|
on Public Economics |
| By: | Gemmell, Norman; Hasseldine, John |
| Abstract: | The work of Feldstein (1995, 1999) has stimulated substantial conceptual and empirical advances in economists’ approaches to analysing taxpayers’ behavioural responses to changes in tax rates. Meanwhile, a largely independent literature proposing and applying alternative measures of tax compliance has also developed in recent years, which has sought to provide tax agencies with tools to identify the extent of tax non-compliance as a first step to designing policies to improve compliance. In this context, measures of ‘tax gaps’ – the difference between actual tax collected and the potential tax collection under full compliance with the tax code – have become the primary measures of tax non-compliance via (legal) avoidance and/or (illegal) evasion. In this paper we argue that the tax gap as conventionally defined is conceptually flawed because it fails to capture behavioural responses by taxpayers. We show that, in the presence of such behavioural responses, tax gap measures both for indirect taxes (such as the ‘VAT-gap’) and direct (income) taxes exaggerate the degree of noncompliance. Further, where these conventional tax gap measures motivate reforms designed to increase the tax compliance rate, they will likely have a tax base reducing effect and hence generate a smaller increase in realised tax revenues than would be anticipated from the tax gap estimate. |
| Keywords: | Behavioural responses, Taxpayers, Tax rate changes, Tax policy, Compliance, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwcpf:2853&r=pbe |
| By: | Angel Solano-Garcia (Globe and Department of Economic Theory and Economic History, University of Granada.) |
| Abstract: | This paper analyzes the political economy of income redistribution when voters are concerned about tax compliance. We consider a two stagemodel where there is a two party competition over the tax rate in the first stage and voters decide about their level of tax compliance in the second stage. We model political competition à la Wittman with the ideology of parties endogenously determined at equilibrium. We calibrate the model for an average of EU-27 countries. Numerical simulations provide the tax rates proposed by the two parties and the level of tax compliance. We find that a decrease in confidence in tax morale, and an increase in parties’ uncertainty about the preferences of the median voter increase the probability that the party offering the lowest income tax will win and decrease tax compliance. |
| Keywords: | tax evasion, ideological parties, income redistribution, ethical voters. |
| JEL: | D72 H26 |
| Date: | 2013–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:13/06&r=pbe |
| By: | Harry Grubert (U.S. Treasury Department); Rosanne Altshuler (Rutgers University) |
| Abstract: | We evaluate proposals for the reform of the U.S. system of taxing cross-border income including dividend exemption, full current inclusion, a Japanese type version of dividend exemption with an effective tax rate test subject to an exception for an active business, dividend exemption combined with a minimum tax, and repeal of check-the-box. We consider two versions of dividend exemption with a minimum tax: one in which the minimum tax is imposed on a country by country basis and another in which the minimum tax is based on overall foreign income. In addition we evaluate versions of minimum taxes that allow current deductions for tangible investment against the minimum tax base. To compare these schemes with current law, we reevaluate the efficiency cost of the dividend repatriation tax using evidence from the response to the 2005 repatriation tax holiday. We find that the burden of avoiding repatriations is higher than found in previous estimates, particularly for high tech profitable foreign businesses, and rises as deferrals accumulate. We simulate the effect of the various alternatives on effective tax rates for investment in high and low tax countries with inclusion of the importance of parent developed intangibles and their role in shifting income from the United States. Our analysis demonstrates that it is possible to make improvements to the system across many dimensions including the lockout effect, income shifting, the choice of location and complexity. The goals are not necessarily in conflict. Compared to the other schemes, we find the per country minimum tax with expensing for real investment has many advantages with respect to these margins. The per country minimum tax offsets (at least in part) the increased incentives for income shifting under pure dividend exemption and is better than full inclusion in tailoring companies’ effective tax rates to their competitive position abroad. No U.S. tax burden will fall on companies that earn just a normal return abroad. The minimum tax is basically a tax on large excess returns in low tax locations, cases in which the company probably has less intense foreign competition. The investment will still be made. Unlike the Japanese type dividend exemption alternative considered, there is no cliff in which the income is subject to the full home country rate if it fails the minimum effective tax rate and active business test. Under the minimum tax with no cliff the company has more of an incentive to lower foreign taxes and will often prefer paying the U.S. minimum tax to paying a higher foreign tax. Finally, the minimum tax with expensing is more effective in discouraging income shifting than repeal of check-the-box. In summary, the per country minimum tax with expensing combines the advantages of the extreme alternatives, dividend exemption and full inclusion, and reduces their shortcomings. Our comparison of the overall and per country minimum tax suggests that the overall version deserves serious consideration. While it is not as thorough as the per country minimum tax in targeting tax haven income, it is a substantial move in that direction and is much simpler. |
| Keywords: | International taxation, , Multinational corporations, Territorial taxation, Corporate taxation |
| JEL: | H20 H25 H87 |
| Date: | 2013–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:rut:rutres:201305&r=pbe |
| By: | Florian Scheuer |
| Abstract: | This paper analyzes Pareto optimal non-linear taxation of profits and labor income in a private information economy with endogenous firm formation. Individuals differ in both their skill and their cost of setting up a firm, and choose between becoming workers and entrepreneurs. I show that a tax system in which entrepreneurial profits and labor income must be subject to the same non-linear tax schedule makes use of general equilibrium (or "trickle down'') effects through wages to indirectly achieve redistribution between entrepreneurs and workers. As a result, constrained Pareto optimal policies can involve low marginal tax rates at the top and, if available, input taxes that distort the firms' input choices. However, these properties disappear when a differential tax treatment of profits and labor income is possible. In this case, redistribution is achieved directly through the tax system rather than "trickle down'' effects, and production efficiency is always optimal. |
| JEL: | D5 D8 E2 E6 H2 J2 J3 J6 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19235&r=pbe |
| By: | Christopher Ball; John Creedy (The Treasury) |
| Abstract: | This paper investigates the implications of population ageing and changes in labour force participation rates for projections of revenue obtained from personal income taxation and a consumption tax (in the form of a broad-based goods and services tax). A projection model is presented, involving changing age-income profiles over time for males and females. The model is estimated and applied to New Zealand over the period 2011-2062. |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:13/09&r=pbe |
| By: | Robert A Buckle; Amy A Cruickshank (The Treasury) |
| Abstract: | New Zealand, like many other countries, is experiencing a changing demographic profile from one dominated by young people during the 20th century to one where the population is more evenly distributed across age groups. This has implications for the economy and society, including the government's fiscal position in the future and for the sustainability of its spending programmes. This paper discusses the link between the government budget constraint and fiscal sustainability, how fiscal sustainability can be measured and why it’s important. We also examine the Treasury’s current approach to modelling the extent of fiscal adjustment required and options available to achieve this adjustment. The paper proposes criteria to evaluate potential policy changes to address these long-term fiscal challenges and suggests areas where further work could be worthwhile. |
| Keywords: | Long-run fiscal sustainability; fiscal consolidation; public debt; public social expenditure; taxation |
| JEL: | E61 E62 H68 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:13/20&r=pbe |
| By: | Fabling, Richard; Gemmell, Norman; Kneller, Richard; Sanderson, Lynda |
| Abstract: | Effective marginal tax rates can be very different from the statutory rate and vary across firms, reflecting such factors as the extent and nature of taxable deductions (losses, depreciation), asset and ownership structures, and debt/equity financing. We estimate firm-specific EMTRs and related user cost of capital (UCC) measures allowing for shareholder-level taxation using data for 2000-2010 from the Longitudinal Business Database. Examining distributions of various UCC measures we find substantial firm-level heterogeneity; systematic changes as a result of tax reforms between 2004 and 2011; and systematic differences between foreignowned and domestically-owned firms. Choices among alternative UCC measures make a difference to interpretations. |
| Keywords: | Tax rates, Taxable deductions, Companies, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwcpf:2854&r=pbe |
| By: | Aziz, Omar; Gemmell, Norman; Laws, Athene |
| Abstract: | This paper examines the age and gender dimensions of income distribution and fiscal incidence in New Zealand using Household Expenditure Survey (HES) data for 2010 and a non-behavioural micro-simulation model. Since many fiscal policies are likely to have quite different incidences across age groups and genders, and with population ageing changing the age and gender composition of the voting population in many countries, age/gender dimensions of fiscal incidence become increasingly relevant. While this single ‘age distribution snapshot’ cannot fully capture lifecycle incidences, it avoids the complex and uncertain assumptions implicit in the latter and is an important component of lifetime redistribution calculations. We explore alternative methods of intra-family allocation of resources including ‘unequal share’ assumptions based on recent research into how families allocate their spending. Our evidence, which in general is not highly sensitive to sharing assumptions, suggests a strong ‘life cycle’ aspect to fiscal incidence whereby net tax liabilities are low, and generally negative, at younger and older ages but positive during much of the ‘working age’ period. Women, on average, are found to have a systematically and persistently lower net fiscal liability than men, most pronounced at older ages when greater female longevity exercises a strong influence. Nevertheless, considerable heterogeneity of fiscal incidence for both men and women is observed with the distributions of various fiscal incidence measures showing substantial overlap. |
| Keywords: | Income distribution, Fiscal incidence, Gender, Age, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwcpf:2852&r=pbe |
| By: | Omar A Aziz; Christopher Ball; John Creedy; Jesse Eedrah (The Treasury) |
| Abstract: | This paper examines the potential distributional impacts of demographic change, particularly population ageing, and changes to labour force participation that are projected to arise over the next 50 years. The approach involves calibration weighting of the Treasury’s microsimulation model, Taxwell, based on the New Zealand Household Economic Survey. The weights are adjusted for each projection year to ensure that a range of population aggregates (by age and gender) match the projected values provided by Statistics New Zealand. Measures of income inequality and poverty, along with the incidence of income tax, Goods and Services Tax and a number of components of government spending (namely health and education) across age groups, are obtained. The results suggest that population ageing and expected changes in labour force participation, in isolation, do not have a significant impact on population-level measures of income inequality. |
| Keywords: | Inequality; population ageing; survey calibration; poverty; fiscal incidence |
| JEL: | H24 I14 I24 J1 H24 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:13/13&r=pbe |
| By: | Shijie Liu; Andrew Adams; Boulis M. Ibrahim |
| Abstract: | This paper investigates the micro and macro effects of income tax on large scale portfolio optimization. Stochastic integer programming is used to optimize post-tax large-scale portfolios when the global market is segmented by regional tax rules. A broad range of realistic trading rules and inequality constraints as well as a large number of assets are considered. The increased complexity and scale of the problem renders theoretical methods infeasible. A new numerical approach based on basic Greedy heuristics, in which integer and non-linear restrictions are considered simultaneously, is proposed. The superiority of this approach is demonstrated through a comparison with extant BONMIN’s Branch-and-Bound (B&B) methods, for problems with up to 288 assets whereas previous efforts under mixed-integer non-linear programming (MINLP) were limited to 200 assets. The approach is used to test and extend extant theoretical work on post-tax portfolio management. The same generic conclusion that taxation affects the portfolio composition dramatically, is reached, but the new approach reveals greater detail of the implications of the combination of various factors. A study of price effects finds that market equilibrium prices are affected by relative as well as absolute tax rates across assets and global regions. The implication is that the market's response to tax rate changes across assets and countries can now, at least partially, be predictable prior to implementation by government. Investors are also better able to forecast how the markets will react in the short term. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hwe:cfidps:1304&r=pbe |
| By: | Rudiger Ahrend; Marta Curto-Grau; Camila Vammalle |
| Abstract: | The paper explores interrelations between the fiscal situation of sub-national and central governments, or – put differently – whether and how sub-national and central governments contribute to each other’s fiscal difficulties. The first part of the paper examines sub-national government policies that may negatively affect the fiscal situation of the central government. Based on a new cross-country data-set at the level of individual regions, it examines structural factors that increase the probability of sub-national entities accumulating amounts of debt that may ultimately turn out to be unsustainable. The underlying idea is to explore to what degree such debt levels could result from moral hazard-driven behaviour at the regional level. The second part of the paper examines whether and how national governments hand the burden of fiscal adjustment down to sub-national levels, mainly looking at examples from the wave of fiscal adjustments in the wake of the 2007-09 global financial crisis.<BR>Cette étude examine dans quelle mesure la situation budgétaire des gouvernements infra-nationaux et celle des gouvernements centraux sont liées – ou, exprimé différemment, comment les gouvernements infra-nationaux et centraux contribuent à leurs difficultés budgétaires réciproques. La première partie de l’étude analyse les politiques conduites par les gouvernements infra-nationaux pouvant affecter négativement la situation budgétaire du gouvernement central. Une analyse des facteurs structurels susceptibles d’accroître la probabilité d’accumulation de dette par les entités infra-nationales (et pouvant au final la rendre insoutenable) est alors conduite. Basée sur une nouvelle base de données au niveau regional pour six pays de l’OCDE, elle cherche à déterminer à quel point ces niveaux de dette sont susceptibles d’être influencés par des comportements d’aléa moral de la part des autorités régionales. La seconde partie de cette étude examine la manière dont les gouvernements centraux transfèrent le poids de l’ajustement budgétaire aux gouvernements infra-nationaux, en se concentrant sur des épisodes de consolidation budgétaire ayant suivi la crise financière internationale de 2007-2009. |
| Keywords: | public debt, sub-national government, bailouts, fiscal stress, plan de sauvetage, stress budgétaire, gouvernements infra-nationaux |
| JEL: | H12 H70 H74 H81 |
| Date: | 2013–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:oec:govaab:2013/5-en&r=pbe |
| By: | Jan Kuckuck (Universitaet Osnabrueck); Frank Westermann (Universitaet Osnabrueck) |
| Abstract: | The Structural Vector Auto-regression (SVAR) approach to estimating fiscal multipliers, following the seminal paper by Blanchard and Perotti (2002), has been widely applied in the literature. In our paper we discuss the interpretation of these estimates and suggest that they are more useful for forecasting purposes than for policy advice. Our key point is that policy instruments often react to each other. We analyze a data set from the US and document that these interactions are economically and statistically significant. Increases in spending have been financed by subsequent increases in taxes. Increases in taxes have been complemented by additional spending cuts in subsequent quarters. In a counterfactual analysis we report fiscal multipliers that abstract from these dynamic responses of policy instruments to each other. |
| Keywords: | Fiscal policy, government spending, net revenues, structural vector autoregression |
| JEL: | E62 H20 H50 |
| Date: | 2013–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:iee:wpaper:wp0096&r=pbe |
| By: | John Creedy (The Treasury and Victoria University of Wellington) |
| Abstract: | This paper provides an introductory review of the alternative possible income distributions which can be used when making cross-sectional evaluations of the effects of taxes and transfers using a household economic survey. This paper attempts to clarify the various alternatives, both for users of data and those wishing to interpret results. Special attention is given to the choice of income unit. The need to avoid spurious comparisons is stressed. The use of adult equivalence scales and the application of an explicit sharing rule are considered. Comparisons over time, where both the tax structure and the populations differ, are also considered. Numerical examples are used to highlight the alternative approaches and distributions. |
| Keywords: | Income distribution; adult equivalence scales; income unit |
| JEL: | D31 D13 D63 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:13/11&r=pbe |
| By: | Callan, Tim (Economic and Social Research Institute, Dublin); Nolan, Brian (University College Dublin); Keane, Claire (ESRI, Dublin); Savage, Michael (Economic and Social Research Institute, Dublin); Walsh, John R. (ESRI, Dublin) |
| Abstract: | Ireland is one of the countries most severely affected by the Great Recession. National income fell by more than 10 per cent between 2007 and 2012, as a result of the bursting of a remarkable property bubble, an exceptionally severe banking crisis, and deep fiscal adjustment. This paper examines the income distribution consequences of the recession, and identifies the impact of a broad range of austerity policies on the income distribution. The overall fall in income was just under 8 per cent between 2008 and 2011, but the greatest losses were strongly concentrated on the bottom and top deciles. Tax, welfare and public sector pay changes over the 2008 to 2012 period gave rise to lower than average losses for the bottom decile. Thus, the larger than average losses observed overall are not due to these policy changes; instead, the main driving factors are the direct effects of the recession itself. Policy changes do contribute to the larger than average losses at high income levels. |
| Keywords: | recession, income distribution, tax, welfare |
| JEL: | D31 D78 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7481&r=pbe |
| By: | Borys, Paweł; Ciżkowicz, Piotr; Rzońca, Andrzej |
| Abstract: | We identify fiscal impulses in the EU New Member States using four different methods and apply econometric panel data techniques to determine what is the response of output and its components to those impulses. We also directly test the effects of fiscal impulses on labor costs and households’ expectations. The results confirm that the composition of impulses matters for output and its components response. Notably we find evidence that investment and export growth accelerates after fiscal adjustment and decelerates after fiscal stimulus when the impulses are expenditure based. In turn, private consumption seems not to respond to fiscal impulses regardless of their size. The analysis confirms that expenditure based fiscal adjustments enhance wage moderation and thereby competitiveness of domestic enterprises, while expenditure-based fiscal stimuli weaken it. By contrast, we do not find evidence that fiscal impulses have an effect on households’ confidence. |
| Keywords: | expansionary fiscal adjustment, contractionary fiscal stimulus, New Member States, panel data |
| JEL: | C22 D22 E24 E62 H30 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48243&r=pbe |
| By: | Viren, Matti (Bank of Finland Research) |
| Abstract: | This paper deals with the problems of assessing the effects of fiscal policy in the European Monetary Union. Here, we face wide cross-country differences in key fiscal parameters, some of which may also be vary over time (business cycle). Moreover, these effects may also depend on trade spillover effects and thus on the extent of policy coordination. Our empirical analyses make use of data for 15 EU countries, mainly for the period 1970-2011. The results clearly indicate that fiscal multipliers are not constant across countries and time, being much larger during economic recessions. By contrast, the policy coordination-effects appear to be more homogenous, although it turns out that small countries may benefit more from coordination. |
| Keywords: | fiscal policy; policy coordination; government deficit; EMU |
| JEL: | E61 E63 H62 |
| Date: | 2013–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2013_011&r=pbe |
| By: | Jamie Murray (The Treasury) |
| Abstract: | I present a simple estimated model of the New Zealand economy which is used to assess the sensitivity of the impact multiplier and output losses associated with fiscal consolidations to uncertainty over model parameters. I find that, in normal times, the fiscal multiplier can be expected to lie between 0.1 and 0.5, with a central estimate of 0.3. Uncertainty over the output effects of fiscal tightening can be attributed to several model parameters and it is found that a bad outcome is likely to be worse than a good outcome is to be better – output risks are skewed to the downside. Sensitivity analysis reveals that if monetary policy in New Zealand were to be constrained by the zero-lower bound, the fiscal impact multiplier would rise substantially, consistent with the empirical evidence for other OECD countries in that position. |
| Keywords: | Fiscal impact multiplier; Ricardian equivalence; DSGE; SVAR; consolidation; monetary policy; uncertainty; lower bound |
| JEL: | E62 E43 E32 F33 F41 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:13/19&r=pbe |
| By: | Catherine Mathieu (OFCE); Henri Sterdyniak (OFCE) |
| Abstract: | The public finances crisis has brought binding fiscal rules proposals back to the forefront. The paper analyses their justifications and specifications, either in a classical or in a Keynesian framework. In the recent period there is no evidence that public deficits were caused by fiscal indiscipline and induced too high interest rates; there is no evidence that economically relevant rules can be designed. The paper provides an analysis of fiscal rules implemented either at country level (like the UK golden rule), or at the EU level (the Stability and Growth Pact). The paper shows that fiscal rules did not work before and during the crisis. The paper discusses the EU project, the “Fiscal Pact”, which risks to paralyse fiscal policies and to prevent economic stabilisation. The priority today is not to strengthen public finance discipline but to question economic developments which make public deficits necessary to support output. |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/dambferfb7dfprc9lip1oi0sn&r=pbe |
| By: | Andrés Rodriguez-Pose; Enrique Garcilazo |
| Abstract: | This paper sets out to examine the impact of the quality of local and regional governments on the returns of investment, focusing on the returns of EU structural and cohesion funds. Despite the widespread belief that the quality of government affects the returns of public investments, whether this is effectively the case has seldom been proved. Using primary data on quality of government collected by the Quality of Government Institute, combined with World Bank Global Governance Indicators data, we conduct a two-way fixed effect panel regression model for a total of 169 in European regions during the period 1996 to 2007. The results of the analysis underline the importance of the quality of government both as a direct determinant of economic growth, as well as a moderator of the efficiency of structural and cohesion funds expenditure. Our analysis finds that both EU investments targeting regions and quality of government make a difference for regional economic growth, but that above a significant threshold level of expenditure, the quality of government is the key factor determining the returns of public investment. In many of the regions receiving the bulk of structural funds, greater levels of cohesion expenditure would, in the best case scenario, only lead to a marginal improvement in economic growth, unless the quality of government is significantly enhanced. |
| Keywords: | investment, European Union, regions, quality of government, regional development and growth |
| JEL: | O43 R11 |
| Date: | 2013–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:oec:govaab:2013/12-en&r=pbe |
| By: | Diego Comin; Mestieri |
| Abstract: | We study the lags with which new technologies are adopted across countries, and their long-run penetration rates once they are adopted. Using data from the last two centuries, we document two new facts: there has been convergence in adoption lags between rich and poor countries, while there has been divergence in penetration rates. Using a model of adoption and growth, we show that these changes in the pattern of technology di ffusion account for 80% of the Great Income Divergence between rich and poor countries since 1820. |
| Date: | 2013–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:thk:rnotes:26&r=pbe |
| By: | David Weild; Edward Kim; Lisa Newport |
| Abstract: | This study provides critical observations on the state of key global equity markets as recent developments have put into question their efficiency and effectiveness in facilitating capital formation. It covers the top 26 initial public offering (IPO) producing nations, with a particular focus on stock markets in the United States. |
| Keywords: | corporate governance, initial public offerings, allocation of capital, equity market structure, stock exchange, tick size |
| JEL: | G30 G32 G34 G38 |
| Date: | 2013–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaae:10-en&r=pbe |
| By: | Guzi, Martin (IZA) |
| Abstract: | Paper demonstrates the existence of a welfare trap in the Czech Republic, created by the tax and social security systems. Combining individual data from the Czech Labor Force Survey and the Czech Household Income Survey, the analysis exploits the difference between the available social benefits and the net household income when a person is employed. This information allows us to calculate the net replacement rate based on the parameters of the taxation system and rules for means-tested social benefits at the household level. Estimates imply the existence of a welfare trap, which means that individuals who receive relatively higher social benefits are also more likely to remain unemployed. It is shown that the most affected groups are those with low education and long unemployment spells. Furthermore, the paper documents the disadvantaged position of women in the Czech labor market. The estimates imply that women outflows to employment are particularly influenced by the high social benefits, and the existence of a welfare trap persists even when the job-search intensity is controlled. This finding contributes to the discussion on the persistent and large unemployment gender gap in the Czech Republic. The results of the analysis support policy improvements towards low-income households. A better harmonization of tax and social security systems is necessary in order to ensure that the incentives to leave unemployment are not hampered by high social benefits. |
| Keywords: | labour supply, welfare trap, net replacement rate |
| JEL: | J22 J31 I38 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7478&r=pbe |
| By: | James Zuccollo; Sholeh Maani; Bill Kaye-Blake; Lulu Zeng (NZIER; University of Auckland Business School) |
| Abstract: | How do private returns to tertiary education in New Zealand compare internationally? According to the latest OECD measures, the private rate of return for New Zealand is 8.9%, compared to an OECD average of 12.4%, placing New Zealand toward the bottom of the OECD ranking. The aim of this study is to better understand the reasons for that gap and determine whether the low returns could be considered as problems amenable to policy interventions. We identify a number of measurement issues with the OECD standardisation. We develop a decomposition approach and provide a series of decompositions of the New Zealand-OECD gap. Our analysis shows that about half of the gap in New Zealand’s private returns can be explained by the way OECD private tertiary returns are measured (eg, old tax rates, New Zealand’s higher employment rates, and compositional issues which have not been controlled for in the OECD analysis such as the mix of degrees and graduates in New Zealand) rather than a “real” gap. However, once those factors are taken into account there remains a gap between New Zealand and the OECD average. We identify a number of endowment, policy, and decision-related contributing factors, and identify directions for future research. |
| Keywords: | Private Returns; Higher Education; Earnings; OECD Index; Decomposition, Measurement Issues |
| JEL: | J24 J31 J38 B49 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:13/10&r=pbe |
| By: | Yann Algan (Department of Economics, Sciences Po - Sciences Po); Camille Hémet (Department of Economics, Sciences Po - Sciences Po, AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales [EHESS] - Ecole Centrale Marseille (ECM)); David Laitin (Department of Political Science, Stanford University - Stanford University) |
| Abstract: | This paper demonstrates the effects of ethnic diversity on social relationships and the quality of public spaces at a very finite neighborhood level. We use detailed block level data on diversity and housing quality from a representative survey on housing in France. We show how and to what extent diversity within a neighborhood can directly affect household well-being and the quality of the common spaces, whereas the previous literature looks at more aggregate outcomes through voting channels. Our identification strategy relies on the exogeneity of public housing allocations with respect to ethnic characteristics in France, to address the bias due to endogenous residential sorting. Diversity is shown to have a negative effect on the quality of local public goods, either due to vandalism, not deterred by other-regarding preferences and social policing, or due to collective action failure to ensure effective property management. However, we find that diversity has no robust effect on public safety at a local level and, if anything, is more related to social anomie. |
| Keywords: | diversity; neighborhood effects; living conditions; public housing |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00843173&r=pbe |
| By: | Marco Faravelli; Luca Stanca |
| Abstract: | This paper provides a direct test of the hypothesis that agents' objective functions are non-separable in economic incentives and social preferences. We study experimentally fixed-prize contests using a 2x2 design, varying orthogonally the degree of competition of the incentive mechanism (all-pay auction vs. lottery) and the presence or absence of social returns to bidding (rent seeking vs. public good). The results indicate that either stronger competition or positive social returns have positive main effects on bids. In addition, we find a negative interaction between the all-pay auction mechanism and the public good environment, leading us to reject separability. This finding provides causal evidence that economic incentives may negatively affect pro-social behavior. |
| Keywords: | Contests, Public goods, Rent-seeking, Social preferences, Separability, Laboratory experiments |
| JEL: | C91 D44 H41 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:250&r=pbe |
| By: | Mapa, Dennis; Albis, Manuel Leonard; Comandante, Dorcas Mae; Cura, Josephine; Ladao, Ma. Maureen |
| Abstract: | This paper looks at the spatial relationship of the average per capita income growth using intra-country or provincial data from 1988 to 2009. The results from the study provide insights on the geographical dimensions of provincial income growth and showed evidence on the role of spatial effects in the formal econometric analysis of intra-country income growth models. Despite the data limitations, the study provides a strong empirical evidence of the presence of positive spatial dependence or degree of similarity in the average per capita income growth of the provinces, albeit the degree of positive spatial dependence weakens in the latter periods. This positive spatial correlation suggests the provinces may be converging in terms of their income growth and they do so in movements similar to their neighbors. Moreover, the study shows that spatial dependence weakened in the latter periods (1994-2000 and 2000-2009). The weakening of spatial dependence may provide insights on the uneven provincial/regional income growth experienced in the country. One possible explanation of the weak spatial dependence is that two or more groups of neighboring provinces are growing at similar rates within the group, but at different rates across groups. This opens the possibility of having different convergence clubs (of provinces) within the country. |
| Keywords: | Spatial Dependence, Moran’s Index, Intra-Country Growth Model |
| JEL: | O1 O4 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48300&r=pbe |
| By: | Neil T.N. Ferguson (Stockholm International Peace Research Institute); Maren M. Michaelsen (Ruhr University Bochum) |
| Abstract: | The relationship between deprivation and educational outcomes has been the subject of a long-running and deep debate in the economic literature. Recent discussions have focused on causality, with experimental and quasi-experimental approaches taken, yet, predominantly, the literature continues to proxy deprivation with measures of wealth. This paper explores a much wider measure and identifies a causal relationship between regional deprivation and school performance in Northern Ireland. Combining panel data on Key Stage II results from each of Northern Ireland's primary schools with the 2005 Northern Ireland Multiple Deprivation Measure, we show the net negative impact of this wider measure, whilst an extension explores the impacts of each single domain. Using an error-component two-stage least squares model, we account for school and neighbourhood selection and the potential endogeneity of our deprivation measure, showing spatial variation in historical violence, which occurred during “The Troubles”, to be a valid instrument for deprivation. Our results confirm the negative impact of deprivation frequently found in the literature but also that, when the impacts of other deprivation domains are accounted for, education and crime deprivation, and not financial deprivation, play a significant role in determining outcomes. This confirms the limitations of using wealth as a proxy for neighbourhood deprivation, whilst suggesting that policies focusing only on income redistribution will be unsuccessful in improving education outcomes of those exposed to deprivation. |
| Keywords: | Violent Conflict, Regional Deprivation, Human Capital Accumulation, Northern Ireland |
| JEL: | I24 R23 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:hic:wpaper:151&r=pbe |