political influence motives and the choice between tariffs and quotas abstract tariffs and quotas are not symmetric under a variety of circumstances this paper pursues the implications of one such circumstance domestic market power for the political choice of protectionist instrument in the context of a political support maximization model tariffs dominate quotas in the political model in the absence of revenue seeking motives in the presence of revenue seeking ambiguity arises but limits can be placed on the range of tariff or quota levels also some welfare implications emerge

efficiency and equity effects of reforming the british system of direct taxation a utility based simulation methodology the simulation model presented in this paper shows how an estimated utility index defined over net income and leisure can be used to replicate labor supply behavior individual by individual this methodology is used to evaluate the efficiency and equity effects of two specific revenue neutral reforms of the british system of direct taxation the first reform involves abolishing the married m an s tax allowance the second abolishes this allowance only when the wife exhausts her own tax allowance the second reform is the most efficient and it may also be preferable on distributional grounds copyright 1988 by the london school of economics and political science

voter preferences and state regulation of smoking i introduction tobacco taxation and smoking restrictions are two areas of regulation for which states have maintained a high level of control relative to the federal government 1 given this flexibility states have established a wide range of restrictions on smoking in areas such as government workplaces restaurants bars shopping malls indoor arenas and hospitals 2 although most states restrict smoking in hospitals there is considerable variation among states in restrictions in other areas in the 1998 99 period of this study about two thirds of states restricted smoking in restaurants whereas only four states restricted smoking in bars what has led to variation in smoking restrictions across states in a democratic society one would expect voter preferences to play an instrumental role in determining which policies are enacted and which are not this article provides the first empirical exploration of whether state level smoking restrictions are consistent with preferences of the citizenry taking into account both voting behavior and the role of smoking status in influencing whether an individual votes specifically we examine whether voters preferences for smoking restrictions in restaurants bars malls indoor sporting events and hospitals are consistent with state level restrictions on smoking in each of these public areas 3 our research draws on public choice models of policy making by state and local governments voters preferences typically play a central role because voting affects legislators incentives to support regulations 4 public choice research also finds that nonvoter factors may influence state and local policy making 5 in the case of smoking regulations public health advocates or tobacco industry lobbyists might influence regulatory policies the specific building block of our analysis of state restrictions on smoking is information on individuals voting behavior which we link to their smoking status and preferences over smoking restrictions our analysis uses measures of political pressure that account for individual preferences as well as their voting behavior to examine the possible role of interest group pressures we also control for nonvoter influences on smoking regulation including the proportion of the state population who smoke measures of state ideology and size of the tobacco industry with the exception of smoking in bars there is majority support for smoking restrictions unsurprisingly smokers are less supportive of restrictions than are nonsmokers nonetheless even smokers demonstrate a high level of support for many restrictions smokers are also less likely to vote than are nonsmokers even after controlling for other demographic factors the lower voting rate diminishes voter opposition to antismoking regulation but is usually not critical in view of the substantial support that most smoking restrictions have among smokers the political pressure indices for restrictions on smoking in each public area are generally significantly related to the probability that a state restricts smoking in that public area the nonvoter factors such as the smoking rate in the state and tobacco s role in the state economy are rarely influential policy debates over the desirability of smoking restrictions emphasize possible health risks due to exposure to environmental tobacco smoke ets and effects on business profitability the primary argument for expanding smoking restrictions is to protect workers and customers from exposure to ets 6 as our results show voters are generally supportive of smoking restrictions in public areas which would thereby protect workers as well as themselves and other customers however there is a substantial controversy over the extent of health risks associated with exposure to ets the basis for the push by the u s occupational and safety health administration osha for increased smoking restrictions to protect workers is the highly controversial u

on measures of excess burden and their application abstract new measures of the additional excess burden of a tax reform are proposed and are shown to be useful in three key policy applications these new measures induce a unique measure of marginal excess burden meb among its interesting properties meb is uniformly zero for a proportional tax on inelastically supplied labor problems in applying the standard measures of total excess burden are demonstrated it is concluded that the induced measure of the marginal cost of funds mcf should be regarded as the most useful concept in applied tax analysis

the effect of taxes on labor supply in the underground economy this paper uses micro data from a randomized survey carried out in the metropolitan area of quebec city canada to analyze the decision to evade taxes and work in the underground economy the results indicate that taxes distort labor market activities away from the regular sector to the underground sector but the distortion is small for the average worker the distortion is large however for particular groups of the population such as welfare claimants copyright 1994 by american economic association

the marginal cost of public funds and tax reform in africa abstract in this paper we propose estimates of the marginal cost of public funds mcf in 38 african countries we develop a simple general equilibrium model that can handle taxes on five major tax classes and can be calibrated with little more than national accounts data a key feature of our model is the explicit recognition of the informal economy our base case estimate of the average mcf from marginal increases in all five tax instruments is 1 2 focusing on the lowest cost tax instruments in each country commonly the vat but not always the average mcf is 1 1 finally extending the tax base to include sections of the informal economy by removing some tax exemptions offers the potential for a low mcf source of public funds and a lowering of mcfs on other tax instruments

strategic extremism why republicans and democrats divide on religious values party platforms differ sharply from one another especially on issues with religious content such as abortion or gay marriage given the high return to attracting the median voter why do vote maximizing politicians take extreme positions in this paper we find that strategic extremism depends on an intensive margin where politicians want to induce their core constituents to vote or make donations and the ability to target political messages toward those core constituents our model predicts that the political relevance of religious issues is highest when around one half of the voting population attends church regularly using data from across the world and within the united states we indeed find a nonmonotonic relationship between religious extremism and religious attendance

quantitative restrictions and the welfare effects of capital inflows abstract this paper explores the welfare effects of capital inflows when some imports are subject to quantitative restrictions it is shown that in a heckscher ohlin model where all imports are restricted by quotas and some fraction of the initial domestic capital stock is foreign owned a capital inflow is welfare improving regardless of the ranking of sectoral factor intensities with sector specific capital stocks and both tariff ridden and quota restricted imports the consequences of direct foreign investment in any sector are uncertain and depend upon whether the two imports are compensated substitutes or complements as well as the characteristics of production

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

government policy and the firm s capital structure abstract the purpose of this paper is to examine the effects of commonly observed forms of government intervention on the firm s capital structure we show that since market claims against the firm are always properly priced the firm is forced to take market claimants interests into account on the other hand since government claims are usually not adjusted for risk the firm can take advantage of the government it does so by choosing strategies that extract maximum value minimum cost from these policies in particular the firm uses its capital capital structure to maximize the value of the policy thus leading to a determinate capital strucure

the effect of income taxation on labor supply in the united states the effect of income taxation on the labor supply of prime age married men and women in the united states is examined using econometric methods similar to those used in the influential work of jerry hausman male labor supply is found to be relatively invariant to the net wage and virtual income in all specifications estimated the estimated impact of taxation on the labor supply of married women depends critically on the method used to estimate the labor supply function estimated net wage and virtual income elasticities are considerably larger when data on nonparticipants are included than when the estimation is conducted conditional on hours being greater than zero

economic development institutional change and the political economy of agricultural protection an econometric study of belgium since the 19th century this empirical study uses 100 years of annual data on 11 agricultural commodities from belgium to measure the impact of structural changes coinciding with economic development and changes in political institutions on agricultural protection the analysis shows that changes in agricultural protection are caused by a combination of factors governments have increased protection and support to farmers when world market prices for their commodities fell and vice versa offsetting market effects on producer incomes other economic determinants were the share of the commodities in total consumer expenditures negative effect and in total output of the economy positive effect with belgium a small economy there was no impact of the trade position changes in political institutions have affected agricultural protection democratic reforms which induced a significant shift in the political balance towards agricultural interests such as the introduction of the one man one vote system led to an increase in agricultural protection the integration of belgian agricultural policies in the common agricultural policy in 1968 coincided with an increase in protection ceteris paribus both institutional factors related to changes in access to and information about the decision making at the eu level and structural changes in the agricultural and food economy may explain this effect

from theory to practice canadian economists contributions to public finance we survey canadian economists contributions to the field of public finance from the mid 1980s to 2016 we highlight the development and extension of the models and tools of public economics and the empirical studies that have deepened our understanding of the efficiency and distributional issues over a wide range of public finance issues we also highlight contributions to the development of policies through commissioned reports and the important role that canadian institutions the canadian tax foundation the think tanks and the federal and provincial departments of finance have played in shaping tax and fiscal policies de la theorie a la pratique contributions des economistes canadiens a la finance publique on examine les contributions des economistes canadiens au domaine de la finance publique du milieu des annees 1980 a 2016 on souligne le developpement et l extension des modeles et des outils d economie publique et les etudes empiriques qui ont aide a approfondir notre comprehension des enjeux d efficacite et de distribution dans un vaste eventail de questions de finance publique on souligne aussi les contributions des rapports commandites au developpement de politiques publiques ainsi que le role important d institutions canadiennes l association canadienne d etudes fiscales les groupes d experts ainsi que les ministeres des finances du gouvernement federal et des gouvernements provinciaux dans le design des politiques fiscales

assessing empirical approaches for analyzing taxes and labor supply recent surveys on the labor supply responses of men document a divergence in the estimates of substitution and income effects obtained using various estimation approaches generally studies accounting for nonlinear tax schedules in a static setting via a piecewise linear approach produce estimates that typically imply higher substitution and lower income responses than are suggested by empirical work applying other approaches this paper demonstrates that maximum likelihood estimation of a consumer choice problem with nonlinear budget sets implicitly relies on the satisfaction of inequality constraints that translate into behaviorally meaningful restrictions these constraints arise not as a consequence of economic theory but instead as a requirement to create a properly defined statistical model in the analysis of piecewise linear budget sets the implicit constraints required by maximum likelihood in estimation amount to imposition of slutsky conditions at all wage income combinations associated with kink points in the analysis of differentiable budget sets the tacit constraints invoked by maximum likelihood also involve inequality restrictions on slutsky terms the empirical work presented in this study supports the contention that these implicit constraints play a major role in explaining the discrepancies in estimates found in the literature on men s labor supply

consumer support for corporate social responsibility csr the role of religion and values ethical behavior among businesses has gained significant prominence in recent years survey evidence shows that asian consumers demand for greater social responsibility among businesses thus a deeper understanding of the factors that contribute to such a demand is useful this study examines the influence of religiosity and values on corporate social responsibility csr support among consumers in hong kong and singapore primary data collected among consumers in these cities point to a significant direct relationship between religiosity and csr support in hong kong this attitude is due both to altruistic as well as for egotistical or face saving reasons in singapore this is mainly due to the latter the results imply that different motivations should guide csr strategies in these two cities

on the political economy of guest worker programs in agriculture guest workers have provided a source of agricultural labor supply in many countries recent legislative proposals on immigration reform in the united states have renewed discussions about the role of guest worker programs and highlighted the arguments for and against such programs even within the agricultural sector there has not been strong broad based support for an expansion in the number of guest workers a model is developed that considers competing interests between commodity groups horticulture crops and grain crops to explain this lack of support and then a series of simulations are conducted to highlight the possible economic effects of an expanded guest worker program results suggest that an increase in the labor supply would have much larger economic impacts for horticultural producers and firms in the supporting input markets furthermore under some conditions simulation outcomes show how an increase in the labor supply may lead to small revenue losses for both producers and input suppliers in grain markets

rent seeking and second best economics in recent years there has been increasing recognition in the economics literature that transfers far from being socially costless may involve intense resource using competition by potential recipients seeking to obtain a favorable share and also similar efforts by potential donors to avoid paying an unfavorable share of these transfers these activities have been traditionally termed as rent seeking though bhagwati 1982 has suggested the alternate name of directly unproductive profit seeking dup that economic rents may generate waste by attracting resources aimed at capturing these rents is by now well established in the economics literature for example the social cost of a monopoly is now recognized to consist not only of the traditional deadweight triangles but also of elements related to and in some cases equal to or exceeding the monopoly profit similarly the welfare costs of quotas or tariffs are now recognized to consist of a distortionary effect and an effect related to rents produced by these quotas or tariffs 1 clearly therefore the recognition of the importance of rent seeking has brought about a need to re evaluate the social costs of various distortions the focus in the rent seeking literature has so far been mainly in this direction and yet another no less important strand of thought which follows logically from the rent seeking literature is one related to socially optimal pricing rules for example if a monopoly s profits are converted into waste such waste is a cost which should figure in evaluating the appropriate pricing rule for other industries output such implications of rent seeking may be as important as the ones described above which are essentially descriptive the optimal pric

optimal policies and marketing board objectives abstract in this paper we examine optimal tax subsidy policies with export marketing boards that compete as oligopolists in world markets by taking a targeting approach to identifying optimal policies we are able to show how optimal policies vary with the objectives of board the nature of competition in world markets as well as assumptions about market segmentation and regulation in none of the cases examined does a marketing board without tax subsidy policy replicate the social optimum moreover we show that the policies necessary to attain the social optimum are quite different with the institutional variation considered arbitrage and regulation is the only case considered in which the optimal export policy is definitely a tax and in which the marketing board s objective does not affect policy

export subsidies as an outcome of the management labor conspiracy a mercantilistic trade policy is often introduced as a tool to generate more jobs in some key industries when employment in an export import industry is perceived to be low the government would be tempted to adopt measures of export promotion import protection to increase it by effectively guaranteeing employment however these policies would reduce incentives for the private sector to reach efficient labor contracts for example the labor union might refuse to sign a profit sharing contract with management and unilaterally demand high wages believing that the resulting loss in competitiveness would not affect the well being of its members since the government would protect the industry it is also conceivable that management and the labor union conspire to reach inefficient contracts so as to invite government intervention in certain cases trade policies only transfer income without any allocative effect this is not merely a theoretical curiosum free trade advocates have often pointed out that protectionist policies would have deleterious effects on the pattern of collective bargaining in the trade sensitive sectors this paper constructs simple models to illustrate this point for export subsidies and so it can be viewed as an addition to the literature that aims to bring attention to the pitfalls of the new mercantilism such as eaton and grossman 1986 dixit and grossman 1986 and horstman and markusen 1986 unlike these studies however the government policies considered here are reactive in the sense that the private sector moves first anticipating the government s response dixit and kyle 1985 carmichael

work costs and nonconvex preferences in the estimation of labor supply models abstract works costs have not been adequately handled in labor supply estimation likely due to their complexity we show that if work costs are not accounted for in the budget and time constraints in a structural labor supply model they will be subsumed into the data generating preferences even if underlying preferences over consumption and leisure are convex the presence of unobservable work costs can make these preferences appear nonconvex however we show that under plausible conditions policy relevant calculations such as estimates of the effect of tax changes on labor supply and deadweight loss measures are not affected by the fact that estimated preferences incorporate work costs

beyond environmental regulations exploring the potential of eco islam in boosting environmental ethics within smes in arab markets the recent global increase in environmental regulation does not necessarily signal improvement in firms ecological imprints like many markets the arab world is struggling to implement environmental compliance measures among local firms for arab countries the reliance solely on formal policies to improve local firms ecological footprints may be risky given the evident institutional challenges to enforce environmental regulations specially post the arab spring drawing from the literature highlighting the merits of combining formal and informal controls to ensure successful implementation of a strategy we argue that the emphasis for regulation must be accompanied by an emphasis for developing environmental ethics of individuals who are the expected implementers of any environmental policy in that light we propose that the eco islam phenomenon can serve as an influential and effective foundation for building organizational cultures with stronger environmental ethics among local small and medium enterprises smes we explain the underlying maxims of eco islam then conduct qualitative research among experts preaching or practicing the concept to gain better insights into the potential of leveraging it in muslim majority arab countries finally we conclude with insightful implications for local smes in the region

labour supply tax evasion and the marginal cost of public funds an empirical investigation abstract in this paper we extend the concept of marginal cost of public funds itmcf to incorporate tax evasion in the labour market mcf values are also computed from various tax reforms applied to the province of quebec canada 1985 for this purpose a utility based labour supply model that allows for both regular and irregular work activities is used at the benchmark situation the mcf associated with an increase in marginal income tax rates ranges between 1 39 and 1 53 depending upon whether we consider rationing or not moreover the presence of the irregular sector accounts for between 0 02 and 0 05 of this mcf although small in magnitude the impact of the irregular sector increases rapidly with the level of marginal tax rates

budgetary policy with unified and decentralized appropriations authority the divestiture of the house appropriations committee in the1880 s has received considerable attention of an empiricalnature this paper presents a formal model of legislativedecisionmaking using a common agency formulation to representinterest group lobbying of legislators this framework is usedto analyze the effects of decentralizing appropriationsauthority the conditions under which decentralization leadsto higher spending are characterized it is argued that theconventional view that divestiture caused higher levels ofspending only holds if decentralization created barriers tolobbying and political bargaining across different committees in addition the role of specialized committee knowledge isexamined

pricing and regulating affect environmental ethics effluent charges and tradeable permits are economically efficient but rarely used a new explanation for this discrepancy is offered pricing may crowd out environmental ethics in the pricing and via spillovers also in non pricing sectors pricing may therefore increase pollution providing a reason why decision makers tend to reject environmental pricing five propositions showing the conditions for counterproductive effects are advanced they are consistent with available empirical evidence regulation by setting standards and subsidies damage environmental ethics less than pricing because pollution is condoned damaging environmental ethics may prevent political action in favor of the environment

smuggling around the world evidence from a structural equation model this article uses a multiple indicators multiple causes mimic model to analyse the determinants of smuggling the analysis reveals that higher corruption and a lower rule of law encourage smuggling tariffs and trade restrictions are important push factors while a higher black market premium bmp discourages smugglers based on the mimic estimates we calculate an index of smuggling which provides a ranking for 54 countries we find that smuggling is rampant in cameroon pakistan and kenya while it is least prevalent in switzerland finland and sweden

ideological conviction and persuasion in the rent seeking society abstract the paper develops a model of rent seeking in a democratic political context where voting as well as rent seeking matters in this context the paper demonstrates that voter ideology is a constraint on the rent seeking game as well as a possible avenue of rent seeking in a setting where there are both rent seeking and ideological interest groups rent seekers can free ride on the efforts of ideologues which tends to reduce rent seeking effort in a setting where complementary economic and ideological interest groups coordinate their efforts both rent seeking and ideological conflict tend to increase

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

voting and paying for public goods an application of the theory of the core abstract let any coalition with a majority of all voters have the power to choose the quantities of public goods under rule i a majority coalition bears a cost of its decision that is proportional to its size under rule ii it must bear the whole cost of its decision thus rule i imposes costs on minorities although they have no power to choose the quantities of public goods while rule ii allows goods to have some attributes of semiprivate goods it is shown that a nonempty core under rule i implies a nonempty core under rule ii but not conversely necessary and sufficient conditions in terms of the properties of the von neumann morgenstern characteristic function are given

the theory of economic regulation and public choice and the determinants of public sector bargaining legislation in this study we used the theory of economic regulation and public choice to derive a model to explain the pattern of public sector bargaining laws among the states we find this type of legislation is influenced by the following demand factors 1 the extent of public sector union membership which represents the interest group hypothesis has a positive influence on pro union legislation 2 the extent of employer opposition to unions as measured by unfair labor practice charges against employers in representation elections has a negative effect on bargaining laws 3 two taste variables the salaries of public employees and the percent of nonwhite employment in the state have a positive influence on these laws a result which will be surprising to many people is that the extent of private sector union membership has no significant influence on the passage of public sector bargaining legislation

tax evasion and the marginal cost of public funds tax evasion and deadweight loss have similar implications for the rules of public finance the optimal mix of taxes can be derived from the minimization of the sum of aggregate deadweight loss and aggregate cost of tax evasion similarly the marginal cost of public funds includes allowances for marginal deadweight loss and marginal cost of tax evasion per dollar of public revenue acquired

optimal policies with strategic distortions abstract this paper analyzes the jointly optimal levels of a variety of policy instruments when markets are imperfectly competitive a targeting principle to identify optimal policies under imperfect competition is derived using the concept of a strategic distortion this allows us to interpret when trade policy is first best and links the literature on optimal policies with imperfect competition to the standard targeting literature we show that optimal tax subsidy policy depends crucially on the presence of other regulations and assumptions about market segmentation

business ethics and finance in greater china synthesis and future directions in sustainability csr and fraud following the financial crisis and recent recession the center of gravity of global economic growth and competitiveness is shifting toward emerging economies as a leading and increasingly influential emerging economy china is currently attracting the attention of academics practitioners and policy makers there has been an increase in research interest in and publications on issues relating to china within high quality international academic journals we therefore organized a special issue conference in conjunction with the journal of business ethics jbe in lhasa tibet on may 19 20 2014 on business ethics in greater china past present and future the papers for the special issue focused on the intersection of ethics and finance and fit within one of the three themes environment and sustainability corporate social responsibility and fraud within these themes issues of intellectual capital protection gender equality political connections regional development investor protection corporate stewardship trust and corruption and corporate transparency each play a significant role in this paper we survey these studies and the related literature to provide a comprehensive coverage of business ethics and finance issues that affect china

the welfare effects of capital inflow in the presence of a tariff quota with revenue premium seeking abstract the paper re examines the impact of capital inflow on the welfare of a small host nation in the presence of a tariff quota with revenue premium seeking it is demonstrated that the welfare impact of capital inflow is neutral in the case of a tariff with revenue seeking but ambiguous in the case of a quota with premium seeking

the optimal size of a tax collection agency the condition that characterizes the optimal size of a tax collection agency is derived and then given a simple interpretation in terms of excess burden the paper clarifies an earlier finding of sandmo which suggests that the optimal degree of enforcement is higher than a simple cost benefit calculation would indicate the appropriate condition is that at the margin the resource cost of increasing enforcement should equal the saving of excess burden due to the decline in exposure to risk the increased revenue gained from stricter enforcement does not enter the expression because it merely represents a transfer among the economy s identical agents

the bias in favor of pro tariff lobbies abstract we show that the probability of success of the pro tariff lobby defined as a decreasing function of the ratio of consumer loss to producer gain rent generated by the tariff rises with the tariff under very general conditions this appears as an exception to becker s view that less distortionary measures tend to be adopted over their more distortionary counterparts we then provide a micro foundation for our probability definition using the imperfectly discriminating lobbying framework

rural urban wage differential rent seeking and a justification for free trade abstract in the well known model of rural urban wage differentials analyzed by e e hagen quart j econom 72 496 514 1958 among others free trade was shown to be inferior to autarky the present paper demonstrates that if rents implicit in the wage differential are dissipated via rent seeking activities the case for free trade can be fully restored the reason for the reversal of the orthodox policy intuition is that when rents are dissipated market prices adequately reflect social opportunity costs of production despite the presence of a wage distortion

rent seeking from a property rights perspective james buchanan 15 15 has suggested that rent seeking analysis can readily be incorporated within the property rights approach and as with public choice the theory of rent seeking can be interpreted as an appropriate extension yet no one has really explored rent seeking or revenue premium tariff or directly unproductive profit seeking from a property rights perspective buchanan 14 15 16 17 clearly indicated that property rights assignments actually underlie the rent seeking process and others have also recognized this 4 20 23 28 but there are further insights into the workings of the political economy which can be derived for instance lobbying activities with nonpecuniary goals clearly fit into the rent seeking framework when viewed through the property rights paradigm this contrasts strikingly with the perception of rent seeking held by some writers 9 10 11 12 13 furthermore a property rights approach to rent seeking provides predictions of a spiraling process of government growth since successful rent seeking by one interest group generally requires expansion of bureaucratic powers while at the same time creating incentives for the formation of additional rent seeking interest groups legislative responses to these new groups requires further expansion of the bureaucracy and creates incentives for more rent seeking so the growth process continues in this paper a brief summary of the conclusions of the rent seeking literature will be presented followed by an explanation of how the same conclusions have been deduced using the property rights paradigm various extensions of the rent seeking concept such as those alluded to above are then obtained by emphasizing a property rights approach following this the terms used to describe rent seeking e g directly unproductive profit seeking etc will be discussed to determine which if any is the most appropriate characterization of the phenomenon

union behavior industry rents and optimal policies abstract this paper examines the welfare gains from strategic industrial policy in the u s steel industry focusing on the role of capacity utilization and the potential gains from capturing labor rents with underutilized capacity strategic policies to capture labor rents lead to an endogenous response that diminishes their importance on the other hand reducing domestic labor market distortions results in welfare gains nearly as large as those from the optimal subsidy this suggests that the focus on labor rents as the subject of industrial policy is overstated at least in manufacturing industries such as integrated steel

family labor supply with taxes over the period 1960 1983 the proportion of federal tax revenue raised by taxation of labor supply has risen from 57 77 percent in this paper we specify and estimate a model of family labor supply which treats both federal and state taxation husbands and wives labor supply are treated jointly rather than in aseparate manner as in previous research a method to calculate the virtual wage for nonworking spouses is used within a utility maximizing framework to treat correctly the joint family labor supply decision joint family efforts are found to be important the efficiency cost deadweight loss of labor taxation is estimated to be 29 6 of tax revenue raised the effect of the new 10 deduction to ease the marriage tax for working spouses leads to a prediction of 3 8 increase in wives labor supply and a 9 decrease in husbands labor supply overall taxes paid are predicted to decrease by 3 4 this abstract was borrowed from another version of this item

random errors dirty information and politics rational voters assessments of candidates and policy proposals are unbiased but affected by random errors clean information decreases these errors while dirty information increases them in politics most voting procedures weigh random individual errors asymmetrically thus such errors do not counterbalance one another in the aggregate they systematically affect politics this illuminates the roles of political propaganda and interest groups it helps to explain various puzzles in public choice e g the frequent use of inefficient policy instruments institutional conditions are identified that shape the aggregate impact of individual errors and the politicians incentives to produce dirty information

unemployment and the labour management conspiracy we study a model in which management and a union bargain sequentially first choosing a rule that will later determine the level of employment and then choosing a wage the government then chooses an output or an employment subsidy an exogenous natural turnover rate in the unionized sector creates unemployment whenever the union wage exceeds the competitive wage government intervention can increase both the equilibrium amount of unemployment and worsen the intersectoral allocation of labour because of the induced change in the endogenous wage unemployment weakens but does not eliminate the possibility of a labour management conspiracy

tariffs subsidies and welfare with endogenous policy abstract it is a well established proposition of trade theory that in the absence of directly trade related distortions or policy goals subsidies are superior to tariffs for achieving any economic or non economic objective this paper shows that once the endogeneity of the distortion or non economic objective is allowed for the welfare ranking of various policies can be reversed the particular model analyzed is one where the level of non economic objectives that have to be fulfilled itself depends on the policy tools considered to fulfill them with this arises from the public good nature of tariffs compared to subsidies

labor supply and taxation in france this paper provides sequential labor supply estimates for french married men and women under specifications analogous to those used by hausman to account for the effects of taxation upon the budget constraint results suggest that even though labor force participation follows the expected pattern work hours are quite rigid most of the variation in the latter being attributed to measurement errors the second part of the paper concentrates on the simultaneous estimation of male and female labor supply conditional maximum likelihood techniques are shown to permit the separate estimation of work hours for both spouses with an appropriate set of instruments aimed at correcting for the biases arising from simultaneity selectivity and the nonlinearity of the budget constraint although consistent the resulting estimates apparently contradict the usual rationality restrictions on family labor supply behavior and seem to confirm the lack of flexibility in work hours

rent seeking market structure and growth we study the role of productive and unproductive entrepreneurship in economic growth in a setting where firms compete in both economic and political markets specifically firms compete for market share through cost reducing technological innovation and they vie for influence over government transfer policy through rent seeking activities we find that rent seeking affects growth in two ways it allows firms to ignore economic competition leading to less innovation and it alters the number of firms that are supported in equilibrium the former effect is negative while the latter is ambiguous we show how these effects depend on various characteristics of economic and political markets

appropriation violent enforcement and transaction costs a critical survey this paper focuses on the extension of transaction costs to appropriative activity and coercive power in the property rights approach it has been argued that including the costs of appropriation and violent enforcement in transaction costs is based on the assumption that coaseian bargaining can be extended to any institutional scenario i e voluntary as well as coercive exchange however voluntary transactions cannot capture the logic of coercive power this means that the assumption of an efficient political market is not valid and that the political coase theorem lacks the logical consistency to provide a cornerstone for political theory

estimation and welfare calculations in a generalized corner solution model with an application to recreation demand the kuhn tucker model of wales and woodland 1983 provides a utility theoretic framework for estimating preferences over commodities for which individuals choose not to consume one or more of the goods due to the complexity of the model however there have been few applications in the literature and little attention has been paid to the problems of welfare analysis within the kuhn tucker framework this paper provides an application of the model to the problem of recreation demand in addition we develop and apply a methodology for estimating compensating variation relying on monte carlo integration to derive expected welfare changes

optimal taxation with costly enforcement and evasion abstract this paper analyzes the relationship between optimal taxation and optimal tax enforcement a central question concerns the extent to which revenue should be raised through higher tax rates which distort behavior or greater enforcement which distorts behavior and also entails direct resource costs in the models examined some expenditure on enforcement may be optimal despite its resource cost its distortionary effect and the availability of other revenue sources having no enforcement costs rules for optimal tax rates and enforcement expenditures are derived which also indicate the marginal cost of government funds and optimal enforcement priorities for a tax collection agency

lobbying dup activities and welfare a response to tullock professor tullock 1981 in trying to understand the results in my 1981 paper on lobbying and welfare has raised issues that require further clarification and analysis for brevity s sake i shall concentrate here on the essentials leaving minor remarks of tullock s aside 1 the specific case of lobbying which i addressed originally was tariffseeking by pr otectionist lobbies so that the tariff would be endogenous i then showed that one could not argue in this instance that an exogenouslyspecified tariff at x was necessarily welfare superior to an endogenous tariff at x0 all other forms of lobbying were excluded of course 2 tullock argues that this result obtains because he and krueger 1974 think whereas i do not that tariff rcvcnucs can be wasted as it happens krueger 1974 made no such assumption she explicitly compared in her analysis of the specific cast of premium seeking for import quotas aircad in place quotas with such premium seeking with tariffs that had no corresponding revenue seeking or for that matter any waste resulting from the government directly expending the tariff revenue bhagwati and srinivasan 1980 were the first to introduce the revenue seeking concept and to argue that it was wholly inappropriate for krueger to compare tariffs and quotas on the assumption that the latter gave rise to fill premium seeking whereas the former gave rise to zero revenue seeking

transaction costs institutional design and the separation of powers abstract the internal organization of the government can be used as a constraint on the capture of political decision makers in a setting where multiple interest groups try to influence policy outcomes centralization i e the choice of a single agency dealing with all interest groups is costly because it induces a better coordination of their influences the choice of specialized agencies is better because it increases the overall transaction costs of capture making agencies more immune to capture by interest groups more generally we discuss how an institutional design relying on separation of powers among specialized agencies may improve policy outcomes

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

the labor supply of married men a switching regressions model according to the family utility function approach the labor supply functions of married men should differ according to whether their wives also work in this paper i explicitly model the switching nature of labor supply while also accounting for the endogeneity of the labor force participation decision of the wife using an endogenous switching regressions model based on the quadratic family utility function the model is estimated from a cross section of 1 210 married couples from the panel study of income dynamics

self regulation taxation and public voluntary environmental agreements an increasingly popular instrument for solving environmental problems is the public voluntary agreement va in which government offers technical assistance and positive publicity to firms that reach certain environmental goals prior papers treat such agreements as a superior low cost instrument that can be used to preempt a threat of traditional inefficient regulation we present a more general model in which public vas may instead be weak tools used when political opposition makes environmental taxes infeasible we explore the conditions under which taxes public vas and unilateral industry actions are to be expected and the welfare implications of the various instruments notably we also show that welfare may be reduced by the introduction of public vas 2002 elsevier b v all rights reserved

the welfare cost of the underground economy this paper estimates the welfare cost of taxes that create an incentive for resources to flow to the underground or untaxed sector in the united states using a general equilibrium model of the american economy the welfare cost is found to be large and growing in absolute and relative terms over time in 1980 the welfare cost may be as much as 220 billion or over 9 percent of output even conservative estimates place the loss at nearly 100 billion it also is found that small reductions in tax rates substantially reduce the welfare cost

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

explaining price policy bias in agriculture the calculus of support maximizing politicians a model is developed to explain observed patterns of policy intervention in agriculture we analyze the interaction between political support seeking politicians and supportsupplying citizens society consists of a rural and urban group we determine the effects on transfers of relative group size disparities in income endowments between groups and the deadweight loss of redistribution the framework advanced is an alternative to that of the interest group model and is used to explain for example why the export sectors in developing countries are taxed more and why the united kingdom is less adamant for higher price supports than germany

tax revenue and the marginal cost of public funds in sweden abstract we assess the welfare cost of raising a marginal unit of tax revenue in a balanced budget general equilibrium framework the calculated social cost of an increment of public funds is sensitive to both the specific type of tax increase and the type of public spending used on the margin best guess assumptions on labor supply elasticities yield marginal costs of public funds for different fiscal mixes of between 0 67 and 4 51 at prevailing tax rates in sweden alternative labor supply assumptions well within the range of current estimates substantially affect the results and can imply infinite marginal welfare costs marginal welfare costs are also sensitive to assumptions about both the income and substitution effects of labor supply

income tax evasion labour supply and the equity efficiency tradeoff abstract this paper is an attempt to incorporate tax evasion into the analysis of optimum income taxation a model of variable labour supply with tax evasion is used to derive supply functions for labour in regular and irregular markets given taxpayer behaviour the government chooses tax rates penalties and the probability of detection to maximize a utilitarian social welfare function the results consist in the derivation of a formula for the optimum marginal tax rate and a characterization of the factors determining the choice between the penalty rate and the probability of detection as instruments for the control of tax evasion

utility based estimation of labour supply functions in the regular and irregular sectors recent theoretical work on labor supply has shown that the tax and transfer system can induce some individuals to work in the irregular labor market models designed to represent such behavior are unable to sign unambiguously the impact of the marginal tax rate as well as many key exogenous parameters on the hours supplied in the irregular market except under strong restrictions on preferences in this paper the authors estimate a simultaneous labor supply model that allows testing some of the more common assumptions found in the literature using a unique data set on the underground economy of the metropolitan area of quebec city canada estimates of elasticities with respect to predetermined variables are presented moreover they test and empirically reject the assumptions of perfect substitution between regular and irregular work activities as well as additive separability of the utility function copyright 1992 by royal economic society

the influence on congress by the thrift industry abstract the investigation of the influential role of the thrift industry on congress as demonstrated by voting behavior on regulatory policy changes in the eighties is the focus of this study specifically we search for the degree to which the inadequately capitalized component of the thrift industry has captured the house of representatives we examine the influence on congress by the thrift industry using the votes by the house of representatives associated with three different legislative acts the garn st germain act the competitive equality banking act and the financial institutions reform recovery and enforcement act addressing the thrift crisis using a multi chotomous voting model we identify traditional public choice variables that could influence the probability of voting for legislation to capture the variation of the thrifts interests we consider a series of financial variables motivated by the thrift literature of failure prediction models these variables allow us to investigate the influences from the health of the congressional district s thrifts their asset composition characteristics and their reliance on regulatory forbearance

allocation of goods by lottery i introduction many goods such as hunting permits oil drilling leases cellular telephone licenses and rights to fishing berths as well as some buds such as the military draft jury duty and who is to be thrown overboard on a sinking life raft are or have been allocated by lotteries in neo classical welfare economics the random distribution of property rights does not affect allocative efficiency as long as transferability is allowed and the transactions costs are non prohibitive lottery allocations however are generally not transferable thus lottery allocations are inefficient since the goods are not ultimately allocated to the users who value them the most a number of authors such as aubert 1959 fienberg 1971 eckhoff 1989 and elster 1989 36 122 have argued that lotteries are chosen as the allocative instrument because it represents a fair or just means of allocating the goods rawls 1971 374 and eckhoff 1989 have noted that where it is impractical to divide the goods equally among those who desire them a lottery serves to satisfy both the requirement that the process be fair and that the allocation problem be resolved relatively costlessly elster 1989 113 however notes that lotteries are not the only fair allocation mechanism for example he points out that in jewish ethics the problem of allocating an indivisible good such as life saving resources is resolved by denying it to everyone even economists would probably prefer a lottery to this resolution the fairness hypothesis has a rich history in the old testament lotteries are deemed a fair way of allocating goods such as the inheritance of land numbers 33 54 lotteries are also used to allocate bads in perhaps the most famous biblical example of use of lots jonah was chosen by lot to be sacrificed to appease god who had brought a storm that threatened to wreck the ship the story goes that the lot selected jonah because he was shirking his duties elsewhere and should not have even been on the vessel jonah 1 6 1 notice that fair here is taken to mean just given this theological foundation it is not surprising that the lottery has seen frequent use in legal history as well one of the most interesting cases occurred in swedish and finnish trials in the 17th and 18th centuries in cases where a man was murdered by a mob lotteries were used to allocate punishment since the law required an eye for an eye no more and no less eckhoff says that if it was impossible to ascertain which of them had dealt the mortal blow the courts determined that one of the responsible parties be sentenced to death and that the person be selected by lottery 1989 19 a similar use of lotteries occurs in military history to deal with cases of mass desertion in roman armies every tenth man was executed decimated and the remainder pardoned in more modern times the lottery has been used in u s law 2 first of course is the use of a lottery to decide who shall sit on a jury a connection between fairness and lotteries however has also appeared in the common law in an 1842 case u s v holmes which has been discussed by fienberg 1971 eckhoff 1989 and elster 1989 a ship sank in a heavy storm and the lone surviving life raft was in grave danger of sinking the crew threw overboard fourteen male passengers in an effort to save the rest when back in port after being rescued a crewman named holmes the only crew member who had not disappeared upon arrival to port was brought to trial for the deaths of the passengers the court ruled that the non essential members of the crew should have been thrown overboard before any passengers and if that was not sufficient then passengers should have been selected by lot which is the fairest mode elster 1989 65 the fact that a human life presumably a large cost was at stake ex post did not affect the decision 3 the environmental economics literature contains a number of references to the social preferences for and benefits of lottery allocations

balancing environmental protection and energy production in the federal hydropower licensing process the u s federal energy regulatory commission ferc must balance environmental protection of riverine resources with the nation s growing demand for power production every time it issues a hydroelectric license this paper models the bureaucratic agency s decision making process in issuing these licenses data on nearly 500 hydro power licenses issued from 1983 to 2005 are utilized it is discovered that legislative and institutional constraints are by far the largest influences on ferc s regulatory decisions implying that if the current allocation of surface water in the united states is considered inefficient the most effective way to alter this allocation is by passing new legislation or by implementing institutional reform at ferc

interest group politics under majority rule abstract we develop a model of interest group politics in which the groups and coalitions that arise and the form of redistributive policies sought are jointly determined the model generates three key results first programs intended to reduce income inequality are more likely to involve direct payments than are programs that redistribute wealth across groups with similar incomes second nonequalizing redistribution is unlikely unless the various participants in the political process face significantly different political and economic costs of obtaining transfers third many policies that induce asymmetries among interest groups also impose significant deadweight costs stable nonequalizing redistribution will therefore tend to involve indirect and economically inefficient methods of transferring income

conceptual issues in the design of trade policy for industrialization abstract this paper considers the following question starting from first principles what kind of a case can be made for an industry oriented trade policy and what would such a policy look like the answer lies in an explicit consideration of specific market failures and externalities which in the absence of corrective policies may leave industry in command of a socially suboptimal share of the economy s resources the paper considers such market failures and the role that trade policy can play in addressing them special attention is paid to a the appropriate level of protection b price versus nonprice measures c the role of targeting selectivity and uniformity d the stability of incentives over time and e the qualitative aspects of trade regimes

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

studying the role of political competition in the evolution of government size over long horizons here we argue for the use of cointegration and error correction analysis to combine economic factors that are nonstationary with political factors that are stationary into an empirical model of the evolution of public policy over long periods the approach is applied to disentangle the contributions of economics and politics to the evolution of public expenditure by the government of canada over 130 years political competition emerges as the primary political factor affecting government size

tax evasion is not a gamble a report on two experiments abstract a tax evasion experiment and an equivalent gambling experiment indicate that contrary to the standard model of evasion tax evasion and gambling are quite different although the standard model provides a good basis for analysis of evasion

trade and capital account liberalization in a keynesian economy this paper analyzes the process of trade and capital account liberalization in a keynesian framework with unemployed resources previous studies on this subject have ignored the potential interactions between the liberalization process and the pre existing distortions in the economy this paper derives the optimal liberalization policy given the keynesian context and solves for explicit formulas for the import tariffs and the capital account tax in a two period general equilibrium model it is argued that a trade reform is likely to have recessionary effects in the short run if the capital account has already been liberalized

separating economic from political influences on government decisions abstract the public interest theory is a poor predictor of government decisions relative to interest group theories but a sophisticated public interest theory is a more serious alternative to the former testing the sophisticated theory s predictions is problematic however when public interest is coincident with an interest group s interests a four step method is developed that disentangles public interest and interest group interests by separating economic from political incentives applying the method to the national forest service decisions about wilderness designations indicates whether interest groups were successful in influencing allocation decisions and whether allocation decisions were in the public interest

distortion triggered lobbying and welfare a contribution to the theory of directly unproductive profit seeking activities abstract the paper considers the normative implications of lobbying for non exclusive income generated by an exogenously specified policy intervention such lobbying activities are a subset of what bhagwati has termed directly unproductive profit seeking dup activities it is demonstrated that the welfare effects of lobbying triggered by a policy distortion depend critically on whether the direct impact of the policy constraint is on price or an quantity it is also shown that several standard comparative static welfare analyses of alternative policy distorted states are significantly affected once the policy intervention is assumed to be continuously accompanied by lobbying for the associated non exclusive income

the political economy of farmland ownership regulations and land prices one of the most ubiquitous forms of agricultural regulation is a restriction on farmland ownership one canadian example of a farmland ownership restriction is the saskatchewan farm security act fsa passed in 1974 the purpose of this article is to explain using a political economy framework why the fsa was implemented and to estimate the effect of the fsa on saskatchewan farmland values a present value pv model is used to estimate the relationship between land values rents and the regulation the hausman endogeneity test reveals that the regulation variable is endogenous with the land price the sign of the regulation variable is negative which fits with the theory i e the more stringent the regulation the lower the land value we estimate that the regulation lowered saskatchewan farmland prices by an average of 4 to 34 us acre depending on whether ordinary least squares ols or two stage least squares tsls is employed in the estimation over the period of 1974 2001