State Tax Policy, Labor, and Tax Revenue Feedback Effects

A new computable general equilibrium model is used to predict the effects of tax rate changes on employment and other macrovariables in California. The model is dynamic in accounting for both migration and investment. The relative strength of migration, labor force participation, and investment in causing tax-rate-decrease-induced growth is examined. The model is used to contrast expected effects of a tax rate increase with and without migration and investment.     

Economics of Food Labeling

Federal intervention in food labeling is often proposed with the aim of achieving a social goal such as improving human health and safety, mitigating environmental hazards, averting international trade disputes, or supporting domestic agricultural and food manufacturing industries. Economic theory suggests, however, that mandatory food-labeling requirements are best suited to alleviating problems of asymmetric information and are rarely effective in redressing environmental or other spillovers associated with food production and consumption. Theory also suggests that the appropriate role for government in labeling depends on the type of information involved and the level and distribution of the costs and benefits of providing that information. This report traces the economic theory behind food labeling and presents three case studies in which the government has intervened in labeling and two examples in which government intervention has been proposed.     

WAGE SIGNALING: A DYNAMIC MODEL OF INTRAFIRM BARGAINING AND ASYMMETRIC LEARNING*

The article analyzes the effect of employer–worker bargaining on wage dynamics in the presence of asymmetric information between current and potential employers. A failure to reach an agreement leads to output loss. Because the disagreement points depend upon the worker's productivity, productive workers separate themselves from less productive workers and signal their ability through wages. In existing models of asymmetric learning, wages are attached to publicly observable characteristics and wage growth occurs only when there is a change in observable characteristics. This model, in contrast, generates an increase in earnings dispersion in cohorts of workers with similar observable characteristics.     

EFFECTS OF GOVERNMENT POLICIES ON URBAN AND RURAL INCOME INEQUALITY

We use three conventional inequality indices—the Gini, the coefficient of variation of income, and the relative mean deviation of income—and the Atkinson index to examine the effect of income tax rates, the minimum wage, and all the major government welfare and transfer programs on the evolution of income inequality for rural and urban areas by state from 1981 to 1997. We find that these programs have qualitatively similar but quantitatively different effects on urban and rural areas. Most importantly, taxes are more effective in redistributing income in urban than in rural areas, while welfare and other government transfer programs play a larger role in rural areas.     

Food product composition,consumer health,and public policy: Introduction and overview of special section

As efforts to improve diets in high income countries intensify, attention has turned to how policies may influence diet composition. The case studies in this special issue contribute to our understanding of how two main types of policies have influenced food product composition and dietary outcomes: (1) policies affecting food manufacturers’ input costs and (2) information policy affecting competition. Research on the first type of policy is relatively new, but suggests that US commodity policies would not be good policy instruments to influence diets, except through the long run impacts of agricultural research. Research on the impacts of information policy continues to demonstrate that it can spur food industry competition to introduce healthier products, but may not result in healthier diets. International comparisons show where the US experience may have relevance for other high income countries.     

WINE QUALITY DIFFERENTIALS IN HEDONIC GRAPE PRICING

The paper focuses on identification and evaluation of wine quality characteristics of grapes. A pricing schedule that rewards producers for quality attributes is developed. This quality-based pricing schedule would serve to reduce the production of poor-quality wines by giving farmers a correct and powerful incentive to provide better grapes. The research evaluates the proposed grape price schedule in two steps. The hedonic qualities of Israeli grapes are estimated by relating the contribution of each grape characteristic to wine quality. Then the price of wine quality is estimated, and the hedonic prices for Israeli grapes are calculated. Results show that the current pricing system pays little premium for a better-quality product.     

Estimation of Non-Stationary Social Accounting Matrix Coefficients with Supply-Side Information

Given aggregated data, a framework for estimating the entries of a social accounting matrix (SAM), or any large matrix of expenditures, trade or income flows, is developed. Under this framework it is possible to evaluate the contribution of structural and supply-side information, as well as policy variables, within the generalized context of a non-stationary SAM. Inference and diagnostic properties are developed as well. This new estimator can be viewed as a generalized maximum likelihood estimator. Stationary and non-stationary estimates of the US SAM for the years 1987-1994 together with the effects of supply-side variables are analyzed.