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...

This paper analyzes corporate and personal income taxes and inflation on the cost of investing in depreciable and inventory capital in Canada in 1963-78. Changes in rates of inflation and corporate tax rates theoretically have an ambiguous effect on the cost of capital. Tax depreciation and FIFO...

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This paper analyzes the case for integration in a small open economy when all firms and households exploit tax arbitrage opportunities to the fullest possible (legal) extent. The analysis shows that integration does not accomplish the objectives that have been attributed to it. Instead of...

Becker derives the Rotten-Kid theorem -- that a child will not behave in a manner which lowers the parent's income more than it raises the child's -- in a one period setting. Not captured in Becker's analysis is that the family environment can exhibit what others refer to as the Samaritan's...

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...