the winners and losers of tax reform an assessment under financial integration abstract i quantify the macroeconomic and redistributive effects of the unilateral elimination of the capital income tax in a two country heterogeneous agent incomplete markets model with progressive labor income taxes home by implementing the reform induces government responses where labor income is taxed in home and mostly subsidized in foreign in addition post reform price dynamics reduce home s wealth and suppress households ability to do consumption smoothing with negative effects on the majority particularly on the poor in turn foreign accumulates wealth and price movements work particularly in favor of the poor as a result a large majority in home prefers the status quo whereas foreign supports the reform unanimously these findings are robust to alternative scenarios where i the borrowing constraints are relaxed ii both countries jointly eliminate capital income taxes iii foreign interest income is taxed and iv home capital income tax is reduced from 40 to 35

constrained efficiency in the neoclassical growth model with uninsurable idiosyncratic shocks we investigate the welfare properties of the one sector neoclassical growth model with uninsurable idiosyncratic shocks we focus on the notion of constrained efficiency used in the general equilibrium literature our characterization of constrained efficiency uses the first order condition of a constrained planner s problem this condition highlights the margins of relevance for whether capital is too high or too low the factor composition of income of the consumption poor using three calibrations commonly considered in the literature we illustrate that there can be either over or underaccumulation of capital in steady state and that the constrained optimum may or may not be consistent with a nondegenerate long run distribution of wealth for the calibration that roughly matches the income and wealth distribution the constrained inefficiency of the market outcome is rather striking it has much too low a steady state capital stock

endogenous trading constraints with incomplete asset markets abstract this paper endogenizes the borrowing constraints on capital in a production economy with incomplete markets we find that these limits get looser with income a property that is consistent with us data on credit limits the framework with endogenous limits is then used to study the effects of a revenue neutral tax reform that eliminates capital income taxes our results illustrate that it is very important to take into account the effects of tax policies on the limits throughout the transition these effects can be big enough to change the overall conclusion about the desirability of a tax reform

should capital be taxed abstract we design an infinite horizon heterogeneous agents and incomplete markets model to demonstrate analytically that in the absence of any redistributional effects of government policies optimal capital tax is zero despite capital overaccumulation under precautionary savings and borrowing constraints our result indicates that in the long run public debt is a better tool than capital taxation to restore aggregate productive efficiency

taxing capital not a bad idea after all we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic uninsurable income shocks and permanent productivity difierences of households the optimal capital income tax rate is signiflcantly positive at 36 percent the optimal progressive labor income tax is roughly a at tax of 23 percent with a deduction of 7 200 relative to average household income of 42 000 the high optimal capital income tax is mainly driven by the life cycle structure of the model whereas the optimal progressivity of the labor income tax is attributable to the insurance and redistribution role of the tax system jel e62 h21 h24

intertemporal labor supply and long term employment contracts the authors compare the implications of a symmetric information contracting model and a dynamic labor supply model for changes in earnings and hours a simple test is whether earnings changes are more variable than hours changes as predicted by the labor supply model or less variable as predicted by the contracting model the authors apply this test to two longitudinal surveys of adult men and find that earnings are somewhat more variable than hours for men who never change employers the estimates suggest that changes in earnings and hours not associated with survey measurement error occur at fixed wage rates copyright 1987 by american economic association

optimal bankruptcy code a fresh start for some abstract what is the optimal consumer bankruptcy law i answer this question using an incomplete markets life cycle model with a planner who can choose state contingent bankruptcy costs i develop two main theoretical characterizations first whenever debt discharge is allowed it should occur without cost second bankruptcy should always be allowed for highly indebted households quantitatively the optimal policy can generate a welfare gain as large as 11 6 however attractive informal default asymmetric information and moral hazard can reduce the welfare gain to as little as 0 7

optimal capital income taxation with incomplete markets borrowing constraints and constant discounting for a wide class of infinitely lived agent models chamley has shown that the optimal capital income tax rate is zero in the long run lucas has argued that for the u s economy there is a significant welfare gain from switching to this policy this paper shows that for the bewley class of models with incomplete insurance markets and borrowing constraints the optimal tax rate on capital income is positive even in the long run therefore cutting the capital income tax to zero may well lead to welfare losses

the three is of public schools irrelevant inputs insufficient resources and inefficiency abstractwe examine the educational production function and efficiency of public school districts in illinois using non parametric kernel methods we find that most traditional schooling inputs are irrelevant in determining test scores even in a very general setting property tax caps are the only relevant factor that is related to districts financial constraints and have predominantly negative associations with test scores therefore insufficient resources may be partially responsible for the lack of growth in test scores for most other relevant inputs we find substantial heterogeneity in the returns which helps reconcile some of the puzzling results in the literature we further find that there exist inefficiencies in school districts moreover the level of test scores commonly used as a measure of school effectiveness while related differs substantially from our efficiency scores and standard parametric approaches drastically underestimate school efficiency we discuss the policy implicati

social security life insurance and annuities for families abstract in this paper we ask whether an aspect of social security namely its role as a provider of insurance against uncertain life spans is welfare enhancing to this end we use an olg model where agents have a bequest motive and differ in sex and marital status and where families are formed and destroyed and their characteristics evolve exogenously according to u s demographic patterns of marriage divorce fertility and mortality we compare the implications of social security under a variety of market structures that differ in the extent to which life insurance and annuities are available we find that social security is a bad idea in economies where the private sector provides annuities and life insurance it is a bad idea for the standard reason that it distorts the intertemporal margin by lowering the capital stock in the absence of such securities social security is still a very bad idea only marginally less so compared with economies with annuities and life insurance we also explore these issues in a world where people live longer and we find no differences in our answers as a by product of our analysis we find that the existence of life insurance opportunities for people is important in welfare terms while that of annuities is not

the one sector growth model with idiosyncratic shocks steady states and dynamics abstract this paper investigates the one sector growth model where agents receive idiosyncratic labor endowment shocks and face a borrowing constraint it is shown that any steady state capital stock lies strictly above the steady state in the model without idiosyncratic shocks in addition the capital stock increases monotonically when it is sufficiently far below a steady state however near a steady state there can be non monotonic economic dynamics

dea and its use in the regulation of water companies abstract this paper begins with an introduction to the basic principles of data envelopment analysis dea dea is a linear programming based method for assessing the productive efficiencies of operating units such as bank branches sales outlets schools or individuals this paper then goes on to describe the use of dea in the regulatory framework regulation employed to safeguard the public interest is increasingly playing an major role in great britain and other countries in the aftermath of the privatisation of publicly owned companies including utilities which still enjoy a good degree of monopoly power this paper gives an account of the use of dea to estimate potential cost savings at water companies in the context of the price review conducted by the regulator of water companies in england and wales in 1994 it also highlights certain generic issues arising in the use of dea in the regulatory context this paper should prove of interest both to those who want to know about dea as a tool in general and to those interested in efficiency measurement under regulation

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

the optimum quantity of debt abstract we find that the welfare gains to being at the optimum quantity of debt rather than the current us level are small and therefore concerns regarding the high level of debt in the us economy may be misplaced this finding is based on a model of a large number of infinitely lived households whose saving behavior is influenced by precautionary saving motives and borrowing constraints this model incorporates a different role for government debt than is found in standard models and it captures different cost benefit trade offs on the benefit side government debt enhances the liquidity of households by providing an additional means of smoothing consumption and by effectively loosening borrowing constraints on the cost side the implied taxes have adverse wealth distribution and incentive effects in addition government debt crowds out capital via higher interest rates and lowers per capita consumption

value for money german local government efficiency in a comparative perspective in this article we investigate the cost efficiency of german local governments in the state of baden wurttemberg in 2004 using a stochastic frontier approach besides being the first study on german data we add two elements to the literature first we provide a comparative perspective allowing us to embed our results in the broader literature second unlike most previous studies we explicitly account for exogenous or nondiscretionary influences when estimating municipal efficiency scores the results suggest that disregarding such exogenous factors can lead to significant and systematic bias in the estimated inefficiency levels particularly underestimation of efficiency occurs for municipalities with high tourist activity while the reverse is true for municipalities with high unemployment

optimal taxation and debt with uninsurable risks to human capital accumulation we consider an economy where individuals face uninsurable risks to their human capital accumulation and analyze the optimal level of linear taxes on capital and labor income together with the optimal path of government debt we show that in the presence of such risks it is beneficial to tax both labor and capital and to issue public debt we also assess the quantitative importance of these findings and show that the benefits of government debt and capital taxes both increase with the magnitude of idiosyncratic risks and the degree of relative risk aversion jel d52 h21 h24 h25 h63 j24 human capital is an important component of wealth both at the individual and aggregate level and its role has been investigated in various fields in economics in public finance jones manuelli and rossi 1997 show that the zero capital tax result of chamley 1986 and judd 1985 1 can be strengthened if human capital accumulation is explicitly taken into account specifically they demonstrate that in a deterministic economy with human capital accumulation in the long run not only capital but also labor income taxes should be zero hence the government must accumulate wealth that is public debt be negative to finance its expenditure

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

explaining differences in efficiency a meta study on local government literature this paper reviews the literature on local government efficiency by meta reviewing 360 observations retrieved from 54 papers published from 1993 to 2016 the meta regression is based on a random effect model estimated with the 2 step random effects maximum likelihood reml technique proposed by gallet and doucouliagos 2014 results indicate that the study design matters when estimating a frontier in local government we find that studies focusing on technical efficiency provide higher efficiency scores than works evaluating cost efficiency the same applies when using panel data instead of cross section data interestingly studies that use the free disposal hull fdh approach yield on average higher efficiency scores than papers employing the data envelopment analysis dea method thereby suggesting that in this literature the convexity hypothesis of the production set is a matter finally the efficiency of local government increases with the level of development of the analysed countries and is positively related to the national integrity of the legal system the opposite holds when considering the corruption

idiosyncratic risk aggregate risk and the welfare effects of social security we ask whether a pay as you go financed social security system is welfare improving in an economy with idiosyncratic productivity and aggregate business cycle risk we show analytically that the whole welfare benefit from joint insurance against both risks is greater than the sum of benefits from insurance against the isolated risk components one reason is the convexity of the welfare gain in total risk the other reason is a direct risk interaction which amplifies the utility losses from consumption risk we proceed with a quantitative evaluation of social security s welfare effects we find that introducing an unconditional minimum pension leads to substantial welfare gains in expectation even net of the welfare losses from crowding out about 60 of the welfare gains would be missing when simply summing up the isolated benefits

idiosyncratic risk and financial policy in economies subject to uninsurable idiosyncratic risks competitive equilibrium allocations are constrained inefficient reallocations of assets support pareto superior allocations this is the case even if the asset market for the allocation of aggregate risks is complete

subjectivist economics and ethical business a number of business ethics theorist have highlighted the potential for economics to contribute to the advancement of business ethics in response this article emphasizes the insights of a particular area of economics that could provide such expansion and development subjectivist economics may yet provide an effective analytical framework through which to investigate and evaluate business decision making and hence the ethics of business integrating the concepts of uncertainty time and imagination subjectivist economic theory contributes to a greater appreciation of economic choice and behaviour while such notions are often effectively omitted from modern economic analysis to aid formal representation business ethicists could utilize such concepts more effectively than their colleagues in economic theory significantly the well known economists who have championed the insights of subjectivist economics have themselves recommended its extension to an analysis of ethics

labor market matching with precautionary savings and aggregate fluctuations we analyze a bewley huggett aiyagari incomplete markets model with labor market frictions consumers are subject to idiosyncratic employment shocks against which they cannot insure directly the labor market has a diamond mortensen pissarides structure firms enter by posting vacancies and match with workers bilaterally with match probabilities given by an aggregate matching function wages are determined through nash bargaining we also consider aggregate productivity shocks and a complete set of contingent claims conditional on this risk we use the model to evaluate a tax financed unemployment insurance scheme higher insurance is beneficial for consumption smoothing but because it raises workers outside option value it discourages firm entry we find that the latter effect is more potent for welfare outcomes we tabulate the effects quantitatively for different kinds of consumers we also demonstrate that productivity changes in the model in steady state as well as stochastic ones generate rather limited unemployment effects unless workers are close to indifferent between working and not working thus recent findings are corroborated in our more general setting

on the determinants of local government performance a two stage nonparametric approach abstract this article analyzes the efficiency of local governments in the comunitat valenciana spain and their main explanatory variables the analysis is performed in two stages firstly efficiency is measured via nonparametric activity analysis techniques specifically we consider both data envelopment analysis dea and free disposable hull fdh techniques the second stage identifies some critical determinants of efficiency focusing on both political and fiscal policy variables in contrast to previous two stage research studies our approach performs the latter attempt via nonparametric smoothing techniques rather than econometric methods such as ols or tobit related techniques results show that efficiency scores especially under the nonconvexity assumption fdh are higher for large municipalities thus there is empirical evidence to suggest that resources may be better allocated by large municipalities however the inefficiency found is not entirely attributable to poor management as second stage analysis reveals both fiscal and political variables to be explicably related to municipality performance moreover the explanatory variables impact on efficiency is robust to the chosen technique either convex dea or nonconvex fdh

moral markets and moral managers revisited in the wake of recent corporate scandals this paper examines the claim made by john boatright that business ethics as it is currently conceived rests on a mistake ethics in business should not be achieved through managerial vision discretion or responsibility rather ethics should shape the design of institutions that regulate business from the outside what ethicists should advocate for according to boatright are moral markets not moral managers i explore the empirical and normative dimensions of his claim with special attention paid to the extent to which boatright s development of the economic theory of the firm supports his position i conclude by suggesting some reasons why moral markets and moral management are compatible frameworks for corporate reform

the use of data envelopment analysis in the regulation of uk water utilities water distribution abstract regulation is increasingly playing a major role in defence of the public interest in the uk and other economies in the aftermath of the privatisation of utilities operating in near monopoly environments this paper gives an account of the use of data envelopment analysis dea by the regulator of water companies in england and wales in 1994 in the context of setting price limits dea is a general purpose linear programming based method for assessing the productive efficiencies of operating units such as bank branches or schools the paper details the use of dea to estimate potential savings in the specific context of water distribution and discusses the use of the results obtained it also highlights certain generic issues arising in the use of dea and more generally performance measurement methods in the regulatory context

accounting for the u s earnings and wealth inequality we show that a theory of earnings and wealth inequality based on the optimal choices of ex ante identical households that face uninsured idiosyncratic shocks to their endowments of efficiency labor units accounts for the u s earnings and wealth inequality almost exactly

optimal capital taxation revisited abstract we revisit the question of how capital should be taxed we allow for a rich set of tax instruments that consists of taxes widely used in practice including consumption dividend capital and labor income taxes we restrict policies to those that respect pre existing promises regarding the current value of wealth we show that capital should not be taxed i e there should be no intertemporal distortions if households have preferences that are standard in the macroeconomics literature we show that ramsey outcomes that must respect such promises are time consistent we show that the presumption in the literature that capital should be taxed for some length of time arises because the tax system is restricted

estimating most productive scale size using data envelopment analysis abstract the relation between the most productive scale size mpss for paparticular input and output mixes and returns to scale for multiple inputs multiple outputs situations is explicitly developed this relation is then employed to extend the applications of data envelopment analysis dea introduced by charnes cooper and rhodes ccr to the estimation of most productive scale sizes for convex production possibility sets it is then shown that in addition to productive inefficiencies at the actual scale size the ccr efficiency measure also reflects any inefficiencies due to divergence from the most productive scale size two illustrations of the practical applications of these results to the estimation of most productive scale sizes and returns to scale for hospitals and stem electric generation plants are also provided emphasize the advantage of this method in examining specific segments of the efficient production surface

estimation of the efficiency of structural funds a parametric and nonparametric approach this article seeks to perform an analysis of the efficiency of the application of the structural funds in the regions classified as objective 1 over the period 2000 to 2006 applying the techniques known as data envelopment analysis dea and stochastic frontier in the first place we are going to identify which are the most efficient regions finally we will analyse the extent to which certain factors have repercussions on the efficiency such as country geographical location and contribution of agriculture of gross domestic product gdp and the result indicates that some of these variables have significantly influences of technical efficiency

the determinants of efficiency in municipal governments this article investigates efficiency in the municipal sector of the region of murcia spain with that aim data of 31 municipalities 69 of the response rate have been collected services analysed are police culture sports green areas refuse collection and water supply ratios of efficiency have been related to other control variables such as economic level size of the municipality decentralization political sign and financial situation a weak positive relation between economic level and efficiency arises some weak evidence also exists that public management of refuse collection is more efficient than private in water supply public management by means of a company controlled by the local government is clearly more efficient than private it also seems that the higher the tax burden the greater the efficiency in providing services

dea based auctions we discuss the design of a multi dimensional procurement mechanism that combines data envelopment analysis dea and auction theory the mechanism selects an agent to provide a project characterized by multiple attributes the optimal configuration of the multiple attributes is settled endogenously by trading off the costs to the provider with the benefits to the acquirer this is done within a context of asymmetric information and strategic behavior as well as possibly correlated costs the mechanism makes it individually rational and incentive compatible to participate and reveal costs and the outcome is socially optimal allocatively efficient

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

the role of environmental factors in water utilities technical efficiency empirical evidence from spanish companies this article computes input specific scores of technical efficiency for a sample of water utilities located in the southern spanish region of andalusia in addition differences in efficiency between different operating environments are investigated concerning the debate about ownership and efficiency we find that privately owned companies outperform public utilities in their management of labour furthermore technical efficiency is found to be greater among firms located in highly populated areas and for utilities providing water services to tourist municipalities finally no empirical evidence supporting the greater technical efficiency of consortia of water utilities a managerial strategy strongly encouraged by regional politicians is found

benchmarking and incentive regulation of quality of service an application to the uk electricity distribution networks abstract quality of service has emerged as an important issue in post reform regulation of electricity distribution networks regulators have employed partial incentive schemes to promote cost saving investment efficiency and service quality this paper presents a quality incorporated benchmarking study of the electricity distribution utilities in the uk between 1991 92 and 1998 99 we calculate technical efficiency of the utilities using data envelopment analysis technique and productivity change over time using quality incorporated malmquist indices we find that cost efficient firms do not necessarily exhibit high service quality and that efficiency scores of cost only models do not show high correlation with those of quality based models the results also show that improvements in service quality have made a significant contribution to the sector s total productivity change in addition we show that integrating quality of service in regulatory benchmarking is preferable to cost only approaches

on the optimal taxation of capital income abstract we show that in models in which labor services are supplied jointly with human capital the chamley and judd result on zero capital income taxation in the limit extends to labor taxes as long as accumulation technologies are constant returns to scale moreover for a class of widely used preferences consumption taxes are zero in the limit as well however we show by the construction of two examples that these results no longer hold for certains types of restrictions on tax rates or if there are profits generated journal of economic literatureclassification numbers e62 h21

externalities in economies with imperfect information and incomplete markets this paper presents a simple general framework for analyzing externalities in economies with incomplete markets and imperfect infonnation by identifying the pecuniary effects of these externalities that net out the paper simplifies the problem of determining when tax interventions are pareto improving the approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained pareto optima it can also lead to simple tests based on readily observable indicators of the efficacy of particular tax policies in situations involving adverse selection signaling moral hazard incomplete contingent claims markets and queue rationing equilibria traditional discussions of externalities have emphasized the distinction between technological externalities in which the action of one individual or firm directly affects the utility or profit ofanother and pecuniary externalities in which one individual s or firm s actions affect another only through effects on prices while the presence of technological externalities imply in general that a competitive equilibrium may not be pareto efficient pecuniary externalities hy themselves are not a source of inefficiency the fact that prices change has of course important consequences there are both distributional and allocational effects but the distribution effects net out gains for example hy firms whose prices increase are precisely offset by losses e g to individuals who must pay higher prices and there are no welfare losses from the allocation effects as long as the price changes involved are small if firms are maximizing profits and individuals are maximizing utility both facing prices that correctly refiect opportunity costs then standard envelope theorem arguments imply that changes in profits or utility induced by changes in allocations resulting from any small change in prices are negligible

pecuniary externalities in economies with financial frictions this article characterizes the efficiency properties of competitive economies with financial constraints in which phenomena such as fire sales and financial amplification may arise we show that financial constraints lead to two distinct types of pecuniary externalities distributive externalities that arise from incomplete insurance markets and collateral externalities that arise from price dependent financial constraints for both types of externalities we identify three sufficient statistics that determine optimal taxes on financing and investment decisions to implement constrained efficient allocations we also show that fire sales and financial amplification are neither necessary nor sufficient to generate inefficient pecuniary externalities we demonstrate how to employ our framework in a number of applications whereas collateral externalities generally lead to over borrowing the distortions from distributive externalities may easily flip sign leading to either under or over borrowing both types of externalities may lead to under or over investment

the performance of german water utilities a semi parametric analysis germany s water supply industry is characterized by a multitude of utilities and widely diverging prices possibly resulting from structural differences beyond the control of firms management but also from inefficiencies in this article we use data envelopment analysis and stochastic frontier analysis to determine the utilities technical efficiency te scores based on cross sectional data from 373 public and private water utilities in 2006 we find large differences in te scores even after accounting for significant structural variables like network density share of groundwater usage and water losses

rational bubbles and public debt policy a quantitative analysis abstract do empirically plausible dynastic general equilibrium models admit bubbles and ponzi schemes under rational expectations contrary to conventional wisdom the answer is affirmative the central assumption is that current securities do not represent claims to all future profits calibrating the model to u s data we find that it is consistent with the presence of rational bubbles the observed level of public debt is entirely a ponzi scheme there are large welfare gains from eliminating bubbles on private assets and lodging all the non fundamental asset value in public debt paying off public debt benefits only a small group of wealthy individuals

optimal taxation in a limited commitment economy this paper studies optimal ramsey taxation when risk sharing in private insurance markets is imperfect due to limited enforcement in a limited commitment economy there are externalities associated with capital and labor because individuals do not take into account that their labor and saving decisions aect aggregate supply wages

efficiency in the public and private french water utilities prospects for benchmarking this article uses a data envelopment analysis dea and a stochastic frontier analysis sfa to assess the relative technical efficiency of 177 decision making units in the french water supply sector in 2009 water utilities can be directly managed by the local authorities or contracted out and then managed by a private operator the use of a three stage model mixing dea and sfa enables us to dissociate managerial inefficiencies from the structural inefficiencies and statistical noise after having taken the environmental variables into account we find that private management are on average slightly less efficient than public management an explanation to this performance gap can be different resource management

an economic approach to business ethics moral agency of the firm and the enabling and constraining effects of economic institutions and interactions in a market economy the paper maps out an alternative to a behavioural economic approach to business ethics special attention is paid to the fundamental philosophical principle that any moral ought implies a practical can which the paper interprets with regard to the economic viability of moral agency of the firm under the conditions of the market economy in particular competition the paper details an economic understanding of business ethics with regard to classical and neo classical views on the one hand and institutional libertarian thought on the other hand implications are derived regarding unintentional and passive intentional moral agency of the firm the paper moves on to suggest that moral agency can be economically viable in competitive market interactions which is conventionally disputed by classical neo classical and institutional libertarian economics the paper here conceptualises active moral agency of the firm as the utilisation of ethical capital in firm stakeholder interactions this yields a reinterpretation of instrumental stakeholder theory

the effectiveness of institutional borrowing restrictions empirical evidence from spanish municipalities the need for restrictions on borrowing by subnational governments is a generally accepted notion that is justified both by public choice theory and by the fact that such restrictions are in force in the majority of decentralized countries furthermore recent breaches of the stability and growth pact of the european union have led to the introduction of legislative tools aimed at balancing the budget at all levels of government have come to the forefront of interest in european public finance research this paper is concerned with the financial situation and debt level of spanish municipalities from 1988 to 2000 we have two main objectives the first is to assess the value of mandatory limitations on municipal borrowing and past trends in the borrowing policies adopted by spanish local authorities the second is to develop an econometric model using panel data stratified by population size to measure indebtedness in spanish municipalities these measures enable us to formulate a series of hypotheses to explain municipal borrowing practices which are then tested empirically the evidence thus obtained appears to support the effectiveness of institutional borrowing restrictions to introduce some financial discipline in the borrowing policies adopted by local governments in spain

production of public safety are socioeconomic characteristics of local communities important factors this paper uses the translog cost function and cross section data from florida to investigate the importance of socioeconomic characteristics sec of local communities in the production of public safety the approach used is noteworthy in four respects 1 the underlying production function is specified as an agem production function 2 sec are treated as non purchased fixed inputs 3 two variables are used to proxy sec in estimation and 4 the paper test for the existence of endogenous quality differences in safety it is shown that exclusion of sec from the production cost function of safety leads to misspecification and hence they provide a misleading guide to policy

partisan politics and public finance changes in public spending in the industrialized democracies 1955 1989 this paper evaluates the role that partisan politics plays in altering public spending levels the analysis covers over three decades of data on the developments of the public sectors in 16 oecd countries the results of the analysis lend firm support to the partisan politics model of special note is the distinction between the electorate and the government ideological preferences and the dominant role that the former plays the results also suggest contrary to conventional wisdom that partisan political influences have not been eliminated with the tightening of linkages to the international economy

exploring the income distribution business cycle dynamics abstract we document the business cycle behavior of the us income distribution and explore the extent to which unemployment spells and cyclically moving factor shares account for this behavior by analyzing four heterogeneous household extensions of the neoclassical growth model we conclude i that partitioning the population into five types subject to type specific employment processes seems to be enough to account for most aspects of the us income distribution business cycle dynamics ii that the role played by cyclically moving factor shares is small and iii that the income distribution business cycle dynamics may be essentially independent from the significant part of the observed wealth concentration that these model worlds fail to account for

elasticity of factor substitution in police agencies evidence from florida a multiproduct translog cost function is estimated and used to calculate elasticities of factor substitution in the production of police services the data come from florida s municipal police departments and are for 1982 1983 it is found that substitution elasticities between any pair of inputs in police production are significantly different from unity this result is inconsistent with the cobb douglas production function a functional form that has been extensively employed in empirical studies of police production

liquidity and inefficient investment we study the role of fiscal policy in a complete markets model where the only friction is the nonpledgeability of human capital we show that the competitive equilibrium is constrained inefficient leading to too little risky investment we also show that fiscal policy following a large negative shock can increase ex ante welfare finally we show that if the government cannot commit to the promised level of fiscal intervention the ex post optimal fiscal policy will be too small from an ex ante perspective

optimal government policies in models with heterogeneous agents abstract in this paper we develop a new approach for finding optimal government policies in economies with heterogeneous agents using the calculus of variations we present three classes of equilibrium conditions from government s and individual agent s optimization problems 1 the first order conditions the government s lagrange euler equation and the individual agent s euler equation 2 the stationarity condition on the distribution function and 3 the aggregate market clearing conditions these conditions form a system of functional equations which we solve numerically the solution takes into account simultaneously the effect of the government policy on individual allocations the resulting optimal distribution of agents in the steady state and therefore equilibrium prices we illustrate the methodology on a ramsey problem with heterogeneous agents finding the optimal limiting tax on total income

taxing capital is a good idea the role of idiosyncratic risk in an olg model abstract we investigate an overlapping generations olg model in which agents who live for two periods receive idiosyncratic productivity shocks when they are old we show that around zero tax equilibria we can always construct a combination of a small capital tax and a lump sum transfer that are pareto improving as davila et al econometrica 2012 show a capital reduction in one period raises the welfare level of agents who are old in that period but lowers that of the young agents because it reduces their wages we show that the government can compensate for these wage losses by additionally taxing the old agents such that their welfare gains remain positive our result is unchanged when earnings are uncertain at young age

is dea useful in the regulation of water utilities a dynamic efficiency evaluation the discussion about public utilities efficiency and its management has become increasingly important in the last decades we focus on the distribution of water which is one of the most important natural resources marshall 1879 this research shows the relationship between efficiency and institutional factors such as management system for this purpose we have data about some spanish water utilities under different provision systems during the period 1985 to 2000 using data envelopment analysis dea we estimate potential cost savings in this context we will extend the results obtained by thanassoulis 2000a b in attempt to guide the regulation of this sector

consumption taxes and precautionary savings financing government spending through lump sum taxes does not distort capital when markets are complete but tends to increase precautionary savings under market incompleteness using flat consumption taxes instead leaves precautionary savings unaffected provided certain conditions on utility are met

the inefficiency of the stock market equilibrium this paper establishes that when there is not a complete set of markets but more than one commodity the stock market equilibrium will not in general be a constrained pareto optimum the economy will lack both the property of exchange and production efficiency necessary conditions which must be satisfied if the economy is to be a constrained pareto optimum for all technologies are derived if all individuals have identical homothetic indifference maps then either there must be unitary price elasticities so there is no effective risk or all individuals must have the same degree of risk aversion so there is no trade on the stock market

measuring the technical efficiency of municipal water suppliers the role of environmental factors this paper extends the multistage procedure set out by fried schmidt and yaisawarng 1999 to examine the importance of environmental factors when assessing the technical efficiency of water agencies however following simar and wilson s 2007 critique of multistage efficiency analyses the paper uses a bootstrapping approach in order to have consistent inference data are from a cross section of municipal water agencies in ontario canada during 1996 the main findings are that environmental factors explain some of the observed variation in efficiency scores and that water agencies relative efficiency scores are changed substantially after controlling for environmental factors

estimation of a doubly heteroscedastic stochastic frontier cost function this article extends the results obtained by caudill ford and cropper in estimating and testing stochastic frontier cost functions in the presence of heteroscedastic inefficiency using cross section data it suggests the estimation of the model under the assumption of heteroscedasticity in both random terms this avoids any possible misspecification bias and the use of incorrect tests the same data as used by caudill et al supports the new specification moreover we find that firm specific inefficiency measures are extremely sensitive to the proposed correction for heteroscedasticity

the risk free rate in heterogeneous agent incomplete insurance economies abstract why has the average real risk free interest rate been less than one percent the question is motivated by the failure of a class of calibrated representative agent economies to explain the average return to equity and risk free debt i construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk free asset i calibrate the economy and characterize equilibria computationally with a borrowing constraint of one year s income the resulting risk free rate is more than one percent below the rate in the comparable representative agent economy

cost of business cycles with indivisibilities and liquidity constraints it is almost universally agreed that individuals face incomplete insurance markets and cannot perfectly insure against the idiosyncratic risk in this paper simple general equilibrium models with incomplete insurance markets are examined in order to assess the impact of imperfect insurance on the magnitude of the welfare costs of business cycles two versions of incomplete insurance markets are considered and certain statistical properties of the equilibrium stochastic processes in these environments are compared with those of a perfect insurance economy

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

money and capital in a persistent liquidity trap abstract using a monetary model with asset scarcity we show that a liquidity trap caused by a persistent deleveraging shock increases real cash holdings and decreases investment and output in the medium term this medium term supply side effect arises when firms face financial constraints policy implications differ from shorter run analyses implied by nominal rigidities quantitative easing leads to a deeper liquidity trap exiting the trap by increasing expected inflation or applying negative interest rates does not solve the asset scarcity problem a higher government debt helps exiting the liquidity trap and reduces asset scarcity but may hurt investment in the medium run

dividend and capital gains taxation under incomplete markets motivated by the jobs and growth tax relief reconciliation act jgtrra of 2003 the effects of capital income tax cuts are investigated in an economy with heterogeneous households and a representative mature firm dividend tax cuts contrary to capital gains tax cuts lead to a decrease in investment and capital this is because they increase the market value of existing capital and households require a higher return to hold this additional wealth in line with empirical evidence the model predicts substantial increases in dividends and stock prices overall the tax cuts lead to a welfare reduction equivalent to a consumption drop of 0 5

the efficiency of immunization of infants by local government the paper makes use of data envelopment analysis dea to measure the cost and production efficiency of local government programmemes for childhood immunization in urban and rural settings in australia model specification is tested for validity methods are used for ranking efficient units and advanced statistical methods are used to establish confidence intervals around the efficiency estimates given the small data set the cost and production models are valid and it is concluded that while neither urban nor rural programmes are particularly efficient there is more room for improvement in rural programmes ways of changing methods of delivery are suggested which may increase efficiency

explaining differences in productive efficiency an application to belgian municipalities the purpose of this paper is to measure and explain variations in productive efficiency of municipal governments in belgium technical efficiency is evaluated using a non parametric method based on the free disposal hull fdh reference technology we first calculate input output and graph farrell efficiency measures for a cross section of all 589 belgian municipalities in a second stage of the analysis we explain the calculated differences in efficiency in terms of variables related to the structural characteristics of municipalities and to the institutional environment

debt constrained asset markets we develop a theory of general equilibrium with endogenous debt limits in the form of individual rationality constraints similar to those in the dynamic consistency literature if an agent defaults on a contract he can be excluded from future contingent claims markets trading and can have his assets seized he cannot be excluded from spot markets trading however and he has some private endowments that cannot be seized all information is publicly held and common knowledge and there is a complete set of contingent claims markets since there is complete information an agent cannot enter into a contract in which he would have an incentive to default in some state in general there is only partial insurance variations in consumption may be imperfectly correlated across agents interest rates may be lower than they would be without constraints and equilibria may be pareto ranked