Social Status and Optimal Income Taxation

This paper examines the optimal (first-best) fiscal policy in a stochastic, infinite-horizon representative agent model that exhibits consumption-enhanced as well as wealth-enhanced social status in the household utility. We show that the optimal labor tax rate is a positive constant that is used to correct negative consumption externalities. The optimal capital tax rate is also positive in order to overturn agents' status-seeking capital over-accumulation. Moreover, we find that in contrast to a conventional automatic stabilizer, the optimal capital tax moves in the opposite direction with shocks to firms' production technology. This result turns out to be qualitatively consistent with the discernible empirical evidence that many countries have implemented procyclical fiscal policies.Social Status, Optimal Income Taxation

On the Public Economics of Casino Gambling

This paper studies casino-style gambling from the public economics point of view in a jurisdiction populated by oligopolistically competitive legal casinos. We consider three different regimes: laissez-faire, entry regulation and tax regulation. The model highlights three important external effects from casino-style gambling: non-casino income creation, social disorder costs, and casino exporting to other jurisdictions. In the generalized case with an endogenously-determined ratio of local to total gamblers, we allow the configuration of casinos to be centralized or jurisdiction-wide dispersed. A complete comparison between equilibrium and command optimum outcomes is provided, and the welfare consequences under the three regimes and two casino configurations are examined.Casino gambling, externalities, oligopoly pricing, entry, tax regulation

Working Hours Reduction and Endogenous Growth

This paper formulates an endogenous growth model and uses it to inquire into the long-run impact of work-sharing arrangements on economic growth. We show that the styles of wage contract, namely salary-style and hourly-style contracts, are a key factor in determining the long-run growth effects of working time reduction. If the labor market is overwhelmingly salaried arrangement, then the extent of wage flexibility is relatively low; as a consequence, a policy of reducing working hours will deteriorate economic growth. On the contrary, if hourly pay predominates, then the wage system tends to increase the degree of wage flexibility. Thus, a cut in working time may favor the economy’s growth rate.Working hours reduction, Endogenous growth

A “Managerial” Trade Union and Economic Growth

By setting up a simple Romer-type (1989) endogenous growth model embodying a political trade union (rather than the traditional economic labor union), this paper explores the effects of unionization on unemployment, growth and welfare by highlighting the essence of internal conflict within the union. It is shown that the conflicting interests between the leadership and membership within the union play a decisive role in the unemployment, growth and welfare effects of unionization. Given the fact that taxation, besides unions, is another potential candidate in explaining the poor performance of employment and economic growth, we re-examine the taxation effects within the growth model with equilibrium unemployment caused by the presence of the trade union and compare our findings with those for the traditional full-employment growth model. In addition, the dynamic properties of the unionized economy are also examined, with particular emphasis being placed on the role of the trade union in the formation of equilibrium indeterminacy.Managerial trade union, collective bargaining, unemployment, economic growth

Interest Rate Rules, Target Policies, and Endogenous Economic Growth in an Open Economy

This paper sets up an endogenous growth model of an open economy in which the monetary authority implements a gradualist interest-rate rule with targets for inflation and economic growth. We show that, under a passive rule, a monetary equilibrium exists and is unique; moreover, the equilibrium is locally determinate. Under an active rule, the open economy either generates multiple equilibria or does not have any equilibrium. If equilibria exist, the high-growth equilibrium is locally determinate while the low-growth equilibrium is a source. Besides these, the stabilization and growth effects of alternative target policies are also explored in this study.Nominal interest rate rules, gradualism, endogenous economic growth

The Stabilizing E¤ect of Government Spending in an Economy with Sectoral Externalities

Abstract: This paper explores a policy rule of government purchases that can remove sunspot ‡uc-tuations in a two-sector model with sector-speci…c externalities. We show that government spending on the investment good can stabilize the economy against the sunspot ‡uctuations, while the government's purchases of the consumption good cannot sever a stabilization policy. Quantitatively, given an empirically plausible extent of the sectoral externality of 0:108, the government should purchase the investment good so that the ratio of government spending on the investment good to real GDP is higher than 8:15% in order to remove sunspot-driven ‡uctuations. This o¤ers a new policy implication in the sense that, instead of the total amount of government spending, the composition of government spending is more crucial in terms of a¤ecting macroeconomic stability. JEL Classi…cation: E32; E36; O41. Keywords: Local indeterminacy; government spending on the investment and consumption goods. Acknowledgements: We would like to thank Jang-Ting Guo and Hsueh-fang Tsai for helpful comments and suggestions. We would also like to express gratitud

Animal Models of Burn Wound Management

Burn injury is known as the most traumatic wound. In the clinical, most patients with burn injury suffer from extreme pain during wound management; hence, the effective treatment that involved advanced medication is needed. In the evaluation of burn wound care devices, the use of animal model is considered suitable as valuable tools to investigate the burn pathophysiology as well as the efficacy of treatment strategies due to the complexity and heterogeneous nature of the burn. This chapter aimed to review the preclinical small and large animal models of burn injury for translational applications and to highlight their benefits and limitations for the burn treatment design that are clinically applicable to humans

Welfare Cost of Inflation: The Role of Price Markups and Increasing Returns to Production Specialization

Estimates of the welfare costs of moderate inflation are generally modest or small. This paper, by shedding light on increasing returns to production specialization, obtains a substantial welfare cost of 8% in an endogenous growth model of monopolistic competition with endogenous entry. Analytically, we show that the effect of inflation is aggravated (resp. alleviated) by a price markup if the degree of increasing returns to production specialization is relatively high (resp. low). Accordingly, our quantitative analysis indicates that the welfare cost of inflation exhibits an inverted U-shaped relationship with the price markup. This non-monotone is sharply in contradiction to the conventional notion. Nonetheless, the welfare cost of inflation is unambiguously increasing in the degree of increasing returns to production specialization

Welfare Cost of Inflation: The Role of Price Markups and Increasing Returns to Production Specialization

Estimates of the welfare costs of moderate inflation are generally modest or small. This paper, by shedding light on increasing returns to production specialization, obtains a substantial welfare cost of 8% in an endogenous growth model of monopolistic competition with endogenous entry. Analytically, we show that the effect of inflation is aggravated (resp. alleviated) by a price markup if the degree of increasing returns to production specialization is relatively high (resp. low). Accordingly, our quantitative analysis indicates that the welfare cost of inflation exhibits an inverted U-shaped relationship with the price markup. This non-monotone is sharply in contradiction to the conventional notion. Nonetheless, the welfare cost of inflation is unambiguously increasing in the degree of increasing returns to production specialization

Capital Adequacy and the Bank Lending Channel: Macroeconomic Implications

This paper develops an analytically tractable dynamic general-equilibrium model with a banking system to examine the macroeconomic implications of capital adequacy requirements. In contrast to the hypothesis of a credit crunch, we find that increasing the strength of bank capital requirements does not necessarily reduce the equilibrium quantity of loans, provided that banks have the option to respond to the capital requirements by accumulating more equity instead of cutting back on lending. Accordingly, we show that there is an inverted-U-shaped relationship between CAR and capital accumulation (and consumption). Furthermore, the optimal capital adequacy ratio for social-welfare maximization is lower than that for capital-accumulation maximization. In accordance with general empirical findings, the capital- accumulation maximizing capital adequacy ratio is procyclical with respect to economic conditions. We also find that monetary policy affects the real macroeconomic activities via the so-called bank lending channel, but the effectiveness of monetary policy is weakened by bank capital requirements