nep-pbe New Economics Papers
on Public Economics
Issue of 2009‒01‒24
ten papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. PILOTs and Public Policy: Steering through the Economic Ramifications By Brad R. Humphreys; Victor Matheson
  2. Public sector efficiency according to COFOG classification in the European Union By Donath , Liliana; Milos, Marius
  3. How democracy resolves conflict in difficult games By Brams, Steven J.; Kilgour, D. Marc
  4. Voluntary participation and cooperation in a collective-good game. By Kene Boun My; Benoît Chalvignac
  5. The Municipal Transfer System in Nicaragua: Evaluation and Proposals for Reform By Jorge Martinez-Vazquez; Cristian Sepúlveda
  6. Optimal Law Enforcement and Welfare in the Presence of Organized Crime By Pääkkönen, Jenni
  7. Lump-Sum Taxes in a R&D Model By Xin Long; Robert Waldmann; Alessandra Pelloni
  8. Cournot-Bertrand competition in a unionized mixed duopoly By Kangsik, Choi
  9. Are Public Sector Workers Underpaid in Russia? Estimating the Public-Private Wage Gap By Gimpelson, Vladimir; Lukiyanova, Anna
  10. Public and Private Expenditures on Health in the Presence of Inequality and Endogenous Mortality: A Political Economy Perspective By Radhika Lahiri; Elizabeth Richardson

  1. By: Brad R. Humphreys (Department of Economics, University of Alberta); Victor Matheson (Department of Economics, College of the Holy Cross)
    Abstract: A recent IRS ruling has allowed the new Yankees Stadium construction project to be financed by a tax exempt bond offering backed by payments in lieu of taxes (PILOTS). This decision appears to contradict the spirit of the Tax Reform Act of 1986. From an economic standpoint, the question is whether it is desirable to significantly expand the number of projects eligible for tax subsidies in exchange for a more direct connection between those receiving benefits from the projects and those paying the taxes, or should the state and municipal bond tax exemption narrowly extend only to true public works even if this means taxing the populace more broadly when certain segments of the population are more apt to benefit from certain projects.
    Keywords: sports, stadiums, tax subsidies, economic impact
    JEL: O18 R53 L83 H25 H42 H81
    Date: 2008–12
  2. By: Donath , Liliana; Milos, Marius
    Abstract: The budgetary constraints governments have to deal with on a daily bases require a new approach in public spending as well as the revision of public goods definition. Consequently the key words are efficiency and effectiveness, in order to comply with the new management approach requirements. Assessing the efficiency and performance of public expenses is a key item for analyzing the quality of public expenses because it connects the entries as public resources and their yield (efficiency) or the entries to the results obtained (performance)
    Keywords: public spending; performance; efficiency; effectiveness
    JEL: H50
    Date: 2008–12–01
  3. By: Brams, Steven J.; Kilgour, D. Marc
    Abstract: Democracy resolves conflicts in difficult games like Prisoners’ Dilemma and Chicken by stabilizing their cooperative outcomes. It does so by transforming these games into games in which voters are presented with a choice between a cooperative outcome and a Pareto-inferior noncooperative outcome. In the transformed game, it is always rational for voters to vote for the cooperative outcome, because cooperation is a weakly dominant strategy independent of the decision rule and the number of voters who choose it. Such games are illustrated by 2-person and n-person public-goods games, in which it is optimal to be a free rider, and a biblical story from the book of Exodus.
    Keywords: Democracy; voting; social choice; public goods; game theory; Prisoners' Dilemma; Bible
    JEL: D7 D6 C72
    Date: 2008–10
  4. By: Kene Boun My; Benoît Chalvignac
    Abstract: We study the effect of voluntary participation in the context of a collective-good experiment. We investigate whether the freedom to participate in the game or not increases contribution levels and enhances their evolution. The analysis of two voluntary participation treatments supports a positive effect of an attractive exit option on both contribution levels and their sustainability. We conclude that the voluntary contribution mechanism can provide sustainable cooperation levels and that the usually observed decay of average contribution levels can be counteracted by voluntary participation in the game..
    Keywords: Collective Goods; Cooperation; Voluntary participation ; Laboratory experiments.
    JEL: H41 C92
    Date: 2009
  5. By: Jorge Martinez-Vazquez (Andrew Young School of Policy Studies); Cristian Sepúlveda (Andrew Young School of Policy Studies)
    Abstract: For almost 20 years, the Nicaraguan authorities have been implementing a fiscal decentralization process to devolve an increasing degree of autonomy to municipalities. As a part of this process, and mainly due to the efforts of the Association of Municipalities of Nicaragua (AMUNIC is the acronym in Spanish), the first municipal transfers were approved in just 1999. Later, the funds available for the municipalities were increased gradually as a percentage of the General Budget (PGR), until in August 2003 the new Law of Municipal Transfers set this percentage at 4% of the total central government tax revenues in 2004, and stated that it should be increased at least by 0,5% per year up to 10% of the PGR in 2010. In 2005 the transfer program corresponded to 5% of the PGR, whereas in the present year the percentage increased to 6%.
    Keywords: fiscal decentralization, Municipal Transfer System, Nicaragua, local government
    Date: 2008–02–01
  6. By: Pääkkönen, Jenni (BOFIT)
    Abstract: This paper explores the optimal law enforcement strategy of a Leviathan government in the presence of organized crime. The government is considered too weak to prevent an upsurge in crime, so it allows the mafia to generate a positive payoff by extracting rents in the shadow economy. From a strategic standpoint, the government, if it has the possibility to monitor shadow production and fine offenders, may not want to shut down illegal production or kick out the mafia, but instead can use its policing activity to capture additional revenue through fines on illegal firm activities and an increased tax base when mafia-harassed firms return to the legal sector. The option of escaping into the shadow economy can benefit some firms, even when this utility is diluted by the presence of a mafia. Monitoring hurts both legal and illegal firms, while the government benefits.
    Keywords: organized crime; shadow economy; taxation
    JEL: H26 H41 K42
    Date: 2009–01–13
  7. By: Xin Long (University of Rome II, Italy); Robert Waldmann (University of Rome II, Italy); Alessandra Pelloni (University of Rome ‘Tor Vergata’ and The Rimini Centre of Economic Analisys, Italy)
    Abstract: Is it possible to increase growth and welfare by raising taxes and disposing of the tax revenues? We show this may indeed be the case in a simple model with endogenous technical change, represented by an increase in the variety of intermediate goods.
    Date: 2008–01
  8. By: Kangsik, Choi
    Abstract: We investigate a differentiated mixed duopoly in which private and public firms can choose to strategically set prices or quantities by facing a union bargaining process. For the case of a unionized mixed duopoly, only public firm is able to choose a type of contract based on the degree of substitutability in the equilibrium. Focusing on the case of substitute goods, we show that Bertrand (respectively, Cournot) competition entails higher social welfare than Cournot (respectively, Bertrand) competition if the degree of substitutability is relatively small (respectively, large). Thus, there are multiple Nash equilibria in the contract stage of the game. As a result, Singh and Vives' ranking of social welfare is reversed in a range of substitution values for which it is a dominant strategy for public firm to choose either quantity or price contracts.
    Keywords: Wage Bargaining; Union; Cournot-Bertrand Competition; Mixed Duopoly.
    JEL: J51 L13 C7 D43 H44
    Date: 2008–09–25
  9. By: Gimpelson, Vladimir (CLMS, Moscow Higher School of Economics); Lukiyanova, Anna (CLMS, Moscow Higher School of Economics)
    Abstract: The paper starts with discussing institutional framework for public sector wage setting in Russia. Given that individual choice of the sector is endogenous to wages, the authors recommend alternative econometric techniques for the public-private wage gap estimation. Applying switching regression that allows correcting for non-random sector selection, the paper provides wage gap estimates for various demographic, occupational, and territorial population subgroups. As it is shown, there is significant cross-group variation in the wage gap. The paper concludes that to eliminate the negative gap wages in the public sector should be linked to the private sector wages at the regional level.
    Keywords: public sector
    JEL: J31 J45
    Date: 2009–01
  10. By: Radhika Lahiri; Elizabeth Richardson
    Abstract: In this paper we study an overlapping-generations model in which agents’ mortality risks, and consequently impatience, are endogenously determined by private and public investment in health care. The proportion of revenues allocated for public health care is also endogenous, determined as the outcome of a voting process. Higher substitutability between public and private health is associated with a “crowding-out” effect which leads to lower public expenditures on health care in the political equilibrium. This in turn impacts on mortality risks and impatience leading to a greater persistence in inequality and long run distributions of wealth that are bimodal.
    Keywords: health; inequality; political economy; income distribution dynamics
    JEL: I12 I20 O5
    Date: 2008–12–15

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