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on Public Finance |
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Issue of 2009‒03‒07
five papers chosen by |
| By: | Hills, Roderick |
| Abstract: | This paper is a draft chapter for an edited collection on Law and Public Choice being published by Edward Elgar and edited by Dan Farber and Anne Joseph O’Connell. The chapter provides an overview of public choice literature regarding three aspects of federalism - exit-based normative justifications for federal regimes, voice-based normative justifications for federal regimes, and positive theories for how federal regimes are sustained through the political process. In general, I suggest that the most promising trend in public choice theory is the effort of economists, political scientists, and lawyers to tackle the thorny question of “voice” in federal regimes - that is, how subnational politics differs in federal regimes from the politics of unitary states. Moreover, the case for federalism based on exit critically depends on the argument for federalism based on improvement of ”voice.” Otherwise, migration from one city or state to another to escape predatory regimes would simply be pointless movement out of a ”Leviathan” frying pan into a ”Leviathan” fire. Public choice theorists seem to have an inveterate suspicion of claims that subnational government facilitates political participation, perhaps because the entire tradition of public choice is based on the theoretical impossibility that collective action can accurately represent individuals’ preferences and values. Yet nothing in the conventional account of how decentralization improves political ”voice” is inconsistent with the abstract principles of public choice theory. |
| Keywords: | Public Choice; federalism; political process; predatory regimes; Leviathan; collective action; |
| JEL: | H77 H7 A12 A10 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:13625&r=pub |
| By: | M. Raimondi |
| Abstract: | In order to examine the role of non-economically measurable factors into the models of voluntary provision of public goods, Experimental Economics showed two systematic findings: (a) in early rounds of game, individual contributions are surprisingly high and increasing, but they tend to decrease progressively for all the agents and to reach a level of cooperation close to zero and (b) complete free riding is never observed. In explaining these evidences, experimental economists have pointed out the importance of factors such as kindness, confusion and strategic cooperation and most laboratory experiments have used clever designs to control for particular factors in order to isolate the effects of others. However, attempts to disentangle and measure the relevant variables of voluntary cooperation are partially and mainly realised comparing pairs of variables, which leaves one of the three hypotheses unexplained. In particular, there are at least two aspects left to be explained: (1) which has more influence in determining the level of contributions: kindness or confusion? (2) What is the role of strategic cooperation? Earlier experiments appear not able to include kindness, confusion and strategic cooperation in the same model and it seems to be very important to separate strategic cooperation from other altruistic motivations. In this work I aim at providing evidence on the way that kindness, confusion and strategic cooperation all affect contributions and to discuss new findings in the measurement and in the disentanglement of these variables made by using a new experimental design with the Voluntary Contribution Mechanism (VCM). I will adopt the same approach as Andreoni (1995), subtracting one component in each treatment and leaving other components as reasonable (and measurable) explanations for cooperation. |
| Keywords: | Experimental Economics; Social Dilemmas; Collective Action; Public Goods |
| JEL: | C92 D64 D80 H41 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:par:dipeco:2009-ep04&r=pub |
| By: | Samuel Calonge; Oriol Tejada (Universitat de Barcelona) |
| Abstract: | We extend the linear reforms introduced by Pf ahler (1984) to the case of dual taxes. We study the relative effect that linear dual tax cuts have on the inequality of income distribution -a symmetrical study can be made for dual linear tax hikes-. We also introduce measures of the degree of progressivity for dual taxes and show that they can be connected to the Lorenz dominance criterion. Additionally, we study the tax liability elasticity of each of the reforms proposed. Finally, by means of a microsimulation model and a considerably large data set of taxpayers drawn from 2004 Spanish Income Tax Return population, 1) we compare different yield-equivalent tax cuts applied to the Spanish dual income tax and 2) we investigate how much income redistribution the dual tax reform (Act 35/2006) introduced with respect to the previous tax. |
| Keywords: | lattices, dual taxes, lorenz domination, linear reforms |
| JEL: | E60 E62 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:bar:bedcje:2009218&r=pub |
| By: | Péter Bakos; Péter Benczúr; Dora Benedek |
| Abstract: | Many Central and Eastern European countries are adopting flat tax schemes in order to boost their economies and tax revenues. Though there are signs that some countries do manage to improve on both fronts, it is in general hard to distinguish the behavioral response to tax changes from the effect of increased tax enforcement. This paper addresses this gap by estimating the elasticity of taxable income in Hungary, one of the outliers in terms of not having a flat tax scheme. We analyze taxpayer behavior using a medium-scale tax reform episode in 2005, which changed marginal and average tax rates but kept enforcement constant. We employ a Tax and Financial Control Office (APEH) panel dataset between 2004 and 2005 with roughly 215,000 taxpayers. Our results suggest a relatively small but highly significant tax price elasticity of about 0.06 for the population earning above the minimum wage (around 70% of all taxpayers). This number increases to around 0.3 when we focus on the upper 20% of the income distribution, with some income groups exhibiting even higher elasticities (0.45). We first demonstrate that such an elasticity substantially modifies the response of government revenues to the 2004-2005 tax changes, and then quantify the impact of a hypothetical flat income tax scheme. Our calculations indicate that though there is room for a parallel improvement of budget revenues and after-tax income, those gains are modest (2% and 1.4%, respectively). Moreover, such a reform involves important adverse changes in income inequality, and its burden falls mostly on lower-middle income taxpayers. |
| Keywords: | elasticity of taxable income, tax reform, behavioral response, revenue estimation, flat tax |
| JEL: | H24 H31 |
| Date: | 2008–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2008/32&r=pub |
| By: | Alexander Haupt (University of Plymouth and CESifo); Tim Krieger (University of Paderborn) |
| Abstract: | In this paper, we analyse the role of mobility in tax and subsidy competition. Our primary result is that increasing ‘relocation’ mobility of firms leads to increasing ‘net’ tax revenues under fairly weak conditions. While enhanced relocation mobility intensifies tax competition, it weakens subsidy competition. The resulting fall in the governments’ subsidy payments overcompensates the decline in tax revenues, leading to a rise in net tax revenues. We derive this conclusion in a model in which two governments are first engaged in subsidy competition and thereafter in tax competition, and firms locate and potentially relocate in response to the two political choices. |
| Keywords: | Tax competition, subsidy competition, capital and firm mobility,foreign direct investment |
| JEL: | H71 H87 F21 H25 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:wpaper:21&r=pub |