Towards a tax constitution for Leviathan

This paper attempts to derive normative tax rules based on the constitutional calculus of the typical voter–taxpayer when he predicts that post-constitutional political processes will be dominated by a budget-maximizing Leviathan-like bureaucracy. In this setting, selection of tax institutions becomes part of the apparatus by which Leviathan is constrained. Such an approach generates tax rules strikingly at variance with more conventional norms. In particular, the goal of a ‘comprehensive’ tax base, which informs standard analysis, gives way to a preference for specific limitations on the width of the tax base: moves towards a greater comprehensiveness will lead inexorably to larger public spending, and beyond some point are clearly undesirable. The analysis also implies a rather unconventional defense of progression in the tax structure. An attempt is made to relate the discussion to contemporary tax reform issues.     

A Regionalised Innovation Policy Should Be Adopted

Original Papers

A Regionalised Innovation Policy Should Be Adopted     

Global apparel production and sweatshop labour: can raising retail prices finance living wages?

This paper provides some empirical evidence on issues raisedby the global anti-sweatshop movement. We first consider therelationship between wage and employment growth, finding noconsistent trade-off between them. We then measure the shareof labour costs in the production of garments in the US andMexico. We find that the retail price increases necessary toabsorb the costs of raising wages substantially are small, wellwithin the range of price increases that polls suggest US consumersare willing to pay. We close by considering some implicationsof these results.     

On payoff heterogeneity in games with strategic complementarities

Recent papers involving binary choices have argued that increasingheterogeneity decreases positive feedback. We show that no suchresult holds in models where all agents make interior choices.The results in the binary choice case arise for two reasons.First, if we increase heterogeneity without limit but imposea bounded choice set, then almost all players eventually becomecompletely unresponsive, preferring some corner so stronglythat they do not react to any feasible change in the behaviorof others. Second, discrete choice permits the constructionof strong, but fragile, positive feedbacks through compositioneffects.