scholarly journals Environmental Regulation of  Firms that Experience Dynamic  Inconsistency

2021 ◽  
Author(s):  
◽  
James Zuccollo
Keyword(s):  
Environmental Regulation ◽  
Optimal Taxation ◽  
Dynamic Game ◽  
Time Consistency ◽  
Behavioural Economics ◽  
Time Inconsistency ◽  
Tax Rate ◽  
Taxation Policy ◽  
Course Of Action ◽  
Consistency Problem

<p>The recent push for environmental regulation has invigorated the discussion of mechanism design and optimal taxation policy. Recent decades have also seen growing interest in behavioural economics and empirically based theory. In this thesis we take a step towards combining the two by asking how a regulator may correct an externality in situations where they have a time consistency problem. Time inconsistency is one of the notable developments of behavioural economics. It posits that an agent’s decisions do not remain consistent over time, which causes a utility loss if the agent cannot commit themselves to a particular course of action and stick to it. The solution to inconsistency problems is to precommit to a course of action and prevent future deviations from it. However, finding a mechanism to enable such precommitment is often problematic. A regulator who maximises welfare can have a time consistency problem because welfare will depend on the decisions of firm and households who may themselves be inconsistent. That inconsistency then propagates to the regulator’s decision and reduces the level of welfare that the regulator can reach. Alternatively, the regulator’s time consistency problem can be caused by non-stationarity in their time preferences. To reach the firstbest outcome the regulator must not only eliminate the environmental externality: they must also overcome their own time inconsistency problem. This thesis draws from the literature on strategic delegation to construct a taxation game in which the regulator can achieve the first best taxation regime without the need for external precommitment devices. We study a dynamic game where the regulator chooses a tax rate and the regulated monopolist chooses their price. We show that the Markov-perfect equilibrium price path of this game will replicate the first best plan. Our results holds for time inconsistency caused by both jump states and quasihyperbolic discounting.</p>

scholarly journals Environmental Regulation of  Firms that Experience Dynamic  Inconsistency

2021 ◽  
Author(s):  
◽  
James Zuccollo
Keyword(s):  
Environmental Regulation ◽  
Optimal Taxation ◽  
Dynamic Game ◽  
Time Consistency ◽  
Behavioural Economics ◽  
Time Inconsistency ◽  
Tax Rate ◽  
Taxation Policy ◽  
Course Of Action ◽  
Consistency Problem

<p>The recent push for environmental regulation has invigorated the discussion of mechanism design and optimal taxation policy. Recent decades have also seen growing interest in behavioural economics and empirically based theory. In this thesis we take a step towards combining the two by asking how a regulator may correct an externality in situations where they have a time consistency problem. Time inconsistency is one of the notable developments of behavioural economics. It posits that an agent’s decisions do not remain consistent over time, which causes a utility loss if the agent cannot commit themselves to a particular course of action and stick to it. The solution to inconsistency problems is to precommit to a course of action and prevent future deviations from it. However, finding a mechanism to enable such precommitment is often problematic. A regulator who maximises welfare can have a time consistency problem because welfare will depend on the decisions of firm and households who may themselves be inconsistent. That inconsistency then propagates to the regulator’s decision and reduces the level of welfare that the regulator can reach. Alternatively, the regulator’s time consistency problem can be caused by non-stationarity in their time preferences. To reach the firstbest outcome the regulator must not only eliminate the environmental externality: they must also overcome their own time inconsistency problem. This thesis draws from the literature on strategic delegation to construct a taxation game in which the regulator can achieve the first best taxation regime without the need for external precommitment devices. We study a dynamic game where the regulator chooses a tax rate and the regulated monopolist chooses their price. We show that the Markov-perfect equilibrium price path of this game will replicate the first best plan. Our results holds for time inconsistency caused by both jump states and quasihyperbolic discounting.</p>

Free Trade versus Protection : Static and Dynamic Aspects

1985 ◽  
Vol 24 (1) ◽  
pp. 39-50
Author(s):  
Gunnar Flфystad
Keyword(s):  
Developing Countries ◽  
Foreign Trade ◽  
Trade Policy ◽  
Empirical Evidence ◽  
Free Trade ◽  
Optimal Taxation ◽  
Foreign Trade Policy ◽  
Taxation Policy

This paper analyses whether the developing countries are pursuing an optimal foreign trade policy, given the theoretical and empirical evidence we have. The paper concludes that constraints in imposing other taxes than tariffs in many developing countries may justify having tariffs as part of an optimal taxation policy.

THE PECULIARITIES OF INDUSTRIAL ENTERPRISES’ PROFIT TAXATION IN A DIFFERENTIATED APPROACH

2021 ◽  
Vol 7 (2) ◽  
pp. 219-242
Author(s):  
Valeria B. DUBKOVA
Keyword(s):  
Optimal Taxation ◽  
Production Efficiency ◽  
Tax Rates ◽  
Effective Mechanism ◽  
Tax Rate ◽  
Surplus Value ◽  
Industrial Enterprises ◽  
Modern System ◽  
Economic Politics ◽  
Industrial Level

This article studies the problem of improving enterprise profit taxation, the ways to solve it, and one of the main problems of the modern system of the enterprises taxation — how it is connected to the production efficiency. By solving it, we can determine the differentiation of the tax rates to the enterprises’ profit. Within its methodological framework, the author proposes to use the theory of surplus value. In order to spread the global methods for solving the issues of improving the taxation profit of enterprises and ensuring the economic efficiency and growth, the principles of neoclassic marginal theory are used. The system of indicators — signs and criteria — provides evidence for differentiating industrial enterprises into groups for a more optimal taxation of their profits. The author provides suggestions for forming the rate of the profit tax to stimulate the increase of production efficiency and reinvestment of funds for its development. The algorithm for calculating the profit tax rate assumes using the index of the norms of surplus value — profitableness of labor. This article proposes using a matrix for classifying industrial enterprises into groups, defining the level of the tax rates to profit for each of them based on the developed algorithm together with the level of production efficiency for 2018. For industrial enterprises, special industrial level of indicators — the signs differentiation — are considered: the structure of capital, the standard of profit, the profitableness of labor, and the results of their profit taxation using the method of free balance, the normative method, the modern and the proposed tax profit systems. In the case of the industrial enterprises, the relevance of the proposed reforms of the taxation of profit is explained. The results of research constitute the methodological basis of developing a more effective mechanism of taxing enterprises’ profit, which is especially necessary when realizing anti-crisis economic politics.

scholarly journals Confidence in future monetary policy as a way to overcome the liquidity trap

2019 ◽  
Vol 5 (2) ◽  
pp. 117-135
Author(s):  
Olga Kuznetsova ◽  
Sergey Merzlyakov ◽  
Sergey Pekarski
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Large Scale ◽  
Global Financial Crisis ◽  
Time Consistency ◽  
Central Banks ◽  
Time Inconsistency ◽  
Liquidity Trap ◽  
Developed Economies ◽  
The Global Financial Crisis

The global financial crisis of 2007–2009 has changed the landscape for monetary policy. Many central banks in developed economies had to employ various unconventional policy tools to overcome a liquidity trap. These included large-scale asset purchase programs, forward guidance and negative interest rate policies. While recently, some central banks were able to return to conventional monetary policy, for many countries the effectiveness of unconventional policies remains an issue. In this paper we assess diverse practices of unconventional monetary policy with a particular focus on expectations and time consistency. The principal aspect of successful policy in terms of overcoming a liquidity trap is the confidence that interest rates will remain low for a prolonged period. However, forming such expectations faces the problem of time inconsistency of optimal policy. We discuss some directions to solve this problem.

A Note On The Principle Of Equal Opportunities

2007 ◽  
pp. 128
Author(s):  
Fernando Cabrales ◽  
Ana Fernández ◽  
Fritz Grafe
Keyword(s):  
Empirical Analysis ◽  
Optimal Taxation ◽  
Oecd Countries ◽  
Developing Economy ◽  
Equal Opportunities ◽  
Tax Rate ◽  
Income Differentials ◽  
Optimal Tax ◽  
Equality Of Opportunities ◽  
The Individual

This note presents an empirical analysis of optimal taxation in Chile, adopting Roemer’s equality of opportunities as the evaluation criterion. The equality of opportunities optimal tax rules seek to equalize income differentials arising from factors beyond the control of the individual. Roemer’s theory of equality of opportunities (Roemer, 1998) has been employed to compute the extent to which tax-andtransfer regimes in some OECD countries equalize opportunities among citizens for income acquisition. In this note we apply this approach to Chile, a developing economy, and compare the results to those reported in Roemer, Aaberge, Colombino, Fritzell, Jenkins, Marx, Page, Pommer, Ruiz-Castillo, Segundo, Tranaes, Wagner and Zubiri (2003). We find that the optimal tax rate in Chile according to Roemer’s equalopportunities approach should be zero.

Mean-variance equilibrium asset-liability management strategy with cointegrated assets

2021 ◽  
Vol 62 ◽  
pp. 209-234
Author(s):  
Mei Choi Chiu
Keyword(s):  
Financial Market ◽  
Time Consistency ◽  
Time Inconsistency ◽  
Asset Liability Management ◽  
Risky Assets ◽  
Liability Management ◽  
Equilibrium Control ◽  
Management Problems ◽  
Hamilton Jacobi Bellman ◽  
Mean Variance

This paper investigates asset-liability management problems in a continuous-time economy. When the financial market consists of cointegrated risky assets, institutional investors attempt to make profit from the cointegration feature on the one hand, while on the other hand they need to maintain a stable surplus level, that is, the company’s wealth less its liability. Challenges occur when the liability is random and cannot be fully financed or hedged through the financial market. For mean–variance investors, an additional concern is the rational time-consistency issue, which ensures that a decision made in the future will not be restricted by the current surplus level. By putting all these factors together, this paper derives a closed-form feedback equilibrium control for time-consistent mean–variance asset-liability management problems with cointegrated risky assets. The solution is built upon the Hamilton–Jacobi–Bellman framework addressing time inconsistency. doi: 10.1017/S1446181120000164

scholarly journals ON TIME CONSISTENCY FOR MEAN-VARIANCE PORTFOLIO SELECTION

2020 ◽  
Vol 23 (06) ◽  
pp. 2050042 ◽  
Author(s):  
ELENA VIGNA
Keyword(s):  
Portfolio Selection ◽  
Optimal Strategy ◽  
Time Consistency ◽  
Time Inconsistency ◽  
Selection Problem ◽  
Portfolio Selection Problem ◽  
The Mean ◽  
Optimal Approach ◽  
Mean Variance Portfolio ◽  
Mean Variance

This paper addresses a comparison between different approaches to time inconsistency for the mean-variance portfolio selection problem. We define a suitable intertemporal preferences-driven reward and use it to compare three common approaches to time inconsistency for the mean-variance portfolio selection problem over [Formula: see text]: precommitment approach, consistent planning or game theoretical approach, and dynamically optimal approach. We prove that, while the precommitment strategy beats the other two strategies (that is a well-known obvious result), the consistent planning strategy dominates the dynamically optimal strategy until a time point [Formula: see text] and is dominated by the dynamically optimal strategy from [Formula: see text] onwards. Existence and uniqueness of the break even point [Formula: see text] is proven.

REGULATION OF A PREY–PREDATOR FISHERY INCORPORATING PREY REFUGE BY TAXATION: A DYNAMIC REACTION MODEL

2011 ◽  
Vol 19 (03) ◽  
pp. 417-445 ◽  
Author(s):  
KUNAL CHAKRABORTY ◽  
MILON CHAKRABORTY ◽  
T. K. KAR
Keyword(s):  
Optimal Taxation ◽  
Social Benefit ◽  
Reaction Model ◽  
Fishing Effort ◽  
Model System ◽  
Prey Refuge ◽  
Predator Species ◽  
Taxation Policy ◽  
Proposed Model ◽  
Fishery Model

This paper, describes a prey–predator fishery model incorporating prey refuge. The proposed model reflecting the dynamic interaction between the net economic revenue and the fishing effort used to harvest the prey species in the presence of predation and a suitable tax. The steady states of the system are determined and the dynamic behavior of the model system is discussed. The occurrence of Hopf bifurcation of the proposed model system is examined through considering density-dependent mortality for the predator as bifurcation parameter. The optimal taxation policy is formulated and solved with the help of Pontryagin's maximal principle. The objective of the paper is to maximize the monetary social benefit as well as prevent the predator species from extinction, keeping the ecological balance. Results are illustrated with the help of numerical examples.

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