nep-pbe New Economics Papers
on Public Economics
Issue of 2005‒10‒15
35 papers chosen by
Peren Arin
Massey University

  1. Modelling and Forecasting Fiscal Variables for the Euro Area By Carlo Favero; Massimiliano Marcellino
  2. Why is fiscal policy often procyclical? By Alberto Alesina; Guido Tabellini
  3. Racial profiling as a public policy question : efficiency, equity, and ambiguity By Durlauf,S.N.
  4. Education Attainment in Brazil: The Experience of FUNDEF By Luiz de Mello; Mombert Hoppe
  5. Who Bears the Corporate Tax? A review of What We Know By Alan J. Auerbach
  6. The Different Extent of Privatisation Proceeds in EU Countries: A Preliminary Explanation Using a Public Choice Approach By Ansgar Belke; Frank Baumgärtner; Friedrich Schneider; Ralph Setzer
  7. Ageing, Welfare Serviced and Municipalities in Finland By Jens Lundsgaard
  8. The CES Utility Function, Non-linear Budget Constraints and Labour Supply: Results on Prime-age Males in Japan By Shun-ichiro Bessho; Masayoshi Hayashi
  9. Nonlinear Taxation and Punishment By Andersson, Tommy
  10. Measuring Cyclically-adjusted Budget Balances for OECD Countries By Christophe André; Nathalie Girouard
  11. Designing Optimal Taxes With a Microeconometric Model of Household Labour Supply By Rolf Aaberge; Ugo Colombino
  12. The Marginal Cost of Public Fund in Africa By AURIOL, Emmanuelle; WARLTERS, Michael
  13. The Social Cost of Public Funds: The Case of Japanese Progressive Income Taxation By Shun-ichiro Bessho; Masayoshi Hayashi
  14. Stabilization versus insurance: welfare effects of procyclical taxation under incomplete markets By James S. Costain; Michael Reiter
  15. Fiscal Hedging and the Yield Curve By Hanno Lustig; Christopher Sleet; Sevin Yeltekin
  16. Distributional Effects of Environmental Taxes on Transportation. Evidence from Engel Curves in the United States By Erling Røed Larsen
  17. Value-Added Tax Treatment of Public Sector Bodies and Non-Profit Organizations: A Developing Country Perspective By Pierre-Pascal Gendron
  18. Base independence in the analysis of tax policy effects: with an application to Norway 1992–2004 By Peter J. Lambert and Thor O. Thoresen
  19. Avoiding Adverse Employment Effects from Energy Taxation: What does it cost? By Geir H. Bjertnæs
  20. "Public Debt and Economic Growth in an Aging Japan" By Toshihiro Ihori; Ryuta Ray Kato; Masumi Kawade; Shun-ichiro Bessho
  21. Estimating a Fiscal Reaction Function: The Case of Debt Sustainability in Brazil By Luiz de Mello
  22. The Labour Market Impact of Rapid Ageing of Government Employees: Some Illustrative Scenarios By Jens Høj; Sylvie Toly
  23. Taxation, Ethnic Ties and the Location Choice of Highly Skilled Immigrants By Thomas Liebig; Alfonso Sousa-Poza
  24. Impact of Changes in Tariffs on Developing Countries' Government Revenue By Przemyslaw Kowalski
  25. Boosting Growth Through Greater Competition in Denmark By Martin Jørgensen
  26. "Interaction between Monetary and Fiscal Policy and the Policy Mix, Theoretical Consideration and Japanese Experience" By Yasushi Iwamoto
  27. Monitoring sickness insurance claimants: evidence from a social experiment By Hesselius, Patrik; Johansson, Per; Larsson, Laura
  28. Una aproximación a los posibles efectos de la estabilidad presupuestaria sobre el gasto municipal de capital By Jaime Vallés Giménez; Anabel Zártate Marco
  29. Do Social PreferencesIncrease Productivity? Field experimental evidence from fishermen in Toyoma Bay By Jeffrey Carpenter; Erika Seki
  30. Earmarking in Theory and Korean Practice By Richard M Bird; Joosung Jun
  31. A Political Economy Theory of the Soft Budget Constraint By James A. Robinson; Ragnar Torvik
  32. A Note on the Anglo-Saxon and Continental Approaches to Europe: Identical in Spirit, not in Practice By Thierry Warin
  33. Fifteen Years of Economic Reform in Russia: What has been Achieved? What Remains to be Done? By Rudiger Ahrend; William Tompson
  34. A theory of civil conflict and democracy in rentier states By Silje Aslaksen; Ragnar Torvik
  35. Getting Better Value for Money from Sweden's Healthcare System By David Rae

  1. By: Carlo Favero; Massimiliano Marcellino
    Abstract: In this paper we assess the possibility of producing unbiased forecasts for fiscal variables in the euro area by comparing a set of procedures that rely on different information sets and econometric techniques. In particular, we consider ARMA models, VARs, small scale semi-structural models at the national and euro area level, institutional forecasts (OECD), and pooling. Our small scale models are characterized by the joint modelling of fiscal and monetary policy using simple rules, combined with equations for the evolution of all the relevant fundamentals for the Maastricht Treaty and the Stability and Growth Pact. We rank models on the basis of their forecasting performance using the mean square and mean absolute error criteria at different horizons. Overall, simple time series methods and pooling work well and are able to deliver unbiased forecasts, or slightly upward biased forecast for the debt-GDP dynamics. This result is mostly due to the short sample available, the robustness of simple methods to structural breaks, and to the difficulty of modelling the joint behaviour of several variables in a period of substantial institutional and economic changes. A bootstrap experiment highlights that, even when the data are generated using the estimated small scale multi country model, simple time series models can produce more accurate forecasts, due to their parsimonious specification.
  2. By: Alberto Alesina; Guido Tabellini
    Date: 2005–10–06
  3. By: Durlauf,S.N. (University of Wisconsin-Madison, Social Systems Research Institute)
    Date: 2005
  4. By: Luiz de Mello; Mombert Hoppe
    Abstract: For many years, Brazil lagged behind other middle-income countries in terms of school enrolment rates. But since 1998 policies have aimed at bridging this gap, in particular, with the implementation of FUNDEF, a fund for financing sub-national spending on primary and lower-secondary education. Using state- and municipality-level data during 1991-2002, this paper shows that FUNDEF played a key role in the increase in enrolment rates over the period, particularly in small municipalities, which rely more heavily on transfers from higher levels of government as a source of revenue. These findings underscore the importance of FUNDEF in eliminating supply constraints to the improvement of education attainment. Enrolment rates are now nearly universal for primary and lower-secondary education. Emphasis should therefore be placed on policies to improve the quality of services and to remove supply constraints to the expansion of enrolment in upper-secondary and tertiary education. <P>Les taux d'inscription scolaire au Brésil Pendant de nombreuses années, les taux d'inscription scolaire au Brésil sont restés derrière ceux des pays à revenu moyen. Mais depuis 1998 des politiques ont visé à réduire cet écart, en particulier, avec la mise en place de FUNDEF, un fonds pour financer la dépense de l'éducation du primaire et du premier cycle du secondaire au niveau local. En utilisant des données au niveau des états et des municipalités de 1991 à 2002, cet article montre que FUNDEF a joué un rôle majeur dans l'augmentation des taux d'inscription au cours de la période, en particulier dans les petites municipalités, qui dépendent plus fortement des transferts à partir des niveaux plus élevés d’administration comme source de revenu. Ces résultats soulignent l'importance de FUNDEF en éliminant les contraintes d’offre liées à l'amélioration des résultats d'éducation. Les taux d'inscription sont maintenant presque universels pour l'éducation du primaire et du premier cycle du secondaire. L'accent devrait donc être mis sur des politiques pour améliorer la qualité des services et pour enlever des contraintes d’offre sur l'expansion de l'inscription dans l'enseignement du deuxième cycle du secondaire et du tertiaire.
    Keywords: education, éducation, Brazil, Brésil, decentralisation, school enrolment, décentralisation, inscription scolaire
    JEL: H52 H72 H77
    Date: 2005–04–04
  5. By: Alan J. Auerbach
    Abstract: This paper reviews what we know from economic theory and evidence about who bears the burden of the corporate income tax. Among the lessons from the recent literature are: 1. For a variety of reasons, shareholders may bear a certain portion of the corporate tax burden. In the short run, they may be unable to shift taxes on corporate capital. Even in the long run, they may be unable to shift taxes attributable to a discount on "old" capital, taxes on rents, or taxes that simply reduce the advantages of corporate ownership. Thus, the distribution of share ownership remains empirically quite relevant to corporate tax incidence analysis, though attributing ownership is itself a challenging exercise. 2. One-dimensional incidence analysis -- distributing the corporate tax burden over a representative cross-section of the population -- can be relatively uninformative about who bears the corporate tax burden, because it misses the element timing. 3. It is more meaningful to analyze the incidence of corporate tax changes than of the corporate tax in its entirety, because different components of the tax have different incidence and incidence relates to the path of the economy over time, not just in a single year.
    JEL: H22 H25
    Date: 2005–10
  6. By: Ansgar Belke (University of Hohenheim and IZA Bonn); Frank Baumgärtner (University of Hohenheim); Friedrich Schneider (University of Linz and IZA Bonn); Ralph Setzer (University of Hohenheim)
    Abstract: This paper empirically investigates the differences in the motives of raising privatisation proceeds for a panel of EU countries from 1990 to 2000. More specifically, we test whether privatisations can be mainly interpreted (a) as ingredients of a larger reform package of economic liberalisation in formerly overregulated economies, (b) as a reaction to an increasing macroeconomic problem pressure and (c) as a means to foster growth and increase tax income and relax the fiscal stance with an eye on the demands by integration of economic and financial markets. Whereas we are able to corroborate claim (a) only partly, we gain consistent evidence in favour of claims (b) and (c).
    Keywords: European Union, panel analysis, partisan theory, privatisation proceeds, state-owned enterprises
    JEL: H42 E62 L33
    Date: 2005–09
  7. By: Jens Lundsgaard
    Abstract: With population ageing setting in sooner and more forcefully than in other OECD countries, Finland needs to reorder its fiscal priorities so as to ensure fiscal sustainability. That will require considerable reform as public spending currently expands vigorously. While GDP growth has slowed from the exceptionally rapid pace of the late 1990s, public consumption has continued to grow fast, as new obligations by central government and popular demand led municipalities to expand service provision. After some consolidation in 2003, local government spending has accelerated again and the deficit has widened to ¾ per cent of GDP in 2004 for the municipalities considered as a whole – despite still larger transfers from central government. At the same time, the tax burden is high, especially on labour. Ensuring the sustainability of public finances over the long term, while maintaining the essential parts of the welfare society will only be possible by i) raising the effectiveness of public spending, ii) reforming the financing of municipalities to encourage better control of spending and limit future rises in municipal income taxation and iii) rebalancing the mix between public and private provision and funding of services. This working paper discusses ways in which progress could be made on such a policy agenda. It relates to the 2004 OECD Economic Survey of Finland ( updating the Survey’s analysis by incorporating data for 2004 and recent developments. <P>Vieillissement, services sociaux et collectiviés locales en Finlande Avec une population qui vieillit plus rapidement et plus fortement que dans les autres pays de l’OCDE, la Finlande se trouve dans l’obligation d’ajuster ses priorités budgétaires afin d’en assurer la viabilité à plus long terme. Il faudra pour cela des réformes considérables, car l’expansion des dépenses publiques est actuellement très forte. Bien que la croissance du PIB se soit ralentie par rapport à son rythme exceptionnellement rapide du début des années 90, la consommation publique a continué à progresser rapidement, les nouvelles obligations imposées par l’administration centrale et par la pression des usagers ayant amené les municipalités à accroître leur offre de services publics. Après une certaine stabilisation en 2003, les dépenses des collectivités locales se sont à nouveau accélérées et le déficit a été porté à ¾ pour cent du PIB en 2004 pour les municipalités considérées dans leur ensemble – malgré le versement de transferts encore plus importants par l’administration centrale. Quant à la charge fiscale, elle reste élevée, surtout celle qui pèse sur la main-d’œuvre. Il ne sera possible d’assurer la stabilisation à long terme des finances publiques tout en maintenant les éléments essentiels de la protection sociale qu’à condition i) d’améliorer l’efficacité des dépenses publiques, ii) de réformer le financement des communes pour les inciter à mieux contrôler leurs dépenses et limiter les augmentations futures de l’impôt municipal sur le revenu et iii) de rééquilibrer le partage entre le secteur public et le secteur privé dans l’offre et dans le financement des services publics. Ce document de travail examine les moyens de progresser dans la réalisation de ce programme. Il se réfère à l’Etude économique de 2004 de l’OCDE sur la Finlande ( et met à jour les analyses effectuées dans cette étude en y insérant des données pour 2004 et en prenant en compte l’évolution récente.
    Keywords: Finland, fiscal policy, politique budgétaire, ageing, public sector efficiency, efficacité du secteur public, pensions, local government, retraites, vouchers, fiscal federalism, vieillissement, fédéralisme budgétaire, Finlande, impôt sur le revenu, contracting out, income tax, property tax, welfare services, collectivités locales, bons d'achat, externalisation, impôt immobilier, services sociaux
    JEL: H2 H4 H5 H7 L3
    Date: 2005–05–10
  8. By: Shun-ichiro Bessho (Ministry of Finance Japan - Policy Research Institute); Masayoshi Hayashi (Ministry of Finance Japan - Policy Research Institute)
    Abstract: When the labour supply is elastic with respect to the net wage, labour income taxation generates economic distortion and welfare loss. The substitute effect is a key determinant of the magnitude of such deadweight loss; thus, evaluating the elasticity of the labour supply has broad and significant implications for assessing the effects of changes in public policy. We estimate the labout supply function based on the CES utility function, using large microdata sets in Japan and treating the complex Japanese income tax system carefully. The results of this chapter suggest that the uncompensated elasticity of the labour supply of prime-age males is at most 0.1.
    Keywords: piecewise linear budget constraint, labout supply, CES utility function
    JEL: D31 D61 D63 H21 H31 J22
    Date: 2005–08
  9. By: Andersson, Tommy (Department of Economics, Lund University)
    Abstract: The paper analyzes nonlinear tax schedules that are identified by maximizing a welfare function represented by a weighted summation of net utilities over a set of n>=3 differing individuals. We demonstrate that some of the feasible and Pareto efficient tax schedules that satisfy self-selection can only be identified by maximizing a welfare function of the above form if (at least) one of the individuals in the economy is assigned a negative weight.
    Keywords: Nonlinear taxation; Pareto efficiency; self-selection; welfare weights
    JEL: D82 H21
    Date: 2005–09–30
  10. By: Christophe André; Nathalie Girouard
    Abstract: Measuring cyclically-adjusted budget balances for OECD countries 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 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 Economiques 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, public finances, politique budgétaire, stabilisateurs automatiques, cycle économique, finances publiques, Business cycles
    JEL: E62 H30 H60
    Date: 2005–07–04
  11. By: Rolf Aaberge (Research Department, Statistics Norway, Oslo, Norway); Ugo Colombino (CHILD, Department of Economics, Turin, Italy)
    Abstract: This paper is concerned with the empirical analyses of optimal taxation, adopting Equality of Outcome (EO) as well as Equality of Opportunity (EOp) as evaluation criteria. The EOp- and EO-criteria provide alternative methods for summarizing the efficiency-equality trade-off in the distribution of individual welfare. We also compare the results depending on whether we use income or money-metric utility as a measure of individual welfare. We estimate micro-econometric models of household labour supply and corresponding individual welfare measures based on 1995 Norwegian data for both married couples and singles. We then use these models to simulate behavioural responses and welfare gains and losses of various constant-revenue four-parameter tax rules, i.e. the tax rules defined by a lump-sum transfer (positive or negative), two marginal tax rates and a “kink point” that produces the same revenue collected with the observed 1995 rules. Using the various EOp- and EO- critera as a basis for evaluating and comparing these tax rules, EOp- and EO-optimal tax rules are identified.
    Keywords: Optimal Taxation, Labour Supply, Microeconometric Models
    JEL: D6 D7 H
    Date: 2005–10–13
  12. By: AURIOL, Emmanuelle; WARLTERS, Michael
    JEL: D43 H25 H26 H32 H60
    Date: 2005–01
  13. By: Shun-ichiro Bessho (Ministry of Finance Japan - Policy Research Institute); Masayoshi Hayashi (MOF - Ministry of Finance Japan, Policy Research Institute)
    Abstract: This paper operationalizes Dahlby's (1998) theoretical analysis on the social marginal cost of public funds (SMCF) with microdata on Japanese prime-age males. Our exercise however, is more than an application. First, we derive the formula for the SMCF that differenciates every individual. Second, we estimate the labour supply function of Japanese prime-age males which no previous studies have appropriately consdiered. Third, taking advantage of our formula, we also calculate the SMCF for sub-groups among out samples. We provide region-specific SMCF and, following Dahlby and Wilson (1994), discuss the desirable direction of regional transfers. we also present an "individual" MCF.
    Keywords: taxation, Dahlby, social marginal cost, public funds ,Japan, prime-age males,
    JEL: E62
    Date: 2005–08
  14. By: James S. Costain; Michael Reiter
    Abstract: We construct and calibrate a general equilibrium business cycle model with unemployment and precautionary saving. We compute the cost of business cycles and locate the optimum in a set of simple cyclical fiscal policies. Our economy exhibits productivity shocks, giving firms an incentive to hire more when productivity is high. However, business cycles make workers' income riskier, both by increasing the unconditional probability of unusually long unemployment spells, and by making wages more variable, and therefore they decrease social welfare by around one-fourth or one-third of 1% of consumption. Optimal fiscal policy offsets the cycle, holding unemployment benefits constant but varying the tax rate procyclically to smooth hiring. By running a deficit of 4% to 5% of output in recessions, the government eliminates half the variation in the unemployment rate, most of the variation in workers'aggregate consumption, and most of the welfare cost of business cycles.
    Keywords: Real business cycles, matching, precautionary saving, unemployment insurance, fiscal policy, incomplete markets, heterogeneity, computation
    JEL: E24 E32 E62 E63 H21 J64 J65
    Date: 2004–11
  15. By: Hanno Lustig; Christopher Sleet; Sevin Yeltekin
    Abstract: We identify a novel, fiscal hedging motive that helps to explain why governments issue more expensive, long-term debt. We analyze optimal fiscal policy in an economy with distortionary labor income taxes, nominal rigidities and nominal debt of various maturities. The government in our model can smooth labor tax rates by changing the real return it pays on its outstanding liabilities. These changes require state contingent inflation or adjustments in the nominal term structure. In the presence of nominal pricing rigidities and a cash in advance constraint, these changes are themselves distortionary. We show that long term nominal debt can help a government hedge fiscal shocks by spreading out and delaying the distortions associated with increases in nominal interest rates over the maturity of the outstanding long-term debt. After a positive spending shock, the government raises the yield curve and steepens it.
    JEL: E4 E6 G1
    Date: 2005–10
  16. By: Erling Røed Larsen (Statistics Norway)
    Abstract: Indirect taxes on transportation activities that pollute can correct externalities and close the gaps between private and social costs. However, policy makers often find such Pigou taxes difficult to implement because of political resistance due to possibly adverse affects on equity. For this reason it is important to assess the distributional aspects of environmental levies. This article estimates properties of the demand for transportation in parametric and non-parametric analyses of Consumer Expenditure Surveys for the United States, 2000, and finds patterns in the resulting set of Engel curves. Private transportation using air flights and new automobiles have Engel elasticities above unity while public transportation via mass transit has Engel elasticity below unity. The findings can be interpreted in an important way since they show that a differentiated scheme of environmental taxes on transportation may function progressively. A Pigou scheme with larger taxes on modes of transportation that pollute more appears to coincide with larger levies on luxury modes preferred by richer households.
    Keywords: consumption patterns; double dividend; Engel curves; environmental levies; equity; externality; indirect taxation; Pigou correction; redistribution; transportation; travel
    JEL: D12 D31 H23 R41
    Date: 2005–06
  17. By: Pierre-Pascal Gendron (The Business School, Humber Institute of Technology and Advanced Learning Toronto, Canada)
    Abstract: The application of the value-added tax to public sector bodies, non-profit organizations and charitable organizations substantially departs from full taxation in most VAT regimes around the world. The problems with the mostly exempt regime for those organizations are reviewed. Options to modify or replace the regimes are reviewed and assessed from the perspective of developing and transitional economies. The Australian-New Zealand model, where all goods and services supplied by those organizations are within the scope of the tax, emerges as the preferred option. Nevertheless, a gradualist policy may be better suited to the circumstance of many developing and transitional economies.
    Keywords: value-added tax, public sector bodies, government, non profit organizations, charitable organizations
    JEL: H24 O23
    Date: 2005–06
  18. By: Peter J. Lambert and Thor O. Thoresen (Statistics Norway)
    Abstract: The analysis contrasts results of two recently expounded micro-level data approaches to derive robust intertemporal characterizations of redistributional effects of income tax schedules; the fixed-income procedure of Kasten, Sammartino and Toder (1994) and the transplant-and-compare method of Dardanoni and Lambert (2002). Our study is normative in that the Blackorby and Donaldson (1984) index of tax progressivity is employed. This enables contributions from vertical redistribution and horizontal inequity also to be assessed, using for the latter one classical measure and one no reranking measure. When the competing methodologies are applied to Norwegian data for 1992–2004, their respective strengths and weaknesses are revealed. The transplant-and-compare procedure is found to have a number of advantages.
    Keywords: Income tax; Tax progressivity; Horizontal inequity
    JEL: D31 D63 H24
    Date: 2005–09
  19. By: Geir H. Bjertnæs (Statistics Norway)
    Abstract: Welfare analysis of energy taxes typically shows that systems with uniform rates perform better than differentiated systems. However, most western countries include some exemptions for their energy-intensive export industry, and hence, avoid this potential welfare gain. Böhringer and Rutherford (1997) find that compared to a differentiated system, uniform taxation in combination with a wage subsidy preserve jobs in these industries at a fraction of the potential welfare gain in the German economy. This result holds in this Norwegian study where a more broad based subsidy scheme, represented by production dependent subsidies, is used to protect jobs in the Norwegian energy-intensive industry. However, the welfare cost per job preserved by this subsidy scheme amounts to about 60 percent of the wage cost per job, suggesting that these jobs are expensive to preserve.
    Keywords: Energy taxes; Political feasibility; Competitiveness; CGE models
    JEL: F41 H21 Q43 Q48
    Date: 2005–09
  20. By: Toshihiro Ihori (Faculty of Economics, University of Tokyo); Ryuta Ray Kato (Graduate School of International Relations, International Univesity of Japan); Masumi Kawade (Faculty of Economics, Niigata University); Shun-ichiro Bessho (Policy Research Institute, Ministry of Finance, Japanese Government)
    Abstract: This@paper@examines@the@effects of the demographic change and the government debt policy in Japan on economic growth and economic welfare, particularly by taking into account the existing public pension scheme as well as national medical expenditure through the existing public health insurance, wherea computational overlapping generations model is used within a general equilibrium context. One of the main results of this paper is that the tax burden (GDP) ratio will increase up to about 36%, and the social security burden (GDP) ratio will increase up to 23.3% in 2050, even though the government tries to have a positive primary balance by 2010. The ratio of public health insurance bene?ts to GDP is expected to increase at 1% every 10years, and the ratio will be around 9.6%in 2050. The 2004 public pension reform will successfully result in a 13 point decrease in the contribution rate from 36.44% to 23.53%, and reduce the social security burden (GDP) ratio by about 8 points from 23.27% to 15.02% in 2050, compared with the benchmark case.
    Date: 2005–09
  21. By: Luiz de Mello
    Abstract: This paper reviews recent trends in fiscal performance in Brazil, estimates fiscal reaction functions for the consolidated public sector and different levels of government, and tests for the sustainability of the public debt dynamics. The empirical analysis, based on monthly data for the period 1995-2004, suggests that all levels of government react strongly to changes in indebtedness by adjusting their primary budget surplus targets. In addition, the central government appears to follow a spend-and-tax policy: changes in revenue are affected strongly by expenditure, with about two-thirds of changes in primary spending being offset through higher revenue over the long term. Institutions are also found to matter for fiscal sustainability. The responsiveness of sub-national fiscal stance to indebtedness, as well as that of central government revenue to changes in primary spending, appears to have strengthened after 1998, when ceilings on indebtedness were introduced. <P>Estimation des fonctions de réaction budgétaire Cet article examine les tendances récentes des performances budgétaires au Brésil, estime les fonctions de réaction budgétaire pour le secteur public consolidé et les différents niveaux d’administration, et teste la soutenabilité de la dynamique de la dette publique. L'analyse empirique, basée sur des données mensuelles pour la période 1995-2004, suggère que tous les niveaux d’administration réagissent fortement aux changements de l'endettement en ajustant leurs cibles d’excédent budgétaire primaire. En outre, l’administration centrale semble suivre une politique de « dépenses suivi d’impôt »: les changements de revenu sont affectés fortement par les dépenses, avec environ deux tiers des changements de la dépense primaire étant compensée par un plus haut revenu sur le long terme. Les institutions budgétaires sont également importantes en matière de soutenabilité budgétaire. La réaction des administrations locales à l'endettement, ainsi que celle du revenu de l’administration centrale aux changements de la dépense primaire, semble s’être renforcé après 1998, quand des plafonds sur l'endettement ont été introduits.
    Keywords: fiscal rules, règles budgétaires, Brazil, Brésil, debt sustainability, fiscal reaction function, soutenabilité de dette, fonction de réaction budgétaire
    JEL: E62 H62 H63
    Date: 2005–04–01
  22. By: Jens Høj; Sylvie Toly
    Abstract: This paper estimates and discusses some of the potential labour market implications arising from the rapid ageing of government employees in a number of OECD countries. Under alternative scenarios for future public employment policies, available labour resources for the private sector are estimated taking into account the declining age cohorts entering the labour market. These scenarios suggest that, in the absence of considerable increases in labour utilisation, maintaining government sector hiring at their historical share of new labour market entrants will entail sharp declines in the production of government services. On the other hand, if present levels of government services are to be preserved, governments are likely to hire an increasing share of labour market entrants, creating a strong crowding-out effect for the private sector. Alternatively, productivity in the government sector would have to increase substantially. <P>Conséquences sur le marché du travail du vieillissement rapide des employés du secteur public Cette étude donne des estimations et analyse quelques implications potentielles du vieillissement rapide des employés du secteur public dans plusieurs pays de l'OCDE. Sous des scénarios alternatifs de politique d'emploi public, l'accroissement de l'offre d'emploi disponible pour le secteur privé a été estimée prenant en considération l'évolution future des cohortes de jeunes entrant dans le marché du travail. Ces scénarios suggèrent qu'en absence d'un accroissement considérable de l'utilisation de la force de travail, le maintien de la part de l'embauche dans le secteur public à son niveau historique impliquerait un déclin assez considérable dans la production des services publics. Alternativement, si les niveaux actuels de service public devraient être maintenus, le secteur public devra pendre un part croissant des nouveaux entrants dans le marché du travail, créant un fort effet d'éviction pour le secteur privé. Une autre solution serait d'accroître substantiellement la productivité dans le secteurs publics.
    Keywords: productivity, productivité, ageing, employment, emploi, retraites, vieillissement, retirement, services sociaux, social services, government sector, labour supply and demand, secteur des administrations publiques, offre de demande de travail
    JEL: H11 J11 J45 O57
    Date: 2005–09–06
  23. By: Thomas Liebig; Alfonso Sousa-Poza
    Abstract: With the emerging international competition to attract highly skilled migrants, the determinants of their choice of residential location are increasing in importance. Besides expected wages and job opportunities, the costs of migration and the subjective evaluation of a location, two other factors help determine the expected net return from migration: taxes and network effects. Yet empirical research on the effects of these two factors and their interaction on highly skilled migration is lacking. The aim of this paper is to throw some empirical light on the role of these two factors via a case study of Switzerland. For several reasons, Switzerland is a particularly interesting case study for this task. Tax rates are primarily determined at the local level and thus enough variation exists to analyse their influence on migration. Furthermore, in contrast to other European countries, Switzerland has pursued a fairly liberal immigration policy and maintains a unique permit system that has become increasingly skills-focused: more than 35% of all persons with a university degree resident in Switzerland are immigrants. Analysis of the 2000 Swiss census data provides evidence for fiscally-induced migration within Switzerland, particularly with respect to a location choice of highly skilled immigrants. Avec l’émergence d’une compétition internationale pour attirer les migrants hautement qualifiés, les déterminants des choix de lieu de résidence de ces derniers gagnent en importance. En plus des perspectives de salaires et d’emploi, du coût de migration et des appréciations subjectives portées sur ces lieux, deux autres facteurs semblent jouer sur le rendement net attendu de la migration : les impôts et les effets de réseaux. Ceci étant, l’étude de l’impact de ces deux facteurs, ainsi que des effets de leurs interactions, manquent dans les analyses empiriques. Le but de ce papier est d’analyser le rôle de ces deux facteurs à travers l’étude du cas de la Suisse. Pour plusieurs raisons, la Suisse s’avère un pays particulièrement intéressant à étudier à cet égard. Les taux d’imposition sont principalement déterminés au niveau local; d’où l’existence de variations suffisantes pour analyser leur impact sur la migration. De plus, contrairement à d’autres pays européens, la Suisse a poursuivi une politique assez libérale en matière d’immigration et maintient un système unique de permis, qui est devenu de plus en plus ciblé sur les qualifications : plus de 35 % de toutes les personnes détenant un diplôme universitaire qui résident en Suisse sont des immigrés. L’analyse des données du recensement Suisse de 2000 met en évidence la migration intra-Suisse engendrée par des raisons fiscales, concernant plus particulièrement le choix des lieux de résidence des immigrés hautement qualifiés.
    JEL: F22 H73 J61
    Date: 2005–07–29
  24. By: Przemyslaw Kowalski
    Abstract: This paper addresses tariff revenue concerns that some countries have been expressing in the context of the current multilateral trade negotiations under the Doha Development Agenda. This paper: discusses methodological issues associated with estimating revenue impacts; provides impact estimates for a sample of developing countries; links the differences in impacts to cross-country differences in existing tariff regimes as well as properties of formulas for tariff cuts; and, discusses efficient tax replacement policies and past experiences. Additionally, the paper presents results of a simulation of the welfare effects of reducing tariffs and simultaneously replacing lost tariff revenues with revenues from consumption tax. It concludes with some policy implications.
    Keywords: tariffs, CGE simulation, government revenue, multilateral trade negotiations, tariff reductions formulas
    JEL: C68 E61 E62 F13 F14 H20
    Date: 2005–04–18
  25. By: Martin Jørgensen
    Abstract: This paper discusses ways of strengthening the competitive environment in order to help boost productivity performance in various sectors of the Danish economy. It looks at a number of indicators of the strength of competition — including price levels, industrial concentration and product market regulation — and it discusses the appropriateness of the competition legislation framework. The paper then focuses on the large public sector, which has been slow to open up to competition, partly because of regulatory restrictions but also because some local governments are too small to handle tenders and provide an attractive market for private providers. The paper also looks at the process of liberalising network industries and at various regulations that still impede effective competition in a number of other sectors, including construction, housing, distribution and professional services. <P>Dynamiser la croissance en stimulant la concurrence au Danemark Le document de travail examine les moyens de renforcer le cadre concurrentiel pour stimuler la productivité dans divers secteurs de l'économie du Danemark. Il passe en revue un certain nombre d'indicateurs de la vigueur de la concurrence –– notamment le niveau des prix, la concentration industrielle et la réglementation des marchés de produits –– et évalue l'adéquation du cadre législatif de la concurrence. L'analyse se porte ensuite sur le vaste secteur public, qui a tardé à s'ouvrir à la concurrence, du fait de restrictions réglementaires mais aussi parce que certaines collectivités locales sont trop petites pour gérer des appels d'offres et offrir un marché attractif à des prestataires privés. Le document de travail examine aussi le processus de libéralisation des industries de réseau ainsi que différentes réglementations qui font encore obstacle à une concurrence efficace dans plusieurs autres secteurs, dont la construction, le logement, la distribution et les services professionnels.
    Keywords: network industries, réglementation, industrie de réseau, competition, privatisation, Denmark, regulations, concurrence, Danemark, privatisation, public procurement, marchés publics, product markets, retail distribution, construction, public sector, competitive neutrality, marchés de produits, grande distribution, construction, neutralité de concurrence
    JEL: H4 K21 L1 L32 L33 L41 L43 L44 L8 L9 O52
    Date: 2005–05–18
  26. By: Yasushi Iwamoto (Faculty of Economics, University of Tokyo)
    Abstract: Interactions between monetary and fiscal policy depend on the specification of policy variables that fiscal policy uses. However, a general rule is that when monetary policy is capable of dealing with sticky price adjustment, a primary concern of fiscal authority should be to remedy the resource allocation. My regression study using cross-country data shows that in a majority of OECD countries fiscal policy relies on the automatic stabilizer. Japan is a unique case in that it relies heavily on discretionary fiscal policy. However, Japanese policymakers have recently changed their thinking regarding fiscal policy.
    Date: 2005–09
  27. By: Hesselius, Patrik (IFAU - Institute for Labour Market Policy Evaluation); Johansson, Per (IFAU - Institute for Labour Market Policy Evaluation); Larsson, Laura (IFAU - Institute for Labour Market Policy Evaluation)
    Abstract: The paper exploits a unique social experiment carried out in 1988 in Sweden to identify the effect of monitoring on sickness absence. The treatment consists of postponing the first formal point of monitoring during a sickness absence spell, a requirement for a doctor’s certificate, from day eight to day fifteen. The experiment was conducted in two geographical areas, and the treatment group was randomized by birth date. The results show strong effects on sickness absence duration from extending the waiting period in both areas. On average, the durations increased by 6.6 percent. No effect on incidence of sickness absence is found. A heterogeneity analysis reveals that monitoring affects men more than women.
    Keywords: Absenteeism; sickness insurance; monitoring; social experiment
    JEL: H55 I18 J22 J28
    Date: 2005–06–19
  28. By: Jaime Vallés Giménez (Universidad de Zaragoza); Anabel Zártate Marco (Universidad de Zaragoza)
    Abstract: El objetivo de este trabajo es estudiar los posibles efectos que sobre los gastos de capital de los municipios españoles tendrá la normativa de estabilidad presupuestaria. Dicho análisis se va a realizar para los distintos estratos de población, ya que pueden existir divergencias relevantes asociadas a la configuración legal de las fuentes de ingresos y competencias de gasto que diseña la normativa nacional. En especial, dos son las cuestiones que pretendemos abordar con la presente investigación. Primero, realizaremos una revisión de la situación y evolución de los gastos de capital y de sus distintas fuentes de financiación. La segunda finalidad que perseguimos en este trabajo es estimar un modelo econométrico para los gastos de capital de los municipios españoles pertenecientes a los diferentes estratos de población, que incorpore las distintas fuentes potenciales de financiación de los proyectos de inversión y un conjunto de variables de control.
    Keywords: capital expenditure, sources of finance, indebtedness, institutional restrictions
    JEL: H7
    Date: 2005
  29. By: Jeffrey Carpenter; Erika Seki
    Abstract: We provide a reason for the wider economics profession to take social preferences, a concern for the outcomes achieved by other reference agents, seriously. Although, we show that student measures of social preference elicited in an experiment have little external validity when compared to measures obtained from a field experiment with a population of participants who face a social dilemma in their daily lives (i.e. team production), we do find strong links between the social preferences of our field participants and their productivity at work. We also find that the stock of social preferences evolves endogeously with respect to how widely team production is utilized.
    Keywords: Field experiment, social preference, income pooling, productivity
    JEL: C93 D21 D24 H41 J24 M52 M54 Z13
    Date: 2005
  30. By: Richard M Bird (Rotman School of Management, University of Toronto); Joosung Jun (Ehwa University)
    Abstract: In the first part of this paper we present a non-technical analysis of earmarking. We then briefly review some international experience with earmarking and its apparent results. The main new contribution of the paper is the concluding description and evaluation of the nature, efficacy, and effects of earmarking in Korea.
    Keywords: Keywords: earmarking; benefit taxation; Korea
    JEL: H29 H59
    Date: 2005–06
  31. By: James A. Robinson (Department of Government, Harvard University); Ragnar Torvik (Department of Economics, Norwegian University of Science and Technology)
    Abstract: Why do soft budget constraints exist and persist? In this paper we argue that the prevalence of soft budget constraints can be best explained by the political desirability of softness. We develop a political economy model where politicians cannot commit to policies that are not ex post optimal. We show that because of the dynamic commitment problem inherent in the soft budget constraint, politicians can in essence commit to make transfers to entrepreneurs which otherwise they would not be able to do. This encourages such entrepreneurs to vote for them. Though the soft budget constraint may induce economic inefficiency, it may be politically rational because it influences the outcomes of elections. In consequence, even when information is complete, politicians may fund bad projects which they anticipate they will have to bail out in the future.
    Keywords: Political Economy; Investment; Development
    JEL: H20 H50 O20
    Date: 2005–08–06
  32. By: Thierry Warin
    Abstract: The purpose of this note is to propose a breakdown of the European concept into different sub-categories, based upon the different stages of the European integration process. In doing so, it is easier to understand the political differences and debate between an allegedly Anglo-Saxon approach and a Continental one. This note challenges the usual definition of the Anglo-Saxon and Continental approaches, and highlights the usual misconceptions and misunderstandings of the European economic goal.
    Keywords: Europe, EMU, EU, Schengen Convention, Anglo-Saxon approach, Continental approach
    JEL: E5 H0
  33. By: Rudiger Ahrend; William Tompson
    Abstract: The paper provides an overview of the course of economic reform and the performance of the Russian economy since the early 1990s and an analysis of the structural reform challenges ahead. It assesses the contribution of institutional and structural reforms to economic performance over the period, before turning to the question of where further structural reforms could make the biggest contribution to improved performance. Three major conclusions emerge. First, there is still a great deal to be done to strengthen the basic institutions of the market economy. While the Russian authorities have embarked on some impressive – and often technically complex – ‘second-generation’ reforms, many ‘first-generation’ reforms have yet to be completed. Secondly, the central challenges of Russia’s second decade of reform are primarily concerned with reforming state institutions. Thirdly, the pursuit of reforms across a broad front could enable Russia to profit from complementarities that exist among various strands of reform. <P>Quinze ans de réformes économiques en Russie L’article donne un aperçu du déroulement des réformes économiques et des performances de l’économie russe depuis le début des années 90, ainsi qu’une analyse des enjeux des futures réformes structurelles. L’article considère la contribution des réformes institutionnelles et structurelles à la performance économique durant la période, avant d’examiner dans quels domaines des réformes structurelles additionnelles pourraient avoir la plus grande contribution à l’amélioration de la performance économique. Il en résulte trois conclusions majeures. Premièrement, il reste encore beaucoup à faire pour renforcer les institutions de base d’une économie de marché. Bien que les autorités russes aient commencé quelques réformes de « seconde génération » qui sont impressionnantes – et souvent techniquement complexes-, il reste un bon nombre de réformes de « première génération » à achever. Deuxièmement, les défis centraux de la deuxième décennie de réformes concernent en première ligne la réforme des institutions de l’État. Troisièmement, la poursuite des réformes sur un large front permettrait à la Russie de profiter des complémentarités existantes entre les différents axes des réformes.
    Keywords: growth, corruption, croissance, transition, competition, transparency, transparence, concurrence, Russia, economy, state ownership, Russie, économie, entreprise d'État, corruption, reforms, stabilisation, réformes, stabilisation
    JEL: H1 K2 P21 P27 P31 P37
    Date: 2005–05–13
  34. By: Silje Aslaksen (Department of Economics, Norwegian University of Science and Technology); Ragnar Torvik (Department of Economics, Norwegian University of Science and Technology)
    Abstract: The effects of resource rents on the political equilibrium have been studied in two main types of models. The first tradition employs models of conflict, and studies how resource rents affect the intensity and duration of civil conflict. The second tradition employs political economy models, where resource rents affect the political equilibrium because the costs and benefits of buying votes change. Although providing much insight, a primary disadvantage of these two model traditions is that they have little to say about when democracy emerges, and about when conflict emerges. This question is simply determined by the type of model one chooses to study. Yet an important empirical literature suggests that a main effect of resource rents may be exactly that it affects the political choice between democracy and civil conflict. In this paper, by integrating the earlier model traditions, we suggest the simplest possible framework we can think of to study this choice. The institutional outcome in our theory is consequently endogenous. We show how factors such as resource rents, the extent of electoral competition, and productivity affect economic and political equilibria, and discuss how our approach, mechanisms and results differ from the earlier theories.
    Keywords: Political economy; Resource curse; Endogenous democratic institutions
    JEL: H1 D72 D74 Q32
    Date: 2005–05–15
  35. By: David Rae
    Abstract: This paper reviews the strengths and weaknesses of the Swedish healthcare system and the challenges that it will face in the future. It discusses ways to improve access to primary care, including different methods for paying GPs, whether access is less equitable than in other countries and the role of patient fees. The maximum waiting time guarantee for elective surgery is reviewed, along with ways of reducing regional variations in quality. The extent of decentralisation is questioned, as that may be affecting the quality of care and value for money in some areas, including elderly and psychiatric care. Mechanisms for improving the hospital sector are also examined including fee-for-service (DRG) payment mechanisms and whether for-profit hospitals would help. Finally, it considers ways to make financing more stable and sustainable. <P>Soins de santé en Suède Cette communication étudie les forces et les faiblesses du système de santé suédois et les défis qui le guettent. Elle examine plusieurs pistes pour améliorer l'accès aux soins de premier recours, notamment différentes manières de rémunérer les médecins généralistes; elle s'efforce également de déterminer si l'accès aux soins est plus ou moins équitable qu'à l'étranger et traite du rôle des honoraires payés par les patients. L'étude s'attache ensuite au temps maximum d'attente pour les actes de chirurgie non vitale et à la manière de réduire les disparités de qualité entre régions. L'étendue de la décentralisation est mise en question dans la mesure où elle pourrait avoir une incidence sur la qualité des soins et sur l'efficacité de la dépense tout particulièrement en gériatrie et en psychiatrie. L'étude examine des mécanismes pour améliorer le fonctionnement du secteur hospitalier y compris l'introduction du paiement à l'acte et la création d'hopitaux à but lucratif. Enfin, l'étude réfléchit à la manière d'assurer la stabilité et la pérennité des ressources financières du secteur.
    Keywords: santé, public sector efficiency, gestion publique, health care
    JEL: H51 H73 I11
    Date: 2005–09–20

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