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International Corporate Taxation and U.S. Multinationals’ Behavior: an Integrated Approach
Get PDFUsing data from the International Revenue Service, this paper explores the effcts of
corporate taxation on U.S. capital invested abroad and on tax planning practices (dividend payments, income shifting, and passive investment). The econometric analysis first indicates that investment is strongly influenced by average tax rates, with a magnified impact for particularly low-tax rates implying that the attractiveness of low-tax countries is not weakened by anti-deferral rules and cross-crediting limitations. Further explorations
suggest that firms report higher profit and are less likely to repatriate dividends when
they are located in low-tax jurisdictions. Firms also report higher Subpart F income in
countries in which they shift their profit, suggesting that cross-crediting provides an incentive to shift passive income in low-tax countries and that passive investment can be an alternative strategy to minimize taxes when active investment opportunities are lacking.
Finally, the paper estimates the role of effective transfer pricing regulation on income shifting activities using the quality of host countries' law enforcement. It appears that low degrees of law enforcement are associated with higher income-shifting
The Dynamics of UK and US Inflation Expectations
Get PDFThis paper investigates the relationship between short term and long term in ation expectations in the US and the UK with a focus on iflation pass through (i.e. how changes in short term expectations affect long term expectations). An econometric methodology is used which allows us to uncover the relationship between in ation pass through and various explanatory variables. We relate our empirical
results to theoretical models of anchored, contained and unmoored inflation expectations. For neither country do we find anchored or unmoored inflation expectations. For the US, contained inflation expectations are found. For the UK, our ndings are not consistent with the specifi =c model of contained inflation expectations presented
here, but are consistent with a more broad view of expectations being constrained by the existence of an inflation target
Payoff levels, loss avoidance, and equilibrium selection in the Stag Hunt: an experimental study
Get PDFGame theorists typically assume that changing a game’s payoff levels—by adding the same constant to, or subtracting it from, all payoffs—should not affect behavior. While this invariance
is an implication of the theory when payoffs mirror expected utilities, it is an empirical question when the “payoffs” are actually money amounts. In particular, if individuals treat monetary gains
and losses differently, then payoff–level changes may matter when they result in positive payoffs becoming negative, or vice versa. We report the results of a human–subjects experiment designed
to test for two types of loss avoidance: certain–loss avoidance (avoiding a strategy leading to a sure loss, in favor of an alternative that might lead to a gain) and possible–loss avoidance (avoiding a
strategy leading to a possible loss, in favor of an alternative that leads to a sure gain). Subjects in the experiment play three versions of Stag Hunt, which are identical up to the level of payoffs, under
a variety of treatments. We find differences in behavior across the three versions of Stag Hunt; these differences are hard to detect in the first round of play, but grow over time. When significant,
the differences we find are in the direction predicted by certain– and possible–loss avoidance. Our results carry implications for games with multiple equilibria, and for theories that attempt to select
among equilibria in such games
Can Migrants save Greece from Ageing? A Computable General Equilibrium Approach using G-AMOS.
Get PDFThe population of Greece is projected to age in the course of the next
three decades. This paper combines demographic projections with a multi-period
economic Computable General Equilibrium (CGE) modelling framework to assess the
macroeconomic impact of these future demographic trends. The simulation strategy
adopted in Lisenkova et. al. (2008) is also employed here. The size and age
composition of the population in the future depends on current and future values of
demographic parameters such as the fertility, mortality rates and the level of annual
net migration. We use FIV-FIV software in order to project population changes for 30
years. Total population and working age population changes are introduced to the GAMOS
modelling framework calibrated for the Greek economy for the year 2004.
Positive net migration is able to cancel the negative impacts of an ageing population
that would otherwise occur as a result of the shrinking of the labour force. The policy
implication is that a viable, long-lasting migration policy should be implemented,
while the importance of policies that could increase fertility should also be
considered
Threshold Effects of Dismissal Protection Regulation and the Emergence of Temporary Work Agencies
Get PDFLabour market regulations aimed at enhancing job-security are dominant in several OECD countries.
These regulations seek to reduce dismissals of workers and fluctuations in employment. The main theoretical contribution is to gauge the effects of such regulations on labour demand across establishment sizes. In order to achieve this, we investigate an optimising model of labour demand under uncertainty through the application of real option theory. We also consider other forms of employment which increase the flexibility of the labour market. In particular, we are modelling the contribution of temporary employment agencies (Zeitarbeit) allowing for quick personnel adjustments in client firms. The calibration results indicate that labour market rigidities may be crucial for
understanding sluggishness in firms´ labour demand and the emergence and growth of temporary work
The long run relationship between stock prices and goods prices: new evidence from panel cointegration
Get PDFWe examine the long run relationship between stock prices and goods prices to gauge whether stock market investment can
hedge against inflation. Data from sixteen OECD countries over the period 1970-2006 are used. We account for different inflation regimes with the use of sub-sample regressions, whilst maintaining the power of tests in small sample sizes by combining time-series data across our sample countries in a panel unit root and panel cointegration econometric framework. The evidence supports a positive long-run relationship between goods prices and stock prices with the estimated goods price coefficient being in line with the generalized Fisher hypothesis
Choice of Contracts in the British National Health Service: An Empirical Study
Get PDFFollowing major reforms of the British National Health Service (NHS) in 1990, the
roles of purchasing and providing health services were separated, with the relationship between purchasers and providers governed by contracts. Using a mixed multinomial
logit analysis, we show how this policy shift led to a selection of contracts that
is consistent with the predictions of a simple model, based on contract theory, in
which the characteristics of the health services being purchased and of the contracting parties influence the choice of contract form. The paper thus provides evidence in support of the practical relevance of theory in understanding health care market reform
Democratization as a cost-saving device
Get PDFWe propose a theoretical analysis of democratization processes in which
an elite extends the franchise to the poor when threatened with a revolution. The poor could govern without changing the political system by maintaining a continuous revolutionary threat on the elite. Revolutionary threats, however, are costly to the poor and democracy is a superior sys-
tem in which political agreement is reached through costless voting. This provides a rationale for democratic transitions that has not been discussed in the literature
Welfare Implications of Public Education Spending Rules
Get PDFIn this paper, we quantitatively assess the welfare implications of alternative public education spending rules. To this end, we employ a dynamic stochastic general equilibrium model in which human capital
externalities and public education expenditures, nanced by distorting taxes, enhance the productivity of private education choices. We allow public education spending, as share of output, to respond to
various aggregate indicators in an attempt to minimize the market imperfection due to human capital externalities. We also expose the economy to varying degrees of uncertainty via changes in the variance
of total factor productivity shocks. Our results indicate that, in the face of increasing aggregate uncertainty, active policy can signi cantly outperform passive policy (i.e. maintaining a constant public education to output ratio) but only when the policy instrument is successful in smoothing the growth rate of human capital
The Global Dimension to Fiscal Sustainability
Get PDFThis paper examines the issue of fiscal sustainability in emerging market countries
and industrial countries. We highlight the importance of the time series properties of
the primary surplus and debt, and find evidence of a positive long run relationship.
Consequently we emphasise, that especially for emerging markets, it is important to
recognise the implications of global capital market shocks for fiscal sustainability, a
relationship which has hitherto been ignored in the empirical literature. Using a factor
model we demonstrate that the relationship between deficit and debt is conditional
upon a global factor and we suggest that this global factor is related to world-wide
liquidity. We also demonstrate that this acts as a constraint on emerging market
economies’ fiscal policy