Income Tax Evasion in a Unionised Labour Market

Labour market outcomes can depend on tax evasion since the returns from working are affected by the amount of taxes paid. In this paper, unionised workers are assumed to select the income which they declare. The rational trade union takes this decision into account. It is shown that the employment effects of a linear income tax are not altered qualitatively by tax evasion if the fine for evasion is a function only of the evaded tax. Moreover, the consequences of changes in the tax enforcement system are determined by the ability to choose evasion activities optimally. The existence of unrestricted tax evasion opportunities lowers wages.     

Labour Taxation in a Unionised Economy with Home Production

The impact of payroll taxes on unemployment and welfare are examined in a model with household production and union–firm wage bargaining. The analysis shows that unemployment typically falls as the payroll tax rate in the market sector for household substitutes (the service sector) is reduced. This holds even when the payroll tax rate in the non-service sector is raised in order to maintain a balanced government budget. Welfare improves with a reduced-service-sector payroll tax rate only if unions are equally strong and firms are equally labour intensive across the sectors.
JEL classification : E 24; H 21; J 22; J 51     

Low Wage Employment in Transitional Economies of Central and Eastern Europe

MOCT-MOST: Economic Policy in Transitional Economies -     

信誉机制在欺诈行为中的运行分析--来自一次博弈与重复博弈的解释

信誉机制是维护市场经济中行为主体交易活动正常化的基石。没有信誉机制的市场是杂乱无章的市场,同时也将伴随着行为主体利益的损失,产生一种低效的市场绩效。本文将分别用一次博弈和重复博弈模型来说明信誉机制在欺诈行为产生及其演变过程中所起的作用,并以相应的结论来说明市场中信息的透明度、信息的传播方式与手段以及政府执法的及时性、公正性等制度因素对信誉机制发挥作用的影响。     

Testing for Ongoing Convergence in Transition Economies, 1970 to 1998

In this paper, the authors use a time-varying parameters procedure to test for a common growth path in the ex-Communist bloc, both pre- and postreform. They test whether there has been convergence within the bloc or between the bloc as a group and the West. Surprisingly, there is little evidence of convergence within the bloc, which brings into question the effectiveness of policies to reduce differentials in income per capita under the Communists. There is also little evidence of convergence with respect to the West, either during the period from 1970 to 1990 or if the reform years are included (i.e., 1970 to 1998). J. Comp. Econ., December 2001, 29(4), pp. 677–691. © 2001 Elsevier ScienceJournal of Economic Literature Classification Numbers: O40, C22, C23, C15.     

Pollution Control in Open Economies: Implications of Within-period Interactions for Dynamic Game Equilibrium

This paper examines a two-country, dynamic game model of pollution control in the presence of economic interactions between countries within a period, as well as the environmental interaction between periods (i.e., a change in the stock of global pollution). These economic interactions emerge because of changes in the terms of trade of polluting goods or the market share of domestic polluting industries. It is shown that if within-period externalities exist, a noncooperative equilibrium may result in a smaller stock of global pollution in the steady state than does international cooperation. Moreover, the properties of equilibrium paths depend on the direction and size of such externalities. In addition, trigger strategy equilibria that achieve the outcome of the collusive solution are examined.     

Exchange Rate Movements and Employment Growth: An OCA Assessment of the CEE Economies

According to the traditional optimum currency area approach, not much will be lost from a very hard peg to a currency union if there has been little reason for variations in the exchange rate in the past. This paper takes a different approach and highlights the fact that high exchange rate volatility may also signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is analyzed, revealing that volatility vis-à-vis the euro significantly lowers employment growth. Hence, eliminating exchange rate volatility could be considered a substitute for removing employment protection legislation.     

Economies with a two-sector representation

Summary In both theoretical and empirical research it is a common practice to partition the economy into (at least) two sectors in order to conduct partial-equilibrium analysis. One merely hopes that general-equilibrium consequences will not obviate all of the analysis of the sector or market in question. In this paper we consider market demand functions which have a two-sector representation. In such economies the aggregate compensated demands in any one sector depend only on prices in that sector, the vector of utilities, and a scalar aggregate which in turn may depend upon everything. In particular, prices in the other sector appear only through this aggregate. In a single-consumer economy this division into two sectors carries with it no further implications. However, when there are three or more consumers, economies with a two-sector representation, which may contain public as well as private goods, must fall into a small number of broad classes which are quite restrictive. This means that the two-sector assumption is far less innocuous than one might have previously believed and that there are some phenomena which simply cannot be investigated in this framework.This research has been supported by the SSHRCC with a research grant and by leave fellowships to all three authors for the year 1984–85. Since then all three authors have been in part supported by various SSHRCC grants. In 1989–90 Blackorby was also partly supported by a Senior Killam Fellowship. The first version was written while all three of us were at CORE, Université Catholique de Louvain, 1984–85. Later versions were written at the University of British Columbia (Blackorby and Schworm), the University of Western Ontario (Schworm), Université Libre de Bruxelles (Davidson), Queen's University (Davidson), Université d'Aix-Marseille II (Davidson), Université d'Aix-Marseille III (Blackorby) and finally GREQE-EHESS (Blackorby and Davidson). We thank all of them for their support. Earlier versions of this paper have been presented at the 1986 Canadian Economic Theory Meetings, the Nuffield Conference on Measurement and Modelling in Economics-May, 1987, the Rheinische Friedrich-Wilhelms-Universität Bonn, the Université de Montréal, University of Saskatchewan, and the University of California at Riverside. We have benefited from the comments of the participants in these seminars, and from those of two anonymous referees.     

强化知识产权保护与南北双赢

传统观点认为,强知识产权保护有利于北方国家而有损于南方国家。本文构建一个两期技术转移模型,说明在一定条件下,南方国家会自愿加强知识产权保护,并实现南北双赢。假设北方企业拥有两种技术,即传统技术和先进技术。若南方的知识产权保护太弱,北方企业可能会因为害怕被模仿而策略性延迟引入先进技术,导致南方国家受损。此时,南方政府将有积极性自愿加强知识产权保护以防止北方企业采用延迟策略,而模型分析表明,最优的知识产权保护力度是南方企业模仿能力的倒U型函数。进一步,如果是否拥有先进技术是北方企业的私人信息,南方政府将更不愿意采用严格的知识产权保护制度,因而消除信息不对称有利于南方国家自愿强化知识产权保护。     

Equilibrium in a Market Game

This paper studies the equilibrium of an exchange economy with the same number of agents and commodities. It is shown that under rather mild conditions on demand the market have a price equilibrium—independently of the divisibility of the commodities. The result extends Gale’s equilibrium theorem for indivisible commodities to the case where some commodities are perfectly divisible. The proof is based on a topological lemma contained in previous paper of one of the authors.     

Market Games in Large Economies with a Finite Number of Types

We study market games derived from an exchange economy with a continuum of agents, each having one of finitely many possible types. The type of agent determines his initial endowment and utility function. It is shown that, unlike the well-known Shapley–Shubik theorem on market games (Shapley and Shubik in J Econ Theory 1:9–25, 1969), there might be a (fuzzy) game in which each of its sub-games has a non-empty core and, nevertheless, it is not a market game. It turns out that, in order to be a market game, a game needs also to be homogeneous. We also study investment games – which are fuzzy games obtained from an economy with a finite number of agents cooperating in one or more joint projects. It is argued that the usual definition of the core is inappropriate for such a model. We therefore introduce and analyze the new notion of comprehensive core. This solution concept seems to be more suitable for such a scenario. We finally refer to the notion of feasibility of an allocation in games with a large number of players. Some of the results in this paper appear in a previous draft distributed by the name “Cooperative investment games or Population games”. An anonymous referee of Economic Theory is acknowledged for his/her comments     

Law and Finance in Transition Economies

This paper offers the first comprehensive analysis of legal change in the protection of shareholder and creditor rights in transition economies and its impact on the propensity of firms to raise external finance. Following La Porta et al. (1998), the paper constructs an expanded set of legal indices to capture a range of potential conflicts between different stakeholders of the firm. It supplements the analysis of the law on the books with an analysis of the effectiveness of legal institutions. Our main finding is that the effectiveness of legal institutions has a much stronger impact on external finance than does the law on the books, despite legal change that has substantially improved shareholder and creditor rights. This finding supports the proposition that legal transplants and extensive legal reforms are not sufficient for the evolution of effective legal and market institutions.     

Sustainability in Closed and Open Economies

This paper discusses unilateral sustainability policies for tradable resources in closed and open economies. The effects of sustainability policies are modeled in an intertemporal, competitive framework by applying different sustainability rules which are introduced unilaterally in the domestic country. The paper shows that no sustainability rule will lead to a slower rate of extraction of the resource. Unilateral policies will lead to an import of sustainability. It is also shown that the foreign country may well gain in terms of consumption and real income from such unilateral sustainability policies but not in terms of sustainability.     

Transboundary Pollution in a Dynamic Game Model

We consider a dynamic game model in which N countries produce a single product that is not traded. Production results in emissions that accumulate a stock of pollution in each country. Households in each country derive utility from consuming the product but face costs depending on the level of the country-specific stock of pollution as well as the pollution stocks of the other countries. We distinguish three different cost scenarios. For all three, we show the existence of a Markov perfect equilibrium (MPE) and derive the collusive outcome. The MPEs are associated with the case where countries fail to coordinate their policies, while the collusive solutions correspond to the coordinated policy.
JEL Classification No.: C73.     

Employment and Environment in a Sustainable Europe

major challenges in Europe. The EuropeanTreaties require an integration of environmental, economic and social policies in orderto allow for a Sustainable Development. This is of special importance for the linkbetween environmental and employment policy. This paper starts with a definition of thethree pillars of sustainable development, the viability (resilience) of environmental, economicand social systems. With regard to economic development and the social field,these objectives are relatively easy to operationalise: GDP and employment are generallyused headline indicators of sustainable development. The total material input into aneconomy can be seen as an indicator showing the environmental impact.This view brings about major challenges for economic theory:We include the total material input along with resource productivities to describe, explainand evaluate possible developments of economic and environmental variables.With the help of the results from a German research project weshow the relationships between the indicators, the productivities and how they can beinfluenced by policy measures. The simulation results indicate the possibility ofwin-win situations concerning the environment and employment. Additionally, we investigatewhether the developed minimum conditions of sustainable development are valid for Austria.