Revisiting the double-binary-pulsar probe of non-dynamical Chern-Simons gravity

One of the popular modifications to the theory of general relativity is non-dynamical Chern-Simons (CS) gravity, in which the metric is coupled to an externally prescribed scalar field. Setting accurate constraints to the parameters of the theory is important owing to their implications for the scalar field and/or the underlying fundamental theory. The current best constraints rely on measurements of the periastron precession rate in the double-binary-pulsar system and place a very tight bound on the characteristic CS lengthscale k_cs^{-1} <~ 3*10^{-9} km. This paper considers several effects that were not accounted for when deriving this bound and lead to a substantial suppression of the predicted rate of periastron precession. It is shown, in particular, that the point mass approximation for extended test bodies does not apply in this case. The constraint to the characteristic CS lengthscale is revised to k_cs^{-1} <~ 0.4 km, eight orders of magnitude weaker than what was previously found.Comment: 12 pages, 4 figures, to be submitted to PRD. Comments are welcom

Efficient Compensation for Employees? Inventions.

We analyze the legal reform concerning employees? inventions in Germany. Using a simple principal-agent model, we derive a unique efficient payment scheme: a bonus which is contingent on the project value. We demonstrate that the old German law creates inefficient incentives. However, the new law concerning university employees and the pending reform proposal concerning other employees also fail to implement first-best incentives. With suboptimal incentives to spend effort on inventions, the government?s goal, an increase in the number of patents, is likely to be missed. (88 words) --Moral hazard,hold-up,efficient fixed wage

Costs of taxation and benefits of public goods with multiple taxes and goods

The recent public economics literature involves an apparent consensus that income effects reduce the costs of raising revenues and hence increase the desirable level of public good provision. Higher taxes can indeed reduce the demand for leisure -- and hence increase the supply of taxed labor -- through income effects. However, the consensus is wrong because the income effects of taxes must be considered symmetrically with those from provision of public goods. This paper uses a model with multiple public goods and taxes to derive consistent measures of the marginal benefits of publicly-provided goods and their marginal social costs. With this model, the authors show that either compensated approaches excluding these income effects or uncompensated approaches including them may be used. If an uncompensated measure of the marginal cost of funds is used, however, the benefits of providing public goods should be adjusted with a simple, benefit multiplier not previously seen in the literature. Once this is done, the optimal level of public provision is independent of whether compensated or uncompensated approaches are used. Proper accounting for these income effects -- or their omission using a compensated approach -- appears to substantially raise the hurdle for government provision where there are substantial taxes bearing on labor.Economic Theory&Research,Public Sector Economics,Debt Markets,Emerging Markets,Taxation&Subsidies

Evaluating public expenditures when governments must rely on distortionary taxation

Anderson and Martin provide simple, robust rules for evaluating public spending in distorted economies. Their analysis integrates, within a clean unified framework, previous treatments of project evaluation as special cases. In this paper, the authors use a general system of fiscal accounting for marginal changes in the provision of public that allows them to account for various approaches to the funding of government projects. They obtain two key results that seem likely to be useful for project evaluation. Firstly, the shadow prices of traded (as well as non-traded) goods are not generally equal to their world prices, but differ from world prices by an amount that depends upon the impact of the project on government revenues and on the Marginal Cost of Funds (MCF). Secondly, the costs of a government project need to be adjusted by the Marginal Cost of Funds before being compared with the benefits accruing from the project. The analysis leads to operational rules for project evaluation that are only slightly more complex than the border pricing rule. To conduct the analysis, the authors utilize a framework that makes explicit the role of government in providing public goods and services subject to a budget constraint. They consider first in Section 1 a general welfare analysis of the provision of a public good which is purchased from the rest of the world and paid for out of distortionary tax revenue. In Section 2 they consider the nature of the resulting shadow prices in more detail. In Section 3 the authors consider the role of the MCF in evaluating the cost of project inputs. Section 4 deals with user charges for public goods, which are of course only feasible when such goods are excludable. Section 5 places the results in the context of the earlier literature in order to clarify the relationship between their results and those obtained by earlier authors. Section 6 provides some simple numerical examples to highlight the potential importance allowing for the costs of raising funds.Public Sector Economics&Finance,Environmental Economics&Policies,Markets and Market Access,Economic Theory&Research,Banks&Banking Reform,Public Sector Economics&Finance,Access to Markets,Markets and Market Access,Economic Theory&Research,Environmental Economics&Policies

Efficient Compensation for Employees' Inventions: An Economic Analysis of a Legal Reform in Germany

The German law on employees' inventions requires employees to report to their employer any invention made in relation with the work contract. An employer claiming the right to the invention is obliged to pay a compensation to the employee. Up to now, this compensation is a matter of negotiations. A reform proposal seeks to introduce a combination of a fixed payment and a share of the project value. Regulations like this can also be found at U.S. universities. Up to now, German scholars enjoyed the privilege of not having to report their inventions to their universities. The new German law concerning inventions made by university scholars has abolished this privilege. Universities now have the right to claim the invention in exchange for a mandatory 30-percent share of the project value. Our model draws on Principal-Agent theory and combines elements of moral hazard and hold-up. We derive a unique efficient payment scheme that consists only of a lump-sum payment. We show that freedom to negotiate over the compensation after the invention has been done provides inefficient incentives. Efficient incentives would require the compensation to be fixed ex-ante, as it is provided by both the proposed law (concerning employees in general) and the new law (concerning university scholars). However, both set the payment schemes in an inefficient way. With suboptimal incentives to spend effort into inventions, the government's goal, an increase in the number of patents, is likely to be missed. -- Dieser Beitrag befaßt sich mit der geplanten und zum Teil schon verwirklichten Reform des Gesetzes über Arbeitnehmererfindungen (ArbEG). Im Mittelpunkt steht die bisher in der Literatur wenig beachtete Analyse der Anreize, die sich aus der Zahlung einer Vergütung durch den Arbeitgeber ergeben. Art und Höhe der Vergütung beeinflussen sowohl das Anstrengungsniveau des Arbeitnehmers bei der Erstellung, als auch das des Arbeitgebers bei der Verwertung der Erfindung. Unsere Analyse basiert auf einem einfachen Prinzipal-Agenten-Modell und verbindet Aspekte des Moral Hazard mit der Hold-Up-Problematik. Es werden zwei Szenarien vorgestellt, die sich bezüglich des Zeitpunktes und der Art der Festlegung der Vergütung unterscheiden. Es wird ein eindeutiges effizientes Ergebnis hergeleitet: Die Vergütung von Arbeitnehmererfindungen sollte sich auf die einmalige Zahlung einer festen Vergütung beschränken, die ex ante festzulegen ist. Gemessen an diesem Ergebnis kann die untersuchte Gesetzesnovelle nur als second best-Lösung eingeschätzt werden.Moral hazard,hold-up,efficient fixed wage

Fighting cartels: some economics of council regulation (EC) 1/2003

This paper investigates the effectiveness of the new Council Regulation (EC) 1/2003 which replaces the mandatory notification and authorization system by a legal exception system. Effectiveness is operationalized via the two subcriteria compliance to Art. 81 EC Treaty and the probabilities of type I and type II errors committed by the European Commission. We identify four different types of Perfect Bayesian Nash Equilibria: fullcompliance, zero-compliance, positive-compliance and full-deterrence. We show that the Commission can, in principle, hit the full-compliance equilibrium, where the cartelizing firms fully obey the requirements of Art 81(3) EC Treaty and both error probabilities are zero. --competition law,cartel law enforcement,legal exception,imperfect