Computational Economics with Applications to Taxation, Industrial Organization, and Finance

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9309613 Judd The primary goal of economic policy-making is to improve the economic well-being of all. To facilitate this, good analyses of the economic growth process are needed. With this in mind, the investigator proposes to continue his work on computational methods in economics with a focus on problems of taxation, imperfect competition, and finance, and their importance in fostering economic growth. New methods for analyzing problems in finance will be applied, and the effects of insider trading and appropriate government policies will be studied. In particular, the research will focus on how insider trading affects capital accumulation and economic growth, and on how vigorously insider trading laws should be enforced. New methods will also be used to analyze the effects of new securities on financial markets. These methods will then be used to study which securities should be introduced, and the results will be compared to the securities and contracts which exchanges have incentives to introduce. The study of imperfect competition will focus on assessing the likely importance of tacit collusion and on evaluating various tests which have been used to detect collusion. Different government policies such as merger and antitrust rules will be evaluated to determine which rules are best for consumers, and which are best for economic growth. The optimal taxation part of the research will combine earlier work on innovation with work on factor taxation to begin a dynamic theory of optimal taxation with public goods, patents, innovation, and endogenous economic growth. The appropriate sharing of the tax burden between labor and capital will be examined in light of interactions between profits, innovation, job creation, and wages. ***