A theory of interregional tax competition

A general equilibrium model is constructed to study tax competition, where local governments compete for capital by holding down property tax rates and public expenditure levels. An exact definition of tax competition is provided, and both the existence and nonexistence of tax competition are shown to be theoretically possible. It is argued, however, that tax competition must occur under empirically reasonable conditions. Inefficiency in public production is also explicitly modeled. The amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms.     

Changing energy parameters and the evolution of urban spatial structure

In this paper two different models of urban spatial structure are developed. The first is based on equilibrium analysis and the dynamics of the equilibrium solution are examined. The second is based on disequilibrium analysis and is formulated as a set of differential equations. The models are run to assess the effects of changing energy parameters, particularly in relation to transport costs, and it is shown that a range of different patterns of spatial structure emerge.     

Rational cooperation in the finitely repeated prisoners' dilemma

A common observation in experiments involving finite repetition of the prisoners' dilemma is that players do not always play the single-period dominant strategies (“finking”), but instead achieve some measure of cooperation. Yet finking at each stage is the only Nash equilibrium in the finitely repeated game. We show here how incomplete information about one or both players' options, motivation or behavior can explain the observed cooperation. Specifically, we provide a bound on the number of rounds at which Fink may be played, when one player may possibly be committed to a “Tit-for-Tat” strategy.     

Does the accruals quality premium arise from information risk?

In this study, we examine whether the accruals quality premium arises from information risk through the following: (i) an investigation of the accruals quality (AQ) premium conditioned by market competition levels; (ii) a test of the impact of an exogenous shock on tax‐loss‐selling incentives; and (iii) an examination of the quality of specific accruals. Consistent with an information risk explanation, we find that the pricing effect of AQ is concentrated in firms with low market competition; that tax‐loss selling is unlikely to explain the observed AQ premium; and that specific accruals quality measures which are more likely to reflect information risk are priced.     

Trade and the Recognition of Commercial Lingua Francas: Russian Language Laws in Post‐Soviet Countries

Trade has the potential to influence a wide range of political and social outcomes. Using the post‐Soviet context, we examine how language policies – vital components for how minorities are treated with far‐reaching economic consequences – are influenced by trade. We argue that while ethnic politics and colonial legacies are both important in shaping language laws, it is important to recognize that the Russian language remains a significant commercial lingua franca in the region. When economic exchanges between Russia and other post‐Soviet republics are frequent, governments are more likely to adopt pro‐Russian language laws as a practicality and to maintain favor with the Russian government and Russian‐speaking businesses. Using an original dataset covering all Russian language‐related laws in the former Soviet states from 1992 to 2009, we find a significant and positive relationship between trade and pro‐Russian language laws. These results are robust even when we (1) instrument for Russian import levels and (2) consider the Baltic effect, spillovers from cultural affinity, and the uniqueness of fuel exports.     

Cost-utility analysis of life-long prophylaxis with recombinant factor VIIIFc vs recombinant factor VIII for the management of severe hemophilia A in Sweden

Aims: Prophylaxis with recombinant factor VIII (rFVIII) is the standard of care for severe hemophilia A in Sweden. The need for frequent injections with existing rFVIII products may, however, result in poor adherence to prophylaxis, leading to increased bleeding and long-term joint damage. Recombinant FVIIIFc (rFVIIIFc) is an extended half-life fusion protein which can offer prolonged protection and reduced dosing frequency. The objective of this study was to evaluate the cost-utility of prophylaxis with rFVIIIFc in severe hemophilia A from the perspective of the Swedish health system.

Methods: A Markov model was built to estimate lifetime costs and benefits of prophylaxis with rFVIIIFc vs rFVIII products. Clinical outcomes were represented by annualized bleeding rate (ABR) and quality of life via disutility applied to bleeding events and injection frequency. Costs included the cost of FVIII for routine prophylaxis and bleed resolution. The pooled comparator was costed by weighting the cost of individual products by their market share.

Results: In the base case, rFVIIIFc was dominant vs the pooled comparator. Savings of SEK 9.0 million per patient resulted from lower factor consumption for prophylaxis and bleed resolution. Fewer bleeds and reduced injection frequency yielded an estimated 0.59 quality-adjusted life years (QALYs). Results were sensitive to drug dosage and robust to variation in other parameters. Probabilistic sensitivity analysis suggested a greater than 85% probability of rFVIIIFc being cost-effective at a willingness-to-pay threshold of 500,000 SEK/QALY.

Limitations: Due to unavailibilty of patient-level data, treatment benefit was based on a non-adjusted indirect comparison. Dosing and treatment outcomes were assumed to persist over the model duration in the absence of long-term outcome data.

Conclusion: The results suggest that rFVIIIFc may be a cost-effective option for hemophilia A prophylaxis, generating greater quality of life and reduced costs for the Swedish payer compared to more frequently administered rFVIII alternatives.     

Internet cautions: Experimental games with internet partners

We report the results of experiments conducted over the internet between two different laboratories. Each subject at one site is matched with a subject at another site in a trust game experiment. We investigate whether subjects believe they are really matched with another person, and suggest a methodology for ensuring that subjects’ beliefs are accurate. Results show that skepticism can lead to misleading results. If subjects do not believe they are matched with a real person, they trust too much: i.e., they trust the experimenter rather than their partner. JEL Classification C9