15,742 research outputs found
Taxation and Corporate Investment: A q-Theory Approach
macroeconomics, taxation, corporate investment, q-theory
Optimal Inflation Policy
This paper considers the problem of optimal long run monetary policy. It shows that optimal inflation policy involves trading off two quite different considerations. First, increases in the rate of inflation tax the holding of many balances, leading to a deadweight loss as excessive resources are devoted to economizing on cash balances. Second, increases in the rate of inflation raise capital intensity. As long as the economy has a capital stock short of the golden rule level, increases in capita intensity raise the level of consumption. Ignoring the second consideration leads to the common recommendation that the money growth rate be set so that the nominal interest rate is zero. Taking it into account can lead to significant modifications in the "full liquidity rule." Inter-actions of inflation policy with financial intermediation and taxation are also considered. The results taken together suggest that inflation can have important welfare effects, and that optimal inflation policy is an empirical question, which depends on the structure of the economy.
Estimating the Long-Run Relationship Between Interest Rates and Inflation: A Response to McCallum
This note demonstrates that Bennett McCallum's recent critique of low frequency estimates of macro-economic relationships is of little empirical significance. It also demonstrates that readily available and frequently used techniques can be used to diagnose the problem McCallum raises. Finally, it shows that the standard critique of expectational distributed lags is not warranted once the role of learning by economic agents is recognized.
The After Tax Rate of Return Affects Private Savings
This paper reviews theoretical argumrents and empirical evidence regarding the interest elasticity of savings. It concludes that there are strong theoretical reasons to expect an increase in after tax rates of return to increase private savings. Moreover, the empirical rrethods used in most previous studies are likely to produce underestimates of the interestelasticity of savings. New evidence based on direct estimation of utility function parameters suggests that savings are likely to be highly interest elastic. The paper concludes by noting that too little time has passed to evaluate the effects of the savings incentives contained in recent tax legislation.
Relative Wages, Efficiency Wages, and Keynesian Unemployment
While modern economic theorists have produced a variety of explanations for the failure of wages to fall in the face of unemployment, Keynes emphasis on relative wages has not been reflected in most contemporary discussions. This short paper suggests that relative wage theories in which workers' productivity depends primarily on their relative wage provide the best available apparatus for understanding actual unemployment and its fluctuations. Such theories are very closely related to the efficiency wage theories that have received widespread attention in recent years.
Investing in all the people
Recent research has convinced the author that once all the benefits are recognized, investment in the education of girls may be the highest return of investment available in the developing world. The author stresses five major points: (1) higher death rates are symptomatic of the more general pattern of female deprivation in the developing world; (2) underinvestment in girls is an economic problem resulting from a vicious cycle caused by distorted incentives; (3) educated women choose to have fewer children and can provide more for those they do have; (4) the social benefits alone of increased female education are more than sufficient to cover its costs; and (5) priorities should be to reduce the cost of schooling for girls and make special efforts to accommodate parent's practical needs. Major initiatives to increase female education can transform society over time. If more girls had gone to school a generation ago, millions of infant deaths could have been averted each year, and tens of millions of families could have been healthier and happier.Health Monitoring&Evaluation,Primary Education,Gender and Education,Adolescent Health,Agricultural Knowledge&Information Systems
Tax Policy in a Life Cycle Model
This study departs from earlier analyses of the effects of taxes on capital income in several respects. Probably the most important difference between this treatment and most preceding ones lies in the assumptions about the interest elasticity of saving. It is shown below that the common two-period formulation of saving decisions yields quite misleading results. A more realistic model of life cycle savings demonstrates that, for a wide variety of plausible parameter values, savings are very interest elastic. This implies that shifting away from capital income taxation would significantly increase capital formation, making possible long-run increases in consumption.
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