nep-pbe New Economics Papers
on Public Economics
Issue of 2009‒02‒07
fourteen papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. An Experimental Study of the Effect of Announcements on Public Goods Contributions By Lisa R. Anderson; Sarah L. Stafford
  2. Financial Leverage and Corporate Taxation : Evidence from German Corporate Tax Return Data By Nadja Dwenger; Viktor Steiner
  3. The Efficacy of Parochial Politics: Caste, Commitment, and Competence in Indian Local Government By Munshi, Kaivan; Rosenzweig, Mark
  4. The Basic Public Finance of Public-Private Partnerships By Engel, Eduardo; Fischer, Ronald; Galetovic, Alexander
  5. Federal, State, and Local Governments: Evaluating their Separate Roles in US Growth By Higgins, Matthew; Young, Andrew; Levy, Daniel
  6. EU Regional Policy and Tax Competition By Johannes Becker; Clemens Fuest
  7. Optimal Public Procurement Contracts Under a Soft Budget Constraint By Ville Mälkönen
  8. Tax Progressivity and Recent Evolution of the Finnish Income Inequality By Marja Riihelä; Risto Sullström; Suoniemi; Ilpo
  9. A New Order of Things: Managing Novelty and Cooperation on E-Government Projects By Binz-Scharf, Maria; Lazer, David
  10. Evaluating the Impact of Changing Mississippi’s Tobacco Tax By Myles, Albert E.; Allen, Albert J.
  11. The Compensative Effects of Tobacco Leaf Price Changes on Tax Revenue in China By Cai, Hailong; Kinnucan, Henry
  12. Searching for Answers: Networks of Practice among Public Administrators By Lazer, David; Binz-Schaft, Maria; Mergel, Ines
  13. Impacts of Federal Government Programs and Specific Farm Variables on Technical Effiicency of Dairy Farms By Murova, Olga; Chidmi, Benaissa
  14. Welfare Reform, 1834 By Clark, Gregory; Page, Marianne

  1. By: Lisa R. Anderson (Department of Economics, College of William and Mary); Sarah L. Stafford (Department of Economics, College of William and Mary)
    Abstract: We include probabilistic announcements in a standard public goods experiment. Although the possibility of having decisions announced encourages subjects to contribute more to the group account, learning that some individuals are free-riding more than the average has a negative effect
    Keywords: Voluntary Contributions Mechanism, Public Goods, Announcement
    JEL: C91 H41
    Date: 2009–02–02
  2. By: Nadja Dwenger; Viktor Steiner
    Keywords: financial leverage, financial structure, debt ratio, corporate income taxation, corporate tax return data
    JEL: G32 G38 H25 H32
    Date: 2009
  3. By: Munshi, Kaivan (Brown U); Rosenzweig, Mark (Yale U)
    Abstract: Parochial politics is typically associated with poor leadership and low levels of public good provision. This paper explores the possibility that community involvement in politics need not necessarily worsen governance and, indeed, can be efficiency-enhancing when the context is appropriate. Complementing the new literature on the role of community networks in solving market problems, we test the hypothesis that strong traditional social institutions can discipline the leaders they put forward, successfully substituting for secular political institutions when they are ineffective. Using new data on Indian local governments at the ward level over multiple terms, and exploiting the randomized election reservation system, we find that the presence of a numerically dominant sub-caste (caste equilibrium) is associated with the selection of leaders with superior observed characteristics and with greater public good provision. This improvement in leadership competence occurs without apparently diminishing leaders' responsiveness to their constituency.
    JEL: H11 H44 O12
    Date: 2008–09
  4. By: Engel, Eduardo (Yale U); Fischer, Ronald (U of Chile); Galetovic, Alexander (U of the Andes)
    Abstract: Public-private partnerships (PPPs) cannot be justified because they free public funds. When PPPs are justified on efficiency grounds, the contract that optimally balances demand risk, user-fee distortions and the opportunity cost of public funds, features a minimum revenue guarantee and a revenue cap. However, observed revenue guarantees and revenue sharing arrangements differ from those suggested by the optimal contract. Also, this contract can be implemented via a competitive auction with realistic informational requirements. Finally, the allocation of risk under the optimal contract suggests that PPPs are closer to public provision than to privatization.
    JEL: H21
    Date: 2008–02
  5. By: Higgins, Matthew; Young, Andrew; Levy, Daniel
    Abstract: We use US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the extent of government employment at three levels: federal, state and local. We find that increases in federal, state and local government employments are all negatively associated with economic growth. We find no evidence that government is more efficient at lower levels. While we cannot separate out the productive and redistributive services of government, we document that the county-level income distribution became slightly more unequal from 1970 to 1998. For those who justify government activities in terms of equity concerns – perhaps even trading off economic growth for equity – the burden falls on them to show that the income distribution would have widened more in the absence of government activities. We conclude that a release of government-employed labor inputs to the private sector would be growth-enhancing.
    Keywords: Economic Growth; Federal Government; State Government; Local Government; County-Level Data; Metro and Non-Metro Counties; Income Distribution; Equity
    JEL: E62 O18 H50 O40 H70 O11 O43 O51 R11
    Date: 2009–01–29
  6. By: Johannes Becker (Oxford University Centre for Business Taxation); Clemens Fuest (Oxford University Centre for Business Taxation)
    Abstract: The European Union provides coordination and financing of trans-European transport infrastructures, i.e. roads and railways, which link the EU Member States and reduce the cost of transport and mobility. This raises the question of whether EU involvement in this area is justified by inefficiencies of national infrastructure policies. Moreover, an often expressed concern is that policies enhancing mobility may boost tax competition. We analyse these questions using a model where countries compete for the location of profitable firms. We show that a coordination of investment in transport cost reducing infrastructures within union countries enhances welfare and mitigates tax competition. In contrast, with regard to union-periphery infrastructure, the union has an interest in a coordinated reduction of investment expenditures. Here, the effects on tax competition are ambiguous. Our results provide a rationale for EU-level regional policy that supports the development of intra-union infrastructure.
    Keywords: European Union, Infrastructure, Regional Policy, Tax Competition
    JEL: H54 H25 F23
    Date: 2009
  7. By: Ville Mälkönen
    Abstract: This paper presents a model where the central government cannot ensure that regional governments manage risks prudentially, due to soft budget constraint. Competition for project funding induces the regional governments use financial instruments as commitment devices as a signal of prudential risk management. A Public-Private Partnership contract, which delegates the monitoring task to a financial institute, is the most efficient commitment device provided that private financiers have an access to the same monitoring technology the regional governments fail to employ. The optimal capital structure of a PPP contract is a combination of public funds and debt from financial institutes. JEL Classification: D8, L3, H54, H57
    Keywords: PPP contracts, public investments, moral hazard
    Date: 2008–12–31
  8. By: Marja Riihelä; Risto Sullström; Suoniemi; Ilpo
    Abstract: After the Economic Crisis in early 1990s the Finnish economy has recovered rapidly, and simultaneously a major period of equalization from the mid 1970s to the mid 1990s has been reversed, taking the levels of the Gini coefficient in a few years back to levels of inequality found 30 years ago. The paper examines how changes in Government policy, and in particular, in the incentives introduced by tax reforms have influenced income inequality. The paper introduces a decomposition of the Gini and concentration coefficients by population groups which are calculated for before- and after-tax incomes to consider evolution of income inequality and tax progressivity in Finland over the period 1990?2004. Decompositions of the Gini coefficient of after-tax income by income sources give little information on the effects of taxation. In contrast, popular measures of tax progressivity (Reynolds and Smolensky 1977) show a significant decrease. Our decomposition of the progressivity measure by income deciles focuses on changes in tax treatment of the income deciles in the ten year period after the mid 1990s. The changes in the decile shares of before-tax and after-tax income among those in the highest before-tax income deciles are the main factors that lie behind the recent change in tax progressivity, and play an important role in explaining the recent surge in inequality. These changes have been accompanied with a change in the composition of factor income. There has been an unprecedented increase in capital income which has mainly accrued to the population groups at the high end of the income distribution after the mid 1990s. The change is most clearly seen among those in the top income percentage. The 1993 Finnish tax reform introducing the Nordic dual income tax model, and creating strong incentives to shift labour income to capital income for those in the highest marginal tax brackets, is among the key policy decisions responsible for this trend. Interestingly enough, but consistent with the income shifting hypothesis, we find no increase in horizontal inequality in response to the introduction of the dual income tax.
    Keywords: Income inequality, Tax progressivity, Decomposition, Gini coefficient
    Date: 2008–12–17
  9. By: Binz-Scharf, Maria (City College of New York, CUNY); Lazer, David (Harvard U)
    Abstract: In this paper, we explore the challenges of managing e-government projects. In particular, we highlight two extraordinary managerial challenges that e-government poses: novelty and cross-agency cooperation. E-government is novel because it offers some fundamentally new possibilities for how government does business. The management of e-government is, in significant part, the management of ideas, creativity, and knowledge. E-government requires cross-agency cooperation because of functional needs for scale, consistency, and integration. We examine how four governments that have adopted a project-based approach to the introduction of e-government have coped with the challenges of novelty and cross-agency collaboration. Our findings indicate that e-government projects experience different activities and coordination mechanisms according to the stage of completion of the project and the complexity of the task at hand. We discuss the implications of our findings for the management of e-government projects.
    Date: 2008–10
  10. By: Myles, Albert E.; Allen, Albert J.
    Abstract: A multiple regression was performed on 37 years of data to determine the impact of raising the tobacco tax on cigarettes by $.24 per pack on cigarette sales in Mississippi. The t-statistic for the slope was significant at the .05 critical alpha level, t(29) =1.69 and p=.05. Thus, we conclude that there is a positive significant relationship between taxes and sales volume. Further, about 91 of the variability in sales volume could be explained by the demand model.
    Keywords: Demand, tobacco tax, regression model, retail employment, elasticity of demand, price change, Community/Rural/Urban Development, Research and Development/Tech Change/Emerging Technologies, Teaching/Communication/Extension/Profession,
    Date: 2009
  11. By: Cai, Hailong; Kinnucan, Henry
    Abstract: Tobacco production in China is influenced by a government-set procurement price for tobacco leaf, and an excise tax on tobacco leaf revenue. This study examines the increase in the procurement price needed to keep tax revenue constant in the face of a 50% reduction in the tax rate. This “compensative effect†is important because reductions in the tax rate are contemplated and tobacco tax revenue is a major source of funding for rural communities. Based on an equilibrium-displacement model of China’s tobacco sector, results suggest the “Compensated Effect Elasticity†(CEE) is between 1.0 and 2.5. This means a 50% cut in the tax rate would necessitate an increase in the procurement price of between 50% and 125%. Sensitivity analysis indicates CEE is most sensitive to the retail demand and input substitution elasticities and least sensitive to oligopoly power and returns to scale.
    Keywords: tobacco leaf, tax rate, procuring price, compensative effects, Agricultural and Food Policy,
    Date: 2009
  12. By: Lazer, David (Harvard U); Binz-Schaft, Maria (City College of New York); Mergel, Ines (Syracuse U)
    Abstract: The obstacles to innovation in government have been the subject of much academic scrutiny. Far less studied, however, has been the sharing of innovation among public administrators. How does a lesson learned, for example, in one agency provide insights that other agencies might borrow? Such sharing of experiences across agency boundaries, while at times potentially offering enormous value to the system as a whole, faces substantial challenges. In the US, one fundamental challenge is the natural dispersion of government across the country, within state and local government. We examine the alternative mechanisms that evolve within the public sector to compensate for this dispersion of expertise. In particular, we argue that the knowledge sharing practices of DNA forensic scientists working in government crime labs constitute such an alternative mechanism. Findings from an in-depth case study of this community suggest that concerns around trust, reliability, and cost, interacting with context specific features, result in the emergence of a network of practice that is fairly parochial, with a few dominant hubs, and a reliance on different channels depending on the needs for security in communication. We conclude by discussing the theoretical and practical implications of our findings.
    Date: 2008–10
  13. By: Murova, Olga; Chidmi, Benaissa
    Keywords: technical efficiency, federal government programs, SFA and DEA analyses, Production Economics, Productivity Analysis,
    Date: 2008
  14. By: Clark, Gregory (U of California, Davis); Page, Marianne (U of California, Davis)
    Abstract: The English Old Poor Law, which before 1834 provided welfare to the elderly, children, the improvident, and the unfortunate, was a bete noire of the new discipline of Political Economy. Smith, Bentham, Malthus and Ricardo all demanded its abolition. The Poor Law Amendment Act of 1834, drafted by Political Economists, cut payments sharply. Because local rules on eligibility and provision varied greatly before the 1834 reform, we can estimate the social cost of the extensive welfare provision of the Old Poor Law. Surprisingly there is no evidence of any of the alleged social costs that prompted the harsh treatment of the poor after 1834. Political economy, it seems, was born in sin.
    Date: 2008–10

This nep-pbe issue is ©2009 by Oliver Budzinski. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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