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on Public Economics |
| By: | Federico Revelli (University of Torino) |
| Abstract: | Based on a theoretical model where state limits on local government policy elicit a move from private value (position issue) to common value (valence issue) voting, I exploit exogenous variation in tax limitation rules in over 7,000 Italian municipalities during the 2000s to show that fiscal restraints provoke a fall in voter turnout and number of mayor candidates, and a rise in elected mayors’ valence proxy and win margins. The evidence is compatible with the hypothesis of hierarchical tax limitations fading the ideological stakes of local elections and favoring valence-based party line crossing, thus questioning the influential accountability postulate of the fiscal decentralization lore. |
| Keywords: | Local elections, voter turnout, tax and expenditure limitations, fiscal decentralization |
| JEL: | D72 H77 C23 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2013/6/doc2013-29&r=pbe |
| By: | Evers, Lisa; Miller, Helen; Spengel, Christoph |
| Abstract: | 11 European countries now operate IP Box regimes that provide substantially reduced rates of corporate tax for income derived from important forms of intellectual property. We incorporate these policies into forward-looking measures of the cost of capital, effective marginal tax rates and effective average tax rates. We show that the treatment of expenses relating to IP income is particularly important in determining the effective tax burden. A key finding is that regimes that allow expenses to be deducted at the ordinary corporate income tax rate, as opposed to the IP Box tax rate, may result in negative tax rates and can thereby provide a subsidy to unprofitable projects. We assess the specific design features of different regimes against the possible policy aim of improving the incentives to undertake R&D investment in a country. While some countries have tried to tie the policy to real activities, others have designed a policy targeted at the income streams associated with intellectual property. A key concern is the role that IP Boxes may play in increased, and possibly harmful, tax competition between European countries. -- |
| Keywords: | corporate taxation,effective tax rate,innovation,tax incentive patent box,innovation box,license box,tax competition |
| JEL: | H25 H32 H87 K34 O38 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:13070&r=pbe |
| By: | Etienne Lehmann (TEPP - Travail, Emploi et Politiques Publiques - CNRS : FR3435 - Université Paris-Est Marne-la-Vallée (UPEMLV), CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, ERMES - Equipe de recherche sur les marches, l'emploi et la simulation - CNRS : UMR7017 - Université Paris II - Panthéon-Assas); Laurent Simula (University of Upssala - University of Upssala); alain trannoy (EHESS - École des hautes études en sciences sociales - École des Hautes Études en Sciences Sociales [EHESS]) |
| Abstract: | We investigate how potential tax-driven migrations modify the Mirrlees income tax schedule when two countries play Nash. The social objective is the maximin and preferences are quasilinear in income. Individuals differ both in skills and migration costs, which are continuously distributed. We derive the optimal marginal income tax rates at the equilibrium, extending the Diamond-Saez formula. The theory and numerical simulations on the US case show that the level and the slope of the semi-elasticity of migration on which we lack empirical evidence are crucial to derive the shape of optimal marginal income tax. Our simulations show that potential migrations result in a welfare drop between 0.4% and 5.3% for the worst-off and an average gain between 18.9% and 29.3% for the top 1%. |
| Keywords: | Optimal Income Tax; Income Tax competition; Migration; Labor Mobility; NashEquilibrium Tax Schedules |
| Date: | 2013–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00870053&r=pbe |
| By: | Ruixin Wang (CentER, Tilburg University); Wendun Wang (Erasmus University Rotterdam) |
| Abstract: | A `dress-up contest' is a competition for the best public image, and fiscal decentralisation can lead to such contests between local governments. In this paper we model the dress-up contest and investigate how it a effects social welfare. We show that yardstick competition (due to fiscal decentralisation) forces local governments to allocate more resources to more visible public goods (such as cash assistance) than less visible goods (such as vendor payments) and thus starts dress-up contests. The resulting distortion of resource allocation causes a structural bias in public expenditure and further hurts social welfare. To empirically verify our theoretical model, we employ U.S. state-level data from 1992 to 2008, and we estimate the panel data model using various econometric approaches. The empirical results provide strong evidence that fiscal decentralisation can lead to distortion in public expenditure arising from dress-up contests. We also find that this distortion increases the regional poverty rate. |
| Keywords: | Fiscal decentralization, yardstick competition, dress-up contest, functional coefficient model |
| JEL: | D72 H75 H77 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2013/6/doc2013-30&r=pbe |
| By: | Fabrizio Colonna (Banca d'Italia - Banca d'Italia); Stefania Marcassa (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise) |
| Abstract: | Italy has the lowest labor force participation of women among European countries. Moreover, the participation rate of married women is positively correlated to their husbands' income. We show that a high tax schedule together with tax credits and transfers raise the burden of two-earner households, generating disincentives to work. We estimate a structural labor supply model for women, and use the estimated parameters to simulate the effects of alternative revenue-neutral tax systems. We find that joint taxation implies a drop in the participation rate. Conversely, working tax credit and gender-based taxation boost it, with the effects of the former concentrated on low educated women. |
| Keywords: | female labor force participation, Italian tax system, second earner tax rate, joint taxation, gender-based taxation, working tax credit |
| Date: | 2013–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00869315&r=pbe |
| By: | Sebastian Gechert |
| Abstract: | We apply meta regression analysis to a unique data set of 104 studies on multiplier effects with 1069 reported multipliers in order to derive stylized facts and to quantify the differing effectiveness of the composition of fiscal impulses, adjusted for the interference of study-design characteristics and sample specifics. As a major result, we find that public spending multipliers are close to one and about 0.3 to 0.4 units larger than tax and transfer multipliers. Public investment multipliers are even larger by approximately 0.5 units. Reported multipliers vary with study-design, thus, policy consulting based on a certain multiplier study should lay open by how much specification affects the results. Our meta analysis provides guidance concerning influential factors, their sign and magnitude. |
| Keywords: | multiplier effects, fiscal policy, meta analysis |
| JEL: | E27 E62 H30 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:imk:wpaper:117-2013&r=pbe |
| By: | Bastani, Spencer (Uppsala Center for Fiscal Studies) |
| Abstract: | In this paper I perform numerical simulations of the discrete model of optimal income taxation employing a large number of taxpayer types. Moreover, I indicate how the results depend on the number of types used to represent the wage distribution. Finally, I compare simulations of the continuous and discrete optimal tax models under identical circumstances based on US wage data. |
| Keywords: | optimal income taxation; simulations; computational methods |
| JEL: | C63 H21 H24 |
| Date: | 2013–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2013_011&r=pbe |
| By: | Emmanuel Combet (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - AgroParisTech); Frédéric GHERSI (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - AgroParisTech); Jean-Charles Hourcade (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - AgroParisTech); Daniel Théry (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - AgroParisTech) |
| Abstract: | This research aims at clearing up misunderstandings about the distributive impacts of carbon taxes, which proved to be a decisive obstacle to their further consideration in public debates. It highlights the gap between partial equilibrium analyses, which are close to the agents' perception of the costs of taxation, and general equilibrium analyses, which better capture its ultimate consequences. It shows that the real impact on households' income inequality is not mechanically determined by the initial energy budgets and their flexibilities but also depends upon the way tax revenues are recycled and its general equilibrium consequences. The comparison of five tax-recycling schemes highlights the existence of trade-offs between maximizing total consumption, maximizing the consumption of the low-income classes and reducing income inequality. |
| Date: | 2013–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00866410&r=pbe |
| By: | Irigoin, Maria Alejandra; Grafe, Regina |
| Abstract: | The great merit of North’s and Weingast’s insight into the importance of a ruler’s credible commitment to protecting property rights is that it is both parsimonious and it lends itself beautifully to generalizations. It has e.g. inspired the economic literature on the importance of legal origins” (LaPorta et al., 1998, 2008), which seemed to vindicate the notion that post-Glorious Revolution English institutions were particularly conducive to economic growth. More recently economists have acknowledged that growth in fact depends on state capacity. This encompasses not only investor protection (legal capacity) but also the ability of the state to finance itself, fiscal capacity. (Besley and Persson, 2009, 2010) show that the protection of private property rights and that of public property rights to taxation are linked and most likely co-evolutionary. However, the precise relation between the two is anything but clear. This paper argues that North’s and Weingast’s models one-sided focus on state coercion that threatened subject’ property rights has obscured the relation between coercion used in revenue collection and total revenue role of fiscal capacity. We suggest a very simple model to show that this relationship between state fiscal capacity and legal capacity is not linear, especially in the phase of nation state building. Before 1800 states faced one of two very different central challenges. 1) States that already exhibited high levels of coercion had to try to keep in check the ruler’s potential for predation as North and Weingast argued. 2) States that used very low levels of coercion faced a coordination problem instead of a predation issue. The case of Spain provides empirical evidence for the existence of states where an increase in coercion would have improved fiscal capacity, but high levels of legal capacity paradoxically prevented the ruler from adopting this path. Finally, we use financial market developments to show the serious welfare implications that resulted from such a lack of coordination and integration. |
| JEL: | N0 D72 K0 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:wpaper:44492&r=pbe |
| By: | Marie-Laure Nauleau (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - AgroParisTech) |
| Abstract: | This econometric study assesses the efficiency of the tax credit implemented in France in 2005 on dwelling retrofitting investments. A before-after estimation is performed at the extensive and intensive margins on micro data over 2001-2011, focusing on insulation measures (windows, walls, roofs, floor, ceilings). After 2-years of latency with no significant effect, the tax credit has had an increasing significant positive effect at both margins between 2007 and 2010, with a decrease in 2011, in line with the tax credit rate evolutions. Focusing on opaque surfaces insulation, the positive effect only started in 2009, when a reform included labor cost in the tax credit base for these retrofitting measures. The percentage of subsidized households that would have invested even in the absence of the subsidy decreases from 79% in 2007 to 43% in 2010. The annual additional private investment in retrofitting generated by 1€ of public expenses was estimated at 3.4€ on average (standard deviation : 2.4) between 2007 and 2010. |
| Date: | 2013–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00866445&r=pbe |
| By: | Tuukka Saarimaa (Government Institute for Economic Research VATT); Janne Tukiainen (Government Institute for Economic Research VATT & Helsinki Center of Economic Research (HECER)) |
| Abstract: | We use Finnish local election voting data to analyze whether voters value local representation and act strategically to guarantee it. To identify such preferences and behavior, we exploit municipal mergers as natural experiments, which increase the number of candidates and parties available to voters and intensify political competition. Using difference-in-differences strategy, we find that voters in merged municipalities start to concentrate their votes to local candidates despite the larger choice set, whereas the vote distributions in the municipalities that did not merge remain the same. Moreover, the concentration effect is clearly larger in municipalities that are less likely to gain local representation in the post-merger councils. We also find that the effect increases both as the geographical distance and income heterogeneity between merging municipalities increases. We interpret these results as evidence of both preferences for local representation and strategic voting. |
| Keywords: | Electoral boundary reform, local representation, municipality mergers, strategic voting |
| JEL: | C21 C23 D72 H73 H77 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2013/6/doc2013-32&r=pbe |
| By: | Persson, Lovisa (Uppsala Center for Fiscal Studies) |
| Abstract: | I investigate consumption smoothing (sensitivity) under a balanced budget rule in Swedish municipalities. In general, I find Swedish municipalities to be highly consumption sensitive during the time period 2001-2011 when the BBR was in place. A one percentage increase in predicted current revenues leads to a 0.74-0.76 percentage increase in current consumption. I use scal indicators - the level of own funds and net operating surplus - as proxies for budget balance boundness. Municipalities that perform well in both these scal areas are more smoothing than municipalities that do not perform well in either, implying that budget balance plays a role for consumption smoothing behavior. However, consumption sensitivity has decreased in the aggregate since the implementa- tion of the BBR. A possible story is that municipalities were primarily upward sensitive before the BBR, and primarily downward sensitive after the BBR. This explanation also ts the descriptive picture that the aggregate surplus in the sector has turned to positive from negative since the BBR implementation. |
| Keywords: | Local public finance; Balanced budget rules; Consumption smoothing; Fiscal consolidation; Fiscal institutions |
| JEL: | D60 D78 H74 H77 |
| Date: | 2013–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2013_012&r=pbe |
| By: | Céline BONNEFOND |
| Abstract: | The paper aims at contributing to the debate on conditional convergence across Chinese provinces by using the most recent techniques of dynamics panel data models. The analysis covers twenty nine Chinese provinces from 1995 to 2009 and is based on the estimation of growth equations using system GMM estimator. Three main results can be drawn from the empirical investigations conducted as part of this study. First, investment in physical capital and education have played an important role in promoting economic growth and may be considered as mean of reducing regional disparities. Second, the hypothesis of conditional convergence is verified over the period 1995-2009. Third, the speed of convergence is found to be faster during the period 2004-2009, which indicates that Chinese provinces have converged more quickly over the most recent period. We suggest that this result may be a consequence of the implementation of regional development programs during the 2000s, and that it may also reflect the existence of growth spillover effects. |
| Keywords: | China, regional disparities, growth, conditional convergence, dynamic panel data, system GMM |
| JEL: | C33 P25 R11 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2013-23&r=pbe |
| By: | Schlenker, Eva; Schmid, Kai D. |
| Abstract: | In this paper, we measure the effect of changing capital income shares upon inequality of gross household income. Using EU-SILC data covering 17 EU countries from 2005 to 2011 we find that capital income shares are positively associated with the concentration of gross household income. Moreover, we show that the transmission of a shift in capital income shares into the personal distribution of income depends on the concentration of capital income in an economy. Using fixed effect models we find that changing capital income shares play an important role in the development of household income inequality. Hence, in many industrialized countries income inequality has by no means evolved independently from the observed structural shift in factor income towards a higher capital income share over the last decades. -- |
| Keywords: | Factor Shares,Income Inequality,EU-SILC,Fixed Effects |
| JEL: | D31 D33 E6 E25 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fziddp:802013&r=pbe |
| By: | Zheng, Xinye; Li, Fanghua; Song, Shunfeng; Yu, Yihua |
| Abstract: | This study employs spatial panel techniques to examine determinants of regional allocation of infrastructure investment made by the central government. Using a sample of 31 Chinese provinces over the 2001-2008 period, we derived four major empirical findings. First, there exist substantial spatial interactions of central government's investment across regions. Second, the central investment exhibits a highly persistent effect. Third, the central government attempts to balance equity and efficiency in its decision-making. Last, the political factor plays a significant role in the regional infrastructure investment. |
| Keywords: | Infrastructure investment; efficiency-equity tradeoff; spatial interaction |
| JEL: | C33 H54 R0 |
| Date: | 2013–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:50407&r=pbe |
| By: | Liliana Proskuryakova (Research Laboratory for Science and Technology Studies, National Research University “Higher School of Economics”); Gulnara Abdrakhmanova (Director Center for Statistics and Monitoring of Information Society, National Research University “Higher School of Economics”); Hans Pitlik (WIFO - Austrian Institute of Economic Research) |
| Abstract: | The paper aims at assessing indicators and individual elements of e-government of selected countries in 2009-2010, and the interrelation of e-government with corruption in the public sector. The authors explore possible causal and dependency relations of the established interlink between e-government and public sector corruption. Although it is universally acknowledged that corruption is an evil, there is much debate over which determinants of corruption are important. Using econometric analysis for sizeable country samples the authors verified the closeness of interrelation between e-government indicators and ICT Development Index indicators, such as online services quality and ICT usage, on one hand, and the level of perceived public sector corruption, on the other hand. The major research papers were analyzed, along with international rankings and databases of international organizations. Based on the analysis recommendations for overcoming international e-government measurement constraints are put forward, as well as suggestions for future studies of the topic |
| Keywords: | Public sector, innovation, e-government, ICT, corruption |
| JEL: | D73 H70 P17 O33 Z18 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:wpbrp04sti2013&r=pbe |
| By: | Bignon, V.; Esteves, R.; Herranz-Loncán, A. |
| Abstract: | Railways were one of the main engines of the Latin American trade boom before 1914. Railway construction often required financial support from local governments, which depended on their fiscal capacity. But since the main government revenues were trade-related, this generated a two-way feedback between government revenues and railways with a potential for multiple equilibria. The empirical tests in this paper support the hypothesis of a positive two-way relationship. The main implication of our analysis is that the build-up of state capacity was a necessary condition for railway expansion and, given the importance of the export sector in these economies, for economic growth and divergence in the region. |
| Keywords: | Railways; Latin America; Export growth; Government revenues. |
| JEL: | H54 N46 N76 O38 O54 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:447&r=pbe |
| By: | Mario Amendola (Università degli studi di Roma La Sapienza); Jean Luc Gaffard (Ofce); Fabricio Patriarca (Università degli studi di Roma La Sapienza) |
| Keywords: | Assets,debt,inequality,taxation |
| JEL: | D3 E2 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:1321&r=pbe |
| By: | Julian Diaz Saavedra (Department of Economic Theory and Economic History, University of Granada.) |
| Abstract: | We use a computable overlapping generations model economy, which matches the stylized facts con- cerning retirement behavior, to analyze the consequences of three reforms designed to reduce tax rates on the labor supply of older workers. We nd that these reforms increase the participation rates of the elderly and show that the gains, in terms of old age work hours, are non-trivial. However, we also nd that the total labor supply response to the reforms is not so much an increase in total lifetime hours as it is a reallocation of hours over the life cycle. Finally, we show that these reforms, designed to increase the length of the working life of individuals, may not increase output. |
| Keywords: | Computable general equilibrium, labor supply, retirement, age-dependent taxation. |
| JEL: | C68 J22 J26 H31 |
| Date: | 2013–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:13/09&r=pbe |
| By: | Irineu de Carvalho Filho; Stephan Litschig |
| Abstract: | This paper provides regression discontinuity evidence on long-run and intergenerational education impacts of a temporary increase in federal transfers to local governments in Brazil. Revenues and expenditures of the communities benefiting from extra transfers temporarily increased by about 20% during the 4 year period from 1982 to the end of 1985. Schooling and literacy gains for directly exposed cohorts established in previous work that used the 1991 census are attenuated but persist in the 2000 and 2010 censuses. Children and adolescents of the next generation---born after the extra funding had disappeared---show gains of about 0.08 standard deviation across the entire score distribution of two nationwide exams at the end of the 2000s. While we find no evidence of persistent improvements in school resources, we document discontinuities in education levels, literacy rates and incomes of test takers' parents that are consistent with intergenerational human capital spillovers. |
| Keywords: | intergovernmental grants, human capital, test scores, regression discontinuity |
| JEL: | H40 H72 I21 O15 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:718&r=pbe |
| By: | Gilles Grolleau (Unité MIAJ - INRA - Mathématiques et Informatique Appliquées - Institut national de la recherche agronomique (INRA)); Angela Sutan (ESC Dijon Bourgogne - ESC Dijon Bourgogne); Radu Vranceanu (Economics Department - ESSEC Business School) |
| Abstract: | We investigate the dynamics of cooperation in public good games when contributions to the public good are immediately redistributed across contributors (intra-temporal transfers) and when contributions to the public good by the current group are transferred over time to a future group (inter-temporal transfers). We show that people are more cooperative in inter-temporal contexts than in intra-temporal contexts. We also find that subjects invest more on average in public goods when they know in advance their inheritance from the past. |
| Keywords: | Public goods ; Voluntary contribution mechanism ; Inter-temporal vs intra-temporal transfers ; Sustainable development |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00866970&r=pbe |