Fiscal policy, long‐run growth, and welfare in a stock‐flow model of public goods

Abstract.  We introduce public capital and public services as inputs in an endogenous growth model. We show that the growth rate depends on the apportionment of tax revenues between the accumulation of public capital and the provision of public services. When public spending is financed by proportional income taxes, the growth rate, the level of public spending as a proportion of GDP, the level of investment in public capital as a proportion of total public spending, and the level of private investment as a proportion of total private spending all are lower in the equilibrium outcome than in the optimal outcome. JEL classification: E62, O40     

Capital income taxation in a growing world economy

This paper deals with dynamic adjustment in large economies to changes in the rate of capital income taxation or in the rate of investment tax credit in one country. The framework applied in the paper is a continuous-time, overlapping generations model with two countries. It features population growth and debt non-neutrality. We address impact and steady state effects of capital income tax and investment subsidy changes in the home country on consumption per capita, the capital intensity, and the per capita net foreign asset position in both countries. We also briefly consider individual welfare consequences of these policies.     

Survival of the gene,intergenerational transfers and precautionary saving

This paper provides a model of bequest and investment in children's human capital at low incomes. It posits that parents and children are linked through their common concern of grandchildren and intergenerational transfers provide a material basis for the perpetuation of the family line. The model characterizes intergenerational strategic interactions in a dynamic game theoretical framework. Moreover, it explores intergenerational uncertainty as a source of precautionary saving. In contrast with the existing literature, the model implies that there are qualitative differences between precautionary saving from one's own income uncertainty and precautionary bequests from children's income uncertainty.     

Asymmetry and uncertainty in capital formation: an application to oil investment

Theories of irreversible investment suggest a negative relation between investment and uncertainty, and nonlinear adjustment costs open for asymmetries in the adjustment of fixed capital. We propose an econometric modelling approach to estimate and test the key predictions of modern investment theory, including asymmetric dynamics and various uncertainty indicators. Our application on a data set from the oil industry offers empirical support for both asymmetric dynamics and uncertainty in oil and gas investment.     

Public Investment, Congestion, and Private Capital Accumulation

This paper analyses the impact of public investment on the dynamics of private capital formation in an intertemporal optimising market-clearing framework. The key feature characterising the analysis is that the public good is treated as a durable capital good, subject to congestion. We show how in the presence of congestion the effect of government investment on private capital formation involves a tradeoff between the degree of substitution between private and public capital in production and the degree of congestion. Both lump-sum and distortionary tax financing are considered, with this tradeoff being tightened in the latter case     

Pursuing the wrong options? Adjustment costs and the relationship between uncertainty and capital accumulation

Abel and Eberly (1999) prove that uncertainty has an ambiguous effect on long run capital accumulation in a real options model. We show that, with adjustment costs quadratic in investment, more uncertainty reduces capital and this effect may be large.     

Life Insurance,Human Capital Accumulation and Economic Growth

We compare growth rates in the absence and presence of life insurance using an overlapping generations framework with human capital accumulation to clarify how life insurance contributes to economic growth through the education investment of individuals depending on economic circumstances. Our results show that, as expected, the growth rate is higher when there is life insurance if the rate of time preference or the productivity of human capital accumulation is sufficiently low and if the income loss induced from lifetime uncertainty is moderate. However, if the income loss is sufficiently large, the growth rate is lower when there is life insurance.     

The effects of environmental policies on the abatement investment decisions of a green firm

This paper focuses on environmental policies aimed at rising investment in pollution abatement capital. We assume that ecological uncertainty, i.e., uncertainty over the dynamics of pollution, affects firm investment decisions. Capital irreversibility is not postulated but endogenized using a quadratic adjustment cost function. Using this framework, we study the effects of environmental policies considering taxes on polluting inputs and subsidies to reduce the cost of abatement capital. Environmental policies promoted to enforce abatement capital may generate the unexpected result of reducing the abatement investment rate.     

Heterogeneity in the dynamic effects of uncertainty on investment

We examine how aggregate profit uncertainty influences capital investment activities, focusing on heterogeneous responses of firms. We model aggregate profit uncertainty as the conditional standard deviation of a common factor across unforecasted fluctuations in the sales growth of different industries and exploit cross‐sectional variations for its estimation. From an investment forecasting model that coherently analyzes firm‐ or group‐specific effects of uncertainty, we find that the direction and the size of investment adjustment vary considerably across firms, with a significant but small negative average impact. Our results highlight the importance of accounting for heterogeneity in the transmission of uncertainty, allowing us to reconcile different views on the effect of uncertainty in the existing literature.     

Laffer strikes again: Dynamic scoring of capital taxes

We set up a neoclassical growth model extended by a corporate sector, an investment and finance decision of firms, and a set of taxes on capital income. We provide analytical dynamic scoring of taxes on corporate income, dividends, capital gains, other private capital income, and depreciation allowances and identify the intricate ways through which capital taxation affects tax revenue in general equilibrium. We then calibrate the model for the US and explore quantitatively the revenue effects from capital taxation. We take adjustment dynamics after a tax change explicitly into account and compare with steady-state effects. We find, among other results, a self-financing degree of corporate tax cuts of about 70–90% and a very flat Laffer curve for all capital taxes as well as for tax depreciation allowances. Results are strongest for the tax on capital gains. The model predicts for the US that total tax revenue increases by about 0.3–1.2% after abolishment of the tax.     

Short- and long-run heterogeneous investment dynamics

In this paper, we model the dynamics of business investment taking into account asset-specific characteristics potentially affecting the reactivity of aggregate and disaggregate capital accumulation over the business cycle. We estimate Information and Communication Technologies (ICTs) and traditional investment (non-ICT) determinants within a Vector Error Correction Model testing the assumptions of the flexible accelerator and neoclassical model as well as the role of financial constraints and uncertainty. We evaluate our model on Italian data over the period 1980–2012, and we check our results also with Spanish and UK data. Our findings support the assumption that capital is heterogeneous since short- and long-run determinants are significantly different across the assets. Traditional assets experience stock adjustment costs while ICT investment incurs flow adjustment cost. In the short run, liquidity is a key determinant of investment independently of the asset type. In the long run, uncertainty significantly affects ICT. Finally, the results of the counterfactual exercises support the idea that ICT is a key policy variable to foster economic growth.     

International tax arbitrage, tax evasion and interest parity conditions

Using a finite-horizon general equilibrium model with uncertainty and money, we characterize situations where tax arbitrage opportunities may arise for international portfolio investors in an economy with heterogeneous capital income taxation when there is some scope to evade taxes on foreign capital income. We derive tax-modified uncovered interest parity conditions and forward rates similar to the no-tax ones, but augmented by tax-induced “risk-premium” terms; covered interest parity conditions remain unaffected by the introduction of capital income taxes, a consequence of our approach of bounding tax-based arbitrage without restricting arbitrage per se.     

STATE‐LEVEL CAPITAL AND INVESTMENT: UPDATES AND IMPLICATIONS

This paper presents state‐by‐state capital stock and gross investment estimates for 1990–2007. I follow the methodology of Garofalo and Yamarik (The Review of Economics and Statistics, 84, 2002, 316–23) and apportion the national capital stock to the individual states using one‐digit NAICS income data. I then test the soundness of the data by estimating a Cobb–Douglas production function and a Solow growth model using a variety of panel data estimators. Under both models, I obtain estimates of the output elasticity for capital that are plausible and close to the observed national income share of one‐third. (JEL O47, O51, R11)     

An essay on the Life Cycle: Characterizing intertemporal behavior with uncertainty,human capital,taxes, durables,imperfect capital markets,and non-separable preferences

This paper formulates a general characterization of a household's portfolio choice and savings behavior in an environment with uncertain future interest rates, prices, wages, and factors influencing tastes. Savings may be invested in three types of assets: financial assets; human capital, which is non-tradable; and consumer durables, in which investment may be partially irreversible. Risk-return relations determine the optimal allocation of resources across assets at a point in time. The optimal intertemporal allocation of resources is determined by a restriction on the planned growth rate for the marginal utility of after-tax wealth, where growth rates depend on rates of time preference and measures of long-term riskless rates of interest. Given special assumptions, this marginal utility follows a martingale process as a consequence of optimizing behavior. Pricing formulae are developed for evaluating shifts in uncertain future income, wage, and price profiles. The relations characterizing portfolio and savings behavior presented here do not rely on particular distributional assumptions; they account for all forms of uncertainty including wage uncertainty induced by human capital investment; they allow for the non-marketability of assets; and the main results apply for very general functional form assumptions for preferences. In later sections, results are extended to incorporate income taxes and to account for a wide variety of imperfections in asset markets.     

产业结构调整的收入分配效应研究--基于1998-2012年中国省际面板数据模型的分析

产业结构调整作为政府实现宏观发展战略目标的重要调控手段,具有显著的收入分配效应。构建产业结构调整对城乡收入差距影响机理的分析框架,利用中国30个省份1998-2012年的面板数据,运用联立方程模型和内生分布滞后模型,研究产业结构调整的收入分配效应,结果发现：由于产业结构调整与人力资本结构负相关,在即期会强化农村居民在就业市场中的弱势地位,扩大城乡收入差距;在长期,城乡居民根据产业结构调整重塑就业预期,通过调整人力资本投资结构、提升人力资本水平实现职业转换,第5年以后将出现农村居民收入增幅高于城镇居民的格局,形成乡城收入赶超效应,产生缩小城乡收入差距的正面效应。     

A model of the socialist firm in transition to a market economy

This paper models the dynamic adjustment path of a socialist firm in transition to a market economy by a price shock that renders old capital obsolete. The firm can adjust with investment in more productive capital equipments. The optimal time paths of investment, output, and employment are analyzed and the impact of fiscal incentives like investment subsidies and a reduced corporate income tax rate are studied. Like output, the aggregate capital stock follows a J-curve. The conditions for viability of firms and the impact of variables such as wage increases on the value of the firm are discussed.     

Optimal fiscal policy, uncertainty, and growth

This paper analyzes the macroeconomic effects of fiscal policy in a stochastic endogenous growth model. Due to externalities in human capital accumulation, the market allocation is inefficient, thereby justifying government intervention. The uncertainty stemming from technological disturbances affects the growth rate, which can be explained by precautionary motives of risk averse agents. Fiscal policy means consist of a consumption tax, investment subsidies, and bonds. We obtain counter-acting growth effects of investment subsidies, which are differentiated with respect to deterministic and stochastic capital income components. The policy implications from the deterministic model are substantially extended in the stochastic context. A general rule for a welfare maximizing policy is derived, which is represented by a continuum of alternative tax-transfer-schemes. We discuss three benchmark cases, which crucially differ with respect to their implications regarding the size of the government expenditure share.     

Tax Havens,Growth, and Welfare

This paper develops an endogenous growth model featuring tax havens, and uses it to examine how the existence of tax havens affects the economic growth rate and social welfare in high‐tax countries. We show that the presence of tax havens generates two conflicting channels in determining the growth effect. First, the public investment effect states that tax havens may erode tax revenues and in turn decrease the government's infrastructure expenditure, thereby reducing growth. Second, the tax planning effect of tax havens reduces marginal cost of capital and hence encourages capital accumulation so as to spur economic growth. The overall growth effect is ambiguous and is determined by the extent of these two effects. The welfare analysis shows that tax havens are more likely to be welfare‐enhancing if the government expenditure share in production is low, or the initial income tax rate is high. Moreover, the welfare‐maximizing income tax rate is lower than the growth‐maximizing income tax rate if tax havens are present.     

技术进步、工资差距与人力资本形成

本文在劳动力异质的假设下通过建立一个二元经济模型分析发展中国家技术进步与收入差距的关系,结果显示技术进步主要通过直接和间接两种途径影响收入差距:其一,通过提高相应劳动力的劳动效率,提高其工资;其二,通过收入差距的扩大,吸引劳动力进行人力资本投资,从而劳动效率的提高,影响其收入.并得也结论,不同类型的技术进步对收入差距的影响存在较大差异,而这种差异在某种程度上影响人力资本投资,因此,在城乡转化的过程中,要缩小收入差距必须选择适当的技术进步,而且还要结合长期经济发展注意保持相应的收入差别.