The Uneasy Case for the Flat Tax

Social contract theories assume thatbecause personal security and private property are at risk ina state of nature, citizens will agree to grant Leviathan a monopolyof violence. But what is to prevent Leviathan from turning onhis citizens once they have lain down their arms? The socialcontract leaves citizens worse off unless Leviathan can fetterhimself, as constitutional democracies seek to do. Self-bindingfetters are hard to find. We suggest that schemes of progressivetaxation, in which marginal tax rates increase with taxable income,may be useful incentives to realign Leviathan's incentives withthose of his citizens. Income taxes give Leviathan an equityclaim in his state's economy, and progressive taxes give hima greater residual interest in upside payoffs. Leviathan willthen demand higher side payments from interest groups beforehe imposes value-destroying regulations.     

A Simple and Flexible Dynamic Approach to Foreign Direct Investment Growth: The Canada‐United States Relationship in the Context of Free Trade

This paper asks a simple question: Did Wilfred Laurier's dream of free trade with the United States, when it came to fruition in 1989, also impact on foreign direct investment (FDI) into Canada by US multinationals? This paper argues that the customary static econometric approach found in the FDI literature, along with the assumption that policy changes influence only the intercept term, are inadequate to address the question. Instead we introduce an innovative dynamic framework to support the testing of hypotheses on behavioural changes in the variables using a structural break framework. A key conclusion is that prior to signing the free trade agreement US FDI responded only to current growth in the Canadian economy, in a unitary fashion, and current exchange rate shifts. This can be described as a static relationship. The implementation of the free trade agreements between Canada and the USA increased the responsiveness of US FDI to growth in the Canadian economy by a factor greater than two. Furthermore, dynamics are found in the form of a lagged effect for changes in the growth in the Canadian economy and interest rate differentials. These conclusions challenge the dominant view, including that in official policy circles, that the free trade agreement had no impact on US firms’ FDI decisions in Canada.     

Rapid housing privatization in reforming economies: Pay the special dividend now

State ownership and operation of the housing stock in the previously centrally planned economies severely distorts housing markets, stifles labor mobility, and produces operating losses that exacerbate fiscal deficits. The conventional wisdom regarding structural reform is to gradually increase administered rents, thereby reducing deficits. Housing sales, where they occur, are primarily motivated to generate revenue to cover deficits in current operating budgets. We argue that the perceived benefits to a prolonged transition are illusory and the social costs are high.Housing will be affordable only if the population's current ownership of the existing housing stock is recognized and dividends on it are paid out. The payment can be a regular dividend (e.g., housing allowances) or a one-time special dividend (e.g., ownership vouchers). The latter is preferable.     

The Hypothesized Relationship Between Accountability and Ethical Behavior

Unethical behavior is important to study because it may have an adverse influence on organizational performance. This paper is an attempt to better understand why individuals behave as they do when faced with ethical dilemmas. We first explore the definition, theories and models of ethical behaviors and accountability. This discussion of societal ethics and accountability as forms of social control segues into a discussion of how accountability may influence ethical behaviors. Based on the business ethics and accountability literatures, we suggest a number of research questions and hypotheses that need to be tested, as well as an appropriate research strategy.     

Measuring progress in agricultural sustainability to support policy-making

The concept of sustainability is one of the forefront issues in discussions of the challenges facing global agriculture, given the mounting pressure to increase food production in both socially responsible and environmentally friendly ways. From the perspective of Irish agriculture, sustainable intensification is of particular relevance, given ambitious targets to increase milk production in the context of European Union (EU) milk quota removal in 2015. A series of farm-level sustainability indicators are developed here using the Teagasc National Farm Survey FADN (Farm Accountancy Data Network) data for Ireland from 2012. Three dimensions, reflecting the multifaceted nature of sustainability (environmental, economic and social) are considered. Given the environmental challenges inherent in the sustainable intensification of agriculture, it is encouraging to observe that the more intensive, top performing farms (in an economic sense) emit relatively less greenhouse gases when compared to their less intensive counterparts. Conversely, the better performing farms in economic terms tend to have a higher nitrogen surplus per hectare on average. This is consistent with their higher rates of production intensity, but poses a challenge in terms of sustainable intensification and expansion. That said this analysis demonstrates that the nitrogen use efficiency of milk production is positively correlated with economic performance, with more intensive farms producing relatively more milk per kilogram of nitrogen surplus. From the perspective of social sustainability, demographic traits also tend to be positively correlated with economic performance. Given a growing recognition of the need for interconnected policy in the area of sustainability, this research should help inform policy debates and provides a guide for the undertaking of similar assessments elsewhere.     

Diversity goals: Reframing the debate and enabling a fair evaluation

While diversity has enjoyed significant popularity in the corporate world for the last two decades, researchers continue to put forward conflicting results regarding the business benefits of workplace diversity. Some say workplace diversity is good for businesses; others argue it is an undertaking full of challenges; and yet others assert that it doesn’t really matter. With this in mind, we attempted to synthesize the research that evaluates the impact of workplace diversity on the organizational bottom line. We find an over-emphasis on demonstrating the business case of diversity in economic denominations, which—to some extent—has limited our understanding of the complex dynamics associated with diversity. We identify a lack of attention toward institutional forces as one of the reasons that has restricted our focus on mere economic gains. Overall, we recommend broadening our definition of goals that organizations have when adopting diversity initiatives by including ‘gain of legitimacy’ and ‘creation of goodwill’ as part of the essential consequences of diversity programs.     

Transfer pricing and economic functions analysis: the Japanese paradigm

This paper examines the difficulties facing tax authorities in valuing cross-border flows from a transactions based analysis, in conditions where intangibles and services are important and where the multinational firm concerned is operating a system in which group-wide economic functions dominate decision making. Its key contention is that the economic functions of any entity should be examined in order to determine whether transactions analysis can be used to produce an acceptable value. This is done in the particular context of Japanese multinational enterprises and uses two hypothetical situations to demonstrate the inadequacy of transactions based analysis as a panacea for transfer pricing problems, especially for transfers of value involving intangibles and services, which it redefines into two categories, perceptible and imperceptible.     

Effective Property Tax Rates and Capital Formation Issues: Manvel, Acton and Darby

Using comparatively new data sources, this study estimates that effective property tax rates on taxable capital declined nearly 50% in the U.S. during the decade of the 1970s, a phenomenon generally overlooked or understated in previous studies. Recognition of this halving of property tax rates permits at least a partial explanation for a number of otherwise unexplained macroeconomic occurrences during the 1970s, particularly the smaller-than-anticipated interactive effects of inflation and the income tax on interest rates, on the one hand, and on capital allocation, on the other. The clear implication is that greater attention must be paid to trends in effective property tax rates in understanding and predicting important economic behavior.