Inflation and Welfare: A Search Approach

This paper uses a search model of monetary exchange to provide new insights for evaluating the welfare costs of inflation. We first show that the search model of money can rationalize the estimates of the welfare cost of inflation based on the "welfare triangle" methodology of Bailey (1956) and Lucas (2000) provided that buyers appropriate the social marginal benefit of their real balances. For other mechanisms, the measure given by the welfare triangle has to be scaled up by a factor that increases with sellers' market power. We introduce capital and endogenous participation decisions and study how the cost of inflation is affected. We provide calibrated examples in which a deviation from the Friedman rule is optimal.     

Information search in the mutual fund market in the U.S. A.

Sequential decision-making principles are introduced which can be applied to mutual fund investing. Specific attention is given to the nature of the mutual fund market and the expected pay-off from a low-cost information search. Empirical results are based on historical returns and information that is readily available in popular press sources. Substantial variation in historical performance was found and the pay-off from a market search was positive and substantial in many cases.     

COMPARABLE WORTH: CANADA'S EXPERIENCE

This paper discusses the design, implementation and administration of comparable worth legislation in Canada, focusing particular attention on the potential of comparable worth to close the male-female earnings gap. The authors document the Canadian legislative initiatives, provide illustrative evidence on the impact of comparable worth, and identify the main policy lessons to be learned from the experience of Canada, where the comparable worth concept has evolved furthest.     

A Survey of Manufacturing Industry Policy: From the Tariff Board to the Productivity Commission

Since World War II Australian industry policy has shifted from providing extensive assistance such as tariff protection to the manufacturing sector to creating an environment for the efficient operation of markets. This paper surveys the evolution of the goals and instruments of industry policy in Australia and elsewhere.     

THE DETERMINANTS OF LAWS RESTRICTING YOUTH ACCESS TO TOBACCO

Since many smokers begin consuming tobacco products in their adolescent years, many states have adopted a variety of restrictions on youth access to tobacco, which studies show reduces the demand for tobacco among this cohort. This paper takes a different track by addressing the demand for youth access restrictions. Specifically, using a random effects Probit procedure, which controls for the endogeneity of cigarette consumption and taxation, we examine the determinants of nine methods commonly used by states to restrict youth access to tobacco . ( JEL H70, I18)     

Household Response to Government Debt: Evidence from Life Insurance Holdings

We use state‐level panel data on life insurance in force in the United States and find that a $1 increase in government debt, at either the state or federal level is associated with a $0.96 increase in the face value of the average life insurance holdings per capita for a household in the average state. This increase represents an intention to save that would almost completely offset the government debt in specific states of the world (i.e., if the insured dies). Because this state of the world is rare, the immediate increase in actual savings is only about $0.03, the cost of the additional insurance. We find, in addition, that this response occurs mainly on the intensive margin, meaning that the size of the average life insurance policy increases when government debt increases. Along the extensive margin, we find the number of policies in force falls slightly with federal debt, and rises slightly with state debt increases. The results show altruistic planning in response to changes in government debt that are consistent with Ricardian Equivalence and the long‐run neutrality of government debt.     

Taxes and Corporate Policies: Evidence from a Quasi Natural Experiment

We document important interactions between tax incentives and corporate policies using a “quasi natural experiment” provided by a surprise announcement that imposed corporate taxes on a group of Canadian publicly traded firms. The announcement caused a dramatic decrease in value. Prospective tax shields partially offset the losses, adding 4.6% to firm value on average, and vary with the tax status of the marginal investor. Further, firms adjust leverage, payout, cash holdings, and investment in response to changing tax incentives. Overall, the event study and time series evidence supports the view that taxes are important for corporate decision making.     

Improving Mineral Taxation Policy in Australia*

Australian State governments have begun to increase royalty rates and other mineral taxes. The most instructive approach to taxation policy for the minerals sector is to set up a general model of mines which year the optimal structure of taxes. A model of mine production under uncertainty is presented. The optimal tax is a single tax with two parts. a bonus bid and conditional tax payments based on the ex-post rent of the mine. The actual structure of taxes levied by State and Commonwealth governments is seen to be distinctly sub-optimal in several respects. Proposals to move the actual to word the optimal structure are made, recognizing some of the constraints on information and the maximum acceptable rate of tax reform .     

Bunching, Time Constraints, and Workfare

This paper explores the use of workfare as part of the optimal tax mix. When agents have preferences that are quasilinear in leisure, unproductive workfare is optimal only if an optimal nonlinear tax scheme in the absence of workfare would feature distortions at the bottom of the wage distribution. These distortions can arise from two sources: binding constraints on the maximum available time, and bunching. An example is presented to illustrate the computation of an optimal schedule with work requirements.     

COMMENT—ALCOHOL ADVERTISING IN MAGAZINES AND YOUTH READERSHIP: ARE YOUTHS DISPROPORTIONATELY EXPOSED?

This article investigates the relationship between alcohol advertising in magazines and youth readership, while controlling for a set of magazine and readership variables related to the demand for advertising space. It reconstructs and reanalyzes a data set including count data for alcohol ads placed in 28 magazines in 2001-2003 that was the basis for a previous study, which concluded that alcohol advertisers do not target youths. We address the problem of collinearity in that data set and add an explanatory variable to explicitly model the hypothesis that alcohol advertising is preferentially directed to a young adult audience. We find that the number of alcohol advertisements in magazines increases significantly with the proportion of youth readers, even after controlling for young adult readership. Our results indicate that youths are disproportionately exposed to alcohol advertising and that reducing youth exposure to alcohol advertising remains an important public policy concern. ( JEL L82, L66, M37)