The effect of property taxes on vacation home growth rates: Evidence from Michigan

The Tiebout model assumes that individuals sort to the jurisdiction which best matches their fiscal preferences. However, there is a paucity of reliable estimates for the impact of tax changes on household mobility. We utilize a state mandated school finance reform and temporal differences in vacation home densities to provide a unique test of this fundamental Tiebout assumption. The results show that changes in property taxes explain a significant amount of the variation in vacation home growth; a 3–4 mil decrease in property tax rates is associated with an increase of approximately one vacation home per square kilometer.     

The Nature of Property Rights in Haiti: Mode of Land Acquisition,Gender, and Investment

In Haiti, two primary pathways to land ownership are through the purchase of land and through inheritance. In terms of inheritance, intestate law treats daughters and sons equally with respect to real property. Despite the formal law, we find that women are relatively less tenure secure on their inherited land than men. In contrast, men and women share similar perceptions of tenure security on purchased land. These differences become manifest in conservation investment activities: tree planting, fallowing, and terracing. We find evidence that these activities are less likely to occur by female respondents on their inherited land.     

RETHINKING BANK REGULATION: A REVIEW OF THE HISTORICAL EVIDENCE

The debate over bank powers has taken on special urgency with the recent flurry of proposed mergers, such as the Citicorp-Travelers Group combination, that would break down the barriers between commercial and investment banking. After more than a decade of failed attempts to expand the scope of permissible bank activities, the House of Representatives recently voted for the first time in favor of a bill to end these Depression era limitations. The issue will be taken up by the Senate this fall. Most of the rationales for regulating banks fall into two broad categories: (1) the need to control potential conflicts of interest stemming from banks' multiple roles as deposit-takers, lenders, securities underwriters, and investment advisers; and (2) the perceived need to protect against the possibility of bank panics and widespread financial instability. In reviewing the historical evidence compiled by banking and finance scholars over the years, this article finds remarkably little cause for concern and suggests the regulatory cure may be far worse than the disease. On the first issue, the article cites a number of recent studies suggesting that market forces deal more effectively than regulation with conflicts of interests that can arise when commercial banks are engaged in securities underwriting. Contrary to the conventional wisdom, investors during the pre-Glass-Steagall era appear to have been better off when they purchased securities from commercial banks rather than investment banks. Moreover, to enhance their credibility in the market, many commercial banks during this period chose to put some distance between their lending and underwriting activities by establishing separate securities affiliates, thereby creating voluntary “firewalls.” In examining the issue of how the expansion of bank powers would affect economic stability, the second half of the article cites a large body of research–including studies of different historical periods and countries–attesting to the durability of commercial (and universal) banking systems. Indeed, one of the most important findings issuing from this research is that the regulatory safety net has often had the unfortunate impact of undermining rather than promoting financial stability.     

The Economic Contributions of Hyman Minsky: varieties of capitalism and institutional reform

The work of Hyman Minsky represents an important link between Post Keynesians and Institutionalists. This essay begins with a brief summary of Minsky's early work, including his well-known financial instability hypothesis and his policy proposals designed to reform the financial system. It then moves on to discuss other proposals that are less well known, and developed after the publication of his Stabilizing an Unstable Economy (1986) book. One of them in all the work of Minsky is his demand that theory be institution-specific. Because there are a variety of possible types of economies, theory must be appropriate to the specific economy under analysis. His analysis concerned an evolving, developed, big-government capitalist economy with complex and long-lived financial arrangements. His policy recommendations were designed to promote a successful, democratic form of capitalism given these financial arrangements. These policies would have to ‘constrain’ instability through creation of institutional ‘ceilings and floors’ while at the same time addressing the behavioral changes induced by reduction of instability. The policies would also have to promote rising living standards, expansion of democratic principles, and enhancement of security for the average household.     

Labor market fluctuations in the small and in the large

Shimer's calibrated version of the Mortensen–Pissarides model generates unemployment fluctuates much smaller than the data. Hagedorn and Manovskii present an alternative calibration that yields fluctuations consistent with the data, but this has been challenged by Costain and Reiter, who say it generates unrealistically big differences in unemployment from the differences in policy we see across countries. We argue this concern might be unwarranted, because one cannot assume that elasticities relevant for small changes work for large changes. Models with fixed factors in market or household production can generate large effects from small changes and reasonable effects from large changes. This is reminiscent of attempts to improve the labor market in the Kydland–Prescott model, especially ones incorporating household production, like Benhabib, Rogerson, and Wright.     

Is institutional improvement possible?

A substantial literature shows that economic prosperity is dependent on the quality of economic institutions. Countries with low-quality institutions remain poor while countries with high-quality institutions prosper. Improvement in institutional quality brings with it economic growth. Poor countries must improve their economic institutions to escape poverty; so, if a poor country’s institutional structure is unlikely to improve, that suggests dismal prospects for economic growth and an escape from poverty. An examination of institutional quality over 30 years indicates that countries with low-quality institutions have improved their institutional quality, which demonstrates that poor countries are not stuck with low-quality institutions. They can improve their institutions, and consequently, can generate economic growth and escape poverty.