Massimo D'Antoni

National Cultures and Social Protection as Alternative Insurance Devices

In a mobile market economy there is a continuous process of creative destruction and specific investments in human capital can be particularly risky. For this reason market economies are likely to be characterised by a painful trade-off between the advantages of market flexibility and those of specialization. The claim of our paper is that the State can do much to improve the terms of this trade-off. National States can invest in the development of homogeneous national cultures that can decrease the specificity of many human capital investments. At the same time, the State can insure the individuals who undertake specific investments by providing them with some form of social protection. In this respect, cultural standardization and social protection can be seen as substitutes, and the optimal mix of cultural standardization and social protection changes in different countries. We observe that the process of European integration has reinforced the role of cultural standardization relatively to that of social protection. We argue that, by mimicking the same mix of policies as the U.S., the E.U. would end up doing too much for cultural standardization and too little for social protection.

Is it possible to make tax evaders pay more by shifting taxation from income to consumption

One of the arguments advanced in favour of a tax shift from income to consumptiontaxation is that, with tax evasion, such a shift would increase the tax paid by evaders.Given that evasion is concentrated in specific sectors, individuals operating in such sectors,who evade all or most of their earnings, could spend only a share of their income ingoods for which consumption taxes can be evaded. In this paper we show that, under therealistic assumption that the income and the consumption tax (the VAT or a sales tax) arejointly evaded, such argument cannot survive a more accurate analysis. As a consequence ofthe tax shift from the income to the consumption tax, prices will adjust to restore the original situation, with no effect on real quantities.

Deterrence and Information: The Optimal Use of Monetary and Nonmonetary Sanctions Revisited

It is a widely accepted conclusion of the economic literature on deterrence that nonmonetary sanctions should be introduced only when monetary fines have been used up to their maximum extent. However, this conclusion is at odds with what is commonly observed e.g. in the case of deterrence of driving offenses, where nonmonetary sanctions such as licence suspension or vehicle withdrawal are extensively used, even though it would be possible to apply a monetary sanction of equivalent value. In this paper it is shown that when the sanctioning policy conveys information about the riskiness of the sanctioned behavior, the conclusion about the optimal use of nonmonetary sanctions may be different. Namely, the use of nonmonetary sanctions can be optimal even though the monetary fine is not maximal. The argument is formalized in a model with rational though uninformed individuals, who know that the enforcer has superior information about the riskiness of action but are uncertain about the true objectives of the enforcer.