nep-pbe New Economics Papers
on Public Economics
Issue of 2005‒07‒11
sixteen papers chosen by
Kerim Arin
Massey University

  1. Who should make corporate law? EC legislation vs regulatory competition By John Armour
  3. Revenue sharing and information exchange under non-discriminatory taxation By Keen,Michael; Ligthart,Jenny E.
  4. The Microeconometric Estimation of Treatment Effects - An Overview By Marco Caliendo; Reinhard Hujer
  5. Increasing Returns to Education and the Skills Under-Investment Trap By Alison Booth; Melvyn Coles
  6. Measuring cyclically-adjusted budget balances for OECD countries By Nathalie Girouard; Christophe André
  7. Competition among different levels of government: the re-election problem By Ponzano, Ferruccio
  8. Is It Culture or Democracy? The Impact of Democracy, Income, and Culture on Happiness By Justina Fischer; GEBHARD KIRCHGÄSSNER; DAVID DORN; ALFONSO SOUSA-POZA
  9. Effects of changes in flows of funds between Government and households.A SAM approach to Portugal. By Susana Santos
  10. Does Rapid Liberalization Increase Corruption? By Samia Tavares
  11. How cyclical do cyclically-adjusted balances remain? An EU study By Enrique Alberola; Jose M González-Minguez; Pablo Hernandez-de-Cos; Jose M Marqués
  13. Fiscal Equlisation and Citizen's Preferences : Evidence from Swiss Municipalities By Nils Soguel; Alexandre Tangerini
  14. 26 cantons suisses… 27 politiques budgétaires ou aucune? By Nils Soguel; Marc-Jean Martin
  15. Demographic transition, intergenerational transfers and the increase in public and national debts. By Jean-Pierre Laffargue
  16. Cross-Border Political Donations and Pareto-Efficient Tariffs By Masahiro Endoh

  1. By: John Armour
    Abstract: This paper makes a case for the future development of European corporate law through regulatory competition rather than EC legislation
    Keywords: European law, company law, regulatory competition, corporate insolvency
    JEL: G34 H73 K22
  2. By: Fabio Sánchez
    Abstract: Entre 1980 y 2003 en Colombia se llevaron a cabo ocho reformas tributarias, en los años de 1983, 1986, 1990, 1992, 1995, 1998, 2000 y 2003. La mayoría de estas reformas tuvieron como objetivo el aumento de los ingresos tributarios para asegurar así el equilibrio de las finanzas públicas a corto y mediano plazo. Si bien las diversas reformas tributarias lograron incrementar los ingresos del gobierno, los efectos de cada una fueron transitorios, lo que obligaba a realizar una nueva reforma. Ello contrasta con el aumento del gasto público que ha sido inflexible a la baja. Este trabajo lleva a cabo un diagnóstico del sistema impositivo colombiano desde 1980 hasta el año 2003, prestando especial atención a los efectos que han tenido las reformas tributarias sobre la estructura de los impuestos y los recaudos. Así, se analiza la estructura impositiva colombiana incluyendo los impuestos de renta, IVA, impuesto a la Gasolina y ACPM, impuesto de Aduanas, impuesto de Timbre, y Gravamen a las Transacciones Financieras. Adicionalmente, se estiman las elasticidades de los diversos impuestos para el periodo 1980-2003, y se examinan los factores asociados a las variaciones de los recaudos tributarios. Por último, se lleva a cabo un análisis de equidad y eficiencia a través de la simulación de tres reformas tributarias. Los resultados muestran que, si bien entre 1980 y 2003 hubo un aumento importante de los ingresos del gobierno, las reformas tributarias de este período no han logrado incrementar la productividad de los impuestos de manera permanente, y por lo tanto no han tenido los efectos esperados sobre los ingresos tributarios a mediano plazo.
    Keywords: Impuestos
    JEL: H21
    Date: 2005–02–15
  3. By: Keen,Michael; Ligthart,Jenny E. (Tilburg University, Center for Economic Research)
    Abstract: The international exchange of tax information, and its merits compared to withholding taxes, is the central topic in current debates in international tax policy. The purpose of this paper is to characterize and compare the tax regimes that emerge with and without information exchange, under the assumption that countries are unable to differentiate between the taxes they apply to residents and non-residents. It focuses in particular on the role of asymmetries in country size (capturing a key feature of tax havens) and on the impact and potential desirability of schemes to share the revenue raised by withholding (as under the new EU savings tax arrangements) or (more innovatively) as a consequence of information exchange. It is shown that (irrespective of country size difference) Pareto efficiency requires that all revenue collected from nonresidents be transferred to the residence country which would require taking the EU practice even further from the norm, but is currently the norm in relation to information exchange. A withholding scheme with revenue fully reallocated in this way Pareto dominates information sharing, whatever the allocation under the latter. Comparing schemes in which there is no revenue sharing, however, shows that information exchange Pareto dominates simple withholding.
    JEL: H77 H87 F42
    Date: 2005
  4. By: Marco Caliendo (DIW Berlin and IZA Bonn); Reinhard Hujer (University of Frankfurt, ZEW Mannheim and IZA Bonn)
    Abstract: The need to evaluate the performance of active labour market policies is not questioned any longer. Even though OECD countries spend significant shares of national resources on these measures, unemployment rates remain high or even increase. We focus on microeconometric evaluation which has to solve the fundamental evaluation problem and overcome the possible occurrence of selection bias. When using non-experimental data, different evaluation approaches can be thought of. The aim of this paper is to review the most relevant estimators, discuss their identifying assumptions and their (dis-)advantages. Thereby we will present estimators based on some form of exogeneity (selection on observables) as well as estimators where selection might also occur on unobservable characteristics. Since the possible occurrence of effect heterogeneity has become a major topic in evaluation research in recent years, we will also assess the ability of each estimator to deal with it. Additionally, we will also discuss some recent extensions of the static evaluation framework to allow for dynamic treatment evaluation.
    Keywords: evaluation, effect heterogeneity, matching, dynamic treatments
    JEL: C40 H43 J68
    Date: 2005–07
  5. By: Alison Booth (RSSS, Australian National University and IZA Bonn); Melvyn Coles (ICREA, IAE and IZA Bonn)
    Abstract: We model educational investment and labor supply in a competitive economy with home and market production. Heterogeneous workers are assumed to have different productivities both at home and in the workplace. We investigate the degree to which there is under-investment in human capital, and examine the deadweight losses that accrue via distortionary taxes. We show that there are increasing returns to education at the participation margin, and that deadweight losses are most severe for workers located here. Although the social planner’s optimum implies the worker should choose a high level of education and participate in the market sector, instead the worker chooses not to invest in human capital and either nonparticipation or partial participation in market-sector work. A severe deadweight loss is generated by this substitution effect. Those individuals most likely to be in this trap are those types with large enough home productivity, who are likely either to be involved in home production or to be characterized by a strong preference for other non-market sector activities.
    Keywords: home production, labor supply, returns to education, income tax
    JEL: H24 J13 J24 J31 J42
    Date: 2005–07
  6. By: Nathalie Girouard; Christophe André
    Abstract: An important tool in the analysis of fiscal policy is the distinction between structural and cyclical components of the budget balance. This paper describes work undertaken to re-estimate and re-specify the elasticities underlying the Economics Department’s calculations of cyclically-adjusted budget balances. Account is taken of tax reforms introduced since the previous updating exercise. A number of methodological innovations have been introduced to better account for the lags between taxes and activity and to ensure greater cross-country consistency in the estimates. The methodology underlying cyclical adjustment of expenditures has also been reviewed. Finally, the country coverage has been extended. The overall results are broadly consistent with the previous set of estimates. The sensitivity of government net lending to a 1 percentage point change in the output gap remains at around 0.5% of GDP for OECD economies on average. <p> Mesurer le solde budgétaire corrigé des fluctuations cycliques pour les pays de l’OCDE <p> La distinction entre les composantes structurelle et cyclique du solde budgétaire est un outil essentiel de l'analyse de la politique budgétaire. Cette étude présente le travail de ré-estimation et de re-modélisation entrepris afin de mettre à jour les élasticités sous-jacentes au calcul par le Département des Affaires économiques du solde budgétaire corrigé des fluctuations conjoncturelles. Les réformes fiscales mise en œuvre depuis le dernier exercice de mise à jour ont été prises en compte. Un certain nombre d'améliorations méthodologiques ont été introduites afin de mieux tenir compte des délais d'ajustement entre les recettes fiscales et l'activité économique ainsi que pour assurer une meilleure cohérence des estimations entre les pays. La méthodologie utilisée pour l'ajustement cyclique des dépenses a aussi été revue. Finalement, le nombre de pays couvert a été augmenté. Les résultats globaux sont, dans l'ensemble, cohérents avec les estimations précédentes. La sensibilité du solde financier des administrations publiques à un changement d'un point de pourcentage de l'écart de production demeure autour de 0.5% du PIB pour la moyenne des pays de l'OCDE.
    Keywords: Fiscal policy; automatic stabilisers; business cycle; public finances
    JEL: E62 H30 H60
    Date: 2005–07–04
  7. By: Ponzano, Ferruccio
    Abstract: The aim of this paper is to analyse competition between two levels of government that want to maximise their tax revenues facing the problem of re-election. We assume that citizens have incomplete information about central and local public goods. Then, they are not able to choose a single efficient level of these two goods but they are able to choose a set of combinations. This choice represent the constraint faced by the levels of government. We develop a model starting from this assumption and three extensions to analyse the behaviour of two levels of government in different scenarios. We find that in each situation the equal sharing of the tax revenue is not the best solution for the governments.
    JEL: D43 D72 H11 H71 H77
    Date: 2005–07
    Abstract: We look at the relation between democracy and perceived subjective well-being, taking also into account the impact of income and culture. After briefly reviewing the empirical results for Switzerland, we re-estimate this relationship allowing for the relative income position of individuals and also using a new more recent data from the Swiss Household Panel. No robust relationship between the extent of (direct) democracy and happiness can be observed. In a second step, we conduct a cross-national analysis, covering 28 countries with data from the 1998 International Social Survey Programme (ISSP). There we observe a robust positive and significant relationship between democracy and happiness.
    JEL: I31 H10
    Date: 2005–06
  9. By: Susana Santos (Instituto Superior de Economia e Gestão - Technical University of Lisbon)
    Abstract: Through the use of aggregate Social Accounting Matrices for Portugal, the flows of funds from three government subsectors to households will be studied, as well as the flows from the latter to the former. From the SAM modelling, both a static and a comparative static analysis will be made, in order to specify the effects of changes in the flows of funds between households and government subsectors.
    Keywords: Social Accounting Matrix; Economic Planning; Macroeconomic Modelling
    JEL: D57 H31 E60
    Date: 2005–07–05
  10. By: Samia Tavares (Rochester Institute of Technology)
    Abstract: Corruption scandals seem to abound in countries that have recently undergone reform. Despite the proliferation of stories in the news media, no one has examined whether reform—be it democratization or economic liberalization or both—actually causes an increase in corruption. Theory provides no guidance as to the direction of causality—on the one hand, reforms make politicians accountable to voters, as well as introduce more competition, which should decrease corruption. On the other hand, the need for politicians to now raise campaign funds, as well as the increased availability of rents that results from economic liberalization provides for an incentive for corruption. This paper uses the numerous cases of democratizations and economic liberalizations that occurred in the 80s and 90s to examine this issue. The paper finds that democratizations reduce corruption, while liberalization may actually increase corruption. Furthermore, undertaking both reforms in rapid succession actually leads to a decrease in corruption, while countries that democratized more than 5 years after liberalizing experienced an increase in corruption.
    Keywords: corruption; liberalization; government; democracy
    JEL: D72 D73 H11 H77 K42
    Date: 2005–07–06
  11. By: Enrique Alberola (Banco de España); Jose M González-Minguez (Banco de España); Pablo Hernandez-de-Cos (Banco de España); Jose M Marqués (Banco de España)
    Abstract: Observed budget balances are an imperfect indicator of the fiscal policy stance, because fluctuations in economic activity induce automatic changes in the balance, hence the use of cyclically-adjusted balances (CAB). However, this paper shows that CABs (as measured through one of the two methods currently used by the Commission) tend to be systematically overestimated during downturns and underestimated during expansions. The dominant source of this distortion arises from the filtering of revenues deemed to be cyclical, possibly signalling a problem with the computation of elasticities. The effect of the items which are assumed not to move with the cycle is non significant, but this overall result conceals offseting effects: public investment turns to be significantly procyclical and interest payments and transfers to firms are countercyclical.
    Keywords: Structural balances, output gap
    JEL: D6 D7 H
    Date: 2005–07–08
  12. By: Enrique Alberola (Banco de España)
    Abstract: El objetivo de la política económica en la última década ha sido la inserción de la economía española en el sistema económico europeo, caracterizado, en lo económico, por la apertura comercial y la competencia y, en lo social, por la existencia de un desarrollado Estado del Bienestar. Este capítulo se centra en el análisis de la política macroeconómica, que podemos definir como aquélla dirigida a mantener la economía en una senda estable de crecimiento. Puesto que los contenidos de otros capítulos del trabajo se solapan con esta definición, aquí nos ceñiremos a una concepción estrecha de la política monetaria, centrándonos en la política fiscal y la política monetaria.
    Keywords: Spain, European Union, economic integration
    JEL: D6 D7 H
    Date: 2005–07–08
  13. By: Nils Soguel (IDHEAP); Alexandre Tangerini (IDHEAP)
    Abstract: The normative literature on fiscal federalism generally recognises the need for fiscal equalisation mechanisms to facilitate the mitigation of inequities in the distribution of resources. The question of how far to go in matters of fiscal equalisation is a very sensitive one. Choices in this area reflect the prevailing social norms and the political debates, in the context of which these norms are expressed. Moreover, the political debates are characterised by the usual tensions between selfish and altruistic visions of society. The empirical part of this contribution analyses the results of two referenda recently held in the Canton of Vaud in Switzerland. It provides explanatory models for both ballots (acceptance rate of the propositions in each municipality). The model’s explanatory variables show that the people of Vaud’s voting behaviour was basically selfish. The widespread belief that voters are capable of altruism in this particular area is, therefore, rejected.
    JEL: D6 D7 H
    Date: 2005–07–08
  14. By: Nils Soguel (IDHEAP); Marc-Jean Martin (IDHEAP)
    Abstract: The aim of the paper is to show that the Swiss cantons do not care –or do not care that much– of the obligation of the article 100 of the federal Constitution, namely to adapt their fiscal policy according to the business cycle. More specifically, the paper aims at confirming on a factual basis that the cantonal fiscal policies are pro-cyclical. Indeed 2003 caracterised by an economic slowdown that could have been already anticipated while preparing the cantonal budgets for that very year. Whereas in most cantons it can be seen that the budgetary proposals for 2003 are either neutral toward the business cycle or more often procyclical. This statement is reinforced by statistical studies carried out by various researchers both at the cantonal individual level and allover the cantons using data for the long run. The meta-analysis of these studies shows that the Swiss cantons usually had behaved procyclically since there had been systematically and clearly more pro- cyclical impulses than contra-cyclical impluses.
    JEL: D6 D7 H
    Date: 2005–07–08
  15. By: Jean-Pierre Laffargue
    Abstract: This paper investigates time consistent policies and reforms of intergenerational transfers. If the weight the Government gives to the living elderly is low enough, successive Governments will implement policies with equitable results across generations, even if their social welfare function is not equitable with the unborn. The ratio of Government public debt to GDP will not change over time, and the consumption flows of successive generations will grow at the natural rate of the economy. However, if the Government gives a higher weight to the elderly, the ratio of public debt to GDP will increase over time. Then, future generations will have to pay higher and higher taxes and consume less and less. Demographic transition does not interfere with these results although it makes every consumer poorer. However, there is the possibility that the weight of the elderly in Government preferences has increased recently, and that some Western democracies are entering a process of increasing public indebtedness and immiserisation of future generations.
    Date: 2005
  16. By: Masahiro Endoh (Economic Growth Center, Yale University)
    Abstract: This paper examines the effects of lobbying activities across international borders, on determining each country’s import tariff in a multi-principal, multi-agent, menu-auction model. Cross-border political donations could promote international policy cooperation because of two of their distinctive characteristics. First, special interest groups use cross-border donations as tools to wield their influence on ruling parties of other countries directly, which promotes efficiency of policy formation. Second, for ruling parties of countries, cross-border donations make them take into account the impact of their policy on other countries, which makes them more sensitive to other countries’ welfare and, therefore, more cooperative with others. When ruling parties estimate the worth of political contributions from national special interest groups and from foreign lobbying groups with the same weight, Pareto-efficient tariffs are attained at which world welfare is maximized.
    Keywords: Cross-border Donations, Truthful Equilibrium, Pareto-Efficient Tariffs
    JEL: D72 F13 H21

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