nep-pbe New Economics Papers
on Public Economics
Issue of 2009‒10‒24
nine papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. Sequential versus simultaneous contributions to public goods: Experimental evidence By Simon Gaechter; Daniele Nosenzo; Elke Renner; Martin Sefton
  2. Tax Competition and Income Sorting: Evidence from the Zurich Metropolitan Area By Christoph A. Schaltegger; Frank Somogyi; Jan-Egbert Sturm
  3. Social Fragmentation and Public Goods Revisiting the Olson's Effect in Uttar Pradesh and Bihar. By Catherine Bros
  4. Review of literature on the productivity of public capital By Pellervo Hamalainen
  5. Global Security Policies Against Terrorism and the Free Riding Problem: An Experimental Approach By Nathalie Colombier; David Masclet; Daniel Mirza; Claude Montmarquette
  6. Governance in health care delivery : raising performance By Lewis, Maureen; Pettersson, Gunilla
  7. A General Financial Transaction Tax: A Short Cut of the Pros, the Cons and a Proposal By Stephan Schulmeister
  8. Tobacco Regulation through Litigation: The Master Settlement Agreement By W. Kip Viscusi; Joni Hersch
  9. The influence of government size on economic growth and life satisfaction. A case study from Japan. By Yamamura, Eiji

  1. By: Simon Gaechter (University of Nottingham); Daniele Nosenzo (University of Nottingham); Elke Renner (University of Nottingham); Martin Sefton (University of Nottingham)
    Abstract: We report an experiment comparing sequential and simultaneous contributions to a public good in a quasi-linear two-person setting. In one parameterization we find that overall provision is lower under sequential than simultaneous contributions, as predicted, but the distribution of contributions is not as extreme as predicted and first movers do not attain their predicted firstmover advantage. In another parameterization we again find that the distribution of contributions is not as predicted when the first mover is predicted to free ride, but we find strong support for equilibrium predictions when the second mover is predicted to free ride. These results can be explained by second movers' willingness to punish first movers who free ride, and unwillingness to reward first movers who contribute.
    Keywords: Public Goods; Voluntary Contributions; Sequential Moves; Experiment
    JEL: C92 H41
    Date: 2009–09
  2. By: Christoph A. Schaltegger (economiesuisse, University of St. Gallen and CREMA); Frank Somogyi (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Jan-Egbert Sturm (ETH Zürich, KOF Swiss Economic Institute, CESifo)
    Abstract: In this paper, we provide empirical evidence for the influence of income taxes on the choice of residence of taxpayers at the local level. The fact that Swiss communities can individually set tax multipliers thereby shifting the progressive tax scheme which is fixed at the cantonal (state) level enables us to study the effect of differences in income taxation on individuals’ choice of location within an economically and culturally homogeneous region. Using panel IV regressions covering the years 1991-2003 and 171 communities in the Swiss canton of Zurich and spatial error regressions for the 171 communities in 2003, we find substantial evidence for income sorting.
    Keywords: tax competition, fiscal federalism, income segregation, income tax
    JEL: H71 H73 R50
    Date: 2009–10
  3. By: Catherine Bros (Centre d'Economie de la Sorbonne and CSH - Delhi)
    Abstract: A vast recent literature has stressed social fragmentation's negative impact on the provision of public goods. This is a key issue, given that public goods availability has been reckoned as crucial to economic development, while developing countries' societies often exhibit high degrees of fragmentation. Although it has been well established both empirically and theoretically that fragmentation is detrimental to collective action, two caveats ought to be considered. First, a high level of social fragmentation is often associated with greater inequality, which, as Olson pointed out, may be beneficial to collective action. In Olson's argument, should most of the public goods benefits accrue to a small number of group members, they are encouraged to invest in group activities, given that their stakes in the collective action are quite high. Second, should access to publicly provided goods be restricted to the elite, a positive relationship may be found between fragmentation and ethnically based patronage. Given that both patronage and inequality are common in developing countries, it is surprising that fragmentation has never been found to have a positive effect on the provision of public goods. This article aims at showing that not only does this positive relationship exist, but it is linked to the presence of wealthy individuals who are in a position to deny access to public goods to other groups members.
    Keywords: Political economy, public goods, collective action, inequality, Olson, Caste, India.
    JEL: H4 O1 O2
    Date: 2009–10
  4. By: Pellervo Hamalainen (Department of Economics, University of Turku, FINLAND)
    Abstract: This paper summarizes previous results on the productivity of public capital. In recent literature, Aschauer's (1989) estimate for the productivity of public capital is often considered too high and the size of the effect is still open to debate. However, the positive effect of public capital on the productivity of the private sector is quite widely accepted.
    Keywords: Public capital, public investments, productivity
    JEL: H11 H54
    Date: 2009–10
  5. By: Nathalie Colombier; David Masclet; Daniel Mirza; Claude Montmarquette
    Abstract: The World Trade Center attack has shed light on the urgent need to implement preventing measures against terrorism and to enhance cooperation in the global security system for all countries. However, international coordination cannot be taken for granted. It is often ineffective and likely to fail for several reasons. Perhaps the more prominent reason to explain failure in coordination is that collective actions against terrorism may suffer from the well known free riding problem (Sandler and Enders, 2004). In this paper we experimentally investigate cooperation dilemma in counterterrorism policies by measuring to what extent international deterrence policy may suffer from free riding. In our game, contributions to the group account do not aim to increase the production of the public good but instead seek to decrease the probability that a stochastic event destroys the good. A country could choose to free ride by investing nothing in the international deterrence policy and instead invest all its resources in its own national protection or even choose to ignore totally terrorism by investing on alternative projects. We also look at the effects of institutions that allow sanctioning and rewarding of other countries to facilitate coordination on deterrence policy. We find that, in absence of institutional incentives and after controlling for risk aversion, most of countries defect by investing very weakly in collective actions against terrorism while largely investing to protect themselves. In contrast, the introduction of punishment/reward incentive systems improves significantly the contribution level to the collective security account. <P>L’attentat qui a frappé le World Trade Center a fait la lumière sur l’urgence de mettre en œuvre des mesures préventives contre le terrorisme et d’améliorer la collaboration au sein du système de sécurité mondial en faisant intervenir tous les pays. Toutefois, on ne peut tenir la coordination internationale pour acquise car elle est souvent inefficace et risque d’échouer pour plusieurs raisons. L’échec de la coordination s’explique peut-être de façon plus marquée par le fait que les actions collectives contre le terrorisme sont susceptibles de souffrir d’un problème bien connu appelé resquillage (Sandler et Enders, 2004). Dans le présent document, nous examinons au moyen d’expériences le dilemme au sujet de la collaboration qui est posé par les politiques contre le terrorisme et nous tentons d’établir dans quelle mesure la politique internationale de dissuasion peut souffrir du phénomène de resquillage. Dans le cadre de notre jeu, les contributions au compte collectif ne visent pas à augmenter la production du bien public, mais plutôt à diminuer la probabilité qu’un événement stochastique détruise le bien en question. Un pays pourrait choisir de resquiller, soit en n’investissant pas dans la politique internationale de dissuasion, mais en utilisant plutôt toutes ses ressources pour sa protection nationale. Il pourrait aussi choisir d’ignorer totalement le terrorisme et d’investir dans certains autres projets. Nous nous penchons aussi sur l’influence qu’exercent les organismes qui permettent de sanctionner ou de récompenser les autres pays dans le but de faciliter la coordination en matière de politique de dissuasion. Nous constatons que, en l’absence d’encouragements institutionnels et une fois l’aversion à l’égard du risque maîtrisée, la plupart des pays font défection en investissant très peu dans les actions collectives contre le terrorisme et beaucoup dans leur propre protection. Par contre, l’introduction de mécanismes d’encouragement axés sur les punitions ou les récompenses améliore considérablement l’ampleur de la participation au compte collectif pour la sécurité.
    Keywords: Design of experiments, experimental economics, terrorism, conflicts,public economics., Structure des expériences, économie expérimentale, terrorisme, conflits, économie du secteur public.
    JEL: D72 C91
    Date: 2009–10–01
  6. By: Lewis, Maureen; Pettersson, Gunilla
    Abstract: The impacts of health care investments in developing and transition countries are typically measured by inputs and general health outcomes. Missing from the health agenda are measures of performance that reflect whether health systems are meeting their objectives; public resources are being used appropriately; and the priorities of governments are being implemented. This paper suggests that good governance is central to raising performance in health care delivery. Crucial to high performance are standards, information, incentives and accountability. This paper provides a definition of good governance in health and a framework for thinking about governance issues as a way of improving performance in the health sector. Performance indicators that offer the potential for tracking relative health performance are proposed, and provide the context for the discussion of good governance in health service delivery in the areas of budget and resource management, individual provider performance, health facility performance, informal payments, and corruption perceptions. What we do and do not know about effective solutions to advance good governance and performance in health is presented for each area, drawing on existing research and documented experiences.
    Keywords: Health Monitoring&Evaluation,Health Systems Development&Reform,Public Sector Expenditure Policy,Health Economics&Finance,Health Law
    Date: 2009–10–01
  7. By: Stephan Schulmeister (WIFO)
    Abstract: The idea of introducing a general financial transaction tax (FTT) has recently attracted rising attention. There are three reasons for this interest: First, the economic crisis was deepened by the instability of stock prices, exchange rates and commodity prices. This instability might be dampened by such a tax. Second, as a consequence of the crisis, the need for fiscal consolidation has tremendously increased. A FTT would provide governments with substantial revenues. Third, the dampening effects of a FTT on the real economy would be much smaller as compared to other tax measures like increasing the VAT. The paper summarises at first the six main arguments in favour and against a FTT. It provides then empirical evidence about the movements of the most important asset prices. These observations suggest that a small FTT (between 0.1 and 0.01 percent) would mitigate price volatility not only over the short run but also over the long run. At the same time, a FTT would yield substantial revenues. For Europe, revenues would amount to 1.6 percent of GDP at a tax rate of 0.05 percent (transaction volume is assumed to decline by roughly 65 percent at this rate). In the UK, tax receipts would be highest. Even if only transactions on exchanges are taxed in a first step (at a rate of 0.05 percent), a FTT would yield 3.6 percent of GDP in the UK. In Germany, FTT receipts would amount to 0.9 percent of GDP in this case. If a FTT is introduced in the UK and in Germany at the same time, neither country needs to fear a significant "emigration" of trading. This can be presumed because roughly 97 percent of all transactions on exchanges in the EU are carried out in these two countries.
    Keywords: Boom and bust of asset prices, speculation, technical trading, transaction tax
    Date: 2009–10–05
  8. By: W. Kip Viscusi; Joni Hersch
    Abstract: The 1998 Master Settlement Agreement resolved the unprecedented litigation in which the states sought to recoup the cigarette-related Medicaid costs. The litigation was settled through a combination of negotiated regulatory requirements and financial payments of about $250 billion over 25 years. Settlement payments received by states are strongly related to smoking-related medical costs but are also related to political factors. The payments largely took the form of an excise tax equivalent, raising potential antitrust concerns. The regulatory restrictions imposed by the agreement also raised antitrust concerns. However, there has been no evident shift in industry concentration. The increase in advertising and marketing expenses has largely taken the form of price discounts. The settlement sidestepped the usual procedures pertaining to the imposition of taxes and the promulgation of new regulations.
    JEL: H2 I18 K0 K13
    Date: 2009–10
  9. By: Yamamura, Eiji
    Abstract: This paper uses Japanese prefecture-level data for the years 1979 and 1996 to examine how the relationship between government size and life satisfaction changes. The major findings are: (1) Government size has a detrimental effect on life satisfaction when government size impedes economic growth in the economic developing stage. However, this effect clearly decreases when government size is not associated with economic growth in the developed stage. (2) Particularized trust is positively associated with life satisfaction of females but not with that of males. Such a tendency becomes more remarkable in the developed stage. These results are unchanged when the endogeneity bias caused by local government size and proxies of trust are controlled for.
    Keywords: Life satisfaction; Government size; Trust; Growth
    JEL: H50 H11 I31
    Date: 2009–10–14

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