Hisahiro Naito

Atkinson and Stiglitz Theorem with Endogenous Human Capital Accumulation

Recently, researchers have started to re-examine the so-called Atkinson-Stiglitz theorem on optimal commodity taxation. The essence of such research is to examine whether or not it is optimal to distort markets other than the labor market for achieving the second-best resource allocation. I examine this theorem by introducing the comparative advantage of human capital accumulation. More specifically, I assume that people with high ability obtain a higher return from skilled human capital accumulation than people with low ability. I explore the implication of this comparative advantage of human capital accumulation for the Atkinson-Stiglitz theorem on optimal commodity taxation.

Endogenous Human Capital Accumulation, Comparative Advantage and Direct vs. Indirect Redistribution

Recently, several papers have re-examined the so-called production efficiency theorem and the Atkinson and Stiglitz theorem on commodity taxes in the optimal taxation literature. Naito (1999) showed that indirect redistribution through production distortion or consumption distortion can Pareto-improve welfare and that the two theorems do not necessarily hold when different factors are imperfect substitutes and factor prices are endogenous. On the other hand, Saez (2001) argued that in the long run where human capital accumulation is endogenous, the two theorems are still valid. This paper develops reasonable alternative models where individuals accumulate human capital based on their comparative advantage. The present paper shows that the production efficiency theorem is not necessarily valid and that indirect redistribution from the able to the less able such as tariffs and production subsidies can increase efficiency even when skill accumulation is endogenous.

Tariffs and Production Subsidies for Income Redistribution

This paper shows that tariffs and production subsidies can Pareto-improve welfare in a small open economy when a government is concerned with income redistribution under asymmetric information. In international trade theory, free trade is optimal if the government can use lump-sum taxes and transfers. However, in reality the government cannot rely on those policy instruments due to asymmetric information between the government and individuals. In this case, the government needs to use a progressive income tax system for income redistribution. This paper shows that tariffs or production subsidies can Pareto-improve welfare even if the government uses a Pareto-optimal progressive income tax system under free trade. That is, tariffs and production subsidies complement a Pareto-optimal progressive income tax system.

Moment Estimation of the Probit Model with an Endogenous Continuous Regressor

We propose an efficient moment estimator for the probit model with a continuous endogenous regressor. The estimation can be readily implemented using a standard statistical package that can estimate a non-linear system two-stage least squares (instrumental variable) estimator.

Is Racial Salary Discrimination Disappearing in the NBA? Evidence from Data during 1985--2015

This study re-examines the racial salary gap of National Basketball Association players by constructing a long unbalanced panel covering the 1985–1986 to 2015–2016 seasons. Contrary to the results of previous studies, we find that non-white players are paid equally to white players with similar characteristics in the 1980s and 1990s, but that white players started to be paid about 20% more than non-white players in the last 10 years. Our results are robust to all specification checks, such as quantile regressions, controlling sample selection, different contract types, and player nationality. We find that neither employer preference nor income gap of white and black residents explains this increasing salary gap.

Is Racial Salary Discrimination Disappearing in the NBA? Evidence from Data During 1985-2015

This study re-examines the racial salary gap of National Basketball Association players by constructing a long unbalanced panel covering the 1985-1986 to 2015-2016 seasons. Contrary to the results of previous studies, we find that non-white players are paid equally to white players with similar characteristics in the 1980s and 1990s, but that white players started to be paid about 20 percent more than non-white players in the last 10 years. Our results are robust to all specification checks, such as quantile regressions, controlling sample selection, different contract types, and player nationality. We find that neither employer preference nor income gap of white and black residents explains this increasing salary gap.

Pareto-Improving Immigration and Its Effect on Capital Accumulation in the Presence of Social Security

The effect of accepting more immigrants on welfare in the presence of a pay-as-you-go social security system is analyzed qualitatively and quantitatively. First, it is shown that if initially there exist intergenerational government transfers from the young to the old, the government can lead an economy to the (modified) golden rule level within a finite time in a Pareto-improving way by increasing the percentage of immigrants to natives (PITN). Second, using the computational overlapping generation model, the welfare gain is calculated of increasing the PITN from 15.5 percent to 25.5 percent and years needed to reach the (modified) golden rule level in a Pareto-improving way in a model economy. The simulation shows that the present value of the welfare gain of increasing the PITN comprises 23 percent of the initial GDP. It takes 112 years for the model economy to reach the golden rule level in a Pareto-improving way.

The Use of Both the Consumption Tax and the Wage Tax in an Incomplete Market

In the standard multi-period model, the general consumption tax and the wage tax are equivalent. When a capital market is incomplete, such that the rate of return from capital is idiosyncratic, the consumption tax, in contrast to the wage tax, can play a role in risk-sharing. However, risk-sharing may disappear if the government applies a linear or non-linear capital income tax, because the source of risk is the return from capital. The present study shows that a consumption tax, when instituted in the presence of a wage tax, increases public welfare when the capital market is incomplete, even if the government applies a non-linear capital income tax for risk-sharing and subsidizes investments.