NP-hardness of hypercube 2-segmentation

The hypercube 2-segmentation problem is a certain biclustering problem that was previously claimed to be NP-hard, but for which there does not appear to be a publicly available proof of NP-hardness. This manuscript provides such a proof

The dynamics of currency substitution, asset substitution and de facto dollarization and euroization in transition countries

currency substitutioneconomic reform;externalities

Rethinking Taxation:The Automated Payment Transaction (APT)Tax

This paper examines the desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction (APT) tax. In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/ payments system. The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property and is therefore more highly skewed than the conventional income or consumption tax base. The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure. The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost. Like all taxes, the APT tax creates new distortions whose costs must be weighted against the benefits obtained by replacing the current tax system.tax reform, APT tax, tobin tax, electric money, transaction tax, flat tax, security transaction tax, globalization, fiscal harmonization, underground economy, automated payment system, elimination of tax returns, compliance costs.

The Dynamics of Currency Substitution, Asset Substitution and De facto Dollarization and Euroization in Transition Countrieses

This paper presents new evidence on the dynamics of dollarization and euroization for twenty-five transition countries. Estimates of the amount of foreign currency in circulation (FCC) in transition countries are used to develop a new comprehensive dollarization index (CDI) and separate indices of currency substitution (CSI) and asset substitution (ASI). When the CDI is compared to the traditional dollarization index (DI) that relies solely on foreign currency deposits as a proxy for the extent of dollarization, I find that the comprehensive dollarization measure provides a more complete picture of the extent of de facto dollarization and euroization, and that it better reflects the separate influences of currency substitution and asset substitution. I find that the dynamic evolution of currency substitution and asset substitution in transition countries is both more variable and complex than is usually believed to be the case. These new dollarization indicators enable researchers to examine the causes of the dollarization process and its tendency to lead to irreversibility (hysteresis). Moreover, the currency substitution and asset substitution indices shed light on the dynamic consequences of these processes for the effectiveness of monetary policy. Finally, the new estimates of FCC make possible the measurement of effective currency/deposit ratios that can be used to develop new estimates of the size and growth of underground economies in transition countries. Forthcoming Comparative Economic Studies, Fall, 2003dollarization, euroization, transition economies, currency substitution, asset substitution, underground economies, foreign currency, network externalities, irreversibility.

UNDERGROUND ACTIVITY AND INSTITUTIONAL CHANGE: PRODUCTIVE, PROTECTIVE AND PREDATORY BEHAVIOR IN TRANSITION ECONOMIES

This paper examines why some transitions are more successful than others by focusing attention on the role of productive, protective and predatory behaviors from the perspective of the new institutional economics. Many transition economies are characterized by a fundamental inconsistency between formal and informal institutions. When formal and informal rules clash, noncompliant behaviors proliferate, among them, tax evasion, corruption, bribery, organized criminality, and theft of government property. These wealth redistributing protective and predatory behaviors activities absorb resources that could otherwise be used for wealth production resulting in huge transition costs. Noncompliant behaviors--evasion, avoidance, circumvention, abuse, and/or corruption of institutional rules--comprise what we can be termed underground economies. A variety of underground economies can be differentiated according to the types of rules violated by the noncompliant behaviors. The focus of the new institutional economics is on the consequences of institutions--the rules that structure and constrain economic activity--for economic outcomes. Underground economics is concerned with instances in which the rules are evaded, circumvented, and violated. It seeks to determine the conditions likely to foster rule violations, and to understand the various consequences of noncompliance with institutional rules. Noncompliance with ‘bad” rules may actually foster development whereas non compliance with “good” rules will hinder development. Since rules differ, both the nature and consequences of rule violations will therefore depend on the particular rules violated. Institutional economics and underground economics are therefore highly complementary. The former examines the rules of the game, the latter the strategic responses of individuals and organizations to those rules. Economic performance depends on both the nature of the rules and the extent of compliance with them. Institutions therefore do affect economic performance, but it is not always obvious which institutional rules dominate. Where formal and informal institutions are coherent and consistent, the incentives produced by the formal rules will affect economic outcomes. Under these circumstances, the rule of law typically secures property rights, reduces uncertainty, and lowers transaction costs. In regimes of discretionary authority where formal institutions conflict with informal norms, noncompliance with the formal rules becomes pervasive, and underground economic activity is consequential for economic outcomes.transition economies, underground economies, institutions, property rights, transaction costs, tax evasion, corruption, rent seeking.