catch up cycles and changes in industrial leadership windows of opportunity and responses of firms and countries in the evolution of sectoral systems this study proposes a framework that aims to explain why successive changes in industry leadership called also the catch up cycle occur over time in a sector in catch up cycles latecomer firms and countries emerge as international leaders whereas incumbents lose their previous positions new leaders are then dethroned by newcomers to identify factors at the base of catch up cycles this article adopts a sectoral system framework and identifies windows of opportunity that may emerge during the long run evolution of an industry this study proposes three windows related to the specific dimensions of a sectoral system one dimension is related to changes in knowledge and technology the second dimension pertains to changes in demand and the third includes changes in institutions and public policy the combination of the opening of a window technological demand or institutional policy and the responses of firms and other components of the sectoral system of the latecomer and incumbent countries determines changes in industrial leadership and catch up sectors differ according to the type of windows that may open and the responses of firms and other components of systems empirical evidence of catch up cycles is presented from six sectors namely mobile phones cameras semiconductors steel mid sized jets and wines

do better schools matter parental valuation of elementary education the evaluation of numerous school reforms requires an understanding of the value of better schools given the difficulty of calculating the relationship between school quality and student outcomes i turn to another method and use house prices to infer the value parents place on school quality i look within school districts at houses located on attendance district boundaries houses then differ only by the elementary school the child attends i thereby effectively remove the variation in neighborhoods taxes and school spending i find that parents are willing to pay 2 5 percent more for a 5 percent increase in test scores this finding is robust to a number of sensitivity checks

making sense of the competitiveness debate the debate over national competitiveness is marked by some basic misperceptions with few exceptions those who use the term have a crude essentially mercantilist view of world trade in which competition among nations is just like competition between corporations not only do the authors and readers of reports on national competitiveness usually not understand comparative advantage they are unaware of the most basic adding up constraints economists however find it hard to believe that seemingly well informed people can really be this naive and assume that there must be more sophisticated ideas lying behind what they say the rationales offered by economists in turn offer false comfort to the would be sophisticates who like the term competitiveness they believe that they have transcended conventional economic theory when the fact is that they have failed to comprehend it in short the actual level of discussion is lower than any of the participants imagines copyright 1996 by oxford university press

in kind transfers self selection and optimal tax policy abstract this paper examines the role of public provision of goods as a redistributive mechanism when tax policies are designed optimally on the basis of the information available to the government we characterize pareto efficient allocations that are attainable through the tax policy and derive the conditions under which public provision will enhance welfare above the maximum that can be achieved through a mix of a general income tax and commodity taxes price subsidies first when there are two produced goods we prove that public provision is always pareto improving the improvement is achieved through changing individuals actual consumption levels second with no restrictions on the number of goods we derive a sufficient condition for public provision to be pareto improving this is achieved by weakening self selection constraints so that welfare improving tax changes are made possible suitable examples include provision of day care basic health care and rights to a minimum old age pension

upgrading in global value chains lessons from latin american clusters it has been shown that clustering helps local enterprises in industrial districts overcome growth constraints and compete in distant markets in advanced and less developed countries nevertheless recent contributions have stressed that more attention needs to be paid to external linkages and to the role played by global buyers to foster upgrading at cluster levels in this study we contribute to this debate focusing on the analysis of the relationships existing between clustering global value chains upgrading and sectoral patterns of innovation in latin america we find that sectoral specificities matter and influence the mode and the extent of upgrading in clusters integrated in global value chains

china s competitive performance a threat to east asian manufactured exports there is growing concern in southeast and east asia about the competitive threat posed by china s burgeoning exports exacerbated by its accession to the wto the threat is not confined to labourintensive products but spans the whole technological and skill range at the same time china is rapidly raising its imports from the region and it is not clear whether its burgeoning exports will damage its neighbours we examine the dimensions of china s competitive threat in the 1990s benchmarking competitive performance by technology and market and finds that market share losses are so far mainly in low technology products with japan being the most vulnerable market we analyse market share changes and highlight product groups that are directly or indirectly exposed to a competitive threat we examine intra regional trade and find that china and its neighbours are raising high technology exports in tandem the nature of the international production systems involved lead to complementari ty rather than confrontation china is thus acting as an engine of export growth for its neighbours in terms of direct trade however this will change as china moves up the value chain and takes on the activities that have driven east asian export growth

jockeying for position what it means and why it matters to regional development policy when places compete malecki e j 2004 jockeying for position what it means and why it matters to regional development policy when places compete regional studies38 1093 1112 the realization that places compete for investment has expanded in recent years to encompass competition among places for the attention of migrants tourists and media glow as well as investment the most competitive places have been multidimensional in their attractions and have made the transition to the knowledge based economy the latest priority is being placed on attracting mobile workers and mobile investment creative workers are the core of the knowledge economy and of its geographies such as intelligent places and learning regions knowledge metrics innovation indices and report cards are increasingly common each seemingly developed to sort the list of places in a different order lists or league tables of the best places for business to live retire and visit are key features of economies and societies whose factors of success

competitiveness indices and developing countries an economic evaluation of the global competitiveness report developing countries policy makers worry about national competitiveness and closely watch indices ranking international competitive performance this paper analyzes from a development economics perspective if competitiveness is a legitimate concern and if the leading indices deserve the attention they get it assesses the best known index the global competitiveness report of the world economic forum and finds deficiencies at several levels its definitions are too broad the approach biased and the methodology flawed many qualitative measures are vague redundant or wrong these weak theoretical and empirical foundations reduce the value of the indices for analytical or policy purposes

friedman rule in a model with endogenous growth and cash in advance constraint this paper introduces money into an overlapping generations model with endogenous growth the model due to docquier et al 2007 exhibits a positive intergenerational externality which precludes its laissez fair equilibrium to be optimal even if the government can control the level of physical capital and set it to satisfy the modified golden rule the main message of the paper is that as long as the modified golden rule is attained friedman rule is optimal the result holds regardless of the ability of the government to internalize the externality and control the level of human capital other results include i violation of friedman rule for a different second best environment wherein human capital accumulation is controlled but not physical capital accumulation ii existence of a negative relationship between money growth rate and the economy s endogenous growth rate and iii non uniqueness of friedman rule

the friedman rule in an overlapping generations model with nonlinear taxation and income misreporting this paper models a two period overlapping generations economy with money populated with individuals of different skills they face a nonlinear income tax schedule and can engage in tax evasion money serves two purposes the traditional one modeled through a money in the utility function it also facilitates tax evasion the main message of the paper is that income tax evasion in this framework leads to the violation of the friedman rule the paper also shows that even in the absence of tax evasion when optimality requires differential commodity taxation complementarity of real cash balances and labor supply does not guarantee the optimality of the friedman rule as a boundary solution an additional assumption is required

taxation with costly administration the concept of a tax technology is used here as providing a unified framework for analyzing both administrative activity by tax authorities and tax resisting activity by taxpayers this framework provides a simple formalization of adam smith s four components of tax costs administration substitution active noncompliance and passive compliance the model is used to derive policy implications concerning the proper measurement of the cost of public funds and concerning the criterion for optimal administration

money and endogenous growth the ramsey romer model of endogenous growth is extended to allow for holdings of real money balances and government debt as well as capital and for non interconnected generations of households tax financed increases in government consumption and debt depress growth prospects and boost inflation as long as a positive birth rate ensures that future taxes are shouldered by future yet unborn generations debt financed increases in government consumption depress growth and boost inflation even more money financed increases in government consumption depress growth less but increase inflation by more giving subsidies through an increase in monetary growth is non neutral since this increases real growth and thus inflation increases by a lesser amount than monetary growth bond financed increases in monetary growth lead to a larger increase in real growth and a smaller increase in inflation if there are cost adjustment for investment cuts in monetary growth and increases in government debt and government consumption induce an increase in the real interest rate copyright 1994 by ohio state university press

public policy and catching up by developing countries in global industries a simulation model this paper examines the effects of different public policies strengthening capability building favouring firms learning protectionism and support of entry of new domestic firms on the catch up of a latecomer with respect to an incumbent country in changing and uncertain technological environments the effects of these policies are analysed with a simulation model first separately and then jointly to assess possible complementarities we reach several results first we confirm that capability building and firms learning are important drivers of catch up second we find that when a large technological discontinuity takes place entry support favours catch up while protectionism has the opposite effect protectionism favours catch up only when no technological discontinuity opens up third we find that depending on the technological conditions different policy complementarities exist therefore different policy mixes should be at the base of a country catch up strategy these results add to the previous literature on public policy and catching up by developing countries in an industry by distinguishing the different effects of various types of public policy and relating them to the technological conditions that are present in an industry

technology and competitiveness this paper reviews the literature on technology and competitiveness first the concept of the international competitiveness of a country and various theoretical approaches on the relationship between trade and growth are discussed then a number of empirical studies of the impact of technology as evidenced by r d patents etc on exports are examined the final section summarizes the evidence and considers the lessons for policy copyright 1996 by oxford university press

the optimal inflation tax when money reduces transactions costs abstract it has been argued that if money acts as an intermediate good the optimal inflation tax is zero this paper reexamines such a claim in the context of a model in which money reduces transactions costs it is shown that modeling money as an intermediate good does not necessarily imply that the optimal inflation tax is zero the optimality of a zero inflation tax depends on the properties of the transactions costs technology in particular if the transactions costs technology does not exhibit constant returns to scale it is optimal to resort to the inflation tax

looming stations valuing transport innovations in historical context we investigate the impact of transport innovations on the productivity of urban locations in 1890 1936 berlin germany we find an increase in land value of up to 2 5 per 100 m decline in distance to urban railway station

the friedman rule old and new abstract in overlapping generations models money growth creates intergenerational wealth effects and leads to the breakdown of the friedman rule the rule can be restored via lump sum tax and transfers that neutralize these wealth transfers additionally and in contrast to money in the utility function models the friedman rule is not the unique first best solution in cash in advance constraint models of money a continuum of combinations of money growth rates and consumption taxes implement the first best allocation this paper traces through the intellectual origins of the first old result which was recently restated in bhattacharya et al 2005 monetary policy fiscal policy and the inflation tax equivalence results macroeconomic dynamics 7 647 669 and formally demonstrates the second new result

does the law of one price hold for hedonic prices hedonic prices of locational attributes in urban land markets are determined by a process of spatial arbitrage that is similar to that which underpins the law of one price if hedonic prices deviat

tax evasion and the optimum general income tax abstract this paper incorporates tax evasion into an optimum general income tax problem with endogenous labor supply it posits a two group model with high and low wage individuals to investigate the properties of optimal audit and tax structures the following main results are obtained first high wage persons are never audited while low wage persons are audited with a probability strictly less than one secondly high wage persons should face a zero marginal tax rate thirdly low wage individuals who have been audited and found innocent should pay a lower tax than those who are not audited fourthly there are two possible tax regimes low wage persons face a positive marginal tax rate under one regime and a zero rate under the other fifthly even if honesty cannot be rewarded the other results of the paper continue to hold

market stimulating technology policies in developing countries a framework with examples from east asia abstract this paper proposes an analytical framework for technology development based upon evolutionary approaches and drawing upon asian development strategies the analysis rests on the concept of market stimulating technology policies comprising a broad array of policies to promote industrial and technological development some market and others government determined these policies may be functional horizontal or vertical and can be analyzed at three levels national strategic and specific the paper suggests that strategic choices are involved at all stages that cannot be resolved entirely by recourse to free markets

valuing rail access using transport innovations this paper uses a powerful empirical method to evaluate the benefits of rail access to consumers we study the effects on house prices of a transport innovation that altered the distance to the nearest station for some households but left others unaffected the transport innovation we study is the construction of new stations in london in the late 1990s using this innovation we implement a quasi experimental approach that allows us to avoid the biases inherent in cross sectional valuation work our evidence on distance station effects on local prices identified through distance changes induced by the transport innovation suggests that households value rail access and that these valuations are large compared to the valuations of other local amenities

pareto efficient income taxation under costly monitoring abstract this paper studies the problem of pareto efficient fiscal policies when labour supply is elastic and the government has no a priori information on income earned the model is a two class economy with an official and an unofficial labour market official income is taxed non linearly while unofficial income is only observable after a costly audit upon which it is taxed at an exogenous penalty rate after characterisation of the pareto efficient audit and tax policies it is verified how these policies react to a higher government revenue requirement an increase in the penalty rate a stronger ambition to redistribute in the two last scenarios the effect on the marginal tax and the audit rate is shown to decompose into a government revenue effect and a substitution effect a numerical example shows that the substitution effects are of minor importance suggesting that first intuition about the best way for a government to cope with increased evasion opportunities substituting auditing effort for high marginal tax rates sketches only part of the picture

a quantitative analysis of inflation as a tax on the underground economy abstract inflation rates are more dispersed and are persistently higher in developing countries this paper quantifies the importance of the public finance motive for inflation in the presence of a tax evading sector the underground economy the approach is motivated by the observation that the underground economy is especially large in poor countries the analysis builds on a general equilibrium monetary model with two production sectors where income in one of the sectors cannot be taxed a benevolent government finances its budget using an optimal combination of the income tax rate and the inflation rate the model is first calibrated to the u s economy and is then used for a cross country simulation the resulting relationships between the size of an underground economy inflation rate income tax rate and the share of seigniorage in the government revenue rationalize the cross country data quantitatively well

spot and futures prices and the law of one price the law of one price lop is tested for narrowly defined commodities traded in futures markets in different countries during the period 1973 80 although the lop holds as an average tendency for most of the commodities there are instances of large riskless arbitrage returns before transactions costs deviations from the lop tend to be commodity specific rather than due to a common external factor and they tend to be smaller the longer the maturity of the futures contract in this paper we examine how well the law of one price lop holds for commodities traded internationally the answer to this question is important for two reasons the first is that in most modern theories of exchange rates price arbitrage for at least some goods is a necessary condition to determine the level of exchange rates but recent empirical research on the behavior of various price indices casts doubt on the empirical validity of the lop across countries for even the most disaggregated indices if it is not possible to identify any commodities for which the lop works satisfactorily then models incorporating the lop will not provide an adequate description of exchange rates the second reason for studying individual commodities is to gain information on the efficiency and the degree of integration of international commodity markets in efficient markets international commodity arbitrage implies that for a standard commodity prices in two markets expressed in a common currency will not differ but for transport costs

tax evasion and the marginal cost of public funds tax evasion and deadweight loss have similar implications for the rules of public finance the optimal mix of taxes can be derived from the minimization of the sum of aggregate deadweight loss and aggregate cost of tax evasion similarly the marginal cost of public funds includes allowances for marginal deadweight loss and marginal cost of tax evasion per dollar of public revenue acquired

measuring the national competitiveness of southeast asian countries national competitiveness is a measure of the relative ability of a nation to create and maintain an environment in which enterprises can compete so that the level of prosperity can be improved this paper proposes a methodology for measuring the national competitiveness and uses the 10 southeast asian countries for illustration the basic idea is to deconstruct the complicated concept of national competitiveness to measurable criteria the observations data on the criteria are then aggregated according to their importance to obtain an index of national competitiveness for data collected from questionnaire surveys a calibration technique has been devised to alleviate bias due to personal prejudice in data aggregation the importance is expressed by both a priori weights and a posteriori weights these two types of weights consistently show that singapore malaysia and thailand have the highest national competitiveness while myanmar cambodia and laos are the least competitive countries the performance of each country in every criteria measured also provides directions for these countries to make improvements and for investors to allocate resources

ruling out divergent speculative bubbles abstract the growth in the empirical literature on testing for divergent in mean speculative bubbles indicates that existing theoretical arguments for ruling out such price paths are not sufficiently compelling here we strengthen the case for ruling out explosive or implosive bubbles a priori by filling in two gaps first we demonstrate why divergent stochastic bubbles arising from purely extrinsic uncertainty as in blanchard 1979 cannot be equilibria in a monetary optimizing model second we show why existing arguments for ruling out implosive price bubbles are insufficient in some cases and we provide stronger arguments

is the friedman rule optimal when money is an intermediate good in contrast to the recent literature on the optimal inflation tax we show that in models where money reduces transactions costs it is optimal to set the inflation tax to zero when seigniorage is replaced by revenue from distortionary taxes the main reasons for this result are that the variable costs of supplying real balances are negligible and the inflation tax is a unit tax we also show that the intermediate good optimal taxation rules in the public finance literature cannot be directly applied both when money is costless and when it requires resources to be produced

towards a theory of the direct indirect tax mix despite the fact that all developed economies levy broadly based indirect taxes alongside direct taxes little theory is devoted to explaining the direct indirect tax mix our purpose is to show that if different taxes have different evasion characteristics some optimal tax mix emerges naturally assuming that only income tax can be evaded and focusing on a two class economy we analyse the case for supplementing optimal non linear income taxation with commodity taxation and we develop conditions under which the latter should or should not be uniform

optimal fiscal and monetary policy some recent results this paper studies the quantitative properties of fiscal and monetary policy in business cycle models in terms of fiscal policy optimal labor tax rates are virtually constant and optimal capital income tax rates are close to zero on average in terms of monetary policy the friedman rule is optimal nominal interest rates are zero and optimal monetary policy is activist in the sense that it responds to shocks to the economy

non optimality of the friedman rule and optimal taxation in a growing economy with imperfect competition abstract this paper shows that if capital generates production externality there exists a wedge between returns to money and to capital driving the friedman rule is not optimal however in the absence of capital externality the friedman rule may be valid even under imperfect competition

south africa s international cost competitiveness and exports in manufacturing abstract the new south african government has embraced globalization with mixed results to date controversies center on south africa s international cost competitiveness and whether south african exports respond to changes in competitiveness we measure competitiveness by relative unit labor costs we find that south african relative unit labor costs declined in the 1990s but are still high relative to other developing countries econometric analysis reveals a strong effect of relative unit labor costs on exports

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

the east asian miracle study does the bell toll for industrial strategy the world bank s east asian miracle study1 has been anticipated with considerable interest by the development community it was intended not least by the japanese government that financed it to be an objective re examination of the role of government interventions in economic particularly industrial development it reflected a widespread unease that the bank was too strongly committed to a neoliberal view of the development process 2 this approach evolved over the 1980s drawing mainly upon evidence from east asia and fuelled by a shift in mainstream economics and political perceptions in the leading developed countries it formed the basis of the bank s subsequent lending and policy advice and was at the core of the structural adjustment programs that have shaped policy in many developing countries this review confines itself to the study s analysis of industrial policy concentrating on the approach and the analysis of the established nies the four tigers

the transformation of competitive advantage in east asia an analysis of technological and trade specialisation summary in recent years there has been considerable interest in the relationship between a country s export competitiveness and the role played by technology in strengthening and maintaining competitive advantage a central feature of recent empirical work mainly focused on the oecd countries has rested on examining patterns of export and technological specialization between economies and sectors this paper moves attention away from the advanced industrialized economies to examine the trends for trade and technological specialization among the east asian developing economies in particular two aspects of specialization are examined first to what extent have patterns of competitive advantage changed over time and second to measure the relationship between patterns of trade and technological specialization important differences are found in the patterns of specialization and in the relationship between them among the advanced east asian economies and those catching up

technology systems and technology policy in an evolutionary framework the central purpose of this paper is to outline an evolutionary theory of technology policy and to connect it with the emerging literature on national systems of innovation any understanding of technology policy must be based on a clear understanding of the nature of technology and the important differences between science and technology technology can be treated in terms of knowledge skills and artifacts and in each case there are different variety generating mechanisms different selection processes and different institutional structures for policy purposes the degree of connection between these different dimensions of technology is at the core of technology policy c 1995 academic press inc copyright 1995 by oxford university press

stochastic multi attribute acceptability analysis smaa an application to the ranking of italian regions we consider the issue of ranking regions with respect to a range of economic and social variables departing from the current practice of aggregating different dimensions via a composite index usu

public provision of private goods self selection and income tax avoidance several contributions in the optimal taxation literature have emphasized that when individuals preferences are not separable between leisure and other goods it is desirable to supplement a nonlinear income tax with public provision of private goods moreover it has also been shown that the choice between a topping up and an opting out scheme depends on whether the publicly provided good is a complement or substitute with leisure with opting out topping up being the preferred scheme for goods which are substitutes complements for labor in this paper using the self selection approach to tax analysis we revisit these results in the presence of tax avoidance and investigate how public provision interacts withthe agents incentives to engage in tax avoidance three results are obtained first we show that tax dodging opportunities imply that non separability between labor and other goods is neither a necessary nor a sufficient condition to make public provision of private goods a welfare enhancing policy instrument second we show how tax dodging opportunities limit the scope for using topping up provision schemes as a redistributive device finally we show that for most of the public provision schemes previously analyzed in the literature being a welfare enhancing policy instrument goes hand in hand with weakening the agents incentives to shelter income from the tax authority however we also point out an important exceptionto this pattern

haircuts or hysteresis sources of movements in real exchange rates abstract we empirically assess the importance of two sources of real exchange rate movements in models where ppp holds only among traded goods real exchange rate variation results from relative price movements within countries an alternative explanation relies on hysteretic price setting and nominal exchange rate changes using disaggregated price data from 11 oecd nations we find some support for the non traded goods models for example prices of haircuts in canada and the united states are unrelated in the long run we find stronger evidence to support models that emphasize sticky prices transportation costs or other impediments to frictionless trade

cross country price dispersion in the euro era a case study of the european car market impact of the euro this paper investigates the effects of the european monetary union on cross country price differences in the european car market the analysis utilizes disaggregate bi annual data on the prices of almost all car models sold in the 15 countries of the european union over 1993 2003 the data refer to identical models with identical specifications and options to identify the euro s effect we exploit the fact that out of the 15 countries in our sample 12 joined euroland at the beginning of 1999 and officially adopted the euro as their national currency at the beginning of 2002 while 3 countries remained outside the monetary union we investigate whether there is a systematic difference in the evolution of cross country price dispersion between euroland members and non members after 1999 our analysis distinguishes between phase i monetary union with national currencies preserved 1999 2001 and phase ii official adoption of the euro as a national currency in 2002 we examine the evolution of both the absolute price differentials across countries and the speed with which deviations from the long term cross country differentials are eliminated we find that in the pre euro era countries that later joined euroland exhibited lower price differentials relative to the base country of the netherlands by approximately 6 the monetary union further reduced these differentials by a small but significant percentage about 1 5 between 1999 and 2001 this reduction happened while the price differentials in non euroland countries increased the price differentials in euroland countries further decreased following the official euro adoption in 2002 however we cannot attribute this decline to the euro as we witness an even faster decrease of price differentials in non euroland countries over the 2002 2003 period despite these reductions cross country price differences remain large even among members regarding the speed of convergence we find that even before 1999 the half life of price shocks was shorter in euroland countries compared to non euroland countries 0 65 versus 1 year however we do not find any evidence that the emu further affected the speed of convergence in a significant manner overall our results suggest a big role for exchange rate stability in reducing international price dispersion and a smaller role for a common currency the surprisingly high remaining international price differentials after the euro suggest the need for additional measures towards integration e g liberalization of the distribution system reduction of high registration taxes in particular countries pinelopi koujianou goldberg and frank verboven

the assessment international competitiveness the concept of international competitiveness as applied to national economies is a popular one politicians businessmen and economists alike re fer to it in day to day discussion when looking at the external export import market share or trade balance performance of different countries indi cators are produced showing changes in or levels of various countries competitiveness e g the relative price or cost indices regularly published by the imf and the oecd or the absolute measures produced by organizations such as the geneva world economic forum and the lausanne institute for management development governments of ten instigate research on the matter as for instance in the case of the 1993 us competitiveness policy council orthe 1995 eu competitiveness advisory group yet it has recently been argued by paul krugman that competitiveness is a meaningless word when applied to national economies and the obsession with competitiveness is both wrong and dangerous krugman 1994 p 44 apositionkrugman forcefully reaffirms in his contribution to this issue of the oxford review of economic policy

higher growth through the blue ocean strategy implications for economic policy a b s t r a c t higher growth is a key goal of companies governments and societies economic policies often attempt to attain this goal by targeting companies of certain sizes that operate in specific industries and focus on a specific business activity this approach to policy making has considerable shortcomings and seems to be less than fully effective in increasing economic growth we suggest a new approach to policy making that stems directly from the entrepreneurial perspective this approach examines a successful business strategy framework the blue ocean strategy to discover conditions for high growth we test the propositions on empirical data for two cases of successful high growth business namely slovenian gazelles and amazon com the results reveal a gap between the macro level of economic policy making to achieve higher growth and the micro level of business growth the findings call for a change in the focus of economic policies on specific size companies industries and business activities to intraindus try cooperation collaboration between companies of different sizes value innovation and creation of uncontested markets

capital income taxation and the atkinson stiglitz theorem abstract accounting for the role of financial system and money holdings in an optimal nonlinear income tax model we argue that capital income taxation is a non redundant policy tool even if individual preferences are separable between leisure and other goods

redistribution when avoidance behavior is heterogeneous abstract the optimal income taxation framework is extended to account for heterogeneity in avoidance behavior the optimal tax formulae are shown to be simply and intuitively modified to reflect the value of taxable income as an indicator of the need for transfers at a given skill level this effect is in addition to any effect implied by just considering additional margins of response to taxes alternative sources of heterogeneity and their likely consequences are discussed when the choice of administration is added to the model it is demonstrated that the optimal tax system may include some seemingly wasteful avoidance schemes even if they could be eliminated without any cost when an avoidance scheme is more heavily used by the needy it may provide additional redistribution without affecting standard incentive constraints

estimates of the impact of crime risk on property values from megan s laws abstract we estimate the willingness to pay for reductions in crime risk using the location and move in dates of sex offenders we find significant effects of sex offenders locations that are geographically localized house prices within 0 1 miles of a sex offender fall by 4 percent on average we then use this finding to estimate the costs to victims of sexual offenses and find costs of over 1 million per victim far greater than previous estimates however we cannot reject the alternative hypotheses that individuals overestimate risks posed by offenders or that living near an offender poses significant costs exclusive of crime risk jel k42 r23 r31

optimality of the friedman rule in economies with distorting taxes abstract we find conditions for the friedman rule to be optimal in three standard monetary models our main contribution is to shed light on two issues in the literature first the conventional view maintains that when money is a final good its services should be taxed moreover if money demand is interest inelastic its services should be taxed heavily we show that this view is incorrect second there is an ongoing controversy about whether the optimality of the friedman rule is connected to the intermediate goods result from public finance we resolve this controversy by showing a deep connection between these results

the role of countercyclical monetary policy when firms set nominal prices in advance optimal monetary policy insulates aggregate output against shocks to demand it can do so however by following the constant money growth rule advocated by milton friedman it need not respond to the shocks in an actively countercyclical way in addition to the extent that output fluctuations are driven by shocks to supply money growth should be procyclical

optimal monetary policy optimal monetary policy maximizes the welfare of a representative agent given frictions in the economic environment constructing a model with two sets of frictions costly price adjustment by imperfectly competitive firms and costly exchange of wealth for goods we find optimal monetary policy is governed by two familiar principles first the average level of the nominal interest rate should be sufficiently low as suggested by milton friedman that there should be deflation on average yet the keynesian frictions imply that the optimal nominal interest rate is positive second as various shocks occur to the real and monetary sectors the price level should be largely stabilized as suggested by irving fisher albeit around a deflationary trend path since expected inflation is roughly constant through time the nominal interest rate must therefore vary with the fisherian determinants of the real interest rate although the monetary authority has substantial leverage over real activity in our model economy it chooses real allocations that closely resemble those which would occur if prices were flexible in our benchmark model there is some tendency for the monetary authority to smooth nominal and real interest rates

tax evasion and optimal commodity taxation abstract this paper incorporates tax evasion into ramsey s optimal taxation problem it provides i a precise and intuitive characterization of the tradeoff between optimal tax rates and audit probabilities and ii a modified version of the ramsey equation it also proves that in the presence of tax evasion a the well known requirement of proportional reduction in compensated demands b the traditional result on the optimality of uniform taxation when income is exogenous and c the equivalence of wage and uniform commodity taxes are no longer valid

optimal fiscal and monetary policy under sticky prices this paper studies optimal fiscal and monetary policy under sticky product prices the theoretical framework is a stochastic production economy without capital the government finances an exogenous stream of purchases by levying distortionary income taxes printing money and issuing one period nominally risk free bonds the main findings of the paper are first for a miniscule degree of price stickiness i e many times below available empirical estimates the optimal volatility of inflation is near zero this result stands in stark contrast with the high volatility of inflation implied by the ramsey allocation when prices are flexible the finding is in line with a recent body of work on optimal monetary policy under nominal rigidities that ignores the role of optimal fiscal policy second even small deviations from full price flexibility induce near random walk behavior in government debt and tax rates third sluggish price adjustment raises the average nominal interest rate above the one called for by the friedman rule finally an interest rate feedback rule whereby the nominal interest rate depends on inflation and output fits well the data emanating from the ramsey economy however the fitted rule is not of the taylor type for the implied inflation coefficient is less than one and close to zero and the output coefficient is negative jel classification e52 e61 e63

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

samurai accountant a theory of auditing and plunder a risk neutral principal wishes to exact a payment from a risk neutral agent whose wealth he does not know but may verify through a costly auditing procedure we characterize efficient schemes for the principal when he is allowed to choose schedules for preaudit and postaudit payments and audit probabilities subject to the constraint that only monetary incentives can be used and that the principal may never make a net payment to the agent the main results are that efficient schemes involve preaudit payments which are increasing in the agent s wealth audit probabilities are decreasing in the agent s wealth and also satisfy certain constraints as equalities in general such schemes involve stochastic auditing and rebates after an audit in this paper we analyse the problem of a principal extracting wealth from an agent who is reluctant to part with it and is also better informed than the principal as to the amount he owns we assume that the principal has a costly means of discovering the agent s

lump sum taxation and the superneutrality and optimum quantity of money in life cycle growth models abstract the question of superneutrality and the optimum quantity of money is addressed in a model where money services enter the utility function and where individuals have finite lives it is demonstrated that the existing result in the literature regarding a positive relationship between money creation and the steady state capital intensity and welfare is not due to monetary policy per se on the contrary this is shown to arise because of the intergenerational wealth effects embedded in the manner in which money is created assuming that preferences are separable between consumption goods and real balances and that the consumption goods are normal it is proved that i money is superneutral and ii any other money supply rule is pareto inferior to the chicago rule provided that the government also embarks on a policy of wealth redistribution across generations through the imposition of appropriate lump sum taxes and transfers

self selection and pareto efficient taxation abstract this paper analyses the set of pareto efficient tax structures the formulation of the problem as one of self selection not only shows more clearly the similarity between this problem and a number of other problems such as the optimal pricing of a monopolist which have recently been the subject of extensive research but also allows the derivation of a number of new results we establish i under fairly weak conditions randomization of tax structures is desirable ii if different individuals are not perfect substitutes for one another in production then the general equilibrium effects until now largely ignored in the literature of changes in the tax structure may be dominant in determining the optimal tax structure in particular if the relative wage of high ability and low ability individuals depends on the relative supplies of labor the optimal tax structure entails a negative marginal tax rate on the high ability individuals and a positive marginal tax rate on the low ability individuals the marnitude of which depends on the elasticity of substitution iii if individuals differ in their preferences pareto efficient taxation may entail negative marginal tax rates for high incomes while iv if wage income is stochastic the marginal tax rate at the upper end may be 100 our analysis thus makes clear that the main qualitative properties of the optimal tax structure to which earlier studies called attention are not robust to these attempts to make the theory more realistic