are consumption taxes really better than income taxes abstract we use political equilibrium theory and the neoclassical growth model to compare consumption and income tax systems if government outlays are used for redistribution through transfers then steady state equilibria in societies that use income taxes are not necessarily worse in welfare terms and may even be better income taxes are attractive precisely because they are more distortionary since this implies low equilibrium transfer levels we also find that switching tax systems typically does not benefit the median voter moreover a change from income to consumption taxes may make everybody worse off

pressure groups and redistribution abstract the simple pressure group model of political redistribution can predict more with less restrictive assumptions instead of ready made pressure groups composed of individuals who vote their pocketbooks we posit heterogeneous agents each of whom decides which group to join and how much effort to expend on political activity our model then examines social affinity conditions that foster pressure group formation political sympathies based on social affinity imply testable effects of growth rate and income distribution on progressive transfers effects that prove substantial in pooled time series cross section regressions for 13 oecd countries 1960 1981

capital taxation and accumulation in a life cycle growth model almost all of the serious economic work on savings decisions within the past decade has relied on some variant of the life cycle hypothesis in which savings arise out of individual choices of an optimum lifetime consumption path this paper reexamines the incidence and welfare consequences of capital income taxes within a realistic life cycle model the results suggest that the elimination of capital income taxation would have very substantial economic effects for example a complete shift to consumption taxation might raise steady state output by as much as 18 percent and consumption by 16 percent the long run welfare gain from such a shift would for plausible parameter values exceed 150 billion annually stated somewhat differently shifting to consumption taxation would raise the lifetime utility of the representative consumer by the equivalent of about six years income in the new steady state these estimates dwarf estimates of the static welfare cost of taxation and significantly exceed even extreme previous estimates of the dynamic loss this study departs from earlier analyses of the effects of taxes on capital income in several respects probably the most important difference between this treatment and most preceding ones lies in the assumptions about the interest elasticity of saving it is shown below that the common two period formulation of saving decisions yields quite misleading results a more realistic model of life cycle savings demonstrates that for a wide variety of plausible parameter values savings are very interest elastic this implies that shifting away from capital income taxation would significantly increase capital formation making possible long run increases in consumption many studies of the welfare effects of capital income taxation have ignored the general equilibrium effects of increased capital formation in an economy with life cycle savings there is no presumption that the undistorted growth path corresponds to any sort of social optimum as peter diamond has shown life cycle savings can lead to a steady state capital intensity either greater or less than the golden rule level more generally it is clear that there is no reason to believe that a life cycle economy will maximize any particular intertemporal social welfare function a fundamental tenet of welfare evaluation is that preexisting distortions must be considered in evaluating the consequences of tax changes the results presented in this paper take explicit account of the nonoptimal character of the no tax steady state this explains in large part why such a sizeable welfare effect of capital taxes is found in an economy far from the golden rule level of capital intensity there are substantial gains in steady state consumption achievable through increased capital formation section i of the paper examines the aggregate savings function in a continuous time life cycle framework the second section clarifies the differences between wage and consumption taxes an aggregate production function is added to complete the model in the third section the effects of changes in capital taxes on both steady state incidence and welfare are considered within a general equilibrium framework the final section of the paper discusses some implications of the results and suggests areas which appear to warrant further study assistant professor of economics massachusetts institute of technology and research analyst national bureau of economic research i am grateful to alan auerbach martin feldstein laurence kotlikoff to the participants in the nber workshop on business taxation and to the harvard public finance seminar for useful discussions james poterba and james buchal performed the numerical calculations

public versus private investment in human capital endogenous growth and income inequality in this paper we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth we use simple functional forms for preferences technologies and income distribution to highlight the distinction between economies with public education and those with private education we find that income inequality declines more quickly under public education on the other hand private education yields greater per capita incomes unless the initial income inequality is sufficiently high we also find that societies will choose public education if a majority of agents have incomes below average

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

optimal taxation in models of endogenous growth we study the problem of optimal taxation in three infinite horizon representative agent endogenous growth models the first model is a convex model in which physical and human capital are perfectly symmetric our second model incorporates elastic labor supply through a lucas style technology analysis of these two models points out the danger of assuming that government expenditures are exogenous in our third model we include government expenditures as a productive input in capital formation showing that the limiting tax rate on capital is no longer zero in numerical simulations we find similar effects on growth and welfare in all three models

qos commitment between vertically integrated autonomous systems abstract vertically integrated autonomous systems bargain to provide quality of service guarantees and revenue sharing depending on the perceived quality of service and access price consumers determine whether they subscribe to the access provider s service four types of contracts are compared i best effort ii bilateral bargaining iii cascade negotiations and iv grand coalition cooperation the impact of the consumers qos sensitivity parameter and power relation are tested for each contract assuming that the consumers quality of service sensitivity parameter is unknown and might evolve dynamically due to error judgement word of mouth effect or competition pressure a learning algorithm is detailed and implemented by each integrated autonomous systems under asymmetrical information its convergence and the influence of bias introduction by the most informed autonomous system is analyzed

politico economic equilibrium and economic growth abstract we propose a notion of dynamic politico economic equilibrium which builds on two key assumptions policies are determined sequentially and agents are fully rational in their roles as both consumers and voters we examine a simple model of endogenous growth and infinitely lived agents where taxes on income are endogenous and where growth critically depends on the initial distribution of asset holdings we relate our equilibrium definition and results to existing literature on time consistency and on political economy and growth we show that our equilibria are time consistent and we argue that the choice of equilibrium concept might have important quantitative implications

political equilibrium income distribution and growth this paper analyzes the impact of income distribution on growth when investment in human capital is the source of growth and individuals vote over the degree of redistribution in the economy the model has three main features first very different patterns of income distribution are conducive to high growth at different levels of per capita income second growth is associated with an externality whereby investment in human capital by one group increases the productivity of other groups thus potentially enabling them to invest in human capital third the initial pattern of income distribution and the resulting political equilibrium are crucial in determining whether the transmission of this externality is promoted in which case growth is enhanced or prevented in which case growth is stopped using a non overlapping generations model with voting i derive several empirical implications in particular the model implies an inverted u relation between levels of inequality and levels of income in cross sections but not necessarily in time series a result that seems consistent with a number of empirical studies

education democracy and growth abstract this note presents a model of endogenous growth where redistribution determined by a political equilibrium is in the form of public education it is shown that there need not be a negative relationship between growth and redistribution as public education increases the level of human capital in the conomy and at the same time tends to produce a more even income distribution

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

the macroeconomic effects of distortionary taxation abstract prescott 1986 estimates that technology shocks account for 75 of the fluctuations in the postwar u s economy this paper reestimates the contribution of technological change for a standard business cycle model that includes a public sector and fiscal disturbances i find that a significant fraction of the variance of aggregate consumption investment output capital stock and hours of work can be explained by disturbances in labor and capital tax rates and government consumption i also use the model to quantify the welfare costs of capital and labor taxation for both the time series and welfare calculations maximum likelihood estimates of taste technology and policy parameters are used

a cost allocation problem arising in hub spoke network systems abstract this paper studies a cost allocation problem arising from hub spoke network systems when a large scale network is to be constructed jointly by several agents both the optimal network design and the fair allocation of its cost are essential issues we formulate this problem as a cooperative game and analyze the core allocation which is a widely used solution concept the core of this game is not necessarily non empty as shown by an example a reasonable scheme is to allocate the cost proportional to the flow that an agent generates we show that if the demand across the system has a block structure and the fixed cost is high this cost allocation scheme belongs to the core numerical experiments are given with real telecommunication traffic data in order to illustrate the usefulness of our analytical findings

economic growth and regional disparities in slovenia banerjee b and jesenko m economic growth and regional disparities in slovenia regional studies regional disparities in gross domestic product gdp per capita and labour utilization have widened in slovenia since 1999 however regional gaps in per capita household disposable income have declined because of higher social transfers to the poorest regions inter regional commuting and other factors econometric analysis shows that there is heterogeneity in steady states across regions and regional growth in per capita gdp and labour productivity are converging to these region specific steady states time series approach to convergence confirms stochastic trend convergence in both indicators for several regions labour productivity growth has been driven by capital deepening and growing importance of total factor productivity tfp improvement

supplier initiated outsourcing a methodology to exploit synergy in transportation over the last decades transportation has been evolving from a necessary though low priority function to an important part of business that can enable companies to attain a competitive edge over their competitors to cut down transportation costs shippers often outsource their transportation activities to a logistics service provider of their choice this paper proposes a new procedure that puts the initiative with the service provider instead supplier initiated outsourcing this procedure is based on both operations research and game theoretical insights to stress the contrast between the traditional push approach of outsourcing and the here proposed pull approach where the service provider is the initiator of the shift of logistics activities from the shipper to the logistics service provider we will refer to this phenomenon as insinking insinking has the advantage that the logistics service provider can proactively select a group of shippers with a strong synergy potential moreover these synergies can be allocated to the participating shippers in a fair and sustainable way by means of a so called shapley monotonic path of customized tariffs insinking is illustrated by means of a practical example based on data from the dutch grocery transportation sector

vested interests in a positive theory of stagnation and growth we study a positive theory of stagnation and growth aimed at understanding the large variations in growth outcomes across actual economies the theory points to the fundamental role played by vested interests in determining policies which are key to the growth process some agents seek to prevent the adoption of new technologies we develop a model of technology adoption and show how technological innovation may sow the seeds of its own destruction in particular we find that the equilibrium is characterized by a long cycle of stagnation and growth over this cycle incumbents are phased out of the economy will new innovation occur in formalizing our theory we make a methodological contribution by characterizing dynamic voting equilibria when voters must forecast the effects of different current policies on future prices and policy outcomes

factor shares and savings in endogenous growth in models of steady investment driven growth an individual s propensity to save depends on how much of his income is drawn from accumulated factors of production capital rather than from nonaccumulated factors when agents are heterogeneous in this respect growth oriented policies have distributional consequences and in the absence of lump sum redistribution their implementation faces political constraints if the median voter is capital poor relative to the economy s representative agent political interactions tend to slow down growth when policy acts on capital s income share and tend to accelerate it when investment subsidies are the policy instrument of choice copyright 1993 by american economic association

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

cooperative interconnection settlement among isps through nap abstract this paper studies the settlement problem among internet service providers isps who interconnect with each other through network access point nap a cooperative game framework is adopted for the analysis two commonly adopted allocations i e the non settlement profit allocation and the shapley value based profit allocation are analyzed and compared we check whether these two allocations can encourage isps to interconnect with each other i e in the core of the game and at the same time demonstrate fairness in settlement our results show that the non settlement allocation is not in the core and does not preserve fairness and the shapley value based profit allocation is in the core and demonstrates fairness however the complex structure of shapley value makes it difficult to understand for isps and hard to be implemented at nap especially when isps can only make their pricing decisions independently therefore we propose a characterized profit allocation cpa which is in the core preserves fairness and is easy to interpret we further propose a settlement rule based on cpa which enables the isps to act independently but achieve global optimality we also extend our basic model to incorporate interconnection quality decisions and market competition and show that the proposed settlement rule and its extended form work well in these scenarios numerical experiments confirm that cpa and its corresponding settlement rule can effectively encourage interconnection among isps and motivate isps to expand their networks

optimal fiscal policy in a stochastic growth model although most neoclassical growth models focus on competitive equilibria which are pareto optimal and ignore the role of government recent works by romer 28 29 judd 20 baxter and king s and bizer and judd 7 have shown that government can be introduced into and suboptimal equilibria can be studied in these models as well their studies however are positive analyses of the effects of fiscal policy in competitive equilibria the purpose of this paper is to apply ramsey s 27 theory of optimal taxation to the normative study of fiscal policy in a stocastic growth model ramsey studied a static representative consumer economy with many goods in his formulation a government consumes a fixed amount of these goods which it purchases at market prices and finances by levying flat rate excise taxes prices and quantities are determined in a competitive equilibrium the government is benevolent and its objective is to choose the optimal tax rates to maximize the representative consumer s utility a number of economists among them kydland and prescott 23 barro 3 turnovsky and brock 31 and lucas and stockey 26 have noted that ramsey s formulation can be applied to dynamic economies with uncertainty if one reinterprets the goods in static problems as dated state contingent goods in this framework a fiscal policy is a rule which specifies state contingent tax rates and the amount of public debt issue in each date the optimal fiscal policy is defined as the one which leads to a quantity