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To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2007.07.006 Byline: Timothy Besley, Maitreesh Ghatak Keywords: CSR; Public goods Abstract: This paper explores the feasibility and desirability of Corporate Social Responsibility (CSR). We identify CSR with creation of public goods or curtailment of public bads. Using a model with profit-maximizing firms, the paper shows that there is a direct parallel between CSR and traditional models of private provision of public goods. Indeed, firms that use CSR will produce public goods at exactly the same level as predicted by the standard voluntary contribution equilibrium for public goods. We compare CSR with government provision and charitable provision, discussing when CSR by private for-profit firms could have a comparative advantage in dealing with public goods provision. Author Affiliation: London School of Economics, United Kingdom Article History: Received 4 August 2006; Revised 11 June 2007; Accepted 10 July 2007 Article Note: (footnote) [star] We are grateful to Jim Andreoni, Erlend Berg, Ted Bergstrom, Jordi Blanes, Patrick Francois, Clare Leaver, Rocco Macchiavello, several seminar audiences and especially, an anonymous referee, for helpful feedback. We thank the E.S.R.C. for financial support under grant RES-000-23-0717.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2006.09.009 Byline: Timothy Besley (a), Michael Smart (b) Keywords: Political agency; Public choice; Transparency; Yardstick competition Abstract: This paper explores the logic of fiscal restraints in a political agency model with both moral hazard and adverse selection. The role of the political process is both to discipline incumbents who may act against the public interest and to sort in those politicians who are most likely act in voters' interests. We use the model to examine the optimality of inefficient taxation, limits on the size of government, increasing transparency, and yardstick competition. Some conclusions are surprising. For example, we show that some forms of fiscal restraint can only be desirable when incumbents are sufficiently likely to be benevolent. Author Affiliation: (a) London School of Economics, London WC2A 2AE, United Kingdom (b) University of Toronto, Toronto ON, Canada, M5S 3G7 Article History: Received 9 December 2005; Revised 26 September 2006; Accepted 27 September 2006 Article Note: (footnote) [star] We are grateful to an anonymous referee, Pierre-Andre Chiappori, Jim Hines and a number of seminar participants for insightful comments.

The trade-off between centralized and decentralized provision of local public goods is analyzed. Sharing of costs of local spending in a centralized system results into a conflict among various jurisdictions and it is stated that spillovers and differences in tastes for public spending are the factors responsible for the relative performance of centralized and decentralized systems.

An analysis of the poll tax experience in UK shows that taxpayer compliance is determined by the tax level, compliance enforcement, economic hardship such as unemployment, and noncompliance rates of geographical neighbors. Response to the poll tax is also found to be influenced by political orientation. Areas with high Conservative vote showed lower noncompliance. However, depending on the size of the Conservative vote, it was also found that Conservative control in an area have sparked protests.

Previous research has shown that the tax optima is not necessarily characterized by the first-order conditions of the Ramsey tax problem. These results have made researchers wary of using the first-order conditions. However, a version of the first-order condition can be used to determine optimal uniform taxation. A necessary and sufficient condition for optimal uniform condition in terms of wage-compensated labor supply and a closed-form representation for preferences is presented.

Two equilibrium models that determine welfare stigma are presented. The 'statistical discrimination approach' deals with the formalization of a sociological approach to welfare stigma. The second theory called 'taxpayer resentment view' deals with the consequences of raising taxes to finance welfare programs. Both theories claim that welfare stigma reduction can be done through system-wide self-targeting improvements in the workfare program or through greater taxpayer examination.

Empirical evidence shows that independent tax setting results in vertical externalities in the economy. In an analysis of cigarette and gasoline tax rates covering the period 1975-1989, it was found that a substantial increase in state taxes occurs when the federal government increases tax rates. For instance, a 10-cent per gallon increase in the federal gasoline tax leads to a 3.2-cent increase in tax rates at the state level. This phenomenon confirms the interdependence of federal and state tax setting decisions.