the great recession and the bulimia of us consumers deep causes and possible ways out this paper focuses on the apparent bulimia of us consumers and its role in the recent crisis we seek to show how various characteristics of american society and the us economy are related to this phenomenon we illustrate some structural features of the us economy and public policies that may have created a difference in terms of patterns of consumption and market participation between the usa and continental europe we then present some explanations of us hyperconsumerism put forward by psychologists and sociologists thus relating this phenomenon to the decline in subjective well being and social capital documented in the usa we also discuss how the negative endogenous growth paradigm may help to account for it finally we review the debate on the us policy agenda by underlining some weaknesses in the two politically more realistic options and by outlining a third policy strategy which is possibly preferable for people s long term well being

micro incentives and municipal behavior political decentralization and fiscal federalism in argentina and mexico summary this article analyzes the mixed results of political and fiscal decentralization in latin america by comparing taxing and spending policies in six cities in argentina and mexico consistent with previous studies we find that decentralization has been frustrated by overconcentration of power at the provincial level and large vertical fiscal imbalances though we characterize these as functional elements in a system of redistributive policy making that benefits a wide array of provincial and municipal actors we seek to add a new dimension to the literature by arguing that micro level incentives conditions and circumstances particular to specific places are more important determinants of municipal behavior than macro level structures those policy and institutional changes intended to make officials more responsive to local conditions federalism local elections intergovernmental transfers and own source revenues we conclude that the theory of decentralization relies on a flawed conception of the causal mechanisms that are hypothesized to create responsiveness in local officials

resource allocation affluence and deadweight loss when relative consumption matters abstract we explore the link between affluence and well being using a simple general equilibrium model with a pure veblen good individuals derive utility from the pure veblen good based solely on how much they consume relative to others in equilibrium consumption of the pure veblen good is the same for everyone so the veblen good contributes nothing to utility hence resources devoted to the veblen good provide us with a measure of deadweight loss we ask under what preference conditions does the proportion of productive capacity devoted to the pure veblen good increase as an economy becomes more affluent in a relatively general preference framework we derive a sufficient condition for which the veblen good crowds out standard forms of consumption and leisure resulting in an inverse relationship between affluence and utility with additional structure on the model we are able to fully characterize the behavior of deadweight loss and utility as an economy becomes more affluent

income distribution and environmental quality in china a spatial econometric perspective abstract paying heed to a surge of concern about the serious and continuous environmental degradation that is currently being witnessed in china in this paper we investigate whether income distribution contributes to environmental deterioration environmental degradation can be linked not only to income growth we argue but also to increases in income inequality the study calculated the gini coefficient of 31 province using a data set of 403 city level data in mainland china and estimated the linkage between income distribution and environmental deterioration utilizing balanced data for 31 chinese provinces during the period 1996 2015 first the degree of environmental pollution was calculated by constructing a comprehensive index system which was formulated using the entropy method based on six environmental indicators then a spatial panel regression model was also employed in order to estimate whether income inequality is likely to be a relevant factor in environmental deterioration in china the estimation results showed that using the index and spatial analysis techniques significant spatial positive agglomeration were found existing between chinese provinces in terms of their levels of environmental degradation the influencing factors estimation results substantiated the existence of an invert u shaped relation lending support to the environmental kuznets curve theory more importantly the study found that income inequality played a significant role in preventing environmental degradation suggesting that an appropriate level of income inequality over a delimited period is beneficial to improving environmental quality it should however also be emphasized that optimizing the country s income distribution is remains an important long term task for the chinese government other factors were found to exert different types and magnitudes of impacts on environmental pollution results showed that many factors for instance energy intensity the share of secondary industry population density and foreign direct investment contribute to environmental deterioration conversely our findings also indicate that rising urbanization levels can have a positive effect on environmental quality in addition no clear evidence was found to suggest that local government expenditure is related to environmental degradation

the labour market in the new information economy the extension of information and communication technologies to economic activity is changing the labour market in important ways this article shows that computerization and use of the internet are associated with greater hours worked as well as higher wages that it occupations are rapidly increasing their share of employment that job search and recruitment are moving rapidly to the web with consequences for matching employers and employees and possibly most important of all that trade unions have begun to use the internet as a tool for servicing members and carrying their message to the public raising the possibility of a major change in the nature of the union movement

foreign direct investment in mexico a cointegration analysis this article addresses the important question of whether foreign direct investment enhances economic growth and labour productivity in mexico both from a theoretical and empirical perspective after briefly reviewing the mexican experience with net fdi inflows during the 1990s the article presents a simple endogenous growth model which explicitly incorporates any positive negative externalities generated by additions to the foreign capital stock using cointegration analysis the article estimates a dynamic labour productivity function for the 1960 95 period that includes the impact of the growth rate in the stocks of both private and foreign capital as opposed to the flows and the economically active population eap rather than the rate of population growth the error correction model ecm estimates suggest that increases in both private ad lagged foreign investment spending as well as the rate of growth in exports have a positive and economically significant effect on the rate of labour pr

a rentier theory of subnational regimes fiscal federalism democracy and authoritarianism in the argentine provinces levels of subnational democracy vary significantly within countries around the world drawing on fiscal theories of the state the author argues that this variance is often explained by a type of rentierism that is not geographically determined by natural resources but politically created by certain fiscal federalism arrangements he posits that less democratic regimes are more likely in rentier provinces those that receive disproportionately large central government transfers and practically forgo local taxation intergovernmental revenue sharing rules that produce large vertical fiscal imbalances and favor the economically smaller districts provide their incumbents with generous fiscal federalism rents that allow them to restrict democratic contestation and weaken checks and balances statistical evidence from a panel data set of the argentine provinces strongly confirms this expectation even after controlling for standard alternative explanations such as level of development sensitivity analysis shows that this finding is extremely robust to alternative panel estimators qualitative and quantitative evidence suggests that the effect of heavy public spending on the economic autonomy of political actors is the main causal mechanism at work

consumption externalities and monetary policy with limited asset market participation this article explores the interaction between consumption externalities and limited asset market participation lamp in the standard new keynesian model we assess the performance of simple taylor type interest rate rules with respect to a equilibrium determinacy b the model s ability to simultaneously generate output and inflation volatility similar to the pre volcker era and c the model s response to a technology shock we find that when individual preferences are affected by average household consumption aggregate consumption externality stronger externalities increase the range of lamp for which multiple equilibria arise even if the policy rule satisfies the taylor principle the interaction of lamp and externalities can generate vast inflation output relative volatility in line with the one observed in the data in the 1970s according to our analysis consumption externalities also affect the responses of endogenous variables to total factor productivity shocks jel e4 e5

income inequality and co2 emissions in the g7 1870 2014 evidence from non parametric modelling abstract we examine whether income inequality effected carbon emissions in what are now the world s wealthiest countries over the period 1870 2014 employing a non parametric panel estimation method with cross sectional and time varying coefficients we find that the relationship between income inequality and co2 emissions is highly non linear in terms of signs and significance the nonparametric coefficient function for income inequality is found to vary over the period 1870 2014 income inequality exhibits a significant positive effect from 1870 to 1880 and a significant negative impact from 1950 to 2000 on co2 emissions we also find that for extended periods between 1881 and 1949 and between 2000 and 2014 there is no significant relationship between the two variables

a wallet full of calories the effect of financial dissatisfaction on the desire for food energy this study shows that people experiencing financial dissatisfaction may choose and consume food for its energy value because money and food are closely related exchangeable resources financially dissatisfied people may be motivated to replenish their need for financial resources by consuming caloric resources or food energy five experiments provide support for this hypothesis across various measures of caloric desire and actual eating behavior the findings have notable implications for marketing and public policy whereas marketing researchers have increasingly investigated the interplay of taste and health considerations in food consumption this research demonstrates the importance of investigating food energy considerations

altruism jealousy and the theory of optimal non linear taxation abstract this paper studies optimal non linear taxes in a world in which there is altruism and jealousy a formula for optimal marginal tax rates is derived which turns out to be a simple and intuitively appealing extension of a result due to mirrlees the paper shows that in this sort of economy all of optimal tax theory s general results either no longer hold or need not hold and it sets out appropriate modifications to standard tax rules

the causal relationship between information and communication technology and foreign direct investment this paper investigates the simultaneous causal relationship between investments in information and communication technology ict and foreign direct investment fdi with reference to its implications on economic growth for the empirical analysis we use data from 23 major countries with heterogeneous economics development for the period 1976 99 the results of unit roots and johansen co integration tests indicate variations in degrees of integration among the sample countries our causality test results suggest that there is a causal relationship from ict to fdi interpreted as the higher level of ict investment leads to increased inflow of fdi ict contributes to economic growth indirectly by attracting more foreign direct investment in developed countries there already exist a build up ict capacity which causes inflow of fdi while in developing countries ict capacity must be build up to attract fdi the inflow of fdi causes further increases in ict investment and capacity

foreign direct investment exports and imports in mexico this paper analyses the liberalisation of foreign direct investment fdi in mexico since the late 1980s and its relationships with exports and imports such a process has eased the access of multinational corporations mncs to the country which has promoted exports however it has also resulted in a higher import content and the displacement of local firms which has limited mexico s economic development through the balance of payments constraint the analysis is supported by the existence of linkages bidirectional granger causality between exports imports and fdi

top incomes in germany and switzerland over the twentieth century this paper presents new homogeneous series on top income shares in germany 1891 1998 and switzerland 1933 1995 using data from income tax returns the general pattern is consistent with recent results for france the secular decline in income inequality is for the most part an accidental capital income phenomenon very top incomes were badly hurt by the major shocks of the 1914 1945 period and never fully recovered afterwards since 1945 top income shares have been relatively stable with no rise during recent years unlike in the u s the striking episode before wwii is how nazi power brought top income shares to almost double within five years the striking result after wwii is that german top incomes are more concentrated within the top decile than in other industrialized countries thus the german super rich were richer than their american counterparts until the 1990s this puzzle is related to the much lower inheritance tax rates observed in germany since wwii jel n33 n34 h23 h24 h23 h24 h23 h24 h23 h24

intra and inter industry externalities from foreign direct investment in the mexican manufacturing sector new evidence from mexican regions summary this paper presents new empirical evidence on externalities from foreign direct investment fdi in several mexican regions in the early 1990s the main findings are threefold first the presence of fdi creates negative externalities within industries and positive externalities between industries through backward linkages second fdi externalities are stimulated by large technological differences between fdi and mexican firms and by geographic concentration of industries third we identify a substantial level of regional heterogeneity of the externality impact of fdi in line with the notion that fdi may have contributed to processes of changing regional prosperity under trade liberalization the findings also imply that maquiladora firms in the border states are generating positive externalities

optimal emissions tax rates under habit formation and social comparisons abstract the existing climate models ignore the behavioral anomalies of households and conclude that the optimal environmental tax rate should comove with business cycles however this assumption has received extensive criticism recently to this end this paper studies the optimal emissions tax rate when households are bounded rational in particular we calculate the optimal climate policy in a dynamic stochastic general equilibrium dsge model that features households with habit formation internal habits and social comparisons external habits compared to the benchmark model without consumption externality the social comparisons model amplifies consumption volatility but produces a similar response of pollutant emissions in the presence of the three types of economic shocks considered in contrast the habit formation model decreases the volatility of both consumption and pollutant emissions in contrast to the previous result that the optimal emissions tax rate should be procyclical we find that the social comparisons model largely mitigates the procyclicality of optimal emissions tax rates and the optimal emissions tax rates under the habit formation model remain constant in response to all the economic shocks considered

is local beautiful fiscal decentralization in mexico summary in this study we present evidence from mexico regarding the weak effectiveness of federal transfers and low absorption capacity of sub national governments in poor areas when political opportunistic behavior is present we show that the distribution of conditional transfers is discretionary due to a monitoring problem and deficiency in institutional frameworks this may be the cause for opportunistic behavior by political elites the results suggest that more funds are distributed to areas with more voters in addition localities with a higher number of swing voters also receive more resources these results show that the poorest populations receive the least amount of money from the community based development funds

did inequality cause the u s financial crisis in his widely discussed book fault lines 2010 raghuram rajan argues that many low and middle income consumers have reduced their saving and increased debt since income inequality started to soar in the united states in the early 1980s this has temporarily kept private consumption and employment high but it also contributed to the creation of a credit bubble this surge in household indebtedness turned out to be unsustainable in the financial crisis starting in 2007 although rajan and others emphasize the role of government in promoting credit to those households with declining relative permanent incomes other strands of the literature have focused more explicitly on the implications of rising inequality for aggregate demand and households demand for credit these differences in emphasis may explain why the literature on the inequality crisis nexus appears somewhat disparate even though the various strands are far from mutually exclusive but rather complement each other we therefore place the rajan hypothesis in the context of competing theories of consumption and survey the empirical literature on the effects of inequality on household behaviour we conclude that the empirical evidence calls for a renaissance of the relative income hypothesis of consumption

thorstein veblen on credit and economic crises the aim of this paper is to provide an interpretation of veblen s theory of economic crises based on the view that banking policy is a major factor in generating crises it will be shown that in veblen s thought crises may emerge due to the banking system s non accommodating behaviour according to the following sequence as firms are not homogeneous the credit system spontaneously tends to help bigger firms increase in size due to the increase in their capital turnover which allows them to produce and sell before their competitors this produces two effects i the reduction in profits of the smaller firms or their bankruptcy generates a decline of employment and output while at the same time ii the increase in the industrial concentration ratio produces a rise in prices and a consequent drop in real wages this in turn reduces total demand for consumption goods thus worsening entrepreneurs expectations and having an adverse effect on production and investment by firms

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

the role of exports fdi and imports in development evidence from sub saharan african countries the disappointing economic performance of sub saharan african ssa economies in the late 1980s prompted reforms in foreign trade and foreign direct investment fdi in the early 1990s using the autoregressive distributed lag ardl approach and pedroni panel estimation procedures that allow for heterogeneity this study found that exports and fdi have a significant impact on economic growth granger type causality tests show the interrelatedness of exports fdi imports and income variables the results also provide evidence of a two stage causal chain of exports imports and income this article calls for more market oriented policy reforms in ssa countries

the politics of federalism in argentina and its implications for governance and accountability summary this paper contributes to an agenda that views the effects of federalism and decentralization as dependent on the incentives of national and subnational political actors it studies the mechanisms by which subnational actors affect decisions at the central level in the context of a highly decentralized middle income democracy argentina in this federal country provincial actors and concerns weigh heavily on national decisions most argentine provinces are dominated by entrenched elites with limited political competition weak division of powers and clientelistic political linkages provincial dominance and national relevance reinforce each other dragging argentine politics toward the practices and features of its most background regions

poverty alleviation in federal systems the case of mexico the function of poverty relief has been the subject of debate in terms of the tier of government that should perform it on the one hand some of the literature in the economics and political science fields argues that this function should be federal because of factor mobility on the other hand because of the distance factor which makes citizens more sensitive to poverty others argue that it should a subnational responsibility finally others in both fields argue that it is more accurate to view the recent trends witnessed in developing countries as delegation of service delivery by the central government to different sets of agents the fact is that the different levels of government across countries intervene in this government obligation this paper employs the case of mexico to test the different implications of the theories this country is studied because it decentralized this activity in 1998 and thus it is subject to evaluation the results suggest that decentralizing the poverty relief function has not delivered results thus they suggest that this task should be a national one however the reason for this is the lack of political accountability at the subnational level and not mobility that is when accountability is introduced a subnational government may in fact perform well

how relative income affects work hours preferences abstractin this article we look at explanations for why people want to change their working hours we focus on the role of income and differentiate between the effect of household income personal

internal and international migration in mexico 1995 2000 using micro data from mexico and us 2000 population censuses and following a multi choice variant of roy s 1951 model this article pools into one model the determinants of internal and international migration in mexico while paying explicit attention to the potential problem of self selection the results reveal that ignoring multiple destinations in the migration decision might lead to erroneous inferences about the determinants of migration and the type of selection after controlling for wage differences the results suggest that single adult men with low schooling levels tend to migrate to the us while married women and men with higher levels of schooling tend to migrate within mexico we also found that there are strong differences between domestic and international social networks

fiscal decentralization and economic growth abstract fiscal decentralization may indeed have a direct impact on economic growth but the theoretical underpinnings for this relationship remain largely undeveloped a fair summary of the empirical search for a direct relationship between fiscal decentralization and economic growth is that it remains an open question much less attention has been devoted in the literature to the indirect channels through which fiscal decentralization may affect economic growth we argue that much work remains to be done before policy advisors and decision makers can formulate and implement decentralization programs on the basis of improving the rate of economic growth

federalism as a commitment to reserving market incentives the authors advance a new perspective in the study of federalism their approach views federalism as a governance solution of the state to credibly preserving market incentives market incentives are preserved if the state is credibly prevented from compromising on future economic success and from bailing out future failures the salient features of federalism decentralization of information and authority and interjurisdictional competition help provide credible commitment or these purposes in addition the authors suggest that some federalism are self sustaining

when do elections encourage ideological rigidity elected officials are commonly accused of being ideologically rigid or failing to alter their positions in response to relevant policy information we examine this phenomenon with a theory in which politicians have private information about their ideological leanings and expected policy consequences the theory shows that in many circumstances the informational differences create a context in which elections induce ideological rigidity correspondingly elections often fail to provide incentives for information based moderation in which both left and right leaning politicians become more likely to use policy information these seemingly perverse incentives occur because politicians wish to signal that they share voters leanings indeed the motivation to signal preference similarity can induce rigidity even when voters want politicians to be responsive to new information we show that such incentives for rigidity are greater when voters have less information about policy and politicians preferences and discuss possible tests of these predictions

patterns of work across the oecd market work per person of working age differs widely across the oecd countries and there have been some significant changes in the last forty years how to explain this pattern taxes are part of the story but much remains to be explained if we include all the elements of the social security systems like early retirement benefits sickness and disability benefits and unemployment benefits then we can capture some aspects of the overall pattern but still a lot remains unexplained the story favoured by alesina et al cepr dp 5140 2005 is that the nexus of strong unions generous welfare and social democracy implies both high taxes and pressure in favour of work sharing in response to adverse shocks this story however falls foul of the simple fact that most scandinavian countries now do much more work than the french and germans despite having stronger unions more generous welfare higher taxes and more social democracy ultimately we are forced into the position that there is no simple story some of the broad patterns can be explained but there remain country specific factors which are hard to identify but lead to substantial differences from one country to another

growth sectoral composition and the evolution of income levels abstract we assert that the endowments of production factors cause cross country differences in gdp by generating disparities in the sectoral composition we characterize the dynamic equilibrium of a two sector endogenous growth model with several consumption goods that are subject to minimum consumption requirements in this model economies with the same fundamentals but different endowments of capitals will end up growing at a common rate although the long run sectoral composition of gdp will be different because the total factor productivity tfp in multisector models depends on sectoral structure these differences in capital endowments will also generate sustained differences in tfps

endogenous selection of comparison groups human capital formation and tax policy this paper considers a setting in which the acquisition of human capital entails a change of location in social space that causes individuals to revise their comparison groups skill levels are viewed as occupational groups and moving up the skill ladder by acquiring additional human capital which in itself is rewarding leads to a shift in the individual s inclination to compare himself with a different and on average better paid comparison group which in itself is penalizing the paper sheds new light on the dynamics of human capital formation and suggests novel policy interventions to encourage human capital formation in the aggregate and at the same time reduce inter group income inequality

on limiting the market for status signals abstract in many societies individuals care how others view them in their efforts to impress such individuals engage in consumption signals which attempt to establish higher levels of status than their true status type this leads to an inefficiency which offers the possibility of a pareto improving tax policy the impacts of tax policy and benefits on the signalling equilibrium are considered

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

fiscal decentralization a political theory with latin american cases theories of fiscal federalism explain the efficiency and other economic gains from decentralization but do not explain its extent and nature in practice the authors develop a political theory of decentralization that focuses on the lines of political accountability between politicians at different levels of government the more accountable central level politicians presidents and legislators are to subnational politicians the greater the extent of decentralization and the more it will conform to the preferences of subnational politicians for example with respect to the degree of the center s discretion the model is tested on five latin american countries that although formally decentralized in fact exhibit wide differences in the distribution of spending and revenue responsibilities the theory also helps explain a number of problems governments have encountered in decentralizing including subnational debt crises and a mismatch between responsibilities and resources

federal competition and economic growth abstract this paper exploits exogenous variation in the natural topography of the united states to estimate the causal impact of inter jurisdictional competition on income growth we find that doubling the number of county governments in a metropolitan area leads to a 17 increase in the average annual growth rate of earnings per employee over 1969 2006 and a 10 increase in 2006 income per employee decomposing income effects using 2000 census worker level data we find that approximately half of the effect stems from making workers more productive while the other half comes from changing the composition of the workforce and inducing workers to work more hours we also present evidence that inter jurisdictional competition leads local governments to raise more in taxes spend more and issue more debt per capita but does not help them obtain more inter governmental transfers however the additional cost from this increase in expenditures to a median wage employee is much smaller than the increase in that employee s wages due to greater inter jurisdictional competition

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

liberalization fdi and growth in developing countries a panel cointegration approach using a panel cointegration framework the article explores the two way link between fdi and growth for a panel of 23 developing countries in addition it investigates the impact of liberalization on the dynamics of the fdi and gdp relationship a long run cointegrating relationship is found between fdi and gdp after allowing for heterogeneous country effects the cointegrating vectors reveal a bidirectional causality between gdp and fdi for more open economies for relatively closed economies long run causality appears unidirectional and runs from gdp to fdi implying that growth and fdi are not mutually reinforcing under restrictive trade and investment regimes

decentralization effects in ecological fiscal transfers a bayesian structural time series analysis for portugal portugal has a unitary system in which the central government transfers funds to lower government levels for their public functions in 2007 portugal introduced ecological fiscal transfers eft where municipalities receive transfers for hosting protected areas pa we study whether introducing eft in portugal incentivized municipalities to designate pa and has led to a decentralization of conservation decisions we employ a bayesian structural time series approach to estimate the effect of introducing eft in comparison to a simulated counterfactual time series quantitative results show a significant increase in the ratio of municipal and national pa designations following portugal s eft introduction which we infer to be a causal consequence the analysis furthermore places emphasis on the importance of relevant municipal conservation competencies for the functioning of the instrument results have important implications for conservation policy making in terms of allocating budgets and competencies in multi level governments

government policies and financial crises mitigation postponement or prevention in the aftermath of the great recession governments have implemented several policy measures to counteract the collapse of the financial sector and the downswing of the real sector within a framework of minsky veblen cycles where relative consumption concerns a debt led growth regime and financial sector confidence constitute the main causes of economic fluctuations we use computer simulations to assess the effectiveness of such measures we find that the considered policy measures help mitigate the impact of financial crises though they do so at the cost of shortening the time between financial crises this result is due to a relatively fast recovery of solvency and confidence induced by the policy measures under study which contribute to an increase in private credit and thereby effective demand our results suggest that without the strengthening of financial regulation any policy intervention remains incomplete

the flypaper effect identifying areas for further research the flypaper effect literature dates back three decades it is overwhelmingly neo classical in approach attempting to improve the median voter demand model and or temper it with public choice supply side perspectives whilst this approach provided valuable early substantial analytical insights more recent papers seem to have contributed only marginally to an understanding of the flypaper effect if indeed it exists at all hence as well as providing a long overdue comprehensive review of the literature on the flypaper effect this paper identifies more productive avenues for further research

decentralization and economic growth revisited an empirical note abstract although it is theoretically expected that decentralization leads to efficient provision of local public services and stimulates economic development there is a mixed picture of the decentralization effect on economic growth across earlier empirical studies using the instrument variables iv technique with the latest cross country data for the period from 1997 to 2001 this paper found that fiscal decentralization has a significant positive impact on per capita gdp growth therefore when the focus is placed on the latest information on the economic situation in the latter 1990s decentralization particularly on the fiscal expenditure side is instrumental in economic growth

paradoxes of decentralization water reform and social implications in mexico summary decentralized governance of water resources is a centerpiece of mexico s neoliberal reform strategy we analyze decentralization based on urban rural case studies in distinct geographical regions to ascertain whether it is linked to more efficient water management or sustainable use of water resources and to examine its development implications we assess whether or not private sector management is related to a more efficient sustainable and accountable management of water variety of municipal and private management arrangement in four urban areas we find that it has not resulted in efficiency or sustainability gains for agricultural water management irrigation districts in two case studies benefited from the more democratic participatory management by water users under mexico s transference strategy but did not result in greater equity efficiency or sustainability of water use we argue that decentralization in the mexican water sector is context specific and marked by limited benefits privatization is less an instrument aimed at improving efficiency than a channel for preferred treatment for capital accumulation by private entities as well as a legitimized way for the state to transfer the burden of water management to non state institutions the creation of new forms of water institutions requires not the retrenchment of the state but rather its involvement to ensure accountability transparency equity and sustainability

the relative income hypothesis abstract despite its theoretical dominance the empirical case in favor of the permanent income hypothesis is weak contrary to one of its basic implications a growing body of evidence suggests that rich households save a higher proportion of their permanent income than poor households we propose an overlapping generations economy where households care about relative consumption as a result an individual s consumption is driven by the comparison of his lifetime income and the lifetime income of his reference group a permanent income version of duesenberry s 1949 relative income hypothesis across households the savings rate increases with income while aggregate savings are independent of the income distribution

determinants of fdi induced externalities new empirical evidence for mexican manufacturing industries summary this paper presents new statistical evidence on foreign direct investment fdi induced externalities in mexican manufacturing industries for 1993 the new empirical results are important in three respects first the size of technological differences between fdi and mexican firms is positively related to positive externalities indicating the importance of sufficient scope of potential externalities incentives to make externality facilitating investments and the absence of negative competition effects second geographical concentration is identified as a structural determinant of positive fdi externalities finally the effect from fdi cleared from the influence of technological differences and agglomeration is the creation of positive externalities especially when endogeneity of the foreign participation variable is controlled for

does decreasing working time reduce environmental pressures new evidence based on dynamic panel approach abstract there is a growing interest in the correlation between working time and environmental pressures but prior empirical studies were mostly focused on static methods within limited country groups to fill the gap this study aims to stimulate the discussion by distinguishing between different time periods for developed and developing country groups respectively in particular we contribute to a further understanding of the environmental effects of working time reduction policies by comparing the differences under the dynamic framework of system generalized method of moments we applied this dynamic panel regression approach for 55 countries worldwide over the period 1980 2010 and employing carbon emissions per capita as the environmental indicator in general results confirmed the significant relationship between hours of work and environmental impacts in developed economies although this is not the case for the developing counterparts interestingly the significant correlations for the developed country group turned from positive during the first sub period 1980 2000 to negative during the second sub period 2001 2010 connecting these results with previous literature we proposed the reasons of rebound energy use derived from certain leisure activities which were more energy intensive if excessive non working time provided

veblen effects political representation and the reduction in working time over the 20th century abstract we explain the substantial decline in work hours over the 20th century by the joint influence of the employees pecuniary emulation of the conspicuous consumption of top income earners and the balance of political power of employers and employees in the presence of conflicts of interest over the issue of working time we present a new labor discipline model incorporating veblen effects in which hours are determined by employers and subject to complete contracts but employee work effort is not we show that while veblen effects increase the hours sought by employees the hours selected by profit maximizing employers may exceed that preferred by employees who may then seek to reduce work hours by means of collective bargaining or governmental intervention we also identify conditions under which employees will prefer longer hours than offered by employers using newly available data on top income shares and on work hours from 10 major industrial economies and covering the entire past century we test two hypotheses that increases in the relative incomes of the very rich are associated with increased hours while increases in the political representation of workers have the opposite effect the estimated effects are large in economic magnitude highly significant and robust to alternative econometric specifications including country and time fixed effects using an alternative data set covering the last third of the past century we show that these results are robust to the inclusion of a measure of taxation and find that decentralized trade union bargaining but not centralized bargaining may raise working hours

fiscal decentralization and intergovernmental fiscal relations a cross country analysis abstract fiscal decentralization consists primarily of devolving revenue sources and expenditure functions to lower tiers of government by bringing the government closer to the people fiscal decentralization is expected to boost public sector efficiency as well as accountability and transparency in service delivery and policy making decentralization also entails greater complexity in intergovernmental fiscal relations and coordination failures in fiscal relations are likely to have a bearing on fiscal positions nationally and subnationally evidence provided in this paper for a sample of 30 countries suggests that coordination failures in intergovernmental fiscal relations are likely to result in a deficit bias in decentralized policy making particularly in the case of developing countries which may not meet important requirements for successful decentralization

greater wage inequality reduces average hours of work i argue that rising inequality in offered wages lowers average working hours if labour supply is concave in wages a decrease in the working hours of low paid workers is greater than an increase in working hours of high paid workers furthermore due to low market opportunities some low paid workers may leave the labour force using cps morg data for prime age men i find evidence in support of this explanation i establish empirically the concavity of the labour supply and find evidence that after controlling for the average wage wage inequality has a negative effect on labour supply

the impact of fiscal decentralization on economics performance in high income oecd nations an institutional approach this paper examines the impact of public sector decentralization on per capita income controlling for differences in institutional arrangements among countries panel data regressions on a sample of observations from 20 high income oecd nations spanning the years 1972 to 2005 indicate that decentralization is positively related to income the empirical analysis shows that institutions consistent with economic freedom enhance the positive income effects of decentralization thus the impact of public sector decentralization is dependent upon a nation s institutional environment

relative consumption of housing marginal saving subsidies and income taxes as a second best policy this paper analyzes whether marginal taxation of labor and capital income are useful second best instruments for internalizing the externalities caused by conspicuous housing consumption when the

conspicuous consumption snobbism and conformism abstract we develop a model in which consumers purchase a conspicuous good in order to signal high income and thereby achieve greater social status in equilibrium the signalling value of conspicuous consumption depends in an identifiable way on the number of consumers and consumer behaviour is characterized by either snobbism or conformism the market demand curve for the conspicuous good may exhibit a positive slope if consumers are conformist we derive some unconventional policy implications concerning the taxation of luxuries and the voluntary provision of public goods

fiscal federalism in argentina policies politics and institutional reform argentine fiscal federalism is considered to be very inefficient by all specialists its allocation of tax and spending authorities and its system of intergovernme ntal transfers do not correspond to any economic criteria and provide all sorts of perverse incentives and obstacles for sound economic policies agreeing with the above diagnostic we attempt to take a step further and to provide an explanation for the many inefficient features of argentine fiscal federalism in order to do that we apply and further develop an approach presented in spiller and tommasi 2000 that tries to explain public policies as the outcome of political transactions these approach argues that the nature and characteristics of the observed policies will be conditioned by the rules of the political game under which those t policies are made hence it re focuses policy recommendations from the level of policy reform to the level of institutional reforms with emphasis on political institutions

inequality and happiness in recent years there has been an accumulation of empirical evidence suggesting that individuals dislike inequality alesina and giuliano 2011 and dawes et al 2007 the literature has built upon estimating the degree of this dislike as well as its causes the use of self reported measures of satisfaction or well being as a proxy for utility has been one of the empirical strategies used to this end in this survey we review the papers that estimate or examine the relationship between inequality and self reported happiness to conclude that inequality correlates negatively with happiness in western societies some of the surveyed papers identify particular sources of heterogeneity on preferences over inequality the evidence for non western societies is more mixed and less reliable notwithstanding that trust in the institutions seems to play an important role in shaping the relationship between income inequality and subjective wellbeing we conclude with suggestions for further research

income inequality and carbon emissions in the united states a state level analysis 1997 2012 abstract this study investigates the relationship between u s state level co 2 emissions and two measures of income inequality the income share of the top 10 and the gini coefficient each of the inequality measures which focus on unique characteristics of income distributions is used to evaluate the arguments of different analytical approaches results of the longitudinal analysis for the 1997 to 2012 period indicate that state level emissions are positively associated with the income share of the top 10 while the effect of the gini coefficient on emissions is non significant the statistically significant relationship between co 2 emissions and the concentration of income among the top 10 is consistent with analytical approaches that focus on political economy dynamics and veblen effects which highlight the potential political and economic power and emulative influence of the wealthy the null effect of the gini coefficient is generally inconsistent with the marginal propensity to emit approach which posits that when incomes become more equally distributed the poor will increase their consumption of energy and other carbon intensive products as they move into the middle class

fiscal decentralization and economic growth a cross country study abstract we use a panel data set of 46 countries over the 1970 1989 period to investigate the relationship between fiscal decentralization and economic growth we find a negative relationship between fiscal decentralization and growth in developing countries but none in developed countries several explanations are offered for our findings

externalities from foreign direct investment in the mexican retailing sector this contribution to the discussion on the impact of foreign direct investment in developing countries is based on an empirical study of the consequences of transnational corporations presence in the mexican retailing sector particularly wal mart first it is shown that the arrival of foreign firms accelerates the modernisation but has a negative impact on local firms performance as well as local worker remuneration as a result of the growing competitive pressure in the sector second the changes that occurred in supply chain governance and the tremendous increase of imports initiated by wal mart are described and some probable implications for local suppliers are suggested

are asean countries havens for japanese pollution intensive industry in an era of closer worldwide economic integration the role that environmental regulations play in shaping a country s comparative advantage is greater than ever this has led to fears that dirty firms will relocate from developed to developing countries where environmental regulations may be less stringent the so called pollution haven hypothesis to date however there is little support for the existence of pollution havens despite anecdotal evidence and the theoretical predictions in this paper we employ a unique industry level dataset for japan and examine whether japanese industries have relocated production to their asean neighbours in response to the relative stringency of japanese environmental regulations not only do we find no evidence for pollution haven consistent behaviour but also some indication that the complex relationship between the characteristics of japanese dirty industries and environmental regulations may actually have reduced japanese outward fdi to the philippines

government spending and economic growth this study reviewed recent empirical studies providing fresh evidence of the impact of government spending on economic growth it is followed by a new theoretical synthesis and this as well as the other models are in turn subjected to empirical validation the empirical validation is conducted for both developed and less developed economies based on simultaneous equations as well as single equation models with or without adjusting for differences in th total factor productivity growth government size is estimated to have positive impact on economic growth in the short run but not in the intermediate run 25 years in this study

instrumental cardinal concerns for social status in two sided matching with non transferable utility in this paper we apply the instrumental approach to social preferences in order to distinguish among various shapes of preferences for social status in particular we consider the shape of reduced preferences that emerge in the equilibrium of a twosided matching model with non transferable utility cole et al 1992 1995 show that under full observability of potential mates attributes instrumental concerns for social status are ordinal i e only one s own rank in the distribution of attributes matters we show that when we depart from full observability instrumental concerns for social status become cardinal i e also other features of the distribution of attributes matter we also show that the actual shape of cardinal concerns depends on how individuals can deal with the informational asymmetry alternatively leading to upward concerns i e making comparisons with higher rank people downward concerns i e making comparisons with lower rank people or bidirectional concerns i e being both upward and downward

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

conspicuous leisure optimal income taxation when both relative consumption and relative leisure matter previous studies on public policy under relative consumption concerns have ignored the role of leisure comparisons this paper considers a two type optimal nonlinear income tax model where people care both about their relative consumption and their relative leisure increased consumption positionality typically implies higher marginal income tax rates for both the high ability and the low ability type whereas leisure positionality has an offsetting role however this offsetting role is not symmetric concern about relative leisure implies a progressive income tax component i e a component that is larger for the high ability than for the low ability type moreover leisure positionality does not modify the policy rule for public good provision when the income tax is optimally chosen

debt driven growth wealth distribution and demand in oecd countries the paper investigates the effects of changes in the distribution of income and in wealth on aggregate demand and its components we extend the bhaduri and marglin 1990 model to include personal income inequality as well as asset prices and debt this allows for an evaluation of the wage or profit led nature of demand regimes of the expenditure cascade argument frank et al 2010 and several hypotheses regarding the effects of wealth and debt our estimates are based on a panel of 18 oecd countries covering the period 1980 2013 for the full panel the average demand regime is found to be wage led we fail to find effects of personal inequality but do find strong effects of debt and property prices which have been the major drivers of aggregate demand in the decade prior to the 2007 crisis

searching for leviathan an empirical study in several papers and a recent book geoffrey brennan and james buchanan 1977 1978 1980 have put forth a striking and controversial view of the public sector drawing by analogy on the conventional theory of monopoly in the private sector they envision a monolithic government that systematically seeks to exploit its citizenry through the maximization of the tax revenues that it extracts from the economy from this perspective they develop a fiscal constitution whose central purpose is to constrain leviathan by limiting in various ways its access to tax and other fiscal instruments while the leviathan hypothesis has been the source of lively debate and a wide range of policy proposals it has not been the subject of much systematic empirical work or testing this is a matter of some importance since the policy implications of the leviathan view are disturbing to put it mildly in particular brennan and buchanan virtually stand on their heads many of the basic theorems in public finance for an efficient and equitable tax system if in fact the leviathan view is an inaccurate depiction of the functioning of the public sector the introduction of their policy proposals is likely to make a sorry mess of the fiscal system the leviathan model does however have some straightforward implications for observable fiscal behavior it is the purpose of this paper to examine one of these testable implications brennan and buchanan stress that fiscal decentralization is itself a powerful constraint on leviathan competition among governments in the context of the interjurisdictional mobility of persons in pursuit of fiscal gains can offer partial or possibly complete substitutes for explicit fiscal constraints on the taxing power 1980 p 184 such competition among governments in a federal system that places heavy reliance on local fiscal decisions will greatly limit the capacity of leviathan to channel resources into the public sector in short as indicated by the epigraph to this paper the leviathan model implies that other things equal the size of the public sector should vary inversely with the extent of fiscal decentralization 2

rat race redux adverse selection in the determination of work hours in law firms this paper describes an organizational setting in which professional employees are required to work inefficiently long hours the focus of the authors investigation is large law firms the income sharing that characterizes legal partnerships creates incentives to promote associates who have a propensity to work very hard law firms use indicators of this propensity especially an associate s record of billable hours in promotion decisions reliance upon work hours as an indicator leads to a rat race equilibrium in which associates work too many hours the authors find evidence in support of this conclusion with data they collected from two large law firms copyright 1996 by american economic association

individual well being in a dynamic perspective this paper explores the determinants of individual well being as measured by self reported levels of satisfaction with income making full use of the panel data nature of the german socio economic panel we provide empirical evidence for well being depending on absolute and on relative levels of income in a dynamic framework this finding holds after controlling for other influential factors in a multivariate setting the main novelty of the paper is the consideration of dynamic aspects individual s own history as well as the relative income performance with respect to the others living in the society under analysis do play a major role in the assessment of well being

emulation inequality and work hours was thorsten veblen right we investigate the manner in which a desire to emulate the rich influences individuals allocation of time between labour and leisure greater inequality inducing longer work hours as a result data on work hours in ten countries over the period 1963 98 show that greater inequality is indeed associated longer work hours these veblen effects are large and the estimates are robust using country fixed effects and other specifications because consumption inequality is a public bad a social welfare optimum cannot be implemented by a flat tax on consumption but may be accomplished by more complicated progressive consumption taxes at the close of the nineteenth century thorsten veblen proposed what he termed pecuniary emulation as the foundation of a theory of consumption spending he maintained is driven by relative status considerations that is by the desire to be a particular type of person as much as bythedesire to enjoytheconsumer goodsper se the joneses with whom one had to keep up were not the neighbours but the rich theirleveloflivingbecamethenever attainableobjectiveinaconsumptionarmsrace among the less well to do in the theory of the leisure class he wrote the motive is emulation the stimulus of an invidious comparison especially in any community in which class distinctions are quite vague all canons and reputability and decency and all standards of consumption are traced back by insensible gradations to the usages and thoughts of the highest social and pecuniary class the wealthy leisure class 1934 p 81 while valued by some economists as capturing common sense aspects of consumption as a form of status seeking veblen s view of social preferences was soon eclipsed by the simpler and more tractable neoclassical theory of the consumer relegated to the underworld of economics veblen s ideas have nonetheless resonated over the ensuing years in the writing of duesenberry 1949 leibenstein 1950 and galbraith 1958 at the middle of the past century and schor 1998