The existence of transaction costs explains why investors do not fully diversify their portfolios. This paper examines the implications of such limited diversification on equilibrium asset prices in the framework of the capital asset pricing model. In the pricing equation obtained here an asset's risk premium depends on a weighted average of its covariance with the market and its own variance.

[This paper analyzes a simple mean-variance model of an imperfect capital market in which trade in assets involves costs. Fixed transactions costs, which result in investors only partially diversifying their portfolios, are shown to imply equilibrium asset prices substantially different from the Sharpe-Lintner prices. An improvement in the markets, in the form of lowering the trading costs, is shown to result in an increase in the number of assets held by each investor, in lowering equilibrium risk premia, and also in increasing the number of active investors.]

This paper analyzes a simple mean-variance model of an imperfect capital market in which trade in assets involves costs. Fixed transactions costs, which result in investors only partially diversifying their portfolios, are shown to imply equilibrium asset prices substantially different from the Sharpe-Lintner prices. An improvement in the markets, in the form of lowering the trading costs, is shown to result in an increase in the number of assets held by each investor, in lowering equilibrium risk premia, and also in increasing the number of active investors.

A tax reform is 'Dalton-improving' if it improves social welfare for all possible social-welfare functions that conform to Hugh Dalton's principle of transfers. According to this principle, there exists a prior social ranking of households and a transfer is approved if it it distributes from high-ranking ('rich') to low-ranking ('poor') households, without altering the ranking itself. In this paper, the authors develop a procedure for identifying marginal Dalton-improving reforms in the context of indirect taxation. The methodology is illustrated using data on excise taxes in the United Kingdom.

A tax reform is "Dalton-improving" if it improves social welfare for all possible social-welfare functions that conform to Dalton's principle of transfers. According to this principle, there exists a prior social ranking of households, and a transfer is approved if it distributes from high-ranking ("rich") to low-ranking ("poor") households, without altering the ranking itself. In this paper we develop a procedure for identifying marginal Dalton-improving reforms in the context of indirect taxation. The methodology is illustrated using data on excise taxes in the United Kingdom.

We analyze the organization of employment in nonsimultaneous shifts, considering the shift composition of manufacturing employment, both in the business cycle frequency and in the long run. With regard to the short run, we argue that shiftwork would be procyclical and that this, combined with the inherent lumpiness of shifts, may help resolve the puzzle of the procyclicality of labor productivity. With regard to the long run, we identify channels that may account for the increase in shiftwork in the past half-century and for the nonnegative cross-country correlation between shiftwork and the level of income.

The conventional theory about the origin of the state is that the adoption of farming increased land productivity, which led to the production of food surplus. This surplus was a prerequisite for the emergence of tax-levying elites and, eventually, states. We challenge this theory and propose that hierarchy arose as a result of the shift to dependence on appropriable cereal grains. Our empirical investigation, utilizing multiple data sets spanning several millennia, demonstrates a causal effect of the cultivation of cereals on hierarchy, without finding a similar effect for land productivity. We further support our claims with several case studies.