nep-pbe New Economics Papers
on Public Economics
Issue of 2009‒08‒02
eight papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. Federalism, Party Competition and Budget Outcome: Empirical Findings on Regional Health Expenditure in Italy By Giardina, Emilio; Cavalieri, Marina; Guccio, Calogero; Mazza, Isidoro
  2. Walras-Lindahl-Wicksell: What equilibrium concept for public goods provision ? I - The convex case By Monique Florenzano
  3. Enforcement of Contribution Norms in Public Good Games with Heterogeneous Populations By Reuben, Ernesto; Riedl, Arno
  4. 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
  5. Tax Co-ordination in Europe: Assessing the First Years of the EU-Savings Taxation Directive By Thomas Hemmelgarn; Gaetan Nicodeme
  6. Does tax policy affect executive compensation? evidence from postwar tax reforms By Carola Frydman; Raven S. Molloy
  7. Who benefits from increased government spending? a state-level analysis By Michael T. Owyang; Sarah Zubairy
  8. Estate taxation with warm-glow altruism By Carlos Garriga; Fernando Sánchez-Losada

  1. By: Giardina, Emilio; Cavalieri, Marina; Guccio, Calogero; Mazza, Isidoro
    Abstract: In the last decade, Italy has experienced a considerable decentralization of functions to the regions. This transformation has been especially relevant for the National Health System that has de facto assumed a federal system design. The federal reform aimed at disciplining public health expenditure, which drains a substantial share of the budget of Italian regions and is among the main causes of the regional deficits. Political economic analysis, however, suggests that impact of federalism on public expenditure depends on central and local government strategies to win in the electoral competition. Results derived in this preliminary study indicate that political competition actually works as a tool of fiscal discipline; it shows a restraining effect on public health expenditure.
    Keywords: Fiscal federalism; local budget; multi-level policy-making; public expenditure; political competition; health economics
    JEL: H51 H72 I18 D78 D72
    Date: 2009
  2. 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
  3. By: Reuben, Ernesto (Columbia University); Riedl, Arno (Maastricht University)
    Abstract: Economic and social interaction takes place between individuals with heterogeneous characteristics. We investigate experimentally the emergence and informal enforcement of different contribution norms to a public good in homogeneous and different heterogeneous groups. When punishment is not allowed all groups converge towards free-riding. With punishment, contributions increase and differ distinctly across groups and individuals with different induced characteristics. We show econometrically that these differences are not accidental but enforced by punishment. The enforced contribution norms are related to fairness ideas of equity regarding contribution possibilities but not regarding earnings. Individuals with different characteristics tacitly agree on the norm to be enforced, even if this leads to large payoff differences. Our results also emphasize the role of details of the environment that may alter focal contribution norms in an important way.
    Keywords: public good, heterogeneous groups, punishment, cooperation, social norms, norm enforcement
    JEL: H41 C92 Z13
    Date: 2009–07
  4. 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
  5. By: Thomas Hemmelgarn (European Commission); Gaetan Nicodeme (European Commission)
    Abstract: This paper reviews the economic effects of the EU Savings Taxation Directive. The Directive aims at enabling taxation of foreign interest payments received by individuals in accordance with the rules of their State of residence. The data suggest that the Directive, which is based on automatic information exchange, has not led to major shifts in international savings. However, this result has to be interpreted with caution since the available data is scarce and not always conclusive.
    Keywords: Savings Taxation, Withholding Tax, Information Exchange, European Union
    JEL: F21 F33 G12 G28 H24 H26 H87 K34 O16
    Date: 2009–06
  6. By: Carola Frydman; Raven S. Molloy
    Abstract: Evidence since the 1980s suggests that the level and structure of executive compensation in U.S. public corporations are largely unresponsive to tax incentives. However, the relative tax advantage of different forms of pay has been relatively small during this period. Using a sample of top executives in large firms from 1946 to 2005, we find little response of salaries, qualified stock options, long-term incentive pay, or bonuses paid after retirement to changes in tax rates on labor income--even though tax rates were significantly higher and more heterogeneous across individuals in the first several decades following WWII. To explain this lack of response, we find suggestive evidence that concerns about within-firm equality may have limited firms' ability to differentiate top executives' compensation packages based on their marginal income tax rates.
    Date: 2009
  7. 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
  8. By: Carlos Garriga; Fernando Sánchez-Losada
    Abstract: This article examines the properties of the optimal fiscal policy in an economy with warm-glow altruism (utility interdependence) and heterogeneous individuals. We propose a new efficiency concept, D-efficiency, that considers an implicit constraint in the act of giving: donors cannot bequeath to donees more than their existing resources. Considering this constraint, we show that the market equilibrium is not socially efficient. The efficient level of bequest transfers can be implemented by the market with estate and labor-income subsidies and a capital-income tax. In the absence of lump-sum taxation, the government faces a trade-off between minimizing distortions and eliminating external effects. The implied tax policy differs from Pigovian taxation since the government's ability to correct the external effects is limited. Finally, we show that the efficiency-equity trade-off does not affect the qualitative features of the optimal distortionary fiscal policy.
    Keywords: Altruism ; Taxation
    Date: 2009

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