Varieties and the terms of trade

This paper analyzes the dynamic adjustment of the terms of trade in an intertemporal, two country model with endogenous product variety. In the base model, all workers are identical. In an extended version, the development of new varieties requires skilled labor while manufacturing uses skilled and unskilled labor. In the model without skill, a population increase in one of the countries has no effect on its terms of trade, not even in the short run. In the model with skill, the terms of trade initially worsen, but eventually return to their original level. The terms of trade immediately and permanently worsen in response to a productivity increase in manufacturing. However, they gradually improve if the productivity in variety research rises. If productivity in both activities rises equiproportionally, the terms of trade respond in the same manner as after a population shock.

The effect of corporate taxes on investment and the capital stock

This paper analyses the effect of the corporate tax rate on the cost of capital and investment through two different channels. The first one concerns the fairly standard change in the user cost of capital, which determines a firm's optimal capital stock given that the firm is located in the Netherlands. The paper demonstrates that a reduction in the corporate tax rate reduces the user cost of capital because cost of capital is not fully deductible. The second channel deals with the direct effect of corporate taxation on profits. If capital is sufficiently mobile, the after tax profit margin cannot be affected by the corporate tax rate in equilibrium. Therefore, a rise in the corporate tax rate must be compensated by a compensating rise in the markup. We have assumed that only 35% actually be established. To get a feel for the quantitative effects of these two channels, they have been incorporated into the JADE model, the econometric macro model of CPB. The results suggest that only considering the user cost of capital approach ignores an important aspect of the impact of a change in corporate taxation

Successful knowledge policies

Knowledge policy is widely considered to be an important subject. The Dutch government conducts intensive policy on the foundations of the knowledge economy: education, research and innovation. In the literature and in policy circles, proposals for additional knowledge policies or reforms of existing policies are currently being discussed. Examples are the Knowledge Investment Agenda of the Innovation Platform, new innovation policies of the Ministry of Economic Affairs, an advice of the Council of Economic Advisors about research, education and entrepreneurship and an advice of the Education Council. Little is known, however, about the effects of all these policies. The question whether knowledge policy works remains difficult to answer. Despite much research effort in the past decades, the manner in which the creation and application of knowledge comes about and the way policy can influence that process are still not well understood. It is difficult, therefore, to form a good judgement about the optimal size and form of knowledge policy. This article discusses several policy options in the fields of education, research, and innovation that are likely to have beneficial, neutral, or negative effects on overall welfare in the Netherlands. For some options, the effects are unknown. Beneficial education policies are, for instance, policies aimed at increasing teachers' quality and early childhood education programs. Additional R&D tax credits for new firms have favourable effects on innovation. A further increase in the research incentives to universities is expected to raise scientific output.

Disproportionate Minority Contact in the U.S. Juvenile Justice System: A Review of the DMC Literature, 2001 to 2014, Part II

The current study provides a systematic review of 107 studies. Studies were drawn from academic journals, reports, and edited books from January 2001 to December 2014. The main question addressed by the review asks, ‘What does recent literature tell us about minority status and juvenile justice processing?’ The purpose of this article is to review recent studies that examine the roles that race and ethnicity play in the juvenile justice decision-making process. The results illustrate the overall complexity of the issues surrounding DMC. A matrix was developed to extract key features from each of the studies, which are presented in Part II. The study site, racial groups, decision points investigated, staged extracted, race effects, and results are included in the matrix