Runaway in the Landscape

We consider flux compactifications of type IIB string theory on the mirror of a rigid Calabi-Yau. In special cases, these models are dual to the type IIA flux vacua with runaway direction in flux space. We show that new weak coupling AdS solutions can be found for large complex structure, while Minkowski solutions with all moduli stabilized are confined to be at strong coupling. The existence of these solutions, as found in a previous work, is nevertheless guaranteed by a non-renormalization theorem of the type IIB flux superpotential. Based on our results, we are led to the conjecture that supersymmetric runaway directions in flux space are always accompanied by a spectrum of moduli masses reaching down to the AdS scale. This could be violated in a non-supersymmetric situation.Comment: 26 page

Politicians' Outside Earnings and Electoral Competition

This paper deals with the impact of electoral competition on politicians' outside earnings. We propose a simple theoretical model with politicians facing a tradeoff between allocating their time to political effort or to an alternative use generating outside earnings. The model has a testable implication stating that the amount of time spent on outside work is negatively related to the degree of electoral competition. We test this implication using a new dataset on outside earnings of members of the German federal assembly. Taking into account the potential endogeneity of measures of political competition that depend on past election outcomes, we find that politicians facing low competition have substantially higher outside earnings

Strategic Trade Policy through the Tax System

If conventional instruments of strategic trade policy are unavailable, the system of foreign profit taxation and transfer price guidelines may serve as surrogate policy instruments. In this paper, I consider a model where firms from two countries compete with each other on a third market. I analyze optimal policy choices of the firms’ residence countries aiming at strategically manipulating the competitivity of their firms on the third market. I show that, as has recently been claimed, countries prefer the tax exemption system over the tax credit system if transfer prices for headquarter services to the affiliate are close to the headquarter’s variable cost and if the third country’s tax rate is low (i.e., if there is a large tax differential between both locations within the firm). However, if transfer prices are high and the tax rate in the third market country is sufficiently close to the residence country’s tax rate, I show that the tax credit system is an optimal tax policy choice for both countries. From a policy perspective, the view that the tax exemption system is generally the best policy response if domestic firms’ competitiveness is a policy goal has to be qualified.corporate taxation, repatriation tax, transfer pricing

Taxation of Foreign Profits with Heterogeneous Multinational Firms

Recent empirical studies find that foreign direct investment (FDI) by a multinational firm is not associated with a reduction of the firm’s domestic activities. As it is often argued, this finding may imply that a country should not tax the firm’s foreign profit income since this reduces foreign investment without benefitting the domestic economy. The paper analyzes this argument using a model with heterogeneous multinational firms which serve a foreign market through exports or FDI. If a firm switches from exporting to FDI, domestic activity and tax payments may decrease, stay constant or even rise due to intra-firm trade. It turns out that, in all three cases, the optimal tax system implies full taxation after deduction of foreign tax payments. If the country accounts for the effects of its policy on the foreign price level, the case for taxing foreign income becomes even stronger. From a global point of view, the nationally optimal tax rate on repatriated foreign profits is inefficiently high. In contrast to the standard literature, the globally optimal tax system requires a lower tax rate than under the tax credit system which, under certain circumstances, may imply exempting foreign income from tax.corporate taxation, foreign profits, multinational firms

On the Number of alpha-Pivotal Players

We show that bounds like those of Al-Najjar and Smorodinsky (J. Econ. Theory, 2000) as well as of Gradwohl et al. (Math. Oper. Res., 2009) on the number of alpha-pivotal agents can be obtained by decomposition of variance. All these bounds have a similar asymptotic behaviour, up to constant factors. Our bound is weaker than that of Al-Najjar and Smorodinsky, but we require only pairwise independent—rather than independent—types. Our result strengthens the bound of Gradwohl et al.alpha-pivotal agent, influence, direct mechanism, decomposition of variance

Politicians' outside earnings and electoral competition

This paper deals with the impact of electoral competition on politicians´ outside earnings. We propose a simple theoretical model with politicians facing a tradeoff between allocating their time to political effort or to an alternative use generating outside earnings. The model has a testable implication stating that the amount of time spent on outside work is negatively related to the degree of electoral competition. We test this implication using a new dataset on outside earnings of members of the German federal assembly. Taking into account the potential endogeneity of measures of political competition that depend on past election outcomes, we find that politicians facing low competition have substantially higher outside earnings. --Political competition,outside earnings,political rents

Politicians' Outside Earnings and Political Competition

This paper deals with the impact of electoral competition on politicians' outside earnings. In our framework, politicians face a tradeoff between allocating their time to political effort or to an alternative use generating outside earnings. The main hypothesis is that the amount of time spent on outside work is negatively related to the degree of electoral competition. We test this hypothesis using a new dataset on outside earnings of members of the German federal assembly. Taking into account the potential endogeneity of measures of political competition that depend on past election outcomes, we find that politicians facing low competition have substantially higher outside earnings.outside earnings, political competition, political rents

Optimal Tax Policy when Firms are Internationally Mobile

The standard tax theory result that investment should not be distorted is based on the assumption that profits are locally bound. In this paper we analyze the optimal tax policy when firms are internationally mobile. We show that the optimal policy response to increasing firm mobility may be taxation, subsidization or non-distortion of investment depending on whether the mobile firms are more or less profitable than the average firm in the economy. Our findings may contribute to understanding recent tax policy developments in many OECD countries.corporate taxes, optimal tax policy

Even Small Trade Costs Restore Efficiency in Tax Competition

We introduce transport cost of trade in products into the classical Zodrow and Mieszkowski (1986) model of capital tax competition. It turns out that even small levels of transport cost lead to a complete breakdown of the seminal result, the underprovision of public goods. Instead, there is a symmetric equilibrium with efficient public goods provision in all jurisdictions.tax competition, public goods provision, trade

A Backward Looking Measure of the Effective Marginal Tax Burden on Investment

Forward looking measures like the well-known effective marginal tax rate developed by King and Fullerton (1984) are often criticized for not taking into account the complexity of the tax law. This paper derives a method of evaluating this kind of measure and of quantifying the bias resulting from simplifying assumptions, especially on the pattern of depreciation deductions. We apply our method to German data and find that even small estimation biases in determining the tax deductions have a large impact on the effective tax rates for marginal and inframarginal investment projects. We conclude that our method may be used to quantify exactly the difference between the actual use of depreciation deductions and the King-Fullerton assumptions and therefore to correct the conventional forward looking measures.effective tax rates, corporate taxation