Free Immigration and Welfare Access: The Swedish Experience

With the expansion of the European Union from 15 to 25 member countries in 2004, fears of migrants’ excessive welfare use led 14 of the 15 older member countries to impose restrictions on the access of citizens of the new member countries – the A10 countries – to their welfare systems. Sweden was the only exception. This paper evaluates the net contribution of post‐enlargement A10 immigrants to Swedish public finances in 2007. On average, A10 immigrants generate less public revenue than the population on average, but they also cost less. The net result is a zero or small positive net contribution. In particular, A10 immigrants do not benefit more from basic social welfare than the population on average. The discounted net contribution over the A10 immigrants’ lifetimes may be positive or negative depending, for example, on their income assimilation rates and on future real interest rates.     

Do Joint Audits Improve or Impair Audit Quality?

Conventional wisdom holds that joint audits would improve audit quality by enhancing audit evidence precision because “Two heads are better than one.” Our paper challenges this wisdom. We show that joint audits by one big firm and one small firm may impair audit quality, because, in that situation, joint audits induce a free‐riding problem between audit firms and reduce audit evidence precision. We further derive a set of empirically testable predictions comparing audit evidence precision and audit fees under joint and single audits. This paper, the first theoretical study of joint audits, contributes to a better understanding of the economic consequences of joint audits on audit quality.     

Uniqueness of Markov equilibrium in stochastic OLG models with nonclassical production

A large class of stochastic OLG economies with nonclassical production is shown to possess a unique Markov Equilibrium (ME) which is also the unique sequential equilibrium. Additional properties such as monotonicity, continuity, and smoothness of the ME are also discussed.     

Welfare Magnet Hypothesis,Fiscal Burden,and Immigration Skill Selectivity

In this paper, we investigate the effect of welfare state generosity on the difference between skilled and unskilled migration rates, and the role of mobility restriction in shaping this effect. We utilize the free labor movement within the European Union plus Norway and Switzerland (EUR) and the restricted movement from outside the EUR in order to compare the free‐migration regime to the restricted‐migration regime. We find strong support for the magnet hypothesis under the free‐migration regime, and the fiscal burden hypothesis under the restricted‐migration regime, even after controlling for differences in educational quality and returns to skills in source and host countries.     

Gender Power,Fertility, and Family Policy

The birth of children often shifts the balance of power within a family. If family decisions are made according to the welfare function of the spouses, this shift in power might cause a time‐consistency problem. In a model of cooperative family decision‐making, we show that this problem can lead to a systematic downward bias in fertility. By keeping fertility low, spouses mitigate the ex ante undesired shift in the balance of power that results from the presence of children. This provides scope for welfare‐enhancing policy intervention. We discuss to what extent existing family policy measures are suitable for overcoming the bias.     

The Intergenerational Consequences of Tobacco Policy: A Review of Policy's Influence on Maternal Smoking and Child Health

The response of pregnant women to tobacco policy is of particular interest due to these women being in a unique position to pass health capital to the next generation. By comparing estimates in the literature, we highlight that while pregnant women are responsive to taxes and taxes improve child health, their responsiveness has declined over time. We show that these trends reflect a compositional change; specifically, the least addicted smokers quit in the 1990s, leaving the pool of smoking mothers to be dominated by less price elastic smokers. Reviewing the literature on other tobacco policies, we show that a state‐level U.S. smoking ban has roughly three times the effect on pregnant women of a 10% increase in prices using elasticity estimates from more recent periods. Throughout this review, we identify areas for improvement in the literature and offer a number of ideas for future research projects.     

Laffer curves in Japan

This paper investigates the Laffer curves in Japan, based on a neoclassical growth model. It is found that while the labor tax rate is smaller than that at the peak of the Laffer curve, the capital tax rate is either very close to, or larger than, that at the peak of the Laffer curve. This problem is more serious when the consumption tax rate is high. It is also found that to maximize total tax revenue, the government should increase the labor tax rate but decrease the capital tax rate.     

Does medicaid generosity affect household income?

Almost all recent literature on Medicaid and labor supply has used Affordable Care Act (ACA)-induced Medicaid eligibility expansions in various states as natural experiments. Estimated effects on employment and earnings differ widely due to differences in the scope of eligibility expansion across states and are potentially subject to biases due to policy endogeneity. Using a Regression Kink Design (RKD) framework, this paper takes a new approach to the identification of the effect of Medicaid generosity on household income. Both state-level data and March CPS data from 1980 to 2013 suggest that generous federal funding of state-level Medicaid costs have a negative effect on household income. The negative impact of Medicaid generosity on household income is more pronounced at the lower end of the household income distribution and on the income and earnings of female heads.     

The trouble with naïve Keynesianism

Since the Keynesian Revolution of the 1930s, many prominent economists have argued that a useful policy response to economic depression is to boost government spending. But pressure to spend quickly increases the potential for waste and inefficiency: this is ignored or dismissed in the Keynesian literature. For example, a widely cited cost–benefit analysis of stimulus spending does not even acknowledge the possibility of waste, and some Keynesians go so far as to argue that wasteful spending during a crisis can nonetheless be desirable. Here we extend the typical analysis by accounting explicitly for the leading sources of cost including waste, resource costs, and the excess burden of taxation. Our results suggest that stimulus spending that is largely wasteful is unlikely to generate net wealth. A proper response to economic depression must consider the possibility that government waste can render stimulus spending counterproductive.