Firm’s tax evasion in a principal-agent model with self-protection

Gatekeepers have an increasing role in taxation and regulation. Whereas burdening them with legal liability for misconducts that benefit those who resort to their services actually discourages wrongdoings—as will be clarified in the article—an alienation effect can also arise. The gatekeeper might become more interested in covering up the illegal behavior. This article studies the problem with respect to tax evasion by firms in a principal-agent framework. It highlights the role of legal rules pertaining to liability for tax evasion in shaping the choices of the parties, as concealment costs vary according to whether the risk-neutral principal or the riskaverse agent is held responsible when tax evasion is detected. The main result of the analysis is that there is a simple ex post test that can be carried out to infer whether harnessing the agent was socially beneficial.     

Neglected Implications of Neoclassical Capital-Labour Substitution for Investment Theory: Another Criticism of Say's Law

Abstract

Recent mainstream macroeconomic models take Say's Law for granted. This paper argues that the justification for this assumption is not found in general equilibrium theory but in the ‘neoclassical-synthesis’ (and then monetarist) criticism of Keynes, which relies in a fundamental way on a treatment of investment that turns out to depend not only on neoclassical capital-labour substitution (called into questioned by the Cambridge controversies) but also on an assumption of full labour employment that on the contrary should be a result of the analysis. This paper first criticizes the attempt to justify a negative interest-elastic investment function through adjustment costs, that is, without relying on traditional neoclassical capital-labour substitution, with special attention on the treatment in Romer's advanced textbook. Then it proceeds to its new contribution, the demonstration that an endogenous determination of labour employment raises questions about the capacity of decreases in the real wage to raise employment even accepting neoclassical capital-labour substitution, because when the latter is correctly understood the rate of interest does not suffice to determine investment; hence, there is an inevitable role for the accelerator (and Say's Law is thereby undermined). This was perceived by Dornbusch and Fischer but they did not realize that then reductions of real wages will reduce investment instead of raising it. Thus, the ‘neoclassical synthesis’ reply to Keynes is undermined even apart from the inconsistencies of neoclassical capital theory. So the paper exposes a deficiency of the neoclassical arguments in support of a tendency toward full employment, additional to the inconsistencies revealed by the capital critique.     

Educating in the design and construction of built environments accessible to disabled people: the Leonardo da Vinci AWARD project

An interdisciplinary partnership within an European Leonardo da Vinci project has developed a new approach aimed at educating secondary school students in the creation of built environments accessible to disabled people and at sensitizing them towards the inclusion of people with disabilities in all realms of social life. The AWARD (Accessible World for All Respecting Differences) project is based on the need for education professionals to contribute to the introduction of the principles of Universal Design in the curricula and on the fact that courses should be set up and teaching materials produced that conform to the principles of Universal Design. The project saw the development of an innovative e-learning tool applicable to traditional, distance and individual forms of learning. The software produced, called AWARD, is structured in teaching modules covering the different functional areas and elements that characterise the indoor and outdoor built environments and is organised in such a way as to cover the wide range of different professional skills involved in the design, construction and management of such environments.     

The determinants of innovation in green supply chains: evidence from an Italian sectoral study

Innovation processes are increasingly spreading through the unbounded universe of European small and medium enterprises (SMEs). It represents a fundamental opportunity especially for those SMEs operating in the so‐called ‘green economy’ sectors, in order to be competitive in a National, European and International market with their sustainable products and services. Drawing upon a database of over 300 enterprises operating within the eight defined green sectors, this paper assesses the determinants and drawbacks of innovation. In particular, by using an econometrical approach, we tested the following propositions: (1) small dimension of enterprises is not an obstacle to their innovation capabilities; (2) the adoption of an internationalisation strategy is an opportunity and a stimulus to innovation for SMEs; (3) cooperation with research centres, financial partners, trade association and public entities can help SMEs to overcome difficulties and help them to develop and offer innovative products and services, so to be competitive at an international level. The econometric analysis shows a positive impact of the variables ‘dimension’ and ‘level of internationalisation’ on innovation capabilities. In addition, cooperation with research centres and access to capital market are positively related with effective innovations.     

Anti-Waste Labeling and Consumer Willingness to Pay

ABSTRACT

Food waste is an important topic in the general context of food consumption sustainability and ethical consumption. Several studies have focused on environment-friendly labeling schemes based on different “ethical attributes,” such as organic, fair trade, and locally grown. However, the effect of a labeling scheme based on food waste prevention has never been studied. In the current work, experimental auctions were used to investigate the effect of a certification about containing food waste within a certain threshold on participants’ willingness to pay. The product chosen for the auctions was the French baguette (500 g) packaged with a paper wrapper. Furthermore, we examined whether the effect would be moderated by different communication strategies about the consequences of wasting. Specifically, two different frames of reference were used: the first is based on the carbon footprint, the other on the water footprint. Our results showed that waste prevention–based labeling positively affected participants’ willingness to pay and that this effect was enhanced by the carbon footprint frame of reference.     

Policy Makers' Preferences,Party Ideology,and the Political Business Cycle

We generate data on the relative preferences of policy makers for inflation and output stability and reexamine how policy makers and political parties behave for 24 countries by using this new approach. This behavior is essential in both the partisan cycle models and the opportunistic political cycle analysis. Our evidence suggests that right-wing parties exhibit a higher relative preference toward stabilizing inflation than left-wing parties. We obtain mixed results on the opportunistic behavior of incumbent parties. Finally, when we analyze the behavior of left and right ideologies separately, we find overwhelming support for party resemblance in the electoral year and strong evidence of opportunistic conduct by right-wing parties.     

Migration as an antidote to rent-seeking?

We develop a new mechanism through which skilled migration may influence economic performance in the sending country. If agents can choose between acting as rent-seekers and engaging in productive activities, and only productive skills are exportable, a positive probability of migration (to a more secure economy) reduces the relative expected returns from rent-seeking, thus decreasing the proportion of skilled workers who opt for “parasitic” activities. Such an improvement in the allocation of talent may prevail over the loss of skilled workers due to outmigration. However, we show that this result is not robust to the introduction of endogenous protection. If productive workers share their resources between accumulation of productive capital and investment in security, prospective migration may induce a weaker protection against rent-seeking, which in turn might depress average income in the source economy.     

Productivity, innovation and R&D: Micro evidence for Italy

By exploiting a rich firm level data-base, this paper presents novel empirical evidence on the effect of process and product innovations on productivity, as well as on the role played by R&D and fixed capital investment in enhancing the likelihood of introducing innovations at the firm level. Our results imply that process innovation has a large impact on productivity. Furthermore, R&D spending is strongly positively associated with the probability of introducing a new product, whereas fixed capital spending increases the likelihood of introducing a process innovation. The latter result might reflect the fact that new technologies are frequently embodied in new capital goods. However, the effect of fixed investment on the probability of introducing a process innovation is magnified by R&D spending internal to the firm. This implies that R&D can affect productivity growth by facilitating the absorption of new technologies.     

The Stability of the Relation Between the Stock Market and Macroeconomic Forces

This paper identifies the macroeconomic factors that influence Italian equity returns and tests the stability of their relation with securities returns. The relation between stock returns and the macroeconomic factors is found to be unstable: not only are the factor loadings of individual securities virtually uncorrelated over time, but a high percentage of the shares experience a reversal of the sign of the estimated loadings. This result is not confined to single periods or to a small group of shares, but holds in different sub–periods and for securities in all risk classes. These findings suggest that research should carefully investigate the specification of the return generating process and the stability of the risk measures.
(J.E.L.: G12, E44).     

R&D Spillovers on a Salop Circle

The paper describes quality/price equilibrium and welfare effects of R&D spillovers when firms are located around the circumference of a Salop circle, and the extent of the spillovers may depend on the geographic proximity between firms. In particular, we show that an increase in competition may have a positive effect on the provision of quality and firms' profits. We also extend the model allowing a multinational enterprise to locate at the centre of the circle. In this scenario it is important to understand the interplay of local R&D spillovers with the spillovers that propagate from and to the centre. Copyright © 2015 John Wiley & Sons, Ltd.