The government's incentives to bail out inefficient projects are determined by the tradeoff between political benefits and economic costs, the latter depending on the decentralization of government. Two effects of federalism are derived: First, fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device (the ...

Debt and currency crises are closely interlinked through the government’s intertemporal budget constraint. The default tax and the inflation/devaluation tax can be considered as alternative means of financing. Our empirical analysis finds that high-debt countries choose default rather than inflation/devaluation for financing, while a high money stock reduces the probability of debt crises. Furt...

Lettau and Ludvigson (2001) argue that a log-linearized approximation to an aggregate budget constraint predicts that log consumption, assets, and labor income will be cointegrated. They conclude that this cointegrating relationship is present in U.S. data, and that the estimated cointegrating residual forecasts future asset growth. This note examines whether the cointegrating relationship sugg...

We consider constrained versions of the prize-collecting traveling salesman and the minimum spanning tree problems. The goal is to maximize the number of vertices in the returned tour/tree subject to a bound on the tour/tree cost. We present a 2-approximation algorithm for these problems based on a primal-dual approach. The algorithm relies on finding a threshold value for the dual variable cor...

A facility layout problem is concerned with determining the best position of departments, cells, or machines on the plant. An efficient layout contributes to the overall efficiency of operations. It’s been proved that, when system characteristics change, it can cause a significant increase in material handling cost. Consequently, the efficiency of the current layout decreases or is lost and it ...