After long suffering from benign neglect if not outright contempt, industrial policy is almost fashionable again. The global financial and economic crisis known as the Great Recession has forced researchers and policy makers to confront the reality that market forces alone generally do not lead...

We explore the interaction between two facts. The first is that income is variable; the second is that the tax and transfer system transforms before tax income into after tax income in highly non-linear ways. The effect is to penalize (and reward) income variability in a manner which is both...

Asset pricing relations are developed for a vector of assets with a time varying covariance structure. Assuming that the eigenvectors are constant but the eigenvalues changing, both the Capital Asset Pricing Model and the Arbitrage Pricing Theory suggest the same testable implication: the time...

Tax and transfer programs transform before-tax income into after-tax income. Income is variable and the tax and transfer system is nonlinear-i.e., marginal tax rates vary. We show that, as a consequence, the tax and transfer system punishes (and rewards) income variability. We calculate the...

In this paper, we define dynamic and static factors and distinguish between the dynamic and static structure of asset excess returns. We examine the value-weighted market portfolio as a dynamic factor and propose an intuitively appealing procedure to search for more dynamic factors. We find...

This paper is an attempt to assess the effect of capital gains taxation on non-Austrian assets, such as claims to profits of continuing enterprises. As compared to taxation on an accrual basis, the capital gains tax discourages sales of appreciated assets. This is the "lock-in" effect. Because...