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PAUL ROTHSTEIN Associate Professor of Economics |
Email: paul.rothstein@duke.edu or rstein@wustl.edu (either
will work).
Cell phone: 314-922-1535
Duke office: 919-660-1829
Economic analysis forces you to think about the incentives that all
sides face in any transaction. It sounds easy, but it takes
practice.
Here I am practicing in Taipei.
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Undergraduate:
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State-local public sector economics has overlooked
the growing importance
of foundations in both providing public goods and redistributing income. There is a wealth of data on foundation
income, assets and spending available from the IRS and private sources. There
are many interesting hypotheses to test
regarding the economic impact of foundation spending and the nature of
public-philanthropic partnerships, in addition to the traditional
questions
about crowding out. About two-thirds of
all foundations exogenously focus their resources on a single state,
either through
bylaws or longstanding internal policies. For
our first project, my coauthors and I are using
exogenous geographic
focus and the diversified nature of foundation assets to identify the
impact of
foundation spending on state growth. The value of net
noncharitable-use
assets is arguably a good instrument for spending given that the value
of these
assets is likely exogenous to state economic conditions and most
foundations
(the “nonoperating” ones) must have qualified expenditures of at least
5% of assets. We are
assembling ten years of foundation asset and expenditure data from the
Statistics
of Income subsample, aggregating to state level by year, and merging
with a
unique dataset we have for geographic focus. If
the results are encouraging, we will purchase complete
data for all
foundations in all years.
This continues
my theoretical work on local fiscal competition. The fiscal
competition
literature examines the ways that the objectives of local governments,
the tax
instruments that are permitted, and the pattern of factor ownership
determine
the efficiency and distributional properties of the equilibria.
My current work focuses on equilibrium tax structures in a model in which the tax bases that different regions are permitted to use are endogenous. A critical feature of this model (and, in general, the models I favor) is that local public goods are essential to all agents, so taxes can be “too low” as well as “too high.” I find that there are Nash equilibria in which owners of fixed factors can reduce fiscal competition in the second-stage choice of tax rates by implicitly cooperating in the first-stage choice of tax bases for each region. There are, however, equilibria in which cooperation in the first stage does not occur if the owners of fixed factors are “too aggressive.” In this case, they try to deny other regions the ability to tax in an attempt to handicap their ability to provide local public goods and thus their ability to compete for mobile factors of production. The strategic thinking that emerges is relevant for understanding constitution making in federal systems, fiscal issues in the European Union, and the current controversy over whether the Scottish Parliament should have the permission to tax Scottish citizens.
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