This paper extends the Domar and Musgrave results concerning the effect of an income tax on risk taking to the case where different tax rates apply to different types of assets. Although the results depend on exactly how the differential tax rates are imposed, as a general matter, an income tax with differential rates can be seen as a tax only on the risk-free rate of return and a fixed ex ante subsidy for purchasing the lower-taxed assets. There are implications for measuring deadweight loss from differential taxation and for spending resources on accurately measuring capital income.

The treaty creating the WTO replaced the GATT dispute resolution system, which contained no formal sanctions for breach of agreement as a practical matter, with a system that results in centrally authorized sanctions against recalcitrant violators of WTO trade agreements. We examine the important features of the new system, and argue that the institutionalization of a sanctioning mechanism was not motivated by a perceived need to increase the penalty for violations, but rather by a need to decrease the penalty. In particular, the GATT system relied on unilateral retaliation and reputation to police the bargain, and toward its end unilateral retaliation became excessive, interfering with opportunities for efficient breach. The WTO mechanism for arbitrating the magnitude of proposed sanctions is the major innovation under WTO law, and ensures that sanctions are not set too high.

The tariffs imposed by the United States on steel imports last year, and the pending challenges to them before the World Trade Organization (WTO), have brought a great deal of publicity to a subject that had already been a subject of considerable litigation within the WTO system—”safeguard measures. ” Such measures are taken pursuant to Article XIX of the General Agreement on Tariffs and Trade (GATT) (the GATT “escape clause”), which permits the imposition of temporary measures to protect industries that exhibit “serious injury ” or the threat of such injury due to “increased quantities ” of imports. During the Uruguay Round of GATT negotiations which led to the formation of the WTO, the obligations of Article XIX were refined and elaborated in the WTO Agreement on Safeguards. Article XIX and the Agreement on Safeguards raise many conceptual and interpretive issues. Such issues received little attention during the long history of GATT because safeguard measures were rarely challenged, in part because they fell into disuse. The advent of the WTO has revived the use of safeguard measures, however, and numerous disputes involving them have now been brought before the WTO resulting in a

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Abstract: This paper is a preliminary draft for eventual inclusion in the Handbook of Law and Economics, A. Mitchell Polinsky & Steven Shavell editors. It reviews and synthesizes the work of economists and law and economics scholars in the field of public international law. The bulk of that work has been in the area of international trade, but many of the ideas in the trade literature have implications for other subfields. Recent years have seen a significant increase in research on other topics as well. The paper begins with a general framework for thinking about the positive and normative economics of public international law, and then proceeds to a treatment of specific topics including customary law, strategic alliances and the laws of war, international trade, international investment, international antitrust, human rights law, conflicts of law, and the international commons (fisheries). 1.

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This Working Paper is brought to you for free and open access by the Coase-Sandor Institute for Law and Economics at Chicago Unbound. It has been accepted for inclusion in Coase-Sandor Working Paper Series in Law and Economics by an authorized administrator of Chicago Unbound. For more

This Working Paper is brought to you for free and open access by the Coase-Sandor Institute for Law and Economics at Chicago Unbound. It has been accepted for inclusion in Coase-Sandor Working Paper Series in Law and Economics by an authorized administrator of Chicago Unbound. For more

This Working Paper is brought to you for free and open access by the Coase-Sandor Institute for Law and Economics at Chicago Unbound. It has been