why hasn t tax competition triggered a race to the bottom some quantitative lessons from the eu abstract the integration of european financial markets in the early 1980s created an environment of near perfect capital mobility across countries that had harmonized indirect taxes but maintained large differences in factor taxes the years that followed witnessed several rounds of competition in capital taxes with puzzling results instead of the dreaded race to the bottom in capital taxes the uk lowered its capital tax to a rate closer to those of france germany and italy while capital taxes changed slightly in these countries the uk increased its labor tax marginally but the other countries increased theirs sharply this paper shows that these results are consistent with the quantitative predictions of a dynamic neoclassical general equilibrium model of tax competition that incorporates the key international externalities of tax policy operating via relative prices wealth distribution and fiscal solvency tax competition is modeled as a one shot game over time invariant capital taxes with dynamic payoffs relative to a status quo calibrated to european data the calibration is preceded by an empirical analysis that shows that the relationship linking taxes to labor supply and the investment rate in the model are in line with empirical evidence and that domestic taxes seem to respond to foreign taxes the solutions of the games show that when countries compete over capital taxes adjusting labor taxes to maintain fiscal solvency there is no race to the bottom and the nash equilibrium is close to observed taxes in contrast if consumption taxes adjust to maintain fiscal solvency competition over capital taxes triggers a race to the bottom but this outcome entails large welfare gains surprisingly the gains from coordination are small in all of these experiments

optimality properties of alternative systems of taxation of foreign capital income foreign source capital income taxes are examined from the point of view of optimal taxation in the framework of a simple economy with international real capital flows a taxonomy of alternative systems of such taxation is first presented showing how crediting and other tax parameters induce what are called source based residence based and related systems next tax rates are determined that are optimal from a single country s point of view given those of the others the achievability of these rates under the various systems is analyzed finally tax rates that are optimal from an international point of view are considered again achievability of an international optimum under the various systems is considered leading to the main conclusions that i a pure residence based system in all countries can achieve an international fiscal optimum ii it cannot however be sustained as an equilibrium

strikes scabs and tread separations labor strife and the production of defective bridgestone firestone tires this paper provides a case study of the effect of labor relations on product quality we consider whether a long contentious strike and the hiring of permanent replacement workers by bridgestone firestone in the mid 1990s contributed to the production of an excess number of defective tires using several independent data sources we find that labor strife in the decatur plant closely coincided with lower product quality count data regression models based on two data sets of tire failures by plant year and age show significantly higher failure rates for tires produced in decatur during the labor dispute than before or after the dispute or than at other plants also an analysis of internal firestone engineering tests indicates that p235 tires from decatur performed less well if they were manufactured during the labor dispute compared with those produced after the dispute or compared with those from other non striking plants monthly data suggest that the production of defective tires was particularly high around the time wage concessions were demanded by firestone in early 1994 and when large numbers of replacement workers and permanent workers worked side by side in late 1995 and early 1996

taxes tariffs and transfer pricing in multinational corporate decision making three interrelated aspects of u s multinational corporation activity are analyzed here the ability to shift profits from high tax countries to low tax countries the impact of host country taxes and tariffs on the distribution of real capital and the influence of these policies on international trade patterns of the united states and host countries the cross sectional empirical analysis indicates that the observed pattern of reported profits in high and low tax countries is consistent with income shifting behavior and that real investment responds to host country effective tax rates and tariffs the united states appears both to import more from and export more to low tax countries where mnc investment is greater but this bilateral focus must be amplified to consider multilateral effects if trade benefits are to be projected copyright 1991 by mit press

taxes and the division of foreign operating income among royalties interest dividends and retained earnings abstract how do taxes influence the way u s corporations divide foreign affiliate operating income among royalties dividends interest and retained earnings the paper goes beyond previous work that focused largely on dividend repatriation behavior and provides a comprehensive analysis of the disposition of foreign subsidiary operating income the empirical results show that taxes have a large and statistically significant effect on the composition of payments own tax prices discourage the payment of dividends royalties and interest but dividend and other repatriation taxes do not increase retained earnings they only alter the composition of payments the results are therefore consistent with a generalized hartman sinn model of the mature controlled foreign corporation that has various alternative repatriation vehicles finally this paper integrates the choice of payments with income shifting among countries because the latter may be part of a low tax strategy for repatriations in this general framework conventional composite tax prices are not appropriate because the response to a change in a composite tax price depends on which components changed

conjecture uncertainty and cooperation in prisoner s dilemma games some experimental evidence abstract this paper presents experimental tests of two models of cooperation in finitely repeated prisoner s dilemma games kreps milgrom roberts and wilson 1982 the models suggest that either a perception that the other party may use the tit for tat strategy or mutual uncertainty concerning dominant noncooperative strategies can lead to rational cooperation the experiment independently manipulated both types of uncertainty and allowed for inferences concerning the players prior homemade preferences for cooperation only in relatively restricted situations did either type of uncertainty promote cooperation instead players cooperated much more than was predicted they also cooperated more when they were certain of their opponents payoffs

labour unrest and the quality of production evidence from the construction equipment resale market this paper examines the construction equipment resale market to assess whether equipment produced by the world s largest manufacturer of construction machinery caterpillar experienced lower product quality in facilities that underwent contract disputes during the 1990 s analysis of auction data reveals that resale market participants significantly discounted machines produced in these dispute affected facilities additionally pieces of equipment produced in facilities undergoing unrest were resold more often received worse appraisal reports and had lower list prices taken together the evidence supports the hypothesis that workmanship at dispute affected facilities declined and that the resulting impact on the economic quality of the equipment produced was significant the dispute was associated with at least 400 million in lost service flows due to inferior quality equipment alone

cooperation among strangers with limited information about reputation abstract the amount of institutional intervention necessary to secure efficiency enhancing cooperation in markets and organizations in circumstances where interactions take place among essentially strangers depends critically on the amount of information informal reputation mechanisms need transmit models based on subgame perfection find that the information necessary to support cooperation is recursive in nature and thus information generating and processing requirements are quite demanding models that do not rely on subgame perfection on the other hand suggest that the information demands may be quite modest the experiment we present indicates that even without any reputation information there is a non negligible amount of cooperation that is however quite sensitive to the cooperation costs for high costs providing information about a partner s immediate past action increases cooperation recursive information about the partners previous partners reputation further promotes cooperation regardless of the cooperation costs

child labor and multinational conduct a comparison of international business andstakeholder codes increasing attention to the issue of child labor has been reflected in codes of conduct that emerged in the past decade in particular this paper examines the way in which multinationals business associations governmental and non governmental organizations deal with child labor in their codes with a standardized framework it analyzes 55 codes drawn up by these different actors to influence firms external societal behavior the exploratory study helps to identify the main issues related to child labor and the use of voluntary instruments such as codes of conduct apart from a specific indication of the topics covered by the code especially minimum age requirements this also includes monitoring systems and monitoring parties most important to company codes are the sanctions imposed on business partners in case of non compliance severe measures may be counterproductive as they do not change the underlying causes of child labor and can worsen the situation of the child workers by driving them to more hazardous work in the informal sector this underlines the importance of a broad rather than a restrictive approach to child labor in codes of conduct the paper discusses the implications of this study offering suggestions for future research

the impact of fine size and uncertainty on punishment and deterrence theory and evidence from the laboratory abstract increasing punishment is typically considered first choice to boost deterrence of unwarranted behavior such as false financial statements asset misappropriation stealing or corruption however if there is uncertainty on a potential violator s guilt judges and juries willingness to impose punishment may decrease in its magnitude thus increasing the magnitude of punishment may backfire when the reduced punishment probability is anticipated by potential violators based on a theoretical model our paper is the first to analyze the interdependency of violation and punishment behavior in a laboratory experiment and to contrast it to the standard partial equilibrium perspective on deterrence that considers the punishment probability to be independent of the fine size varying both the magnitude of fines and the degree of uncertainty shows that in case of legal uncertainty the deterrent effect of higher fines is far less pronounced than if the punishment probability was exogenous

dispute resolution or escalation the strategic gaming of feedback withdrawal options in online markets many online markets encourage traders to make good after an unsatisfactory transaction by offering the opportunity to withdraw negative reputational feedback in a dispute resolution phase motivated by field evidence and guided by theoretical considerations we use laboratory markets with two sided moral hazard to show that this option contrary to the intended purpose produces an escalation of dispute the mutual feedback withdrawal option creates an incentive to leave negative feedback independent of the opponent s behavior to improve one s bargaining position in the dispute resolution phase this leads to distorted reputation information and less trust and trustworthiness in the trading phase buyers who refuse to give feedback strategically even when it comes at a personal cost mitigate the detrimental impact it is also mitigated in markets with one sided moral hazard and a unilateral feedback withdrawal option the supplementary appendix is available at https doi org 10 1287 mnsc 2017 2802 t

strategic capital tax competition a pecuniary externality and a corrective device abstract d e wildasin journal of urban economics25 193 212 1989 identifies a source of inefficiency in capital tax competition models with price taking jurisdictions and provides a pigovian correction this paper identifies a second source of inefficiency in a non price taking environment when a jurisdiction increases its capital tax it affects the price of capital and thus other jurisdictions returns from trade in capital the pigovian correction to internalize this pecuniary externality is derived since a focus of recent research is on non price taking environments the existence of the pecuniary externality is important in qualifying existing results in the literature

will social welfare expenditures survive tax competition increasing economic openness creates demands for social welfare programmes designed to cushion the impact of economic changes but may also encourage governments to reduce tax rates to attract mobile economic resources competitive tax reductions could then prevent governments from being able to finance significant welfare spending alternatively economic globalization might improve the ability of governments to afford social welfare programmes and several considerations point in this direction first taxes on internationally mobile activity represent only small fractions of total revenue collections personal income taxes value added taxes and social insurance contributions finance most social welfare spending second international competition need not reduce taxes and indeed over the past 25 years corporate tax collections have remained high as fractions of gdp and total taxes third the vitality of a country s economy largely determines its level of social spending to the extent that incomes rise as a result greater economic openness should strengthen provision of social welfare copyright 2006 oxford university press

multinational corporations economic and human rights impacts on developing countries a review and research agenda developing countries are attracting a significant portion of global foreign direct investments governments of such countries often compete fiercely for attracting multinational corporations mncs in the expectation of the advantages they will bring to their economies often prioritising economic goals over fundamental human rights for a long time economists have analysed the economic impacts of mncs while a parallel strand of work in political science business ethics and international law investigates the repercussions of mnc operations on human rights despite the significant relatedness and complementarities these two bodies of literature have so far poorly interacted this paper addresses this limitation and systematically analyses and integrates existing micro level empirical evidence on the economic and human rights impacts of mncs on developing countries it provides a critical analysis of what is known and highlights what we do not know about the factors that mediate the positive and or negative impacts of mnc operations on host developing countries based on a critical analysis of the literature it discusses avenues for future research in this field and sets the grounds for a new interdisciplinary research agenda on this subject

collusion as public monitoring becomes noisy experimental evidence this paper uses laboratory experiments to test the implications of the theory of repeated games on equilibrium payoffs and estimate strategies in an infinitely repeated prisoners dilemma game with imperfect public monitoring we find that subjects payoffs i decrease as noise increases and ii are lower than the theoretical maximum for low noise but exceed it for high noise under the assumption that the subjects strategy uses thresholds on the public signal for transition between cooperation and punishment states we find that the best fitting strategy simply compares the most recent public signal against a single threshold

imperfect public monitoring with costly punishment an experimental study this paper experimentally investigates the effects of a costly punishment option on cooperation and social welfare in long finitely repeated public good contribution games in a perfect monitoring environment increasing the severity of the potential punishment monotonically increases average net payoffs in a more realistic imperfect monitoring environment we find a u shaped relationship access to a standard punishment technology in this setting significantly decreases net payoffs even in the long run access to a severe punishment technology leads to roughly the same payoffs as with no punishment option as the benefits of increased cooperation offset the social costs of punishing jel c92 h41 k42

trust but verify monitoring inspection costs and opportunism under limited observability abstract is feedback on trustworthiness necessary for the functioning of economic relationships in many real world economic environments such feedback can at best be acquired through costly monitoring raising questions of how trust and efficiency can be maintained in the lab we conduct a modified finite horizon binary trust game in which we vary the observability of the trustee s actions in the baseline condition trustors can perfectly observe their trustee s actions we compare this to a condition in which that actions are unobservable and three conditions in which they must be actively monitored at zero low or high cost respectively counter intuitively differences in observability do not lead to significant differences in trust and efficiency but the levels are supported by very different information structures while trustors monitored every action under zero observation costs most of trusting actions were blind trustors did not learn whether their trust was honored or not under costly monitoring even under complete unobservability almost half of the available surplus was realized there are distributive impacts however the gains from trust favor trustees under the more adverse informational conditions the behavioral patterns are consistent with the fact that trustors beliefs about their trustee s conduct are almost invariant across conditions

international exchanges as the basis for conceptualizing ethics in international business extant business ethics literature available for application to international business demonstrates some variety but no comprehensive principles while the domains of both international business and business ethics are expanding they are also becoming increasingly divergent at the same time the primacy accorded to the multinational enterprise in both fields ignores the socio cultural and political embeddedness of economic activities and multiple agencies in international business individuals firms nations etc some international business theorists have offered the view that international exchange should be the central building block for theories on international business in this paper it is argued that international exchange could be the fundamental unit of analysis for international business ethics as well the potentially unifying features of exchange norms and ethical principles leads the author to develop some core exchange ethics principles that are tested on three recent international business practices

the provision of local public goods and factors in the presence of firm and household mobility abstract this paper studies the efficiency properties of allocations when firms and households are mobile and when local governments provide local public goods and local public factors the analysis differentiates between immobile land owners and perfectly mobile workers and concludes that an efficient allocation is obtained if there is no outflow of land rents to absentee owners if rents flow out only local public goods are supplied in accordance with the samuelson rule the provision of local public factors is inefficiently low however and jurisdictions tax mobile firms and mobile households inefficiently high in order to restrict the outflow of rents an optimal intervention scheme is derived in this case we also analyze the distortions that result when the non availability of local head taxes makes it impossible to internalize crowding costs

the theory of moral hazard and unobservable behaviour part i principal agent models are studied in which outcomes conditional on the agent s action are uncertain and the agent s behaviour therefore unobservable for a model with bounded agent s utility conditions are given under which the first best equilibrium can be approximated arbitrarily closely by contracts relating payment to observable outcomes for general models it is shown that the solution may not always be obtained by using the agent s first order conditions as constraint general conditions of lagrangean type are given for problems in which contracts are finite dimensional 1 the moral hazard situation

labour relations and ethical dilemmas of extractive mnes in nigeria south africa and zambia 1950 2000 this article examines the ethical characteristics of mnes employee relations in developing countries specifically it addresses various ethical issues relating to labour relations and trade unions in extractive industries in nigeria south africa and zambia data collected in these countries indicate that criticisms against mnes relating to labour issues and labour practices in developing countries are not lessening the discussion is lent focus and direction through the analysis of critical incidents from the perspectives of various stakeholders government oil and mining companies and leaders of trade unions tensions over pay expatriate employments as against the locals negotiation rights and employees well being are evident the argument advanced is that the mnes operating in the extractive industries of africa will have to improve their relations with local employees in order to bridge the legitimacy gaps that exist an improved mutual understanding between the mnes and trade unions is required for both actors to have a smooth working relationship