housing market responses to transaction taxes evidence from notches and stimulus in the uk we investigate housing market responses to transaction taxes using administrative data on all property transactions in the u k from 2004 to 2012 combined with quasi experimental variation from tax notches and tax stimulus we present two main findings first transaction taxes are highly distortionary across a range of margins causing large distortions to the price volume and timing of property transactions secondly temporary transaction tax cuts are an enormously effective form of fiscal stimulus a temporary elimination of a 1 transaction tax increased housing market activity by 20 in the short run due to both timing and extensive responses and less than half of the stimulus effect was reversed after the tax was reintroduced due to re timing because of the complementarities between moving house and consumer spending these stimulus effects translate into extra spending per dollar of tax cut equal to about 1 we interpret our empirical findings in the context of a housing model with downpayment constraints in which leverage amplifies the effects of transaction taxes

tax motivated transfer pricing and us intrafirm trade prices abstract this paper analyzes monthly data on us international trade prices between 1997 and 1999 in order to investigate the impact of tax influences on intrafirm trade prices results indicate that there is substantial evidence of tax motivated transfer pricing in us intrafirm trade prices there is a strong and statistically significant relationship between countries tax rates and the prices of intrafirm transactions controlling for other variables that affect trade prices as country tax rates are lower us intrafirm export prices are lower and us intrafirm import prices are higher this finding is consistent with theoretical predictions regarding tax motivated income shifting behavior

intertemporal substitution and durable goods long run data abstract in this paper we use long run annual data to estimate the intertemporal elasticity of substitution while accounting for the intra temporal substitution between nondurable consumption goods and durable consumption goods we apply a two step procedure that combines a cointegration approach to preference parameter estimation with generalized method of moments

imperfect patent protection and innovation the paper studies the effect of strengthening protection on r d incentives in the context of process innovation it shows that for non drastic innovations that do not render the pre existing technology obsolete the innovator might favor imitation if the expected royalty rate determined by the court is sufficiently high since imitation is discouraged for very high levels of patent protection r d investment is maximized for an intermediate level of patent strength this finding provides a theoretical explanation for emerging empirical evidence questioning the effectiveness of strengthening protection on innovation incentives it also serves as a justification for the imperfections of the existing patent system that allows for some infringement

a credible approach for measuring inframarginal participation in energy efficiency programs abstract economists have long argued that many recipients of energy efficiency subsidies may be non additional getting paid to do what they would have done anyway demonstrating this empirically has been difficult however because of endogeneity concerns and other challenges in this paper we use a regression discontinuity analysis to examine participation in a large scale residential energy efficiency program comparing behavior just on either side of several eligibility thresholds we find that program participation increases with larger subsidy amounts but that most households would have participated even with much lower subsidy amounts the large fraction of inframarginal participants means that the larger subsidy amounts are almost certainly not cost effective moreover the results imply that about half of all participants would have adopted the energy efficient technology even with no subsidy whatsoever

patent policy imitation incentives and the rate of cumulative innovation abstract we study an infinite horizon cumulative innovation model in which patents are characterized by their length and the likelihood of being ruled valid in a patent infringement litigation strengthening patent protection via a greater validity or length has two opposing effects on innovation 1 a negative litigation effect due to increasing the litigation threat for future innovators and 2 a positive competition effect due to reducing profit eroding imitation by competitive firms without innovation capacity the optimal innovation maximizing patent policy balances these two opposing effects for moderate patent validity longer remaining lifetime increases innovation due to the competition effect the opposite is true for higher validity for which the litigation effect dominates moderate validity and infinite patent length maximizes innovation when future profits are subject to greater discounting and r d costs are low while strong validity and finite length stimulates more innovation under lower discounting and higher r d costs

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

is there an energy efficiency gap many analysts have argued that energy efficiency investments offer an enormous win win opportunity to both reduce negative externalities and save money this overview paper presents a simple model of investment in energy using capital stock with two types of market failures first uninternalized externalities from energy consumption and second forces such as imperfect information that cause consumers and firms not to exploit privately profitable energy efficiency investments the model clarifies that only if the second type of market failure cannot be addressed directly through mechanisms such as information provision energy efficiency subsidies and standards may be merited this chapter therefore reviews the empirical work on the magnitude of profitable unexploited energy efficiency investments a literature which frequently does not meet modern standards for credibly estimating the net present value of energy cost savings and often leaves other benefits and costs unmeasured these problems notwithstanding recent empirical work in a variety of contexts implies that on average the magnitude of profitable unexploited investment opportunities is much smaller than engineering accounting studies suggest finally there is tremendous opportunity and need for policy relevant research that utilizes randomized controlled trials and quasi experimental techniques to estimate the returns to energy efficiency investments and the welfare effects of energy efficiency programs

employment protection legislation and firm growth evidence from a natural experiment a swedish reform in 2001 made it possible for firms with less than 11 employees to exclude two from the last in first out principle in case of layoffs the reform increased employment growth with o

using referenda to improve targeting and decrease costs of conditional cash transfers cost effective allocation of conditional cash transfers cct requires identifying recipients with low opportunity costs who might change behavior this paper develops a low cost approach for improving program implementation by using a stated preference referendum style survey question to calculate willingness to accept wta for cct contracts this is illustrated in the context of mexico s payments for ecosystem services program with the paper finding that the estimated social cost based on wta is substantially lower than actual payments simulation of three geographic targeting approaches shows that joint selection using deforestation risk and wta could increase program impact under the same budget the paper also simulates modified payment schedules based on predicted wta and demonstrates that these could reduce program cost

when tax incentives drive illicit behavior the manipulation of fuel economy in the automobile industry abstract this study examines and identifies the underlying incentives for falsifying fuel economy on the part of the automobile industry using novel microdata on on road fuel consumption in japan we find a discontinuous increase in the fuel economy gap the disparity between official test results and real world fuel economy of 6 percent at the tax incentive eligibility thresholds further evidence suggests that much of the observed gap remains unexplained by driver or vehicle characteristics and that no gap is observed at similar levels of fuel economy when they are not tied to the large tax incentive eligibility our findings suggest that feebates large incentive schemes based on fuel economy levels may in turn incentivize automakers to cook the books on fuel economy figures

household expenditure and the income tax rebates of 2001 using questions expressly added to the consumer expenditure survey we estimate the change in consumption expenditures caused by the 2001 federal income tax rebates and test the permanent income hypothesis we exploit the unique randomized timing of rebate receipt across households households spent 20 to 40 percent of their rebates on nondurable goods during the three month period in which their rebates arrived and roughly two thirds of their rebates cumulatively during this period and the subsequent three month period the implied effects on aggregate consumption demand are substantial consistent with liquidity constraints responses are larger for households with low liquid wealth or low income

when do stronger patents increase continual innovation under continual innovation greater patent strength expands innovating firms profit against imitation but also shifts profit from current to past innovators we show how the impact of patents on innovation as determined by these two opposing effects varies with industry characteristics when the discount factor is sufficiently high the negative profit division effect is negligible and innovation monotonically increases in patent strength otherwise innovation has an inverted u relationship with patent strength and stronger patents are more likely to increase innovation when the discount factor or the fixed innovation cost is higher we also show how the impact of patents on innovation may change with firms innovation capability and with the intensity of competition from imitators

on measuring the effects of fiscal policy in recessions we do not have a good measure of the effects of fiscal policy in a recession because the methods that we use to estimate the effects of fiscal policy both those using the observed outcomes following different policies in aggregate data and those studying counterfactuals in fitted model economies almost entirely ignore the state of the economy and estimate the government multiplier which is presumably a weighted average of the one we care about the multiplier in a recession and one we care less about the multiplier in an expansion notable exceptions to this general claim sug gest this difference is potentially large our lack of knowledge stems significantly from the focus on linear dynamics vector autoregressions and linearized or close to linear dynamic stochastic general equilibrium dsge models our lack of knowledge also reflects a lack of data deep recessions are few and nonlinearities hard to measure the lack of statistical power in the estimation of nonlinear models using aggregate data can be addressed by exploiting estimates of partial equilibrium responses in disaggregated data microeconomic estimates of the partial equilibrium causal effects of a policy can discipline the causal channels inherent in any dsge model of the general equilibrium effects of policy microeconomic studies can also provide measures of the dependence of the effects of a policy on the states of different agents which is a key component of the dependence of the general equilibrium effects of fiscal policy on the state of the

how will energy demand develop in the developing world most of the medium run growth in energy demand is forecast to come from the developing world which consumed more total units of energy than the developed world in 2007 we argue that the main driver of the growth is likely to be increased incomes among the poor and near poor we document that as households come out of poverty and join the middle class they acquire appliances such as refrigerators and vehicles for the first time these new goods require energy to use and energy to manufacture the current forecasts for energy demand in the developing world may be understated because they do not accurately capture the dramatic increase in demand associated with poverty reduction

a trade off theory of ownership and capital structure abstract this paper determines the optimal ownership share held by a unit into a second unit when both face a tax bankruptcy trade off full ownership is optimal when the first unit has positive debt because dividends help avoid its default positive debt is in turn optimal when its corporate tax rate exceeds a threshold and or thin capitalization rules place an upper limit on the debt level in the second unit and or the volcker rule bans bailout transfers to the second unit full ownership is no longer optimal only if there is a tax on intercorporate dividend this theory rationalizes observations on multinationals financial conglomerates and family groups

shared patent rights and technological progress we study how to reward innovators who build on one another rewards come in the form of patents because patent rights are scarce the optimal allocation involves sharing more than one innovator s patent is in force at a given time we interpret such allocations as patents that infringe one another as licensing through an ever growing patent pool and as randomization through litigation we contrast the rate of technological progress under the optimal allocation with the outcome if sharing is prohibitively costly avoiding sharing initially slows progress and leads to a more variable rate of technological progress

do low income housing subsidies increase the occupied housing stock abstract a necessary condition for justifying a policy such as subsidized low income housing either via tenant based rental assistance or construction of public or private projects is that it has a real effect on market outcomes in this paper we examine one aspect of the real effect of subsidized housing does it increase the housing stock if subsidized housing raises the quantity of occupied housing per capita either more people are finding housing or they are being housed less densely on the other hand if subsidized housing merely crowds out equivalent quality low income housing that otherwise would have been provided by the private sector the housing policy may have little real effect on housing consumption using both census place and msa level data from the decennial census and from the department of housing and urban development we ask whether housing markets with more subsidized housing also have more total housing after accounting for housing demand we find that government financed units raise the total number of units in a market although on average one government subsidized unit adds only one third to one half of a unit to the total housing stock there is less crowd out in more populous markets and more crowd out in places where there is less excess demand for subsidized housing as measured by the number of government financed units per eligible person tenant based housing programs such as section 8 certificates and vouchers seem to be more effective than project based programs at targeting subsidized housing units to people who otherwise would not have their own

antitrust in innovative industries we study the effects of antitrust policy in industries with continual innovation antitrust policies that restrict incumbent behavior toward new entrants may have conflicting effects on innovation incentives raising the profits of new entrants but lowering those of continuing incumbents we show that the direction of the net effect can be determined by analyzing shifts in innovation benefit and supply holding the innovation rate fixed we apply this framework to analyze several specific antitrust policies we also show that in some cases the tension does not arise and policies that protect entrants necessarily raise the rate of innovation

debt and the marginal tax rate abstract do taxes affect corporate debt policy this paper tests whether the incremental use of debt is positively related to simulated firm specific marginal tax rates that account for net operating losses investment tax credits and the alternative minimum tax the simulated marginal tax rates exhibit substantial variation due to the dynamics of the tax code tax regime shifts business cycle effects and the progressive nature of the statutory tax schedule using annual data from more than 10 000 firms for the years 1980 1992 i provide evidence which indicates that high tax rate firms issue more debt than their low tax rate counterparts

an assessment of two environmental and economic benefits of cash for clunkers abstract this research aims to provide a more comprehensive life cycle accounting of two categories of environmental and economic benefits associated with the 3 billion us cash for clunkers vehicle scrappage program first using a life cycle emissions methodology developed in lenski et al 2010 we find that about 29 000 metric tons of criteria pollutant emissions were avoided for a benefit of about 23 million avoided carbon dioxide emissions by comparison provided a benefit worth 90 million second we compare the market value of scrapped vehicles to the rebates provided calculating the consumer surplus or gift to participants to be up to 2 billion about 2000 to 3000 per vehicle this is significantly more than offered in previous vehicle scrappage programs and suggests opportunities to get more environmental and economic bang for the buck finally these two categories of benefits are found to be heavily concentrated geographically around urban centers about 2 of us counties 50 counties received 50 and 30 of the aggregate benefits from avoided criteria pollutant emissions and consumer surplus from the rebates respectively

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

does more cash in conditional cash transfer programs always lead to larger impacts on school attendance abstract there is considerable evidence that conditional cash transfer cct programs can have large impacts on school enrollment including in very poor countries however little is known about what features of program design account for the observed outcomes in this paper we analyze the impact of a program in cambodia that made payments of varying magnitude to otherwise comparable households the identification is based on a sharp regression discontinuity design we find that a modest cash transfer equivalent to approximately 2 of the consumption of the median recipient household had a substantial impact on school attendance approximately 25 percentage points a somewhat larger transfer did not raise attendance rates above this level

self selection bias in the evaluation of voluntary energy conservation programs while voluntary energy conservation programs have been extensively promoted by electric utilities and public utility commissions their effectiveness has been insufficiently critiqued this paper contributes to the growing evaluation of such programs by measuring the net energy savings directly attributable to an actual set of programs the analysis explicitly corrects for the self selection bias that can arise in program evaluation the correction is found to be important traditional evaluation methods are subject to considerable bias correcting for this bias the amount of program induced energy savings is found to be considerably less than traditionally believed copyright 1988 by mit press

revenue raising vs other approaches to environmental protection the critical significance of pre existing tax distortions using analytical and numerical general equilibrium models we show that preexisting factor taxes produce a tax interaction effect that increases the costs of pollution taxes and quotas under policies that raise revenue and recycle it through cuts in marginal factor tax rates this effect is partially offset by a revenue recycling effect grandfathered pollution quotas such as those used under the 1990 clean air act amendments to regulate electric utilities so2 emissions do not benefit from this offset preexisting taxes raise this regulation s cost by over 70 more than half of this additional cost could be avoided by auctioning quotas and exploiting the revenue recycling effect

the reaction of consumer spending and debt to tax rebates evidence from consumer credit data we use a new panel data set of credit card accounts to analyze how consumers responded to the 2001 federal income tax rebates we estimate the monthly response of credit card payments spending and debt exploiting the unique randomized timing of the rebate disbursement we find that on average consumers initially saved some of the rebate by increasing their credit card payments and thereby paying down debt but soon afterward their spending increased counter to the permanent income model spending rose most for consumers who were initially most likely to be liquidity constrained whereas debt declined most so saving rose most for unconstrained consumers

why pay more corporate tax avoidance through transfer pricing in oecd countries this paper presents suggestive evidence of income shifting in response to differences in corporate tax rates for a large selection of oecd countries we use a new method to disentangle the income shifting effects from the effects of tax rates on real activity our baseline estimates suggest that a substantial share of the revenues from a unilateral increase in the corporate tax rate is lost because of a decline in reported income

collateral taxes and leverage we quantify the importance of collateral versus taxes for firms capital structures we estimate a dynamic model in which a taxable firm seeks financing for investment and a dynamic contracting environment motivates endogenous collateral constraints optimal leverage stays a safe distance from the constraint balancing the tax benefit of debt with the cost of lost financial flexibility we estimate this flexibility cost to be 7 2 of firm assets a percentage that is comparable to the tax benefit models with different tax rates fit the data equally well and leverage responds to the tax rate only when taxes are low

free riding on tax credits for home insulation in france an econometric assessment using panel data abstract this econometric study assesses the efficiency of the income tax credit system introduced in france in 2005 on investment decisions for household retrofits focusing on insulation measures a logit model with random individual effects is estimated using an unbalanced panel of 23 879 households surveyed over the period 2002 2011 an estimation in difference is performed to identify the impact of the policy the tax credit is found to have had no significant effect during the first two years suggesting a latency period related to inertia in households investment decisions possibly due to the complexity of the tax credit scheme the tax credit had an increasing significant positive effect from 2007 to 2010 before slightly decreasing in 2011 this is in line with changes in the tax credit rates suggesting a correlation with the level of subsidy defined as the situation in which the subsidized household would have invested even in the absence of the subsidy free ridership progressively decreased over the period was lower for insulation of opaque surfaces roofs walls etc than for insulation of windows and depended on individual characteristics the estimated average proportion of free riders varies between 40 and 85 after 2006 in addition we assess the potential bias caused by time varying unobservable variables and conclude that our estimates of the impacts of the policy are conservative

have the tax benefits of debt been overestimated abstract we re examine the claim that many corporations are underleveraged in that they fail to take full advantage of debt tax shields we show prior results suggesting underleverage stems from biased estimates of tax benefits from interest deductions we develop improved estimates of marginal tax rates using a non parametric procedure that produces more accurate estimates of the distribution of future taxable income we show that additional debt would provide firms with much smaller tax benefits than previously thought and when expected distress costs and difficult to measure non debt tax shields are also considered it appears plausible that most firms have tax efficient capital structures

patents and cumulative innovation causal evidence from the courts cumulative innovation is central to economic growth do patent rights facilitate or impede such follow on innovation this paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent as measured by later citations we exploit random allocation of judges at the u s court of appeal for the federal circuit to control for the endogeneity of patent invalidation we find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent on average but the impact is highly heterogeneous patent rights appear to block follow on innovation only in the technology fields of computers electronics and medical instruments moreover the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small innovators suggesting that patents may impede the democratization of innovation

regulating household leverage this article studies how credit markets respond to policy constraints on household leverage exploiting a sharp policy induced discontinuity in the cost of originating certain high leverage mortgages we study how the dodd frank ability to repay rule affected the price and availability of credit in the u s mortgage market our estimates show that the policy had only moderate effects on prices increasing interest rates on affected loans by 10 15 basis points the effect on quantities however was significantly larger we estimate that the policy eliminated 15 of the affected market completely and reduced leverage for another 20 of remaining borrowers this reduction in quantities is much greater than would be implied by plausible demand elasticities and indicates that lenders responded to the policy not only by raising prices but also by exiting the regulated portion of the market heterogeneity in the quantity response across lenders suggests that agency costs may have been one particularly important market friction contributing to the large overall effect as the fall in lending was substantially larger among lenders relying on third parties to originate loans finally while the policy succeeded in reducing leverage our estimates suggest this effect would have only slightly reduced aggregate default rates during the housing crisis

taxes and leverage at multinational corporations abstract empirical research has struggled to show that variation in corporate capital structure arises from variation in estimated corporate income tax rates we argue that in previous studies both the tax rates applied to multinational corporations and the taxable income earned have been mismeasured using the bureau of economic analysis annual survey sample combined with each firm s income and country specific tax rate we find that firms do have higher leverage ratios and lower interest coverage ratios when they operate in countries with higher tax rates as theory would suggest the trade off theory of capital structure continues to have empirical support

the production impact of cash for clunkers implications for stabilization policy during july and august of 2009 americans purchased nearly 700 000 new automobiles or light trucks under the government s cash for clunkers program officially the car allowance rebate system or cars under the terms of the purchase qualified buyers traded in their old vehicles to receive a rebate on the price of a new vehicle the amount of the rebate either 3 500 or 4 500 depended on both the model that was traded in and the model that was acquired the direct cost to taxpayers of subsidizing these purchases was roughly 2 8 billion the program had two primary goals to reduce energy consumption and pollution by inducing consumers to replace their old gas guzzlers with newer fuel efficient models and to serve as a stimulus for the troubled automobile industry and the u s economy as a whole in this article we take a close look at the second objective exploring how the cars program affected sales and more important production in the automobile industry 1 drawing on our findings we then propose an answer to the more difficult question of the program s impact on u s gross domestic product gdp 2 in line with other recent studies our analysis shows that the cars program had only a transitory cumulative effect on sales we estimate an initial impact of about 450 000 additional automobile sales but these were essentially shifted from the periods before and especially after the program we calculate that by january 2010 the cumulative effect of the cars program on auto sales was essentially zero 3 more important for our purposes however is the program s effect on automobile production while most studies of cars have focused on sales we argue that the program s success as a stimulus to the economy hinges on its impact on production production increases are more likely to translate into higher gdp and employment gdp being fundamentally a measure of production sales clearly rose at the outset but given that the industry can simply let inventory stocks absorb the increase in sales higher sales alone do not imply higher gdp or employment 4 overall we find that the program had a very modest and short lived effect on production production was about 200 000 units higher during the program in comparison to the 450 000 increase in sales sales from september 2009 to january 2010 were correspondingly lower than they would have been in the absence of cars which allowed producers to have lower production while still replenishing their inventory stocks thus on a quarterly basis we estimate that the cars program shifted production by around 100 000 units from 2009q4 and 2010q1 to 2009q3 these calculations suggest that the program had a negligible direct effect on gdp shifting less than roughly 2 billion or less than one tenth of 1 of gdp into 2009q3 from the subsequent two quarters this contrasts starkly with a study released by the department of transportation dot in the immediate aftermath of the program which concluded that cars had given a substantial boost to both gdp and employment in the final section of the article we discuss why our conclusions differ from those of the dot study our findings raise broader questions beyond just this particular program about the efficacy of efforts to stimulate short term spending it is clearly a mistake to gauge their impact by just looking at the spending they induce without looking at the supply side it is reasonable to expect that producers will use other margins than production and employment to respond to temporary movements in sales so the only question is quantitative how large is the gap between the sales and production impact we find it to be large in the case of cash for clunkers in what follows we will lay out the economics behind our analysis by examining how rebates and other transitory price changes affect consumer purchases and manufacturers inventory decisions

simpler is better predicting consumer vehicle purchases in the short run abstract when agencies such as the us environmental protection agency epa establish future greenhouse gas emissions standards for new vehicles forecasting future vehicle purchases due to changes in fuel economy and prices provides insight into regulatory impacts we compare predictions from a nested logit model independently developed for us epa to a simple model where past market share predicts future market share using data from model years 2008 2010 and 2016 the simple model outperforms the nested logit model for all goodness of prediction measures for both prediction years including changes in vehicle price and fuel economy increases bias in forecasted market shares this bias suggests price increases are correlated with unobserved increases in vehicle quality changes in preferences or brand specific changes in market size but not cost pass through for 2010 past shares predict better than a nested logit model despite a major shock the economic disruption caused by the great recession observed share changes during this turbulent period may offer upper bounds for policy changes in other contexts the largest observed change in market share across the two horizons is 6 6 for manufacturers in 2016 and 3 4 for an individual vehicle in 2010

making conditional cash transfer programs more efficient designing for maximum effect of the conditionality conditional cash transfer programs are now used extensively to encourage poor parents to increase investments in their children s human capital these programs can be large and expensive motivating a quest for greater efficiency through increased impact of the programs imposed conditions on human capital formation this requires designing the programs targeting and calibration rules specifically to achieve this result using data from the progresa randomized experiment in mexico this article shows that large efficiency gains can be achieved by taking into account how much the probability of a child s enrollment is affected by a conditional transfer rules for targeting and calibration can be made easy to implement by selecting indicators that are simple observable and verifiable and that cannot be manipulated by beneficiaries the mexico case shows that these efficiency gains can be achieved without increasing inequality among poor households

consumption dynamics during recessions when will durable expenditures respond strongly to economic stimulus we build from micro evidence and show that in a heterogeneous agent business cycle model with xed costs of durable adjustment responsiveness is substantially dampened during recessions our model estimates imply that during the great recession durable expenditures were half as responsive to additional stimulus as during the boom in the 1990s this procyclical responsiveness is driven by changes in the distribution of households desired durable holdings over the cycle we directly test our model by estimating this distribution empirically using psid micro data and nd that the distribution in the data moves cyclically as predicted in addition to this micro evidence we also provide support for our model s procyclical responsiveness using aggregate time series data and we show this time series evidence is inconsistent with simpler models featuring smooth adjustment costs

the effects of low income housing tax credit developments on neighborhoods abstract this paper evaluates the impacts of new housing developments funded with the low income housing tax credit lihtc the largest federal project based housing program in the u s on the neighborhoods in which they are built a discontinuity in the formula determining the magnitude of tax credits as a function of neighborhood characteristics generates pseudo random assignment in the number of low income housing units built in similar sets of census tracts tracts where projects are awarded 30 higher tax credits receive approximately six more low income housing units on a base of seven units per tract these additional new low income developments cause homeowner turnover to rise raise property values in declining areas and reduce incomes in gentrifying areas in neighborhoods near the 30th percentile of the income distribution lihtc units significantly crowd out nearby new rental construction in gentrifying areas but do not displace new construction in stable or declining areas

zipf s law for cities an explanation zipf s law is a very tight constraint on the class of admissible models of local growth it says that for most countries the size distribution of cities strikingly fits a power law the number of cities with populations greater than s is proportional to 1 s suppose that at least in the upper tail all cities follow some proportional growth process this appears to be verified empirically this automatically leads their distribution to converge to zipf s law

unconventional fiscal policy at the zero bound when the zero lower bound on nominal interest rates binds monetary policy cannot provide appropriate stimulus we show that in the standard new keynesian model tax policy can deliver such stimulus at no cost and in a time consistent manner there is no need to use inecient policies such as

the retirement consumption puzzle evidence from a regression discontinuity approach in this paper we investigate the size of the consumption drop at retirement in italy we use micro data on food and total non durable household spending covering the period 1993 2004 and evaluate the change in consumption that accompanies retirement by exploiting the exogenous variability in pension eligibility to correct for the endogenous nature of the retirement decision we take a regression discontinuity design approach and make the identifying assumption that consumption would be the same around the threshold for pension eligibility if individuals would not retire we check in our data that a non negligible fraction of individuals retire as soon as they become eligible and estimate at 9 8 the part of the non durable consumption drop that is associated with retirement induced by eligibility we show that such fall is not driven by liquidity problems for the less well off in the population and can be accounted for by drops in goods that are work related expenses or leisure substitutes however we also show that retirement induces a significant drop in the number of grown children living with their parents and this can account for most of the retirement consumption drop

taxes and corporate policies evidence from a quasi natural experiment we document important interactions between tax incentives and corporate policies using a quasi natural experiment provided by a surprise announcement that imposed corporate taxes on a group of canadian publicly traded firms the announcement caused a dramatic decrease in value prospective tax shields partially offset the losses adding 4 6 to firm value on average and vary with the tax status of the marginal investor further firms adjust leverage payout cash holdings and investment in response to changing tax incentives overall the event study and time series evidence supports the view that taxes are important for corporate decision making

site selection bias in program evaluation site selection bias can occur when the probability that a program is adopted or evaluated is correlated with its impacts i test for site selection bias in the context of the opower energy conservation programs using 111 randomized control trials involving 8 6 million households across the united states predictions based on rich microdata from the first 10 replications substantially overstate efficacy in the next 101 sites several mechanisms caused this positive selection for example utilities in more environmentalist areas are more likely to adopt the program and their customers are more responsive to the treatment also because utilities initially target treatment at higher usage consumer subpopulations efficacy drops as the program is later expanded the results illustrate how program evaluations can still give systematically biased out of sample predictions even after many replications jel codes c93 d12 l94 o12 q41

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

optimal environmental taxation in the presence of other taxes general equilibrium analyses this paper examines the optimal setting of environmental taxes in economies where other distortionary taxes are present we employ analytical and numerical models to explore the degree to which in a second best economy optimal environmental tax rates differ from the rates implied by the pigovian principle according to which the optimal tax rate equals the marginal environmental damages both models indicate contrary to what several analysts have suggested that the optimal tax rate on emissions of a given pollutant is generally less than the rate supported by the pigovian principle moreover the optimal rate is lower the larger are the distortions posed by ordinary taxes numerical results indicate that previous studies may have seriously overstated the size of the optimal carbon tax by disregarding pre existing taxes this abstract was borrowed from another version of this item

proxies for the corporate marginal tax rate abstract this paper focuses on how best to measure the corporate marginal tax rate which is an important input into financial analysis of the cost of capital financing policy corporate hedging and corporate reorganizations the results indicate that the simulated tax rate used by shevlin 1990 and graham 1996 although difficult to calculate is the best available proxy for the true marginal tax rate if the simulated rate is unavailable an easy to calculate trichotomous variable or the statutory marginal tax rate which captures the progressivity in the tax schedule are reasonable alternatives better than most commonly used tax variables

energy efficiency subsidies with price quality discrimination abstract we compare various designs of energy efficiency subsidies in a market subject to both energy use externalities and price quality discrimination by a monopolist we find that differentiated subsidies can establish the social optimum unlike per quality regimes ad valorem regimes generate downstream interferences subsidising of the high end good leads the monopolist to reduce the quality of the low end good for this reason ad valorem differentiated rates should always decrease with energy efficiency a result seemingly at odds with actual practice in contrast with per quality differentiated subsidies the rates can increase if the externality is large enough relative to the market share of low type consumers contrary to differentiated subsidies what we shall call single instrument subsidies only achieve second best outcomes a uniform ad valorem subsidy should have a rate higher than that needed to specifically internalise energy use externalities lastly if as is often observed in practice only the high end good is to be incentivised a per quality regime should be preferred to an ad valorem one an ad valorem tax on the high end good may even be preferred to an ad valorem subsidy if the externality is small enough and low end consumers dominate the market

how broad should the scope of patent protection be i explore the trade off between a patent s length that is its lifetime and its width that is its scope of coverage a wider patent generally reduces the distortion of consumers choices between the patented brand of the product and unpatented lower priced varieties sold by competitors but also permits higher prices which increase relative to profits the deadweight losses from consumers switching consumption out of the product class i show under what conditions infinitely lived but very narrowly focused patents are the socially efficient way to reward innovation and under what conditions very short lived but very broad patents are optimal

balladurette and juppette a discrete analysis of scrapping subsidies this paper studies the effects of subsidies on durable goods markets in particular we focus on a recent policy in france in which the governments of balladur and juppe subsidized the replacement of old cars with new ones to study this policy we construct a dynamic stochastic discrete choice model of car ownership at the household level the resulting decision rules and equilibrium conditions are used to estimate the underlying parameters of the model using aggregate data these policy functions are used to evaluate the short and long run effects of the french policies we find that these policies do stimulate the automobile sector in the short run but through the induced changes in the cross sectional distribution of car ages create the basis for subsequent low activity further while these policies increase government revenues in the short run revenues in the long run are lower relative to a baseline without intervention

using tax return data to simulate corporate marginal tax rates abstract we document that simulated corporate marginal tax rates based on financial statement data shevlin t 1990 estimating corporate marginal tax rates with asymmetric tax treatment of gains and losses the journal of the american taxation association 11 51 67 graham j 1996a debt and the marginal tax rate journal of financial economics 41 41 73 are highly correlated with simulated rates based on corporate tax return data we provide algorithms that can be used to estimate the book or tax simulated rates when they are not available we find that the simulated book marginal tax rate does a better job of explaining financial statement debt ratios than does the analogous tax return variable and discuss how the book simulated rate is likely to be an appropriate measure in settings with global long term considerations

the effects of fiscal stimulus evidence from the 2009 cash for clunkers program we evaluate the impact of the 2009 cash for clunkers program on short and medium run auto purchases our empirical strategy exploits variation across u s cities in ex ante exposure to the program as measured by the number of clunkers in the city as of summer 2008 we find that the program induced the purchase of an additional 370 000 cars in july and august 2009 however we find strong evidence of reversal high clunker counties bought fewer autos in the 10 months after the program expired which offset most of the initial purchases we find no evidence of an effect on employment house prices or household default rates in cities with higher exposure to the program jel codes h20 e62 copyright 2012 oxford university press

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

interest rate pass through mortgage rates household consumption and voluntary deleveraging abstract exploiting variation in the timing of resets of adjustable rate mortgages arms we find that a sizable decline in mortgage payments up to 50 percent induces a significant increase in c

innovation and competition the role of the product market abstract we study how competition impacts innovation and welfare when firms compete both in the product market and in innovation development this relationship is complex and may lead to scenarios in which a lessening of competition increases r d and consumer welfare in the long run we provide conditions for when competition increases or decreases industry innovation and welfare these conditions are based on properties of the product market payoffs implications for applied work and policy are discussed

does the source of capital affect capital structure prior work on leverage implicitly assumes capital availability depends solely on firm characteristics however market frictions that make capital structure relevant may also be associated with a firm s source of capital examining this intuition we find firms that have access to the public bond markets as measured by having a debt rating have significantly more leverage although firms with a rating are fundamentally different these differences do not explain our findings even after controlling for firm characteristics that determine observed capital structure and instrumenting for the possible endogeneity of having a rating firms with access have 35 more debt copyright 2006 oxford university press

adjustment of consumers durables stocks evidence from automobile purchases this paper tests an optimal s s rule in household durable purchases and examines directly the resulting aggregate expenditure dynamics the observed decision rule responds to income uncertainty and growth as predicted by an s s model resulting from transactions costs tests against liquidity constraints find that about half the households purchase according to an optimal s s rule aggregating the s s rule over households produces a cross section distribution of durables holdings the empirical distribution is similar to that predicted theoretically as is its response to aggregate shocks furthermore simulations of aggregate expenditure based on the household distribution exhibit dynamics consistent with those observed in the 1980s

patent litigation as an information transmission mechanism patent litigation reveals important information about the validity of the contested patent to other potential entrants this paper explores the implications of such informational externalities for entry dynamics in the presence of multiple potential entrants the nature of the entry game can be one of either waiting or preemption depending on the degree of patent protection therefore the payoffs for the patentee and the initial imitator are discontinuous in the degree of patent protection furthermore strengthening intellectual property rights is not necessarily desirable for the patentee the analysis may also help explain the apparently puzzling practice of delaying patent suits copyright 1998 by american economic association

the debt tax shield in general equilibrium abstract we study the general equilibrium effects of the corporate debt tax shield in an endowment economy with a redistributive tax system that taxes firm profits and household income and redistributes tax revenues in an attempt to harmonize households lifetime consumption opportunities in general equilibrium the debt tax shield not only affects corporate capital structure and valuation but also causes poorer households to consume more and save less at a younger age without the debt tax shield the same welfare improvements for poorer households are achievable with significantly lower tax rates

temporary investment tax incentives theory with evidence from bonus depreciation even modest reductions in the after tax cost of capital purchases provide strong incentives for increased investment indeed for tax subsidies that are temporary and for capital goods that are very long lived the incentive to invest when the after tax price is temporarily low is essentially infinite firms that would have purchased new capital equipment in the future instead make their purchases during the period of the subsidy for tax increases the effects are the opposite firms that would have normally invested now delay until the tax rate returns to normal we present a model of the equilibrium effects of temporary investment tax incentives the model reveals a simple relationship between the shadow price of investment goods and the size of a temporary investment tax incentive specifically for sufficiently long lived capital goods goods with very low rates of economic depreciation and for sufficiently short lived investment tax subsidies the shadow value of capital should be nearly unchanged and thus the pre tax shadow price of capital goods should fully reflect the magnitude of the tax subsidy this result holds regardless of the elasticity of investment supply and regardless of the underlying demand for capital instead it relies only on the firm s ability to arbitrage predictable movements in the after tax price of long lived capital over time two conclusions immediately follow first observ ing price increases following a temporary tax incentive is not evidence that investment supply is relatively inelastic a temporary investment tax subsidy can substantially affect investment even if it bids up the price of investment sharply second because economic theory dictates that the shadow price of investment moves one for one with a temporary tax subsidy the elasticity of supply can be inferred from quantity data alone recent changes in us tax law allow us to use the model and its implications to estimate struc tural parameters that govern the supply of investment the 2002 and 2003 tax bills provided temporarily accelerated tax depreciation called bonus depreciation for certain types of qualified capital goods under the 2002 bill firms could immediately deduct 30 percent of investment purchases and then depreciate the remaining 70 percent under standard depreciation schedules

car notches strategic automaker responses to fuel economy policy notches where small changes in behavior lead to large changes in a tax or subsidy gure prominently in many policies but have been rarely examined by economists in this paper we analyze a class of notches associated with policies aimed at improving vehicle fuel economy we provide several pieces of evidence showing that automakers respond to notches in fuel economy policy by precisely manipulating fuel economy ratings so as to just qualify for more favorable treatment we then describe the welfare consequences of this behavior and derive a welfare summary statistic applicable to many contexts