The optimal length of contracts with application to outsourcing

This paper resolves three empirical puzzles in outsourcing by formalizing the adaptationcost of long-term performance contracts. Side-trading with a new partner alongside a long-term contract (to exploit an adaptation-requiring investment) is usually less effective than switching to the new partner when the contract expires. So long-term contracts that prevent holdup of specific investments may induce holdup of adaptation investments. Contract length therefore trades of specific and adaptation investments. Length should increase with the importance and specificity of self-investments, and decrease with the importance of adaptation investments for which side-trading is ineffective. My general model also shows how optimal length falls with cross-investments and wasteful investments.

The changing relationship between tax and financial reporting in Spain

The degree of connection between tax and financial reporting is regarded as a key factor in the study of international accounting differences. The position for Spain is briefly outlined in previous research but without examination of any specific accounting issues except, in outline only, depreciation and the tax-free revaluation of assets from 1977 to 1983. The absence of a detailed study of the major tax/accounting linkages for Spain is of particular importance because the relationship is regarded as having changed dramatically in the early 1990s, from a position of tax dominance. In order to measure the links between tax and financial reporting, we adopt the methodology of Lamb et al. (1998) by assessing major accounting topics using a five-case classification shown as Table 1. We refute the proposition that suggests that the link between tax/accounting has been reduced substantially.

Iowa Tax Expenditures Report 2000

Exemptions, exclusions, credits against tax and reductions in tax base that are tied to specific provisions in tax law; estimation of the annual dollar effect for each of those provisions. Phase 1 Report including Corporate Income, Individual Income, Sales Tax Use Tax.

Executive Summary 2007 Iowa Tax Amnesty, 2008

Results of Iowa Tax Amnesty 2007

Tax incentives and the city

It is difficult to justify tax incentives within the existing economicsliterature on tax competition. We develop a model in which communitiesare interested in attracting firms not only for their own capital butalso for the concentration externalities, a form of agglomerationeconomies, their location bestows on existing firms. We find that itis efficient in this case for communities to offer tax incentives,defined as a tax rate below the benefit tax level, to firms. We presentthe recent relocation of the Boeing Corporation's headquarters fromSeattle to Chicago as a case study.

Iowa Individual Income Tax Statistical Report 2006

Iowa Individual Income Tax Statistical Report 2006

Competition and cost overruns. Optimal misspecification of procurement contracts

Most cases of cost overruns in public procurement are related to important changes in the initial project design. This paper deals with the problem of design specification in public procurement and provides a rationale for design misspecification. We propose a model in which the sponsor decides how much to invest in design specification and awards competitively the project to a contractor. After the project has been awarded the sponsor engages in bilateral renegotiation with the contractor, in order to accommodate changes in the initial project s design that new information makes desirable. When procurement takes place in the presence of horizontally differentiated contractors, the design s specification level is seen to affect the resulting degree of competition. The paper highlights this interaction between market competition and design specification and shows that the sponsor s optimal strategy, when facing an imperfectly competitive market supply, is to underinvest in design specification so as to make significant cost overruns likely. Since no such misspecification occurs in a perfectly competitive market, cost overruns are seen to arise as a consequence of lack of competition in the procurement market.

The impact of tax credits on labour supply

One of the principle aims of the Working Families' Tax Credit in the UK was to increase the participation of single mothers. The literature to date concludes there was approximately a five-percentage-point increase in employment of single mothers. The differences-in-differences methodology that is typically used compares single mother with single women without children. However, the characteristics of these groups are very different, and change over time in relative covariates are likely to violate the identifying assumption. We find that when we control for differential trends between women with and without children, the employment effect of the policy falls significantly. Moreover, the effect is borne solely by those working full-time (30 hours or more), while having no effect on inducing people into the labor market from inactivity. Looking closely at important covariates over time, we can see sizeable changes in the relative returns to employment between the treatment and control groups.

Stabilization versus insurance: Welfare effects of procyclical taxation under incomplete markets

We construct and calibrate a general equilibrium business cycle model with unemployment and precautionary saving. We compute the cost of business cycles and locate the optimum in a set of simple cyclical fiscal policies. Our economy exhibits productivity shocks, giving firms an incentive to hire more when productivity is high. However, business cycles make workers' income riskier, both by increasing the unconditional probability of unusuallylong unemployment spells, and by making wages more variable, and therefore they decrease social welfare by around one-fourth or one-third of 1% of consumption. Optimal fiscal policy offsets the cycle, holding unemployment benefits constant but varying the tax rate procyclically to smooth hiring. By running a deficit of 4% to 5% of output in recessions, the government eliminates half the variation in the unemployment rate, most of the variation in workers'aggregate consumption, and most of the welfare cost of business cycles.

Wild bids. Gambling for resurrection in procurement contracts

This paper analyzes the problem of abnormally low tenders in theprocurement process. Limited liability causes firms in a bad financialsituation to bid more aggressively than good firms in the procurementauction. Therefore, it is more likely that the winning firm is a firm infinancial difficulties with a high risk of bankruptcy. The paper analyzesthe different regulatory practices to face this problem with a specialemphasis on surety bonds used e.g. in the US. We characterize the optimalsurety bond and show that it does not coincide with the current USregulation. In particular we show that under a natural assumption the USregulation is too expensive and provides overinsurance to the problem ofabnormally low tenders.

Are tax subsidies for private medical insurance self-financing? Evidence from a microsimulation model for outpatient and inpatient episodes

This paper analyses whether or not tax subsidies to private medicalinsurance are self-financing by means of a structural approach. Weconstruct a simulation routine based on a microeconometric discretechoice model that allows us to evaluate the impact of premium changeson the utilisation of outpatient and inpatient health care services. Wesimulate the 1999 Spanish tax reform that abolished the tax deductionfor expenditures on private health insurance using a representativesample of the Catalan population. Prior to this reform, foregone taxrevenue arising from deductions after the purchase of private insuranceamounted to 69.2 M. per year. In contrast, the elimination of thesubsidies to private policies is estimated to generate an extra costfor the public sector of about 8.9 M. per year.

Optimal taxation without state-contingent debt

To recover a version of Barro's (1979) `random walk'tax smoothing outcome, we modify Lucas and Stokey's (1983) economyto permit only risk--free debt. This imparts near unit root like behaviorto government debt, independently of the government expenditureprocess, a realistic outcome in the spirit of Barro's. We showhow the risk--free--debt--only economy confronts the Ramsey plannerwith additional constraints on equilibrium allocations thattake the form of a sequence of measurability conditions.We solve the Ramsey problem by formulating it in terms of a Lagrangian,and applying a Parameterized Expectations Algorithm tothe associated first--order conditions. The first--order conditions andnumerical impulse response functions partially affirmBarro's random walk outcome. Though the behaviors oftax rates, government surpluses, and government debts differ, allocationsare very close for computed Ramsey policies across incomplete and completemarkets economies.

Road Use Tax/Fund Primary Road Fund Budget: Reversions, September 11, 2008

Pursuant to Iowa Code Section 307.46(2) - This is the Iowa Department of Transportation's report on the use of reversions.

Bundling and competition for slots: On the portfolio effects of bundling

We consider competition among sellers when each of them sells a portfolio ofdistinct products to a buyer having limited slots. We study how bundling affectscompetition for slots. Under independent pricing, equilibrium often does not existand hence the outcome is often inefficient. When bundling is allowed, each sellerhas an incentive to bundle his products and an efficient equilibrium always exists.Furthermore, in the case of digital goods, all equilibria are efficient if slotting contracts are prohibited. We also identify portfolio effects of bundling and analyze theconsequences on horizontal mergers. Finally, we derive clear-cut policy implications.

Tax simulation in the SHP

This paper describes a simulation package designed to estimate the annual income taxes paid by respondents of the Swiss Household Panel (SHP). In Switzerland, the 26 cantons have their own tax system. Additionally, tax levels vary between the over 2000 municipalities and over time. The simulation package takes account of this complexity by building on existing tables on tax levels which are provided by the Swiss Federal Tax Administration Office. Because these are limited to a few types of households and only 812 municipalities, they have to be extended to cover all households and municipalities. A further drawback of these tables is that they neglect several deductions. The tax simulation package fills this gap by taking additionally account of deductions for children, double-earner couples, third pillar and support for dependent persons according to cantonal legislation. The resulting variable on direct taxes not only serves to calculate household income net of taxes, but can also be a variable for analysis by its own account.