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on Public Economics |
| By: | Casaburi, Lorenzo; Troiano, Ugo |
| Abstract: | The incentives of political agents to enforce tax collection are key determinants of the levels of compliance. We study the electoral response to the Ghost Buildings program, a nationwide anti-tax evasion policy in Italy that used innovative monitoring technologies to target buildings hidden from tax authorities. Two million buildings were registered as a result of the program. Our difference-in-differences identification strategy exploits both variation across towns in the ex-ante program scope to increase enforcement as well as administrative data on actual building registrations. Local incumbents experience an increase in their reelection likelihood as a consequence of the policy. In addition, these political returns are higher in areas with lower tax evasion tolerance and with higher speed of public good provision, implying complementarity among enforcement policies, the underlying tax culture, and government efficiency. |
| Keywords: | tax evasion, public economics, political economics |
| JEL: | D72 E62 H26 |
| Date: | 2013–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52242&r=pbe |
| By: | Obst, Thomas |
| Abstract: | This paper explores the nexus between the phenomenon of increasing income inequality and redistributive effects of the public sector. In an empirical analysis of seven OECD countries the redistributive effect will be examined by measuring the difference between inequality of market incomes and disposable incomes. Moreover, this paper will try to estimate the redistributive effect of public goods. The period of investigation is between the mid 1980s and the mid 2000s. The paper suggests that the public sector still reduces market income inequality significantly but to a lower extent than in the previous decades and with greater variation across different welfare regimes. Public goods further reduce income inequality considerably. However, the estimation and allocation process of these in-kind benefits involves several methodological issues that need to be taken into account when evaluating the empirical results. Furthermore, the empirical analysis indicates that market forces drove greater income inequality until the mid 1990s, and structural changes in tax and transfer systems reinforced this trend from the mid 1990s onwards. -- |
| Keywords: | income inequality,welfare state,public sector,redistribution,tax and transfer systems,public goods,market and disposable income |
| JEL: | H23 H41 H53 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ipewps:292013&r=pbe |
| By: | Emanuele Baldacci; Sanjeev Gupta; Carlos Mulas-Granados |
| Abstract: | This paper assesses the effects of fiscal consolidations associated with public debt reduction on medium-term output growth during periods of private debt deleveraging. The analysis covers 107 countries and 79 episodes of public debt reduction driven by discretionary fiscal adjustments during 1980–2012. It shows that expenditure-based, front-loaded fiscal adjustments can dampen growth when there are credit supply restrictions. Instead, fiscal adjustments that are gradual and rely on a mix of revenue and expenditure measures can support output expansion, while reducing public debt. In this context, protecting public investment is critical for medium-term growth, as is the implementation of supply-side, productivity-enhancing reforms. |
| Keywords: | Public debt;Fiscal consolidation;Debt reduction;Fiscal policy;Credit restraint;Economic growth;Cross country analysis;Debt consolidation, fiscal adjustments, output growth |
| Date: | 2013–11–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/238&r=pbe |
| By: | Hollmayr, Josef; Matthes, Christian |
| Abstract: | The recent crisis in the United States has often been associated with substantial amounts of policy uncertainty. In this paper we ask how uncertainty about fiscal policy affects the impact of fiscal policy changes on the economy when the government tries to counteract a deep recession. The agents in our model act as econometricians by estimating the policy rules for the different fiscal policy instruments, which include distortionary tax rates. Comparing the outcomes in our model to those under full-information rational expectations, we find that assuming that agents are not instantaneously aware of the new fiscal policy regime (or policy rule) in place leads to substantially more volatility in the short run and persistent differences in average outcomes. -- |
| Keywords: | DSGE,Fiscal Policy,Learning |
| JEL: | E32 D83 E62 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:512013&r=pbe |
| By: | Alberto Locarno (Banca d’Italia); Alessandro Notarpietro; Massimiliano Pisani (Bank of Italy) |
| Abstract: | This paper briefly reviews the literature on fiscal multipliers and then presents results for the Italian economy obtained by simulating a dynamic general equilibrium model that allows for the possibility (a) that the zero lower bound may be binding and (b) that the initial public debt-to-GDP ratio may affect the financing conditions of the public and private sectors (sovereign risk channel). The results are the following. First, the public consumption multiplier is in general less than 1. Second, it goes above 1 only under extremely strong assumptions, namely the constancy of the monetary policy rate for an exceptionally long period (at least five years) and there is full time-coincidence between the fiscal and the monetary stimuli. Third, when the sovereign risk channel is active the government spending multiplier is much lower. Finally, in all cases tax multipliers are lower than government consumption multipliers. |
| Keywords: | Fiscal multiplier, monetary policy, zero lower bound, sovereign risk. |
| JEL: | E32 E52 E62 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_943_13&r=pbe |
| By: | Kammas, Pantelis; Litina, Anastasia; Palivos, Theodore |
| Abstract: | This paper examines the effect of income inequality on the quality of public education in the presence of weak institutions and tax evasion. Our theoretical model predicts that higher level income inequality within a country leads to lower quality of public education and that this effect is diminishing on the quality of institutions. The effect of inequality operates via two channels, namely via an impact on the resources allocated to public education and via an impact on the number of individuals participating in the public schooling scheme. Exploiting variations in the levels of inequality and governance across countries, the empirical analysis confirms the theoretical predictions. |
| Keywords: | Quality of Public Education, Income Inequality, Tax Evasion. |
| JEL: | D63 H26 I2 |
| Date: | 2013–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52193&r=pbe |
| By: | Dolls, Mathias; Fuest, Clemens; Neumann, Dirk; Peichl, Andreas |
| Abstract: | The 2008-09 crisis has shown that some euro area member countries were unable to sufficiently stabilize their economies which has given rise to a debate about deeper fiscal integration in Europe. In this paper, we analyze the redistributive and stabilizing effects of two scenarios of fiscal integration in the Eurozone, namely the introduction of i) a joint tax and transfer system that replaces 10 per cent of national systems and ii) a system of fiscal equalization that equalizes 10 per cent of differences in taxing capacity. Based on the European tax-benefit calculator EUROMOD and representative household micro data for the current 17 euro area member states, our conceptual experiment shows that a joint tax and transfer system would only lead to moderate gains in terms of stabilization while redistribution would flow especially towards the Eastern European member states. In contrast, a fiscal equalization mechanism that redistributes revenues across countries could even lead to destabilizing effects. -- |
| Keywords: | European fiscal integration,redistribution,automatic stabilization |
| JEL: | F55 H23 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:13106&r=pbe |
| By: | Will Clark; Manuel Rosales |
| Abstract: | Liberia is facing large infrastructure gaps and developmental needs that constrain the country’s growth potential. The government has set an ambitious agenda to transform the economy and to reach middle-income country status by 2030 by scaling up investment in infrastructure and human capital. Fiscal space remains constrained by rigidities in current spending and the government will need to resort to borrowing to close some of the gaps. This paper presents an estimate of the nexus between public investment, financing, and growth in Liberia using an inter-temporal macroeconomic model. The model has been calibrated as much as possible to Liberian economic data and assumes that public investment has a high economic and social rate of return and is highly complementary toward private sector investment. The objective of the paper is to contribute to the debate on how fast public investment should be scaled up to address the country’s developmental needs. The paper also highlights the trade-offs and potential risks associated with different financing options and the required changes in fiscal policy to ensure macroeconomic stability. |
| Keywords: | Public investment;Liberia;Infrastructure;Economic growth;Debt sustainability;Fiscal policy;Economic models;Public Investment, Growth, Debt Sustainability, Fiscal Policy, Infrastructure, Aid. |
| Date: | 2013–11–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/237&r=pbe |
| By: | Philippe Cyrenne; Manish Pandey |
| Abstract: | This paper analyzes the effect of a fiscal equalization system on the composition of government expenditures of subnational governments. We incorporate vertical equalization transfers with optimal choice of the composition of government expenditures in an endogenous growth model and show that such transfers reduce the incentives of recipient subnational governments to undertake productive expenditures. Using data for Canadian provinces, we find evidence that, after controlling for a number of determinants of government expenditures, the ratio of productive expenditures to total government expenditures was lower in equalization-receiving than non-receiving provinces. |
| JEL: | H7 E62 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:win:winwop:2013-03&r=pbe |
| By: | Álvarez, Inmaculada (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Barbero, Javier (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.) |
| Abstract: | We propose a framework to analyze convergence between regions, incorporating the public sector and technological knowledge spillovers in the context of a Neoclassical Growth Model. Secondly, we apply novel estimation methods pertaining to the spatial econometrics literature introducing a spatial autoregressive panel data model based on instrumental variables estimation. Additionally, we introduce marginal effects associated with changing explanatory variables. Our model makes it possible to analyze, in terms of convergence, the results obtained in Spanish regions with the policies implemented during the period 1980-2007. The results support the idea that investments in physical, private and public capital, as well as in education have a positive effect on regional development and cohesion. Therefore, we can conclude that it is possible to obtain better results for regional convergence with higher rates of public investment. We also obtain interesting results that confirm the existence of spillover effects in economic growth and public policies, identifying their magnitude and significance. |
| Keywords: | speed of convergence; growth models; public policies. |
| JEL: | E13 H54 O41 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:uam:wpaper:201307&r=pbe |
| By: | Behaghel, Luc; Lorenceau, Adrien; Quantin, Simon |
| Abstract: | This paper uses regression discontinuity design to provide quasi-experimental estimates of the impact of a tax credit program targeted at rural areas in France, including corporate and payroll tax exemptions. We find no impact of the program on total employment or the number of businesses, and no impact of the different program components on targeted subsets of firms. Comparison with a contemporaneous urban scheme suggests ways the incentives of the rural program could be targeted more effectively. |
| Keywords: | tax exemptions; rural development; enterprise zones |
| JEL: | J23 J32 H32 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:docweb:1308&r=pbe |
| By: | Singh, Nirvikar; Kendall, Jake; Jain, R.K.; Chander, Jai |
| Abstract: | This paper examines changes in regional inequality in India in the 1990s, using data for 59 of India’s 78 agro-climatic regions from the National Sample Survey. It extends the work of Singh et al. (2003) in two ways. First, it allows for differences in baseline growth performance across individual states. It confirms the relatively poor performance of eastern states in the 1990s. Second, it also analyzes economic performance using NSS consumption expenditure data. In this case, it finds that there was conditional convergence for urban households, but not for rural households in that period. |
| Keywords: | Social and Behavioral Sciences, regional inequality, growth convergence, economic reform, inclusive growth |
| Date: | 2013–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:qt8pd8n5qn&r=pbe |
| By: | Hottenrott, Hanna; Lopes-Bento, Cindy |
| Abstract: | This study analyses the impact and effectiveness of targeted public support for R&D investment at the firm level. We test whether the policy design aiming at incentivizing (international) collaboration and R&D in SMEs achieves input as well as output additionality. Our results show that the targeted public subsidies trigger R&D spending, especially so in internationally collaborating SMEs. We further evaluate the different impact of privately financed and publicly-induced R&D investment on innovation performance. The results confirm that the publicly-induced R&D is productive as it translates into marketable product innovations. While both types of R&D investments trigger significant output effects, the effect of policyinduced R&D investment on sales from market novelties is highest for international collaborators as well as for SMEs. -- |
| Keywords: | Public Innovation Policy,Subsidies,R&D,SMEs,International Collaboration,Treatment Effects |
| JEL: | C14 C30 H23 O31 O38 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:121&r=pbe |