Public Economics Program Meeting

NBER Reporter, Summer 1997 | Go to article overview

Public Economics Program Meeting


Members of the NBER's Program on Public Economics, directed by James M. Poterba of MIT, met in Cambridge on April 10 and 11. They discussed the following papers:

Rosanne Altshuler, NBER and Rutgers University, and Jagon G. Cummins, New York University, "Tax Policy and the Dynamic Demand for Domestic and Foreign Capital by Multinational Corporations"

Discussant: Douglas Shackelford, University of North Carolina

Kenneth L. Judd, NBER and Stanford University, "Optimal Taxation and Spending in General Competitive Growth Models"

Discussant: Rodolfo Manuelli, NBER and University of Wisconsin

Steven D. Levitt, NBER and Harvard University, and Ian Ayres, Yale University, "Measuring Positive Externalities from Unobservable Victim Precaution: An Empirical Analysis of Lojack" (NBER Working Paper No. 5928)

Discussant: Edward Glaeser, NBER and Harvard University

Olivia S. Mitchell, NBER and University of Pennsylvania; James M. Poterba; and Mark J. Warshawsky, TIAA-CREF, "New Evidence on the Money's Worth of Individual Annuities" (NBER Working Paper No. 6002)

Discussant: Benjamin Friedman, NBER and Harvard University

John B. Shoven, NBER and Stanford University, and David A. Wise, NBER and Harvard University, "The Taxation of Pensions: A. Shelter Can Become a Trap" (NBER Working Paper No. 5815)

Discussant: Daniel Halperin, Harvard University

David F. Bradford, NBER and Princeton University, "Fixing Realization Accounting: Symmetry, Consistency, and Correctness in the Taxation of Financial Instruments" (NBER Working Paper No. 5754)

Discussant: William M. Genry, NBER and Columbia University

Joel B. Slemrod, NBER and University of Michigan, "Tax Compliance: New Evidence from Minnesota"

Discussant: Ann D. Witte, NBER and Florida International University

Altshuler and Cummins use firm-level panel data on Canadian multinational corporations that invest solely in the United States and find that domestic and foreign capital are greater-than-unit-elastic substitutes in the production process, and that there is a statistically significant coordination cost to domestic and foreign investment. They also simulate the effect of various tax policies on the dynamics of investment and on the steady-state values of the Canadian and U.S. capital stock. Their simulations show the importance of interrelated production and adjustment costs in the analysis of tax policy towards multinational corporations.

Judd examines the optimal taxation of capital and the provision of public goods. He points out that many "consumption" tax proposals, such as the Flat Tax and the VAT, are not consumption taxes. He instead proposes a tax system biased against human capital and in favor of physical capital investment.

Levitt and Ayres find that the presence of Lojack is associated with a sharp fall in auto theft in central cities and a more modest decline in the remainder of the state. Rates of other crimes do not change appreciably. Their estimates suggest that, at least historically, the marginal social benefit of an additional unit of Lojack has been as much as 15 times greater than the marginal social cost in high crime areas. Those who install Lojack in their cars, however, obtain less than 10 percent of the total social benefits of Lojack, causing Lojack to be undersupplied by the free market. Current insurance subsidies for the installation of Lojack appear to be well below the socially optimal level. …

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