1980 imply a negative impact of unionism on full time hours while cross section data for 1978 suggest some notable differences in both the direction and the magnitude of this impact across occupations and industries

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

inequality and growth in the presence of competition for status abstract we investigate a simple endogenous growth model where agents care about their social status as greater equality tends to provide greater incentives to differentiate oneself redistribution may increase wasteful competitive consumption and lead to lower growth

income inequality in the united states 1913 1998 this paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the united states using individual tax returns data top income and wages shares display a u shaped pattern over the century our series suggest that the large shocks that capital owners experienced during the great depression and world war ii have had a permanent effect on top capital incomes we argue that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks top wage shares were flat before world war ii dropped precipitously during the war and did not start to recover before the late 1960s but are now higher than before world war ii as a result the working rich have replaced the rentiers at the top of the income distribution

a theory of optimal inheritance taxation this paper derives optimal inheritance tax formulas that a capture the key equityeciency trade o b are expressed in terms of estimable sucient statistics c are robust to the underlying structure of preferences we consider dynamic stochastic models with general and heterogeneous bequest tastes and labor productivities we limit ourselves to simple but realistic linear or two bracket tax structures to obtain tractable formulas we show that long run optimal inheritance tax rates can always be expressed in terms of distributional parameters aggregate behavioral elasticities and social preferences for redistribution importantly those results carry over with tractable modications to a the case with social discounting instead of steady state welfare maximization b the case with partly accidental bequests c the standard barro becker dynastic model in all cases the optimal inheritance tax rate increases with the concentration of bequest received and decreases with the elasticity of aggregate bequests to the net of tax rate the optimal tax rate is positive and quantitatively large if concentration is high the elasticity is low and society cares mostly about those receiving little inheritance in contrast the optimal tax rate is negative when society cares mostly about inheritors we propose a calibration using micro data for france and the united states we nd that for realistic parameters

class systems and the enforcement of social norms abstract we analyze a model in which there is socially inefficient competition among people in this model self enforcing social norms can potentially control the inefficient competition however the inefficient behavior often cannot be suppressed in equilibrium among those with the lowest income due to the ineffectiveness of sanctions against those in the society with the least to lose we demonstrate that in such cases it may be possible for society to be divided into distinct classes with inefficient behavior suppressed in the upper classes but not in the lower

overtime pay overtime hours and labor unions this article analyzes the effect of labor unions on overtime compensation and overtime hours estimates from may 1985 current population survey data indicate that unionization increases the prevalence of premium pay for overtime and reduces the incidence and extent of overtime hours along with the finding of previous research that unionized workers are more susceptible to temporary layoffs these results are consistent with a model in which unions use overtime pay to stabilize working hours and expand membership

did lower unionization in the united states result in more flexible industries do unions really impede manufacturers output flexibility if so in what ways the authors propose a methodology for quantifying george stigler s concept of output flexibility and for decomposing the effects of unionization on average cost differences between union and non union plants using a recently compiled data set on u s three digit manufacturing industries from 1973 to 1996 they adapt this methodology to simulate the effects of unionization on flexibility and average costs for average size plants simulation results indicate that higher unionization was associated with higher average costs and lower flexibility than low unionization higher average costs appear to have been primarily due to higher fixed costs such as higher benefits

social status education and growth this paper investigates the implications of social rewards on the allocation of talent in society and consequently on the process of economic growth we consider two sources of heterogeneity among workers nonwage income and innate ability a greater emphasis on status may induce the wrong individuals that is those with low ability and high wealth to acquire schooling causing workers with high ability and low wealth to leave the growth enhancing industries this crowding out effect taken alone discourages growth growth may be enhanced by a more egalitarian distribution of wealth which reduces the demand for status

taxation and migration evidence and policy implications in this article we review a growing empirical literature on the effects of personal taxation on the geographic mobility of people and discuss its policy implications we start by laying out the empirical challenges that prevented progress in this area and then discuss how recent work has made use of new data sources and quasi experimental approaches to credibly estimate migration responses this body of work has shown that certain segments of the labor market especially high income workers and professions with little location specific human capital may be quite responsive to taxes in their location decisions when considering the implications for tax policy design we distinguish between uncoordinated and coordinated tax policy we highlight the importance of recognizing that mobility elasticities are not exogenous structural parameters they can vary greatly depending on the population being analyzed the size of the tax jurisdiction the extent of tax policy coordination and a range of non tax policies while migration responses add to the efficiency costs of redistributing income we caution against over using the recent evidence of sizeable mobility responses to taxes as an argument for less redistribution in a globalized world

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

the choice of the personal income tax base abstract starting with vickrey 1945 and mirrlees 1971 the optimal tax literature has studied the design of a personal income tax the assumed ideal would be to tax earnings ability earnings ability is unobservable for tax purposes however past papers have focused instead on designing a tax on labor income existing tax bases though depend on a broader range of information about each individual than just labor income in principle this supplementary information can help in designing a tax that has more attractive distributional properties by more closely approximating an ability tax the objective of this paper is to lay out theoretically and estimate empirically how to make best use of available information about each individual in addition to earnings in a setting where the first best tax would be an ability tax the theory lays out an equity efficiency trade off when choosing the tax base in the empirical work we find the tax base that is best on equity grounds alone we find that the choice to tax couples based on their joint income and the inclusion of dividends interest income and dependents deduction in the tax base in roughly their current form can be rationalized simply based on their value in better approximating an ability tax without any need for supplementary motivations for these provisions however the inclusion of mortgage and property tax payments in the list of itemized deductions cannot be defended on these grounds

income shifting as income creation abstract income shifting arises as one of the key questions when thinking about the design of a tax system as a whole we study a simple economy involving a benevolent policy maker and a population of agents differing in terms of productivities labor supply elasticities and shifting costs paying special attention to the cost structure of income shifting we highlight that when people who shift easily along the extensive margin are also more elastic in labor supply giving them a lower tax rate is a good thing and the government should not necessarily combat income shifting this mechanism may be compared to third degree price discrimination in industrial organization and works as a form of endogenous tagging we explore this possibility numerically before showing that our results derived for a policy maker optimally adjusting two linear tax instruments carry over when two fully non linear taxes are potentially available

bargaining and shift length abstract we examine the determination of shift length employment and wages in a partial equilibrium bargaining framework using the nash bargaining solution a number of clearcut results are obtained perhaps the most interesting of which concern the effects of changes in demand on shift length in two of the cases examined hours worked are invariant with respect to an increase in demand whilst in a third shift length actually falls

nonlinear capital taxation without commitment we study efficient nonlinear taxation of labor and capital in a dynamic mirrleesian model incorporating political economy constraints policies are chosen sequentially over time without commitment our main result is that the marginal tax on capital income is progressive in the sense that richer agents face higher marginal tax rates

economic and social class voting in a model of redistribution with social concerns we investigate how concerns about social status may affect individuals preferences for redistribution in our model agents are heterogeneous across two dimensions productivity and social class and an individual s social status is de ned as his relative standing in terms of a weighted average of these two components the weight on each component depends positively on its standard deviation redistribution thus simultaneously affects labor supply and the weights that determine social status as such taxation not only redistributes resources from the rich to the poor but also becomes a way of preserving or modifying social status thus individuals who have the same productivity but belong to different social classes support different tax rates we characterize the equilibrium of the political game as the solution of a system of non linear equations and identify the interclass coalition of voters who support the equilibrium tax rate

a simpler theory of optimal capital taxation abstract this paper develops a theory of optimal capital taxation that expresses optimal tax formulas in sufficient statistics we first consider a simple model with utility functions linear in consumption and featuring heterogeneous utility for wealth in this case there are no transitional dynamics the steady state is reached immediately and has finite elasticities of capital with respect to the net of tax rate this allows for a tractable optimal tax analysis with formulas expressed in terms of empirical elasticities and social preferences that can address many important policy questions these formulas can easily be taken to the data to simulate optimal taxes which we do using u s tax return data on labor and capital incomes second we show how these results can be extended to the case with concave utility for consumption the same types of formulas carry over by appropriately defining elasticities we show that one can recover all the results from the simpler model using a new and non standard steady state approach that respects individual preferences even with a fully general utility function

running to keep in the same place consumer choice as a game of status if individuals care about their status defined as their rank in the distribution of consumption of one positional good then the consumer s problem is strategic as her utility depends on the consumption choices of others in the symmetric nash equilibrium each individual spends an inefficiently high amount on the status good using techniques from auction theory we analyze the effects of exogenous changes in the distribution of income in a richer society almost all individuals spend more on conspicuous consumption and individual utility is lower at each income level in a more equal society the poor are worse off

moving costs nondurable consumption and portfolio choice the substantial adjustment cost for housing affects nondurable consumption and portfolio allocations as well as the frequency of housing transactions a simple theoretical model roughly calibrated is used to assess the quantitative impact of adjustment costs on those decisions the impact on portfolios is found to be significant suggesting that housing wealth should be useful in empirical studies of portfolio choice the welfare loss from the transaction cost is also substantial the effect on nondurable consumption is small however so adjustment costs can explain only a small part of the equity premium puzzle

layoff unemployment risk shifting and productivity this paper is concerned with the theory of implicit labor contracts the implications of introducing hours worked or effort as an argument both in workers utility functions in addition to the wage rate and in firms production functions in addition to the number of workers are considered it is shown that layoffs can occur at equilibrium in the absence of unemployment compensation and value of leisure but only because of the inclusion of this additional variable

optimal indirect and capital taxation we consider an environment in which agents skills are private information and follow arbitrary stochastic processes we prove that it is typically pareto optimal for an individual s marginal benefit of investing in capital to exceed his marginal cost of doing so this wedge is consistent with a positive tax on capital income we also prove that it is pareto optimal for the marginal rate of substitution between any two consumption goods to equal the marginal rate of transformation this lack of a wedge is consistent with uniform taxation of consumption goods within a period

de growth and welfare in an equilibrium model with heterogeneous consumers this paper studies equilibrium growth and voluntary degrowth allowing for heterogeneous and time varying preferences the approach is based on applying a dynamic equilibrium model with externalities in production consumption and leisure preference heterogeneity regarding status competition is modeled by asymmetric consumption externality parameters whereas heterogeneity regarding voluntary simplicity is incorporated by allowing for agent specific restrictions on maximum consumption equilibrium is studied in terms of a balanced growth path bgp numerical examples suggest that degrowth triggered by voluntary simplicity by a subset of consumers less affected by status competition has a positive effect on the aggregate welfare under externalities in consumption and leisure a reduction in status competition increases the aggregate welfare and reduces the equilibrium growth rate simulations suggest that a time varying equilibrium in the heterogeneous preference model with two consumer classes is well approximated by a constant bgp

tax evasion and swiss bank deposits bank deposits in jurisdictions with banking secrecy constitute an eective tool to evade taxes on interest income a recent eu reform reduces the scope for this type of tax evasion by introducing a source tax on interest income earned by eu residents in switzerland and several other jurisdictions with banking secrecy in this paper we estimate the impact of the source tax on swiss bank deposits held by eu residents while using that non eu residents were not subject to the tax to apply a natural experiment methodology we nd that the 15 source tax caused swiss bank deposits of eu residents to drop by more than 40 with most of the response occurring in two quarters immediately before and after the source tax was introduced the estimates imply an elasticity of swiss deposits with respect to the net of source tax rate in the range 2 5 3

contracts job experience and cyclical labor market adjustments longitudinal estimates of the variability of individual wages hours and weeks worked over the course of changing demand states are provided for all workers generally and for workers of varied levels of job experience emphasis is placed on that part of job experience represented as years on current job a commonly used proxy for the magnitude of firm specific skills interpretation of resulting estimates in the context of the labor market contracting literature is attempted generally significant procyclical patterns are found for real weekly wages weekly hours and weeks worked the extent of weekly wage variability is much greater than is generally suggested in the literature furthermore workers with greater tenure exhibit greater cyclical wage and hours variability and less weeks variability finally empirical distinctions are drawn separately for white collar and blue collar as well as union and nonunion workers

women wealth and mobility using estate tax returns data we observe that the share of women among the very wealthy in the united states peaked in the late 1960s at nearly one half and then declined to one third we argue that this pattern reflects changes in the importance of dynastic wealth with the share of women proxying for inher ited wealth if so wealth mobility decreased until the 1970s and rose thereafter such an interpretation is consistent with technological change driving long term trends in mobility and inequality as well as the recent divergence between top wealth and top income shares documented elsewhere jel d31 j16 j62 033 the extent of and changes in intergenerational mobility of wealth are central to understanding dynamics of wealth inequality but are hard to measure in this paper we argue that the share of women among the wealthiest americans can be used as a proxy for the importance of inherited rela tive to self made wealth this approach assumes that women tend to inherit rather than make great fortunes if so a higher share of women among the wealthy would reflect a rise in inherited wealth at the top and thus lower wealth mobility conversely higher wealth mobility where self made wealth replaces inherited wealth would result in more men at the top of the wealth distribution judged by this proxy and corroborated by various data sources wealth mobility decreased in the period 1925 1969 and increased thereafter such a pattern is consistent with an important role for technological change in shaping the wealth distribution and can provide an explanation for why wealth concentra tion has remained stable despite increasing income concentration in the last three decades over the past century the share of women among the very wealthy followed an inverse u pattern peaking in the late 1960s according to estate tax returns in 1925 one quarter of the wealthiest 0 01 percent were women this fraction rose rapidly through world war ii wwii and then more slowly to peak in 1969 when women neared parity with men since then the decline has been marked by 2000 women s share had fallen to one third its prewar level while the rise was evident among all wealth groups in the top 1 percent of the wealth distribution the decline was confined to the very top figure ia graphs the share of women for four different groups in the top 1 percent among decedents by year figure ib does the same for the living population with the help of estate multipliers a method that treats death as a random sampling device and uses mortality rates by age and gender to infer the distribution of wealth among the living as described in the data appendix while the rise in the share of women among the wealthy until the 1960s could reflect improve ments in women s economic status labor market gains work against the recent decline for instance since the 1970s the share of women among top earners top 0 1 percent has risen by

how progressive is the u s federal tax system a historical and international perspective this paper provides estimates of federal tax rates by income groups in the united states since 1960 with special emphasis on very top income groups we include individual and corporate income taxes payroll taxes and estate and gift taxes the progressivity of the u s federal tax system at the top of the income distribution has declined dramatically since the 1960s this dramatic drop in progressivity is due primarily to a drop in corporate taxes and in estate and gift taxes combined with a sharp change in the composition of top incomes away from capital income and toward labor income the sharp drop in statutory top marginal individual income tax rates has contributed only moderately to the decline in tax progressivity international comparisons confirm that is it critical to take into account other taxes than the individual income tax to properly assess the extent of overall tax progressivity both for time trends and for cross country comparisons the pattern for the united kingdom is similar to the u s pattern france had less progressive taxes than the united states or the united kingdom in 1970 but has experienced an increase in tax progressivity and has now a more progressive tax system than the united states or the united kingdom

why isn t growth making us happier utility on the hedonic treadmill abstract a preference structure is constructed grounded in psychological evidence with well being a function of the consumption level and the growth of the variety of goods consumed such preferences are analyzed in an endogenous variety growth model the implications are consistent with the increase in income and the variety of goods consumed in developed economies in the post war period that have not been accompanied by an increase in reported well being moreover the results suggest a connection between the stagnancy of reported well being and diminishing returns in technological change despite an increase in the variety of goods available over time

adjustment costs firm responses and micro vs macro labor supply elasticities evidence from danish tax records we show that the effects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by firms we develop a model in which firms post job offers characterized by an hours requirement and workers pay search costs to find jobs we present evidence supporting three predictions of this model by analyzing bunching at kinks using danish tax records first larger kinks generate larger taxable income elasticities second kinks that apply to a larger group of workers generate larger elasticities third the distribution of job offers is tailored to match workers aggregate tax preferences in equilibrium our results suggest that macro elasticities may be substantially larger than the estimates obtained using standard microeconometric methods

comparing with the average reference points and market reactions to above average earnings surprises abstract we examine whether the average earnings surprises announced yesterday affect investors responses to earnings news announced today we find that in the short window surrounding an earnings announcement the market rewards today s earnings news that is above yesterday s average earnings surprises with a premium consistent with yesterday s average becoming a reference point for investors to classify today s earnings news as a gain or a loss the price premium for an above average earnings surprise is larger when more earnings announcements are made on the same day and when investors face greater uncertainty in assessing firms performance we interpret this evidence as suggesting that investors rely more on the average as a reference point when they are more likely to be subject to cognitive constraints in processing information we also find that firms announcing above average earnings surprises exhibit a greater abnormal trading volume consistent with the notion that beating reference points prompts investors to trade

are we consuming too much this paper articulates and applies frameworks for examining whether consumption is excessive we consider two criteria for the possible excessiveness or insufficiency of current consumption one is an intertemporal utility maximization criterion actual current consumption is deemed excessive if it is higher than the level of current consumption on the consumption path that maximizes the present discounted value of utility the other is a sustainability criterion which requires that current consumption be consistent with non declining living standards over time we extend previous theoretical approaches by offering a formula for the sustainability criterion that accounts for population growth and technological change in applying this formula we find that some poor regions of the world are failing to meet the sustainability criterion in these regions genuine wealth per capita is falling as investments in human and manufactured capital are not sufficient to offset the depletion of natural capital

the case for a progressive tax from basic research to policy recommendations the fair distribution of the tax burden has long been a central issue in policyhe fair distribution of the tax burden has long been a central issue in policymaking a large academic literature has developed models of optimal tax making a large academic literature has developed models of optimal tax theory to cast light on the problem of optimal tax progressivity in this theory to cast light on the problem of optimal tax progressivity in this paper we explore the path from basic research results in optimal tax theory to paper we explore the path from basic research results in optimal tax theory to formulating policy recommendations formulating policy recommendations models in optimal tax theory typically posit that the tax system should maximize a models in optimal tax theory typically posit that the tax system should maximize a social welfare function subject to a government budget constraint taking into account social welfare function subject to a government budget constraint taking into account that individuals respond to taxes and transfers social welfare is larger when resources that individuals respond to taxes and transfers social welfare is larger when resources are more equally distributed but redistributive taxes and transfers can negatively are more equally distributed but redistributive taxes and transfers can negatively affect incentives to work save and earn income in the fi rst place this creates the clasaffect incentives to work save and earn income in the fi rst place this creates the classical trade off between equity and effi ciency which is at the core of the optimal income sical trade off between equity and effi ciency which is at the core of the optimal income tax problem in general optimal tax analyses maximize social welfare as a function of tax problem in general optimal tax analyses maximize social welfare as a function of individual utilities the sum of utilities in the utilitarian case the marginal weight for individual utilities the sum of utilities in the utilitarian case the marginal weight for a given person in the social welfare function measures the value of an additional dollar a given person in the social welfare function measures the value of an additional dollar of consumption expressed in terms of public funds such welfare weights depend on of consumption expressed in terms of public funds such welfare weights depend on the level of redistribution and are decreasing with income whenever society values the level of redistribution and are decreasing with income whenever society values more equality of income therefore optimal income tax theory is fi rst a normative more equality of income therefore optimal income tax theory is fi rst a normative theory that shows how a social welfare objective combines with constraints arising from theory that shows how a social welfare objective combines with constraints arising from limits on resources and behavioral responses to taxation in order to derive specifi c limits on resources and behavioral responses to taxation in order to derive specifi c

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

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

veblen effects in a theory of conspicuous consumption the authors examine conditions under which veblen effects arise from the desire to achieve social status by signaling wealth through conspicuous consumption while veblen effects cannot ordinarily arise when preferences satisfy a single crossing property they may emerge when this property fails in that case budget brands are priced at marginal cost while luxury brands though not intrinsically superior are sold at higher prices to consumers seeking to advertise wealth luxury brands earn strictly positive profits under conditions that would with standard formulations of preferences yield marginal cost pricing the authors explore factors that induce veblen effects and they investigate policy implications copyright 1996 by american economic association

status effects and negative utility growth this paper explains the observed stagnation of happiness measures through a growth model in which agents care about conspicuous consumption normal goods confer direct utility while status goods confer utility only at the expense of others firms can improve the quality of both goods through r d the nash equilibrium of the consumer game results in the share of expenditure on status goods increasing with the number of times the status good has been improved as the economy grows resources for innovation are transferred entirely to status good r d the resulting long run rate of utility growth is negative

unipolarity status competition and great power war most scholars hold that the consequences of unipolarity for great power conflict are indeterminate and that a power shift resulting in a return to bipolarity or multipolarity will not raise the specter of great power war this article calls into question the core assumptions underlying the consensus 1 that people are mainly motivated by the instrumental pursuit of tangible ends such as physical security and material prosperity and 2 that major powers satisfaction with the status quo is relatively independent of the distribution of capabilities in fact it is known that people are motivated powerfully by a noninstrumental concern for relative status and there is strong empirical evidence linking the salience of those concerns to distributions of resources if the status of states depends in some measure on their relative capabilities and if states derive utility from status then different distributions of capabilities may affect levels of satisfaction just as different income distributions may affect levels of status competition in domestic settings building on research in psychology and sociology the author argues that even capabilities distributions among major powers foster ambiguous status hierarchies which generate more dissatisfaction and clashes over the status quo and the more stratified the distribution of capabilities the less likely such status competition is unipolarity thus augurs for great power peace and a shift back to bipolarity or multipolarity raises the probability of war even among great powers with little material cause to fight

how responsive is investment in schooling to changes in redistributive policies and in returns this paper uses an unusual pay reform to test the responsiveness of investment in schooling to changes in redistribution schemes that increase the rate of return to education we exploit an episode where different israeli kibbutzim shifted from equal sharing to productivity based wages in different years and find that students in kibbutzim that reformed earlier invested more in high school education and in the long run also in post secondary schooling we further show that the effect is mainly driven by students in kibbutzim that reformed to a larger degree our findings support the prediction that education is highly responsive to changes in the redistribution policy

generalized social marginal welfare weights for optimal tax theory this paper proposes to evaluate tax reforms by aggregating money metric losses and gains of different individuals using generalized social marginal welfare weights optimum tax formulas take the same form as standard welfarist tax formulas by simply substitut ing standard marginal social welfare weights with those generalized weights weights directly capture society s concerns for fairness without being necessarily tied to individual utilities suitable weights can help reconcile discrepancies between the welfarist approach and actual tax practice as well as unify in an operational way the most prominent alternatives to utilitarianism such as libertarianism equality of opportunity or poverty alleviation jel d60 d63 h21 h23 i38