Public goods,voting, and growth

We study a parametric politico‐economic model of economic growth with productive public goods and public consumption goods. The provision of public goods is funded by a proportional tax. Agents are heterogeneous in their initial capital endowments, discount factors, and the relative weights of public consumption in overall private utility. They vote on the shares of public goods in gross domestic products (GDP). We propose a definition of voting equilibrium, prove the existence and provide a characterization of voting equilibria, and obtain a closed‐form solution for the voting outcomes. Also we introduce a “fictitious” representative agent and interpret the outcome of voting as a choice made by a central planner for his benefit. Finally, we undertake comparative static analysis of the shares of public goods in GDP and of the rate of balanced growth with respect to the discount factors and the preferences for public consumption. The results of this analysis suggest that the representative‐agent version of our model is capable of capturing the interaction between many voting heterogeneous agents only if the heterogeneity is one‐dimensional.     

Room to Manoeuvre? International Financial Markets and the National Tax State

Globalisation has triggered a downwards trend in direct taxation as governments compete for internationally mobile capital. This popular postulation has blurred the attention to potential upward constraints on tax policy-making emanating from globalised capital markets. In this paper, we illustrate when and how capital markets exert an upward pressure on taxes. While the increasing access to international capital allowed governments in developed democracies to indulge their voters with deficit-financed spending, the most recent crisis has shown that this is no panacea. When international loans become costly, governments have to revert to raising revenue domestically. Using comparative time-series data since the 1980s, we investigate how rising bond yields affect the number and the direction of tax reforms, as well as the tax mix in the OECD. The empirical analysis provides some evidence that international capital markets place an upward pressure on taxes, recently above all on consumption taxes. Yet, governments have also retained room to manoeuvre as a number of tax decisions are more dependent on domestic political factors than on pressure from the capital markets.     

Dynamic competition with network externalities: how history matters

We consider dynamic competition among platforms in a market with network externalities. A platform that dominated the market in the previous period becomes “focal” in the current period, in that agents play the equilibrium in which they join the focal platform whenever such equilibrium exists. Yet when faced with higher-quality competition, can a low-quality platform remain focal? In the finite-horizon case, the unique equilibrium is efficient for “patient” platforms; with an infinite time horizon, however, there are multiple equilibria where either the low- or high-quality platform dominates. If qualities are stochastic, the platform with a better average quality wins with a higher probability, even when its realized quality is lower, and this probability increases as platforms become more patient. Hence, social welfare may decline as platforms become more forward looking.     

The Effects of Financial Literacy Overconfidence on the Mortgage Delinquency of US Households

This study investigated the effect of objective and subjective financial literacy on mortgage payment delinquency using the 2015 National Financial Capability Study dataset. A hierarchical model showed a substantial negative effect of objective literacy on delinquency, but subjective literacy did not have a significant effect. The predicted likelihood of delinquency at the 10th percentile of objective literacy was over three times as high as the likelihood at the 90th percentile. In a model with combinations of high or low objective and subjective financial literacy, those who were overconfident had a delinquency likelihood three times as high as those who had high objective and subjective literacy. Subjective literacy had substantial effects on delinquency both for high- and low-objective literacy levels. In financial education, attention should be focused not only on objective learning but also making sure consumers are aware of the limitations of their understanding.     

Financial Constraints: Routine Versus Cutting Edge R&D Investment

We analyze financial constraints on R&D, where we account for heterogeneity among investments that has been neglected in previous literature. According to economic theory, investments should be distinguished by their degree of uncertainty, e.g. routine R&D versus cutting‐edge R&D. Financial constraints should be more binding for cutting‐edge R&D than for routine R&D. Using panel data we find that R&D spending of firms devoting a significant fraction of R&D to cutting‐edge projects is curtailed by credit constraints while routine R&D investments are not. This has important policy implications with respect to the distribution of R&D subsidies in the economy.     

Identifying strategic interactions in Swedish local income tax policies

This paper uses data on Swedish local governments to test for strategic interaction in local tax setting. We make use of a number of indirect predictions from the theories of tax competition and yardstick competition in order to test for the presence of strategic interaction in these forms. Using such additional predictions of the theories serves a twofold purpose—first it helps us establish if the spatial coefficient is due to strategic interactions or merely reflecting spatial error correlation, and second, it helps identify the source of interaction. The analysis provides strong evidence for spatial correlation in tax rates among Swedish local governments. Moreover, we find weak evidence of tax competition effects in the setting of tax rates.     

Health-related quality of life and compensating income variation for 18 health conditions in Iceland

ABSTRACT

Using data from an Icelandic health and well-being survey, carried out in 2007, 2009, and 2012, we estimate the value of health-related suffering in two different ways. Our primary aim is to obtain the monetary compensation needed to maintain the same level of well-being with and without 18 health conditions using the compensating-income-variation approach. This method employs individual well-being measures with no hypothetical situations involved, thus offering a solution to biases of frequently used methods to value non-marketed goods. We also use zero-one normalization of regression coefficients to estimate health-related quality-of-life weights. Results from monetary valuations indicate that 1,685,594 USD are needed per year to compensate for the presence of melancholy, 206,273 USD for frequent headaches, 153,396 USD for severely low vision, and 80,824 USD for severe monthly menstrual cramps. This research adds to the literature by employing two rarely used methods to a range of health conditions. By valuing several different conditions with the same sample and methodology this research provides a ranking between the conditions, aiding policy makers in prioritizing scarce resources. We do however advise against using the normalization method for policy purposes at this point, due to the deviation of results from the general literature.     

Customer experience in omni-channel banking services

The banking industry is experiencing rapid and widespread changes due to advances in technology that go hand-in-hand with the customer demands for real-time, personalized and seamless banking experience. Along with this development, omni-channel orientation is becoming an inherent feature of banking services. However, its role has not yet been thoroughly understood, specifically in this context. The purpose of this study is to create in-depth understanding of how do customers experience omni-banking services and what are the key factors related to their experiences. We identify both actual critical events and imaginings, positive and negative that are related to the forming of customer experiences and suggest both theoretical and managerial implications based on the results.     

Hygienic quality of cleaning cloths used in professional cleaning of private domestic homes

The objective of this laboratory study was to obtain general background information concerning professional cleaning in private domestic homes. The specific aim was to examine the effect of storage and washing of dirty cloths on their hygienic status. The effect of storage on the number of Staphylococcus aureus bacteria in cleaning cloths was examined using current or potential materials for professional cleaning in private homes. The bacterial content increased in microfibre cloths in some cases during a normal working day (8 h storage), and more clearly after 16 h or 48 h of storage. Disposable fibre cloths did not promote the growth of microbes as well as microfibre cloths. The effect of detergents on the hygienic status of cleaning cloths was unclear: some cleaning agents appeared to enhance the growth of bacteria, while others did not. In many cases, organic substances, i.e. protein added to the cloths, enhanced the growth of microbes. Washing of microfibre cloths at 60°C reduced the numbers of bacteria on the cloths but did not remove them entirely. Storage of dirty cloths before washing will probably cause difficulties in the proper washing of the cloths, and thus negatively affect their capacity for hygienic results in cleaning surfaces, as well as presenting a risk to the safety of the worker. Cleaning cloths should be washed as soon as possible after use: washing after each working day, at the latest, is recommended. Furthermore, cleaning cloths should be selected for professional use to allow washing at hot temperatures. The findings of this study could be used for training in professional home cleaning. They also provide valuable information for other branches of cleaning, including consumer use in households.