AEAweb: JEL: Contents: June 1997

Journal of Economic Literature
Vol. 35, No. 2, June 1997

Contents

The Economic Effects of the Tax Reform Act of 1986
Alan J. Auerbach and Joel Slemrod      589

Cross-National Comparisons of Earnings and Income Inequality
Peter Gottschalk and Timothy M. Smeeding      633

Financial Development and Economic Growth: Views and Agenda
Ross Levine      688

Inner Cities
Edwin S. Mills and Luan Sende Lubuele      727

Invaluable Goods
Kenneth J. Arrow      757

The Tax Reform Act of 1986 constituted the most sweeping postwar change in the U.S. federal income tax. This paper considers what the Act accomplished and its implications for future tax policy. After a review of the Act itself, and why it happened, we consider the evidence of the Act's impact on economic activity and how this evidence squares with initial predictions. Where appropriate, we draw out how consideration of the impact of TRA86 has contributed to the development of the methodology of economic analysis. We conclude with an overall evaluation of the Act.

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This article reviews the evidence on cross-national comparisons of earnings and income inequality in OECD countries. It begins with a series of stylized facts which are then examined and supported by recent studies in the field. Economic, demographic, institutional and policy-related influences on earnings and income distribution are reviewed. The paper concludes with a call for more work on empirically testable structural models of household income distribution.

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This critique argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive, first-order relationship between financial development and economic growth. The body of work would push even most skeptics toward the belief that the development of financial markets and institutions is a critical and inextricable part of the growth process and away from the view that the financial system is an inconsequential sideshow, responding passively to economic growth. Many gaps remain, however, and the paper highlights areas in acute need of additional research.

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This paper presents and analyzes contracts in socio-economic conditions between metropolitan inner, or central, cities and surrounding suburbs. The paper starts with a brief summary of basic theory of metropolitan formation and spatial structure. It is shown that the theoretical model provides a partial explanation of voluntary segregation by income, with income rising by distance of residences from the metropolitan center. Attention is next focused on the high U.S. incidences of socioeconomic dysfunctions compared with other OECD countries. High U.S. levels of dysfunction are racially related, as is metropolitan segregation by income. These relationships are documented and analyzed, with emphasis focused on reasons that relatively low income minorities have remained in inner cities in such large numbers.

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Margaret Jane Radin's new book, Contested Commodities, is reviewed. The book's thesis is that some activities are too close to the intrinsic identity of persons to be proper subjects of the market and that discourse which treats all such activities as commodities can itself create harm. She therefore argues for a concept of "incomplete commodification." The review first locates Radin's thesis as part of a long tradition. Second, it notes that a state-based or legal determination of which goods are so deeply personal is certainly not clearly superior to self-determination in the context of a market. Third, it argues that the effect of discourse on behavior is not empirically clear and that acting on the view that discourse can threaten deep values can lead to limits on freedom.

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