decentralization and intra country transfers in the great recession the case of the european union empirical evidence is found supporting the assignment of the redistribution function to the central government viewing the great recession or recessions in general as a shock it is found that a

applied general equilibrium models of taxation and international trade an introduction and survey we wish to acknowledge the help of three referees and of john pencavel on several earlier drafts as well as the assistance of the modelers whose work is referred to in the paper they corrected our lack of understanding of their work and provided many other helpful comments excellent research and bibliographical assistance have been provided by debbie fretz radwan shaban and janet stotsky helpful comments have been made by charles ballard michael boskin lans bovenberg sylvester damus harvey galper glenn harrison gordon lenjosek jack mutti serena ng t n srinivasan charles stuart and eric toder the authors also acknowledgefinancial support from the national bureau of economic research the national science foundation international business machines and the social sciences and humanities research council ottawa canada

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

dynamic stability under a dual exchange rate regime with neutral intervention operations abstract this paper examines the dynamic stability under dual exchange rates with neutral intervention operations it is shown that the relationship between the stability properties and the residents net foreign asset position depends crucially on the impact of foreign assets on the current account and that regardless whether the domestic economy is in a net creditor of debtor position it is not possible for the system to have an infinite number of stable paths

litigation and settlement in patent infringement cases a patent grants its owner the right to sue intruders that have been identified the patentholder must then supervise the market and react in case of infringement his reaction may be to go to court to settle or to accept entry we investigate how intensive the monitoring effort should be and how it will influence the entry decision in a simultaneous game even if the penalty paid by the infringer in case of a finding of liability is high the patentholder may prefer a settlement to a trial the likelihood of entry may increase with the penalty in sequential games regardless who plays first entry occurs comparatively less often than in the simultaneous game

estimating the general equilibrium benefits of large changes in spatially delineated public goods the purpose of this article is to report a new approach for measuring the general equilibrium willingness to pay for large changes in spatially delineated public goods such as air quality we estimate the parameters of a locational equilibrium model and compute equilibria for alternative scenarios characterizing the availability of public goods within a system of communities welfare measures take into consideration the adjustments of households in equilibrium to nonmarginal changes in public goods the framework is used to analyze willingness to pay for reductions in ozone concentrations in southern california between 1990 and 1995

firm reputation and incentives to milk pending patents abstract in this paper we develop a theory of patenting in which a firm preserves its reputation by only applying for a patent whenever a truly patentable idea has been generated firms have a short run incentive to deviate and receive additional rents from unworthy pending patents as well as potential rents from pto mistakes in granting patents we provide conditions for reputation to be preserved in equilibrium and analyze which market environments are favorable for such an equilibrium to exist in particular we analyze the merits of different patent systems

capitalization and the theory of local public finance the tiebout literature is incomplete this paper argues because it has not fully accounted for the capitalization of local fiscal variables into house values the paper explains why capitalization arises why it persists in long run equilibrium how it affects both residential location and the outcome of local voting and why it interferes with the efficiency of a system of local governments the analysis which is based on the main tiebout assumptions plus a property tax combines a model of household bids in a housing market with a median voter model of local public service determination

tax structure in a federation abstract does national taxation of a base influence the degree to which the local government will use the same tax base does the tax rate chosen by one local government influence the choices made by another local government the theoretical answer to these questions is often in the affirmative because of vertical and horizontal externalities that result when several governments are operating at the same time in a fiscal system however little empirical information is available this paper estimates the impact of horizontal and vertical externalities on the choice of tax rates by local governments operating in a federation higher national income tax rates and lower poverty rates are found to lead to lower local income tax rates

market trade in patents and the rise of a class of specialized inventors in the 19th century united states it has long been recognized that one of the original aims of the u s patent system was to stimulate technological development by granting inventors temporary monopoly rights to their discoveries this paper argues that the u s system fostered inventive activity in another important way as well by providing the institutional infrastructure necessary for the growth of a market for technology early 19thcentury inventors often had to play a direct role in the commercial development of their ideas a situation that constrained their ability to focus on the generation of new technologies b zorina khan and sokoloff 1993 the growth of a market in patents not only made invention a more attractive activity by raising retums but also enabled creative individuals to extract income from their ideas by selling them off making it possible for them to specialize in the inventive activities for which they had a comparative advantage ever since adam smith economists have understood that one of the most fundamental processes at work in economic development is the specialization in the use of resources that the growth of market trade makes possible given the importance of the generation of new technologies to economic growth as well as the long standing recognition that investment in invention like other types of investment activity is responsive to material returns the lack of research on the dynamics of these processes for the case of technology is somewhat puzzling the answer may simply be that this topic did not seem very relevant in a world dominated by large scale businesses that integrated both the generation and commercialization of new technologies in recent years however venture capital has flowed to firms that focus on inventive activity and sell off or license the resulting intellectual property to enterprises better positioned to exploit its commercial advantages in other words it now seems that whatever the coordination benefits of conducting these various activities within a single large firm investors are realizing that there are also potential gains to be derived from a division of labor across organizations this specialization of function is not however a modern innovation in organization on the contrary as we will show such a division of labor was commonplace by the late 19th century a period which like the present age was characterized by rapid technological change the institutional foundation for market trade in technology was the u s patent system created in accordance with the commerce clause of the constitution although influenced by british law the framers of the u s system self consciously made a number of important innovations among them were dramatically lower fees impersonal administrative procedures for handling applications and the requirement that a patentee be the first and true inventor anywhere in the world patentees also had to be humans not firms these provisions extended the protection of property rights to a much broader range of inventions than obtained in britain or elsewhere in europe and when coupled with effective enforcement meant that inventors could advantageously reveal information about their ideas to prospective buyers even before they received a patent grant moreover uncertainty about the value of the patents decreased dramatically after the law was reformed in 1836 replacing a registration system which left to civil litigation the resolution of questions of originality novelty and appropriate scope by an examination system in which technically department of economics university of california los angeles 90095 and national bureau of economic research lamoreaux is also affiliated with the department of history at ucla we thank marigee bacolod lisa boehmer yael elad brian rivera ludmila skulkina matthew wiswall and tamara zavaliyenko for research assistance research support was provided by the national science foundation and the ucla academic senate

tax competition and income redistribution an empirical analysis for switzerland tax competition is supposed to lead to thecollapse of the welfare state because first it willbecome difficult for a single jurisdiction to levy aredistribution tax upon the rich and mobile andsecond such a policy if undertaken in onejurisdiction will attract poor individuals from otherjurisdictions and erode internal redistributionpolicies in this paper the impact of personal incometaxes and transfers on residence decisions oftaxpayers is analyzed with swiss subfederal data therelationship of tax competition and the erosion of theswiss welfare state is tested with aggregate data onincome redistribution

why weak patents testing the examiner ignorance hypothesis there is a widespread impression reflected in recent legislation that us patent office examiners issue many patents of dubious validity and are insufficiently informed to distinguish these from other valid applications we address this issue using related application outcomes at the european patent office as indicators for patent weakness we create a proxy for potentially citable prior art using latent semantic analysis of us patent documents and use this to construct a measure of examiner search effort we find that us examiners tend to devote more search effort to weaker patents implying that they can identify a substantial portion of the weak patents that they issue why the patent system fails to make better use of examiners ability to identify weak patents is a question that merits further investigation

alternative tax regimes in a local public good economy abstract this paper presents two specifications of a simple general equilibrium model of a local public goods economy in which median voters determine the tax expenditure package in each jurisdiction within the context of this model two alternative tax regimes a local income tax and a property tax are compared prices incomes utility levels and the allocation of individuals across jurisdictions are shown to depend on the tax regime

dynamic stability in a model of dual exchange rates abstract the dynamic stability of a small open economy operating under a regime of dual exchange rates is shown to depend on residents net foreign asset position this result is in contrast to the economy s dynamic behavior under unified fixed rate and flexible rate regimes where stability is unrelated to net foreign asset position

interjurisdictional sorting and majority rule an empirical analysis the goal of this paper is to provide a comprehensive empirical analysis of majority rule and tiebout sorting within a system of local jurisdictions the idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice the estimator controls for observed and unobserved heterogeneity among households observed and unobserved characteristics of communities and the potential endogeneity of prices and expenditures as well as the self selection of households into communities of their choice we estimate the structural parameters of the model using data from the boston metropolitan area the empirical findings reject myopic voting models more sophisticated voting models based on utility taking provide a potential explanation of the main empirical regularities

patent office in innovation policy nobody s perfect abstract the number of patent applications and bad patents issued has been rising rapidly in recent years based on this trend we study the overload problem within the patent office and its consequences on the firms r d incentives we assume that the examination process of patent applications is imperfect and that its quality is poorer under congestion depending on policy instruments such as submission fees and the toughness of the non obviousness requirement the system may result in a high r d equilibrium in which firms self select in their patent applications or in an equilibrium with low r d opportunistic patent applications and the issuance of bad patents multiple equilibria often co exist which deeply undermines the effectiveness of policy instruments we investigate the robustness of our conclusions as to how the value of patent protection is formalized taking into consideration the introduction of a penalty system for rejected patent applications as well as the role of commitment to a given patent protection policy

a quality index for patent systems abstract this paper presents a quality index for patent systems the index is composed of nine operational design components that shape the transparency and stringency of patent systems and affect the extent to which they comply with patentability conditions seven components are related to rules and regulations e g grace period opposition process and continuation in parts while two components measure patent offices resource allocation policy i e workload per examiner and incentives the index is computed for 32 national patent systems and displays a high degree of heterogeneity across countries cross sectional quantitative analyses suggest that the demand for patent rights is lower in patent systems with a higher quality index controlling for research efforts patent fees and the strength of enforcement mechanisms these results have important policy and research metrics implications

a theory of distributional conflict voluntarism and segregation along with the rise in income inequality in the us there is evidence of a simultaneous move towards fiscal devolution and increased government reliance on private provision of public goods this article argues that these phenomena are related we describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving the model predicts that an increase in income inequality leads to decentralisation with local jurisdictions becoming more income homogeneous than the population as a whole this reduction in local income heterogeneity combined with a reduced tax base results in increased reliance by government on private provision

on the importance of public choice in migration models abstract recent general equilibrium tiebout models that use single crossing indifference curves to establish a migration equilibrium incorporate both voting and migration decisions these models have concentrated on the important question of the existence of an equilibrium but the incorporation of both voting and migration has important efficiency consequences as well this paper demonstrates the important effect of the interaction of voting and migration on efficiency conditions by showing that head taxes which are generally considered to provide efficient migration incentives with constant marginal congestion costs do not provide incentives for efficient migration decisions unless the public choice mechanism results in optimal public service provision within jurisdictions

the settlement of patent litigation in this article i develop a model to analyze patent licensing that is induced as part of a settlement agreement to avoid litigation of the issue of patent validity the patentee possesses private information about patent validity and makes a take it or leave it settlement offer to a single potential rival an essentially unique sequential equilibrium exists if out of equilibrium beliefs are restricted appropriately the model analyzes the effect of the probability of settlement and litigation

exchange rate differential and balance of payments under dual exchange markets abstract this paper develops a model of an economy that uses two exchange markets an official market in which the exchange rate is determined by central bank intervention and a free market in which the exchange rate is determined by market forces the official market handles selected imports and exports while the free market handles the remaining imports and exports and capital transactions the model is used to discuss the effects of various policies on the differential between the free and the official exchange rates and on the balance of payments

income redistribution in a federal system the question of the appropriate level of government to undertake income redistribution is receiving renewed attention from economists the standard argument about the issue might be summarized as follows 1 interstate migration of taxpayers and transfer recipients raises the cost to voters of income redistribution at the state level above the cost at the federal level 2 statewide redistribution confers spillover benefits to residents of other states 3 therefore as compared with a national system decentralized responsibility for income redistribution yields both less redistribution and less than the socially optimal amount of income redistribution the purpose of this paper is only to question step 1 of the above argument of course readers who accept the assumptions of the standard argument may conclude that the possible weakening of step 1 of that argument reduces the likelihood that its conclusion holds the paper argues that the cost of redistribution faced by state residents may in fact be lower at the state level than at the national level because their federal tax obligations fall as the state redistributes more income thus part of the cost of redistribution at the state level can be exported to residents of other states the state s federal tax bill falls when taxable incomes in the state are reduced by increased redistribution deductibility of state taxes enhances this result but is not necessary for it to demonstrate the proposition without adding unnecessary complication a simple model of income redistribution is described in which governments at all levels use linear tax transfer schedules to redistribute income the single government case is considered first then two levels of government are introduced and finally migration is allowed it is shown that without migration state costs are never greater than national costs of redistribution as long as redistribution reduces total money income when migration is allowed the result depends on the elasticity of migration responses compared with the elasticity of labor supply responses

a test for allocative efficiency in the local public sector abstract this paper develops a test for pareto efficiency in the local public sectorusing the analytical result that aggregate property value is maximized at the public output level which satisfies the samuelson condition for efficiency by using cross section data it is possible to deduce whether a representative community provides its public goods in a property value maximizing and hence efficient fashion the empirical results show no systematic tendency to either under or over provide public goods in a sample of massachusetts communities

interjurisdictional housing prices in locational equilibrium abstract in this study we discuss how to construct interjurisdictional housing price indexes that are consistent with locational equilibrium theory in theoretical models housing is assumed to be homogeneous which provides problems in empirical analysis we provide conditions that allow us to treat heterogeneous housing as if it were homogeneous the same conditions that allow us to develop a quantity index for housing also imply that we can estimate interjurisdictional housing price indexes using hedonic price regressions locational equilibrium models impose a number of restrictions regarding the co movement of housing price indexes local public goods and mean income levels we propose to use these properties of locational equilibrium models to evaluate the different price index estimates we estimate a variety of price indexes using a unique panel data set of housing transactions in southern california our empirical results by and large support our approach

exploring the schemes for green climate fund financing international lessons summary as a key issue in recent international climate summits the green climate fund gcf is confronted with the problem of insufficient financing this paper intends to explore several schemes for raising the public finance of the gcf among developed countries lessons from three main ongoing international financing mechanisms have been drawn including the united nations un membership dues official development assistance oda and the global environment facility gef the indexes that reflect historical emission responsibility hr and ability to pay ap are also used to share the burden results reveal that the ongoing international financing mechanisms vary in their burden sharing results and the shares of existing donors are driven by highly complex reasons weighting the hr un and gef approaches with the preference score compromises psc method could yield a compromise scheme in which the regional contributions are highly similar to those under the gcf initial resource mobilization from 2015 to 2018 gcf financing heavily depends on contributions from the developed countries even if the donor parties are extended to emerging economics this paper also finds that the decision of the united states to withdraw from climate finance will significantly increase the burden for other donors particularly for the european union the contribution share of which is predicted to increase to nearly 14 percentage points the schemes proposed in this study can provide a useful reference for gcf financing

characteristics of patent litigation a window on competition we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid 1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms copyright 2001 by the rand corporation

assistance to the poor in a federal system abstract this paper explores the roles of different levels of government in assisting the poor using a model incorporating utility interdependence the paper first presents some theoretical results indicating how levels of poor relief vary with the extent of mobility of the poor under both centralized and decentralized systems of support it then provides a survey of the empirical work on migration of the poor along with a brief historical discussion of the experience under the english poor laws the concluding section turns to normative issues and contends that mobility of the poor is a basic source of inefficiency in wholly decentralized systems of support this inefficiency along with certain other equity considerations establishes a role for the central government in assistance to the poor

ends against the middle determining public service provision when there are private alternatives abstract public provision of a service coexists with private market provision the quality of public provision is determined by majority vote preferences are not single peaked owing to the presence of private alternatives we identify two cases in one majority voting equilibrium always exists and the median income voter is pivotal in the other a necessary condition for equilibrium indentifies the pivotal voter who must have income below the median when equilibrium exists a coalition of middle income households who consume the public alternative will be opposed by a coalition of rich and poor households with the rich choosing private consumption

essential patents frand royalties and technological standards in this paper we abandon the usual assumption that patents bring known benefits to the industry or that their benefits are known to all parties when royalty payments are increasing in one s patent portfolio private information about the quality of patents leads to a variety of distortions in particular the incentives of firms to pad by contributing weak patents three main results that emerge from the analysis are that i the threat of court disputes reduces incentives to pad but at the cost of lower production of strong patents ii mitigating this undesirable side effect calls for a simultaneous increase in the cost of padding that is a better filtering of patent applications iii upstream firms have more incentives to pad than vertically integrated firms which internalize the fact that patent proliferation raises the share of profits going to the upstream segment of the industry but at the expense of its downstream segment this seems consistent with recent evidence concerning padding

what is behind the recent surge in patenting abstract we investigate the cause of an unprecedented surge of us patenting over the past decade conventional wisdom points to the establishment of the court of appeals of the federal circuit by congress in 1982 we examine whether this institutional change which has benefited patent holders explains the burst in us patenting using both international and domestic data on patent applications and awards we conclude that the evidence is not favorable to the conventional view instead it appears that the jump in patenting reflects an increase in us innovation spurred by changes in the management of research

the quality factor in patent systems this article develops a methodology to compare the quality of examination services in three major patent systems quality is defined as the extent to which patent systems comply with the patentability conditions in a transparent way the methodology consists of a two layer analytical framework encompassing legal standards ls and their operational design od which includes several interdependent components that affect the stringency and transparency of the filtering process the comparison of patent systems in europe japan and the united states shows that their operational designs differ substantially the european system provides higher quality and more expensive examination services than the united states one while the japanese patent system is in an intermediate position the results illustrate that different system designs lead to different outcomes in terms of backlogs patent propensity and the number of dubious patent rights in force in this respect these findings i provide an empirical validation of the conjecture of a vicious cycle linking the quality of examination and demand for patents and ii highlight the need for a multifaceted convergence of patent systems before mutual recognition is put in place the author 2011 published by oxford university press on behalf of associazione icc all rights reserved

money prices and the current account in a dual exchange rate regime abstract this paper examines the behavior of money prices and the current account in a dual exchange rate regime where all current account transactions take place at a pegged official rate and all capital account transactions occur at a freely floating financial rate the adjustment of a small open economy to a monetary disturbance under this regime is compared to that found under unified fixed and flexible rates the results concerning the behavior of the economy under dual rates are shown to apply also to an economy operating with fixed rates and controls on the international movement of capital

the transmission of disturbances under alternative exchange rate regimes with optimal indexing the paper develops a general stochastic macroeconomic model that can be used to study the international transmission of disturbances under four alternative exchange rate systems uniform flexible exchange rates uniform fixed exchange rates and two versions of two tier exchange rates the analysis makes two general points first one cannot assume stability of structure when assessing the consequences of alternative exchange rate regimes for example the slope of the aggregate supply curve and the rationally formed expectations in the asset markets can respond dramatically to the government s choice of exchange rate regime second exchange rate regimes that provide full insulation from foreign disturbances may nevertheless be inferior to other regimes in terms of their ability to maximize social welfare

pioneering inventors or thicket builders which u s firms use continuations in patenting why do firms use continuations in the prosecution of their patents motivated by the widespread use of continuations by u s firms and the prominence of this procedure in u s patent policy debates we investigate the influence of corporate and patent characteristics on the use of continuations we employ novel data on applicants and their filings of three types of continuations the continuation application cap the continuations in part cip and divisions during 1981 2000 to distinguish among the motives for continuing patents we find that cips are disproportionately filed by research and development intensive firms that patent heavily and that these continuations are more common in chemical and biological technologies patents issuing from cips cover relatively important inventions and their use appears consistent with a strategy of protecting pioneering inventions in contrast caps and divisions are associated with less important patents assigned to capital intensive firms particularly in computer and semiconductor fields and appear to be used in defensive patenting strategies we analyze the effects of the 1995 change in patent term and find that the act reduced continuations overall and shifted the output of continuations toward less important patents

the flypaper effect and other anomalies abstract i develop a model in which income both in its own right and as a proxy for other socioeconomic characteristics is an input in the production function for local public services the most obvious example is education though there are other applications as well the comparative statics results from this model yield the following results 1 the observed flypaper effect the tendency for local government to spend a higher fraction of unrestricted grants than income of residents may be due at least in part to the fact that own income but not grants is a substitute for purchased inputs in the technology hence the propensity to spend on purchased inputs out of own income is lower than out of grants 2 the income elasticity of demand for public sector output may be higher than the observed income elasticity of demand for purchased inputs 3 equalization of educational opportunity via wealth neutrality as suggested by feldstein requires major changes in education finance once we recognice the distinction between purchased inputs and output

the patent paradox revisited an empirical study of patenting in the u s semiconductor industry 1979 1995 we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms

the tiebout model bring back the entrepreneurs several recent papers in the literature have reformulltlated the nature of equilibrium in ifiebout mo lels by alssliuim ing an exogenous number of communities inflexible commullity l ou alaries anti in pirticular inactive lantlowners and developers ihis paper argues that these assumptions are unwarranted and resul1t iin in eterminate solutions and incorrect analyses determinate lon1g run1 solutions require equilibrium in intercommui land markets which in turn require giving lantlowners and or entrepreneurial leveloelers an active role in the models the role of politics in these models and its juxtaposition with entrepreneurial activities are also analyzed

brand extension as informational leverage the marketing literature refers to the concept of brand capital and provides empirical evidence that firms with a large stock of well established brands have an advantage in introducing new products this paper develops a theory of brand extension as a mechanism for informational leverage in which a firm leverages off a good s reputation in one market to alleviate the problem of informational asymmetry encountered in other markets it is shown that brand extension helps a multi product monopolist introduce a new experience good with less price distortion thus the paper provides a theoretical foundation for the concept of brand capital

theory and estimation in the economics of housing demand the main purpose of this paper is to review recent theoretical and empirical developments in the economics of housing demand in particular we ask what is known concerning the permanent income elasticity of housing demand vis a vis the current or measured income elasticity what is known concerning price elasticities what is the appropriate functional form for housing demand equations what is the role of demographic variables what is known concerning dynamic aspects of housing demand what appear to be the major sources of bias in existing estimates of demand equations

the effects of grants in aid on state and local expenditures abstract this paper develops econometric methods to estimate the effect of the piecewise linear budget constraints created by grant formulas in which the subsidy rate is not constant over expenditures e g closed end grants the methods are applied to the afdc program the results show that because of the kinked nature of the grant formula 1 the present federal formula actually increases cross state inequality in afdc benefits 2 several subsidy rates in the formula actually reduce benefits and 3 the so called flypaper effect disappears

umbrella branding as a signal of new product quality an example of signalling by posting a bond i present a signalling model in which a multiproduct firm can use its reputation as a bond for quality by using a brand name for an established product when it introduces a new experience good as out of equilibrium beliefs are specified a false signal may be taken to imply that both the established and the new product are of low quality in contrast the absence of a signal leaves open the possibility that one of the two products is of high quality hence the signal can be credible without excessive sunk costs as long as the bond posted is sufficiently large

an optimal taxation approach to fiscal federalism in a federal system of government each unit of government decides independently how much of each type of public good to provide and what types of taxes and which tax rates to use in funding the public goods in this paper we explore what types of problems can arise from this decentralized form of decision making in particular we describe systematically the types of externalities that one unit of government can create for nonresidents through both its public goods decisions and its taxation decisions the paper also explores briefly what the central government might do to lessen the costs of decentralized decision making

corporate tax integration in the united states a general equilibrium approach this paper presents estimates of static and dynamic general equilibrium resource allocation effects for four alternative plans for corporate and personal income tax integration in the united states a medium scale numerical general equilibrium model is used which integrates the u s tax system with consumer demand behavior by household and producer behavior by industry results indicate that total integration of personal and corporate taxes would yield an annual static efficiency gain of around 6 billion 1973 dollars partial integration plans yield less dynamic effects are larger and our analysis indicates that full integration may yield gains whose present value is as large as 500 billion or about 1 0 percent of the discounted present value of the gnp stream to the u s economy after correction for population growth plans differ in their distributional impacts although these findings depend on the nature of replacement taxes used to preserve government revenues the size of dynamic resource allocation effects is sensitive to the choice of the replacement tax while static gains are reasonably robust

optimal jurisdictional fragmentation and mobility abstract tiebout s hypothesis is examined in a model with the continuum of income classes and no economies of scale of population in public output provision any efficient allocation of resources can be achieved in this model by a system of jurisdictions each containing a separate income class and each using a local property tax to finance local public output however in general at most one such allocation will be an equilibrium if residents can vote with their feet conditions are derived under which higher income residents will locate in jurisdictions providing a higher level of public output these are shown necessary given a separable utility function for any optimal allocation to be sustainable as an equilibrium when residents are mobile

a re examination of the use of ability to pay taxes by local governments abstract the orthodox view of local finance in the u s is that local governments should abstain from using ability to pay taxes because migration would result in a misallocation of resources and would nullify any attempt to redistribute income this paper uses a general equilibrium model of a metropolitan area to examine the efficiency and redistributive properties of local income taxation relative to local head taxes contrary to the orthodox assertion the results indicate that local governments can use income taxation without substantially misallocating resources in addition some redistribution results from the use of local income taxes

the intergenerational conflict over the provision of public education abstract we study the intergenerational conflict over the provision of public education this conflict arises because older households without children have weaker incentives to support the provision of high quality educational services in a community than younger households with school age children we develop an overlapping generations model for households in a system of multiple jurisdictions this model captures the differences in preferred policies over the life cycle we show that the observed inequality in educational policies across communities is not only the outcome of stratification by income but is also determined by the stratification by age and a political process that is dominated by older voters in many urban communities with low quality of educational services the mobility of older households creates a positive fiscal externality since it creates a larger tax base per student this positive tax externality can dominate the negative effects that arise because older households tend to vote for lower educational expenditures as a consequence sorting by age can reduce the inequality in educational outcomes that is driven by income sorting

tax competition and tax structure in open federal economies evidence from oecd countries with implications for the european union tax competition arguments suggest that governments that operate in an open economy such as local governments should not and will not rely on non benefit taxes such as the income tax yet we observe reliance on income taxes by local governments in many countries and such reliance changes over time evidence from a panel data set of 13 oecd countries over the period 1975 1984 suggests that competition between levels of government resulting in a vertical fiscal externality and between levels of government at the same level resulting in a horizontal fiscal externality provide some economic rationale for these changes moreover the evidence indicates that the vertical and horizontal fiscal externalities interact these results have some interesting implications for fiscal policy in the european union particulary as the eu continues to evolve one implication for the eu is that enlargement that increases tax base disparities within the eu and is not accompanied by an eu level income tax will tend to lower national income tax rates although this must be qualified because it also depends on the mobility of the population a second implication is that fiscal expansion of the eu to include an eu levelincome tax may tend to lower the reliance of national governments on income taxes through the vertical externality but may also tend to equalize tax bases across countries and so increase reliance on national income taxes through the horizontal externality

insulation properties of a two tier exchange market in a portfolio balance model when countries peg their currencies to those of their major trading partners they expose themselves to interest sensitive and speculative capital flows that can undermine their ability both to maintain their exchange rate and to pursue an independent monetary policy some countries notably france italy and the belgo luxembourg economic union bleu experimented with two tier exchange rates in the early 1970s in the hopes of insulating their economies from the effects of international capital flows while at the same time protecting foreign trade from exchange rate fluctuations france and italy soon abandoned the experiment but the bleu continues to maintain separate exchange markets with separate exchange rates for current and capital account transactions the commercial exchange rate which relates to the market for current account transactions is generally pegged by the authorities the financial exchange rate determined in the market for capital account transactions is usually free to fluctuate 1 this paper investigates how well a two tier exchange market insulates a small open economy from foreign disturbances taking into account recent developments in the theory of exchange rate determination work by branson 1977 dornbusch 1976 and kouri 1976 suggests that the short run equilibrium value of the exchange rate is determined along with interest rates by demand and supply in the markets for financial assets this asset market or portfolio balance approach to exchange rate determination is particularly well suited to a study of the two tier exchange market one can view the financial exchange rate as a relative asset price it is among the variables that equilibrate asset markets and it is determined in the short run in those asset markets previous theoretical work on the two tier exchange market has generally been within the mundellian framework the financial exchange rate has been treated as equating a flow demand and supply of foreign exchange the asset market approach has the advantage of carefully distinguishing between stocks and flows in particular it treats demands for assets as stock demands that are realized instantaneously so that actual holdings of assets always reflect the desired composition of the portfolio disturbances to portfolio equilibrium create immediate stock adjustments as portfolios are rebalanced causing instantaneous changes in endogenous market clearing variables in addition disturbances alter the rate of accumulation the flow of financial assets over time portfolio balance models of two tier exchange rates can be found in dornbusch 1976 and decaluwe and steinherr 1976 but they differ from the one presented here dornbusch partitioned the exchange market so that interest income a current account transaction was channelled through the financial market that segmentation yields a different expected rate of return on foreign

patent quality and research productivity measuring innovation with multiple indicators we analyse the determinants of the decline in research productivity using panel data on manufacturing firms in the us for the period 1980 93 we focus on three factors the level of demand the quality of patents and technological exhaustion we develop an index of patent quality using detailed patent information and show that using multiple indicators substantially reduces the measured variance in quality research productivity at the firm level is inversely related to patent quality and the level of demand as predicted by theory and patent quality is positively associated with the stock market value of firms

patent quality and examination in europe following the publication of the federal trade commission report 2003 policymakers in many jurisdictions started to consider administrative patent system reforms the three largest patent offices the european patent office epo the japanese patent office jpo and the united states patent and trademark office uspto introduced measures to cope with the growing number of claims and volume of patent applications which were deemed too complex and thus prone to uncertain interpretation by courts and competitors besides revamping the fee structure the epo also modified its rule base in 2010 under the motto raising the bar requiring applicants to restrict the scope of subject matter considered in prior art search and examination this paper reports on some effects of these measures in patents granted by the epo the number of claims started to decline in 2008 when new claims fees became effective claims sections in patents became shorter and independent claims longer and presumably more specific the grant rate remained at relatively low levels but the epo was unable to stem the use of divisional filings 1 the developments at the epo point to a high private value of delay options delay may be achieved either by making use of explicit statutory rules or by

income taxes property values and migration we consider the effects of income redistribution when people can migrate from one country to another and when land within each country is heterogeneous taxes related to income can then affect property values and can induce migration which further affects property values we show that under these conditions a utilitarian government should never equalize after tax incomes if migration is impossible it may even transfer income from the poor to the rich reducing the rents earned by absentee landlords the redistributive tax on the rich may be higher or lower when the rich can migrate than when they cannot a rawlsian government in the absence of mobility will equalize after tax incomes under mobility rawlsian governments cut their taxes if and only if the relative pre tax income of the poor is sufficiently low