international taxation and the direction and volume of cross border m as we show that the parent subsidiary structure of multinational firms created by cross border mergers and acquisitions is affected by the prospect of international double taxation specifically the likelihood of parent firm location in a country following a cross border takeover is reduced by high international double taxation of foreign source income at the same time countries with high international double taxation attract smaller numbers of parent firms a unilateral elimination of worldwide taxation by the united states is simulated to increase the proportion of parent firms locating in the united states following cross border mergers and acquisitions from 53 to 58

the use of quantile regressions in estimating gender wage differentials a case study of the philippines quantile regressions are used to analyse the size components and nature of the gender earnings differentials as well as the returns to education by gender in the philippines over the entire conditional distribution of earnings using data from the 1999 apis survey this approach allows more focused conclusions about the nature of gender earnings differentials incorporating the quantile regression approach to the oaxaca blinder decomposition allows the localization of gender discrimination to particular quantiles of the earnings distribution and permits more targeted policy intervention

why doesn t technology flow from rich to poor countries what determines the technology that a country adopts while there could be many factors the e ciency of the country s nancial system may play a signi cant role to address this question a dynamic contract model is embedded into a general equilibrium setting with competitive intermediation the ability of an intermediary to monitor and control the cash ows of a rm plays an important role in a rm s decision to adopt a technology can such a theory help to explain the

capital tax reform and the real economy the effects of the 2003 dividend tax cut this paper tests whether the 2003 dividend tax cut one of the largest reforms ever to a us capital tax rate stimulated corporate investment and increased labor earnings using a quasi experimental design and us corporate tax returns from years 1996 2008 i estimate that the tax cut caused zero change in corporate investment and employee compensation economically the statistical precision challenges leading estimates of the cost of capital elasticity of investment or undermines models in which dividend tax reforms affect the cost of capital either way it may be difficult to implement an alternative dividend tax cut that has substantially larger near term effects jel c72 c78 c91

private equity jobs and productivity private equity critics claim that leveraged buyouts bring huge job losses and few gains in operating performance to evaluate these claims we construct and analyze a new dataset that covers us buyouts from 1980 to 2005 we track 3 200 target firms and their 150 000 establishments before and after acquisition comparing to controls defined by industry size age and prior growth buyouts lead to modest net job losses but large increases in gross job creation and destruction buyouts also bring tfp gains at target firms mainly through accelerated exit of less productive establishments and greater entry of highly productive ones jel d24 g24 g32

theoretical and empirical foundations of hipc debt sustainability targets this article traces the origins of hipc heavily indebted poor country debt sustainability targets these targets are interpreted as switching values below which countries are expected to avoid debt service problems but as such they do not take into account that countries encounter debt problems for a variety of reasons and at different levels of debt it is likely that the true switching value of the debt to export ratio of many hipcs lie below the present target regarding the fiscal window of the hipc initiative the lack of analytical basis for a 250 per cent target for the debt torevenue ratio is noted and the problems raised by the joint openness revenue condition are discussed the article concludes that the sustainability targets as presently applied are not well supported in analytical terms

changes in the u s wage structure 1963 1987 application of quantile regression the 1980 s witnessed rapid changes in the structure of wages in the united states in this study recently developed techniques for quantile regression are applied to every march current population survey since 1964 and changes in the return to schooling and experience at different points of the wage distribution are examined the quantile regression technique parsimoniously describes the entire conditional wage distribution this conditional distribution is used to examine changes in within group wage inequality as measured by the difference between conditional quantiles two linear models are considered a simple one group model and a 16 group model the results suggest that the returns to schooling and experience differ across quantiles of the wage distribution but their patterns of change are similar significant differences in wage inequality are also found across the various skill groups the paper also presents a new imputation method for cps data

international competition and exchange rate shocks a cross country industry analysis of stock returns this article systematically examines the importance of exchange rate movements and industry competition for stock returns common shocks to industries across countries are more important than competitive shocks due to changes in exchange rates weekly exchange rate shocks explain almost nothing of the relative performance of industries using returns measured over longer horizons the importance of exchange rate shocks increases slightly and the importance of industry common shocks increases more substantially both industry and exchange rate shocks are more important for industries that produce internationally traded goods but the importance of these shocks is economically small for these industries as well economists journalists and politicians around the world argue that some of the industries in their country compete vigorously with the same industries in other countries and that exchange rate shocks affect their competitiveness in the united states it is routinely stated that some u s industries compete with japanese industries and that a depreciation of the yen is bad for these u s industries and good for the rival japanese industries if the yen falls trade tensions could intensify between the u s and japan as autos and machinery from japan gain a competitive edge 1 further the exchange rate literature shows that exchange rate shocks lead to persistent deviations from purchasing power parity 2 froot and klemperer 1989 and knetter 1989 1993 among others demonstrate that deviations from purchasing power parity lead to sharp changes in price markups and profit margins for exporters

the effects of taxation on the selling of corporate stock and the realization of capital gains this study provides the first econometric analysis of the effect of taxation on the realization of capital gains the analysis thus extends and complements the earlier study by feldstein and yitzhaki 1978 of the effect of taxation on the selling of corporate stock the present analysis using a large new body of data obtained from individual tax returns supports the earlier finding that corporate stock sales are quite sensitive to tax rates and then shows that the effect on the realization of capital gains is even stronger

employment protection and takeovers labor restructuring is a key driver of takeovers and the associated synergy gains worldwide in a difference in differences research design we show that major increases in employment protection reduce takeover activity by 14 27 and the combined firm gains synergies by over half consistent with the labor channel behind these effects deals with greater potential for workforce restructuring show a greater reduction in volume number and synergies the reforms do impede layoffs and the associated wage costs match the magnitude of synergy losses offer prices are not fully adjusted with both bidders and targets exhibiting lower returns following the reforms

capital gains taxes and asset prices capitalization or lock in this paper demonstrates that the equilibrium impact of capital gains taxes reflects both the capitalization effect i e capital gains taxes decrease demand and the lock in effect i e capital gains taxes decrease supply depending on time periods and stock characteristics either effect may dominate using the taxpayer relief act of 1997 as our event we find evidence supporting a dominant capitalization effect in the week following news that sharply increased the probability of a reduction in the capital gains tax rate and a dominant lock in effect in the week after the rate reduction became effective this paper jointly tests two effects of capital gains taxation on equity trading a demand side capitalization effect and a supply side lock in effect while previous studies have tested these effects separately to the best of our knowledge this is the first study to evaluate them jointly and empirically document the relative dominance of each effect surrounding a change in a tax rate employing an equilibrium approach we show that these effects net tax impact on asset prices is ambiguous evaluating returns and trading volume around the 1997 reduction in the capital gains tax rate we find evidence that the capitalization and the lock in effects jointly affect trading in particular the capitalization effect dominates the lock in effect in the week following an increase in the probability of a reduction in the capital gains tax rate as buyers respond to information that future capital gains tax rates will be lower the lock in effect however dominates the capitalization effect after the rate reduction actually becomes effective taxation is one of the most prevalent market frictions in financial markets affecting investors decisions and distorting the valuation of assets capital gains taxes in particular play an important role in determining an investor s trading strategies and can ultimately affect asset prices because investors

returns to education and wage equations the paper shows why considering a number of education dependent covariates in a wage equation decreases the coefficient of education in that equation this result is illustrated empirically with a meta analysis for portugal the education coefficient decreases when covariates are used that can be considered post education decisions on the other hand it is independent of sample size tenure and whether hourly or monthly wages are used these results support the use of a simple specification of the mincer equation for the study of the total returns to education

the disciplinary role of takeovers this paper presents a theory of the disciplinary role of takeovers based on an explicit model of managerial incentive problems stemming from asymmetric information it is argued that an informed raider can reduce incentive problems by making managerial compensation more sensitive to information unavailable to shareholders the paper also highlights the importance of specifying the source of contractual inefficiencies when analyzing the effect of takeovers on incentives

education returns across quantiles of the wage function alternative explanations for returns to education by race in south america private wage returns to schooling in south africa in 1993 are twice as high for nonwhites as for whites and substantially higher at advanced levels of schooling for both races to explore how these returns might be expected to change as the proportion of africans with secondary and higher education increases quantile regressions for the wage function are estimated for african males and white males if the residuals based on a standard wage function specification are interpreted as omitted ability and it is assumed that ability increases decreases returns to schooling then we expect quantile returns to increase decrease at higher quantiles this is not observed for africans at the higher and secondary school level but is evident among whites at higher educational levels the opposite pattern of differential returns favoring the least able i e lowest deciles is reported for the lower tail of the educational distribution that is for africans at the level of primary school and for whites at secondary school authors

payout taxes and the allocation of investment when corporate payout is taxed internal equity retained earnings is cheaper than external equity share issues if there are no perfect substitutes for equity finance payout taxes may therefore have an effect on the investment of firms high taxes will favor investment by firms who can finance internally using an international panel with many changes in payout taxes we show that this prediction holds well payout taxes have a large impact on the dynamics of corporate investment and growth investment is locked in in profitable firms when payout is heavily taxed thus apart from any level effects payout taxes change the allocation of capital

fiscal policy elastic labor supply and endogenous growth abstract endogenizing labor supply leads to fundamental changes in the equilibrium structure of the ak growth model the balanced growth equilibrium can be described in terms of two tradeoff loci relating the equilibrium growth rate to the fraction of time devoted to leisure the implications of endogenous labor supply for fiscal policy are analyzed three issues are addressed first the effects of various distortionary tax changes and government expenditure changes on the equilibrium growth leisure employment tradeoff are analyzed second optimal fiscal policy is characterized finally the formal analysis is supplemented by numerical results focusing particularly on the quantitative welfare implications

taxing away m a capital gains taxation and acquisition activity abstract capital gains taxation distorts the market for corporate control by imposing a cost on selling shareholders in acquisitions this lock in effect increases premiums required for deal completion preventing some m as from taking place at all we estimate the effect of capital gains taxation on the quantity of realized m a deals and compute the deadweight loss related to taxing these transactions we find that a one percentage point increase in the capital gains tax rate reduces acquisition activity by around 1 annually for the united states this implies unrealized synergy gains of 9 3 billion each year due to capital gains taxes

how do mergers create value a comparison of taxes market power and efficiency improvements as explanations for synergies there is little evidence in the literature on the relative importance of the underlying sources of merger gains prior literature suggests that synergies could arise due to taxes market power or efficiency improvements based on value line forecasts we estimate the average synergy gains in a broad sample of 264 large mergers to be 10 03 of the combined equity value of the merging firms the detailed data in value line projections allow for the decomposition of these gains into underlying operating and financial synergies we estimate that tax savings contribute only 1 64 in additional value while operating synergies account for the remaining 8 38 operating synergies are higher in focused mergers while tax savings constitute a large fraction of the gains in diversifying mergers the operating synergies are generated primarily by cutbacks in investment expenditures rather than by increased operating profits overall the evidence suggests that mergers generate gains by improving resource allocation rather than by reducing tax payments or increasing the market power of the combined firm

are alcohol tax hikes fully passed through to prices evidence from alaska on 1 october 2002 the state of alaska increased taxes on malt beverages from 0 35 per gallon to 1 07 per gallon increased taxes on wine from 0 85 per gallon to 2 50 per gallon and increased taxes on distilled spirits from 5 60 per gallon to 12 80 per gallon the net effect is that the tax on a standard serving rose from about 3 cents for beer 2 cents for wine and 4 cents for spirits to a uniform tax of 10 cents per standard serving of each type of alcohol beverage this paper uses primary data on alcoholic beverage prices in alaska to study a very basic question what was the impact of the tax hikes on prices an alcohol tax hike is often viewed as a public health policy tool to discourage excessive alcohol consumption and alcohol related problems such as drunk driving the impact of a tax hike on alcoholic beverage prices is a key link in the chain of the causality from the tax to public health economic theory and previous empirical studies mainly of taxes on goods other than alcoholic beverages do not provide very much guidance on what to expect following a tax hike it is an empirical question to answer the question i conducted telephone surveys just before and a year after the tax hike of on premise and off premise alcohol retail establishments across alaska

increasing wage dispersion and the changes in relative employment and wages in mexico s urban informal sector 1987 1993 this study analyses the role of changes in informal formal relative employment wage levels and wage inequality in explaining increasing wage dispersion in mexico during the 1987 1993 period from 1987 to 1993 the variance of the log of hourly wages for mexican workers increased by more than 50 per cent using data from the encuesta nacional de empleo urbano we find that this increase in the overall wage dispersion was mainly driven by increasing wage dispersion in the formal sector coupled with a faster growth in formal sector employment as a percentage of total employment however compression in the distribution of wages within the informal sector contributed to substantially slowdown the increasing overall wage inequality about 60 per cent of the 1987 1993 4 65 percentage point reduction in the informal sector share of total employment is explained by changes in the structure that determines sectoral employment the rest is explained by changes in the composition of the labour force particularly in

the impact of investor level taxation on mergers and acquisitions abstract when capital gains are taxed at a lower rate than dividends the difference in rates creates a tax discount on mergers and acquisitions the intuition is that if a target firm s assets are subject to the higher dividend tax rate but the proceeds from the sale of these assets are taxed at the lower capital gains rate there is a tax preference to be acquired using quasi experimental variation created by the jobs growth and tax relief reconciliation act of 2003 we show that this tax discount increases the quantity and decreases the quality of acquisitions made by dividend paying firms with taxable shareholders our estimates suggest that re implementing the same wedge between dividend and capital gains rates that the 2003 reform eliminated would destroy approximately 59 billion of the value of mergers and acquisitions in the u s annually

intergroup economic inequality in south africa the post apartheid era one of the most pressing challenges facing the south african government is how to expand the overall opportunity set for nonwhites who have been historically disadvantaged by apartheid this is perhaps best accomplished by expanding employment opportunities within the economy general employment expansion mnust be accomplished keeping in mind the urgent need to radically expand nonwhite employment employment and unemployment statistics are difficult to interpret but there is a general sense that the unemployment situation especially for nonwhites is extremely bad in dealing with employment issues two concerns must be faced both are legacies of the apartheid era the first is related to differences in educational attainment across racial groups during apartheid the bantu education policy was designed to suppress the educational attainment of africans blacks relative to whites however educational opportunities for coloureds mixed race and asians primarily indian were also depressed relative to whites the second concern is that labor market discrimination could be used either to exclude nonwhites for employment consideration or to limit their wages and opportunities once they are employed for policy reasons it is imperative to understand the extent to which premarket or market factors operate to limit opportunities for nonwhites given the institutionalized nature of apartheid segregation one can imagine three scenarios earnings differences could be the result entirely of premarket factors such as education differences alternatively earnings differences could be the result of labor market practices that limit one group s eamings relative to another s a third scenario a synthesis of the former two would find earnings differences to be the result of a combination of premarket differentials and in market discrimination to address premarket discrimination policy would focus entirely on leveling funding and increasing access to educational opportunities for historically disadvantaged groups however legislative forms such as affirmative action would be required to remedy exclusively labormarket discrimination a combination of these policies would be required to deal with the third scenario understanding the relative importance of these factors is important when resource allocation is considered this paper concerns itself with measuring income losses to nonwhites from labor market discrimination to evaluate the extent of labor market discrimination ordinary least squares ols estimates of earnings equations are evaluated for males in each population group observed wage differentials are decomposed into a component attributable to human capital differences while a residual is attributed to labor markelt discrimination these findings are then contrasted to those of others to give a sense of the trend in market discrimination in south africa

fiscal policy profits and investment this paper evaluates the effects of fiscal policy on investment using a panel of oecd countries we find a sizeable negative effect of public spending and in particular of its wage component on profits and on business investment this result is consistent with different theoretical models in which government employment creates wage pressure for the private sector various types of taxes also have negative effects on profits but interestingly the effects of government spending on investment are larger than those of taxes our results can explain the so called non keynesian i e expansionary effects of fiscal adjustments jel e22 e62

capital gains taxation and the cost of capital evidence from unanticipated cross border transfers of tax base abstract in a cross border takeover the tax base associated with future capital gains is transferred from target shareholders to acquirer shareholders cross country differences in capital gains tax rates enable us to estimate the discount in target valuation on account of future capital gains we estimate that a 1 percentage point increase in the capital gains tax rate reduces the value of equity by around 0 3 which suggests that the capital gains tax significantly raises firms cost of capital furthermore we find that the implied capital gains tax burden is higher at times of high economic growth and low stock market valuation

who pays cigarette taxes the impact of consumer price search abstract we conduct an empirical study of the impact of consumer price search on the shifting of cigarette excise taxes to consumer prices we use novel data on the prices that smokers report paying and document substantial price dispersion we find that cigarette taxes are shifted at lower rates to carton buyers and especially smokers who buy cartons of cigarettes in a state other than their state of residence we also find evidence that taxes are shifted at somewhat lower rates to the prices paid by heavier smokers and at somewhat higher rates to the prices paid by smokers of light cigarettes

do higher corporate taxes reduce wages micro evidence from germany because of endogeneity problems very few studies have been able to identify the incidence of corporate taxes on wages we circumvent these problems by using an 11 year panel of data on 11 441 german municipalities tax rates 8 percent of which change each year linked to administrative matched employer employee data consistent with our theoretical model we find a negative effect of corporate taxation on wages a 1 euro increase in tax liabilities yields a 77 cent decrease in the wage bill the direct wage effect arising in a collective bargaining context dominates while the conventional indirect wage effect through reduced investment is empirically small due to regional labor mobility high and medium skilled workers who arguably extract higher rents in collective agreements bear a larger share of the corporate tax burden

changes in the rate of return to education in sweden 1968 1991 this paper estimates changes in the rate of return to education in sweden between 1968 and 1991 both the quantity years of schooling completed and quality highest qualification obtained dimensions of education are considered adopting a human capital approach the rate of return is measured in terms of differences in wage rates associated with differences in education both quadratic wage and cubic spline wage functions are estimated the data used are from the 1968 1981 and 1991 swedish level of living surveys

explaining the enhanced hipc initiative a response to michaelowa 2003 michaelowa 2003 2002 proposes a political economy model to explain the re design of the heavily indebted poor country hipc debt reliefinitiative in 1999 the principal assumption justifying the adoption of thisalternative approach is an alleged paucity if not non existence of applied economic research on sustainable debt levels this note challenges that assumption

who bears the burden of international taxation evidence from cross border m as cross border m as can trigger additional taxation of the target s income in the form of non resident dividend withholding taxes and acquirer country corporate income taxation this paper finds that this additional international taxation is fully capitalized into lower takeover premiums in contrast acquirer excess stock market returns around the bid announcement date do not appear to reflect additional taxation of the target s income these findings suggest that international taxation is considered to be burdensome and that the incidence of this taxation is primarily on target firm shareholders

fuel tax incidence and supply conditions abstract the incidence of taxes on consumers and producers plays a central role in evaluating energy tax policy yet the literature testing the main predictions of the tax incidence model is sparse in this paper we examine the pass through rate of state gasoline and diesel taxes to retail prices and importantly we estimate the dependence of pass through on factors constraining the gasoline and diesel supply chains we consider several factors that alter the elasticity of supply including within state heterogeneity in gasoline content requirements refinery capacity utilization inventory constraints and variation in the demand for untaxed uses of diesel in general we find that in periods of time when the supply chain is constrained and the constraint is plausibly unrelated to shifts in demand the pass through rate of fuel taxes declines we describe several potential implications for tax policy including tax breaks during peak driving season and during times of supply disruptions such as after major hurricanes

heterogeneity in returns to schooling econometric evidence from ethiopia this paper investigates whether returns to schooling in ethiopia vary across the wage distribution of individuals to do so it adopts an instrumental variables quantile regression framework that allows for both endogeneity of schooling resulting from unmeasured ability and possible heterogeneity in the impact of schooling the empirical estimates indicate that education contributes more to the earnings of individuals at a lower end of the income distribution

economic volatility and returns to education in venezuela 1992 2002 preliminary evidence suggests that the rates of return to education in venezuela have been declining since the 1970s this study rigorously estimates the returns to education in venezuela for the period 1992 to 2002 and links them to earlier available estimates from the 1980s consistent cross sections from the encuesta de hogares por muestro are used to document falling returns to schooling and educational levels until the mid 1990s followed by increasing returns thereafter quantile regression analysis is used to provide further insight into the within skill group changes in returns over time

repatriation taxes and outbound m as repatriation taxes reduce the competitiveness of multinational firms from tax credit countries when bidding for targets in low tax countries this comparative disadvantage with respect to bidders from exemption countries violates ownership neutrality which results in production inefficiencies due to second best ownership structures this paper empirically estimates the magnitude of these effects the abolishment of repatriation taxes in japan and in the u k in 2009 has increased the number of acquisitions abroad by japanese and british firms by 16 1 and 1 6 respectively a similar policy switch in the u s is simulated to increase the number of u s cross border acquisition by 11 0 the yearly gain in efficiency is estimated to be 108 9 million dollar due to the japanese reform and 3 9 million dollar due to the u k reform simulating such a reform for the u s results in a yearly efficiency gain of 537 0 million dollar

consumption taxes and corporate investment consumers nominally pay the consumption tax but theoretical and empirical evidence is mixed on whether corporations partly shoulder this burden thereby affecting corporate investment using a quasi natural experiment we show that consumption taxes decrease investment firms facing more elastic demand decrease investment more strongly because they bear more of the consumption tax we corroborate the validity of our findings using 86 consumption tax changes in a cross country panel we document two mechanisms underlying the investment response reduced firms profitability and lower aggregate consumption importantly the magnitude of the investment response to consumption taxes is similar to that of corporate taxes received september 25 2017 editorial decision august 26 2018 by editor wei jiang authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

on the marginal source of investment funds abstract under the new view of dividend taxation developed by auerbach quarterly journal of economics 1979 93 433 446 bradford journal of public economics 1981 15 1 22 and king public policy and the corporation chapman hall london 1977 the marginal source of finance for new investment projects is retained earnings in this case the tax advantage of retaining earnings precisely offsets the double taxation of subsequent dividends taxes on dividends have no impact on the investment incentives of firms using retentions as a marginal source of funds and paying dividends with residual cash flows we show that the same invariance with respect to dividend taxes may hold under weaker conditions with respect to the source of funds if the use of funds follows the same pattern we find evidence that there is significant heterogeneity in our sample of us firms with some firms exhibiting dividend behavior consistent with this expanded version of the new view and others exhibiting behavior consistent with the traditional view that retained earnings are not an important marginal source of funds

the political economy of the enhanced hipc initiative only three years after its endorsement bythe world bank and the imf the heavilyindebted poor country hipc initiativewas considerably altered and enhanced thispolicy shift can be explained as a resultof utility maximization behavior bynational and international politicians international bureaucrats and ngo apolitico economic model suggests that theoverall rise of hipc default risk and thesymbolic value of the year 2000 have beenthe two major determinants of changes involume eligibility and conditionalityrequirements

simulating fundamental tax reform in the united states this paper uses a new large scale dynamic life cycle simulation model to compare the welfare and macroeconomic effects of transitions to five fundamental alternatives to the u s federal income tax including a proportional consumption tax and a flat tax the model incorporates intragenerational heterogeneity and a detailed specification of alternative tax systems simulation results project significant long run increases in output for some reforms for other reforms namely those that seek to insulate the poor and initial older generations from adverse welfare changes long run output gains are modest