money growth output gaps and inflation at low and high frequency spectral estimates for switzerland abstract while central banks generally have abandoned monetary targeting many continue to attach weight to monetary aggregates in setting policy this raises the issue of how money can be combined with other variables when analysing inflation we decompose inflation in switzerland into two frequency bands and show that inflation is granger caused by monetary factors at low frequencies defined as those corresponding to periodicities of more than 4 years but is granger caused by the output gap at high frequencies we also estimate phillips curve models that are augmented by the low frequency components of the monetary factors

money at low frequencies many central banks have abandoned monetary targeting because the link between money growth and inflation seemed to disappear in the 1980s using spectral regression techniques we show that for the euro area japan the uk and the us there is a unit relationship between money growth and inflation at low frequencies when the impact of interest rate changes on money demand is accounted for we estimate phillips curve equations in which the low frequency information from money growth is combined with high frequency information from the output gap to explain movements in inflation jel c22 e3

the structure of licensing contracts industrial organization theory has explored several issues related to licensing but empirical analyses are extremely rare we amass a new and detailed dataset on licensing contracts and use it to present some simple facts concerning licensing behavior our analysis reveals robust cross industries differences in several contractual features such as exclusivity cross licensing ex ante versus ex post technology transfers and licensing to related versus unrelated parties we offer an interpretation of these facts based on cross industry variation in the strength of intellectual property rights

the public choice of differing degrees of tax progressivity there are a number of hypotheses developed in the literature for explaining the degree of public income redistribution that can be adapted to explain the degree of progressivity that a collectivity will chose in some cases it is difficult to obtain easily measurable and unambiguous proxies for the theoretical proposition nevertheless our attempts to do so prove at least somewhat encouraging

macroeconomic forecasting in the euro area country specific versus area wide information abstract this paper compares several time series methods for short run forecasting of euro wide inflation and real activity using data from 1982 to 1997 forecasts are constructed from univariate autoregressions vector autoregressions single equation models that include euro wide and us aggregates and large model methods in which forecasts are based on estimates of common dynamic factors aggregate euro wide forecasts are constructed from models that utilize only aggregate euro wide variables and by aggregating country specific models the results suggest that forecasts constructed by aggregating the country specific models are more accurate than forecasts constructed using the aggregate data

is there a role for monetary aggregates in the conduct of monetary policy abstract we examine the potential policy role of monetary aggregates by attempting to use them as effectively as possible in the analysis of empirical relationships we focus on their role as information variables since any more ambitious use such as in a policy rule would presuppose some information content in the aggregates our results show that in the united states since 1979 the monetary aggregates fall considerably short of those requirements and results with german m3 are hardly more favorable we also investigate whether empirical relationships are not reflective of information relationships because of the use of these variables in countercyclical policy the results are not consistent with that interpretation

why is bank debt senior a theory of asymmetry and claim priority based on influence costs this theory can explain why bank debt is universally senior consistent with the presence of conflict lawyers and absolute priority violations in financial distress better organized banks would more strongly contest priority in financial distress if they were junior because deterrence can reduce creditors total expenses in a priority contest the ex post stronger lobbyist litigant should be senior ex ante for equivalent reasons the theory can advise when public debt should be senior to trade credit and or implicit contracts and can even suggest one rationale for the absolute priority rule apr this article further shows that chapter hi creditor reimbursement procedures can lower overall costs article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

is inflation always and everywhere a monetary phenomenon using a sample of about 160 countries over the last 30 years we test for the quantity theory relationship between money and inflation when analysing the full sample of countries we find a strong positive relation between long run inflation and the money growth rate the relation is not proportional however the strong link between inflation and money growth is almost wholly due to the presence of high or hyper inflation countries in the sample the relationship between inflation and money growth for low inflation countries on average less than 10 per annum over the last 30 years is weak

how smes exploit their intellectual property assets evidence from survey data this paper seeks to understand how motives to patent affect the use of the patent portfolio with a particular focus on motives aimed at the monetization of intellectual property the analysis relies on data from an international survey conducted by the european patent office there are three main results first small and medium sized enterprises smes exhibit a much stronger reliance on monetary patents than large companies and nearly half of the smes in the sample patent for monetary reasons second smes tend to use their patents more actively than large firms third smaller companies generally have a higher proportion of their portfolio that is licensed but the licensing rate is significantly higher in the usa an american sme is twice as likely as a european sme to have a high share of its portfolio that is actually licensed witnessing a fragmented market for technology in europe

why has u s inflation become harder to forecast we examine whether the u s rate of price inflation has become harder to forecast and to the extent that it has what changes in the inflation process have made it so the main finding is that the univariate inflation process is well described by an unobserved component trend cycle model with stochastic volatility or equivalently an integrated moving average process with time varying parameters this model explains a variety of recent univariate inflation forecasting puzzles and begins to explain some multivariate inflation forecasting puzzles as well

tax perceptions and preferences over tax structure in the united kingdom do voters know their tax liabilities accurately or do they systematically misperceive them could such misperceptions influence voters choices over alternative tax structures proposed by politicians this paper assesses the accuracy of individuals tax perceptions in the uk using micro data from the british social attitudes survey 1995 and tests an empirical model of the determinants of tax structure preferences including tax misperceptions a systematic bias towards over estimation of income and expenditure tax vat liabilities is found and individ uals tax preferences appear to be both dominated by self interest and distorted by tax misperceptions whether using a traditional utility maximisation framework or a variety of public choice frameworks economists agree that consumer voters or taxpayer voters dislike taxes taxes lower the consumption possibility set and thereby utility politicians proposing higher taxes expect to lose votes unless they can persuade voters that the utility gain from the use of those taxes will exceed the tax induced utility loss of course the extent of individuals losses will depend on their circumstances and how revenues are raised the tax structure traditional tax incidence and excess burden analyses and models of political costs associated with the tax structure hettich and winer 1984 1988 each provide guidance on the extent to which different individuals may be expected to suffer and vote differently under alternative tax structures much will depend on attitudes towards and perceptions of specific taxes especially personal income taxes and consumption taxes underlying most such analyses are two common presumptions i tax preferences are dictated by self interest and ii individuals accurately assess their tax liabilities and so make informed choices two largely independent areas of literature have challenged these assumptions first models incorporating altruism

the two pillars of the european central bank i interpret the european central bank s two pillar strategy by proposing an empirical model for inflation that distinguishes between the short and long run components of inflation the latter component depends on an exponentially weighted moving average of past monetary growth and the former on the output gap estimates for the 1971 2003 period suggest that money can be combined with other indicators to form the broadly based assessment of the outlook for future price developments that constitutes the ecb s second pillar however the analysis does not suggest that money should be treated differently from other indicators while money is a useful policy indicator all relevant indicators should be assessed in an integrated manner and a separate pillar focused on monetary aggregates does not appear necessary stefan gerlach

the implications of competition among jurisdictions does tiebout need politics the paper investigates whether compensation among local jurisdiction is by itself sufficient to ensure efficient provision of local public goods jurisdictions have fixed boundaries and each has an entrenched government with the power to tax and supply the public good residents can move costlessly among jurisdictions it is shown that competition among numerous jurisdictions is not sificient to guarantee public sector efficiency though residents can vote with their feet land is immobile hence governments can unsurp some land rents for their own ends increasing the number of jurisdictions limits but cannot completely eliminate the ability to exercise discretionary governmental power

partial fiscal decentralization and sub national government fiscal discipline empirical evidence from oecd countries recent theoretical research suggests that financing sub national governments expenditure out of own revenue sources is linked to more responsible budgeting because the financial implications of spending decisions then are internalized within a jurisdiction we test this proposition empirically on a sample of 23 oecd countries over the 1975 2000 period and find evidence in line with the hypothesis that greater revenue decentralization measured as sub national governments share of own source tax revenues in general government tax revenue is associated with improved sub national government budget deficits surpluses this finding is cross validated with a novel independent dataset consisting of all 34 oecd member states from 2002 to 2008

interpreting euro area inflation at high and low frequencies abstract several authors have recently interpreted the european central bank s ecb s two pillar framework as separate approaches to forecast and analyse inflation at different time horizons or frequency bands the ecb has publicly supported this understanding of the framework this paper presents further evidence on the behaviour of euro area inflation using band spectrum regressions which allow for a natural definition of the short and long run in terms of specific frequency bands and causality tests in the frequency domain the main finding is that variations in inflation are well explained by low frequency movements of money and real output growth and high frequency fluctuations of the output gap

local intergovernmental competition and the law of 1 n this article proposes an empirical framework based on a synthesis of the seminal law of 1 n and leviathan theories which models the relationship between government spending and the number of jurisdictions in a federal system as determined by the interplay of the costs related to centralized government which fall as the number of jurisdictions increases and the costs of distributive politics which rise as the number of jurisdictions increases using a panel of u s state and local government spending data empirical tests based on this combined framework show that the effect of intergovernmental competition predicted by the leviathan model is partially offset by the law of 1 n this result helps explain the inconsistent findings in the previous empirical literature

tax structure in a federation abstract does national taxation of a base influence the degree to which the local government will use the same tax base does the tax rate chosen by one local government influence the choices made by another local government the theoretical answer to these questions is often in the affirmative because of vertical and horizontal externalities that result when several governments are operating at the same time in a fiscal system however little empirical information is available this paper estimates the impact of horizontal and vertical externalities on the choice of tax rates by local governments operating in a federation higher national income tax rates and lower poverty rates are found to lead to lower local income tax rates

taxation and presidential approval separate effects from tax burden and tax structure turbulence previous research has established that taxation may impose significant electoral costs on politicians this literature however focuses exclusively on the effect of the tax burden in this paper we test the hypothesis that both the level of the tax burden and the change in the tax structure affect the us president s approval ratings over the 1959 2006 period our results support this proposition specifically we find a negative impact from the magnitudes of the tax burden and the deficit as well as from changes in the tax structure on presidential approval ratings

cross country estimates of the demand for money and its components the demand for money aggregates m1 m2 and their components currency demand deposits and time deposits are estimated using a sample of 103 countries at two time periods money demand is found to be affected by age literacy industrial development and political structure as well as income and inflation this expanded demand function helps to explain the considerable changes in money demand that have occurred over long periods and the large variation in money demand found across countries the knowledge thus gained is useful for understanding differences in monetary and taxation policies across countries

the institutional and political factors which influence taxation the ability of politicians to concentrate the benefits of spending while dispersing the costs of taxation makes taxation attractive distributive politics but the degree to which it is attractive varies widely among the states the objective of the research was to develop a fully specified model of per capita tax revenues of state governments not state plus local and thereby identify the political and institutional factors which cause the attractiveness of taxation to vary the resulting model includes 17 significant explanatory variables which together account for all but 10 of the variation in per capita tax revenue thirteen of the significant variables are institutional or political factors thus providing decisionmakers specific options for influencing the future size of government

fiscal decentralization and government size numerous studies have attempted to model the possible factors contributing to universal growth in public sectors this paper analyzes one device that appears capable of controlling some of that growth fiscal decentralization the results reported here also support the use of monopoly government assumptions in models of public policy

tax base choice by local governments limitations on general property tax rates and or levies existed in 28 states as of 1983 an increase from only 6 states prior to 1970 acir 1984 what began with property tax circuit breakers and homestead exemptions led in some cases to statewide campaigns to limit property tax rates and assessments research on the genesis of these state and local government slg tax and spending limitations has found that voters appear to dislike high taxes rapid spending growth and perceived government inefficiency but do not favor major cuts in service provision ladd and wilson 1982 1983 frieman and grasso 1982 courant et al 1980 voter desire for reduced taxes without ser

a rent seeking model of tels tax and expenditure limits or tels are constitutional or statutory constraints on the fiscal powers of government since the taxpayer revolt beginning in the late 1970s tels have been introduced in twenty three states in recent years a number of studies attempting to test the impact of tels have found little evidence that tels significantly reduced the growth of state government in this study we challenge the implicit leviathan model that underlies most of these studies and offer an alternative rent seeking model econometric tests provide support for this rentseeking model and indicate that tels have been significant in reducing the growth of state government at least in the short run

the leviathan lottery testing the revenue maximization objective of state lotteries as evidence for leviathan unlike other governmental units statelottery agencies publicly acknowledge thattheir primary objective is revenuemaximization this claim and the inherentmonopoly power of lottery agencies providesa unique arena to test for leviathan withdata obtained from united states lotterygames i perform a laffer curve analysis toderive the optimal lottery tax rates fordifferent categories of games theseoptimal tax rates and monte carlosimulations are then used to test whetherthe current tax structure of lottery gamesis indeed the revenue maximizing structure i find strong empirical evidence for the leviathan lottery

the political costs of taxes and government spending the marginal political costs of different types of taxes and government spending as well as voter preferences over different fiscal variables are examined using two different specifications for political cost one based on the probability of incumbent defeat and the other based on the incumbent s percentage of the vote models associated with these two specifications in which voting behaviour depends on disaggregated taxes and government expenditures are estimated using clata from canadian provincial elections the empirical results which indicate that different types of taxes and expenditures have quite different marginal political costs have important implications for models that incorporate voter pref erences

are small innovators credit rationed drawing upon a sample of 256 small firms who applied for bank loans the current paper is concerned with the extent to which innovativeness is associated with a lower level of loan application success the paper records the proportion of loan successfully applied for and estimates a series of tobit models utilising a number of proxy measures for innovation in terms of inputs outputs and commercial significance to the firm and incorporating standard controls in general the models suggest as anticipated that the most innovative firms are less successful in loan markets than their less innovative peers though there is some variation by proxy moreover there is tentative evidence that a little innovation may be a good thing

innovation in structural change of local government rural development has become a national concern as many local communities in rural areas of the united states are increasingly confronted with fiscal stress from several sources these sources include structural change in the local economic base demographic shifts reduced intergovernmental revenues and lower property values short of state and national rural development initiatives the range of choices for local government officials encompasses economic development efforts raising effective tax rates reducing services and or restructuring institutions to provide services more efficiently institutional restructuring or innovation in local government structure refers to internal restructuring functional consolidation geographical consolidation and or privatization community choice regarding institutional innovation is often

rational voting applied to choice of taxes fulton county atlanta georgia conducted a referendum on a local option sales tax the referendum offered voters an opportunity to substitute a 1 sales tax for an equal amount of property taxes the precinct level voting patterns of the referendum are analyzed using a rational voter framework the regression results generally support the implication of the model

tax mix corners and other kinks abstractthis paper models the local tax mix determination process in the presence of statewide fiscal limitations the decentralized government finance archetype and shows how excess sensitivity of local public spending to grants the conventionally and somewhat misleadingly termed flypaper effect arises in the constrained tax mix irrespective of whether lower or upper limits bind and how it cannot in general be taken as a symptom of local government overspending an empirical application to italian province panel data provides consistent evidence of the role of corner solutions produced by two sided tax limits in explaining the sensitivity of local public expenditures to grants

government size and decentralization evidence from disaggregated data public choice models of government behavior draw heavily from the economics literature of industrial organization following the argument that private monopoly in production leads to relatively high prices and profits the public choice literature suggests that similar analysis of government structure may be useful in the modeling of public production brennan and buchanan 3 4 model government as leviathan a public entity which seeks to maximize its revenue the leviathan hypothesis is motivated by the desire to successfully understand government behavior as well as to recommend effective means of controlling its behavior among other suggestions brennan and buchanan offer the private monopoly corollary that competition among different fiscal units is an effective means of controlling the aggregate size of leviathan the resulting decentralization hypothesis is total government intrusion into the economy should be smaller ceteris paribus the greater the extent to which taxes and expenditures are decentralized 3 15 this paper tests the decentralization hypothesis by examining a data set which considers all units of government by disaggregating federal spending on a state by state basis we construct a cross section of state data on federal state and local government activity all previous examinations of the decentralization hypothesis at the level of the state have excluded the activity of the federal government however given that federal government expenditures greatly exceed those of state and local governments previous cross sectional tests of the decentralization hypothesis may have employed grossly incomplete measures of governmental activity in each state our study provides two extensions to the debate one by testing the decentralization hypothesis at the level of state aggregation we suggest that previous cross sectional studies do not report strong evidence in support of the hypothesis because of their exclusion of the federal sector two our study suggests the importance of including all potential competitors in the government arena state local and federal governments our study does not solve all issues concerning aggregation

r d in smes a paradox this paper has three objectives 1 to survey the relevant literature addressing the apparent paradox of research development investments carried out within small and medium enterprises 2 to provide focused summaries of the articles in this special issue 3 to draw some general conclusions in terms of policy implications

a positive model of tax structure the model of tax structure developed in this paper is one in which the composition of revenues and the structure of specific taxes arise naturally as the result of self interested political behavior it is assumed that political agents choose tax structure so as to minimize the political costs or expected net loss in votes associated with raising a budget of given size several hypotheses concerning the nature of political cost functions are developed and applied to an explanation of the differences among u s states in their reliance on income taxation the empirical application emphasizes differences in political constraints across jurisdictions in the belief that much can be learned about the choice of policy instruments by studying structural adjustments in response to varying constraints the paper discusses how the proposed approach differs from or is consistent with that adopted by other authors and how the estimating equation relates to other empirical research in the literature

federalism and the growth of government revisited recent research in public economics has been testing for a relationship in federal states between the decentralization of governments and the total and individual size of government shares in gnp according to one view economic theory offers no unambiguous empirical predictions provided there is a competitive political environment at each government level the rivalry between political parties will result in an outcome that conforms approximately to the preferences of the citizens as interpreted in the conventional median voter model under this scenario it is not certain what differences might be caused by more decentralization oates 1985 to determine any difference we would have to possess considerable knowledge about the distribution of tastes and the location of the populace it has been hypothesized nevertheless that increased decentralization could result in a higher level of government expenditure quoting the economic historian john wallis oates 1985 749 suggests that since individuals have more control over public decisions at the local than at the state or national level they will wish to empower the public sector with a wider range of functions and responsibility where these activities are carried out at more localizedlevels of government

public education supply and student performance this paper develops a model of public exchange whereby voters and education policy makers exchange with one another within school districts because school district consolidation lowers alternatives to voters parents consolidation is hypothesized to raise public education spending because weakened intergovernmental competition allows policy makers to promote their own utility rather than that of constituents models of public education spending and academic performance are estimated over 1988 1990 while evidence indicates little support for the traditional treatment of the leviathan hypothesis that greater competition lowers public spending this paper argues that education spending by itself does not fully provide a valid test of the leviathan hypothesis since spending by itself does not necessarily indicate the quality of public education programmes empirical evidence indicates that greater numbers of schools and school districts promote higher student achievement as evidenced by higher math and v

bureaucratic corruption as a constraint on voter choice this paper has attempted to explain variations among countries in the tax level in the importance of progressive taxes and transfers and in the after tax share of middle income groups particular attention was paid to the declines in each of these variables which are observable in cross section data in the intermediate ranges of development it was argued that these phenomena are difficult to explain by variations in the demand for public spending or in the degree of tax evasion

searching for leviathan comment and extension in a recent article wallace oates 1985 investigated whether fiscal decentralization tended to act as a constraining influence on the overall size of the public sector this hypothesis has been advanced by several alternative theories of government behavior including richard musgrave s 1959 model of how the distribution function of government would be carried out by subnational governments geoffrey brennan and james buchanan s 1980 leviathan model and the more traditional public choice model for example walter hettich and stanley winer 1984 all contend that the decentralization of tax and spending decisions introduces competition among governmental units seeking to attract citizens and other mobile resources and thereby constrains taxing power oates analyzed two data sets one pertaining to the state and local sector in the united states and the other consisting of a sample of 43 countries and found little empirical support for the decentralization hypothesis the purpose of this paper is to reconsider his analysis in the case of state and local governments specifically it will be argued that oates s measures of decentralization may be inappropriate to test the hypothesis furthermore by taking into account the structure or composition of local governmental jurisdictions within a state empirical support of the decentralization hypothesis can be marshaled for general purpose local governments such as counties and municipalities i measuring fiscal decentralization among the states

debt and tariffs an empirical investigation of the evolution of revenue systems abstract this paper presents a theoretical framework where government chooses fiscal structure so as to maximize political support and where the evolution of fiscal systems is determined by changing economic political and administrative factors estimating equations are derived and the model is used to explain the development of revenue structure in canada from 1871 to 1913 a period when major revenue sources consisted of the tariff debt and excises the empirical analysis distinguishes between government plans and ex post observations of public revenues and places particular emphasis on the derivation of hypotheses linking economic political and administrative variables to revenue structure

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

an empirical analysis of state and local tax structure in the context of the leviathan model of government this paper has investigated the ability of an extreme and relatively simple model of political behavior to explain the level of revenues generated by state and local governments in general the behavior of these governments appears to be at least consistent with many of the fiscal outcomes predicted by the leviathan theory several although not all of the specific leviathan theory hypotheses considered received empirical support the evidence was consistent with the hypothesis that states utilizing comprehensive tax bases especially a personal income tax can be expected to generate higher levels of aggregate revenues strong support was also observed for the contention that intergovernmental competition by general purpose substate governments may serve as a substitute for constitutional constraints in limiting the revenue generating power of local governments

the convergence of fiscal regimes and the decline of the tiebout effect i have argued that the spatial convergence of per capita incomes and income distributions lead to the spatial convergence of fiscal regimes and that convergence diminishes opportunities for tiebout type moves in the economy considerable empirical evidence confirms the hypothesis states with relatively low initial levels of taxation have had relatively higher growth rates of taxation low per capita income states have had higher growth rates of real per capita incomes than have had high per capita income states the high economic growth rate states have had lower growth rates of taxation than the low income growth rate states spatial convergence of per capita incomes is associated with spatial convergence of fiscal regimes furthermore there has been a spatial convergence in income distributions increased equality of income empirically is associated with increased size of the fiscal regime confirming the public choice insight the spatial convergence of fiscal regimes has diminished the gains from tiebout type moves as such fiscal convergence diminishes the opportunity for citizen voters to reveal their preference for collective goods through migration of course at the limit where per capita incomes and the income distribution are invariant spatially the spatial convergence of fiscal regimes makes the musgrave samuelson problem of revealed preference for collective goods as intractable at the state and local levels as at the national level tiebout type moves no longer allow escape from leviathan

the balanced budget amendment clarifying the arguments from the perspective of a supporter this paper responds to the several criticisms that have been raised to the proposed constitutional amendment to require budget balance economists have concentrated on the loss of fiscal flexibility this objection is countered by reference to the political inefficacy of attempted budgetary manipulation lawyers have concentrated on problems of enforcement this objection is countered by reference to observed respect to other constitutional rules

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

motives to patent empirical evidence from germany abstract against the background of the patent upsurge we first analyse the role of patenting and alternative instruments to protect intellectual property based on a sample of german companies active in patenting in a second step we investigate the motives to patent considering sector and company size effects we find that company size matters both for the importance of instruments and the motives to patent especially important are the new strategic motives to patent like using patents to improve a company s own position in negotiations with partners licensees and the financial sector or to use patents as incentives for r d personnel or performance indicators these correlate positively with company size we derive some possible challenges for future patent policies from these insights

federal deductibility and local property tax rates abstract recent econometric work has suggested that federal deductibility of state and local taxes has raised the proportion of these taxes especially property taxes in local budgets this paper lends additional support to these earlier findings by showing that one channel through which deductibility leads to higher local property tax revenues is by increasing the rate of local property taxation specifically we find that if deductibility were eliminated the mean property tax rate in our sample would fall by 0 00715 7 15 per 1000 of assessed property or 21 1 of the mean tax rate

the incidence of cross licensing a theory and new evidence on the firm and contract level determinants abstract this paper examines the firm and contract level determinants of the incidence of cross licensing among manufacturing firms it develops a simple stochastic theory explaining such incidence which implies that cross licensing compared with unilateral licensing is more prevalent between large and symmetric firms under a reasonable set of assumptions we find strong empirical support to these implications based on a new dataset of more than 1100 licensing contracts by japanese manufacturing firms we also find that the incidence of cross licensing is higher when the contract covers only patent than when it covers only know how consistent with the theory the licensing probability between two firms depends primarily on the size of a potential licensor which according to the theory is consistent with the fact that a licensor is larger than a licensee on the average

taxes welfare costs and public consumption the case of the unwitting monopsonist our analysis provides some initial insight into the distributional consequences of alternative tax structures it has been shown that tax distortions when incorporated into an expenditure framework drive a wedge between the price paid by consumers for government goods and the explicit price received by producers such a wedge operates as a monopsonistic device that in the final analysis can improve the well being of public consumers whether this result emerges depends not only on the relative elasticity of demand and supply but also on the institutional setting in which public spending decisions are made

voting education and the great gatsby curve abstract high inequality goes hand in hand with low intergenerational earnings mobility across countries little is known about why the us is characterized by high inequality and low mobility while the opposite tends to hold for scandinavian countries in an overlapping generations model calibrated to the us education policies are endogenized via probabilistic voting by exploiting cross country variation in the bias in voter turnout towards the educated and elderly the model replicates the negative relation between inequality and public education expenditures and accounts for more than a quarter of the variation in inequality and mobility for the us i find that compulsory voting could foster mobility whereas inequality would be hardly affected

tax reform and the political economy of the tax base abstract this paper studies the political prospects for reform in a model where the tax base and statutory rate are separate instruments of tax policy the model suggests that large changes in the tax code may be easier to enact than marginal reforms the tax base faces a tipping point where even the beneficiaries from tax exemptions support reform at this tipping point tax reform is pareto improving politically feasible tax reform occurs when fiscal needs are large but may nonetheless involve reductions in marginal tax rates there is strategic complementarity in lobbying for tax exemptions resulting in multiple equilibria the model s main predictions are consistent with recent tax reforms in oecd countries

the role of tax bases and collections costs in the determination of income tax rates seigniorage and inflation a growing theoretical literature on optimal taxation predicts that governments will set the tax rates on money holdings and on more traditional tax bases to minimize the deadweight losses of collecting government revenue under the presumption that relative collection costs and tax bases have not changed significantly over time the empirical time series seigniorage literature has focused on the theory s tax smoothing implication finding only weak support we show that changes in collections costs and tax bases played an important role in the determination of tax composition and find stronger support for tax smoothing when this is taken into account

bibliography of james m buchanan s publications 1949 1986 1 prices income and public policy with c l allen and m r colberg new york mcgraw hill 1954 second edition 1959 2 public principles of public debt homewood richard d irwin 1958 3 the public finances homewood richard d irwin 1960 second edition 1965 translated into spanish as hacienda publica 1968 third edition 1970 translated into japanese 1972 fourth edition with marilyn flowers 1975 fifth edition with marilyn flowers 1980 sixth edition with marilyn flowers 1986 4 fiscal theory and political economy chapel hill university of north carolina press 1960 translated into turkish 1965 translated into japanese 1972 5 the calculus of consent logical foundations of constitutional democracy with gordon tullock ann arbor university of michigan press 1962 paperback edition 1965 translated into japanese 1979 translated into spanish 1980 6 public finance in democratic process chapel hill university of north carolina press 1966 translated into japanese 1971 translated into spanish 1973 7 demand and supply of public goods chicago rand mcnally 1968 translated into italian 1968 translated into japanese 1974 8 cost and choice an inquiry in economic theory chicago markham publishing co october 1969 out of print reprinted by university of chicago press midway reprint 1979 9 academia in anarchy an economic diagnosis with nicos devletoglou basic books 1970 english edition 1971 10 theory of public choice political applications of economics edited with robert tollison university of michigan press 1972 11 lse essays on cost edited with g f thirlby london wiedenfeld and nicholson 1973 12 the limits of liberty between anarchy and leviathan chicago university of chicago press 1975 translated into japanese 1977 translated into italian 1979 translated into german 1984 13 democracy in deficit the political legacy of lord keynes with richard e wagner new york academic press 1978 translated into japanese 1979 translated into korean 1981 14 freedom in constitutional contract perspective of a political economist college station texas a m university press 1978 15 whatshould economistsdo indianapolis indiana liberty press 1979

the impact of bad writing in economics we find significant style differences between articles written by economists for their professional journals and articles by the same economists in the wall street journal we find no evidence that style influences the professional success of economists which suggests that the private rewards to improving the quality of writing are low indeed each community of scholars has probably adopted a professionally correct writing style from which its members diverge little however scholars do alter their rhetorical style to communicate effectively with audiences other than the professional community this suggests that intra and inter group written communication by economists is efficient

renter illusion fact or fiction the renter illusion hypothesis holds that renters underestimate their property tax burden and therefore support excessive levels of local expenditure a number of studies have reached results that are consistent with the hypothesis but so far empirical investigations have proceeded from the assumption that renter illusion is a fact and have investigated the implications of this fact no one has investigated renter illusion as such in other areas of fiscal illusion survey analyses of voter perceptions have yielded considerable insight into the validity of illusionary hypotheses this paper follows this method and investigates a representative sample of 1000 danish renters and home owners perception of the local property tax system the evidence raises doubts about the renter illusion hypothesis the survey findings are corroborated by an analysis of property taxation in danish municipalities

a political theory of regulation with some observations on railway abandonments one of the main themes of partisan dispute in the recent past and doubtless in the foreseeable future is whether or not the value of detailed governmental regulation of the economy exceeds the cost this is exactly the kind of dispute that might be resolved by raising it from the level of mere partisan interest to the level of economic and political science unfortunately however it has not been raised because we do not have the necessary intellectual apparatus namely a theory about the motivation for the operation of and the consequences of regulation as a result most of the discussion consists of biased ad hoc explanations of particular cases with little effort to formulate and test alternative generalizations we have therefore nothing but unresolved and unresolvable disputes about a more or less random collection of stories and some contradictory recipes about cause and effect

centralization and government competition this paper examines the relationship between government size and fiscal centralization with specific focus on the separate influences of centralism and fragmentation on the size of public sector in the united states the empirical findings at the national level provide support to the hypothesis that fiscal decentralization leads to a smaller government the findings at the state and local levels however show no empirical relationship between government size and the degree of centralization

tax structure and the size of government an empirical analysis of the fiscal illusion and fiscal stress arguments this study attempts to fulfill a number of objectives one is the possible reconciliation of two divergent strains of thought concerning the size of government fiscal illusion and fiscal stress in this respect the results show little evidence of fiscal illusion but provide support for some of the notions associated with the fiscal stress hypothesis namely the effects of revenue and income variability on the size of government

interest group demand for taxation researchers have typically ignored the determinants of the tax structure of the public sector political scientists have concentrated their analyses on the expenditure side of the public ledgers while economists have avoided the issue by assuming that taxes are exogenously determined in this paper we have shown that a behavioral model of political interest groups can be employed to gain insights into the political selection of taxes the theory provides a general complement to the well documented analysis of special interest demand for public expenditures our analysis raises several important policy questions first is the influence of interest groups on the determination of tax systems desirable from a public policy perspective for example special interest groups dominated by high and middle income individuals may prefer regressive tax systems which reduce their own tax burden certainly the impact of interest groups on the well known regressivity of state and local tax systems is an area worthy of additional investigation second does the influence of interest groups lead to tax systems that unduly hamper economic efficiency and retard economic growth for example governments with economies dominated by a single industry may forsake diversity and economic development by selecting a tax system favorable to the major industry interest group demand for taxes may be a factor in explaining long run regional cycles such as the rise and fall of heavy manufacturing states such as the upper midwest this research has established that a link exists between special interest group demand for taxation and the structure of local tax systems however the extent to which these groups influence tax systems and the exact nature of this influence requires further research additional research may also provide insights into the control e g constitutional or legislative of interest group influence on taxes should it be determined that such control is necessary

a median voter analysis of variations in the use of property taxes among local governments this paper explores the variations among local governments in the composition of tax revenues or more specifically in the relative use of property taxes using a median voter framework various hypotheses are developed concerning the factors that should influence the relative use of property taxes a cross sectional sample of central cities is employed to test the hypotheses the empirical results are consistent with the hypotheses

median voters political systems and public policies an empirical test this paper tests the median voter hypothesis that variations in policies across political systems are caused by variations in median voter preferences the context of the empirical analysis is the tax policies of three groups of sub national governments in england in three time periods the results of a median voter model of tax policy variation are compared to the results of a mean voter model in different party systems and different electoral systems the evidence provides little support for the median voter hypothesis

responding to fiscal stress fiscal institutions and fiscal adjustment in four brazilian states abstract despite similar external shocks and pressures brazilian state leaders varied in the timing and the manner in which they adjusted to fiscal stress some state leaders rapidly switched to market oriented strategies that cut public intervention in the economy other state leaders delayed adjustment and when they finally put their accounts in order it was through market governing strategies that preserved government activism in part these different fiscal policy regimes were products of the decision making process in which chief executives operated in states where budgeting obeyed a more open and democratic pattern chief executives lacked autonomy and were forced to build coalitions to adjust this meant that they adjusted more slowly and their adjustment strategies included appeals to broad interests including those seeking protection from market pressures in states where budgeting was more autocratic chief executives could act quickly and without building a coalition the current project u

explaining the decision to repeal an optional local tax county governments in pennsylvania have had the option to repeal the intangible property tax since 1978 as of 1992 27 of pennsylvania s 66 counties had repealed it an attempt is made to explain empirically the probability of repeal in this paper the empirical model accounts for a large part of the variation across counties the results show that the probability of levying the intangible property tax is positively related to the projected change in the real estate tax rate further it was found that revenue diversification and several taste and political variables significantly influence the repeal decision these findings are consistent with those of previous tax adoption studies the evidence however does not show the exportation of real estate taxes to have the expected effect on the probability of repeal

federalism and the size of government over the last few decades the size of the public sector in both absolute and relative terms has increased in all of the western economies this has led to considerable investigation of the factors determining government size factors considered have included income elasticity of voter demand for public goods i e wagner s law relative price changes threshold effects e g wars or depressions interest group demands e g public sector employees or unions 17 productivity differentials 1 and redistributional motivations 18 10 one factor which has received little more than passing interest is government structure that is centralization of government activities as opposed to decentralization or federalism authors such as fratianni and spinelli 7 musgrave and musgrave 12 beck 2 and buchanan 4 make no mention of government structure as a factor in the determination of government size when considered the impact of government structure on government size is treated more as an afterthought for example mueller and murrell 11 incorporate a centralization variable in only two of their twenty two regression equations and then only in their two stage least squares equations and offer little analysis of its expected impact on government size exceptions to this standard treatment of federalism include brennan and buchanan 3 oates 15 nelson 13 14 and marlow 9 brennan and buchanan consider the structure of government and its impact on public sector size in the context of a revenue maximizing government model they argue that with mobile voters and local public goods decentralization of government taxing and expenditure powers would serve to constrain the size of the public sector in a tiebout like world any attempt on the part of one jurisdiction to exploit its citizenry would result in instantaneous and complete migration on the part of the citizenry to an alternative nonexploitive jurisdiction this competition among jurisdictions for the patronage of the citizenry limits the extent of fiscal exploitation possible and as such the size of the public sector brennan and buchanan note however that w ithin a constitutionally designed federal structure one would predict that there would be constant pressures by competitive lower level governments to secure institutional rearrangements that would moderate competitive pressures 3 182 these institutional rearrangements would take the form of collusive agreements between the central and lower level governments which assign to the central government what were previously lower level revenue raising powers subject to the revenues being returned to the lower level governments by

do monetary indicators lead euro area inflation abstract this paper assesses based on euro area data whether the strong in sample long run link between money growth and inflation that has been highlighted by a number of recent empirical studies is exploitable to predict inflation out of sample the results from standard bivariate forecasting models suggest that no monetary nor any other single indicator significantly outperforms a simple benchmark forecast the further analysis shows that it would be premature however to discard based on such evidence the usefulness of monetary and all other indicators first it is shown that based on judgemental adjustments to monetary indicators correcting for the effects of identifiable persistent velocity shifts it appears possible to significantly improve predictive ability in real time second i find that a factor forecasting model combining monetary and economic indicators which can be regarded as a generalized quantity theory or two pillar phillips curve forecasting model delivers a fairly good and stable forecasting performance

local governments monopoly power and local tax reform theory and evidence from the u k this paper hypothesises the existence of several sources of monopoly power for local governments when the system of local taxation is reformed by central government in particular we argue that information asymmetries between tax payers and central and local government at the time of reform provide opportunities for local politicians to set tax levels which differ from those expected in a full information setting we predict that compared to pre reform tax levels local tax levels post reform will differ according to four local government characteristics i the size of the seat majority of the ruling local party ii whether the party controlling local government is the same as or is different from the ruling party of central government iii whether the local government structure has one or two tiers and whether the same party controls both tiers and iv the degree of indebtedness of the local authority testing the model on the u k local tax reform of 1990 we find strong evidence consistent with the hypothesis that inter authority differences in local tax levels reflect differences in the degree of local political monopoly power resulting from information asymmetries this monopoly power appears to have been used generally but not exclusively to raise tax levels

the relationship between firm mobility and tax level empirical evidence of fiscal competition between local governments the mobility of the tax base may influence fiscal outcomes the many theoretical contributions about the role of mobility are not matched by empirical evidence existing studies address strategic interaction between governments but have little to say about mobility we introduce a new measure of mobility conditions based on the geographic profit variability of industrial sectors the econometric analysis shows a systematic negative relationship between mobility conditions and tax level among municipalities in norway the analysis takes into account neighborhood effects in a spatial model and the endogeneity of mobility conditions is handled with instrumental variables

tax decentralization and local government size this paper investigates the relationship between fiscal federalism and the sizes of local governments while many empirical studies emphasized that grants encourage the growth of local public spending and local taxes constrain it they are more silent regarding the effects of different types of tax autonomy the paper addresses this issue by arguing that tax decentralization as organized on tax bases used only by local governments tax separation rather than on tax base sharing would restrain local public expenditures using an unbalanced panel of oecd countries the key finding is that only property taxes mostly based on a tax separation scheme seem to favor smaller local governments thus while tax decentralization is a necessary condition for limiting the growth of local governments it does not appear sufficient as tax separation schemes among government levels would in fact be required

fiscal decentralization and government size an extension this paper analyzes one method governments employ to circumvent the discipline of a competitive system of fiscal federalism intergovernmental collusion in the form of intergovernmental grants grants it is argued serve to encourage the expansion of the public sector by concentrating taxing powers in the hands of the central government and by weakening the fiscal discipline imposed on governments forced to self finance their expenditures the results reported suggest that intergovernmental grants do encourage growth in the public sector the results offer further support for the use of monopoly government assumptions in public sector modeling

inequality the politics of redistribution and the tax mix political economy literature generally predicts a positive relationship between income inequality and redistribution however there is no clear empirical evidence supporting such a relationship by incorporating an informal sector that evades income taxes we account for the tax base effect that along with the political channel determines the equilibrium redistribution and tax mix we find a non monotonic relationship between inequality and redistribution and explore under which conditions an unequal society relies more heavily on indirect taxes to finance redistribution ultimately this paper shows the limitations of the income tax to finance redistribution in developing countries even when taxes are democratically chosen

do financial variables help forecasting inflation and real activity in the euro area abstract this paper uses a large data set consisting of 447 monthly macroeconomic time series concerning the main countries of the euro area to simulate out of sample predictions of the euro area industrial production and the harmonized inflation index and to evaluate the role of financial variables in forecasting we considered two models which allow forecasting based on large panels of time series forni et al rev econom statist 82 2000 540 mimeo 2001b and stock and watson mimeo 1999 performance of both models were compared to that of a simple univariate ar model results show that multivariate methods outperform univariate methods for forecasting inflation at one three six and twelve months and industrial production at one and three months we find that financial variables do help forecasting inflation but do not help forecasting industrial production

government expenditure and economic growth a cross country study this paper examines the relationship between the share of government consumption expenditure in gdp and the rate of growth of real per capita gdp the work of the u n international comparison project has recently made available new estimates for over 100 countries of both per capita gdp and the share of government consumption these new estimates are based on direct price comparisons rather than exchange rate conversions as a result the statistics for different countries are more comparable and cross country studies will be more reliable

charles k rowley william f shughart ii and robert d tollison eds the economics of budget deficits the international library of critical writings in economics 153 ed by mark blaug cheltenham u k and northampton ma u s a edward elgar 2002 2 vols 1 112 pages usd 370 00 gbp 245 00 cloth

does fiscal decentralization constrain leviathan new evidence from local property tax competition this paper reexamines whether fiscal decentralization constrains leviathan government using panel data for pennsylvania we compare actual property tax rates to the leviathan revenue maximizing rates for municipalities school districts and counties using spatial econometric methods we also estimate the degree of spatial dependence at the three levels of local government we find that fiscal decentralization results in stronger intergovernmental competition and lower tax rates we also find evidence of collusion among school districts that exhibit high interdependence but also high tax rates this calls into question the current literature s blind use of spatial dependence as a measure of intergovernmental competition

a positive model of tax reform this paper is devoted to the explanation of tax policy from a behavioural theoretic point of view it for the first time brings together within a unified framework behavioural determinants of government expenditure taxation and tax reform administrative and compliance costs associated with taxation factors generally neglected in models of taxation as well as tax avoidance evasion deadweight losses and the costs that are involved in the tax reform process itself play a crucial role in the model the paper investigates how these factors influence the development of taxation and expenditure and the occurrence of tax reform

exit voice and mimicking behavior evidence from swiss cantons previous empirical literature hasshown that in order to overcome agencyproblems voters make inter jurisdictionalcomparisons of fiscal performance whenmaking electoral decisions incumbents therefore anticipate voters feedback by copying fiscal policy decisionsfrom neighbors this paper argues thatfiscal autonomy exit as well as directlegislation voice enrich politicalcompetition reducing thus the influence of electoral competition onfiscal decisions consequently policymimicking does not matter in circumstancesof direct legislation and fiscal autonomywhere the impact of voters on the politicalagenda is particularly strong based onpanel data between 1980 and 1998 we findencouraging evidence supporting ourtheoretical arguments

tax competition rent seeking and fiscal decentralization abstract the present paper provides a basis for evaluating fiscal decentralization of expenditure and tax responsibilities by encompassing the literature on tax competition and rent seeking both tax and rent seeking competitions are conceived of as being wasteful and self defeating we find that rent seeking activities account for political distortions which may be mitigated in the process of fiscal decentralization while tax competition results in economic distortions associated with decentralization welfare evaluation should be based on the balance of the political gain and the economic cost

entrepreneurs creativity and firm innovation the moderating role of entrepreneurial self efficacy there are several studies in entrepreneurship investigating determinants of innovation outcomes in smes although entrepreneurs entrepreneurial creativity is often seen as a prerequisite previous research indicates it is not an exclusive determinant of innovation we use theoretical logics of social cognitive theory and innovation theory to develop a conceptual model of entrepreneur s creativity self efficacy and innovation outcomes the model is then tested on a large sample of small and medium firms from two distinct economies the united states and slovenia empirical findings partially support the proposed moderation effects of entrepreneurial self efficacy but with the same variations between countries the implications of these results in relation to entrepreneurship theory and practice are discussed

politicians opinions on tax reform this paper examines politicians stated preferences on tax reforms which aim to bring about a given change in revenue the paper starts from a simple framework inwhich politicians are vote maximisers analyses how disequilibria may affect tax choices and considers possible asymmetries in decisions the empirical examination of the problem uses the stated preferences of 637 flemish local politicians for both raising and lowering taxes by the same amount using multinomial logit estimation symmetric and asymmetric effects are found and so the symmetry assumption underlying the standard approach is questioned in the analyses of tax choices