This paper suggests two generalizations of the deposit-refund idea. In the first, we apply the idea not just to solid waste materials, but to any waste from production or consumption including wastes that may be solid, gaseous, or liquid. Using a simple general equilibrium model, we derive the optimal combination of a tax on a purchased commodity and subsidy to a clean' activity (such as emission abatement, recycling, or disposal in a sanitary landfill). This two-part instrument' is equivalent to a Pigovian tax on the dirty' activity (such as emissions, dumping, or litter). In the second generalization, we consider the case where government must use distorting taxes on labor and capital incomes. To help meet the revenue requirement, would the optimal deposit be raised and the refund reduced? We derive the second-best revenue-raising DRS or two-part instrument to answer that question.
The factors that led to the collapse of the ruble are analyzed. It is argued that it resulted from exogenous factors (closely related to the unanticipated Asian financial crisis) interacting with inherited weaknesses in fundamentals (of fiscal policy) that made the Russian economy, while progressively being brought to macroeconomic stability, nonetheless vulnerable to a large external shock. It is contended that, instead of the policy mistake of August 1998 requiring a default of domestic debt and moratorium on payment of foreign commercial debt, a decision by Russian authorities to offer temporary exchange controls, sanctioned by the IMF and the U.S. Treasury as an emergency measure, would have been a better alternative, obviating the de facto partial and unilateral resort to controls that the moratorium and default implied.
One of the most pressing challenges facing the South African government is how to expand the overall opportunity set for nonwhites who have been historically disadvantaged by apartheid. This is perhaps best accomplished by expanding employment opportunities within the economy. General employment expansion mnust be accomplished keeping in mind the urgent need to radically expand nonwhite employment. Employment and unemployment statistics are difficult to interpret. But there is a general sense that the unemployment situation, especially for nonwhites is, extremely bad. In dealing with employment issues, two concerns must be faced. Both are legacies of the apartheid era. The first is related to differences in educational attainment across racial groups. During apartheid, the Bantu Education policy was designed to suppress the educational attainment of Africans (blacks) relative to whites. However, educational opportunities for coloureds (mixed race) and Asians (primarily Indian) were also depressed relative to whites. The second concern is that labor-market discrimination could be used either to exclude nonwhites for employment consideration or to limit their wages and opportunities once they are employed. For policy reasons it is imperative to understand the extent to which premarket or market factors operate to limit opportunities for nonwhites. Given the institutionalized nature of apartheid segregation, one can imagine three scenarios. Earnings differences could be the result entirely of premarket factors such as education differences. Alternatively, earnings differences could be the result of labor-market practices that limit one group' s eamings relative to another's. A third scenario, a synthesis of the former two, would find earnings differences to be the result of a combination of premarket differentials and in-market discrimination. To address premarket discrimination, policy would focus entirely on leveling funding and increasing access to educational opportunities for historically disadvantaged groups. However, legislative forms such as affirmative action would be required to remedy exclusively labormarket discrimination. A combination of these policies would be required to deal with the third scenario. Understanding the relative importance of these factors is important when resource allocation is considered. This paper concerns itself with measuring income losses to nonwhites from labor-market discrimination. To evaluate the extent of labor-market discrimination, ordinary least-squares (OLS) estimates of earnings equations are evaluated for males in each population group. Observed wage differentials are decomposed into a component attributable to human-capital differences while a residual is attributed to labor-markelt discrimination. These findings are then contrasted to those of others to give a sense of the trend in market discrimination in South Africa.
If price discrimination is realized, the economy shifts from one equilibrium to another. It clearly involves welfare effects: The price-discriminator clearly gains, some consumers may also gain from the price cut, but others may lose faced with higher prices, etc. Traditionally the change in social welfare is known to be closely related to the change in total output. In the case of third-degree price discrimination, it is well known that an increase in total output is a necessary condition for welfare improvement. Richard Schmalensee (1981) proves this fact in a model in which the monopolist with constant marginal cost can perfectly separate markets. Further, Hal R. Varian (1985) extends this result to the case of interdependent markets, permnitting increasing marginal cost of the monopolist. And finally, the assumption of nondecreasing marginal cost is eliminated by Marius Schwartz (1990). Roughly speaking, this proposition says that if there is a welfare gain from price discrimination, there has to be some gain to offset the distortion involved. On the other hand, the vast majority of legal and other policy disputes over the price discrimination concern input markets, not final good markets. Thus, it seems important to investigate the situation in which a discriminating monopolist is not a final good supplier but an input supplier, and the buyers of the input are downstream producers of a final good, as is assumed in this paper. If the downstream firms have different technologies, their input demand functions will be different, and thus the monopolist has an incentive to price-discriminate. In this scenario, Michael L. Katz (1987) and Patrick DeGraba (1990) study the effect of inputmarket price discrimination, and show that price discrimination always lowers welfare because it involves the distortion that a lower-cost downstream firm is assigned a higher price. Unfortunately, in their simple settings on the technology of downstream industry, price discrimination can never change total output (of the input or of the final good).1 Thus we must say that welfare effect of input-market price discrimination remains open to question if it has some effect on total output. In particular, we are curious as to whether we can obtain some close relationship between the changes in welfare and total output as we have obtained in the final good market settings. With this motivation, we will construct a model which involves change in total output (of the final good). In the next section, the model and assumptions are provided. In Section II, after we extend the result of Katz (1987) and DeGraba (1990), we find a relationship between the changes in welfare and total output. Strikingly, it states that an increase in the total output of the final good is a sufficient condition for welfare deterioration. This result contrasts with that obtained by Schmalensee (1981), Varian (1985), and Schwartz (1990) from usual models of price discrimination in a final good market. Section III concludes the analysis.
Tiebout choice among districts is the most powerful market force in American public education. Naive estimates of its effects are biased by endogenous district formation. I derive instruments from the natural boundaries in a metropolitan area. My results suggest that metropolitan areas with greater Tiebout choice have more productive public schools and less private schooling. Little of the effect of Tiebout choice works through its effect on household sorting. This finding may be explained by another finding: students are equally segregated by school in metropolitan areas with greater and lesser degrees of Tiebout choice among districts.
This paper examines the role for tax policies in productivity-shock driven economies with catching-up-with-the-Joneses utility functions. The optimal tax policy is shown to affect the economy countercyclically via procyclical taxes, i.e., “cooling down” the economy with higher taxes when it is “overheating” in booms and “stimulating” the economy with lower taxes in recessions to keep consumption up. Thus, models with catching-up-with-the-Joneses utility functions call for traditional Keynesian demand-management policies but for rather unorthodox reasons.
Asset Markets: How They Are Affected by Tournament Incentives for Individuals by Duncan James and R. Mark Isaac. Published in volume 90, issue 4, pages 995-1004 of American Economic Review, September 2000
Economies of Scale and Constant Returns to Capital: A Neglected Early Contribution to the Theory of Economic Growth by Edmund S. Cannon. Published in volume 90, issue 1, pages 292-295 of American Economic Review, March 2000