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on Public Economics |
| By: | Christoph A. Schaltegger; Lars P. Feld |
| Abstract: | The fiscal commons problem is one of the most prominent explanations of excessive spending in political economics. The more fragmented a government, the higher its spending. In this paper we investigate to what extent this problem can be mitigated by different fiscal or constitutional insti-tutions. We distinguish between two variants of fragmented governments: cabinet size and coali-tion size. In addition, we analyze whether constitutional rules for executive and legislature as well as formal fiscal restraints shape the size of government and how different rules interact with fragmentation in determining government size. The empirical analysis of the role of fragmented governments for fiscal policy outcomes is based on a panel of 26 Swiss cantons from 1980-1998. The results indicate that the number of ministers in the cabinet is negatively associated with fiscal discipline. Furthermore, fiscal referendums effectively restrict the size of government, while for-mal fiscal restraints more effectively restrict the fiscal commons problem. (This is a thoroughly revised version of Crema WP Nr. 2004-15) |
| Keywords: | Fragmentation; Fiscal Policy; Referendums; Legislative Rules; Formal fiscal restraints |
| JEL: | E61 E63 H61 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2008-10&r=pbe |
| By: | Lars P. Feld; Benno Torgler; Bin Dong |
| Abstract: | The paper explores whether a social learning model helps explain the observed conformity and compliance with social norms after the unification of Germany. We compare tax morale, (the willingness to pay taxes), between inhabitants of East and West Germany during the post-unification period, using three World Values Survey/European Values Survey waves between 1990 and 1999. German unification is of particular interest in analyzing tax morale since it is close to a quasi-natural experiment. Factors such as a common language, similar education systems and a shared cultural and political history prior to the separation after the Second World War can be controlled because they are similar. Our findings indicate that the social learning model employed in this study helps to predict the development of tax morale over time. It is clear that tax morale values converged within a mere nine years after unification, due largely to a strong change in the level of tax morale in the East. Thus, the paper contributes to the literature that attempts to explain how norms arise, how they are maintained and how they are changed. |
| Keywords: | Tax Morale; Social Learning; Conformity; Convergence Process; Deterrence; Quasi-Natural Experiment |
| JEL: | H26 H73 D78 C93 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2008-09&r=pbe |
| By: | Rolf Aaberge; Ugo Colombino; John E. Roemer |
| Abstract: | The purpose of this paper is to introduce and adopt a generalised version of Roemer's (1998) Equality of Opportunity (EOp) framework, which we call extended EOp, for analysing second-best optimal income taxation. Unlike the pure EOp criterion of Roemer (1998) the extended EOp criterion allows for alternative weighting profiles in the treatment of income differentials between and within types when types are defined by (observable) circumstances that are beyond people's control. An empirical microeconometric model of labour supply in Italy is used to simulate and identify income tax-transfer rules that are optimal according to the extended EOp criterion. The tax-transfer rules are only allowed to depend on income, i.e. we look for second-best optimality. The rules are defined by a universal lump-sum transfer (positive or negative) and by one or two marginal tax rates. A rather striking result of the analysis is that the optimal tax-transfer rule turns out to be a universal lump-sum tax (with marginal tax rates equal to zero), under Roemer's pure EOp criterion as well as under the generalised EOp criterion with moderate degrees of aversion to within-type inequality. A high degree of withintype inequality aversion instead produces EOp-optimal rules with positive marginal tax rates. When the EOp-version of the Gini welfare function is adopted, the optimal tax rule turns out to be close to the actual 1993 Italian tax system, if not for the important difference of prescribing a universal lumpsum positive transfer of 3,500,000 ITL, which has no comparable counterpart in the actual system. On the other hand, when using the conventional equality of outcome (EO) criterion, the pure lump-sum tax always turns out to be optimal, at least with respect to the classes of two- and three-parameter rules. We also compute optimal rules under the additional constraint that universal lump-sum taxes are not feasible. Overall, the results suggest, somehow surprisingly, that the extended EOp approach would demand more redistribution than the EO approach. |
| Keywords: | Equality of opportunity, equality of outcome, labour supply, optimal income taxation |
| JEL: | D19 D63 H21 H24 H31 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:wpc:wplist:wp05_08&r=pbe |
| By: | Ziesemer, Thomas (UNU-MERIT, Maastricht University) |
| Abstract: | We estimate the impact of worker remittances on savings, taxes, and public expenditures on education, all as a share of GDP, for about thirty years in two samples of countries with per capita income above and below $1200 using dynamic panel data methods. Governments of the poorer sample raise less taxes in the short run but more in the long run and spend more money on education when remittances come in; in the richer sample they raise less taxes and spend less on education in response to remittances but this is almost completely compensated by the positive response of expenditure on education to higher savings, which results from remittances as well. |
| Keywords: | Remittances, Tax Revenue, Government Expenditure, Education |
| JEL: | F24 H20 H52 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2008029&r=pbe |
| By: | Wendner, Ronald |
| Abstract: | This paper analyzes the impact of consumption externalities on the ``Pigouvian ranking,'' according to which the second-best level of public good provision is \emph{smaller} than the first-best level. Consumption externalities introduce exceptions to the Pigouvian ranking. Two necessary and sufficient conditions for reversal of the Pigouvian ranking are identified, when preferences for private goods (Cobb-Douglas) and the public good are weakly separable: (i) consumption generates a \emph{negative} externality, (ii) utility is not too concave in the subutility of private goods. If preferences are \emph{strongly} separable in the public good, the Pigouvian ranking is reversed if and only if the second-best consumption price is lower than the corrective (Pigouvian) consumption price. |
| Keywords: | consumption externality public good provision; first-best; second-best; Pigouvian ranking |
| JEL: | D62 H41 H23 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8540&r=pbe |
| By: | Hubert Kempf (Banque de France, Paris School of Economics and Université Paris-1, Panthéon-Sorbonne; Contact address: Banque de France, 39 Croix-des-Petits-Champs, 75049 Paris Cedex 01, France.); Leopold von Thadden (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper offers a framework to study commitment and cooperation issues in games with multiple policymakers. To reconcile some puzzles in the recent literature on the nature of policy interactions among nations, we prove that games characterized by different commitment and cooperation schemes can admit the same equilibrium outcome if certain spillover effects vanish at the common solution of these games. We provide a detailed discussion of these spillovers, showing that, in general, commitment and cooperation are non-trivial issues. Yet, in linear-quadratic models with multiple policymakers commitment and cooperation schemes are shown to become irrelevant under certain assumptions. The framework is su??ciently general to cover a broad range of results from the recent literature on policy interactions as special cases, both within monetary unions and among fully sovereign nations. JEL Classification: E52, E63. |
| Keywords: | Monetary policy, Fiscal regimes. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080880&r=pbe |