Tariffs and collection costs

Conclusion Tariffs and export taxes may comprise part of a first-best tax package if their cost of collection is lower than alternative means of raising revenue. Using various proxies for relative collection costs, and holding constant standard indices of development, we find evidence of a significant relationship between a country’s usage of trade taxes and the relative cost of raising revenue. This relationship holds for a large sample of developed and developing countries, and when only developing countries are studied. This research suggests that more attention should be paid to the administrative costs of raising revenue, in addition to the usual focus on the allocative effects of taxes and tariffs. Further study of the nature of these costs should prove valuable in understanding the optimal mix of these policy instruments. It would be particularly valuable to have empirical evidence on what characteristics of a country influence the relative collection cost of raising revenue in alternative ways. This would enable researchers to more precisely identify the effect of relative collection costs on observed tax policy, and facilitate the formulation of tax policy by policymakers.     

Strategic stability and uniqueness in signaling games

A class of signaling games is studied in which a unique Universally Divine equilibrium outcome exists. We identify a monotonicity property under which a variation of Universal Divinity is generically equivalent to strategic stability. Further assumptions guarantee the existence of a unique Universally Divine outcome.     

In Whose Interest? A First Look at National Survey Data on Interest‐Based Bargaining in Labor Relations

The first national survey data on interest‐based bargaining (IBB) in labor relations reveal broad awareness of IBB, contrasting union and management views, and variation by negotiator experience and gender. A majority of negotiators are aware of IBB, and approximately one‐third of management negotiators and nearly one‐half of union negotiators report using IBB in prior negotiations. An exploratory analysis of the relationships between IBB preferences and contract outcomes suggests that the process is producing more than a simple “mutual gains” pattern of outcomes. Based on these initial results, two hypotheses are suggested as the focus for future studies of the diffusion and sustainability of IBB in collective bargaining.     

The Law and Economics of Costly Contracting

In most of the contract theory literature, contracting costsare assumed either to be high enough to preclude certain formsof contracting or low enough to permit any contract to be written.Similarly researchers usually treat renegotiation as eithercostless or prohibitively costly. This article addresses themiddle ground between these extremes, in which the costs ofcontracting and renegotiation can take intermediate values andthe contracting parties can themselves influence these costs.The context for our analysis is the canonical problem of inducingefficient relation-specific investment and efficient ex posttrade. Among our principle results are: (i) The efficiency andcomplexity of the initial contract are decreasing in the costto create a contract. Hence the best mechanism design contractscan be too costly to write. (ii) When parties use the simplercontract forms, they require renegotiation to capture ex postsurplus and to create efficient investment incentives. In somecases, parties want low renegotiation costs. More interestingis that, in other cases, parties have a strict preference formoderate renegotiation costs. (iii) The effect of contract lawon contract form is significant but has been overlooked. Inparticular, the law's interpretive rules raise the cost of enforcingcomplex contracts, and thus induce parties to use simple contracts.Worse, the law also lowers renegotiation costs, which furtherundermines complex contracts and is also inappropriate for someof the simpler contracts.     

Bank failure,risk, and capital regulation

This paper examines the effect of capital regulation on bank risk. It is shown that an increase in the capital-to-asset ratio reduces the riskiness of a bank's equity capital. Nevertheless, the probability of bank failure increases. The reason for this result is that the probability of bank failure depends upon both the risk and return of the asset portfolio. An increase in the capital requirement results in an optimal portfolio with a risk-return combination that has a higher probability of bank failure.     

Impact management, worst scenatrio: possible technological strategic options

Analysis of the present situation and future predictions leaves no doubt of the inevitability of progressive degradation of the ecosytem. A worst scenatio is an option which has to be considered in any strategic planning. Mistaken assessment, focussing on modern technology as teh cause rather than the agent porducing the current devastation, has called for its drastic curtailment. This would not help matters—in fact, technology may yet save the situation: by building refuges, in attempting to reverse the processes which undermine it, and in helping adaptations to present conditions, not only throuht mechanical devices but also through bioengineering. concurrently the main reasons for the plight of the planet—over-population, overkill and waste—have to be tackled. This can only be accomplished by a complete change in ethical standards—the taming of the 'genetic ethics' of growth and dominance and the institution of a new mnorality.     

PORTFOLIO INSURANCE AND VOLATILITY REGIME SWITCHING

A new equilibrium model of portfolio insurance is presented in order to study the volatility effects of dynamic insurance strategies. While prior research has focused on the relationship between portfolio insurance and the overall level of market volatility, this article shows that the salient feature of portfolio insurance is volatility regime switching. Regime switching is shown to be a necessary condition for portfolio insurance, which provides a new explanation for the pervasive volatility clustering effect that is found in most equity markets. The equilibrium involves a free boundary and the local time of the equilibrium price process at the free boundary plays an important role in solving the model.