nep-pbe New Economics Papers
on Public Economics
Issue of 2009‒09‒11
eight papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. Voters hold the key: lock-in, mobility, and the portability of property tax exemptions By Ron Cheung; Chris Cunningham
  2. Informal Sector and Taxation By Jellal, Mohamed
  3. Playing with the Good Guys: A Public Good Game with Endogenous Group Formation By Brekke, Kjell Arne; Hauge, Karen Evely; Lind, Jo Thori; Nyborg, Karine
  4. Do Re-election Probabilities Influence Public Investment? By Fiva, Jon H.; Natvik, Gisle James
  5. ISEL: An e-Taxation System for Employers By Olivier Glassey; Alain Sandoz
  6. Comparative Statics of Optimal Nonlinear Income Taxation in the Presence of a Publicly Provided Input By Craig Brett; John A. Weymark
  7. Positive Constitutional Economics II—A Survey of Recent Developments By Stefan Voigt
  8. Productivity of Tax Offices in Norway By Førsund, Finn R.; Edvardsen, Dag Fjeld; Kittelsen, Sverre A. C,; Lindseth, Frode

  1. By: Ron Cheung; Chris Cunningham
    Abstract: Since California voters approved Proposition 13 in 1978, fifteen states have enacted caps on the annual growth in assessed property values. These laws often impose a great burden on municipal finances and create horizontal inequity among homeowners. Why do voters choose to limit local government in this way? Reasons may include controlling the power of special interests, addressing agency failures of government officials (the "Leviathan" hypothesis), or preserving the impact of a current but fleeting antitax political alignment. Yet research has found that voters' perception of a limitation's fiscal consequences do not match reality, questioning the rationality of voter behavior. To counter this position, another strand of literature argues that support for tax limitations is driven not by perceptions of government inefficiency but by reasonable expectations of who will ultimately bear the tax limitation's burden. We explore this view by exploiting the differential tax treatment generated by assessment caps in the context of a recent, novel referendum in Florida. We examine voter support for a 2008 constitutional amendment that included a unique provision making the existing assessment cap portable within the state. We test the hypothesis that voters understood the mobility consequences of tax limitations and the net burden of the cap. We find that high potential tax savings and high expected mobility rates result in higher support for portability. We also find that the degree of racial segregation, the presence of nonresidential tax bases, and the share of migrants from out of state all contribute to support for the amendment. Results suggest that voters were as concerned with reducing their own tax share at the expense of other property owners as they were with curtailing local expenditures.
    Date: 2009
  2. By: Jellal, Mohamed
    Abstract: In this paper, we present a model of tax evasion in the presence of imperfect auditing. We show that there is a clear link between the degree of observability associated with a given taxpayer or activity and that taxpayer’s optimal declaration strategy with respect to fiscal agency. We also show that the degree of observability is critical in determining the optimal policies to be followed by the fiscal authorities. Our imperfect monitoring approach provides a new strategy for understanding the informal sector in LDCs, which can be interpreted as that group of economic activities characterized by low observability.
    Keywords: Informal sector;information and observability;tax evasion;taxation
    JEL: D21 O17 H26 O12
    Date: 2009–08–02
  3. By: Brekke, Kjell Arne (Dept. of Economics, University of Oslo); Hauge, Karen Evely (Dept. of Economics, University of Oslo); Lind, Jo Thori (Dept. of Economics, University of Oslo); Nyborg, Karine (Dept. of Economics, University of Oslo)
    Abstract: In public good games, voluntary contributions tend to start o high and decline as the game is repeated. If high contributors are matched, however, contributions tend to stay high. We propose a formalization predicting that high contributors will selfselect into groups committed to charitable giving. Testing this experimentally, we let subjects choose between two group types, where one type donate a xed amount to a charity. Contributions in these groups stayed high, whereas contributions in the other groups showed the well known declining pattern. One implication is that corporate social responsibility may attract more responsible employees.
    Keywords: Altruism; conditional cooperation; self-selection
    JEL: D11 D12 D64 H41
    Date: 2009–04–17
  4. By: Fiva, Jon H. (Dept. of Economics, University of Oslo); Natvik, Gisle James (Norges Bank)
    Abstract: We identify exogenous variation in incumbent policymakers’ re-election probabilities and explore empirically how this variation affects the incumbents’ investment in physical capital. Our results indicate that a higher re-election probability leads to higher investments, particularly in the purposes preferred more strongly by the incumbents. This aligns with a theoretical framework where political parties disagree about which public goods to produce using labor and predetermined public capital. Key for the consistency between data and theory is to account for complementarity between physical capital and flow variables in government production.
    Keywords: Political Economics; Strategic Capital Accumulation; Identifying Popularity Shocks
    JEL: E62 H40 H72
    Date: 2009–08–15
  5. By: Olivier Glassey (IDHEAP - Institut de hautes études en administration publique - Swiss Public Administration Network); Alain Sandoz (e-Government Research Unit - Université de Neuchatel)
    Abstract: In 2008 the State of Geneva modified its regulation on taxation at source in order to collect electronic fiscal data from employers. Indeed the latter provide data on their employees directly to the tax administration (AFC) and furthermore pay taxes to the State on behalf of their employees. They subtract the corresponding amounts from employees' income and refund that money to the fiscal administration. The taxation at source system is applied to foreigners who work in Switzerland or who receive Swiss pensions, to people who live in Geneva but work in other Cantons, as well as to performers, artists or speakers who work occasionally in Geneva. More than 12'000 companies and 117'000 employees are concerned by the scheme, and large companies provide data on several thousand employees. In the past these files provided by employers were handled semi-automatically by the AFC (at best). The new system (called ISEL for Impôt à la Source En Ligne) offers employers two electronic channels to provide data on employees: file transfer (.XSD) and internet e-form. This case study describes the ISEL project and its context, and discusses the issues raised by the introduction of this e-taxation system. On the human side, our paper takes a qualitative approach, based on interviews of various stakeholders involved in the project. They were asked questions on ISEL's functionality, usability, performance, and so on. On the technical side, the paper presents the architecting principles of the e-government approach in Geneva (Legality, Responsibility, Transparency and Symmetry) and the workflow that was implemented on top of AFC's legacy system.
    Keywords: private public partnership; tax collection; e-services; e-government; data exchange; architecture; usability
    Date: 2009–06–29
  6. By: Craig Brett (Department of Economics, Mount Allison University); John A. Weymark (Department of Economics, Vanderbilt University)
    Abstract: Comparative static properties of the solution to an optimal nonlinear income tax problem are provided for a model in which the government both designs a redistributive income tax schedule and provides a public input into a nonlinear production process. These assumptions imply that wage rates are endogenous. The endogeneity of the wages necessitates taking account of general equilibrium effects of changes in the parameters of the model that are not present when the technology is linear.
    Keywords: Asymmetric information, comparative statics, optimal income taxation, publicly provided inputs
    JEL: D82 H21
    Date: 2009–08
  7. By: Stefan Voigt (MACIE (Philipps University Marburg), Barfüßertor 2, 35032 Marburg, Germany; CESifo; ICER, Torino)
    Abstract: Analysis of the economic effects of constitutional rules has made substantial progress over the last decade. This survey provides an overview of this rapidly growing research area and also discusses a number of methodological issues and identifies underresearched areas. It argues that the next logical step of Positive Constitutional Economics is to endogenize constitutional rules.
    Keywords: Positive Constitutional Economics, Constitutional Political Economy, Economic Effects of Constitutions, New Institutional Economics, Endogenous Constitutions
    JEL: H11 K10 O17 O43 P51
    Date: 2009
  8. By: Førsund, Finn R. (Dept. of Economics, University of Oslo); Edvardsen, Dag Fjeld (SINTEF Building and Infrastructure,); Kittelsen, Sverre A. C, (Ragnar Frisch Centre for Economic Research); Lindseth, Frode (The Norwegian Directorate of Taxes)
    Abstract: The performance of local tax offices of Norway is studied over a three-year period using Data Envelopment Efficiency analysis and calculating Malmquist productivity indices. One input, labour, is used, and six output categories of the main service activities carried out by tax offices are specified. A bootstrap approach recently developed for DEA models is applied to establish confidence intervals for the individual indices enabling an identification of units that have either significant productivity decline or growth, or no change. A specially developed graphic display gives a visual test and grouping into the three possible categories. Looking at change in labour use and productivity change together the productivity development of individual offices is classified into the four categories efficient labour increase, efficient labour savings, inefficient labour savings and inefficient labour increase.
    Keywords: Tax office; Malmquist productivity index; DEA; bootstrap
    JEL: C60 D24 L89
    Date: 2009–06–30

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