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Based on the indirect arbitrage opportunities afforded citizens by tax-exempt debt issue, this article presents a model establishing equilibrium in the market for tax-exempt debt. The model yields two predictions. Increases in Federal income tax rates increase the spread between taxable and...
Persistent link: https://www.econbiz.de/10013151247
In this paper we leverage a national panel of US municipalities to show that a pair of heuristics identified from the behavioral economics literature, anchoring and the bandwagon effect, help to explain the number of years of expenses municipalities hold in reserve. We build our empirical case...
Persistent link: https://www.econbiz.de/10012844887
An age-old issue is how inquiry and action can reciprocally contribute to transforming existing into preferred conditions. Leading scholars of a recent generation repeatedly addressed this general issue in human affairs. Herbert Simon's major proposal was to develop design-oriented sciences or,...
Persistent link: https://www.econbiz.de/10012726577
This article raises several issues regarding the valuation and disclosure of pension commitments, quasi-commitments, and guarantees. We all know that the annual process of budgetary decision-making is prone to myopia and to tunnel vision. The long-term consequences of fiscal commitments are...
Persistent link: https://www.econbiz.de/10012732000
In recent years, scholars have developed new analytical tools and financial instruments that could help governments cope more effectively with financial volatility. In this essay we show how states can achieve fiscal sustainability using financial instruments based upon mean-variance analysis:...
Persistent link: https://www.econbiz.de/10012734594
In recent years, scholars have developed new analytical tools and financial instruments that could help governments cope more effectively with financial volatility. In this essay we show how states can achieve fiscal sustainability using financial instruments based upon mean-variance analysis:...
Persistent link: https://www.econbiz.de/10012772074
Budget policymakers should focus on expected revenue growth (average growth over history) and on the risk or volatility around that average. It makes sense to think about this risk as having two components purely random risk unrelated to the economy and risk associated with an economy that is...
Persistent link: https://www.econbiz.de/10012772083
Accurately predicting revenue growth is nearly impossible. Predicting the peaks and valleys of the business cycle is even more hopeless. This matters because tax revenues are largely driven by economic growth. Volatile, unpredictable revenue growth causes all sorts of unpleasant responses on the...
Persistent link: https://www.econbiz.de/10012772084
Private enterprises should be concerned with maximizing productivity. Government should be concerned with minimizing risk, perhaps subject to a cost or productivity constraint. Value creation in government ought to strive for consistency, coherency, and transparency. Achieving consistency and...
Persistent link: https://www.econbiz.de/10013051021
Minimum wage hikes express our sympathy for the working poor and our solidarity with them. But their importance is largely symbolic. The net effects of moderate increases in wage floors are vanishingly small. Statutory wage minimums work like taxes on labor, with their proceeds paid directly to...
Persistent link: https://www.econbiz.de/10013051703