Optimal Emissions Taxation under Imperfect Competition in a Durable Good Industry

This paper investigates optimal emissions taxation under imperfect competition in a durable good industry where products are sold (instead of rented). As a benchmark, attention is paid to the special case of monopoly with exogenously given product durability. In line with previous literature, the optimal emission tax in this benchmark model falls short of marginal damage (underinternalization). Extending the benchmark model either to the case of an oligopolistic market structure and/or to the case of endogenous product durability then provides two cases in which the optimal emission tax overinternalizes marginal damage.     

Competition, Contractibility, and the Market for Donors to Nonprofits

This article investigates theoretically and empirically theeffects of competition for donors on the behavior of nonprofitorganizations. Theoretically, we consider a situation in whichnonprofit organizations use donations to produce some commodity,but the use of donations is only partially contractible. Themain results of the model indicate that an increase in competition(i) decreases the fraction of donations allocated to perquisiteconsumption and (ii) increases the fraction of donations allocatedto promotional expenditures. Moreover, the effects of competitionare magnified by the ability to contract on the use of donations.These hypotheses are tested with data on the expenditures ofnonprofit organizations in a number of subsectors where competitionis primarily local. We use across–metropolitan statisticalareas' variation to measure differences in competition and proxycontractibility by the importance of tangible assets, whichare more easily observed by donors. The estimated effects ofcompetition and contractibility are consistent with our model.     

Environmental Taxation and Vertical Cournot Oligopolies: How Eco-industries Matter

This article specifies what an optimal pollution tax should be when dealing with a vertical Cournot oligopoly. Polluting firms sell final goods to consumers and outsource their abatement activities to an environment industry. It is assumed that both markets are imperfectly competitive. Thus, the tax is a single instrument used to regulate three sorts of distortions, one negative externality and two restrictions in production. Consequently, the optimal tax rate is the result of a trade-off that depends on the firms’ market power along the vertical structure. A detailed analysis of Cournot-Nash equilibria in both markets is also performed. In this context, the efficiency of abatement activities plays a key-role. It gives a new understanding to the necessary conditions for the emergence of an eco-industrial sector.      

Employment and Wage Bargaining in an Open Monetary Union

This paper studies alternative patterns of wage bargaining in an open two-country monetary union. Wages are fixed by trade unions for two periods, either at the national or at the monetary union level. It is shown that the best solution with regard to unemployment depends on the nature of externalities and dynamic strategic interactions between the monetary union's countries; namely on the degree of openness of the monetary union, and the differentiation index between national goods.     

A note on comparative downside risk aversion

We provide comparative global conditions for downside risk aversion, which are similar to the ones studied by Ross for risk aversion. We define a coefficient of downside risk aversion, and study its local properties.     

Choice, preference and rationalizability in pareto’s theory of economic behavior

Pareto initiated the shift of economic theory from utility/preference to choice in order to fill a gap between theoretical and empirical economics. His suggestions for an empirically-oriented theory of choice were to be developed decades later in the literature on revealed preference and on the conditions of equivalence between preference-based and choice-based axiomatic structures. In the process, however, substantial departures from Pareto’s implicit design of the situation of choice were introduced. In this paper, the conditions for the rationalizability of choice are re-defined so that they fit the type of situation that Pareto had in mind. The result is that the main consistency axioms of standard choice theory have to give way to a different combination of axioms that concern decisiveness as well as consistency. (JEL:B13, D01, D11).     

Government financing in an endogenous growth model with financial market restrictions

Summary. In this paper, we develop an endogenous growth model with market regulations on explicitly modeled financial intermediaries to examine the effects of alternative government financing schemes on growth, inflation, and welfare. In the presence of binding regulation, there is always a unique equilibrium. We perform four alternative policy experiments; a change in the seigniorage tax rate, a change in the seigniorage tax base, a change in the income tax and a change in the fiscal-monetary policy mix. We find that in the presence of binding legal reserve requirements, a marginal increase in government spending need not result in a reduction in the rate of economic growth if it is financed with an increase in the seigniorage tax rate. Raising the seigniorage tax base by means of an increase in the reserve requirement retards growth and it has an ambiguous effect on inflation. An increase in income tax financed government spending also suppresses growth and raises inflation although not to the extent that the required seigniorage tax rate alternative would. Switching from seigniorage to income taxation as a source of government finance is growth reducing but deflationary. From a welfare perspective, the least distortionary way of financing an increase in the government spending requirements is by means of a marginal increase in the seigniorage tax rate. Under the specification of logarithmic preferences, the optimal tax structure is indeterminate. Received: March 20, 2000; revised version: June 26, 2001     

The Effect of Disagreement on Noncooperative Bargaining

A seemingly mild assumption of the standard alternating offers bargaining model under risk is that the breakdown event is not strictly worse than the worst agreement. When this assumption is relaxed the structure of the equilibrium set of agreements changes in an interesting way. We analyse the effect of disagreement on equilibrium, and relate our result to a class of outside option models. Journal of Economic Literature Classification Number: C78.     

Fiscal deficits and inflation

Macroeconomic theory postulates that persistent fiscal deficits are inflationary. Yet empirical research has had limited success in uncovering this relationship. This paper reexamines the issue in light of broader data and a new modeling approach that incorporates two key features of the theory. Unlike previous studies, we model inflation as non-linearly related to fiscal deficits through the inflation tax base and estimate this relationship as intrinsically dynamic, using panel techniques that explicitly distinguish between short- and long-run effects of fiscal deficits. Results spanning 107 countries over 1960-2001 show a strong positive association between deficits and inflation among high-inflation and developing country groups, but not among low-inflation advanced economies.