Steven E. Crane

Inflation and Tax Evasion: An Empirical Analysis

This paper contains an analysis of the effect of inflation on aggregate tax evasion in the United States over the period 1947-81. It is found that tax evasion in both absolute and relative terms is positively related to the inflation rate. Further, the results indicate that aggregate evasion has risen in both absolute and relative terms with increases in the marginal tax rate, but has fallen with increases in the detection probability, the penalty rate, and the wage share of income. Finally, evasion has risen in absolute terms but has fallen in relative terms when real true income has risen.

Improving Local Manufacturing Employment Forecasts Using Cointegration Analysis

Procedures for tracking and forecasting economic conditions in regional economies have evolved significantly over the last 30 years. Much of this evolution has followed developments in macroeconomics, where techniques for tracking/forecasting key economic variables have tended to originate. This technique adoption and adaptation process continues today, as developments in the technique adoption and adaptation process continues today, as developments in the modeling of cointegrated macroeconomic time series have begun to appear in the regional modeling and forecasting literature. This paper presents an effort at modeling a segment of a regional economy using the cointegration testing procedures suggested by Johansen and Jusilius (1990) to develop a forecasting model for manufacturing employment in Milwaukee, WI. The paper demonstrates how Vector Error Correction (VEC) modeling can lead to gains in the accuracy of local manufacturing employment forecasts relative to more traditional VAR models in either levels or first-differenced form. In the process, it demonstrates procedures for developing a relatively simple VEC model that reveals something about the structure of the local manufacturing sector, including possible linkages to the national economy. This information can assist local policy makers in anticipating and adapting to business cycle-related fluctuations in this critical sector of the local economy.

The Problem of Geographic Market Definition: Geographic Proximity vs. Economic Significance

Summary and ConclusionsThis paper has challenged the views that geographic markets must be made up of contiguous areas and that one should expand continuously from some baseline location when applying a shipments-based market definition procedure. If volume of shipments, rather than immediate proximity, is used as the ranking criterion for adding trading locations to meet the threshold percentages, geographic markets may well be composed of noncontiguous areas.There are a number of possible reasons why noncontiguous geographic markets might exist. Among the possibilities that have been suggested are differential production costs coupled with nonlinear transportation costs, and asymmetric transportation costs. These have been illustrated using a simple theoretical model of spatial competition. The empirical relevance of the concept has also been demonstrated by identifying noncontiguous geographic markets for several products using a shipments-based market definition procedure and the U. S. as the baseline market.

Rethinking Shipments Asymmetries

A modification of a well-known shipments test for geographic market definition may be useful in identifying antitrust markets. By recognizing the possible significance of a high LIFO value and a notably lower LOFI value, and searching for possible barriers to product entry that could explain the asymmetry, analysts can reduce the chances of adopting an overly broad geographic market. This is illustrated by comparing the results from applying the shipments test to those from residual demand estimations, and by reviewing the evidence and findings in several recent antitrust proceedings in light of the asymmetric shipments patterns they report.