Public Goods in Trade: On the Formation of Markets and Political Jurisdictions

The current debate in Western Europe centers on the relationship between economic and political integration. To address this problem, we construct a simple general equilibrium model in which the returns to trading are directly affected by the availability of a public good. In our model, heterogeneous agents choose both a club and a market to belong to. In the club, agents vote over the public good, are taxed to finance this good, and receive access to it when they trade. In the market, they are randomly matched with a partner. If a match occurs between traders of different clubs, they both suffer a transactions cost. We show that, in general, the political boundaries established by the clubs can be distinct from market borders, leading to international trade between members of different clubs. Further, as the region develops, markets become wider (eventually leading to a common market) and the desire to avoid transaction costs initially leads to political unification. At still higher levels of development, however, where transaction costs are less important, traders prefer the diversity offered by multiple clubs.

Economic Exchange During Hyperinflation

Historical evidence indicates that hyperinflations can disrupt individuals' normal trading patterns and impede the orderly functioning of markets. To explore these issues, we construct a theoretical model of hyperinflation that focuses on individuals and their process of economic exchange. In our model buyers must carry cash while shopping, and some transactions take place in a decentralized setting in which buyer and seller negotiate over the terms of trade of an indivisible good. Since buyers face the constant threat of incoming younger (hence richer) customers, their bargaining position is weakened by inflation, allowing sellers to extract a higher real price. However, we show that higher inflation also reduces buyers' search, increasing sellers' wait for customers. As a result, the volume of transactions concluded in the decentralized sector falls. At high enough rates of inflation, all agents suffer a welfare loss

The Relationship between State and Federal Tax Audits

In this paper we present an econometric analysis of state and federal tax audits. We first present results from a survey of state tax administrators. The survey results indicate that most state tax audit programs are small and rely extensively on information provided by the IRS, although some programs are large and sophisticated. We then present results from a detailed econometric analysis of Oregon state and federal tax returns and tax audits for tax year 1987. Our analysis generates three main conclusions. First, Oregon state and IRS selection criteria are similar, but not identical, suggesting that both tax agencies might benefit from greater sharing of information, especially in some audit classes. Second, Oregon state and IRS audit assessments are strongly positively correlated, as expected. Third, we estimate the shadow values associated with providing additional audit resources to the Oregon Department of Revenue and the IRS in various audit classes, and find that for the IRS the shadow values range from two to five dollars, while for Oregon the values range from one to three dollars.

Functional neuroimaging of conversion disorder: The role of ancillary activation

AbstractBackgroundPrevious functional neuroimaging studies investigating the neuroanatomy of conversion disorder have yielded inconsistent results that may be attributed to small sample sizes and disparate methodologies. The objective of this study was to better define the functional neuroanatomical correlates of conversion disorder.MethodsTen subjects meeting clinical criteria for unilateral sensory conversion disorder underwent fMRI during which a vibrotactile stimulus was applied to anesthetic and sensate areas. A block design was used with 4 s of stimulation followed by 26 s of rest, the pattern repeated 10 times. Event-related group averages of the BOLD response were compared between conditions.ResultsAll subjects were right-handed females, with a mean age of 41. Group analyses revealed 10 areas that had significantly greater activation (p < .05) when stimulation was applied to the anesthetic body part compared to the contralateral sensate mirror region. They included right paralimbic cortices (anterior cingulate cortex and insula), right temporoparietal junction (angular gyrus and inferior parietal lobule), bilateral dorsolateral prefrontal cortex (middle frontal gyri), right orbital frontal cortex (superior frontal gyrus), right caudate, right ventral-anterior thalamus and left angular gyrus. There was a trend for activation of the somatosensory cortex contralateral to the anesthetic region to be decreased relative to the sensate side.ConclusionsSensory conversion symptoms are associated with a pattern of abnormal cerebral activation comprising neural networks implicated in emotional processing and sensory integration. Further study of the roles and potential interplay of these networks may provide a basis for an underlying psychobiological mechanism of conversion disorder

An Economic Analysis of Life Care

Life care communities offer long term care to the elderly in the context of a residential community. Residents move into a life care community while still relatively young (though typically past age 65), initially occupying an independent living unit situated in a living complex similar to a retirement community. Later, when a resident requires more intensive care, she moves to an on-site nursing facility. We present an economic analysis of the life care industry. Our model includes a detailed specification of elderly couples' utility, a description of elderly morbidity and mortality experiences, and a formulation of the life care contract. Using extensive computer simulations we show that life care offers two main advantages to elderly as compared with stand-alone nursing homes: (i) reduced mobility costs and nearness to spouse and friends when sick; and (ii) insurance, linked to a rebate paid to the couple's heirs. We also investigate regulation of life care and the effects stemming from the risk of operator bankruptcy.