A popular theory of optimal tax policies suggests that tax rates should follow a random walk. This paper extends the existing empirical literature in three ways. First, the impact on the marginal utility of consumption when the government chooses a tax plan to smooth the distorting impact of taxes is considered. Second, exogenous changes in the real rate of interest are incorporated into the government's optimal tax plan. Finally, the tax elasticity of output is not constant over time. Allowing for these changes, there is evidence that the government discounts the future, attempts to smooth the distorting impact of taxes on the marginal utility of consumption, and that the tax elasticity of output moves predictably during wars.

The demand for two custom calling services is investigated. The services may be bought individually or in a discounted package. A micro-theory based on discrete choice model is formulated that explicitly accounts for these purchase options. The model is estimated assuming both dependence and independence of the unobservable choice-influencing variables. The estimated parameters are used to simulate the revenue impact of price and discount changes.

This paper concerns the problem of properly specifying the dynamic structure of models of industry costs and factor demands. The paper compares three common frameworks: long-run costs with all factors assumed in equilibrium (Full Static Equilibrium), short-run costs with variable factors in short-run equilibrium (Partial Static Equilibrium) followed by computation of long-run costs, and short-run costs including internal capital adjustment costs (Partial Dynamic Equilibrium). The approach of the paper is to estimate a capital-labor-fuel-electricity model for six OECD countries (G7 less Italy) for the 1960-1989 period. Using the three different 'dynamic' specifications, we obtain substantially different results in terms of factor demand, cross-price effects and technical change. The implication is that proper dynamic specification is critical. The Partial Dynamic Equilibrium model appears to behave most consistently across the cross-section.

The objective of this paper is to examine empirically the determinants of the joint decision whether or not to adopt a new input and invest in technical knowledge. A log-linear probability model of the joint occurrence or nonoccurrence of adoption and information acquisition is estimated. The results suggest that information acquisition and adoption decisions are made jointly and that the influences of the determinants of adoption and information acquisition differ with the timing of adoption and the channels of information dissemination.

Economic models of politics typically use the expected value of a candidate's vote share to proxy electoral probability. In this paper, the authors introduce a risk calculation to augment the evaluation of a candidate's (or party's) expected vote share and they divide this risk element into its systematic and unsystematic components. For the same reason that systematic risk is a primary focus of portfolio management, the authors discover that an analogous systematic risk component is central to presidential elections. Their approach accounts for correlations in vote swings among states, piercing the fiction of a state-by-state or 'local' campaign strategy.