nep-pbe New Economics Papers
on Public Economics
Issue of 2008‒01‒26
seven papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. Federalism's Values and the Value of Federalism By Robert P. Inman
  2. Federal Institutions and the Democratic Transition: Learning from South Africa By Robert P. Inman; Daniel L. Rubinfeld
  3. Civic Virtue, the American Founding, and Federalism By Stephen J. Lange
  4. Government for the People: On the Determinants of the Size of U.S. Government By Fernando M. Goncalves; Tamim Bayoumi
  5. Performance competition in local media markets By Revelli Federico
  6. Effects of Taxes on Economic Behavior By Martin S. Feldstein
  7. A Reconsideration of gDouble Dividendsh Hypothesis in Taxation on Externalities By SUMINO, Koh; YAMADA, Masatoshi

  1. By: Robert P. Inman
    Abstract: What is it about federal governance that makes it so attractive to economists, political philosophers, and legal scholars and is there any evidence that would suggest all this attention is warranted? Proponents see federalism as a means to more efficient public and private economies, as the foundation for increased political participation and democratic stability, and as important check on governmental abuses of personal rights and liberties. This study provides a working definition of federal governance and classifies a sample of 73 countries as either a constitutionally-based federal democracy, an administratively-based federal democracy, a unitary democracy, a federal dictatorship, or a unitary dictatorship. Governance is then related to eleven measures of economic, democratic, and rights performance. Three conclusions follow. First, decentralized policy-making does have a unique contribution to make to a society's ability to enforce property rights, to protect political and civil rights, and then because of such rights protections, to enhance private sector economic performance. Second, while policy decentralization is the key to federalism's strong rights and economic performance and can be achieved within a unitary government by fiat, constitutionally established provincial (or state) governments provide an extra and important protective barrier for policy decentralization. Federal institutions protect policy decentralization, and policy decentralization provides federalism's valued outcomes. Third, federalism needs democracy; there is no evidence that adding policy decentralization or provinces to a dictatorship significantly improves a dictatorship's economic or rights performance.
    JEL: H11 H77 P48
    Date: 2008–01
  2. By: Robert P. Inman; Daniel L. Rubinfeld
    Abstract: We present a model of a peaceful transition in South Africa from white, elite rule under apartheid to a multi-racial democracy. We ask how can the emerging majority credibly promise not to exploit the once ruling elite? Under South Africa’s "democratic federalism" the constitution creates an annual policy game where the new majority and the elite each control one policy instrument of importance to the other. The game has a stable, stationary democratic equilibrium that the elite prefer to autocratic rule. For the elite, the move to democracy means higher tax rates, but also higher economic growth; democracy is preferred to apartheid if the elite's rate of time preference is less than the transition's rate of return.
    JEL: H11 H77 P26
    Date: 2008–01
  3. By: Stephen J. Lange (Morehead State University)
    Abstract: The question of what kind of civic virtues citizens of the United States need in order to maintain the republic and to enable it to flourish, is one that was on the minds of the Framers themselves. They recognized that good government would depend upon the moral character and intellectual abilities of the citizens, on their having certain qualities of heart and mind. While institutional arrangements were employed to minimize reliance upon such character and abilities as much as possible, the Framers did not understand themselves to be eliminating those qualities, as an examination of The Federalist shows. Further, the institutional arrangements themselves were expected to contribute to the fostering of certain civic virtues. Yet it is not the case that such formal, structural provisions were expected to be sufficient on their own to engender good citizens. Rather, the Framers left the bulk of the responsibility of forming character to the states instead of the national government, where it was already being undertaken. Public education, in particular, is one means by which the states at the time of the Founding were seeking to cultivate good citizens for republican government in the United States.
    Date: 2008–01
  4. By: Fernando M. Goncalves; Tamim Bayoumi
    Abstract: Trends in the size of U.S. government are examined. In the postwar period, general government primary spending rose by ¼ percent of GDP a year through 1975, stabilizing thereafter. With higher social transfers offset by a lower burden of defense spending, expansion reflected a baby-boom driven rise in education spending. The parallel improvement in tax efficiency helped equate the benefits of higher spending with the costs from higher taxation, in accordance with a marginalist view of the size of government. Looking forward, the retirement of baby boomers appears likely to expand government and lead to a more efficient tax system.
    Keywords: Government expenditures , United States , Education , Tax systems ,
    Date: 2007–12–20
  5. By: Revelli Federico (University of Turin)
    Abstract: This paper investigates the impact of tax and public service performance on English local government popularity by using data on local property taxes, service performance ratings and local election results after the introduction of a system of evaluation of local government performance (Comprehensive Performance Assessment). The evidence emerging from estimation of a reelection equation offers a somewhat more rounded portrait of the voter than the conventional fiscal conservative icon, by highlighting the beneficial consequences of public service performance on government popularity and pointing to the role of local media networks (the BBC regional television, local radio and web network) in shaping consensus by spreading tax-related information.
    Date: 2008–01
  6. By: Martin S. Feldstein
    Abstract: This paper discusses how the effects of taxes on economic behavior are important for revenue estimation, for calculating efficiency effects, and for understanding short-term macroeconomoic consequences. The primary focus is on taxes on labor income but some attention is given to taxes on income from saving. Specific calculations illustrate the importance of behavioral responses for accurate calculation of the revenue effects and deadweight losses of tax changes.
    JEL: H2
    Date: 2008–01
  7. By: SUMINO, Koh (Department of Economics, Otaru University of Commerce); YAMADA, Masatoshi (Graduate School of Economics, Osaka University)
    Abstract: Bovenberg and Mooij (1994) and others pointed out that the optimal taxation on goods with external diseconomy both collects revenue and also corrects the external diseconomy by the goods, and thus it is said that the tax has gdouble dividendsh. The purpose of the present paper is to examine whether the double-dividend arguments by Bovenberg and Mooij and others are appropriate when they are viewed from the traditional arguments of optimal and corrective (Pigovian) taxation. Based on their framework, we show that it should be evaluated differently from Bovenberg and Mooij whether double-dividend hypothesis holds or not, and that the hypothesis usually holds if it is appropriately defined.
    Keywords: Optimal tax rule, external diseconomies, double-dividend hypothesis
    JEL: D62 H23
    Date: 2008–01

This nep-pbe issue is ©2008 by Oliver Budzinski. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.