nep-pbe New Economics Papers
on Public Economics
Issue of 2005‒01‒09
eight papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. A quantitative investigation of the Laffer curve on the continued work tax : the French case By Sopraseuth, Thepthida; Hairault, Jean-Olivier; Langot, François
  2. The Incentive Effect of Fiscal Equalization Transfers on Tax Policy By Thiess Büttner
  3. Normative Evaluation of Tax Policies: From Households to Individuals By Bargain, Olivier
  4. Hobbes to Rousseau: Inequality, Institutions, and Development By Cervellati, Matteo; Fortunato, Piergiuseppe; Sunde, Uwe
  5. Capital Taxation, Growth, and Non-renewable Resources By Christian Groth; Poul Schou
  6. Low-Income and Welfare Client Priorities: Patterns of Earnings and Welfare Receipt for Workforce Investment Act Participants By Peter R. Mueser; David W. Stevens
  7. The Economics of Human Rights By Lorenz Blume; Stefan Voigt
  8. Improving Credibility by Delegating Judicial Competence - the Case of the Judicial Committee of the Privy Council By Stefan Voigt; Michael Ebeling; Lorenz Blume

  1. By: Sopraseuth, Thepthida; Hairault, Jean-Olivier; Langot, François
    Abstract: It is often argued that the tax on continued work should be removed by implementing actuarially fair schemes. However, these schemes cannot help finance the expected Social Security deficit. This paper proposes to give individuals on a fraction of the marginal actuarially fair incentives in case of postponed retirement. Social Security then faces a trade off between giving enough incentives to make individuals actually delay retirement and giving little increase in pensions in order to help finance its expected deficit. This trade-off is captured by a Laffer curve that we quantify on French data. Furthermore, we analyze the interactions between wealth and retirement behavior.
    JEL: H31 H55 J26
    Date: 2004
  2. By: Thiess Büttner
    Abstract: A theoretical analysis considers the impact of a typical system of redistributive \"fiscal equalization\" transfers on the taxing effort of local jurisdictions. More specifically, it shows that the marginal contribution rate, i.e. the rate at which an increase in the tax base is reducing those transfers, might be positively associated with the local tax rate while the volume of grants received is likely to be inversely related to the tax base. These predictions are tested in an empirical analysis of the tax policy of German municipalities. In order to identify the incentive effect the analysis exploits discontinuities in the rules of the fiscal equalization system as well as policy changes. The empirical results support the existence of an incentive effect, suggesting that the high marginal contribution rates induce the municipalities to raise their business tax rates significantly.
    Keywords: Fiscal Equalization, Tax Competition, Fiscal Federalism, Incentive Effect of Taxation, Regression Discontinuity
    JEL: H71 H77
    Date: 2005–01–05
  3. By: Bargain, Olivier (IZA Bonn and DELTA, Paris)
    Abstract: In this paper, we analyze the impact of a tax policy change on social welfare by using jointly a collective model of household labor supply and a microsimulation program of the French taxbenefit system. The collective approach allows studying the intrahousehold distribution so that for the first time, social welfare can be characterized using individual utilities rather than an ambiguous concept of household welfare. This way, the planner’s preferences address not only inter-household inequalities but also intra-household inequalities often neglected in the literature. The other contribution of the paper derives from a larger interpretation of labor supply behaviors which represent more than the simple work duration and incorporate unobserved dimensions related to effort or intensity at work. We simulate an extended version of the British Working Family Tax Credit on married couples in France. Two types of conclusions emerge. First, the reform is not desirable for low values (utilitarian) or high values (rawlsian) of the social inequality aversion but rather for an intermediary range. In effect, on the efficiency side, the reform induces strong disincentive effects on the participation of second-earners while on the equity side, it does not specifically target the poorest households. Second, we show that the choice of unit – household or individual – strongly condition the results of the normative analysis when departing in a reasonable way from the assumption of equal sharing within the household.
    Keywords: collective model, intrahousehold distribution, social welfare, household labor supply, microsimulation, tax reform
    JEL: C71 D13 D31 D63 H21 H31 J22
    Date: 2004–12
  4. By: Cervellati, Matteo (Universitat Pompeu Fabra and University of Bologna); Fortunato, Piergiuseppe (University of Bologna); Sunde, Uwe (IZA Bonn)
    Abstract: We analyze the endogenous evolution of economic and political institutions and the interdependencies with the process of economic development. Favorable economic institutions ensure the appropriability of rents in form of a state of law. We study the conditions under which a state of law can be implemented under oligarchy, and when democratization is necessary. Inequality in endowments and incomes prolongs the absence of good institutions and delays democratization. Conversely, institutions shape the income distribution. Simulations illustrate how inequality affects the development process and may lead to overtaking and divergence. The implications are in line with historical and empirical evidence.
    Keywords: inequality, democratization, institutions, state of law, long-term development
    JEL: H10 O20 N10
    Date: 2005–01
  5. By: Christian Groth (Institute of Economics, University of Copenhagen); Poul Schou (Danish Rational Economic Agents Model (DREAM))
    Abstract: The conventional view within the endogenous growth literature is that interest income taxes impede economic growth and investment subsidies promote economic growth. The present paper lays out a simple framework to see whether this is still true when non-renewable resources enter the ”growth engine” in an essential way. It is not! The framework allows a rich set of determinants of longrun growth, including some fiscal policy measures, but interest income taxes and investment subsidies are not among these. The results not only contrast with the modern literature on taxes and endogenous growth, but also with observations in the literature from the 1970’s on non-renewable resources and taxation - observations which were not based on general equilibrium considerations.
    Keywords: non-renewable resources; endogenous growth; greenhouse effect; taxes; subsidies
    JEL: H2 O4 Q3
    Date: 2004–07
  6. By: Peter R. Mueser (Department of Economics, University of Missouri-Columbia); David W. Stevens
    Abstract: This paper examines labor market and welfare experiences of participants in Workforce Investment Act (WIA) programs who exited in July 2000-June 2001. Administrative data from six states on earnings and welfare receipt are used to trace the experiences of participants in the two years prior to and in the year following exit from WIA. Individuals are classified as “Adults” or “Dislocated Workers” and by whether they received “Training” or less intensive services under WIA. We find that Adults have large employment gains associated with participation in WIA, and Adults in Training have particularly large earnings gains. Following losses, employment and earnings of Dislocated Workers largely recover following WIA participation. Welfare receipt declines, especially for those in Training activities. Despite some differences, similarities between states in basic patterns are striking.
    JEL: H43 I38 I32
    Date: 2004–10–18
  7. By: Lorenz Blume (Department of Economics, University of Kassel); Stefan Voigt (Department of Economics, University of Kassel and ICER, Torino)
    Abstract: Economists are often skeptical concerning the economic effects of various forms of human rights: it has been argued that basic human rights can make the legal system less efficient but also that extensive social rights are incompatible with market economies. It is argued here that basic human rights are a precondition for other kinds of rights such as property and civil rights and that they are thus efficiency-enhancing. Four different groups of rights are identified. It is asked what effects they have on welfare and growth. The transmission channels through which the different rights affect welfare and growth are identified by estimating their effects on investment in both physical and human capital and overall productivity. Basic human rights have indeed a positive effect on investment, but do not seem to contribute to productivity. Social or emancipatory rights, in turn, are not conducive to investment in physical capital but do contribute to productivity improvements. None of the four groups of rights ever has a significant negative effect on any of the economic variables here included.
    JEL: H41 H73 K10 O11 O57 P14 P51
    Date: 2004–12
  8. By: Stefan Voigt (Department of Economics, University of Kassel and ICER, Torino); Michael Ebeling (Department of Economics, University of Kassel); Lorenz Blume (Department of Economics, University of Kassel)
    Abstract: It is argued that government credibility is an important resource and that it can be improved by delegating decision-making competence beyond the nation-state. It is hypothesized that such delegation should result in higher income and growth. Some former British colonies retained the Judicial Committee of the Privy Council as their final court of appeals even after independence. This court is thus taken as a natural experiment to test our hypothesis. It turns out that retaining the jurisdiction is indeed significant for explaining economic growth.
    Keywords: Credibility, Delegation of Competence, Judicial Independence, Economic History, Judicial Committee of the Privy Council
    JEL: H11 K11 K41 N40 O57 P51
    Date: 2004–12

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