Countercyclical taxes in a monopolistically competitive environment

In the context of a neoclassical growth model with monopolistic competition, this paper studies the stabilizing effects of countercyclical tax policy when the income tax rate has an additional role of financing government budget deficits. Consistent with the conventional wisdom, countercyclical taxes generally reduce aggregate volatility, unless the fiscal response to debt accumulation is weak. The presence of monopoly power enhances these effects. Even when automatic stabilizers successfully stabilize business cycle fluctuations, countercyclical taxes are welfare inferior, due to reduced precautionary saving motives. While, if the fiscal response to debt is weak and countercyclical tax policy destabilizing, the increased precautionary saving motive is not welfare enhancing as the asset accumulated is government debt rather than capital. These results are generally robust. Nominal inertia may, however, dominate the precautionary saving mechanism.     

Heterogeneity of consumer preferences and trade patterns in a monopolistically competitive setting

The paper considers a two-sector two-country trade model of monopolistic competition featuring the heterogeneity of consumer preferences and incomes within and across countries. The incorporation of heterogeneity into a monopolistic competition setting is achieved by assuming a nested Cobb–Douglas and CES utility function exhibiting both country and sector-specific consumer tastes and expenditure shares on manufacturing and traditional goods. The key question analyzed in the paper is how consumer heterogeneity affects the home bias of trade in different countries. The key finding here is that the heterogeneity in tastes and incomes of consumers can provide a substantial influence on degree of home bias in trade but only in combination with high transportation costs.     

A competitive equilibrium for a warm-glow economy

The warm-glow model (Andreoni in J Political Econ 97:1447–1458, 1989; Econ J 100:464–477, 1990) of public goods provision has received widespread interest, yet surprisingly most attention has focused on the voluntary contribution equilibrium of the model, and only very little attention has been devoted to the competitive equilibrium. In this paper, we introduce the concept of competitive equilibrium for a warm-glow economy (henceforth, warm-glow equilibrium) and establish both existence and welfare properties. The warm-glow equilibrium concept may prove to be very useful to the normative and positive theory of public goods provision. First, it is a price-based mechanism achieving efficient outcomes. Second, not only could the warm-glow equilibria outcomes serve as a point of reference to measure free-riding and welfare loss but also, as suggested by Bernheim and Rangel (Behavioral Economics and Its Applications, 2007), in large economies they may be approximated by Walrasian equilibria outcomes.     

The testable implications of competitive equilibrium in economies with externalities

Suppose that one has a data set consisting of prices and individual endowments for some economy. Brown and Matzkin (Econometrica 64:1249–1262, 1996) have shown that there are conditions that the data have to satisfy, if the observed prices are determined by the competitive equilibrium process, given the observed endowments, when there are no external effects in the economy’s interactions. The results here show that the same conclusion does not apply, in general, if the economy exhibits externalities. On the other hand: (i) some restrictions exist if there exist at least two commodities on which the individuals’ preferences are weakly separable; (ii) although extremely mild, restrictions exist too if one observed individual consumption for the economy that causes the external effects; and (iii) importantly, even if the previous two cases do not apply, restrictions exist when the externalities that exist are in the form of a public good.     

Pareto-optimal Nash equilibria are competitive in a repeated economy

Consider a finite exchange economy first as a static, 1 period, economy and then as a repeated economy over T periods when the utility of each agent is the mean utility over T. A family of strategic games is defined via a set of six general properties the most distinct of which is the ability of agents to move commodities forward in time. Now consider Pareto optimal allocations in the T period economy which are also Nash equilibria in this family of strategic games. We prove that as T becomes large this set converges to the set of competitive utility allocations in the one period economy. The key idea is that a repetition of the economy when agents can move commodities forward in the time acts as a convexification of the set of individually feasible outcomes for player i holding all other strategies fixed.     

The dynamics of capacity adjustments in a competitive economy

In this paper we consider a simple model of a competitive economy, focusing our analysis on the problem of capacity adjustments resulting from a time-lag between production decisions and the availability of investments. Our main proposition shows that a particular form of myopic behaviour of the productive sector about output and price anticipations combined with instantaneous price adjustments, leads the economy to the efficient steady state where capacity is optimally adapted to the repeated level of economic activity. By contrast, persistent wage inflexibility at a too high level generates a permanent decline of capacity.     

Private ownership economies with externalities and existence of competitive equilibria: a differentiable approach

We consider a general equilibrium model of a private ownership economy with consumption and production externalities. Utility functions and production technologies may be affected by the consumption and production activities of all other agents in the economy. We use homotopy techniques to show that the set of competitive equilibria is non-empty and compact. Fixing the externalities, the assumptions on utility functions and production technologies are standard in a differentiable framework. Competitive equilibria are written in terms of first order conditions associated with agents’ behavior and market clearing conditions, following the seminal paper of Smale (J Math Econ 1:1–14, 1974). The work of adapting the homotopy approach to economies with externalities on the production side is non-trivial and it requires some ingenious adjustments, because the production technologies are not required to be convex with respect to the consumption and production activities of all agents.     

The efficiency of monopolistically competitive equilibria in large economies: Commodity differentiation with gross substitutes

A general model of commodity differentiation is developed using two different approaches to the theory of demand. It is shown that a local version of Bertrand's argument holds under reasonable conditions. If all commodities are sustitutes and sunk costs are small, there is never too little commodity differentiation relative to the optimum. Under the same conditions, monopolistically competitive equilibria are approximately perfectly competitive if the optimal collection of commodities is sufficiently rich.     

Political economy of a public corporation: Pricing objectives of BART

The revealed preference approach is used to identify the objectives implicit in the fare structure of a rail mass transit system. A model assuming bureaucratic aggrandizement provided a better predictor of actual fares than a majority rule or interest group political model. Bureaucratic objectives work to the advantage of commuters from distant suburbs who are relatively wealthy and young. The data is too weak to support firm conviction about these conclusions, but our methods contribute to quantitative political economy.     

Optimality of the competitive equilibrium in the Uzawa-Lucas model with sector-specific externalities

Summary. In this paper, we show that the competitive equilibrium is optimal in the Uzawa-Lucas model with sector-specific externalities associated to human capital in the goods sector. Thus, these external effects do not provoke a market failure and do not provide a rationale for government intervention.Received: 1 November 2002, Revised: 3 June 2003, JEL Classification Numbers: E62, H21, O41.I wish to thank Sandra López Calvo and an anonymous referee for their valuable comments. Financial support from the Spanish Ministry of Science and Technology and FEDER through Plan Nacional de Investigación Científica, Desarrollo e Innovación Tecnológica (I+D+I) Grant SEC2002-03663 is gratefully acknowledged.     

Partial inflation indexation and long-run inflation targeting in a growing economy: A comparison of Calvo and Rotemberg pricing models

The observed 2% long run inflation target in most developed industrial nations is in variance with the zero or negative optimal inflation rates predicted by prominent monetary theories. Using a calibrated simple New-Keynesian model with endogenous growth and nominal rigidity, we compare two price setting environments of Calvo (1983) and Rotemberg (1982). In our growth model, the steady state welfare maximizing inflation takes into account the growth effect as well as the price distortionary effects of inflation. The long-run welfare maximizing trend inflation could be positive in economies with nominal rigidity in the form of partial inflation indexation and price stickiness. A higher degree of inflation indexation lowers the steady state price distortion in the Calvo model and steady state price adjustment cost in Rotemberg model and raises the long run optimal inflation. Since the productive inefficiency caused by partial inflation indexation is higher in Calvo economy compared to Rotemberg, the long run optimal trend inflation is higher in Rotemberg than in Calvo. In both models, a two percent long run inflation target is attainable for a reasonable degree of inflation indexation.     

The nonobserved economy in the European Union

To better understand the share of the nonobserved economy (NOE) in the European Union, especially on the PIIGS, we estimate, through the multiple indicators multiple causes model, the path between 1980 and 2013. The model includes (i) the tax burden (disaggregated into direct and indirect taxes), a proxy of regulation burden, the unemployment rate and self-employment as causes of the NOE economy; (ii) the GDP and the labour force participation ratio as indicators of the NOE economy. In particular, the estimated weight of NOE as a percentage of official GDP was always higher in the PIIGS group.     

品牌营销:现代经济中一种更高层次的竞争模式

随着知识营销时代的到来，品牌营销作为一种更高层次的企业竞争模式巳成为企业界的热门话题，品牌企业青睐的原因可从差异化战略、产品、顾客和企业四个角度阐述。     

Entry and fiscal policy effectiveness in a small open economy within a Monetary Union

In this article I develop an imperfectly competitive dynamic general equilibrium model for a small open economy integrated in a monetary union. Here, the type of entry in the non-traded goods’ sector affects fiscal policy effectiveness. Fiscal policy effectiveness is enlarged when aggregate demand stimuli increase intra-industrial competition (case I). This is due to the counter-cyclical mark-up mechanism generated by entry. Such a mechanism is absent in the usual monopolistic competition where entry only has a sharing effect (case II).