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...

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...

In this paper we argue that rules are desirable in the conduct of fiscal policy. Since the market does not constrain federal borrowing, policy-imposed constraints are necessary to maintain fiscal prudence. A simple rule such as the annually balanced budget is sufficient for fiscal prudence but...

The paper estimates a life-cycle model of consumption, saving, and wealth accumulation from disaggregated time series data containing an explicit age dimension. Highly significant age effects indicate the importance of age disaggregated analysis. Interest elasticities of saving are considerably...

It is now well known that "optimal" government policies may not be time consistent--that is, ex post optimal. Time consistency considerations can be shown to reverse the conclusions about the relative merits of different tax structures that are drawn from Ramsey type analysis. In this paper I...

This paper explores the structure and specification of goods and factor markets in open economy macro models. Simple benchmark models are set up which abstract entirely from market structure and focus on goods market structure. These real and monetary factors are combined in a full employment...

Evaluating projects on the basis of aggregate (unweighted) costs and benefits is a wide spread practice in cost-benefit analysis. This practice continues despite serious flaws in the "compensation principle", which is the usual welfare theoretic basis to justify the procedure. For this reason we...

An exact expression for the normalized change in utility resulting from discrete changes in tax rates on economic activities is derived using certain linearity assumptions in preferences. This expression is used to consider alternative ways of identifying the resulting efficiency cost (or excess...

The prevalent assertion that replacement valued depreciation deductions are superior to historic valued deductions is critically examined in this paper. The neoclassical theory of the firm with constraints on debt issue provides the analytic foundations for examining the investment decision of...

This paper examines portfolio theory underpinnings of the familiar IS and LM model to discover a common ground to determine the differences separating the monetarist and income-expenditure approaches. It is emphasized that the LM curve represents portfolio balance conditions rather than full...