TAXATION, AGGREGATE ACTIVITY and ECONOMIC GROWTH: FURTHER CROSS-COUNTRY EVIDENCE ON SOME SUPPLY-SIDE HYPOTHESES

This paper investigates the effect of marginal tax rates on the level of economic activity. Data from sixty-three countries for the period 1970-84 provide support for Koester and Kormendi's method of estimating marginal tax rates for individual countries. However, their conclusion that increases in marginal tax rates have negative effects on the level of economic activity is not robust when we extend the time period from 1970-79 to 1970-84. Further, even for Koester and Kormendi's own data set, the negative relation does not hold when the sample is disaggregated into industrial countries and low-income countries.     

Children's time in household work: Estimation issues

The purpose of this article is to analyze children's time in household production using tobit analysis to adjust for nonparticipation and to compare the results to a regression analysis. In general, more variables are significant in each of the analyses based upon gender and birth order of the children. More importantly, the additional variables go beyond whether the day was a schoolday and the age of the child. The past failure of children's time spent in household work to change with differences in their families' characteristics appears to have been an artifact of not accounting for nonparticipation when estimating marginal effects.Her current research interests include use of clothes washers and family members' time use. She received her Ph.D. from Cornell University.She is currently conducting research in the areas of home-based employment and small family businesses.     

Marginal Welfare Costs of Taxation with Human and Physical Capital

We develop a perfect foresight, overlapping generations model with intragenerational inequality and endogenous human and physical capital investment, and we calculate welfare costs for marginal reforms of taxation and public spending. Welfare costs are uniformly lower than in the equivalent static model where human and physical capital are fixed. Most of the upward bias in static estimates arises from fixed human capital because welfare cost is predominantly tax leakage from lower effective labor supply, but reallocating time between education and labor can leave effective labor supply unchanged. Hence, adjustments in human capital have an important mitigating influence on marginal welfare costs. (JEL D91, H20, H31, H41, J22, J24 )     

Growth Effects of Shifting from a Graduated-rate Tax System to a Flat Tax

We compute the growth effects of adopting a revenue-neutral flat tax for both a human capital–based endogenous growth model and a standard neoclassical growth model. Long-run growth effects are decomposed into the parts attributable to the flattening of the marginal tax schedule, the full expensing of physical-capital investment, and the elimination of double taxation of business income. The most important element of the reform is the flattening of the marginal tax schedule. Without this element, the combined effects of the other parts of the reform can actually reduce long-run growth. In the years immediately following the reform, the transition dynamics implied by the neoclassical growth model are quite similar to that of the endogenous growth model. (JEL E62 , H21 )     

CAPACITY CONSTRAINED EXPORTERS: IDENTIFYING INCREASING MARGINAL COST

This study revisits a central assumption of standard trade models: constant marginal cost technology. The presence of increasing marginal costs for exporters introduces significant market interdependence across borders missing from traditional models of international trade that rely on constant marginal cost technology. Such market interdependence represents an additional channel through which local shocks are transmitted globally. To identify increasing marginal cost at the level of the firm, we build in flexible production assumptions that nest increasing, decreasing, and constant marginal cost technology to an otherwise standard international trade model. We derive an estimating equation that can be taken directly to the data. Our structural equation explicitly guides our inference on the shape of the marginal cost curve from estimated coefficients. The results suggest that increasing marginal cost is predominant at the firm level. Moreover, utilizing plant‐level information on physical and financial capacity constraints, we find that the degree of increasing marginal cost is significantly exacerbated by both types of constraints. The evidence suggests that access to larger markets through greater international integration may not have the expected welfare gains typically predicted in standard models. (JEL F12, F14)     

A methodology for estimating ambulance requirements

Provision of adequate size of Ambulance fleet is a matter of concern for any hospital. For estimating ambulance requirements queuing analysis was used in this study. In this analysis incidence of long waiting times rather than mean waiting times were taken as the basis for estimating ambulance requirements in keeping with the desired service level.     

AN ESTIMATE OF THE RENT GENERATED BY A PREMIUM COLLEGE FOOTBALL PLAYER

The National Collegiate Athletic Association limits the payments athletes can receive for their services. Colleges are effectively monosony employers so players will not be paid their marginal revenue product. Therefore, colleges capture an economic rent from players. This paper measures these rents by estimating the marginal revenue product of a top college football player. The empirical results suggest that a premium college player generates over $500,000 in annual revenues for his team.     

Incremental cost sharing: Characterization by coalition strategy-proofness

Each one of n users consumes an idiosyncratic commodity produced in indivisible units. The n commodities are jointly produced by a central facility and total cost must be shared by the users.  A “sequential stand alone mechanism” shares costs incrementally according to a fixed ordering of the users: the first user always pays stand alone cost, the second pays the stand alone cost of the first two users minus that of the first and so on. If the second derivatives of costs are of a constant sign, such a method yields a unique strong equilibrium at every profile of convex preferences in the game where each user chooses his own demand. This equilibrium, in turn, defines a coalition strategy-proof social choice function.  Under decreasing marginal costs and submodular costs, the sequential stand alone mechanisms are almost characterized by these properties; the only exception is the binary demand case (each agent consumes zero or one unit) where a rich family of cost sharing methods (the Shapley value among them) yields a coalition strategy-proof equilibrium selection. Under increasing marginal costs and supermodular costs, coalition strategy-proofness characterizes a richer family of cost sharing methods: they give out one unit at a time while charging marginal costs, with the users taking turns according to a sequence fixed in advance. These methods contain serial cost sharing as a limit case. Received: 8 July 1997/Accepted: 22 January 1998     

Tax rates and economic growth in the OECD countries

This article proposes refined econometric estimates of effective marginal income tax rates for 23 OECD countries from 1951 to 1990. Panel regressions find such measures negatively correlated with economic growth. These results are consistent with endogenous growth theories and opposite to those of most empirical literature, which relies on measures of effective average tax rates. The negative correlation is also robust to consideration of other growth determinants.     

To live an ordinary life: resource needs and additional costs for people with a physical impairment

Disabled people face increased risks of living in poverty largely due to lower incomes and extra resource requirements compared to non-disabled people. This study incorporated the social model of disability with an economic approach to costing to estimate the additional costs required by people with a physical impairment to achieve an adequate standard of living in New Zealand. Budgets estimating the additional equipment, modifications, transport, support and time required to achieve an adequate standard of living were developed and validated through focus groups with community members. The findings suggest that reducing barriers involves substantial costs ranging from NZ$645–$2,348 per week.     

INFLATION DYNAMICS AND SUBJECTIVE EXPECTATIONS IN THE UNITED STATES

We estimate a forward‐looking New Keynesian Phillips Curve (NKPC) for the United States using data from the Survey of Professional Forecasters as proxy for expected inflation. We obtain significant and plausible estimates for the structural parameters independently of whether we use the output gap or unit labor costs as a measure of marginal costs. Moreover, when estimating a Phillips curve where lagged inflation enters due to price indexation by nonreoptimizing firms, we obtain significant parameter estimates of the sign predicted by theory independently of the marginal cost measure used. (JEL E31)     

Power indices expressed in terms of minimal winning coalitions

A voting situation is given by a set of voters and the rules of legislation that determine minimal requirements for a group of voters to pass a motion. A priori measures of voting power, such as the Shapley–Shubik index and the Banzhaf value, show the influence of the individual players in a voting situation and are calculated by looking at marginal contributions in a simple game consisting of winning and losing coalitions derived from the legislative rules. We introduce a new way to calculate these measures directly from the set of minimal winning coalitions and derive explicit formulae for the Shapley–Shubik and Banzhaf values. This new approach logically appealing as it writes measures as functions of the rules of the legislation. For certain classes of games that arise naturally in applications the logical shortcut drastically simplifies the numerical calculations to obtain the indices. The technique generalises directly to all semivalues.     

THE LAW OF DEMAND, POSITIVE SLOPING MARGINAL REVENUE, AND MULTIPLE PROFIT EQUILIBRIA

This paper demonstrates that the conditions for a positively sloping marginal revenue curve are much less stringent than is generally recognized. Simple transformations of any well-behaved convex demand function can easily result in a demand for which marginal revenue is positively sloping. For this reason, positively sloping marginal revenue functions must be considered whenever convex demand functions are analyzed. The existence of positively sloping marginal revenue makes multiple profit equilibria for the firm a very real possibility.     

THE MICROECONOMIC FOUNDATIONS OF MEASURING BRACKET CREEP and OTHER TAX CHANGES

We derive a measure of the bracket-creep-induced inflation tax based on an income-compensation function that recognizes that consumers substitute among deductible and nondeductible goods as the incentives to consume the goods change over time. The measure of the inflation tax is decomposed into a convenient function of marginal tax rates and the change in expenditures on tax deductible goods relative to nondeductible goods that are required to maintain a fixed level of utility. Tentative estimates suggest that the inflation tax as a percentage of constant utility income during the 1970s averaged about 1 percent per year.     

FIXED-EFFECTS METHODS FOR THE ANALYSIS OF NONREPEATED EVENTS

For repeated events, fixed-effects regression methods—which control for all stable covariates—can be implemented by doing Cox regression with stratification on individuals. For nonrepeated events, we consider the use of conditional logistic regression to estimate fixed-effects models with discrete-time data. Known in the epidemiological literature as the case-crossover design, this method fails when any covariate is a monotonic function of time. Hence, no control for time itself can be included, leading to potentially spurious estimates. As an alternative, we consider the case-time-control method for estimating the effect of a dichotomous predictor. This method allows for the introduction of a control for time by reversing the role of the dependent and independent variables. In contrast to earlier work, we show that the method can be applied to data that contain only uncensored cases, and that it is possible to control for additional covariates, both categorical and quantitative. Simulation studies indicate that the case-time-control method is substantially superior to the case-crossover method and to conventional logistic regression. The methods are illustrated by estimating the effect of a wife's death on the hazard of death for her husband.     

ENCLOSURE

We model the development of property rights as an endogenous process, driven by capital accumulation. Property rights internalize the portion of the return to capital that is otherwise treated as common property. This enclosure further encourages capital accumulation and sustains economic growth. We view effective property rights as multilateral agreements among agents that can only be implemented and sustained when agents are sufficiently patient. Patience is determined by the marginal product of capital; the marginal product of capital shrinks, and consequently patience increases, as capital grows. Hence, property rights can be established only when an economy is rich enough. ( JEL P14, O11, C73)     

Tax–benefit revealed social preferences

This paper inverts the usual logic of applied optimal income taxation. It starts from the observed distribution of income before and after redistribution and corresponding marginal tax rates. Under a set of simplifying assumptions, it is then possible to recover the social welfare function that would make the observed marginal tax rate schedule optimal. In this framework, the issue of the optimality of an existing tax–benefit system is transformed into the issue of the shape of the social welfare function associated with that system and whether it satisfies elementary properties. This method is applied to the French redistribution system with the interesting implication that the French redistribution authority may appear, under some plausible scenario concerning the size of the labor supply behavioral reactions, non Paretian (e.g. giving negative marginal social weights to the richest class of tax payers).     

CRIMINAL DETERRENCE IN NEW YORK: THE RELATIONSHIP BETWEEN COURT ACTIVITIES AND CRIME

This study provides new evidence on the deterrent effects of criminal justice sanctions. The supply-of-crime function is tested using 1970 cross-sectional data for the 62 counties in New York State. Most studies consider only expected length of sentence when estimating the offender's cost of crime. The current analysis includes the length of time needed to dispose of a case and the severity of conviction charge as well as the expected prison sentence     

Valuing housework time from willingness to spend time and money for environmental quality improvements

We develop a new approach to assessing the value of home production time based on willingness to spend time and money to obtain environmental improvements. When peoples’ choice is constrained by time as well as money, measures of willingness to pay can be defined with respect to either numeraire. In a model that explicitly allows for multiple shadow values of time, we show that the willingness to pay time and money measures are linked through the value of saving time. With survey information on peoples’ willingness to spend additional time on housework activities, as well as pay money, to obtain environmental quality improvements, joint estimation within a utility-consistent structure produces estimates of both willingness to pay and the value of saving housework time. From the value of saving housework time, the marginal value of housework time can be readily identified. When applied to Korean households’ valuation of water quality improvements in the Man Kyoung River, we find that the value of housework time is 70–80% of the market wage.

The impact of deregulation on labor demand in class-I railroads

This paper examines the impact of the Staggers Rail Act of 1980 on labor demand in Class-I railroads during 1961–1990. The demand for labor is a function of output, hourly wage rates, a time trend, and a vector of interactive dummy variables. Since deregulation, the labor demand curve has shifted downward; wage elasticities have become more elastic, ranging from −0.668 in 1980 to −1.187 in 1990; output elasticities trended upward from 0.557 to 0.809; and the marginal product of labor rose from 3.421 to 5.296 during 1980–1990. These findings suggest that unions’ bargaining power has declined, that the total wage bill is likely to decrease if the real wage rate rises further, and that cost savings and efficiency gains are realized through increases in the marginal product of labor. We thank an anonymous referee and Henry McFarland for insightful comments and assistance.