nep-pbe New Economics Papers
on Public Economics
Issue of 2008‒04‒21
eleven papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. "Interregional Tax Competition and Intraregional Political Competition: The Optimal Provision of Public Goods" By Toshihiro Ihori; C. C. Yang
  2. Status Effects, Public Goods Provision, and the Excess Burden By Wendner, Ronald; Goulder, Lawrence, H.
  3. Who visits the museums? A comparison between stated preferences and observed effects of entrance fees By Lampi, Elina; Orth, Matilda
  4. Capture and Corruption in Public Utilities: the Cases of Water and Electricity in Sub-Saharan Africa By AURIOL, Emmanuelle; BLANC, Aymeric
  5. Large Institutional Underpinnings of Trustworthiness in Infrastructure Contracts: Trust and Trust Perceptions By Xeni Dassiou; Jon Stern
  6. Redistributive taxation, multinational enterprises, and economic integration By Haufler, Andreas; Klemm, Alexander; Schjelderup, Guttorm
  7. Rethinking public auditing institutions: Empirical evidence from Swiss municipalities By Mark Schelker; Reiner Eichenberger
  8. "Overlapping Tax Revenue, Local Debt Control and Soft-Budget Constraint" By Toshihiro Ihori
  9. Does taxation rhyme with democracy? By Pablo Zoido
  10. "Effects of Transparency in Procurement Practices on Government Expenditure: A Case Study of Municipal Public Works" By Hiroshi Ohashi
  11. Efficiency Enhancing Taxation in Two-sided Markets By Kind, Hans Jarle; Koethenbuerger, Marko; Schjelderup, Guttorm

  1. By: Toshihiro Ihori (Faculty of Economics, University of Tokyo); C. C. Yang (Institute of Economics, Academia Sinica and Department of Public Finance, National Chengchi University)
    Abstract: This paper explores the implications of the interaction between interregional tax competition and intraregional political competition for the optimal provision of public goods. In contrast to Hoyt's (1991) finding that the extent to which public goods are undersupplied is monotonically increasing in the number of competing regions, we show that the relationship between the level of public good supply and the number of competing regions is nonmonotonic if political as well as tax competition is considered. Interestingly, some certain interaction between interregional tax competition and intraregional political competition can result in the optimal provision of public goods.
    Date: 2008–04
  2. By: Wendner, Ronald; Goulder, Lawrence, H.
    Abstract: Most studies of the optimal provision of public goods or the excess burden from taxation assume that individual utility is independent of other individuals' consumption. This paper investigates public good provision and excess burden in a model that allows for interdependence in consumption in the form of status (relative consumption) effects. In the presence of such effects, consumption and labor taxes no longer are pure distortionary taxes but have a corrective tax element that addresses an externality from consumption. As a result, the marginal excess burden of consumption taxes is lower than in the absence of status effects, and will be negative if the consumption tax rate is below the "Pigouvian" rate. Correspondingly, when consumption or labor tax rates are below the Pigouvian rate, the second-best level of public goods provision is above the first-best level, contrary to findings from models without status effects. For plausible functional forms and parameters relating to status effects, the marginal excess burden from existing U.S. labor taxes is substantially lower than in most prior studies, and is negative in some cases.
    Keywords: status effects; excess burden; deadweight loss; public goods provision; corrective taxation; consumption externality; first best; second best
    JEL: D62 H41 H23
    Date: 2008
  3. By: Lampi, Elina (Department of Economics, School of Business, Economics and Law, Göteborg University); Orth, Matilda (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This study investigates whether the introduction of an entrance fee affects visitor composition at a state funded museum in Sweden. While entrance to the museum was still free, we conducted a survey to collect information about visitor characteristics and used the Contingent Valuation (CV) method to measure visitors’ willingness to pay (WTP) for a visit. The results of the CV survey show that even a very low entrance fee level results in a significant reduction in several target groups that the museum has policy directives to reach. Additionally, we conducted another survey after the introduction of the fee. Thus, we have a unique opportunity to test the validity of CV in the context of a cultural good. The comparison between the predicted results from the CV and the observed change in visitor composition after the introduction of the fee implies that CV does predict a majority of the changes successfully.<p>
    Keywords: free entrance; visitor composition; museum; natural experiment; stated preferences
    JEL: D12 H41 Z11
    Date: 2008–04–09
  4. By: AURIOL, Emmanuelle; BLANC, Aymeric
    Date: 2008–01
  5. By: Xeni Dassiou (Department of Economics, City University, London); Jon Stern (Department of Economics, City University, London)
    Abstract: This paper discusses trust and trust perceptions in infrastructure contracts. We focus on perceptions of the trustworthiness of the government purchasers of infrastructure services (a) by supplying companies and (b) by governments. In particular, we allow for trust misalignments which may give rise to `undertrusting' and `overtrusting'. The core of the paper sets out a game theoretic model of contracts which we use to explore the impact of trust misalignment both on economic efficiency and on investment levels, taking account both of asset specificity issues and maladaptation costs. We explore flexible contracts with and without pre-payments, rigid contracts (which do not allow for post-investment renegotiation) and hybrid contracts. Their efficiency is compared to an incentive compatible benchmark contract. The model is also used to shed light on current issues on the sustainability of private investment infrastructure contracts both in OECD countries (e.g. Private-Public Partnerships) and in developing countries.
    Date: 2008–04
  6. By: Haufler, Andreas (Department of Economics, University of Munich); Klemm, Alexander (Fiscal Affairs Dept., International Monetary Fund (IMF)); Schjelderup, Guttorm (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: Increased activity of multinational firms exposes national corporate tax bases to cross-country profit shifting, but also leads to rising profitability of the corporate sector. We incorporate these two effects of economic integration into a simple political economy model where the median voter decides on a redistributive income tax rate. In this setting economic integration may raise or lower the equilibrium tax rate, and it is more likely to raise the tax rate of a low-tax country. The implications of the model are consistent with the empirical observations that effective corporate tax rates have not fallen in all OECD countries, and that corporate tax revenues have generally risen.
    Keywords: Redistributive taxation; profit shifting
    JEL: F23 H20
    Date: 2008–03–12
  7. By: Mark Schelker (University of Fribourg, Switzerland; CREMA); Reiner Eichenberger (University of Fribourg, Switzerland; CREMA)
    Abstract: In the economic literature various political institutions designed to control the government have been analyzed. However, an important institution has been neglected so far: independent auditing institutions with an extended mandate to analyze the budget draft and individual policy proposals. We argue that auditors with an extended mandate improve transparency and provide essential information on the impact of policy proposals on common pool resources. This leads to less wasteful spending and a more efficient allocation of public resources. We empirically analyze the policy impact of local auditors with an extended audit mandate in Switzerland. Auditors, who can evaluate and criticize policy proposals ex ante to policy decisions, significantly reduce the general tax burden and public expenditures. We find similar results with different datasets. These results are robust to various changes in the econometric specification
    Keywords: Auditor, audit court, special interests, political economics, public finance.
    JEL: D70 H10
    Date: 2008
  8. By: Toshihiro Ihori (Faculty of Economics, University of Tokyo)
    Abstract: This paper investigates how the soft budget constraint with grants from the central government to local governments tends to internalize the vertical externality by stimulating insufficient local expenditure when both the central and local governments impose taxes on the same economic activities from public investment. The theoretical model incorporates local governments' rent-seeking activities in a multi-government setting with and without central controls on local borrowing. Two channels through debt issuance and public investment cause the soft budget outcome. In the unrestricted scheme of local debt issuance we have the positive effect on public investment and debt issuance although it would also stimulate wasteful rent seeking activities. In the restricted scheme of local debt issuance the soft budget case may not stimulate public investment since its effect through debt issuance is absent. In either case the soft budget constraint is welfare improving if the marginal valuation of central public goods is relatively small and/or the tax share of local government is relatively small.
    Date: 2008–04
  9. By: Pablo Zoido
    Abstract: Latin America has put its faith in democracy and the market economy. Efficient, fair and equitable fiscal policy can help foster development and consolidate democracy. * This Policy Insights is based on the Latin American Economic Outlook 2008.
    Date: 2007–10
  10. By: Hiroshi Ohashi (Faculty of Economics, University of Tokyo)
    Abstract: This paper examines the e?ect of improved transparency in the bidder quali.cation process, using the experience based on a case study of municipal public work auctions. It reveals that improved transparency reduces procurement cost by a maximum of three percent. This .nding is robust to the concerns of endogeneity, sample selectivity, and distributional assumptions. The bidding-function estimates, combined with features of Japanese procurement system, imply that the improved transparency limits abuse of auctioneer.s discretion, and thus weakens the stability of collusion among bidders.
    Date: 2008–03
  11. By: Kind, Hans Jarle (Department of Economics, Norwegian School of Economics and Business Administration (NHH)); Koethenbuerger, Marko (Center for Economic Studies, Ludwig-Maximilians-Universität); Schjelderup, Guttorm (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: This paper examines the efficient provision of goods in two-sided markets and characterizes optimal specific and ad-valorem taxes. We show that (i) a monopoly may have too high output compared to the social optimum; (ii) output may be reduced by imposing negative value-added taxes (subsidy) or positive specific taxes.
    Keywords: Market Structure and Pricing; Efficiency; Optimal Taxation; Incidence
    JEL: D40 D43 H21 H22 L13
    Date: 2008–01–25

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