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on Public Economics |
| By: | Elinor Ostrom |
| Abstract: | Unlocking human potential requires a rich network of institutional arrangements in both private and public spheres. Opening the private sphere to entrepreneurship and complex market organization is well understood as a key to increasing the level and quality of private goods available to consumers. Opening the public sphere to entrepreneurship and innovation at local, regional, and international levels is also a key to increasing the level and quality of public goods – e.g., peace, safety, and health – available to citizens. This paper reviews studies of urban service delivery that have repeatedly found communities of individuals who have self-organized to provide and co-produce surprisingly good local services. In addition to unlocking individual freedom, we need to unlock the public sector from rigid, top-down, hierarchical organization.[Discussion Paper No. 2005/01] |
| Keywords: | entrepreneurship, urban public services, polycentricity |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2580&r=pbe |
| By: | Laszlo Paizs (Institute of Economics - Hungarian Academy of Sciences) |
| Abstract: | This paper tests new implications of the asymmetric tax competition model on diesel excise taxes in the European Union (EU). I extend the standard tax competition model by replacing the unit demand assumption with iso-elastic demand. As a result, not only the level of the equilibrium tax but also the slope of the tax reaction function depends positively on the size of the country. The new implication is testable on panel data in first differences, and it is tested on a panel of 16 European countries. The results provide strong evidence for strategic interaction in the setting of diesel excises and confirm the effect of country size on the response to tax changes in neighboring countries. Strategic interaction between EU countries intensified in the mid 1990s and drove small European countries to set lower diesel tax rates. These results explain why the EU's minimum tax policy has failed to harmonize diesel tax rates across member states. |
| Keywords: | tax competition, minimum tax, asymmetric regions, diesel excise, European Union |
| JEL: | H70 H77 H87 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1012&r=pbe |
| By: | Emmanuelle Taugourdeau (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Abderrahmane Ziad (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen) |
| Abstract: | In this methodological paper, we prove that the key tax competition game introduced by Zodrow and Mieszkowski (1986) and Wildasin (1988), extended to asymmetric regions, possesses a Nash equilibrium under several assumptions commonly adopted in the literature : goods are supposed to be normal ; the public good is assumed to be a desired good ; the demand for capital is concave ; and the elasticity of the marginal product is bounded. The general framework we develop enrables us to obtain very tractable results. By applying our method to several examples with standard production functions, we show that it is easy to use. |
| Keywords: | Nash equilibrium, tax competition. |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00492098_v1&r=pbe |
| By: | Emilie CALDEIRA; Grégoire ROTA-GRAZIOSI (Centre d'Etudes et de Recherches sur le Développement International); Martial FOUCAULT |
| Abstract: | Without denying particular dimensions of the decentralisation in Sub-Saharan countries, this paper applies standard reasoning from the fiscal federalism literature to a developing country and tests the existence of strategic interactions among local Beninese governments, called 'communes'. We first propose a two-jurisdiction model of public expenditure interactions, considering a constrained Nash equilibrium to capture the extreme poverty of some communes. We show that spillovers among jurisdictions involve strategic behaviours of local officials who have sufficient levels of fiscal resources. Second, by estimating a spatial lag model, our analysis provides evidence for the presence of strategic interactions in Benin, contingent on 'communes fiscal autonomy. Such interactions arise among communes which are geographically or ethnically close. We also highlight both an opportunistic behaviour of local governments before local elections and an effect of partisan affiliations. This African democracy appears to be as concerned as developed democracies with strategic fiscal interactions. |
| Keywords: | Fiscal interactions, benin, decentralisation, local government, dynamic panel data |
| JEL: | H7 H2 D72 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1176&r=pbe |
| By: | Johannes Becker (Max PLanck Institute for Intellectual Property Munich); Marco Runkel (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) |
| Abstract: | Would the introduction of a corporate tax system with consolidated tax base and formula apportionment lead to socially wasteful mergers and acquisitions across borders? This paper analyzes a two-country model with an international investor considering acquisitions of already existing target firms in a high-tax country and a low-tax country. The investor is able to shift profits from one location to another for tax saving purposes. Two systems of corporate taxation are compared, a system with separate accounting and a system with tax base consolidation and formula apportionment. It is shown that, under separate accounting, the number of acquisitions is inefficiently ciently high in both the high tax and the low tax country. Under formula apportionment, the number of acquisitions is inefficiently ciently high in the low tax country and inefficiently ciently low in the high tax country. Under tax competition, a novel externality arises that worsens the effciency; ciency properties of equilibrium tax rates under separate accounting, but may play an effciency; ciency enhancing role under formula apportionment. |
| Keywords: | Corporate Taxation, Separate Accounting, Formula Apportionment |
| JEL: | H25 F23 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:mag:wpaper:100014&r=pbe |
| By: | Mauricio Olivera; Monica Pachon; Guillermo Perry |
| Abstract: | This paper explores the characteristics of the political economy process that conditioned the scope and success of the combination of fiscal reforms before and after Colombia’s 1991 constitutional reforms. Using formal analysis of reforms and interviews with actors, reforms in taxation, decentralization, the budgetary process and pensions are examined in times of political crisis, economic crisis, and economic boom. The results generally confirm the hypothesis that increased political fragmentation and limited unilateral executive power after the 1991 reforms restricted the extent of reforms, particularly in tax law. Nonetheless, the enactment of piecemeal reforms was encouraged by crisis conditions. |
| Keywords: | Policymaking process, Political economy, Structural reform, Colombia |
| JEL: | H20 H71 H77 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:idb:wpaper:4674&r=pbe |
| By: | Jana Chvalkovská (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jiří Skuhrovec (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | The objective of this paper is to analyze the potential of e-Government tools to enable the general public to oversee spending of public institutions. The paper illustrates the “watchdog” potential of reducing corruption by means of providing information to the public on the example of the Czech Public e-Procurement Information System (further called System). The System is an Internet portal, where public authorities announce their intention to purchase goods and services. Such announcements are monitored by private entities that can compete for the respective public contract. For our paper we used a web robot to collect data about public procurements from the System and utilized them for construction of an original Transparency Index, which rates institutions that award public contracts (so called contracting authorities). The composite Index is constructed as a weighted sum of ten various transparency indicators, computed separately for each contracting authority. This Index could serve as an efficient benchmark for continuous control and comparison of public institutions in the area of public procurement and demonstrates how an e-Government tool can contribute to greater openness and accountability of these public institutions and to enhancement of the civic engagement in the control of governmental activities. The results of our research suggest that although the System is good step forward, its current structure does not enable the public to effectively exercise public control over procurements spending of contracting authorities, because of serious difficulties related to viewing (and extraction) of aggregate data. On the other hand, on example of our Transparency Index, we demonstrate that if the System allowed for easier access to data on public procurements, it would serve as an efficient tool of public control and facilitate open government initiatives. |
| Keywords: | public procurement, Transparency Index, efficient public control, open government, corruption |
| JEL: | H57 C43 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2010_11&r=pbe |
| By: | Robert P. Inman |
| Abstract: | The 2007-2010 recession has imposed significant fiscal hardships on state and local governments. The result has been state deficits and the need to increase state taxes, cut spending, and withdraw funds from state rainy day accounts. The primary cause of state budget “gaps” has been the rise in the level of state unemployment. There is no evidence that gaps are related to state political institutions, the state’s prior receipt of federal funding, or possibly favored access to key congressional budget committees. The federal government has responded to these gaps with the passage of the American Recovery and Reinvestment Act (ARRA) of 2009 intended to aid states in fiscal distress and to provide an economic stimulus. As insurance for fiscal distress, ARRA covers at most $.23 of each additional dollar of a state’s budget gap; there is a large per capita payment that goes to all states, independent of the level of state deficits. As targeted assistance for stimulating local economies, ARRA funding is uncorrelated with state unemployment rates. ARRA funding appears to be decided by congressional politics, given the desire to pass a major spending and tax relief package as quickly as possible. States are important “agents” for federal macro-policy, but agents with their own needs and objectives. |
| JEL: | H71 H77 H81 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16086&r=pbe |
| By: | Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn) |
| Abstract: | In their majority, public international lawyers postulate that for a new rule of customary law to originate, two conditions must be fulfilled: there must be consistent practice, and it must be shown that this practice is motivated by the belief that such behaviour is required in law. Maurice Mendelson (Recueil des Cours 272 (1998) 155) has challenged this view. He believes that the majority view ignores the fundamentally incomplete nature of public international law. He claims that the new rule emerges because mere practice leads to convergent expectations. This paper uses data from student experiments with a linear public good to show that behaviour con-verges even absent verbal communication; that convergence is guided by mean contributions in the previous round, which serve as an implicit norm; that freeriding on this implicit norm is re-garded as illegitimate; that cooperation can be stabilised at a high level if “reprisals” are permitted. Hence the mechanism of norm formation proposed by Maurice Mendelson is fully borne out by the experimental data. |
| Keywords: | experiment, customary international law, opinio iuris, linear public good |
| JEL: | H41 K33 D23 C91 F53 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2010_13&r=pbe |
| By: | Sean Corcoran; William N. Evans |
| Abstract: | Using a panel of U.S. school districts spanning 1970 – 2000, we examine the relationship between income inequality and fiscal support for public education. In contrast with recent theoretical and empirical work suggesting a negative relationship between inequality and public spending, we find results consistent with a median voter model, in which inequality that reduces the median voter’s tax share induces higher local spending on public education. We estimate that 12 to 22 percent of the increase in local school spending over this period is attributable to rising inequality. |
| JEL: | H72 I21 I22 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16097&r=pbe |
| By: | Furceri, Davide; Karras, Georgios |
| Abstract: | This paper investigates the effects of economic size and trade openness on tax design in the OECD. Using data for thirty OECD countries over the 1965-2007 period, we test the recently proposed Hines-Summers [2009] Hypothesis, according to which the smaller the size and the greater the openness of the economy, the more it will rely on expenditure taxes and the less on income taxes. Our findings show that the Hines-Summers Hypothesis can claim broad, statistically significant, and robust empirical support in the OECD data sets we examined. |
| Keywords: | Income tax; Consumption tax; Country size; Trade openness |
| JEL: | H20 E60 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:23358&r=pbe |
| By: | Torben M. Andersen (School of Economics and Management, Aarhus University, Denmark); Allan Sørensen (School of Economics and Management, Aarhus University, Denmark) |
| Abstract: | It is widely perceived that globalization is a threat to tax financed public sector activities. The argument is that public activities (public consumption and transfers) financed by income taxes distort labour markets and cause higher wages and thus a loss of competitiveness. Since this link is strengthened by globalization, it is inferred that the marginal costs of public funds increase and a retrenchment of the public sector follows. We challenge whether these conclusions have support in a general equilibrium model featuring standard effects from open macroeconomics and trade theory. Even though income taxation unambiguously worsens wage competitiveness, it does not follow that marginal costs of public funds increase with product market integration due to gains from trade. Moreover, non-cooperative fiscal policies do not have a race-to-the-bottom bias despite that taxes harm competitiveness. In fact we identify an expansionary bias in ?scal policies that is likely to increase with globalization when taxes finance either public consumption or transfers. |
| Keywords: | labour taxation, open economy, policy spill-over, marginal costs of public funds |
| JEL: | H2 F1 J22 |
| Date: | 2010–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2010-09&r=pbe |
| By: | Elena Besedina (Kyiv School of Economics, Kyiv Economic Institute) |
| Abstract: | Recent theoretical models postulate that only the most productive firms become exporters due to the existence of costs of exporting. Empirical evidence does suggest that exporters are on average more productive than their domestic counterparts. However, contrary to the theory the productivity distribution for exporters and non-exporters overlaps. Motivated by this empirical finding, I extend an existing model of heterogeneous firms by adding endogenous trade policy based on a political economy argument. Using Ukrainian data I identify firms that receive explicit government support in the form of preferential tax policy, subsidies and other exclusive benefits. I find that explicit political support is positively associated with firms’ size, voter turnout and state ownership but not efficiency. |
| Keywords: | TFP, Exporting, Subsidy, Electoral Competition |
| JEL: | D24 D72 P26 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:kse:dpaper:28&r=pbe |
| By: | Ilona Kovacs (Institute of Economics - Hungarian Academy of Sciences) |
| Abstract: | This study surveys various views on income distribution and income inequality and presents alternative approaches to and analytical methods of measuring income inequality. In contrast to traditional income distribution analyses, the author examines the development of income distribution and income inequality for a period between 1996 and 2004, following the change in the regime, based on personal income (consolidated income subject to general tax rates and total income including income subject to separate tax rates) declared to the Hungarian Tax and Financial Control Administration (APEH). A follow-up to this work based on similar data available up to the year 2007 is forthcoming. Based on income surveys by the Hungarian Central Statistical Office (KSH), the ratio of the income of the top tenth of the population to the bottom tenth of the population doubled from 4.6 to 9.2 between 1987 and 1997. Analyses for years following 1996 (TµRKI, Institute of Economics) show that income inequality did not increase considerably following that year; it essentially stagnated with nothing more than internal structural changes taking place. The results obtained based on data from personal income tax returns contradict these findings, as income inequality has further increased since, while the extent of income inequality itself was also considerably larger. Based on her conclusions, the author formulates important economic policy recommendations. She sees taxation, inflation, demographic changes, and changes in the structure of ownership and the way privatization took place as the leading causes behind these changes in income distribution and income inequality which were extensive by international standards. |
| Keywords: | income distribution, income inequalities |
| JEL: | D31 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1011&r=pbe |