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on Public Economics |
| By: | Vidar Christiansen and Luca Micheletto, Sören Blomquist, (Uppsala Center for Fiscal Studies) |
| Abstract: | The incidence and efficiency losses of taxes have usually been analyzed in isolation from public expenditures. This negligence of the expenditure side may imply a serious misperception of the effects of marginal tax rates. The reason is that part of the marginal tax may in fact be a payment for publicly provided goods and reflects a cost that the consumers should bear in order to face the proper incentives. Hence, part of the marginal tax may serve the same role as a market price in the sense that it conveys information about a real social cost of working more hours. <p> We develop this idea formally by studying an optimal income tax model in combination with a type of public provision scheme not analyzed before; the provision level is individualized and positively associated with the individual's labor supply. As examples we discuss child care, elderly care, primary education and health care. We show that there is a potential gain in efficiency where public provision of such services replaces market purchases. We also show that it is necessary for efficiency that, other things equal, marginal income tax rates are higher than in economies where the services are purchased in the market. This is because the optimal tax should be designed so as to face the taxpayers with the real cost of providing the services. Hence, it might very well be that economies with higher marginal tax rates have less severe distortions than economies with lower marginal tax rates. |
| Keywords: | Nonlinear income taxation; Marginal income tax rates; Public provision of private goods; In-kind transfers |
| JEL: | H21 H42 I38 |
| Date: | 2009–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2009_007&r=pbe |
| By: | Kempf, H.; Rota Graziosi, G. |
| Abstract: | We address in this paper the issue of leadership when two governments provide public goods to their constituencies with cross border externalities as both public goods are valued by consumers in both countries. We study a timing game between two different countries: before providing public goods, the two policymakers non-cooperatively decide their preferred sequence of moves. We establish conditions under which a first- or second-mover advantage emerges for each country, highlighting the role of spillovers and the complementarity or substitutability of public goods. As a result we are able to prove that there is no leader when, for both countries, public goods are substitutable. When public goods are complements for both countries, each of them may emerge as the leader in the game. Hence a coordination issue arises. We use the notion of risk-dominance to select the leading government. Lastly, in the mixed case, the government for whom public goods are substitutable becomes the leader. |
| Keywords: | Endogenous timing ; First/second-mover advantage ; Public good ; Stackelberg equilibria ; Risk dominance. |
| JEL: | E31 E42 E58 E62 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:240&r=pbe |
| By: | Ralph-C. Bayer; Elke Renner; Rupert Sausgruber |
| Abstract: | We use a limited information environment to mimic the state of confusion in an experimental, repeated public goods game. The results show that reinforcement learning leads to dynamics similar to those observed in standard public goods games. However, closer inspection shows that individual decay of contributions in standard public goods games cannot be fully explained by reinforcement learning. According to our estimates, learning only accounts for 41 percent of the decay in contributions in standard public goods games. The contribution dynamics of subjects, who are identified as conditional cooperators, differ strongly from the learning dynamics, while a learning model estimated from the limited information treatment tracks behavior for subjects, who cannot be classified as conditional cooperators, reasonably well. |
| Keywords: | public goods experiments, learning, limited information, confusion, conditional cooperation |
| JEL: | C90 D83 H41 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2009-22&r=pbe |
| By: | Eggert, Wolfgang; Itaya, Jun-ichi |
| Abstract: | This paper analyzes a model of corporate tax competition with repeated interaction and with the strategic use of profit shifting within multinationals. We show that international tax coordination is more likely to prevail if the degree of asymmetry in terms of productivity differences between countries is smaller, or if concealment costs of profit shifting are larger when the tax authorities adopt grim-trigger strategies. Allowing for renegotiation in the tax harmonization process generally requires more patient tax authorities to support tax harmonization as a subgame perfect equilibrium. We find somewhat paradoxical situations where higher costs of profit shifting make international tax arrangements less sustainable under weakly-renegotiation-proof strategies. |
| Keywords: | corporate taxation, tax coordination, multinational firms, |
| JEL: | H25 H87 F23 |
| Date: | 2009–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:hok:dpaper:214&r=pbe |
| By: | André C. Martínez Fritscher (Banco de México); Aldo Musacchio (Harvard Business School, Business, Government and the International Economy Unit) |
| Abstract: | There is a large literature that aims to explain what determines country risk (defined as the difference between the yield of a sovereign's bonds and the risk free rate). In this paper, we contribute to the discussion by arguing that an important explanatory factor is the impact that commodities have on the capacity to pay. We use a newly created data base with state-level fiscal and risk premium data for Brazil states between 1891 and 1930 to show that Brazilian states with natural endowments that allowed them to export commodities that were in high demand (e.g., rubber and coffee) ended up having higher revenues per capita and, thus, lower cost of capital. We also explain that the variation in revenues per capita was both a product of the variation in natural endowments (i.e., the fact that states cannot produce any commodity they want) and a commodity boom that had asymmetric effects among states. These two effects generated variation in revenues per capita at the state level thanks to the extreme form of fiscal decentralization that the Brazilian government adopted in the Constitution of 1891, which gave states the sole right to tax exports. We end by running instrumental variable estimates using indices of export prices for each state to instrument for revenues per capita. Our IV estimates confirm our results that states with commodities that had higher price increases had lower risk premia. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:10-027&r=pbe |
| By: | Germà Bel (Department of Economics, Technical University of Lisbon); Ferran Elias-Moreno (Department of Economics, Columbia University) |
| Abstract: | Drawing on a database for 1988-2006 containing information on 157 countries, we investigate the effects on military spending of government form, electoral rules, concentration of parliamentary parties, and ideology. From an OLS regression on pooled data, our results show that presidential democracies spend more than parliamentary systems on defense, whereas the presence of a plurality voting system will reduce the defense burden. Our findings suggest that, in contrast to theoretical predictions in the literature, institutions do not have the same impact on the provision of all public goods. We present as well evidence regarding the effect of ideology on defense spending. |
| Keywords: | Military Spending; Politics; Institutions |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:200922&r=pbe |
| By: | Sailesh Gunessee (Nottingham University Business School China) |
| Abstract: | We study the effect of a payoff advantage, symmetric payoff change and policymakers interaction on choices in tax competition games. To examine the first two effects a standard symmetric game is respectively compared to an asymmetric game where one player has a payoff advantage and to another symmetric game where both players have symmetrically higher payoffs. When payoffs are asymmetric, we find that if policymakers have a payoff disadvantage they are more likely to compete. Instead policymakers with a payoff advantage are keener to tax above equilibrium. Our results also show there is a payoff size effect where choices are brought closer to equilibrium when payoffs are symmetrically higher. These two effects are further studied when players interact repeatedly. With repeated interaction cooperation is sustained only in the symmetric games but fail to materialise in the asymmetric game. A regression analysis of our results reveals further differences between these games. |
| Keywords: | Tax Competition; Experimental Economics; Asymmetry. |
| JEL: | H21 H73 C92 |
| Date: | 2009–10–08 |
| URL: | http://d.repec.org/n?u=RePEc:bbr:workpa:5&r=pbe |
| By: | Jorge Martinez-Vazquez (International Studies Program. Andrew Young School of Policy Studies, Georgia State University); Violeta Vulovic (Andrew Young School of Policy Studies, Georgia State University); Yongzheng Liu |
| Abstract: | One of the oldest questions in the theory and practice of taxation is that of the appropriate mix of direct and indirect taxes. The choice between direct and indirect taxes has contributed to a long animated debate, in political and academic circles, regarding the virtues and defects of those two forms of taxation. In this paper we provide an overview of the evolution of the ratio of direct taxes to indirect taxes across countries over the past three decades, the theorizing that has gone behind the alleged superiority of one form of taxation or the other, the determinants that appear to be behind the intensity with which both forms of taxation are used, and the economic relevance of the choice of tax structure in terms of economic growth, macroeconomic stability, the distribution of income, and the flow of foreign direct investment (FDI). |
| Keywords: | Direct Taxation,Indirect Taxation, Taxation, Foreign direct investment (FDI). |
| Date: | 2009–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0911&r=pbe |
| By: | Sabrina Teyssier (Thurgau Institute of Economics - Universität Konstanz, GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines) |
| Abstract: | This paper analyzes which type of intrinsic preferences drive an agent's behavior in a sequential public good game depending on whether the agent is first or second mover. Theoretical predictions are based on heterogeneity of individuals in terms of social and risk preferences. We modelize preferences according to the inequity aversion model of Fehr and Schmidt (1999) and to the assumption of constant relative risk aversion. Risk aversion is significantly and negatively correlated with the contribution decision of first movers. Second movers with sufficiently high advantageous inequity aversion free-ride less and reciprocate more than others. Both results are predicted by our model. Nevertheless, no effect of disadvantageous inequity aversion of first movers is found in the data while theory predicted it. Our results underline the importance of taking into account the order of agents' play to correctly understand which type of preferences influences cooperation in voluntary contribution mechanisms. They suggest that individuals' behavior can be consistent between different experimental games. |
| Keywords: | inequity aversion ; risk aversion ; public good game ; conditional contribu- tion |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00422669_v1&r=pbe |
| By: | Eduardo Engel; Ronald Fischer; Alexander Galetovic |
| 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. JEL classification: H21, L51, L91. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:edj:ceauch:265&r=pbe |
| By: | Rukanova, B. (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Wigand, R.T.; Tan, Y.H. |
| Abstract: | While inter-organizational systems (IOS) driven by supranational government (here referred to as supranational IOS or SN IOS) are increasingly being developed and implemented in practice, this phenomenon remains largely unexplored in the existing literature. What makes such SN IOS specifically interesting to study is that their development and implementation is driven by supranational bodies (rather than businesses or national governments), implying that Member States have given up some of their sovereignty and decision-making power to a higher level body and are bound to implement the decisions of this higher-level body at their respective national level. In this process Member States are driven by their own agendas, which are often diverging and even conflicting with that of the supranational government. While standards are essential for the development and implementation of IOS, in a supranational context the processes of agreeing on standards as well as the subsequent development and adoption of systems based on these standards are quite challenging. This is due to diverging and conflicting agendas of Member State and supranational bodies. A key question then becomes: Are SN IOS a distinct organizational form of IOS such as industry IOS and, if so, what makes them different? In order to better understand the characteristics of SN IOS we develop a novel uniform and integrative typology, considering current IOS studies along two dimensions: (1) the type of interactions they support (business-to-business; government-to-government or business-to-government), and (2) scope (national, transnational). This typology then provides a comprehensive overview of how different types of IOS studies can be derived conceptually and related to each other across several levels of analysis, enabling us to reason about similarities and differences as well as suggesting improvements and knowledge transfer. In addition we provide an in- depth case study of the development and implementation of a SN IOS (i.e. here the New Computerized Transit System) in Europe in |
| Keywords: | supranational IOS; typology; standards; standards development; adoption; diffusion |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:vuarem:2009-1&r=pbe |
| By: | Elodie Fabre |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ete:vivwps:5&r=pbe |
| By: | António Afonso (Department of Economics, Technical University of Lisbon); Peter Claeys (Faculty of Economics, University of Barcelona); Ricardo M. Sousa (Department of Economics and Economic Policies Research Unit, University of Minho) |
| Abstract: | We estimate changes in fiscal policy regimes in Portugal with a Markov Switching regression of fiscal policy rules for the period 1978-2007, using a new dataset of fiscal quarterly series. We find evidence of a deficit bias, while repeated reversals of taxes making the budget procyclical. Economic booms have typically been used to relax tax pressure, especially during elections. One-off measures have been preferred over structural ones to contain the deficit during economic crises. The EU fiscal rules prompted temporary consolidation, but did not permanently change the budgeting process. |
| Keywords: | fiscal regimes, Markov Switching, Portugal. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:200921&r=pbe |