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on Public Economics |
| By: | Julio Davila (Centre d'Economie de la Sorbonne. Paris School of Economics); Jan Eeckhout (Department of Economics, University of Pennsylvania); Cesar Martinelli (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM)) |
| Abstract: | In a simple public good economy, we propose a natural bargaining procedure whose equilibria converge to Lindahl allocations as the cost of bargaining vanishes. The procedure splits the decision over the allocation in a decision about personalized prices and a decision about output levels for the public good. Since this procedure does not assume price-taking behavior, it provides a strategic foundation for the personalized taxes inherent to the Lindahl solution to the public goods problem. |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:cie:wpaper:0901&r=pbe |
| By: | Göbel, Jürgen |
| Abstract: | The impact of local fiscal policy depends on the choice of the tax base. In this paper, we take four criteria to evaluate tax bases, namely: efficiency, simplicity, flexibility, and fairness. The results of such an evaluation depend on how we describe the involved agents. We construct a two stage model of a local economy with three types of agents: Leviathans, households, and housing firms. Each Leviathan seeks to maximize the surplus of his local fiscal budget. Each household seeks to maximize its life-time utility from three types of goods: composite private goods, housing, and local public goods. Each housing firm seeks to maximize its profits. In this model, we analyze the characteristics of four distinct tax bases: land rent, housing capital rent, housing sales, and housing property. In particular, we analyze the responses of the households, the housing firms, and the housing prices on a change of a specific tax rate. The results are used to evaluate each tax base with respect to our four criteria. |
| Keywords: | Leviathan; tax base; exit option; sensitivity analysis |
| JEL: | H21 H11 R51 |
| Date: | 2009–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:13940&r=pbe |
| By: | Francesca Bortolami; Luigi Mittone |
| Abstract: | From a purely theoretical perspective, there is no reason to expect that different levels of contributions in public goods games are associated with the same sanctioning/rewarding rule. The efficiency of a norm should be independent of its enactment procedure. On the contrary, multidisciplinary and empirical considerations suggest that individuals may behave differently, according to the level of their direct involvement. The question whether participation in norm enactment results in more contributory gap than when the same norm is received, has not been addressed in public good literature so far. Our three experiments show a behavioural regularity: participating in a normative enactment generates different contributory effects, with respect to the case when the sanctioning norm is merely received. |
| Keywords: | participation, public good games, free riding |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:0902&r=pbe |
| By: | Asher, Sam; Casaburi, Lorenzo; Nikolov, Plamen; Ye, Maoliang |
| Abstract: | There is a substantial literature examining coordination in public goods games. We conducted an experiment to explore how varying patterns of thresholds affect the willingness of subjects to contribute to a public good. We had subjects play a multiperiod game where each subject was allocated an initial point endowment, told a threshold for the group and had to choose how much to contribute to the common pot. Each period is identical, except for the possibility of having a different threshold, which is always stated before the players make their contributions. We found that while contributions are similar for the increasing and decreasing threshold group types when thresholds were low, a sizeable gap opens up around the average threshold size. We found that for nearly every threshold, it is more profitable to be in an increasing than in a decreasing threshold group type. Early cooperation seems to facilitate the achievement of harder-to-reach thresholds, which require considerable contributions from all members of the group. These findings are also very robust in the regression specifications. Our findings shed light on the role of past cooperative success and threshold patterns on subsequent willingness to cooperate. |
| Keywords: | Experimental economics, public goods decision making |
| JEL: | C91 C92 D81 G14 H41 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:7484&r=pbe |
| By: | Franz Hackl; Martin Halla; Gerald J. Pruckner |
| Abstract: | This paper explores the capability of the state to affect the individual’s decision to work for free. For this purpose we combine individual-level data from the European and World Values Survey with macroeconomic and political variables for OECD member countries. Empirically we identify three channels for crowding out of voluntary labor. Firstly, an increase in public social expenditure decreases the probability that the individual will volunteer (fiscal crowding out). Secondly, a political consensus between individuals and the government also induces volunteers to reduce their unsalaried activities (consensual crowding out). And finally, the more a government supports democratization, the lower is the individual’s engagement (participatory crowding out). Religiosity and a more unequal income distribution in a country increase individuals’ willingness to volunteer. |
| Keywords: | Volunteering, voluntary labor supply, private provision of public goods, public social expenditure, political consensus, democratization |
| JEL: | H41 H44 H31 J22 I38 H11 D30 D64 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:jku:nrnwps:2009_01&r=pbe |
| By: | Kangsik, Choi |
| Abstract: | By introducing the government's preference for tax revenues into an extended game with observable delay, this study provides new insight into the trade-off between the government and the public firm's payoff in a government's optimal policy of privatization. The results show that: (i) regardless of the government's preference for tax revenues, the government does not have an incentive to privatize in an endogenous timing context even though there are conflicts of interest between the public firm and the government and (ii) under a mixed duopoly, each sequential-move equilibrium varies with the level of the government's preference for tax revenues. |
| Keywords: | Government's Preference; Extended Game; Tax; Privatization. |
| JEL: | L13 C7 D43 H44 |
| Date: | 2009–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:13844&r=pbe |
| By: | Konrad, Kai A; Qari, Salmai |
| Abstract: | We study the effects of patriotism on tax compliance. If individuals feel a (random) patriotic warm glow from honest tax compliance, this has implications for optimal auditing and tax compliance. A higher expected warm glow reduces the government's optimal audit probability and yields higher tax compliance. Also, individuals with higher warm glow are less likely to evade taxes. This prediction is confirmed empirically by a multivariate analysis on the individual level while controlling for several other potentially confounding factors. The findings survive a variety of robustness checks, including an instrumental variables estimation to tackle the possible endogeneity of patriotism. On the aggregate level, we provide evidence for a negative correlation between average patriotic warm glow and the size of the shadow economy across several countries. |
| Keywords: | patriotism; tax evasion; warm glow |
| JEL: | H26 K42 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7215&r=pbe |
| By: | M. Raimondi |
| Abstract: | The issue of the cooperation among private agents in realising collective goods has always raised problems concerning the basic nature of individual behaviour as well as the more traditional economic problems. The Computational Economics literature on public goods provision can be useful to study the possibility of cooperation under alternative sets of assumptions concerning the nature of individual rationality and the kind of interactions between individuals. In this work I will use an agent-based simulation model to study the evolution of cooperation among private agents taking part in a collective project: a high number of agents, characterised by computational rationality, defined as the capacity to calculate and evaluate their own immediate payoffs perfectly and without errors, interact to producing a public good. The results show that when the agents’ behaviour is not influenced either by expectations of others’ behaviour or by social and relational characteristics, they opt to contribute to the public good to an almost socially optimal extent, even where there is no big difference between the rates of return on the private and the public investment. |
| Keywords: | Computational Economics; Agent-based models; Social Dilemmas; Collective Action; Public Goods |
| JEL: | C63 D64 D80 H41 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:par:dipeco:2009-ep02&r=pbe |
| By: | Christian Jaramillo |
| Abstract: | Several types of arguments advocate state involvement in the promotion of culture. Many of them imply some sort of subsidy, usually to non-for-profit firms; none favors taxing cultural events. The tax literature, on the other side, discusses excise taxation on culture only as a way to redistribute income. However, to the extent that culture is a public good, taxing it is undesirable. Why are then excise taxes on public events extant in many countries? This paper argues that the development of profitable artists is analogous to R&D in the industrial organization literature, and that the excise taxation of public cultural events may be part of an efficient policy to fund it. Using a Stackelberg game to model the investment to develop an artist, I find that the optimal tax is a multiple of the expected surplus created by the artist that cannot be appropriated by the investor who funds her, and that progressivity plays a limited role at most. |
| Date: | 2009–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:005346&r=pbe |
| By: | Daniel J. Seidmann (School of Economics, University of Nottingham) |
| Abstract: | We analyze voting in private and public committees whose members care about the selected decision and the rewards which outsiders pay for representing their interests. If the agenda is binary or outsiders are symmetric then a private committee reaches decisions which better serve organizational goals than either a public committee or a randomly chosen committee member; whereas symmetric outsiders are best served by a public committee. The voting patterns of both private and public committees may fail Duverger’s Law, but they both satisfy a weaker condition: Dissidents in private [resp. public] committees all vote decisions which better [resp. worse] serve organizational goals than the plurality decision; so single-peakedness implies that all dissents lie on one side of the plurality decision. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2009-06&r=pbe |
| By: | Eduardo Engel; Ronald Fischer; Alexander Galetovic |
| Abstract: | When are public-private partnerships (PPPs) better than conventional provision and regulated privatization? And should PPP contracts be structured and governed when this is the case?. We show that the defining features of a PPP are (i) bundling of construction and operation, (ii) private but temporary ownership of assets and (iii) intertemporal risk sharingwith the public sector. Thus some characteristics of PPPs are akin to privatization while others are similar to conventional provision. Since incentives for efficient building and management are related to bundling, PPPs are closer to privatization in this regard. As the discounted government budget under a PPP is similar to that under conventional provision, PPPs are closer to conventional provision when it comes to budgetary accounting. We also show that avoiding distortionary taxation and relieving strained government budgets are weak arguments for PPPs. We examine the institutional requirements for a successful PPP program and emphasize the need for an independent supervisor of PPPs (and in general of all public works) and a Committee of Experts to award when conflicts or the need for renegotiation arises. Lack of rule of law alters the choice between conventional provision and PPPs in favor of the former, as there is less risk of regulatory takings in a short termconstruction contract than in a long lived PPP. In the case where quality service is contractible, the the PPP contract that optimally balances demand risk, user-fee distortions and the opportunity cost of public funds, features a minimum revenue guarantee and a revenue cap that differ from those observed in practice. This contract can be implemented via a competitive auction with realistic informational requirements. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:edj:ceauch:257&r=pbe |
| By: | Daniel Lema |
| Abstract: | This paper presents evidence of electoraly-motivated changes in the budget balance, public expenditures, composition of public expenditures and provincial revenues in Argentine provinces. The empirical study is made using panel data analysis for 22 provinces during the period 1985-2001. Unconditional results show that conditioning on the alignment of provincial and federal executives (same political party in power) there is evidence of systematic changes in fiscal policies around elections. The observed changes support the predictions of rational opportunistic models of PBC. In election years, total provincial expenditures increase in aligned provinces, without affecting the fiscal balance, because to the increased discretional transfers from the federal government supporting the provincial incumbent federal revenues. By contrast, deficit increases for unaligned provinces. In addition, expenditure shifts toward current spending and away from capital spending for unaligned provinces in electoral years. |
| JEL: | D72 E62 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:cem:doctra:389&r=pbe |
| By: | Raphaela Hyee (Queen Mary, University of London); Julio R. Robledo (University of Nottingham) |
| Abstract: | We develop a two period family decision making model in which spouses bargain over their contributions to a family public good and the distribution of private consumption. In contrast to most models in the literature, specialization within the couple emerges endogenously from the production of the public good, and is not caused by exogenous differences between the spouses. Increasing marginal benefits of labour market experience make specialization efficient, even if both spouses have equal market and household productivities on the outset. If spouses are not able to enter into a binding contract governing the distribution of private consumption in the second period, the spouse specialized in market labour cannot commit to compensate the other spouse for foregone investments in earnings power. As a consequence, this spouse may withdraw part of his/her contribution and the provision level of the household good is likely to be inefficiently low. |
| Keywords: | Family bargaining, Specialization, Private provision of public goods |
| JEL: | D19 H41 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp640&r=pbe |
| By: | Frederico G. Jayme Jr. (Cedeplar-UFMG); Guilherme Jonas C. da Silva (Cedeplar-UFMG); Ricardo S. Martins (Cedeplar-UFMG) |
| Abstract: | This paper aims at analyzing theoretically and empirically the role of infrastructure expenditure on economic growth in Brazil from 1986 to 2003. The hypothesis is that public infrastructure expenditures in transport are central to foster sustainable growth in Brazil. Theoretical and empirical literature highlights the fact that this type of investment fosters economic growth and the multiplier by means of its effects on productivity. By using a panel data model to Brazilian states, conclusions highlight the fact that infrastructure investments are one of the demand constraints to growth in Brazil. |
| Keywords: | Investments, Public Policies, Economic Growth, Brazil |
| JEL: | H54 O40 E62 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td346&r=pbe |