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on Public Economics |
| By: | Matthias Wrede (University of Marburg and CESifo, Am Plan 2, 35032 Marburg, Germany) |
| Abstract: | This paper analyzes tax competition when welfare maximizing jurisdictions levy source-based corporate taxes and multinational enterprises choose tax-efficient capital-to-debt ratios. Under separate accounting, multinationals shift debt from low-tax to high-tax countries. The Nash equilibrium of the tax competition game is characterized by underprovision of publicly provided goods. Under formula apportionment, the country-specific capital-to-debt ratio of a multinational's affiliate is independent of the jurisdiction's tax rate. Public good provision is either too large or too small. If the formula is predominately based on capital shares and if there is a positive debt externality there is clearly underprovision under formula apportionment. |
| Keywords: | Multinational enterprises, financial policy, profit shifting, corporate taxation, tax competition. |
| JEL: | H25 H42 H73 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:200934&r=pbe |
| By: | Ralf Hepp (Fordham University, Department of Economics); Jürgen von Hagen (University of Bonn, Indiana University, and CEPR) |
| Abstract: | We provide empirical estimates of the risk-sharing and redistributive properties of the German federal fiscal system based on data from 1970 until 2006, with special attention to the effects of German unification. We find that tax revenue sharing between the states and the federal government and the fiscal equalization mechanism (Länderfinanzausgleich) together reduce differences in per-capita state incomes by 36.9 percent during period 1970 to 1994. After the full integration of East German states into the mechanism in 1995, the redistributive effects increase slightly to about 38.6 percent. With respect to the insurance effect of the German fiscal system, our results indicate that the federal fiscal system offsets 47 percent of an asymmetric shock to state per-capita incomes. This effect has significantly decreased after the inclusion of the East German states in 1995. Furthermore, we find that the German fiscal system provides almost perfect insurance for state government budgets against asymmetric revenue shocks; also, its redistributive effect with regard to the tax resources available to state governments is very strong. |
| Keywords: | Regional Risk-sharing, Fiscal Federalism, Monetary Union |
| JEL: | H77 E63 F42 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:frd:wpaper:dp2009-06&r=pbe |
| By: | Pantelis Kammas |
| Abstract: | This paper investigates whether OECD countries compete with each other for mobile factors by using various fiscal (tax-spending) policy instruments. We use a panel dataset of 20 OECD countries over the 1982-2000 period. There is evidence that international capital inflows (FDI) are affected by fiscal policy at home and abroad. Also, there is evidence of fiscal competition for mobile factors which takes place via capital tax rates. More precisely, we find that domestic capital tax rates react: (i) positively to changes in capital tax rates and (ii) negatively to changes in public investment spending in neighbouring countries. In contrast, evidence of such a strategic interdependence over public investment spending decisions is not established. |
| Keywords: | Capital mobility; tax competition; welfare |
| JEL: | F02 H2 H4 |
| Date: | 2009–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2009_11&r=pbe |
| By: | Charles FIGUIERES; Marc WILLINGER; David MASCLET |
| Abstract: | This paper provides a general framework that accounts for the decay of the average contribution observed in most experiments on voluntary contributions to a public good. Each player balances her material utility loss from contributing with her psychological utility loss of deviating from her moral ideal. The novel and central idea of our model is that people.s moral motivation is "weak": their judgement about what is the right contribution to a public good can evolve in the course of interactions, depending partly on observed past contributions and partly on an intrinsic "moral ideal". Under the assumption of weakly morally motivated agents, average voluntary contributions can decline with repetition of the game. Our model also explains other regularities observed in experiments, in particular the phenomenon of over-contributions compared to the Nash prediction and the so-called restart e¤ect, and it is compatible with the conditional cooperation hypothesis. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:09-09&r=pbe |
| By: | Rockenbach, Bettina; Wolff, Irenaeus |
| Abstract: | Considerable experimental evidence has been collected on how to solve the public-good dilemma. In a 'first generation' of experiments, this was done by presenting subjects with a pre-specified game out of a huge variety of rules. A 'second generation' of experiments introduced subjects to two different environments and had subjects choose between those. The present study is part of a 'third generation', asking subjects not only to choose between two environments but to design their own rule sets for the public-good problem. Whereas preceding 'third-generation' experiments had subjects design and improve their strategies for a specified game, this study is the first to make an attempt at answering the question of how people would shape their environment to solve the public-good dilemma were they given full discretion over the rules of the game. We explore this question of endogenous institution design in an iterated design-and-play procedure. We observe a strong usage of punishment and redistribution components, which diminishes over time. Instead, subjects successfully contextualize the situation. Interestingly, feedback on fellow-players’ individual behavior tends to be rendered opaque. On average, rules do improve with respect to the welfare they elicit, albeit only to a limited degree. |
| Keywords: | Public good; strategy method; experiment; public choice |
| JEL: | C9 D7 D71 C92 D72 C72 |
| Date: | 2009–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16922&r=pbe |
| By: | Mala Lalvani |
| Abstract: | The present study has sought to introduce, conceptualise and operationalise a scheme for integrating the ‘quality’ dimension of public spending into the devolution scheme of intergovernmental transfers by the Finance Commission. The study illustrates a scheme of inter-se distribution from an incentive fund, which we would like to label as a “Quality Control Fund” (QCF). Portions of this fund could be kept aside to reward States for their performance on the three aspects of expenditure quality, viz., Expenditure Adequacy, Effectiveness and Efficiency. [DRG Study Series No. 30] |
| Keywords: | Expenditure, Fiscal Responsibility, fiscal, Merit Goods, finance, adequacy, effectiveness, quality, public spending, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2189&r=pbe |
| By: | Charles B. Blankart; Gerrit B. Koester |
| Abstract: | There is little disagreement that the EU budget should be refocused. Redistributive agricultural and structural spending should be reduced in favour of more public good spending as the Boege and Sapir reports demand. But a public choice analysis can show that the current deadlock makes a refocusing of the budget unlikely. Starting with the Treaty of Rome we demonstrate how Member States became net payers and receivers and why the underlying coalitions were fairly stable and will remain so after Lisbon. We propose an additional public good budget within an improved process of enhanced cooperation to overcome the deadlock. |
| JEL: | H31 D78 H87 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2009-16&r=pbe |
| By: | Eduardo Engel (Cowles Foundation, Yale University); Ronald Fischer (U. de Chile); Alexander Galetovic (U. de los Andes) |
| Abstract: | Public-private partnerships (PPPs) are increasingly used to provide infrastructure services. Even though PPPs have the potential to increase efficiency and improve resource allocation, contract renegotiations have been pervasive. We show that existing accounting standards allow governments to renegotiate PPP contracts and elude spending limits. Our model of renegotiations leads to observable predictions: (i) in a competitive market, firms lowball their offers, expecting to break even through renegotiation, (ii) renegotiations compensate lowballing and pay for additional expenditure, (iii) governments use renegotiation to increase spending and shift the burden of payments to future administrations, and (iv) there are significant renegotiations in the early stages of the contract, e.g. during construction. We use data on Chilean renegotiations of PPP contracts to examine these predictions and find that the evidence is consistent with the predictions of our model. Finally, we show that if PPP investments are counted as current government spending, the incentives to renegotiate contracts to increase spending disappear. |
| Keywords: | Build-operate-and-transfer, Concessions, Lowballing |
| JEL: | H21 L51 L91 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1723&r=pbe |
| By: | Wolff, Irenaeus |
| Abstract: | Evolutionary game theory has shown that in environments characterised by a social-dilemma situation punishment may be an adaptive behaviour. Experimental evidence closely corresponds to this finding but yields contradictory results on the cooperation-enhancing effect of punishment if players are allowed to retaliate against their punishers. The present study sets out to examine the question of whether cooperation will still be part of an evolutionary stable strategy if we allow for counterpunishment opportunities in a theoretic model and tries to reconcile the seemingly contradictory findings from the laboratory. We find that the apparent contradictions can be explained by a difference in the number of retaliation stages employed (one vs many) and even small differences in the degree of retaliativeness. |
| Keywords: | Public goods; Strong reciprocity; Conformism; Counter-punishment; Evolution of behavior |
| JEL: | H4 H41 C90 C7 C73 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16923&r=pbe |
| By: | Mahoney, Joseph; McGahan, Anita; Pitelis, Christos |
| Abstract: | The predominant focus in research on organizations is either on private or public institutions without consistent consideration of their interdependencies. The emphasis in scholarship on private or public interests has strengthened as disciplinary and professional knowledge has deepened: management scholars, for example, tend to consider the corporation as the unit of analysis, while scholars of public policy often analyze governmental, multilateral, community and non-profit organizations. This article advocates a partial merging of these research agendas on the grounds that private and public interests cannot be fully understood if they are conceived independently. We review three major areas of activity today in which public and private interests interact in complex ways, and maintain that current theories of organization science can be deployed to understand better these interactions. We also suggest that theories of public-private interaction also require development and describe a concept called "global sustainable value creation," which may be used to identify organizational and institutional configurations and strategies conducive to worldwide, intertemporal efficiency and value creation. We conclude that scholarship on organizations would advance if private-public interactions were evaluated by the criterion of global sustainable value creation. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:dynreg40&r=pbe |