energy price disparity and public welfare abstract the differences in the price of energy to economic sectors are linked to a number of system parameters and to public welfare there are large disparities in energy prices within states when comparing residential and industrial prices although neoclassical economics predicts one price in markets the large disparities between the two sectors across states negatively affects the efficiency of resource allocation creates subsidies for those getting the cheap energy and results in unequal access to energy these in turn lead to inefficient partitioning of energy between products and waste higher pollution leakage of wealth and poorer energy use efficiency i e high energy intensity states with large energy price disparities between sectors have statistically higher poverty lower incomes more pollution and use more energy but with less efficiency higher energy price disparities also result in higher throughput per unit of output thus reducing the chances for sustainability and lower public welfare

estimating the tax advantage of corporate debt this paper presents estimates of the effective tax value of incremental interest deductions for corporations taking into account that they may not be able to utilize all their interest deductions fully because of either insufficient taxable income or the availability of nondebt tax shields after describing particular features of the tax code which may drive a wedge between statutory and effective tax rates for debt finance we present estimates using the treasury corporate tax model of effective tax rates for a variety of industry groupings our estimates suggest that the after tax cost of debt varies widely across industries the magnitude of the effective tax advantage to debt finance has important implications for corporate financial behavior one issue which has been examined extensively in the corporate finance literature is whether the value of the firm is affected by the firm s leverage ratio in a recent contribution deangelo and masulis 3 have shown that financing decisions can affect the value of the firm if the effective tax advantage to debt finance varies among firms or is reduced by the presence of nondebt tax shields such as investment tax credits and depreciation deductions the effective tax advantage to debt is also an important determinant of leverage related costs gordon and malkiel 5 have recently used the statutory tax rate to estimate expected bankruptcy costs induced by the corporate tax when the firm is assumed to balance the marginal tax advantage to debt with marginal expected bankruptcy costs if however the effective tax rate for interest deductions falls short of the statutory rate the magnitude of these costs may be overstated this paper presents detailed estimates of the marginal effective tax advantage to debt finance our estimates based on data in the treasury 1978 corporate master statistical file and on simulations done with the treasury corporate tax model quantify the impact of increasing interest deductions without changing other items on the corporation s income statement 1 we simulate the impact of a change in a firm s capital structure holding its investment and production decisions constant this is an appropriate procedure for estimating the marginal

taxation and the allocation of risk inside the multinational firm abstract this paper provides the first theoretical and empirical analysis of how taxation shapes the joint allocation of risk and profits inside the multinational firm theoretically we identify three mechanisms through which corporate taxes may shape the within firm allocation of risk 1 transfer pricing rules requiring risk to be compensated with higher expected returns create incentives to shift risk to low tax jurisdictions as a means to shift profits 2 risk averse owners create incentives to allocate risk to high tax affiliates to maximize risk sharing with governments 3 limited loss offset creates incentives to shift risk to affiliates in other countries empirically we show that multinational firms disproportionately allocate risk to low tax countries and that the key mechanism is the nexus between risk and profits established by transfer pricing rules within firm differences in risk explain a significant fraction of the well established correlation between profits and tax rates suggesting that risk shifting is a quantitatively non negligible channel for profit shifting

economy environment interactions in the long run a neo austrian approach abstract this paper describes a neo austrian approach to the long run interactions between invention innovation and technical progress on the one hand and resource use and pollution on the other this approach is used to construct a formal model which simulates output capital accumulation pollution emission pollution abatement etc for a simple model economy we begin by reviewing the role and conceptualisation of time in economic modelling we then move on to outline neo austrian capital theory as an alternative to the conventional approach we note the implications of the neo austrian approach for modelling resource use and pollution and a simulation model is constructed embodying the neo austrian approach to the time structure of production the two possible ways the model can be interpreted are then explored results from the simulation model are presented and assessed finally plans for future work with this approach are described

a multiperiod energy acquisition model for a distribution company with distributed generation and interruptible load this paper presents a multiperiod energy acquisition model for a distribution company disco with distributed generation dg and interruptible load il in a day ahead electricity market assuming that cost information for individual generation companies gencos and discos is known the disco s energy acquisition strategy is modeled as a bilevel optimization problem with the upper subproblem representing individual discos and the lower subproblem representing the independent system operator iso the upper subproblem maximizes individual discos revenues the lower subproblem simulates the iso s market clearing problem that minimizes generation costs and compensation costs for interrupting load the bilevel problem is solved by a nonlinear complementarity method an 8 bus system is employed to illustrate the proposed model and algorithm in particular the roles of dgs and ils to alleviate congestion are analyzed

some nonlinear tax effects on asset values and investment decisions under uncertainty abstract tax system nonlinearities are often ignored but with uncertainty may have important implications for the magnitude and direction of tax effects this paper studies a particular nonlinear tax rule the policy subsidizes asset values but may discourage some investments and encourage earlier shutdown of some projects the marginal effective tax rate varies with project risk furthermore a corporate cash flow tax can encourage investment due to interactions with the nonlinear policy the paper also presents a general statement of the stochastic equilibrium valuation method which can be used to analyze other nonlinear taxes numerical examples demonstrate computational feasibility

a distribution company energy acquisition market model with integration of distributed generation and load curtailment options this work presents a novel day ahead energy acquisition model for a distribution company disco in a competitive market based on pool and financial bilateral contracts the market structure encompasses wholesale generation companies distributed generation dg units of independent producers dg units owned by the disco and load curtailment options thus while satisfying its technical constraints the disco purchases active and reactive power according to the offers of dg units customers and the wholesale market the resulting optimal power flow model is implemented with an object oriented approach which is solved numerically by making use of a branch and border sequential quadratic programming algorithm the model is validated in test systems and then applied to a real case study results show the general applicability of the proposed model with potential cost savings for the disco finally the analysis of lagrange multipliers gives valuable information which can be used to improve the market design and to extend the use of the model to a more general market structure such as a power exchange

democratising the global economy by ecologicalising economics the example of global warming abstract the aim of this paper is to show that continued reliance on an unreconstructed neo classical economic model for human progress is largely responsible for an economic development path which is both unsustainable and undemocratic using the topical issue of global warming as an illustration it is argued that the ecological isation of the economics discipline challenges the foundations of this strategy and promises among other benefits a more democratic global economic organisation the data analysed in this paper suggest that the damage of global warming is directly attributable to economic activity the benefits of economic growth go to the economically articulate and the disbenefits in terms of environmental damage are borne by the economically inarticulate mainstream economics gives no answer to and becomes a method for evading this moral problem the data also show that huge increases in energy efficiency are required if a basically unchanged world economic system is to be sustainable nevertheless the predominant goal of development policy is to ignore the problem of scale and to promote an economic model of urbanised development in the developing countries which carries the implication and the promise that the rates of resource consumption typical in developed countries can be achieved globally an alternative development model is presented which includes the recognition that in ecological terms developed countries are in debt to developing countries largely because of the way in which economic growth is measured gross of externalised social and environmental costs a method is suggested for calculating part of this ecological debt for individual countries thus going some way towards quantifying the extent of the distortions in the current global political economy and the unsustainability of the present economic order

the importance of reporting conventions for the theory of corporate taxation abstract this paper shows that for the analysis of a tax policy it is important to be explicit about the reporting convention to which a corporation tax is required or allowed to adhere the paper shows that the corporation tax cannot be used to alter capital formation under uniform reporting a convention required by the majority of the oecd countries this tax is however a more useful policy tool in those oecd countries that have created the privilege of separate reporting fiscal depreciation makes the marginal valuation of equity differ from the marginal valuation of capital use of tax allowances directed to investment stimulus operates rather differently under the two reporting conventions

foreign ownership and corporate income taxation an empirical evaluation abstract foreign ownership allows countries to effectively export part of their corporate tax burden hence countries with high foreign ownership are expected to impose relatively high corporate taxes the findings of this paper suggest that there indeed is an economically significant positive relationship between foreign ownership and tax burdens in europe already significant foreign ownership levels in europe offer an explanation for the absence of a race to the bottom in corporate tax levels

energy as a factor of production and entropy as a pollution indicator in macroeconomic modelling abstract fluctuating energy prices and the environment s limited capacity for absorbing pollution constitute significant uncertainties for future industrial evolution solving a set of differential equations and using the simplex algorithm in linear programming we look into the questions how changing energy inputs and prices have affected industrial growth in the past and how the energy system can be optimized so that pollution becomes minimum in the future we obtain production functions which depend linearly on energy and exponentially on the ratios of labor capital and energy capital they describe well the growth of output in west germany and the u s a during the last two decades and the responses to theenergy price explosions energy conservation was an important response element the most optimistic possible savings of primary energy by heat exchangers heat pumps and cogeneration at the present fixed energy demand profiles are computed to be 54 in the netherlands 36 in west germany and 59 in japan a pollution indicator entropy production is proposed and incorporated in a model of enviromental constraints on industrial growth

profit shifting and investment effects the implications of zero taxable profits abstract recent empirical research documents a tendency of multinational enterprise affiliates to bunch around zero reported profit we set up a theoretical model of multinational firm behavior in which we allow for corner solutions in the choice of the optimal transfer price due to insufficient profits or losses of affiliates such constraints in the choice of the transfer price induce bunching and generate investment effects in the low tax as well as the high tax country in equilibrium affiliates might overinvest and the investment effects generate a tendency for too high profit taxes the analysis provides a micro foundation for the investment effects that result from transfer pricing the finding stands in contrast to the existing literature where transfer pricing choices are unconstrained

coordinated price maker operation of large energy storage units in nodal energy markets in this paper a new optimization framework is proposed to coordinate the operation of large price maker and geographically dispersed energy storage battery systems in a nodal transmission constrained energy market the energy storage units are assumed to be investor owned and independently operated seeking to maximize their total profit various design factors are taken into consideration such as the location size efficiency and charge and discharge rates of the energy storage units as well as the joint impact of the energy storage operations on the locational marginal prices while the formulated optimization problem is originally nonlinear and hard to solve nonlinearities are tackled both in the objective function and in the constraints and the problem is transformed into a tractable mixed integer linear program for which the global optimal solutions are found for the charge and discharge schedules of each energy storage unit both deterministic and stochastic design scenarios are addressed various case studies are presented it is observed that transmission line congestion is often but not always desirable for the coordinated storage systems locational diversity practice of arbitrage robust design self scheduling versus economic bidding and the overall power system performance are also investigated

energy aesthetics and knowledge in complex economic systems it is argued that the fact that economic systems are dissipative structures must be taken fully into account in economics if we are to understand the nature of the economic ecological interface and how to deal with emergent environmental problems such as global warming such problems are a product of economic growth which is widely accepted to be the outcome of the acquisition and application of knowledge drawing upon disparate literatures within and outside economics it is argued that economic growth should be more properly viewed as the outcome of a co evolutionary process that involves the autocatalytic interaction of new knowledge and access of increasing amounts of free energy to do increasingly specialized forms of work specifically the relevance of the energy hypothesis associated with erwin schrodinger and more recently revived by eric schneider and his collaborators is assessed this hypothesis states that all dissipative structures have as their primary objective the reduction of accessible free energy gradients it is concluded that such a hypothesis cannot be rejected in the context of economic behaviour and that this opens up an important research agenda for economists

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

the significance of tax law asymmetries an empirical investigation this study uses tax return data for u s nonfinancial corporations for the period 1971 1982 to estimate the importance of restrictions on the ability of firms to use tax credits and to obtain refunds for tax losses our results suggest that the incidence of such unused tax benefits increased substantially during the early 1980s though we do not find these increases attributable to increased investment incentives during that period we present estimates of the marginal tax rate on interest payments which take into account unused tax benefits and emphasize the importance of distinguishing current tax payments from marginal tax rates in estimating the incentive to invest

a reexamination of the role of thermodynamics for environmental economics abstract as the discussion about the role of thermodynamics in environmental economics has not led to a conclusion yet a more fundamental approach seems to be necessary which also takes into consideration the relationship between economics and the natural sciences in general to this end value theory is chosen as a starting point because it is the centerpiece of every economic theory it is shown that neoclassical environmental economics suffers from serious deficiencies because of its value concept heedlessly copied from classical mechanics thermodynamics can be expected to be helpful to redress these defects because the economy can be thought of as a dissipative structure dependent on its environment the obvious way to integrate thermodynamics consists in the formulation of thermodynamic constraints to complement neoclassical environmental economics but this approach remains unsatisfactory because the neoclassical mechanical hardcore is incompatible with the entropy law and its implications evidently the neoclassical paradigm and its value concept have to be given up but the alternative of the energy theory of value must be rejected because its determinism cannot be reconciled with the richness of human behaviour as thermodynamic analogies offer no solution either there is a dilemma between the necessity and the apparent impossibility of adequately integrating thermodynamic concepts it turns out that a normative inconsistency is responsible which is due to the demand for intergenerational justice therefore the integration of thermodynamics into environmental economics hinges on a meta economic value decision if sustainability is adopted as the guiding principle the insights of thermodynamics call for a macro economic environmental policy setting absolute limits to the economy but this macro policy is incompatible with neoclassical economics so that a social reconstruction of economics based on a social theory of value becomes necessary in sum thermodynamics is important for environmental economics besides fulfilling a general heuristic function it also fulfils a decisive conceptual and an analytical function insofar as it helps to justify sustainability and to operationalize macro economic environmental policy

risky local tax bases risk pooling vs rent capture abstract when a jurisdiction s land or other fixed resources are owned by non residents its residents have an incentive to capture the non residents rents by imposing confiscatory taxes when different jurisdictions are subject to less than perfectly correlated risks such taxes destroy the benefits of risk pooling that cross ownership of property otherwise permits if jurisdictions must use property taxes i e taxes on both immobile land and mobile capital instead of taxes on land alone they will compete for mobile capital by keeping tax rates low if capital is sufficiently substitutable for immobile factors tax rates will be low enough to achieve greater effective diversification of risks and higher welfare

experience with pjm market operation system design and implementation this paper outlines the fundamental features of the pjm day ahead energy market and real time energy market the day ahead market is based on a voluntary least cost security constrained unit commitment and dispatch with several fundamental design features that ensure the market is robust and competitive this market offers market participants the option to lock in energy and transportation charges at binding day ahead prices the flexibility of the day ahead market rules provide all participants with equal access to the day ahead market through consistent price signals and by providing all participants with the ability to submit virtual demand bids and virtual supply offers these mechanisms promote liquidity in the markets economic incentives drive the convergence of the day ahead and real time market prices the real time energy market is based on security constrained economic dispatch and is cleared based on the actual system operating conditions the lmp based markets support reliable grid operations through efficient price signals

risk based electricity procurement for large consumers in a competitive electricity market consumers seek strategies to procure their energy needs from different resources pool bilateral contracts and their own generation facilities at minimum cost while controlling the risk in this paper a novel method is proposed to address the electricity procurement problem of large consumers using the concept of information gap decision theory the method can be used as a tool for assessing the risk levels considering whether a large consumer is risk taking or risk averse regarding its midterm procurement strategies in the proposed method procurement decisions are evaluated by means of two criteria the first criterion is the robustness of the decision against experiencing high procurement costs and the second one is the opportunity of taking advantage of low procurement costs the pool price is considered an uncertain variable and it is assumed that the large consumer has an estimate of the prices in this study two models of uncertainty are addressed for the pool price based on the concept of weighted mean squared error using a variance covariance matrix and the expected procurement cost is modeled using a joint normal probability distribution function a case study illustrates the working of the proposed technique

tax competition when firms choose their organizational form should tax loopholes for multinationals be closed we analyze a sequential game between two symmetric countries when firms can invest in a multinational structure that confers tax savings governments are able to commit to long run tax discrimination policies before firms decisions are made and before statutory capital tax rates are chosen non cooperatively whether a coordinated reduction in the tax preferences granted to mobile firms is beneficial or harmful for the competing countries depends critically on the elasticity with which the firms organizational structure responds to tax discrimination incentives a model extension with countries of different size shows that small countries are likely to grant more tax preferences than larger ones along with having lower effective tax rates

on the life cycle metaphor where ecology and economics diverge abstract there is an attractive analogy between nature and industry based on the similarity of natural functions and certain industrial activities for instance animals ingest eat and digest food finally there are metabolic wastes firms are analogous to organisms in several respects insofar as they consume material resources process digest them and produce output products and excrete wastes firms like organisms also compete with each other for resources curiously enough one of the apparent differences between natural and man made systems is actually not one like the industrial system the natural system does not recycle everything however there are at least four real and important differences between the biosphere ecology and the technosphere economy first there is no primary producer in the economic system analogous to what photosynthesizers play in the biosphere inputs to the economy are mostly natural resources capital services and labor second in the economic system output is a heterogeneous mix of manufactured products and services labor in economics is an input but not an output the economic system recycles much less than the ecological system but utilizes a far greater suite of elements in the biosphere there are no products as such growth is tantamount to accumulation of embodied solar exergy in the form of cellulose sugars lipids and proteins the biosphere produces only wastes and more of itself plus dead matter third in the biosphere there are no markets there is no medium of exchange like money and there is nothing analogous to paid labor exchanges are involuntary i e by predation parasitism or theft fourth evolution in nature is driven by differentiation by random mutations of the genome and darwinian selection based on reproductive success in economics differentiation is based on discovery invention and innovation by intelligent economic agents and selection is based on competition at the individual or firm level either way the economic system is not closely analogous to an ecosystem attempts to use ecological concepts in an economic context are often misleading and unjustified the paper discusses the implications of the eco eco mismatch for resource accounting and life cycle analysis

capital income and profit taxation with foreign ownership of firms abstract this paper establishes optimal rules for capital income and profits taxation in the open economy with or without foreign ownership of domestic firms we show that if there are constraints on the feasibility of profits taxation both saving and investment taxes generally enter the optimal tax package if instead profits can be fully taxed then source based investment taxes vanish if domestic firms are in part owned by foreigners then source based investment taxes can be used to shift income away from these to domestic citizens and they may even be used to finance lump sum transfers to domestic residents

optimal capital structure a multi period programming model for use in financial planning abstract this paper describes a multi period chance constrained mathematical programming model to compute for each period the firm s optimal debt to equity ratio and the optimal maturity distribution of its debt the model assumes that the firm s objective is to maximize total value of the firm and that the firm operates in a world of uncertainty with corporate income taxes and bankruptcy costs finally the actual coupon rate paid by the firm which is commensurate to the risk of default is endogenously determined by the model

in praise of tax havens international tax planning and foreign direct investment abstract the multinationalization of corporate investment in recent years has given rise to a number of international tax avoidance schemes that may be eroding tax revenues in industrialized countries but which may also reduce tax burdens on mobile capital and so facilitate investment both the welfare effects of and the optimal response to international tax planning are therefore ambiguous evaluating these factors in a simple general equilibrium model we find that citizens of high tax countries benefit from some tax planning paradoxically if tax rates are not too high an increase in tax planning activity causes a rise in optimal corporate tax rates and a decline in multinational investment thus fears of a race to the bottom in corporate tax rates may be misplaced

taxation of mobile factors as insurance under uncertainty this paper considers the effects of the taxation of mobile factors i e capital under uncertainty the wages earned by residents of a jurisdiction are uncertain due to random shocks since the uncertain wages in a jurisdiction depend on the amount of mobile capital employed in the jurisdiction and since taxation alters the quantity of capital employed taxation affects the riskiness of uncertain wages in particular the taxation of capital moderates the fluctuation of uncertain wages thereby providing insurance for this reason jurisdictions use distortionary capital taxation even if lump sum taxation is available in addition this insurance effect counteracts the tendency toward too low tax rates on capital arising from tax competition and possibly improves the efficiency of tax competition

optimal allocation of energy storage system for risk mitigation of discos with high renewable penetrations along with the increasing penetration of renewable energy distribution system power flow may be significantly altered in terms of direction and magnitude this will make delivering reliable power on demand a major challenge in this paper a novel battery energy storage system bess based energy acquisition model is proposed for the operation of distribution companies discos in regulating price or locational marginal price lmp mechanisms while considering energy provision options within disco controlled areas based on this new model a new battery operation strategy is proposed for better utilization of energy storage system ess and mitigation operational risk from price volatility meanwhile optimal sizing and siting decisions for bess is obtained through a cost benefit analysis method which aims at maximizing the disco s profit from energy transactions system planning and operation cost savings the proposed energy acquisition model and ess control strategy are verified on a modified ieee 15 bus distribution network and risk mitigation is also quantified in two different markets the promising results show that the capacity requirement for ess can be reduced and the operational risk can also be mitigated

maximizing disco profit in active distribution networks by optimal planning of energy storage systems and distributed generators abstract energy storage systems esss are generally planned based on the active power while reactive power is another important aspect of the esss that has not been adequately addressed and discussed moreover esss are often managed individually but coordinated planning on the esss and distributed generators dgs may result in more suitable outcomes in order to address these issues a coordinated ess and dg planning is presented in this paper in the proposed planning the place and capacity of the esss and dgs are determined at the same time the active and reactive powers are included in the planning for both the esss and dgs in other words the optimal active and reactive capacities are denoted for both the esss and dgs on the network the proposed coordinated ess and dg planning is carried out on a radial distribution network under deregulated electricity market objective function of the proposed planning is to maximize the profit of distribution company disco subject to the secure operation of the network the planning is expressed as a nonlinear mixed integer optimization problem and solved by advanced pso as a strong meta heuristic optimization technique simulation results demonstrate the great impacts of the proposed planning on the network the results demonstrate the priority of the proposed coordinated dg and ess planning compared to the individual ess planning additionally it is verified that considering reactive power of the dgs and esss changes the results of the planning and provides more realistic and reasonable outputs the proposed planning significantly increases disco profit while guarantees the safe operation of the network through satisfying several security constraints

corporation tax asymmetries and investment evidence from uk panel data theoretical work has emphasised the potentially powerful impact of corporation tax asymmetries on investment behaviour but empirical work has mainly been confined to the measurement of effective tax rates this paper uses panel data from 597 u k companies to ask are tax asymmetries important to understanding observed investment behaviour an optimising investment model is developed and estimated both as a q equation and a euler equation in which the cost of capital appears careful modelling of asymmetries does not noticeably improve the empirical performance of these equations possible explanations are discussed

toward consilience between biology and economics the contribution of ecological economics abstract during its ten year history ecological economics has made a real difference in the way economists look at the natural world and in the way biologists look at the economy in this survey article we examine the contributions to the journal in terms of e o wilson s concept of consilience that is his argument that the methods and assumptions of any field of study should be consistent with the known and accepted facts in other disciplines in particular we examine the contributions of ecological economics to reconciling the economic theory of the consumer and producer with biophysical reality

impact of optimal storage allocation on price volatility in energy only electricity markets recent studies show that the fast growing expansion of wind power generation may lead to extremely high levels of price volatility in wholesale electricity markets storage technologies regardless of their specific forms e g pump storage hydro large scale or distributed batteries are capable of alleviating the extreme price volatility levels due to their energy usage time shifting fast ramping and price arbitrage capabilities in this paper we propose a stochastic bilevel optimization model to find the optimal nodal storage capacities required to achieve a certain price volatility level in a highly volatile energy only electricity market the decision on storage capacities is made in the upper level problem and the operation of strategic regulated generation storage and transmission players is modeled in the lower level problem using an extended stochastic bayesian cournot based game the south australia sa electricity market which has recently experienced high levels of price volatility and a 30 bus ieee system are considered as the case studies our numerical results indicate that 50 price volatility reduction in the sa electricity market can be achieved by installing either 430 mwh regulated storage or 530 mwh strategic storage in other words regulated storage firms are more efficient in reducing the price volatility than strategic storage firms

from microscopic to macroscopic theories entropic aspects of ecological and economic processes abstract the paper discusses the relevance of thermodynamics and related theories to ecological economics it is argued that it is not useful to apply the entropy term directly to economic processes physical entropy terms defined on a microscopic level for isolated systems are quite far from economic and ecological reality only theories that deal with the development of open systems far from thermodynamics equilibrium provide the important link between entropy and evolution towards higher complexity major new impulses for ecological economics come especially from evolutionary ecological theories these quite recent theoretical approaches incorporate the knowledge of far from equilibrium thermodynamics and explain dynamic changes in ecosystems on a macroscopic level from a thermodynamic perspective thermodynamic approaches provide a heuristic base for the analysis of economy environment interactions important implications of these approaches concern time irreversibility ecological efficiency and the interdependencies of environmental problems and evolution

corporate financial policy with personal and institutional investors abstract in this paper we present a simple general equilibrium model of the portfolio behavior of households and institutions paying particular attention to the influence of differences in tax rates and attitudes toward risk under the plausible assumptions that households are more risk averse than institutions and possess a greater relative tax preference for equity versus debt we are able to characterize the equilibria which may result when debt is subject to bankruptcy risk

entropy structure and organisational change abstract the paper sets out a basis for rigorous thermodynamic characterisation of structural change and of organisational interdependencies between economic and environmental processes many attempts have been made to exploit entropy as a generic explanatory variable it has widely been proposed that entropy is a measure of the level of dis order of a system of how mixed up things are then as organisation is often thought synonymous with some notion of order it has been a small step to propose that increasing organisation is the converse of increasing entropy another suggestion has been that social system structure and change can be explained in terms of a tendency towards maximum entropy production the lotka principle of maximum energy dissipation all these notions must be rejected the putative entropy order connection has its inspiration in boltzmann s probabilistic interpretation of thermodynamic entropy as a measure of microscopic disorder this order principle is simply not applicable under conditions far from thermodynamic equilibrium prigogine conditions which prevail for all important economic and ecological processes under such conditions the relationship between entropy production and changes in structure or organisation is multi faceted and situation specific attempts to account for the specificity of societal activities in terms of a generic scalar measure of organisation or dissipation are largely after the fact and in no way do away with the need for analysis of institutional and ethical dimensions of human action in their own right when properly allied to institutional analysis however the far from equilibrium thermodynamics furnishes a rich impetus for a coevolutionary perspective in ecological economics with promise of incisive treatments of in particular issues of system environment codependency and of the time in determinacies of economy environmental change

cross border loss offset can fuel tax competition following recent court rulings cross border loss compensation for multinational firms has become a major policy issue in europe this paper analyzes the effects of introducing a coordinated cross border tax relief in a setting where multinational firms choose the size of a risky investment and host countries non cooperatively choose tax rates we show that coordinated cross border loss compensation may intensify tax competition when following current international practice the parent firm s home country bases the tax rebate for a loss making subsidiary on its own tax rate in equilibrium tax revenue losses may thus be even higher than is implied by the direct effect of the reform in contrast tax competition is mitigated when the home country bases its loss relief on the tax rate in the subsidiary s host country

an empirical estimate of corporate tax refundability and effective tax rates the provisions of generous tax incentives during the 1970s and the recession of the early 1980s led to a marked increase in the number of nontaxable corporations in canada during the 1977 to 1982 period over 40 percent of investment was done by corporations that were rarely taxable 30 percent by corporations that were normally taxable and the balance undertaken by corporations that were taxable about half the time 1 the degree to which taxable losses can be used to shelter other forms of taxable income has important implications with regard to the study of effective tax rates on capital income this paper attempts to quantify the impact of imperfect loss offsetting or refundability on industry effective tax rate measurements section ii of this note provides an estimate of the extent to which tax losses are written off current or future taxable income in a present value sense refundability is measured by discounting the estimated proportion of a taxable loss written off by companies through carryback and carryforward provisions section iii uses the refundability measures to estimate effective tax rates on canadian firms by industry three cases are compared i the taxpaying firm this firm expects to use all deductions and credits immediately ii the nontaxpaying firm this firm expects to be nontaxpaying with probability 1 in the period in which new investment is undertaken marginal tax losses on new investment are used up slowly over time

grazing the commons an empirical analysis of externalities subsidies and sustainability abstract an empirical means of measuring externalities in the fifty states of the us is presented and the relationship between externalities subsidies and sustainability is investigated firms seeking to maximize profits create externalities thus securing implicit internal subsidies the subsidies are generally supported by those less well off and the socioeconomic energy and environmental indicators of the public sector worsen as externalities and subsidies increase implicit subsidies due to externalities in pollution control energy consumption and taxes are quantified the amount of subsidy is calculated by state and statistically compared to socioeconomic energy environmental and economic variables poverty unemployment and income disparity are found to increase significantly while income economic development attractiveness energy efficiency and environmental quality decline with increasing externalization across states an empirical method of operationalizing sustainability is presented and the relationship of sustainability to subsidies is investigated and found to be significant and negative recommendations are presented for minimizing the effects of externalities

partitioning of resources in production an empirical analysis abstract industrial economies ingest materials energy and information to produce goods and services and excrete wastes and emissions wastes can be minimized and the relative amounts of resources which go into goods and services as opposed to waste are essential to clean production and to the sustainability of the production system a regression model based on empirical data is presented that provides a partition coefficient expressing the ratio of energy or material resources invested in goods to energy going to waste partition coefficients are developed for five countries and are shown to be related to gdp energy and material consumption and energy and waste intensities higher partition coefficients mean higher productivity and lower energy waste and material intensities in addition energy use capita and pollution capita is lower the price of energy to the industrial sector is related to the partition coefficient the policy implications are that partitioning of resources to goods should be maximized and waste minimized for economic as well as environmental reasons

linking material and energy flow analyses and social theory the paper explores the potential of habermas theory of communicative action to alter the social reflexivity of material and energy flow analysis with his social macro theory habermas has provided an alternative critical justification for social theory that can be distinguished from economic libertarianism and from political liberalism implicitly most flow approaches draw from these theoretical traditions rather than from discourse theory there are several types of material and energy flow analyses while these concepts basically share a system theoretical view they lack a specific interdisciplinary perspective that ties the fundamental insight of flows to disciplinary scientific development instead of simply expanding micro models to the social macro dimension social theory suggests infusing the very notion of flows to the progress of disciplines with regard to the functional integration of society material and energy flow analyses can rely on the paradigm of ecological economics and at the same time progress the debate between strong and weak sustainability within the paradigm however placing economics at the centre of their functional analyses may still ignore the broader social integration of society depending on their pre analytic outline of research and the methods used

investment incentives and corporate tax asymmetries abstract recent facts on the importance of corporate losses motivate more careful study of the impact of tax incentives for investment on firms that lose money i model firm investment decisions in a setting featuring financing constraints and carrybacks and carryforwards of operating losses i estimate investment responses to tax incentives allowing effects to vary with cash flows and taxable status results suggest that asymmetries in the corporate tax code could have made recent bonus depreciation tax incentives at most 4 less effective than they would have been if all firms were fully taxable cash flows have more important effects on the impact of tax incentives recent declines in cash flows would predict a 24 decrease in the effectiveness of bonus depreciation results thus suggest that tax incentives have the smallest impact on investment exactly when they are most likely to be put in place during downturns in economic activity when cash flows are low

tax revenue losses through cross border loss offset an insurmountable hurdle for formula apportionment abstract this paper analyzes the relevance of firm losses for tax revenues and welfare when switching from separate accounting to a system of tax base consolidation with formula apportionment we find that a system change unambiguously decreases tax revenues in the short run in which neither firms nor governments can adjust their behavior due to the cross border loss offset inherent in formula apportionment in the medium run in which only firms can adjust their strategies tax revenues are still lower under formula apportionment if the probability of incurring losses or the costs of profit shifting are sufficiently small however in the long run where firms and governments can adjust their behavior a switch from separate accounting to formula apportionment is beneficial under the aforementioned conditions furthermore we show that a higher weight on input shares in the apportionment formula may mitigate tax competition and thus increase tax revenues because contrary to output factors input factors provide a backstop against a shortfall of tax revenues due to loss making subsidiaries

miller s equilibrium shareholder leverage clienteles and optimal capital structure the purpose of this paper is twofold first we examine the individual portfolio decisions when income from stocks and bonds is taxed at different rates second a rationale for the existence of risky debt in the presence of leverage related costs and differential personal income taxation is provided previous studies on capital structure with differential personal income taxation have ignored either the portfolio risk consideration and or the possibility of losing personal and corporate interest tax shields due to insufficient taxable earnings e g 8 2 3 14 13 6 7 1 9 19 20 21 23 in section i of this paper both the portfolio risk consideration and the possibility of losing personal and corporate interest tax shields are explicitly introduced this enables us to provide a rationale for the shareholder leverage clientele phenomenon within a mean variance framework we also demonstrate a non corner solution for the optimal corporate capital structure in a tax environment similar to that of miller s debt and taxes 14 in sections ii and iii of this paper miller s world is further modified to include risky debt and the attendant costs we re examine and synthesize recent studies on the theory of optimal capital structure which have appeared since the publication of debt and taxes e g 4 6 7 13 19 20

the dynamic effects of tax law asymmetries under the laws of most countries a distinction is made between gains and losses by businesses losses that must be carried forward are subjept to two penalties a loss of interest and expiration previous examinations have focused on the higher expected tax payments such a tax system without full loss offset imposes on risky projects this paper presents a dynamic analysis of the impact of taxation on investment when gains and losses are treated asymmetrically the results demonstrate how firm characteristics and the timing of taxes can influence behaviour under current u s tax law a distinction is made between gains and losses by businesses for corporations gains are taxed at what is essentially a flat rate of 46 while losses do not necessarily qualify for a refund at the same rate to obtain an immediate refund the taxpayer must have had taxable income during the three previous years in excess of the current loss any losses that cannot be carried back in this fashion must be carried forward subject to two implicit penalties such loss carryforwards earn no interest and they expire after fifteen years similar provisions apply in other countries hence businesses investing in risky projects for which the probability of having to carry losses forward is positive can expect to pay higher taxes than they would under a system with full loss offset i e the immediate refund of taxes for losses incurred many corporations

do countries compete over corporate tax rates this paper tests whether oecd countries compete with each other over corporate taxes in order to attract investment we develop two models with firm mobility countries compete only over the statutory tax rate or the effective average tax rate while with capital mobility countries compete only over the effective marginal tax rate we estimate the parameters of reaction functions using data from 21 countries between 1983 99 we find evidence that countries compete over all three measures but particularly over the statutory tax rate and the effective average tax rate this is consistent with a belief amongst governments that location choices by multinational firms are discrete we also find evidence of concave reaction functions consistent with the model outlined in the paper

opportunity cost bidding by wind generators in forward markets analytical results wind generation must trade in forward electricity markets based on imperfect forecasts of its output and real time prices when the real time price differs for generators that are short and long the optimal forward strategy must be based on the opportunity costs of charges and payments in real time rather than a central estimate of wind output we present analytical results for wind s optimal forward strategy in the risk neutral case the optimal strategy is determined by the distribution of real time available wind capacity and the expected real time prices conditioned on the forward price and wind out turn our approach is simpler and more computationally efficient than formulations requiring specification of full joint distributions or a large set of scenarios informative closed form examples are derived for particular specifications of the wind price dependence structure in the usual case of uncertain forward prices the optimal bidding strategy generally consists of a bid curve for wind power rather than a fixed quantity bid a discussion of the risk averse problem is also provided an analytical result is available for aversion to production volume risk however we doubt whether wind owners should be risk averse with respect to the income from a single settlement period given the large number of such periods in a year

self organization and sustainability energetics of evolution and implications for ecological economics abstract in the 1920s alfred lotka suggested that evolution results both in an increasing total energy flow through the biosphere and in increasing energy efficiency of biological processes later authors attempted to generalize lotka s conjectures and to transform them into general evolutionary laws these laws are derived from the laws of thermodynamics and it is frequently argued that they also apply to the development of economic systems in the present paper an alternative interpretation of the lotka principles is suggested which starts from the self organization of dissipative structures self organization concepts from ecological and evolutionary economics are integrated on this basis energetic regularities in evolutionary processes are interpreted as emergent properties of competitive self organization given the close relationship between energy dissipation in economic processes and various environmental problems thermodynamic effects of economic evolution are of practical policy relevance the evolutionary perspective taken here implies that policy measures toward sustainable development will primarily have to affect the kinds of innovative behavior triggered in competitive processes

taxation and the cost of capital the uk experience since the 1960s the uk has witnessed a series of reforms to its corporation tax system these include the creation of corporation tax as an independent tax in 1965 the gradual introduction of generous capital allowances in the early 1970s the introduction of the partial imputation system in 1973 and stock relief in 1975 and the 1984 reforms which reduced the tax rate and capital allowances and abolished stock relief a number of these reforms were designed with the specific intention of influencing company decisions regarding investment and finance through the real cost of capital

taxation portfolio choice and debt equity ratios a general equilibrium model this paper explores the portfolio behavior of investors differing with respect to both tax rates and risk aversion emphasizing the role of constraints on individual and firm behavior in ensuring the existence of and characterizing portfolio equilibrium under certain conditions on the securities available in the market which also are necessary for shareholders to be unanimous in supporting firm value maximization investors will be segmented by tax rate into two groups one specialized in equity and the other in debt though the relative wealths of the two groups determine the aggregate debt equity ratio each firm will be indifferent to its financial policy

tax competition with imperfectly mobile capital abstract this paper considers interjurisdictional tax competition in a two period model with imperfectly mobile capital in the first period capital is perfectly mobile in the second period however capital cannot move perfectly because of transactions costs once employed in a jurisdiction in the first period this imperfect mobility of capital may lead to the overprovision rather than the underprovision of public goods in the second period and may make jurisdictions compete more aggressively for capital in the first period

corporation tax finance and the cost of capital this paper examines the influence of corporate tax exhaustion on the firm s financial and investment decisions a dynamic programming model is used to establish effective marginal tax rates in the presence of a tax system that permits the carry forward of losses to future periods the paper demonstrates that internal optimal financial structures may result which do not require the imposition of external constraints the cost of capital is highly sensitive to the current taxable earnings of the firm and the implications of this for such tax transfer activities as leasing are discussed

entropy law and exhaustion of natural resources is nicholas georgescu roegen s paradigm defensible abstract i examine whether the entropy law dictates absolute limits to growth i distinguish the entropy law proper diffusion without coherent work from its application the carnot cycle diffusion with coherent work while the entropy law pertains to mechanistic systems the carnot cycle is the result of purposeful agency since the economic process is carried out by purposeful agency to generate coherent work it is not governed by the entropy law rather it resembles the carnot cycle resources hence cannot be defined objectively a la the entropy law resources can only be defined relative to the purposeful agency thus the prognosticators of doom like georgescu roegen cannot be bolstered by the entropy law

purchase allocation and demand bidding in electric power markets the purchase allocation problem is one of the most important problems faced by an electric energy service provider under new market environments the optimal purchase allocation problem for dual electric power markets and demand bid generation are discussed in this paper the price volatility is explicitly considered in purchase allocation problems and the sequential nature is modeled by conditional stochastic characteristics an analytical solution for the optimal allocation is derived with given demand and statistical characteristics of the market prices the method for generating demand bids for purchaser based on market allocation and price forecasting is then developed the numerical simulations for market allocation and bid generation are demonstrated based on the actual data of the u s california power market

a regulatory framework for a policy of sustainability lessons from the neo liberal school abstract in this paper targets institutions and policy measures for describing and implementing sustainable development are evaluated in terms of their conformity with the economic framework of a market system from the viewpoint of neo liberal economic thinking as conceived by the german freiburg school of economists a general set of criteria is developed it includes issues of operationalization and legitimation of goals as well as institutional and instrumental issues on this basis general rules for designing an ecological framework guaranteeing the greatest possible degree of conformity with a market system are derived the concrete application of these rules leads to recommendations for a policy of sustainability with respect to the setting of goals the establishment of institutions as well as the use of appropriate instruments

corporate tax incentives and capital structure new evidence from uk firm level tax returns abstract we investigate how companies capital structure is affected by corporate income taxes using confidential company level tax returns for a large sample of uk firms exploiting variation in companies marginal tax rates we find a positive and substantial long run tax effect on leverage leverage responds more to decreases in the marginal tax rate and it responds to changes in the marginal rather than the average tax rate most importantly we find that the marginal tax rate based on tax returns has greater explanatory power for companies leverage than the marginal tax rate based on financial statements our study suggests that errors in the measurement for tax incentives using financial statements could lead to underestimation of the tax effects on capital structure

the capital structure puzzle revisited corporate finance researchers have long been puzzled by low corporate debt ratios given debt s corporate tax advantage this article recognizes that firm value typically reflects a growing stream of earnings while current debt reflects a nongrowing stream of interest payments debt to value is therefore a distorted measure of corporate tax shielding even with very small debt related costs this may explain the observed magnitude and cross sectional variation of debt ratios since this variation may be independent of tax shielding debt ratios provide an inappropriate framework for empirically examining the trade off theory of capital structure article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

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

investment behaviour of dutch industrial firms a panel data study abstract this study describes a putty clay model of investment for a monopolistic firm in which factor price movements also affect expected output the specifications are tested on a set of panel data for individual dutch industrial firms factor prices are significant and expected output effects of factor prices dominate substitution effects in investment demand corrections are made for attrition and for measurement errors correction for attrition does not make an important difference but correction for measurement errors does

lease valuation when taxable earnings are a scarce resource in this paper we examine leasing as a tax arbitrage instrument analysis of a sample of uk leases presented in this paper suggests that lessors earn large positive npvs our theoretical model seeks to explain these positive npvs in terms of a market price for a scarce resource that we identify as scarce taxable earnings using these prices the model permits a lessor to determine whether the profitability of a proposed set of lease contracts can be improved by writing e different set of contracts that makes better use of the lessor s taxable earnings there may be two reasons why an initial portfolio of contracts may be suboptimal either there may be clienteles or the leasing market may be inefficient subsequently we discuss reasons why the leasing market may be characterized by clienteles and using two different samples of leases we test whether the leasing market is segmented and efficient in this paper we examine leasing as a tax arbitrage instrument with asymmetrical tax positions between lessors and lessees there will be positive net present values npvs to lease transactions see myers dill and bautista 21 analysis of a sample of united kingdom uk leases presented in this paper suggests that lessors earn large positive npvs our theoretical model seeks to explain these positive npvs in terms of a market price for a scarce resource that we identify as scarce taxable earnings there are two implications of our model one for financial intermediaries that act as lessors and the other for financial economists interested in the leasing market the model permits a lessor to determine whether the profitability of a proposed set of lease contracts can be improved upon by writing a different set of contracts that makes better use of the lessor s taxable earnings there may be two reasons why an initial portfolio of contracts that a lessor is about to write may be suboptimal either there may be clienteles because the leasing market

on the implications of introducing cross border loss offset in the european union abstract this article investigates a tax competition model where countries compete for capital and profits of multinational enterprises mnes through statutory tax rates and cross border loss offset provisions which allow a transfer of foreign subsidiaries losses to the parent company a joint implementation of full cross border loss relief is welfare maximizing because it ensures production efficiency and no profit shifting in equilibrium local governments choose zero level of the loss relief in a noncooperative equilibrium if only capital is mobile and relax the loss offset when mnes engage in profit shifting therefore allowing multinationals to undertake international tax planning activities may be welfare improving in our model

the second law the fourth law recycling and limits to growth abstract despite counter examples in nature it has been argued that total recycling is impossible for an industrial society as a consequence of the second law of thermodynamics in this paper it is shown that there is no such limitation however it is also shown that there must be a large stockpile of inactive materials as well as an exogenous source of exergy e g from the sun for a stable steady state recycling system to function the paper also discusses briefly some of the implications for economic growth

monopolistic competition and the q theory of investment abstract in this paper we analyse the implications for q models of investment of replacing the assumption of perfect competition in the output market with the assumption of monopolistic competition the structural investment equation that can be derived in this case has a richer dynamic structure than the conventional one and it contains in addition to present and future q output as an explanatory variable in the applied section we discuss the extent to which monopolistic competition helps in providing a remedy for the empirical weaknesses of q models the estimates are obtained using aggregate data for u k industrial and commercial companies for the period 1951 1979

energy diversity and development in economic systems an empirical analysis abstract as economic systems develop over time they tend to become more complex with more structure and greater throughputs assuming favorable conditions energy use increases as more economic sectors develop and more channels for flow are opened economic diversity as measured by the number of economic sectors using energy and the equatability of flows between them generally increases as diversity increases the efficiency of generating outputs with a given amount of energy also increases development capacity the product of system energy throughput and diversity of flows is a measure of the potential system output and is calculated for selected countries capacity changes over time are shown to relate to changes in economic output in selected countries two distinct development strategies become evident one which promotes energy use and one which emphasizes diversity and the sustainability of each is examined while most countries utilize a mix of the two developing countries generally rely more on increasing energy use to increase output while developed countries tend to become more diverse as a means of increasing outputs sustainability is enhanced by strategies which promote diversity and resource use efficiency in economic systems