the birth of a new industry entry by start ups and the drivers of firm growth the case of encryption software the paper analyses the birth of the encryption software industry esi a new niche in the software industry using a chandlerian perspective this work reports the main facts about fir entry and growth with a particular focus on start up strategies and actions since scale economies do not play a major role in esi the paper investigates the different sources of fir competitive advantages this work shows that innovation and product differentiation along with investments in co specialised assets are variables strongly correlated to young fir probability to survive and grow in doing so we have collected highly detailed information on product introduction us patents granted worldwide alliances and biographical data of fir founders 2004 elsevier b v all rights reserved jel classificatio m13 l86 o32

some aspects of the taxation of capital gains abstract the analysis of the effects of capital gains taxation requires a careful modelling both of the details of the tax code and the imperfections in the capital market under the standard assumptions concerning perfect capital markets and under the standard idealizations of the tax code there are several strategies by which rational investors can avoid note only all taxes on their capital income but also all taxes on their wage income these strategies leave individuals consumption and bequests in each state of nature and at each date unchanged from what they would have been in the absence of taxes although certain detailed provisions of the tax code may limit the extent to which rational investors can avail themselves of these tax avoidance activities there are ways in a perfect capital market by which the effects of these restrictions can be ameliorated accordingly any analysis of the effects of capital taxation must focus on imperfect capital markets if individuals face limitations on the amounts which they can borrow and or if there are limitations on short sales then under some circumstances there is a locked in effect individuals do not sell securities which they would have sold in the absence of taxation but under other circumstances individuals are induced to sell securities that they otherwise would have held in order to take advantage of the asymmetric treatment of short term losses and long term gains a policy of realizing gains as soon as they become eligible for long term treatment dominates the policy of postponing the realization of capital gains provided the gains are not too large a simple general equilibrium model is constructed within which it is shown that the taxation of capital gains may increase the volatility of asset prices and lead individuals not to trade when they otherwise would while the analysis casts doubt on the significance of the welfare losses resulting from these exchange inefficiencies there are circumstances in which the tax leads to production inefficiencies e g terminating projects at other than the socially optimal date finally we argue that the focus of some recent policy debates on the short run revenue impact of a decrease in the tax rate on capital gains is misplaced even when the short run revenue impact is positive consumption may increase thus exacerbating inflationary pressures and private savings may decrease thus leading to a lower level of investment in the private sector moreover there is some presumption that the long run revenue impact is negative our analysis has some important implications for empirical research in particular it suggests that the impact of the tax is not adequately summarized by a single number such as the effective tax rate representing the average ratio of tax payments to capital gains moreover the impact of the tax cannot be assessed by looking only at reported capital gains and losses

unemployment institutions and reform complementarities re assessing the aggregate evidence for oecd countries there is no or limited consensus on the quantitative impact of institutions on unemployment which has led some to question the case for structural reforms recent studies suggest also that institutions interact with each other and cannot be analysed in isolation in this paper we estimate a standard reduced form model to explore the institutional determinants of unemployment and assess its robustness using a large battery of robustness checks we show that although the impact of each individual policy varies across countries due to policy interactions the simple linear model can be used to draw inferences for countries with an average mix of institutions the model is then extended to encompass systemic interactions in which individual policies interact with the overall institutional framework we find relatively robust evidence of broad reform complementarities

how and when should companies retain their human capital contracts incentives and human resource implications the increasing competition in the labor market for human capital pushes firms to create better incentives to manage talented individuals in this article we model the optimal employment contract when two features of human capital are present i private information of the employee about his skills and ii the inability to contract on the output of the employment activity our model shows how firms can use delegation i e the employee s job autonomy to provide the incentives to a privately informed employee the model novelty resides in turning a classic source of potential inefficiency like asymmetric information into a factor that firms can use to design incentives our model provides a new explanation of why in technologically dynamic environments one observes more intense formations of start ups and a greater inter firm mobility of human capital our setting also suggests how established companies can use their complementary assets to provide better incentives to their skilled employees copyright 2010 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

subjective performance measures in optimal incentive contracts objective measures of performance are seldom perfect in response incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures this paper explores the combined use of subjective and objective performance measures in respectively implicit and explicit incentive contracts naturally objective and subjective measures often are substitutes sometimes strikingly so we show that if objective measures are sufficiently close to perfect then no implicit contracts are feasible because the firm s fallback position after reneging on an implicit contract is too attractive we also show however that objective and subjective measures can reinforce each other if objective measures become more accurate then in some circumstances the optimal contract puts more weight on subjective measures because the improved objective measures increase the value of the ongoing relationship and so reduce the firm s incentive to renege we also analyze the use of subjective weights on objective performance measures and provide case study evidence consistent with our analyses

the capital gain lock in effect and perfect substitutes abstract this paper analyses the effect of investors accrued capital gains on optimal portfolio composition and equilibrium returns under the assumption that investors are able to re balance with perfect substitute securities no dominance arguments are used to show that pricing differences because of accrued capital gains do not arise among securities which are perfect substitutes these arguments are insufficient however to prevent pricing differences because of accrued capital gains among securities which are not perfect substitutes trading rules are developed which outline the conditions necessary for the realisation of accrued capital gains and the deferral of capital losses these trading rules also provide guidance on which securities investors should sell given their tax basis when re balancing their portfolios

portfolio choice in the presence of background risk in this paper we focus on how the presence of background risks from sources such as labour and entrepreneurial income influences portfolio allocations this interaction is explored in a theoretical model that is calibrated using cross sectional data from a variety of sources the model is shown to be consistent with some but not all aspects of cross sectional observations of portfolio holdings the paper also provides a survey of the extensive theoretical and empirical literature on portfolio choice

rent sharing and workers bargaining power an empirical cross country cross industry panel analysis this paper studies how rents are shared between capital and labour using industry level panel data for 19 oecd countries over the 1988 2007 period the first step is an explanation of the rent creation process we provide evidence of a significant impact of regulation on value added prices at the industry level relative to the value added price for the overall economy rent in the second step we dissect the value added sharing process running ols and iv estimations our results confirm the blanchard giavazzi 2003 prediction the impact of rents on the capital share depends on workers bargaining power this article is protected by copyright all rights reserved

macroeconomic performance and collective bargaining an international perspective this paper critically reviews the research on how collective bargaining systems influence macroeconomic performance in industrialized countries the review considers effects of bargaining level coordination and corporatist institutional arrangements key empirical results turn out to be quite fragile and much of the paper explores issues of measurement and specification that account for the fragility the paper concludes that complementarities between key institutions and between institutions and the economic environment may be more important for macroeconomic performance than the effects of individual institutions and it suggests research strategies

how burdensome are capital gains taxes abstract this paper uses capital gain realization data from individual tax returns to evaluate recent claims that sophisticated portfolio strategies permit investors to avoid capital gains taxes the results suggest important investor heterogeneity twenty percent of taxpayers with capital gains or losses face binding loss offset constraints another significant group of investors evades the capital gains tax prior to recent legislative changes forty percent of capital gains were unreported finally about forty percent of capital gains accrue to investors who report capital gains and face significant tax burdens as the traditional analysis of the capital gains tax suggests

direct evidence on the marginal rate of taxation on dividend income abstract miller and scholes 1978 hypothesize that the marginal tax rate on dividend income may be less than the marginal rate of tax on capital gains their hypothesis is dependent upon individuals utilizing existing provisions of the code which serve to reduce the taxation of dividends in this study estimates of the marginal and effective rates of tax on dividend income for the year 1979 are presented using the statistics of income sample of returns the average marginal rate of tax on dividend income is estimated to be 40 while the average effective rate of tax is estimated to be 30

monetary policy taxes and the business cycle this paper analyzes the interaction of inflation with the tax code and its contribution to aggregate fluctuations we find significant effects operating through the tax on realized nominal capital gains a tax on nominal bond income magnifies these effects our innovation is to combine monetary policy shocks with non indexed taxes in a model where the central bank implements policy using an interest rate rule monetary policy had important effects on the behavior of the business cycle before 1980 because policymakers did not exert effective control over inflation monetary policy reform around 1980 led to better control and with more stable inflation the effect of the interaction between monetary policy and the nominal capital gains tax has become negligible

some indirect evidence on effective capital gains tax rates this paper presents estimates of effective marginal tax rates on capital gains excluding housing between 1960 and 1978 in the united states concern that the inflation of the 1970s may have worked through the tax system to reduce incentives to produce and save has focused attention on the effective marginal tax rates that apply to various sources of income joines 1981 sheds light on this issue by calculating the historical effective marginal tax rates on factor incomes for the united states part of the recent debate however has focused specifically on capital gains taxes and the desirability of reducing them to enhance incentives for saving and investment the effective marginal tax rate on capital gains henceforth emtg may be the most difficult rate to measure in addition to the usual problems of how to attribute deductions exclusions and tax credits further adjustment must be made because investors pay taxes only when they realize their capital gains 1 the expected emtg this paper reports estimates of effective marginal tax rates on capital gains by comparing reported capital gains with total capital gains on an annual basis the estimates show that the effective marginal tax rates on capital gains fluctuated between 3 4 and 6 6 between 1960 and 1978 and that capital gains are held on average between 24 and 31 years before they are reported

tax motivated trading by individual investors we study the stock trades of a large number of individual investors to investigate how tax incentives affect the realization of capital gains and losses we compare investors realization behavior in their taxable and tax deferred accounts and thereby identify the effect of taxes on trading decisions we reach four conclusions first we find clear evidence of a lock in effect for capital gains in taxable accounts relative to tax deferred accounts we find evidence of the disposition effect the tendency for investors to hold losses and sell gains in both types of accounts and especially at short holding periods the lock in effect is stronger for large stock transactions than for small ones second we find tax loss selling throughout the calendar year though it is most pronounced in december tax loss trading is more pronounced among investors who have realized capital gains elsewhere in the portfolio during the year third we observe substantial heterogeneity in individual investors propensity to trade controlling for this heterogeneity however does not alter the relation between a stock s past performance and the realization decision finally we find that relatively few investors repurchase stocks that they have sold at a loss even after the 30 day wash sale holding period has expired

the role of shocks and institutions in the rise of european unemployment the aggregate evidence two key facts about european unemployment must be explained the rise in unemployment since the 1960s and the heterogeneity of individual country experiences while adverse shocks can potentially explain much of the rise in unemployment there is insufficient heterogeneity in these shocks to explain cross country differences alternatively while explanations focusing on labour market institutions explain current heterogeneity well many of these institutions pre date the rise in unemployment based on a panel of institutions and shocks for 20 oecd nations since 1960 we find that the interaction between shocks and institutions is crucial to explaining both stylised facts

the courage of misguided convictions the field of modern financial economics assumes that people behave with extreme rationality but they do not furthermore people s deviations from rationality are often systematic behavioral finance relaxes the traditional assumptions of financial economics by incorporating these observable systematic and very human departures from rationality into standard models of financial markets we highlight two common mistakes investors make excessive trading and the tendency to disproportionately hold on to losing investments while selling winners we argue that these systematic biases have their origins in human psychology the tendency for human beings to be overconfident causes the first bias in investors and the human desire to avoid regret prompts the second

macroeconomic effects of regulation and deregulation in goods and labor markets product and labor market deregulation reduce and redistribute rents leading economic players to adjust to this new distribution it typically comes with distribution and dynamic effects to study these effects we build a macroeconomic model on two central assumptions monopolistic competition in the goods market which determines the size of rents and bargaining in the labor market which determines the distribution of rents product market regulation determines entry costs and the degree of competition labor market regulation determines the bargaining power of workers we show the effects of deregulation we then use our results to discuss the political economy of deregulation and recent macroeconomic evolutions in europe

capital gains taxation in an economy with an austrian sector abstract this paper examines the effects of a proportional capital gains in an economy with an austrian sector with wine and trees and an ordinary sector we analyze the effect of capital gains taxation on both an accrual and a realization basis on the efficiency with which resources are used within the austrian sector since time is the only input which can be varied in the austrian sector this amounts to looking at the effect of capital gains taxation on the harvesting time or selling time of assets accrual taxation decreases the selling time of austrian assets realization taxation decreases the selling time of some austrian assets and leaves it unchanged for others inflation further reduces the selling time of assets taxed on an accrual basis often but not always inflation increases the selling time of austrian assets taxed on a realization basis we also examine the effect of the special tax treatment of capital gains at death and find that the current u s tax system under which capital gains taxes are waived at death encourages investors to hold assets longer in contrast to these results which suggest that the capital gains tax can reduce the holding period of an asset we show that there is a sense in which such taxes at least when levied on a realization basis discourage transactions and increase holding periods it is never profitable to change the ownership of an austrian asset between the time of the original constraint and the ultimate harvesting of the asset for final use capital gains taxation diverts resources from the austrian sector to the ordinary sector the effects on the efficiency of the allocation of investment between sectors are complicated and not easy to summarize

optimal stock trading with personal taxes implications for prices and the abnormal january returns abstract the tax law confers upon the investor a timing option to realize capital losses and defer capital gains with the tax rate on long term gains and losses being about half the short term rate the law provides a second timing option to realize losses short term and gains long term if at all our theory and simulation over the 1962 1977 period establish that taxable investors should realize long term gains in high variance stocks and repurchase stock in order to realize potential future losses short term tax trading does not explain the small firm anomaly but predicts a seasonal pattern in trading volume which maps into a seasonal pattern in stock prices the january anomaly only if investors are irrational or ignorant of the price seasonality

tax evasion and capital gains taxation this paper uses time series data to investigate how changes in capital gains tax rates affect taxpayer compliance it finds that a one percent increase in the marginal tax rate reduces voluntary compliance by between one half and one percent these results confirm the findings of previous studies based on individual household data they also suggest that at least one quarter of the observed capital gain realization response to changes in marginal tax rates is due to changes in reporting behavior rather than portfolio behavior this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

evidence on tax motivated securities trading behavior tax loss selling by investors in common stocks near the end of calendar years has been proposed as an explanation for the turn of the year effect in stock returns past analyses of this hypothesis have relied on inferential data we provide here some direct data from a compilation of over 80 000 actual common stock investment round trips by a sample of 3000 individual investors we find strong evidence of a concentration of loss taking trades late in the year and milder evidence of a concentration just prior to the dates when investments become eligible for long term tax treatment the question as to whether and in what manner the impostion of a tax on realized capital gains affects the securities trading behavior of investors who are subject to the tax has been a longstanding topic of research in the financial ecomonics literature the original attention devoted to the matter was motivated primarily by a concern about resource allocation and federal tax revenue consequences and was directed toward the phenomenon of what has been termed the lock in effect of a gains tax that issue has remained an important public policy one and continues today as part of the ongoing debate about appropriate strategies for reducing the federal budget deficit particular additional interest in the topic has emerged in recent years however because securities transactions undertaken systematically for tax reasons have also been proposed as part of the explanation for certain observed anomalies in historical common stock returns most prominently the well documented turn of the year effect our purpose here is to provide some new evidence that decisions by investors as to the timing of the realization of capital gains and losses from their common stock investments are significantly affected by tax considerations this evidence indicates that a difference in the tax rates applicable to realizations classified as short and long term influences the timing of individual investors trades and further that there is a clear tendency for trades by individuals which give rise to losses to be concentrated near the end of calendar which for them are also tax years while we cannot conclude that

leviathan as an inventor an extended agency model of state owned versus private firm invention in emerging and developed economies we examine the relative merits of state soe and private poe ownership on firm invention output in emerging as well as developed economies firm soe affords a vehicle by which governments throughout the world encourage risky investment in new technological paths yet from a traditional agency theoretical standpoint soes are plagued by low powered incentives and dysfunctional involvement e g wasteful budgets and political meddling which reduces soe performance relative to poes to examine this paradox we build an extended agency model which rather than overlooking agency cost drivers entertains a more balanced view in which these so called agency liabilities in fact benefit soes particularly in the sphere of inventions we argue that given relatively higher levels of managerial autonomy soes may outperform poes in some types of inventive output we further propose that key boundary conditions operate to modify this base effect in that contexts lacking political constraints a condition found in most emerging economies increase the risk of political meddling reducing managerial autonomy so that any soe inventive advantages wane significantly we also hypothesize that this negative effect of weak institutions is attenuated in high invention productivity sectors empirically we track the frequency pioneerism and impact of patent inventions of 521 soes and matched poes for 16 years across 43 countries and 22 industries we find empirical support for our hypotheses based on a robust set of fixed effects regression analyses aided by a battery of checks to assess self selection and omitted variable bias

optimal consumption and investment with capital gains taxes this article characterizes optimal dynamic consumption and portfolio decisions in the presence of capital gains taxes and short sale restrictions the optimal decisions are a function of the investor s age initial portfolio holdings and tax basis our results capture the trade off between the diversification benefits and tax costs of trading over an investor s lifetime the incentive to rediversify the portfolio is inversely related to the size of the embedded gain and investor s age contrary to standard financial advice the optimal equity holding increases well into an investor s lifetime in our model due to the forgiveness of capital gains taxes at death taxes play an important role in the decision making process of individuals concerning their consumption and investment plans the taxation of returns on financial assets alters the benefits of saving for future consumption and thus affects the trade off between current consumption and investment moreover the ability of investors to defer the taxation of capital gains alters the relative valuation of stocks and bonds and thus affects the optimal portfolio composition of investors the deferral feature of capital gains taxes also affects the trade off investors face regarding taxes and diversification investors would like to maintain an optimally diversified portfolio over time

dynamic asset pricing effects and incidence of realization based capital gains taxes abstract many analyses of capital gains taxation assume that realization based taxes are economically similar to accrual based taxes in equilibrium however the distinctive implications of realization taxes for asset trading through the lock in effect are associated with distinctive dynamic asset pricing effects asset prices are increased by the current realization tax to partly offset the sale disincentive that the tax would otherwise impose the resulting division of the tax burden between buyers and sellers of assets is similar to traditional public finance models of excise tax incidence in product markets

the optimal trading and pricing of securities with asymmetric capital gains taxes and transaction costs this article explores the optimal trading and pricing of taxable securities with asymmetric capital gains taxes and transaction costs in the long term region investors realize all gains below some critical cutoff level which we derive analytically in the short term region investors defer all gains and depending upon the time remaining in the short term region may also defer small losses contrary to common intuition deferral of short term losses can be optimal even without transaction costs the value of tax timing is considerably bigger under the optimal trading strategy than under alternative strategies previously analyzed the impact of offset rules is also explored article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

cross base tax elasticity of capital gains abstractthis paper studies the cross base tax elasticity of capital gains realizations to labour income taxes when capital gains are taxed at a separate proportional tax rate using a longitudinal panel of over 265 000 individuals in sweden this paper shows in a regression kink design that labour income taxes affect capital gains realizations in two ways an increase in the marginal labour income tax rate increases the likelihood of realizing capital gains and the amount of realized capital gains one implication of this result is that labour income taxes have a lock out effect but that the magnitude of this effect is smaller than the lock in effect of the actual capital gains tax

on the management of open innovation abstract in an open innovation relationship the party that owns a key asset enjoys bargaining power that discourages the investments of the other party in the collaboration we show that these incentives can be restored by conferring on the weak party the power to take decisions during the research process e g a pharmaceutical firm with manufacturing and commercialization assets offers the direction of a joint research project to a biotech partner however on many occasions the strong party still captures more value from the collaboration by retaining the power to take decisions during research even if it produces less innovation value and fewer aggregate profits we conclude that the potential of open innovation is underexploited in particular owners may not release enough power to take decisions on the use of their assets

a reexamination of the value of tax options this article reexamines the value of tax trading when the tax rate on long term realizations is less than that on short term realizations in particular the value of the option to realize long term capital gains and repurchase stock in order to increase one s tax basis and restart the option to realizefuture losses short term is examined empirically our estimate of the incremental value of restarting which is based on the results of simulations of several alternative tax trading policies over a large number of independent return sequences is generally much smaller than that reported by constantinides 1984 the incremental value of restarting is shown to depend critically on the particular pattern of realized returns and the assumed tax treatment of unrealized capital gains at the end of the simulation period the effects of stockprice volatility transaction costs portfolio offset rules and realization cutoff levels on the value of tax trading are also investigated

does the investment interest limitation explain the existence of dividends abstract miller and scholes have shown that under certain conditions the federal income tax taxes dividend income at a rate no higher than the rate on capital gains tabulations of actual 1977 tax returns show that the special circumstances under which this can occur apply to recipients of two and one half percent of dividend income and that no dominant role may therefore be ascribed to their hypothesis in the determination of corporate dividend policy

does child labour displace schooling evidence on behavioral responses to an enrollment subsidy this brief summarizes the results of a gender impact evaluation study entitled does child labour displace schooling evidence on behavioral responses to an enrollment subsidy conducted between 1995 and 1996 in bangladesh the study observed that the subsidy increases schooling but its effect on child labour is ambiguous the subsidy increased schooling by far more than it reduced child labour substitution effects helped protect current incomes from the higher school attendance induced by the subsidy substitution effects helped protect current incomes from the higher school attendance induced by the subsidy the reduction in the incidence of child labour by boys girls represents about one quarter eighth of the increase in their school enrollment rate

special tax regimes and the choice of organizational form evidence from the european tonnage taxes abstract tax systems often discriminate among the various organizational forms of doing business and may therefore affect the choice of organizational form this paper studies how special tax regimes shape the organizational form choice although the full effects depend on the way that firm level special tax regimes are designed special regimes generally tend to favor pass through firms over non pass through firms the tonnage tax a tax incentive for international shipping firms available in many countries worldwide is examined to understand these effects employing european firm and country level data the impact of the tonnage tax on organizational form choice is studied empirically the results are consistent with the theoretical model shipping firms are less likely to incorporate if the tonnage tax is also available for firms that have adopted pass through organizational forms

the role of relative performance in inter firm mobility of inventors abstract prior research has emphasized the influence of inter firm mobility on knowledge flows and innovation yet we have an incomplete picture of the antecedents of inventor mobility building on theoretical traditions related to decision making based on limited asymmetric bounded information and economic and other incentives our paper suggests that after controlling for individual performance and other variables previously shown to affect inter organizational mobility an inventor s performance relative to his co patenting group alters his likelihood of mobility our analysis of 2648 inventors in the pharmaceutical industry shows that for those performing above their reference group of past and current co inventors in patenting an increase in relative performance decreases the likelihood of mobility and for those performing below the reference group a decrease in relative performance decreases the likelihood of mobility we also find that when inventors have more external scientific collaborations their likelihood of mobility increases and this variable moderates the relationship between the performance gap and mobility but only for those performing above their peers