an empirical investigation of coalitional bargaining procedures abstract models of government formation processes in multi party democracies are usually highly sensitive to the rules that govern the selection of formateurs i e the parties selected to propose a potential government the theoretical literature has focused on two selection rules selection proportional to seat share and selection in order of seat share in this paper we use a new data set on government formations in 11 parliamentary democracies to empirically assess which selection rule most closely approximates the data we find that while there is little empirical support for selection in order of seat share proportional selection fits the data well however we also find that a simple alternative that combines the insights of the two selection rules outperforms both of them in their ability to explain the data

party system institutionalization and government formation in new democracies party systems provide the essential structure of the coalition bargaining environment stability in party systems ensures the presence of regularities that can be observed in government formation but most empirical research focuses on established democracies in new democracies party systems are less institutionalized which means that interactions between parties can be unpredictable and has significant implications for coalition formation this article presents the first study of coalition formation in new democracies that employs an empirical design comparable to that of the leading research on western europe the author uses a new data set of potential coalitions in central and eastern europe to examine three explanations for government formation that arise when party systems are weakly institutionalized the results show first that incumbency is a disadvantage for governments in new democracies when formation occurs postelection this disadvantage is due to high levels of electoral volatility caused by policy failure and clientelistic practices incumbents are advantaged when formation takes place midterm as weak party system institutionalization leads to an inchoate pattern of interaction between opposition parties which therefore fail to provide a viable alternative second the presence of former dominant parties influences government formation by stifling the development of programmatic competition instead programmatic competition is subjugated to contestation based on historical enmities and third established parties collude to exclude new parties from coalition formation a possible indicator that a party system is becoming more institutionalized the article provides new insights into the importance of routinized and stable political practices and institutions

cyclical and political influences on the size distribution of income in the us 1959 1989 the quesion of whether the size distribution of income is subject to cyclical fluctuations in unemployment and inflation has been investigated in several studies in these studies however the fact that unemployment inflation and distribution may be influenced intentionally by policy makers is ignored in order to investigate whether any political influence on the size distribution of income actually exists a model is formulated in which the distribution not only depends on unemployment and inflation but also on a variable representing the political process the model is tested using time series data pertaining to the case of the us in the period 1958 to 1989 the results indicate that inequality tends to be negatively influenced by democratic administrations

a model of endogenous government formation political parties bargain over the allocation of cabinet portfolios when forming coalition governments noncooperative theories of legislative bargaining typically predict that the formateur enjoys a disproportionate share of government ministry positions however empirical evidence indicates that parties receive shares of portfolios proportional to their share of legislative seats that a government party contributes to the government coalition in support of gamson s law of portfolio allocation this article examines government formation as a process in which both the government coalition and the formateur are determined endogenously in equilibrium if parties have similar preferences over cabinet portfolios the share of seats they are allocated is proportional to the parties sizes

fiscal redistribution and income inequality in latin america income inequality in latin america ranks among the highest in the world it can be traced back to the unequal distribution of assets especially land and education in the region but the extent to which asset inequality translates into income inequality depends on the redistributive capacity of the state this paper documents the performance of latin american fiscal systems from the perspective of income redistribution using newly available information on the incidence of taxes and transfers across the region the findings indicate that i the differences in income inequality before taxes and transfers between latin america and western europe are much more modest than those after taxes and transfers ii the key reason is that in contrast with industrial countries in most latin american countries the fiscal system is of little help in reducing income inequality and iii in countries where fiscal redistribution is significant it is achieved mostly through transfers rather than taxes these facts stress the need for fiscal reforms across the region to further the goal of social equity however different countries need to place different relative emphasis on raising tax collection restructuring the tax system and improving the targeting of expenditures

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

the transition from payroll to consumption receipts with endogenous human capital abstract the transition from payroll to consumption receipts is simulated in a life cycle growth model featuring adult human capital as in other studies savings are higher under the consumption base however unlike those studies much of the additional savings here take human form human capital production increases for all cohorts in or yet to join the labor market as of the tax change the additional human capital production tends to dampen physical capital accumulation when compared with otherwise identical simulations which hold human capital constant the implications for intergenerational incidence are similar to that found in other examinations of the transition to a consumption base

do rising tides lift all boats the impact of secular and cyclical changes on poverty discussions about the antipoverty effects of economic growth in the united states have largely been predicated on john kennedy s metaphor that a rising tide lifts all boats but the magnitude of these effects has been a subject of debate since the inception of the war on poverty see lowell gallaway 1965 and henry aaron 1967 this debate has public policy as well as academic implications the greater the antipoverty effectiveness of growth the less the need for special programs or income supplements during economic expansions elsewhere we have shown that increased real income need not be associated with a decline in poverty see our 1984 and 1985 papers in fact poverty rates did not fall from 1982 to 1983 even though real median income increased and in 1984 the official poverty rate was about the same as it was in 1967 while real median family income was 7 1 percent above its 1967 level if a rising tide was lifting all boats the tide was late in many harbors in this paper we examine the relationship between macroeconomic conditions and poverty section i argues that several factors now limit the effectiveness of growth in reducing poverty section ii differentiates the effects of secular economic growth from those of cyclical recoveries the next section presents our interpretation of the data followed by a brief conclusion we show that growth had a large antipoverty effect through the early 1970 s but that the more recent experience has been different because growth rates have slowed and inequality has increased

the later you pay the higher the k this paper shows the importance of the age path life cycle timing of any tax for the accumulation of capital in the economy income consumption and wage taxes differ in their age paths as well as their incentive effects this paper studies how the differing age path of each tax affects the capital accumulation of the economy in an empirically calibrated life cycle model we investigate lump sum age taxes and find in every case that the later the person pays tax the higher the k of the economy to analyze the life cycle timing effect of conventional transactions based taxes income consumption and wage we replace each tax with a lump sum age tax that has the identical age path of tax payments over the life cycle we find that the timing effect is quantitatively important and often causes the impact of a tax on capital accumulation to be very different from what would be predicted from the incentive effect

tax policy the interest elasticity of saving and capital accumulation numerical analysis of theoretical models increasing disillusionment with traditional empirical methods is having a major impact on research methodology which is increasingly turning to simulation analysis based on theoretical models and assumed parameter values in research on saving and wealth accumulation there have been several recent studies consisting of simulation of theoretical models based on the life cycle model a particular focus has been tax policy and capital formation which is the area of concentration of this paper the aim is to analyze in a theoretical simulation context the impact on saving and wealth of an increase in the after tax rate of return to saving generated by a cut in the tax rate on income from capital this paper suggests that such simulation analysis while instructive as to the behavior of the class of models examined and as to the critical channels of influence does not yield a theoretical presumption in favor of cutting taxes on income from capital as a means of stimulating capital formation the development of this literature derives in part from disillusionment with traditional empirical methods many such papers begin by listing a litany of the problems involved in the usual type of empirical analysis before proceeding to simulation of theoretical structures the implicit conclusion at times appears to be that because of the daunting problems of standard empirical methodology the results derived from it can be ignored and that empirical magnitudes can perhaps be discovered by deductive means the temptation to think of the precise numerical results derived from theoretical simulation as empirical can be rather strong it needs to be reemphasized that empirical magnitudes can only be determined by empirical studies in section i the theoretical structure of a zero bequest life cycle model2 is outlined and several numerical simulations of this model are presented these simulations highlight interesting and nontrivial interactions of theoretical parameters and also demonstrate the difficulty involved in attempts to develop robust aggregate implications from such a framework for instance it is argued that summers claim to have developed a prima facie theoretical case for a high interest elasticity of savings 1981a p 537 does not stand up to sensitivity analysis a small change in the assumed rate of pure time preference or in other parametric assumptions generate otherwise plausible cases in which the interest elasticity of aggregate saving is low the experiments conducted in section i are partial equilibrium in the sense that the interest rate is changed exogenously which changes savings and hence the capital stock but the feedback effect of the capital international monetary fund this paper derives from chs 2 and 3 of my doctoral dissertation completed during a research fellowship at the brookings institution financial support was received from brookings and the social science research council i am grateful to henry aaron barry bosworth maxim engers irwin friend laurence kotlikoff franco modigliani joseph pechman duncan ripley robert shiller patricia stack and my supervisor albert ando for comments and guidance on earlier drafts none of the above institutions or individuals is responsible for the views expressed or any remaining errors for example see james tobin and walter dolde betsy white lawrence summers 1978 1981a b g moore alan auerbach and laurence kotlikoff and auerbach kotlikoff and j skinner 2it is popular to establish a sharp dichotomy between life cycle models and bequest models this taxonomy ignores the frequent references to the potential significance of bequests in the writings of the originators of the life cycle hypothesis a distinction between zero bequest life cycle models and life cycle models incorporating bequests is more accurate in terms of doctrinal history see for example albert ando and franco modigliani and modigliani and richard brumberg

constitutional power and competing risks monarchs presidents prime ministers and the termination of east and west european cabinets some european constitutions give cabinets great discretion to manage their own demise whereas others limit their choices and insert the head of state into decisions about government termination in this article we map the tremendous variation in the constitutional rules that govern cabinet termination and test existing expectations about its effects on a government s survival and mode of termination in doing so we use the most extensive government survival data set available to date the first to include east and west european governments our results demonstrate that constitutional constraints on governments and presidential influence on cabinet termination are much more common than has previously been understood and have powerful effects on the hazard profiles of governments these results alter and improve the discipline s understanding of government termination and durability and have implications for comparative work in a range of areas including the survival and performance of democracies electoral accountability opportunistic election calling and political business cycles

the conditional impact of incumbency on government formation previous research on coalition politics has found an incumbency advantage in government formation but it has provided no clear explanation as to why this advantage exists we classify existing theories as either preference based or institutions based explanations for why incumbent coalitions might be likely to form again and we integrate these explanations into a coherent theoretical argument we also claim that it is possible to some extent to distinguish these explanations empirically by taking into account the historical context of coalition bargaining using a comprehensive new data set on coalition bargaining in europe we show that coalitions in general are more likely to form if the parties comprising them have worked together in the recent past and that incumbent coalitions are more likely to re form if partners have not experienced a severe public conflict while in office together or suffered a recent setback at the polls the incumbency advantage disappears completely if partners have become mired in conflict or have lost legislative seats even after accounting for the impact of seat share on coalition size moreover in certain circumstances institutional rules that grant incumbents an advantage in coalition bargaining greatly enhance their ability to remain in office

is the general public licence a rational choice open source projects are networks of developers distributors and end users of non proprietary created knowledge goods it has been argued that this form of organization has some advantages over the firm or market coordination i show that for sufficiently convex and modular projects proprietary licences are not able to sustain sequential knowledge production which however can be carried out if the project is run on the open source basis

openness open source and the veil of ignorance author s scotchmer suzanne abstract the open source movement evolved in the one industrial context where openness is not required by intellectual property law 1 nevertheless openness itself cannot be the driving force behind the open source movement this is because openness can be achieved in many ways other than the gpl for example with proprietary licenses or licenses that are even more permissive than the gpl such as the bsd license early commentators explained this new development model by focussing on the motives of the programmer such as to demonstrate skills see the survey by stephen m maurer and suzanne scotchmer 2006 but firms also participate in open source collaborations sometimes contributing significant resources joachim henkel 2006 dirk riehle 2009 doing so can be profitable even if the contributors are rivals in the market the quality improvements or cost reductions provided by a rival s open source contributions may outweigh the deleterious effect of empowering the rival to be a better competitor

when politics and models collide estimating models of multiparty elections theory the spatial model of elections can better be represented by using conditional logit models which consider the position of the parties in issue spaces than by multinomial logit models which only consider the position of voters in the issue space the spatial model and random utility models in general suffer from a failure to adequately consider the substitutability of parties sharing similar or identical issue positions hypotheses multinomial logit is not necessarily better than successive applications of binomial logit conditional logit allows for considering more interesting political questions than does multinomial logit the spatial model may not correspond to voter decision making in multiple party settings multinomial probit allows for a relaxation of the iia condition and this should improve estimates of the effect of adding or removing parties methods comparisons of binomial logit multinomial logit conditional logit and multinomial probit on simulated data and survey data from multiparty elections results multinomial logit offers almost no benefits over binomial logit conditional logit is capable of examining movements by parties whereas multinomial logit is not multinomial probit performs better than conditional logit when considering the effects of altering the set of choices available to voters estimation of multinomial probit with more than three choices is feasible

is there a wage premium for volunteer oss engagement signalling learning and noise abstractvolunteer based open source production has become a significant new model for the organization of software development economics often pictures this phenomenon as a case of signalling individuals engage in the volunteer programming of open source software oss as a labour market signal resulting in a wage premium yet this explanation could so far not be empirically tested this article fills this gap by estimating an upper bound composite wage premium of voluntary oss contributions and by separating the potential signalling effect of oss engagement from other effects although some 70 of oss contributors believe that oss involvement benefits their careers we find no actual labour market premium for oss engagement the presence of other motives such as fun of play or altruism renders oss contributions too noisy to function as a signal

comparing the distribution of top incomes across countries comparing the distribution of top incomes across countries raises many methodological problems including differences in tax legislation and in tax avoidance the definition of the income unit and the definition of a control total for income the paper considers the significance of these problems in three applications comparing top income shares at a point in time analysing the extent of convergence or divergence over time and setting national changes in the context of the world distribution of income jel d31

the after tax rate of return affects private savings level of savings and the rate of capital formation are of central concern to both economists and policymakers although the welfare effects of tax reforms do not directly depend on their impact on savings the effects of taxes on savings is crucial to considerations of tax incidence and equity and to the issue of long run growth the impact of the rate of return on consumption and savings decisions also bears on questions regarding the appropriate government discount rate the short run crowding out effects of fiscal policy and the effects of public indebtedness on capital intensity the traditional view among economists is that changes in the rate of return are likely to have only a small effect on the savings rate this consensus is supported by theoretical arguments pointing to the opposing income and substitution effects associated with changes in the rate of return the ambiguous implications of theory are matched by empirical studies which yield conflicting estimates as to the size of the impact of changes in the rate of return the polar empirical estimate is michael boskin s 1978 suggestion that the interest elasticity of savings is 4 this estimate is widely regarded as too high

the future of the income tax the federal income tax has been under attack by the economics profession for more than a decade the attack comes from two directions supply siders who believe that progressive income taxation impairs economic incentives and more traditional economists who would substitute a progressive expenditure tax for the income tax 2 at one time support for the expenditure tax was confined to a few members of our profession including such distinguished names as john stuart mill irving fisher nicholas kaldor and james meade today it is fair to say that many if not most economists favor the expenditure tax or a flat rate income tax this group has joined the opponents of progressive taxation in the attack on the income tax despite an incessant barrage from both groups no country in the world is planning to abandon the income tax or is even considering a personal expenditure tax a wave of tax reform beginning with the u s reform in 1986 has been sweeping the world aimed at improving the income tax not at eliminating it tax preferences formerly regarded as sacrosanct are being removed and there is a distinct movement toward comprehensive income taxation 3 however individual income tax rates are being cut tax progressivity has been declining almost everywhere and reliance on the income tax has been diminishing it will come as no surprise to this audience that i approve of the base broadening feature of the current tax reform movement but i believe that the reduction in the redistributive effect of the income tax has gone too far in this paper i shall show that the progressivity of the u s tax system never very pronounced except during and immediately after the two world wars has been declining for more than two decades and that the tax reform act of 1986 reversed this decline but only slightly consequently we have a long way to go to improve the equity of the tax system i believe this can be done without punitive tax rates that will hurt economic incentives i begin with a brief review of recent changes in the u s distribution of income and follow this with an analysis of the effect of taxes on the income distribution i next examine arguments for and against the income tax with particular emphasis on its effects on economic incentives and its merits when compared with the expenditure tax i then evaluate the income tax as it emerged from the 1986 tax reform and conclude with tjoseph pechman passed away on august 19 1989 his presidential address was delivered at the onehundred second meeting of the american economic association december 29 1989 atlanta georgia joseph a pechman economic studies program the brookings institution 1775 massachusetts avenue nw washington dc 20036 i have benefited from the comments and suggestions on an earlier draft of this paper by henry j aaron richard goode jane g gravelle robert w hartman donald w kiefer herbert e klarman robert d reischauer clifford m winston and h peyton young but they should not be held responsible for the views expressed in this paper i am indebted to richard kasten for various simulations i am also grateful to stephen j kastenberg for research assistance and to diane a shugart valerie m owens and sara c hufham for secretarial assistance some of the more extreme supply siders argued that large tax cuts pay for themselves see for example laffer 1981 but i believe it is fair to say that this view has been totally discredited for a more reasonable supply side view see the economic report of the president 1982 2see for example michael j boskin 1978 david e bradford 1980 charles l ballard don fullerton john shoven and john whalley 1985 paul courant and edward gramlich 1982 martin feldstein 1978 robert hall and alvin rabushka 1985 john kay and mervyn king 1983 charles mclure 1987 mieszkowski 1980 and lawrence summers 1981 it is interesting that the recent popularity of the expenditure tax among economists was stimulated by a tax lawyer william d andrews 1974 3see pechman 1988

inference tests for gini based tax progressivity indexes distribution free statistical inference procedures for changes in lorenz and gini based indexes of tax progressivity are developed and applied related but distinct tests for the reynolds smolensky index of residual progression and the kakwani index of liability progression are provided the inference procedures are illustrated by applying them to luxembourg income study microdata for sweden the united kingdom and the united states before and after periods of tax reform in each country a finding of significant change depends on the choice among progressivity indexes no single index exhibits a consistent pattern of significant change in all countries across time

is college financial aid equitable and efficient nk reed based financial aid is often defended both on grounds of equity and efficiency equity because it provides equality of opportunity and efficiency because it encourages the formation of productive human capital james 1988 however need is now determined in a way that is both inequitable and inefficient an informal survey of my colleagues who do not study financial aid revealed no one who named the financial aid system as a substantial tax on savings however once this interpretation was suggested they quickly revealed their unanimous and disturbing impression that savings are summarily confiscated from parents upon their first child s matriculation at university though exaggerated this impression is not without foundation two families with identical earnings paths pay dramatically different amounts for college if one saves more than the other thus while the financial aid system may contribute to vertical equity since the poor get more aid than the rich its horizontal inequities are substantial moreover the federal rules for financial aid raise significant efficiency concerns 1 they might conceivably distort many household decisions including family size and the spacing of children however this paper will focus upon the most important incentive distorted by present policies the incentive to save because saving leads to receiving less financial aid a family s return to saving is substantially below the social return this may lead to families making inefficient intertemporal choices and correspondingly to an inefficient loss of capital formation

sample audit tax assessment for businesses what s fair how should a revenue agency assess a business taxpayer s income on the basis of a sample audit of transactions the agency would like to maximize revenue while minimizing the risk that the taxpayer will be assessed more than he really owes the taxpayer reasons that overassessment is worse than underassessment as far as he is concerned and therefore the taxpayer might reasonably argue that the lower bound of a one sided confidence interval should be used by the assessor the revenue agency might understandably take a different point of view the revenue agency might argue that overassessment is really no worse than underassessment from its point of view so the midpoint of such a confidence interval should be used in fact it is this latter position that is currently in use most commonly by state agencies but such practice is being challenged the courts will have to make a decision

legislative bargaining under weighted voting organizations often distribute resources through weighted voting we analyze this setting using a non cooperative bargaining game based on the baron ferejohn 1989 model unlike analyses derived from cooperative game theory we find that each voter s expected payoff is proportional to her voting weight an exception occurs when many high weight voters exist as low weight voters may expect disproportionately high payoffs due to proposal power the model also predicts that ex post the coalition formateur the party chosen to form a coalition will receive a disproportionately high payoff using data from coalition governments from 1946 to 2001 we find strong evidence ofsuch formateur effects

bargaining delays in the government formation process in parliamentary democracies the transfer of power from one government to the next is sometimes characterized by long periods of negotiations in which party leaders bargain over the composition and policy objectives of a new cabinet although these delays can have substantial political and economic consequences surprisingly little is known about their determinants moreover the few studies that exist reach contradictory conclusions in this article the author examines how factors relating to uncertainty and bargaining complexity influence the duration of the government formation process in 16 west european countries from 1944 to 1998 in line with the article s theoretical expectations the author finds that factors increasing uncertainty over the type of cabinet that is acceptable always lead to delays in forming governments but that factors increasing bargaining complexity such as the number of parties and ideological polarization in the legislature only do so when there is sufficient uncertainty

on the optimality of the patent renewal system the patent system is mainly a renewal system the patent life is chosen by the patentee in return for fees i ask whether such a system can be justified by asymmetric information on costs and benefits of research in such a model i show that renewal mechanisms possibly with subsidies are equivalent to direct revelation mechanisms and therefore cannot be improved on regardless of the objective function under plausible circumstances patents should have a uniform life rather than varying in length as typically occurs under a renewal system

tax reform 1986 and marginal welfare changes for labor during the 1980s in the united states before tax income shifted away from the poor and toward the upper income groups changing the distribution of tax burdens or after tax income is one way to redress a growing imbalance in before tax income pechman 14 feldstein 6 and wallace et al 17 have all shown that the tax reform act of 1986 tra86 increased the progressivity of the combined personal and corporate income taxes an achievement not accomplished in the last two decades of income tax reform 14 tax reform can also increase or decrease the welfare of individuals in an economy through its effect on the allocation of labor supply resources tra86 reduced the highest marginal income tax rates from 50 percent to 28 percent for high income persons and removed some lower income persons from the tax roles such large marginal tax rate changes introduce significant potential for increased economic efficiency in labor supply and for welfare gains for the rich and poor alike these changes should be part of the benefit analysis of tax reform indeed hausman and poterba 10 report welfare cost changes that result from tra86 for the average male and female their estimates however do not account for welfare cost changes throughout the income distribution in addition to our use of microdata to estimate the marginal welfare cost of tax reform we use more precise measures of marginal tax rates than other researchers in this paper we use browning s partial equilibrium framework to examine the influence of the reduction in marginal tax rates from tra86 on the distribution of welfare gains from labor supply reallocation for males by population decile and for females by population decile and by marital status the empirical results illustrate how the tax reform affected low income female household heads where poverty is so heavily concentrated as well as other household heads and spouses the results indicate that tra86 reduced welfare costs in the economy but these welfare

cabinet survival and competing risks we attempt to resolve a recent controversy in the study of cabinet terminations pertaining to the shape of hazard rates on the one hand warwick 1992b provides evidence that cabinets are more likely to terminate the longer they are in office alt and king s 1994 analysis on the other hand suggests that hazard rates are constant over the life time of a cabinet this issue is of particular theoretical importance since a constant hazard rate would add support to the nonstrategic model of cabinet termination due to browne et al 1986 while an increasing hazard rate would seem to favor lupia and strom s 1995 strategic approach by applying a semi parametric competing risk approach to data on cabinet durations we are able to show that through its use of theory based censoring the previous literature in effect analyzed only one mode in which cabinets terminate the case where one cabinet is replaced by another without a new election once cabinet terminations that lead to chamber dissolutions with subsequent elections are analyzed directly we can show that they are governed by a very different stochastic process hazard rates are not flat as in the case of replacements but increase over the life of the government further the covariates governing replacement terminations fail to explain dissolution terminations these findings add support to the strategic approach suggested by lupia and strom

the role of intergenerational transfers in aggregate capital accumulation this paper uses historical u s data to directly estimate the contribution of intergenerational transfers to aggregate capital accumulation the evidence presented indicates that intergenerational transfers account for the vast majority of aggregate u s capital formation only a negligible fraction of actual capital accumulation can be traced to life cycle or hump savings a major difference between this study and previous investigations of this issue is the use of more accurate longitudinal age earnings and age consumption profiles these profiles are simply too flat to generate substantial life cycle savings this paper suggests the importance of and need for substantially greater research and data collection on intergenerational transfers life cycle models of savings that emphasize savings for retirement as the dominant form of capital accumulation should give way to models that illuminate the determinants of intergenerational transfers

equity effects of the tax reform act of 1986 the major goals of the tax reform act of 1986 included an increase in the equity of the tax system but equity is a concept that is difficult to evaluate one dimension of equity involves vertical equity the idea that people of different income should be treated differently by the tax code this notion is often closely linked with the idea that the tax code should be at least somewhat progressive the tax reform act has also been characterized as favoring lower income individuals relative to higher income ones six million lowincome families were removed from the tax roles through increased standard deductions and personal exemptions and the earned income tax credit which refunded taxes to low income workers was expanded a second dimension of equity is horizontal equity the attempt to be sure that individuals with equal incomes are treated equally the tax reform act took many steps toward equalizing the treatment of different types of income it converted the personal tax rate schedule into two rates eliminated longstanding tax benefits such as the investment tax credit and the capital gains exclusion curtailed recently enacted incentives such as accelerated depreciation and individual retirement accounts struck deeply at popular tax shelters cut the top marginal tax rate for individuals by over one third and reduced the corporate tax rate by over one quarter but although efficiency gains have been

voting weights and formateur advantages in the formation of coalition governments over the last two decades a large and important literature has emerged that uses game theoretic models of bargaining to study legislative coalitions to test key predictions of these models we examine the composition of coalition governments from 1946 and 2001 these predictions are almost always expressed in terms of parties minimal integer voting weights we calculate such weights for all parliamentary parties in addition we develop a statistical model that nests the predictions of many of these models of the distribution of posts we find that for parties that join but did not form the government there is a linear relationship between their share of the voting weight in parliament and their share of cabinet posts the party that forms the government the formateur receives a substantial bonus relative to its voting weight the latter finding is more consistent with proposal based bargaining models of coalition formation and suggests that parties gain disproportionate power not because of their size but because of their proposal power

politics and the structural dependence of the state in democratic capitalist nations i explore empirically a central claim of the structural dependence thesis namely that capitalists ability to disinvest fundamentally conditions policy choices in democratic capitalist systems utilizing time series data for 16 affluent democracies from 1965 to 1984 i find that indeed low rates of business investment are associated with reductions in corporate tax burdens and that these reductions are more pronounced in periods of economic crisis moreover low rates of capital formation engender cuts in personal income taxes during periods of economic stress however i also find that the magnitude of responsiveness of taxation to low rates of investment is relatively small and that analyses of the political context of investment and taxation indicate that governments have choices the responsiveness of corporate tax burdens to capital formation may under some governments be part of a policy mix designed to maintain adequate investment and to address the demands of core constituencies

negotiation in legislatures over government formation we question results claiming to extend non cooperative models of legislative bargaining to the theoretically general and substantively typical case with an arbitrary number of disciplined parties we identify problems with both the derivation of formal results and empirical evaluation of these no empirically robust formateur advantage is observed in field data on bargaining over government formation given this theoretical and empirical impasse we reconsider the substantive premises that should form the foundation for any new attempt to model this fundamental political process arguing that models should be grounded in binding constitutional constraints on the government formation process in parliamentary democracies

positive time preference the case for positive time preference is absolutely compelling unless there is an infinite time horizon with the expectation of unending technological advance combined with what we call drastically diminishing marginal utility this finding holds both in the positive and normative senses a corollary is that savings are interest elastic

wage polarisation in the us and the flexibility debate the proportion of workers earning low wages in the american economy declined from 1963 through 1979 since 1979 both the low wage and the high wage shares of employment have increased leading to wage polarization analysis of current population survey data indicates that this occurred for both men and women for men this condition has been exacerbated by a secular stagnation in real median wages these empirical developments in the distribution of labor income are analyzed in detail and discussed in light of theoretical debates about employers attempts to increase labor flexibility under the pressure of declining profits copyright 1990 by oxford university press

making the first move a two stage analysis of the role of formateurs in parliamentary government formation a standard conclusion of theorists who model bargaining as a non cooperative game is that the party designated to make the first move the formateur party will determine the bargaining outcome most empirical studies of parliamentary coalition formation have paid surprisingly little attention to the formation process in this paper we model government formation as a two stage unordered discrete choice problem that better reflects this process the first step involves the selection of a formateur party and the second involves the choice of partners by the predicted formateur we evaluate several hypotheses for the two stages using a data set of all cabinets formed in the western european countries from 1970 to 2006 in our analyses of formateur selection we find that party size is clearly the dominant feature in the second stage we show that when predicting government composition it is fruitful to add information drawn from a first stage analysis

recreation demand models with taste differences over people we estimate random parameter logit models of anglers choice of fishing site the models generalize logit by allowing coefficients to vary randomly over anglers rather than being fixed the models do not exhibit the restrictive independence from irrelevant alternatives property of logit and can represent any substitution pattern estimation explicitly accounts for the fact that the variation in coefficients over anglers induces correlation in unobserved utility over trips by the same angler willingness to pay for improved fish stock and the value to anglers of specific sites are calculated from the models and compared with the estimates obtained from a standard logit model

novelty and disclosure in patent law the stringency of the novelty requirement in patent law affects the pace of innovation because it affects the amount of technical information that is disclosed among firms it also affects ex ante profitability of research we compare weak and strong novelty requirements from the standpoint of social efficiency we ask how our answer depends on the rule that determines which firm gets a patent when two firms have patents pending on the same technology the possible rules are first to invent which applies in the u s and first to file which applies everywhere else

uncertain lifetime consumption and dissaving in retirement this paper asks whether the continued accumulation or mild dissaving observed among the retired can be explained by uncertain lifetime in the absence of annuities after an initial period influenced by borrowing constraints under constant relative risk aversion uncertain lifetime depresses consumption by a proportion increasing with age if the elasticity of intertemporal substitution in consumption is small illustrative computations based on actual income and survival data show that plausible elasticities are sufficiently small to give this effect the reduction in consumption is large enough to explain much of the lack of decumulation by the elderly

who wins determining the party of the prime minister the prime ministership is the preeminent political post in parliamentary democracies yet few studies examine pm party choice perhaps under the assumption that the choice is a simple function of party size in this article we argue that key strategic actors and the context in which government negotiations take place can play a critical role in pm party choice we test our hypotheses using a mixed logit with random coefficients on an original data set comprising pm selection opportunities in 28 european countries our methodological approach allows us to incorporate qualitative concerns about heterogeneity and causal complexity into our analysis contrary to conventional wisdom we find that the largest party is often disadvantaged when it comes to pm party choice that some presidents play an influential role in choosing the pm and that the value of being the incumbent depends on one s performance in office and how the previous government ended

savings and wealth in models with altruistic bequests during recent years much attention has been given to the role of bequests in explaining various aspects of economic behavior for example authors have studied the impact of bequests on physical wealth accumulation laurence kotlikoff and lawrence summers 1981 the interest elasticity of savings owen evans 1983 tax reform laurence seidman 1984 and the distribution of wealth alan blinder 1976a more recently economists have begun to distinguish between human and physical bequests gary becker and nigel tomes 1986 acknowledging the presence of bequest in human form is important in analyzing each of the issues mentioned above outlays on children affect the shape of the family s labor supply and expenditure profiles upon which the level of aggregate savings crucially depends if these outlays are interest sensitive substitutes for physical bequests they will also influence the interest elasticity of savings in the area of tax reform the neutrality of the consumption tax depends on the ability of the government to identify human capital bequests from general consumption raymond batina 1987 if this is not possible the portfolio choice of investment in human versus physical capital may be distorted at the margin finally the unequal transmission of wealth across generations may be explained by the lack of physical bequests and the inefficiently low levels of human bequests made by wealthconstrained households becker and tomes 1986 to distinguish clearly the behavior of constrained households from unconstrained households who make sizeable physical bequests both types of bequests must be recognized this paper introduces a model that makes explicit examination of these issues possible it extends lord s 1989 multiperiod model of life cycle savings and adult human capital investment by adding altruistically motivated human and physical bequests 2 the model is calibrated using microeconomic data on earnings time and goods expenditures on children s human capital and physical bequests we then use the model to examine the contribution of bequests to wealth accumulation and the level of savings this topic is the source of an important but yet unresolved debate between franco modigliani 1988 and kotlikoff 1988 kotlikoff maintains that u s wealth accumulation is primarily the consequence of bequests as opposed to life cycle savings for retirement one type of evidence cited by kotlikoff comes from simulation results demonstrating the failure of realistically calibrated life cycle models to generate sufficiently high saving rates and wealth income ratios alan auerbach and kotlikoff 1987 we show however that if a pure life cycle

the consumption tax in the presence of altruistic cash and human capital bequests with endogenous fertility decisions abstract we provide an analysis of the consumption tax policy in the presence of cash bequests human capital investments in children and endogenous fertility decisions it is shown that the consumption tax is no longer neutral if the tax rate is constant over the taxpayer s life cycle labor supply is exogenous and the parent expects the offspring to pay the same tax rate if the number of children is chosen optimally by the parent neutrality breaks down because the shadow prices of both bequests and fertility are interlinked it is more expensive to produce a child the larger either bequest is and it is more expensive to make a bequest of either type to each child the larger the number of children produced several examples are provided where imposing the consumption tax induces an increase in the number of children produced and a decrease in net capital formation

truncation bias and the measurement of income inequality 1988 truncation bias and the measurement of income inequality journal of business economic statistics vol 6 no 3 pp 335 337

constraints on cabinet formation in parliamentary democracies coalition theory typically treats political parties involved in government formation in parliamentary democracies as if they were unconstrained players in an institution free world yet actual coalition options are often severely constrained by institutional arrangements and prior commitments we develop a systematic account of different constraints on government formation and examine their frequency across 10 parliamentary democracies hypothetical and empirical examples demonstrate how a small number of constraints can dramatically reduce the range of coalition options and redistribute bargaining power among political parties more adequate coalition theories need to recognize the effects of such constraints and to build on the theoretical lessons of the neoinstitutionalist approach to legislative behavior

income inequality income composition and macroeconomic trends israel 1979 93 the paper offers several explanations for income inequality trends in israel during 1979 93 two types of analysis are employed decomposition of the gini coefficient by income source and population sub group and time series regression on macroeconomic variables it is found that the slight increase in inequality over the period is a result of opposing forces and that the major difference between the inflation 1979 84 and stabilization 1985 93 periods is in the inequality reducing effect of direct taxes increasing in the first period while declining in the second unemployment had a regressive impact whereas inflation acted as a progressive tax in the first period but not in the second