nep-pbe New Economics Papers
on Public Economics
Issue of 2008‒03‒01
eleven papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. The spatial range of public goods revealed through referendum voting By Robert Deacon; Felix Schläpfer
  2. Why Me ? Siting a Locally Unwanted Public Good By Jérémy Laurent-Lucchetti; Justin Leroux
  3. Democratic Institutions and Provision of Public Good By Sarani Saha
  4. One Chance in a Million: Altruism and the Bone Marrow Registry By Ted Bergstrom; Rod Garratt; Damien Sheehan-Connor
  5. Baltic Tax Reform By Azacis, Helmuts; Gillman, Max
  6. Effective Taxation of Top Incomes in Germany, 1992 - 2002 By Stefan Bach; Giacomo Corneo; Viktor Steiner
  7. Assessment of income distribution and a hypothetical flat tax reform in Hungary By Lelkes, Orsolya; Benedek, Dora
  8. Employment in Government in the Perspective of the Production Costs of Goods and Services in the Public Domain By Elsa Pilichowski; Edouard Turkisch
  9. Benchmarking the Efficiency of Public Expenditure in the Russian Federation By David Hauner
  10. Exiting a lawless state By Stiglitz, Joseph E.; Hoff, Karla
  11. A Public Good Version of the Collective Household Model By Chris van Klaveren; Bernard M.S. van Praag; Henriette Maassen van den Brink

  1. By: Robert Deacon (University of California, Santa Barbara); Felix Schläpfer (Socioeconomic Institute, University of Zurich, Switzerland)
    Abstract: Billions of dollars are now spent annually in the United States and Europe for spatially delineated environmental services such as agricultural landscape management and river restoration programs, yet little is known about the spatial distribution of the benefits from these policies. This paper develops a framework for recovering information on this question from the spatial pattern of votes cast for referenda on the provision of spatially delineated public goods. We specify a model linking voter support for environmental improvement to the distance at which such improvements are expected to occur. The empirical application is to a river restoration referendum in the Swiss canton of Bern. Our results indicate that the benefits from river restoration have a strong local component, sufficiently strong that voter approval would not occur if only canton-wide benefits were at stake. Surprisingly, support of river restoration is no greater, and in some specifications is actually lower, in locations where rivers are a prominent feature in the environment.
    Keywords: voting, local public goods, valuation,
    Date: 2007–08–01
  2. By: Jérémy Laurent-Lucchetti; Justin Leroux (IEA, HEC Montréal)
    Abstract: The siting of public facilities, such as prisons, airports or incinerators for hazardous wastes faces social rejection by local population. These public goods have a private bad aspect which creates a siting problem: all communities benefit from its existence, but only one (the host) bears its cost. We tackle this inevitable asymmetry from a responsibility and equity viewpoint: the host should not be perceived as a "victim". To realize this objective, we design a method to share the total cost (the disutility of the host plus the construction cost) in a way that bypasses the natural asymmetry of the problem. We also introduce a basic incentives property which has strangely been overlooked in the existing literature: voluntary participation.
    Date: 2007–12
  3. By: Sarani Saha (UCSB Economics)
    Abstract: This paper aims to test empirically the predictions of a theory that deals with the effect of different democratic regimes on public good provision. The theory predicts higher provision of public good in proportional electoral systems and parliamentary political regimes in comparison to majoritarian systems and presidential regimes respectively. The tests are performed using cross-country data from the 1990s on health and education quantity indicators of public good. Use of quantity indicators instead of expenditure data, previously used by other researchers, enables a cleaner test of the theory as a higher amount of any quantity measure clearly indicates a higher supply of public good. Overall, the robust results in this paper do not provide enough support for the theory. Electoral system has no effect on any of the public good indicators while except for two indicators under education, the nature of the political regime has no significant effect either.
    Keywords: good, democracy, political regime, electoral system,
    Date: 2007–04–30
  4. By: Ted Bergstrom (University of California, Santa Barbara); Rod Garratt (University of California, Santa Barbara); Damien Sheehan-Connor (UCSB)
    Abstract: Transplants of donated stem cells save the lives of many patients with blood diseases. Donation is somewhat painful, but rarely has lasting adverse effects. Patients can accept transplants only from donors with compatible immune systems. Those lacking a sibling match must seek donations from the population at large. The probability that two persons of the same race are compatible is less than 1/10,000. Health authorities maintain a registry of several million genetically-tested potential donors who have agreed to donate if asked. We study the peculiar structure of voluntary public good provision represented by the registry, and compare the marginal benefits and marginal costs of expanding the registry.
    Keywords: altruism, voluntary contributions of public goods, value of statistical life, benefit-cost analysis, donations, bone marrow registry, genetics,
    Date: 2007–08–20
  5. By: Azacis, Helmuts (Cardiff Business School); Gillman, Max (Cardiff Business School)
    Abstract: The paper presents an endogenous growth economy with a representation of the tax rate system in the Baltic countries, and the constraint that government spending is a given fraction of output. It shows how a flat tax system is second best optimal. It then computes how specific changes in tax policy since the 2000 Baltic tax reforms affect the growth rate and welfare, including transition dynamics. Conducting alternative tax experiments, it shows that a flat tax increases welfare more in Latvia than actual recent tax changes. This shows how flat rate taxes can be optimal in both theory and practice. Simply lowering personal and social security taxes is better in Estonia and Lithuania compared to recent tax changes, which results because labour income is taxed relatively more heavily than corporate income, as compared to Latvia.
    Keywords: tax reforms; endogenous growth; transitional dynamics; flat taxes
    JEL: E13 H20 O11 O14
    Date: 2008–02
  6. By: Stefan Bach; Giacomo Corneo; Viktor Steiner
    Abstract: We analyze the taxation of top personal incomes in Germany on the basis of an integrated data file of individual tax returns and a general household survey for the years 1992 - 2002. The unique feature of this integrated data set is that it includes all taxpayers in the top percentile of the gross income distribution. We show that despite substantial tax base erosion and significant reductions of top statutory marginal tax rates, German income taxation has remained effectively progressive. The distribution of the tax burden is highly concentrated, and the effective average income tax rate of the German economic elite - the top 0.001 quantile of the gross income distribution - is about 34 percent, which is well below the legislated tax rate.
    Keywords: Personal Income Tax, Taxing the Rich, Effective Progressivity
    JEL: H24 H26 D31
    Date: 2008
  7. By: Lelkes, Orsolya; Benedek, Dora
    Abstract: The paper presents evidence on the effects of taxes and benefits on household incomes in Hungary referring to the 2006 system and a hypothetical flat tax reform. For this, a microsimulation model is used, which is based on a matched sample of an income and a consumption survey and administrative tax records. The Hungarian budget receives more revenues from VAT than from PIT. This has major implications on equity, as while PIT is progressive, VAT is regressive, imposing a higher tax burden on low-income households. We highlight the importance of tax allowances. The absolute amount of total tax allowances tends to increase with income, and the share of allowances within total incomes is around 5-7% in all income groups, except the top fifth, where it declines. Targeting is thus inadequate, and it is especially so in case of child support. Family tax allowance reaches the bottom decile only to a limited extent. This is in sharp contrast with the universal child benefit, which is well targeted to the poorest. The second part explores the likely impact of the introduction of a flat tax, where VAT and PIT rates are set at 20%, and a tax free bracket for low incomes is kept. We show that a budget neutral solution would have a largely regressive effect, where 70% of the population would lose, with a minority on the top of the distribution gaining.
    Keywords: Tax-benefit microsimulation; redistribution; flat tax reform; Hungary
    JEL: D31 I38 C80
    Date: 2007–07–15
  8. By: Elsa Pilichowski; Edouard Turkisch
    Abstract: One of the activities of the Public Governance Committee is the development of comparable data and indicators of good government and efficient public services. An ongoing element is the development of a new methodology to gather comparable data on public employment. Achieving a consistent and acceptable classification of the data first required establishing a terminology and a new definition of what has been called the "public domain". Thus the scope of the project broadened to include a comparison of employment data in government to the costs of production of services of the public domain (Comparison of Employment in the Public Domain, CEPD). The new classification is now consistent with the system of national accounts (SNA).
    Date: 2008–02
  9. By: David Hauner
    Abstract: This paper benchmarks the efficiency of public expenditure in the social sectors in the Russian Federation relative to other countries and among the country's regions. It finds that there is substantial room for efficiency gains, particularly in health care and social protection, although less so in education. An econometric analysis of efficiency differences between the regions suggests that they are positively related to per capita income and the quality of governance and democratic control, while they are negatively related to the share of federal transfers in the respective region's government revenue and the level of spending relative to gross regional product.
    Keywords: Working Paper , Government expenditures , Russian Federation , Public sector , Productivity , Governance , Fiscal analysis ,
    Date: 2007–10–29
  10. By: Stiglitz, Joseph E.; Hoff, Karla
    Abstract: An earlier paper showed that an economy could be trapped in an equilibrium state in which the absence of the rule of law led to asset-stripping, and the prevalence of asset-stripping led to the absence of a demand for the rule of law, highlighting a coordination failure. This paper looks more carefully at the dynamics of transition from a non-rule-of-law state. The paper identifies a commitment problem as the critical feature inhibiting the transition: the inability, under a rule of law, to forgive theft. This can lead to the perpetuation of the non-rule-of-law state, even when it might seem that the alternative is Pareto-improving.
    Keywords: Public Sector Corruption & Anticorruption Measures,National Governance,Labor Policies,Gender and Law,Economic Theory & Research
    Date: 2008–02–01
  11. By: Chris van Klaveren (University of Amsterdam); Bernard M.S. van Praag (Universiteit van Amsterdam); Henriette Maassen van den Brink (Universiteit van Amsterdam)
    Abstract: In this paper we consider an empirical collective household model of time allocation for two- earner households. The novelty of this paper is that we estimate a version of the collective household model, where the internally produced goods and the externally purchased goods are assumed to be public. The empirical results suggest that: (1) Preferences of men and women differ; (2) Although there are significant individual variations, on average the utility functions of men and women are equally weighted in the household utility function; (3) Differences in the ratio of the partners’ hourly wages are explanatory for how individual utilities are weighted in the household utility function. (4) The female’s preference for household production is influenced by family size, but this does not hold for the male; (5) Both the male and the female have a backward-bending labor supply curve; (6) Labor-supply curves are forward-bending with respect to the partner’s wage rate; (7) Our model rejects the unitary <I>Slutsky</I> symmetry condition.
    Keywords: collective household models; household behavior; labor supply; intra-household; time allocation
    JEL: D12 D13 J22
    Date: 2008–02–18

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