1.Editorial Board
Pages CO2
2. Corporate tax evasion with agency costs
Pages 1593-1610
Crocker, Keith J. and Slemrod, Joel
This paper examines corporate tax evasion in the context of the contractual relationship between the shareholders of a firm and a tax manager who possesses private information regarding the extent of legally permissible reductions in taxable income, and who may also undertake illegal tax evasion. Using a costly state falsification framework, we characterize formally the optimal incentive compensation contract for the tax manager and, in particular, how the...
3. Timing tax evasion
Pages 1611-1637
Niepelt, Dirk
Standard models of tax evasion implicitly assume that evasion is either fully detected, or not detected at all. Empirically, this is not the case, casting into doubt the traditional rationales for interior evasion choices. I propose two alternative, dynamic explanations for interior tax evasion rates: First, fines increasing in the duration of an evasion spell, implying that the expected costs of evasion increase convexly with the time spent non-reporting,...
4. Organized crime, corruption and punishment
Pages 1639-1663
Kugler, Maurice, Verdier, Thierry and Zenou, Yves
We analyze an oligopoly model in which differentiated criminal organizations globally compete on criminal activities and engage in local corruption to avoid punishment. When bribing costs are low, that is badly-paid and dishonest law enforcers work in a weak governance environment, and the rents from criminal activity are sufficiently high, we find that increasing policing and sanctions can generate higher crime rates. Indeed, beyond a threshold, further...
5. On the demand for grandchildren: tied transfers and the demonstration effect
Pages 1665-1697
Cox, Donald and Stark, Oded
It is argued that parents provide help with housing downpayments in order to encourage the production of grandchildren, and that such a subsidization emanates from the “demonstration effect:” a child's propensity to furnish parents with attention and care can be conditioned by parental example. Parents who desire such transfers in the future have an incentive to make transfers to their own parents in order to instill appropriate preferences in their children....
6. Does the balance of power within a family matter? The case of the Retirement Equity Act
Pages 1699-1717
Aura, Saku
This paper studies within-family decision making regarding investment in income protection for surviving spouses using a simple and tractable Nash-bargaining model. A change in US pension law (the Retirement Equity Act of 1984) is used as an instrument to derive predictions from the bargaining model about the household demand for survivor annuities and life insurance and to contrast these with the predictions of the classical single-utility-function model of...
7. Regional decentralization and fiscal incentives: Federalism, Chinese style
Pages 1719-1742
Jin, Hehui, Qian, Yingyi and Weingast, Barry R.
Aligning the interests of local governments with market development is an important issue for developing and transition economies. Using a panel data set from China, we investigate the relationship between provincial government's fiscal incentives and provincial market development. We report three empirical findings. First, we find that during the period of “fiscal contracting system” the discrepancy between ex ante contracts and ex post implementation was...
8. Political turnover and economic performance: the incentive role of personnel control in China
Pages 1743-1762
Li, Hongbin and Zhou, Li-An
In this paper, we provide empirical evidence on the incentive role of personnel control in post-reform China. Employing the turnover data of top provincial leaders in China between 1979 and 1995, we find that the likelihood of promotion of provincial leaders increases with their economic performance, while the likelihood of termination decreases with their economic performance. This finding is robust to various sensitivity tests. We also find that the...
9. Public input competition
Pages 1763-1787
Bucovetsky, S.
Public investment in infrastructure may help create agglomeration economies, by attracting mobile factors such as skilled labour. Competition among regions in public investment can then be destructive. This paper analyzes the Nash equilibria to a simple model of public input competition. Even though the regions are assumed identical, the equilibrium may not be symmetric. The problem with non-cooperative behaviour is not (only) that regions invest too much,...
10. Tax competition, tax exporting and higher-government choice of tax instruments for local governments
Pages 1789-1821
Braid, Ralph M.
This paper presents a theoretical model with tax exporting due to external ownership of a fraction θof the land in each local jurisdiction. There are nlocal jurisdictions in a metropolitan area ( n≥1) and many metropolitan areas in a world economy. The paper examines the usage of business property taxes and source-based wage taxes by local jurisdictions, first in the presence of and then in the absence of residence-based...
11. Economic integration and tax policy with endogenous foreign firm ownership
Pages 1823-1840
Fuest, Clemens
This paper analyses the impact of economic integration on tax policy in a model where corporate taxation is motivated by the desire to tax profits accruing to foreigners and the number of foreign owned firms is endogenous. Increasing economic integration is modeled as a decline in trade costs or tariffs. It turns out that declining trade costs lead to increasing profit taxes if the government may use import tariffs. If tariffs are not available, declining...
12. Immigration quotas and skill upgrading
Pages 1841-1863
Ortega, Francesc
A reason why immigration policy is such a contended issue is that often immigrants end up obtaining the right to vote and, hence, may affect future policies. This paper offers a dynamic, general equilibrium model of immigration policy. In each period, a heterogeneously skilled population chooses an immigration policy by majority vote. Voters anticipate that immigration affects the skill premium and the skill composition of the electorate. The main insight is...
13. Adverse selection in health insurance markets? Evidence from state small-group health insurance reforms
Pages 1865-1877
Ilayperuma Simon, Kosali
The past decade witnessed major changes in state laws governing the sale of health insurance to small employers. States took measures to restrict insurers' ability to distinguish between high and low-risk customers because of concern about the low rate of coverage among workers in small firms, the high prices in the small-group market and the absence of federal health reform. Using both individual-level and employer-level data, I test predictions about the...
14. Moral hazard and sickness insurance
Pages 1879-1890
Johansson, Per and Palme, Mårten
We study if the replacement level in the Swedish national sickness insurance, which replaces foregone earnings due to temporary illnesses, affects work absence behavior. We use micro data and estimate the effects of a major reform, whereby the replacement level during the first 90 days in each absence spell was reduced, on work attendance. To separate out the effect of the reform from any trend in work absence, we distinguish between the implications on the...
15. Insurance, self-protection, and the economics of terrorism
Pages 1891-1905
Lakdawalla, Darius and Zanjani, George
This paper investigates the rationale for public intervention in the terrorism insurance market. It argues that government subsidies for terror insurance have the effect of discouraging self-protection and limiting the negative externalities associated with self-protection. Cautious self-protective behavior by a target can hurt public goods like national prestige if it is seen as “giving in” to the terrorists, and may increase the loss probabilities faced by...
16. Earthquake fatalities: the interaction of nature and political economy
Pages 1907-1933
Anbarci, Nejat, Escaleras, Monica and Register, Charles A.
To say that the level of fatalities resulting from an earthquake is inversely related to a country's per capita level of income is hardly novel. What makes our approach novel is that we relate fatalities to both per capita income and the level of inequality that exists within a country through their joint impact on the likelihood of collective action being taken to mitigate the destructive potential of quakes. We first develop a theoretical model which offers...
17. Allocation of pollution abatement under learning by doing
Pages 1935-1960
Bramoullé, Yann and Olson, Lars J.
This paper examines how learning by doing affects the allocation of pollution abatement between heterogeneous technologies over time. The optimal policy balances current abatement costs against reductions in future costs and infant technologies may be preferred to mature technologies despite greater initial costs. We characterize when a technological winner might emerge and we identify conditions under which optimal abatement is shared across all...
18. The two-part instrument in a second-best world
Pages 1961-1975
Fullerton, Don and Wolverton, Ann
Standard Pigovian tax theory has been extended in two directions. First, many polluting activities are difficult to tax because they are not market transactions, and so recent papers have shown that the same effects can be achieved by use of a two-part instrument (2PI): a tax on output or income and a subsidy for clean alternatives to pollution. It is a generalization of a deposit–refund system (DRS). Second, a different literature concerns the second-best...
19. Corrigendum to “Equivalent-expenditure functions and equivalent-dependent equivalence scales”
Pages 1977-1979
Donaldson, David and Pendakur, Krishna
