nep-pbe New Economics Papers
on Public Economics
Issue of 2005‒02‒20
twelve papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Characterizing the Optimal Composition of Government Expenditures By Rafaela Pérez Sánchez
  2. Tradable emission permits in a federal system By Harrie A.A. Verbon; Cees A. Withagen
  3. Economic Evaluation of the Spanish port System Using the Promethee Multicriteria decision Method By José Ignacio Castillo Manzano; Mª Teresa Arévalo Quijada; Mª Mercedes Castro Nuño
  4. Free Choice of Unfunded Systems: A First Assessment By Gabrielle Demange
  5. Sustainability of Portuguese Fiscal Policy in Historical Perspective By Carlos Fonseca Marinheiro
  6. Ageing, Funded Pensions and the Dutch Economy By Lans Bovenberg; Thijs Knaap
  7. The Incentive Effect of Fiscal Equalization Transfers on Tax Policy By Thiess Büttner
  8. Effects of decentralization on school resources By Ahlin, Åsa; Mörk, Eva
  9. Social Security in Belgium: Distributive Outcomes By Jousten, Alain; Lefèbvre, Mathieu; Perelman, Sergio; Pestieau, Pierre
  10. Welfare Reform and Immigrant Participation in the Supplemental Security Income Program By Paul S. Davies; Michael J. Greenwood
  11. Value-Added Taxes in Developing and Transitional Countries: Lessons and Questions By Richard M. Bird
  12. Protecting minorities through the average voting rules By Régis Renault; Alain Trannoy

  1. By: Rafaela Pérez Sánchez (Universidad Complutense de Madrid)
    Abstract: This paper extends the neoclassical growth model with productive public capital by including an infrastructure efficiency index, which is assumed to depend on a public choice variable, in particular, the share of public spending allocated to productive public consumption. A golden rule for the allocation of public expenditure between productive consumption and investment is specified. Under this framework, the observed path for the stock of infrastructures and the proposed efficiency index in the US economy during the last fifty years have been close to optimal: a lower stock of infrastructures has been accumulated, but it has been used more efficiently.
    Keywords: Public Expenditure Composition, Public Investment, Public Consumption, Nominal and Effective Infrastructures, Infrastructures Efficiency Index
    JEL: E62 E65 H40 H54 O41
    Date: 2004
  2. By: Harrie A.A. Verbon (Tilburg University and Center); Cees A. Withagen (Tilburg University and Center; Free University Amsterdam and Tinbergen Institute)
    Abstract: A system of tradable permits in the standard setting is effective in attaining the policy objective with regard to pollution reduction at the least cost. This outcome is challenged in case of a tradable permit system in a federal state with individual states having discretionary power regarding environmental policy and where pollution is transboundary across states. This paper explores the opportunities of the central authority to influence the effectiveness of the system, under different institutional arrangements, through the initial allocation of permits
    Keywords: tradable permits, trade bans, fiscal federalism.
    JEL: H21 H23 Q00
    Date: 2004
  3. By: José Ignacio Castillo Manzano (Universidad de Sevilla); Mª Teresa Arévalo Quijada (Universidad de Sevilla); Mª Mercedes Castro Nuño (Universidad de Sevilla)
    Abstract: Due to legislation changes during the Nineties, the Spanish Port System has gone through a series of changes that, simultaneous with a period of economic expansion and generalized marine traffic growth, have affected the Port System's composition and organization. The gradual transformations produced, give shape to a new model of operation for Port Authorities, which now start to be managed under business criteria and procedures of functional autonomy and competition.Our work considers these circumstances from the approach offered by multiple objective decision models, using certain ratios with economic meaning which will allow determining how their relative ranking within the national set has varied. The great variety of available business ratios gives the problem a discrete multicriteria dimension. Thus we have chosen the Promethee method for our analysis, given its results simplicity and easy understanding for the decision agent, the economic interpretation of its parameters, and the stability of its results.
    Keywords: Spanish Port System, Multicriteria Analysis, Promethee Method.
    JEL: C61 H54
    Date: 2004
  4. By: Gabrielle Demange
    Abstract: The first pillars of social security systems differ widely across European countries both in the contribution rate and intra-generational redistribution. What would the impact of these differences be if EU citizens had free access to all systems? This paper aims to highlight some basic features of this question in a very simple two-country model.
    Keywords: unfunded systems, intragenerational redistribution, free choice
    JEL: H55 H87
    Date: 2005
  5. By: Carlos Fonseca Marinheiro
    Abstract: This paper analyses the sustainability of Portuguese public finances, making use of a long dataset with more than a full century of observations. The use of such a long dataset is appropriate because both unit root and cointegration tests require a long period of data. The sustainability testing procedure is based on unit root and cointegration tests. We find considerable evidence in favour of sustainability for the 1903-2003 period. The overall conclusion of sustainability for the 1903-2003 period is not maintained for the more recent 1975-2003 period, which is characterised by the largest GDP deficit ratios of our sample. This latter period appears to signal a shift to an unsustainable path in Portuguese fiscal policy. Hence, our results suggest that fiscal consolidation efforts must, in fact, be continued in Portugal.
    Keywords: fiscal sustainability, sustainability of public debt, intertemporal budget constraint, government deficits and debt, Portugal
    JEL: E60 H60
    Date: 2005
  6. By: Lans Bovenberg; Thijs Knaap
    Abstract: This paper attempts to paint a coherent picture of the effects of ageing on a small, open, economy with large pension funds in different institutional settings. Quantitative scenarios are projected with an applied computable general equilibrium model with institutional details. We find that ageing leads to a tighter labor market, increasing costs for both pension funds and the government, and leaving the economy vulnerable to financial and further demographic shocks. We show that defined benefit pension arrangements can be destabilizing, but less so if an average-wage variable-indexation contract is chosen. Government can help by adopting a policy of tax smoothing, but the single most important determinant of the net burden of ageing is the eventual size of the increase in labor market participation of older workers. The intergenerational welfare effects of demographic shocks and changes in international interest rates are sizable and should be an integral part of the assessment of different policy instruments.
    Keywords: ageing, funded pensions, applied general equilibrium models, the Netherlands
    JEL: E17 H30 J18
    Date: 2005
  7. 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 reduces 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
  8. By: Ahlin, Åsa (Uppsala University); Mörk, Eva (IFAU - Institute for Labour Market Policy Evaluation)
    Abstract: Sweden has undertaken major national reforms of its schooling sector which, consequently, has been classified as one of the most decentralized ones in the OECD. This paper investigates the extent to which local tax base, grants, preferences and structural characteristics affected local schooling resources as decentralization took place. We use municipal data for the period 1989–95 which covers the key reform years without confounding decentralization with institutional changes after 1995. The main arguments against decentralization are not supported by our findings. First, school spending as well as teacher density is found to be more equally distributed across municipalities following decentralization. Second, local tax capacity does not influence schooling resources more in the decentralized regime than in the centralized regime. We also find that the form in which grants are distributed matter: Targeted grants have a significant positive impact on resources while general grants have not.
    Keywords: School resources; school finance reform; decentralization
    JEL: H40 H52 H70
    Date: 2005–02–12
  9. By: Jousten, Alain (Université de Liège, CEPR and IZA Bonn); Lefèbvre, Mathieu (Université de Liège); Perelman, Sergio (Université de Liège); Pestieau, Pierre (Université de Liège, CEPR and DELTA)
    Abstract: The paper analyzes the link between old-age income programs and economic outcomes in Belgium. We use a simulation methodology to construct an average pension generosity variable. Our regression analysis explores the link with distributional outcomes in income, consumption and more subjective indicators. Results document the weak link between average generosity and distributional outcomes across a heterogeneous population.
    Keywords: pensions, inequality, social security, elderly
    JEL: H31 H55 I31 I32
    Date: 2005–02
  10. By: Paul S. Davies (Social Security Administration); Michael J. Greenwood (University of Colorado at Boulder)
    Abstract: We examine the effect of the 1996 welfare reform legislation on participation in the Supplemental Security Income (SSI) program by immigrants. Although none of the immigrants on the SSI rolls before welfare reform lost eligibility, the potential exists for future impacts on the SSI caseload and the well-being of recent immigrants. We use microdata files from the Social Security Administration’s Continuous Work History Sample matched to administrative data on SSI participation for the period 1993 to 1999. We estimate simple models of SSI participation and compare our results to the existing literature. We then estimate a series of difference-in-differences models of SSI participation. These models compare SSI participation by immigrants relative to nativeborn individuals, and among affected immigrants relative to unaffected immigrants and native-born individuals, before and after welfare reform. Descriptive results indicate that the percentage of immigrants and natives receiving SSI decreased after welfare reform, but by a larger percentage for natives than for immigrants. The probability of SSI participation decreased after welfare reform for immigrants who were affected by the legislation relative to immigrants who were unaffected. The difference-in-differences estimate is positive for immigrants relative to otherwise similar natives, but the estimated effect among affected immigrants is about half as large as the effect for unaffected immigrants. When the sample is limited to low earners as a proxy for the SSI means test, the results are qualitatively unchanged but quantitatively much stronger. Authors’ Acknowledgements We are grateful to Ulyses Balderas for assisting with the collection of some data used here. A previous version of this paper was presented at the 2004 Western Regional Science Association Annual Meeting, February 25-28, 2004, Maui, HI.
    Date: 2004–09
  11. By: Richard M. Bird (International Tax Program, Rotman School of Management, University of Toronto)
    Abstract: The value-added tax has, in recent decades, become the most important single tax in most developing and transitional economies. This paper reviews some problems that have emerged as important as more experience has been gained with how VATs really work in many such countries and suggests some lines of research that need to be explored further to overcome those problems.
    Keywords: value-added tax, developing countries, transitional countries
    JEL: H25 R10
    Date: 2005–02
  12. By: Régis Renault; Alain Trannoy (Ehess, Greqam-Idep)
    Abstract: Properties of an average voting rule - the outcome being some weighted average of votes - are investigated, with particular attention to its ability to protect minorities. The unique average voting outcome is characterized with a median formula which depends on the voters’ preferred allocations and some parameters constructed from the voters’ weights. We provide necessary and sufficient conditions for the average outcome to be above the majority outcome. A minority is said to be protected by a switch in voting rule if the voting outcome becomes closer to the median bliss point of the minority. A sufficient condition for minority protection is that, either the minority’s weight is sufficiently large or the majority outcome is too unfavorable to the minority. Applications to the composition of public goods and to public expenditures level are considered. We end by exploring the combined use of average and majority voting in a two-stage procedure for determining both the level and the composition of public expenditures.
    Keywords: minority, majority voting, public goods, Nash equilibrium.
    JEL: D74 H41 I22
    Date: 2003–04

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