regressive sin taxes with an application to the optimal soda tax a common objection to sin taxes corrective taxes on goods that are thought to be overconsumed such as cigarettes alcohol and sugary drinks is that they often fall disproportionately on low income consumers this paper studies the interaction between corrective and redistributive motives in a general optimal taxation framework and delivers empirically implementable formulas for sufficient statistics for the optimal commodity tax the optimal sin tax is increasing in the price elasticity of demand increasing in the degree to which lower income consumers are more biased or more elastic to the tax decreasing in the extent to which consumption is concentrated among the poor and decreasing in income effects because income effects imply that commodity taxes create labor supply distortions contrary to common intuitions stronger preferences for redistribution can increase the optimal sin tax if lower income consumers are more responsive to taxes or are more biased as an application we estimate the optimal nationwide tax on sugar sweetened beverages using nielsen homescan data and a specially designed survey measuring nutrition knowledge and self control holding federal income tax rates constant our estimates imply an optimal federal sugar sweetened beverage tax of 1 to 2 1 cents per ounce although optimal city level taxes could be as much as 60 lower due to cross border shopping

pigou meets mirrlees on the irrelevance of tax distortions for the second best pigouvian tax this paper extends the mirrlees 1971 model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities using general utility structures and exploring both linear and non linear taxes it is demonstrated that the optimal second best tax on an externality generating good should not be corrected for the marginal cost of public funds since it equals one in the optimal tax system in the optimum distortions of income taxes are equal to marginal redistributional gains if the government does not have access to a non distortionary marginal source of finance the marginal cost of public funds can be either larger or smaller than one depending on subjective preferences for income redistribution the optimal second best corrective tax is then either higher or lower than the pigouvian level the findings in this paper generalize and amend prior results based on representative agent models shedding new light on the weak double dividend hypothesis and on the welfare gains of recycling revenue from environmental taxes

minimum unit prices for alcohol minimum unit prices mups have been proposed on the grounds that they can reduce alcohol consumption of the heaviest drinkers without significantly burdening moderate drinkers this paper examines the case for mups in an optimal tax framework such a policy can improve welfare when two conditions are both satisfied first beverage quality and quantity should be substitutes second there should be more distortion to consumption of cheaper alcohol than to more expensive varieties the consequences of a mup for the optimal corrective tax are explored with a calibrated numerical example this example illustrates how the optimal tax rate might be higher when used in isolation than when a mup is also being used

e ztax tax salience and tax rates this paper examines whether the salience of a tax system affects equilibrium tax rates i analyze how tolls change after toll facilities adopt electronic toll collection etc drivers are substantially less aware of tolls paid electronically i estimate that in steady state tolls are 20 to 40 percent higher than they would have been without etc consistent with a salience based explanation for this toll increase i find that under etc driving becomes less elastic with respect to the toll and toll setting becomes less sensitive to the electoral calendar alternative explanations appear unlikely to be able to explain the findings

do pharmacists buy bayer informed shoppers and the brand premium we estimate the effect of information and expertise on consumers willingness to pay for national brands in physically homogeneous product categories in a detailed case study of headache remedies we find that more informed or expert consumers are less likely to pay extra to buy national brands with pharmacists choosing them over store brands only 9 percent of the time compared to 26 percent of the time for the average consumer in a similar case study of pantry staples such as salt and sugar we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar nonchefs we extend our analysis to cover 50 retail health categories and 241 food and drink categories the results suggest that misinformation and related consumer mistakes explain a sizable share of the brand premium for health products and a much smaller share for most food and drink products we tie our estimates together using a stylized model of demand and pricing

positive and normative judgments implicit in u s tax policy and the costs of unequal growth and recessions calculating the welfare implications of changes to economic policy or shocks requires economists to decide on a normative criterion one approach is to elicit the relevant moral criteria from real world policy choices converting a normative decision into a positive inference as in the recent surge of inverse optimum research we find that capitalizing on the potential of this approach is not as straightforward as we might hope we perform the inverse optimum inference on u s tax policy from 1979 through 2010 and argue that the results either undermine the normative relevance of the approach or challenge conventional assumptions upon which economists routinely rely when performing welfare evaluations

dematerialization decoupling and productivity change abstract the prospects for long term sustainability depend on whether and how much we can absolutely decouple economic output from total energy and material throughput while relative decoupling has occurred that is resource use has grown less quickly than the economy absolute decoupling has not raising the question whether it is possible this paper proposes a novel explanation for why decoupling has not happened historically drawing on a recent theory of cost share induced productivity change and an extension of post keynesian pricing theory to natural resources cost share induced productivity change and pricing behavior set up two halves of a dynamic which we explore from a post keynesian perspective in this dynamic resource costs as a share of gdp move toward a stable level at which the growth rate of resource productivity is typically less than the growth rate of gdp this provides a parsimonious explanation of the prevalence of relative over absolute decoupling the paper then presents some illustrative applications of the theory

commodity taxes and taste heterogeneity we study optimal linear commodity taxes in the presence of non linear income taxes when agents differ in skills and tastes for consumption we show that optimal commodity taxes are partly determined by a many person ramsey rule when there is taste heterogeneity within income classes the usual role of commodity taxes in relaxing incentive constraints explains the remaining part of these taxes when there is taste heterogeneity between income classes we quantify these two parts using french consumption microdata and find that commodities taxes are only shaped by many person ramsey considerations

secular labor reallocation and business cycles we study the eect of mean preserving idiosyncratic industry shocks on business cycle outcomes we develop an empirical methodology using a local area s exposure to industry reallocation based on the area s initial industry composition and employment trends in the rest of the country over a full employment cycle using confidential employment data by local area and industry over the period 1980 2014 we find sharp evidence of reallocation contributing to worse employment outcomes during national recessions but not during national expansions we repeat our empirical exercise in a multi area multi sector search and matching model of the labor market the model reproduces the empirical results subject to inclusion of two key empirically plausible frictions imperfect mobility across industries and downward nominal wage rigidity combining the empirical and model results we conclude that reallocation can generate substantial amplification and persistence of business cycles at both the local and the aggregate level

bounds on elasticities with optimization frictions a synthesis of micro and macro evidence on labor supply how can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention i derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand the size of the price change and the degree of frictions the degree of frictions is measured by the utility losses agents tolerate to deviate from the frictionless optimum the bounds imply that frictions affect intensive margin elasticities much more than extensive margin elasticities i apply these bounds to the literature on labor supply the utility costs of ignoring the tax changes used to identify intensive margin labor supply elasticities are typically less than 1 of earnings as a result small frictions can explain the differences between micro and macro elasticities extensive and intensive margin elasticities and other disparate findings pooling estimates from existing studies i estimate a hicksian labor supply elasticity of 0 33 on the intensive margin and 0 25 on the extensive margin after accounting for frictions

is addiction rational theory and evidence this paper makes two contributions to the modeling of addiction first we provide new and convincing evidence that smokers are forward looking in their smoking decisions using state excise tax increases that have been legislatively enacted but are not yet effective and monthly data on consumption second we recognize the strong evidence that preferences with respect to smoking are time inconsistent with individuals both not recognizing the true dife culty of quitting and searching for self control devices to help them quit we develop a new model of addictive behavior that takes as its starting point the standard rational addiction model but incorporates time inconsistent preferences this model also exhibits forward looking behavior but it has strikingly different normative implications in this case optimal government policy should depend not only on the externalities that smokers impose on others but also on the internalities imposed by smokers on themselves we estimate that the optimal tax per pack of cigarettes should be at least one dollar higher under our formulation than in the rational addiction case

tax incidence when individuals are time inconsistent the case of cigarette excise taxes abstract one of the most cogent criticisms of excise taxes is their regressivity with lower income groups spending a much larger share of their income on goods such as cigarettes than do higher income groups we argue that traditional quantity based measures of incidence are only appropriate under a very restrictive time consistent model of consumption of sin goods a model that is much more consistent with existing evidence on smoking decisions is a time inconsistent formulation where excise taxes on cigarettes serve a self control function that is valued by smokers who would like to quit but cannot this self control function benefits lower income groups more since they have a significantly higher price sensitivity of smoking calibrations show that as a result cigarette taxes are much less regressive than previously assumed and are even progressive for a wide variety of parameter values

uninformed votes information effects in presidential elections theory recent scholarship has emphasized the potential importance of cues information shortcuts and statistical aggregation processes in allowing relatively uninformed citizens to act individually or collectively as if they were fully informed hypotheses uninformed voters successfully use cues and information shortcuts to behave as if they were fully informed failing that individual deviations from fully informed voting cancel out in a mass electorate producing the same aggregate election outcome as if voters were fully informed methods hypothetical fully informed vote choices are imputed to individual voters using the observed relationship between political information and vote choices for voters with similar social and demographic characteristics estimated by probit analysis of data from national election study surveys conducted after the six most recent united states presidential elections results both hypotheses are clearly disconfirmed at the individual level the average deviation of actual vote probabilities from hypothetical fully informed vote probabilities was about ten percentage points in the electorate as a whole these deviations were significantly diluted by aggregation but by no means eliminated incumbent presidents did almost five percentage points better and democratic candidates did almost two percentage points better than they would have if voters had in fact been fully informed

shrouded attributes and information suppression evidence from the field we use eld and natural experiments in online auctions to study the revenue eect of varying the level and disclosure of shipping charges our main ndings are 1 disclosure aects revenues for low shipping charges a seller is better odisclosing 2 increasing shipping charges boosts revenues particularly when these charges are hidden and 3 the level and disclosure of the shipping charge have little eect on the number of bidders attracted to an auction

predicting the effects of sugar sweetened beverage taxes on food and beverage demand in a large demand system a censored exact affine stone index incomplete demand system is estimated for 23 packaged foods and beverages and a numeraire good instrumental variables are used to control for endogenous prices a half cent per ounce increase in sugar sweetened beverage prices is predicted to reduce total calories from the 23 foods and beverages but increase sodium and fat intakes as a result of product substitution the predicted decline in calories is larger for low income households than for high income households although welfare loss is also higher for low income households neglecting price endogeneity or estimating a conditional demand model significantly overestimates the calorie reduction

worst case robust profit in generation self scheduling recent research has shown that portfolio optimization theory can be extended to generation self scheduling in a competitive energy market this letter considers the self scheduling problem in the case where the mean vector and covariance matrix of the probability distribution of prices are only known within given bounds and the probability distribution is otherwise arbitrary under the above assumptions it is shown that a method for optimization over symmetric cones can be used to 1 compute the worst case robust profit with probability level beta and 2 optimize the self schedule for a given probability level beta of the corresponding worst case robust profit

u s economic growth since 1870 one big wave it is now 25 years since the growth rate of labor productivity and of multi factor productivity mfp decelerated sharply both in the united states and in most other industrialized nations this productivity slowdown has eluded many attempts to provide single cause explanations slow productivity growth in the past 25 years echoes slow productivity growth in the late 19th century perhaps both were normal and what needs to be explained is not the post 1972 slowdown but rather the post1913 speedup that ushered in the glorious 60 years between world war i and the early 1970 s in which u s productivity growth was much faster than before or after this paper makes a sharp distinction between mfp growth calculated from inputs that combine simple measures of labor hours and the capital stock and growth based on measures that adjust for the changing composition of labor and capital the first step toward an understanding of long term trends is to compare like with like splicing mfp data based on unadjusted inputs prior to 1950 with post1950 data based also on unadjusted inputs as contrasted to the composition adjusted inputs that are now desirably incorporated into our official mfp measures the mfp record prior to 1929 still rests largely on the monumental work of john kendrick 1961 which however is based almost entirely on input quantities that lack any adjustment for changes in composition edward denison 1962 1985 and zvi griliches 1960 pioneered the development of composition adjustments for labor input dale jorgenson and zvi griliches 1967 introduced a framework that treats the problem of composition adjustment in both labor and

insurance and taxation over the life cycle we consider a dynamic mirrlees economy in a life cycle context and study the optimal insurance arrangement individual productivity evolves as a markov process and is private information we use a first order approach in discrete and continuous time and obtain novel theoretical and numerical results our main contribution is a formula describing the dynamics for the labour income tax rate when productivity is an ar 1 our formula resembles an ar 1 with a trend where i the auto regressive coefficient equals that of productivity ii the trend term equals the covariance productivity with consumption growth divided by the frisch elasticity of labour and iii the innovations in the tax rate are the negative of consumption growth the last property implies a form of short run regressivity our simulations illustrate these results and deliver some novel insights the average labour tax rises from 0 to 37 over 40 years whereas the average tax on savings falls from 12 to 0 at retirement we compare the second best solution to simple history independent tax systems calibrated to mimic these average tax rates we find that age dependent taxes capture a sizable fraction of the welfare gains in this way our theoretical results provide insights into simple tax systems copyright 2013 oxford university press

who pays for obesity adult obesity is a growing problem from 1962 to 2006 obesity prevalence nearly tripled to 35 1 percent of adults the rising prevalence of obesity is not limited to a particular socioeconomic group and is not unique to the united states should this widespread obesity epidemic be a cause for alarm from a personal health perspective the answer is an emphatic yes but when it comes to justifications of public policy for reducing obesity the analysis becomes more complex a common starting point is the assertion that those who are obese impose higher health costs on the rest of the population a statement which is then taken to justify public policy interventions but the question of who pays for obesity is an empirical one and it involves analysis of how obese people fare in labor markets and health insurance markets we will argue that the existing literature on these topics suggests that obese people on average do bear the costs and benefits of their eating and exercise habits we begin by estimating the lifetime costs of obesity we then discuss the extent to which private health insurance pools together obese and thin whether health insurance causes obesity and whether being fat might actually cause positive externalities for those who are not obese if public policy to reduce obesity is not justified on the grounds of external costs imposed on others then the remaining potential justification would need to be on the basis of helping people to address problems of ignorance or self control that lead to obesity in the conclusion we offer a few thoughts about some complexities of such a justification

unemployed but optimistic optimal insurance design with biased beliefs biased perceptions of risks change the perceived value of insurance and the per ceived returns to avoiding these risks i show empirically that unemployed workers overestimate how quickly they will nd work but underestimate the return to their search eorts i analyze the consequences for the optimal design of unemployment insurance with biased beliefs contracts equalizing the marginal smoothing ben e t and the moral hazard cost of insurance are suboptimal social and private insurance diverge a paternalistic social planner corrects the moral hazard cost for the distortion in the insured s eort choice while private insurers focus on the perceived rather than the true smoothing bene ts when unemployed workers are optimistic privatizing unemployment insurance may result in ine ciently low or rapidly decreasing unemployment bene ts

income inequality in the united states 1913 1998 this paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the united states using individual tax returns data top income and wages shares display a u shaped pattern over the century our series suggest that the large shocks that capital owners experienced during the great depression and world war ii have had a permanent effect on top capital incomes we argue that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks top wage shares were flat before world war ii dropped precipitously during the war and did not start to recover before the late 1960s but are now higher than before world war ii as a result the working rich have replaced the rentiers at the top of the income distribution

optimal control of externalities in the presence of income taxation a substantial literature examines second best environmental policy focusing particularly on how the pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription it is demonstrated however that simple first best rules unmodified for labor supply distortion or distribution are correct in a natural basic formulation of the problem specifically setting all commodity taxes equal to marginal harms and subsidies equal to marginal benefits can generate a pareto improvement likewise a marginal reform in the direction of the first best can yield a pareto improvement qualifications and explanations for differences from previous work are also presented

habit formation and demand for sugar sweetened beverages using scanner data we estimated demand for nine nonalcoholic beverages under habit formation we found strong evidence for habit formation although demand for sugar sweetened beverages by low income households is less elastic to own price changes compared with high income households there is evidence that high income households consider beverages to be more substitutable than low income households do a half cent per ounce tax on store purchased sugar sweetened beverages will result in a moderate reduction in consumption of sugar sweetened beverages for both income strata because of habit formation long run national tax revenue from a sugar sweetened beverage tax is about 15 to 20 lower than short run revenue

addiction and cue triggered decision processes we propose a model of addiction based on three premises 1 use among addicts is frequently a mistake 2 experience sensitizes an individual to environmental cues that trigger mistaken usage 3 addicts understand and manage their susceptibilities we argue that these premises find support in evidence from psychology neuroscience and clinical practice the model is tractable and generates a plausible mapping between behavior and the characteristics of the user substance and environment it accounts for a number of important patterns associated with addiction gives rise to a clear welfare standard and has novel implications for policy

food deserts and the causes of nutritional inequality we study the causes of nutritional inequality why the wealthy eat more healthfully than the poor in the united states exploiting supermarket entry and household moves to healthier neighborhoods we reject that neighborhood environments contribute meaningfully to nutritional inequality we then estimate a structural model of grocery demand using a new instrument exploiting the combination of grocery retail chains differing presence across geographic markets with their differing comparative advantages across product groups counterfactual simulations show that exposing low income households to the same products and prices available to high income households reduces nutritional inequality by only about 10 while the remaining 90 is driven by differences in demand these findings counter the argument that policies to increase the supply of healthy groceries could play an important role in reducing nutritional inequality

a hybrid model for day ahead price forecasting this paper presents a hybrid time series and adaptive wavelet neural network awnn model for the day ahead electricity market clearing price forecast instead of using price series one period continuously compounded return series is used to achieve more attractive statistical properties the autoregressive moving average with exogenous variables armax model is used to catch the linear relationship between price return series and explanatory variable load series the generalized autoregressive conditional heteroscedastic garch model is used to unveil the heteroscedastic character of residuals and awnn is used to present the nonlinear nonstationary impact of load series on electricity prices the monte carlo method is adopted to generate more evenly distributed random numbers used for time series and awnn models to accelerate the convergence several criteria such as average mean absolute percentage error amape and the variance of forecast errors are used to assess the model and measure the forecasting accuracy illustrative price forecasting examples of the pjm market are presented to show the efficiency of the proposed method

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

the substantial bias from ignoring general equilibrium effects in estimating excess burden and a practical solution we show that under typical conditions the simple excess burden triangle formula substantially underestimates the excess burden of commodity taxes in some cases by a factor of 10 or more this formula performs poorly because it ignores general equilibrium interactions most important interactions between the taxed commodity and the labor market many prior studies have shown that general equilibrium interactions affect excess burden but have not appreciated the bias associated with ignoring these interactions or the quantitative importance of this bias we derive an implementable alternative to the simple formula this alternative formula captures interactions that the simple formula omits as a result it is both unbiased and usually more accurate

notice of violation of ieee publication principles a hybrid arima and neural network model for short term price forecasting in deregulated market in the framework of competitive electricity markets power producers and consumers need accurate price forecasting tools price forecasts embody crucial information for producers and consumers when planning bidding strategies in order to maximize their benefits and utilities respectively the choice of the forecasting model becomes the important influence factor on how to improve price forecasting accuracy this paper provides a hybrid methodology that combines both autoregressive integrated moving average arima and artificial neural network ann models for predicting short term electricity prices this method is examined by using the data of australian national electricity market new south wales in the year 2006 comparison of forecasting performance with the proposed arima ann and hybrid models are presented empirical results indicate that a hybrid arima ann model can improve the price forecasting accuracy

optimal taxation with behavioral agents this paper develops a theory of optimal taxation with behavioral agents we use a general framework that encompasses a wide range of biases such as misperceptions and internalities we revisit the three pillars of optimal taxation ramsey linear commodity taxation to raise revenues and redistribute pigou linear commodity taxation to correct externalities and mirrlees nonlinear income taxation we show how the canonical optimal tax formulas are modified and lead to novel economic insights we also show how to incorporate nudges in the optimal taxation framework and jointly characterize optimal taxes and nudges

negotiating bilateral contracts in electricity markets in mixed pool bilateral electricity markets participants can sign forward bilateral contracts several months in advance of its delivery in addition generators may sell to and loads may buy from the pool at the spot price through the day ahead or balancing markets forward bilateral contracts have the advantage of price predictability in comparison with the uncertain spot price however the risk is that such a contract commits the partners to a price that may be disadvantageous compared to the spot price here we propose a systematic negotiation scheme through which a generator and load can reach a mutually beneficial and risk tolerable forward bilateral contract either physical or financial under this approach the generator and load respond rationally to a stream of bilateral bids counter bids and offers counter offers considering their respective benefits while accounting for the risks incurred by the prediction uncertainty in the pool spot price and other market parameters over the length of the contract each negotiating party can choose its own definition of risk which can be influenced by regret value at risk or dispersion from the mean numerical tests show that this flexible negotiating approach can be readily put into practice

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

the real real price of nonrenewable resources copper 1870 2000 over the past 40 years economists have devoted considerable effort to estimating long run trends in real commodity prices the results indicate that the real prices for many commodities have fallen suggesting to the surprise of many that resource scarcity is declining over time almost all of this work however uses the u s producer price index or other standard price deflators which recent research shows overestimate inflation for several reasons this article examines copper prices with adjusted deflators designed to eliminate this bias it finds that the trend over time which is significantly downward when no adjustment is made to the deflator displays no tendency in either direction or is significantly upward depending on the magnitude of the deflator adjustment employed these findings suggest that real resources prices provide less support than widely assumed for the hypothesis that resources are becoming more available or less scarce over time

optimal sin taxes abstract we investigate sin taxes on unhealthy items such as fatty foods that people may by their own reckoning consume too much of we employ a standard optimal taxation framework but replace the standard assumption that all consumers have 100 self control with an assumption that some consumers may have some degree of self control problems we show that imposing taxes on unhealthy items and returning the proceeds to consumers can generally improve total social surplus because such taxes counteract over consumption by consumers with self control problems while at the same time they naturally redistribute income to consumers with no self control problems who consume less such taxes can even create pareto improvements finally we demonstrate with some simple numerical examples that even if the population exhibits relatively few self control problems optimal taxes can still be large

the desirability of commodity taxation under non linear income taxation and heterogeneous tastes abstract this paper revisits the atkinson stiglitz result on uselessness of commodity taxation in the presence of optimal non linear income taxation in a more general setup namely when tastes are heterogeneous this general analysis displays the key economic assumptions under which the atkinson stiglitz result is robust a small tax on a given commodity is desirable if high income earners have a relatively higher taste for this commodity or if consumption of this commodity increases with leisure an application to the case of savings suggests that even in the presence of optimal non linear earnings taxation there is a role for a supplemental capital income tax in the standard overlapping generation model

health insurance for humans information frictions plan choice and consumer welfare traditional models of insurance choice are predicated on fully informed and rational consumers protecting themselves from exposure to financial risk in practice choosing an insurance plan is a complicated decision often made without full information in this paper we combine new administrative data on health plan choices and claims with unique survey data on consumer information to identify risk preferences information frictions and hassle costs our additional friction measures are important predictors of choices and meaningfully impact risk preference estimates we study the implications of counterfactual insurance allocations to illustrate the importance of distinguishing between these micro foundations for welfare analysis

attention variation and welfare theory and evidence from a tax salience experiment this article shows that accounting for variation in mistakes can be crucial for welfare analysis focusing on consumer under reaction to not fully salient sales taxes we show theoretically that the efficiency costs of taxation are amplified by differences in under reaction across individuals and across tax rates to empirically assess the importance of these issues we implement an online shopping experiment in which 2 998 consumers purchase common household products facing tax rates that vary in size and salience we replicate prior findings that on average consumers under react to non salient sales taxes consumers in our study react to existing sales taxes as if they were only 25 of their size however we find significant individual differences in this under reaction and accounting for this heterogeneity increases the efficiency cost of taxation estimates by at least 200 tripling existing sales tax rates nearly doubles consumers attention to taxes and accounting for this endogeneity increases efficiency cost estimates by 336 our results provide new insights into the mechanisms and determinants of boundedly rational processing of not fully salient incentives and our general approach provides a framework for robust behavioural welfare analysis

optimal income transfer programs intensive versus extensive labor supply responses this paper analyzes optimal income transfers for low incomes labor supply responses are modeled along the intensive margin intensity of work on the job and along the extensive margin participation into the labor force when behavioral responses are concentrated along the intensive margin the optimal transfer program is a classical negative income tax program with a substantial guaranteed income support and a large phasing out tax rate however when behavioral responses are concentrated along the extensive margin the optimal transfer program is similar to the earned income tax credit with negative marginal tax rates at low income levels and a small guaranteed income carefully calibrated numerical simulations are provided

shrouded costs of government the political economy of state and local public pensions abstract why do public sector workers receive so much of their compensation in the form of pensions and other benefits this paper presents a political economy model in which politicians compete for taxpayers and government employees votes by promising compensation packages but some voters cannot evaluate every aspect of promised compensation if pension packages are shrouded so that public sector workers better understand their value than ordinary taxpayers then compensation will be highly back loaded in equilibrium the welfare of public sector workers could be improved holding total public sector costs constant if they received higher wages and lower pensions centralizing pension determination has two offsetting effects on generosity more state level media attention helps taxpayers better understand pension costs and that reduces pension generosity but a larger share of public sector workers will vote within the jurisdiction which increases pension generosity a short discussion of pensions in two decentralized states california and pennsylvania and two centralized states massachusetts and ohio suggests that centralization appears to have modestly reduced pensions but as the model suggests this is unlikely to be universal

tagging and targeting of energy efficiency subsidies corrective taxation is a common approach to addressing externalities internalities and other market distortions these distortions are often heterogeneous for example some cars pollute more than others and many people consume alcohol rationally even as present biased individuals might over consume such heterogeneity raises the question of whether a corrective tax is well targeted does it primarily affect individuals subject to relatively large distortions a tax set at the average level of the distortion could actually reduce welfare if the marginal individuals were already making relatively undistorted decisions this paper studies the targeting of corrective subsidies for energy ef cient durable goods such as air conditioners insulation and cars these subsidies are justi ed by multiple distortions primarily including environmental externalities credit constraints landlord tenant information asymmetries imperfect information and behavioral biases such as inattention to energy costs allcott and greenstone 2012 gillingham newell and palmer 2009 we rst argue that these distortions are heterogeneous on observables wealthy people are less credit constrained homeowners are unaffected by the landlord tenant problem and we show empirically that environmentalists are more attentive to energy costs and believe that energy ef cient goods save more money we then show that

risk constrained profit maximization in day ahead electricity market the deregulation of the electricity industry has caused for the generation company genco the need of tools for measuring and managing the risk beyond the classical problem of generating unit scheduling in this paper a probabilistic framework for the problem of managing risk faced by gencos trading in day ahead energy market is proposed in particular a stochastic forecast of electricity price and the technical features of hydrothermal units are considered the approach is based on an optimization procedure for maximizing expected profits in the presence of risk constraints conditional value at risk for the distribution of daily profit is used as risk measure

optimal control of externalities in the presence of income taxation optimal control of externalities a substantial literature examines second best environmental policy focusing particularly on how the pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription it is demonstrated however that simple first best rules unmodified for labor supply distortion or distribution are correct in a natural basic formulation of the problem specifically setting all commodity taxes equal to marginal harms and subsidies equal to marginal benefits can generate a pareto improvement likewise a marginal reform in the direction of the first best can yield a pareto improvement for other reforms a simple efficiency test characterizing when a pareto improvement is possible is offered qualifications and explanations for the substantial departure from results in previous work are also elaborated

optimal environmental taxation in the presence of other taxes general equilibrium analyses this paper examines the optimal setting of environmental taxes in economies where other distortionary taxes are present we employ analytical and numerical models to explore the degree to which in a second best economy optimal environmental tax rates differ from the rates implied by the pigovian principle according to which the optimal tax rate equals the marginal environmental damages both models indicate contrary to what several analysts have suggested that the optimal tax rate on emissions of a given pollutant is generally less than the rate supported by the pigovian principle moreover the optimal rate is lower the larger are the distortions posed by ordinary taxes numerical results indicate that previous studies may have seriously overstated the size of the optimal carbon tax by disregarding pre existing taxes this abstract was borrowed from another version of this item

does the new economy measure up to the great inventions of the past abstract during the four years 1995 99 u s productivity growth experienced a strong revival and achieved growth rates exceeding that of the golden age of 1913 72 accordingly many observers have declared the new economy to be an industrial revolution even more important than the second industrial revolution of 1860 1900 which made the golden age of productivity growth possible this paper dissects the recent productivity revival subtracts out a cyclical component and concludes that there is no revival of the productivity growth trend in the 88 percent of the private economy lying outside of the durables manufacturing sector the paper explains this surprising finding by pointing to limitations in computers and the internet in comparison with the great inventions of the past

optimal self scheduling of thermal units during commissioning this paper addresses the problem of the self scheduling of thermal generating units during commissioning a 0 1 mixed integer linear formulation is presented which allows an accurate and realistic modeling for the scheduling of the commissioning tests that should be performed once the construction of the thermal unit has been completed and prior to entering its commercial operation a flexible contract between the producer and the contractor regarding the performing period of the commissioning tests is proposed the model presented can be used by a producer with thermal units in commissioning who acts either as a price taker or a price maker in the day ahead energy market test results on a medium scale real test system address the effect that the implementation of the proposed model has on the producer profits as well as on the day ahead market clearing prices

implications of a sugar sweetened beverage ssb tax when substitutions to non beverage items are considered abstract using the 2006 homescan panel we estimate the changes in energy fat and sodium purchases resulting from a tax that increases the price of sugar sweetened beverages ssbs by 20 and the effect of such a tax on body weight in addition to substitutions that may arise with other beverages we account for substitutions between ssbs and 12 major food categories our main findings are that the tax would result in a decrease in store bought energy of 24 3 kcal per day per person which would translate into an average weight loss of 1 6 pounds during the first year and a cumulated weight loss of 2 9 pounds in the long run we do not find evidence of substitution to sugary foods and show that complementary foods could contribute to decreasing energy purchases despite their significantly lower price elasticity the tax has a similar effect on calories for the largest purchasers of ssbs

the effect of prices on nutrition comparing the impact of product and nutrient specific taxes this paper provides an analysis of the role of prices in determining food purchases and nutrition using very detailed transaction level observations for a large nationally representative sample of us consumers over the period 2002 2007 using product specific nutritional information we develop a new method of partitioning the product space into relevant nutritional clusters that define a set of nutritionally bundled goods which parsimoniously characterize consumer choice sets we then estimate a large utility derived demand system over this joint product nutrient space that allows us to calculate price and expenditure elasticities using our structural demand estimates we simulate the role of product taxes on soda sugar sweetened beverages packaged meals and snacks and nutrient taxes on fat salt and sugar we find that a 20 nutrient tax has a significantly larger impact on nutrition than an equivalent product tax due to the fact that these are broader based taxes however the costs of these taxes in terms of consumer utility are only about 70 cents per household per day a sugar tax in particular is a powerful tool to induce healthier nutritive bundles among consumers

the effectiveness of taxes in decreasing candy purchases abstract we use candy purchase data at the household level to analyze changes in candy purchases due to colorado s candy tax colorado is one of the many states that exempts candy containing flour from their candy tax to do this we construct a dataset of monthly household taxed and tax exempt candy purchases for the years 2009 and 2010 for the denver co and omaha ne metros difference in differences estimates imply that colorado s candy tax led to a decrease in taxed candy purchases of at least 11 2 which would translate into a reduction of household body weight of at least one pound during the first year the tax is in effect conversely we find no effect on the purchase of tax exempt candy

optimal policy instruments for externality producing durable goods under present bias abstract when consumers exhibit present bias the standard solution to market failures caused by externalities pigouvian pricing is suboptimal i investigate policies aimed at externalities for present biased consumers optimal policy includes an instrument to correct the externality and an instrument to correct the present bias either instrument can be an incentive based policy e g a tax on fuel economy or a command and control policy e g a fuel economy mandate under consumer heterogeneity a command and control policy may dominate an incentive based policy calibrated to the us automobile market simulation results suggest that the second best gasoline tax is 3 30 higher than marginal external damages the optimal price policy includes a gasoline tax set about equal to marginal external damages and a fuel economy tax that increases the price of an average non hybrid car by about 550 2200 relative to the price of an average hybrid car

uniform pricing in us retail chains we show that most u s food drugstore and mass merchandise chains charge nearly uniform prices across stores despite wide variation in consumer demographics and competition demand estimates reveal substantial within chain variation in price elasticities and suggest that the median chain sacrifices 16 million of annual profit relative to a benchmark of optimal prices in contrast differences in average prices between chains are broadly consistent with the optimal benchmark we discuss a range of explanations for nearly uniform pricing highlighting managerial inertia and brand image concerns as mechanisms frequently mentioned by industry participants relative to our optimal benchmark uniform pricing may significantly increase the prices paid by poorer households relative to the rich dampen the response of prices to local economic shocks alter the analysis of mergers in antitrust and shift the incidence of intranational trade costs

a reconsideration of the sugar sweetened beverage tax in a household production model abstract we study the impact of a hypothetical tax on sugar sweetened beverages ssbs on the u s households nutrients purchase welfare change and health benefit differently from the traditional approach food at home fah is here defined as a home good instead of a market good and consumers demands derived under the assumption that households maximize utility subject to both a money and a time constraint the model is estimated by using an incomplete approximate exact affine stone index easi demand system on a data set built by merging the u s consumer expenditure and time use surveys results show that a ssb tax would be much more effective in decreasing household nutrients purchase than it would appear by estimating a model neglecting time costs in home food production due to a lesser compensation of calories from increasing fah consumption a tax induced 38 increase in ssb price is predicted to decrease the per capita energy purchase by 41 kcal day

financial risk evaluation in stochastic pbuc this letter is an extension of our previous price based unit commitment pbuc work this letter identifies a frontier relationship between payoff and risk this letter also discusses the calculation of target value and risk using payoff risk frontiers test results show a trade off between risk minimization and payoff maximization for power generation utilities

forecasting next day electricity prices by time series models in the framework of competitive electricity markets power producers and consumers need accurate price forecasting tools price forecasts embody crucial information for producers and consumers when planning bidding strategies in order to maximize their benefits and utilities respectively this paper provides two highly accurate yet efficient price forecasting tools based on time series analysis dynamic regression and transfer function models these techniques are explained and checked against each other results and discussions from real world case studies based on the electricity markets of mainland spain and california are presented

behavioral economics and public policy a pragmatic perspective the debate about behavioral economics the incorporation of insights from psychology into economics is often framed as a question about the foundational assumptions of economic models this paper presents a more pragmatic perspective on behavioral economics that focuses on its value for improving empirical predictions and policy decisions i discuss three ways in which behavioral economics can contribute to public policy by oering new policy tools improving predictions about the eects

sales and consumer inventory temporary price reductions sales are common for many goods and naturally result in a large increase in the quantity sold we explore whether the data support the hypothesis that these increases are at least partly due to demand anticipation at low prices consumers store for future consumption this effect if present has broad economic implications we test the predictions of an inventory model using scanner data with two years of household purchases the results are consistent with an inventory model and suggest that static demand estimates may overestimate price sensitivity

adverse selection and inertia in health insurance markets when nudging hurts this paper investigates consumer inertia in health insurance markets where adverse selection is a potential concern we leverage a major change to insurance provision that occurred at a large firm to identify substantial inertia and develop and estimate a choice model that also quantifies risk preferences and ex ante health risk we use these estimates to study the impact of policies that nudge consumers toward better decisions by reducing inertia when aggregated these improved individual level choices substantially exacerbate adverse selection in our setting leading to an overall reduction in welfare that doubles the existing welfare loss from adverse selection jel d82 g22 i13 a number of potential impediments stand in the way of efficient health insur ance markets the most noted of these is adverse selection first studied by akerlof 1970 and rothschild and stiglitz 1976 in insurance markets prices reflect the expected risk costs of the insured pool whether the reason is price regulation or private information when insurers cannot price all risk characteristics riskier consumers choose more comprehensive health plans this causes the equilibrium prices of these plans to rise and healthier enrollees to select less comprehensive coverage than they would otherwise prefer

the effects of soft drink taxes on child and adolescent consumption and weight outcomes abstract childhood and adolescent obesity is associated with serious adverse lifetime health consequences and its prevalence has increased rapidly soft drink consumption has also expanded rapidly so much so that soft drinks are currently the largest single contributors to energy intake in this paper we investigate the potential for soft drink taxes to combat rising levels of child and adolescent obesity through a reduction in consumption our results based on state soft drink sales and excise tax information between 1989 and 2006 and the national health examination and nutrition survey suggest that soft drink taxation as currently practiced in the united states leads to a moderate reduction in soft drink consumption by children and adolescents however we show that this reduction in soda consumption is completely offset by increases in consumption of other high calorie drinks

distributional national accounts methods and estimates for the united states this article combines tax survey and national accounts data to estimate the distribution of national income in the united states since 1913 our distributional national accounts capture 100 of national income allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth we estimate the distribution of both pretax and posttax income making it possible to provide a comprehensive view of how government redistribution affects inequality average pretax real national income per adult has increased 60 from 1980 to 2014 but we find that it has stagnated for the bottom 50 of the distribution at about 16 000 a year the pretax income of the middle class adults between the median and the 90th percentile has grown 40 since 1980 faster than what tax and survey data suggest due in particular to the rise of tax exempt fringe benefits income has boomed at the top the upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000 the government has offset only a small fraction of the increase in inequality the reduction of the gender gap in earnings has mitigated the increase in inequality among adults but the share of women falls steeply as one moves up the labor income distribution and is only 11 in the top 0 1 in 2014

optimal linear commodity taxation under optimal non linear income taxation abstract this paper analyzes optimal linear commodity taxes joint with non linear income taxes we provide optimal tax rules based on empirically observable elasticities earnings and commodity demands we demonstrate that commodities should be taxed subsidized if conditional on earnings doing so boosts labor supply as the critical role of commodity taxation is to alleviate distortions on labor supply caused by income taxation we extend the standard formula for optimal non linear income taxation for the presence of optimal linear commodity taxes we correct parts of the literature by showing that the optimal second best allocations derived by atkinson and stiglitz 1976 1980 cannot be supported by linear commodity taxes

electricity price short term forecasting using artificial neural networks this paper presents the system marginal price smp short term forecasting implementation using the artificial neural networks ann computing technique the described approach uses the three layered ann paradigm with backpropagation the retrospective smp real world data acquired from the deregulated victorian power system was used for training and testing the ann the results presented in this paper confirm considerable value of the ann based approach in forecasting the smp

optimal self scheduling of a thermal producer in short term electricity markets by milp this paper addresses the problem of the self scheduling of a thermal electricity producer in day ahead energy and reserves markets a 0 1 mixed integer linear formulation of the producer self scheduling problem is provided which allows a realistic and accurate modeling of the unit s operating phases a novel unit start up modeling is presented in which three different start up types are modeled hot warm and cold each with distinct start up cost synchronization time soak time and predefined start up power output trajectories all dependent on the unit s prior reservation time test results address the effect of the energy and reserves market clearing prices on the producer units day ahead commitment status and profits

price maker self scheduling in a pool based electricity market a mixed integer lp approach this paper addresses the self scheduling problem faced by a price maker to achieve maximum profit in a pool based electricity market an exact and computationally efficient mixed integer linear programming milp formulation of this problem is presented this formulation models precisely the price maker capability of altering market clearing prices to its own benefits through price quota curves no assumptions are made on the characteristics of the pool and its agents a realistic case study is presented and the results obtained are analyzed in detail

climate change policy s interactions with the tax system abstract this paper presents a range of insights from recent literature on how climate change policies and other environmental policies interact with the fiscal system it explores four issues associated with fiscal interactions first it examines how these interactions influence the prospects for a double dividend both an environmental improvement and a reduction in the costs of the tax system second it analyzes how the use of revenues from a carbon tax or from a cap and trade system involving auctioned emissions allowances influences these policies economic costs third it addresses the question whether carbon taxes or cap and trade programs represent more efficient sources of government revenue than other more traditional revenue sources such as income sales or payroll taxes finally it analyzes how fiscal interactions affect the choice between co 2 emissions pricing instruments carbon taxes and cap and trade and other climate policy instruments

day ahead electricity price forecasting in a grid environment accurate electricity price forecasting is critical to market participants in wholesale electricity markets market participants rely on price forecasts to decide their bidding strategies allocate assets negotiate bilateral contracts hedge risks and plan facility investments market operators can also use electricity price forecasts to predict market power indexes for the purpose of monitoring participants behaviors various forecasting techniques are applied to different time horizons for electricity price forecasting in locational marginal pricing lmp spot markets available correlated data also have to be selected to improve the short term forecasting performance in this paper fuzzy inference system fis least squares estimation lse and the combination of fis and lse are proposed based on extensive testing with various techniques lse provides the most accurate results and fis which is also highly accurate provides transparency and interpretability

are consumers myopic evidence from new and used car purchases abstract we investigate whether car buyers are myopic about future fuel costs we estimate the effect of gasoline prices on short run equilibrium prices of cars of different fuel economies we then compare the implied changes in willingness to pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates using different assumptions about annual mileage survival rates and demand elasticities we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow we interpret this as showing little evidence of consumer myopia jel d12 h25 l11 l62 l71 l81

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

the elasticity of taxable income evidence and implications abstract a central tax policy parameter that has recently received much attention but about which there is substantial uncertainty is the overall elasticity of taxable income we provide new estimates of this elasticity which address identification problems with previous work by exploiting a long panel of tax returns to study a series of tax reforms throughout the 1980s this identification strategy also allows us to provide new evidence on both the income effects of tax changes on taxable income and on variation in the elasticity of taxable income by income group we find that the overall elasticity of taxable income is approximately 0 4 the elasticity of real income not including tax preferences is much lower we estimate small income effects of tax changes on reported income implying that the compensated and uncompensated elasticities of taxable income are very similar we estimate that this overall elasticity is primarily due to a very elastic response of taxable income for taxpayers who have incomes above 100 000 per year who have an elasticity of 0 57 while for those with incomes below 100 000 per year the elasticity is less than one third as large moreover high income taxpayers who itemize are particularly responsive to taxation our estimates suggest that optimal tax structures may feature tightly targeted transfers to lower income taxpayers and a flat or even declining marginal rate structure for middle and high income taxpayers

temperature and temperament evidence from twitter abstract how do people value their climate this paper demonstrates a new approach to estimating preferences for nonmarket goods using social media data i combine more than a billion twitter updates with natural language processing algorithms to construct a rich panel dataset of expressed sentiment for the united states and six other english speaking countries around the world in the u s i find consistent and statistically significant declines in expressed sentiment from both hot and cold temperatures to better understand how preferences may adapt i document heterogeneity in both regional and seasonal responses i complete the u s analysis with a suite of validation exercises to understand the magnitude of these effects and two methods to estimate willingness to pay for climate amenities finally i document similar relationships between temperature and expressed sentiment for four out of the six non u s countries i examine

day ahead price forecasting of electricity markets by mutual information technique and cascaded neuro evolutionary algorithm in a competitive electricity market price forecasts are important for market participants however electricity price is a complex signal due to its nonlinearity nonstationarity and time variant behavior in spite of much research in this area more accurate and robust price forecast methods are still required in this paper a combination of a feature selection technique and cascaded neuro evolutionary algorithm cnea is proposed for this purpose the feature selection method is an improved version of the mutual information mi technique the cnea is composed of cascaded forecasters where each forecaster consists of a neural network nn and an evolutionary algorithm ea an iterative search procedure is also incorporated in our solution strategy to fine tune the adjustable parameters of both the mi technique and cnea the price forecast accuracy of the proposed method is evaluated by means of real data from the pennsylvania new jersey maryland pjm and spanish electricity markets the method is also compared with some of the most recent price forecast techniques

optimal response of a thermal unit to an electricity spot market this paper addresses the optimal response of a thermal unit to an electricity spot market the objective is to maximize the unit profit from selling both energy and spinning reserve in the spot market the paper proposes a 0 1 mixed integer linear programming approach that allows a rigorous modeling of i nonconvex and nondifferentiable operating costs ii exponential start up costs iii available spinning reserve taking into account ramp rate restrictions and iv minimum up and down time constraints this approach overcomes the modeling limitations of dynamic programming approaches and is computationally efficient results from realistic case studies are reported