nep-pbe New Economics Papers
on Public Economics
Issue of 2009‒08‒22
nine papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. Why the Legal System is Not Necessarily Less Efficient than the Income Tax In Redistributing Income By Dan Usher
  2. Stagnation of a “Miracle”:Botswana’s Governance Record Revisited By Christian von Soest
  3. Corporate Taxes and Union Wages in the United States By R. Alison Felix; James R. Hines, Jr.
  4. Strengthening Decentralization - Augmenting The Consolidated Fund of the States by the Thirteenth Finance Commission: A Normative Approach By Abhay Pethe
  5. Negative marginal tax rates and heterogeneity By Philippe Choné; Guy Laroque
  6. New evidence on taxes and portfolio choice By Sule Alan; Kadir Atalay; Thomas Crossley; Sung-Hee Jeon
  7. Das Governance-Dilemma der demokratischen Wirtschaftspolitik By Kruse, Joern
  8. Democracy and voting survey: first results from Ethiopia By Marie-Anne Valfort
  9. Estimated State and Local Fiscal Effects of the Nurse Family Partnership Program By Timothy J. Bartik

  1. By: Dan Usher (Queen's University)
    Abstract: A common, though by no means universally-accepted doctrine among practitioners of law and economics is that redistribution is no business of the law. This efficiency-only doctrine is not that redistribution is unworthy as a social objective, but that any given benefit to the poor is attainable at a lower cost to the rich through taxation than through the choice of legal rules. The rationale for the efficiency-only doctrine is that redistributive law creates a double distortion: an initial distortion arising from redistribution pre se, through taxation or through law, and an additional distortion all its own. The efficiency-only doctrine is sometimes valid, but is far narrower than its advocates would seem to suggest, and is inapplicable to most of what is commonly thought of as redistributive law. Redistribution is best supplied by a balance of law and taxation.
    Keywords: Law, Income Tax, Redistribution
    JEL: K10 K34 H21 H26
    Date: 2009–06
  2. By: Christian von Soest (GIGA Institute of African Affairs)
    Abstract: Botswana has been dubbed an “African miracle.” The country has been praised not only for maintaining a multiparty system and high growth rates since independence but also for its good governance record. In contrast to other African countries, the extent of neopatrimonialism, which runs counter to good governance, is said to be low. This article aims to a) precisely assess Botswana’s neopatrimonial profile and b) put forward explanations for the comparatively low level of neopatrimonialism and for the recent “stagnation of a miracle.” The paper finds that there have always been neopatrimonial tendencies in Botswana, though they have been largely overlooked by mainstream analyses. The crucial difference is the limited nature of these tendencies relative to other African countries. This can be attributed to the independence period, characterized by the homogeneity of political, economic, and administrative interests in safeguarding private property rights through a “strong” rational-legal state, that is, by limiting neopatrimonialism. Financed by massive revenues stemming from diamonds, the Southern African Customs Union (SACU), and the Bank of Botswana, the government of the Botswana Democratic Party (BDP) was able to secure its reign through the provision of public goods and limited neopatrimonial exchange relations. However, due to decreasing electoral dominance and elite cohesion, the ruling party is now reverting to some neopatrimonial and authoritarian means in order to safeguard its rule.
    Keywords: neopatrimonialism, corruption, governance, institutions, interests, development, Botswana
    Date: 2009–04
  3. By: R. Alison Felix; James R. Hines, Jr.
    Abstract: This paper evaluates the effect of U.S. state corporate income taxes on union wages. American workers who belong to unions are paid more than their non-union counterparts, and this difference is greater in low-tax locations, reflecting that unions and employers share tax savings associated with low tax rates. In 2000 the difference between average union and non-union hourly wages was $1.88 greater in states with corporate tax rates below four percent than in states with tax rates of nine percent and above. Controlling for observable worker characteristics, a one percent lower state tax rate is associated with a 0.36 percent higher union wage premium, suggesting that workers in a fully unionized firm capture roughly 54 percent of the benefits of low tax rates.
    JEL: H22 H25 J31 J51
    Date: 2009–08
  4. By: Abhay Pethe
    Abstract: The present study examines issues related to fiscal federalism at the third tier in general and grants to local bodies in particular. The study presents a normative framework to estimate the requirements of operation and maintenance (O&M) expenditure at the local body level based on three important public services that is, water, education and roads. [DRG Study Series No. 29].
    Keywords: fiscal federalism, local bodies, normative frame work, expenditure, local body, local body, water, education, roads, consolidated fund, finance commission, finance, panchayat raj,
    Date: 2009
  5. By: Philippe Choné; Guy Laroque (Institute for Fiscal Studies and INSEE - CREST)
    Abstract: <p>Heterogeneity is likely to be an important determinant of the shape of optimal tax schemes. This article addresses the issue in a model à la Mirrlees with a continuum of agents. The agents differ in their productivities and opportunity costs of work, but their labor supplies depend only on a unidimensional combination of their two characteristics. Conditions are given under which the standard result that marginal tax rates are everywhere non-negative holds. This is in particular the case when work opportunity costs are distributed independently of productivities. But one can also get negative marginal tax rates: economies where negative tax rates are optimal at the bottom of the income distribution are studied, and a numerical illustration is given, based on UK data. </p>
    Keywords: Optimal taxation, heterogeneity, welfare.
    JEL: H21 H31
    Date: 2009–05
  6. By: Sule Alan (Institute for Fiscal Studies and University of Cambridge); Kadir Atalay; Thomas Crossley (Institute for Fiscal Studies and University of Cambridge); Sung-Hee Jeon
    Abstract: <p>Identifying the effect of differential taxation on portfolio allocation requires exogenous variation in marginal tax rates. Marginal tax rates vary with income, but income surely affects portfolio choice directly. In systems of individual taxation - like Canada's - couples with the same household income can face different effective tax rates on capital income when labor income is distributed differently within households. Using this source of variation we find statistically significant but economically modest responses to taxation. In a 'placebo' test, using data from the U.S. (which has joint taxation), we find no effect of the intra-household distribution of labor income on portfolios. </p>
    Keywords: Household portfolio choice, taxes
    JEL: G11 H24 H31
    Date: 2009–04
  7. By: Kruse, Joern (Helmut Schmidt University, Hamburg)
    Abstract: As a result of the prevailing governance structure, economic policy in democracies usually suffers from specific deficiencies. Among these are the predominance of distributive over efficiency objectives, the neglect of long-run effects, and the lack of or biased use of expert knowledge in the political decision making process. These deficiencies can be attributed to a 'monopoly of democratic legitimacy' of the politicians and parties, an overloaded democratic delegation, the influence of interest groups, and the short-run incentives in the political process. The focus of this paper is on the reform of the governance structure of economic policy. It is suggested that a 'dual democratic legitimacy' should be introduced. A 'senate' which is independent of the political parties will be directly elected by the people. The senate firstly works as a second chamber in bicameralistic legislation, closely cooperating with consultative expert institutions. Secondly, the senate acts as a principal for any public institution outside of the parliament and the government, appointing the top personnel.
    Keywords: Delegation; Politische Institutionen; Zwei-Kammer-Systeme; Senat
    JEL: D02 D72
    Date: 2009–08–10
  8. By: Marie-Anne Valfort (LEEP - Laboratoire d'econometrie de l'école polytechnique - CNRS : UMR7657 - Polytechnique - X)
    Abstract: This working paper contains the first results of a questionnaire that was conducted in May 2004 (May, 8-9) among 331 students of the Addis Ababa University to know their opinion about democracy and the political preferences they express through voting. The paper takes the form of the questionnaire itself in which we included, for each question, the corresponding first statistical results that we get. We create a synthetic table of content as well as an index at the end of the document to facilitate for the reader an easy access to the information he may be looking for.
    Keywords: Africa, Altruism, Equity, Ethiopia, Institution design, Public goods, Voting behaviour
    Date: 2009–04–15
  9. By: Timothy J. Bartik (W.E. Upjohn Institute for Employment Research)
    Abstract: This short paper estimates the state and local fiscal benefits of the Nurse Family Partnership (NFP) program. NFP provides nurse home visiting services to low-income first-time mothers. In addition to social benefits, NFP provides state and local fiscal benefits by reducing costs of social services, welfare, and crime, and increasing tax receipts due to increased earnings of mothers and former child participants when they grow up. Based on previous studies, this paper estimates that the present value, in 2007 dollars, of these state and local fiscal benefits is a little over $15,000 per NFP case.
    Keywords: Nurse Family Partnership Program, state and local effects
    JEL: H75 H71 I18 J48
    Date: 2009–06

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