This paper develops a contractarian theory of the state and the existence of redistribution. The existence of rules of redistribution is explained without any recourse to the risk-aversion of agents. No veil of ignorance is needed. This avoids obligational problems inherent in most other contractarian theories of justice. Hence, this paper departs from the standard legitimization of redistribution as fundamental insurance and interprets it as stemming from a principle of reciprocity in trade. Since this paper deals with an anarchic society, the implementation of redistributional rules
is constrained by the assumption of self-enforcement. We show that this assumption changes the interpretation of the state: the state is characterized by a particular design of equilibrium strategies, not by the existence of enforcement agencies.
In this paper we deal with voluntary and compulsory redistribution in an economy where the enforcement of property rights is costly. The definition and enforcement of property rights is one of the undisputed responsibilities of the government. However, the fact that the enforcement of property rights requires the investment of scarce resources has only rarely been systematically analyzed. In a world where the provision of "property rights" incurs opportunity costs, some of the basic economic principles concerning taxation and redistribution can be turned upside down.
This paper studies the impact of trade policy on industry concentration. Based on the Swiss Business Census, concentration levels for all four-digit manufacturing industries in Switzerland are calculated. Then the effect of a bilateral reduction in technical barriers to trade with the European Union is estimated. Adopting a difference-in-differences approach, it turns out that concentration in affected industries with low R&D intensity increased significantly following the policy change. This supports the notion that fewer firms are able to survive as the toughness of price competition increases. The effect on industries with high R&D intensity is found to be insignificant.
In this paper we analyze the effects of labor-market integration on national, unfunded public-pension systems that are organized according to a ‘place of residence' principle. With this principle, labor might migrate for purely fiscal reasons. Thus, some kind of coordination becomes necessary. We first show that for the case of unrestricted labor mobility the equalization of contributions is necessary and sufficient for efficiency if the pension systems remain decentralized. However, national decision makers do not in general have an incentive to voluntarily stick to equalized contributions. With a segmented labor market where one segment is costlessly mobile whereas the other segment is completely immobile, the coordination requirements are far more complicated if migration cannot compensate for differences in national fertilities. If it can, the efficiency of equalization turns out to be robust. Finally we show that replacing the principle of residence with the ‘principle of nationality' does not eliminate the risk of fiscal externalities.
We analyze an overlapping-generations world comprising two groups of small countries whose preferences for public spending differ. Key steady-state effects from introducing bank secrecy and a withholding tax in countries with low government spending are: a reduction of global capital and income, a shift of wealth towards bank-secrecy countries, and falling consumption, welfare and government spending despite rising tax rates in the rest of the world. Qualitative results are robust to changes in tax-payer honesty, the Leviathan effect (permitting governments to drive public spending higher than citizens prefer), and the fraction of withholding taxes repatriated to countries of residence.
This paper attempts two things: First, to modernize partisan theory by merging the idea of partisan differences in macroeconomic preferences with recent, optimizing models of aggregate supply that account for sluggish nominal adjustment. This aids in resolving some puzzles posed by the current state of partisan theory research. Second, to exploit partisan patterns for a comparison of the empirical performance of the new Keynesian Phillips curve with that of a recent challenger, the sticky-information Phillips curve. It turns out that the sticky-information Phillips curve clearly outperforms its better established rival: in accounting for econometric estimates of partisan patterns in OECD countries, and in tracking post-war experience in the US.
[http://www.vwa.unisg.ch/RePEc/usg/dp2005/DP-25_Ga.pdf Download full text]
This paper proposes a new explanation for the empirical finding that yields on risk-free bonds are increasing with their maturity (the term premium). The key assumption is that investors not only dislike risk, but also dislike uncertainty about the current trend growth rate of the economy. In the proposed model, investors observe consumption growth rates and use these observations to estimate the current level of a mean reverting trend growth rate. At a given point in time, uncertainty is given by the variance of the estimate. Disliking uncertainty, investors bias their estimate of the current trend downwards. On average this lowers short term interest rates relative to long run interest rates. The model can account quantitatively for the observed term premium in the US data and correctly predicts the flattening of the real yield curve since the early nineties.
