Economic Rents Research Articles

Providing Environmental Public Goods under the Common Agricultural Policy as a Cure for Market Failure

Purpose: In the reality of the marketplace, a situation often arises where an economic surplus (rent) achieved by agricultural producers is partly taken over by related non-agricultural sectors. In this sense the category of economic rent embraces market failures related to such factors as price flexibility, and thus represents an effect of the misallocation of resources in the agricultural sector. The question therefore arises of whether there exists a developmental model of agriculture in which such market failures would be reduced. Apparently the only coherent response to this need is action taken under the paradigm of sustainable agriculture. This type of model for the sector’s functioning is supported by the objectives of the European Union’s Common Agricultural Policy (CAP), including through support for the supply of public goods in rural areas. Design / Methodology / Approach: To verify the hypothesis, a panel regression analysis was performed on three sets: the EU-15 countries and the EU-12 countries. The analysis covered two hitherto accomplished CAP programming periods: 2004-2006 and 2007-2013. Findings: Increase in the level of payments for public goods, as a percentage of total subsidies to agriculture, leads on average to a reduction in the drainage of economic rents through prices. It was also found that the financing of public goods under the CAP is more effective in reducing market failures in the EU-15 countries than in the EU-12. Practical Implications: This article addresses the question of whether CAP payments for public goods are a desirable systemic solution serving to reduce market failures. It is hypothesised that the financing of activity relating to the supply of public goods mitigates the “market treadmill”, since it reduces the unexpected outflows of economic surplus away from farms, caused by agricultural prices.

Capital taxation efficiency of agricultural businesses in the Slovak Republic

Effective tax rates are presented by indicators of the actual corporate tax burden, which take into account the impact of all the elements listed in the legislation. The submitted contribution explores the issue of effective taxation through effective average tax rates (EATRs) focusing on agricultural production enterprises. The analysis assessed the effect of changing the statutory tax rate (and other taxes and factors) on changing the effective average rate of capital. Taxation efficiency was monitored for selected intangible and tangible assets for 2004 and 2018. Analysis indicated a depreciation tax shield that tracked the amount of tax savings on capital investment as well as the economic rent of the project with taxation. The analysis showed that a 3% increase in the statutory rate over the reference period increased the effective average corporate rates for intangible assets by 13.35%, tangible assets by 14.25% and inventories by 16.63%. The highest annual tax saving was achieved in 2018 for tangible assets of € 4,647.50, with a four-year return.

Middlemen: good for resources and fishermen?

AbstractThis paper studies the role of middlemen in open-access fisheries and how the organization of the supply chains affects resource exploitation and the level and distribution of economic rent. Imperfect competition among middlemen can help ensure that fish stocks are not depleted, which is typically the case in open-access fisheries with competitive markets. Middlemen with market power can also induce higher economic rent for the supply chain in total, but these rents mainly benefit the middlemen. The supply chains of inshore anchovy and offshore skipjack tuna fisheries in Vietnam are used as empirical examples. The analysis shows that in the anchovy supply chain, the middlemen have insignificant market power and the stock is being overexploited. In the skipjack tuna supply chain, the middlemen have oligopsony power and the stock is higher than the level that produces maximum sustainable yield.

Testing the SDG targets on water and sanitation using the world trade model with a waste, wastewater, and recycling framework

In this article, we employ an extended world trade model and rectangular choice of technology (WTM/RCOT) framework, which minimizes global factor costs subject to satisfying final demand and respecting region-specific factor constraints, to calculate the economic costs of achieving the United Nations Sustainable Development Goals (SDGs) for water and sanitation. We estimate how achieving these goals will affect factor use, trade balances, scarcity rents, and production in 19 regions of the world, drawing on an expanded database developed from the GTAP9 database, the developed model involves 64 technology columns and 74 rows of factors of production. On a theoretical level, this model contributes to the existing literature on the topic by using endogenous cost estimates that consider shifts in production and factor scarcity rents and by considering recycling and wastes within an input-output model, in which wastes can be modelled as input resources as well as waste outputs. We find that the additional factor costs of meeting the water and sanitation targets of the SDGs exceed US$100 billion annually, with a total cost of US$3.3 trillion from 2015 to 2030. These figures are similar to other recent works on the subject despite methodological differences. It also suggests that the worldwide SDG targets can be achieved with moderate costs relative to the total global GDP, especially in comparison to the high estimated cost of inaction. Predictably, in areas working toward water and sanitation SDGs (areas such as Sub-Saharan Africa, regions in South Asia, etc.), factor use costs increase, but not commensurately with the growth of coverage—some regions, such as areas of South America, notably have higher factor use costs along in proportion to the coverage. Indeed, Sub-Saharan Africa, which needs the highest increase in coverage, will not likely have as large increases in factor uses and would barely get scarcity rents. In general, regions with higher SDG targets will require further trade, especially additional imports of inputs such as chemicals and energy products. This trade will increase factor earnings in factor rich regions such as the European Union, Japan, and Korea.

Distritos industriales y renta económica: el efecto distrito – renta

En el presente trabajo se expone una primera aproximación al efecto distrito desde la variable de la renta económica, lo que se ha denominado efecto distrito – renta. Esta aproximación al fenómeno distritural se realiza desde la perspectiva del desarrollo local neomarshalliano para enfatizar la centralidad del distrito industrial como fuente de interpretaciones propias sobre el cambio económico y sujeto activo del mismo. A nivel empírico se realiza una aproximación a la contrastación de la existencia o no de efecto distrito – renta en los distritos industriales españoles para el año 2013; estos datos son analizados a través de la comparativa de la renta total, per cápita y por ocupado expresada por los distritos industriales en relación al resto de tipologías de sistemas productivos locales.

Wealth Circulation among the Rich People, Violation of Citizenship Rights

Wealth circulation among the rich people is in the sense of circulation of domination over the properties and assessts of society and violation of citizenship rights. Among the striking examples of wealth circulation, one can refer to the exclusive domination of a number of chosen people over natural resources, domination over the economic information stream, determination of commodity prices, domination over money and capital market, domination over imports and exports and international commerce. In the current essay the authors have first analyzed this principle based on Islamic Sharia and jurisprudents and then considered the implementation of this principle to be among the tasks of Islamic state based on constitution and citizenship rights. The principle of denial of wealth circulation is a universal principle whose scope covers all economic activities and even it can be generalized to the interests and revenues resulted from the economic rent and monopoly which have been acquired without further efforts. This principle explains the orientation of Islamic economy in several stages and via different ways relying on the principle of wealth distribution; in the first stage, this principle respects the private ownership and at the same time prevents from wealth monopolization that renders its transaction impossible which is the prerequisite of development. In the next stage by referring to the principle of public nature of wealth and for the sake of administration of economic justice the natural resources and the spoils of war have been given to Islamic state and finally the individuals are obliged to pay part of their legitimate incomes for the interests of the system and overcoming the poverty in the form of tax, khums, zakat, and kafareh. Please cite this article as: Fatullahi Z, Ayati SMR, Qanbari Jahromi MJ, Jafari Harandi M. Wealth Circulation among the Rich People, Violation of Citizenship Rights. Bioethics Journal , Special Issue on Human Rights and Citizenship Rights 2019; 57-74.

Taxing Capital Income and the Z-Tax Solution

This paper looks at issues with conventional approaches to capital income taxation, such as the income tax, the capital gains tax and the cash-flow consumption tax, and finds that there are difficulties with all of these. It proposes an alternative solution based on treating ordinary capital income in the same manner as capital gain, with tax deferral until drawdown. To achieve this it relies on a novel combination of two taxes, the pre-paid and the post-paid consumption tax, whereby tax levied under the latter takes account of tax previously paid under the former. In other words this ‘Z-tax’ is a modified form of cash flow consumption tax where much of the tax is payable up front. It potentially allows all capital income to be treated similarly, and allows excess returns - economic rents - to be taxed.

Political Corruption and Firm Value in the U.S.: Do Rents and Monitoring Matter?

Political corruption imposes substantial costs on shareholders in the U.S. Yet, we understand little about the basic factors that exacerbate or mitigate the value consequences of political corruption. Using federal corruption convictions data, we find that firm-level economic rents and monitoring mechanisms moderate the negative relation between corruption and firm value. The value consequences of political corruption are exacerbated for firms operating in low-rent product markets and mitigated for firms subject to external monitoring by state governments or monitoring induced by disclosure transparency. Our results should inform managers and policymakers of the tradeoffs imposed on firms operating in politically corrupt districts.

Property as Rent

As fear of financial market turbulence reaches its most severe level since the lead up to the Great Recession in 2007, this article revisits the topic of real estate securitization while broaching a broader concern with the inadequacy of how property theory has reckoned with major changes in the post-war economy since the 1970s. To do so the article highlights a new form of securitization— of rental payments from single-family homes — that has been emerging in the United States since 2013. It discusses the new class of securities that such single family rental (SFR) payments support as one example of the economy’s ever shifting overreliance on debt-based forms of financial asset property more generally. The article situates real estate securitization in specific and financial asset property in general in relation to our reinvigorated debate in law about property as an in rem right to exclude versus a versus a bundle of social relations making democratic community possible. Arguing that neither side in the debate has been well equipped to account for financial asset property, the article makes a normative case against the renewed resort to securitization in the real estate market. Using SFR-backed securities as an example, it argues that we can better understand debt-based property derived from real estate value according to a long-standing conception in law and economics of property as a means of extracting economic rent from land. Neglected by recent theorists on all sides, this conception of property-as-rent dates to the origins of classical economic thought and remained highly influential for early institutional economists and their legal realist inheritors in the United States. Its distinguishing feature was an underlying idea of rent that concentrated attention on land control as a means of garnishing unearned revenue from production so as to inhibit rather than promote economic well being. As renewed debate in property theory has instead focused on other concerns, we have missed the key role that financial ownership claims on land’s scarcity value have continued to play in our actual economy, steadily re-directing income and investment from productive to speculative use since the 1970s. In pressing the case for the conception of property-as-rent, the article closes by drawing on a novel data set to disaggregate the relative share of land versus built structure values in the long-term composition of housing prices in the United States. By doing so, the article shows how contingent securitization is on extracting — and transforming into bondholder interest — rentierist scarcity premiums from land, which the data demonstrate to comprise much/most of the increasing value of residential real estate in the last half-century.

Bioeconomic analysis on coral fish in Raja Ampat Regency, West Papua Province

Fishery resources of Raja Ampat Regency’s waters in West Papua Province have shown a declining trend in terms of total coral fish production. In order to sustainably manage the fishery for future utilization, a baseline analysis needs to be carried out as a tool for sustainable management. This paper attempts to indicate baseline performance of fisheries from bioeconomic perspectives. Data in this study was collected from primary and secondary data. Primary data collected by using quesionair for asking respondents who coastal people of Raja Ampat in 6 (six) villages, than secondary data collected should be in time series format and coming from officially office related government. Than the data resulted to be analyses using bioeconomic formula. One of important results of bioeconomic analysis is that currently there is no indication of overfishing yet in Raja Ampat waters. Total production in open access level has showen 3.97 ton per week. Effort in sole owner level (MEY) has showen 9.06 trip per week. Economic rent under sole owner regime is around Rp 43,040,425.19 per week. This condition has shown that catch per unit effort has been efficient, so that fish harvest has been better and will be followed by maximum economic rent.

Effect of Pedestrian-friendly Revitalization Program of Area near Seoul Station on Namdaemun Market Merchants’ Movement Decision Making

This paper examined the effect of Pedestrian-friendly Revitalization Program of Area near Seoul Station on Namdaemun Market Merchants’ Movement Decision Making, whether to stay or move. Research survey had been carried to 400 merchants from Dec. 2016 to Jan. 2017 and finally 70 cases were adopted to analysis. The binary logistic regression model was employed to analysis. And the results were as follow. First, 37.1% of merchants were willing to move to another region. Second, the significant factors at below 90% were Rent per square meter(-), Recent increase of rent(+), Accessory sector(+), Participating Association(+), Positive business outlook(+). So, these results showed that the determinant factor was economic rent burden. Specifically, More visitors coming, higher pressure forcing merchants, who had paid lower rent, to move involuntarily. Consequently, If more floating population were coming to Namdaemun market, Accessory wholesaler, which had increased from the 1980s and occupied large portion in Namdaemun market, would be displaced by retail shops.

Over‐, Required, and Undereducation: Consequences on the Bottom Lines of Firms

AbstractWe provide first evidence regarding the direct effect of over‐, required, and undereducation on the bottom lines of firms across work environments. We use detailed Belgian linked employer–employee panel data, rely on the methodological approach pioneered by Hellerstein et al. (1999), and estimate dynamic panel data models at the firm level. Our findings show an ‘inverted L’ profitability profile: undereducation is associated with lower profits, whereas higher levels of required and overeducation are correlated with positive economic rents of roughly the same magnitude. The size of these effects is amplified in firms experiencing economic uncertainty or operating in high‐tech/knowledge sectors.

The Practical Intelligence of Social Entrepreneurs: Managing the Hybridity of Social Enterprises

Abstract The hybridity of social enterprises – that is to say, their simultaneous pursuit of both economic and social value – has increasingly drawn the attention of scholars in the fields of social entrepreneurship and, more broadly, entrepreneurship. To date, there has been significant debate as to whether or how social enterprises are distinct from for- and non profit organizations and whether generating economic rents and achieving a social mission can complement or substitute for each other. To add nuance to this literature, this study focuses on the role of social entrepreneurs’ practical intelligence, seeking to understand how the practical intelligence of social entrepreneurs can contribute to creating both economic and social value. We generally find positive relationships between practical intelligence and the creation of both social and economic value. However, empirical evidence suggests that some dimensions of practical intelligence are closely related to the creation of economic value, whereas others are related to creating social value. Based on the findings, we discuss how practical intelligence can effectively help social entrepreneurs manage the hybridity of their social enterprises.

The Cost of Energy Review and its implementation

The Cost of Energy Review recommended that, in the face of radical technical change, government should: move towards an Equivalent Firm Power capacity auction, integrating the renewables; establish independent public system operators at the national and regional levels; and move towards an economy-wide carbon price. These have met resistance from vested interests, in defence of the economic rents that have accumulated from the dense web of interventions that have accumulated. The paper shows that the first two of these reforms are nevertheless inevitable with active demand, storage, and decentralized generation technologies inverting the old assumptions of passive demand, no storage, and ever larger-scale generation that have underpinned the electricity industry for the past century. Delay in implementation means continued excess costs of energy and delays innovation.

Tax Policy Next to the Elephant: Business Tax Reform in the Wake of the US Tax Cuts and Jobs Act

While there is considerable uncertainty regarding the US Tax Cut and Jobs Act’s (TCJA) economic and fiscal impacts, one thing is certain – the significant corporate tax competitiveness advantage that Canada enjoyed over the US for years has disappeared. This Commentary explores some major TCJA measures as they relate to corporations, examines their implications for Canadian business, evaluates Ottawa’s response in the Fall Economic Statement and discusses what is required going forward. The TCJA impact on real domestic investment in Canada is complicated, with competing effects. The TJCA will likely have a net negative effect on domestic and US foreign investment in Canada, moderated in the long-run by the international nature of capital markets. Still, concerns remain about income shifting due to the statutory rate reductions in the US. Our review of the academic literature suggests the US tax-rate cut will result in Canadian affiliates of US companies shifting homeward 8 percent to 28 percent of their profits – a back-of-the-envelope calculation for sure, but nonetheless suggesting a potential significant impact on Canadian corporate tax revenues. The TCJA represents a long overdue sea change in US corporate taxation and, on balance, will have a positive impact on investment and productivity in that country. However, the reform is not anchored in sound tax principles and introduces undesirable distortions. Ottawa, in its 2018 Fall Economic Statement, duplicated in part some aspects of the US reforms in accelerated depreciation for new capital expenditures. While we think that this short-run response is reasonable in light of the fiscal constraints facing the government and the uncertainty regarding the impact of the TCJA, we do not think that the work is done. The US reform provides an opportunity to make a bold move toward a corporate tax system in Canada that is grounded in sound tax policy principles, is less distortionary, promotes economic growth and prosperity, and restores Canada’s tax competitiveness on a worldwide basis. A structured, principled approach to tax reform in Canada is preferable than an ad hoc response to US developments, which may turn out to be fragile in light of the American political climate and the point in the business cycle. We advocate for a corporate tax system based on the taxation of economic rents. A simple example of such a regime is a cash-flow tax, which would involve the immediate write-off of all capital expenditures coupled with the elimination of the debt-interest deduction. The basic idea is to replace the corporate income tax with a rent tax that taxes only the above-normal return on investment and is, therefore, neutral with respect to business investment and financing decisions. A cash-flow tax would reduce the business cost of capital investment by roughly 20 percent – offering a much greater boost to capital investment than alternative and fractional reforms such as temporary accelerated depreciation or statutory tax rate cuts.

Building blocks for the macroeconomics and political economy of housing

Housing played an essential part in the global financial crisis 2007–2008 and the Euro crisis. Large parts of bank lending continue to go to mortgages. Housing wealth is the largest part of wealth for most households and is, at the same time, more dispersed than other forms of wealth. House prices exhibit pronounced fluctuations that are closely linked to credit growth. Housing thus plays a crucial role in the macroeconomy, which has become even more pronounced under neoliberalism. We scrutinize different theoretical approaches to housing. Despite its theoretical shortcomings, mainstream economics has pioneered empirical research on wealth effects in consumption and recently documented the role of house prices in financial cycles. Post-Keynesian theory emphasizes endogenous money creation, cycles in asset prices and debt, and has formalized the notion of a debt-driven demand regime. Comparative political economy research has recently developed the concept of the varieties of residential capitalism, which has different structures of house ownership and housing finance at the core of political coalitions. Marxist political economy has long established the intrinsic link between ownership of land and economic rent and notes that homeownership can act as force of working-class fragmentation. Wealth surveys can be used to trace the extent of conflicting interests in a class-relational approach.

Policy Forum: Business Tax Reform in the United States and Canada

The authors examine some of the key features of the US Tax Cuts and Jobs Act (TCJA) and discuss the implications for Canadian corporations and government revenues. They show that the tax advantage that Canada enjoyed prior to the TCJA has declined significantly, in terms of both statutory and effective (marginal and average) tax rates. They discuss the economic effects of possible responses to the TCJA by Canadian governments, including cutting statutory rates and accelerating tax depreciation deductions. Looking ahead, the authors argue that it would be preferable to focus on a more fundamental tax reform based on the taxation of economic rents.

WHO PROFITS FROM PATENTS? RENT-SHARING AT INNOVATIVE FIRMS.

This article analyzes how patent-induced shocks to labor productivity propagate into worker compensation using a new linkage of U.S. patent applications to U.S. business and worker tax records. We infer the causal effects of patent allowances by comparing firms whose patent applications were initially allowed to those whose patent applications were initially rejected. To identify patents that are ex ante valuable, we extrapolate the excess stock return estimates of Kogan et al. (2017) to the full set of accepted and rejected patent applications based on predetermined firm and patent application characteristics. An initial allowance of an ex ante valuable patent generates substantial increases in firm productivity and worker compensation. By contrast, initial allowances of lower ex ante value patents yield no detectable effects on firm outcomes. Patent allowances lead firms to increase employment, but entry wages and workforce composition are insensitive to patent decisions. On average, workers capture roughly 30 cents of every dollar of patent-induced surplus in higher earnings. This share is roughly twice as high among workers present since the year of application. These earnings effects are concentrated among men and workers in the top half of the earnings distribution and are paired with corresponding improvements in worker retention among these groups. We interpret these earnings responses as reflecting the capture of economic rents by senior workers, who are most costly for innovative firms to replace.

PENGELOLAAN SUMBERDAYA PERIKANAN TANGKAP BERBASIS DAYA DUKUNG LINGKUNGAN PERAIRAN DI WPPNRI 711

The maritime potential of the Fisheries Managemen Area of Indonesia (FMA) 711, particularly in the small pelagic capture fisheries sector is very large, it encourages the occurrence of illegal fishing conducted by Indonesian and foreign fishing boats, thereby reducing the production of legal fish catches. This study aims to estimate economic losses due to illegal fishing and the benefits of economic management by staying based on the sustainability of fishery resources, using primary data and secondary data. Primary data were obtained through interviews, fishermen questionnaire results and marine supervisors from July to November 2016. Secondary data, in the form of production statistics and small pelagic capture fishery effort in FMA 711 from Directorate General of Capture Fisheries, MMAF-Indonesia, illegal fishing catch data from the Fisheries Resources Monitoring Station Pontianak, the Indonesian Navy, the Water Police Unit, and Bakamla. The data series of 2005 to 2016 were also analyzed. Estimates of established models, including bio-economic analysis using the Gordon Schaefer model, and for economic benefit analysis using Fox's surplus production model. The results show the production amount 15,361 tons and effort 4,592 units, with economic rent of Rp 293.93 billion per year. While the economic losses due to illegal fishing are the difference between legal and illegal fishing estimates, ie production of 604 tonnes and rents of Rp 12.89 billion. This illustrates that the production and efforts of small pelagic capture fisheries in WPPNRI 711 can still be improved to reach the optimum level.

Complementarity in Open Innovation and Corporate Strategy: The Moderating Effect of Ownership and Location Strategies

This paper investigates the ownership and location strategies as contingency factors, which affect the relationship between SMEs’ open innovation activities and innovation performance in the context of emerging economies. Drawing from the corporate strategy and open innovation literature, we argued that SMEs with state and foreign ownership can more effectively capture economic rents from open innovation in a weak intellectual-property-rights regime. Meanwhile, the subnational environments in which SMEs locate their businesses is also crucial for them to capture value from open innovation. Using the data of 1050 SMEs in China, we found that state ownership positively and significantly moderates the relationship between openness and innovative performance, while foreign ownership partially supports the same effect. By disentangling the pro-business environment and the market development, we found that for SMEs that are located in a region with a stronger pro-business environment and a higher level of market development, open innovation can bring more value than it does for those located in regions with lower levels of those factors. Overall, this paper also contributes to our understanding of the complementary relationships between ownership and location strategies and open innovation.