National Bureau of Economic Research Project Report – serie

The takeover boom that began in the mid-1980s has exhibited many phenomena not previously observed, such as hostile takeovers and takeover defenses, a widespread use of cash as a means of payment for targeted firms, and the acquisitions of companies ranking among the largest in the country. With the aim of more fully understanding the implications of such occurances, contributors to this volume consider a broad range of issues as they analyze mergers and acquisitions and study the takeoveer process itself.

The realities of mounting government debt, tax burdens, and an ageing population raise serious concerns about the financial legacy confronting future generations. How great a fiscal burden will late-1990s policies leave to subsequent generations, and how might changes in those policies alter the intergenerational distribution of public welfare? Generational accounting has recently emerged as a robust new method of fiscal analysis and planning designed to assess the long-term sustainability of fiscal policy and to measure the extent of the financial load ultimately borne by present and future generations. A seminal contribution to public economics, generational accounting has already been adopted by 23 nations around the world. Combining late-1990s country-by-country generational analyses with a comprehensive review of generational accounting's innovative methodology, these papers are a resource for economists, political scientists and policy makers concerned with fiscal health and responsibility.

The past decade has witnessed a decline in saving throughout the developed world—the United States has the dubious distinction of leading the way. The consequences can be serious. For individuals, their own economic security and that of their families is jeopardized. For society, inadequate rates of saving have been blamed for a variety of ills—decreasing the competitive abilities of American industry, slowing capital accumulation, increasing our trade deficit, and forcing the sale of capital stock to foreign investors at bargain prices. Restoring acceptable rates of saving in the United States poses a major challenge to those who formulate national economic policy, especially since economists and policymakers alike still understand little about what motivates people to save. In National Saving and Economic Performance, edited by B. Douglas Bernheim and John B. Shoven, that task is addressed by offering the results of new research, with recommendations for policies aimed to improve saving. Leading experts in diverse fields of economics debate the need for more accurate measurement of official saving data; examine how corporate decisions to retain or distribute earnings affect household-level consumption and saving; and investigate the effects of taxation on saving behavior, correlations between national saving and international investment over time, and the influence of economic growth on saving. Presenting the most comprehensive and up-to-date research on saving, this volume will benefit both academic and government economists.

In the past several decades, pension plans have become one of the most significant institutional influences on labor and financial markets in the U.S. In an effort to understand the economic effects of this growth, the National Bureau of Economic Research embarked on a major research project in 1980. Issues in Pension Economics, the third in a series of four projected volumes to result from thsi study, covers a broad range of pension issues and utilizes new and richer data sources than have been previously available. The papers in this volume cover such issues as the interaction of pension-funding decisions and corporate finances; the role of pensions in providing adequate and secure retirement income, including the integration of pension plans with social security and significant drops in the U.S. saving rate; and the incentive effects of pension plans on labor market behavior and the implications of plans on labor market behavior and the implications of plans for different demographic groups. Issues in Pension Economics offers important empirical studies and makes valuable theoretical contributions to current thinking in an area that will most likely continue to be a source of controversy and debate for some time to come. The volume should prove useful to academics and policymakers, as well as to members of the business and labor communities.

Pensions in the U.S. Economy is the fourth in a series on pensions from the National Bureau of Economic Research. For both economists and policymakers, this volume makes a valuable contribution to current research on pensions and the economics of the elderly. The contributors report on retirement saving of individuals and the saving that results from corporate funding of pension plans, and they examine particular aspects of the plans themselves from the employee's point of view. Steven F. Venti and David A. Wise offer a careful analysis of who contributes to IRAs and why. Benjamin M. Friedman and Mark Warshawsky look at the reasons more retirement saving is not used to purchase annuities. Personal saving through pension contribution is discussed by B. Douglas Bernheim and John B. Shoven in the context of recent government and corporate pension funding changes. Michael J. Boskin and John B. Shoven analyze indicators of the economic well-being of the elderly, addressing the problem of why a large fraction of the elderly remain poor despite a general improvement in the economic status of the group as a whole. The relative merits of defined contribution versus defined benefit plans, with emphasis on the risk aspects of the two types of plans for the individual, are examined by Zvi Bodie, Alan J. Marcus, and Robert C. Merton. In the final paper, pension plans and worker turnover are the focus of the discussion by Edward P. Lazear and Robert L. Moore, who propose pension option value rather than the commonly used accrued pension wealth as a measure of pension value.

In the United States today, there are some 3,400 separately governed colleges and universities, amounting to a higher education industry with expenditures that constitute 2.8% of the gross national product. Yet, the economic issues affecting this industry have been paid relatively little attention. In this collection of eight essays, experts in economics and education bring economic analysis to bear on such underexamined topics as the nature of competition in higher education, higher education's use of resources, and who chooses to purchase what kind of education and why. In higher education, supply refers to such issues as government support for public colleges and universities, the means by which graduate programs allocate financial support to students, and the criteria that universities use for investing endowments. Demand pertains to patterns of student enrollment and to the government, business, and individual market for the service and research activities of higher education. Why are tuitions nearly the same among schools despite differences in prestige? How are institutions with small endowments able to compete successfully with institutions that have huge endowments?How are race and ethnicity reflected in enrollment trends? Where do the best students go? What choices among colleges do young people from low-income backgrounds face? This volume addresses these questions and suggests subjects for further study of the economics of higher education.

The debt crisis of 1982 caused serious economic disruptions in most developing countries. This book explains why some of these countries have recovered from the debt crisis, while, more than a decade later, others continue to stagnate. Among the questions addressed are: what are the requirements for a stabilization policy that reduces inflation in a reasonable amount of time at an acceptable cost?; what are the effects of structural reforms, especially trade liberalization, deregulation and privatization, on growth in the short and long runs?; how do macroeconomic instability and adjustment policies affect income distribution and poverty?; and how does the specific design of structural adjustment efforts affect results? In this companion to "Macroeconomics of Populism in Latin America", the authors confirm that macroeconomic stability has a positive effect on income distribution. The volume presents case studies that describe, in detail, the stabilization experiences in Brazil, Israel, Argentina and Bolivia, and also includes discussion of Chile, Mexico, Peru and Turkey.

Economists disagree on whether recent US trade policies are harmful or helpful, but they all agree that there is a trend towards focusing on results-oriented policies in specific markets and with particular trading markets. These 12 essays explore crucial issues in US trade policy, examining topics such as the markets for automobiles and automobile parts in the USA and Japan, and the US response to "unfair" trading practices, such as dumping, and the effects of industry- and country-specific policies. Examples include high-technology and agricultural industries and offshore assembly in US border cities. The volume concludes that some policies can act to both protect imports and promote exports; that the threat of protectionist policies can often have effects that are as pronounced as their implementation; and that regulatory policy has as great an impact on trade and investment patterns as does trade policy itself.

Written for a non-technical audience, this book summarizes the research on the structure and effects of tax policies collected in "The Effects of Taxation on Multinational Corporations". The book covers such practical issues as the impact of tax law on US competitiveness, the volume and location of research and development spending, the extent of foreign direct investment and the financial practices of multinational companies. In ten succinct chapters, the book documents the channels through which tax policy in the United States and abroad affects plant and equipment investments, spending on research and development, the cost of debt and equity finance, and dividend repatriations by United States subsidiaries. It also discusses the impact of US firms' outbound foreign investment on domestic and foreign economies. Especially useful to non-specialists is an appendix that summarizes current United States rules for taxing international income.

The tax rules of the United States and other countries have intended and unintended effects on the operations of multinational corporations, influencing everything from the formation and allocation of capital to competitive strategies. The growing importance of international business has led economists to reconsider whether current systems of taxing international income are viable in a world of significant capital market integration and global commercial competition. In an attempt to quantify the effect of tax policy on international investment choices, this volume presents in-depth analyses of the interaction of international tax rules and the investment decisions of multinational enterprises. Ten papers assess the role played by multinational firms and their investment in the US economy and the design of international tax rules for multinational investment; analyze channels through which international tax rules affect the costs of international business activities; and examine ways in which international tax rules affect financing decisions of multinational firms.As a group, the papers demonstrate that international tax rules have significant effects on firms' investment and other financing decisions.

The nine papers in this volume exploit the substantial variation in U.S. tax policy during the last two decades to investigate how taxes affect a range of household behaviour, including labour-force participation, saving behaviour, choice of health insurance plan, choice of child care arrangements, portfolio choice, and tax evasion. They also present analytical results on the effects of different types of tax policy.

This volume presents one of the pressing policy issues of the moment: the privatization of social security. While social security encounters enormous fiscal pressure in the face of an ageing population, there has been relatively little published on the fundamentals of essential reform through privatization. The text fills this void by studying retirement benefits in systems based on individual saving in funded accounts. It begins with an introductory paper that argues for reform by overviewing the economic effects of social security and the system's current dire situation. The next chapters investigate how five different countries - Argentina, Australia, Chile, Great Britain, and Mexico - have experienced privatization of their social security systems. The final five papers consider the economics of a privatized social security system in the United States.

This volume presents one of the pressing policy issues of the moment: the privatization of social security. While social security encounters enormous fiscal pressure in the face of an ageing population, there has been relatively little published on the fundamentals of essential reform through privatization. The text fills this void by studying retirement benefits in systems based on individual saving in funded accounts. It begins with an introductory paper that argues for reform by overviewing the economic effects of social security and the system's current dire situation. The next chapters investigate how five different countries - Argentina, Australia, Chile, Great Britain, and Mexico - have experienced privatization of their social security systems. The final five papers consider the economics of a privatized social security system in the United States.

Regional economic arrangements such as free trade areas (FTAs), customs unions, and currency blocs, have become increasingly prevalent in the world economy. Both pervasive and controversial, regionalization has caused some economists to be optimistic about the opportunities it creates and others fearful that it may corrupt fragile efforts to encourage global free trade. Including both empirical and theoretical studies, this volume addresses several important questions: why do countries adopt FTAs and other regional trading arrangements? To what extent have existing regional arrangements actually affected patterns of trade? What are the welfare effects of such arrangements? Several chapters explore the economic effects of regional arrangements on patterns of trade, either on price differentials or via the gravity model on bilateral trade flows. In addition, this text examines the theoretical foundation of the gravity model. Making extensive use of the gravity model of bilateral trade, several chapters explore the economic effects of regional arrangements.

This volume addresses three important recent trends in the internationalization of equity markets. These trends are: extensive market integration through foreign investment and links among stock prices around the world; increasing securitization of other markets at the expense of banks; and the opening of national financial systems of newly industrializing countries to international financial flows and institutions. Eight essays examine such issues as: the current extent of international market integration; gains to US investors through international diversification; home-country bias in investing; the role of time and location around the world in stock-trading; and the behaviour of country funds. Other long-standing questions about equity markets are also addressed, including market efficiency and the accuracy of models of expected returns, with a particular focus on variances, covariances and the price of risk according to the Capital Asset Pricing Model.

As a united global economy evolves, economists and policymakers are forced to consider whether the current system of taxing income is inconsistent with the trend toward liberalized world financial flows and increased international competition. To help assess existing tax policies and incentives, this volume presents new research on how taxes affect the investment and financing decisions of multinationals today. The contributors examine the effects of taxation on decisions about international financial management, business investment, and international income shifting. They consider the influence of tax rules on dividend policy decisions within multinationals; the extent to which tax incentives affect the level and location of research and development across countries; and the fact that foreign-controlled companies operating in the United States pay lower taxes than do domestically controlled companies. The contributors to this volume are Rosanne Altshuler, Alan J. Auerbach, Neil Bruce, Timothy Goodspeed, Roger H. Gordon, Harry Grubert, Bronwyn H. Hall, David Harris, Kevin Hassett, James R. Hines Jr., Roy D. Hogg, Joosung Jun, Jeffrey K. Mackie-Mason, Jack M.Mintz, Randall Morck, John Mutti, T. Scott Newlon, James M. Poterba, Joel Slemrod, Deborah Swenson, G. Peter Wilson, and Bernard Yeung.

As a united global economy evolves, economists and policymakers are forced to consider whether the current system of taxing income is inconsistent with the trend toward liberalized world financial flows and increased international competition. To help assess existing tax policies and incentives, this volume presents new research on how taxes affect the investment and financing decisions of multinationals today.The contributors examine the effects of taxation on decisions about international financial management, business investment, and international income shifting. They consider the influence of tax rules on dividend policy decisions within multinationals; the extent to which tax incentives affect the level and location of research and development across countries; and the fact that foreign-controlled companies operating in the United States pay lower taxes than do domestically controlled companies.The contributors to this volume are Rosanne Altshuler, Alan J. Auerbach, Neil Bruce, Timothy Goodspeed, Roger H. Gordon, Harry Grubert, Bronwyn H. Hall, David Harris, Kevin Hassett, James R. Hines Jr., Roy D. Hogg, Joosung Jun, Jeffrey K. Mackie-Mason, Jack M. Mintz, Randall Morck, John Mutti, T. Scott Newlon, James M. Poterba, Joel Slemrod, Deborah Swenson, G. Peter Wilson, and Bernard Yeung.

How has the United States government grown? What political and economic factors have given rise to its regulation of the economy? These eight case studies explore the late 19th- and early 20th-century origins of government intervention in the United States economy, focusing on the political influence of special interest groups in the development of economic regulation. This book examines how constituent groups emerged and demanded government action to solve perceived economic problems, such as exorbitant railroad and utility rates, bank failure, falling agricultural prices, the immigration of low-skilled workers, work-place injury and the financing of government. The contributors look at: how pre-existing policies, institutions and market structures shaped regulatory activity; the origins of regulatory movements at the state and local levels; the effects of consensus-building on the timing and content of legislation; and how well government policies reflect constituency interests. This work aims to provide a wide-ranging historical view of the way interest group demands and political bargaining have influenced the growth of economic regulation in the United States.It should be of interest to economists, political scientists and public policy experts.

"An essential reference for specialists in the economics of technological change."--D. G. McFertridge, Canadian Journal of Economics

Due to falling fertility rates, the ageing of the baby-boom cohort, and increases in life expectancy, the percentage of the population that is elderly is expected to increase rapidly in the United States and Japan over the first two decades of the 21st century. The 14 essays in this volume seek to show that, despite differences in culture and social and government structure, population ageing will have many similar macro and micro effects on the economic status and behaviour of the elderly in both countries. The most obvious effects will be on social programmes such as public pension systems and the provision for medical needs of the elderly. However, the contributors assert that ageing will also affect markets for labour, capital, housing, and health care services as well as firms through their participation in the demand side of the labour market and through their provisions for pensions.

Since the 1980s, economists have used the concept of strategic trade policy, which takes account of imperfect competition and increasing returns in the international marketplace, to criticize conventional views about free trade. According to the new view, a government can take strategic steps to raise its income at another country's expense - by subsidizing exports or erecting trade barriers, protecting certain firms from foreign competition or promoting the development of new industries. This volume looks at the experience of specific industries in order to determine the effectiveness of strategic trade policy in promoting economic growth. The nine papers cover the US and European auto industries, the US steel industry, the commercial aircraft industry, airline deregulation in Scandinavia, and labour and industrial policy in Korea and Taiwan. The authors refine the basic techniques for measuring policy effectiveness, extend them to encompass industry dynamics and test the implications of new trade models.

Exploring the political and economic determinants of trade protection, this study provides a range of information on key American industries and documents the process of seeking and conferring protection. Eight analytical histories of the automobile, steel, semiconductor, lumber, wheat, and textile and clothing industries demonstrate that trade barriers rarely have unequivocal benefits and may be counterproductive. They show that criteria for awarding protection do not take into account the interests of consumers or other industries and that political influence and an organized lobby are major sources of protection. Based on these findings, a final essay suggests that current policy fails to consider adequately economic efficiency, the public good, and indirect negative effects. This volume should interest scholars in economics, business, and public policy who deal with trade issues.

This summary examines the level, form and evolution of American trade protection. In case studies of trade barriers imposed during the 1980s to help the steel, semiconductor, automobile, lumber, wheat, and textile and clothing industries, the contributors trace the evolution of efforts to obtain protection, protectionist measures and their results. A chapter assessing the common themes that emerge from the studies concludes that the focus of current trade law is exclusively on the individual protection-seeking industries, with little regard for indirect effects on using industries or for consumers. Reform could usefully take these effects into account. This volume should interest policymakers, business executives, and anyone interested in trade policy formulation and practice.

Governments and corporations may contribute, but around the world household saving is the biggest factor in national saving. To increase understanding of why saving rates differ across countries, this volume provides analyses of patterns of household saving behaviour in Canada, Italy, Japan, Germany, the United Kingdom and the United States. Each of the six chapters examines micro data sets of household saving within a particular country and summarizes statistics on patterns of saving by age, income and other demographic factors. The authors provide age-earning profiles and analyses of the accumulation of wealth over the lifetime which allows comparisons between earning, consumption and saving in the six countries. Designed as a companion to Public Policies and Household Saving (1994), which addresses saving policies in the G-7 nations, this volume offers detailed descriptions of saving behaviour in all G-7 nations except France.

We often think of fiscal decisions as being made by a single government, but in the United States the reality is that an astounding number of entities have the power to tax and spend. State, local, and federal governments all play crucial roles in the U.S. fiscal system, and the interrelation has been the source of continuing controversy. This fact is the focus of the seven papers and commentaries presented in this volume, the result of a conference sponsored by the NBER. The contributors use various quantitative tools to study policy issues, obtaining results that will interest policymakers and researchers working in the areas of taxation and public finance. The first three papers study the distribution of power and responsibilities among the various levels of government. John Joseph Wallis and Wallace E. Oates look at the extend and evolution of decentralization in the state and local sector; Robert P. Inman examines the growth of federal grants and the structure of congressional decision making; and Jeffrey S. Zax investigates the effects of the number of government jurisdictions on aggregate local public debt and expenditures. The next three papers look at the deductibility of state and local taxes on federal tax returns. Using an econometric analysis, Douglas Holtz-Eakin and Harvey S. Rosen examine the effects of deductibility on revenue sources and level of expenditures. Lawrence B. Lindsey looks at how deductibility affects the level and type of taxation. George R. Zodrow uses a two-sector general equilibrium model to investigate revenue effects of deductibility. Finally, Charles R. Hulten and Robert M. Schwab analyze the problem of developing an accurate estimate of income for the state and local sector, finding that conventional accounting procedures have underestimated the income generated by a startling $100 billion.

For dozens of developing countries, the financial upheavals of the 1980s have set back economic development by a decade or more. Poverty in those countries have intensified as they struggle under the burden of an enormous external debt. In 1988, more than six years after the onset of the crisis, almost all the debtor countries were still unable to borrow in the international capital markets on normal terms. Moreover, the world financial system has been disrupted by the prospect of widespread defaults on those debts. Because of the urgency of the present crisis, and because similar crises have recurred intermittently for at least 175 years, it is important to understand the fundamental features of the international macroeconomy and global financial markets that have contributed to this repeated instability. Developing Country Debt and the World Economy contains nontechnical versions of papers prepared under the auspices of the project on developing country debt, sponsored by the National Bureau of Economic Research. The project focuses on the middle-income developing countries, particularly those in Latin America and East Asia, although many lessons of the study should apply as well to other, poorer debtor countries. The contributors analyze the crisis from two perspectives, that of the international financial system as a whole and that of individual debtor countries. Studies of eight countries—Argentina, Bolivia, Brazil, Indonesia, Mexico, the Philippines, South Korea, and Turkey—explore the question of why some countries succumbed to serious financial crises while other did not. Each study was prepared by a team of two authors—a U.S.-based research and an economist from the country under study. An additional eight papers approach the problem of developing country debt from a global or "systemic" perspective. The topics they cover include the history of international sovereign lending and previous debt crises, the political factors that contribute to poor economic policies in many debtor nations, the role of commercial banks and the International Monetary Fund during the current crisis, the links between debt in developing countries and economic policies in the industrialized nations, and possible new approaches to the global management of the crisis.

In the increasingly global economy, domestic tax policies have taken on a new importance for international economics. This unique volume compares the tax reform experiences of Canada and the United States, two countries with the world's largest bilateral flow of trade and investment. With the signing of the U.S.-Canada Free Trade Agreement and the tax reforms of the 1980s, there has been some harmonization of tax systems. But geographic, cultural, and political characteristics shape distinct national social policies that may impede harmonization. As the U.S. and Canadian economies become even more integrated, differences in tax systems will have important effects, in particular on the relative rates of economic growth. In this timely study, scholars from both countries show that, while the United States and Canada exhibit similar corporate tax structures and income tax systems, they have very different approaches to sales tax and social security taxes. Despite these differences, the two countries generate roughly the same amounts of revenue, produce similar costs of capital, and produce comparable distributions of income.

How has the Bank of Japan (BOJ) helped shape Japan's economic growth during the past two decades? This book comprehensively explores the relations between financial market liberalization and BOJ policies and examines the ways in which these policies promoted economic growth in the 1980s. The authors argue that the structure of Japan's financial markets, particularly restrictions on money-market transactions and the key role of commercial banks in financing corporate investments, allowed the BOJ to influence Japan's economic success. The first two chapters provide the most in-depth English-language discussion of the BOJ's operating procedures and policymaker's views about how BOJ actions affect the Japanese business cycle. Chapter three explores the impact of the BOJ's distinctive window guidance policy on corporate investment, while chapter four looks at how monetary policy affects the term structure of interest rates in Japan. The final two chapters examine the overall effect of monetary policy on real aggregate economic activity. This volume will prove invaluable not only to economists interested in the technical operating procedures of the BOJ, but also to those interested in the Japanese economy and in the operation and outcome of monetary reform in general.

This is the fourth book in a series from the National Bureau of Economic Research that addresses economic issues in ageing and retirement. Building on the research in "The Economics of Aging" (1989), "Issues in the Economics of Aging" (1990) and "Topics in the Economics of Aging" (1992), this volume examines relations between elderly population growth and government spending. Chapters cover life expectancy and health, saving for retirement and the role of 401(k) plans, demographic transition and housing values, ageing in Germany and Taiwan, and the utilization of nursing homes and other long-term care.