Search results

The purpose of this paper is to analyze the effect of utility and production externalities on the equilibrium efficiency, and to devise tax policies capable of correcting the distortions caused by the external effects.

The paper analyzes a Ramsey‐type model with utility and production externalities. It compares the decentralized equilibrium in the market economy with the optimal growth path attainable by a central planner.

The paper shows the effects of utility and production externalities on competitive long‐run equilibrium values. It devises optimal tax policies capable of decentralizing the optimal growth path, and shows how the leisure specification affects the optimal tax policy.

The paper adds to the literature on optimal taxation, and provides theoretical results that may help policy makers to set the tax policy.

The paper analyzes the equilibrium efficiency in a rather general model with utility externalities, associated with both consumption and leisure, and production externalities. Equilibrium efficiency is studied under the two typical leisure specifications proposed in the literature: home production and raw time. This allows one to analyze the effect that the leisure specification has on the optimal tax policy.

Current research within law and economics focus on money laundering as an externality problem caused by financial institutions. Thus, when existing research and legislation place the responsibility on financial institutions, it creates a void where it is neglected that clients of financial institutions may, in fact, play a vital role in the problem of externality. However, based on the definition of money laundering, this paper aims to examine and analyze the need to focus on the clients as part of the externality problem with regard to money laundering.

This paper examines how a lack of regulatory focus on the clients of financial institutions lead to inefficient anti-money laundering regulation. Through a functional approach of law and economics, it analyzes the externality problem of money laundering based on both the legal definition and the economic conditions of the problem.

Based on the fourth anti-money laundering directive, the paper argues that present regulation has a tendency to focus on financial institutions, thereby not considering the entire scope of the externality problem in money laundering. For regulation to efficiently combat money laundering, it is necessary to place some responsibility on the clients of financial institutions and not solely on the financial institutions. Nevertheless, the inclusion of client responsibility might lead to some legal or economic complications, which need to be subject to further research.

The paper identifies the need for a fundamental change in the perception of the externality problem of money laundering, and thus, presents the required approach to reach an efficient solution.

The purpose of this paper is to present a review of the literature on alcohol consumption, the externality cost of alcohol consumption, and the effectiveness of policy options.

Evidence on the cost to society of alcohol consumption, the amount of excise tax collected, the demand response of consumers, and the effectiveness of alcohol‐control policies is reviewed.

Alcohol excise taxes generally, but not everywhere, fail to recover the externality costs placed on society that arise from alcohol consumption. Where externality costs are greater than excise revenue higher excise taxes are one effective and appropriate policy response. Complementary policies to higher excise taxes are likely to include: the provision of more information about harmful effects to consumers, especially the young; greater enforcement of drunk‐driving laws and zero tolerance drunk‐driving laws for young drivers. Restrictions on the opening hours of late night venues may have a modest impact on reducing costs, while advertising restrictions are unlikely to be effective.

Typically. articles on alcohol consider a single issue. This review paper brings together information from both the health stream of alcohol studies and the economics stream of alcohol studies and provides a useful survey and synthesis of the literature.

The U.S. 2009 Tobacco Control Act opened the door for new antismoking policies by giving the Food and Drug Administration broad regulatory authority over the tobacco industry. We develop a behavioral welfare economics approach to conduct cost-benefit analysis of FDA tobacco regulations. We use a simple two-period model to develop expressions for the impact of tobacco control policies on social welfare. Our model includes: nudge and paternalistic regulations; an excise tax on cigarettes; internalities created by period 1 versus period 2 consumption; and externalities from cigarette consumption. Our analytical expressions show that in the presence of uncorrected internalities and externalities, a nudge or a tax to reduce cigarette consumption improves social welfare. In sharp contrast, a paternalistic regulation might either improve or worsen social welfare. Another important result is that the social welfare gains from new policies do not only depend on the size of the internalities and externalities, but also depend on the extent to which current policies already correct the problems. We link our analytical expressions to the graphical approach used in most previous studies and discuss the information needed to complete cost-benefit analysis of tobacco regulations. We use our model as a framework to reexamine the evidence base for strong conclusions about the size of the internalities, which is the key information needed.

This paper aims to identify the effects of social learning and network externalities by conditioning on product quality and early sales momentum. This approach is demonstrated using film sales data.

This study used econometric modeling approach.

It was found that both social learning and network externalities have significant and comparable impacts on film choice. We show that the relative effects of network externalities and social learning in the film market are robust to different momentum and quality definitions and to alternative estimation methods.

Scholars have long argued that social learning plays a key role in new product diffusion. In some product categories, consumer choice may also be influenced by network externalities, meaning that purchasing popular products may provide the consumer utility above and beyond that derived from product usage directly. We propose a novel identification approach to help quantify the relative magnitude of these two effects on new product sales.

In a simple reciprocal dumping model of trade, this study scrutinizes the strategic role of trade and commodity taxes as environmental instruments when consumption of an imported product generates pollution. The results suggest that for sufficiently small values of the marginal disutility from pollution, commodity taxes can be preferred over import tariffs, and compared to the case of trade policies, free trade can be welfare dominating even for higher values of the marginal disutility from pollution when commodity taxes are used strategically as environmental instruments.

The authors employ a reciprocal dumping model of trade.

A sufficiently high marginal disutility from pollution (or sufficient asymmetries between the countries in terms of their marginal disutility from pollution) may jeopardize bilateral trade, especially if countries are given the option to set tariffs freely for imported goods (consumption of which generate environmental pollution). For sufficiently weak transboundary pollution and sufficiently low marginal disutility from pollution, (1) both Nash trade and domestic policies may prove to be helpful in addressing consumption-based pollution, and (2) it is possible to show in such a case that Nash domestic policies may be preferred over Nash trade policies, especially when both transboundary pollution and the trading partner's marginal disutility from pollution are sufficiently low.

The novel contribution of this paper is (1) to capture asymmetries among trading partners in terms of how much they account for environmental pollution when deciding on their (domestic/trade) policy measures and (2) to focus on environmental degradation that is caused by final consumption of a product imported from a trading partner.

When the policy maker contemplates the current aggregate demand (AD), she/he does so given implicitly the current state of income inequality. And, policy goals should be set based on the distance between this demand and some “optimal” AD from the viewpoint of optimal income inequality. The purpose of this paper is to relate this policy concern to the sources of modern inequality.

To characterize optimality, recent research in inequality reveals that paternalistic inheritance is the decisive source of it. Inequality is the outcome of an intergenerational externality according to which the current entrepreneurs (physical-capital formation agents) bequeath to descendants who use the inheritance as rentiers rather than as entrepreneurs. Several policy measures have been proposed to correct for this externality. Yet, it is found that if the “dynastic” character of inequality is disregarded, the distance between actual and optimal AD will be ever increasing.

Policy should be addressing the motive of the descendants to act as rentiers, which is found to be easy to attain once the policy maker adopts a natural-resource view of sizeable inheritance and proceeds to reassign property rights over it across generations.

Optimality is identified with the Cantorian (total) ordering of the social economy, which is inhibited by the institution of dynastic property rights. One way to deal with this problem is to view inheritance as a depletable natural resource.

The effects of social learning and network externalities in the diffusion of a new product imply that there should be local spillovers from existing owners to new adopters in a closely related community. Using the data from a unique household survey in rural China, this paper aims to examine the importance of local spillovers in the diffusion of two major durable goods, washing machine and refrigerator.

Based on a 1999 rural household survey of durable goods consumption conducted by the National Bureau of Statistics (NBS) of China, the authors examine the likelihood of rural households adopting a washing machine and a refrigerator during 1998-1999, respectively.

The estimation results indicate that a household is more likely to buy its first durable good in villages where a large share of households already own one. Further evidence suggests that these patterns are unlikely to be explained by unobserved local characteristics. When examined in more detail, the extent of local spillovers appears to be positively related to the household education level.

First, the study reveals the importance of local spillovers in the diffusion of these two durables. Specifically, 64 percent of washing machine adoptions during 1998-1999 are due to these spillovers. For refrigerator adoptions, the proportion is 55 percent. Second, to the authors' best knowledge, the authors are among the first to test and provide evidence on the interaction between education level and local spillovers based on the learning hypothesis.