nep-pbe New Economics Papers
on Public Economics
Issue of 2007‒01‒23
thirty papers chosen by
Peren Arin
Massey University

  1. Economic Growth with Constraints on Tax Revenues and Public Debt: Implications for Fiscal Policy and Cross-Country Differences By Joshua Aizenman; Kenneth Kletzer; Brian Pinto
  2. Fiscal Sustainability ů Definition, Indicators and Assessment of Czech Public Finance Sustainability By Ales Krejdl
  3. Does tax simplification yield more equity and efficiency? An empirical analysis for Germany By Fuest, Clemens; Peichl, Andreas; Schaefer, Thilo
  4. Do Large Companies Have Lower Effective. Corporate Tax Rates? A European Survey By Gaëtan Nicodème
  5. The Impact of Tax Morale and Institutional Quality on the Shadow Economy By Benno Torgler; Friedrich Schneider
  6. Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis By Benno Torgler; Friedrich Schneider
  7. Measuring distributional effects of fiscal reforms By Ochmann, Richard; Peichl, Andreas
  8. Tax Morale after the Reunification of Germany: Results from a Quasi-Natural Experiment By Lars P. Feld; Benno Torgler
  9. Documentation FiFoSiM : integrated tax benefit microsimulation and CGE model By Peichl, Andreas; Schaefer, Thilo
  10. Does Stake Size matter for Cooperation and Punishment? By Martin G. Kocher; Peter Martinsson; Martine Visser
  11. Counterintuitive response to tax incentives? Mortgage interest deductions and the demand for debt By Dag Einar Sommervoll
  12. Alcohol Taxation and Regulation in the European Union By Sijbren Cnossen
  13. Measuring Richness and Poverty By Peichl, Andreas; Schaefer, Thilo; Scheicher, Christoph
  14. Heterogeneity, climate change and stability of international fiscal harmonization By François Gusdorf; Abdelhakim Hammoudi
  15. The significance of transport costs in the Swedish forest industry By Hammar, Henrik; Lundgren, Tommy; Sjöström, Magnus
  16. How to help unemployed find jobs quickly ; experimental evidence from a mandatory activation program By Graversen,Brian Krogh; Ours,Jan C. van
  17. Monopolistic Group Design with Peer Effects By Simon Board
  18. On the Measurement of Intra-Generational Lifetime Redistribution in Pension Systems By Antonio Abatemarco
  19. Costs of alternative environmental policy instruments in the presence of industry compensation requirements By Bovenberg,Lans; Goulder,Lawrence H.; Jacobson,Mark R.
  20. Self-Protection and Insurance with Interdependencies By Alexander Muermann; Howard Kunreuther
  21. Measuring the Effectiveness of Public Employment Service (PES) Workers By Pierre Koning
  22. The effect of health care expenditure on sickness absence By Granlund, David
  23. Innovation Policy: Europe or the Member States? By Albert van der Horst; Arjan Lejour; Bas Straathof
  24. Striking at the Roots of Crime: The Impact of Social Welfare Spending on Crime During the Great Depression By Ryan S. Johnson; Shawn Kantor; Price V. Fishback
  25. Pursuing the “Public Good:” Sustainable Development as a Common Goal for Social and Environmental Management By Secchi Davide; Zatti Andrea
  26. Competition in a Pure World of Internet Telephony By Christoph Engel
  27. Ranking Journals Following a Matching Model Approach. An Application to Public Economics Journals By Francesc Pujol
  28. Climate Change, Insurability of Large-scale Disasters and the Emerging Liability Challenge By Howard C. Kunreuther; Erwann O. Michel-Kerjan
  29. A Policy Impact Evaluation Model For Scotland: Decoupling Single Farm Payments By Gelan, Ayele; Schwarz, Gerald
  30. Determinants of entrepreneurial engagement levels in Europe and the US By Isabel Grilo; Roy Thurik

  1. By: Joshua Aizenman; Kenneth Kletzer; Brian Pinto
    Abstract: This paper evaluates optimal public investment and fiscal policy for countries characterized by limited tax and debt capacities. We study a non stochastic CRS endogenous growth model where public expenditure is an input in the production process, in countries where distortions and limited enforceability result in limited fiscal capacities, as captured by a maximal effective tax rate. We show how persistent differences in growth rates across countries could stem from differential public finance constraints, and differentiate between the case where the public expenditure finances the flow of recurring spending (such as law enforcement), versus the stock of tangible public infrastructure. Although the flow of public expenditure raises productivity, the government should not borrow to finance it as the resulting increase in public debt would lower welfare and the growth rate. With outstanding public debt, the optimal fiscal policy should keep the debt-to-GDP ratio constant in the economy with or without a binding constraint on tax revenues as a share of GDP - current non-durable public goods should be financed only from current revenue. With investment in the stock of public infrastructure, public sector borrowing to finance the accumulation of public capital goods may allow the economy to reach a long-run optimal growth path faster. With a binding tax capacity constraint, if the ratio of the initial public/private sector stock of capital is smaller than the sustainable balanced growth ratio, the optimal policy for the government is to purchase public capital, financed by debt, to immediately attain the sustainable ratio of public capital to private capital. The sustainable steady-state ratio is endogenous to the initial public-to-private capital ratio, the tax capacity and any exogenous debt limit (say, due to sovereign risk). With capital stock adjustment costs, these statements apply to a transition of finite duration rather than an instantaneous stock jump. With either a binding exogenous debt limit or solvency constrained borrowing, a more patient country will have a higher steady-state growth rate but a lower steady-state public-to-private capital ratio.
    JEL: F15 F43 H20 O41
    Date: 2007–01
  2. By: Ales Krejdl
    Abstract: The aim of this paper is to shed some light on what fiscal sustainability actually means. In doing so, it looks in the literature for a definition of fiscal sustainability that not only is theoretically sound, but can also be used for setting fiscal targets in practice. Sustainability is defined in a rather standard way ů fiscal policy is said to be sustainable if the present value of future primary surpluses equals the current level of debt. This definition enables various sustainability indicators to be constructed. A good indicator of fiscal sustainability should signal, with a sufficient lead, excessive debt accumulation. The paper introduces several sustainability indicators varying in how closely they are related to the sustainability definition (the infinite and finite horizon gaps), whether they take account of the future evolution of spending (the primary gap and the tax gap) and what target value of debt is set at the end of a finite horizon. While the indicators can be used for different time horizons ů from one year to an infinite horizon, the paper is by and large focused on long-term sustainability. When combined with long-term projections the indicators gauge the resilience of public finances to population ageing. The indicators are used to assess the sustainability of Czech fiscal policy. The sustainable revenue ratio, enabling the future surge in age-related spending to be financed, is estimated at 48% of GDP in the Czech Republic. It is some 7 percentage points higher than the current revenue-to-GDP ratio. The sustainable primary balance stands at 0.4% of GDP. By observing this primary surplus, governments would stabilise the debt ratio in the long run. However, compliance with this target would require immediately raising taxes or cutting spending by almost 3.0% of GDP and containing any future spending pressures (projected at 7.3% of GDP) either by systemic reforms preventing age-related spending from rising or by annual discretionary spending cuts and tax increases.
    Keywords: . Fiscal sustainability, population ageing, primary gap, sustainability indicators, tax gap.
    JEL: E61 E62 H30 H62 H63
    Date: 2006–10
  3. By: Fuest, Clemens; Peichl, Andreas; Schaefer, Thilo
    Abstract: This paper investigates the impact of tax simplification on various indicators of the efficiency of the tax system and on the distribution of income. The analysis is based on a simulation model (FiFoSiM) using German income tax and household survey microdata. We model tax simplification as the abolition of a set of deductions from the tax base included in the German income tax system. We find that this form of tax base simplification leads to a reduction in the use of professional tax advice, a more equitable income distribution and an increase in tax revenue. If these measures are combined with a reduction of income tax rates to preserve revenue neutrality, the effects depend on the type of rate schedule adjustment. The combination with a flat rate tax implies redistribution in favour of very high incomes, and an overall increase in income inequality. Efficiency effects in terms of changes in marginal tax rates and labor supply effects are mixed. The combination with a rate schedule adjustment which preserves the directly progressive rate schedule yields a tax reform which reduces the inequality of after tax incomes. We conclude that tax simplification may improve the efficiency of the tax system without increasing inequality of after tax income.
    Keywords: Income distribution, polarisation, tax simplification, flat tax
    JEL: D3 H2 J22
    Date: 2006
  4. By: Gaëtan Nicodème (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and European Commission.)
    Abstract: The current debate in corporate taxation is focusing on leveling the tax playing field within the European Union for companies operating across-countries. However, tax burdens could also vary with the size of companies within the same country, raising the question whether large companies pay their share of the burden. This paper uses firm-level data for 21 European countries between 1992 and 2004. The paper finds a robust negative correlation between the number of employees and the effective tax burden of companies. This result tends to validate theories arguing that large companies may enjoy a lower tax burden. As a caveat, using total assets as size variable produces a positive relationship. This relationship is however less robust and less economically significant.
    Keywords: Corporate taxation, Effective tax rates, political power, political cost.
    JEL: E61 H21 H22
    Date: 2007–01
  5. By: Benno Torgler; Friedrich Schneider
    Abstract: This paper analyses how tax morale and countries’ institutional quality affect the shadow economy, controlling in a multivariate analysis for a variety of potential factors. The literature strongly emphasizes the quantitative importance of these factors to understand the level and changes of shadow economy. Relatively new available data sources offer the unique opportunity to shed more light in the understanding of a topic that has received an increased attention. We find strong support that a higher tax morale and a higher institutional quality lead to a smaller shadow economy.
    Keywords: Shadow economy; tax morale; institutional quality; government intervention; corruption.
    JEL: D73 D78 H2 H26 O17 O5
    Date: 2007–01
  6. By: Benno Torgler; Friedrich Schneider
    Abstract: This paper analyses how governance or institutional quality and tax morale affect the shadow economy, using an international country panel and also within country data. The literature strongly emphasizes the quantitative importance of these factors to understand the level and changes of shadow economy. However, the limited number of investigations use cross-sectional country data with a relatively small number of observations, and hardly any paper has investigated tax morale and provides evidence using within country data. Using more than 25 proxies that measure governance and institutional quality we find strong support that its increase leads to a smaller shadow economy. Moreover, an increase in tax morale reduces the size of the shadow economy.
    Keywords: Shadow economy; tax morale; governance quality; government intervention; corruption.
    JEL: D73 D78 H2 H26 O17 O5
    Date: 2007–01
  7. By: Ochmann, Richard; Peichl, Andreas
    Abstract: The purpose of this paper is to provide an overview of how to analyse the distributional effects of fiscal reforms. Thereby, distributional e¤ects shall be differentiated by four subconcepts, i.e. 1.) the traditional concept of inequality, 2.) the rather novel concept of polarisation, 3.) the concept of progression in taxation, and 4.) the concepts of income poverty and richness. The concept of inequality and the concept of income poverty are the by far most widely applied concepts in empirical analyses, probably since they appear to be the most transparent ones in their structure as well as the most controversial ones in political affairs. However, the concepts of richness, polarisation and progression in taxation shall additionally be subject of this analysis, since they appear to be useful devices on the course of analysing cause and effect of the other two concepts.
    Keywords: Inequality, polarisation, progression, poverty, richness
    JEL: D3 H2 J22
    Date: 2006
  8. By: Lars P. Feld; Benno Torgler
    Abstract: This paper provides a comparison of tax morale between inhabitants of East and West Germany in its post-reunification period, using three World Values Survey/European Values Survey waves between 1990 and 1999. The setting of German reunification is particularly interesting for the analysis of tax morale as it is close to a natural experiment. Many factors can be controlled because they are similar, as, e.g., a common language, similar education systems and a shared cultural and political history prior to the separation after the Second World War. As a consequence, an East-West comparison has a methodological advantage compared to cross-country studies. Our findings show higher tax morale in East than in West Germany. However, in only 9 years after reunification, tax morale values strongly converged, especially due to a strong change in the level of tax morale in the East.
    Keywords: Tax Morale; Tax Evasion; Deterrence; Quasi-Natural Experiment
    JEL: H26 H73 D78 C93
    Date: 2007–01
  9. By: Peichl, Andreas; Schaefer, Thilo
    Abstract: This documentation describes FiFoSiM, the integrated tax benefit microsimulation and CGE model of the Center of Public Economics at the University of Cologne. FiFoSiM consists of three main parts. The first part is a static tax benefit microsimulation module. The second part adds a behavioural component to the model: an econometricaly estimated labour supply model. The third module is a CGE model which allows the user of FiFoSiM to assess the global economic e¤ects of policy measures. Two specific features distinguish FiFoSiM from other tax benefit models. First, the simultaneous use of two databases for the tax benefit module and second, the linkage of the tax benefit model to a CGE model.
    Keywords: FiFoSiM, microsimulation, CGE
    JEL: D58 H2 J22
    Date: 2006
  10. By: Martin G. Kocher (CREED, Universiteit van Amsterdam); Peter Martinsson (Göteborg University, Sweden); Martine Visser (Göteborg University, Sweden)
    Abstract: The effects of stake size on cooperation and punishment are investigated using a public goods experiment. We find that an increase in stake size does neither significantly affect cooperation nor, interestingly, the level of punishment.
    Keywords: C72; C91; H41
    Date: 2006–11–22
  11. By: Dag Einar Sommervoll (Statistics Norway)
    Abstract: A number of European countries changed their tax system in the early 1990s along the lines of the US tax reform act of 1986. After the reforms marginal tax rates were generally lower, and mortgage interest deductions less generous. At the same time a long period of house appreciation started in most countries. This paper considers this puzzle empirically using a rich data base of Norwegian tax records from 1986 to 2000. We use nonparametric, difference in difference and tobit approaches in attempt to control for a wide array of factors that may offset, or mask, response to changed incentives. Of special concern is possible credit constrains as implied by credit score models routinely applied by credit institutions. We find a surprisingly static relationship between the probability of debt across age groups, and a strikingly linear and unchanged relationship between debt and gross income for young households. After the reform house prices doubled and tripled. The wealth effect may spur consumption. We find no sign of consumption smoothing by using self-owned housing as debt collateral, not even for older households. On the contrary, older households did react to the reform by reducing real debt.
    Keywords: Tax incentives; credit rationing; mortgage market; household debt
    JEL: D91 H20
    Date: 2007–01
  12. By: Sijbren Cnossen
    Abstract: This paper provides estimates of the external costs of harmful alcohol use in the European Union (EU) and confronts them with the alcohol excise duty collections per adult and per litre of pure alcohol in the various Member States. In all but one Member State, drinkers do not appear to pay their way. This reflects the EU’s acquiescence in a formidable alcohol problem. Fifteen per cent of adults ‘drink too much’, while the extent of youth drinking has reached alarming proportions. The external costs should be internalised in price through an appropriate optimal alcohol excise duty, supplemented by regulatory measures aimed at specific problem groups. Further, a coordinated alcohol tax policy seems called for, which would, among others, raise the minimum duties on wine, beer and spirits, preferably in line with their relative alcohol content. A drawback of these measures is that they would reduce the welfare of moderate drinkers.
    Keywords: alcohol taxation; European Union; external costs; social costs
    JEL: H2 H8
    Date: 2006–11
  13. By: Peichl, Andreas; Schaefer, Thilo; Scheicher, Christoph
    Abstract: In this paper, we define a new class of richness measures. In contrast to the often used headcount, these new measures are sensitive to changes in rich person's income and therefore allow for a more sophisticated analysis of richness. We demonstrate the application of these new measures to analyse the development of poverty and richness over time in Germany, to compare Germany to the other EU-15 countries and to investigate the impact of tax reforms on poverty and richness. The latter analysis is based on micro data provided by the simulation model FiFoSiM using German income tax and household survey micro data. We show that it partly depends on the measure whether the development of richness in Germany is increasing or decreasing. The cross country analysis yields several groups of countries according to their values of poverty and richness indices. The new richness measures show that the effects of flat tax reform scenarios depend on the reform parameters. Using these examples, we show the importance of taking into account the dimension of changes and not only the number of people beyond a given richness line (headcount). We propose to use the new measures in addition to the headcount index for a more comprehensive analysis of richness.
    Keywords: richness, affluence, poverty, tax reform, flat tax
    JEL: D31 H23 I32
    Date: 2006
  14. By: François Gusdorf (CIRED - Centre international de recherche sur l'environnement et le développement - [CIRAD : UMR56][CNRS : UMR8568] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale des Ponts et Chaussées][Ecole Nationale du Génie Rural des Eaux et des Forêts]); Abdelhakim Hammoudi
    Abstract: This paper analyses harmonization on fuel taxes between two coalitions. Harmonization is considered as a tool to mitigate greenhouse gas emissions, and reduce environmental costs. Domestic fuel producers can sell abroad, and their profits influence national governments in the negotiations. If all countries are identical, harmonization is environmental friendly provided environmental marginal damages are high. It is also economically profitable, but may be unstable if one of the coalitions is small enough. In this case, however, financial transfers between coalitions can stabilize harmonization. Nevertheless, countries can be heterogeneous with respect to the existence of a domestic producer. Heterogeneity introduces a new instability: not only the size, but also the composition of coalitions matters. Furthermore, the level of environmental damages also influences the stability of harmonization. In this case, intra- and inter-coalition financial transfers are necessary but not sufficient to stabilize harmonization.
    Keywords: Fiscal harmonization; Climate Change; Coalitions; Stability.
    Date: 2007–01–09
  15. By: Hammar, Henrik (National Institute of Economic Research); Lundgren, Tommy (Department of Forest Economics); Sjöström, Magnus (National Institute of Economic Research)
    Abstract: Environmental and transport policies based on marginal external costs, such as a kilometer tax for heavy goods vehicles, can be constrained by the risk of industries incurring higher production costs than competi-tors in other countries. However, the significance and size of this cost is largely an empirical question. We estimate factor demand elasticities in the wood and the pulp and paper industries using firm level data for the 1990-2001 period on input prices and quantities. The results show that the introduction of a kilometer tax for heavy goods vehicles affects transport demand as well as other factor demands and output, but that the ef-fects are less pronounced in terms of changes in output. In the wood industry, production decreases by be-tween 0.6 % and 3.0 %. The corresponding decrease in the pulp and paper industry is between 0.4 % and 1.3 %. The effects on average profits are small in both industries.
    Keywords: elasticity; factor demand; kilometer tax; forest industry; transport policy; environmental policy;
    JEL: D20 H23 R48
    Date: 2006–12–01
  16. By: Graversen,Brian Krogh; Ours,Jan C. van (Tilburg University, Center for Economic Research)
    Abstract: This paper investigates how a mandatory activation program in Denmark affects the job finding rate of unemployed workers. The activation program was introduced in an experimental setting where about half of the workers who became unemployed in the period from November 2005 to March 2006 were randomly assigned to the program while the other half was not. It appears that the activation program is very effective. The median unemployment duration of the control group is 14 weeks, while it is 11.5 weeks for the treatment group. The analysis shows that the job finding rate in the treatment group is 30% higher than in the control group. This result is mainly driven by the more intensive contacts between the unemployed and the public employment service.
    Keywords: unemployment insurance;unemployment duration;experiment
    JEL: C41 H55 J64 J65
    Date: 2006
  17. By: Simon Board
    Abstract: In a range of settings, private firms manage peer effects by sorting agents into different groups, be they schools, neighbourhoods or teams. This paper considers such a firm, which controls group entry by setting a series of anonymous prices. We show that private provision systematically leads to two distortions relative to the efficient solution: first, agents are segregated too finely; second, too many agents are excluded from all groups. We demonstrate that these distortions are a consequence of anonymous pricing and do not depend upon the nature of the peer effects. This general approach also allows us to assess the way the `returns to scale' of peer technology and the cost of group formation affect the optimal group structure.
    Keywords: mechanism design, peer effects, public goods
    JEL: D82 H40 L12
    Date: 2007–01–14
  18. By: Antonio Abatemarco (Center for Research on Pensions and Welfare Policies, Turin)
    Abstract: It is known that existing measures of intra-generational (within cohorts) redistribution induced by pension schemes may prove highly misleading in the presence of inter-generational (between cohorts) redistribution. In this paper we show that the Kakwani progressivity index, extended to account for both positive and negative individual tax liabilities, is a non-distorted measure of intra-generational redistribution in pension systems. The relevance of the distortion induced by inter-generational transfers is empirically shown in the comparison between pre- and post-reform Italian pension schemes from 1992 to 2004.
    Keywords: Redistribution, progressivity, pension
    JEL: D30 D63 H55
    Date: 2006–12
  19. By: Bovenberg,Lans; Goulder,Lawrence H.; Jacobson,Mark R. (Tilburg University, Center for Economic Research)
    Abstract: This paper explores how the costs of meeting given aggregate targets for pollution emissions change with the imposition of the requirement that key pollution-related industries be compensated for potential losses of profit from the pollution regulation. Using analytically and numerically solved equilibrium models, we compare the incidence and costs of emissions taxes, fuel (intermediate input) taxes, performance standards and mandated technologies in the absence and presence of this compensation requirement. Compensation is provided either through industry tax credits or industry-specific cuts in capital tax rates. We decompose the added costs from the compensation requirement into (1) an increase in "intrinsic abatement cost," reflecting a lowered efficiency of pollution abatement, and (2) a "lump-sum compensation cost" that captures the efficiency costs of financing the compensation. The compensation requirement affects these components differently, depending on the policy instrument involved and the required extent of pollution abatement. As a result, it can change the cost-rankings of the different instruments. In particular, when compensation is provided through tax credits, the lump-sum compensation cost is higher under the emissions tax than under the command-andcontrol policies (performance standards and mandated technologies) - a reflection of the higher compensation requirements under the emissions tax. When the required pollution reduction is modest, imposing the compensation requirement causes the emissions tax to lose its status as the least costly instrument and to become more costly than command and control policies. In contrast, when required abatement is extensive, the emissions tax again becomes the most-cost effective instrument because of its advantages in terms of lower intrinsic abatement cost.
    Keywords: environmental instrument choice;pollution control;compensation requirements; emissions abatement costs
    JEL: Q58 H23 H21
    Date: 2006
  20. By: Alexander Muermann; Howard Kunreuther
    Abstract: We study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles can partially internalize this externality and thereby improve individual and social welfare.
    JEL: C22 D80 G22 H23
    Date: 2007–01
  21. By: Pierre Koning
    Abstract: In this paper, we measure the effectiveness of the Dutch public employment service (PES) for various performance measures, ranging from outflow rates to the timeliness of the benefits allocation. Using unique administrative monthly data from local PES offices during 2004, we exploit the fact that the number of PES workers per job seeker varies substantially between offices. We find additional PES workers to significantly increase outflow rates for short term unemployed and unemployment insurance (UI) recipients. In contrast, no effects are obtained for the outflow rates of long term unemployed and social assistance (SA) recipients. We also find additional PES workers to reduce the inflow into the schemes, to improve the timeliness of UI benefits and to increase the number of vacancies that are registered by offices. Although the effectiveness of PES workers is limited, we conclude that changes in the number of PES workers per client are cost-effective - that is, the extra costs are compensated for by the resulting reduction in benefit expenses.
    Keywords: public employment service; project evaluation
    JEL: H83 H43
    Date: 2006–12
  22. By: Granlund, David (Department of Economics, Umeå University)
    Abstract: This paper studies the effect of public health care expenditure on absence from work due to sickness or disability using an instrumental variable method. The study is based on data from a panel of the Swedish municipalities during the time period 1993-2004. Public health care expenditure is found to have no significant effect on absence due to sickness or disability and the standard errors are small enough to rule out all but a minimal effect. The same result is obtained when separate estimates are done for men and women and for sickness absence and absence due to disability pension, respectively.
    Keywords: health care expenditure; sickness absence; dynamic panel data models; endogeneity
    JEL: H51 I12 J22
    Date: 2007–01–16
  23. By: Albert van der Horst; Arjan Lejour; Bas Straathof
    Abstract: Innovation seldom has purely domestic causes and consequences, but how can a European innovation policy complement or substitute national policies? Taking the subsidiarity principle as a starting point, this report discusses the economic rationale of a European innovation policy. Explorative empirical analysis suggests that public R&D and public funding of private R&D are subject to economies of scale and external effects. This is an argument in favour of a European innovation policy but amongst other things, the heterogeneity in social economic objectives on public R&D spending between Member States pleas for national government involvement. In addition, there are scale economies in the protection of intellectual property and in the development of standards. We conclude that a European innovation policy could have, or already has, substantial benefits over purely national policy in these areas. With respect to innovation policies targeted at SMEs, we do not find economies of scale or external effects. It seems to be efficient that these policies are mainly conducted at the national level.
    Keywords: innovation policy; subsidiarity; European Union
    JEL: O38 H77 H87 F15
    Date: 2006–11
  24. By: Ryan S. Johnson; Shawn Kantor; Price V. Fishback
    Abstract: The Great Depression of the 1930s led to dire circumstances for a large share of American households. Contemporaries worried that a number of these households would commit property crimes in their efforts to survive the hard times. The Roosevelt administration suggested that their unprecedented and massive relief efforts struck at the roots of crime by providing subsistence income to needy families. After constructing a panel data set for 83 large American cities for the years 1930 through 1940, we estimated the impact of relief spending by all levels of government on crime rates. The analysis suggests that relief spending during the 1930s lowered property crime in a statistically and economically significant way. A lower bound ordinary least squares estimate suggests that a 10 percent increase in per capita relief spending during the Great Depression lowered property crime rates by close to 1 percent. After controlling for potential endogeneity using an instrumental variables approach, the estimates suggest that a 10 percent increase in per capita relief spending lowered crime rates by roughly 5.6 to 10 percent at the margin. More generally, our results indicate that social insurance, which tends to be understudied in economic analyses of crime, should be more explicitly and more carefully incorporated into the analysis of temporal and spatial variations in criminal activity.
    JEL: H53 I38 K4 N31 N41
    Date: 2007–01
  25. By: Secchi Davide (Department of Economics, University of Insubria, Italy); Zatti Andrea (Department of Public and Territorial Economics, Faculty of Political Science, University of Pavia, Italy)
    Abstract: The environmental and social responsibility “movements” affected jointly corporate behavior and public policy in many countries, while their theoretical backgrounds have resulted often quite different and independent. Despite this divide, we argue that the two approaches share many elements in common, and in this paper we try to analyze advantages that contributions from the two fields of studies should reach if considered as one. The paper is divided into three parts. After few methodological points (section 2), the third section overviews social, environmental, and sustainable issues from a social costs, and externality theory angle. The fourth part focuses on the European framework, where the European Union is on the forefront of the promotion of socially responsible practices. The fifth section is dedicated to present some operative managerial issues. We suggest that this multi-perspective and multi-actors approach well fits the European context and, in the concluding section we suggest that sustainable development is driving the European continent towards a new social and ethical frontier.
    Keywords: corporate social responsibility, ethics, externalities, sustainable development
    Date: 2005–07
  26. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: From the angle of competition policy, Voice over IP looks like a panacea. It not only brings better service, but it also increases competitive pressure on former telecommunications monopolists. This paper points to the largely overlooked downside. In a pure world of Internet telephony, there would be no charge for individual calls, nor for telephony, as distinct from other services running over the uniform network. Specifically, establishing property rights for either of these would be costly, whereas these property rights were automatic and free of charge in switched telephony. Giving voice over IP providers classic telephone numbers would enhance systems competition with switched telephony. But this would make it more difficult for clients to swap providers. The anti-competitive caller pays principle would extend to IP telephony.
    Keywords: property right, non-linear pricing, pure bundling, club good, cross-subsidisation, packet switched telephony
    JEL: D D43 H41 K21 K23 L13 L15 L43 L86
    Date: 2007–01
  27. By: Francesc Pujol (Universidad de Navarra)
    Abstract: Journal rankings based on citation indexes are widely used in the economics field for global top journals. We propose an alternative way to rank journals based on the publishing behavior of top ranked authors. We justify this approach by depicting the scientific publishing market as following a matching process. Compared to the citation approach, the methodology that we propose has comparative advantages in terms of time effort to produce national and subdiscipline rankings, and it makes it possible to compare them with global rankings. It also corrects the impact underestimation that the citation approach tends to produce in new and re-founded journals. We propose an empirical application to the case of public economics journals.
    JEL: A14 H00 C78
  28. By: Howard C. Kunreuther; Erwann O. Michel-Kerjan
    Abstract: This paper focuses on the interaction between uncertainty and insurability in the context of some of the risks associated with climate change. It discusses the evolution of insured losses due to weather-related disasters over the past decade, and the key drivers of the sharp increases in both economic and insured catastrophe losses over the past 20 years. In particular we examine the impact of development in hazard-prone areas and of global warming on the potential for catastrophic losses in the future. In this context we discuss the implications for insurance risk capital and the capacity of the insurance industry to handle large-scale events. A key question that needs to be addressed is the factors that determine the insurability of a risk and the extent of coverage offered by the private sector to provide protection against extreme events where there is significant uncertainty surrounding the probability and consequences of a catastrophic loss. We discuss the concepts of insurability by focusing on coverage for natural hazards, such as earthquakes, hurricanes and floods. The paper also focuses on the liability issues associated with global climate change, and possible implications for insurers (including D&O), given the difficulty in identifying potential defendants, tracing harm to their actions and apportioning damages among them. The paper concludes by suggesting ways that insurers can help mitigate future damages from global climate change by providing premium reductions and rate credits to companies investing in risk-reducing measures.
    JEL: H23 H75 K32
    Date: 2007–01
  29. By: Gelan, Ayele; Schwarz, Gerald
    Abstract: The purpose of this paper is to assess the impacts of decoupling single farm payments in Scotland. It focuses on aggregate impacts on the agricultural products in domestic and external markets and the spill-over effect of this on the non-agricultural sector as well as an aggregate impact on the Scottish GDP. In order to capture system-wide impacts of the policy reform, a CGE model was formulated and implemented using a social accounting matrix constructed for Scotland. The simulation results suggest that the Scottish agricultural sector may encounter declines in output and factor us as a result of the policy reform. However, this critically depends on two factors: (a) the price effect of the policy reform on Scottish agricultural products relative to the EU average as well as the conditions of changes in world agricultural market prices; and (b) the extent to which customers would be sensitive to price effects of the policy reform. As far as the spill-over effect to the non-agricultural sector is concerned, decoupling of direct payments seems to have a positive spill-over effect. Similarly, the aggregate GDP effect is positive under all simulation scenarios. Critically, the simulation experiments indicate that policy shock may have a symmetrical outcome across the two sectors, with contractions in agriculture being accompanied by expansions in the non-agricultural sector, mainly because of factor market interactions between the two sectors.
    Keywords: Cap reform; single farm payments; spill-over effects; Scotland
    JEL: Q18 Q11 R00 Q10 H00
    Date: 2006
  30. By: Isabel Grilo; Roy Thurik
    Abstract: The process of the entrepreneurial decision is decomposed in seven engagement levels ranging from “never thought about starting a business” to “gave up”, “thinking about it”, “taking steps for starting up”, “having a young business”, “having an older business” and “no longer being an entrepreneur”. By using a multinomial logit model we allow the effect of covariates to differ across the various entrepreneurial engagement levels. Data from two Entrepreneurship Flash Eurobarometer surveys (2002 and 2003) con-taining over 20,000 observations of the 15 old EU member states, Norway, Iceland, Liechtenstein and the US are used. Other than demographic variables, the set of explanatory variables used includes the percep-tion by respondents of administrative complexities, of availability of financial support and of risk tolerance, the respondents’ preference for self-employment and country specific effects. Among our results we find that the perception of lack of financial support has no discriminative effect across the various levels of en-trepreneurial engagement while perception of administrative complexities plays a negative role only for high levels of engagement.
    Keywords: entrepreneurship, determinants, nascent entrepreneurship, multinomial logit, barriers to entry, Europe
    JEL: H10 J23 L26 M13 R12
    Date: 2007–01

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