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on Public Finance |
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Issue of 2009‒08‒30
four papers chosen by |
| By: | Eduardo Engel (Cowles Foundation, Yale University); Ronald Fischer (U. de Chile); Alexander Galetovic (U. de los Andes) |
| Abstract: | Public-private partnerships (PPPs) are increasingly used to provide infrastructure services. Even though PPPs have the potential to increase efficiency and improve resource allocation, contract renegotiations have been pervasive. We show that existing accounting standards allow governments to renegotiate PPP contracts and elude spending limits. Our model of renegotiations leads to observable predictions: (i) in a competitive market, firms lowball their offers, expecting to break even through renegotiation, (ii) renegotiations compensate lowballing and pay for additional expenditure, (iii) governments use renegotiation to increase spending and shift the burden of payments to future administrations, and (iv) there are significant renegotiations in the early stages of the contract, e.g. during construction. We use data on Chilean renegotiations of PPP contracts to examine these predictions and find that the evidence is consistent with the predictions of our model. Finally, we show that if PPP investments are counted as current government spending, the incentives to renegotiate contracts to increase spending disappear. |
| Keywords: | Build-operate-and-transfer, Concessions, Lowballing |
| JEL: | H21 L51 L91 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1723&r=pub |
| By: | Matthias Wrede (University of Marburg and CESifo, Am Plan 2, 35032 Marburg, Germany) |
| Abstract: | This paper analyzes tax competition when welfare maximizing jurisdictions levy source-based corporate taxes and multinational enterprises choose tax-efficient capital-to-debt ratios. Under separate accounting, multinationals shift debt from low-tax to high-tax countries. The Nash equilibrium of the tax competition game is characterized by underprovision of publicly provided goods. Under formula apportionment, the country-specific capital-to-debt ratio of a multinational's affiliate is independent of the jurisdiction's tax rate. Public good provision is either too large or too small. If the formula is predominately based on capital shares and if there is a positive debt externality there is clearly underprovision under formula apportionment. |
| Keywords: | Multinational enterprises, financial policy, profit shifting, corporate taxation, tax competition. |
| JEL: | H25 H42 H73 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:200934&r=pub |
| By: | John Creedy (Department of Economics, The University of Melbourne); Nicolas Hérault (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne) |
| Abstract: | Extensive research has shown that few robust results regarding the optimal tax structure are available. Moreover, the stylised models used in optimal tax analyses are not appropriate for practical policy advice. This paper proposes a method of examining optimal marginal income tax reforms using behavioural microsimulation models in which the full extent of population heterogeneity is represented along with all the details of highly complex tax and transfer systems. The approach is illustrated using the Australian microsimulation model MITTS. The results show that the marginal welfare changes for the Australian income tax structure are not symmetric with respect to increases and decreases in tax rates, largely because of the asymmetry in tax revenue changes arising from differential labour supply effects in different ranges of the income distribution. In addition, the extent of inequality aversion was found to play a much larger role in the determination of the optimal direction of rate changes than the form of the welfare metric or the specification of adult equivalence scales. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2009n23&r=pub |
| By: | Ericson, Peter (Empirica); Flood, Lennart (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | This paper follows the theory of optimal taxation and the goal is to identify a tax/benefit design that maximizes social welfare. A two stage process is proposed where the individuals preferred choice of leisure and consumption is solved in the first stage, and the second stage identifies the tax/benefit system that maximize the social welfare function. Our study deviates from the mainstream literature as the first stage is based on a static micro simulation model with behavioral responses. The behavioralresponses take two different forms and use two different types of models; first binary models that describe mobility in/out from non-work states such as old age pension, disability, unemployment, long term sickness, and second models that describe change in working hours and welfare participation. Compared to the current Swedish income tax, our results suggests that increased basic deduction and in-work tax credit in combination with a reduction of the progressive national taxes would increase welfare. We also find strong support for increased housing allowances. The reforms are financed by a tax based on the same tax base as the proportional municipal income tax.<p> |
| Keywords: | Micro simulation; tax-benefit system; in-work tax credit reform; optimal taxation |
| JEL: | C80 D31 H24 |
| Date: | 2009–08–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0375&r=pub |