An equilibrium analysis of information aggregation and fluctuations in markets with discrete decisions

This paper shows how the interaction between decentralized information gathering and discreteness of investment decisions at the individual level can generate random fluctuations in aggregate investment that involve occasionally large allocation errors. This interaction is illustrated in a model in which private information is costly to acquire and prices reveal information. The unique rational expectations equilibrium outcome of the model is shown to always be noisy and characterized by investment levels which may be high simply because uninformed investors are buying under the impression that the high price is a signal of good investment opportunities.     

Effective property rights, conflict and growth

This paper shows how the interaction between conflict and growth can give rise to a nonmonotone relationship between property rights and social welfare. This interaction is illustrated in a model of endogenous growth in which equilibrium diversion of resources is the cost of securing effective property rights. A symmetric equilibrium allocation associated with more secure property rights and faster growth can be Pareto dominated by one associated with poorer property rights and slower growth. Faster growth can exacerbate the problem of diversion whenever property rights are sufficiently poor. These results call for caution before a society decides to pursue economic growth independently of the institutional structure of property rights. Furthermore, if this structure is inappropriate piecemeal reform might not be in the interest of society, and a substantial reform might be necessary if it is to be welfare-improving.     

Consumption and Portfolio Choice over the Life Cycle

This article solves a realistically calibrated life cycle modelof consumption and portfolio choice with non-tradable laborincome and borrowing constraints. Since labor income substitutesfor riskless asset holdings, the optimal share invested in equitiesis roughly decreasing over life. We compute a measure of theimportance of human capital for investment behavior. We findthat ignoring labor income generates large utility costs, whilethe cost of ignoring only its risk is an order of magnitudesmaller, except when we allow for a disastrous labor incomeshock. Moreover, we study the implications of introducing endogenousborrowing constraints in this incomplete-markets setting.     

Assessing the international spillover effects of capital income taxation

Changes in capital taxes by one economy spill onto other economies with internationally mobile capital. We evaluate these impacts using a two-region, intertemporal general equilibrium model. The foreign economy's unilateral reduction in corporate income taxation has positive but small effects on U.S. welfare. In contrast, unilateral reductions in personal income taxation impose large negative spillovers. The differences result from CIT being source-based and PIT residence-based. The CIT cut reduces tax burdens to U.S. residents who invest abroad, while the PIT cut reduces foreigners' tax burdens only. Through general equilibrium adjustments neglected in simpler models, the PIT cut lowers U.S. residents' welfare.     

Tax penalties on fluctuating incomes: estimates from longitudinal data

Progressive personal income taxes can cause individuals with fluctuating incomes to pay more taxes over time than individuals with constant incomes of the same average value. The implicit tax penalty violates principles of equity and may harm efficiency by discouraging risk-taking activities, such as entrepreneurship. This paper uses longitudinal data to estimate the tax penalties in six panels of Canadian data from 1993 to 2010. The effects of various income averaging policies for mitigating tax penalties are then examined.     

The risk-based approach under the new EU data protection regulation: a critical perspective

Abstract

The first broad reform of personal data protection legislation in the European Union entered into force in May 2018 (Regulation (EU) 2016/679, the General Data Protection Regulation). Remarkably, with this reform a risk-based approach has been introduced as the core data protection enforcement model, while data protection authorities see their regulatory role significantly weakened. The risk-based approach is to be implemented by the data controllers (i.e. the operators) via data protection impact assessments (evoking the established environmental impact assessment procedure) and notification of breaches, among other procedures. Hence the scope of both the concepts of risk and risk regulation spread beyond conventional domains, namely the environment, public health or safety, i.e. physical risks, to encompass risks to intangible values, i.e. individual rights and freedoms, presumably harder to assess and manage. Strikingly, the reform has been accompanied by a confident discourse by EU institutions, and their avowed belief in the reform’s ability to safeguard the fundamental right to data protection in the face of evolving data processing techniques, specifically, big data, the Internet of Things, and related algorithmic decision-making. However, one may wonder whether there isn’t cause for concern in view of the way the risk-based approach has been designed in the data protection legislation. In this article, the risk-based approach to data protection is analysed in the light of the reform’s underlying rationality. Comparison with the risk regulatory experience in environmental law, particularly the environmental impact assessment procedure, is drawn upon to assist us in pondering the shortcomings, as well as the opportunities of the novel risk-based approach.     

How to measure competition in an economy in transition

This paper attempts to find a robust method of measuring competition when firms' operational activities are subject to frictions. The first part theoretically tests the indicative quality of two competition measures, the price‐cost margin (PCM) and the profit elasticity, in a model of monopolistic competition. The second part studies the empirical performance of the indices for a panel of Ukrainian manufacturing firms. This study offers a new approach to measuring profit elasticity that relies on structural estimation of a production function. The estimation methodology retrieves a productivity index that is adjusted to imperfect competition. The proposed method of measuring profit elasticity is found to be robust to frictions, but the PCM and traditional profit elasticity are biased, especially when the intensity of competition is low. Empirical findings show that competition exhibits a significantly positive correlation with aggregate productivity performance, while its impact on firm productivity is nonlinear.