nep-pbe New Economics Papers
on Public Economics
Issue of 2009‒03‒22
fifteen papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. The Effect of Property Taxes on Location Decisions:Evidence From the Market for Vacation Homes By Erik B. Johnson; Randall Walsh
  2. The segregative properties of endogenous jurisdictions formation with a welfarist central government. By Biswas, Rongili; Gravel, Nicolas; Oddou, Rémy
  3. From equilibrium models to mechanism design: On the place and the role of government in the public goods provision analysis in the second part of the twentieth century By Monique Florenzano
  4. Do political incentives matter for tax policies? Ideology, opportunism and the tax structure By Konstantinos Angelopoulos; George Economides; Pantelis Kammas
  5. Does aversion to the sucker's payoff matter in public goods games? By Douadia Bougherara; Sandrine Costa; Gilles Grolleau; Lisette Ibanez
  6. Finanzpolitik und Produktionspotential in Deutschland: 1991-2008 By Alfred Boss
  7. Patriotism, taxation and international mobility By Geys, Benny; Konrad, Kai A; Qari, Salmai
  8. Walras-Lindahl-Wicksell: What equilibrium concept for public goods provision ? I - The convex case By Monique Florenzano
  9. On the (Sequential) Majority Choice of Public Good Size and Location By De Donder, Philippe; Le Breton, Michel; Peluso, Eugenio
  10. Endogenous Group Formation and Public Goods Provision: Exclusion, Exit, Mergers, and Redemption By Gary Charness; Chun-Lei Yang
  11. Issues with implementing ERP in the public administration By Hurbean, Luminita
  12. Livelihood and Care of the Elderly: Determinants of Public Attitudes in Japan By Bernd Hayo; Hiroyuki Ono
  13. Who benefits from increased government spending? a state-level analysis By Michael T. Owyang; Sarah Zubairy
  14. "The Return of Big Government--Policy Advice for President Obama " By L. Randall Wray
  15. Cross-border metropolitan integration in Europe (Luxembourg, Basel and Geneva) By Sohn, Christophe; Reitel, Bernard; Walther, Olivier

  1. By: Erik B. Johnson; Randall Walsh
    Abstract: The Tiebout model assumes that individuals 'vote with their feet' and choose to locate in the jurisdiction which best matches their fiscal preferences. In this paper, we test Tiebout's voting mechanism by examining whether housing purchase decisions are sensitive to changes in local property tax rates. Results from previous empirical tests of the link between property taxes and mobility are mixed and typically suffer from a myriad of identification problems including the confounding influence of tax rates on public good levels, tax endogeneity arising as a result of jurisdictional composition, and aggregation bias. In this paper, we are able to overcome many of the traditional obstacles to identification by: 1) focusing on purchasers of vacation homes who arguably receive no benefits from public goods funded by the tax change; 2) examining an exogenous and differential change in tax rates that arose from Michigan's Proposal A in 1994; and 3) using a high-resolution tax dataset at the Census Tract level. Our results provide some of the clearest evidence to date that household location choices are sensitive to tax changes. Further, consistent with theoretical predictions, the impact of tax changes on housing counts is found to be sensitive to the elasticity of housing supply.
    JEL: H2 H22 H71 R21 R23 R31
    Date: 2009–03
  2. By: Biswas, Rongili; Gravel, Nicolas; Oddou, Rémy
    Abstract: This paper examines the segregative properties of endogenous processes of jurisdiction formation à la Tiebout in the presence of a central government who makes equalization transfers to jurisdictions in such a way as to maximize a welfarist objective. Choice of location by households, of local public good provision by jurisdictions, and of equalization grants and tax by the central government are assumed to be made simultaneously, taking the choices of others as given. Two welfarist objectives for the central government are considered in turn: Leximin and Utilitarianism. If the central government pursues a Leximin objective, it is easily shown that the only stable jurisdiction structures that can emerge are those in which the jurisdictions' poorest households have all the same wealth. A richer class of stable jurisdiction structures are compatible with a central utilitarian government. Yet, it so happens that, if individual preferences are additively separable, the class of households preferences that garantee the segregation of any stable jurisdiction structure remains unchanged by the presence of a central government.
    Date: 2009–03
  3. By: Monique Florenzano (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: Focussing on their analysis of the optimal public goods provision problem, this paper follows the parallel development of equilibrium models and mechanism design after the accommodation of Samuelson's definition of collective goods to the general equilibrium framework. Both paradigms lead to the negative conclusion of the impossibility of a fully decentralized optimal public goods provision through market or market-like institutions.
    Keywords: General equilibrium, Lindahl-Foley equilibrium, Wicksell public competitive equilibrium, private provision equilibrium, mechanism design, free-rider problem, incentive compatibility.
    Date: 2009–02
  4. By: Konstantinos Angelopoulos; George Economides; Pantelis Kammas
    Abstract: This paper investigates the importance of political ideology and opportunism in the choice of the tax structure. In particular, we examine the effects of cabinet ideology and elections on the distribution of the tax burden across factors of production and consumption for 21 OECD countries over the period 1970-2000 by employing four alternative cabinet ideology measures and by using the methodology of effective tax rates. There is evidence of both opportunistic and partisan effects on tax policies. More precisely, we find that left-wing governments rely more on capital relative to labor income taxation and that they tend to increase consumption taxes. Moreover, we find that income tax rates (but not consumption taxes) tend to be reduced in pre-electoral periods and that capital effective tax rates (defined broadly to include taxes on self-employed income) are reduced by more than effective labor tax rates.
    Keywords: tax structure; political economy; partisan and opportunistic effects
    JEL: H2 H1
    Date: 2009–02
  5. By: Douadia Bougherara; Sandrine Costa; Gilles Grolleau; Lisette Ibanez
    Abstract: A usual explanation to low levels of contribution to public goods is the fear of getting the sucker’s payoff (cooperation by the participant and defection by the other players). In order to disentangle the effect of this fear from other motives, we design a public good game where people have an assurance against getting the sucker’s payoff. We show that contributions to the public good under this ‘protective’ design are significantly higher and interact with expectations on other individuals' contribution to the public good. Some policy implications and extensions are suggested.
    Keywords: Experiments, Public good, Sucker’s payoff, Assurance
    JEL: C72 C91 H41
    Date: 2009
  6. By: Alfred Boss
    Abstract: In recent years, a lot of rules concerning government expenditures as well as tax revenues were changed in Germany. Government expenditures in relation to GDP were reduced, income tax rates were lowered and the budget deficit declined. The structure of government expenditures changed in favor of productive expenditures, tax expenditures were reduced. It is concluded that the growth of potential output accelerated in recent years
    Keywords: Fiscal policy, tax burden, government expenditures, potential output
    JEL: H10 H30 H60
    Date: 2009–03
  7. By: Geys, Benny; Konrad, Kai A; Qari, Salmai
    Abstract: For patriotic citizens, living in their native country is intrinsically preferable compared to living in the diaspora. In this paper, we analyze the implications of such a patriotic lock-in in a world with international migration and redistributive taxation. In a formal model of redistribution with international migration and fiscal competition we derive the main hypothesis: that countries with a more patriotic population should have higher redistributive taxes. Using ISSP survey data and combining them with OECD taxation data, we find robust evidence suggesting that a) higher patriotism is associated with higher tax burdens, and b) this relation is stronger for the upper-middle range of the income distribution.
    Keywords: fiscal competition; international mobility; patriotism; redistribution; taxation
    JEL: H20 H73
    Date: 2009–03
  8. By: Monique Florenzano (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: Despite the large number of its references, this paper is less a survey than a systematic exposition, in an unifying framework and assuming convexity as well on the consumption side as on the production side, of the different equilibrium concepts elaborated for studying provision of public goods. As weak as possible conditions for their existence and their optimality properties are proposed. The general conclusion is that the drawbacks of the different equilibrium concepts lead to founding public economic policy either on direct Pareto improving government interventions or on state enforcement of decentralized mechanisms.
    Keywords: Private provision equilibrium ; Lindahl-Foley equilibrium ; public competitive equilibrium ; abstract economies ; equilibrium existence ; welfare theorems ; core
    Date: 2009–02
  9. By: De Donder, Philippe; Le Breton, Michel; Peluso, Eugenio
    Abstract: In this paper, we lay the first building blocks of a positive theory of nation formation where national choices consist of the size and location of a public good. Individuals differ both in income and in their preferences for the public good location. Public expenditures are financed either by a lump sum tax or by a proportional income tax. We study both the simultaneous and the sequential determinations of the public good size and location. We show that, while the choice of the type of public good follows the traditional median logic, the majoritarian determination of the taxation rate need not coincide with the choice of a median income citizen. With lump sum financing, income heterogeneity plays no role and the sequential equilibrium consists of the median location together with the public good level most-preferred by the individual located at the median distance from the median. This policy bundle also constitutes an equilibrium with simultaneous voting in the special case of a uniform bivariate distribution of individuals' income and location. With proportional taxation, there is no policy equilibrium with simultaneous voting. We offer a complete characterization of the equations describing the sequential equilibrium in the general case and we show why and how our results depart from those obtained with the lump sum case. The public good level is lower than the one emerging under lump sum taxation when the income distribution is concave and when the correlation between individuals' income and location is positive but not perfect.
    Keywords: bidimensional policy and trait spaces; proportional income taxation
    JEL: D72 H41
    Date: 2009–03
  10. By: Gary Charness (University of California, Santa Barbara); Chun-Lei Yang
    Abstract: We test a mechanism whereby groups are formed endogenously, through the use of voting. Once formed, groups play a public-goods game, where there are economies of scale: in two treatments the social value of an incremental contribution to the group account increases with the size of the group, but in the second treatment, the social value is capped once a certain group size is reached. Societies of nine people are initially formed randomly into three groups of three people who play the game for three periods. Individuals then learn about the average contribution of each individual (by ID number) in one's current own group, as well as the average contribution in other groups, and can decide whether to exit the group. Remaining group members choose whether to exclude any current members from the group; the new groups and 'free agents' then choose whether to merge with other existing groups and/or other free agents. We find a great degree of success for this mechanism. The average contribution rate is quite high in both treatments, but is modestly (albeit significantly) higher in the first treatment, when there is no cap on the social value of a contribution. In the first treatment, we see large and stable groups forming, but we see considerably more instability and smaller group sizes in the second treatment. The driving force appears to be the economies of scale combined with the awareness that bad behavior will result in ostracism, but in the Athenian sense of possible redemption. This redemption is a unique feature of our environment, with about one-third of the population becoming good citizens after initially being low contributors.
    Keywords: Endogenous group formation, Exclusion, Experiment, Merger, Ostracism, Public goods, Social efficiency, Voting,
    Date: 2008–09–29
  11. By: Hurbean, Luminita
    Abstract: As governments work to transform their environments from an internal resource optimization to a process integration and external collaboration focus, integrated systems stand at the forefront of solutions that will achieve this goal. Enterprise Resource Planning (ERP) is proven to significantly increase efficiency, improve information access, reduce total cost of ownership, and help government achieve the highest levels of accountability and constituent service. Yet implementing ERP in a manner that achieves its promises is no easy task. Public sector organizations often rationalize their ERP modernization initiatives within the context of budgetary constraints and are faced with multiple ERP providers that, on the surface, are difficult to discern. In addition, adjudicating between competing ERP solutions on their functional merit is not only difficult because of the complexity of ERP systems, but it is further complicated by the intricacy of the government acquisition process. Therefore, it is particularly important that the business value be sold at the executive and political levels of government and, to be successful, that government embeds the ERP solution within its culture and processes. What's more, the level of detailed analysis required to map functional requirements to ERP solutions is an arduous task that, even if done thoroughly, hasn't always delivered a successful implementation. In this article, we will address these issues by examining the evolution and shortcomings of ERP solutions; by defining the features and functionality needed to address government transformation; and by recommending the steps to take to position for success.
    Keywords: government; public organizations; ERP; integrated systems
    JEL: H83 O33
    Date: 2008–03–20
  12. By: Bernd Hayo (Faculty of Business Administration and Economics, Philipps-University Marburg); Hiroyuki Ono (Faculty of Economics, Toyo University, 5-28-20 Hakusan Bunkyo-ku, 112-8606 Tokyo, Japan)
    Abstract: This study analyses public attitudes towards the degree of government involvement in ensuring the livelihood and care of the elderly in Japan. Using four waves of individual-level annual data from the Japanese General Social Survey collected over the period 2000-2005, we estimate ordered logit models with various explanatory variables based on the socio-demographic, economic, political, and social background of the respondents. Many significant factors are common for both livelihood and care specifications, their effects being qualitatively the same and in line with our prior expectations. The estimation results also show positive coefficients of year intercept dummies, implying an increase in support of a government-based system over time. Further investigation shows that this trend is caused by those who favour government redistribution policies becoming increasingly more consistent in their support for a government-based social security system in Japan.
    Keywords: Livelihood of elderly, care of elderly, public attitudes, aging societies, Japan
    JEL: H55 Z10
    Date: 2009
  13. By: Michael T. Owyang; Sarah Zubairy
    Abstract: We simultaneously identify two government spending shocks: military spending shocks as defined by Ramey (2008) and federal spending shocks as defined by Perotti (2008). We analyze the effect of these shocks on state-level personal income and employment. We find regional patterns in the manner in which both shocks affect state-level variables. Moreover, we find differences in the propagation mechanisms for military versus nonmilitary spending shocks. The former benefits economies with larger manufacturing and retail sectors and states that receive military contracts. While nonmilitary shocks also benefit states with the proper industrial mix, they appear to stimulate economic activity in more-urban, lower-income states.
    Keywords: Government spending policy ; Expenditures, Public
    Date: 2009
  14. By: L. Randall Wray
    Abstract: In the current global financial crisis, economists and policymakers have reembraced Big Government as a means of preventing the reoccurrence of a debt-deflation depression. The danger, however, is that policy may not downsize finance and replace money manager capitalism. According to Senior Scholar L. Randall Wray, we need a permanently larger fiscal presence, with more public services. His advice to President Obama is to discard all of former Treasury Secretary Paulson's actions. Wray believes that we can afford any necessary spending and bailouts, and that these actions will not burden our grandchildren.
    Date: 2009–03
  15. By: Sohn, Christophe (Centre for Population, Poverty and Public Policy Studies (CEPS/INSTEAD), Luxembourg); Reitel, Bernard (University of Upper Alsace, France); Walther, Olivier (Centre for Population, Poverty and Public Policy Studies (CEPS/INSTEAD), Luxembourg)
    Abstract: This article questions the integration processes in three small cross-border metropolitan areas: Luxembourg, Basel and Geneva. By referring to an original analysis framework, it evaluates the nature and intensity of the functional and institutional integration and highlights the elements that structure the cooperation between the actors. The analysis shows that there is not necessarily a reciprocal link between the size of the functional area and the extent of the cooperation. Whilst no metropolitan-sized project is on the agenda in Luxembourg, the example of Basel and Geneva shows that the presence of a national border offers an opportunity to invent original forms of governance, increase the autonomy of the local authorities by different types of cooperation which transcend the institutional and territorial divides, and enable the international character of the metropolitan centre to be valued for what it is. In a context of global competition, these features represent an undeniable benefit.
    Keywords: Metropolitan regions; Governance ; Border studies ; Integration ; Europe
    JEL: R12 R58 P41 P52
    Date: 2009–02

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