dividend taxes corporate investment and q abstract taxes on corporate distributions have traditionally been regarded as a double tax on corporate income this view implies that while the total effective tax rate on corporate source income affects real economic decisions the distribution of this tax burden between the shareholders and the corporation is irrelevant recent research has suggested an alternative to this traditional view one explanation of why firms in the united states pay dividends in spite of the heavy tax liabilities associated with this form of distribution is that the stock market capitalizes the tax payments associated with corporate distributions this capitalization leaves investors indifferent at the margin between a corporation s decision to pay out dividends or to retain earnings this alternative view holds that while changes in the dividend tax rate will affect shareholder wealth they will have no impact on corporate investment decisions this paper develops econometric tests which distinguish between these two views of dividend taxation by extending tobin s q theory of investment to incorporate taxes at both the corporate and personal levels the implications of each view for corporate investment decisions can be derived the competing views may be tested by comparing the performance of investment equations estimated under each theory s predictions british time series data are particularly appropriate for testing hypotheses about dividend taxes because of the substantial postwar variation in effective tax rates on corporate distributions the econometric results suggest that dividend taxes have important effects on investment decisions

genetically modified crops as real options identifying regional and country specific differences abstract this paper employs real options methodology for evaluating profitability of genetically modified gm crops in volatile market and regulatory environments observed instances of market entry or product introduction are viewed as outcomes of profit maximizing decisions based on comparison of market entry costs expected future returns and the value of managerial flexibility the process is estimated using simulated maximum likelihood the estimates suggest that in the developing countries the downward volatility of the returns is higher resulting in lower adoption rates whereas the environment in the top four industrialized gmo adopting countries appears to be costlier but much more optimistic commercial success of gm soybean and maize in argentina brazil and the u s is explained mostly by a combination of high upward return volatility and moderate entry costs the findings may contribute to the general understanding measurement and possibilities of controlling the rate of technical advance in biotechnology

knowhow trading as economic exchange abstract knowhow trading is the informal exchange of practical technical knowledge between pairs of engineers and other technicians in different firms this paper explains the advantages and disadvantages of this particular mode of knowledge sharing from an economic perspective under a knowhow trading regime long term self selected partners barter knowledge ex post i e they exchange information already known to one of them the paper explains why barter is better suited to the exchange of ideas than to the exchange of conventional goods and points out advantages of ex post knowledge sharing between firms whose priorities differ it is generally cheaper to acquire knowhow through exchanges than to reinvent the wheel but sharing knowhow can cut into the firm s competitive advantage pairwise exchanges limit although they do not eliminate the firm s loss of competitive advantage when it shares technical knowledge because knowhow trading is informal and off the books such trading is difficult for the firm to evaluate and to manage similarly since it eludes the traditional measures of economic activity knowhow trading is difficult to document and integrate into studies of the general economy

constrained efficiency in the neoclassical growth model with uninsurable idiosyncratic shocks we investigate the welfare properties of the one sector neoclassical growth model with uninsurable idiosyncratic shocks we focus on the notion of constrained efficiency used in the general equilibrium literature our characterization of constrained efficiency uses the first order condition of a constrained planner s problem this condition highlights the margins of relevance for whether capital is too high or too low the factor composition of income of the consumption poor using three calibrations commonly considered in the literature we illustrate that there can be either over or underaccumulation of capital in steady state and that the constrained optimum may or may not be consistent with a nondegenerate long run distribution of wealth for the calibration that roughly matches the income and wealth distribution the constrained inefficiency of the market outcome is rather striking it has much too low a steady state capital stock

endogenous trading constraints with incomplete asset markets abstract this paper endogenizes the borrowing constraints on capital in a production economy with incomplete markets we find that these limits get looser with income a property that is consistent with us data on credit limits the framework with endogenous limits is then used to study the effects of a revenue neutral tax reform that eliminates capital income taxes our results illustrate that it is very important to take into account the effects of tax policies on the limits throughout the transition these effects can be big enough to change the overall conclusion about the desirability of a tax reform

taxing capital not a bad idea after all we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic uninsurable income shocks and permanent productivity difierences of households the optimal capital income tax rate is signiflcantly positive at 36 percent the optimal progressive labor income tax is roughly a at tax of 23 percent with a deduction of 7 200 relative to average household income of 42 000 the high optimal capital income tax is mainly driven by the life cycle structure of the model whereas the optimal progressivity of the labor income tax is attributable to the insurance and redistribution role of the tax system jel e62 h21 h24

on the optimal progressivity of the income tax code this paper computes the optimal progressivity of the income tax code in a dynamic general equilibrium model with household heterogeneity in which uninsurable labor pro ductivity risk gives rise to a nontrivial income and wealth distribution a progressive tax system serves as a partial substitute for missing insurance markets and enhances an equal distribution of economic welfare these bene cial eects of a progressive tax system have to be traded oagainst the e ciency loss arising from distorting endoge nous labor supply and capital accumulation decisions a determination of the optimal progressivity of the income tax code therefore calls for a quantitative exploration using a utilitarian steady state social welfare criterion we nd that the optimal us income tax is well approximated by a at tax rate of19 5 and a xed deduction of about 3 700 the steady state welfare gains from a fundamental tax reform towards this tax system are equivalent to 0 4 higher consumption in each state of the world an explicit computation of the transition path induced by a reform of the current towards the optimal tax system indicates however that a majority of the population currently alive would suer welfare losses calling into question the political feasibility of such

evolutionary stability in games of communication abstract this paper identifies evolutionarily stable outcomes in games in which one player has private information and the other takes a payoff relevant action the informed player can communicate at little cost outcomes satisfying a set valued evolutionary stability condition must exist and be efficient in common interest games when there is a small cost associated with using each message the outcome preferred by the informed player is stable the paper introduces a nonequilibrium set valued stability notion of entry resistant sets for games with partial common interest the no communication outcome is never an element of an entry resistant set journal of economic literature classification numbers c72 d82

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

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

it s not just the thought that counts an experimental study on the hidden cost of giving receiving a gift can create an impulse to reciprocate even when doing so may be inefficient and potentially harmful to a third party this paper provides a theoretical framework for a pure gift effect on reciprocity impulses and experimental evidence that such an effect exists that is a gift receiver will favor an actual gift giver over an intended gift giver even if the intended gift giver incurred the same costs and signaled the same intention to give this result contrasts with the predictions of existing theories on social preferences we also show that the pure gift effect is present even when it leads to a less efficient outcome or when the gift is given without the expectation of future returns our findings suggest that when reciprocating a gift becomes socially inefficient it may be more advantageous to guard against gift receiving or to keep donations secret than to try to control the intent to give

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

gift giving and the evolution of cooperation gift giving is a practice common to many societies in an evolutionary model the social custom of giving gifts at the beginning of a relationship can lead to trust and cooperation the evolutionary approach makes predictions about the character of the goods that can be used as gifts for example gift goods may have little use value even at low levels of consumption although the gifts themselves are useless the institution is not

the role of patent rights in mergers consolidation in plant biotechnology few micro level empirical papers have addressed the impact of the patent system on industry structure using firm level patent data for public and private firms in plant biotechnology we develop a measure of patent enforceability duration models show that patent statistics are a useful predictor of the timing of merger activity we find that patent enforceability is an important factor influencing the likelihood of mergers mergers in plant biotechnology may be partially motivated by the enforcement of patent rights when firms have overlapping technologies some of the merger activity may be explained by attempts to avoid mutually blocking technology as exemplified in the case of roundup ready corn

the non monetary nature of gifts this paper addresses the prevalence of non monetary gifts over more highly valued and e cient monetary transfers in social relationships we demonstrate that under a wide variety of circumstances ine cient non monetary gifts will be o ered by a donor in lieu of cash in order to signal the donor s quality of information about the recipient s preferences this result emerges because gift giving is ine cient relative to cash and not because of any arbitrary assumptions regarding communication in particular the donor has available the strategy of o ering cash and saying what he would have purchased nonetheless there is still an important equilibrium role for buying gifts 2001 elsevier science b v all rights reserved jel classixcation a13 d10 d64 d82 z1

competition between private and public schools vouchers and peer group effects a theoretical and computational model with tax financed tuition free public schools and competitive tuition financed private schools is developed students differ by ability and income achievement depends on own ability and on peers abilities equilibrium has a strict hierarchy of school qualities and two dimensional student sorting with stratification by ability and income in private schools high ability low income students receive tuition discounts while low ability high income students pay tuition premia tuition vouchers increase the relative size of the private sector and the extent of student sorting and benefit high ability students relative to low ability students

interfirm relationships and informal credit in vietnam trading relations in vietnam s emerging private sector are shaped by two market frictions the difficulty of locating trading partners and the absence of legal enforcement of contracts examining relational contracting we find that a firm trusts its customer enough to offer credit when the customer finds it hard to locate an alternative supplier a longer duration of trading relationship is associated with larger credit as is prior information gathering customers identified through business networks receive more credit these network effects are enduring suggesting that networks are used to sanction defaulting customers

dividend taxes and investment during the u s great depression abstract this paper builds an aiyagari model calibrated to the us economy in the 1930s and shows that the household precautionary saving motives can tremendously mitigate the investment decline possibly caused by the anticipated dividend tax increases during the great depression

self enforcing contracts shirking and life cycle incentives he labor market is a rich and complicated place when a worker takes a job he expects to earn a wage but will also care about rates of wage growth fringe benefits levels of risk retirement practices pensions promotion and layoff rules seniority rights and grievance procedures in return the worker must give up some time but he is also asked to upgrade his skills train other workers provide effort and ideas and defer to authority in questions of how his time is spent great changes are occurring in the way labor market institutions such as these are modelled central to the new approach is the concept of a self enforcing implicit contract this is the latest in a series of variations on the ideas of azariadis 1975 baily 1974 and gordon 1974 and is one of the more exciting new developments in the theory of labor markets this essay will outline this approach and evaluate some of its accomplishments the ideas will be presented in the context of an incentive model that is of some independent interest the model was introduced by becker and stigler 1974 and was extended by lazear 1979 to account for wage growth and mandatory retirement in these papers the workers retire at a fixed age lending the name life cycle incentives to the approach more recently shapiro and stiglitz 1984 have used a version without a fixed retirement date to account for unemployment this version is often called the shirking model these models have generated some controversy but much of it can be resolved when the models are presented in the framework of self enforcing contracts in fact this simple incentive model can do even more it can provide a rationale for competitive hierarchies where firms place their workers in competition with

a quantitative analysis of capital income taxation this paper studies the quantitative impact of eliminating capital income taxation on capital accumulation and steady state welfare in a general equilibrium model with overlapping generations of sixty five period lived individuals who face idiosyncratic earnings risk borrowing constraints and life span uncertainty under a wide range of parameter configurations the capital income tax rate that maximizes steady state welfare is positive even though eliminating it completely would raise the steady state capital stock toward the golden rule this is because the tax burden is shifted toward the younger and liquidity constrained years reducing the individuals ability to self insure copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

taxation of human capital and wage inequality a cross country analysis wage inequality has been significantly higher in the united states than in continental european countries ceu since the 1970s moreover this inequality gap has further widened during this period as the us has experienced a large increase in wage inequality whereas the ceu has seen only modest changes this paper studies the role of labor income tax policies for understanding these facts we begin by documenting two new empirical facts that link these inequality differences to tax policies first we show that countries with more progressive labor income tax schedules have significantly lower before tax wage inequality at different points in time second progressivity is also negatively correlated with the rise in wage inequality during this period we then construct a life cycle model in which individuals decide each period whether to go to school work or be unemployed individuals can accumulate skills either in school or while working wage inequality arises from differences across individuals in their ability to learn new skills as well as from idiosyncratic shocks progressive taxation compresses the after tax wage structure thereby distorting the incentives to accumulate human capital in turn reducing the cross sectional dispersion of before tax wages we find that these policies can account for half of the difference between the us and the ceu in overall wage inequality and 76 of the difference in inequality at the upper end log 90 50 differential when this economy experiences skill biased technological change progressivity also dampens the rise in wage dispersion over time the model explains 41 of the difference in the total rise in inequality and 58 of the difference at the upper end

on the distributional effects of reducing capital taxes this article asks whether household heterogeneity and market incompleteness have quantitatively important implications for the welfare effects of tax changes we compare a representative agent economy to an economy in which households face idiosyncratic uninsurable income risk the income process is consistent with empirical estimates and implies a realistic wealth distribution we find that capital tax cuts imply large welfare gains in the representative agent economy however when households are heterogeneous substantial redistribution during transition means that only a minority will support capital tax cuts whereas most households can expect large welfare losses

gift giving and worker productivity evidence from a firm level experiment abstract we present results from a field experiment designed to measure worker response to a monetary gift from their employer the experiment took place inside a tree planting firm paying its workforce incentive contracts firm managers told a crew of tree planters they would receive a pay raise for one day as a result of a surplus not attributable to past planting productivity we compare planter productivity the number of trees planted per day on the day the gift was handed out with productivity on previous and subsequent days of planting on the same block and thus under similar planting conditions we find direct evidence that the gift had a significant and positive effect on daily planter productivity controlling for planter fixed effects weather conditions and other random daily shocks

domestic alliance network to attract foreign partners evidence from international joint ventures in china partner selection is a critical issue in building international joint ventures ijvs we argue that foreign firms are more likely to select local firms with unique network structural advantages within a local alliance network we frame structural advantages as two network position traits centrality and brokerage specifically network centrality acts as a stronger network trait than brokerage in attracting foreign ijv partners however such a relationship may be moderated by foreign firms local experience and perceived capabilities we contend that when foreign firms have a high level of local market experience and perceived capabilities they may prefer a local broker over a centrally located local firm data on the domestic alliance network in china s electronics and information technology it industries largely support our hypotheses we conclude that as foreign investors become strategic insiders they may not only seek a local partner s capability attributes but also more critically pay attention to a local partner s domestic network

accounting for the u s earnings and wealth inequality we show that a theory of earnings and wealth inequality based on the optimal choices of ex ante identical households that face uninsured idiosyncratic shocks to their endowments of efficiency labor units accounts for the u s earnings and wealth inequality almost exactly

effective tax rates in macroeconomics cross country estimates of tax rates on factor incomes and consumption abstract this paper proposes a method for computing tax rates using national accounts and revenue statistics using this method we construct time series of tax rates for large industrial countries the method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases this method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework these tax rates compare favorably with existing estimates of marginal tax rates and highlight important international differences in tax policy

the folk theorem with imperfect public information the authors study repeated games in which players observe a public outcome that imperfectly signals the actions played they provide conditions guaranteeing that any feasible individually rational payoff vector of the stage game can arise as a perfect equilibrium of the repeated game with sufficiently little discounting the central condition requires that there exist action profiles with the property that for any two players no two deviations one by either player give rise to the same probability distribution over public outcomes the results apply to principal agent partnership oligopoly and mechanism design models and to one shot games with transferable utilities copyright 1994 by the econometric society

an analysis of cooperative research and development i analyze the effects of cooperative research whereby member firms agree to share the costs andfruits of a research project before they undertake it in this model industrywide agreements tend to have socially beneficial effects when the degree ofproduct market competition is low when there are r d spillovers in the absence of cooperation when a high degree of sharing is technologically feasible and when the agreement concerns basic research rather than development activities i show that a royalty free cross licensing agreement among any number offirms lowers the equilibrium level of innovation even though it increases the efficiency of r d through sharing

group consumption free riding and informal reciprocity agreements we examine conditions under which group consumption is likely to involve informal reciprocity agreements rather than a price system our model shows that reciprocity agreements are used when transactions costs are high the good is inexpensive demand is inelastic the group continues to interact over time the consumers are patient the time between interactions is short and the group is small and homogeneous further the results suggest that reciprocity agreements are likely to involve goods that are consumed along with other group benefits such as companionship we use the model to analyze overlapping social networks and investments in social capital

new housing supply and the dilution of social capital this paper examines the role of local housing supply conditions for social capital investment using an instrumental variables approach and data from the social capital community benchmark survey it is documented that the positive link between homeownership and individual social capital investment is largely confined to more built up neighborhoods with more inelastic supply of new housing the empirical findings provide support for the proposition that in these localities house price capitalization provides additional incentives for homeowners to invest in social capital the findings are also largely consistent with the proposition that built up neighborhoods provide protection from inflows of newcomers that could upset a mutually beneficial equilibrium involving reciprocal cooperation however the results do not appear to be driven by selection based on inherent differences in social aptitudes or by tiebout sorting

voluntarily separable repeated prisoner s dilemma ordinary repeated games do not apply to real societies where one can cheat and run away from partners we formulate a model of endogenous relationships which one can unilaterally end and start with a randomly assigned new partner with no information flow focusing on two person two action prisoner s dilemma we show that the endogenous duration of partnerships gives rise to a significantly dierent evolutionary stability structure from the ordinary evolutionary games monomorphic equilibria require initial trust building while a polymorphic equilibrium includes early cooperators than any strategy in monomorphic equilibria and is thus more ecient this

deterrence by market sharing a strategic incentive for licensing the potential of an incumbent firm to retain its dominant position in a market is a focal point of the modem theory of industrial organization a recent literature examines this issue for markets in which challengers threaten an incumbent s position by engaging in research for a new technology richard gilbert and david newbery 1982 show that an incumbent firm with a firstmover advantage will preempt potential entrants by inventing a new technology slightly earlier than would its rivals in a stochastic r d therefore its introduction does not alter the decision to research when the pre innovation market is characterized by an incumbent and potential entrants stephen salant 1984 shows that licensing ex post to innovation can alter the research decision as anticipation of the returns from future licensing encourages research by the entrant as a counterpoint to the salant result i find that licensing ex ante to research may discourage further research by the entrant indeed this strategic incentive for licensing may be so strong as to persuade the incumbent as well as the entrant to terminate research activity to isolate this incentive for licensing from the one discussed by salant a simple model is constructed in which licensing of future technologies is not desirable anecdotal evidence suggests that the strategic incentive does lead innovators in some markets to license their technologies examples of this information sharing are prevalent in markets where technological change is rapid in the 1940 s standard oil of new jersey discovered a process for synthetic rubber it traded patent rights on this process for a synthetic oil production process discovered by farben a german rubber company in both the synthetic oil and synthetic rubber markets rival companies were department of economics scarsborough college university of toronto toronto ontario canada m5s lal i thank jon cohen and ron saunders for discussions that inspired this paper i am also grateful to yehuda kotowitz andy mclennan jennifer reinganum ralph winter myma wooders two anonymous referees and seminar participants at the university of toronto for helpful comments on earlier drafts

taxation and corporate payout policy this paper presents new evidence on how corporate payout policy responds to the differential between the tax burden on dividend income and that on accruing capital gains it describes the construction of weighted average marginal tax rate series for the period since 1929 and it suggests that the enactment of the job growth of taxpayer relief reconciliation act of 2003 should raise the after tax value of dividends relative to capital gains by more than five percentage points the impact of this change on payout depends on the elasticity of dividend payments with respect to the after tax value of dividend income relative to capital gains time series estimates suggest an elasticity of more than three and imply that the recent tax reform could ultimately increase dividends by almost twenty percent this abstract was borrowed from another version of this item

mobility targeting and private school vouchers simulations are derived from a three district model of low middle and highincome school districts calibrated to new york data with housing stocks that vary within and across districts in this model it is demonstrated that school district targeted vouchers are similar in their impact to nontargeted vouchers but vastly different from vouchers targeted to low income households furthermore strong migration effects are shown to significantly improve the likely equity consequences of voucher programs jel 122 128 h73 persistent frustration with the perceived low quality of public education exacerbated by concerns over the inherently unequal levels of public school quality across school districts has caused policy makers courts and researchers to investigate modifications and alternatives to the current public school system one idea that has received increasing academic and public attention is that of private school vouchers with proponents arguing that the competitive pressures of voucher programs would cause improvements in the efficiency of the publicschool system while at the same time addressing equity concerns if vouchers can be targeted to low income households or low income school districts but aside from a few limited experiments in some u s cities our experience with vouchers in the united states remains virtually nonexistent this limits the amount of information researchers can derive from standard empirical analysis in that it forces them to rely on only current nonvoucher induced differences in competition despite important suggestive results such work may not anticipate all the impacts from a large scale policy such as the voucher policies currently under discussion at the same time theoretical models of school finance are also limited in that they often either focus on only one particular aspect of the general equilibrium school finance problem or they are too rich and complex to yield crisp predictions

in search of welfare improving gifts gift giving is thought to decrease welfare recipients are sometimes stuck with gifts they would not have purchased because the giver does not perfectly know the recipient s preferences and in kind gifts cannot be costlessly refunded such gifts are welfare reducing compared to giving cash if in addition recipients possess full information as to which stores carry their desired goods and the ability to reach these stores costlessly we replace these two latter assumptions with the more realistic assumptions of uncertainty about the location of goods and search costs in contrast to existing economic models gifts in our model enhance expected welfare moreover gift giving cannot be replaced by a profit maximizing trader nor the introduction of nearby specialty stores carrying gift goods we use our model to explain a number of stylized facts about gift giving the organization of retail trade and in kind government transfers 2008 elsevier b v all rights reserved

forced gifts the burden of being a friend abstract in many developing countries gift expenses escalate with income growth and account for a substantial share of household expenditure we develop a theoretical model to demonstrate how unequal income growth may trigger gift competition and drive up the financial burden associated with gift exchange we use unique census type panel data from rural china to test our model predictions and demonstrate that 1 the value of gifts responds to the average gift in the community 2 the escalation of gift giving may have adverse welfare implications especially for the poor and 3 escalating gift expenses crowd out expenditures on other consumption items

too good to fire non assortative matching to play a dynamic game abstract we model stable non assortative labor market matchings we endogenize how transferable utility is a matched firm and worker play an infinite horizon game with one sided moral hazard becker s 1973 result that complementarity yields positively assortative matching fails because increasing match quality harms dynamic incentives a firm cannot credibly threaten to fire a worker who is productive even with low effort thus firms may prefer lower type workers who will exert more effort we offer a new interpretation of efficiency wages committing to a high wage improves effort incentives indirectly by increasing the firm s willingness to walk away we also show that the set of stable outcomes has a lattice structure

social capital and growth we define and characterize social capital in a simple growth model we capture social capital in a model where individuals in a community maximize their lifetime gains to trade each trade between two members of a community has the structure of the prisoners dilemma trades are repeated indefinitely but not necessarily each period social capital is defined as the social structure which facilitates cooperative trade as an equilibrium the trading model is incorporated into a growth model to explore the connections between growth labor mobility and social capital the key assumption is that technological innovation which drives growth involves a reallocation of labor that affects social capital modifying the responsiveness of labor to a technological shock has implications for both labor efficiency and social capital

the magic of the personal touch field experimental evidence on money appreciation as gifts this paper makes use of two field experiments to explore individual effort responses to gifts we extend the literature by looking at nonfinancial gifts and gifts that combine financial and nonfinancial elements with or without adding a personal touch we find that non pecuniary gifts that signal worker appreciation induce reciprocity most importantly we find that there are interaction effects between money and appreciation while money and appreciation are individually effective they only work well together when they are combined with a personal touch this points to the importance of interpersonal elements in gift giving and has important implications for how to effectively elicit worker effort

the globalisation of technology a new taxonomy book synopsis international management of research and development brings together the most influential contributions to managing organising and coordinating r d and innovation on a global scale in addition to papers on the fundamental principles trends and drivers of international r d it covers strategies and operations of global r d it also provides an introduction to modern concepts such as knowledge networks open innovation and virtual innovation it is a key reference collection for professors researchers and practitioners

taxes regulations and the corporate debt market outstanding credit market debt in the u s corporate sector increased dramatically over the second half of the 20th century during this period tax rates on dividend distributions and corporate income decreased this article argues that the observed decline in dividend and corporate income tax rates generated an improvement in the collateral value of corporate assets and led to an increase in u s corporate debt to analyze this conjecture we build a general equilibrium model with enforcement constraints that induce endogenous limits on debt financing we find that the model can account for the time series features of u s corporate debt data

shareholders unanimity with incomplete markets macroeconomic models with heterogeneous agents and incomplete markets e g krusell and smith 1998 usually assume that consumers rather than rms own and accumulate physical capital this assumption while convenient is without loss of generality only if the asset market is complete when nancial markets are incomplete shareholders will in general disagree on the optimal level of investment to be undertaken by the rm this paper derives conditions under which shareholders unanimity obtains in equilibrium despite the incompleteness of the asset market in the general equilibrium economy analyzed here consumers face idiosyncratic labor income risk and trade rms shares in the stock market a rm s shareholders decide how much of its earnings to invest in physical capital and how much to distribute as dividends the return on a rm s capital investment is affected by an aggregate productivity shock the paper contains two main results first if the production function exhibits constant returns to scale and short sales constraints are not binding then in a competitive equilibrium a rm s shareholders will unanimously agree on the optimal level of investment thus the allocation of resources in this economy is the same as in an economy where consumers accumulate physical capital directly second when short sales constraints are binding instead the unanimity result breaks down in this case constrained shareholders prefer a higher level of investment than unconstrained ones

strategic behavior and marriage payments theory and evidence from senegal abstract this article proposes an original theory of marriage payments based on insights gained from firsthand information collected in the senegal river valley this theory postulates that decisions about the bride price which are made by the bride s father take into account the likely effects of the amount set on the risk of ill treatment of the wife and the risk of marriage failure based on a sequential game with three players the bride s father the husband and the wife and a matching process it leads to a number of important predictions that are tested against senegalese data relating to bride prices and various characteristics of women the empirical results confirm that parents behave strategically by keeping bride prices down so as to reduce the risk of marriage failure for their daughters other interesting effects on marriage payments and the probability of separation are also highlighted stressing the role of the bride s bargaining power in her own family

leave and let leave a sufficient condition to explain the evolutionary emergence of cooperation the option to leave your current partner in response to his behavior also known as conditional dissociation is a mechanism that has been shown to promote the emergence and stability of cooperation in many social interactions this mechanism nevertheless has always been studied in combination with other factors that are known to support cooperation by themselves in this paper we isolate the effect of conditional dissociation on the evolution of cooperation and show that this mechanism is enough to sustain a significant level of cooperation if the expected lifetime of individuals is sufficiently long 2014 elsevier b v all rights reserved

equilibrium and inefficiency in a community model with peer group effects public service output depends on input expenditures on own personal characteristics and on the characteristics of the other residents in the community the peer group effect in a community model with public expenditures set by voting with migration between communities and with land price differentials capitalization it is shown that communities may become heterogeneous in composition and second best inefficient this equilibrium occurs when the peer group effect is neither too strong nor too weak the inefficiency arises because an externality is created by migration the land price differential does not play the part of the price of the better peer group but of a transfer payment

intangible investment and ramsey capital taxation the standard analysis of optimal fiscal policy aggregates different types of assets into a unique capital good and all types of capital taxes into a unique capital tax this paper considers a disaggregated framework an economy with corporate and dividend taxes where firms invest in both tangible and intangible assets which can be expensed or sweat in our setup firms can always respond to changes in the timing of taxation we find that the optimal long run policy features zero corporate taxes and positive dividend taxes with labor and dividend taxes being identical moreover the initial capital levy is relatively small

an evolutionary approach to pre play communication we add a round of pre play communication to a finite two player game played by a population of players pre play communication is cheap talk in the sense that it does not directly enter the payoffs the paper characterizes the set of strategies that are stable with respect to a stochastic dynamic adaptive process periodically players have an opportunity to change their strategy with a strategy that is more successful against the current population any strategy that weakly improves upon the current poorest performer in the population enters with positive probability when there is no conflict of interest between the players only the efficient outcome is stable with respect to these dynamics for general games the set of stable payoffs is typically large every efficient payoff recurs infinitely often

if homo economicus could choose his own utility function would he want one with a conscience reply in my model of the evolution of honesty 1 i assumed the existence of a signal a blush perhaps extreme values of which served to identify some individuals as being honest with certainty joseph harrington notes that without this assumption honest individuals have difficulty invading a population initially dominated by defectors for readers who do not wish to work through the algebra in his comment the argument is easily summarized in nontechnical terms suppose two honest mutants a and b arrive in an uncountably large population consisting entirely of dishonest persons and suppose that the probability that an honest person exhibits an intense blush is say 0 999 while the corresponding probability for everyone else is only 0 001 when a sees an intense blush on the face of b what will then be his estimate of the probability that b is honest assuming that a knows the laws of elementary probability and corrects for the base rate of honest persons in the population it will be zero when virtually everyone in the population is dishonest even a person with an intense blush will be pegged as dishonest provided that even the smallest fraction of dishonest persons also shows an intense blush with

profit sharing with workers facilitates collusion among firms we show how profit sharing by firms with workers facilitates collusion among firms in a dynamic oligopoly environment with uncertain demand we first show that firm profits can always be increased by tying wages to market conditions the optimal agreement takes the form of an option and features partial sharing because increased sharing raises the expected price wage differential but reduces price wage variability we then show that given any cartel there exist market conditions such that simply giving some expected profit to workers raises expected firm profits via the transfer s impact on the incentive to cheat on the cartel

patents as options some estimates of the value of holding european patent stocks in many countries holders of patents must pay an annual renewal fee in order to keep their patents in force this paper uses data on the proportion of patents renewed and the renewal fees faced by post world war ii cohorts of patents in france the united kingdom and germany in conjunction with a model of patent holders renewal decisions to estimate the returns earned from holding patents in these countries since patents are often applied for at a nearly stage in the innovation process the model allows agents to be uncertain about the sequence of returns that will be earned if the patent is kept inforce formally then the paper presents and solves a discrete choice optimal stochastic control model derives the implications of the model on aggregate behaviour and then estimates the parameters of the model from aggregate data the estimates enable a detailed description of the evolution of the distribution of returns earned from holding patents over their life spans and calculations of both the annual returns earned from holding the patents still in force or the patent stocks in the alternative countries and the distribution of the discounted value of returns earned from holding the patents in a cohort this abstract was borrowed from another version of this item

consumption taxes and precautionary savings financing government spending through lump sum taxes does not distort capital when markets are complete but tends to increase precautionary savings under market incompleteness using flat consumption taxes instead leaves precautionary savings unaffected provided certain conditions on utility are met

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

know how sharing with stochastic innovations we provide a model of know how sharing between competing firms in which each of two firms gets a stochastic innovation in its stock of know how in every period separately considering the cases when innovations are indivisible and divisible we examine the nature of the subgame perfect sharing agreements that can obtain we discover that both stochasticity and indivisibility undermine the ability to support sharing furthermore we find that there are equilibria in which know how sharing can be intermittent and that small innovations are more likely to be shared than large ones when innovations are divisible but not necessarily when they are indivisible jel classification o30 o33 partage du savoir faire quand les innovations sont stochastiques les auteurs proposent un modele de partage du savoir faire entre entreprises concurrentes dans lequel chacune des deux entreprises obtient une innovation stochastique dans son stock of savoir faire a chaque periode en considerant separement les cas ou les innovations sont divisibles et non divisibles on examine la nature des accords de partage parfait qui peuvent se produire dans le sous jeu on montre que la stochasticite et l indivisibilite minent la possibilite de maintenir le partage de plus on decouvre que des solutions d equilibre avec partage de savoir faire peuvent jouer par intermittence et qu on est davantage susceptible de partager les fruits des petites innovations plus que des grandes quand les innovations sont divisibles mais pas necessairement quand elles sont indivisibles

on the marginal source of investment funds abstract under the new view of dividend taxation developed by auerbach quarterly journal of economics 1979 93 433 446 bradford journal of public economics 1981 15 1 22 and king public policy and the corporation chapman hall london 1977 the marginal source of finance for new investment projects is retained earnings in this case the tax advantage of retaining earnings precisely offsets the double taxation of subsequent dividends taxes on dividends have no impact on the investment incentives of firms using retentions as a marginal source of funds and paying dividends with residual cash flows we show that the same invariance with respect to dividend taxes may hold under weaker conditions with respect to the source of funds if the use of funds follows the same pattern we find evidence that there is significant heterogeneity in our sample of us firms with some firms exhibiting dividend behavior consistent with this expanded version of the new view and others exhibiting behavior consistent with the traditional view that retained earnings are not an important marginal source of funds

dividend and capital gains taxation under incomplete markets motivated by the jobs and growth tax relief reconciliation act jgtrra of 2003 the effects of capital income tax cuts are investigated in an economy with heterogeneous households and a representative mature firm dividend tax cuts contrary to capital gains tax cuts lead to a decrease in investment and capital this is because they increase the market value of existing capital and households require a higher return to hold this additional wealth in line with empirical evidence the model predicts substantial increases in dividends and stock prices overall the tax cuts lead to a welfare reduction equivalent to a consumption drop of 0 5

on the early holocene foraging to early agriculture we consider a world in which the mode of food production foraging or agriculture is endogenous and in which technology grows exogenously within a model of coalition formation we allow individuals to form co operative communities bands of foragers or farmers rationally at the lowest levels of technology equilibrium entails the grand coalition of foragers a co operative structure which avoids over exploitation of the environment but at a critical state of technology the co operative structure breaks down through an individually rational splintering of the band at this stage there can be an increase in work and through the over exploitation of the environment a food crisis in the end technological growth may lead to a one way transition from foraging to agriculture

knowledge barter in cities abstract since marshall principles of economics 1890 macmillan london it has been common for economists to model knowledge transfers as exogenous spillovers however there are many instances of knowledge transfers that are deliberate and reciprocal this paper models these endogenous knowledge transfers and shows that endogenous knowledge barter is fundamentally different than exogenous spillovers holding city size fixed we show that knowledge transfers may arise as a kind of barter when the value of knowledge is verifiable ex ante knowledge barter can also take place when the value of the knowledge transferred is verifiable only ex post if the interaction is repeated and if discount rates are not too high however the sustainability of knowledge barter depends crucially on city size when city size is large it is easier for an agent who withholds knowledge to go unpunished this means that the sustainable level of knowledge barter is smaller in a large city this result suggests that the knowledge agglomeration relationship is non monotonic the loss of cooperative knowledge exchange that occurs as city size grows can be a limit to optimum and equilibrium city sizes

theft gift giving and trustworthiness honesty is its own reward in rural paraguay in developing countries lacking legal enforcement villagers may use implicit contracts to minimize crime i construct a dynamic limited commitment model in which a thief cannot commit to forego stealing but is induced to steal less by the promise of future gifts combining survey data on production theft gifts and trust with experiments measuring trustworthiness i provide supporting evidence farmers living near more relatives or with plots that are difficult to steal from give fewer gifts and trust more and those living near more relatives also experience less theft giving increases when trust is lower and the threat of theft is greater

open knowledge disclosure an overview of the evidence and economic motivations abstract this paper reviews current literature on open knowledge disclosure strategies used by firms it is usually acknowledged that for an innovative firm that does not benefit from a natural protection such as lead time advance the best strategy is to keep an innovation secret as long as possible or to protect it through an exclusive patent however in apparent contrast to this traditional view many studies suggest that firms often disclose important parts of their knowledge through scientific publications conferences the internet etc this paper aims to provide an overview first of the evidence supporting the existence of open knowledge disclosure and second of the economic motivations that encourage rational profit seeking firms to adopt these behaviours

shaping the national system of inter industry knowledge exchange vertical integration licensing and repeated knowledge transfer in the german plastics industry we will claim in this paper that it was in particular the above average propensity to share innovative information with customers and competitors which caused the exceptional international competitiveness of the west german plastics industry including chemical firms plastics fabricators and machine makers the system of knowledge exchange of this national cluster was shaped in two main steps in the first half of the 20th century cartellization and mergers were first tolerated and then even supported by the german government it was in this period when german chemical firms formed the vertically integrated i g farben concern which provided an optimal organisational framework to explore the new technological path of plastics after the breaking up of i g farben the firms of the west german chemical firms had to find new ways to maintain inter industry technological co operation in the second half of the 20th century it turned out that they became aware of both contractual and non contractual solutions of bundling standard good and information which were often placed somewhere between market and hierarchy it seems to be no accident that all these different institutions did primarily encourage knowledge exchange between firms in geographical and cultural proximity that is why the knowledge exchanging network of the plastics industry described in this paper has been in particular concentrated on german firms even so the question is still open whether this localisation is just a curiosity limited to a special industry cluster or part of a broader german system of knowledge exchange