nep-pbe New Economics Papers
on Public Economics
Issue of 2005‒05‒14
seven papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Les difficultés de la stabilisation économique en Europe : un révélateur de l'inachèvement institutionnel de l'Union Economique. By Robert Boyer
  2. Effort fiscal comparé :<BR> le Québec et les autres provinces canadiennes By Luc Godbout; Karine Dumont; Sébastien Raymond
  3. Fiscalité et offre de travail :<BR> une étude expérimentale By Louis Lévy-Garboua; David Masclet; Claude Montmarquette
  4. Minimum Wages in Colombia: Holding the Middle with a Bite By Carlos Arango; Angélica Pachón
  5. Economic Growth and the Household Optimal Income Tax Evasion. By Oscar Mauricio VALENCIA ARANA
  6. Looking for a road to get out of poverty. Is the current allocation of public spending on education in Colombia helping? By Blanca Cecilia Zuluaga Díaz; Erick Schokkaert.
  7. Optimal Wage Taxation when the Choice to Work Depends on Accumulated Human Capital By Kreider, Brent

  1. By: Robert Boyer
    Abstract: The difficult implementation of the Stability and Growth Pact (SGP) during the 2000s can be explained by the low rank of the policy mix in the general process of European integration. Actually the coordination between a common monetary policy and a series of national budgetary policies has emerged rather recently, whereas the extension and deepening of competition on the single market has been the key principle governing the European integration. Since 1999, all the actors have had to readjust their anticipations and strategies about the consequence of the euro: they are in the process of learning how to manage a new policy mix. Various reform proposals of the SGP are presented and discussed. Finally they are related to the nature of the European institutional reforms. The agreement of the European council about the reform of the SGP on March 2005 is interpreted in the light of some major scenarios analyzing the medium-long term evolution of competences in the European Union.
    Date: 2005
  2. By: Luc Godbout; Karine Dumont; Sébastien Raymond
    Abstract: This study compares Quebec’s tax effort with that of the other Canadian provinces. The results show that the tax effort is higher in Quebec than in any other Canadian province. In the first section, the authors expose the global situation that currently prevails in Quebec. In the second section, an analysis of the tax effort for six tax bases is carried out. Those six bases are equally divided between individuals and corporations. The analysis makes it possible to identify the tax bases where the gaps are the largest. This in turn lets us identify achievable adjustments within Quebec’s current tax structure in order to attain a comparable structure with the other provinces, if such is the wish of the present government. <P>L’étude compare l’effort fiscal du Québec à celui des autres provinces canadiennes. On y constate que l’effort fiscal est effectivement supérieur au Québec relativement aux autres provinces canadiennes. Dans la première partie de l’étude, les auteurs dressent le portrait de la situation fiscale qui prévaut au Québec. Dans la deuxième partie, une analyse de l’effort fiscal pour six assiettes fiscales est réalisée. Cette analyse s’effectue en deux temps, soit la situation des particuliers et celle des sociétés. Elle permet d’identifier les assiettes où les écarts sont les plus grands et d’envisager certains déplacements possibles au sein de la structure fiscale québécoise afin de la rendre davantage comparable à celles des autres provinces, si tel est le souhait du gouvernement.
    Keywords: : personal taxes, corporate taxes, income tax, property tax, corporate income tax, tax on capital, payroll tax, consumption tax, tax effort, tax bases, comparison, Quebec, canadian provinces, impôts sur les particuliers, impôts sur les sociétés, impôt sur le revenu, impôt foncier, impôt sur les bénéfices, taxe sur le capital, taxe sur la masse salariale, taxe à la consommation, effort fiscal, assiettes fiscales, comparaison, Québec, provinces canadiennes
    JEL: H24 H25
    Date: 2005–04–01
  3. By: Louis Lévy-Garboua; David Masclet; Claude Montmarquette
    Abstract: We make use of experimental economics to examine how people adjust their supply of work effort in response to a variation in tax rates. Participants are paired in the experiment. In each pair, one participant randomly chosen has to exert an effort and is taxed to the benefit of the other participant. The working subjects are confronted with four different tax rates (12%, 28%, 50% or 79%) and are asked to perform a number of real tasks. We ran four different treatments depending on volume of work (high or low) and whether the tax rate is chosen by the other subjects in the pairing or randomly chosen by the computer. We observe that the work supply decreases (increases) with a rise (decline) in tax rates. We find a strong disincentive effect of taxation, particularly when the tax rates are chosen by the tax receivers in the high volume of work treatment. <P>Dans cet article, nous examinons à partir d’une étude expérimentale dans quelle mesure l'offre de travail des individus est influencée par des variations de taux de taxation. L’économie expérimentale permet la collecte dans un environnement contrôlé de données empiriques pertinentes et fiables afin d’identifier et évaluer l’importance de chaque motivation particulière dans la prise de décision des agents. Cette approche offre une alternative aux études économétriques sur la question de l’élasticité de l’offre de travail relativement aux taxes sur le revenu de travail où il est souvent difficile d’isoler l’effet des taxes des autres facteurs. Les résultats expérimentaux obtenus ne laissent aucun doute quant au rôle de la fiscalité sur l’offre de travail. Des taxes élevées incitent les individus à réduire leur offre de travail. Au plan de la dynamique, des variations positives (négatives) de taux diminuent (augmentent) leur offre de travail. Cette influence est particulièrement importante lorsque les taux de prélèvement sont hauts, que le volume de travail est élevé et que le niveau de taxation choisi est endogène dans le cadre d’une fiscalité où le bénéficiaire décide du taux.
    Keywords: taxation and labor supply, experimental economics, taxation et offre de travail, économie expérimentale
    JEL: C91 H30 J22
    Date: 2005–04–01
  4. By: Carlos Arango; Angélica Pachón
    Abstract: This paper exploits the long history of the minimum wage in a relatively stable developing economy like Colombia in order to see whether it may alleviate the living conditions of low income families and reduce income inequality. The paper does not only explore how the minimum wage may serve these purposes, but also how it may distort market outcomes to do so. We found significant negative minimum wage effects on both the likelihood of being employed and hours worked for all family members, being it stronger for women, and the young and less educated people. We also found a positive effect on non-head participation especially in families with low human capital. But, more important, we found evidence that the minimum wage ends up being regressive, improving the living conditions of families in the middle and the upper part of the income distribution with net losses for those at the bottom.
    Keywords: Minimum wage,
    JEL: O15
    Date: 2004–03–31
  5. By: Oscar Mauricio VALENCIA ARANA
    Abstract: This paper presents an analysis of the relationship between economic growth and income tax evasion. For this purpose we constructed a dynamic model with human capital in which income tax evasion is endogenous. The model captures the effects of income tax evasion on economic growth through three channels: 1) Income tax evasion alters the optimal path of consumption and savings 2) income tax evasion generates labor market distortions; 3) returns on assets are affected when tax evasion occurs. The concept of optimal policy against evasion is introduced. Based on the Ramsey policy approach, the income tax evasion is reformulated as particular case of endogenous incompleteness tax code. In this case, we found that the optimal income tax rate in the steady-state is different to zero. The model was calibrated for the 2000 Colombian economy. Counterfactual experiments show that different enforcement policies based on an increased probability of detection and punishment have a positive impact on welfare and growth. On the other hand, as income tax evasion increases so the capital cost goes up, the labor supply is reduced and economic growth and welfare decreases.
    Keywords: Income Tax Evasion
    Date: 2004–12–28
  6. By: Blanca Cecilia Zuluaga Díaz; Erick Schokkaert.
    Abstract: This paper presents a methodology to explore the impact on poverty of the public spending on education. The methodology consists of two approaches: Benefit Incidence Analysis (BIA) and behavioral approach. BIA considers the cost and use of the educational service, and the distribution of the benefits among groups of income. Regarding the behavioral approach, we use a Probit model of schooling attendance, in order to determine the influence of public spending on the probability for the poor to attend the school. As a complement, a measurement of targeting errors in the allocation of public spending is included in the methodology.
    Keywords: Poverty,
    JEL: H52
    Date: 2004–12–31
  7. By: Kreider, Brent
    Abstract: This paper studies how optimal wage tax conclusions from the classic life-cycle model of endogenous human capital accumulation are affected by relaxing a standard assumption that everyone works. In the standard model, the optimal wage tax is zero when wages are nonstochastic regardless of the impact of human capital on the future wage rate or the wage elasticity of labor hours. After allowing human capital accumulation to affect the extensive margin decision to work as well as the intensive number of labor hours to supply, distortionary wage taxation becomes desirable even with nonstochastic wages. In the absence of a corrective policy, young individuals underinvest in human capital from a social perspective because tax premiums for transfers to nonworkers are not actuarially adjusted downward for human capital attainment. To restore proper price signals, wage taxes should be negatively correlated with age. Results from previous models hold when the decision to work is treated as exogenous or premiums for transfers are actuarially tailored to human capital choices. Calibrating the model using data from the 2000 Current Population Survey, numerical simulations suggest that even modest extensive margin employment elasticities can be sufficient to substantially impact the magnitudes -- and even change the signs -- of optimal wage tax rates on prime-age workers.
    JEL: H2 H3 J2
    Date: 2005–05–11

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