Economic Rents Research Articles

Does Pillar One Amount A Effectively Tax the Digital Economy?

This article examines to what extent Pillar One Amount A of the OECD's new ‘Two-Pillar’ solution effectively taxes the largest digital multinational enterprises (MNEs). The original purpose behind the OECD’s proposal was to tax the digital economy by defining a sales-based allocation key. However, the metrics behind Amount A – a global turnover of €20bn, a profitability margin of 10% and a limited list of excluded industries – diverge from that policy. This article first examines the policy objective of ‘taxing the digital economy’, and how Amount A is understood to work by exploring how the ‘residual profits’ criterion and the allocation key apply. By comparing the UNCTAD’s list of the top 100 digital MNEs to those meeting the Amount A metrics using the Orbis database, it is concluded that the majority of digital MNEs would not be subject to Amount A. This article then analyses the economic incidence of Amount A and concludes that, if ‘residual profits’ is a proxy for economic rent and the allocation key remains sales-based, Amount A could successfully target digital MNEs, as they are prone to producing such economic rent and cannot reduce their tax burden by shifting it onto other economic players.

The Digital Markets Act’s Innovation Paradox: Towards a Digital <em>Magna Carta </em>and <em>Leviathan</em>?

The Digital Markets Act (DMA) represents the culmination of over a decade of debate and litigation on how to deal with the impact of the largest technology companies on the European economy. The DMA explicitly seeks to promote fairness and contestability. But it is also undeniable a key motivation behind the regulation was to promote competition and innovation in digital markets. This article aspired to partially address a simple, but complex question: Will the DMA promote innovation? It is argued that the DMA is concerned with the promotion of specific forms of competition innovation, with an emphasis on the structural redistribution of economic rents to achieve its aims. The article posits that the predominant forms of innovation competition promoted in the regulation both exemplify the DMA’s genius as well as its principal failing. By prioritising its pursuit of structural rent distribution, the DMA fails to acknowledge the idiosyncrasies of individual digital markets, instead favouring particular forms of innovation competition. As a result, the regulation is at risk of becoming a regulatory Leviathan: an overbearing set of rules whose objective is to impose or foster particular forms of competitive pressure in the digital sector, regardless of whether such competition is effective.

Space and technology in catching-up economies: “the city as a laboratory for innovation”

Successful catching-up economies tend to exhibit a set of properties: (i) rapid increases in skilled labor and R&D investment, (ii) industrial structure upgrading from technology adoption toward technology creation sectors, and (iii) spatial concentration on the rise. The paper accounts for them by combining the mechanisms of skill-city complementarity and knowledge spillover in the setting of catching-up economies where ideas are more challenging to find along the growth path. With the diminishing possibility of adopting existing ideas, catching-up economies gradually rely more on creating ideas, which requires efficient knowledge spillover through urban spatial concentration based on ability sorting. We highlight that (i) catching-up economies choose proper city size and structure to benefit from growth effects through fostering innovation and spillovers, and (ii) rents here are not just an economic rent but play a productive role of allocating innovative abilities over space in an incentive-compatible manner. We discuss the policy on urban rents.

Efficient Economic Rent Taxation under a Global Minimum Corporate Tax

Efficient Economic Rent Taxation under a Global Minimum Corporate Tax

Decentralized finance (DeFi) markets for startups: search frictions, intermediation, and the efficiency of the ICO market

This paper examines the efficiency of the Initial Coin Offering (ICO) market through a search-theoretical lens. Search intensity associated with the process of identifying valuable startups is increasing in market granularity. DLT increases market granularity because asset tokenization lowers entry barriers. Lower-end entrants, however, increase aggregate search intensity but may lack search skills. The resulting search-related inefficiency creates a niche for intermediaries or institutional investors that specialize on search. Consistent with the theory, specialized crypto funds increase ICO market efficiency by reducing search frictions, inter alia, by shortening the time-to-funding and increasing the funding amount. At the same time, crypto funds extract sizable economic rents for their intermediation services. Overall, the study relates to the general trade-off between centralization and decentralization in entrepreneurial finance. It suggests that market frictions specific to early-stage crowdfunding of entrepreneurship may prevent “perfectly” Decentralized Finance (DeFi) markets from functioning efficiently.

The Economic Value of Onion Farming Land and Its Impact on Farming Activities in Lambu District, Bima Regency

The research aims to: (1) Analyze the economic value of land (land rent) for shallot farming, both as land rent and economic surplus; (2) Analyze the costs and income of shallot farming in Lambu District, Bima Regency, NTB; and (3) Knowing farmers' perceptions of shallot farming activities. The research method is an exploratory-descriptive research method. This research was conducted in 2 (two) locations which are centers for the development of superior shallot commodities in Lambu District, Bima Regency, NTB, namely: Rasabou Village and Lambu Village. The number of samples at each location was 15 farmer households. Data were analyzed descriptively. The results show that: (1) The economic value of land as an economic surplus (land rent or economic rent or reaches) IDR 80,510,400/ha (94.45% comes from the economic surplus of dry season shallots); while the rental price (contact rent) is IDR 20,00,000 (66.25% is the dry season rental value); (2). The average production cost for red onion farming is IDR 87,582,200, while the production value reaches IDR 150,375,000, - resulting in a profit of IDR 62,792,800/ha; (3) The high profits and large absorption of labor in shallot farming have resulted in the emergence/judgment of farmers and farm workers that dry season farming (shallots) is more important than the rainy season (rice or other crops).

Evaluation of the Synergies of Land Use Changes and the Quality of Ecosystem Services in the Andean Zone of Central Ecuador

The scarcity of information that allows for understanding the importance of natural resources from an economic approach is often a limitation to establishing parameters related to environmental investment in conservation plans. This study proposes a methodology that allows for modeling the variability of páramo land uses and the EV of the Chambo-Ecuador sub-basin from bioeconomic monitoring that links the economic rent of páramo land uses with remote sensing tools and geographic information systems. Multilayer Perception, Markov Chains, and Automata Cells algorithms were efficient for the detection of land uses in páramo; the normalized differential humidity index was the most relevant variable to identify crops, showing that leaf properties and water stress are linked to crop yields in the Andean region. The páramo decreased by 13% between 2000 and 2010, increasing its degradation to 19% between 2010 and 2020. A 28% reduction is expected between 2000 and 2030; the EV between 2000 and 2020 was $2.86 × 108 and $2.59 × 108 respectively. In 2030, EV is expected to decrease to $2.48 × 108. Transitions in land use and EV are associated with productive dynamics, which decrease environmental services, such as water retention and carbon storage, intensifying changes in the ecosystem climate.

Unions, Industrial Concentration, and Economic Rents: How the Wagner Act increased wages during the 1930s

Unions, Industrial Concentration, and Economic Rents: How the Wagner Act increased wages during the 1930s

СВЯЗЬ НЕРАВЕНСТВА ДОХОДОВ И НАУЧНО-ТЕХНИЧЕСКОГО ПРОГРЕССА С ТОЧКИ ЗРЕНИЯ ПОЛИТЭКОНОМИИ

The article analyzes the views of scientists of the late 20th and early 21st centuries on the question of whether there is a connection between income inequality and the development of the digital economy. Based on an analysis of the works of Lawrence F. Katz, David Autor, David Deming, Dani Rodrik, Robert Solow, Joseph Schumpeter and Klaus Schwab, the author answers the research question – what factors are determining for the generation of inequality in the digital economy. As such factors, the author identifies globalization, a reduction in the share of labor in the world GDP with a simultaneous reduction of the capital profitability, an increase in economic rent from the possession of technology, and a greater profitability for capital compared to labor from the introduction of technology. As a result of a comparative analysis of the concepts set out in the works of the above mentioned authors, it is concluded that they all recognize the fact that as a result of the introduction of new technologies, there is an increase in inequality. It was also found that the IT industry is developing according to the same laws as conventional production. As a new technology is widely introduced, it becomes «routinized,» and accordingly, as a large number of workers master the technology, wages fall. Moreover, the development of technology can, in principle, lead to layoffs of workers, which further deepens the problem of inequality. To verify the results of the analysis, the author analyzed statistical indicators for achieving SDG 10 «Reducing inequality within and between countries» based on the annual UN Sustainability Report. It was found that the target will not be achieved by 2030, but it significantly lays behind the other 16 SDGs. Thus, the author’s hypothesis about the growth of income inequality under the influence of digitalization processes is confirmed.

Conquests and Rents: A Political Economy of Dictatorship and Violence in Muslim Societies

Eric Chaney of University of Oxford reviews “Conquests and Rents: A Political Economy of Dictatorship and Violence in Muslim Societies” by Faisal Z. Ahmed. The Econlit abstract of this book begins: “Examines how the institutional legacy of Muslim conquest is a robust determinant of less cohesive institutions in contemporary Muslim societies, detailing how variation in economic rents explain ebbs and flows of dictatorship and propensity for civil wars in these societies.”

The Economic Public Interest in a World of Oligopoly*

The Australian economy has performed well compared with comparable countries over the last three decades only if we average the excellent performance in the 1990s and the poor performance over the past decade. Real wages over the past decade have stagnated—to an extent without historical parallel. We cannot understand the economy's underperformance without recognising the increasing claims of economic rents on national income. Correction of weaknesses requires coordination of many policy instruments including measures to reduce the prevalence of rents (competition policy and regulation of oligopoly where competition is not feasible or inefficient) and changes in taxation arrangements to shift the burden of business taxation from firms in competitive activities to firms relying heavily on economic rents.

Merit first, need and equality second: hierarchies of justice

AbstractThe question of “Justice” still divides social research, moral philosophy, and public discourse. Three principles of distributive justice (allocation rules) occupy center stage in the debate: merit (equity, proportionality), need, and equality. Yet their relation remains diffuse, and current theory does not inform political practice. Here, we aim to develop a coherent picture with an interdisciplinary analysis. From an evolutionary point of view, the foundational principle of justice is reciprocity in social exchange (what corresponds to merit). But besides being just, justice must be effective, efficient, and communicable, thereby making justice rather a social bargain and an optimization problem. Social-psychological insights (intuitions, rules of thumb, self-bindings) can inform us when and why the two allocation principles need and equality are more likely to succeed than merit would. But both are governed by reciprocal considerations, and self-bindings help to interpret altruism as “very generalized reciprocity.” Regarding politics, the reciprocal social norm Meritocratic Principle can be implemented, and its controversy avoided, by concentrating on “non-merit,” i.e., institutionally draining the wellsprings of undeserved incomes (economic rents). Avoiding or taxing away economic rents is an effective implementation of justice in market economies.

Feasibility of Launching a Palestinian Currency Using Hypothetical Alternatives That May Fit the Specificities of the Palestinian Economy: Supporting Vs Opposition

This research attempted to determine the viability of issuing a Palestinian currency by using hypothetical choices that may fit the uniqueness of the Palestinian economy. Because of the freezing of peace accords, the lack of Palestinian money, and the confiscation of Palestinian financial dues by the Zionist Entity, this is a positive perspective of the nature of Palestinian monetary structures. These hypothetical choices were developed because the Palestinian currency is crucial to the Palestinian economy and important in preventing financial losses such as economic rent. To that purpose, the researcher used a statistical test to investigate the viewpoints of academic specialists on this subject. The research results revealed no statistically significant variations at (α≤0.05) in respondents’ opinions regarding the prospect of issuing money using hypothetical possibilities linked to demographic factors. The authors propose that the entity in charge of administering and issuing Palestinian money be the currency commission, with the authority to progressively introduce it alongside other monetary standards in existence. This research advocated for partial issuance of total currency with a restriction on money in the system) (CC) (rather than complete is suing to cover the full monetary base in the narrow sense) (M1). Therefore, the author recommended using fictitious exchange rates, currency values, and deposit cover alternatives.

Numerical Simulations of How Economic Inequality Increases in Democratic Countries

It is not easy to perform a numerical simulation of the path to a steady state in dynamic economic growth models in which households behave by generating rational expectations. It is much easier, however, if households are assumed to behave according to a procedure based on the maximum degree of comfortability (MDC), where MDC indicates the state at which a household feels most comfortable with its combination of income and assets. In this paper, I simulate how economic inequality increases in democratic countries under the supposition that households behave according to the MDC-based procedure. The results indicate that high levels of economic inequality can be generated and even increase in a democracy. As causes, I postulate households’ misunderstandings of the economic situation, a government against certain groups in the economy, or an upward trend in temporary rent incomes. I then present a criterion for establishing the socially acceptable level of economic inequality and point out a practical shortfall arising from the inability to distinguish temporary economic rents. 

Sustained Competitive Advantage and Complexity: A Configurational Approach

In recent years, Qualitative Comparative Analysis (QCA) has emerged as a research approach to get insight into social science and business complexity. In contrast to the inferential methods that measure the net effect of an independent variable into a dependent variable, the QCA approach uncovers the necessary and sufficient conditions leading to a desired outcome. This paper discusses complexity in social science and business from the QCA perspective. In this regard, there are three streams of literature in strategic management aiming to explain how some firms outperform others: Porter´s competitive advantage approach, Barney´s sustained competitive advantage perspective, and D´Aveni´s temporary advantage. However, the sustained competitive advantage approach suggests that generating economic rents must be understood as a complex phenomenon characterised by three features: i) path dependency (e.g., some resources and capabilities can only be developed over long periods, ii) social complexity (e.g., it may not always be clear how some firms develop some capabilities in short to medium term), and iii) causal ambiguity (e.g., some resources and capabilities cannot be bought and sold in markets). Therefore, this framework draws from a complex (or complexity) process that establishes logical connections between combinations of causal conditions (i.e., resources and capabilities) and a desired outcome (i.e., economic rents). The research methodology for business from the QCA perspective thus may raise some critical questions: How do some firms accumulate and deploy resources and capabilities more efficiently than their competitors to internally (not in markets) acquire and sustain a competitive advantage? And what is the nature of a firm´s economic rents? In short, this paper discusses the nature of sustained competitive advantage (i.e., desired outcome) as a complex process (and not as a linear process) in that some firms outperform others, managing and deploying different resources and capabilities (i.e., conditions).

Preparing for a Mid-Life Crisis: Section 92A at 40

Section 92A, the resources amendment, was added to Canada’s foundational constitutionaldocument in 1982 at the same time as Canada patriated its Constitution from Westminster and adopted the Canadian Charter of Rights and Freedoms. The provision was designed to confirm and enhance the legislative and executive authority of provincial governments. As we approach the fortieth anniversary of section 92A, Canada appears destined for another federation-defining conflict over resource-related issues including the construction of new pipelines, legislative and policy responses to greenhouse gas emissions, and the reach of federal environmental impact assessment legislation. This article begins by examining the events that led to the adoption of section 92A and next assesses both how litigants have invoked section 92A and how Canadian courts have interpreted its text in the 40 years since its adoption. Earlier decisions relied on section 92A to confirm the validity of provincial or municipal legislation, but, in more recent cases, section 92A has been invoked to question the validity or applicability of federal legislation. Section 92A arose out of conflict with respect to trade in resources and the right to appropriate the economic rent associated with developing those resources. The current conflicts focus on the power to make laws with respect to the development and exploitation of those resources.

Foreseen risks

Large crises tend to follow rapid credit expansions. Causality, however, is far from obvious. We show how this pattern arises naturally when financial intermediaries optimally exploit economic rents that drive their franchise value. As this franchise value fluctuates over the business cycle, so too do the incentives to engage in risky lending. The model leads to novel insights on the effects of unconventional monetary policies in developed economies. We argue that bank lending might have responded less than expected to these interventions because they enhanced franchise value, inadvertently encouraging banks to pursue safer investments in low-risk government securities.

An Economic Theory of Disinformation

The impacts of misinformation and disinformation have rarely been studied in economics. In this paper, I examine these impacts using a model constructed on the basis of the concept of ranked information. The value of information is changeable and differs across people; therefore, disinformation can be used as a tool to manipulate people’s behaviors. I first define misinformation and disinformation and then show the mechanism through which disinformation decreases efficiency by manipulating ranked information. Decreases in efficiency are observed as decreases in total factor productivity, lowered success rates of investment, and increased costs of bad speculations. In addition, disinformation generates economic rents and, as a result, increases inequality, possibly by a great deal. Furthermore, disinformation can cause large-scale economic fluctuations.

Startups in Algeria - Towards the promotion of the economic development movement as an alternative to wealth creation without depending on economic rents

The Algerian legislator sought to establish a legal framework for emerging enterprises whose managers aim to create and market new technologies with the intention of promoting the economic development and encouraging investment and innovation in the field of information and communication technology. For this, he first started by embodying a committee specialized in granting the label of an emerging enterprise or Startup, with the introduction of provisions that simplify the requirements and conditions for establishing a simple Joint-Stock Company with the label of a Startup. For the first time ever, the legislator added a number of amendments to the Labor Law and the Basic Law of Public Function in order to give the employee the possibility to invest in the private sector and establish his own enterprise. In addition, regarding the university student, the legislator gave him a chance to prepare a new form of graduation dissertation project about the creation of startup. In this case, this student can therefore benefit from financial support and funding. This would certainly make the university student a creator of new job positions, which will surely help to reduce the unemployment rate.
 The present study aims to carry out an analytical interpretation of the different recent legal texts in order to frame them within the Algerian law.

The effect of corruption level in steering the business–government relations: evidence from 23 African countries

PurposeThe purpose of this paper is to investigate the effect of corruption level in steering the business–government relations (BGRs) in developing countries. It also examines the moderating effect of firm size.Design/methodology/approachUsing robust tobit and probit models, this study tests the response behavior of 9787 firms from 23 African countries to their government's policy and regulations and the direct effect of corruption control level in their response decisions. The authors also perform several other additional analyses to ensure the robustness of the findings, including change analysis, two-stage model and recursive bivariate model.FindingsThe result shows that corruption level is among the significant factors that drive BGRs exponentially. The finding points out that, there is a strong alliance of business and government in more corrupt countries. Moreover, the impact of corruption level exacerbates when the firm is bigger.Research limitations/implicationsManagers should focus more on activities that create long-term sustainable advantage. Valuable time of the senior managers should not waste on negotiating government policies to earn a short term advantages.Practical implicationsIt is evident that legal and transparent government alliances can lead to economic rent for firms. However, it is important to note that any alliance based on corruption and illegality is short-lived and ultimately detrimental to long-term prosperity. Therefore, it is crucial for firms to prioritize ethical business practices and build relationships with governments that prioritize transparency and accountability.Social implicationsGiven the detrimental impact of corruption on economic progress, it is crucial for Africa policy-makers to prioritize reforms aimed at reducing its adverse effect. By implementing ethical and transparent business practices, countries can attract more investment and promote economic growth.Originality/valueThis study contributes to the existing literature on the passive form of political connectivity/activity and to what extend corruption level affect the political activities of firms.