Asymmetric oligopoly and foreign direct investment: implications for host-country tax-setting

We present a duopoly model with heterogeneous firms that vary in cost-efficiency, each of which can choose to serve a foreign market by either exporting or local production. We do so to analyse the effects of a host-country corporate profit tax on both the scale and composition of FDI, and find that: strategic interaction between oligopolistic firms provides for a pattern of FDI that favours cost-inefficiency to the detriment of host-country welfare; and the host-country tax rate can be optimally used to avoid such patterns of FDI and instead promote direct investment by a relatively cost-efficient firm.

Agricultural tenancy reform: the end of law; or a new popular culture?

This paper applies a reading of the postmodernisation of law to the incremental reform of agricultural holdings legislation over the last century. In charting the shifting legal basis of agricultural tenancies, from ‘black letter’ positivism to the cultural contextuality of sumptuary law, the paper theorises that the underlying political imperative has been allied to the changing significance of property ownership and use. Rather than reflecting the long-term official desire to maintain the let sector in British agriculture, however, the paper argues that this process has had other aims. In particular, it has been about an annexation of law to legitimise the retention of landowner power while presenting a rhetorical ‘democratisation’ of farming, away from its plutocratic associations and towards a new narrative of ‘depersonalised’ business.

The financial system reform in China: the lesson learnt from the global financial crisis

This paper reviews the impact of the global financial crisis on financial system reform in China. Scholars and practitioners have critically questioned the efficiencies of the Anglo- American principal-agent model of corporate governance which promotes shareholder-value maximisation. Should China continue to follow the U.K.-U.S. path in relation to financial reform? This conceptual paper provides an insightful review of the corporate governance literature, regulatory reports and news articles from the financial press. After examining the fundamental limitations of the laissez-faire philosophy that underpins the neo-liberal model of capitalism, the paper considers the risks in opening up China’s financial markets and relaxing monetary and fiscal policies. The paper outlines a critique of shareholder-capitalism in relation to the German team-production model of corporate governance, promoting a “social market economy” styled capitalism. Through such analysis, the paper explores numerous implications for China to consider in terms of developing a new and sustainable corporate governance model. China needs to follow its own financial reform through understanding its particular economy. The global financial crisis might help China rethink the nature of corporate governance, identify its weakness and assess the current reform agenda.

Applications of behavioural economics to tax evasion

The paper reviews recent models that have applied the techniques of behavioural economics to the analysis of the tax compliance choice of an individual taxpayer. The construction of these models is motivated by the failure of the Yitzhaki version of the Allingham–Sandmo model to predict correctly the proportion of taxpayers who will evade and the effect of an increase in the tax rate upon the chosen level of evasion. Recent approaches have applied non-expected utility theory to the compliance decision and have addressed social interaction. The models we describe are able to match the observed extent of evasion and correctly predict the tax effect but do not have the parsimony or precision of the Yitzhaki model.

Regulatory reform and productivity change in Indian banking

This paper examines the impact of regulatory reform on productivity growth and its components for Indian banks in 1992-2009. We estimate parametric and non-parametric efficiency frontiers, followed by Divisia and Malmquist indexes of Total Factor Productivity respectively. To account for technology heterogeneity among ownership types we utilise a metafrontier approach. Results are consistent across methodologies and show sustained productivity growth, driven mainly by technological progress. Furthermore, results indicate that different ownership types react differently to changes in the operating environment. The position of foreign banks becomes increasingly dominant and their production technology becomes the best practice in the industry.

Another reform? proposals for the post-2013 Common Agricultural Policy

Following two decades of policy change, in 2011 the European Commission tabled proposals for a new ‘reform’ of the CAP. A major component of the reform would be a revamping of the existing system of direct payments to farmers. For example, 30% of the spend would be dependent on farmers respecting new greening criteria; and payments would be restricted to active farmers and subject to a payment cap. These proposals will be debated by the Council of Ministers and the European Parliament throughout 2012, and possibly 2013, before final decisions are reached. What aspects, if any, of the proposals will prove acceptable is yet to be discerned. Although tabled as part of a financial package, the proposals do not appear to be driven by financial exigency: indeed they seek to maintain the expenditure status quo. Nor do they appear to be driven by international pressures: if anything, they backtrack on previous attempts to bring the CAP into conformity with a post-Doha WTO Agreement on Agriculture. Instead they seek to establish a new partnership between society and ‘farmers, who keep rural areas alive, who are in contact with the ecosystems and who produce the food we eat’ (Cioloș 2011), in an attempt to justify continuing support.

Social networks and occupational choice: the endogenous formation of attitudes and beliefs about tax compliance

The paper analyses the emergence of group-specific attitudes and beliefs about tax compliance when individuals interact in a social network. It develops a model in which taxpayers possess a range of individual characteristics – including attitude to risk, potential for success in self-employment, and the weight attached to the social custom for honesty – and make an occupational choice based on these characteristics. Occupations differ in the possibility for evading tax. The social network determines which taxpayers are linked, and information about auditing and compliance is transmitted at meetings between linked taxpayers. Using agent-based simulations, the analysis demonstrates how attitudes and beliefs endogenously emerge that differ across sub-groups of the population. Compliance behaviour is different across occupational groups, and this is reinforced by the development of group-specific attitudes and beliefs. Taxpayers self-select into occupations according to the degree of risk aversion, the subjective probability of audit is sustained above the objective probability, and the weight attached to the social custom differs across occupations. These factors combine to lead to compliance levels that differ across occupations.

Youth justice reform: redressing age discrimination against children?

This article considers whether the system of reprimands and final warnings in the youth justice system in England and Wales constitutes age discrimination for the purposes of human rights law. Whilst much youth justice discourse has addressed the use of diversionary measures that steer children away from formal justice processes, little attention has been paid to measures which negatively discriminate against children, in comparison to adults, without reasonable justification. The discussion contextualizes the issue within discourses on the sociology of childhood and youth justice, and considers why there is a general reluctance to recognize children as ‘victims’ of age discrimination.

Tax principles, product differentiation and the nature of competition

We analyze the choice between the origin and destination principles of taxation when there is product differentiation and Bertrand competition. If taxes are redistributed to consumers and demand is linear the origin principle dominates the destination principle whatever the degree of product differentiation and extent of economic integration. With nonlinear demand the origin principle dominates if there is sufficient economic integration. When the social value assigned to tax revenue is higher than the private value, the destination principle dominates for intermediate values of product differentiation and economic integration. The same results are also shown to hold with Cournot competition.

The structure of the optimal income tax in the quasi-linear model

Existing numerical characterizations of the optimal income tax have been based on a limited number of model specifications. As a result, they do not reveal which properties are general. We determine the optimal tax in the quasi-linear model under weaker assumptions than have previously been used; in particular, we remove the assumption of a lower bound on the utility of zero consumption and the need to permit negative labor incomes. A Monte Carlo analysis is then conducted in which economies are selected at random and the optimal tax function constructed. The results show that in a significant proportion of economies the marginal tax rate rises at low skills and falls at high. The average tax rate is equally likely to rise or fall with skill at low skill levels, rises in the majority of cases in the centre of the skill range, and falls at high skills. These results are consistent across all the specifications we test. We then extend the analysis to show that these results also hold for Cobb-Douglas utility.

Revenue-neutral tax policy under price uncertainty

The firm's response to revenue-neutral taxation is investigated under price uncertainty. Revenue-neutral policies adjust simultaneously the marginal tax rate and the level of exemptions while keeping expected tax receipts constant. Nonincreasing absolute risk aversion is sufficient to sign the firm's response: a reduction in the marginal rate causes the firm to contract output. Implications are established for the equilibrium level of treasury receipts.

Revenue-neutral tax policies under price uncertainty: reply

In their comment on my 1990 article, Yeh, Suwanakul, and Mai extend my analysis-which focused attention exclusively on firm output-to allow for simultaneous endogeneity of price, aggregate output, and numbers of firms. They show that, with downward- sloping demand, industry output adjusts positively to revenue-neutral changes in the marginal rate of taxation. This result is significant for two reasons. First, we are more often interested in predictions about aggregate phenomena than we are in predictions about individual firms. Indeed, firm-level predictions are frequently irrefutable since firm data are often unavailable. Second, the authors derive their result under a set of conditions that appear to be more general than those invoked in my 1990 article. In particular, they circumvent the need to invoke specific assumptions about the nature of firms' aversions toward risk. I consider this a useful extension and I appreciate the careful scrutiny of my paper.

Budget constrained tax policy under price uncertainty: implications for supply control

Tax policies that constrain net transfers between the farm sector and the fisc are modeled under price uncertainty. Increasing the level of tax on profits causes the firm to expand output. Implications are derived for supply control and the distributions of profits and net receipts at the fisc.