When redistribution makes personalized pricing of externalities useless

We consider a standard optimal taxation framework in which consumers' preferences are separable in consumption and labor and identical over consumption, but are affected by consumption externalities. For every nonlinear, income-dependent pricing of goods there is a linear pricing scheme, combined with an adjusted income tax schedule, that leaves all consumers equally well-off and weakly increases the government's budget. The result depends on whether a linear pricing scheme exists that keeps the aggregate amount of consumption at its initial level observed under nonlinear pricing. We provide sufficient conditions for the assumption to hold. If adjusting the income tax rate is not available, personalized prices for an externality can enhance social welfare if they are redistributive, that is, favor consumers with a larger marginal social value of income.     

Consumer Heterogeneity,Free Trade,and the Welfare Impact of Income Redistribution

Demographic differences, like young and elderly, and healthy and disabled, are summarized as consumers' heterogeneity in expenditure shares, and introduced into an otherwise standard Heckscher–Ohlin model, together with income distribution in this paper. We prove that free trade may hurt consumers who spend more on the exporting good if the volume of trade is small, while redistributing more income to consumers who spend more on the exporting good may make everyone in the country better off. By contrast, redistributing more income to consumers who spend more on the importing good may make everyone in the country worse off.     

Lifetime Utility Maximization When the Consumer's Lifetime Depends on his Consumption*

A model of consumer behaviour is postulated whereby expected lifetime is an argument of the consumer's utility function and the consumption pattern chosen by the consumer affects his subjective probability distribution over expected, lifetime. Although introducing uncertainty makes the derivation of general conclusions difficult, it is shown for a simple two-good case that there are significant implications for income and substitution effects and the shape of the consumer's demand curve.     

Effects of the Mexican Apple Tariff on the World Apple Market

In response to the USA blocking Mexican trucks from traveling to the inland part of the USA, Mexico imposed tariffs on US fresh apple exports. This study analyzes the impacts of the Mexican tariff on USA, Mexican and world apple markets by using theoretical analysis and developing a spatial equilibrium trade model. The results show that this tariff increases apple prices in Mexico, to the benefit of Mexican producers but harming Mexican consumers. Even though Mexico collects revenues from its tariff, the overall welfare impact is negative because consumers' loss outweighs producers' gain and tariff revenues. Since the USA exports less to Mexico, its prices and production decline, but consumption increases. To mitigate the export market loss to Mexico, the USA redirects its exports to other importing countries, displacing other apple exporting countries' trade with these importing countries.     

Liquidity constraints, precautionary saving and aggregate consumption: an international comparison

This paper has three objectives. First, to expand Hall's [J. Polit. Econ. 86 (1978) 971] rational expectations permanent income/life cycle hypotheses (REPIH/RELCH) representative agent model to allow for current income consumers, the durable component of total consumer expenditures and for intertemporal substitution, which are often cited as the main reasons for the rejection of Hall's model. Second, to apply this modified model to 20 OECD countries over the post-World War II period. The GMM estimation method is employed. Third, to examine the relative influence of liquidity constraints and precautionary saving on the cross-country variation in the proportion of current income consumers, using cross-country regressions and a non-linear model of panel data. The presence of current income consumers, which is primarily due to liquidity constraints and to a lesser extent to precautionary saving, is the major factor for the rejection of the basic REPIH/RELCH model in all OECD countries.     

Lifetime versus Annual Tax‐and‐Transfer Progressivity: Sweden, 1968–2009

In this paper, we analyze the evolution of tax‐and‐transfer progressivity in Sweden over both annual and lifetime horizons. Using a rich micro panel covering the period 1968–2009, we calculate tax rates over a cohort's entire working life cycle. Our main finding is that taxes are considerably less progressive over the lifetime than in any single year. Social insurance transfers to transitory low‐income earners account for most of this result. We offer a number of robustness checks of the measurement of lifetime incomes and progressivity, but none of them changes our overall findings.     

Constrained Inefficiency and Optimal Taxation with Uninsurable Risks

When individuals' labor and capital income are subject to uninsurable idiosyncratic risks, should capital and labor be taxed, and if so how? In a two‐period general equilibrium model with production, we derive a decomposition formula of the welfare effects of these taxes into insurance and distribution effects. This allows us to determine how the sign of the optimal taxes on capital and labor depend on the nature of the shocks and the degree of heterogeneity among consumers' income, as well as on the way in which the tax revenue is used to provide lump‐sum transfers to consumers. When shocks affect primarily labor income and heterogeneity is small, the optimal tax on capital is positive. However, in other cases a negative tax on capital is welfare‐improving.     

Ricardian equivalence under imperfect information

In the US, aggregate private consumption changes are excessively sensitive not only to current and lagged changes in income, but also to current and lagged changes in government expenditures. I give a new theoretical interpretation to this observation. I show that this excess sensitivity arises when consumers take into account the link between taxes and government expenditures (i.e. when they are Ricardian), but lack exact information on the aggregate economy. While the model provides a simultaneous explanation for both types of excess sensitivity, the strong restrictions that it imposes on the data are not supported by the results of econometric estimation.     

The political economy of public debt

Public debt (as opposed to current taxation) alters the inter-temporal pattern of tax rates??it reduces current rates and increases future rates. Accordingly, whether the share of the cost of a given public expenditure is reduced or increased by debt for a given individual depends on the time profile of that individual??s income (tax base) vis-à-vis others?? incomes. Therefore, given the age-profile of income in virtually all Western countries, individuals will tend to be better off under current taxes the younger they are. If (as most standard models of political economy assume) individuals vote according to their economic interests, and if they are tolerably well-informed, then the pattern of support for public debt will track age. And increases in the median age of the population will lead to larger public debt. In other words, public debt policy collapses to a kind of demographic politics. This explanation may, however, be sensitive to assumptions about motives for bequest. Specifically, if bequestors seek to leave positive bequests and are motivated exclusively by the lifetime consumption of their heirs (as well as themselves) then the aged may, under plausible assumptions about the age of their heirs, prefer current taxes over debt.     

Consumption patterns of food,tobacco and beverages: a cross-country analysis

This study considers the consumption patterns of food, tobacco, soft drinks, and alcohol in 43 developed and developing countries. Such an analysis is important for policy issues associated with tobacco, alcohol, and soft drinks. The results show that consumers in the developing countries spend a much higher proportion of their income on food than consumers in developed countries. The proportion of expenditure allocated to the other three commodities, tobacco, alcohol, and soft drinks, are similar in the two groups of countries. On average, people around the world allocate about one quarter of their income on food, 2.6% on tobacco, 3.2% on alcohol and 1.2% on soft drinks. The income elasticity estimates reveal that food is a necessity in most countries, while tobacco and alcohol are necessities in most of the developed countries and luxuries in a majority of developing countries. Soft drinks are a luxury in a majority of the developing as well as the developed countries. The own-price elasticities show that demand for all four commodities is price inelastic in all countries.     

Economic Stabilization and Inflation

The climate change issue imposes us not only to change the way we produce and convert energy but also to modify current energy consumption patterns. A substantial body of literature has shown that our behavior is often guided by habits. The existence of habits - not fully conscious forms of behavior - is important as it contradicts rational choice theory. Their presence thus calls for the setting of new instruments as it is difficult to expect consumers to be capable of exercising control over their consumption of energy in reaction to given incentives. This is further increased in our perspective where the current carbon-based Socio-Technical System constrains and shapes consumers' choices through structural, cultural, social and institutional forces. Habits being potentially "counterintentional," can be considered as a form of behavioral lock-in that may explain continued increase of energy consumption. Policies should thus specifically address the performance context of habits.     

碳税再循环分配效应演化博弈研究

促进企业低碳生产和消费者绿色消费,是在社会经济高质量发展条件下实现碳达峰、碳中和目标的充分保障。构建由地方政府、企业和居民多主体构成的碳税再循环系统,结合当前中国国民收入水平和低碳经济发展状况,利用三方演化博弈理论研究多主体策略选择的演化过程,并应用Python程序设计语言对整个演化过程进行数值仿真,探究地方政府不同的补贴策略、产品的收入需求弹性和需求价格弹性等变量对碳税再循环分配效应的影响。研究结果表明：在低碳补贴和收入补贴策略之间,地方政府实施前者更能够促进居民绿色消费和企业低碳生产,但实施后者有利于改善收入不平等问题,同时产品的收入需求弹性和需求价格弹性差异也会影响地方政府碳税返还政策的效果。     

Perspectives on International Trends and Dynamics in Population and Consumption

There are increasing concerns that global environmental limits may soon be met as a result of increasing numbers of people coupled with increasing consumption of resources. However, the current level and rates of growth in both consumption and population vary systematically among countries grouped according to income levels. Many high income countries have population growth rates at close to replacement levels, but their per capita consumption is consistently several times higher than low income countries. Low income countries need to grow out of poverty and have high population growth rates. Using current population structures for India and the USA in an age-structured demographic model, and simple projections of annual reductions in fertility or consumption per capita over the next 50 years, we show that while reductions in both consumption and fertility are necessary to stabilize impacts, there are short term gains from consumption reductions in high income countries such as the USA, and long term gains from early fertility reductions in growing economies such as India.     

Birth,Death, and Consumption: Overlapping Generations and the Random Walk Hypothesis

This paper studies the time-series behavior of consumption in a model that incorporates birth, death, and a precautionary motive for saving. Consumption of an individual agent is a random walk. However, aggregate consumption is a random walk if and only if the sum of the death rate and population growth rate is zero. Failure of the random walk hypothesis should not be attributed to finite horizons perse, but rather to inter-generational transfers caused by birth and death. Unlike certainty-equivalent models, the expected growth of consumption depends on financial wealth, rather than wage income or human capital. [D91, E21]     

Microeconomic consequences and macroeconomic causes of foreign direct investment in southern African economies

The authors use a new data set on firms in 13 countries of the Southern African Development Community (SADC) and comparators from other regions to identify the benefits and determinants of FDI in this region. Foreign Direct Investment (FDI) has facilitated local development in the SADC. Foreign-owned firms perform better than domestic firms, are larger, and locate in richer and better-governed countries and in countries with more competitive financial intermediaries. They are also more likely to export than domestic firms and evidence suggests that they might have positive spillover effects on domestic firms. Based on a standard empirical model, the SADC is attracting the inward FDI per capita that the region's level of income would predict. But this means that there are less capital inflows per capita to the region than there are to wealthier parts of the developing world. Moreover, the SADC is attracting less FDI than comparators for reasons that are possibly more fundamental than current income, namely, countries’ past growth record, demographic structure and the quality of physical infrastructure. Interestingly, inward FDI is less sensitive to variation in income within the SADC than in other parts of the world, but is more responsive to changes in country's openness to trade.     

ECONOMIC MODELLING OF SUICIDE UNDER INCOME UNCERTAINTY: FOR BETTER UNDERSTANDING OF MIDDLE‐AGED SUICIDE*

This paper formalises an individual's decision about suicide within a framework of lifetime utility maximisation models. This is in line with the literature on economic modelling of suicide. The novelty of the paper is to take into account income uncertainty. Income uncertainty reduces a risk‐averse individual's expected utility, making them more likely to commit suicide. On the other hand, income uncertainty creates a value to postponing suicide even when their income gets sufficiently low. This is because income uncertainty means that if things go well, they will get higher income in the future. Thus, income uncertainty has two opposite effects on suicidal behaviour. The main objective of this paper is to construct an economic model of suicide for investigating net impacts of income uncertainty on suicidal behaviour. For this purpose, it is assumed that the wage evolves according to a stochastic process. Then, the threshold wage, below which an individual commits suicide, is derived as a function of the parameters of the stochastic process assumed for the wage evolution. Impacts of changes in these parameters on the threshold wage are calculated. With the result, the paper shows how income uncertainty affects suicidal behaviour.     

CHANGES IN CANADIAN FAMILY INCOME AND FAMILY CONSUMPTION INEQUALITY BETWEEN 1978 AND 1992

This paper uses Canadian cross-sectional income and expenditure data to examine changes in the distribution of family income and family consumption during the period 1978 to 1992. Family consumption data are analyzed because in the presence of intertemporal consumption smoothing, the cross-sectional distribution of consumption may characterize the distribution of lifetime wealth. I find that both Canadian family income inequality and Canadian family consumption inequality moved countercyclically. In addition, both Canadian family income inequality and Canadian family consumption inequality trended upward over the period; however, the change in family consumption inequality was much smaller than the change in family income inequality, suggesting that inequality in the distribution of lifetime wealth may have changed much less than is suggested by changes in the distribution of income.     

Income inequality,consumer debt,and prudential regulation: An agent-based approach to study the emergence of crises and financial instability

The paper presents an agent-based model to study the interaction between income inequality and prudential regulations in a macroeconomic framework characterized by consumer debt. Simulation results show that income inequality is detrimental to both macro and financial stability as it leads to higher credit demands, higher unemployment rates, economic volatility, and financial fragility. Besides the importance of consumers' leveraging, deleveraging externalities are found to be equally important for the emergence of crises and financial fragility because of the liquidity risk they entail. Minsky moments are also observed; they are related to consumers' prudential behavior and their beliefs about the macroeconomic conditions. Concerning the policy relevance of our investigation, simulations allow us to highlight that the effectiveness of prudential regulation depends on the phase of the business cycle and that there is not a “one-size-fits-all” regulation. This study emphasizes that regulatory constraints should take into account the features of the economic agents, such as the distribution of income and their willingness to borrow, in addition to the features of the financial sector.     

HOW DO SPEED AND SECURITY INFLUENCE CONSUMERS' PAYMENT BEHAVIOR?

The Federal Reserve named improvements in the speed and security of the payment system as two of its policy initiatives for 2012–2016. Using new data from the 2013 Survey of Consumer Payment Choice (SCPC) and models from earlier research, we estimate how various aspects of speed and security influence consumers' decisions to adopt and use payment instruments. Some aspects of speed and security have a statistically significant influence on the adoption and use of selected payment instruments, but not as much as other characteristics of payment instruments. Using econometric models to simulate selected policies proposed by the Fed, we show that faster speed of payment deduction for Automatic Clearing House (ACH) transactions would slightly increase consumers' adoption of ACH‐based payment methods, while enhanced security of payment cards would marginally increase the use of credit and debit cards. However, neither improvement is likely to increase consumer welfare much because consumer demand for payments is very inelastic with respect to speed and security. Our analysis focuses exclusively on consumers' behavior and does not include potential benefits of improvements to the payment system that would directly benefit businesses or financial institutions. In addition, preventing security breaches may preserve public confidence in the payment system, benefitting consumers even if they do not change their payment behavior. (JEL D12, D14, E58)     

Global corporations and local politics: income redistribution vs. FDI subsidies

Income inequality has been used empirically to explain the mixed performance of developing countries in attracting FDI. This paper sets up a theoretical model that links the skewness of the income distribution to a host government's willingness to subsidize FDI. Large skewness makes government subsidies less likely because the median income person prefers redistribution. Little skewness, however, does not guarantee FDI. In addition, host governments may switch from positive to no subsidies if a shift in economic variables changes how the policymaker trades off the FDI benefits and income redistribution, thereby offering an alternative to the conventional hold-up story.