National Bureau of Economic Research

About: National Bureau of Economic Research is a nonprofit organization based out in Cambridge, Massachusetts, United States. It is known for research contribution in the topics: Monetary policy & Population. The organization has 2626 authors who have published 34177 publications receiving 2818124 citations. The organization is also known as: NBER & The National Bureau of Economic Research.

Tax Avoidance and the Deadweight Loss of the Income Tax

Abstract: The traditional method of analyzing the distorting effects of the income tax greatly underestimates its total deadweight loss as well as the incremental deadweight loss of an increase in income tax rates Deadweight losses are substantially greater than these conventional estimates because the traditional framework ignores the effect of higher income tax rates on tax avoidance through changes in the form of compensation (eg, employer paid health insurance) and through changes in the patterns of consumption (eg, owner occupied housing) The deadweight loss due to the increased use of exclusions and deductions is easily calculated Because the relative prices of leisure, excludable income, and deductible consumption are fixed, all of these can be treated as a single Hicksian composite good The compensated change in taxable income induced by changes in tax rates therefore provides all of the information that is needed to evaluate the deadweight loss of the income tax These estimates using TAXSIM calibrated to 1994 imply that the deadweight loss per dollar of revenue of using the income tax rather than a lump sum tax is more than twelve times as large as Harberger's classic estimate A marginal increase in tax revenue achieved by a proportional rise in all personal income tax rates involves a deadweight loss of nearly two dollars per incremental dollar of revenue Repealing the 1993 increase in tax rates for high income taxpayers would reduce the deadweight loss of the tax system by $24 billion while actually increasing tax revenue

Do Leaders Matter? National Leadership and Growth Since World War II

Abstract: Economic growth within countries varies sharply across decades. This paper examines one explanation for these sustained shifts in growth— changes in the national leader. We use deaths of leaders while in office as a source of exogenous variation in leadership, and ask whether these plausibly exogenous leadership transitions are associated with shifts in country growth rates. We find robust evidence that leaders matter for growth. The results suggest that the effects of individual leaders are strongest in autocratic settings where there are fewer constraints on a leader’s power. Leaders also appear to affect policy outcomes, particularly monetary policy. The results suggest that individual leaders can play crucial roles in shaping the growth of nations.

Universal Banking and the Performance of German Firms

Abstract: Universal banking is an alternative mechanism to a stock market for risk-sharing, for providing information for guiding investment, and for contesting corporate governance. In Germany, where the stock market has historically been small, banks hold equity stakes in firms and have proxy voting rights over other agents' shares. In addition, banks lend to firms and have representatives on corporate boards. If a banking relationship is a substitute for the stock market, then interaction with a bank should improve the performance of firms. But, if banks have private information about firms that they lend to and have monopolistic control over access to external capital markets, then bank interests may conflict with those of other equityholders, especially those whose shares are voted by the banks in proxy. We empirically investigate the influence of banks on the performance of German firms taking account of banks' equity holdings, the extent of banks' proxy voting rights, and the ownership structure of the firms' equity. We test for conflicts-of-interest in bank behavior and ask whether the relationship between banks and firms has changed between the 1970s and 1980s.

Do Foreigners Invest Less in Poorly Governed Firms

Abstract: As domestic sources of outside finance are limited in many countries around the world, it is important to understand factors that influence whether foreign investors provide capital to a country's firms. This study uses a unique and comprehensive dataset of foreign holdings by U.S. investors from 1997 to examine whether and why concerns about corporate governance results in fewer foreign holdings. Based on a sample of 4409 firms from 29 countries, we find that foreigners invest significantly less in firms with ownership structures that are more conducive to governance problems and, at the same time, reside in countries with poor outsider protection and disclosure. We argue that information asymmetry and monitoring costs faced by foreign investors are likely to drive this result. Supporting this explanation, we show that foreign investment is lower in firms that have opaque earnings and appear to engage in more earnings management.

Predicting Volatility: Getting the Most out of Return Data Sampled at Different Frequencies

Abstract: We use the MIDAS (Mixed Data Sampling) approach to study regressions of future realized volatility at low-frequency horizons (one to four weeks) on lagged daily and intra-daily (1) squared returns, (2) absolute returns, (3) realized volatility, (4) realized power and (5) return ranges. We document first of all that daily realized power and daily range are surprisingly good predictors of future realized volatility and outperform models based on realized volatility. Moreover, MIDAS models with daily data - range, realized power, realized volatility - require a polynomial with at least 30 days. We document that high-frequency absolute returns are also better at forecasting future low frequency realized volatility than high-frequency squared returns. We also discuss many issues that are encountered in practice, such as long memory and seasonality. All the results are based on a commonly used FX data set.