Suchergebnisse

The value of the elasticity of substitution between labor and capital (ó) is a "crucial" assumption in the study of factor incomes (e.g., Piketty (2014a), Piketty and Zucman (forthcoming), Karabarbounis and Neiman (2014)) and long-run growth (Solow, 1956). This paper begins by examining the role of ó in the analyses of these two issues. It then develops and implements a new strategy for estimating this crucial parameter by combining a low-pass filter with panel data techniques to identify the low-frequency/long-run relations appropriate to production function estimation. Our low-frequency/long-run approach is in the spirit of Friedman's permanent income theory of consumption and Eisner's related permanent income theory of investment. While their estimation strategies and ours are similar in relying on permanent (long-run) components, we identify these unobservable components with a low-pass filter. Using spectral analysis, we assess the extent to which our choices of the critical periodicity and window defining the low-pass filter are successful in emphasizing long-run variation. The empirical results are based on the comprehensive panel industry dataset constructed by Dale Jorgenson and his research associates. Our preferred estimate of ó is 0.40. This result is robust to variations in the two spectral parameters that define the low-pass filter, instrumental and split-sample estimates, and disaggregation by industry. Moreover, we document that standard estimation methods, which do not filter-out transitory variation, generate downwardly biased estimates. As medium and high frequency variation is introduced into the model variables, ó declines by over 40% relative to the benchmark value. Despite correcting for this bias, our preferred estimate of ó is less than one, and we find no support for the Cobb-Douglas assumption.

This paper presents empirical evidence on one aspect of central bank communication policy - formal pronouncements by central bankers - to better understand whether this channel matters and, if so, the nature of the information being transmitted. We examine the relationship between three types of pronouncements from Chairman Alan Greenspan -- speeches, testimonies, and FOMC meetings (STF's) -- and volatility in the 30-year U.S. Treasury bond futures market. Using high-frequency, intraday data proves important in uncovering the impacts of pronouncements on the bond market. Three questions relevant to central bank communication policy are addressed (see Figure 1 for a summary). We find that STF's matter for bond market volatility, that this impact depends on the transmission of information (rather than just noise), and that this information reflects both substantive content and a coordinating signal. We further find that speeches only deliver content, that testimonies are largely a coordinating device, and that FOMC meetings play both roles. These findings of an important coordination channel document the relevance of the "global games" model of Morris and Shin and the "herding" model of Banerjee and the associated policy implication that pronouncements by the central bank may reduce welfare by overwhelming important private information.

Dramatic declines in capital tax rates among U.S. states and European countries have been linked by many commentators to tax competition and an inevitable "race to the bottom." This paper provides an empirical analysis of the reaction of capital tax policy in a given U.S. state to changes in capital tax policy by other states. The analysis is undertaken with a novel panel dataset covering the 48 contiguous U.S. states for the period 1965 to 2006 and is guided by the theory of strategic tax competition. The latter suggests that capital tax policy is a function of "foreign" (out-of-state) tax policy, home state and foreign state economic and demographic conditions and, perhaps most importantly, preferences for government services. We estimate this reaction function for the two primary business tax policies employed by states: the investment tax credit rate and the corporate income tax rate. The slope of the reaction function - the equilibrium response of home state to foreign state tax policy - is negative, contrary to many prior empirical studies of fiscal reaction functions. This seemingly paradoxical result is due to two critical elements - controlling for aggregate shocks and allowing for delayed responses to foreign tax changes. Omitting either of these elements leads to a misspecified model and a positively sloped reaction function. Our results suggest that the secular decline in capital tax rates, at least among U.S. states, reflects synchronous responses among states to common shocks rather than competitive responses to foreign state tax policy. While striking given prior findings in the literature, these results are not surprising. The negative sign is fully consistent with qualitative and quantitative implications of the theoretical model developed in this paper. Rather than "racing to the bottom," our findings suggest that states are "riding on a seesaw."

The standard model of strategic tax competition assumes that government policymakers are perfectly benevolent, acting solely to maximize the utility of the representative resident in their jurisdiction. We depart from this assumption by allowing for the possibility that policymakers also may be influenced by the rent-seeking (lobbying) behavior of businesses. This extension to the standard strategic tax competition model implies that business contributions may affect not only the levels of equilibrium tax rates but also the slope of the tax reaction function between jurisdictions, thus enhancing or retarding the mobility of capital across jurisdictions. The model is estimated with panel data for 48 U.S. states and unique data on business campaign contributions. Among other results, we document a significant direct effect of business contributions on tax policy; the economic value of a $1 business campaign contribution in terms of lower state corporate taxes is approximately $6.65.

AbstractThe possibility of creating a state bank has received much recent attention in the USA. In 2021, six states introduced legislation to create a state bank; in 2019, similar legislation was enacted in California for municipal banks. This article develops a framework to evaluate state banking, reviews prior experiences with state banking and related alternatives to traditional private banking, and identifies five questions determining the advisability of creating a state bank. The overall goal is to shed some light on whether a state bank can be a useful tool to further state economic development and the welfare of state residents (JEL codes: G21 (banks), G28 (government policy, financial institutions), and H70 (state and local governments)).

This study provides some perspective on analyzing the effects of corporate taxation on capital formation. Our framework translates tax policy legislation into real outcomes, and identifies three parameters that play a central role in determining the impact on policy. The remainder of the paper focuses on the substitution elasticity between labor and capital. Several of the prominent studies representing the major contours of this research area over the past 40 years are examined. Our review of five general equilibrium studies indicates that alternative values of this elasticity matter a great deal for the welfare changes following from proposed tax reforms. The paper concludes with two lessons for tax policy analysis and some suggestions for future research.

The economic approach to understanding human behavior has encountered serious difficulties when attempting to explain the private provision of public goods, such as voting and charitable contributions to large organizations. To gain insights into these important issues, this study takes an interdisciplinary approach. The individual is modeled formally in terms of dual egoistic/altruistic utilities, and the recursive relation between altruism and the existence and production of social capital is developed. The model is analyzed as a non‐cooperative game between the egoistic and altruistic selves. The socialized rational actor that results from the combination of social capital, dual utilities, and non‐cooperative behavior resolves a number of public goods paradoxes. Comparative statics and the dynamics of social capital formation are explored.