nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2009‒10‒10
twelve papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data By Burkhauser, Richard V.; Feng, Shuaizhang; Jenkins, Stephen P.; Larrimore, Jeff
  2. Development of the Commercial Banking System in Afghanistan: Risks and Rewards By Jelena Pavlovic; Joshua Charap
  3. A Framework for Monitoring Capital Flows in Hong Kong By Dong He; Frank Leung; Philip Ng
  4. The investment and financing decisions of closely held firms when there is a tax on the equity premium By Erik Fjærli and Arvid Raknerud
  5. The legacy of the Swedish gift and inheritance tax, 1884-2004 By Ohlsson, Henry
  6. A Microsimulation Approach to an Optimal Swedish Income Tax By Ericson, Peter; Flood, Lennart
  7. Modernizing Bank Regulation in Support of Financial Deepening: The Case of Uruguay By Mario Mansilla; Gustavo Adler; Torsten Wezel
  8. Capital Tax Competition When Monetary Competition is Present By Onder, Ali Sina
  9. Firing Tax vs. Severance Payment - An Unequal Comparison By Wesselbaum, Dennis
  10. The Need for Special Resolution Regimes for Financial Institutions—The Case of theEuropean Union By Martin Cihák; Erlend Nier
  11. The Federal Reserve System Balance Sheet-What Happened and Why it Matters By Peter Stella
  12. Do value-added estimates add value ? accounting for learning dynamics By Andrabi, Tahir; Das, Jishnu; Khwaja, Asim Ijaz; Zajonc, Tristan

  1. By: Burkhauser, Richard V. (Cornell University); Feng, Shuaizhang (Princeton University); Jenkins, Stephen P. (University of Essex); Larrimore, Jeff (Cornell University)
    Abstract: Although the majority of research on US income inequality trends is based on public-use March CPS data, a new wave of research using IRS tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates are largely reconciled if the inequality measure and the income distribution are defined in the same way. Using internal CPS data for 1967-2006, we closely match IRS data-based estimates of top income shares reported by Piketty and Saez (2003). Our results imply that any inequality increases since 1993 are concentrated among the top 1 percent of the distribution.
    Keywords: March CPS, top income shares, US income inequality, IRS tax return data
    JEL: D31 C81
    Date: 2009–09
  2. By: Jelena Pavlovic; Joshua Charap
    Abstract: Lending practices of commercial banks in Afghanistan were analyzed using CAMEL ratings. Statistically significant correlations were found: Banks with worse ratings (a) had more lending to domestic clients and (b) paid less tax. There was no statistically significant relationship between profits and total assets or between lending/assets versus profit/assets. Interviews of senior management of 8 banks accounting for about 90 percent of the commercial banking system corroborated evidence that poorly rated banks lend to domestic clients, whereas highly rated banks do not lend. Banks that lend extensively domestically engage in extra-judicial, non-traditional contract enforcement.
    Keywords: Afghanistan, Islamic Republic of , Banking , Banking sector , Commercial banks , Emerging markets , Financial sector , Loans , Profits ,
    Date: 2009–07–16
  3. By: Dong He (Research Department, Hong Kong Monetary Authority); Frank Leung (Research Department, Hong Kong Monetary Authority); Philip Ng (Research Department, Hong Kong Monetary Authority)
    Abstract: In this paper we attempt to delineate conceptual issues relating to the definition of capital flows, and introduce a framework that organises survey data and accounting information at different time horizons to form a judgment on the nature and scale of fund flows in Hong Kong. Given the complexity of international financial transactions in Hong Kong, cross-border capital flows may not correspond closely to fund flows into and out of the Hong Kong dollar. A comprehensive view on the scale and nature of capital flows in Hong Kong requires the joint analysis of both monetary and Balance of Payments statistics, in addition to information gathered through market intelligence. We then apply the monitoring framework to analyse four episodes of large fund flows between 2003 and mid-2009.
    Keywords: Capital flows; Fund flows; Hong Kong; Balance of Payments; External claims and liabilities of banks; Monetary Survey
    JEL: F21 F32
    Date: 2009–09
  4. By: Erik Fjærli and Arvid Raknerud (Statistics Norway)
    Abstract: This paper analyzes a tax system where personal share income in excess of the risk-free return on equity (the equity premium) is taxed. The rate of return allowance (RRA) in the Norwegian shareholder income tax system is, to the best of our knowledge, the first attempt of implementing such taxation in practice, and represents an innovation. This paper analyzes the effects of this form of taxation on the investment and financing decisions of closely held firms. Such firms typically have limited access to capital markets, but a high degree of financial flexibility that allows them to participate in tax planning. We show that even if the RRA reduces distortions compared to traditional dividend taxation, the tax system is not neutral if the shareowners' discount rate exceeds the risk-free interest rate used in the computation of the RRA. We find empirical support to the view that a tax on shareholder income without sufficient allowance for the opportunity cost of capital discourages investment in corporate equity. This finding is particularly relevant for entrepreneurship and investment in closely held firms.
    Keywords: Dividend taxation; shareholder income tax; corporate financial policy
    JEL: G32 G35 H24 H25
    Date: 2009–09
  5. By: Ohlsson, Henry (Uppsala Center for Fiscal Studies)
    Abstract: This paper has two objectives. The first is to study the revenue from the gift, inheritance, and estate taxes in Sweden during more than a century. The second is to focus on a unique episode during the second half of the 1940s when gifts and gift tax revenue exploded. This episode has never before been discussed in the research literature. It gives an extremely clear illustration of behavioural response to taxes in general, and the impact of expectations of future tax increases in particular. It is also a very interesting episode in the economic history of Sweden. I have access to aggregate tax revenue data since 1884. Moreover, I have constructed a rich micro data set of all gifts reported during the period 1942-1949 in one county. A first main result is that gift tax revenue during the 1940s started to increase long before a new estate tax and increased wealth taxation were decided an implemented. The increase even began before the legislative process started. Second, both the number and the average values of gifts increased. Promissory notes were, in value, the most common way to give. Finally, gifts, inheritances, and estates were never important sources of tax revenue. Revenue as a share of GDP reached a peak already in the 1930s. The role of these taxes has instead primarily been equity and to provide integrity for other tax bases.
    Keywords: gift tax; inheritance tax; estate tax; tax avoidance; expectations
    JEL: D10 D31 H24 N33 N34
    Date: 2009–09–22
  6. By: Ericson, Peter (Empirica); Flood, Lennart (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 behavioral responses 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 suggest 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.
    Keywords: micro simulation, tax-benefit system, in-work tax credit reform, optimal taxation
    JEL: C8 D31 H24
    Date: 2009–08
  7. By: Mario Mansilla; Gustavo Adler; Torsten Wezel
    Abstract: This paper studies how Uruguay's regulatory framework was gradually strengthened to address shortcomings identified during the 2002-03 crisis, to align with international standards and, more recently, to deal with cyclical pressures resulting in an acceleration of bank lending. In particular, regulatory reforms pertaining to loan classification and provisioning as well as liquidity requirements are reviewed and evaluated against best practices. The paper concludes that prudential regulation in Uruguay now generally conforms to high standards while also embracing innovative elements such as dynamic provisioning.
    Keywords: Bank reforms , Bank regulations , Bank supervision , Banking sector , Basel Core Principles , Business cycles , Credit expansion , Credit risk , Financial crisis , Financial soundness indicators , Liquidity management , Loans , Risk management , Uruguay ,
    Date: 2009–09–17
  8. By: Onder, Ali Sina (Uppsala Center for Fiscal Studies)
    Abstract: In a model that allows for international trade in goods market as well as in money markets, interactions between the capital tax rate and the inflation rate are investigated. It is shown that interactions of capital tax rate and inflation rate create horizontal and vertical externalities. Optimal levels of the capital tax rate and the inflation rate depend on how these externalities dominate one another. If a currency union is formed, the inflation rate that prevails across the currency union will be higher than the inflation rate in either country under monetary independence, and national public good provision will be suboptimally high. Inflation elasticities of the demand for a country’s national currency determine whether capital taxes will be higher or lower under single currency in that country.
    Keywords: Inflation Tax; Capital Tax Competition; Currency Union
    JEL: F15 F33 H21 H77
    Date: 2009–09–22
  9. By: Wesselbaum, Dennis
    Abstract: The effects of firing costs crucially depend on the extend to which the additional costs can be shifted to the worker, which refers to the so called "bonding critique". In the recent literature about firing costs, these costs are assumed to be a wasteful tax, such that they can not be shifted to the worker. In this paper, we analyze the eects from respecting and non-respecting the bonding critique. We consistently show, that firing costs have to be introduced in a different way as severance payments. If they are introduced in a similar way, results are likely to be different, in particular for fluctuations of vacancies, unemployment and wages.
    Keywords: Bonding Critique, Endogenous Separations, Firing Costs, Severance Payments
    JEL: E32 E24 J64
    Date: 2009–10–02
  10. By: Martin Cihák; Erlend Nier
    Abstract: The global financial crisis has demonstrated weaknesses in resolution regimes for financial institutions around the globe, including in the European Union (EU). This paper considers the principles underlying resolution regimes for financial institutions, and draws out how a well-designed resolution regime can expand the toolset available for crisis management. Introducing, or in some cases expanding the scope, of these regimes is pressing to achieve more effective responses to ongoing financial sector weaknesses across the EU.
    Keywords: Bank resolution , Bank supervision , Bankruptcy , Banks , Credit risk , European Union , Financial institutions , Financial risk , Financial sector , Financial stability , Nonbank financial sector , Risk management ,
    Date: 2009–09–17
  11. By: Peter Stella
    Abstract: The recent expansion of the balance sheet of the consolidated Federal Reserve Banks (FRB) is analyzed in an historical context. The analysis reveals that the nature of Fed involvement in U.S. financial markets has changed dramatically and its expansion is several orders of magnitude beyond what is usually reported. The associated fiscal risks and potential exit strategies are then considered. Although risks are considerable in certain unlikely scenarios, FRB capital, earnings capacity, and reserves are more than ample to preserve their financial independence. Nevertheless, the occurrence of losses or a significant drop in FRB profit might lead to an eventual curtailment of Fed operational independence. The paper concludes by considering options to enhance FRB risk management and to assign responsibilities for monetary, financial stability and fiscal policies once the current crisis is overcome.
    Keywords: Capital markets , Central bank policy , Central banks , Commercial banks , Credit risk , Financial risk , Financial systems , Liquidity management , Monetary policy , Monetary reserves , Risk management , United States ,
    Date: 2009–06–01
  12. By: Andrabi, Tahir; Das, Jishnu; Khwaja, Asim Ijaz; Zajonc, Tristan
    Abstract: Evaluations of educational programs commonly assume that what children learn persists over time. The authors compare learning in Pakistani public and private schools using dynamic panel methods that account for three key empirical challenges to widely used value-added models: imperfect persistence, unobserved student heterogeneity, and measurement error. Their estimates suggest that only a fifth to a half of learning persists between grades and that private schools increase average achievement by 0.25 standard deviations each year. In contrast, estimates from commonly used value-added models significantly understate the impact of private schools’ on student achievement and/or overstate persistence. These results have implications for program evaluation and value-added accountability system design.
    Keywords: Education For All,Tertiary Education,Secondary Education,Primary Education,Teaching and Learning
    Date: 2009–09–01

This nep-acc issue is ©2009 by Alexander Harin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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