THE OPTIMAL TAXATION OF ASSET INCOME WHEN GOVERNMENT CONSUMPTION IS ENDOGENOUS: THEORY,ESTIMATION AND WELFARE

This paper derives the Ramsey optimal fiscal policy for taxing asset income in a model where government expenditure is a function of net output or the inputs that produce it. Extending work by Kenneth L. Judd, I demonstrate that the canonical result that the optimal tax on capital income is zero in the medium to long term is a special case of a more general model. Employing a vector error correction model to estimate the relationship between government consumption and net output or the factor inputs that generate it for the United States between 1948Q1 and 2015Q4, I demonstrate that this special case is empirically implausible, and show how a cointegrating vector can be used to determine the optimal tax schedule. I simulate a version of the model using the empirical estimates to measure the welfare implications of changing the tax rate on asset income, and contrast these results with those generated in a version of the model where government consumption is purely exogenous. The shifting pattern of welfare measurements confirms the theoretical results. I calculate that the prevailing effective tax rate on net asset income in the United States between 1970 and 2014 averaged 0.449. Hence abolishing the tax completely does generate welfare improvements, though only by the equivalent of between 1.103% and 1.616% permanent increase in consumption—well under half the implied welfare benefit when the endogeneity of the government consumption is ignored. The maximum welfare improvement from shifting part of the burden of tax from capital to labor is the equivalent of a permanent increase in consumption of between only 1.491% and 1.858%, and is attained when the tax rate on asset income is lowered to between 0.148 and 0.186. Allowing the tax rate to vary over time raises the maximum welfare benefit to 1.865%. All the results are very robust to a wide range of elasticities of labor supply. (JEL E62, H21, H50)     

WELFARE IMPLICATIONS OF 'SOCIAL INCOME' IN A CHANGING ECONOMY

Samuelson (1961) concluded that in a dynamic setting any scalar concept of current economic activity is inherently myopic with respect to the relevant welfare-space. This conclusion, which virtually undermines any welfare foundations for the concept of income, is shown to be based on an incomplete and inconsistent concept of capital formation. When this is amended, the alleged welfare contradiction in the concept of income vanishes .     

THE EXCESS SUPPLY-PURE DEMAND APPROACH TO INTERNATIONAL COMMODITY TRADE: THE CASE OF JAPANESE STEEL EXPORTS TO THE UNITED STATES

The purpose of this paper is twofold: 1) to develop a theoretical framework for the analysis of export supply which is empirically more fruitful than existing approaches, and 2) to present an empirical application of the theory to the market for Japanese steel, thereby quantifying important export supply elasticities not dealt with in the past. Evidence is presented which indicates that the supply of Japanese steel exports to the U.S. is price elastic, and sensitive to Japanese and rest of world demand conditions.     

THE WELFARE EFFECTS OF DISTRIBUTION REGULATIONS IN OECD COUNTRIES

This article presents new data on distribution margins in eight OECD countries and uses an Applied General Equilibrium (AGE) framework to assess the welfare impacts of inefficient distribution. I estimate the extent to which regulations inflate margins. A comparison of margins across countries finds, in contrast to other studies, that Japan's margins are unusually high. The AGE simulations imply that inefficient distribution imposes substantial welfare costs, especially in Japan, with the costs rivaling those of trade barriers. The results also imply that distribution impediments can significantly reduce imports. (JEL D58 , F13 , L81 )     

STRIKE DURATIONS IN THE UNITED STATES:

This study examines the durations of strikes in selected occupations of the public and private sectors of the U. S. economy in the late post-World War II period. It asks whether differences in the legitimacy of unions and the legality of strikes alter the speed with which strikes end. Also, it argues that a curvilinear relationship between the institutionalization of strikes and unions and the termination rates of strikes exists. Data support hypotheses linking both the distribution of power resources and the institutional setting to the termination rates of different types of strikes (e.g., strikes under different contract statuses and over different issues). In general, where strikes are moderately institutionalized and precedents are being set, strikes end more slowly; at very high or very low levels of institutionalization, strikes end more rapidly.     

PROSTITUTES' RIGHTS IN THE UNITED STATES:

The prostitutes' rights campaign emerged in the early 1970s with the formation of COYOTE in San Francisco and affiliated movement organizations. This study examines the movement's major claims and goals, resource problems, and impact on public opinion, legislation, and law enforcement. The failure to attain key movement goals is explained in terms of chronic deficiencies of material and human resources that might compensate for the campaign's lack of moral capital and enhance its prospects for success.     

DISINFLATION,INEQUALITY, AND WELFARE IN A TANK MODEL

We investigate the redistributive and welfare effects of disinflation in a two-agent New Keynesian model characterized by limited asset market participation and wealth inequality. We highlight two key mechanisms driving our long-run results: (1) the cash in advance constraint on firms working capital; (2) dividends endogeneity. These two channels point in opposite directions. Lower inflation softens the cash in advance constraint and, by raising labor demand, lowers inequality. But disinflation also raises dividends and this increases inequality. The disinflation is always welfare-improving for asset holders. We obtain ambiguous results for non-asset holders, who suffer substantial consumption losses during the transition. (JEL E31, E5, D3, D6)     

ON LEGITIMALAISE IN THE UNITED STATES:

This article argues that Weberian principles of rational/legal legitimacy do not presently support American political institutions effectively. Instead, these institutions are characterized by "legitimalaise," a condition that Weber himself foresaw. This article provides evidence to support this thesis. It then discusses the distinctive political consequence of legitimalaise, that is, structural innovation, or the more or less permanent reform of American political institutions. It concludes with doubt that structural innovation will establish rational/legal legitimacy anew or that new forms of political legitimacy will emerge in the twenty-first century.     

TRADE IN POLARIZED AMERICA: THE BORDER EFFECT BETWEEN RED STATES AND BLUE STATES

Political and cultural polarization in the United States is widely discussed, but does it relate to any economic disconnection among states? We estimate the “border” effect between Red and Blue states using the gravity equation with a nonlinear generalized method of moments estimator to simultaneously overcome the problems associated with endogeneity, cross‐state price differences, and zero‐trade flow. The border effect is robustly confirmed for the 2000s, while not so robustly detected for the 1990s. Notably, in 2007, the border reduces trade between Red and Blue states to approximately 75% of the trade within each set of states. This estimated border effect is much smaller than the United States–Canada national border effect estimated by Anderson and van Wincoop (2003), and by Feenstra (2002), yet is comparable to the border effect that Nitsch and Wolf (2009) find for the former West and East Germanies approximately 10 years after reunification. While the border effect in Germany after reunification is decreasing, the border effect between the Red and Blue states is emerging. We also find the border effect is more significant for consumption, rather than intermediate, goods. The border effect is an important indicator for a potential dismantling of the economic connectivity in the United States. (JEL D72, F10, F15, R1)     

FOOD PRICES,WAGES, AND WELFARE IN RURAL INDIA

With soaring food prices in recent years has come alarm about rising poverty in the developing world. Less appreciated, however, is that many of the poor in agricultural economies may benefit from higher wages. This study finds that wages for manual labor in rural India, both within and outside agriculture, rose faster in districts growing more of those crops with large producer price run‐ups over the 2004–2009 period. Based on a general equilibrium framework that accounts for such wage gains, rural households across the income spectrum are found, contrary to more conventional welfare analysis, to benefit from higher agricultural prices. (JEL Q17, Q18, F14)     

THE GLOBAL VORTEX: SOCIAL WELFARE IN A NETWORKED WORLD

This paper examines the impact of economic globalization on the organization and delivery of social welfare services. Sennett's analysis of the modern networked organization is linked to psychodynamic theory in relation to the loss of ‘containment’ resulting from the demise of the post‐war welfare bureaucracies. This changing environment has generated an anxiety‐ridden and risk‐obsessed society that features surveillance, control and the gradual diminution of civil liberties. The impact of these changes on the ethics of professional social welfare practice has been profound. It is argued that public moral debate in the context of pluralist ethics is required not only for upholding a relational based social welfare practice, but also for preserving an open and compassionate democratic society. The paper concludes with a set of questions that provides a framework whereby practitioners can assess the extent to which different practice organizations support relational practice. This typology can be a tool to enable practitioners to exercise moral agency when making career choices in today's fluid organizational world.     

COMMODITY PRICES AND BANK LENDING

We analyze the transmission of changes in commodity prices to bank lending in a large sample of developing countries. A bank-level analysis shows that a fall in commodity net export prices is associated with a reduction of bank lending, particularly for commodity exporters and during episodes of terms-of-trade decline. We complement this analysis with loan-level data from a credit register, which allows us to identify the effect of a commodity price shock on the supply of credit, controlling for unobserved factors that could drive borrowers' credit demand. Results show that banks with relatively lower deposits and poor asset quality transmit the changes in commodity prices to lending more aggressively. (JEL F30, F34, G21, Q02)     

CO-MOVEMENTS IN RELATIVE COMMODITY PRICES AND INTERNATIONAL CAPITAL FLOWS: A SIMPLE MODEL

Suppose a number of countries produce a commodity which employs local labor and a type of capital that is internationally mobile. Within the framework of a specific-factors model the paper argues that there is a presumption about the international movement of capital when the relative price of the industry using that capital rises on world markets. Capital flows towards countries less heavily involved in producing the commodity; internal labor flows contribute toward worldwide industry dispersion; and the volume of international trade in that commodity tends to fall.