Separating small and big fish: The case of income tax evasion

This paper proposes to offer the taxpayer a choice of tax-enforcement schemes for self-selection. More specifically, the taxpayer should have the possibility of opting for the prevailing regime with a certain penalty on the evaded tax or for an alternative regime with a higher penalty on the evaded tax but a reduced tax rate. It is shown that this leads to a separation of taxpayers characterized by a relatively high degree of evasion (H-evaders) from taxpayers who evade only a relatively small amount of tax (L-evaders). Furthermore, the procedure is not self-defeating, it is effectively possible to direct the efforts of auditing towards the H-evaders. At the end of the game the L-evaders experience a welfare gain, the H-evaders are induced to reduce their evasion activities and the government can expect higher yields.We wish to thank Johann K. Brunner and two anonymous referees for many helpful comments.     

On the persistence of corruption

This paper tries to answer the question why the phenomenon of corruption seems to be inherently existent in any society. The dynamic model presented shows how rational agents may generate multiple equilibria of corruption within the same kind of socio-economic system. We assume that the individual disutility caused by the loss of reputation from a corrupt transaction depends on the acceptance of corrupt behavior by the representative individual. Depending on the values of some key parameters like the marginal utility of corrupt behavior and the initial acceptance of corruption a completely corrupt equilibrium where all people completely accept corruption or a completely honest equilibrium where corruption is not accepted at all may be the limit state of the optimal path. Also inner equilibria in-between exist; however, they are always unstable.     

Long horizon versus short horizon planning in dynamic optimization problems with incomplete information

Summary. This paper compares the implications of short and long horizon planning in dynamic optimization problems with the structure of a standard one-sector growth model if agents have incomplete knowledge about the production function. Agents know the output and rate of return at the current capital stock and use an estimation of the production function based on this knowledge to determine current consumption. For standard utility functions without wealth-effects both long and short planning horizons yield convergence to the steady state - however at a faster rate than optimal -, or fluctuations around the steady state, and in both cases, long horizon planning yields a policy which locally at the steady state is closer to the optimal one than short horizon planning. On the other hand, for preferences with wealth effects where the intertemporal optimal path exhibits fluctuations, long horizon planning destabilizes the path and short horizon planning can generate paths which are qualitatively closer to the optimal one and yield higher discounted utility.Received: 5 April 2001, Revised: 15 September 2003, JEL Classification Numbers: C61, D83, D90.Herbert Dawid: The author would like to thank Richard Day for numerous stimulating discussions which led to this article and an anonymous referee for helpful comments     

Misuses of Statistics: Lessons for Statisticians, Non-statisticians, Students and Teachers

A bstract . Statisticians, students, teachers and even non statisticians can learn from a study of misuses of statistics. The practitioners can improve their use of statistical methods in research , the student can learn the correct method of analysis and the effects of incorrect analysis, the teacher can improve teaching and the non statistician can learn to evaluate statistical inputs to decision making All users of statistics, professional and nonprofessional, can benefit from the same examples. In this paper, the authors categorize misuses, by both the nature and effect of the misuse, and give examples for each category.     

Assigned versus assumed: Towards a contemporary,detailed understanding of subsidiary autonomy

This paper critically documents the rise of autonomy in subsidiary management literature, and develops an agenda for future research in this key area. Integrating and updating the seminal works of Paterson and Brock (2002) and Young and Tavares (2004), the paper begins with a critical review of subsidiary autonomy within the streams of subsidiary management literature. This leads to an assessment of the key contemporary issues requiring further investigation. These issues center around two key types of autonomy: assigned and assumed. We argue these types represent a more accurate, in-depth conceptualization of subsidiary autonomy, and also have significant implications for key related topics, including subsidiary development. This is depicted in an integrative model that draws upon agency theory, the network model of the MNE, the decision process perspective and the bundling model in presenting a revised view of subsidiary autonomy, and offers a basis for further research within the field.     

How is Futures Trading Affected by the Move to a Computerized Trading System? Lessons from the LIFFE FTSE 100 Contract

Abstract:  We consider the impact of the May 1999 move to screen trading of the LIFFE FTSE 100 index futures contract. This resulted in a narrowing of the effective spread. Spread determinants are broadly similar in the two regimes. The narrowing of the spread appears due to increased competition among traders and a decline in tick-level volatility rather than to the way these or other variables affect the spread. Market depth appears largely unaffected. Under screen trading, realized spreads widen as more limit orders are taken up rather than in relation to order size per se .