The Comparison between Ad Valorem and Unit Taxes under Monopolistic Competition

This paper shows that the welfare dominance of ad valorem over unit taxes under imperfect competition, extends to the Dixit-Stiglitz framework with differentiated products, entry and love of variety. This contrasts against findings by Anderson et al. (J Public Econ, 2001) made in a similar framework, but under Bertrand competition.Unit tax; Specific tax; Ad valorem tax; Welfare

Cartel Stability and Economic Integration

This paper investigates the effect of economic integration on the ability of firms to maintain a collusive understanding about staying out of each other's markets. The paper distinguishes among different types of trade costs: ad valorem, unit, fixed. It is shown that for a sufficient reduction of ad valorem trade costs, a cartel supported by collusion on either quantities or prices will be weakened, thus integration is pro-competitive. If integration consists of a reductions in unit (fixed) trade costs a price setting cartel is strengthened (unaffected), while a quantity setting one is weakened.Collusive behavior; Trade liberalisation; Specific tariffs; Market access cost

Competition and Innovation in a Technology Setting Software Duopoly

Recently the software industry has experienced fundamental changes in market structure through the entry of open source competitors, e.g. Linux's entry into the operating systems market. In a simple model we examine the effects of such a change in market structure from monopoly to duopoly under the assumption that software producers compete in technology rather than price or quantities. The model includes the presence of technological progress and menu costs of adjusting existing software, i.e. innovation. It is found that: (i) moving from monopoly to duopoly does increase the technology level set by firms in the software industry; (ii) a duopoly adjusts more readily to global technological progress than a monopolist. Furthermore, results are presented comparing open source versus for-profit firms in terms of technology levels and innovation.open source software, strategic interaction, duopoly, menu costs

International migration with heterogeneous agents : theory and evidence

"Two puzzling facts of international migration are that only a small share of a sending country's population emigrates and that net migration rates tend to cease over time. This paper addresses these issues in a migration model with heterogeneous agents that features temporary migration. In equilibrium a positive relation exists between the stock of migrants and the income differential, while the net migration flow becomes zero. Consequently, empirical migration models, estimating net migration flows instead of stocks, may be misspecified. This suspicion appears to be confirmed by our empirical investigation of cointegration relationships of flow and stock migration models." (Author's abstract, IAB-Doku) ((en))Herkunftsland, internationale Wanderung - Modell, Wanderungspotenzial, Wanderungsstatistik, Mobilitätsbereitschaft - Determinanten, regionale Mobilität, Einkommensunterschied, Einwanderungsland, Rückwanderung, Rückwanderungsbereitschaft, Aufenthaltsdauer, Migrationstheorie, Stromgrößenanalyse, ökonomische Faktoren, Wanderungsmotivation, Mobilitätsforschung, Europäische Union, Welt

VLSI-sorting evaluated under the linear model

AbstractThere are several different models of computation used on which to base evaluations of VLSI sorting algorithms and there are different measures of complexity. This paper revises complexity results under the linear model that have been gained under the constant model. This approach is due to expected technological development (see Mangir, 1983; Thompson and Raghavan, 1984; Vitanyi, 1984a, 1984b).For the constant model we know that for medium sized keys there are AT2and AP2 optimal sorting algorithms with T ranging from ω(log n) to O(√nk) and P ranging from Ω(1) to O(√nk) (Bilardi, 1984). The main results of asymptotic analysis of sorting algorithms under the linear model are that the lower bounds allow AT2 optimal sorting algorithms only for T = Θ(√nk) but allow AP2 algorithms in the same range as under the constant model. Furthermore the sorting algorithms presented in this paper meet these lower bounds. This proves that these bounds cannot be improved for k = Θ (log n). The building block for the realization of these sorting algorithms is a comparison exchange module that compares r × s bit matrices in time TC = Θ(r + s) on an area AC = Θ(r2) (not including the storage area for the keys).For problem sizes that exceed realistic chip capacities, chip-external sorting algorithms can be used. In this paper two different chip-external sorting algorithms (BBB(S) and TWB(S)) are presented. They are designed to be implemented on a single board. They use a sorting chip S to perform the sort-split operation on blocks of data BBB(S) and TWB(S) are systolic algorithms using local communication only so that their evaluation does not depend on whether the constant or the linear model is used. Furthermore it seems obvious that their design is technically feasible whenever the sorting chip S is technically feasible.TWB has optimal asymptotic time complexity, so its existence proves that under the linear model external sorting can be done asymptotically as fast as under the constant model. The time complexity of TWB(S) is linearly dependent on the speed gs = nsts. It is shown that the speed if looked at as a function of the chip capacity C is asymptotically maximal for AT2 optimal sorting algorithms. Thus S should be a sorting algorithm similar to the M-M-sorter presented in this paper. A major disadvantage of TWB(S) is that it cannot exploit the maximal throughput ds = ns/ps of a systolic sorting algorithm S.Therefore algorithm BBB(S) is introduced. The time complexity of BBB(S) is linearly dependent on ds. It is shown that the throughput is maximal for AP2 optimal algorithms. There is a wide range of such sorting algorithms including algorithms that can be realized in a way that is independent of the length of the keys. For example, BBB(S) with S being a highly parallel version of odd-even transposition sort has this kind of flexibility. A disadvantage of BBB(S) is that it is asymptotically slower than TWB(S)

Corrective Ad Valorem and Unit Taxes: A Welfare Comparison

The ad valorem versus unit taxes debate has traditionally emphasized tax yield. For this criterion, ad valorem taxes outperform unit taxes in terms of welfare for a wide range of imperfect competition settings, including Dixit-Stiglitz monopolistic competition. Yet, in a number of policy fields, such as environmental, health or trade economics, policy makers apply taxes to target the production/consumption volume in an industry, i.e. aim at a certain corrective effect rather than tax yield. This paper compares the two tax instruments with respect to equal corrective-effect in a Dixit-Stiglitz setting with love of variety, entry, exit, and redistribution of tax revenues. We find that unit taxes lead to more firms in the industry, less output per firm, less tax revenue, but higher welfare compared to ad valorem taxes.Externalities; Monopolistic competition; Taxes; Specific taxes; Welfare

How to Turn an Industry Green: Taxes versus Subsidies

Environmental policies frequently target the ratio of dirty to green output within the same industry. To achieve such targets the green sector may be subsidised or the dirty sector be taxed. This paper shows that in a monopolistic competition setting the two policy instruments have different welfare effects. For a strong green policy (a severe reduction of the dirty sector) a tax is the dominant instrument. For moderate policy targets, a subsidy will be superior (inferior) if the initial situation features a large (small) share of dirty output. These findings have implications for policies such as the Californian Zero Emission Bill or the EU Action Plan for Renewable Energy Sources.Environmental policy; Monopolistic competition; Taxes; Subsidies; Welfare; Zero Emission Bill

Bug-Fixing and Code-Writing: The Private Provision of Open Source Software

Open source software (OSS) is a public good. A self-interested individual would consider providing such software, if the benefits he gained from having it justified the cost of programming. Nevertheless each agent is tempted to free ride and wait for others to develop the software instead. This problem is modelled as a war of attrition with complete information, job signaling, repeated contribution to the public good and uncertainty in programming. The resulting game does not feature any delay: software will be provided swiftly, by young, low-cost individuals who gain considerably by signaling their programming skills; the startup (and collapse) of an OSS project displays bandwagon dynamics.open source software, war of attrition, public goods

Effects of Tariffication: Tariffs, Quotas and VERs under Monopolistic Competition

Recent rounds of GATT and later WTO have advocated widespread tariffication, meaning that existing non-tariff barriers be converted into import equivalent tariffs. From an economic point of view, the effects of such tariffication are not entirely clear. The paper presents a general equilibrium model with monopolistic competition to examine the welfare effects of tariffication. The ranking of pre- and post-tariffication welfare depends crucially on the nature of the initial trade barrier and the tariff tool applied. Tariffication using a specific (an ad valorem) tariff results in the same (a reduced) welfare level compared to an initial quota, whereas welfare is increased (the same) compared to an initial VER.Trade policy, tariffication, specific tariff, ad valorem tariff, quota, VER

Tariffs and Firm-Level Heterogeneous Fixed Export Costs

Recent literature on the workhorse model of intra-industry trade has explored heterogeneous cost structures at the firm level. These approaches have proven to add realism and predictive power. This note shows, however, that this added realism also implies that there may exist a positive bilateral tariff that maximizes national and world welfare. Applying one of the simplest specifications possible, namely a symmetric two-country intra-industry trade model with fixed export costs that are heterogeneous across firms, we find that the reciprocal reduction of small tariffs reduces welfare.Optimal tariff; Welfare; Intra-industry trade; Monopolistic competition; Protectionism