nep-pbe New Economics Papers
on Public Economics
Issue of 2005‒03‒06
seven papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Measuring lifetime redistribution in Dutch collective arrangements By Harry ter Rele
  2. Demand and Distance: Evidence on Cross-Border Shopping By Friberg, Richard; Asplund, Marcus; Wilander, Fredrik
  3. Can We Trust Private Firms as Suppliers of Vaccine for the Avian Influenza? By Forslid, Rikard
  4. Incentives to Work: The Case of Germany By Alfred Boss; Thomas Elendner
  5. Reforming Turkey's public expenditure management By Rauf Gönenç; Willi Leibfritz; Erdal Yilmaz
  6. The impact of tax and transfer systems on children in the European Union By Holly Sutherland; Miles Corak; Christine Lietz

  1. By: Harry ter Rele
    Abstract: This paper assesses how the system of Dutch collective arrangements redistributes between the rich and the poor. Its approach deviates from the way these issues are commonly dealt with by incorporating the full life cycle in the measurements rather than only the annual effects, and by including a larger part of the arrangements than is usually the case. <P> The measurements on redistribution are carried out using the level of educational attainment to classify the population. For an average, representative person of each level of education we measure, in terms of present values, the average net benefit from government. <P> The results show that the net benefits are positive for the lower levels of education and negative for the higher levels. The figures indicate a sizable redistribution from the rich to the poor and a significant reduction of welfare inequality. The net effect on income inequality is, however, substantially smaller than when it is measured on an annual basis.
    Keywords: redistribution; lifetime redistribution; comprehensive measurement; government; tax; taxes; social security; health insurance; pension; pensions; disability; unemployment; education
    JEL: D31 H24 H52 H53
    Date: 2005–02
  2. By: Friberg, Richard (Dept. of Economic Statistics, Stockholm School of Economics); Asplund, Marcus (London Business School); Wilander, Fredrik (Dept. of Economic Statistics, Stockholm School of Economics)
    Abstract: While many studies have documented deviations from the Law of One Price in international settings, evidence is scarce on the extent to which consumers take advantage of price differentials and engage in cross border shopping. We use data from 287 Swedish municipalities to estimate how responsive alcohol sales are to foreign prices, and relate the sensitivity to the location’s distance to the border. Typical results suggest that the elasticity with respect to the foreign price is around 0.4 in the border region; moving 200 (400) kilometers inland reduces it to 0.2 (0.1). Given that cross country price differences for alcohol and other products are often caused by taxes, our evidence has implications for the debate on tax competition/harmonization.
    Keywords: Law of one price; tax competition; tax harmonization; cross border shopping; European integration.
    JEL: F15 H20 H77 R12
    Date: 2005–02–28
  3. By: Forslid, Rikard (Dept. of Economics, Stockholm University)
    Abstract: Using a simple monopoly model, this note analyses the incentives of a vaccine producer. Because a vaccine tends to eradicate the disease for wich it is intended, it also tends to destroy its own market. This means that monopolistic producers may be tempted, in a socially non-optimal way, to delay the introduction of vaccines against new infections until the disease has spread.
    Keywords: Vaccines
    JEL: D42 D62 H10 I18 L10
    Date: 2005–02–22
  4. By: Alfred Boss; Thomas Elendner
    Abstract: Based on a description of the German system of taxes and transfers, the incentives to work are analyzed for several groups of the labor force. The effects of the “Hartz IV” reform (effective from 2005 onwards) on the incentives receive particular attention. It turns out that the marginal (explicit and implicit) tax rates for most groups of the labor force remain high. It is concluded that employment probably will not be affected significantly by that part of the reform which aims at strengthening the incentives to work. Other elements of “Hartz IV” are only touched on.
    Keywords: Income tax rates, contributions to social security, unemployment benefits, implicit tax rates, incentives to work
    JEL: H24
    Date: 2005–02
  5. By: Rauf Gönenç; Willi Leibfritz; Erdal Yilmaz
    Abstract: Fiscal imbalances were a main cause for chronic high inflation and macroeconomic instability before the 2000/2001 crisis. Fiscal consolidation is the cornerstone of post-crisis stabilization. It has been quite successful over the past three years as sizeable primary surpluses have been sustained and the fall in interest rates has reduced the interest cost of public debt. Fiscal targets have been achieved chiefly by raising revenues which has increased the tax burden; greater emphasis should now be placed on the control of public expenditure. At the same time, core public services such as education, justice, infrastructure and rural development will need to be upgraded. Social security costs may also rise with the planned shift to universal health insurance, and the ambitious administrative decentralization project could cause upward pressure on local spending. Far-reaching rationalization of public expenditures is therefore required to meet the quantitative fiscal targets while achieving the intended improvement in public governance. Turkey has made important steps in this direction with new fiscal laws and regulations but an integrated strategy is necessary to harness their full benefits. This Working Paper relates to the 2004 OECD Economic Survey of Turkey ( <p> Réformer la gestion des dépenses budgétaires en Turquie <p> Les déséquilibres fiscaux ont été une cause majeure de l'inflation forte et de l'instabilité macroéconomique avant la crise de 2000-2001. La consolidation budgétaire a été au cœur de la stabilisation après la crise. Elle a été mise en œuvre depuis trois ans avec des excédents primaires larges, et la baisse des taux d'intérêt a réduit le coût du service de la dette publique. Les objectifs budgétaires ont été atteints principalement par une hausse des revenus, augmentant la pression fiscale, et plus d'attention devra être accordée à l'avenir au contrôle des dépenses. En même temps des services publics majeurs comme l'éducation, la justice, les infrastructures et le développement rural devront être améliorés. Les dépenses de sécurité sociale pourraient aussi augmenter avec le passage annoncé à la couverture médicale universelle, et l'ambitieux projet de décentralisation administrative pourrait accroître les dépenses locales. Une forte rationalisation des dépenses devient donc nécessaire pour atteindre les objectifs quantitatifs de la politique budgétaire tout en améliorant la qualité de la gouvernance publique. La Turquie a fait d'importants pas dans cette direction avec de nouvelles lois et réglementations budgétaires mais une stratégie intégrée est nécessaire pour recueillir pleinement leurs fruits.
    Keywords: Turkey; government expenditure; public sector efficiency; budget systems; intergovernmental relations; new public management
    JEL: E62 H1 H4 H5 H7
    Date: 2005–02–10
  6. By: Holly Sutherland; Miles Corak; Christine Lietz
    Abstract: The objective of this paper is to analyse the impact of fiscal policy on the economic resources available to children, and on the child poverty rate. A static microsimulation model specifically designed for the purposes of comparative fiscal analysis in the European Union, EUROMOD, is used to study the age incidence of government taxes and transfers in 2001 in 15 EU countries. Three related questions are addressed. First, what priorities are currently embodied in government budgets across age groups, and in particular to what degree do cash transfer and tax systems benefit children relative to older groups? We find that in most countries children receive a higher proportion of their share of household income from government transfers than young and middle-aged adults, but this is not universally the case. Low income children receive 60 per cent to 80 per cent of their income from transfers in all countries with child poverty rates lower than 10 pr cent. But the proportion is much lower, 20 per cent to 30 per cent, in countries with higher child poverty rates. Further, in many high child poverty countries the low income population in their 50s receive a higher proportion of household disposable income from state transfers than those younger than 18. These results are based on the broadest possible measure of public resources for children, one influenced not only by government budgets but also by the number of co-resident adults, transfer payments directed to them, and their labour market behaviour. For this reason we also examine only those payments from the state depending on the presence of children, and ask: what fraction of the needs of children are supported by elements of the tax and transfer systems directed explicitly to them? There is considerable cross-country variation in the fraction of the additional household needs arising from having children which is supported through government transfers. It is higher than 30 per cent in 10 out of the 15 countries we study, but in the neighbourhood of 20 per cent in others, and in some cases close to only 10 per cent. We also find that tax concessions are an important component in many countries and cannot be ignored in measuring public resources for children. Our third set of findings has to do with the relationship between the measures of public resources we calculate and child poverty: what impact do measures of public resources for children have on child poverty rates? We find that poverty rates would be much higher in all countries if there were no child contingent transfers being made. But countries with the lowest poverty rates are those in which children benefit a good deal from other transfers not necessarily directed to them. In some cases this is because of public support to working mothers and fathers, in others because of intra-household transfers from co-resident adults. In another set of countries with low poverty rates child contingent payments make a large contribution to child poverty reduction. These countries mainly make use of universal benefits and tax concessions. Though their systems are not particularly targeted on low income children they nevertheless perform well in protecting children from poverty. This is in contrast with countries targeting income to children in poverty, where levels of spending may be comparable but child poverty rates are higher.
    Keywords: Child Poverty; Child-Related Policies;; European Community;
    JEL: I32
    Date: 2005
  7. By: Bernard Cornet (Department of Economics, The University of Kansas); Mihaela Topuzu (CERMSEM, Universite de Paris I)
    Abstract: This paper considers an exchange economy with a measure space of agents and consumption externalities, which take into account two possible external eects in consumers¡¯ preferences: the dependence upon prices and other agents¡¯ consumptions, respectively, as in Greenberg et al. [12] and Khan and Vohra [15] (see also Balder [4] for a general discussion). This allows to cover a general model of reference coalitions externalities, in which the agents¡¯ preferences are influenced by the global (or the mean) consumption of the agents in the finitely many reference coalitions. Our paper provides a general existence theorem of equilibria that extends previous results by Schmeidler [21], in the case of fixed reference coalitions and Noguchi [17], for a more particular concept of reference coalitions.
    Keywords: Externalities, Reference coalitions, Measure space of agents, Equilibrium.
    JEL: D62 D51 H23
    Date: 2005–02

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