When do Cost Differentials among Privately Provided Public Goods make Income Transfer Policy Effective?

Some papers have disputed when cost differentials among privately provided public goods make income transfer policy effective. This paper clarifies the different assumptions underlying this disputation and shows that original cost equalization is a necessary and sufficient condition to hold the transfer neutrality.artificial cost differential

"Fiscal Decentralization, Commitment and Regional Inequality: Evidence from State-level Cross-sectional Data for the United States"

While conventional approaches to fiscal decentralization suggest that decentralization lowers the power of redistribution among regions, recent theories argue that fiscal decentralization works as a commitment device. In this manner, where the budget in a given region is highly dependent on transfers from the central government, there is an incentive for effort following fiscal decentralization. The former effect is argued to increase regional inequality, while the latter suggests a decrease in regional inequality. However no known empirical work has directly examined the relationship between fiscal decentralization and regional inequality. In this paper, cross-sectional data for the United States, excluding the convergence of regional income, are used to derive the net relationship. It is also the case that the direction of this effect on regional inequality depends on how fiscal decentralization is promoted. While the former distribution effect directly depends on the central government's share of power, the latter incentive effect depends on autonomy. Two measures that represent the power of the central government and autonomy are used to identify these effects. The results indicate that local expenditure or revenue share in fiscal decentralization has no significant effect on regional inequality, while the achievement of autonomy by fiscal decentralization has a negative effect on regional inequality. This supports the theory that fiscal decentralization works as a commitment device. The results also show that how fiscal decentralization is promoted is important for how it impacts on regional inequality.

"Inflexibility as a Stabilisation Device"

A possible rationale for institutional conservatism, i.e., reluctance to adjust actions in accordance with external environmental changes, may be found in the payoff stabilisation effect it strategically affords. Suppose, for example, that one of the duopolists is capable of adjusting its action, either price or quantity, in response to unexpected demand fluctuations. Then the other duopolist, if incapable of such adjustments, recuperates some of the meager opportunities when the shock is negative whilst forgoing lucrative profit opportunities when the demand shock is positive, thereby "smoothes" its profits across varying states of demand in exchange for a small loss in expected profits, as opposed to when being as adjustable as its competitor. Similar qualitative results hold true both in Cournot and in Bertrand, and by extension, in a larger class of situations where economic decision makers interact through either strategic substitution or strategic complementarity.

Carrier induced ferromagnetism in diluted local-moment systems

The electronic and magnetic properties of concentrated and diluted ferromagnetic semiconductors are investigated by using the Kondo lattice model, which describes an interband exchange coupling between itinerant conduction electrons and localized magnetic moments. In our calculations, the electronic problem and the local magnetic problem are solved separately. For the electronic part an interpolating self-energy approach together with a coherent potential approximation (CPA) treatment of a dynamical alloy analogy is used to calculate temperature-dependent quasiparticle densities of states and the electronic self-energy of the diluted local-moment system. For constructing the magnetic phase diagram we use a modified RKKY theory by mapping the interband exchange to an effective Heisenberg model. The exchange integrals appear as functionals of the diluted electronic self-energy being therefore temperature- and carrier-concentration-dependent and covering RKKY as well as double exchange behavior. The disorder of the localized moments in the effective Heisenberg model is solved by a generalized locator CPA approach. The main results are: 1) extremely low carrier concentrations are sufficient to induce ferromagnetism; 2) the Curie temperature exhibits a strikingly non-monotonic behavior as a function of carrier concentration with a distinct maximum; 3) $T_C$ curves break down at critical $n/x$ due to antiferromagnetic correlations and 4) the dilution always lowers $T_C$ but broadens the ferromagnetic region with respect to carrier concentration.Comment: 11 pages, 5 figure

"Action Timing as a Collusive Common Good"

Frequent revision of firms' actions facilitates to sustain tacit collusion. Even when some, not all, firms revise their actions with enhanced frequency, the change contributes positively to collusive sustainability, i.e., lowering the critical discount factor. In this sense, the added frequency in revising actions can be viewed as a common good shared among oligopolists. Particularly noteworthy is the fact that, in a large class of environments, a firm's deviation can be deterred by no more than one punisher, implying that at most two firms need to invest in frequent revision in order to sustain collusion.

"On Fiscal Federalism under Democracy"

In his seminal work on fiscal federalism, Oates (1972) addressed the socalled Decentralization Theorem, which states that, if such factors as scale economies and spillovers are left out of consideration, a decentralized system is always more efficient than a centralized system for the supply of local public goods. Based on his analytical framework, we contrarily show that a centralized system is at times more efficient than a decentralized system under a democratic decision rule (Proposition 2). The key to such a possibility is the interests of minorities that may be sacrificed in each lower district under decentralization. That is, when the majority adopts an extreme policy that is far from minorities' tastes in a lower district under decentralization, if instead a moderate policy which is closer to minorities' tastes were chosen under centralization, then the interests of minorities would be saved. As a result, centralization could attain higher social welfare than decentralization.

"leadership meets soft budget"

In this paper, it is shown that real indeterminacy of stationary equilibria generically arises in most matching models with perfectly divisible fiat money. In other words, the real indeterminacy follows from the condition for stationarity of money holdings, and surprisingly it has nothing to do with the other specifications, e.g., the bargaining procedures, of the models. Thus if we assume the divisibility of money in money search models, it becomes quite difficult to make accurate predictions of the effects of some policies.