New Economics Papers
on Public Finance
Issue of 2010‒10‒30
four papers chosen by



  1. How Big (Small?) are Fiscal Multipliers? By Ethan Ilzetzki; Enrique G. Mendoza; Carlos A. Végh
  2. Relative Income, Redistribution and Well-being By FitzRoy, Felix; Nolan, Michael A.
  3. The Effect of Social Security, Demography and Technology on Retirement By Ferreira, Pedro Cavalcanti; Santos, Marcelo Rodrigues dos
  4. Do people invest in local public goods with long-term benefits: Experimental evidence from a shanty town in Peru By De Hoop, Thomas; Van Kempen, Luuk; Fort, Ricardo

  1. By: Ethan Ilzetzki; Enrique G. Mendoza; Carlos A. Végh
    Abstract: We contribute to the intense debate on the real effects of fiscal stimuli by showing that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a novel quarterly dataset of government expenditure in 44 countries, we find that (i) the output effect of an increase in government consumption is larger in industrial than in developing countries, (ii) the fiscal multiplier is relatively large in economies operating under predetermined exchange rate but zero in economies operating under flexible exchange rates; (iii) fiscal multipliers in open economies are lower than in closed economies and (iv) fiscal multipliers in high-debt countries are also zero.
    JEL: E2 E6 F41 H5
    Date: 2010–10
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:16479&r=pub
  2. By: FitzRoy, Felix (University of St. Andrews); Nolan, Michael A. (University of Hull)
    Abstract: In a model with heterogeneous workers and both intensive and extensive margins of employment, we consider two systems of redistribution: a universal basic income, and a categorical unemployment benefit. Well-being depends on own-consumption relative to average employed workers’ consumption, and concern for relativity is a parameter that affects model outcomes. While labour supply incurs positive marginal disutility, we allow negative welfare effects of unemployment. We also compare Rawlsian and utilitarian welfare in general equilibrium under the polar opposite transfer systems, with varying concern for relativity. Basic income Pareto dominates categorical benefits with moderate concern for relativity in both cases.
    Keywords: relative income, redistribution, basic income, unemployment benefits, happiness, well-being
    JEL: H20 D40
    Date: 2010–10
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp5241&r=pub
  3. By: Ferreira, Pedro Cavalcanti; Santos, Marcelo Rodrigues dos
    Abstract: This article investigates the causes in the reduction of labor force participation ofthe old. We argue that the changes in social security policy, in technology and indemography may account for most of the changes in retirement over the second partof the last century in the U.S. economy. We develop a dynamic general equilibriummodel with endogenous retirement that embeds social security legislation. The modelis able to match very closely the increase in the retirement rate of males aged 65 andolder. It also quanti es the isolated impact on retirement and on the solvency of thesocial security system of the di¤erent factors. The model suggests that technologicaland demographic changes had a strong in uence on retirement, so that it would haveincreased signi cantly even if the social security rules had not changed. However, asthe latter became much more generous in the past, changes in social security policycan account not only for a sizeable part of the expansion of retirement, but also for themost of the observed increase in the social security expenses as a share of GDP.
    Date: 2010–10–21
    URL: http://d.repec.org/n?u=RePEc:fgv:epgewp:710&r=pub
  4. By: De Hoop, Thomas; Van Kempen, Luuk; Fort, Ricardo
    Abstract: This paper discusses voluntary contributions to health education in a shanty town in Peru, using a new experimental setup to identify voluntary contributions to local public goods. The experiment enables individuals to contribute to a health education meeting facilitated by an NGO, which they know will only be organised if the cumulative investment level exceeds a certain threshold value. In contrast to expectations of aid distributors, individuals contributed a substantial amount of money, despite the long-term nature of the health benefits from health education. High discount rates only seem to have had a detrimental effect on investment in a poorer subsample. Results from a complementary experiment, which identifies donations to a nutrition program, suggest that positive beliefs about short-term benefits from health education in the form of learning effects have played an important role in the investment decision. The results indicate that channelling decision-making power about public good provision to beneficiaries not necessarily implies a crowding out of investment in local public goods with long-term benefits. Hence, particular attention is given to the potential role of cash transfers in the financing of local public goods.
    Keywords: Health education; Field Experiment; Public Good; Peru
    JEL: H41 C93 I1
    Date: 2010–07
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:24968&r=pub

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