the effect of collusion on efficiency in experimental auctions abstract this paper examines the effect of collusion on allocative efficiency in a second price sealed bid auction in which bidders valuations have both private and common value components we present a theoretical model which shows that explicit collusion improves average efficiency furthermore a reduction in common value signal variance increases the efficiency of allocations when a cartel is present we test for the presence of these patterns in a laboratory experiment subjects can choose whether to compete or to form a cartel colluding bidders can communicate and make side payments using a knockout auction our results show that a large majority of bidders joins a cartel and collusion has a negative impact on efficiency

vintage technologies and skill constraints evidence from u s exports of new and used machines when countries import production machinery they must choose between new and used equipment this article looks at that choice in the presence of labor saving technical progress and complementarity between technologies and skills within the firm it develops a theoretical model of the market for used machines it then analyzes data on united states u s exports of metalworking machine tools by country of destination classifying machines according to their vintage and their technological characteristics the data show that the share of used equipment imported is higher if the importing country has a lower level of development as measured by income per capita econometric estimation of the determinants of this share shows that it also is higher the greater is the technological change embodied in the machine or the greater is the change in the skills required to run the machine efficiently these results indicate that technological factors and skill constraints may be as important as factor prices in determining the choice of technique in developing countries the policy recommendation emerging from this work avoid constraints on imports of used equipment is similar to that in the existing literature but the reasoning is different instead of emphasizing inappropriate capital labor ratios for low wage countries the results indicate that investment in advanced technologies is effective only if importing countries have the skills to use them

reciprocity and willingness to pay taxes evidence from a survey experiment in latin america are citizens more willing to pay taxes when the government s performance improves we review the tax morale literature disentangling its different components and provide empirical evidence exploiting a novel survey conducted in seventeen latin american cities and an experimental attempt at measuring reciprocity in tax collection in developing countries the evidence suggests that governments interested in increasing tax revenues should not focus solely on escalating the coercive power of the state that is more audits and fines rather providing better public services to society can be an effective albeit limited tool to raise revenues

vintage capital and the dynamics of the ak model this paper analyzes the equilibrium dynamics of an ak type endogenous growth model with vintage capital the inclusion of vintage capital leads to oscillatory dynamics governed by replacement echoes which additionally influence the intercept of the balanced growth path these features which are in sharp contrast to those from the standard ak model can contribute to explaining the short run deviations observed between investment and growth rates time series to characterize the optimal solutions of the model we develop analytical and numerical methods that should be of interest for the general resolution of endogenous growth models with vintage capital

optimal redistribution and monitoring of labor supply this paper extends the mirrlees 1971 model of optimal non linear income taxation with a monitoring technology that allows the government to verify labor supply at a positive but non infinite cost we analyze the joint determination of the non linear monitoring and tax schedules and the conditions under which these can be implemented monitoring of labor supply reduces the distortions created by income taxation and raises optimal marginal tax rates possibly above 100 the optimal intensity of monitoring increases with the marginal tax rate and the labor supply elasticity our simulations demonstrate that monitoring strongly alleviates the trade off between equity and efficiency welfare gains of monitoring are around 2 8 of total output the optimal intensity of monitoring follows a u shaped pattern similar to that of optimal marginal tax rates our paper can explain why large welfare states optimally rely on work dependent tax credits active labor market policies benefit sanctions and work bonuses in welfare programs

existence of equilibrium in single and double private value auctions we show existence of equilibria in distributional strategies for a wide class of private value auctions including the first general existence result for double auctions the set of equilibria is invariant to the tie breaking rule the model incorporates multiple unit demands all standard pricing rules reserve prices entry costs and stochastic demand and supply valuations can be correlated and asymmetrically distributed for double auctions we show further that at least one equilibrium involves a positive volume of trade the existence proof establishes new connections among existence techniques for discontinuous bayesian games

endogenous vs exogenously driven fluctuations in vintage capital models in this paper we present a particular case of the creative destruction model of caballero and hammour quart j econ 111 1996 805 851 in which both exogenous and endogenous fluctuation sources are present we show that job creation follows a delayed differential equation with periodic coefficients the delay is equal to the optimal age of capital goods the period of the coefficients is equal to the period of an exogenous profitability cycle we mathematically show that job creation is asymptotically periodic with the same period as the profitability cycle furthermore using an explicit numerical method we find that replacement echoes generally dominate the short run dynamics finally we find that the combination of the two fluctuations sources favors the appearance of asymmetries in job creation and job destruction patterns

collusion in second price auctions with heterogeneous bidders abstract we show that efficient collusion by any subset of bidders in second price private value auctions is possible even when the bidders are heterogeneous an important property of efficient collusion is that a bidder s net payoff from participating in collusion is independent of her valuation we show that the cooperative game whose characteristic function evaluated at a coalition is the ex ante collusive surplus of that coalition has a nonempty core a feature of more technical interest is the mechanism characterization when the private information of agents does not enter in a linear or even piecewise linear manner

collusion and equilibrium selection in auctions we study bidder collusion and test the power of payoff dominance as an equilibrium selection principle in experimental multi object ascending auctions in these institutions low price collusive equilibria exist along with competitive payoff inferior equilibria achieving payoff superior collusive outcomes requires complex strategies that depending on the environment may involve signalling market splitting and bid rotation we provide the first systematic evidence of successful bidder collusion in such complex environments without communication the results demonstrate that in repeated settings bidders are often able to coordinate on payoff superior outcomes with the choice of collusive strategies varying systematically with the environment auctions for timber cars oil drilling rights and spectrum bandwidth are just a few examples of markets where multiple heterogeneous lots are offered for sale simultaneously in multi object ascending auctions the applied issue of collusion and the theoretical issue of equilibrium selection are closely linked in these auctions bidders can profit by splitting the markets by acting as local monopsonists for a disjoint subset of the objects the bidders lower the price they must pay as opposed to the sealed bid auction the ascending auction format provides bidders with the opportunity to coordinate tacitly on dividing markets and to punish non collusive bidding thus low price collusive equilibria co exist along with high price competitive equilibria even in a non repeated setting brusco and lopomo 2002 if there are complementarities in bidder values across objects and auctions are repeated bidders may further benefit by splitting the markets over time and taking turns in buying packages at low prices these opportunities make the multi object ascending auction an ideal institution for the study of equilibrium selection assuming that communication between the bidders is limited to the bidding any splitting of the markets must be tacitly coordinated in the early stages of the auction thus achieving payoff superior collusive outcomes requires complex strategies that depending on the environment may involve signalling market splitting and bid rotation while such tacit coordination is possible in theory it is an empirical question of whether it may be achieved in practice

from the lab to the field a review of tax experiments tax experiments have been gaining momentum in recent years although this literature dates back several decades with new developments in methods and data availability tax experiments have gradually moved away from lab settings and towards the field this movement from the lab to the field has happened against the background of the credibility revolution in applied economics which has seen more rigorous methods applied to policy relevant questions and of the availability to researchers of administrative data from tax returns these developments have allowed significant advances in the experimental literature on tax compliance this paper reviews this literature giving particular attention to field experiments using administrative data but putting them in the broader context of the compliance literature a particular effort is made to take a global perspective in a literature that is only recently seeing the emergence of evidence from africa latin america and asia

partnerships and double auctions with interdependent valuations in a symmetric independent private values setting a sealed bid double auction dissolves a partnership efficiently this well known result remains valid in a model with interdependent valuations however if common values components are large agents might prefer not to participate in a double auction therefore a simple extention of the rules of double auctions is suggested that ensures participation even though these modified double auctions are not incentive efficient they still realize gains from trade and can be implemented without knowledge about the specifications of the model

some theoretical results on the economics of forestry pose the value of timber from a tree is related to its age a according to a function ft and a discount rate of p 0 is given at what age should a tree or a stand of trees of the same vintage be cut down to maximize the present value of the timber content the answer to this question proposed by jevons 1871 wicksell 1911 and others can be stated as follows cut the tree at an age at which the increase in value of timber content of the standing tree over an additional unit time interval equals the interest that can be earned over an additional unit time interval if the revenue from cutting the tree is invested at an interest rate p from the point of view of the economics of forestry the above solution and indeed the above question is missing something more precisely the solution is based on the assumption that the land on which the stand of trees was growing is not used after the trees are cut down consequently it fails to encompass an important aspect of the forest rotation problem once trees are removed from a given area the land is available for new forest growth clearly the longer the felling of the existing forest is delayed the longer it takes to acquire revenues from future harvests the opportunity cost of utilizing the forest site for the existing stand of trees must be considered taking this reforestation aspect into account faustmann 1849 noted that the question to be asked is the following assuming that one had an empty tract of land and one were interested in maximizing the discounted sum of the value of timber content of trees harvested timber being evaluated at a constant price what pattern of planting and harvesting trees should one follow

assessing energy price induced improvements in efficiency of capital in oecd manufacturing industries to assess how capital stocks adapt to energy price changes it is necessary to account for the impacts on different vintages of capital and to account separately for price induced and autonomous improvements in the energy efficiency of capital stock the results of econometric analysis for five manufacturing industries in 19 oecd countries between 1990 and 2005 indicate that higher energy prices resulted in smaller energy use due to both improved energy efficiency of capital stock and reduced demand for the energy input the investment response to energy prices varied considerably across manufacturing industries being more significant in energy intensive sectors the results of policy simulations indicate that a carbon tax can deliver significant reductions in energy consumption in the medium run with modest declines in energy using capital stock

environmental policy and growth when inputs are differentiated in pollution intensity environmental policy affects the distribution of market shares if intermediate goods are differentiated in their pollution intensity when innovations are environment friendly a tax on emissions skews demand towards new goods which are the most productive in this case the tax has to increase along a balanced growth path to keep the market shares of goods of different vintages constant comparing balanced growth paths we find that tightening the policy stance spurs innovation because it increases the market share of recent vintages and promotes environment friendly technological progress as a result the cost of environmental policy in terms of slower growth is weaker

who participates in tax avoidance evidence from swedish microdata abstractthis article empirically examines why not all individuals participate in tax avoidance we use rich swedish administrative panel data on all taxpayers with a link between corporate and individual tax returns and document that few individuals utilize legal and observable tax avoidance opportunities our results show that there are several frictions in tax avoidance participation in addition to monetary benefits from tax avoidance incentives the opportunity to participate in tax avoidance access as well as information and knowledge about these opportunities awareness are important factors for the individual s tax avoidance decision we further show that tax avoidance spreads within communities the impact of the local network is stronger for non commuters who live and work in the same municipality

fairness spillovers the case of taxation abstract it is standardly assumed that individuals react to perceived unfairness or norm violations in precisely the same area or relationship where the original offense has occurred however grievances over being exposed to injustice may have even broader consequences and also spill over to other contexts causing non compliant behavior there we present evidence that such fairness spillovers can incur large economic costs a belief that there is unfairness in taxation in the sense that the rich do not pay enough taxes is associated with a twenty percent higher level of paid absenteeism from work

efficiency in auctions with private and common values an experimental study this discussion has resulted in a publication in the american economic review 2002 92 3 625 43 auctions are generally not efficient when the object s expected value depends on private and common value information we report a series of first price auction experiments to measure the degree of inefficiency that occurs with financially motivated bidders while some subjects fall prey to the winner s curse they weigh their private and common value information in roughly the same manner as rational bidders with observed efficiencies close to predicted levels increased competition and reduced uncertainty about the common value positively affect revenues and efficiency the public release of information about the common value also raises efficiency although less than predicted

reducing evasion through self reporting evidence from charitable contributions abstract in absence of third party reporting taxpayers are required to self report information with various degrees of detail ranging from uncorroborated claims to comprehensive records with receipts using a quasi experimental design applied to noncash charitable contribution deductions i show that even basic self reporting requirements are effective at reducing evasion but impose large compliance costs on taxpayers i find that simplified reporting requirements reduce reporting costs by 55 per person and substantially increase claimed donations however half of the new donations are due to evasion thus information reporting should only be imposed on total reported donations above a pre specified threshold

vintage human capital and learning curves abstract i study a vintage human capital model in which long lived workers accumulate human capital following an exogenous learning curve different skill levels inside a vintage are complementary in production this makes the ex ante homogeneous workers enter different vintages the continuous time framework allows me to study the timing decision for the technology phase out differentially and to derive sharp characterization for wages and the distribution of workers in the dying technology i show how to posit and solve a planner s problem and construct equilibrium in this way consistent with empirical evidence i show that the experience premium is always positive but diminishes as a technology ages the connection between workers learning curves and the technology s progress curve is characterized

a study of the internal organization of a bidding cartel this paper examines bidding in over 1 700 knockout auctions used by a bidding cartel or ring of stamp dealers in the 1990s the knockout was conducted using a variant of the model studied by daniel graham robert marshall and jean francois richard 1990 following a reduced form examination of these data damages induced inefficiency and the ring s benefit from colluding are estimated using a structural model in the spirit of emmanuel guerre isabelle perrigne and quang vuong 2000 a notable finding is that nonring bidders suffered damages that were of the same order of magnitude as those of the sellers

on the economics of forest vintages abstract we study optimal harvesting of a multiple vintage forest system under discounting discrete time and strictly concave utility it is shown that at the optimal stationary state timber harvest may evolve cyclically over time the cycles occur because in the forest vintage model space is measured continuously and time in discrete units cycles disappear as period length moves toward zero when the faustmann rotation is not unique or when the discount factor approaches unity we develop an equivalent model that can be used to solve the vintage problem numerically from any initial state numerical examples suggest that the optimal solution converges to the stationary cycle from any initial vintage structure

an econometric analysis of income tax evasion and its detection this article presents an econometric analysis of income tax evasion and its detection based on individual level data drawn from the internal revenue service 1982 and 1985 taxpayer compliance measurement programs i specify a model consisting of two equations the first measures the extent of evasion the second the fraction of evasion detected the empirical analysis explores the effects of income the marginal tax rate and various socioeconomic characteristics on filer evasion behavior and it assesses the variability in detection rates among irs examiners finally i use the empirical estimates to construct new estimates of the income tax gap the new estimates are very close to the previous irs estimates

strategic timing of adoption of new technologies under uncertainty abstract in this paper we introduce experience effects into a duopoly game of timing of adoption of new technologies which exhibit exogenous technological progress departing from the existing literature with this model we obtain continuous and downward sloping reaction functions we find that a higher level of uncertainty increases the extent of dispersion between the equilibrium timings of adoption furthermore we find that the equilibrium timings are even more dispersed when the leader takes the follower s reaction into account when firm roles are made endogenous we find that if there is an incentive to lead follow the equilibrium timings are more less dispersed finally we show that it is possible for collusive adoption to improve welfare

on the faustmann solution to the forest management problem abstract this paper is concerned with optimal solutions to the forest management problem when future utilities are undiscounted by examining asymptotic properties of such solutions we find that i if the utility function is linear then the faustmann periodic solution is optimal ii if the utility function is increasing and strictly concave an optimal solution converges to the maximum sustained yield solution which we characterize as a golden rule these results may be viewed as a possible resolution to the debate in forestry economics about what constitutes an optimal policy in forest management

technology shocks and job flows we consider a version of the solow growth model where technological progress can be investment specific or investment neutral the labour market is subject to search frictions and the existing productive units may fail to adopt the most recent technological advances technological progress can lead to the destruction of technologically obsolete jobs and cause unemployment we calibrate the model to replicate the high persistence that characterizes the dynamics of firms neutral technology and the frequency of firms capital adjustment we find that neutral technological advances increase job destruction and job reallocation and reduce aggregate employment investment specific technological advances reduce job destruction have mild effects on job creation and are expansionary hence neutral technological progress prompts schumpeterian creative destruction while investment specific technological progress operates essentially as in the standard neoclassical growth model using structural var models we provide support to the key dynamic implications of the model copyright 2007 wiley blackwell

endogenous growth and time to build the ak case abstract in this paper a continuous time ak model is fully analyzed under the time to build assumption the existence and uniqueness of a real balanced growth path as well as oscillatory convergence are proved transversality conditions and capital depreciation are highlighted moreover it has been shown how the introduction of the time to build assumption supports some interesting empirical evidences such as the negative link between mean output growth and output growth volatility finally numerical simulations are provided for different choices of the time to build delay in order to clarify the analytical results

the dynamics of technological unemployment this article compares the short and long run effects of technological progress on employment it presents a simple model of frictional unemployment capturing the negative creative destruction effects of technological change on employment in the long run faster technological change accelerates job obsolescence which reduces the equilibrium level of employment but it is also shown to have short run positive and potentially important effects on employment this tends to partially reconcile the schumpeterian view of the effects of technological change on labor markets with facts such as the response of most oecd unemployment rates to the 1970s productivity slowdown

enforcement socioeconomic diversity and tax filing compliance in the united states in this article we examine the determinants of tax filing compliance in the united states we use county level data on non filing rates for the tax year 2000 obtained directly from the internal revenue service we include explanatory variables identified in the rational compliance framework including an enforcement index against identified non filers the audit rate of filers and the average penalty rate for both filers and non filers we also examine the role of socioeconomic diversity on tax compliance testing whether within county heterogeneity in household income language race and religion can help explain variation in non filing rates we find that non filing is increasing with heterogeneity by race although not by income or language and that non filing is decreasing with heterogeneity by religious membership as for enforcement variables we find that non filing rates tend to fall with the enforcement index other variables have somewhat mixed results

ghostbusting in detroit evidence on nonfilers from a controlled field experiment abstract many people who owe income tax fail to file a timely tax return in communication with these ghosts what messages from the tax authority are effective for eliciting a return this is the first study to address message content in communication with income tax nonfilers i assess the efficacy of messages related to penalty salience punishment probability compliance cost and civic pride by evaluating the response to experimental mailings distributed by detroit to 7142 suspected resident nonfilers the penalty salience message was the most effective relative to a basic mailing that requested a return penalty salience mailings that stated the statutory penalty for failing to file a return tripled response rates from 3 to 10 compliance cost mailings that enclosed a blank tax return and punishment probability mailings that stated the recipient s federal income also raised response rates relative to the basic mailing but civic pride mailings did not i investigate the impact of treatment mailings on the behavior of untreated neighbors and find no evidence of geographic network effects

taxpayer response to an increased probability of audit evidence from a controlled experiment in minnesota abstract in 1995 a group of 1724 randomly selected minnesota taxpayers was informed by letter that the returns they were about to file would be closely examined compared to a control group that did not receive this letter low and middle income taxpayers in the treatment group on average increased tax payments compared to the previous year which we interpret as indicating the presence of noncompliance the effect was much stronger for those with more opportunity to evade in fact the difference in differences is not statistically significant for those who do not have self employment or farm income and do not pay estimated tax surprisingly however the reported tax liability of the high income treatment group fell sharply relative to the control group

why can modern governments tax so much an agency model of firms as fiscal intermediaries we develop an agency model explaining why third party information reporting by firms makes tax enforcement successful while third party reporting would be ineffective with frictionless collusion between firms and employees collusive evasion is impossible to sustain in firms with many employees and accurate business records as any single employee may reveal evasion we embed our agency model into a macro model where the number of employees grows with development showing that the tax take evolves as an s shape driven by changes in third party information we show that our model is consistent with a set of stylized facts on taxation and development

taxes informality and income shifting evidence from a recent pakistani tax reform abstract this paper examines firm behavior to taxation in a low enforcement and large informality setting using quasi experimental variation created by a tax reform which increased taxation of partnerships substantially relative to firms of other legal form and the population of income tax returns filed in pakistan in 2006 11 i document that treated firms report significantly lower earnings migrate into informality and switch business form in response to the increase in tax rate the revenue loss caused by these behavioral responses is so large that by the third year after the reform the government was collecting less revenue than it would have without the tax increase this implies that the new tax rate was on the wrong side of the laffer curve and would not have been optimal under any social preferences the richness of the data and tax variation permits me to decompose the observed responses into real and evasion margins and to identify fiscal externalities created by the reform on other tax bases the welfare cost of the reform increases by around 40 once these externalities are taken into account

morality in the market abstract being honest can be a competitive disadvantage in markets with the opportunity to violate laws and regulations producers who are willing to cheat may crowd out more efficient producers who are honest and buyers who are willing to cheat may crowd out honest buyers with higher willingness to pay this mechanism makes morality honesty a bad substitute for sanctions in markets honesty reduces cheating but the output may be less efficiently produced and less efficiently allocated among buyers i also show that the effect of honesty depends crucially on the fraction of honest traders among both buyers and sellers while it does not matter whether a buyer or a seller pays the sanction it does matter who is honest

energy price energy efficiency and capital productivity empirical investigations and policy implications abstract the immediate effect of carbon pricing policy is to raise energy costs which in turn reduces energy consumption either through induced capital under utilization or investments in new energy efficient capital the latter mechanism which implies improvements in energy efficiency is realized in the long run while the former which has implications for capital productivity tends to occur in the short run we employ panel vector autoregressions as well as co integration and error correction techniques to identify these short and long run relationships including their differences across canadian industries

a note on growth accounting with vintage capital abstract we show how growth accounting can be performed in the classic vintage capital model of solow solow r 1956 technical change and the aggregate production function review of economics and statistics the growth in real output can be decomposed into the labor share times the growth of labor plus the gross quasi rents on capital times the saving rate we show that data easily obtained from conventional national income accounts can be used to perform this growth accounting

the optimal economic lifetime of vintage capital in the presence of operating costs technological progress and learning abstract this paper studies the optimal vintage specific investment and disinvestment decision of a firm the decision is formulated as a distributed optimal control problem with a constraint on the state variable the economic model takes into accounts maintenance and operating costs technological progress and learning it allows firms to purchase not only the latest technology but also previous year vintages and completely disinvest old machines it does not assume that the firms keep machines of all vintages as other similar models do an analytical expression for the optimal economic lifetime of capital is derived and the qualitative dynamics of the optimal investment and disinvestment rules is analyzed

vintage capital investment and growth abstract we study the dynamics of growth and investment in a continuous time model with vintage capital vintage capital models may be characterized by non exponential rates of depreciation and technical change and can incorporate gestation lags as well as learning by using we investigate the effect of such features on the dynamics of investment and growth and show how they can contribute to explaining the volatile nature of investment time series

unwilling or unable to cheat evidence from a tax audit experiment in denmark this paper analyzes a tax enforcement field experiment in denmark in the base year a stratified and representative sample of over 40 000 individual income tax filers was selected for the experiment half of the tax filers were randomly selected to be thoroughly audited while the rest were deliberately not audited the following year threat of audit letters were randomly assigned and sent to tax filers in both groups we present three main empirical findings first using baseline audit data we find that the tax evasion rate is close to zero for income subject to third party reporting but substantial for self reported income since most income is subject to third party reporting the overall evasion rate is modest second using quasi experimental variation created by large kinks in the income tax schedule we find that marginal tax rates have a positive impact on tax evasion for self reported income but that this effect is small in comparison to legal avoidance and behavioral responses third using the randomization of enforcement we find that prior audits and threat of audit letters have significant effects on self reported income but no effect on third party reported income all these empirical results can be explained by extending the standard model of rational tax evasion to allow for the key distinction between self reported and third party reported income

solving optimal growth models with vintage capital the dynamic programming approach this paper deals with an endogenous growth model with vintage capital and more precisely with the ak model proposed in r boucekkine o licandro l a puch f del rio vintage capital and the dynamics of the ak model j econ theory 120 1 2005 39 72 in endogenous growth models the introduction of vintage capital allows to explain some growth facts but strongly increases the mathematical difficulties so far in this approach the model is studied by the maximum principle here we develop the dynamic programming approach to the same problem by obtaining sharper results and we provide more insight about the economic implications of the model we explicitly find the value function the closed loop formula that relates capital and investment the optimal consumption paths and the long run equilibrium the short run fluctuations of capital and investment and the relations with the standard ak model are analyzed finally the applicability to other models is also discussed

auction cartels and the absence of efficient communication abstract this paper examines the feasibility of collusive mechanisms in single unit auctions a model is constructed with private and common value information asymmetry and continuous type space we show that an incentive compatible bid coordination mechanism bcm does not exist if common value uncertainty is present this result contradicts actual antitrust cases where common effects or resale opportunities created uncertainty about valuations but a price fixing cartel was formed we solve the puzzle by relaxing the assumption that all bidder types truthfully reveal their private information the introduced bayesian bid coordination mechanism bbcm exists if the main source of information asymmetry is private value in that case a designated ring member can signal high valuation and suppress competition our results demonstrate the rationale behind cartel mechanisms with pre auction knockouts

collusion in private value ascending price auctions we investigate the effects of bid improvement rules and bidder value asymmetry on bidder collusion in experimental ascending price auctions without communication we find that the strict bid improvement rule and private values are not always sufficient to break collusion among well motivated bidders collusion still occurs as long as bidder gains from collusion are high

eliciting beliefs proper scoring rules incentives stakes and hedging accurate measurements of probabilistic beliefs have become increasingly important both in practice and in academia introduced by statisticians in the 1950s to promote truthful reports in simple environments proper scoring rules psr are now arguably the most popular incentivized mechanisms to elicit an agent s beliefs this paper generalizes the analysis of psr to richer environments relevant to economists more speci cally we combine theory and experiment to study how beliefs reported with a psr may be biased when i the psr payments are increased ii the agent has a nancial stake in the event she is predicting and iii the agent can hedge her prediction by taking an additional action our results reveal complex distortions of reported beliefs thereby raising concerns about the ability of psr to recover truthful beliefs in general economic environments

capital accumulation under technological progress and learning a vintage capital approach abstract in standard capital accumulation models all capital goods are equally productive and produce goods of the same quality however due to technological progress in reality it holds most of the time that newer capital goods are either more productive process innovation or produce goods of better quality product innovation implications of process innovation for the firm s investment policies are investigated while the output price development is subject to a business cycle and a given generation of capital goods gets more productive over time due to learning the problem is turned into an optimal control model that distinguishes the vintages of capital goods and where unlike most of the recent contributions it is possible to keep on investing in older technologies it is shown that i learning is one of the reasons why a firm may invest in old technologies even when apparently superior technologies are available ii investments in machines of a given age increase more over time under faster technological progress iii under faster technological progress investments are more vulnerable to output price developments and iv on average machines are older during recessions in deciding whether to invest in newer or older capital goods also the lower productivity due to aging versus differences in cost of discounting and acquisition have to be taken into account

bunching at the kink implications for spending responses to health insurance contracts abstract a large literature in empirical public finance relies on bunching to identify a behavioral response to non linear incentives and to translate this response into an economic object to be used counterfactually we conduct this type of analysis in the context of prescription drug insurance for the elderly in medicare part d where a kink in the individual s budget set generates substantial bunching in annual drug expenditure around the famous donut hole we show that different alternative economic models can match the basic bunching pattern but have very different quantitative implications for the counterfactual spending response to alternative insurance contracts these findings illustrate the importance of modeling choices in mapping a compelling reduced form pattern into an economic object of interest

feasible smooth income tax schedules benefits and distributional implications existing tax schedules are often overly complex and characterized by discontinuities in the marginal tax burden in this paper we propose a class of progressive smooth functions to replace persona

fighting collusion in auctions an experimental investigation the danger of collusion presents a serious challenge for auctioneers in this paper we compare the collusive properties of two standard auctions the english auction and the first price sealed bid auction and a lesser known format the amsterdam second price auction in the amsterdam auction the highest losing bidder earns a premium for stirring up the price we study two settings in one all bidders can collude and in another only a subset is eligible the experiments show that the amsterdam auction triggers less collusion than the standard auctions we compare experimental results to theoretical predictions and provide an explanation where they differ

replacement echoes in the vintage capital growth model this paper is concerned with a non standard source of fluctuations called echo effects i e the ability of an economy to reproduce its own past history in the 1960s growth theorists believed that this property could arise in vintage capital models taking the form of replacement echoes this line of research was stopped after the publication of solow et al 15 who showed that echoes should vanish in a solow growth model with vintage capital however the fundamental reason for this result has nothing to do with vintages rather it comes directly from the main assumption in a solow growth model i e at equilibrium investment is a constant fraction of output and does not depend on any optimal replacement rule we claim that in a more general ramsey model replacement echoes do not necessarily vanish and we show this in the case when instantaneous utility is linear c 1997 academic press

anticipation effects of technological progress on capital accumulation a vintage capital approach abstract due to embodied technological progress new generations of capital goods are more productive therefore in order to study the effects of technological progress a model must be analyzed in which different generations of capital goods can be distinguished we determine in what way the firm adjusts current investments to predictions of technological progress in the presence of market power we show that a negative anticipation effect occurs i e current investments in recent generations of capital goods decline when faster technological progress will take place in the future because then it becomes more attractive to wait for new generations of capital goods in case that only investments in new machines are possible actually a whole wave of anticipation phases arises

the economics of orchards an exercise in point input flow output capital theory abstract this paper is concerned with the qualitative properties of optimal intertemporal programs in a model of point input flow output capital theory when future utilities are discounted under a mild condition on the flow output vector we establish that optimal programs for every discount factor and every initial state other than a unique stationary optimal state will exhibit non convergence furthermore we provide a necessary and sufficient condition on the flow output vector for which a neighborhood turnpike theorem holds that is long run fluctuations on an optimal program are small when the discount factor is close to unity

cheating ourselves the economics of tax evasion no government can announce a tax system and then rely on taxpayers sense of duty to remit what is owed some dutiful people will undoubtedly pay what they owe but many others will not over time the ranks of the dutiful will shrink as they see how they are being taken advantage of by the others thus paying taxes must be made a legal responsibility of citizens with penalties attendant on noncompliance but even in the face of those penalties substantial tax evasion exists and always has the history of taxation is replete with episodes of evasion often notable for their inventiveness during the third century many wealthy romans buried their jewelry or stocks of gold coin to evade the luxury tax and homeowners in eighteenth century england temporarily bricked up their fireplaces to escape notice of the hearth tax collector webber and wildavsky 1986 p 141 this essay reviews what is known about the magnitude nature and determinants of tax evasion with an emphasis on the u s income tax alm 1999 andreoni erard and feinstein 1998 and slemrod and yitzhaki 2002 offer more comprehensive recent reviews of the literature it then places this information into a conceptual and policy context

on the interplay between speculative bubbles and productive investment the aim of this paper is to study the interplay between long term productive investments and more short term and liquid speculative ones a three period lived overlapping generations model allows us to make this distinction agents have a portfolio decision when young they can invest in human capital that is a productive long term investment that provides a return during the following two periods when young or in the middle age they can invest in a bubble young individuals can also borrow on a credit market to finance the productive investment however the amount borrowed is limited by a credit constraint we show that the existence of a stationary bubble raises productive investment and production when the bubleless economy is credit constrained and dynamically efficient indeed young agents sell short the bubble to increase productive investments whereas traders at middle age transfer wealth to old age the bubble allows to relax the credit constraint we outline that a permanent technological shock inducing either a larger return of capital in the short term or a similar increase in the return of capital in both periods raises productive capital production and the bubble size we use our framework to discuss the effect on the occurrence of bubbles of financial regulation and fiscal policy

life expectancy and endogenous growth we consider an overlapping generations model with uncertain lifetime and endogenous growth individuals have to choose the length of time devoted to schooling before starting to work we show that it depends positively on life expectancy but that the positive effect of a longer life on growth could be offset by a decrease in the participation rate dynamics are characterized by a delay differential equation and human capital converges with oscillations to a balanced growth path

sustainable economic development and the environment theory and evidence the relationship between growth and pollution is studied through a vintage capital model where new technologies are more environmentally friendly we find that once the optimal scrapping age of technologies is reached an economy may achieve two possible cases of sustainable development one in which pollution falls and another in which it stabilizes or a catastrophic outcome where environmental quality reaches its lower bound the outcome will depend on countries investment path and their propensity to innovate in environmentally clean technologies both of which are likely to differ across economies empirical results using long time series for a number of developed and developing countries indeed confirm heterogenous experiences in the pollution output relationship

threshold nonlinearities and asymmetric endogenous business cycles abstract this paper presents a model of endogenous business cycles in the presence of knowledge spillovers and a time to build restriction there are two key assumptions that characterize the model i the payoff to each firm depends on the aggregate state of knowledge and ii the innovation of a project is time consuming under those assumptions a simple structure is shown to be described by a piecewise linear difference equation with a discontinuity we show that the resulting dynamics generated by such a dynamical system leads to an asymmetric periodic cycle of arbitrary period that appears to switch repeatedly between different regimes

on the external validity of laboratory tax compliance experiments i introduction laboratory methods are now widely accepted as a methodological approach in economics and increasingly they have been used to examine specific public policy issues there is much to be gained from careful laboratory experiments they offer a low cost means of testing and replicating policy innovations and they generate precise data on individual behavior thereby allowing estimation of behavioral responses importantly they allow many policy innovations to be introduced singly and exogenously in a controlled environment and as a result laboratory experiments are typically seen as having a high degree of internal validity brewer 2000 campbell and stanley 1966 shadish cook and campbell 2002 because the causal relation between variables can be properly demonstrated however as emphasized by plott 1987 using laboratory experiments can allow more general inferences regarding human behavior only when the setting implemented in the laboratory parallels what is observed in the naturally occurring world even beyond this requirement of parallelism is the need for generalizing behavioral observations from the laboratory to the field or external validity internal validity can be demonstrated through the evaluation of the design however external validity can only be verified empirically and only with respect to the specific setting being investigated this paper investigates the external validity of laboratory experiments and does so in the context of experiments on tax compliance behavior tax evasion is central to many important policy questions current estimates report the tax gap or difference between taxes owed and taxes paid in the united states to be 450 billion annually internal revenue service 2012 beyond these massive revenue losses evasion creates major misallocations in resource use when individuals alter their behavior to cheat on their taxes its presence requires that government expend resources to detect noncompliance to measure its magnitude and to penalize tax evasion evasion alters the distribution of income in arbitrary unpredictable and unfair ways and it may contribute to feelings of unjust treatment and disrespect for the law more broadly it is not possible to understand the true impact of taxation without recognizing the existence and the effects of tax evasion laboratory methods have been used to examine a wide range of policies that may affect the compliance decision policies that have not always proven amenable to either theoretical analyses or empirical analyses with field data however laboratory studies of compliance are sometimes viewed with skepticism the most common criticism is that the student subjects typically used in experiments may not be representative of taxpayers undergraduates may have little experience with filing tax returns and their economic and demographic backgrounds may differ from those of taxpayers another criticism is that the context of laboratory compliance experiments does not closely enough resemble the context in which actual compliance decisions are made as a result there is a concern that experimental results on policy innovations that rely upon student subjects in laboratory compliance experiments cannot be generalized to the population it is this issue that we examine here building on previous research we present several types of evidence on the external validity of experiments on individual compliance decisions a first question examines whether behavior of laboratory participants is replicated by behavior of individuals making a similar decision in the naturally occurring world that is do participants in laboratory experiments exhibit different patterns of behavior than individuals in a similar naturally occurring setting to answer this question we utilize a special data set from the u s internal revenue service irs assembled as part of its national research program nrp

productivity slowdown due to scarcity of capital to scrap in a putty clay model abstract the conditions for a productivity slowdown to take place simultaneously with accelerated technical change are investigated in a simple putty clay macro model of the johansen type a capacity distribution such that the resulting supply curve is concave at the scrapping margin means a high likelihood of a reversed relation the relation between growth rates of wages and output is crucially dependent on the tail elasticity of the capacity distribution the need in a putty clay economy to scrap in order to transfer labor to new investment is the key mechanism the model emphasizes the decisive role of past investment in shaping the current relation between technical change and productivity growth

new or used investment with credit constraints abstract used capital is cheap up front but requires higher maintenance payments later on we argue that the timing of these investment cash outflows makes used capital attractive to financially constrained firms since it is cheap when evaluated using their discount factor in contrast it may be expensive from the vantage point of an unconstrained agent we provide an overlapping generations model and determine the price of used capital in equilibrium agents with less internal funds are more credit constrained invest in used capital and start smaller firms empirically we find that the fraction of investment in used capital is substantially higher for small firms and varies significantly with measures of financial constraints

reported gross income and marginal tax rates estimation of the behavioural reactions of spanish taxpayers this article estimates for the spanish personal income tax the elasticity of reported gross income to marginal tax rates the identification of this elasticity has been performed using the reform approved by law 35 2006 which came into force in january 2007 the elasticities obtained suggest the existence of important efficiency costs with significant regional differences the average elasticity estimated for spain as a whole is 0 676 however this elasticity is highly dispersed throughout the spanish administrative regions which indicates the unequal power of distortion of the tax thus households whose principal source of income is salary display an elasticity of 0 337 compared to 0 682 for households whose main income source comes from business or savings lastly a positive correlation is also detected between elasticity and income level an elasticity of 3 6 is reached for taxpayers with an annual gross income exceeding 100 000

differential difference equations in economics on the numerical solution of vintage capital growth models we examine techniques for the analytical and numerical solution of state dependent differential difference equations such equations occur in the continuous time modelling of vintage capital growth models which form an important class of models in modern economic growth theory the theoretical treatment of non state dependent differential difference equations in economics was discussed by benhabib and rustichini 1991 in general though the state dependence of a model prevents its analytical solution in all but the simplest of cases we review a numerical method for solving state dependent models using simple examples to illustrate our discussion in addition we apply this numerical method to the solow vintage capital growth model

collusive practices in repeated english auctions experimental evidence on bidding rings the repeated meeting of buyers at english auctions where multiple units are sold is a common occurrence the art auctions at sotheby s christie s and other prestigious auction houses are attended by a regular group of institutional buyers more mundanely the same taxicab buyers meet at vehicle auctions for used police cars jon p nelson 1995 commission order buyers attend the same livestock and agricultural commodity auctions these buyers may be agents for multiple meat processors u s department of agriculture grain inspection packers and stockyards administration 2001 the 1946 american tobacco antitrust case american tobacco co et al v united states 328 u s 781 1946 is a well known account of how buyers of tobacco operated to hold down the price of auctioned leaf tobacco at various sites buyers for the big three cigarette manufacturers had developed facilitating practices that helped them purchase raw tobacco at relatively low prices these buyers voluntarily restricted themselves to attend the same auctions buyers were aware of the amount of leaf and the tobacco grades available at auction sites they had instructions from the cigarette makers on the highest bid prices they could pay and communication among these buyers seemed evident from a coordinated practice of buying low grade tobacco that was not used by the makers in the sale of livestock cattle producers have claimed that packer buyers act to hold down cattle prices at the auction site there are a few large processors who give their agents buy orders these orders along with further communication between the processor and agent instruct the agent on the number of cattle to purchase during a given week and provide a schedule of prices they can pay for varying types of cattle some agents represent more than one processor or packer and therefore have multiple buy orders agents repeatedly meet each other at regional cattle auctions they may not be the only buyers but they are the largest purchasers of slaughter cattle brought to market and at most auction sites have substantial monopsony power this paper documents the impacts of several practices that may facilitate low sale prices when multiple units are sold at repeated english auctions laboratory english auction markets are created the number of symmetric buyers attending the auction is either six or two with total demand in these two environments held constant the six buyer market is intended to represent a relatively competitive environment while auctions with two buyers represent rivalry with substantial monopsony power held by each agent we use these two market environments to study how selected treatments or facilitating influences affect the behavior of buying agents the six buyer market generally is viewed as a control for comparison to the dominant twobuyer environment but very collusive behavior may be observed in the six buyer auctions depending upon market practices phillips department of economics and finance university of wyoming p o box 3985 laramie wy 82071 e mail owenphil uwyo edu menkhaus department of agricultural and applied economics university of wyoming p o box 3354 laramie wy 82071 e mail menkhaus uwyo edu coatney u s department of agriculture grain inspection packers and stockyards administration competition branch aurora co 80011 e mail kalyn t coatney usda gov this work has been supported by the u s department of agriculture under grant numbers usdagipsnc5418 and usdag00354009126 the findings and conclusions expressed in this paper are those of the authors and do not necessarily reflect the views of the funding agency 1 these are regional auctions houses where slaughter cattle primarily cull cows and fed steers and heifers and feeder cattle are sold cull cows are animals taken out of a herd and slaughtered because of age inability to produce calves or reduced milk production concerns regarding slaughter cow possessors sharing common purchasing agents have been raised in assessment of the cattle and hog industries calendar year 2000 u s department of agriculture grain inspection packers and stockyards administration june 2001

collusion facilitating and collusion breaking power of simultaneous ascending and descending price auctions this article demonstrates that a robust tacit collusion evolves quickly in a collusion incubator environment but is destroyed by the simultaneous descending price auction theories of collusion producing behavior along with the detail of the states on which strategies are conditioned lead to a deeper understanding of how tacit collusion evolves and its necessary conditions these theories explain how the descending price auction destroys the collusion the experiments proceed by conducting simultaneous ascending price auctions in the collusion incubator then once the tacit collusion developed changing to the descending auction the change moved prices from collusive levels to near competitive levels

higher taxes more evasion evidence from border differentials in tv license fees this paper studies the evasion of tv license fees in austria we exploit border differentials to identify the effect of fees on evasion comparing municipalities at the low and high fee side of state borders reveals that higher fees trigger significantly more evasion our preferred estimator indicates that a one percent increase in fees raises the evasion rate by 0 3 percentage points the positive effect of fees on evasion is confirmed in different parametric and non parametric approaches and survives several robustness checks