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Showing papers on "Golden Rule (fiscal policy) published in 1994"


Journal ArticleDOI
Abstract: This paper examines empirically the effects of multimarket contact on pricing in the U. S. airline industry. The analysis of the time-series and cross-sectional variability of airline fares in the 1000 largest domestic city-pair routes reveals the presence of statistically significant and quantitatively important multimarket effects—fares are higher in city-pair markets served by carriers with extensive interroute contacts. These findings are consistent with the claims of industry experts that airlines live by the "golden rule"; i.e., that they refrain from initiating aggressive pricing actions in a given route for fear of what their competitors might do in other jointly contested routes. During his testimony, Mr. Steven B. Elkins (Senior Director of marketing systems development for Northwest Airlines) cited an example in which Northwest lowered fares on night flights that were flying with empty seats in a number of routes from Minneapolis and Upper Midwest cities to various West Coast cities. He said that Continental Airlines swiftly responded by cutting prices in important Northwest markets … Mr. Elkins's memo advises Northwest pricing analysts: "We Will Live by the Golden Rule!" In his testimony, he explained that, "the Golden Rule in that context was that I did not want my pricing analyst initiating actions in another carrier's market like Chicago for fear of what that other carrier might do to retaliate" [Wall Street Journal, October 9,1990, p. B1].

396 citations


Journal ArticleDOI
TL;DR: In this paper, the authors focus upon intergenerational transfers overlapping generation models generational accounting and life cycle saving while assuming golden rule steady states and stable age profiles of transfers and economic activity, and explore how resource allocation over the life cycle generates real wealth and transfer wealth through the family public sector and financial markets.
Abstract: This paper focuses upon intergenerational transfers overlapping generation models generational accounting and life cycle saving while assuming golden rule steady states and stable age profiles of transfers and economic activity. Using 1987 US data synthetic cohort methods were employed to explore how resource allocation over the life cycle generates real wealth and transfer wealth through the family public sector and financial markets. While data problems assumption violations and accounting framework shortcomings would not permit firm conclusions transfer wealth in the US nonetheless seems to be about 2/3 greater than real wealth. Social Security wealth Medicare wealth and government debt are the main positive forms of wealth and together have greater value than real wealth. Transfer wealth must therefore displace holdings of physical capital and lead to lower labor productivity and higher interest rates.

95 citations



Posted Content
TL;DR: In this paper, tax policy determines the rate of technical progress without a generally accepted welfare function, and the outcome of this political decision will determine the level of technological progress, regardless of the ability of the individual.
Abstract: If government revenues from a flat-rate income tax are spent on public factors and public factors are used for human capital production and human capital is used for the production of technical progress, then a higher rate of taxation will lead to a higher rate of technical progress if steady states are not unstable. If human capital producing households have different abilities they will have different desired (Lindahl) tax rates and a golden rule is no longer an acceptable welfare function. Therefore tax policy determines the rate of technical progress without a generally accepted welfare function. People with lower abilities want lower tax rates at least in the short run. When the rate of time preference is larger than the rate of technical progress people with greater abilities want higher levels of public factors and taxes also in the long run if indirect marginal utility is inelastic with respect to net income. The outcome of this political decision will determine the rate of technical progress.

18 citations



Journal ArticleDOI

1 citations