the choice of regulatory instrument when there is uncertainty about compliance with fisheries regulations noncompliance is an important problem for fisheries regulators and a number of studies have considered optimal enforcement issues within fisheries regulation our article extends this literature by studying the implications of noncompliance for the choice between tax and quota regulation we first develop a general stock recruitment model of a search fishery with illegal landings and show that compliance uncertainty where the regulator is uncertain about the extent of noncompliance generates an efficiency advantage for taxes over individual transferable quotas we also provide evidence that uncertainty about compliance is an important source of uncertainty for regulators copyright 2008 oxford university press

on optimal audit mechanisms for environmental taxes abstract we consider the auditing problem of an environmental enforcement agency with fixed audit resources how to decide which firms to audit after having observed the firms taxable emissions reports the goal of the agency is to implement the socially efficient emissions level the audit mechanism is the agency s sole choice variable while other variables such as the tax rate on emissions and the fine for non compliance are determined by other governmental actors the fines and budget of the agency are constrained in such a way that the common random audit mechanism fails to implement socially efficient emissions assuming perfect information among the firms we derive an optimal audit mechanism capable of implementing the socially efficient emissions level the optimal audit mechanism creates a contest exploiting the strategic interdependencies between the firms where the probability of winning not being audited for each firm depends on costly efforts their taxable emissions reports

profits from violating controls on the use of a polluting input profits from violating the quota charge and permit market systems are compared the results indicate that for a given permit price the violation profits of the charge and permit market systems are the same and exceed the profits from violating a quota system if the optimal use of inputs in a compliant market is lower than the quota it is also shown that under a permit market system the occurrence of violation decreases the equilibrium price of permits this implies that the profits from violating a permit market are lower than violation profits of a charge system

are those paid more really more productive the case of experience this study uses computerized personnel microdata on the white male managerial and professional employees at a major u s corporation to address the following question can the additional earnings which are associated with more labor market experience at a point in time really be explained by higher productivity at the same point in time our answer to this question based on both cross sectional and longitudinal information is that performance plays a substantially smaller role in explaining cross sectional experience earnings differentials and earnings growth than is claimed by those who have adopted the human capital explanation of the experience earnings profile this response depends critically on our assumption that the performance ratings which supervisors give to their white male managerial and professional subordinates adequately reflect the subordinates relative productivity in the year of assessment we present a great deal of evidence which strongly supports this assumption

enforcement of pollution levies in china abstract this paper investigates how industrial plants react to inspections conducted by environmental authorities under the pollution levy taxation regulation in china contrary to studies in the united states and canada magat and viscusi 1990 laplante and rilstone 1996 and previous studies in china dasgupta et al 2001 we find that inspections increase plants self reported pollution by 3 45 we provide a model to analyze plants strategic reactions to the pollution levy regulation in china the model concludes that under the specific regulation plants actual pollution might increase with inspections our study provides a key policy implication that inspections by environmental authorities in china are effective for verifying plants self reported pollution but not for reducing their pollution

remediation and self reporting in optimal law enforcement abstract many environmental laws encourage firms to self report their violations to government regulators rather than subject themselves to probabilistic enforcement this paper studies self reporting enforcement regimes when there are ex post benefits of remediation or clean up remediation benefits are shown to impart two advantages to the use of self reporting beyond those identified elsewhere firstly whereas non reporting firms only engage in costly clean up when they are caught by an enforcement authority self reporting firms always engage in efficient remediation secondly with self reporting the government can costlessly impose stiffer non reporter penalties that reduce the government enforcement effort required to achieve a given level of violation deterrence

the regulatory choice of noncompliance in emissions trading programs this paper addresses the following question to achieve a fixed aggregate emissions target cost effectively should emissions trading programs be designed and implemented to achieve full compliance or does allowing a certain amount of noncompliance reduce the costs of reaching the emissions target the total costs of achieving the target consist of aggregate abatement costs monitoring costs and the expected costs of collecting penalties from noncompliant firms under common assumptions i show that allowing noncompliance is cost effective only if violations are enforced with an increasing marginal penalty however one can design a policy that induces full compliance with a constant marginal penalty that meets the aggregate emissions target with lower expected costs this last result does not depend on setting an arbitrarily high constant marginal penalty in fact the marginal penalty need not be higher than the equilibrium marginal penalty under the policy with the increasing marginal penalty and can actually be lower finally tying the marginal penalty directly to the permit price allows the policy objective to be achieved without any knowledge of firms abatement costs

pay for percentile we propose an incentive scheme for educators that links compensation to the ranks of their students within comparison sets under certain conditions this scheme induces teachers to allocate socially optimal levels of effort moreover because this scheme employs only ordinal information it allows education authorities to employ completely new assessments at each testing date without ever having to equate various assessments this removes incentives for teachers to teach to a particular assessment form and eliminates opportunities to influence reward pay by corrupting assessment scales education authorities can employ separate no stakes assessment systems to track trends in scaled measures of student achievement jel i21 i28 j33 j45

incentive compensation in a corporate hierarchy abstract a theoretical and empirical analysis of within job and promotion based incentives for middle managers is presented using personnel data from a firm within job incentives are stronger than implied by previous studies evidence is provided that promotions sort employees by ability and also generate incentives promotions are associated with large increases in lifetime earnings as long as performance is sustained in the future there is little evidence that the firm trades off within job and promotion based incentives as predicted instead it appears to use a simple incentive scheme resulting in declining incentives for those passed over for promotion

efficient environmental policy with imperfect compliance discussions of efficient environmental policytend to recommend taxes rather than quotas ongrounds of efficiency a uniform tax willequalize marginal abatement cost betweenpolluters when polluters actions are imperfectly observable the distinction betweentaxes and quotas becomes less clear taxes maybe evaded by underreporting of emissions whilequota violations will not always be discovered this paper explores the conditions under whichthe efficiency properties of taxes continue tohold even when evasion is possible and theextent to which the fine for quota violationsplays the same role as a tax on emissions withsimilar efficiency properties

promotion incentives in the public sector evidence from chinese schools abstract we provide evidence that promotion incentives influence the effort of public employees by studying china s system of promotions for teachers predictions from a tournament model of promotion are tested using retrospective panel data on primary and middle school teachers consistent with theory high wage increases for promotion are associated with better performance teachers increase effort in years leading up to promotion eligibility and they reduce effort if they are repeatedly passed over for promotion evaluation scores are positively associated with teacher time use and with student test scores diminishing concerns that evaluations are manipulated

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

the effect of marginal tax rates on taxable income a panel study of the 1986 tax reform act this paper uses a treasury department panel of more than 4 000 taxpayers to estimate the sensitivity of taxable income to changes in tax rates on the basis of a comparison of the tax returns of the same individual taxpayers before and after the 1986 tax reform the analysis emphasizes that the response of taxable income involves much more than a change in the traditional measures of labor supply the evidence shows an elasticity of taxable income with respect to the marginal net of tax rate that is at least one and could be substantially higher the implications for recent tax rate changes are discussed

the internal economics of the firm evidence from personnel data we analyze twenty years of personnel data from one firm the hierarchical structure is quite simple and stable career movements suggest that the employee s rate of learning and the firm s learning about ability are important there are promotion fast tracks exit rates vary little with tenure or salary the firm has personnel policies like those described in the internal labor markets literature although several theoretical preconditions for ilms such as ports of entry and exit are lacking job levels are important to compensation but there is also substantial individual variation in pay within levels our companion paper in this issue explores the wage policy of this firm

self reporting of pollution and the firm s behavior under imperfectly enforceable regulations abstract motivated by the nature of u s laws a model is developed for a firm that maximizes expected profit and faces imperfectly enforceable pollution standards with imperfectly enforceable reporting requirements some previous models of imperfectly enforceable standards and taxes are special cases of this general mode when the fine for violating the pollution standard is linear in excess pollution the form will equate the marginal cost of control to the marginal fine rate and thus actual pollution will be insensitive to enforcement parameters related to under reporting the more complex comparative statics that exist when the fine is non linear are analyzed and comparisons with other models are made

incentives wages and promotions theory and evidence i study an incentive problem that has been largely ignored in the agency literature incentives for repeated human capital investment the optimal contract is very simple but still provides rich implications for incentive and wage structures in large organizations the empirical evidence is presented using personnel records of health insurance claim processors in a large u s insurance company these processors are white collar nonmanagerial female service industry workers a rapidly growing but rarely studied labor group the empirical findings are consistent with the main features of the optimal contract

on indirect tax evasion abstract this paper examines some aspects of the decision to evade indirect taxes in the context of a monopolistic firm in particular the degree of interdependence between the tax shifting and the tax evasion decisions is analyzed both in the case of a fixed and of a variable probability of being detected it is shown that in the first case the shifting and evasion decisions are separable while in the second case this is no longer true in this latter case a rule according to which the probability decreases with larger declarations can be said to be an efficient one the conditions for a firm s becoming a completely submerged one are derived and finally direct and indirect tax evasion are compared it is shown that for decreasing risk aversion an indirect tax is evaded as a percentage less than a profit tax of equal yield

self reporting and the design of policies for regulating stochastic pollution abstract existing environmental regulations frequently require firms to self report their compliance status to regulatory agencies using a principal agent framework i derive and compare incentive compatible regulatory policies with and without self reporting i find the firm needs to be audited less often when self reporting is required but punished more often the sign and magnitude of the gains from self reporting depend on the relative size of audit and sanction costs the accuracy of the regulator s monitoring technology and the desired level of abatement effort

the internal economics of a university evidence from personnel data using a rich personnel data set of a large european university we find strong evidence for the existence of an internal labor market first there is a strong port of entry at the lowest academic rank and in fact even prior to entering professorship resulting in very long internal careers second wages do not follow external wage developments we subsequently consider various incentive theories regarding the dynamics of promotions as organized through annual tournaments as expected a rigid set of research and teaching criteria determine the speed of promotions at the same time administrative rigidities play an important role

emission taxes versus other environmental policies in the environmental policy of most countries various forms of quotas and direct regulation are more important than environmental taxes this paper addresses four arguments which are often given against the use of emission taxes the three arguments related to information asymmetries and non convexities are valid in the sense that they point to complications in the use of environmental taxes the fourth argument is related to the employment effects of different types of environmental policies in economies with unemployment although this argument is frequently used by politicians the analysis provides no justification for it on the contrary in the model used employment is higher with environmental taxes than with nonrevenue raising environmental policies

environmental policy instruments technology adoption incentives with imperfect compliance we study the incentives to adopt advanced abatement technologies in the presence of imperfect compliance interestingly incentives under emission taxes and pollution abatement subsidies are the same that in the perfect compliance scenario however under emission standards imperfect compliance can increase firms incentives to invest whereas under an emission permit mechanism investment incentives decrease only if widespread non compliance induces a reduction in the permit price our results are valid for fairly general characteristics of the monitoring and enforcement strategies commonly found in both theoretical and empirical applications

strengthening state capabilities the role of financial incentives in the call to public service we study a recent recruitment drive for public sector positions in mexico different salaries were announced randomly across recruitment sites and job offers were subsequently randomized screening relied on exams designed to measure applicants intellectual ability personality and motivation this allows the first experimental estimates of i the role of financial incentives in attracting a larger and more qualified pool of applicants ii the elasticity of the labor supply facing the employer and iii the role of job attributes distance attractiveness of the municipal environment in helping fill vacancies as well as the role of wages in helping fill positions in less attractive municipalities a theoretical model guides each stage of the empirical inquiry we find that higher wages attract more able applicants as measured by their iq personality and proclivity towards public sector work i e we find no evidence of adverse selection effects on motivation higher wage offers also increased acceptance rates implying a labor supply elasticity of around 2 and some degree of monopsony power distance and worse municipal characteristics strongly decrease acceptance rates but higher wages help bridge the recruitment gap in worse municipalities

comparing environmental policy instruments in the presence of imperfect compliance a case study in this paper we aim to include rule making implementation monitoring and enforcement costs into the cost comparison of policy instruments we use a simple partial equilibrium model and apply it to the textile industry the model includes discrete abatement functions and costly monitoring and enforcement the case study uses individual firm data to simulate the differences in abatement costs and compliance decisions between firms we compare combinations of regulatory instruments emission taxes emission standards and technology standards and enforcement instruments criminal fines civil fines and transaction offers we show that the inclusion of information monitoring and enforcement costs indeed alters the relative cost efficiency of the different instruments

performance promotion and the peter principle this paper considers why organizations use promotions rather than just monetary bonuses to motivate employees even though this may conflict with efficient assignment of employees to jobs when performance is unverifiable use of promotion reduces the incentive for managers to be affected by influence activities that would blunt the effectiveness of monetary bonuses when employees are risk neutral use of promotion for incentives need not distort assignments when they are risk averse it may sufficient conditions for this are given the distortion may be either to promote more employees than is efficient the peter principle effect or fewer

atmospheric externalities and environmental taxation abstract the paper reviews the theory of environmental taxation under first best and second best conditions it argues that negative environmental externalities lead to reductions of the provision of public goods while investment in abatement increases the supply of public goods together with optimal tax rules the paper therefore also derives conditions for the optimal use of resources on abatement after brief discussions of the dimensions of time and uncertainty tax reform and the double dividend and taxes vs quotas the optimal tax model is applied to the problem of global warming with a discussion of the particular incentive problems that arise in designing and implementing global climate policy

the elasticity of taxable income evidence and implications abstract a central tax policy parameter that has recently received much attention but about which there is substantial uncertainty is the overall elasticity of taxable income we provide new estimates of this elasticity which address identification problems with previous work by exploiting a long panel of tax returns to study a series of tax reforms throughout the 1980s this identification strategy also allows us to provide new evidence on both the income effects of tax changes on taxable income and on variation in the elasticity of taxable income by income group we find that the overall elasticity of taxable income is approximately 0 4 the elasticity of real income not including tax preferences is much lower we estimate small income effects of tax changes on reported income implying that the compensated and uncompensated elasticities of taxable income are very similar we estimate that this overall elasticity is primarily due to a very elastic response of taxable income for taxpayers who have incomes above 100 000 per year who have an elasticity of 0 57 while for those with incomes below 100 000 per year the elasticity is less than one third as large moreover high income taxpayers who itemize are particularly responsive to taxation our estimates suggest that optimal tax structures may feature tightly targeted transfers to lower income taxpayers and a flat or even declining marginal rate structure for middle and high income taxpayers