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on Public Economics |
| By: | Sérgio Wulff Gobetti (IPC-IG); Rodrigo Octávio Orair (IPC-IG) |
| Abstract: | This paper presents a critical analysis of income and profit taxes in Brazil, demonstrating how measures adopted in the 1980s and 1990s, as a result of mainstream recommendations, hindered the redistributive role of taxes in the country. Investigation of tax data reveals a high degree of income concentration at the top of the distribution, low progressivity and violations of the principles of horizontal and vertical equity. The main reason for these distortions is the complete tax exemption of dividends for shareholders, a benefit that is very rarely seen in developed countries. We propose a return to a progressivity-focused tax reform plan, a theme that has returned as a focus of debates with Piketty (2014). (?) |
| Keywords: | Taxation, distribution, income in Brazi, evidence, tax data, tax reform, tax progressivity |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:wpaper:136&r=pbe |
| By: | Sérgio Afonso (Independent) |
| Abstract: | This paper argues that austerity is not a good solution for fiscal consolidation and sustainability. Therefore, it is imperative to find a new approach. This paper presents a mechanism to improve both tax compliance and fiscal sustainability. |
| Keywords: | fiscal consolidation, fiscal sustainability, formalization |
| Date: | 2016–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01263164&r=pbe |
| By: | Juergen Jung (Department of Economics, Towson University); Chung Tran (Research School of Economics, The Australian National University) |
| Abstract: | We quantify the welfare implications of three alternative approaches to providing social health insurance: (i) a mix of private and public health insurance (US-style), (ii) compulsory universal public health insurance (UPHI), and (iii) private health insurance for workers combined with government subsidies and price regulation. We use a Bewley-Grossman lifecycle model calibrated to match the lifecycle structure of earnings and health risks in the US. For all three systems we find that welfare gains triggered by a combination of improvements in risk sharing and wealth redistribution dominate welfare losses caused by tax distortions and ex-post moral hazard effects. Overall, the UPHI system outperforms the other two systems in terms of welfare gains if the coinsurance rate is properly designed. A switch from the US system to a well-designed UPHI system results in large welfare gains. However, such a radical reform faces political impediments due to opposing welfare effects across different income groups. . |
| Keywords: | Health capital, lifecycle health risk, incomplete insurance markets, social insurance, optimal policy, dynamic general equilibrium with idiosyncratic shocks. |
| JEL: | I13 D52 E62 H31 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:tow:wpaper:2016-02&r=pbe |
| By: | Fagereng, Andreas; Guiso, Luigi; Malacrino, Davide; Pistaferri, Luigi |
| Abstract: | Lacking a long time series on the assets of the very wealthy, Saez and Zucman (2015) use US tax records to obtain estimates of wealth holdings by capitalizing asset income from tax returns. They document marked upward trends in wealth concentration. We use data on tax returns and actual wealth holdings from tax records for the whole Norwegian population to test the robustness of the methodology. We document that measures of wealth based on the capitalization approach can lead to misleading conclusions about the level and the dynamics of wealth inequality if returns are heterogeneous and even moderately correlated with wealth. |
| Keywords: | Heterogeneity; Returns to Wealth; Wealth Inequality |
| JEL: | E13 E21 E24 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11047&r=pbe |
| By: | Nathalie Morel (Centre d'études européennes de Sciences Po); Chloé Touzet (Sciences Po LIEPP); Michaël Zemmour (Centre lillois d'études et de recherches sociologiques et économiques) |
| Abstract: | Since the 1990s, welfare state reform has been at the core of much of the welfare state research. From an analysis of reform pressures, to an understanding of welfare state resilience, to a focus on reform trajectories, the literature has highlighted the role of politics, of institutions and of ideas in understanding processes and trajectories of reform. This paper aims to contribute to the literature on welfare state reform through a different angle, by analysing reform processes through the development of specific policy instruments, namely tax expenditures for social purposes (hereafter called social tax expenditures, or STEs), which has remained a blind spot in much of the welfare state literature. |
| Keywords: | welfare state; tax expenditures; tax |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/6tnf35nani90ravvbmcpt0tod1&r=pbe |
| By: | Iancu, Aurel (National Institute of Economic Research, Romanian Academy); Olteanu, Dan (National Institute of Economic Research, Romanian Academy) |
| Abstract: | After a brief introduction dealing with critical opinions of some economists on the European austerity policy, the authors point out that austerity as a means of achieving fiscal consolidation and financial stability is applied when the fiscal domain is weak. After analyzing the effects of the 2009 crisis on some indicators and austerity measures taken by almost all EU countries, the study presents the content and the role of the EU fiscal compact and methodology used to support the fiscal consolidation measures. Most of the study consists in the analysis of the outcome of this methodology (through indicators, key-equations, graphs) revealing the relationships between indicators: effective GDP and potential GDP, production variation, effective, cyclical and structural deficits as well as the deficit in the balance of payments. The paper reveals some shortcomings of the new mechanism which affect the development of some major segments of the real economy, such as public investments, and further the economic potential growth on medium and long terms. |
| Keywords: | fiscal policy, budget deficits, structural deficits, austerity, fiscal consolidation, the golden rule of public finance, economic growth |
| JEL: | E62 F02 H2 H5 H6 H7 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:ror:wpince:151209&r=pbe |
| By: | Mauro Bambi; Alain Venditti |
| Abstract: | In this paper we study the dynamics of an economy with productive government spending under the assumption that the government balances its budget by levying endogenous non-linear consumption taxes. For standard specifcation of the utility function and production function, we prove that under counter-cyclical consumption taxes, while there exists a unique balanced growth path, sunspot equilibria based on self-fulfilling expectations occur through a form of global indeterminacy. |
| Keywords: | Endogenous growth, time-varying consumption tax, global indeterminacy, self-fulfilling expectations, sunspot equilibria. |
| JEL: | C62 E32 H20 O41 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:16/01&r=pbe |
| By: | Cremer, Helmuth; Roeder, Kerstin |
| Abstract: | This paper considers an economy where individuals differ in productivity and in risk. Rochet (1991) has shown that when private insurance markets offer full coverage at fair rates, social insurance is desirable if and only if risk and productivity are negatively correlated. This condition is usually shown to be satisfied for many health risks, but it appears to be violated for the old age dependency risk (mainly because longevity in turn is positively correlated with productivity). We examine the role of uniform and nonuniform social insurance to supplement a general income tax when neither public nor private insurers can observe individual risk and when it is positively correlated with wages. Consequently, a Rothschild and Stiglitz (1971) equilibrium emerges in the private insurance market and low-wage/low-risk individuals are not fully insured. We show that even when social insurance provided to the poor has a negative incentive effect, it also increases their otherwise insufficient insurance coverage. Social insurance to the rich produces exactly the opposite effects. Whichever of these effects dominates, some social insurance is always desirable. Finally, we introduce risk misperception which exacerbates the failure of private markets. The insurance term now reflects the combined failure brought about by adverse selection and misperception. Now the low-risk individuals are not only underinsured, but also pay a higher than fair rate. However, and rather surprisingly, it turns out that this does not necessarily strengthen the case for public insurance. |
| Keywords: | adverse selection; long-term care; optimal taxation; overconfidence; social insurance |
| JEL: | D82 H21 H51 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11050&r=pbe |
| By: | Enrique Alberola (BIS); Iván Kataryniuk (Banco de España); Ángel Melguizo (OECD DEVELOPMENT CENTRE); René Orozco (OECD DEVELOPMENT CENTRE) |
| Abstract: | Their strong macroeconomic position when the financial crisis erupted allowed Latin American economies to mitigate its impact through fiscal expansions, reversing the characteristic procyclical behaviour of fiscal policy. At the same time, in the last two decades fiscal rules have been extensively adopted in the region. This paper analyses the stabilising role of discretionary fiscal policy over time, and the role of fiscal financing conditions and fiscal rules in the behaviour of a sample of eight Latin American economies. The analysis shows three main results: i) fiscal policies became countercyclical during the crisis, but they have turned procyclical again in recent years; ii) financing conditions are confirmed to be a key driver of the fiscal stance, although their relevance has recently diminished; and iii) fiscal rules are associated with a more marked stabilising role for fiscal policy. |
| Keywords: | procyclical fiscal policy, fiscal rules, financing conditions, Latin America. |
| JEL: | H3 G12 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1604&r=pbe |
| By: | Bleaney,Michael Francis; Halland,Havard |
| Abstract: | Fiscal indicators for resource-rich and resource-poor low- and middle-income countries are compared using annual data from 1996 to 2012. Resource richness is defined by export composition: fuel greater than a 25 percent share and/or ores and metals greater than a 10 percent share. Fuel exporters have a significantly better general government fiscal balance than the rest of the sample, and higher revenues and expenditures, which are approximately evenly split between extra consumption expenditure and extra capital expenditure. Only about a quarter of their extra revenue goes into extra consumption expenditure, and this proportion has been lower since 2005. Fuel exporters'expenditure reacts with a lag to oil price fluctuations. There are no significant differences between ores and metals exporters and resource-poor countries, or between new and old resource exporters, in aggregate expenditures and revenues. Ores and metals exporters spend more on investment and less on government consumption. Some individual country cases are briefly discussed. |
| Keywords: | Currencies and Exchange Rates,Debt Markets,Economic Theory&Research,Emerging Markets,Markets and Market Access |
| Date: | 2016–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7552&r=pbe |
| By: | João A. S. Andrade (Faculty of Economics and GEMF, University of Coimbra, Portugal); Adelaide P. S. Duarte (Faculty of Economics and GEMF, University of Coimbra, Portugal); Marta C. N. Simões (Faculty of Economics and GEMF, University of Coimbra, Portugal) |
| Abstract: | In recent years the desirability of an extensive Welfare State has been increasingly questioned on the grounds that economies with less social intervention by the Government are more competitive and productive. But even if countries do not increase public expenditure, changing the composition of the Welfare State might foster growth by rescaling their intervention in domains that are productivity enhancing. Education and health are the most striking examples given their role as sources of human capital, a fundamental ingredient in many growth models. It is thus important to empirically assess the impact of public expenditures on education and health on educational attainment and health status indicators, and real income. We do this for three groups of countries: a group of high income OECD economies, the EU before the enlargement and the EU enlargement group. We identitfy long-run relationships across the main variables using the DOLS estimator corrected for cross-sectional dependence and we estimate short-run relationships that include an ECM term from the associated long-run equation by applying Fixed-Effects and Pooled Mean Group estimators for the period 1960-2012. The results of the estimation of the long-run equilibrium relationships point to a positive, direct or indirect, influence of (public) education expenditures and (public, private or total) health expenditures on output for the three groups of countries. Causality relationships exhibit mixed results concerning policy variables, within and between country groups, with the results for the high-income OECD (non EU) group supporting the use of social policy variables to foster economic growth. |
| Keywords: | education, health, public expenditures, economic growth, OECD |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:wpaper:2016-03.&r=pbe |
| By: | Hagedorn, Marcus; Manovskii, Iourii; Mitman, Kurt |
| Abstract: | We measure the aggregate effect of unemployment benefit duration on employment and the labor force. We exploit the variation induced by Congress' failure in December 2013 to reauthorize the unprecedented benefit extensions introduced during the Great Recession. Federal benefit extensions that ranged from 0 to 47 weeks across U.S. states were abruptly cut to zero. To achieve identification we use the fact that this policy change was exogenous to cross-sectional differences across U.S. states and we exploit a policy discontinuity at state borders. Our baseline estimates reveal that a 1% drop in benefit duration leads to a statistically significant increase of employment by 0.019 log points. In levels, 2.1 million individuals secured employment in 2014 due to the benefit cut. More than 1.1 million of these workers would not have participated in the labor market had benefit extensions been reauthorized. |
| Keywords: | aggregate employment; labor force; macroeconomic stabilization; search and matching; unemployment insurance |
| JEL: | E24 E62 E65 J65 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11060&r=pbe |