nep-pbe New Economics Papers
on Public Economics
Issue of 2005‒09‒11
thirty-two papers chosen by
Peren Arin
Massey University

  1. (UBS Pensions Series 038) Reforming Public Pensions in the US and the UK By Peter Diamond
  3. The Economics of Workaholism: We Should Not Have Worked on This Paper By Daniel S. Hamermesh; Joel Slemrod
  4. Understanding the Effects of Government Spending on Consumption By Jordi Galí; J. David López-Salido; Javier Vallés
  5. Tax Competition and Tax Revenues By Alfred Boss
  6. Asymmetric Information, Tax Evasion and Alternative Instruments of Government Revenue By Rangan Gupta
  7. Tributação e a Organização dos Prestadores de Serviços no Brasil By Silvia Helena Barcellos; Juliano Junqueira Assunção; Rogério L. F. Werneck
  8. Institutions, Corruption and Tax Evasion in the Unofficial Economy By Hibbs Jr., Douglas A.; Piculescu, Violeta
  9. A Comparison of Alternative Tax Bases By John Freebairn
  10. Qualitative und quantitative Aspekte einer Elternrente By Michael Voigtländer
  11. Trade Spillovers of Fiscal Policy in the European Union: A Panel Analysis By Roel Beetsma; Massimo Giuliodori; Franc Klaassen
  12. Policy Response of Endogenous Tax Evasion By Rangan Gupta
  13. The Collection Efficiency of the Value Added Tax: Theory and International Evidence By Joshua Aizenman; Yothin Jinjarak
  14. Optimal fiscal and monetary policy with sticky wages and sticky prices By Sanjay K. Chugh
  15. Top Incomes in Sweden over the Twentieth Century By Roine, Jesper; Waldenström, Daniel
  16. Sluggish exit and entry of labour and capital, stability and effects of taxes and subsidies in models of fisheries By Asgeir Danielsson
  17. Fiscal Rules and Targets and Public Expenditure Management: Enthusiasm in the 1990s and its Aftermath By Hideaki Tanaka
  19. A Search Model of Venture Capital, Entrepreneurship, and Unemployment By Robin Boadway; Oana Secrieru; Marianne Vigneault
  20. Price elasticity estimates for tobacco and other addictive goods in India By Rijo M. John
  21. Fiscal Divergence and Business Cycle Synchronization: Irresponsibility is Idiosyncratic By Zsolt Darvas; Andrew K. Rose; György Szapáry
  22. Pre- and Post-Dynamic GST Effects on Goods and Services Included in the CPI Basket By Valadkhani, Abbas
  23. Vehicle Choices, Miles Driven, and Pollution Policies By Ye Feng; Don Fullerton; Li Gan
  24. Are Agricultural Extension Packages What Ethiopian Farmers Want? A Stated Preference Analysis By Carlsson, Fredrik; Köhlin, Gunnar; Mekonnen, Alemu; Yesuf, Mahmud
  25. Buergerversicherung vs. Gesundheitspraemie – Vergleich der Reformoptionen zur Finanzierung der Gesetzlichen Krankenversicherung By Anita B. Pfaff; Bernhard Langer; Florian Freund
  26. Discretionary Policy Interactions and the Fiscal Theory of the Price Level: A SVAR Analysis on French Data By Jerome Creel; Paola Monperrus-Veroni; Francesco Saraceno
  27. Tolima: deuda pública municipal con el sector financiero 1994-2003 By Pastor Enrique Quintero Carvajal; Jorge Edgar Silva Veloza
  28. Experimental Analysis of Neighborhood Effects By Jeffrey R. Kling; Jeffrey B. Liebman; Lawrence F. Katz
  29. Keeping Up with the Vaishyas: Caste and Relative Standing By Carlsson, Fredrik; Gupta, Gautam; Johansson-Stenman, Olof
  30. Informaility, Corruption and Trade Reform By Sugata Marjit; Amit Biswas
  31. Sweet land or Sweat land: Two proposals for facilitating access to land and adjustment to eroding EU sugar preferences in Fiji By Satish Chand
  32. Preferences Between Continuous Streams of Events By Charles M. Harvey; Lars Peter Østerdal

  1. By: Peter Diamond
    Abstract: This essay describes the current debate on reforming Social Security in the US, along with a brief description of how the program works. Along the way it comments on the quality of some reform proposals as well as their political standing. Where issues are similar, some inferences are drawn for the UK.
    Date: 2005–09
  2. By: K. Peren Arin; Faik Koray
    Abstract: We investigate the dynamic effects of five different fiscal shocks on the US economy using a structural vector autoregressive (SVAR) model that uses Blanchard-Quah type restrictions. We find that an increase in indirect taxes or in corporate taxes has a contractionary effect on the economy, while an increase in personal taxes in neither contractionary, nor expansionary. These results imply that the Ricardian Equivalance hypothesis holds only for personal taxes. On the spending side, we find that an increase in government wages and salaries has a contractionary effect on the economy, while an increase in defense spending is expansionary. Our results suggest that different fiscal shocks have different and offsetting effects on the economy, and using aggregated data may, therefore, conceal the effects of fiscal policy.
    JEL: E62 H20 H30
    Date: 2005–04
  3. By: Daniel S. Hamermesh; Joel Slemrod
    Abstract: A large literature examines the addictive properties of such behaviors as smoking, drinking alcohol and eating. We argue that for some people addictive behavior may apply to a much more central aspect of economic life: working. Workaholism is subject to the same concerns about the individual as other addictions, is more likely to be a problem of higher-income individuals, and can, under conditions of jointness in the workplace or the household, generate negative spillovers onto individuals around the workaholic. Using the Retirement History Survey and the Panel Study of Income Dynamics, we find evidence that is consistent with the idea that high-income, highly educated people suffer from workaholism with regard to retiring, in that they are more likely to postpone earlier plans for retirement. The evidence and theory suggest that the negative effects of workaholism can be addressed with a more progressive income tax system than would be appropriate in the absence of this behavior.
    JEL: J22 H24 D91
    Date: 2005–08
  4. By: Jordi Galí; J. David López-Salido; Javier Vallés
    Abstract: Recent evidence suggests that consumption rises in response to an increase in government spending. That finding cannot be easily reconciled with existing optimizing business cycle models. We extend the standard new Keynesian model to allow for the presence of rule-of-thumb consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending.
    JEL: E32 E62
    Date: 2005–08
  5. By: Alfred Boss
    Abstract: It is often feared that tax competition might lead to a “race to the bottom”. The consequence of a decline of tax rates on capital income would be shrinking capital income tax revenues and difficulties for national governments to perform their usual tasks. The paper analyzes what happened to tax revenues in a lot of OECD countries. It turns out that taxes on capital income contribute to the financing of public expenditures in a more or less unchanged extent; in addition, there are no significant changes of the level and the structure of total tax revenues.
    Keywords: Tax competition, „race to the bottom“, income tax revenues
    JEL: H20 H87
    Date: 2005–07
  6. By: Rangan Gupta (University of Connecticut and University of Pretoria)
    Abstract: Using a pure-exchange overlapping generations model, characterized with tax evasion and information asymmetry between the government (the social planner) and the financial intermediaries, we try and seek for the optimal tax and seigniorage plans, derived from the welfare maximizing objective of the social planner. We show that irrespective of whether the economy is characterized by tax evasion, or asymmetric information, a benevolent social planner, maximizing welfare and simultaneously financing the budget constraint, should optimally rely on explicit rather than implicit taxation.
    Keywords: Tax evasion; Information Asymmetry in Financial Markets
    JEL: E63
    Date: 2005–07
  7. By: Silvia Helena Barcellos; Juliano Junqueira Assunção (Department of Economics PUC-Rio); Rogério L. F. Werneck (Department of Economics PUC-Rio)
    Abstract: The real impact of taxes on the economy can only be assessed when we consider the behavioral responses of economic agents due to these taxes. This paper shows how income taxation in Brazil gives incentives to some classes of taxpayers to incorporate in order to reduce their tax burden. Microdata analysis on these taxpayers characteristics indicate that the probability of incorporation is strongly related to tax rule
    Keywords: Taxation, Organizational Form, Tax Avoidance.
    Date: 2005–02
  8. By: Hibbs Jr., Douglas A. (CEFOS, Göteborg University); Piculescu, Violeta (Department of Economics, School of Economics and Commercial Law, Göteborg University)
    Abstract: In this paper we propose a model of how institutional benefits, taxation and government regulations affect the productive activity of private enterprises. We consider an environment in which public officials enforcing tax and regulatory obligations are potentially corruptible, and markets for corruption may therefore arise that give firms the option of producing unofficially and evading taxes and regulations. By contrast to some previous studies that view corruption and bribery as forces driving firms out of official production into the underground economy, our model features the idea that the ‘grabbing hands’ of corrupt bureaucrats may alternatively serve as ‘helping hands’ allowing firms to exploit profitable opportunities in the unofficial sector. And contrary to a traditional view maintaining that high tax rates are intrinsically a major cause of large shadow economies, our model implies that incentives to evade taxation and produce underground depend on statutory tax rates relative to firm-specific thresholds of tax toleration. Tax toleration is determined, among other things, by firm-specific institutional benefits available to official producers and the costs of corruption required to produce unofficially. Some core predictions of the model concerning the determinants of tax toleration and the relative size of unofficial activity and tax evasion receive broad support from empirical analyses based on firm-level data from the World Business Environment Surveys sponsored by the World Bank. <p>
    Keywords: institutions; corruption; tax evasion; tax toleration; unofficial economy; underground economy; black economy; WEBS
    JEL: D21 H26 K42 O17
    Date: 2005–08–23
  9. By: John Freebairn (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: The revenue, efficiency, equity and operating costs properties of alternative tax bases or taxable sums are compared and contrasted. Initially the assessment is made for generic, comprehensive tax bases on income and consumption flows, wealth stocks, and on transactions. On the criteria of efficiency and equity, there are unresolved conceptual and empirical arguments in choosing between income, consumption and wealth tax bases, but general revenue raising transaction taxes are inferior. In practice, including in current Australia, the different tax bases are far from comprehensive because of the many exemptions and deductions. On all good tax design criteria, the case is made to broaden the tax bases for income, the GST, payroll and land taxes; special purpose transaction taxes to counter market failures should be redesigned; and conveyance duties and other stamp duties should be removed.
    Date: 2005–08
  10. By: Michael Voigtländer
    Abstract: On efficiency grounds, a social contract can be justified if not only pension payments but also the funding of education is taken into account. By introducing a pay-as-you system, which is a type of implicit social contract, each young generation can overcome its liquidity problems with regards to the financing of education and each older generation gains an attractive investment opportunity as funding human capital offers high returns and allows for an additional diversification of risks. As the marginal returns to education are decreasing, however, pension entitlements should be made contingent on educational investments and on the number of children. Given the tax-financed provision of education in Germany, especially the introduction of child pensions promises efficiency gains for the statutory pension systems. Additionally, it is shown how child pensions can be quantified. With reference to the concept of fiscal returns to education a relationship between child-rearing, education and income can be established. As the calculations suggest, one third of all pension entitlements in the German statutory pension scheme should be granted according to the number of children. Finally, the article shows how the institutional setting of the German pension system has to be changed in order to implement a child pension.
    Keywords: pension reform, child pensions, returns to education
    JEL: H55
    Date: 2005–07
  11. By: Roel Beetsma; Massimo Giuliodori; Franc Klaassen
    Abstract: We explore the international spillovers from fiscal policy shocks via trade in Europe. A fiscal expansion stimulates domestic activity, which leads to more foreign exports and, hence, higher foreign output. To quantify this, we combine a panel VAR model in government spending, net taxes and GDP with a panel trade model. On average, a public spending increase equal to 1% of GDP implies 2.3% more foreign exports over the first two years. The corresponding figure for an equal-size net tax reduction is 0.6%. Both estimates are statistically significant. As far as the effect on foreign activity is concerned, a 1% of GDP spending increase (net tax reduction) in Germany on average raises GDP of trading partners by 0.23% (0.06%) over the first two years. These figures are likely to form lower bounds for the actual effects and suggest that it may be worthwhile to further investigate the benefits from coordinated fiscal expansions (contractions) in response to European-wide cyclical downturns (upswings).
    Keywords: Fiscal shocks; trade spillovers; European Union; coordination; impulse responses.
    JEL: E62 F41 F42
    Date: 2005–08
  12. By: Rangan Gupta (University of Connecticut and University of Pretoria)
    Abstract: The paper analyzes the relationship between the "optimal" degree of tax evasion and policy decisions in a simple overlapping generations framework. The model suggests that the best way to effectively reduce tax evasion is through increases in penalty rates.
    Keywords: Underground Economy; Tax evasion; Macroeconomic Policy.
    JEL: E63
    Date: 2005–07
  13. By: Joshua Aizenman; Yothin Jinjarak
    Abstract: This paper evaluates the political economy and structural factors explaining the collection efficiency of the Value Added Tax [VAT]. We consider the case where the collection efficiency is determined by the probability of audit and by the penalty on underpaying. Implementation lags imply that the present policy maker determines the efficiency of the tax system next period. Theory suggests that the collection efficiency is impacted by political economy considerations greater polarization and political instability would reduce the efficiency of the tax collection. In addition, collection is impacted by structural factors affecting the ease of tax evasion, like the urbanization level, the share of agriculture, and trade openness. Defining the collection efficiency of the VAT as the ratio of the VAT revenue to aggregate consumption divided by the standard VAT rate, we evaluate the evidence on VAT collection efficiency in a panel of 44 countries over 1970-99. The results are consistent with the theory - a one standard deviation increase in durability of political regime, and in the ease and fluidity of political participation, increase the VAT collection efficiency by 3.1% and 3.6%, respectively. A one standard deviation increase in urbanization, trade openness, and the share of agriculture changes the VAT collection efficiency by 12.7%, 3.9%, and - 4.8%, respectively. In addition, a one standard deviation increase in GDP/Capita increases the tax efficiency by 8.1%. Qualitatively identical results apply for an alternative measure of VAT collection efficiency, defined by the ratio of VAT revenue to GDP divided by the standard VAT.
    JEL: F15 H21
    Date: 2005–08
  14. By: Sanjay K. Chugh
    Abstract: We determine the optimal degree of price inflation volatility when nominal wages are sticky and the government uses state-contingent inflation to finance government spending. We address this question in a well-understood Ramsey model of fiscal and monetary policy, in which the benevolent planner has access to labor income taxes, nominal riskless debt, and money creation. One main result is that sticky wages alone make price stability optimal in the face of government spending shocks, to a degree quantitatively similar as sticky prices alone. With productivity shocks also present, optimal inflation volatility is higher, but still dampened relative to the fully-flexible economy. Key for our results is an equilibrium restriction between nominal price inflation and nominal wage inflation that holds trivially in a Ramsey model featuring only sticky prices. We also show that the nominal interest rate can be used to indirectly tax the rents of monopolistic labor suppliers. Interestingly, a necessary condition for the ability to use the nominal interest rate for this purpose is positive producer profits. Taken together, our results uncover features of Ramsey fiscal and monetary policy in the presence of labor market imperfections that are widely-believed to be important.
    Keywords: Inflation (Finance) - Mathematical models ; Monetary policy - Mathematical models ; Fiscal policy - Mathematical models
    Date: 2005
  15. By: Roine, Jesper (Dept. of Economics, Stockholm School of Economics); Waldenström, Daniel (Dept. of Economics, Stockholm School of Economics)
    Abstract: This paper presents homogenous series of top income shares in Sweden from 1903 to 2003 using individual tax returns data. We find that Swedish top incomes have developed more similarly to the US, Canada and the UK than to other continental European countries when capital gains are included. The top income shares are U-shaped over time, falling steadily until around 1980 when they start increasing again. Around 2000 they reach levels similar to those found around 1950, before the expansion of the Swedish welfare state. However, unlike the Anglo-Saxon countries, where the recent increases were mainly driven by increased wage earnings inequality, Swedish top income shares have risen almost exclusively due to capital gains, a finding consistent with relatively high marginal wage taxes and internationally high price increases in financial and real estate markets since 1980. When excluding capital gains the increase in top income shares since 1980 almost disappears and the Swedish experience looks more like that of continental Europe. Furthermore, we also find that the largest decrease of top income shares happens between 1935 and the beginning of the 1950s, but not (as in the US and in France) during the war years, but before 1939 and after 1945 suggesting that the Swedish development was more driven by policy than by exogenous shocks.
    Keywords: Income inequality; Top incomes; Sweden; Taxation
    JEL: D31 H20 J30 N30
    Date: 2005–08–15
  16. By: Asgeir Danielsson
    Abstract: It is assumed that exit and entry of fishermen, as well as vessels, is not instantaneous. The wage rate varies with the fortunes of the fishing firms and affects the endogenous labour supply creating a second transmission mechanism from profits to effort. There are realistic cases where this mechanism has important effects on the stability of the dynamic system and on the effects of taxes (subsisdies) on the size of the fish stock. If labour supply depends negatively on the wage rate, the immediate effect of an increase in the tax rate is to increase effort and harvest. In some cases the increase in the tax rate increases overexploitation also in the long term. This outcome is highly probable if the dynamic system is unstable.
    Date: 2004–01
  17. By: Hideaki Tanaka (Australia–Japan Research Centre, The Australian National University, Canberra)
    Abstract: The 1990s saw an era of fiscal consolidation in industrialised countries, which struggled with fiscal deficits throughout the 1970s and 1980s. Reforms in public expenditure management, typically the introduction of fiscal rules and targets, together with favourable economic growth contributed to a significant improvement in fiscal positions. However, fiscal deficits have been increasing again since the turn of the 21st century in many OECD countries. Interestingly, some countries have been able to maintain fiscal discipline since the achievement of fiscal balance in the latter half of the 1990s. What has caused this difference? This paper derives important lessons for reform in public expenditure management from the experiences of major OECD countries’, including Australia, France, Germany, Japan, the Netherlands, New Zealand, Sweden, the UK and the USA. Essentially, success in maintaining fiscal discipline lies in maintaining a firm political commitment, and strengthening expenditure management that underpins any such commitment, specifically a medium-term fiscal plan in line with fiscal rules and targets in a centralised and transparent manner. Public expenditure management reform is a cornerstone of the restructuring of public sector services, especially in welfare programs aimed at overcoming problems arising from an aging population.
    Keywords: fiscal deficit, public expenditure management, OECD, Australia, France, Germany, Japan, Netherlands, New Zealand, Sweden, UK, USA, welfare programs, aging population
    JEL: O23 H87 E63
    Date: 2005–01
  18. By: Hutlkrantz, Lars (Department of Business, Economics, Statistics and Informatics); Armelius, Hanna (Uppsala universitet)
    Abstract: A full-scale road pricing seven months trial will be performed in Stockholm in 2006. The road tolls are bundled with major improvements of public transport. The trial will be followed by a local referendum. <p> We conduct numerical simulations with a model of modal choice to estimate the welfare effects of road tolls on commuters crossing the toll zone. We find that in the absence of revenue recycling, few commuters gain from the road-toll reform. However, the fraction who gain rises considerably when public transport is improved as planned in Stockholm.
    Keywords: Congestion charges; road tolls; distributional effects; modal choice
    JEL: H23 H54 R48
    Date: 2005–08–12
  19. By: Robin Boadway; Oana Secrieru; Marianne Vigneault
    Abstract: The authors develop a search model of venture capital in which the number of successful matches of entrepreneurs and venture capitalists (VCs) at any moment in time is a function of the number of entrepreneurs searching for funds, the number of VCs searching for entrepreneurs, and the number of vacancies posted by each VC. The authors extend the literature by incorporating search unemployment and they explicitly model the occupational choice of individuals to become workers or entrepreneurs. Their analysis shows that, in the market equilibrium, the level of advice VCs offer is inefficiently low compared with the social optimum. Furthermore, the number of vacancies, the level of employment, and the number of potential entrepreneurs are generally either too low or too high relative to their socially optimal level. Policy to achieve the social optimum consists of a capital gains subsidy, an employment tax or subsidy, and an investment tax or subsidy.
    Keywords: Financial markets; Fiscal policy; Labour markets
    JEL: D82 G18 G24 H21 J64
    Date: 2005
  20. By: Rijo M. John (Indira Gandhi Institute of Development Research)
    Abstract: The tax base of tobacco in India is found to be heavily depended on about fifteen percent of the tobacco users who represent cigarettes smokers. Non-cigarette tobacco products used by the majority of tobacco users are largely out of the tax net. Analysis of the price elasticity of various tobacco products would bring out the potential of tax as an instrument to control tobacco use of any kind. In this context, this paper examines how the demand for a variety of tobacco products and addictive goods such as pan and alcohol respond to changes in prices. The spatial variations of prices that are obtained from a cross section of 120,000 households spread across the country have been used for this purpose. Estimates of price elasticities showed that the own price elasticity estimates of various addictive goods in India ranged between -0.5 to -1.0 with bidis, leaf tobacco and alcohol having elasticities close to unity, cigarettes being the least price elastic of all. As against the general notions regarding the complementarity between cigarettes and alcohol, our study nds that these are substitutes at least in urban India. We also observed that, over a five year period, the addictive goods such as bidis and leaf tobacco in India have become slightly more price responsive while elasticity of cigarettes and pan have stabilized. With some assumptions, it is shown that taxes on cigarettes can be raised nearly 2.5 times the current level while that of bidis can be raised tenfold without any fall in revenue.
    Keywords: Tobacco, Bidi, Cigarette, Alcohol, Consumption, Elasticity, India
    JEL: C31 D12 H21 I18 R22
    Date: 2005–08
  21. By: Zsolt Darvas; Andrew K. Rose; György Szapáry
    Abstract: Using a panel of 21 OECD countries and 40 years of annual data, we find that countries with similar government budget positions tend to have business cycles that fluctuate more closely. That is, fiscal convergence (in the form of persistently similar ratios of government surplus/deficit to GDP) is systematically associated with more synchronized business cycles. We also find evidence that reduced fiscal deficits increase business cycle synchronization. The Maastricht “convergence criteria,” used to determine eligibility for EMU, encouraged fiscal convergence and deficit reduction. They may thus have indirectly moved Europe closer to an optimum currency area, by reducing countries’ abilities to create idiosyncratic fiscal shocks. Our empirical results are economically and statistically significant, and robust.
    JEL: F42
    Date: 2005–08
  22. By: Valadkhani, Abbas (University of Wollongong)
    Abstract: This paper quantifies the magnitude and duration of the GST effect on the quarterly growth rate of the eleven groups of the consumer price index (CPI) in Australia using the Box and Tiao intervention analysis. It was found that prices did not increase significantly before or after the introduction of GST beyond what could have been expected on the basis of the discernible systematic pattern of fluctuation in the data. Furthermore, the varying one-off effect of GST on prices was significant in seven out of eleven CPI groups, the effect was found insignificant for the other four CPI groups.
    Keywords: Intervention Analysis; Goods and Services Tax; Australia
    JEL: C22 E31 H71 C22
    Date: 2005
  23. By: Ye Feng; Don Fullerton; Li Gan
    Abstract: Mobile sources contribute large percentages of each pollutant, but technology is not yet available to measure and tax emissions from each vehicle. We build a behavioral model of household choices about vehicles and miles traveled. The ideal-but-unavailable emissions tax would encourage drivers to abate emissions through many behaviors, some of which involve market transactions that can be observed for feasible market incentives (such as a gas tax, subsidy to new cars, or tax by vehicle type). Our model can calculate behavioral effects of each such price and thus calculate car choices, miles, and emissions. A nested logit structure is used to model discrete choices among different vehicle bundles. We also consider continuous choices of miles driven and the age of each vehicle. We propose a consistent estimation method for both discrete and continuous demands in one step, to capture the interactive effects of simultaneous decisions. Results are compared with those of the traditional sequential estimation procedure.
    JEL: D12 H23 Q58
    Date: 2005–08
  24. By: Carlsson, Fredrik (Department of Economics, School of Economics and Commercial Law, Göteborg University); Köhlin, Gunnar (Department of Economics, School of Economics and Commercial Law, Göteborg University); Mekonnen, Alemu (Department of Economics, Addis Ababa University, Ethiopia; and Environmental Economics Policy Forum); Yesuf, Mahmud (Environmental Economics Policy Forum, Ethiopian Development Research Institute, Ethiopia)
    Abstract: There is an evident dichotomy in many rural development policies in the world between extension driven adoption of modern inputs and community driven local public goods. However, the target populations of these policies seldom have the possibility to express their preference between these two policies. In this paper we report the results of a stated preference survey in the highlands of Ethiopia where the farmers are given a choice between an agricultural extension package and a local public good - health care or protected spring. The study finds that a majority of people prefers the public good. However, when the extension package is combined with insurance in terms of no payback of the credit in case of crop loss, then we find a significant increase in the choice of the extension package. The study thus sheds light on why Ethiopia’s major development strategy has had limited success and gives evidence of how stated preference methodologies can be utilized for development policy design. <p>
    Keywords: Agricultural extension; choice experiment; local public goods; Ethiopia; Africa
    JEL: D13 H41 H43 O13
    Date: 2005–08–17
  25. By: Anita B. Pfaff (University of Augsburg, Department of Economics); Bernhard Langer (University of Augsburg, Department of Economics); Florian Freund (University of Augsburg, Department of Economics)
    Abstract: The wage-dependence of the Public Health Insurance (PHI) as well as the somewhat inconsistent parallel coverage via PHI and private health insurance constitute drawbacks of the present health care revenue system, leading to undesirable distributional and allocative patterns and disadvantages in the course of demographic and economic change. Two conflicting approaches, the “Buergerversicherung” (“Citizens’ Health Insurance”) and the “Gesundheitsprämie” (“Flat Rate Health Insurance”) try to remedy these by way of different methods – the former with a statutory health insurance for all and a comprehensive income basis for proportionate health insurance contributions, the latter with a flat rate contribution for the present PHI including a massive tax subsidy for the contributions for low-income groups and children. The paper presents simulations of the distributional effects. Differing effects become evident. Moreover these patterns also reflect different “philosophies” of social welfare and public revenue regimes. The “Bürgerversicherung” reduces payments by wage and wage-replacement earners and generally by low income groups, the “Gesundheitspraemie” favors higher-income individuals and particularly two-earner married couples.
    Keywords: Social Health Insurance System, Public Finance
    JEL: I10 I18
    Date: 2005–09
  26. By: Jerome Creel (Observatoire Français des Conjonctures Économiques); Paola Monperrus-Veroni (Observatoire Français des Conjonctures Économiques); Francesco Saraceno (Observatoire Français des Conjonctures Économiques)
    Abstract: We estimate a SVAR model of the French economy. The econometric method originates in Blanchard and Perotti [Quarterly Journal of Economics, 2002] but owes also extensively to the fiscal theory of the price level (FTPL) that investigates the interactions between government surplus, debt accumulation and price dynamics. We have the objective, on the one hand, of assessing the effects of fiscal and monetary policy shocks on the economy; and, on the other, of studying the strategic interactions between fiscal and monetary authorities. As a consequence, the theoretical restrictions to identify our model are derived from a FTPL framework. Our estimations reveal so-called Keynesian features of fiscal and monetary shocks; meanwhile, they are consistent with the prediction of the FTPL as regards price dynamics. Although the first part of our findings agrees with most of the recent literature on the subject, the non-rejection of the FTPL is an originality.
    Keywords: Fiscal policy, Monetary policy, Fiscal theory of the price level, Structural VAR, France
    JEL: C32 E60 E63 H60
    Date: 2005
  27. By: Pastor Enrique Quintero Carvajal; Jorge Edgar Silva Veloza
    Abstract: En este documento se describe el comportamiento de la deuda pública con el sector financiero de 15 municipios del Tolima, así como el servicio de la misma (amortizaciones a capital e intereses) y su relación con otras variables: PIB regional, rentas y gastos. Para ello se utilizaron como fuentes estadísticas las ejecuciones presupuestales de ingresos y gastos, los informes financieros de la contraloría municipal, departamental y nacional, como también, las bases de datos del Ministerio de Hacienda y Crédito Público, la Superintendencia Bancaria y la Contaduría General de la Nación. Los resultados reflejan unos elevados niveles de endeudamiento de estos municipios, que disminuyeron en los dos últimos años del período que abarca el estudio, en virtud de las medidas y apoyos otorgados por el estado colombiano; sin embargo, aún persisten niveles preocupantes en su situación de endeudamiento.
    Keywords: Deuda Pública financiera, .
    JEL: H63
    Date: 2005–01–30
  28. By: Jeffrey R. Kling; Jeffrey B. Liebman; Lawrence F. Katz
    Abstract: Families, primarily female-headed minority households with children, living in high-poverty public housing projects in five U.S. cities were offered housing vouchers by lottery in the Moving to Opportunity program. Four to seven years after random assignment, families offered vouchers lived in safer neighborhoods that had lower poverty rates than those of the control group not offered vouchers. We find no significant overall effects of this intervention on adult economic self-sufficiency or physical health. Mental health benefits of the voucher offers for adults and for female youth were substantial. Beneficial effects for female youth on education, risky behavior, and physical health were offset by adverse effects for male youth. For outcomes exhibiting significant treatment effects, we find, using variation in treatment intensity across voucher types and cities, that the relationship between neighborhood poverty rate and outcomes is approximately linear.
    JEL: H43 I18 I38 J38
    Date: 2005–08
  29. By: Carlsson, Fredrik (Department of Economics, School of Economics and Commercial Law, Göteborg University); Gupta, Gautam (Department of Economics, Jadavpur University); Johansson-Stenman, Olof (Department of Economics, School of Economics and Commercial Law, Göteborg University)
    Abstract: We investigate the importance of relative income within the Indian Caste system, using a choice experiment. We find that slightly more than half of the marginal utility of income comes from some kind of relative income effects, on average, which is comparable to the results from previous studies in other countries. Belonging to a low caste and having a low family income are associated with higher concern for relative income. Moreover, an increase in the mean income of the caste to which the individual belongs, everything else held constant, reduces utility for the individual. Thus, the negative welfare effect of reduced relative income compared to the average own caste income dominates the positive welfare effect of increased relative income of the own caste relative to other castes. <p>
    Keywords: Caste; India; relative income; positionality; status; questionnaire-experimental methods; random utility models; choice experiments
    JEL: C91 D63 H21
    Date: 2005–08–17
  30. By: Sugata Marjit (Department of Economics and Finance, City University of Hong Kong); Amit Biswas (Viswasharati University, india)
    Abstract: Stringent regulations coupled with corruption generate and sustain extra legal or informal transactions in the developing countries. Does trade related reform discourage informal activities and corruption? This appears attempts to analyze such a phenomenon. An import competing firm allocates production between a high wage formal and a low wage informal segment. Illegal use of labour in the informal sectior is characterized by a probability of punishment which depends on the size of the informal output. In such a structure, as tariff comes down, total employment contracts but the informal sector expands. However, lowering of interest rate, possibly through the liberalization of capital account, tends to reduce the size of the informal segment. Hence, trade reforms may have conflicting impact on informaility and corruption.
    Keywords: Trade liberalization, informal sector, corruption
    JEL: F11 H2
    Date: 2004–12
  31. By: Satish Chand (Asia Pacific School of Economics and Government, Australian National University)
    Abstract: The resolution of problems with lease renewals in Fiji, particularly in the sugarcane districts, has ramifications for private investment and growth in the entire economy. The impending withdrawal of subsidies to sugar as world trade is liberalised has increased the urgency of finding solutions to these problems. This paper draws on game theory to characterise the problems facing the Fiji sugar industry. The incentives for land and ethnic politics are identified. Separate proposals are put forward to facilitate secure access to land and to minimise adjustment costs from the erosion of preferences under the Sugar Protocol. The rationalisation forced upon the sugar industry, if managed well, could induce land reforms that could improve the investment climate and the prospects for growth, whilst minimising pains of adjustment.
    Keywords: Fiji, access to land, EU, Sugar, European Union, economic growth, private investment, game theory, rationalisation
    JEL: C70 O13 H71
    Date: 2004–06
  32. By: Charles M. Harvey (Department of Decision and Information Sciences, University of Houston); Lars Peter Østerdal (Department of Economics, University of Copenhagen)
    Abstract: Cost-benefit and health policy studies often model a consequence occurring over time as a continuous stream of events. Such a consequence is measured by the rates at which events occur or by the states that occur, and the value of the consequence is measured by an integral. This paper presents a foundation for such models. It defines conditions on preferences between consequences that are equivalent to an integral value function having a discounting function and an intertemporal equity function.
    Keywords: discounting; equity; continuous time; value function; evaluation
    JEL: D90 H43 I31
    Date: 2005–08

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