the 1985 86 oil price collapse and afterwards what does game theory add this paper focuses on the strategies used by opec to generate cartel profits over the period 1983 90 the evidence supports the hypothesis that opec adopted a swing producer strategy from 1983 to 1985 but when saudi arabia s profits fell below the level of coumot profits in the summer of 1985 it abandoned the role of swing producer driving prices to the cournot level subsequently saudi arabia appears to have adopted a tit for tat strategy designed to punish excessive cheating by other opec members based on these findings the strengths and limitations of game theory are assessed

tax policy uncertainty and corporate investment abstract the anticipatory effects of a corporate tax reform of the tax cut cum base broadening variety are analyzed in a dynamic stochastic adjustment model of firm behavior focusing on the case where the firm is uncertain both about the timing and the contents of the expected reform the value of the firm is solved prior to and after the reform the existence of investment spurts prior to the implementation of the tax reform is established rigorous results are derived under constant returns and the effects of diminishing returns are explained the expectation of a future tax cut causes the firm to accelerate optimal investment while the expectation of a reduction in the tax base the rate of fiscal depreciation has the opposite effect for a firm which updates information timing uncertainty interacts with the expectation effect moreover increased timing uncertainty may accelerate or decelerate investment as an optimal response to an expected tax cut futhermore for reasonable assumptions it is shown that a rate cut cum base broadening tax reform of the type implemented in several oecd countries in the 1980s and 1990s cannot be revenue neutral

islamic economics and a third fundamental theorem of welfare economics the discipline of economics started as a moral science but became detached from moral concerns over time to emulate natural science and to adopt positivism consequently mainstream economics assumes people to be sordidly selfish the teachings of islam however promote social preferences where individuals should be other regarding and have preferences over social outcomes this paper replaces the selfish agent with a social agent and presents the results in a theorem referred to as the third fundamental theorem of welfare economics tftwe the tftwe states that when the selfish agents are replaced with the social agents market outcomes are pareto optimal equitable and unique this is an important result which has widespread implications we show that the tftwe holds under conditions where the first two fundamental theorems of welfare economics fail and that a walrasian equilibrium is more likely to exist when selfish preferences are non convex unlike the popular convention there is no equity efficiency trade off in fact we point to the possibility of reversal in equity efficiency trade off

capital allocation how the us compares with other major industrialized nations data for the seven major industrialized nations spanning two decades provide evidence that capital formation as a percentage of gross domestic product differs significantly among the major industrialized nations comparatively the us ranks among the leaders in residential structures and among the lowest in commercial structures however us private sector allocation of capital to machinery and equipment appears to be in line with other major trading nations the rate of capital cost recovery appears to affect the amount of capital allocated to commercial structures but not to residential structures or machinery and equipment likewise changes in the capital cost recovery provisions under the economic recovery tax act of 1981 seem to have led to an increase in capital allocated to commercial structures and to a marginal increase in capital allocated to machinery and equipment

politics time and the laffer curve why should a rationally motivated political decision process generate an inverse relationship between tax rates and tax revenues there would never seem a logical reason for increasing tax rates beyond maximum revenue limits in this note we explain how such a position can emerge and show why once in such a position political decision makers may find it difficult to escape

behavioural development economics lessons from field labs in the developing world abstract explanations of poverty growth and development depend on the assumptions made about individual preferences and the willingness to engage in strategic behaviour economic experiments especially those conducted in the field have begun to paint a picture of economic agents in developing communities that is at variance with the traditional portrait we review this growing literature with an eye towards preference related experiments conducted in the field we also offer lessons on what development economists might learn from experiments we conclude by sharing our thoughts on how to conduct experiments in the field and then offer a few ideas for future research

business political power the case of taxation we examine contending views about the forms and mechanisms of business power in u s politics by estimating time series models explaining taxation and redistribution taxation and redistribution constitute strong cases for theories about business and class power since all firms have an interest in reducing taxation we find that changes in corporate taxation and in redistribution between capital gains income and earned income and between corporate taxation and individual taxation are strongly influenced by political partisanship with democratic administrations increasing the tax burden on firms and their owners how far corporations engage in electoral financing measured through the establishment of corporate political action committees is also influential the models show some evidence consistent with the understanding of class power conceptualized by bowles gordon and weisskopf and the presence of election cycle effects but inconsistent with implications arising from the structural dependence of the state on capital and asset concentration in the largest corporations as a mechanism of class power

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

regional policy incentives and the relative costs of capital in assisted areas in britain and germany bennett r j and krebs g 1989 regional policy incentives and the relative costs of capital in assisted areas in britain and germany reg studies 23 201 218 regional policies of various forms have been employed in most european countries both as means of stimulating investment in problem regions and as an attempt to limit the pace of industrial contraction this paper evaluates the resulting incentives to capital in britain and germany and compares the stimulus provided by the different packages of incentives over time and between the two countries it is demonstrated that pre tax real rates of return and fiscal wedges between pre and post tax real rates of return are affected very markedly by the incentive packages in britain fiscal wedges of 3 derive from regional policy up to the late 1970s but decline to 1 6 in the mid 1980s in germany fiscal wedges increase from 3 to 3 5 over the same period on a standardized basis of comparison thus declines in the significance of regional po

tax asymmetries the cost of capital and investment some evidence from united kingdom panel data a measure of the cost of capital is developed that incorporates the dynamic effects of tax changes and tax asymmetries estimates of the cost of capital are made using an unbalanced panel of 1987 u k quoted companies over the period 1971 to 1984 there is wide cross sectional variation in the cost of capital the measure is used in estimating an equation where this cross sectional variation is found to be a significant determinant of the level of company investment copyright 1989 by royal economic society

developing countries in need which characteristics appeal most to people when donating money paul hansen1 nicole kergozou2 stephen knowles1 and paul thorsnes2 1 department of economics university of otago 2 reserve bank of new zealand

progressive taxation as social insurance and as a median voter outcome an empirical assessment progressive taxation with a balanced government budget functions as social insurance since individuals with low realized incomes receive a net subsidy from the public sector we calculate the level of taxes that optimally trades off benefits due to such insurance with costs arising from distorted labor supply incentives given the best available evidence on parameter values this optimal rate is roughly 15 percentage points less than the aggregate marginal rate on earned income in sweden as of 1979 we also assess the median voter hypothesis by calculating the rate preferred by the median voter this rate turns out to be about 50 percentage points lower than the actual rate progressive taxation which redistributes income that is a negative income tax can function as insurance since individuals who are unlucky and have low realized incomes are compensated via a net redistribution from the public sector given risk aversion this social insurance is valuable at the same time the provision of insurance generates moral hazard in the form of distorted factor supply incentives thus an optimal pattern of taxation should balance the insurance effects and distortions caused by greater tax progressivity this paper is concerned with the magnitudes of tax rates and progressivity implied by this optimal taxation tradeoff the topic is of particular interest in view of the high tax rates in a number of northern european countries one wonders whether these actual rates may be close to or perhaps even beyond the rates that would optimally balance social insur

the distribution of abilities and the progressive income tax abstract this paper develops a model of endogenous labor supply where agents are uncertain about their future wages assuming risk aversion some redistributive taxation is thus warranted it is shown that for a particular parameterization of the tax system an optimally progressive income tax exists comparative ststics analysis demonstrates how this tax system is effected by changes in the wage distribution the paper ends with a discussion of whether an optimally progressive income tax can be politically sustained it is shown that generally this is not the case in a political system with majority voting

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

the vanishing harberger triangle this paper shows that the double taxation of corporate dividends or profit repatriations implies a nucleus theory of the corporation after the firm is set up with a small stock of original capital it enters a phase of purely internal growth during which no dividends are paid and no shares are issued the phase terminates when an efficient stock of capital has been accumulated and dividends are paid during the growth phases the tax distortion is inversely related to the tax burden and it is larger than conventional formulae for the cost of internal and external equity finance suggest

a test of the opec cartel hypothesis 1974 1983 this paper tests whether the higher oil prices fo the last decade could have been the result of producer collusion we find little evidence that opec influenced oil prices during the years of skyrocketing prices 1974 1980 but there is evidence that it did so during the recent years of softening prices 1981 1983

how effective are fiscal incentives for r d a review of the evidence this paper surveys the econometric evidence on the effectiveness of fiscal incentives for r d we describe the effects of tax systems in oecd countries on the user cost of r d the current position changes over time and across different firms in different countries we describe and criticize the methodologies used to evaluate the effect of the tax system on

poverty in dictator games awakening solidarity abstract this paper investigates the effect of recipient poverty and medicines on dictator game giving we develop a new design with three variants 1 subjects do not know they are participating in an experiment 2 dictators receive three 5 bills instead of 15 coins 3 three recipients are used instead of one we performed three different treatments regarding the information about recipients i no info condition ii poverty dictators were informed that their recipients were poor iii medicines donations were given in the form of medicines instead of money we found that 46 percent of the subjects gave the full endowment in the poverty treatment while in the medicines treatment this percentage increased to 72 percent

on the possibility of an inverse relationship between tax rates and government revenues abstract when arthur laffer and other supply side advocates plot total tax revenue as a function of a particular tax rate they draw an upward sloping segment called the normal range followed by a downward sloping segment called the prohibitive range a brief literature review indicates that tax rates on the prohibitive range in theoretical and empirical models have been the result of particularly high tax rates high elasticity parameters or both the labor tax rate which maximizes total revenue for example will depend on the assumed labor supply elasticity this paper introduces a new curve which summarizes the tax rate and elasticity combinations that result in maximum revenues separating the normal area from the prohibitive area a general purpose empirical u s general equilibrium model is used to plot the laffer curve for several elasticities and to plot the newly introduced curve using the labor tax example results indicate that the u s could conceivably be operating in the prohibitive area but that the tax wedge or labor supply elasticity would have to be much higher than most estimates would suggest

the effects of oil price shocks on the iranian economy abstract the iranian economy is highly vulnerable to oil price fluctuations this paper analyzes the dynamic relationship between oil price shocks and major macroeconomic variables in iran by applying a var approach the study points out the asymmetric effects of oil price shocks for instance positive as well as negative oil price shocks significantly increase inflation we find a strong positive relationship between positive oil price changes and industrial output growth unexpectedly we can only identify a marginal impact of oil price fluctuations on real government expenditures furthermore we observe the dutch disease syndrome through significant real effective exchange rate appreciation

iranian oil free zone and international oil prices abstract one of the main elements of economic sanctions against iran due to its nuclear and military programs is crude oil exportation restrictions in addition to investment in iranian energy related projects senders of such sanction are interested in understanding the impacts of such embargos on international oil prices we apply unrestricted vector autoregressive var model using impulse response functions irf and variance decomposition analysis vda tools with annual data from 1965 to 2012 to analyze the dynamic response of international oil prices to iranian oil export sanction controlling for the supply of non iranian oil the world gdp per capita and post islamic revolution exogenous dummy variables we show that international oil prices respond negatively and statistically significant to increasing shock in absolute negative changes of the iranian oil exports our proxy of iran oil sanctions following the first 2 years after shock the main reason is the positive response of the non iranian oil supply to negative shocks in iranian oil exports filling the missing supply of iranian oil in international markets

crude oil price fluctuations and saudi arabia s behaviour this study attempts to explain why crude oil prices fluctuate the main cause being the quota regime which characterises the opec agreements given that the saudi oil supply is inelastic in the short term a shock in the oil market is accommodated by an immediate price change by contrast a dominant firm behaviour in the long term causes an output change which is accompanied by a smaller price change this explains why oil prices overshoot the results of a general equilibrium model applied to saudi arabia support this analysis they also indicate that saudi arabia does not have any incentive for altering the crude oil market equilibrium with either positive or negative supply shocks as its welfare declines and that it has an incentive disincentive for intervening if a negative positive demand shock hits the crude oil market a second set of simulations is designed to understand what kind of oecd policy might help to bring down prices a tax cut would worsen the situation whereas policies that can increase the price elasticity of demand seem to be very effective

emphasising the problem or the solution in charitable fundraising for international development abstractwe conduct a laboratory experiment to test the effect on charitable donations to international development ngos ingos of emphasising current deprivation in a developing country versus emphasising the potential good a donation can achieve using a double blind dictator experiment with earned endowments we find that varying the information emphasis has no significant effect on total donations nor on the probability of donating we find suggestive evidence that an emphasis on current deprivation may raise the variance of donations and thus the size of donations conditional on donating but the effect is not significant in hurdle models that explicitly recognise this

willpower and the optimal control of visceral urges common intuition and experimental psychology suggest that the ability to self regulate willpower is a depletable resource we investigate the behavior of an agent who optimally consumes a cake or paycheck or workload over time and who recognizes that restraining his consumption too much would exhaust his willpower and leave him unable to manage his consumption unlike prior models of self control a model with willpower depletion can explain the increasing consumption sequences observable in high frequency data and corresponding laboratory findings the apparent links between unrelated self control behaviors and the altered economic behavior following imposition of cognitive loads at the same time willpower depletion provides an alternative explanation for a taste for commitment intertemporal preference reversals and procrastination accounting for willpower depletion thus provides a more unified theory of time preference it also provides an explanation for anomalous intratemporal behaviors such as low correlations between health related activities

growth effect of taxes in an endogenous growth model to what extent do taxes affect economic growth abstract this paper presents an endogenous growth model comprising of financial human and physical capital and incorporating major features of a general tax system technology and preference parameter values in the model are chosen to fit the actual growth experiences of the united states and a rapidly growing east asian nic using the calibrated model i assess the role of differences in taxes and other variables in explaining the difference in growth rates the main findings are i the difference in tax systems across countries explains a significant proportion around 30 of the difference in growth rates ii the difference in preferences explains at most 4 and iii differences in labor income tax debt equity ratio and inflation can be important in explaining the growth difference further i evaluate the contribution of the monetary factor to the growth rate gap and the growth effect of us tax reforms e g revenue neutral changes in relative tax structure

measuring marginal income tax rates for individuals in canada averages and distributions over time average marginal tax rates amtrs and the dispersion of marginal tax rates across income groups for canada over 1947 91 are reported federal amtrs fluctuated with little trend from 1947 to the mid 1960s rose to the mid 1970s fell and then rose from the early 1980s through to 1991 federal plus provincial amtrs trended upward after 1949 increasing fastest from the mid 1960s to the mid 1970s relative dispersion of mtrs shows a strong downward trend over the sample period this compression has been due partly to a decline in top mtrs but the main influence has been the steady increase in the portion of the population and of income subject to tax the amtr time series is quite volatile difference stationarity is not rejected

push don t nudge behavioral spillovers and policy instruments abstract policy interventions are generally evaluated for their direct effectiveness little is known about their ability to persist over time and spill across contexts these latter aspects can reinforce or offset the direct impacts depending on the policy instrument choice through an online experiment with 1486 subjects we compare four widely used policy instruments in terms of their ability to enforce a norm of fairness in the dictator game and to persist over time i e to a subsequent untreated dictator game or spill over to a norm of cooperation i e to a subsequent prisoner s dilemma as specific policy interventions we employed two instances of nudges defaults and social information and two instances of push measures rebates and a minimum donation rule our results show that i rebates the minimum donation rule and social information have a positive direct effect on fairness although the effect of social information is only marginally significant and that ii the effect of rebates and the minimum donation rule persists in the second game but only within the same game type these findings demonstrate that within our specific design push measures are more effective than nudges in promoting fairness

resource rents distribution income inequality and poverty in iran abstract our goal is to examine the income inequality and welfare effects of the direct distribution of resource rents and subsequent taxation in iran we use survey based microdata that covers 140 000 individuals which include more than 36 000 iranian urban and rural households in 2009 we examine how direct distribution of oil and gas rents among all citizens and a subsequent direct income tax differ from distributional impacts of targeted policies on income inequality and poverty in iran our analysis shows that the resource dividend policy with a subsequent direct income tax has a significant decreasing effect on the household gini index while targeted policies are more effective in reducing number of households under the poverty line

cartel formation and oligopoly structure a new assessment of the crude oil market while economic theorists regard opec as a perfect example of a long lasting cartel energy economists strongly deny such view applying the ideas of new empirical industrial organization a market description is derived cartel theory and empirical evidence fit together well stable long lasting cartels can be explained only for subclasses of market models and exactly such type of model is obtained here a variety of different market models is tested opec and the market for crude oil is best described by a price leader model

evaluating the minimum asset tax on corporations an option pricing approach abstract king fullerton methodology cannot assess the minimum asset tax because it cannot handle uncertainty we present an alternative based on option pricing and show how carryover rules depreciation conventions and uncertainty affect the mat burden using brazilian data we show a because of the high intersectoral variance of returns on capital the mat does not reduce sectoral distortions b while high variance raises the mat burden high risk firms are not hit harder by the mat high risk firms also have a high rate of return which reduces the impact of the mat

welfare and optimum dynamic taxation of consumption and income abstract this paper estimates that the us could attain large welfare gains by implementing an optimal ramsey tax policy that taxes consumption and income it is also found that the welfare implications associated with taxing consumption are quantitatively more important than those associated with dynamically taxing income indeed replacing income taxes with a constant consumption tax leads to a welfare gain that is only slightly lower than that attained by a dynamic policy that taxes consumption and income in computing these welfare gains careful attention is given to the dynamic path of tax rates and the transitional dynamics associated with how the economy responds to a new tax policy

progressive income taxes test of efficiency upper bounds on efficient tax rates in a progressive labor income tax schedule are derived within the standard framework of optimal taxation a tax rate is efficient if it is not pareto dominated by any other tax rate the formulas derived are applied to the swedish 1982 tax schedule inefficiency is revealed for the middle income groups copyright 1990 by the editors of the scandinavian journal of economics

the taxation of corporate investment income in canada an analysis of marginal effective tax rates this paper reports estimates of marginal effective tax rates on corporate investment income in canada taking into account sales taxes as well as corporation personal and business property taxes marginal effective tax rates are found to vary widely depending upon the type of asset acquired the industry in which the asset is used the manner in which the investment is financed and the tax status of the investor supplying the funds an examination of the sensitivity of these estimates to various tax arbitrage assumptions reveals the pattern of marginal effective tax rates to be similar irrespective of the arbitrage assumption used l imposition des revenus dinvestissement des societes au canada une analyse des taux marginaux effectifs ce memoire evalue les taux marginaux effectifs d imposition des revenus d investissement des societes au canada en tenant compte des taxes de vente aussi bien que des impots personnels et des impots sur les profits et sur les actifs des societes i1 appert que les taux marginaux effectifs d imposition varient grandement selon le type d actif acquis l industrie dans laquelle cet actif est utilise la faqon dont cet

the impact of declining oil rents on tax revenues does the shadow economy matter abstract we study the association between oil rents and tax revenues highlighting the importance of the shadow economy se as a moderating factor in this relationship declining oil rents may not lead to higher tax efforts in a state if the se is sizable using a sample of 124 countries from 1991 to 2015 our panel data regression analysis illustrates the moderating role of the se in the final effect of negative oil rent shocks on tax revenues a decline in oil rents following negative oil price shocks ceases to have any significant positive impact on tax revenues in countries with an se representing more than 35 of gross domestic product the results are robust after controlling for country and year fixed effects other determinants of tax revenues and using a dynamic model

a dual self model of impulse control we propose that a simple dual self model gives a unified explanation for several empirical regularities including the apparent time inconsistency that has motivated models of quasi hyperbolic discounting and rabin s paradox of risk aversion in the large and small the model also implies that self control costs imply excess delay as in the o donoghue and rabin models of quasi hyperbolic utility and it explains experimental evidence that increased cognitive load makes temptations harder to resist the base version of our model is consistent with the gul pesendorfer axioms but we argue that these axioms must be relaxed to account for the effect of cognitive load

strotz meets allais diminishing impatience and the certainty effect abstract decision makers tend to exhibit a higher degree of impatience when considering a delay to an immediate reward than when contemplating an identical delay to an equal future reward this work argues that diminishing impatience originates from the distinction between the certain present and the risky future a simple functional representation of preferences exhibiting time inconsistency when the future is uncertain is derived experimental evidence which is inconsistent with other formulations that account for diminishing impatience supports the proposed approach the new theory uncovers a tight relation between diminishing impatience and well known behavioral regularities in choice under risk and uncertainty jel d12 d81

short run politicians and long run tax revenue an empirical assessment a life cycle growth model fit to the u s economy is used to calculate the tax rate that would maximize steady state tax revenue the rate that would be set by a short run politician interested in maximizing current period receipts is also calculated in the current period the capital stock is fixed but labor is a variable factor following the intuition of buchanan and lee 1982 it might be suspected that this fixity of capital would lead the short run politician to set taxes above the steady state revenue maximizing level however such a conclusion does not hold for the cases considered in this study

procrastination and obedience in this lecture i shall focus on situations involving repeated decisions with time inconsistent behavior although each choice may be close to maximizing and therefore result in only small losses the cumulative effect of a series of repeated errors may be quite large thus in my examples decision makers are quite close to the intelligent well informed individuals usually assumed in economic analysis but cumulatively they make seriously wrong decisions that do not occur in standard textbook economics this lecture discusses and illustrates several pathological modes of individual and group behavior procrastination in decision making undue obedience to authority membership of seemingly normal individuals in deviant cult groups and escalation of commitment to courses of action that are clearly unwise in each case individuals choose a series of current actions without fully appreciating how those actions will affect future perceptions and behavior the standard assumption of rational forwardlooking utility maximizing is violated the nonindependence of errors in decision making in the series of decisions can be explained with the concept from cognitive psychology of undue salience or vividness for example present benefits and costs may have undue salience relative to future costs

uk stock relief legislation and the short run tax elasticity of inventory investment abstract this paper analyzes the effects of uk stock relief legislation on the cost of capital for inventory investment taking account of the tax position of individual companies a sample of large uk companies representative of the uk non oil non financial corporate sector is used to make calculations of the cost of capital both for aggregate corporate inventory investment and for various industrial sectors stock relief legislation reduces the cost of capital by between 4 and 8 per annum the tax position of individual companies generally makes only a small difference to the aggregate cost of capital stock relief legislation induces a pronounced seasonality in the cost of capital due to the uneven distribution of the end date of company accounting years this seasonality is exploited in time series estimates of the short run elasticity on the pre tax and post tax cost of capital for six manufacturing subsectors there is some evidence of a significant effect from the pre tax cost of capital on inventory investment but no evidence of any response to the tax incentives created by the stock relief legislation

the social opportunity cost of capital in the presence of labour market distortions this paper examines the conditions under which the social opportunity cost of capital in a tax distorted economy is equal to the gross of tax return to capital plus the excess of the market over the shadow wage bill whenever public investment serves as an unpriced or underpriced input in the private sector s production process only part of the excess of the market over the shadow wage bill should be attributed to private sector capital in addition whenever some of the benefits of public investment are appropriated by owners of capital the gross of tax return to capital will tend to overstate the genuine marginal product of capital the overall implication is that the social discount rate may be less than the gross of tax rate of return to capital in the private sector even if public investment crowds out private investment dollar for dollar

corporate tax holidays and investments governments of developing countries commonly adopt tax holidays to encourage investment this article evaluates the incentives provided by company income tax holidays and explains the importance of the timing of depreciation allowances in determining the effective tax rates and the cost of capital to firms considering additional investment during the holiday if an asset is long lived and depreciation allowances for tax purposes are accelerated the tax holiday by preventing depreciation deductions during the periods of peak profits may actually penalize a company for investing during the holiday the closer the investment to the end of the holiday period the more severe the penalty if instead depreciation allowances may be deferred until after the holiday this program of incentives is quite generous to the firm how these sharply contrasting results may emerge is illustrated through estimation of effective tax rates and user costs of capital under tax holiday systems in bangladesh cote d ivoire malaysia morocco and thailand

theocracy and resilience against economic sanctions abstract this paper provides a simply theory to explain the impact of sanctions on a regime s policies and behavior sanctions are generally put to strip the target country from its available rents and weaken the government s stance against growing discontent in the population we show however that sanctions may give legitimacy to an incumbent government by influencing the optimal level of religious ideology provided by the state and further stabilizing its grip to power and rents while in a good state of nature sanctions build resilience as long as religious ideology among the population is strong at bad times they compel the target country to move towards ideological moderation in a world of asymmetric information the target country always finds it optimal to send a signal that truly represents the prevailing state of nature in order to induce learning and reach a win win outcome

marginal taxes and the asset portfolios of swedish households this paper focuses on the effects of marginal tax rates wealth income and a set of socioeconomic and demographic variables on the portfolio composition of households using detailed micro data on 2 000 swedish households in particular efforts are made to disentangle the effects of marginal tax rates on the portfolio behavior of households some econometric problems involved when estimating asset demand equations in the presence of incomplete portfolios are briefly discussed a final section examines the overall effect of marginal tax rates on asset demands by applying estimated discrete and continuous portfolio equations to compute different tax elasticities

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

the effectiveness of tax incentives for r d i in developing countries the case of argentina abstract there is increasing interest in developing countries in granting tax incentives in order to encourage private investment in research development and innovation r d i however evidence on the effectiveness of such schemes in achieving policy goals in weak innovation systems contexts is still very scarce this paper aims at narrowing this knowledge gap by focusing on the effects of a tax credit scheme for promoting firm level innovation investment in argentina the analysis applies dynamic panel data techniques to a novel dataset merging several waves of the national innovation survey collected by the national institute of statistics and censuses the results suggest that the elasticity of r d i investment to its user cost of capital is a greater than 1 in absolute terms which implies that the intervention has been effective in increasing firms innovation efforts however effects vary depending on the type of innovation investment being subsidized industrial sector and size of the firm moreover when innovation investment is divided into innovation related capital goods expenditures and only r d the results suggest that the absolute value of the elasticity for the r d component of the innovation investment is less than 1 these heterogeneous effects should be exploited for further policy design

demographic transition in resource rich countries a blessing or a curse summary this study argues that resource wealth is a key factor for understanding income effects of demographic transition we develop a simple model highlighting how the income effect of increased labor supply may depend on resource rents and provide empirical evidence that support the theoretical predictions using panel data covering the period from 1982 to 2006 for more than 120 countries we find a negative interaction effect between resource wealth and demographic transition on national income moreover the negative interaction effect does not depend on institutional quality and is found also across different samples

opec behavior a test of alternative hypotheses since interpretations of past and future oil price patterns depends on the model chosen the author tests and compares alternative theories of opec as a first step in validating the choice on any one model the results show that among opec countries the partial market sharing cartel model is the only model not rejected by at least some of the 11 members and gives the best explanation of production in comparison with 11 non opec countries the competitive model could not be rejected for 10 of the 11 non opec producers this raises the question of why if opec is a cartel friedman s predictions have not come true and introduces new questions for future research 19 references 3 tables

oil and the macroeconomy since the 1970s economists have long been intrigued by empirical evidence that suggests that oil price shocks may be closely related to macroeconomic performance this interest dates back to the 1970s the 1970s were a period of growing dependence on imported oil unprecedented disruptions in the global oil market and poor macroeconomic performance in the united states thus it was natural to suspect a causal relationship from oil prices to u s macroeconomic aggregates since then a large body of work has accumulated that purports to establish this link on theoretical grounds and to provide empirical evidence in its support we do not attempt a comprehensive survey of this literature but rather provide an idiosyncratic synthesis of what we view as the key issues in this debate and the insights gained over the last 30 years the timing seems right for such an account although the experience of the 1970s continues to play an important role in discussions of the link between oil and the macroeconomy there have been a number of new oil price shocks since the 1970s notably the 1986 collapse of oil prices and the 2000 boom in oil prices as well as the oil price increases associated with the 1990 1991 gulf war and the 2003 iraq war given this richer case history we are arguably in a better position than two decades ago to distinguish the idiosyncratic features of each oil crisis from the systematic effects increases in oil prices have been held responsible for recessions periods of excessive inflation reduced productivity and lower economic growth in this paper we review the arguments supporting such views first we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining

annual inequality and lifetime inequality an estimator of inequality in lifetime incomes is derived it can be computed for a population from the distribution of incomes in one year as a result the estimates are as easily calculated as measurements of annual inequality but can be used as measurements of lifetime inequality estimates from this measure and two others have been computed for selected years since 1947 the results are compared by their implications for the level and trend of inequality in the united states

the ineffectiveness of effective tax rates on business investment a critique of feldstein s fisher schultz lecture abstract in his fisher schultz lecture martin feldstein 1982 examined the effects of non neutral tax rules on business investment by estimating three econometric models and he concluded that the rising rate of inflation has because of the structure of existing u s tax rules substantially discouraged investment in the past 15 years in a detailed examination of feldstein s effective tax rate model and a less extensive review of his other formulations neoclassical and return over cost we advance a number of important and independent criticisms and find that these three models fail to support feldstein s conclusion that taxes have exerted a significantly depressing effect on net investment during the recent inflation episode

internationally mobile firms and tax policy abstract this paper analyses how the government should tax internationally mobile firms the analysis finds that if tax authorities are unable to observe firms true mobility and domestic and foreign profitability are uncorrelated then 1 information rents are acquired by immobile inefficient firms and 2 the optimal policy will stimulate investment in the immobile sector compared to the complete information case another result of the paper is that the optimal allocation is implementable within the framework of a corporate income tax system where mobile firms self select more unfavourable capital allowances than immobile firms

procrastination of enjoyable experiences abstract the tendency to procrastinate applies not only to aversive tasks but also to positive experiences with immediate benefits the authors propose that models of time discounting can explain this behavior and they test these predictions with field data and experiments a multicity study shows that people with unlimited time windows delay visiting desirable landmarks however procrastination is reduced when the window of opportunity is constrained similarly people procrastinate in redeeming gift certificates and gift cards with long deadlines more than those with short deadlines resulting in overall lower redemption rates these results run counter to participants predictions and typical models of impulsive behavior

testing for the cartel in opec non cooperative collusion or just non cooperative this paper extends the framework of green and porter 1984 and porter 1983a to encompass the case of a cartel opec faced by a competitive fringe non opec oil producers estimation of a simultaneous equation switching regression model allows us to examine which market structure better characterizes the world oil market during the 1974 2004 period and to test whether switches between collusive and non cooperative behaviour occurred the null hypothesis that no switch occurred is rejected in favour of the alternative that both cooperative and non cooperative behaviour was observed we find that although there were periods in which oil prices were measurably higher owing to collusion among opec members overall opec has not been effective in systematically raising prices above cournot competition levels our results suggest that on average over the period of study opec s behaviour is best described as cournot competition in the face of a competitive fringe constituted by non opec producers

oil revenue shocks and government spending behavior in iran abstract oil revenues play an important role in the political economy of iran on average 60 of the iranian government revenues and 90 of export revenues originate from oil and gas resources current international sanctions on iran have mainly targeted the oil production capacity of iran and its exports to the global markets in this study we analyze the dynamic effects of oil shocks on different categories of the iranian government expenditures from 1959 to 2007 using impulse response functions irf and variance decomposition analysis vdc techniques the main results show that iran s military and security expenditures significantly respond to a shock in oil revenues or oil prices while social spending components do not show significant reactions to such shocks

the incentives to capital in the uk enterprise zones this paper provides a systematic assessment of the incentives to capital investment in uk enterprise zones it compares different investment projects between industrial sectors types of asset sources of finance and type of investor using the costs of capital methodology in addition micro economic and macro economic effects are compared as are ezs in round 1 and round 2 and the relative importance of capital allowances and property tax relief is considered the paper demonstrates that capital allowances are the more important incentive particularly in round 2 ezs the greatest incentives are to building assets for commerce financed by debt and tax exempt institution the greatest benefits offer an increase of between 7 6 and 8 7 in real rates of return on investments

inequality aversion and marginal taxes the concept of a lower bound on optimal linear taxes is analyzed a marginal tax rate is defined to be optimal if the corresponding state of the economy is a welfare maximum for some social welfare function reflecting at least a minimal aversion to inequality the lower bound on optimal tax rates is proved to be strictly positive this tax rate is also calculated in a numerical example based on swedish data the value obtained is 29 per cent

new findings on firm investment and monetary transmission in the euro area in this paper we present comparable results on the determinants of firms investment and their link to monetary policy the results have been obtained by the eurosystem monetary transmission network this network has produced a series of papers in which the use of micro data permits estimating and quantifying the relevance of two channels of monetary policy transmission the interest rate and the broad credit channel the research findings provide evidence of an operative interest rate channel in all countries examined moreover the results indicate that variables which proxy firms financial conditions play a role firms characterised by weaker balance sheets show higher liquidity sensitivity

tax revenue and the marginal cost of public funds in sweden abstract we assess the welfare cost of raising a marginal unit of tax revenue in a balanced budget general equilibrium framework the calculated social cost of an increment of public funds is sensitive to both the specific type of tax increase and the type of public spending used on the margin best guess assumptions on labor supply elasticities yield marginal costs of public funds for different fiscal mixes of between 0 67 and 4 51 at prevailing tax rates in sweden alternative labor supply assumptions well within the range of current estimates substantially affect the results and can imply infinite marginal welfare costs marginal welfare costs are also sensitive to assumptions about both the income and substitution effects of labor supply

determinants of opec production implications for opec behavior we estimate models that identify the economic and organizational determinants of crude oil production by individual opec nations to clarify the interpretation of econometric results we model production with specifications that resolve the statistical ordering of variables and estimate models with techniques that can cope with stochastic trends in the time series we also analyze the short run dynamics for asymmetries that may carry important insights about opec behavior results indicate that quotas are an important determinant of production and their effects generally are symmetric which implies that opec is an organization that influences production and ultimately prices real prices generally have a positive effect on production and the size of this effect may depend on spare capacity which implies that opec behaviors also embody competitive elements finally all nations other than saudi arabia show some form of production sharing behavior which may imply that opec shares mismatches between the call for opec production and opec quotas

the market power of opec 1973 2001 we apply a multi equation dynamic econometric model on monthly data to test if the behaviour of opec as a whole or different sub groups of the cartel is consistent with the characteristics of dominant producers on the world crude oil market in the period 1973 2001 our results indicate that the producers outside opec can be described as competitive producers taking the oil price as given and maximizing profits the opec members do not fit the behaviour of price taking producers our findings of low residual demand price elasticities for opec underpin the potential market power of the producer group and are in line with the results in some recent energy studies on the other hand our findings indicate that neither opec nor different sub groups of the cartel can be characterized as a dominant producer in the period 1973 1994 however we find that the characteristics of a dominant producer to some extent fit opec core as from 1994 thus although opec clearly has affected the market price the producer g

internationalization and changes in tax policy in oecd countries the importance of domestic veto players this article examines the role that economic and political factors played in tax reform in organization for economic cooperation and development oecd countries from 1986 to 1990 some writers argue that economic integration forced states to reform their tax systems the authors findings indicate that economic openness had an indirect effect on the level of change in marginal tax rates the institutional structure of a country was most important countries that had only one veto player or only one institution or party whose approval was necessary for a bill to become law enacted more sweeping reform than states that had more than one veto player these results suggest that even when international or domestic economic factors might dictate a change in policy reform will not be as sweeping in countries in which agreement among several institutions and or parties is necessary

testing the hypothesis of collusive behavior among opec members abstract this paper presents a test to discriminate among collusive and competitive behavior by producers of exhaustible resources in contrast to previous studies griffin 1985 jones 1990 which are based on static models our approach is based on of the dynamic implications of the optimization problem faced by a competitive producer we use this framework to test the hypothesis of collusive behavior within opec between 1983 and 1991 the existence of future markets allows us to sidestep the difficult issues related to the estimation of future prices and demand

taxation and inflation a new explanation for capital flows abstract in a world of mobile capital the current system of taxation implies that the after tax cost of capital and return to saving in each country are negatively correlated with the rate of inflation thus a country s net foreign asset position ought to be negatively correlated with its long run inflation rate the magnitude of these effects is shown to be potentially large for oecd countries cross section and time series regressions confirm that inflation rates are good predictors of net foreign assets the existing distribution of net foreign assets may therefore largely reflect tax distortions

some doubts about measuring self interest using dictator experiments the costs of anonymity abstract traditionally economists have assumed self interest governs economic choices recently some social scientists and economists especially those working in game theoretic and experimental areas have begun to treat self interest as a testable hypothesis one important vehicle for evaluating self interest has been a class of experiments called dictator experiments we believe that these experiments may have a flaw in their design which leads researchers to overstate systematically the role of self interest in individuals motivations double blind experiments designed to create conditions of privacy and anonymity may engender doubts in subjects regarding the existence of pairings and the disposition of any money they share moreover subjects may view the experiment as a game we test these conjectures using both traditional and modified dictator experiments

opec and other commodity cartels a comparison abstract the economic literature provides specific characteristics for cartels although the theory of international cartels is not well developed in the literature and every cartel is unique some of these characteristics exist in each cartel this study investigates the existence of these characteristics in six known commodity cartels including opec in addition it compares the oil companies cartel the seven sisters to opec and summarizes the findings of opec econometric models developed in the literature in the last 25 years and concludes that the results do not support cartel or competitive models for opec although other cartels are more successful than opec many books and articles in economics use opec as a cartel example neither statistical tests nor theory support the popular use of opec as a cartel example indeed this article concludes that opec is composed of saudi arabia the dominant world producer plus several distinct sub groups and that separate models are required to explain the behavior of each assigning the power of some opec members to opec has caused confusion about its behavior recent opec success is attributed to political natural and technical capacity limitations in the oil fields that prevented countries from cheating on their quota in other words opec adherence to the quota except for saudi arabia is anything but voluntary

structural dependence of the state on capital a central claim of both marxist and neoclassical political theory is that under capitalism all governments must respect and protect the essential claims of those who own the productive wealth of society this is the theory of structural dependence of the state on capital using a formal model the internal logic and the robustness of the theory is examined we conclude that in a static sense the theory is false virtually any distribution of consumption between wage earners and owners of capital is compatible with continual private investment once an appropriate set of taxes and transfers is in place yet the state may be structurally dependent in a dynamic sense policies that once in place redistribute income without reducing investment do reduce investment during the period in which they are anticipated but not yet implemented

local business taxes theory and practice local taxes which are borne by business are an aspect of local government revenue systems in almost all western countries these taxes cover a wide range of possible structures from the highly visible and direct such as taxes on business profits assets and wealth to the more indirect which bear on the inputs to a firm such as payroll property and resource rentals and severance taxes or taxes which bear on outputs such as sales taxes most local governments also employ in addition to taxes user fees and charges the range of local business tax is still further widened when we extend consideration beyond corporate business to include sole traders and partnerships in this case in addition to most of the above taxes we must also consider local taxes on personal income capital gains capital transfers and inheritance hence the range of taxes to be considered amongst local business taxes is both large and very complex

transaction costs the opportunity cost of time and procrastination in charitable giving abstract we conduct a laboratory experiment to study whether giving people more time to donate to charity reduces donations people may intend to donate but because of the transaction costs of doing so postpone making the payment until they are less busy and having postponed making the donation once keep postponing we conjecture that transaction costs will have a greater effect on donations if the solicitation is received when the opportunity cost of time is high we find evidence of a transaction cost reducing donations with the size of this effect depending on the opportunity cost of time but no statistically significant evidence that giving people more time to donate increases procrastination and thus reduces donations

conditions for efficient tax rates abstract in a standard model of optimal taxation and for a small open economy necessary and sufficient conditions for a tax rate to be efficient are derived those conditions are applied to swedish 1982 data marginal tax rates in sweden 1982 are the highest in the oecd countries but not inefficient as evaluated on the basis of the present model

ex ante commitments to give if you win exceed donations after a win abstract should fundraisers ask a banker to donate if he earns a bonus or wait and ask after the bonus is known standard eu theory predicts that these approaches are equivalent loss aversion and signaling models predict a larger commitment before the bonus is known theories of affect predict the reverse in five experiments incorporating lab and field elements n 1363 we solicited charitable donations from small lottery winnings varying the conditionality of donations between participants pooling across experiments participants are 23 more likely to commit to donate from the winning income and commit 25 more when asked before the lottery s outcome is determined relative to those asked to donate after they learn they have won these differences are strongly statistically significant this represents the first evidence on how pro social behavior extends to conditional commitments over uncertain income with implications for charitable fundraising giving pledges and experimental methodology

oil and the macroeconomy when prices go up and down an extension of hamilton s results in an important paper hamilton 1983 demonstrated a strong correlation between oil price changes and gross national product growth in u s data however his study pertained to a period in which all the large oil price movements were upward and thus it left unanswered the question whether the correlation persists in periods of price decline moreover the price variable he used was somewhat distorted by price controls in the 1970s this note investigates whether hamilton s results continue to hold when the sample is extended to include the recent oil market collapse and the oil price variable is corrected for the effects of price controls particular attention is given to the possibility of asymmetric responses to oil price increases and decreases as suggested in the structural employment literature loungani 1986 davis 1987 hamilton 1988 like hamilton i based my investigation on the gnp equation in sims s 1 980b six variable quarterly vector autoregressive model