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on Public Economics |
| By: | Julio Davila (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Jan Eeckhout (University of Pennsylvania - Department of Economics); César Martinelli (Centro de Investigacion Economica - Instituto Tecnologico Autonomo) |
| Abstract: | In a simple public good economy, we propose a natural bargaining procedure whose equilibria converge to Lindahl allocations as the cost of bargaining vanishes. The procedure splits the decision over the allocation in a decision about personalized prices and a decision about output levels for the public good. Since this procedure does not assume price-taking behavior, it provides a strategic foundation for the personalized taxes inherent to the Lindahl solution to the public goods problem. |
| Keywords: | Public goods, bargaining, alternating offers. |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:paris1:halshs-00289435_v1&r=pbe |
| By: | Gajwani, Kiran; Zhang, Xiaobo |
| Abstract: | "This paper seeks to contribute to the literature on village governance and local public goods provision. Using data from 144 village-level governments in India's Tamil Nadu state, we examine whether the gender and caste of village government leaders influence village public goods provision. In particular, we examine: 1) whether public goods are provided in accordance with gender or caste preferences; and 2) whether public goods provision differs based on the knowledge level of the village government leader. We find evidence of different preferences for public goods between men and women, and between Scheduled Caste (SC) and non-SC persons. Additionally, a test of knowledge regarding the village government reveals that female and SC presidents receive lower scores relative to male and non-SC presidents, with women scoring lowest overall. We find that preferences and knowledge have little effect on public goods provision by female presidents, and hypothesize that this may be due to the influence of their male spouses. In the context of SC presidents, we find evidence that SC presidents provide more drinking water access—a location-specific public good—to SC-inhabited village areas." from authors' abstract |
| Keywords: | Local governance, public goods provision, Gender, Caste, |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:807&r=pbe |
| By: | Lorenz Blume (Department of Economics, Universitaet Kassel); Stefan Voigt (Marburg Center for Institutional Economics, Philipps University Marburg) |
| Abstract: | The economic effects of federalism are unclear: some papers find that federalism has strong positive effects on a number of economically relevant variables, others find negative effects. The results often crucially hinge upon the proxies for federalism used. In this paper, we critically survey the existing indicators for both federalism and fiscal decentralization. We argue that federalism is a constitutional institution whereas decentralization is (the outcome of) a policy choice and that the two ought to be systematically distinguished because decentralization can also occur in non-federally structured states. We further argue that institutional details are very important with regard to federalism and that dummy variables usually capture only very specific aspects of the institutional details. We use factor analysis to test whether the latent variables behind the observed indicators support these assumptions. It is shown that more than two important factors result, implying that a more fine-grained differentiation beyond the distinction between federalism and decentralization might be in order. The correlations of the most important proxies for various aspects of federalism and decentralization with a number of (quasi-) exogenous variables as well as with institutional variables are usually rather modest. |
| Keywords: | Federalism, Fiscal federalism, Decentralization |
| JEL: | H1 H3 H5 H8 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:200821&r=pbe |
| By: | Teresa Lloyd-Braga (FCEE - Faculdade de Ciencias Economicas e Empresariais - Universidade Catolica Portuguesa); Leonor Modesto (FCEE - Faculdade de Ciencias Economicas e Empresariais - Universidade Catolica Portuguesa); Thomas Seegmuller (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | We consider a constant returns to scale, one sector economy with segmented asset markets of the Woodford (1986) type. We analyze the role of public spending, financed by labor income and consumption taxation, on the emergence of indeterminacy. We find that what is relevant for indeterminacy is the variability of the distortion introduced by government intervention. We further discuss the results in terms of the level of the tax rate, its variability with respect to the tax base and the degree of externalities in preferences due to the existence of a public good. We show that the degree of public spending externalities affects the combinations between the tax rate and its variability under which indeterminacy occurs. Moreover, in contrast to previous results, we find that consumption taxes can lead to local indeterminacy when asset markets are segmented. |
| Keywords: | Indeterminacy ; public spending ; taxation ; segmented asset markets |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:paris1:halshs-00194395_v1&r=pbe |
| By: | Marcelin Joanis (Université de Sherbrooke, GREDI and CIRANO) |
| Abstract: | Because they yield durable and visible benefits to voters, public infrastructure expenditures are an attractive instrument for politicians to build enduring electoral support in their constituencies. Static models of special-interest politics typically predict that public spending should be targeted at swing voters, at the expense of voters who display strong partisan loyalty. Yet static theories are not well-suited to capture the implications of long-run relationships between political parties and their loyal supporters. To address this limitation, I set out a simple dynamic probabilistic voting model in which a government allocates a fixed budget across electoral districts that differ in their loyalty to the ruling party. The model predicts that the contemporaneous geographic pattern of spending depends on the way the government balances long-run ‘machine politics’ considerations with the more immediate concern to win over swing voters. To assess the empirical relevance of both forces, I analyze rich data on road spending from a panel of electoral districts in Québec. Empirical results exploiting the province’s linguistic fragmentation provide robust evidence that partisan loyalty is a key driver of the geographic allocation of spending, in contrast with the standard ‘swing voter’ view. |
| Keywords: | partisan loyalty, swing voters, political competition, local public goods, distributive politics, long-run relationships |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:08-15&r=pbe |
| By: | Péter Bakos (Royal Bank of Scotland); Péter Benczúr (Magyar Nemzeti Bank, Central European University.); Dóra Benedek (Central European University, Ministry of Finance.) |
| Abstract: | Many Central and Eastern European countries are adopting flat tax schemes in order to boost their economies and tax revenues. Though there are signs that some countries do manage to improve on both fronts, it is in general hard to distinguish the behavioral response to tax changes from the effect of increased tax enforcement. This paper addresses this gap by estimating the elasticity of taxable income in Hungary, one of the outliers in terms of not having a flat tax scheme. We analyze taxpayer behavior using a medium-scale tax reform episode in 2005, which changed marginal and average tax rates but kept enforcement constant. We employ a Tax and Financial Control Administration (APEH) panel dataset between 2004 and 2005 with roughly 215,000 taxpayers. Our results suggest a relatively small but highly significant tax price elasticity of about 0.06 for the population earning above the minimum wage (around 70% of all taxpayers). This number increases to around 0.3 when we focus on the upper 20% of the income distribution, with some income groups exhibiting even higher elasticities (0.45). We first demonstrate that such an elasticity substantially modifies the response of government revenues to the 2004-2005 tax changes, and then quantify the impact of a hypothetical flat income tax scheme. Our calculations indicate that though there is room for a parallel improvement of budget revenues and after-tax income, those gains are modest (2% and 1.4%, respectively). Moreover, such a reform involves important adverse changes in income inequality, and its burden falls mostly on lower-middle income taxpayers. |
| Keywords: | elasticity of taxable income, tax reform, behavioral response, revenue estimation, flat tax. |
| JEL: | H24 H31 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:mnb:wpaper:2008/7&r=pbe |
| By: | Rupert Sausgruber (University of Innsbruck); Jean-Robert Tyran (Department of Economics, University of Copenhagen) |
| Abstract: | Tax incentives can be more or less salient, i.e. noticeable or cognitively easy to process. Our hypothesis is that taxes on consumers are more salient to consumers than equivalent taxes on sellers because consumers underestimate the extent of tax shifting in the market. We show that tax salience biases consumers’ voting on tax regimes, and that experience is an effective de-biasing mechanism in the experimental laboratory. Pre-vote deliberation makes initially held opinions more extreme rather than correct and does not eliminate the bias in the typical committee. Yet, if voters can discuss their experience with the tax regimes they are less likely to be biased. |
| Keywords: | tax salience; learning; deliberation; voting |
| JEL: | C92 H22 D72 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:0821&r=pbe |
| By: | Johann K. Brunner; Susanne Pech |
| Abstract: | Inheritances create a second distinguishing characteristic of individuals, in addition to earning abilities. We incorporate this fact into an optimum income taxation model with bequests motivated by joy of giving, and show that a tax on inherited wealth is equivalent to a uniform tax on consumption plus bequests. These taxes are desirable according to an intertemporal social objective if, on average, high-able individuals inherit more wealth than low-able. We demonstrate that such a situation results as the outcome of a process with stochastic transition of abilities over generations, if all descendants are more probable to have their parent’s ability rank than any other. |
| JEL: | H21 H24 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:jku:nrnwps:2008_02&r=pbe |
| By: | Lacetera, Nicola (Case Western Reserve University); Macis, Mario (University of Michigan) |
| Abstract: | Using longitudinal data on the entire population of blood donors in an Italian town, we examine how donors respond to an award scheme which rewards them with “medals” when they reach certain donation quotas. Our results indicate that donors significantly increase the frequency of their donations immediately before reaching the thresholds for which the rewards are given, but only if the prizes are publicly announced in the local newspaper and awarded in a public ceremony. The results are robust to several specifications, sample definitions, and controls for observable and unobservable heterogeneity. Our findings are consistent with social image concerns being a primary motivator of pro-social behavior, and indicate that symbolic prizes are most effective as motivators when they are awarded publicly. Because we do not detect a reduction in donation frequency after the quotas are reached, this incentive based on social prestige leads to a net increase in the frequency of donations. |
| Keywords: | incentives, awards, public good provision, pro-social behavior, public health, social prestige |
| JEL: | D12 D64 I18 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3771&r=pbe |
| By: | Nicolas Chatelais (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Institut CDC pour la recherche - Institut CDC pour la recherche); Mathilde Peyrat (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, ESSEC Business School - Ecole Supérieure des Sciences Economiques et Commerciales) |
| Abstract: | The aim of this paper is to develop a better understanding of the literature dealing with strategic fiscal behaviours of small EU countries using estimations of tax reaction functions of competing national governments. Deriving a simple model of tax competition in a Nash and Stackelberg game, we use panel data and tools from spatial econometrics to examine the role of small countries in tax competition within the enlarged European Union. We find that interactions are stronger among smaller EU countries than between larges ones and rates set in small countries influence those in big countries. Finally, small countries located in the centre of the EU have more influence on tax policies choices of big countries than small countries located in the periphery of EU. |
| Keywords: | Strategic interactions, tax behaviours, spatial econometrics, European Union, tax competition, small countries. |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:paris1:halshs-00332479_v1&r=pbe |
| By: | Matthias Walter; Astrid Cullmann |
| Abstract: | We analyze potential gains from hypothetical mergers in local public transport using the non-parametric Data Envelopment Analysis with bias corrections by means of bootstrapping. Our sample consists of 41 public transport companies from Germany's most densely populated region, North Rhine-Westphalia. We merge them into geographically meaningful, larger units that operate partially on a joint tram network. Merger gains are then decomposed into individual technical efficiency, synergy and size effects following the methodology of Bogetoft and Wang [Bogetoft, P., Wang, D., 2005. Estimating the Potential Gains from Mergers. Journal of Productivity Analysis, 23(2), 145-171]. Our empirical findings suggest that substantial gains up to 16 percent of factor inputs are present, mainly resulting from synergy effects. |
| Keywords: | Merger; Public Transport; Efficiency; Data Envelopment Analysis |
| JEL: | L92 C14 L11 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp832&r=pbe |