Regulation and taxation: A complementarity

I show how quantity regulation can lower elasticities and thereby increase optimal tax rates. Such regulation imposes regulatory incentives for particular choice quantities. Their strength varies between zero (laissez faire) and infinite (command economy). In the latter case, regulation effectively eliminates any intensive behavioral responses to taxes; a previously distortionary tax becomes a lump sum. For intermediate regulation (where some deviation is feasible), intensive behavioral responses are still weaker than under zero regulation, and so quantity regulation reduces elasticities, thereby facilitating subsequent taxation. I apply this mechanism to labor supply and present correlational evidence for this complementarity: hours worked in high-regulation countries are compressed, and these countries tax labor at higher rates.     

Government size and macroeconomic stability: A comment

We show that in a standard, technology shock-driven one-sector real business cycle model, the stabilization effects of government fiscal policy depend crucially on how labor hours enter the household's period utility function and the associated labor-market behavior. In particular, as Galí [European Economic Review 38 (1994), 117-132] has shown, when the household utility is logarithmic in both consumption and leisure, income taxes are destabilizing and government purchases are stabilizing. However, the results are reversed when preferences are instead convex in hours worked. That is, income taxes are now stabilizing and public spending is destabilizing. Furthermore, under both preference specifications, the magnitude of cyclical fluctuations in output remains unchanged when the income tax rate and the share of government purchases in GDP are equal (including laissez-faire).     

Innovation and coordination: A schutzian perspective

This paper discusses the nature of innovation, the innovation process and its associated coordination problems in the subjectivist perspective. It argues that innovation, when viewed in the first person perspective, is not a homogeneous concept. Instead, the degree of newness of an innovation is determined subjectively by adopters. The stages of the innovation process described in the management literature are re-interpreted in light of Schutz' phenomenology. Innovation creates coordination problems. Schumpeterian innovation disrupts plans of market participants and threatens people's sense of reality. The stocks of knowledge of market participants are no longer able to solve new problems brought about by pioneering entrepreneurs. Knowledge taken for granted becomes problematic. As a result, coordination fails. In attempting to remove uncertainty arising from radical innovation, human agents create knowledge surrogates and project acts in the future perfect tense. Through a process of typification, successful actions are crystallised into firm routines and institutions that once again help to serve for coordination. The arguments developed in this paper throw new light on three aspects of business strategies, namely, management of innovation, vertical integration and advertising.     

Waste Sites and Property Values: A Meta-Analysis

Recent studies suggest that some of the most contaminated waste sites in the United States have idiosyncratic or no discernable effects on nearby property values. This paper presents a meta-analysis of the literature measuring the economic impact of sites harboring waste materials on real estate values. A sample of 46 North American studies issued from 1971 to 2008 yields 129 distinct estimates that survive outlier diagnostics. The estimation results are highly robust and significant across estimators and specifications. They suggest that all classes of waste sites affect real estate prices, but sites classified as hazardous, especially aquatic hazardous sites, are associated with the greatest discounts. The estimated impacts of nonhazardous waste and nuclear sites are not statistically different from one another. Surprisingly, estimated impacts associated with sites included on the EPA??s National Priority List (NPL) are generally smaller (although still statistically significant) than those for non-NPL hazardous waste sites. The estimates for sites in Canada and Mountain, Middle Atlantic, and South Atlantic states exceed those for other regions. Larger impact areas and aggregated data, such as census block observations, are associated with lesser estimates.     

China financial research: A review and synthesis

We review the financial research on China as a transitional economy over the past 15 years or so. This review sheds light on several important issues that are pertinent for an emerging financial market—how regulation can affect the prices of different financial assets; how and why markets are segmented; corporate governance effects between major and minor shareholders in an emerging market; the importance of a bank-based financial system; interactions between the financial market and the goods market; how market participants can complete the market; and how an emerging financial market emulates established markets and evolves over time. Many unexplored financial issues remain unexplored, and more research is warranted into, what theories are at work, and what are missing.     

Relative standards: A positive and normative analysis

The paper considers relative standards which limit the level of emissions per unit of output. The representative firm is characterized by a cost function describing the actual production process, a separate abatement technology, and the fact that (gross) emissions are proportional to output. At first, the implications of a relative standard and of its marginal change for a single firm are examined. It is shown that the standard cannot be replaced by a corresponding tax. Afterwards a positive analysis is performed for an industry consisting of identical firms under perfect competition. Comparative statics are used to analyze the impacts of changes in the relative standard in a short-run and long-run equilibrium. It turns out that the standard always possesses a price effect. Moreover the relevant factors which govern price, quantity, and profit changes are revealed. Then the paper characterizes the optimal standard for the same framework. A main result is that the first-best allocation can never be obtained by means of a relative standard, even if firms are identical. The influence of the demand and supply side on an optimal standard can be demonstrated since the underlying model is simple and transparent. The resulting market price is compared to social marginal costs. Finally the investigation is extended to monopoly and symmetric oligopoly.     

Oligopoly and Merger: A Simple Classroom Game

Professor Miller describes a game which has been used in intermediate price theory courses as well as in introductory classes. Two versions are presented—a duopoly and a six-firm market, both with undifferentiated product and a known market demand schedule. Students are also asked to make a monopoly of the six firms by forming a trust or holding company. Miller contends that the game is more stimulating than lectures aud suspects that it will result in longer retention.     

Entry and Managerial Incentives: A Note

This note reinforces the results in a paper by Sen (International Journal of Industrial Organization, vol. 11, 1993, pp. 123–37). It is shown that his assumption that the incentive schemes in a two‐period model are the same for the two periods is not necessary for the results: only the long‐term nature of contracts with managers matters.     

Tax evasion and heuristics: A research note

The paper examines the heuristics which taxpayers use in making tax evasion decisions. The following propositions are tested in an experiment using students. First, the taxpaper's own level of evasion will be positively related to what he perceives as the levels of evasion by others. Second, taxpayers who have been audited are more likely to assess the probability of audit as higher and therefore decrease their levels of evasion. The experimental results fail to support the first proposition but do support the second suggesting the presence of an ‘availability’ effect.     

Feedback spillover and analogy-based expectations: A multi-game experiment

We consider a multi-game interactive learning environment in which subjects sometimes only have access to the aggregate distribution of play of the opponents over the various games and sometimes are told the joint distribution of actions and games in a more or less accessible way. Our main findings are: 1) In the presence of feedback spillover, long run behaviors stabilize to an analogy-based expectation equilibrium (Jehiel, 2005). 2) Faced with the same objective feedback, the long run behaviors are sometimes better described by Nash equilibrium and sometimes they are better described by the analogy-based expectation equilibrium depending on the accessibility of the feedback.     

Green fiscal reform and employment: A survey

In the European debate an increase in employment is generally regarded as an important extra-dividend-in addition to improved environmental quality-from environmental taxes. The scope of this paper is to evaluate, going through the existing empirical literature, if-and to what degree-this result could be achieved through a green fiscal reform. A further goal of this paper is to assess which taxes are more efficient in terms of employment-creation when they are utilized for recycling back to the economy the revenue flowing from environmental taxes. This kind of exercise is largely different from the theoretical analysis of the double dividend issue. A large quantity of literature has grown during the recent years according to this approach, but this version of the double dividend theory will be disregarded in this paper.     

AIDS and economic growth: A human capital approach

Using a model that combines growth and health capital equations this study analyses the impact of HIV/AIDS on economic growth. The econometric results indicate that the epidemic's effects have been substantial; in Africa the marginal impact on income per capita of a 1% increase in HIV prevalence rate is minus 0.59%. Even in countries with lower HIV prevalence rates the marginal impacts are non-trivial. Hence while the human and social costs of the HIV/AIDS epidemic are major causes for concern, these results indicate that the macroeconomic affects of the HIV/AIDS epidemic are important.     

Unawareness and bankruptcy: A general equilibrium model

Summary. We present a consistent pure-exchange general equilibrium model where agents may not be able to foresee all possible future contingencies. In this context, even with nominal assets and complete asset markets, an equilibrium may not exist without appropriate assumptions. Specific examples are provided. An existence result is proved under the main assumption that there are sufficiently many states that all the agents foresee. An intrinsic feature of the model is bankruptcy, which agents may involuntarily experience in the unforeseen states. Received: April 23, 1997; revised version: May 19, 1997     

Exhaustible resources and secondary materials: A macroeconomic analysis

In this paper we have developed an endogenous growth model to deal with exhaustible resources and secondary materials together, under the assumptions that these two inputs are, or are not, technologically perfect substitutes of each other, in order to compare the results obtained under both hypotheses. We highlight the implication of these two assumptions on the rate of growth of total output and upon the flow of exhaustible resources extracted. There are also some other interesting findings related to the spill-over on welfare of the waste recycling process, and the dynamics of shadow prices of both inputs considered. Finally, some implications on Hotelling's rule also emerge in our analytical framework.     

Money and inflation in Germany: A cointegration analysis

This paper analyses the relation between money and inflation in Germany in a cost-push/demand-pull model of an open small economy by means of cointegration methods. The full-information-maximum-likelihood method of Johansen as well as structural methods are applied to datasubsets and the full data set. The focus of the paper is on tests for overidentifying restrictions and for weak and strong exogeneity within these data sets. The result of the paper is that the money stock, the price level and gross national product are endogenous whereas the interest rate and the real import price are both weakly and strongly exogenous. By means of the price cointegration relation we illustrate how monetary targeting should react to imported inflation.     

Disability and Economy: A Game Theoretic Approach

This paper takes a game theoretic approach to disability‐related issues by constructing a model that studies the case of hereditary deafness on Martha's Vineyard Island, USA from the seventeenth century to the early years of twentieth, where the island community adjusted itself to the hereditary deafness so that it was not treated as a disability. The model of the present paper has two stages. First of all, there are two types of continua of agents, the deaf and the non‐deaf. In the first stage, the non‐deaf agents become either bilinguals or monolinguals. In the second stage, agents are classified into deaf people, bilinguals and monolinguals. They are then randomly matched to form a trio to play a three‐person bargaining game with infinite horizon, random proposers and language constraints. Two bargaining games are considered. The first one is a majority bargaining game where only two out of three can agree to implement a bargaining outcome. The second one is a unanimity bargaining game where all three agents are required to reach an agreement. The majority game exhibits strategic complementarity, while the unanimity game exhibits strategic substitutability. This paper also takes an inductive approach to examine how prejudice against people with disability may emerge.     

Joint Production and the Structure of Technology: A Generalization

In this paper, we have a peek inside the black box of technology in an attempt to get a better understanding of the concept of joint production. We introduce the notion of input and output subtechnologies; these are then used as building blocks to define various types of production processes, either joint or nonjoint. Thus, in the 2×2 case, we are able to identify up to 36 different production structures, some of which are well known, but most of which are new. These are all described in the primal quantity space as well as in the dual price space. Comparative statics results for the 2×2 joint production process are derived.     

Factor analysis and development: A reply

The suggestion by Mr. Bumb that several of our factor analyses are spurious is questioned on both technical and empirical grounds. Evidence of exceeding robustness of our factor-analytic results is presented.     

Enrollment and Curriculum: A Laffer Curve Analysis

When a college or graduate school toughens its curriculum, entry requirements, or graduation requirements, generally two opposite effects on enrollment will occur. First, because the graduating students have learned more and can signal to employers that they are more able, they can command higher starting wages, and this enhances enrollment. Second, the pool of students who are both eligible to enroll and able to complete the program is diminished, having a negative effect on enrollment. The resulting curve depicting enrollment as a function of the difficulty of the curriculum has the general Laffer curve properties and can be fruitfully examined. A preoccupation with current enrollment levels can lead to pressure to ease the difficulty of the curriculum, however doing so will backfire in the long run.