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on Public Finance |
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Issue of 2008‒11‒18
four papers chosen by |
| By: | Khemani, Stuti; Wane, Waly |
| Abstract: | Political economy explanations for fiscal profligacy are dominated by models of bargaining among organized interest groups over group-specific targeted benefits financed by generalized taxation. These models predict that governments consisting of a coalition of political parties spend more than single-party regimes. This paper presents an alternative model-that of populist pressure on political parties to spend more on the general public good, financed by costly income taxation-and obtains the opposite prediction. According to this model, public spending and taxes are lower under coalition governments that can win elections more cheaply. Indeed, in order to win elections, coalition partners need to satisfy a smaller share of swing voters than does a single-party government that enjoys narrower support from its core constituency. A coalition government therefore spends less on the public good to capture the share of the swing vote necessary for re-election. Using data from more than 70 countries during the period 1970-2006, the paper provides robust supporting evidence for this alternative model. |
| Keywords: | Parliamentary Government,Public Sector Economics&Finance,Debt Markets,Economic Theory&Research,E-Government |
| Date: | 2008–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4762&r=pub |
| By: | Jens Arnold; Cyrille Schwellnus |
| Abstract: | This paper uses a stratified sample of firms across OECD economies over the period 1996-2004 to analyse the effects of corporate taxes on productivity and investment. Applying a differences-in-differences estimation strategy which exploits differential effects of corporate taxes on firms with different profitability, it is found that corporate taxes have a negative effect on productivity at the firm level. The effect is negative across firms of different size and age classes except for the small and young, which may be attributable to the relatively low profitability of small and young firms. The negative effect of corporate taxes is particularly pronounced for firms that are catching up with the technological frontier. In the investment analysis, the results suggest that corporate taxes reduce investment through an increase in the user cost of capital. This may partly explain the negative productivity effects of corporate taxes if new capital goods embody technological change. |
| Keywords: | Productivity; growth; corporate income tax; firm level data; fiscal policy |
| JEL: | D21 D24 E22 E62 H25 H32 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2008-19&r=pub |
| By: | van der Hoek, M. Peter; Kong, Shuhong; Li, Zhenzi |
| Abstract: | For many years, foreign funded companies in China enjoyed a relatively low tax rate and a series of preferential policies which were aimed at encouraging foreign direct investment in China. By adopting a new law in 2007, however, the National People's Congress proclaimed the end of the dual corporate-income-tax system. From 2008, the preferential tax treatment of foreign capital will be phased out. As a result, the income tax rate for domestic and foreign funded companies will be unified at the rate of 25%. This paper explores the impact of the dual corporate income tax system on both domestic and foreign funded enterprises and discusses the possible effects of the unification. |
| Keywords: | dual corporate income tax; China; unification; foreign funded enterprises |
| JEL: | H25 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11547&r=pub |
| By: | Vollrath, Dietrich |
| Abstract: | This paper examines the role of inequality in the provision of public goods. County level data from the U.S. in 1890 provides comparable units of analysis operating with similar property tax systems, ensuring that we do not empirically confuse differences in tax systems with differences in public goods provision. Climatic data is used as an instrument for land inequality to provide identification of the effect of inequality. The results indicate that land inequality caused significantly lower overall property tax rates. This effect is driven almost exclusively by the effect of land inequality on taxes related directly to schooling. In contrast, non-school funding was not significantly affected by inequality. While informative about the effect of land inequality on public goods provision, an examination of the details of the tax system suggests that these results should not necessarily be taken as a rejection of median voter predictions. |
| Keywords: | Land distribution; Inequality; Public Goods; Property Taxes |
| JEL: | N51 O13 Q15 |
| Date: | 2008–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11534&r=pub |