Organizations & Markets

As a tax base, 'consumption' is sometimes argued to be less fair than 'income' because the benefits of not taxing capital income accrue to high-income households. We argue that, despite the common perception that consumption taxation eliminates all taxes on capital income, consumption and income taxes actually treat similarly much of what is commonly called capital income. Indeed, relative to an income tax, a consumption tax exempts only the tax on the opportunity cost of capital. In contrast to a pure income tax, a consumption tax replaces capital depreciation with capital expensing.

In the chapter, we review existing literature and offer some new empirical evidence concerning developmental trends in intrinsic and extrinsic motivation. We then examine several possible explanations for these developmental findings and consider their implications for social and educational policy.

This article suggests that the introduction of bank branching restrictions and federal deposit insurance in the United States likely was motivated by political considerations. Specifically, we argue that these restrictions were instituted for the benefit of the small unit banks that were unable to compete effectively with large, multiunit banks. We analyze this "political hypothesis" in two steps.

The U.S. Social Security system is in need of reform. Its trustees forecast that, absent changes, contributions will fall below benefits in 2012, and the system's trust fund will be exhausted in 2030. Many have discussed achieving system solvency by raising taxes and cutting benefits, but recently a more fundamental reform has been proposed, namely, privatization of some or all aspects of Social Security. This article identifies key economic issues that must be addressed in the debate over a privatized system in the U.S.

Examines the effectiveness of incentives to promote household saving in the United States. Individual retirement accounts; 401(k) plans; Cost-benefit approach to saving incentives; Welfare-theoretic approach to saving incentives.

In this paper, we critically examine the recommended practice of matching currency footprints. We argue that while matching currency footprints reduces profit variability, this practice can also cause reductions in expected profitability, a point that appears to have been overlooked in current literature. The expected profit effects of matching depend on the trade-off between possible expected cost savings of sourcing abroad verses the loss of what we refer to as "strategic flexibility" in responding to competitors' pricing and quantity decisions.

This paper examines CEO pay in the banking industry and the effect of deregulating the market for corporate control. Using panel data on 147 banks over the 1980s, we find higher levels of pay in competitive corporate control markets, i.e., those in which interstate banking is permitted. We also find a stronger pay-performance relation in deregulated interstate banking markets. Finally, CEO turnover increases substantially after deregulation.

The article presents a study using the Euler equation for capital accumulation by individual business firms. First, authors' use an estimation strategy based on the Euler equation representation of firms' investment decisions. This strategy reflects reservations with standard investment models based on the q theory with adjustment costs. In particular, there are well-known problems in measuring marginal q, as well as concerns that observed stock market valuations may not accord with the predictions of the efficient markets hypothesis.