Foundations of Supply-Side Economics - 1st Edition - ISBN: 9780121588205, 9781483271576

Foundations of Supply-Side Economics

1st Edition

Theory and Evidence

Authors: Victor A. Canto Douglas H. Joines Arthur B. Laffer
eBook ISBN: 9781483271576
Imprint: Academic Press
Published Date: 28th January 1983
Page Count: 300
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Foundations of Supply-Side Economics: Theory and Evidence is composed of a series of papers containing both theoretical and empirical analyses of a set of issues in government fiscal policy.

The type of analysis employed in the book is standard neoclassical economics, and this analysis is used to study the macroeconomic incentive effects of taxation. The book contains contributions that cover the analysis of the effects of taxes imposed purely for generating revenues; the process of capital formation; and an attempt to integrate supply-side analysis into a traditional macroeconomic framework. Reports on the empirical evidence on taxation and economic activity and the estimation of a small macroeconomic model of the United States for the postwar period; description of a method of calculating effective marginal tax rates on factor incomes using available U.S. data; and the estimation of the effect of fiscal policy on private investment in plant and equipment are presented as well.

Economists will find the book highly insightful.

Table of Contents



Chapter 1 Tax Rates, Factor Employment, Market Production, And Welfare

1. The Model

2. Taxation and Market Activity

3. Taxation and Revenue

4. The Tax Structure, Market Output, and Welfare

5. The Empirical Relevance of the Prohibitive Range

6. Some Numerical Examples

7. Conclusion


Chapter 2 Taxation In A Closed Economy Intertemporal Model With A Variable Supply Of Labor To The Market Sector


1. The Model

2. The Government Sector

3. Long-Run Effects of Taxes

4. A Special Case

5. Welfare Ranking of the Tax Policies

6. Concluding Remarks


Chapter 3 A Neoclassical Model Of Fiscal Policy, Employment, And Capital Accumulation

1. The Model

2. Comparative Statics of the Individual's Maximization Problem

3. Government Fiscal Policies

4. General Equilibrium

5. Summary

Appendix A. Evaluation of Changes in h*1+1

Appendix B. Further Assumptions Behind the Theoretical Model and Resulting Implications Concerning the Existence of Bequests

Appendix C. Steady-State Effects of Taxation on Factor Employment in a Cobb-Douglas World


Chapter 4 The Revenue Effects Of The Kennedy Tax Cuts

1. A Simple Model

2. Historical Antecedents of the Laffer Curve

3. Existing Empirical Evidence on Tax Rates, Economic Activity, and Tax Revenues

4. Time-Series Estimates

5. Effects on Other Economic Variables

6. Tranfer Function Estimates

7. Conclusions



Chapter 5 Fiscal Policy And The Labor Market

1. Introduction

2. The Supply of Labor

3. The Demand for Labor

4. Empirical Implementation of the Model

5. Simulation of the Model

6. Summary



Chapter 6 Εstimates Of Effective Marginal Tax Rates On Factor Incomes

1. Introduction

2. Some Caveats

3. The Nature of Available Data

4. A Hypothetical Tax Structure

5. Relation of Hypothetical Tax Structure to Available Data

6. Some Remaining Issues

7. Alternative Tax Rate Series

8. Behavior of Tax Rates Over Time

9. Uses of Components of Tax Rates

10. Summary


Chapter 7 Government Fiscal Policy And Private Capital Formation—Some Aggregate Time-Series Estimates

1. Introduction

2. The Hypotheses to Be Tested

3. Methodology

4. Identification, Estimation, and Diagnostic Checks of Transfer Function Models

5. Choice of a Government Spending Variable

6. The Data

7. Univariate Time-Series Models for Exogenous Variables

8. Transfer Function Models for INVS

9. Transfer Function Models for INVE

10. Comparison of Results for INVS and INVE

11. Results for Selected Subperiods

12. Conclusion



Chapter 8 What Does A Tax Cut Do?

1. Introduction

2. Econometric Specifications of the Model

3. Some Econometric Issues

4. An Empirical Model of the U.S. Economy

5. Discussion of the Estimates

6. Policy Analysis



Chapter 9 Persistent Growth Rate Differentials Among States In A National Economy With Factor Mobility

1. The Model

2. Some Theoretical and Empirical Caveats

3. Empirical Evidence: The States' Performance

4. Summary and Conclusions

Appendix A. Data Sources

Appendix B. Derivation of States' Personal Income

Appendix C. The States' Performance Relative to Their Region: The Seemingly Unrelated Regression Estimates


Chapter 10 The Missing Equation: The Wedge Model Alternative


1. The IS-LM Framework

2. A More General Model

3. The IS Curve Revisited

4. The Effects of Government Expenditures

5. The Effects of Nonneutral Taxes

6. Deficit Financing: The Money and Bond Markets

7. Concluding Remarks




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© Academic Press 1983
Academic Press
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About the Author

Victor A. Canto

Victor A. Canto is the Chief Economist and Managing Director of Global Strategies at Cadinha & Co. and founder and Chairman of La Jolla Economics. He was an advisor to the Lazard Capital Allocator Series, Advisor to the Nestegg Funds, Trustee of in Culver City, California, Director, Chief Investment Officer, and Portfolio Manager of Calport Asset Management, and President and Director of Research of A.B. Laffer, V. A. Canto & Associates. He was a tenured Associate Professor of finance and business economics at the University of Southern California (USC) from 1983 to 1985. Dr. Canto was Assistant Professor of finance and business economics at the University of Southern California from 1977 to 1983 and Visiting Professor at the Universidad Central del Este in the Dominican Republic. He was also a Visiting Professor of economics at the University of California at Los Angeles (UCLA) during the winter of 1987. During 1980, Dr. Canto was a consultant to the Financial Council of Puerto Rico; during 1977, an advisor to the economic Studies Division of the Dominican Republic’s Central Bank. During 1975 he was technical advisor to the Finance Minister of the Dominican Republic. Dr. Canto received a B Sc. in civil engineering from the Massachusetts Institute of Technology in 1972, an M.A. and Ph. D. in economics from the University of Chicago (1974, 1977). Dr. Canto has authored, edited, or co-edited a number of books, including the landmark Foundations of Supply-Side Economics, as well as Monetary Policy, Taxation, and International Investment Strategy; Supply-Side Portfolio Strategies; and Currency Substitution: Theory and Evidence from Latin America , Understanding Asset Allocation as well as Cocktail Economics. Economic Disturbances and Equilibrium in an Integrated Global Economy ( Forthcoming). He is the recipient of the Supremo de Plata awarded by the Dominican Republic JC to the Outstanding Young Man of 1983, and the recipient of the University of Southern California University Scholar award. He is a member of Chi Epsilon (the civil engineering honorary society). Victor Canto’s articles have appeared in many of the leading economic journals, including Economic Inquiry, Journal of Macroeconomics, The International Trade Journal, Journal of Business and Economic Statistics, The Southern Economic Journal, Applied Economics, Weltwirstchaftliches Archiv, The CATO Journal, Public Finance, The Journal of International Money and Finance and The Journal of Wealth Management. In addition to his principal fields of interest--International Economics, Public Finance, and Macroeconomics, Dr. Canto has been published in the Wall Street Journal and the Investor’s Business Daily. He authored articles on energy markets for the Public Utilities Fortnightly, and the Oil and Gas Journal, as well as a series of articles on portfolio strategy for the Financial Analysts Journal. He contributed “Exotic Currencies,” to The New Palgrave Dictionary of Money and Finance, published by MacMillan Press Limited in 1992. He also was a contributing editor for National Review Online Financial.

Affiliations and Expertise

Chief Economist and Managing Director of Global Strategies at Cadinha & Co., Founder and Chairman of La Jolla Economics

Douglas H. Joines

Arthur B. Laffer

Ratings and Reviews