This paper models the linkage between a country's national security and the defense spending of its allies and adversaries. The cost of an arms race is introduced into the alliance public good framework of Olson and Zeckhauser. Contrary to their presumption, for a cooperative treaty to increase...

The sum of Hicksian compensation measure is shown to be the incorrect criterion for determining potential Pareto improvements. The correct criterion is a weighted average of households' compensation measures and is not, in principle, independent of the distribution of costs and benefits across...

A business tax is neutral if it does not effect the firms' decisions at the margin. We analyze the effect of a business tax on the firms' investment decision. The "implicit rent deduction" and "immediate write-off" methods are found to be special cases of our general tax design. The implication...