Government Spending and Welfare with Returns to Specialization

Article Abstract:

We explore a novel channel through which government spending can stimulate consumption and welfare through its effects on aggregate productivity, without directly affecting either utility or production possibilities. In the presence of monopolistic competition and increasing returns to specialization, it is shown that government spending can partly alleviate the inefficiencies of monopolistic competition. This is because government spending generates an endogenous increase in total factor productivity by increasing the variety of intermediate goods. If the degree of increasing returns to variety is large enough, a rise in such wasteful government spending may increase consumption levels enough to increase welfare. Keywords: Increasing returns to scale; government spending JEL classification: E60

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The Distributional Impact of Public Goods Provision: A Veil of Ignorance Approach

Article Abstract:

The "veil of ignorance" approach is used to consider the redistribution implied by different tax-benefit systems. Assuming a (hypothetical) ex-ante situation in which individuals lack any knowledge about their future income, redistribution from rich to poor can be seen as a form of insurance. Taking redistribution and insurance as synonymous, the analysis derives cases of redistributionally neutral systems of taxation and public good provision. Keywords: Redistribution; public goods provision; veil of ignorance JEL classification: H23; D30; H41

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Transfer pricing, double taxation, and the cost of capital

Article Abstract:

Analysis of the effect of double taxation policies on the tendency of multinational companies to resort to transfer pricing to reduce their tax burden results in seemingly surprising results. In other words, a reduction in the taxation of foreign profits may actually lead to an increase in capital costs, and vice versa. This is generally the case except with newly established companies.

Econometrics & Model Building, Econometrics, Transfer pricing, Business models, Double taxation

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