The Optimal Linear Income Tax Model: Utility or Equivalent Income?

This paper compares the use of equivalent income with that of utility, in the social welfare function, in optimal income tax models. Equivalent income is a money metric welfare measure that, unlike utility, is not affected by monotonic transformations of utility. The use of equivalent income is found to produce an optimal tax rate that is more sensitive to the degree of inequality aversion, compared with the use of utility. With Cobb-Douglas and CES utility functions, the optimal tax rate is the same for utility and equivalent income where relative inequality aversion is unity. When using equivalent incomes, the case for high marginal rates does not depend on the assumption of a very low elasticity of substitution between consumption and leisure.     

Biases in demand analysis due to variation in retail distribution

Aggregate demand models typically assume that consumers choose between all available products. Since consumers may be unwilling to search across every store in a given market for a particular item, this assumption is problematic when product assortments vary across stores. Using supermarket scanner data for five product categories we demonstrate that approximately one third of products have limited retail distribution, which account for one fourth of dollar sales. Monte Carlo analysis demonstrates that the level of limited product availability observed in the data can significantly bias the results of aggregate demand models that incorrectly assume all consumers in a given market face the same choice set.     

Trends and developments in industrial relations and industrial relations law: Trade union discipline and non-strikers

Perhaps the most controversial change introduced in the 1988 Employment Act was the statutory right given to union members not to be disciplined by their unions for continuing to work during lawful industrial action approved by a majority in a secret ballot. Here the authors examine the legal contexts, implications for trade unions and the wider industrial relations and political significance of this important new right.     

THE BUS INDUSTRY IN DANGER

After seeking to placate the local government lobby while retaining the benefits of private enterprise, the Labour government's policy for bus services is slipping into a dangerous compromise which will neglect the market while seizing assets from commercial operators. Behind this lies a policy leading to the return of bus services to public ownership.