reassessment of the tiebout model abstract the tiebout model has been the reference point for the classical approach to fiscal federalism its emphasis on mobility benefit taxation and the advantages of fiscal competition have informed fiscal federalism since the seminal contributions of musgrave and oates this paper reviews the influence that the tiebout model has had on fiscal federalism and argues that while its insights remain relevant for local government it is far from compelling as a positive description of or a normative prescription for fiscal federalism at the state level some aspects of alternative approaches are presented which lead to different perspectives than tiebout inspired ones

taiwan s trade imbalance and exchange rate revisited this article applies the recently developed econometric method of autoregressive distributed lag ardl model to re examine the relationship between the exchange rate and bilateral trade imbalance for taiwan and its several trading partners china hong kong the us japan south korea and malaysia the implication of this issue is critical to policy makers particularly after china and taiwan joined the world trade organization wto in late 2001 and early 2002 respectively the empirical evidence shows a stable long run relationship of bilateral trade balance and real exchange rate between taiwan and its trading partners except japan other findings indicate that except for the us there is no specific pattern supporting the j curve phenomenon for these trading partners

can state taxes redistribute income abstract the evidence presented in this paper supports the basic theoretical presumption that state and local governments cannot redistribute income since individuals can avoid unfavorable taxes by migrating to jurisdictions that offer more favorable tax conditions a relatively unfavorable tax will cause gross wages to adjust until the resulting net wage is equal to that available elsewhere the current empirical findings go beyond confirming this long run tendency and show that gross wages adjust rapidly to the changing tax environment thus states cannot redistribute income for a period of even a few years the adjustment of gross wages to tax rates implies that a more progressive tax system raises the cost to firms of hiring more highly skilled employees and reduces the cost of lower skilled labor a more progressive tax thus induces firms to hire fewer high skilled employees and to hire more low skilled employees since state taxes cannot alter net wages there can be no trade off at the state level between distribution goals and economic efficiency shifts in state tax progressivity by altering the structure of employment in the state and distorting the mix of labor inputs used by firms in the state create deadweight efficiency losses without achieving any net redistribution

a developing country view of the current global crisis what should not be forgotten and what should be done macroeconomic theory will surely be affected by the current global crisis there are signs that some old theories and insights will have a comeback this paper argues that among them economists should not forget the lessons that have been learnt from three decades of several financial crises in developing countries we emphasise two important lessons first preventing crises in developing countries requires not only the regulation of domestic financial systems but also a consistent set of macroeconomic policies in particular we stress the need for consistency between the exchange rate rule the capital account regime and the domestic financial market regulations second financial crises in developing countries tend to worsen both the balance of payments and the fiscal balance traditional adjustment policies tend to exacerbate the recessive trends in output and employment this is just the opposite of what is required and what governments in developed countries are able to do developing countries should push for an agenda that helps them deal with these problems

financial globalisation and crisis institutional transformation and equity this paper comprises the long introduction to the symposium of five papers on financial globalisation published in the cambridge journal of economics volume 34 no 2 the paper discusses the impact of financial globalisation in a variety of spheres and shows how the five papers link together to provide a coherent view of the current economic and financial crisis in this paper we also examine the globalisation of finance more broadly both in historical terms as well as in relation to the current widespread failure in the financial markets we take up the policy question of how the interests of the poor in particular and developing countries in general could be safeguarded from the vagaries of financial globalisation questioning how much choice communities and countries have and what can the international community do to extend these choices

predicting the competitive relationships of industrial production between taiwan and china using lotka volterra model abstractthis work is the first to apply lotka volterra model combined with genetic algorithm ga to predict the production relationships of high tech industry among different areas previous studies analysed the trade interdependency among various countries but few studies have highlighted the quantitative evidence of production relationships thus this study utilizes motherboard shipment volumes to predict the competitive relationships of industrial production on both sides of the taiwan strait specifically this work uses simultaneous non linear least square regression in combination with gas for numerical parameter optimization of the proposed lotka volterra model the results of parameter estimation reveal that shipment growth in china substantially promotes that in taiwan whereas the shipment growth in taiwan curtails that in china the standard deviation of the estimated parameters from the 3000 iterated simulations is small confirming the reliability and stability of our parameter estimations

a new product growth for model consumer durables this article originally appeared in management science january 1969 volume 15 number 5 pp 215 227 published by the institute of management sciences a growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables the basic assumption of the model is that the timing of a consumer s initial purchase is related to the number of previous buyers a behavioral rationale for the model is offered in terms of innovative and imitative behavior the model yields good predictions of the sales peak and the timing of the peak when applied to historical data a long range forecast is developed for the sales of color television sets

capital market crises liberalisation fixed exchange rates and market driven destabilisation everyone knows the epigraph to anna karenina happy families are all alike every unhappy family is unhappy in its own way tolstoy may well have been right about families but the extension of his judgement to economies hit by capital market crises distinctly fails their causes and unhappy consequences in latin america and asia over the past 20 years have many elements in common

a comparison of linear forecasting models and neural networks an application to euro inflation and euro divisia linear models reach their limitations in applications with nonlinearities in the data in this paper new empirical evidence is provided on the relative euro inflation forecasting performance of linear and non linear models the well established and widely used univariate arima and multivariate var models are used as linear forecasting models whereas neural networks nn are used as non linear forecasting models it is endeavoured to keep the level of subjectivity in the nn building process to a minimum in an attempt to exploit the full potentials of the nn it is also investigated whether the historically poor performance of the theoretically superior measure of the monetary services flow divisia relative to the traditional simple sum measure could be attributed to a certain extent to the evaluation of these indices within a linear framework results obtained suggest that non linear models provide better within sample and out of sample forecasts and linear models are simply a subset of them the divisia index also outperforms the simple sum index when evaluated in a non linear framework 2005 taylor francis group ltd

evaluating alternative capacity strategies in semiconductor manufacturing under uncertain demand and price scenarios abstract because product demand is very volatile and machine and process technologies are advanced at a rapid pace capacity planning and investment in the semiconductor industry is a challenging task many studies have addressed mid and short term machine portfolio planning tasks of capacity planning however capacity planning should be considered in a framework of strategy planning in order to address the whole problem this paper describes a method of analysis for adapting capacity strategy to changing business environment the paper has three major parts in the first part empirical data analysis of a case study company yields predictive formulas for production and capacity costs the uncertainty of demand is also calibrated using the geometric brownian motion process in the second part experiments are designed to simulate demand and profit scenarios for comparing two capacity strategies in the third part the resultant data of simulation are analysed to gain insights to the relative performance of the two strategies in various scenarios the analysis method provides a framework for formulating capacity strategy and for integrating capacity planning with business planning

cash welfare as a consumption smoothing mechanism for divorced mothers abstract while there has been considerable research on the disincentive effects of cash welfare under the aid to families with dependent children afdc program there is little evidence on the benefits of the program for single mothers and their children one potential benefit of this program is that it provides short run consumption insurance for women at the point that they become single mothers this is only true however to the extent that the program is not crowding out other sources of support such as own savings labor supply or transfers from others i assess the importance of this insurance mechanism by measuring the extent to which afdc smooths the consumption of women who transition to single motherhood through marital dissolution i use longitudinal data on family structure and consumption expenditures on food and housing from the panel study of income dynamics psid matched to information on the welfare benefits available in each state and year over the 1968 1985 period i find that raising potential benefits by one dollar raises the food and housing consumption of women who get divorced and their families by 28 cents this estimate implies that for each dollar of afdc received by this population their consumption of these categories of goods rises by up to 51 cents this is roughly the share of food and housing in the consumption bundle of divorced mothers and their families suggesting little crowdout of other sources of support

introduction the global financial crisis there cannot now be a shadow of a doubt that the flaw in his ideology admitted by alan greenspan in response to a question by henry a waxman chairman of the us house of representatives committee on oversight and government reform whether he felt that your ideology pushed you to make decisions that you wish you had not made is both significant and permanent the current financial and economic crisis that has forced the likes of greenspan to question the coherence of dominant conceptual frameworks is unprecedented in global reach and systemic gravity some basic figures speak for themselves according to mckinsey s mapping global financial markets october 2008 global financial assets rose from us 12 trillion in 1980 to us 196 trillion in 2007 the international monetary fund s global financial stability report imf 2009a estimate for the latter figure is considerably higher at us 241 trillion global cross border capital flows more than doubled between 2002 and 2007 with foreign investors holding one in four debt securities and one in five equities while in 2000 only 11 countries had financial assets of more than 350 of gross domestic product gdp 25 countries had deepened their financial markets to the same extent by 2007 as early as 1990 money managers had increased their control of us corporate equities from 8 in 1950 to 60 porter 1992 p 6 whalen 2002 p 402 similarly pension funds had extended their share of total business equities from less than 1 to just short of 39 and their fraction of corporate debt from 13 to 50 ghilarducci 1992 p 117 whalen 2002 p 402 in the period from 1986 to 2006 the us financial sector as a whole increased its share of corporate profits from 10 to 30 while its outstanding debts grew from 20 of gdp in 1980 to 116 in 2007 fed 2009 according to gillian tett from the financial times outstanding credit defaults swaps cds today amount to no less than us 60 trillion with the risk embodied after discounting mutually off setting contracts still as high as us 14 trillion tett 2009 p 264 as we know the curtains have now come down on this dance of the trillions palma 2009 the immediate hang over in the form of a pile of toxic debt is surreal not only in its

manufacturing intelligence for semiconductor demand forecast based on technology diffusion and product life cycle abstract semiconductor industry is capital intensive in which capacity utilization significantly affect the capital effectiveness and profitability of semiconductor manufacturing companies thus demand forecasting provides critical input to support the decisions of capacity planning and the associated capital investments for capacity expansion that require long lead time however the involved uncertainty in demand and the fluctuation of semiconductor supply chains make the present problem increasingly difficult due to diversifying product lines and shortening product life cycle in the consumer electronics era semiconductor companies must forecast future demand to provide the basis for supply chain strategic decisions including new fab construction technology migration capacity transformation and expansion tool procurement and outsourcing focused on realistic needs for manufacturing intelligence this study aims to construct a multi generation diffusion model for semiconductor product demand forecast namely the smprt model incorporating seasonal factor s market growth rate m price p repeat purchases r technology substitution t in which the nonlinear least square method is employed for parameter estimation an empirical study was conducted in a leading semiconductor foundry in hsinchu science park and the results validated the practical viability of the proposed model this study concludes with discussions of the empirical findings and future research directions

volatility of the capital flows and structural breaks in latin american and the caribbean espanolen este trabajo se estudia la presencia de quiebres estructurales en los flujos de capitales de 16 economias de latinoamerica usando el test de raiz unitaria de zivot y andrews 1992 para complementar el analisis se utiliza el test de quiebres estructurales de bai perron 1998 luego se procede a analizar la posibilidad de contemporaneidad entre los quiebres encontrados y las crisis que tales paises sufrieron en los ultimos 40 anos dichas crisis pueden ser de moneda bancarias domesticas o de deuda externa se encontraron muchos casos de contemporaneidad especialmente con las crisis que ocurrieron al final de los 90 englishthis paper studies the presence of structural breaks in the capital flows of sixteen economies of latin america using the unit root test by zivot and andrews 1992 it is complemented by the structural break test by bai perron 1998 afterwards an analysis of the likelihood of contemporaneity between the breaks found and the crises the countries had suffered in the last forty years is presented these crises were either of currency banking domestic and external debt type many cases of contemporaneity were found especially with the crises that occurred at the end of the 90s

expectations the business cycle and the mexican peso crisis the 1994 95 peso crisis did not display characteristics which allow it to be easily captured by traditional crisis models models based on minsky s financial fragility hypothesis offer more persuasive accounts but have been supported by relatively little direct empirical evidence this paper provides such evidence with particular attention being paid to the role of domestic financial liberalisation in the process minsky s hypotheses about the evolution of expectations over the business cycle are tracked using business survey data in addition crisis indicators are constructed reflecting the changing vulnerability of the economy to shocks the findings support a minskyian interpretation of the crisis copyright 2006 oxford university press

financial crisis in southeast asia dispelling illusion the minskyan way this paper extends minsky s financial instability hypothesis to the case of the open liberalised economy making it possible to put forward a specifically minskyan account of the road to the financial crisis in southeast asia 1997 1998 the analysis suggests that the threats to growth and employment emanating from the financial sector which minsky identified in the closed economy setting are much intensified in open liberalised developing economies financial liberalisation is an important key factor in this process rival explanations of the crisis are examined and rejected in favour of the extended minskyan explanation the policy implications are derived and discussed copyright 2002 oxford university press

sub saharan africa s growth south south trade and the generalised balance of payments constraint using the post keynesian balance of payments constrained growth approach we investigate the recent increase in sub saharan africa ssa growth focussing on the contribution of south south trade the model is estimated by panel co integration on a sample of 20 low and lower middle income ssa countries using annual data from 1990 to 2008 and considering three partner areas ssa itself developing asia and the rest of the world the results show that in the past decade the balance of payments constraint of ssa has been relaxed this shift has occurred through different channels of transmission the other ssa countries contributed through the real growth effect developing asia through the market share effect and the rest of the world through the terms of trade effect these results help reconcile puzzling evidence on the pattern of ssa external indebtedness and provide new insights on the role of asian drivers on ssa growth as well as on the sustainability of ssa growth recovery

defence spending economic growth and temporal causality evidence from taiwan and mainland china 1952 1995 this paper uses a cointegration analysis and a vector autoregressive model var to examine the causal relationship between defence spending and economic growth for taiwan and mainland china over the period 1952 1995 it is found that these two variables are not cointegrated for both countries studied the results of the granger causality tests suggest bidirectional granger causality feedback between defence spending and economic growth for taiwan unidirectional granger causality running from economic growth to defence spending for mainland china and unidirectional granger causality running from taiwan s defence spending to mainland china s defence spending for cross country studied these results further indicate that there exists no arms race between two countries from both sides of taiwan strait furthermore impulse responses and variance decompositions are incorporated into the analysis the results from the impulse responses and variance decompositions tell a similar story

what causes public assistance caseloads to grow this paper uses state panel data to investigate changes in public assistance caseloads through the end of the afdc program in 1996 with particular attention to the rapid increase in caseloads between 1990 and 1994 previous research has focused on total caseloads with attention to economic and policy variables and does a relatively poor job of explaining this caseload increase this paper utilizes a much richer set of control variables to investigate the causes of caseload change it separates afdc caseloads into three subcomponent programs separately investigating changes within the afdc up program afdc child only cases and the remaining core afdc cases with benefits paid to single mothers and their children and it explores whether this caseload rise was driven by changes in takeup rates versus in eligibility the results indicate a large unexplained rise in total afdc caseloads even with a very rich specification a good share of this is due to sharp increases in child only cases driven by program and demographic shifts to a lesser extent this rise was caused by the expansion of afdc up to all states these two factors explain half of the overall rise and all of the unexplained rise in afdc caseloads the remaining increase in core afdc cases benefits received by single mothers and their children is well explained within the model and is the result of economic demographic political and policy changes these variables appear to have increased eligibility among the core afdc population in the early 1990s during the economic slowdown takeup rates also increased during this time period but not by a large amount

social mobility and the demand for redistribution the poum hypothesis this paper examines the often stated idea that the poor do not support high levels of redistribution because of the hope that they or their offspring may make it up the income ladder this prospect of upward mobility poum hypothesis is shown to be fully compatible with rational expectations and fundamentally linked to concavity in the mobility process a steady state majority could even be simultaneously poorer than average in terms of current income and richer than average in terms of expected future incomes a e rst empirical assessment suggests on the other hand that in recent u s data the poum effect is probably dominated by the demand for social insurance in the future everyone will be world famous for e fteen minutes andy warhol 1968

time consistent health insurance currently available health insurance contracts often fail to insure long term illnesses sick people can suffer large increases in premiums or denial of coverage i describe insurance contracts that solve this problem their key feature is a severance payment a person who is diagnosed with a long term illness and whose premiums are increased receives a lump sum equal to the increased present value of premiums this lump sum allows him or her to pay the higher premiums required by any insurer people are not tied to a particular insurer or a group and the improvement is free insurance companies can operate at zero economic profits and consumers can pay exactly the same premium they do with standard contracts

modern macroeconomics in practice how theory is shaping policy over the last three decades macroeconomic theory and the practice of macroeconomics by economists have changed significantly for the better macroeconomics is now firmly grounded in the principles of economic theory we focus on the role of economic theory in shaping policy over the last several decades the united states and other countries have undertaken a variety of policy changes that are precisely what macroeconomic theory of the last 30 years suggests the evidence that theoretical advances have had a significant effect on the practice of policy is often hard to see for policymakers and advisers involved in the hurly burly of day to day policymaking but easy to see if one steps back and takes a longer term perspective examples of the effects of theory on the practice of policy include increased central bank independence adoption of inflation targeting and other rules to guide monetary policy increased reliance on consumption and labor taxes instead of capital income taxes and increased awareness of the costs of policies that distort labor markets

developing countries changing nature of financial integration and new forms of external vulnerability the brazilian experience this article argues using the example of brazil that the changing nature of developing and emerging countries decs financial integration has created new forms of external vulnerability causing large and volatile capital and exchange rate movements despite sound fundamentals and a substantial reduction in its traditional external vulnerabilities the brazilian real has been one of the most volatile currencies over recent years the article argues that this has been the result of the surging exposure of foreign investors in an increasingly complex set of very short term domestic currency assets following a minskyan analysis we demonstrate that the changing nature of brazil s external vulnerability confirms both the inherent and endogenous instability of international capital flows and decs subordinate role in the international financial system we conclude with policy recommendations to reduce decs external vulnerability sustainably

assessing the importance of tiebout sorting local heterogeneity from 1850 to 1990 this paper argues that long run trends in geographic segregation are inconsistent with models where residential choice depends solely on local public goods the tiebout hypothesis we develop an extension of the tiebout model that predicts as mobility costs fall the heterogeneity across communities of individual public good preferences and of public good provision must weakly increase given the secular decline in mobility costs these predictions can be evaluated using historical data we find decreasing heterogeneity in policies and proxies for preferences across i a sample of u s municipalities 1870 1990 ii all boston area municipalities 1870 1990 and iii all u s counties 1850 1990

the insurance value of state tax and transfer programs abstract this paper estimates the total value that individuals derive from their state s tax and transfer program and shows how this value varies by income the paper decomposes this total value into two components redistributive value which is due to predictable changes in income and family circumstances and insurance value which occurs when taxes and transfers compensate for unexpected income shocks our approach is a forward looking one where we examine income and transfers net of taxes over a 10 year period we model state taxes personal income taxes the eitc and sales taxes and state means tested transfers afdc tanf and medicaid schip the calculations are made using the panel study of income dynamics and allow for analysis of the role of changes in tax and transfer programs demographics and income in the value of state net benefits over a period of more than 30 years we find that the redistributive value of state tax and transfer programs sharply declines with income but that the insurance value is increasing in income the resulting total value still declines with income but not nearly as sharply as the redistributive value hence the insurance value mitigates the incentives for mobility that would undo state redistributive spending

deleveraging crises and deep recessions a behavioural approach macroeconomic dynamics are characterized by alternating patterns of periods of relative stability and large swings standard micro founded macro economic models account for these patterns through exogenous and persistent shocks in this paper we develop a fully decentralized and micro founded macro economic agent based model augmented with an opinion model which produces endogenous waves of pessimism and optimism that feed back into firms leverage and households precautionary saving behaviour a major emergent property of our model is precisely the complex successions of stable and unstable macro economic regimes the model is further able to account for a wide spectrum of macro and micro empirical regularities within this framework we analyse a series of macro economic phenomena of key relevance in the current macro economic debate especially the occurrence of deleveraging crises and fisherian debt deflation recessions our analysis suggests that the relative dynamics of prices and wages and the resulting income distribution along a deflation ary path are critical determinants of the severity of the recession and the chances of recovery

three and a half cycles of mania panic and asymmetric crash east asia and latin america compared this paper argues that despite some significant differences the 1982 debt crisis the 1994 mexican crisis and the 1997 east asian crisis share the common characteristic that over lending and over borrowing are basically endogenous market failures of over liquid and under regulated financial markets along the lines described by kindleberger s manias panics and crashes although these crashes have tended to be asymmetric as the largest international lenders have emerged relatively intact the paper concludes with a discussion of brazil s increasing vulnerability to a sudden collapse of confidence and withdrawal of finance which indicates the probability of another impending crisis

the monetarist experiment in chile a critical survey abstract chile constitutes the most outstanding case of implementation of an extreme market economy model during nine years between 1973 and 1982 a model was implemented that for its pureness deepness and extension induced a drastic transformation of the chilean economy the main features of the model are examined focusing on the anti inflationary policy the reform of the financial system and the external opening then the global results concerning output income distribution and saving investment are studied the paper shows that the balance of the results was clearly negative during the 1973 1981 period output stagnated the concentration of wealth was spectacular and saving and investment rates fell significantly the characteristics themselves of the model and the weakening of the productive apparatus that they originated additionally explain that the international recession was multiplied during 1982 within the domestic economy the paper concludes with an attempt to interpret the main causes of the failure of this experiment

evidence on the insurance effect of redistributive taxation copyright 2010 by the president and fellows of harvard college and the massachusetts institute of technology

reprint of the insurance value of state tax and transfer programs abstract this paper estimates the total value that individuals derive from their state s tax and transfer program and shows how this value varies by income the paper decomposes this total value into two components redistributive value which is due to predictable changes in income and family circumstances and insurance value which occurs when taxes and transfers compensate for unexpected income shocks our approach is a forward looking one where we examine income and transfers net of taxes over a 10 year period we model state taxes personal income taxes the eitc and sales taxes and state means tested transfers afdc tanf and medicaid schip the calculations are made using the panel study of income dynamics and allow for analysis of the role of changes in tax and transfer programs demographics and income in the value of state net benefits over a period of more than 30 years we find that the redistributive value of state tax and transfer programs sharply declines with income but that the insurance value is increasing in income the resulting total value still declines with income but not nearly as sharply as the redistributive value hence the insurance value mitigates the incentives for mobility that would undo state redistributive spending