Value-added tax options for India

The pressures of aggregate revenue, the requirement of a reduced role for customs duties for the liberalization of the economy, and the complexity and strains of the current system together point clearly toward the desirability of tax reform in India. Since domestic indirect taxes provide the major source of revenue, they deserve special attention. This paper argues that India would benefit from moving toward a system of value-added taxation (VAT) and focuses on the way in which a VAT (or VATs) can be best introduced into India given the country's federal structure. Three different options are distinguished: a central VAT, dual VAT, and states' VAT. We argue that the first is politically infeasible, that the second represents the best way forward in the short term, and that the third deserves consideration as a long-run option. Special attention is paid to the problems that would arise under either a states' or a dual VAT with regard to taxing interstate trade.     

What You Should Know About Globalization and the World Trade Organization

This paper reviews the essentials of economic globalization, as well as the major institution that has recently gotten much of the credit and blame for it, the World Trade Organization (WTO). It first defines globalization, which is just the increasing economic integration of the world economy. It then asks who gains and loses from globalization, drawing primarily upon economic theory to identify its benefits and costs, and who within and among the world's economies get these benefits and costs. That part of the discussion concludes by asking briefly what can and should be done about globalization. The second half of the paper turns to the WTO, which was the focus of so much negative attention at its Seattle meeting in December 1999. The authors try to clarify several misperceptions about what it does, and why. Some groups gain and some lose from the WTO, some simply as a byproduct of its role in facilitating globalization, but others from particular WTO rules and procedures. The paper suggests what might be done to change both the WTO itself and the public's perceptions of it.     

CORPORATE GOVERNANCE, EVA, AND SHAREHOLDER VALUE

Together with corporate governance expert Stuart Gillan, the managing partner of Stern Stewart discusses important issues of corporate financial management, including the fundamental objective of the public corporation and how boards of directors can achieve it. Whereas financial economists have long argued that the corporate goal is the maximization of firm value, Stern advocates a variation of the concept known as "Market Value Added"–one that is designed to discourage corporate growth and capital raising that does not end up adding value for shareholders. To accomplish this goal, he emphasizes the importance of incentive compensation systems tied not to accounting earnings, but to a measure of economic profit like EVA. And, as Stern argues in closing, EVA-based incentive systems are likely to be effective not only in the private sector, but in increasing the efficiency and value of state-owned enterprises. Indeed, such systems could bring about a new kind of employee capitalism that ESOPs promised, but have largely failed, to deliver.     

Trade‐Policy Issues and Policy Options for Japan and the United States: Introduction and Overview

This symposium includes papers that analyse a number of issues that are likely to play a key role in the Doha Development Agenda (DDA) negotiations. These issues are analysed from the perspective of US‐Japanese economic relations. In these papers, the economic effects of the WTO negotiating options available to both countries are explored. A final paper examines the important issues raised by the free trade agreements (FTAs) that have or will soon be negotiated by the United States and Japan. Brief summaries of the papers are provided. With all the advantages that have accrued to Japan from the multilateral trading system, it is not surprising that for many years Japan, alone among the world's major economies, stayed aloof from regional trading arrangements. The very past success of the multilateral trading system has made further progress at this level far more complex and has pushed many countries, Japan included, to look to new and deeper regional trading agreements as a more productive path. But it should not be forgotten that while FTAs may be easier to conclude, their benefits are modest compared with what can be gained from a successful Doha Round, and the costs from new distortions imposed on regional trade can be very significant for some of the world's poorer economies. Every good reason remains for Japan to continue to wish to be a pillar of the WTO and of the new Doha Round.     

An Evaluation of Services Provided by the Market Research Industry

The stature of the market research industry appears threatened by uccusations including invasion of respondent privacy, excessive interviewing and disguised sales appeals. The much publicised lawsuit involving Beecham vs. Yankelovich questions the very foundation of the industry; the validity and reliability of the information generated by marketing researchers. Just how well is the industry performing? This article reports the results of an assessment of the quality of services provided by the research industry by measuring both suppliers' and buyers' perceptions of a number of service performance dimensions. Reactions to industry threats and attitudes toward certification are also examined.     

Tariff and Defensive Responses: A Computational Analysis

We use the Michigan Model of World production and Trade to analyze how other countries might be affected by unilateral import surcharge and then to determine how large a surcharge might be required if these countries wanted to offset the detrimental effects that the U.S. action had on them. Our computational results suggest that several countries would not try to offset the U.S. action since doing so might make them worse off. But some of the major U.S. trading partners (Japan, Germany, Italy, and the United Kingdom) might feel compelled to introduce countermeasures to defend themselves. More generally, our computations show how complex defensive responses may be because a given country may not know or be able to anticipate the effects of the responses of all other countries. [420]     

The Squam Lake Report: Observations from two policy professionals

The Squam Lake Report (SLR) contains a host of recommendations to “fix the financial sector.” A credible fix must take on the excessive risk-taking of financial institutions created when uninsured creditors of important financial institutions expect government protection from loss (i.e., the too-big-to-fail problem). The vast majority of SLR’s recommendations constitute important contributions to addressing TBTF; the analysis offered in support of recommendations is sound and brings modern economics and finance to bear. The clarity and focus of SLR offers a model for academics writing for a policy audience.We differ in emphasis with SLR on a few issues, including capital and living wills, but support moving forward with the core of SLR’s recommendations even in these cases.Legislation (i.e., “Dodd-Frank”) seeking to fix the financial sector became law around the time SLR was published. The legislation includes in one form or another the predominance of credible recommendations made to address TBTF, including the majority of those in SLR. The ultimate success of the legislation, however, depends on implementation. We hope the government focuses on a macroprudential regime that reduces fallout from financial spillovers, considers new efforts to measure and tax expected TBTF subsidies, and reconsiders aspects of Dodd-Frank that expand the safety net. Given the stakes, another SLR-caliber effort, this time centered on Dodd-Frank implementation, promises high returns.     

Explaining UK house price inflation 1971–89

An econometric analysis of UK house price inflation and changes in residential construction is presented for the period 1971–89, paying particular attention to the supply side of the housing market. The results of this analysis are used to examine the contributions of the various factors to the nominal rate of house price inflation. While the results confirm the importance of real disposable income in determining house prices, they indicate that supply variables may be of greater importance than interest rates in this respect. There are close similarities between the three housing booms of the 1970s and 1980s.     

When does funding research by smaller firms bear fruit?: Evidence from the SBIR program*

This paper evaluates whether the relative concentration of funding for small, research-oriented firms in a small number of high-technology industries is related to differences across industries in the appropriability level facing small firms. We exploit a novel test based on the relationship between industry-level private venture financing and the performance of government-subsidized R&D projects. If industries differ in their appropriability level, then private funding and subsidized project performance should be positively correlated. Our principal finding is that subsidized project performance is higher in industrial segments with higher rates of private venture capital investment. Industrial sectors therefore seem to differ in the degree of appropriability and this variation helps explain why venture capital is concentrated. * The latest version of this paper is available at http://www.mbs.edu/home//jgans/research.htm