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on Public Economics |
| By: | Louis Kaplow |
| Abstract: | A substantial literature addresses the design of transfer programs and policies, including the negative income tax, other means-tested transfers, the earned income tax credit, categorical assistance, and work inducements. This work is largely independent of that on the optimal nonlinear income tax, yet formulations of such a tax necessarily address how low-income individuals should be treated. This paper draws on the optimal income taxation literature to illuminate the analysis of transfer programs, including the level and shape of marginal tax rates (including phase-outs), the structure of categorical assistance, and the role of work inducements in an optimal income transfer scheme. |
| JEL: | H21 H53 I38 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12284&r=pbe |
| By: | Stéphanie Guichard; Willi Leibfritz |
| Abstract: | Portugal’s fiscal policy has failed to durably reduce the deficit below the Stability and Growth Pact threshold of 3% of GDP and was submitted to the excessive deficit procedure of the EU Commission for a second time in 2005. The paper describes fiscal developments in Portugal over the past years and explores why earlier attempts of fiscal consolidation have failed. It also examines the new consolidation programme and assesses its chances of success and discusses further necessary steps to ensure consolidation over the longer term. It is argued that reasons for the failures of past consolidation efforts were the pro-cyclical policy during the earlier economic upswing and the reliance on one-off-measures which reduced the sense of urgency and commitment to undertake structural reforms and to address the chronic weak control of public spending. The new consolidation strategy is not relying on one-off measures in a context where Portugal has been granted more time to get its deficit under 3% of GDP. It includes structural reforms on the spending side that are going in the right direction and, if fully implemented, are likely to succeed in bringing the deficit below 3% of GDP over the next few years. But consolidation will only be successful if all measures are implemented immediately and forcefully. The consolidation programme needs to be complemented by additional reforms to strengthen expenditure control and in particular to reform the general pension system. On the revenue side, further simplifying the tax system and refraining from revising the tax legislation from one year to the next, as has happened in recent years, would make the tax system easier to manage and would facilitate long-term decision-making by economic agents. <P>Le défi budgétaire du Portugal La politique budgétaire du Portugal ne lui a pas permis de ramener durablement son déficit sous le seuil de 3 % du produit intérieur brut (PIB) prévu par le Pacte de stabilité et de croissance, si bien que la Commission européenne a déclenché pour la seconde fois la procédure concernant les déficits excessifs contre ce pays en 2005. Nous décrivons dans ce document l’évolution de la situation budgétaire du Portugal ces dernières années, et tentons de cerner les raisons pour lesquelles les précédentes tentatives d’assainissement des finances publiques ont échoué. Nous nous penchons également sur le nouveau programme en la matière et évaluons ses chances de réussite, tout en examinant les mesures complémentaires nécessaires pour assurer l’assainissement des finances publiques à long terme. Nous démontrons que les efforts antérieurs déployés en la matière ont échoué en raison de la politique procyclique menée au cours de la précédente reprise économique, et du recours à des mesures ponctuelles, qui ont atténué le sentiment d’urgence et entamé la détermination nécessaire pour engager des réformes structurelles et remédier aux insuffisances chroniques de la maîtrise des dépenses publiques. La nouvelle stratégie d’assainissement budgétaire ne repose pas sur des mesures ponctuelles, alors que le Portugal s’est vu accorder un délai supplémentaire pour ramener son déficit sous la barre des 3 % du PIB. Elle prévoit au chapitre des dépenses des réformes structurelles qui vont dans la bonne direction et, si elles sont intégralement appliquées, devraient permettre de faire refluer le déficit sous le seuil des 3 % du PIB au cours des prochaines années. Reste que cette stratégie ne sera couronnée de succès que si toutes les mesures prévues sont mises en ?uvre immédiatement et énergiquement. Ce programme d’assainissement doit être complété par d’autres réformes destinées à renforcer la maîtrise des dépenses, notamment en réformant le régime général des pensions. Au chapitre des recettes, en simplifiant davantage le système d’imposition et en s’abstenant de réviser la législation fiscale d’une année à l’autre, comme ce fut le cas ces dernières années, les autorités le rendraient plus simple à gérer et faciliteraient les prises de décisions à long terme des agents économiques. |
| Keywords: | fiscal policy, politique budgétaire, Portugal, Portugal, déficit budgétaire |
| JEL: | E62 E65 H20 H6 |
| Date: | 2006–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:489-en&r=pbe |
| By: | Luiz de Mello; Diego Moccero |
| Abstract: | Brazil's fiscal adjustment since the floating of the real in 1999 has been impressive, even in periods of lacklustre growth. This suggests a remarkable fiscal effort to ensure public debt sustainability. To better gauge the magnitude of this adjustment effort, this paper applies the methodology used by the OECD Secretariat to distinguish changes in the fiscal stance that are due to policy action from those that are related to the automatic stabilisers built into the tax code, the social security system and unemployment insurance. The paper's main finding is that discretionary action tends to be essentially pro-cyclical in downturns, underscoring the presence of a strong "sustainability motive" in the conduct of Brazilian fiscal policy. Spending on mandatory items, such as personnel, are pro-cyclical in upturns too, which can create a "ratcheting-up" effect on government spending over time, an issue that will have to be addressed to improve the quality of on-going fiscal adjustment. An increase in the debt-to-GDP ratio by 1 percentage point is associated with a decrease in discretionary federal spending by 0.33 percentage point during 1997-2005. This responsiveness appears to have become stronger after the floating of the real in 1999. This Working Paper relates to the 2005 OECD Economic Survey of Brazil (www.oecd.org/eco/survey/brazil). <P>Orientation de la politique budgétaire au Brésil sur la période 1995-2005 L'ajustement budgétaire du Brésil depuis l'adoption d'un régime de taux de change flottant en 1999 a été impressionnant, malgré la morosité de la croissance pendant ces années. Cela suggère un remarquable effort budgétaire pour assurer la soutenabilité de la dette publique. Pour mieux évaluer l'ampleur de cet effort d'ajustement, ce document applique la méthodologie utilisée par le Secrétariat de l'OCDE pour distinguer les changements dans la position budgétaire liés à l'orientation de la politique discrétionnaire de ceux liés aux stabilisateurs automatiques du code des impôts, du système de sécurité sociale et de l'assurance chômage. Les calculs sont utilisés pour estimer la sensibilité des initiatives de la politique discrétionnaire à un changement de la dette publique. La politique budgétaire discrétionnaire est essentiellemen procyclique dans les phases de basses conjonctures, ceci est la principale conclusion rapportée dans ce document. Cela souligne que la conduite de la politique budgétaire Brésilienne est fortement motivée par la soutenabilité de la dette publique. Les catégories de dépenses obligatoires, comme les dépenses en personnel,sont également procycliques dans les périodes de reprise. Ceci crée un effet rattrapage en «dents de scie» des dépenses publiques, une question qui devra être abordée pour améliorer la qualité de l'ajustement budgétaire progressif. Une augmentation du ratio de la dette publique sur le PIB de 1% est associé à une baisse de 0.33 point de pourcentage dans les dépenses discrétionnaires au niveau fédéral. Cette réponse paraît s'être renforcée après l'adoption d'un régime de taux de change flottant en 1999. Ce Document de travail se rapporte à l'Étude économique de l'OCDE du Brésil, 2005 (www.oecd.org/eco/etudes/bresil). |
| Keywords: | fiscal policy, politique budgétaire, business cycles, Brazil, Brésil, debt sustainability, soutenabilité de dette, cycle des affaires |
| JEL: | E32 E62 H60 |
| Date: | 2006–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:485-en&r=pbe |
| By: | Peter J. Lambert (University of Oregon Economics Department); Helen T. Naughton (University of Oregon Economics (Student)) |
| Abstract: | What does an equal sacrifice tax look like in the case of a rank-dependent social welfare function? One's tax liability evidently becomes a function of one's income and one's position in the distribution in such a case, but not much else appears to be known. (Menahem Yaari touched upon the issue in his paper "A controversial proposal concerning inequality measurement", Journal of Economic Theory 1988, but focused only on a poll tax). In this paper, we determine the properties of the equal sacrifice tax for a wide class of rank-dependent social welfare functions, and integrate the theory with that already available for the class of utilitarian social welfare functions. In an additional step, we analyze the equal sacrifice tax for a class of mixed utilitarian and rank-dependent social welfare functions, and finally we review what this synthesis has achieved. |
| Keywords: | equal sacrifice, income tax, inequality |
| JEL: | D63 H22 H23 |
| Date: | 2006–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:ore:uoecwp:2006-4&r=pbe |
| By: | John Gibson (University of Waikato); Susan Olivia (University of California, Davis); Scott Rozelle (University of California, Davis) |
| Abstract: | This paper investigates whether there is a non-linear relationship between income and the private transfers received by households in developing countries. If private transfers are unresponsive to household income, expansion of public social security and other transfer programs is unlikely to crowd out private transfers, contrary to concerns first raised by Barro and Becker. There is little existing evidence for crowding out effects in the literature, but this may be because they have been obscured by methods that ignore non-linearities. If donors switch from altruistic motivations to exchange motivations as recipient income increases, a sharp non-linear relationship between private transfers and income may result. In fact, threshold regression techniques find such non-linearity in the Philippines and after accounting for these there is evidence of serious crowding out, with 30 to 80 percent of private transfers potentially displaced for low-income households [Cox, Hansen and Jimenez 2004, 'How Responsiveare Private Transfers to Income?' Journal of Public Economics]. To see if these non-linear effects occur more widely, semiparametric and threshold regression methods are used to model private transfers in four developing countries - China, Indonesia, Papua New Guinea and Vietnam. The results of our paper suggest that non-linear crowding-out effects are not important features of transfer behaviour in these countries. The transfer derivatives under a variety of assumptions only range between 0 and -0.08. If our results are valid, expansions of public social security to cover the poorest households need not be stymied by offsetting private responses. |
| Keywords: | crowding out; private transfers; social security |
| JEL: | H55 O15 |
| Date: | 2006–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:06/01&r=pbe |
| By: | Roger Gordon; Martin Dietz |
| Abstract: | How do dividend taxes affect firm behavior and what are their distributional and efficiency effects? To answer these questions, the first problem is coming up with an explanation for why firms pay dividends, in spite of their tax penalty. This paper surveys three different models for why firms pay dividends, and then uses each model to examine the behavioral and efficiency effects of dividend taxes. The three models examined are: the “new view,” an agency cost explanation, and a signaling model. While all three models forecast dividends, their forecasts regarding other firm behavior, and their forecasts for the efficiency and distributional effects of a dividend tax, often differ. Given the evidence to date, we find the agency model is the one most consistent with the data. |
| JEL: | H25 G35 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12292&r=pbe |
| By: | Gaggermeier, Christian (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | "In an overlapping-generations model with endogenous birth rates, I design a reform of the pay-as-you-go pension system, which internalises positive externalities of children - their pension contributions. Individuals may differ in their preferences for children and their ability to have children at all. They can choose between the status-quo flat-rate benefits and a new system, in which they get just the benefits that are (on average) financed by their own children, reduced by an amount which is used to subsidise the flat-rate system. Whereas people with low child preferences keep the status quo, people with high child preferences choose the individualised system, having the optimal incentives to raise children and a higher utility." (author's abstract, IAB-Doku) ((en)) |
| Keywords: | Rentenreform - Modell, Rentenhöhe, Rentenanpassung, Rentenunterschied, Rentenversicherung, Eltern, Rentner, Kinderlosigkeit, Kinderzahl, Rente - Finanzierung, Versorgungsausgleich, Lebensstandard, Generationenvertrag, Familienpolitik, demografische Faktoren, Rentenpolitik |
| JEL: | H55 J11 J13 J26 |
| Date: | 2006–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:200603&r=pbe |
| By: | Katrin Millock (Centre d'Economie de la Sorbonne); David Zilberman (Department of Agricultural and Resource Economics, University of California, Berkeley) |
| Abstract: | Random accidents can be contained by collective penalties. These penalties are not likely to be enforced but rather induce self-reporting that enhances welfare due to early containment. Self-reporting under collective penalties increases overall welfare, but may increase expected environmental cost. Even when regulation is constrained by an upper limit on the acceptable collective penalty, the threat of collective penalties can induce an incentive-compatible mutual insurance scheme under which a side-payment is made to the agent that self-reports an accident. This self-reporting mechanism is welfare-improving, but first-best outcomes can only be obtained when the collective penalty is unconstrained, or when an honor system applies. In cases when there is a new externality that requires fast response (avian flu),collective penalties can compliment or substitute for monitoring. |
| Keywords: | Ambient tax, collective penalties, enforcement, self-reporting. |
| JEL: | H23 K42 Q28 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:mse:wpsorb:v06048&r=pbe |
| By: | Geoffrey Heal; Howard Kunreuther |
| Abstract: | We model tipping as a game-theoretic phenomenon and investigate the connection between supermodular games, tipping of equilibria and cascading, and apply the results to issues that arise in the context of homeland security and computer security. We show that tipping and cascading can occur in supermodular games and that "increasing differences"is a sufficient condition for tipping. Supermodularity and tipping of equilibria are closely related. We relate our results to Schelling’s early work on tipping. |
| JEL: | C72 D80 H23 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12281&r=pbe |
| By: | Stefan Voigt (Department of Economics, University of Kassel); Lorenz Blume (Department of Economics, University of Kassel) |
| Abstract: | This is the first study that assesses the economic effects of direct democratic institutions on a cross country basis. Most of the results of the former intra-country studies could be confirmed. On the basis of some 30 countries, a higher degree of direct democracy leads to lower total government expenditure (albeit insignificantly) but also to higher central government revenue. Central government budget deficits are lower in countries using direct democratic institutions. As former intra-country studies, we also find that government effectiveness is higher under strong direct-democratic institutions and corruption lower. Both labor and total factor productivity are significantly higher in countries with direct democratic institutions. The low number of observations as well as the very general nature of the variable used to proxy for direct democracy clearly call for a more fine-grained analysis of the issues. |
| JEL: | H1 H3 H5 H8 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:kas:wpaper:2006-84&r=pbe |
| By: | Luis G. González-Morales |
| Abstract: | A simple contract-theoretic model is used to show that, in a democratic system, positive political rents and efficient provision of public goods can characterize an equilibrium in the political contest. Moreover, this equilibrium is stable under the assumption that a fraction of the political rents can be shared with a subgroup of voters through corporativist arrangements. These features correspond fairly well to the presidential and corporativist political system of post-revolutionary Mexico. |
| URL: | http://d.repec.org/n?u=RePEc:mik:wpaper:01_05&r=pbe |
| By: | Sergi Jiménez-Martín; José M. Labeaga; Cristina Villaplana Prieto |
| Abstract: | There is a controversial debate about the effects of permanent disability benefits on labor market behavior. In this paper we estimate equations for deserving and receiving disability benefits to evaluate the award error as the difference in the probability of receiving and deserving using survey data from Spain. Our results indicate that individuals aged between 55 and 59, self-employers or working in an agricultural sector have a probability of receiving a benefit without deserving it significantly higher than the rest of individuals. We also find evidence of gender discrimination since male have a significantly higher probability of receiving a benefit without deserving it. This seems to confirm that disability benefits are being used as an instrument for exiting the labor market for some individuals approaching the early retirement or those who do not have right to retire early. Taking into account that awarding process depends on Social Security Provincial Department, this means that some departments are applying loosely the disability requirements for granting disability benefits. |
| Keywords: | Disability benefits, Award error, Early retirement, Social security |
| JEL: | H55 J26 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:966&r=pbe |
| By: | Martin Feldstein |
| Abstract: | A desirable system for providing and financing health care would achieve three goals: (1) preventing the deprivation of care because of a patient's inability to pay; (2) avoiding wasteful spending; and (3) allowing care to reflect the different tastes of individual patients. Although it is not possible to realize fully all three of these goals, they can condition and inform the design of a good system for financing health care. This paper discusses the application of these goals in more detail and use them to consider a reform of the system of Health Savings Accounts that was enacted as part of the 2003 Medicare legislation and, separately, the challenge posed by the very expensive treatments for rare diseases that are becoming more common. |
| JEL: | I1 H2 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12279&r=pbe |
| By: | Wolfgang Leininger |
| Abstract: | We analyze group contests for public goods by applying the solution concept of an evolutionary stable strategy (ESS). We show that a global ESS cannot exist, because a mutant free-rider can always invade group behavior succesfully. There does exist, however, a unique local ESS, which we identify with evolutionary equilibrium. It coincides with Nash equilibrium, the hitherto dominant solution concept in contest theory, if and only if groups are symmetric. For asymmetric groups it always proposes a different and arguably more sensible solution than Nash equilibrium. We explore the properties of (local) ESS in detail. |
| URL: | http://d.repec.org/n?u=RePEc:mik:wpaper:02_02&r=pbe |
| By: | Ignacio Ortuño Ortín (Universidad de Alicante); Klaus Desmet (Universidad Carlos III de Madrid) |
| Abstract: | We propose a two-region two-sector model of uneven development,where technological change benefits either the lagging or the leading region. Inthis framework inter-regional transfers may lead to persistentunderdevelopment; by raising wages, transfers reduce the chance of thebackward region adopting a new technology and taking o.. Due to uncertaintyabout which region benefits from technological change, the backward regionmay rationally choose to remain underdeveloped, while the advanced regioncontinues to pay transfers. The model provides a rationale for cases, such asItaly’s Mezzogiorno, where the same rich region subsidizes the same poorregion on a continuous basis. |
| Keywords: | inter-regional transfers, regional policy, uneven development. |
| JEL: | R58 H7 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2006-12&r=pbe |
| By: | Blien, Uwe (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Hirschenauer, Franziska (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | "A common problem of regional policy is the distribution of funds to regional units. To follow the specific purpose of this budgeting process in a rational way this is often done in a formula allocation on the basis of official statistics. In the paper this is shown with the example of funds for active labour market policy. In Germany, measures of active labour market policy - e.g. training measures, integration subsidies and job creation schemes - are paid from a common budget. For the allocation of these budgetary funds (amounting to EURO 0,194 billion in 2004) to the regions of the Federal Republic of Germany, a formula was developed which was to be based essentially on a labour market indicator. The criteria for the development of a formula allocation were: most accurate fit to the legal guidelines of the Social Code, transparency of the procedure, openness for necessary policy decisions, scientific correctness in implementation, efficiency of the whole process. Here the procedure used in constructing the distribution process is explained and the distribution result is set out. Both were finally passed by the Supervisory Board of the Federal Employment Agency in Germany." (author's abstract, IAB-Doku) ((en)) |
| Keywords: | Arbeitsmarktpolitik - Finanzierung, regionale Verteilung, Budget, Indikatorenbildung |
| JEL: | H11 J00 R10 |
| Date: | 2005–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:200511&r=pbe |
| By: | W. Kip Viscusi |
| Abstract: | This article examines the economic basis for what is termed “rational discounting,” which entails full recognition of policy effects over time and exponential discounting at a riskless rate of return. Policies often cannot be ranked unambiguously in terms of their present or future orientation. Both failure to discount and preferential intergenerational discounting generate inconsistencies and economic anomalies. Office of Management and Budget discounting guidelines now stipulate more reasonable discount rates than earlier guidelines, but err in permitting open-ended preferential rates for intergenerational effects. The article presents a methodology for monetizing the value of statistical life for people of different ages and at different points in time. Review of regulatory analyses indicates increased consistency of discounting practices. However, examination of two policies with intergenerational effects, stratospheric ozone regulation and nuclear waste storage at Yucca Mountain, reveal failures to adopt a rational discounting approach. The influence of behavioral anomalies such as hyperbolic discounting may make full recognition of intertemporal effects in benefit-cost analysis more consequential than the use of preferential discount rates. |
| JEL: | Q50 D90 H10 L50 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12294&r=pbe |
| By: | Caliendo, Marco; Hujer, Reinhard; Thomsen, Stephan L. |
| Abstract: | "Previous empirical studies of job creation schemes in Germany have shown that the average effects for the participating individuals are negative. However, we find that this is not true for all strata of the population. Identifying individual characteristics that are responsible for the effect heterogeneity and using this information for a better allocation of individuals therefore bears some scope for improving programme effciency. We present several stratification strategies and discuss the occurring effect heterogeneity. Our findings show that job creation schemes do neither harm nor improve the labour market chances for most of the groups. Exceptions are long-term unemployed men in West and long-term unemployed women in East and West Germany who benefit from participation in terms of higher employment rates." (author's abstract, IAB-Doku) ((en)) |
| Keywords: | aktivierende Arbeitsmarktpolitik, Wirkungsforschung, Arbeitsbeschaffungsmaßnahme - Erfolgskontrolle, IAB-Bewerberangebotsdatei, IAB-Maßnahmeteilnehmergrunddatei, Beschäftigtenstatistik, berufliche Reintegration, Langzeitarbeitslose, Arbeitsmarktchancen, Ostdeutschland, Westdeutschland, Bundesrepublik Deutschland |
| JEL: | C13 H43 J68 |
| Date: | 2005–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:200508&r=pbe |
| By: | Caliendo, Marco; Hujer, Reinhard; Thomsen, Stephan L. |
| Abstract: | "Job creation schemes (JCS) have been one important programme of active labour market policy (ALMP) in Germany for a long time. They aim at the re-integration of hard-to-place unemployed into regular employment. A thorough microeconometric evaluation of these programmes was hindered by the fact, that the available (survey) datasets have been too small to account for a possible occurrence of effect heterogeneity. However, identifying effect heterogeneity can help to improve the design and implementation of future programmes. Hence, we use an administrative dataset of the Federal Employment Agency, containing over 11,000 participants to analyse the employment effects of JCS on an individual level. Whereas in a previous paper we analysed these effects with respect to group-specific and regional heterogeneity, we focus here explicitly on effect heterogeneity caused by differences in the implementation of programmes. In particular, we first evaluate the effects with respect to the economic sector in which the JCS are accomplished. Second, we analyse if different types of promotion lead to different effects. And finally we examine if there are varying effects which can be attributed to different implementing institutions. The results are rather discouraging and show that JCS are in general not able to improve the re-integration chances of participants into regular employment." (author's abstract, IAB-Doku) ((en)) |
| Keywords: | IAB-Bewerberangebotsdatei, IAB-Maßnahmeteilnehmergrunddatei, Arbeitsbeschaffungsmaßnahme - Erfolgskontrolle, Wirkungsforschung, Wirtschaftszweige, Trägerschaft, berufliche Reintegration, Teilnehmer, beruflicher Verbleib, Geschlechterverteilung, Westdeutschland, Ostdeutschland, Bundesrepublik Deutschland |
| JEL: | H43 J68 C13 |
| Date: | 2005–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:200513&r=pbe |