Taxation and the Veil of Ignorance – A Real Effort Experiment on the Laffer Curve

In this paper we address the role of theveil of ignorance on work incentives andtax rates in a two-person real effortexperiment. We find that effort levelsdecrease with a rise in tax rates. Taxrevenues peak at intermediate tax rates of50% to 65%, supporting the existence of aLaffer curve in taxation. Tax authoritiesdo not exploit their power to tax in full,which is compatible both with revenuemaximizing but also fair behavior. Behindthe veil of ignorance, subjects care morefor efficiency and restrict the power totax more than in case their position(taxpayer or tax authority) is fixed inadvance.     

Changes in Eastern Europe and the Soviet Union: The effects on China

The rapidly changing political, economic, and security policies in the Soviet Union and Eastern Europe in late 1989 and 1990 have added to the complications faced by Chinese leaders since they decided to suppress the unprecedented large-scale pro-democracy demonstrations in Chinese cities in spring 1989. These changes had an obvious “ripple effect” in China, encouraging prodemocracy forces and alarming Chinese leaders. They attracted strong positive attention from the developed countries of the West and Japan, and international financial institutions and businesses. This came at the indirect expense of China. And they accelerated changes in world politics (especially in U.S.-Soviet relations) and in the politics of government decision making in the West that promised to reduce China’s relative influence in world affairs in the 1990s. The prospect of reduced influence abroad and curbed economic contacts did not appear to be sufficient cause for Beijing leaders to markedly change existing policies. Chinese leaders in mid-1990 appeared focused on issues of internal political power at a time of leadership transition. Significant changes in policy appeared most likely to await leadership changes as Deng Xiaoping and other aged leaders die or are incapacitated.     

An experimental analysis of voting in the Stability and Growth Pact in the European Monetary Union

The Stability and Growth Pact (SGP) in the European Monetary Union shall deter countries from running excessive deficits by the threat of punishment, executed conditional on the outcome of a multistage voting procedure. We examine voting behaviour in an experiment which closely resembles the SGP’s design and find that the SGP enables larger countries to block punishment more often than smaller countries. In addition, we study an institutional modification of the SGP by excluding countries with excessive deficits from voting on other ‘fiscal sinners’. Our findings clearly suggest that this innovation would give the SGP sharper teeth than it actually has in reality.     

When are stable rights to rents bad?

Stable, enforceable property rights over resources normally furthers economic efficiency. I argue that stable rights to government created rents and wealth transfers, by contrast, generate inefficiency. Secure rights to receive transfers increases rent-seekers' incentive to make political investments creating new transfers. I demonstrate the point using a two period rent-seeking game. Contestable transfers reduce the probability of establishing a transfer program and aggregate rent-seeking expenditures. Strengthening transfer recipients' rights increases the difficulty of eliminating a transfer program.     

Why only Nixon could go to China

Right-wing politicians sometimes can implement policies that left-wing politicians cannot, and vice versa. Contemporary wisdom has it that only Nixon could have gone to China. We develop a model to explain this phenomenon. A policy issue could depend on information, on which every one could potentially agree on policy, or on values, on which agreement is impossible. Politicians, who value both reelection and policy outcomes, realize the nature of the issue, whereas voters do not. Only a right-wing president can credibly signal the desirability of a left-wing course of action. The Nixon paradox can hold then if citizens vote retrospectively on the issue.     

Assessing China's Rise and US Leadership in Asia—growing maturity and balance

The common prediction in media and specialist commentary during much of the past decade was that Asia was adjusting to an emerging China-centered order and US influence was in decline. Over time, it became clearer that developments in the region showed a more complex reality. A growing contingent of scholars and specialists looked beyond accounts that inventoried China's strengths and US weaknesses and carefully considered other factors, including Chinese limitations and US strengths, before making their overall judgments. These more comprehensive and balanced assessments tempered sometimes alarming implications of earlier predictions of China's rise and decline in US leadership. This article reviews the evolution over the past decade of media and specialist assessments of China's rise and its implications for US leadership in Asia in order to draw lessons from this evolution in analysis and what the lessons might mean for future assessments of China's increasing role in Asian and world affairs.