Do vertical tax externalities lead to tax rates being too high? A note

When both vertical and horizontal externalities are at work in a federation, they generally distort levels of taxation in opposite directions. This article is an extension of the Keen and Kotsogiannis (Am Econ Rev March: 363–370, 2002) model. It focuses on state tax policy when states provide an industrial public good increasing firms’ marginal productivity rather than a residential public good intended to households. We find that some results related to whether equilibrium state taxes are likely to be too high or too low are much more complex when state-provided industrial public goods are considered. First, we show that in the presence of industrial public goods, a dominant vertical externality may result in state tax rates being too low (and not too high as it is the case with residential public goods). Second, we find that under certain conditions, horizontal and vertical externalities may point in the same direction and reinforce each other towards tax rates being too high or too low.     

New housing supply elasticity in Australia: a comparison of dwelling types

This paper extends the work of McLaughlin (Australas J Reg Stud 1(17):60–80, 2011) by estimating housing supply elasticities of the six Australian capital cities over a longer panel, from 1983–2010. In addition, we extend McLaughlin’s analysis by comparing housing supply elasticities by dwelling type and also test for the presence of longer supply lags than previously examined in the supply literature. Based on widespread implementation of land-use regulations by Australian federal and state governments over the past 30 years, we hypothesize difference in elasticity between housing types is ambiguous, with supply lags greater for multifamily units. We employ the urban growth model of new housing supply developed by Mayer and Somerville (J Urb Econ 48(1):85–109, 2000a) and Mayer and Somerville (Reg Sci Urb Econ 30(6):639–662, 2000b) and employed in Zabel and Paterson (J Reg Sci 46(1):67–95, 2006) and McLaughlin (Australas J Reg Stud 1(17):60–80, 2011), to estimate the elasticity of new housing supply in Australia’s six capital cities—Sydney, Melbourne, Brisbane, Perth, Adelaide, and Hobart—using an unbalanced quarterly panel from 1983–2010. Our findings suggest that the elasticity of new supply is greater for multifamily units than single-family units, while supply response lags for multifamily homes are on the order of 4–8 quarters longer than that of single-family homes. These findings suggest that although Australian land-use policies may be achieving their goal of increasing the supply of smaller, more affordable units, future policies should seek to reduce the extensive supply lags of housing types to help ease short-run price increases.     

US excise tax horizontal interdependence: yardstick versus tax competition

US cigarette excise tax rates are state interdependent. In contrast, we cannot reject the absence of interdependence for gasoline taxation, which shows a very high degree of inertia. A one-cent increase in the neighbors’ cigarette tax rate implies a contemporaneous cigarette tax increase of around 0.24 cents. However, identifying the source of interaction is key to its normative assessment. Our empirical analysis—spanning the period 1992–2006—finds that cigarette tax interdependence is politically driven: only states with non-term-limited governors react (providing evidence of yardstick competition), basically as the election year approaches. We also show this political motivation is in accordance with List and Sturm’s (Q J Econ 121:1249–1281, 2006) hypothesis of single-issue voters: politicians tend to favor smokers when they are non-term limited, being this effect counteracted when they are term limited.     

Sequential location in a discrete directional market with three or more players

This paper expands Lai’s (Reg Sci Urban Econ 31:535–546, 2001) directional market analysis to a three-player game and endogenizes a restricted assumption of Lai (Reg Sci Urban Econ 31:535–546, 2001) through the test of a validated equilibrium introduced by Spagat (Math Soc Sci 24:49–57, 1992) and the use of lexicographic preference relation players (with payoff ranking a secondary consideration after the game’s payoff). There are multiple equilibrium outcomes, and any player may take advantage in this game due to the indifference problem of the players. However, if we utilize the validated equilibrium refinement, then the results present that the later the players enter a directional market, the greater the benefits they receive. If a player’s preference relation is lexicographic ordering, then we obtain results identical to the validated equilibrium outcomes. This paper ends with an extension of a general number of players.     

Location choice under delivered pricing: a reinterpretation

This article reinterprets, under a common framework, previous results on location choice under delivered pricing. The paper clearly identifies the economic forces which explain why the socially optimal locations are an equilibrium of the location-price game in some models, and why they are not an equilibrium in other models. The paper shows that the rationale behind Hamilton et al. (Reg Sci Urban Econ 19:87–102, 1989) and Gupta’s (Reg Sci Urban Econ 24:265–272, 1994) non-optimality results are very different. While the first result is explained by the social inefficiency of the price game, the second one is due to the existence of a strategic effect. The author is grateful to the three anonymous referees for their valuable comments.     

Human capital and state-level economic growth: what is the contribution of schooling?

In this paper, we set out to quantify the magnitude of the positive empirical relationship between schooling and regional growth. We apply the growth empirics method of Mankiw et al. (Q J Econ 107:407–438, 1992) to a panel of US states. We improve upon the existing regional growth literature by (i) removing transfer payments from personal income, (ii) deflating non-transfer income by individual state price indices, and (iii) using a system GMM estimator. We estimate an education share of income of 20–25%, which corresponds to estimates from the growth accounting literature.     

Trends of greenhouse gas emissions from the road transport sector in India

The road transport sector is the largest consumer of commercial fuel energy within the transportation system in India and accounts for nearly 35% of the total liquid commercial fuel consumption by all sectors. Gasoline and diesel consumption for road transportation have quadrupled between 1980 and 2000 due to about nine times increase in the number of vehicles and four-fold increase in freight and passenger travel demands. The paper elaborates the trends of energy consumption and consequent emissions of greenhouse gases such as CO(2), CH(4) and N(2)O and ozone precursor gases like CO, NO(x) and NMVOC in the road transport sector in India for the period from 1980 to 2000. For the first time, efforts have been made to apportion the fuels, both diesel and gasoline, across different categories of vehicles operating on the Indian roads. In order to generate more comprehensive and complete emission estimates, additionally, other minor fuel types like light diesel oil and fuel oil along with lubricants have also been taken into account. Emission estimates have revealed that nearly 27 Mt of CO(2) were emitted in 1980, increasing to about 105 Mt in 2000. Similar trends have also been observed for other gases. Further scope for improvements in emission estimation is possible by generating country specific emission factors for different vehicle categories and improvement in documentation of fuel consumption at segregated levels by fuel types and vehicle types.     

Quality of life in the regions: results for German Counties

In order to assess differences in living conditions across German regions we apply the hedonic approach of Rosen (Current issues in urban economics, 1979) and Roback (J Polit Econ 90(6):1257–1278, 1982) to land-price and wage differences across Germany’s counties. Employing a recent survey of more than half a million Germans on a wide range of social and political issues we confirm that differences in amenities give rise to substantial differences in land prices. With regard to wages, however, we find only little effects of amenities. Relying on the land-price effects we assess the quality of life in each of the German counties and provide a comprehensive ranking.     

Knowledge spillovers, location of industry, and endogenous growth

A Grossman–Helpman–Romer-type (Grossman and Helpman in Innovation and growth in the world economy, 1991; Romer in J Polit Econ 98:71–102, 1990) endogenous-growth model is developed in this study. This model has two countries in which there are knowledge spillovers that are partially local. Owing to these spillovers, the innovation costs in a particular country decrease as the number of firms locating in both that country and the other country increases. If international knowledge spillovers are symmetric, the innovation sector is in the country with the larger market. However, if international knowledge spillovers are asymmetric, the innovation costs may be in the small-market country. When innovation costs are lower in the country with a large market, the growth rate increases with a reduction of transportation costs. However, when innovation costs are lower in the country with the smaller market, the growth rate decreases with a reduction in transportation costs. We are grateful to Marcus Berliant, Masahisa Fujita, Koichi Futagami, Tatsuo Kinugasa, Takuo Imagawa, Tomoya Mori, Se-il Mun, Hisahiro Naito, Ryoji Ohdoi, Tatsuyoshi Saijyo, and Akihisa Shibata for their helpful comments and suggestions. Any remaining errors are the responsibility of the authors.     

Regional implications of the 2001 recession

This paper investigates the 2001 recession on a state by state basis. The approach used for this investigation measured the state by state severity of the 2001 recession and identifies the contribution that each state made to the overall U.S. GDP Okun gap. State by state long-term growth rates for both output and employment were calculated and an “Okun gap contribution” for the 2001–2005 period was estimated for each state. Each state’s Okun gap contribution for output and employment was expressed in relative terms allowing for comparisons of volatility between states with respect to the 2001 recession. Finally, for both output and employment regressions were estimated using the relative Okun gap contribution as the dependent variable and selected demographic and economic measures as explanatory variables to explain the state and regional differences in cyclical performance. The results of the regression analysis provide insight into the factors that tend to increase state and regional cyclical volatility and the factors that tend to smooth volatility.     

The Sales Tax Puzzle – Has the law of demand been repealed?

TRA86 removed the deductibility of state and local sales taxes from U.S. personal income taxes. This effectively increased the price to state governments of sales tax revenue relative to income tax revenues. This implies that state reliance on income taxes relative to sales taxes should have increased after TRA86 was implemented. Leading public finance economists investigated this in the period shortly following the reform and invariably found that the predicted substitution of income for sales taxes did not take place. In fact, several studies noted that state dependence on the sales tax increased relative to income taxes – hence the Sales Tax Puzzle. Several experts tried to rationalize their non-findings. These rationalizations are unconvincing. This paper asserts that the puzzle may be resolved in two different ways. The first, seemingly trivial, is that the analysis must incorporate sufficient time so as to allow for relatively complex adjustments. Our contributions here are to anchor this obvious point with a theoretical model related to earlier work of the authors, and an explicit empirical examination of the lag structures of individual states reactions to the comprehensive tax reform. The second demonstrates that the analysis must take into account regional shifts that were taking place in the U.S. during this period. When such compositional shifts involving political and deductibility patterns are explicitly introduced into the model, the paradoxical findings are resolved both in the long and in the short run. Our contribution here is a demonstration that the use of detailed state-level data, unlike any of the earlier work in this area, allows for the inclusion in the analysis of inter-regional shifts in various parameters. An additional contribution is the explicit use and emphasis of the propensity to itemize as an independent variable. The use of this variable ties this area of analysis of post tax reform behavior into a hitherto untapped strand of public-finance literature. The variable is both theoretically interesting, and proves to have experienced compositional shift patterns which help resolve the sales-tax puzzle paradox.     

Rheological properties of water-in-diesel fuel emulsions

The addition of water dispersed phase into the diesel continuous phase will lead to the formation of water-in-diesel (W/D) emulsion, which significantly reduces the pollution level of NO_x and particulate matters in the diesel engines. The study of the rheological properties of stable W/D emulsions is important to understand the flow characteristics of these emulsions. Pure diesel fuel and three samples of W/D emulsions (10%, 20%, and 30% by volume water) were examined. Pure diesel fuel exhibits a Newtonian profile since its viscosity remains constant with the shear rate. All W/D emulsions display higher viscosity than diesel fuel with non-Newtonian flow behaviour of yield pseudoplastic response. The viscosity of the W/D emulsions decreases with the shear rate and water addition. The flow behaviour of pure diesel fuel can be described by the Power law model. The Casson model very sufficiently fits the flow behaviour of different W/D emulsions.     

Urbanization process and land use policy

Within a framework of NEG model, this paper intends to show that urbanization rate is determined as a synthetic result of rational behavior of each socio-economic agent. In particular, a model is constructed with bearing in mind to explain the urbanization process in China such that the role of government in managing land use is explicitly incorporated and policy effects can be evaluated. Some results of theoretical analysis and numerical simulation analysis are contrasted with the ones of Fujita-Krugman (Reg Sci Urban Econ 25: 505–528, 1995) incorporating land into a NEG model as well.     

The efficiency of Swedish regional policy

In this paper, I evaluate the efficiency of Swedish regional policy. I analyze the government’s regional policy goals and means as presented in Government Bills 1997/1998:62 and 2001/2002:4. In the light of the literature on where growth occurs as well as the results of the regional policy so far, the realism of the government’s goal of “sustainable economic growth in the whole country” could be questioned. Subsidies to companies in problematic regions have uncertain or even negative effects. The government could therefore eliminate these subsidies and replace them with venture capital loans. It could also stop its subsidies to municipal housing companies for shutting down apartments. The positive effects of the government’s tax and subsidy system for the municipalities, motivated by its distribution goal, come at the price of negative effects on incentives for a high national rate of growth. The government could replace this system with extended general subsidies. Investments in transportation projects that do not show a net benefit, such as the large Bothnia Railway in northern Sweden should be reconsidered. However, I find significant and systematic evidence that the government’s investments in regional colleges, particularly in research, have been successful.     

Sealability Properties of Fluorine-Free Fire-Fighting Foams (FfreeF)

This contribution compares the sealability performance of recently developed three synthetic foam formulations (that do not contain fluorosurfactants or fluoropolymers) with that of an aqueous film forming foam (AFFF). We apply the sealability methodology outlined in the Australian Defence Force Specification, DEF(AUST)5706. This methodology specifies a 0.28 m² small-scale indoor fire pan. The pan is first filled with 10 L of water and then 5 L of AVGAS (aviation gasoline, flash point of −50°C) or heptane (flash point of −4°C) is placed on top of the water. Foams were generated from a pressurised extinguisher with a foam nozzle as described in the standard’s specification, set to create foams with expansion of 4:1. The foam spread across the fuel until the entire fuel surface was covered with foam. At 5 min intervals, a lit taper was introduced into the space above the pan area by passing it twice around the surface of the foam in a circular motion at a height of approximately 15 mm from the surface of the foam. The results demonstrate differences in the sealability performance between AFFF and fluorine-free foams (FfreeF). Under laboratory conditions, with a foam blanket 1–2 cm deep, best-performing FfreeF formulation (RF6) provides about 30% of the durability of an AFFF for protection against evaporation of low-flashpoint flammable liquids. We also note in the results the significant differences among FfreeF with almost no sealability of AVGAS vapours offered by the two other formulations. Presented at the Suppression and Detection Research and Applications—A Technical Working Conference (SUPDET 2007); Wyndham Orlando Resort, March 5–8, 2007, Orlando, FL, USA.     

On the role of distance for outward FDI

This paper focuses on the estimation of three distance-related effects on outward FDI. (1) Distance harms vertical multinationals, since they engage in trade. (2) It makes non-trading multinationals better off than exporters. (3) This positive effect on horizontal FDI is expected to rise with bilateral parent and host market size. The use of panel data and related econometric methods is highly recommended to avoid parameter bias from endogenous, unobserved, time-invariant effects. A unified estimation approach to assess all three hypotheses then has to rely on instrumental variable techniques for generalized least-squares methods. In the empirical analysis of 1989-1999 bilateral US outward FDI stocks at the industry level, it is shown that testing and accounting for autocorrelation is extremely important for parameter inference. In sum, the paper lends strong support to the theory of horizontally organized multinationals as outlined in Markusen and Venables (J Int Econ 52(2):209–234).     

Spatial spillovers in US wholesale gasoline markets

This paper analyses how oil industry‐related activities in neighbouring gasoline markets affect local markets. Our contribution consists of applying spatial econometric models to better understand pricing behaviour in US gasoline markets and the spatial phenomena unique to this particular industry. We find that neighbouring state‐level gasoline price variation explains a large portion of the variation of in‐state (or local) gasoline prices. Consistent with intuition, the empirical results imply that wholesale gasoline prices are positively affected by state and federal‐level gasoline content regulations. Further, our results suggest that changes in state‐level wholesale gasoline prices respond to both in‐state and neighbouring‐state inventory levels.     

Ecological problems with the design of fuel and power-generating complexes

Information on characteristic features of geologic-engineering conditions is cited for the construction of large-scale tanks, and the laying of arterial pipelines in the Krasnodar Kray. Conditions relative to the reliability and ecological safety of fuel and power-generating complexes built in a complex and natural setting are discussed. __________ Translated from Osnovaniya, Fundamenty i Mekhanika Gruntov, No. 6, pp. 14–17, November–December, 2006.     

Safe separation distances from liquid fuel fires

In question is the adequacy of the current method for calculating safe separation distances from large-scale liquid fuel fires. The authors point out the limitations and weaknesses of such calculations and recommend further research. Note: Adapted from a paper presented at the Central States Section of the Combustion Institute Meeting on Disaster Hazards held at NASA’s Manned Spacecraft Center in Houston, Texas, 1970.