An Earned Income Tax Credit in the Netherlands: Simulations with the MIMIC Model

In recent policy discussions in the Netherlands, the Earned Income Tax Credit (EITC) has been put forward as an instrument to reduce the unemployment rate among low-skilled workers. Using MIMIC, CPB's applied general equilibrium model for the Netherlands, this article discusses the economic impact of different forms of the EITC. The analysis reveals that moderately targeting the EITC to the unskilled makes the instrument more effective in reducing unemployment. The targeting concept features decreasing returns, however. Indeed, it may be counterproductive if the EITC is targeted at a very small income range. Furthermore, targeting the EITC to the low skilled induces adverse effects on the quality and quantity of labour supply because it raises the marginal tax burden on medium-income workers.     

Advances in random utility models report of the workshop on advances in random utility models duke invitational symposium on choice modeling behavior

In recent years, major advances have taken place in three areas of random utility modeling: (1) semiparametric estimation, (2) computational methods for multinomial probit models, and (3) computational methods for Bayesian estimation. This paper summarizes these developments and discusses their implications for practice.     

An applied analysis of ACE and CBIT reforms in the EU

We assess the quantitative impact of two reforms to corporation tax, which would eliminate the differential treatment of debt and equity: the allowance for corporate equity (ACE) and the comprehensive business income tax (CBIT). We explore the impact of these reforms on various decision margins, using an applied general equilibrium model for the EU calibrated with recent empirical estimates of elasticities. The results suggest that, if governments adjust statutory corporate tax rates to balance their budget, profit shifting and discrete location render CBIT more attractive for most individual European countries. European coordination makes a joint ACE more, and a joint CBIT less efficient. A combination of ACE and CBIT is always welfare improving.     

Uncertainty causes rounding: an experimental study

Rounding is a common phenomenon when subjects provide an answer to an open-ended question, both in experimental tasks and in survey responses. From a statistical perspective, rounding implies that the measured variable is a coarsened version of the underlying continuous target variable. Since the coarsening process is non-random, inference from rounded data is generally biased. Despite the potentially severe consequences of rounding, little is known about its causes. In this paper, we focus on subjects’ uncertainty about the target variable as one potential cause for rounding behavior. We present a novel experimental method that induces uncertainty in a controlled way, thus providing causal evidence for the effect of subjects’ uncertainty on the extent of rounding. Then, we specify and estimate a mixture model that relates uncertainty and rounding. The results suggest that an increase in the exogenous level of uncertainty translates into higher variance of the subjects’ beliefs, which in turn results in more rounding.     

Price-Predicting Ability of Farm Managers: Empirical Findings with Flower Producers in the Netherlands

Differences in income among horticultural growers producing under similar conditions are known to be substantial. Production policy, including cultivar choice, plays an important role. Both price variation over time and price differences among cultivars provide valuable management information to growers to adapt their production policy. This study focuses on price-predicting skills of specialized chrysanthemum growers. The study, based on a survey among 26 participants, shows that growers who predict absolute prices well for one period do not have a higher chance of predicting well for other periods. With respect to predicting relative price positions (relative to other cultivars or other firms), evidence is found, however, that this is a skill, especially for estimating the relative market position. Also, evidence is provided that price differences among cultivars are nonrandom in time, and it is concluded that growers could adapt their production planning and cultivar choice to benefit from expected price variations.     

Reinventing the Dutch tax-benefit system: exploring the frontier of the equity-efficiency trade-off

European governments aim to raise labour supply, cut unemployment and, at the same time, maintain social cohesion. Yet, economists have stressed the trade-off between these objectives. This paper reviews the key policy insights from optimal tax theory to identify options for reform in the tax-benefit system that can potentially improve the equity-efficiency trade-off. Using a comprehensive applied general equilibrium model, we then explore whether reforms along these lines in the Dutch tax-benefit system raise employment without sacrificing equality. The analysis reveals that selective tax relief for elastic secondary earners and low-skilled workers have this potential. A flat income tax structure, possibly combined with a negative income tax, worsens the equity-efficiency trade-off.      

The Role of Value‐Informed Pricing in Market‐Oriented Product Innovation Management*

Although the positive effect of a market orientation on new product success is widely accepted and the market orientation literature has increased its understanding of how a market orientation leads to performance, the extant literature has overlooked the role of value‐informed pricing in the relationship. Value‐informed pricing is a pricing practice in which the decision makers base the price of the new product on the customers' perceptions of the benefits that the product offers and how these benefits are traded by customers against the price (that has yet to be determined). Considering that pricing mistakes may hit hard on the profitability of product innovations, it is important to firms to have a good understanding of its role. This study develops a framework in which value‐informed pricing is integrated in the relationship between market orientation and new product performance. A distinction is made between customer and competitor orientations, and relative product advantage is also included in the conceptual model. The model is tested on data obtained from managers based on a cross sectional sample of 144 firms. The respondents were involved in a decision‐making process of the pricing of a new product. The model is tested using structural equations modeling. The results show that value‐informed pricing has a strong effect on new product performance. It also reveals that each component of a market orientation fulfills a specific role in a market‐oriented organization. Value‐informed pricing is found to have important mediating effects in the market orientation–new product performance relationship. Results show that firms with a strong customer orientation engage in value‐informed pricing and develop superior benefits to customers in an advantageous product. In turn, both value‐informed pricing and relative product advantage positively affect new product market performance. However, no significant effect of competitor orientation on value‐informed pricing is found. Combined with the finding that competitor orientation negatively affects relative product advantage, this suggests that competitor orientation may hurt new product performance when this orientation is not balanced with a strong customer orientation. The results also portray that value‐informed pricing leads to higher product advantage. Interestingly, this relation is contingent on the degree of interfunctional coordination within the firm. This suggests that the relationship between market orientation and new product performance is strongest if firms integrate value‐informed pricing in the new product development process. In this sense, a market‐oriented firm mirrors the customer value perception that makes a trade‐off between benefits and price.     

The vision phenomenon: Towards a theoretical underpinning of visions of the future and the process of envisioning

Visions of the future and the method of envisioning are common approaches for making claims about and for the future. On the one hand, we can have our own vision, and we also expect certain people (mostly leaders) to have vision. On the other hand, most futures practitioners confirm that a (shared) vision is needed for successful action, and the active development of vision is therefore to be encouraged. However, theory development has been limited and many authors do not go beyond the confirmation that it is important to have or develop (a) vision, mostly in relation to a specific desire for action. Vision appears to be much more a phenomenon (in its original sense as ‘appearance’) than a theory. Hence, what we should expect from a vision theory is a deeper understanding of what vision is, what the added value of the process of visioning could be, and how we have to appreciate and assess (explicit) vision statements. In this contribution, we propose a basic theoretical framework in order to move towards the underpinning of ‘visionary’ approaches.     

Tax policy in a matching model with training

This paper develops a model of search on the labour market withtraining. We explore how the combination of an average job taxand a marginal wage tax can be used to alleviate inefficienciesin job matching and, at the same time, raise a positive revenuewith minimal distortions in search and training. We find that(i) a wage tax is less distortionary to raise revenue than isa job tax if training is not distorted initially; (ii) thisconclusion may reverse in the presence of training distortions;(iii) marginal wage taxes are less distortionary in economieswhere bargaining parties can commit to the wage profile.