Income tax reform for a globalized world: The case for a dual income tax

Countries that are industrialized, or becoming so, must adopt tax systems that are capable of raising considerable amounts of revenue efficiently, equitably and with administrative simplicity, while at the same time coping with the competitive features of a globalized world economy. A component of that tax system will be direct taxation of households alongside general sales and payroll taxation. This paper addresses the role that capital income taxes should play in the income tax system. Arguments for the preferential treatment of capital income are summarized, and a case is made for adopting a schedular approach in which capital and labor income are taxed according to separate rate structures. The particular case of the dual income tax system used in the Nordic countries is advocated whereby capital income is taxed at a low, flat rate and non-capital income is taxed progressively. It is argued that this system best combines the objectives of a good tax system in an internationally competitive environment.     

Body support testing and rating

The REF, C, and score are a means to give quantitative values for product performance. Other product variables defined as humidity control factor, shear control factor, differential temperature control factor, product life factor, and cost factor were not addressed as part of this study. Additional variables include delivery, maintenance, and warranties. These components can be added to the score in some weighted manner as they become clinically founded. Interface pressures and shears were not measured for beds that are gatched. Each product tested will have characteristics pertinent to its own design that must be addressed to minimize sacral and coccyx skin breakdown when subjects are in this posture because some pneumatic pads bottom out to give excessive sacral and coccyx pressure while others wrinkle when used in this position. This is of major concern when one considers that the coccyx is more susceptible to pressure than any other bony prominence. There may be some aversion to labeling support product performance because it will allow the purchaser to know what is being bought. This initial study indicates the feasibility of quantitating what all patients require: a valid interface support surface for each specific need. The user can be adequately informed before the purchase as to a product's merits without being influenced by the results of inadequate testing, referrals, or sales media influences. Although cushions, shoes, or other prosthetic/orthotic devices were not part of this study, it is appropriate to rate all these devices in a similar manner by simply comparing pressure relief attained to that desired, expressing the result as a percentage of the worst case, and then labeling the product accordingly. Those subjects with sensation can rate comfort as part of the overall score. For cushions, ischial tuberosity pressure relief can be expressed as a percentage of the maximum attainable relief. Metatarsal head relief during gait as well as during static testing can be measured, and claims can be made for shoes and sneakers. Where impact loads and shear forces are paramount, the score must comprise appropriate parameters. Similarly, amputee distal stump relief as a percentage of worst case could be specified by the fitter. Iliac crest relief as a percentage of worst case can also be specified by the fitter. In all instances the score is not a subjective rating but one that can be measured correctly. All body support products can be given an REF, C value, and score as well as other qualifying values where appropriate instrumentation and sufficient subject sampling is used.     

Adverse selection in group insurance: The virtues of failing to represent voters

Compared with non-union workers, union workers take more of their compensation in the form of insurance. This may be because unions choose democratically, and democratic choice mitigates adverse selection in group insurance. Relative to individually-purchased insurance, we show that group insurance chosen by an ideal profit-maximizing employer can be worse for every employee, while group insurance chosen democratically can be much better. The reason is that democracy can fail to represent the preferences of almost half the group.Received: January 2003, Accepted: September 2004, JEL Classification: J51, D82, G22     

The evolution of consumer knowledge and sources of information: Hungary in transition

The authors’ research in Hungary during the period of transition to a market economy provides an opportunity to examine the evolving relationships between consumer product knowledge and its antecedents, including advertising, personal search, interpersonal sources, and brand experience. Their findings, based on survey data collected in Budapest in 1992 and 1998, indicate that the market information variables explain more variance in consumer knowledge later rather than earlier in the transition. Advertising is an important predictor of consumer knowledge later but not earlier in the transition, personal search is important at both times, and interpersonal sources are not important in either time period; brand experience is negatively related to knowledge earlier in the transition and positively related later in the transition. This study allows one to begin to understand the boundary conditions associated with studies conducted in developed economies. Managerial implications for firms investing in transitional economies are presented. Robin A. Coulter (robin.coulter@business.uconn.edu) is Ackerman Scholar and an associate professor of marketing in the School of Business at the University of Connecticut. She received her Ph.D. from the University of Pittsburgh. Her research interests include branding, cross-cultural consumer behavior, advertising, and research methods. Her work has appeared in theJournal of Consumer Research, the Journal of Consumer Psychology, theJournal of Applied Psychology, and theInternational Journal of Research in Marketing. Linda L. Price (llprice@email.arizona.edu) is Soldwedel Professor of Marketing in the Eller School of Management at the University of Arizona. She received her Ph.D. from the University of Texas at Austin. Her research combines qualitative and quantitative methodologies to examine the active, emotional, imaginative aspects of consumers’ decisions and activities, and the social and cultural context of marketplace behaviors. Her work has appeared in theJournal of Consumer Research, Journal of Marketing, and other leading marketing, management, and social science journals. Lawrence Feick (feick@katz.pitt.edu) is a professor of business administration in the Katz Graduate School of Business at the University of Pittsburgh. He received his Ph.D. from Pennsylvania State University. His current research focuses on cross-cultural consumer behavior, consumer word-of-mouth, and referrals. His work has appeared in the Journal of Marketing, theJournal of Marketing Research, the Journal of Consumer Research, Psychological Bulletin, andPublic Opinion Quarterly. Camelia Micu (camelia.micu@business.uconn.edu) is a marketing doctoral candidate at the University of Connecticut. Her research interests include advertising and product trial and cross-cultural consumer behavior.     

Social learning with private and common values

Summary. We consider an environment where individuals sequentially choose among several actions. The payoff to an individual depends on her action choice, the state of the world, and an idiosyncratic, privately observed preference shock. Under weak conditions, as the number of individuals increases, the sequence of choices always reveals the state of the world. This contrasts with the familiar result for pure common-value environments where the state is never learned, resulting in herds or informational cascades. The medium run dynamics to convergence can be very complex and non-monotone: posterior beliefs may be concentrated on a wrong state for a long time, shifting suddenly to the correct state.Received: 6 January 2005, Revised: 5 May 2005, JEL Classification Numbers: C72, D82.Jacob K. Goeree: Correspondence toFinancial support from the National Science Foundation NSF (SBR-0098400 and SES-0079301) and the Alfred P. Sloan Foundation is gratefully acknowledged. We thank Richard McKelvey posthumously for insights and conjectures about information aggregation that helped shape our thinking about the problem. We also acknowledge helpful comments from Kim Border, Tilman Börgers, Bogachen Celen, Luis Corchon, Matthew Jackson and seminar participants at University College London, the University of Arizona, Universitat Autonoma de Barcelona, the California Institute of Technology, the 2003 annual meeting of ESA in Pittsburgh, the 2003 Malaga Workshop on Social Choice and Welfare Economics, the 2003 SAET meetings in Rhodos, and the 2003 ESSET meetings in Gerzensee.     

On the real effects of inflation and inflation uncertainty in Mexico

We estimate an augmented multivariate GARCH-M model of inflation and output growth for Mexico at business cycle frequencies. The main findings are: (1) inflation uncertainty has a negative and significant effect on growth; (2) once the effect of inflation uncertainty is accounted for, lagged inflation does not have a direct negative effect on output growth; (3) However as predicted by Friedman and Ball, higher average inflation raises inflation uncertainty, and the overall net effect of average inflation on output growth in Mexico is negative. That is, average inflation is harmful to Mexican growth due to its impact on inflation uncertainty. (4) The Mexican Presidential election cycle significantly raises inflation uncertainty both during the year of the election and the year following the election which has correspondingly negative effects on output growth.     

Can intertemporal choice experiments elicit time preferences for consumption?

The paper considers what can be inferred about experimental subjects’ time preferences for consumption from responses to laboratory tasks involving tradeoffs between sums of money at different dates, if subjects can reschedule consumption spending relative to income in external capital markets. It distinguishes three approaches identifiable in the literature: the straightforward view; the separation view; and the censored data view. It shows that none of these is fully satisfactory and discusses the resulting implications for intertemporal decision-making experiments. JEL Classification C90, C91, D90, D91, D11, D12     

Growth, crisis and change in the insurance industry: a retrospect

The insurance industry currently finds itself in a revolutionary situation characterized, in part, by the impact of new direct marketing techniques, facilitated by new technologies; by corporate restructuring and the creation of international mega-corporations; and by the accelerating globalization of the industry. This article surveys recent research on insurance history with the aim of placing these developments in their long-run context. Three areas are examined for evidence of continuities and discontinuities with the past: namely, the impact of technology, the interaction between markets and organizational change, and the globalization of insurance and its relationship to economic growth.     

Issues in decentralizing the provision of education

This paper analyzes some of the problems that arise in decentralizing education to the private sector. We concentrate on the difficulties that result from the heterogeneity of students and competition among schools in a location setting. We analyze two main issues, the resources expended by schools and the mix of students in schools, and report on results for two others, the location of schools and their number. For each of these, we investigate the extent to which decentralizing the provision of schooling results in an efficient allocation of resources, and consider the use of vouchers to improve the situation. Our analysis draws on elements of three distinct methodologies: the theory of clubs, location theory, and the theory of monopolistic competition. We find that private schooling will typically be inefficient, but that inefficiency may sometimes be corrected by appropriately designed vouchers.We would like to thank Olivier Debande, Jean-François Wen, two anonymous referees, and seminar participants at the 1st meeting of the Canadian Public Economics Study Group and the 51 st congress of the International Institute of Public Finance for helpful comments. Stefan Buergi and Luc Savard provided useful research assistance. We are also grateful to the SSHRCC and the FCAR for financial support.