tax collection with agency costs private contracting or government bureaucrats historically governments contracted with private agents known as tax farmers to collect taxes this paper develops a theoretical framework for determining when a welfare maximizing government should choose tax farmers over bureaucratic tax collectors while bureaucratic collectors have an incentive to shirk and raise collection costs above least costs profit maximizing private collectors tend to reduce tax evasion below the optimal level generally the choice of collection methods depends on a comparison of the welfare loss associated with monitoring in the bureaucratic setting and the welfare loss associated with overdetection of evasion in the private setting copyright 1992 by the london school of economics and political science

secular cost changes and the size of government towards a generalized theory abstract baumol s cost disease account of government growth is contrasted with that of kau and rubin who focus on decreasing costs of tax collection over time the apparent paradox wherein the first theory explains government growth by cost increases and the second by way of cost decreases is technically resolved why both theories seem to be able to stand up to empirical tests even though they use similar data is then explained finally public choice analysis is employed to reveal further potential for the ultimate construction of one all embracing secular cost change theory of government growth

corporate income tax competition double taxation treaties and foreign direct investment abstract in the presence of international capital mobility foreign direct investment is influenced by corporate income tax rates and the rules of how taxes paid in the host country are treated at home in this paper the exemption credit and deduction methods are considered as tax rules tax competition is modeled as a non cooperative game with respect to both corporate tax rates and the form of double taxation relief the subgame perfect equilibrium is shown to be independent of the tax rules since capital is inefficiently allocated the feasibility and the content of a cooperative contract between governments are analyzed it is argued that only the credit method requires neither compensatory payments nor fully harmonized tax rates this is consistent with the observation that tax credits are very often adopted in double taxation treaties

law enforcement and the black market exchange rate abstract this paper examines how a system of multiple exchange rates can give rise to unreported exports and imports and a black market for foreign exchange risk aversion rather than an assumed smuggling or detection technology generally guarantees the coexistence of legal and illegal trading evidence for brazil suggests that enforcement of the exchange rate and trade regime is an important fundamental of the black market exchange rate that has so far invariably been left out of empirical work

fixed investment and economic growth new results on causality this study re examines the issue of causality between investment shares and economic growth a methodology is applied based on arellano and bond 1991 and holtz eakin newey and rosen 1988 to quinquennial panel data on growth and investment shares for the post war period and shows that contrary to previous results in the literature causality between fixed investment and growth runs in both directions investment shares granger cause growth rates and growth rates granger cause investment shares granger causality from investment shares to growth rates is found to be negative the result is in contrast with a capital fundamentalist view which sees fixed investment as the key to long run growth but is fully consistent with the predictions of solow type growth models

the long run relationship between openness and government size evidence from bounds test the bounds test is applied to determine the existence of a level relationship between government size openness terms of trade volatility and external risk using time series data from australia canada england norway sweden and the usa bounds test results show that the existence of a long run relationship in the usa and canada but not in any of the other countries long run parameters are estimated using both autoregressive distributed lag and fm ols procedures results vary from country to country with some evidence that government size is significantly affected by openness and terms of trade volatility however contrary to argument and evidence developed using cross section data empirical evidence presented in this paper show that the size of the government has not changed to mitigate the effect of increased income risks associated with greater openness

trade openness and public expenditure the spanish case 1960 2000 the empirical link between the post wwii expansion of international market integration and the growth of national public expenditure has been widely noted with no consensus as yet regarding the interpretation of this correlation we posit that a likely link between increased openness and public spending is the use of the latter to offset changes in the distribution of income that result from increased openness to explore this potential link we study time series data from spain in 1960 2000 a period of major changes in political organization as well as in both fiscal and trade policy we find evidence that democracy reinforced the causal relation from increased openness to greater public expenditure thus the paper contributes to the literature that emphasizes that changes in political regimes are potentially important determinants of the observed international patterns of openness and government size

strategic behaviour and the rules for international taxation of capital this paper examines the welfare of a capital exporting or source country and a capital importing or host country under tax credit and tax deduction systems for the international taxation of capital because the two tax systems may create quite different strategic incentives for the countries the authors compare the equilibria in the tax setting game played by the two countries under each system they find that the tax credits system introduces an antitrade bias into the equilibrium contrary to initial impressions and that both capital exporting and capital importing countries will prefer the tax deductions scheme to tax credits copyright 1989 by royal economic society

public goods self selection and optimal income taxation using the self selection approach to tax analysis this paper derives a modified samuelson rule for the provision of public goods when the government deploys an optimal nonlinear income tax this approach gives a straightforward interpretation of the central result in this area generalises it and provides a simple characterisation of optimal policy in a wide range of circumstances the analysis also emphasises and clarifies the significance of the choice of numeraire for the optimality of decentralising public spending decisions it is well known that the famous samuelson rule for the provision of public goods may not be applicable when the tax revenues used to finance the public goods come from distorting taxes the principle was recognized as long ago as pigou 1947 long before the samuelson rule was devised pigou saw that in addition to the resource cost involved in transferring funds from the private to the public sector there was a deadweight loss involved from this insight he suggested that the criterion for providing public goods should be more stringent than the samuelson rule would later suggest in particular one might expect that the inclusion of the deadweight loss of taxes as part of the cost of providing a public good would lead to a reduction in its optimal provision relative to a situation in which lump sum taxes were available the problem was investigated more systematically by atkinson and stern 1974 who considered the case in which a public good is financed by a set of optimal commodity taxes all individuals were assumed to be identical so efficiency alone dictated the objective they found that no prima facie case could be made for the pigou position that the use of distortionary taxes called for a reduction in the supply of the public good their analysis clearly showed that there were two influences at work when the financing of a public good was by distorting taxes on the one hand

why do countries combine the exemption system for the taxation of foreign profits with domestic double taxation relief many european countries exempt foreign profits from domestic corporate taxation at the shareholder level however all corporate profits are taxed and double taxation relief is granted only for domestic corporate taxes this paper attempts to rationalize this tax policy in the presence of double taxation agreements which exempt foreign profits from domestic corporate taxation countries may use shareholder taxes to tax these profits the disadvantage of shareholder taxes is that they create incentives to sell domestic firms to foreigners but double taxation relief for domestic profits may preserve domestic ownership our results imply that national dividend tax policies may be a factor contributing to the empirically observed home bias in investment

government size government debt and globalization this article empirically investigates the effect of globalization on government size and debt using panel heterogeneous cointegration techniques to a panel of developing and developed countries i

marginal cost of public funds for different tax instruments and government expenditures the marginal cost of public funds that is the size of the direct and indirect excess burden costs for marginal tax revenues is examined in this paper for an open economy with a savings response and using swedish 1979 data the marginal cost of public funds spent on transfer payments is estimated to vary from 1 47 for a distributionally neutral tax on labor and capital to 7 20 for a more progressive tax where average and marginal labor taxes increase by the same rates for changes in the most important tax instrument the marginal cost of public funds varies from 0 98 for expenditures on infrastructure to 2 27 for transfer payments

labour supply tax evasion and the marginal cost of public funds an empirical investigation abstract in this paper we extend the concept of marginal cost of public funds itmcf to incorporate tax evasion in the labour market mcf values are also computed from various tax reforms applied to the province of quebec canada 1985 for this purpose a utility based labour supply model that allows for both regular and irregular work activities is used at the benchmark situation the mcf associated with an increase in marginal income tax rates ranges between 1 39 and 1 53 depending upon whether we consider rationing or not moreover the presence of the irregular sector accounts for between 0 02 and 0 05 of this mcf although small in magnitude the impact of the irregular sector increases rapidly with the level of marginal tax rates

globalisation and government spending evidence for the hyper globalisation of the 1990s and 2000s in this paper we provide an up to date empirical assessment of the relationship between economic globalisation and government spending for the hyper globalisation period of the 1990s and 2000s we use data on government consumption spending and more disaggregated spending components e g social welfare we also use a range of globalisation measures including the most recent version of the kof globalisation index and a combination of econometric methods including fixed effects and instrumental variable iv estimation the results suggest that hyper globalisation has had divergent and conflicting effects on consumption spending while de jure trade globalisation has tended to raise spending de jure financial globalisation has tended to reduce it we also find evidence that the positive effect of de facto trade globalisation on spending weakened significantly during the 1990s and 2000s in comparison with earlier decades these effects could have contributed to the growing political backlash witnessed against globalisation since the early 2000s

do more open economies have bigger governments another look abstract we reconsider the evidence of a positive relationship between openness and the size of government recently established by rodrik rodrik d 1998 why do more open economies have bigger governments journal of political economy 106 997 1032 and others while the existing literature focuses on expenditure based measures of government we consider non budgetary measures such as government ownership of enterprises price controls asset expropriation each of these may have little impact on government expenditures yet can make the role of government sizable we demonstrate that the scope of government is much larger in less open economies when considering non budgetary measures additionally we show that higher levels of non budgetary government are positively correlated with trade barriers finally we provide further evidence on the hypothesis that larger governments provide social insurance in open economies subject to terms of trade shocks although we find that greater terms of trade risk is weakly associated with larger government in all forms these interventions include price controls and greater risk of asset expropriation which are hard to reconcile with a pure insurance motive

estimating time varying bargaining power a fishery application i introduction many economists and ecologists alike have supported rights based management systems as a form of fishery management that addresses the causes of inefficient resource use e g costello et al 2008 despite these convincing studies most fisheries have yet to impose any form of rights based management in fact in the united states from 1996 through 2002 a moratorium was in effect on the creation of management systems that assigned fishing quota to individual vessels often referred to as individual fishing quota ifq management 1 there has been some political resistance to the move from regulated open access management which imposes total catch limits for the fishery but no individual limits to rights based management which generally imposes some form of individual fishing rights at the core of this resistance is not the question of efficiency but the possibility of potentially severe changes or distortions in rent distribution in the market between fishers and processors the ex vessel market processors and some researchers have been concerned that fishers will achieve near total rent extraction when ifqs are given only to fishers as is typically the case e g matulich et al 1996 models that assume complete rent extraction by fishers also assume that the ex vessel market is perfectly competitive for many fisheries this assumption of perfect competition is not appropriate the geographic remoteness of many fishing areas often creates markets in which multiple fishing vessels must deliver their catch to a small number of processing facilities when one considers this remoteness together with the possibility of limited entry restrictions on the harvesting and processing sectors processing firm consolidation fishers bargaining associations and instances of fisher processor vertical integration it is evident that there are a host of reasons why ex vessel markets are normally not completely competitive thus the creation of property rights through ifqs occurs not in an idealized purely competitive environment but in an imperfectly competitive market with a myriad of factors that affect both processors and fishers abilities to extract rents a bilateral bargaining framework has been suggested by several researchers as an alternative to the competitive market specification for some ex vessel markets e g halvorsen et al 2000 matulich et al 1995 munro 1982 in this framework fishers act as upstream monopolist oligopolists selling whole fish to downstream monopsonistic oligopsonistic fish processors we follow this specification to analyze the rent distribution effect that switching to ifq management has had on a specific fishery the alaskan sablefish fishery in doing so we develop an unobserved components ucs inspired econometric technique to estimate a fixed quantity i e the quantity transacted is exogenously determined bilateral bargaining model in the presence of unobserved reservation prices and potentially time varying bargaining power this technique is general in its formulation and could thus have applicability in other contexts given the wide range of industries for which the bilateral bargaining framework is appropriate the organization of the paper is as follows in the next section we explain how imposing property rights in a fishery through an ifq system may affect the bargaining position of fishers and processors in the ex vessel market in section iii we introduce the general purpose model of bilateral bargaining used in this study and the econometric technique we use to estimate this model we provide some brief background information for the alaskan sablefish fishery in section iv in section v we present and discuss our estimation results and we conclude in the final section ii impacts of ifq management matulich et al 1996 present a theoretical model which is restated in matulich and sever 1999 with both competitive fishing and processing sectors to analyze the effect of ifq management implementation on rent distribution between the two sectors

the long run relationship between trade and population health evidence from five decades in recent years the increase in international trade has sparked a debate about the impact of international trade on population health to date however there has been very little econometric research on the relationship between these two variables this paper examines the long run relationship between trade openness and population health for a sample of 74 countries over five decades from 1960 to 2010 using panel time series techniques it is shown that international trade in general has a robust positive long run effect on health as measured by life expectancy and infant mortality this effect tends to be greater in countries with lower development levels higher taxes on income profits and capital gains and less restrictive business and labour market regulations

the real exchange rate under various systems of international capital taxation international organizations such as the organization for economic co operation and development oecd and the european community ec have promoted to varying degrees the liberalization of capital movements among their member countries the code of liberalization of capital movements an agreement drawn in 1982 by the oecd sets different degrees of capital liberalization among its member countries depending on the nature of capital transactions e g direct or portfolio investment the treaty of rome 1957 recommended among other things the liberalization of capital movements among the ec countries chapter iv articles 67 72 by and large capital movements in the ec have been liberalized since 1990 the remaining restrictions in the capital markets of some member countries such as greece ireland portugal and spain were to be eliminated by the end of 1992 2 these developments in the world capital markets have prompted a renewed interest among trade theorists regarding the response of key economic variables e g national income employment and welfare to the liberalization of capital movements with capital becoming more mobile internationally capital flows in a country depend among other things on the domestic and the foreign capital tax rate and on the prevailing system of taxing net repatriated capital earnings in the capital exporting countries frequently capitalexporting countries tax the net repatriated capital earnings according to a system i of tax credits under which tax payments by foreign capital invested in a capital importing country are credited toward its tax liability to the source capital exporting country 3 ii of tax deductions under which

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

the taxing task of taxing transnationals financial and real investment flexibility tax competition and superior economic information by transnationals both create a rationale for corporate income taxation and limit the effectiveness of such taxation while these factors have led to a variety of transnational tax policies such as deferral double taxation apportionment and trade rules very few of these institutional features have been integrated into tax competition and agency models in this paper i show how the integration of investment flexibility tax competition and agency issues is crucial to our understanding of corporate tax policies

toward a more complete model of individual transferable fishing quotas implications of incorporating the processing sector abstract economic analyses of individual transferable quota itq fisheries management traditionally have focused on the harvesting sector however harvester decisions impact the economic performance of co dependent processing firms this paper incorporates both sectors in an analysis of the effect of itqs on commercial fisheries results show that as a consequence of season elongation under a harvester only allocation of fishing rights capital nonmalleability implies that processor quasi rents will be redistributed to harvesters these losses could promote political gridlock and jeopardize adoption of an itq policy unless they are fully compensated or unless redistribution is avoided by a policy superior initial allocation of rights to both harvesters and processors

the econometrics of markets with quantity controls this paper presents econometric methods for single markets with quantity controls or quotas a theory of quotas based on disequilibrium bargaining nations is outlined maximum likelihood methods are described for these theories the methods are applied to the australian tobacco leaf market it is argued that cigarette manufacturers gain slightly more from bargaining proces than tobacco growers

age structure and trade openness an empirical investigation this study focuses on the relationship between age structure and trade openness we hypothesise that a higher share of the working age population in the total population increases trade openness because the dependent population tends to spend more than the working age population on non tradable goods such as education and medical services we estimate the effects of age structure on trade openness using panel data for 85 countries from 1991 to 2010 the empirical results show that the share of the working age population has a positive effect on trade openness an increase in the share of the working age population is considered to be one factor that contributed to an increase in trade openness in the sample period

the size of government most research on the causes of growth in government expenditure has focused on the demand for government services in this paper we argue that in fact this growth may have occurred because of changes in supply changes in technology leading to increased specialization and thus increased opportunity costs of self production have led to increased market production and increased record keeping also female labor force participation has increased both of these factors serve to reduce the efficiency cost of collecting taxes if the demand for government spending has not changed this increase in supply would lead to a larger public sector we estimate a system of simultaneous equations for the period 1929 1970 incorporating this hypothesis and the results are consistent with the theory we are able to explain virtually all of the growth of government increases in female labor force participation seems to be a very important variable in this explanation

can capital income taxes survive in open economies optimal tax theory forecasts that small open economies should not tax capital income yet countries do tax capital income why the inconsistency this paper shows that use of the double taxation convention whereby governments credit taxes paid abroad against domestic taxes helps explain this inconsistency in particular capital income will be taxed if a dominant capital exporter acts as a stackelberg leader when setting its tax policy due to the convention other countries will then tax capital imports making it attractive for the dominant capital exporter to tax capital income without a dominant capital exporter however the model still forecasts no capital income taxes can taxation of capital income survive the increasing integration of world capital markets a number of recent papers suggest not diamond and mirrlees 1971 for example showed that a small open economy would not choose to tax the income generated by the physical capital located within the country this is because production would occur efficiently under an optimal tax system which requires that domestic investments earn the rate of return available on the world capital market in principle a country might still attempt to tax income earned on the savings of its residents however in practice income from savings invested outside the country is virtually impossible for a government to monitor individuals therefore can evade tax on such savings with very little risk as razin and sadka 1989 show such capital flight in theory eliminates any possibility of a tax on savings investors will simply transfer their funds abroad to avoid taxation yet virtually all countries do in fact tax the capital income earned by corporations and individuals located within their borders how can the theoretical forecast of no capital income taxation be reconciled with this simple observation it is difficult to use existing models with any confidence to analyze the implications of changes in capital income tax rates if these same models forecast that countries should never tax capital income

trade openness and government size abstract we examine whether trade openness influences government size using panel data we find no evidence of a positive relationship rather causality tests show that larger government size leads to lower openness the opposite of what rodrik rodrik dani 1998 why do more open economies have bigger governments journal of political economy 106 997 1032 hypothesized

exvessel price determination in the alaska king crab fishery a formula price contract under uncertainty abstract commercial fisheries industry structure often suggests exvessel price formation occurs in the context of a competitive harvesting sector and an oligopsonistic processing sector however industry conduct leading to a determination of exvessel price can be notably at odds with this inference this paper presents empirical evidence that the conduct of at least one such fishery the alaska king crab industry may emulate bilateral monopoly exvessel price determination is consistent with an implicit formula price contract in which fishers behave as monopolists through bargaining associations while processors behave as countervailing monopsonists even in the absence of explicit collusion both sectors appear to behave in a manner consistent with joint expected profit maximization with profit shares apportioned via the implicit formula price contract this price formation process simplifies empirical analysis of the bilateral monopoly conduct by avoiding complicated game theoretic bargaining models

optimal taxation with costly enforcement and evasion abstract this paper analyzes the relationship between optimal taxation and optimal tax enforcement a central question concerns the extent to which revenue should be raised through higher tax rates which distort behavior or greater enforcement which distorts behavior and also entails direct resource costs in the models examined some expenditure on enforcement may be optimal despite its resource cost its distortionary effect and the availability of other revenue sources having no enforcement costs rules for optimal tax rates and enforcement expenditures are derived which also indicate the marginal cost of government funds and optimal enforcement priorities for a tax collection agency

reconsidering the initial allocation of itqs the search for a pareto safe allocation between fishing and processing sectors advancement of rights based fishing is stymied by industry and congressional concern over distributional issues arising out of traditional itq design this paper examines the existence and policy feasibility of two alternative initial allocations intended to leave the two principal industry participants the fishers and processors no worse off while maximizing efficiency market structure is shown to be a critical consideration not only to avoid unintended wealth redistribution but also to achieve efficiency

income tax compliance in a principal agent framework previous analyses have modeled income tax evasion as a portfolio problem deriving the optimal consumption of the risky asset unreported income under the assumption of a fixed probability of detection the purpose of this paper is to examine some of these issues in tax compliance starting from a different set of assumptions in particular we compare alternative audit policies to the standard random audit policy we focus on an audit cutoff policy in which an agent triggers an audit if his or her reported income is too low and is not audited if reported income is sufficiently high this paper establishes two major results first random audit rules are weakly dominated by audit cutoff rules it can be shown given lump sum taxes and fines that these audit cutoff rules are the least cost policies which induce truthful reporting of income second the dominance of audit cutoff rules over random audit rules holds for lump sum as well as proportional taxation in fact the equilibrium consequences of the two are equivalent

openness country size and government abstract this paper shows that smaller countries have a larger share of public consumption in gdp and are also more open to trade these empirical observations are consistent with recent theoretical models explaining country formation and break up and may account for the observed positive empirical relationship between trade openness and government size

swedish tax rates labor supply and tax revenues effective marginal tax rates on labor income for the representative swede have increased from roughly 50 percent in 1959 to 80 percent today the effects of this increase in the level of taxation are examined using a two sector model parameterized to correspond to the swedish economy the model contains a single household which allocates labor to either taxed essentially market or untaxed largely household uses the estimated long run effects are sufficient to explain up to 75 percent of the recent decline in the measured growth rate of the swedish gnp calculations of total tax revenues are also derived from the model these peak when the tax rate is approximately 70 percent indicating that sweden is presently on the downward sloping portion of its laffer curve

international capital tax evasion and the foreign tax credit puzzle in this paper we examine how the presence of international tax evasion affects the choice of a foreign tax credit by a capital exporting region since the credit raises the opportunity cost of concealing foreign source income it can be employed to discourage evasion activity international tax evasion can thus help to rationalize the adoption of a tax credit in excess of a deduction equivalent rate jel classification h21 h26 evasion fiscale pour le capital international et le probleme du credit d impot pour le fardeau fiscal a l etranger ce memoire examine comment la presence d evasion fiscale pour le capital international affecte le choix du credit d impot pour le fardeau fiscal a l etranger par une region qui exporte du capital puisque le credit d impot accroit le cout d opportunite du camouflage de la source etrangere de revenus c est une technique qui peut etre employee pour decourager l evasion fiscale voila qui peut expliquer qu on adopte un credit d impot qui est plus genereux que ce qui constituerait la deduction dans un systeme ou le fardeau fiscal a l etranger est simplement deduit du revenu imposable

spatial competition with changing market institutions summary competition across space can be fundamentally altered by changes in market institutions we propose a framework that integrates market altering policy changes in the spatial analysis of competitive behavior and incorporates endogenous breaks in explanatory variables for spatial panel datasets this paper fills a gap in the literature between work focusing on spatial price responsiveness of agents and work on changes in market regulations that affect competition we apply the framework to an important current fishery management policy to explore how a change from aggregate to individual fishing quotas affects the spatial price responsiveness of fish processors copyright 2012 john wiley sons ltd

optimal tax and tariff policies with tax credits abstract this paper examines the optimal tax and tariff policies for a small open economy when mobile capital receives a tax credit for taxes paid to the host country for a capital importing country a tax on capital equal to the source country tax rate to capture tax revenue combined with a subsidy to encourage capital imports is the optimal policy results are also derived for cases in which only one of the instruments can be varied for a capital exporting country that cannot reduce its capital tax rate a subsidy to the sector using exported capital is desirable

the cyclical component of u s economic activity quarterly data on industrial production and deflated gross national product in the united states from 1947 through 1985 are decomposed into independent nonstationary trend and stationary cycle components using kalman filtering and smoothing techniques estimates of the model parameters imply that at least half of the quarterly innovation in u s economic activity can be attributed to a stationary cyclical component that persists over periods of time as long as five years this finding is inconsistent with the hypothesis that most of the apparent variation in u s economic activity can be attributed to a nonstationary trend component

foreign direct investment under oligopoly profit shifting or profit capturing abstract in this paper a model of taxation of foreign source corporate income is developed when the output market is not perfectly competitive profit shifting policies similar to those in the new trade literature are also present in the case of foreign direct investment fdi there are however important differences to the new trade theory since in case of fdi i corporate taxation and double taxation relief are the policy instruments rather than output or revenue taxes ii countries are not symmetric in the sense that the host country has the first right to tax the multinational s profit and the home country reacts by providing double taxation relief and iii output but not corporate taxation is specific to imperfectly competitive industries it is argued that a variants of a tax credit are analogous to export subsidies b when the home country operates a tax credit system the host country s incentive to capture the multinational s profit is bounded under imperfect competition c when the host country offers a tax holiday the home country should imitate this policy and d in the presence of perfect competitive industries double taxation relief is a good instrument to target imperfectly competitive industries

the optimal use of fines and imprisonment abstract this paper examines the use of fines and imprisonment to deter individuals from engaging in harmful activities these sanctions are analyzed separately as well as together first for identical risk neutral individuals and then for two groups of risk neutral individuals who differ by wealth when fines are used alone and individuals are identical the optimal fine and probability of apprehension are such that there is some underdeterrence if individuals differ by wealth then the optimal fine for the high wealth group exceeds the fine for the low wealth group when imprisonment is used alone and individuals are identical the optimal imprisonment term and probability may be such that there is either underdeterrence or overdeterrence if individuals differ by wealth the optimal imprisonment term for the high wealth group may be longer or shorter than the term for the low wealth group when fines and imprisonment are used together it is desirable to use the fine to its maximum feasible extent before possibly supplementing it with an imprisonment term the effects of risk aversion of these results are also discussed

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

waiting to settle multilateral bargaining with subjective biases abstract we study multilateral bargaining games where agents disagree over their bargaining power we show that if agents are extremely optimistic there may be costly delays in an arbitrarily long finite game but if optimism is moderate all sufficiently long games end in immediate agreement we show that the game with extreme optimism is highly unstable in the finite horizon and we examine the ramifications of this instability on the infinite horizon problem finally we consider other voting rules and show that the majority rule may be more efficient than the unanimity rule when agents are optimistic