STRUCTURAL CONTRASTS AND CONVERGENCE IN SOCIALIST AND CAPITALIST AGRICULTURE

Political Economy,

The taxation of natural resources : principles and policy issues

Natural resources are typically subject both to taxation under the income tax system and to special resource taxes. Properly designed income taxes attempt to include capital income on a uniform basis. But in most countries the income tax treats resource industries more favorably than most other industries - through favorable treatment of such capital expenses as depletion, exploration and development, and the cost of acquiring resource properties. The case for special resource taxes is precisely to tax resource rents over and above the levies implicit in general income taxes. There are two justifications for this: (a) the efficiency-based argument that a tax on resource rents is nondistorting and complementary; and (b) the equity argument that the property rights to resources ought to accrue to the public at large rather than to private citizens since the rents represent the bounty nature has bestowed on the economy rather than a reward for economic effort. If the main purpose of a resource tax is to capture rents for the public sector, the base of resource taxes should be economic rents (or their present value equivalent), contend the authors. Actual resource taxes differ from rent taxes in significant ways. Unlike a general income tax - which allows the resource industries to understate capital income - resource taxes often overstate rents. This is because they typically do not offer full deductions for all costs, especially capital costs. Some systems tax revenues without allowing any deductions for costs; others allow the deduction of current costs only. As a result, they discourage investment activity in resource industries, encourage the exploitation of high-grade relative to low-grade resources, and make it difficult to impose high tax rates for fear of making the marginal tax rate higher than 100 percent. The authors discuss three alternative ideal ways for the government to divert a share of rents to the public sector: levy a tax on rents, ideally in the form of a cash flow tax; require firms to bid for the rights to exploit resources; and take a share of equity in the firm. They discuss these options in terms of their implications for the ability of firms to obtain finance, the allocation of risk, the share of rents accruing to the public sector, the extent of involvement of foreign firms, and other factors. The time has come in many countries, they say, when gains from further refinement of imperfect existing taxes on resources are less than replacing them with simpler, more efficient forms of pure rent taxes.Environmental Economics&Policies,Public Sector Economics&Finance,Economic Theory&Research,Banks&Banking Reform,Tax Law

Public infrastructure and regional economic development

A review of recent empirical studies concerned with how investment in public infrastructure affects various types of state- and local-level economic activity. The relationships between public and private investment are examined and assessed.Infrastructure (Economics) ; Regional economics

Price Discrimination, Copyright Law, and Technological Innovation: Evidence from the Introduction of DVDs

This paper examines the welfare effects of intellectual property protection, accounting for firms' optimal responses to legal environments and technological innovation. I examine firms' use of indirect price discrimination in response to U.S. copyright law, which effectively prevents direct price discrimination. Using data covering VHS and DVD movie distribution, I explain studios' optimal pricing strategies under U.S. copyright law, and determine optimal pricing strategies under E.U. copyright law, which allows for direct price discrimination. I analyze these optimal pricing strategies for both the existing VHS technology and the new digital DVD technology. I find that studios' use of indirect price discrimination under US copyright law benefits consumers and harms retailers. Optimal pricing under E.U. copyright law also tends to benefit studios and consumers. I also reanalyze these issues assuming continued DVD adoption.

How tax incentives affect decisions to invest in developing countries

The authors contend that in evaluating and designing investment incentives in developing economies, analysts should consider their effect on: the marginal effective tax rate (METR). Even simple tax incentives can perversely affect the METR. Many schemes have relatively generous write-offs to begin with, so generous that a negative marginal effective tax rate is not uncommon. In these circumstances, tax rate reductions (including tax holidays) can discourage investment. Investment tax credits are more likely to be effective. Loss firms. Incentives that do not have generous loss-offsetting or refundability provisions willbe of limited use to firms likely to suffer losses (including small growing firms and firms in risky environments). Cash flows. Incentives that improve firms'cash flows may be more effective than those that do not. Refundability may be important here. Simply adopting cash-flow costing principles with refundability may be more effective than reducing tax rates. Foreign-owned firms. If the value of a tax incentive is fully offset by reduced credits for foreign taxes, the incentive effect will probably be minimal. Capital allocation among assets. Some measures favor short- over long-lived capital, machinery over inventory, some industries over others. Incentives that encourage investment selectively may cause distortions in the way capital is allocated. Other factors to be considered in designing tax incentives: inflation, which is typically high in developing economies. Incentives should offset the effects of inflation; tax evasion, a common problem in developing countries; technology transfer; the fulfillment of social, environmental, and regional non-economic objectives; the effects on firms'organization (do the incentives encourage mergers, takeovers, or bankruptcy?)Economic Theory&Research,Environmental Economics&Policies,International Terrorism&Counterterrorism,Public Sector Economics&Finance,Banks&Banking Reform

Cooperative Organizational Strategies: A Neo-Institutional Digest

This paper describes the neo-institutional approaches of transaction cost economics, agency theory, and property rights analysis and summarizes efforts by economists to apply these concepts to cooperatives. Several problems intrinsic to the cooperative organizational form and its property rights structure are reviewed. These problems have been hypothesized to affect the comparative economic efficiency of cooperative firms and have led to the development of life cycle models seeking to explain the formation, growth, and eventual decline of cooperatives as markets evolve. In this context, statistical analyses of the comparative efficiency of cooperatives and ex post studies of cooperative conversions are surveyed.Agribusiness,

Creating a Market Economy in Eastern Europe: The Case of Poland

macroeconomics, market economy, Eastern Europe, Poland