Tax Evasion and Auditing in a Federal Economy

This paper analyzes the relation between tax auditing and fiscal equalization in the context of fiscal competition. We incorporate a model of tax evasion by firms into a standard tax competition framework where regional governments use their audit rates as a strategic instrument to engage in fiscal competition. We compare the region’s choice of audit policies for three different cases: A scenario of unconfined competition without interregional transfers, a scenario with a gross revenue equalization (GRS) scheme and finally, a scenario with net revenue sharing (NRS), where not only the revenues from taxation but also the regions auditing costs are shared. Without regional transfers, fiscal competition leads to audit rates which are inefficiently low for revenue-maximizing governments. While in general GRS aggravates the inefficiency, NRS makes the decentralized choice of auditing policies more efficient.JEL Code: H26, H71, H77     

Ein Test zum Erkennen von Exponentialverteilungen

Zusammenfassung Es wird ein statistisches Testverfahren beschrieben, mit dessen Hilfe nach einer Stichprobennahme entschieden wird, ob es sich bei der betrachteten Verteilung einer Zufallsvariablen um eine Exponentialverteilung handelt oder nicht.

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Summary A statistical test is described which permits to decide, whether the considered distribution of a random variable is an exponential distribution or not.

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Mitteilung aus dem Zentral-Laboratorium der Siemens & Halske AG     

A new extension of bivariate FGM copulas

We propose a new family of copulas generalizing the Farlie–Gumbel–Morgenstern family and generated by two univariate functions. The main feature of this family is to permit the modeling of high positive dependence. In particular, it is established that the range of the Spearman’s Rho is [ − 3/4,1] and that the upper tail dependence coefficient can reach any value in [0,1]. Necessary and sufficient conditions are given on the generating functions in order to obtain various dependence properties. Some examples of parametric subfamilies are provided.     

Who is afraid of capital mobility? on taxation of labor income and the level of public services in an open economy

This paper deals with the effects of international capital mobility on the taxation of labor income and on the size of the public sector. It employs a model of the labor market where national trade unions set the wage level in their country and national governments set the tax rate of a proportional labor-income tax. The tax revenues are used to finance a public good and unemployment benefits. In this model, competition between the national trade unions caused by international capital mobility leads to full employment, and the governments supply the public good on the first best level. As no unemployment benefits have to be financed, the tax on labor income may decline with the introduction of capital mobility. These tax cuts may even overcompensate the unions for the wage decline.     

Is there structure in the selection interview? Evidence from hotels in Switzerland

Many studies have shown that structured interviews have better predictive validity than unstructured interviews. The aim of this study was, then, to examine if recruiters in Swiss hotels use structured interviews to select candidates. Results obtained on 150 recruiters indicate that selection interviews are rather unstructured. They also show that selection interviews are more structured in larger hotels than in smaller hotels and in chain hotels than in independent hotels. Finally, and contrarily to one of the hypotheses, selection interviews are not more structured in four-star and five-star hotels than in three-star hotels.     

Concurrent Ownership of Brands and Counterfeits: Conceptualization and Temporal Transformation from a Consumer Perspective

The aim of this paper is to shed light on consumers’ concurrent ownership of original and counterfeit versions of a brand, a phenomenon that is lively in the global market place but has thus far failed to attract adequate research attention. Using findings from eight focus group discussions, this paper investigates the relationships consumers have with brands and counterfeits when they own both at the same time, based on different object‐, self‐, and other‐centered engagements. Subsequently, three distinct consumer segments were identified that vary in their relationship trajectories over time. Along three established phases, a decline in purchasing of counterfeits can be observed; between Phases 1 and 2, this is due largely to negative emotional aspects, while making the transition to Phase 3 is always induced by a conflict with the social self. In all three segments the gap between the perceived and ideal social self widens, yet, once again, there are differences in the coping strategies.     

The Effects of Rhetorical Figures and Cognitive Load in Word‐of‐Mouth Communications

Advertising messages often are intended to ignite large‐scale word‐of‐mouth campaigns among consumers. Drawing primarily from memetic theory, cognitive fit theory, and perceptual fluency, this research examines how rhetoric and cognitive load interact to enhance or diminish desirable effects such as retention of the original intent of the message (copy‐fidelity) and engendering a desire to pass the message along (fecundity). Certain types of rhetoric are shown to aid this process by making some messages more attractive for retransmission and increasing retention of the original message, while cognitive load modifies which types are effective in accordance with cognitive fit and perceptual fluency. The results suggest that low‐deviation high‐complexity message forms (known as reversal) are the most effective for creating positive word‐of‐mouth outcomes and limiting potentially negative outcomes. Additionally, the results show that destabilization messages are more likely to yield mutated word‐of‐mouth messages that consumers still feel a strong desire to pass along to others. For practitioners, the results indicate what message forms should be used to effectively spark word‐of‐mouth campaigns.     

BILATERAL COUNTERPARTY RISK UNDER FUNDING CONSTRAINTS—PART II: CVA

The correction in value of an over‐the‐counter derivative contract due to counterparty risk under funding constraints is represented as the value of a dividend‐paying option on the value of the contract clean of counterparty risk and excess funding costs. This representation allows one to analyze the structure of this correction, the so‐called Credit Valuation Adjustment (CVA for short), in terms of replacement cost/benefits, credit cost/benefits, and funding cost/benefits. We develop a reduced‐form backward stochastic differential equations (BSDE) approach to the problem of pricing and hedging the CVA. In the Markov setup, explicit CVA pricing and hedging schemes are formulated in terms of semilinear partial differential equations.