Knowledge that Transforms

[This paper examines how corporate taxation of multijurisdictional firms using formula apportionment affects the incentives faced by individual firms and individual states. Under formula apportionment, a firm's tax payments to a given state depend on its total profits nationally (or internationally) times an average of the fractions of the firm's total property, payroll, and sales located in that state. This apportionment of a firm's total profits among states, based on three separate factors, in effect creates three separate taxes, each with complicated incentive effects. A large part of our analysis is concerned with the component of the tax tied to the allocation of property. Under this tax, price distortions differ in general among firms within the same state, creating incentives for firms producing in different states to merge their operations. State tax policies are also affected by this apportionment formula: states choose inefficiently low tax rates and are encouraged to shift to direct taxation of property. The component of the tax based on payroll creates many similar incentives. With this tax, however, the marger of firms producing different goods is discouraged.When a sales component to the tax is added, there are incentives for the cross-hauling of output, with production in low tax rates states sold in high tax rate states, and conversely. None of the above distortions are created when the corporate tax uses separate accounting to divide a firm's profits among states. The final section presents an alternative apportionment formula which retains the administrative advantages of existing law, yet creates the same incentives as separate accounting as long as there are no economic profits.]

This papjer proposes alternatives to maximum likelihood estimation of the censored and truncated regression models (known to economists as "Tobit" models) .The proposed estimators are based on symmetric censoring or truncation of the upper tail of the distribution of the dependent variable.Unlike methods based on the assumption of identically distributed Gaussian errors/ the estimators are consistent and asymptotically normal for a wide class of error distributions and for heteroscedasticity of unknown form.The paper gives the regularity conditions and proofs of these large sample results, demonstrates how to construct consistent estimators of the asymptotic covariance matrices, and presents the results of a simulation study for the censored case.Extensions and limitations of the approach are also considered.

[It is commonly believed that textbook publishers attempt to "kill off" competition from used textbooks through yearly edition changes. In the context of Wicksell's model of durable goods, Peter Swan has shown that such "planned obsolescence" is never optimal: a monopolist seller of durable goods maximizes profits by setting product durability equal to the competitive or socially optimal level, and efficiently extracts consumer surplus through sales price alone. This paper formulates a monopolist seller's choice of price and durability as the solution to a Stackelberg game between the monopolist and consumers. We employ a new equilibrium model of a durable goods market which, unlike Wicksell's model, recognizes that scrappage of durables is endogenously determined. We show that with endogenous scrappage, consumers have a substitution possibility which constrains the profits of a monopolist seller. This constraint on profits causes the monopolist to distort durability from the socially optimal level. We derive conditions under which this distortion takes its most extreme form: the monopolist kills off competition from used durables by producing new assets of zero durability.]

[In this paper several results are established which provide for the consistent estimation of macroeconomic effects using cross-section data, for general assumptions on the movement of the population distribution over time. We show that macroeconomic effects are always consistently estimated by linear instrumental variables coefficients, where the instruments are determined by the form of distribution movement. This leads to a natural way to assess the biases in OLS coefficients as estimators of macroeconomic effects, provides a nonparametric macroeconomic interpretation of linear instrumental variables coefficients when the true microeconomic behavioral model is unknown, and gives a nonparametric interpretation of standard regression decomposition statistics such as R extasciicircum2 relative to the information costs of nonlinearities in aggregation. All of the results are valid without imposing any testable restrictions on the cross-section data.]

[Structural and stochastic neutrality have refutable implications for aggregate economic time series only in conjunction with other maintained hypotheses. Simple and commonly employed maintained hypotheses lead to restrictions on measures of feedback and their decomposition by frequency. These restrictions also suggest an empirical interpretation of the notional long and short runs. It is found that a century of annual U.S. data, and postwar monthly data, consistently support structural superneutrality of money with respect to output and the real rate of return and consistently reject its superneutrality with respect to velocity. A quantitative characterization of the long run is suggested.]

A basic problem in the theory of noncooperative games is the following: which Nash equilibria are strategically stable, i.e. self-enforcing, and does every game have a strategically stable equilibrium?We list three conditions which seem necessary for strategic stabilitybackwards induction, iterated dominance, and invariance-and define a set-valued equilibrium concept that satisfies all three of them.We prove that every game has at least one such equilibrium set.Also, we show that the departure from the usual notion of single-valued equilibrium is relatively minor, because the sets reduce to points in all generic games.

THIS PAPER INVESTIGATES a property of estimators called stability. The stability exponent of an estimator is a measure of the magnitude of the effect of any single observation in the sample on the realized value of the estimator. A number of reasons related to robustness suggest that often it is desirable for an estimator to be relatively insensitive to any particular observation in the sample, i.e., to have high stability. In addition, it is useful for diagnostic purposes to have knowledge of the stability exponents of different estimators, in order to know which estimators are likely to rely more heavily on some single observation. The paper is organized as follows: Section 1 introduces the basic idea contained in the paper, motivates it, and summarizes the results in an informal manner. Section 2 presents definitions, assumptions, and the general results. For purposes of illustration, the linear regression model with the least squares estimator is used as a running example throughout this section. Section 3 discusses numerous additional applications of the general results. An Appendix contains proofs of

This paper considers a generalized mean value m(p) defined implicitly for a probability measure p on the reals as the unique y for which J +(x, y) dp(x) = 0, where 0 is skewsymmetric and strictly increasing in its first argument. Conditions on m that are necessary and sufficient for the implicit characterization are given and its relationship to certainty equivalence is discussed.

In this paper we will show how a message process which "realizes" (or computes) a given social choice rule F can be used to construct a game which implements F in Nash equilibrium. Any efficient encoding of information that occurs in the message process causes a corresponding reduction in the size of the strategy space of the game which we will construct to implement F. Necessary and (stronger) sufficient conditions on the message process will be given for this construction.