Wealth, Enterprise and Credit Policy

Empirical evidence suggests that capital-market constraints prevent low-wealth individuals from setting up in business. This paper shows this finding to be consistent with socially excessive lending and an interest-rate tax being welfare-improving. One feature of the model, banks' inability to identify entrepreneurial quality, leads to excessive bank lending and investment in low-return projects. The reduction in the probability of bankruptcy lowers the cost of borrowing and eliminates deadweight costs and hence promotes entry. If the incentive effects are sufficiently large, wealth and the volume of entrepreneurial activity move together. A key result of the paper is to show that a market equilibrium in which there is a positive relationship between entry and the level of wealth is consistent with either subsidies to inactivity or taxes on interest raising welfare.     

Politically Determined Income Inequality and the Provision of Public Goods

Political processes may bring about Pareto improvements by increasing income inequality in a society that produces a public good by voluntary contributions. Proportional taxation funds a “governing agent.” The most endowed agent is the Condorcet winner for governing agent. When the tax rate can also be chosen by a vote, the ideal point of the agent with median initial endowment is the Condorcet winner under Cobb–Douglas utility. If Pareto improvements are possible, this ideal point corresponds to Pareto improvement. Pareto improvement may also be possible, even when a Leviathan set taxes, if there is deadweight loss from taxation. Pareto improvements are indeed always possible in “large” societies. On the other hand, no improvements may be possible if the initial distribution of wealth is very unequal in a “small” society, and Condorcet winners may not exist for other utility functions.     

Oligopoly and entry

This paper investigates the price and nonprice response of a wealth-maximizing leader firm under threat of entry, taking into account the effects of “learning” through cumulative output. The important characteristic of all the comparative statics results is that along the equilibrium trajectory, price and demandincreasing cost expenditures (capitalizable and noncapitalizable) are “substitutes” in the current contribution to wealth, and demand-increasing cost expenditures are “complements” in the current contribution to wealth. That is to say, an increase in price decreases the marginal contribution of demandincreasing cost expenditures to the current contribution to wealth such that to keep the current contribution to wealth constant, expenditures on demandincreasing costs must fall; and conversely, for a price reduction.     

Endogenous change and the economic theory of regulation

This paper extends the economic theory of regulation to include endogenous regulatory change. It outlines conditions under which endogenously rising deadweight costs of regulation can alter the policy equilibrium, even if those rising costs are fully anticipated. Within this framework, alternative wealth redistribution mechanisms can alter the equilibrium path if they bias interest groups' organization costs asymmetrically. The history of natural gas regulation is broadly consistent with this theory.     

WHY SMALL GROUPS AND LOW INCOME SECTORS OBTAIN SUBSIDIES: THE “ALTRUISTIC” SIDE OF A “SELF-INTERESTED” GOVERNMENT*

We develop a model of political support seeking politicians and support supplying voters. Based on Downs' original formulation, the framework yields endogenous political weights with both liberal and conservative properties. Our model reconciles the apparent contradiction between models of self-interested politicians and of governments motivated by social concerns. We show that the “altruistic” aspect of government behavior is consistent with its “self-interested” behavior. We determine that the Olson-Becker pressure group model is not unique. An increase in deadweight costs reduces the equilibrium subsidy. Smaller groups receive a larger per capita subsidy. These results are consistent with Becker's model.     

THE VANISHING BEQUEST TAX: THE COMPARATIVE EVOLUTION OF BEQUEST TAXATION IN HISTORICAL PERSPECTIVE

Bequest tax revenues have been declining in OECD countries for at least 70 years. We propose an explanation that is based on a dynamic politico‐economic model where the evolution of bequest taxation is determined by wealth inequality. Since economic development induces a growing role of labor income and thus a reduction of wealth inequality, bequest taxation is reduced over time. The model also embeds a process of structural reallocation from agriculture to manufacturing and a consequent shift of the tax base from easy‐to‐tax land to hard‐to‐tax capital. This process implies a lower tax level and slower equalization‐induced tax reduction, the higher is the tax avoidance rate and the less developed is the economy. The introduction of franchise restrictions which are gradually lifted over time allows the hump‐shaped long‐term evolution of bequest taxation to be reproduced starting from the nineteenth century for those countries that are now modern industrial democracies. The evolution of political institutions also helps to explain the discrepancies currently observed between tax systems in developed and underdeveloped countries.     

法治之用:公共支出、税收与经济绩效

法治对经济绩效的影响可以从公共支出和税收两方面解释.税收与再分配所造成的激励扭曲是决定公共支出乃至经济绩效的关键因素.在其他条件不变的情况下,法治的完善会降低经济体的均衡税率水平,减少税收与再分配造成的激励扭曲和总产出损失.在法治与民主的协同作用下,公共支出与社会总产出水平都会得到提高.从现实经济生活来看,法治之用主要体现在两方面:协调经济利益,实现"非自我实施型"交易收益.     

Trade, inequality, and the political economy of institutions

This paper investigates the relationship between international trade and the quality of economic institutions. We model institutions as fixed costs of entry, in a framework that has two key features. First, preferences over entry costs differ across firms and depend on firm size. Larger firms prefer to set higher costs of entry, in order to reduce competition. Second, these costs are endogenously determined in a political economy equilibrium. Trade opening can lead to higher entry costs when it changes the political power in favor of a small elite of large exporters, who in turn prefer to install high entry barriers.     

Demography, growth, and inequality

We extend the single-sector endogenous growth model to allow for a general demographic structure. The model shows that due to the “generational turnover term,” the equilibrium growth rate is less than that of a representative agent model. We find the local dynamics about the balanced growth path (bgp) to be unstable, implying that the bgp is the only viable equilibrium. Using numerical simulations, we analyze how economic consequences of a change in the population growth rate differ, depending on the source of the demographic change. In addition, we analyze the relationship between changes in the demographic structure and what we call the “natural rate of wealth inequality”. Finally, we use our model to study how the demographic transition experienced by the United States has affected the economic growth rate and the degree of wealth inequality.     

A Public Choice Approach to Strategic and Nonstrategic Environmental Policy

In this paper we take a public choice perspective on strategic environmental policy and international environmental agreements. We examine cooperative and noncooperative environmental policies under governments that are either welfare maximizers (“good dictators”) or tax revenue maximizers (“Leviathans”). We show that Leviathans can perform better in terms of welfare and that good dictators can set higher taxes. We then analyze international environmental agreements and show that the breakdown of environmental cooperation can indeed lead to a welfare gain for all signatory countries. Considering a delegation game between governments, we find that a Pareto‐superior Leviathan outcome can be the unique Nash equilibrium.     

POLITICAL ECONOMY AND THE EFFICIENCY OF COMPENSATION FOR TAKINGS

To assess compensation for regulation-induced "takings," the authors model political support for regulation as a function of externalities, landowner wealth, and tax burdens. When competing social interests have equal influence on political outcomes, compensation should not be paid. However, when environmentalists and property owners have unequal influence, the model yields several counterintuitive implications. For example, disenfranchised environmentalists should support takings compensation, since it reduces landowner opposition to regulation. The authors also show how compensation rules can limit the deadweight social costs of income transfers, while recognizing their effects on regulator and landowner behavior. (JEL K11 , D72 , L51 )     

“Love of wealth” and economic growth

In a Ramsey–Cass–Koopmans growth framework it is shown that for an optimum a benevolent social planner cannot have an excessive “love of wealth”. With a “right” “love of wealth” an optimum exists and implies higher long‐run per‐capita capital, income, and consumption relative to the standard model. This has important implications for comparative development trajectories. The optimum implies dynamic efficiency with the possibility of getting arbitrarily close to the golden rule where long‐run per‐capita consumption is maximal. It is shown that the optimal path attains its steady state more slowly. Thus, the beneficial effects of love of wealth materialize later than in the standard model. Furthermore, the economy can be decentralized as a competitive private ownership economy. One can then identify “love of wealth” with the “spirit of capitalism.” The paper thus implies that one needs a “right” level of the “spirit of capitalism” to realize any beneficial effects for the long run.     

COMPETITION VS. FRANCHISE MONOPOLY IN CABLE TELEVISION

A modern defense of public utility regulation has arisen from the “transactions costs” literature. Traditional economic theorists called for government to establish regulated, franchise monopolies to guard against over-investment and wasteful duplication in natural monopoly (i.e., cost subadditive) markets. However, the new view is that monopoly licenses are issued to promote investment into markets where suppliers must sink considerable sums of specific…nonsalvageable…capital. Consumers, in this scenario, “delegate” their choice-making to political or bureaucratic agents, who administer day-to-day and year-to-year arrangements with a monopoly producer in a long-term exclusive-dealing arrangement. This may be a plausible explanation for the issuance of legal monopoly rights. But the troubling question regarding the public agency is: why should self-interested political agents create proconsumer regulatory contracts? They might instead be expected to maximize political clout by erecting monopolistic restrictions and directing excess returns to effective distributional coalitions. These competing explanations for the political issuance of monopoly franchises are contrasted in this paper through the use of legal and economic evidence in the cable television industry.     

Second degree price discrimination and natural monopoly

This paper considers the efficiency of a contestable natural monopoly if consumers are heterogeneous and the monopolist can differentiate prices imperfectly. The paper shows that a “no‐distortion‐at‐the‐top” result, which is standard in models with restricted entry, may also appear in a contestable market. Depending on cost and demand structures, first best efficiency can also be a sustainable equilibrium. However, due to the existence of a continuum of equilibria, first best efficiency is not guaranteed. Most notably, even a stable “distortion‐at‐the‐top” result is possible.     

产权性质、税收成本与上市公司股利政策

文章研究了上市公司控股股东的税收成本差异对上市公司股利政策的影响。作为股利政策的决策者,控股股东须权衡股利政策的成本和收益,其中税收成本是影响股利政策的重要因素之一。不同性质的控股股东对税收成本的关注程度存在显著差异:由于税利分离程度较高,民营控股股东对现金股利的税收成本更为敏感,尤其是在自然人直接控股的上市公司。研究发现,自然人控股公司最不偏好采用现金股利的分配方式以规避税收成本,而国有控股公司更倾向于发放较高的现金股利。实证结果支持了文章的假说,即不同产权所隐含的税收成本差异是影响上市公司股利政策的重要因素。     

A Theory of Civil Conflict and Democracy in Rentier States*

The effects of resource rents on the political equilibrium have been studied in two main types of models. The first tradition uses models of conflict, and studies how resource rents affect the intensity and duration of civil conflict. The second tradition uses political economy models, where resource rents affect the political equilibrium due to changes in the costs and benefits of buying votes. Although they provide considerable insight, these traditions have little to say about when democracy emerges, and about when conflict emerges. In this paper, by integrating the earlier model traditions, we suggest the simplest possible framework we can think of to study the choice between conflict and democracy. We show how factors such as resource rents, the extent of electoral competition, and productivity affect economic and political equilibria.     

Impact of Economic Development on Commodity and Public Research Policies in Agriculture

A political-economic explanation is provided for the existence of commodity policy and research expenditures in agriculture. Structural economic characteristics such as pre-policy endowment incomes, deadweight costs, and distributional impact of research are found to determine the levels of commodity price subsidies (taxes in developing countries) and underinvestment in research in all countries. Unequal benefits from research generate two types of interaction effects: political interaction effects , whereby commodity policy reduces research-induced inequality, resulting in more research; and economic interaction effects , whereby deadweight costs per unit transfer decline with research. The latter effect generates increased levels of political optimal research investment.     

REVEALED POLITICAL POWER

When is a polity biased? Consider an “outsider” who observes policy data but observes neither citizens’ preferences nor the underlying distribution of political power. He views political power as if it were derived from wealth‐weighted voting, where the weights determine the wealth bias. Positive weights favor the rich whereas negative ones favor the poor. We show that any policy data is rationalized by any wealth‐weighted system. However, policy and polling observations together imply explicit bounds on the set of rationalizing biases. Accumulated data narrows this band. The inferential model is consistent with models of political competition for campaign contributions.     

Canada’s dependence on natural capital wealth: Was Innis wrong?

Canada has abundant natural resources—its stock of natural capital wealth. A recurring debate in the literature is whether resource rich countries benefit in the form of higher sustained growth rates or not from the export of their natural resources. Canada's Harold Innis wrote extensively on this subject over 80 years ago and argued for the “no” side in the debate. Was he was right or wrong? I begin with the foundations of natural resource theory then turn to empirical work in recent decades. I agree with the literature that Canada overall has benefited from the export of its natural resources, but question whether that can continue given the focus on short term growth and the failure to account for the social costs of resource extraction and use—the environmental externalities that degrade and reduce stocks of natural capital. These externalities increasingly threaten our water and land resources and without more effective policy, the ability of resources to sustain growth and well‐being is questionable. Was Innis wrong? Yes in that the evidence supports the counter argument—resources have helped Canada become a developed economy with relatively high incomes and sustained growth rates. Innis was right that the uneven distribution of resources causes different impacts regionally especially during booms and busts and recognized the need to find substitutes for declining and degrading resource stocks. But Innis, like many after him, focused more on the intrinsic features of natural resources than policy to address the social costs of their development, a legacy that leaves us in a precarious position today.     

Optimal fiscal policy in sunspot‐driven oligopolistic economies

Economies with oligopolistic markets are prone to inefficient sunspot fluctuations triggered by autonomous changes in firms equilibrium conjectures. A well‐designed taxation‐subsidization scheme can eliminate these fluctuations by coordinating firms in each sector on a single equilibrium, left unaffected. The optimal taxation scheme must select the number of active firms that makes the best trade‐off (in terms of consumer welfare) between the markup and the scale inefficiency distortions. Implementing such stabilization policy leads to significant welfare gains, attributable to an “efficient stabilization effect,” typically ignored in usual computations of the welfare costs of fluctuations.