en-us http://economics.ca/cje/en/ The journal of the Canadian Economics Association Copyright 2012, Canadian Economics Association green@econ.ubc.ca (David Green) werner@sauder.ubc.ca (Werner Antweiler) Journals 8640 Sun, 19 Feb 2012 17:00:01 -0800 http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01667.x/abstract The paper discusses the choices of mathematical approaches in economics and econometrics, in particular, approaches that either (a) aim for a sharp result or (b) use the least restrictive assumptions. It is argued that, while the choice (a) often necessitates strong mathematical assumptions, choice (b) may lead to only partial identification and may require using less familiar mathematical techniques. This is discussed in the context of the problem of defining a probability density: existence may fail in function spaces; even after imposing assumptions that ensure existence, the problem is not well posed. A density function may not exist for economic variables as a consequence of institutional rigidity such as an income supplement. The apparatus of generalized functions provides the general solution to identification and well-posedness of density, but at the cost of less sharp results and greater mathematical complexity. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1052(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01668.x/abstract Universality is a hallmark of Canadian social policy for very young children. The evidence base for these policies is small, non-experimental, and offers mixed results. In contrast, the evidence base for targeted early childhood interventions is largely experimental and offers strong guidance. Policy makers and advocates often cite the research on targeted programs in support of universal programs, although this is problematic for a number of reasons. Universal programs require a better understanding of the developmental trajectories of more advantaged children. Evidence from the NLSCY suggests there are some potentially important differences in the association of early and later childhood developmental outcomes by family economic resources. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1069(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01669.x/abstract This paper examines the role of evidence in drawing up the recommendations for tax reform in theMirrlees Review. The arguments are organised loosely under five related headings: (i) Key margins of adjustment. (ii) Measurement of effective tax rates. (iii) The importance of information and complexity. (iv) Evidence on the size of responses. (v) Implications from theory for tax design. Although theMirrlees Reviewfocuses on all aspects of tax reform, the focus is this paper is on the taxation of earnings with some examples drawn from the taxation of consumption and savings. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1106(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01670.x/abstract We present a survey of key results from second-best optimal redistribution theory and their implications for tax-transfer policy. The core results include the Corlett-Hague theorem, the Deaton conditions, the production-efficiency theorem, the Atkinson-Stiglitz theorem, and the Mirrlees-Saez characterization of the optimal non-linear income tax system. These have been augmented in recent years by optimal participation tax rates, the implications of involuntary unemployment, the use of unconventional instruments, such as minimum wages, in-kind transfer, and workfare, and the optimal taxation of capital income and bequests. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1138(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01671.x/abstract http://economics.ca/cgi/jab?journal=cje&article=v44n4p1184(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01672.x/abstract This paper studies the impact of a wage subsidy program aimed at long-term social assistance recipients in Quebec. The program closely mimics the Self-Sufficiency Project and was implemented for a trial period of one year in 2002.We focus on the labour market transitions of the targeted population starting one year before the implementation of the program and until the end of 2005. Our results show that the duration of spells off social assistance increased, while the duration of social assistance spells decreased slightly. The response to the program varies considerably with both observed and unobserved characteristics. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1195(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01673.x/abstract This paper sets out a simple non-cooperative model of resource allocation within the household in developing countries that incorporates domestic violence as a vehicle for enhancing bargaining power. We demonstrate that the extent of domestic violence faced by women is not necessarily declining in their reservation utilities, or necessarily increasing in their spouses'. Using the National Family Health Survey data of India for 1998-99, we isolate the effect of domestic violence on female autonomy, taking into account the possible endogeneity of domestic violence through the choice of appropriate instruments. We provide some evidence for the evolutionary theory of domestic violence, which argues that such violence stems from the jealousy caused by paternity uncertainty in our evolutionary past. The findings have strong policy implications suggesting that it will take more than an improvement in women's employment options to address the problem of spousal violence. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1222(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01674.x/abstract This paper uses an equilibrium search and matching model to study Canada's sectoral labour adjustment in 2002-2006 during an increase in global commodity prices and exchange rate appreciation. I estimate economically significant adjustment costs for the aggregate economy in this episode and demonstrate that difficulty in transferring skills between jobs for individual workers can be an important contributor to these aggregate costs. The analysis also demonstrates that the level of unemployment benefits impacts the economy's sectoral composition, its aggregate productivity, and the speed of its adjustment to shocks. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1264(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01675.x/abstract This paper examines the ability of various financial and macroeconomic variables to forecast Canadian recessions. It evaluates four model specifications, including the advanced dynamic, autoregressive, dynamic autoregressive probit models as well as the conventional static probit model. The empirical results highlight several significant recession predictors, notably the government bond yield spread, growth rates of the housing starts, the real money supply and the composite index of leading indicators. Both the in-sample and out-of-sample results suggest that the forecasting performance of the four probit models is mixed. The dynamic and dynamic autoregressive probit models are better in predicting the duration of recessions while the static and autoregressive probit models are better in forecasting the peaks of business cycles. Hence, the advanced dynamic models and the conventional static probit model can complement one another to provide more accurate forecasts for the duration and turning points of business cycles. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1297(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01676.x/abstract This paper studies the flows into and out of unemployment in Canada at an aggregate and a number of disaggregated levels. I find that inflows into unemployment are countercyclical and outflows are procyclical. At an aggregate level, changes in the rate at which individuals leave unemployment account for most of the changes in unemployment rates in Canada between 1976 and 2008. However, flows into unemployment matter more at some disaggregated levels. There are also some differences in the contributions of flows into and out of unemployment to changes in unemployment rates across the 1981-82 and 1990-92 recessions. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1331(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01677.x/abstract It is well known that real business cycle small open economy (SOE) models rely on Greenwood, Hercowitz, and Huffman (1988) preferences to match the countercyclical trade balance observed in open economies, as well as other second moments, while standard preferences à la King, Plosser, and Rebelo (1988) are commonly labelled `ineffective,' owing to their inability to yield the countercyclical trade balance. In this paper, I show that an SOE model with standard preferences and `involuntary' unemployment with efficient risk sharing can obtain a countercyclical trade balance and match main empirical regularities in small open economies. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1350(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01678.x/abstract This paper quantifies the redistributional effects of inflation in Canada that arise through the revaluation of nominal assets and liabilities. We find that the effects are non-trivial even for low inflation episodes. The main winners are young, middle-class households with mortgage debt. The government receives a windfall gain from its long-term debt. The old, the rich or the middle-aged, middle-class lose, largely owing to their holdings of bonds and non-indexed defined benefit pension assets. Finally, our Canada-U.S. comparison reveals that the extent of redistributions can be quite different even between countries of similar economic and legal environments. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1369(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01679.x/abstract For two decades, the share of trade in inputs, also called vertical trade, has been dramatically increasing. In reallocating trade flows to their original input-producing industries and countries, this paper suggests a new measure of international trade: `value-added trade' and makes it possible to answer the question `who produces for whom?' In 2004, 27% of international trade was vertical trade. The industrial and geographic patterns of value-added trade are very different from those of standard trade. Value-added trade is relatively less important in regional trade but the difference is not more important for Asia than for America. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1403(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01680.x/abstract Recent empirical work on tax incidence suggests that after-tax price responses are independent of the tax change direction. This paper investigates asymmetric price responses to ad-valorem tax changes in the Brazilian food market for 10 goods in 16 states during the period 1994-2008. Our results suggest that when tax rates increase, tax full shifting occurs for 2 of the 10 goods and tax overshifting occurs for one of the 10 goods; the price response to tax cuts is an undershifting for all goods. Moreover, this last result is similar to our estimation of (average) tax incidence (undershifting). We also investigate the short-term and long-term relationships between prices and VAT rate parameters and find that prices seem to respond to tax shocks within four months. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1438(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01681.x/abstract The role of fiscal policy is examined when public goods provide both productive and utility services. In the presence of congestion, the consumption tax is shown to be distortionary. Optimal fiscal policy involves using consumption-based instruments in conjunction with the income tax. An income tax-financed increase in government spending dominates both lump-sum and consumption tax-financing. Replacing the lump-sum tax with an income tax to finance a given level of spending dominates introducing an equivalent consumption tax. These results contrast sharply with the literature, where the consumption tax is generally viewed as the least distortionary source of public finance. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1471(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01682.x/abstract Foreign investments of multinational firms are often complex in that they involve conduit entities. In particular, a multinational can pursue either a direct or an indirect investment strategy, where the latter involves an intermediate corporate entity and is associated with enhanced opportunities for international tax planning. As a consequence, in the case of indirect investments, the role of corporate taxation in destination countries may change. This paper investigates the effects of corporate taxation on foreign investment decisions of German multinationals, taking explicitly into account that firms choose in a first stage the investment regime (direct vs. indirect). The empirical findings, consistent with theoretical predictions, suggest that tax effects differ according to whether the investment is direct or indirect. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1497(null) http://www.onlinelibrary.wiley.com/doi/10.1111/j.1540-5982.2011.01683.x/abstract We conduct an update of the ranking of economic journals by Kalaitzidakis, Mamuneas, and Stengos (2003). However, our present study differs methodologically from that earlier study in an important dimension. We use a rolling window of years between 2003 and 2008, for each year counting the number of citations of articles published in the previous 10 years. This allows us to obtain a smoother longer view of the evolution of rankings in the period under consideration and avoid the inherent randomness that may exist at any particular year, because of new entrants. http://economics.ca/cgi/jab?journal=cje&article=v44n4p1525(null)