nep-pbe New Economics Papers
on Public Economics
Issue of 2009‒10‒31
twelve papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. Strategic tax collection and fiscal decentralization: the case of Russia By Alexander Libman; Lars P. Feld
  2. Financing the Panchayati Raj Institutions: Flagging Some Issues For The 13th CFC By Abhay Pethe
  3. São Tomé and Príncipe: Domestic Tax System and Tax Revenue Potential By Nisreen H. Farhan
  4. Threats in Latin American and Caribbean countries: How do inequality and the asymmetries of rules affect tax morale? By Mariana Gerstenblüth; Natalia Melgar; Juan Pablo Pagano; Máximo Rossi
  5. Tax–Benefit Incidence. The Mexican experience during the last twenty years By César Octavio Vargas-Téllez
  6. A new mechanism to implement the Lindahl equilibriums (In French) By Sébastien ROUILLON (GREThA UMR CNRS 5113)
  7. Evaluating the effects of decentralization on educational outcomes in Spain? By Paula Salinas; Albert Solé-Ollé
  8. Large Changes in Fiscal Policy: Taxes Versus Spending By Alberto F. Alesina; Silvia Ardagna
  9. Social Background, Cooperative Behavior, and Norm Enforcement By Kocher, Martin; Martinsson, Peter; Visser, Martine
  10. An Incentive Mechanism to Break the Low-skill Immigration Deadlock By David de la CROIX; FrŽdŽric DOCQUIER
  11. Anti-Americanism and Public Opinion in the European Union By Lawson, Colin; Hudson, John
  12. Indirect taxation and the welfare effects of altruism on the optimal fiscal policy By Carlos Garriga; Fernando Sánchez-Losada

  1. By: Alexander Libman (University of Mannheim); Lars P. Feld (University of Heidelberg)
    Abstract: In a centralized federation, where tax rates and taxation rules are set by the federal government, manipulating the thoroughness of tax auditing and the effectiveness of tax collection could be attractive for regional authorities because of a variety of reasons. These range from tax competition to principal-agent problems, state capture and benefits of fiscal equalization. In this paper we discuss strategic tax auditing and collection from the perspective of fiscal federalism and test for strategic tax collection empirically using data of the Russian Federation. Russia’s regional authorities in the 1990s have always been suspect of tax auditing manipulations in their favor. However, in the 2000s increasing bargaining po¬wer of the centre seems to induce tax collection bodies in the regions to manipulate tax auditing in favor of the federal centre. Our findings confirm the existence of strategic tax collection for the Yeltsin period after exclusion of outliers; the results for the Putin period are however rather ambiguous.
    Keywords: fiscal federalism, tax arrears, transition economies
    JEL: H26 H77
    Date: 2009
  2. By: Abhay Pethe
    Abstract: The Finances of the PRIs are looked into. The role of 13th Finance Commissionis is explained. Some ‘learnings’ from International experience is given.
    Keywords: finances, PRIs, coalitional government, India, finance commission, tax revenue, liabilities, RBI, decentralization,
    Date: 2009
  3. By: Nisreen H. Farhan
    Abstract: São Tomé and Príncipe is very open and highly depends on imports resulting in high indirect tax revenue. At the same time, the production and export base are very narrow, leaving the authorities with a small domestic tax base. For these reasons, the country compares unfavorably with neighboring economies and other island countries, in terms of domestic revenue in percent of GDP. The paper describes the domestic tax system in São Tomé and Príncipe and uses cross-country empirical analysis to reach a benchmark tax potential for the country. The paper reaches the conclusion that whether São Tomé and Príncipe becomes an oil producer or not, it is more sustainable for it to rely on non-oil domestic revenue-a less volatile and less exhaustible resource-to finance current expenditures. To meet the country's increasing development and social objectives, the authorities need to mobilize sufficient domestic resources. The paper offers a number of fiscal reforms to reach this goal, including implementation of the new tax laws, reduction of exemptions, tax system reforms, and improvement of the tax administration.
    Keywords: Cross country analysis , Fiscal policy , Fiscal reforms , São Tomé and Príncipe , Sub-Saharan Africa , Tax administration , Tax policy , Tax reforms , Tax revenues , Tax systems , Taxation ,
    Date: 2009–10–01
  4. By: Mariana Gerstenblüth (Department of Economics, State University, Uruguay); Natalia Melgar (Department of Economics, State University, Uruguay); Juan Pablo Pagano (Department of Economics, State University, Uruguay); Máximo Rossi (Department of Economics, State University, Uruguay)
    Abstract: Latin America is well known as the most inequitable region. As it is recognized, inequality and corruption perception weaken the way that political institutions works and the democratic system. Focusing on Latin American and Caribbean countries, we analyze what are the elements that shape tax morale. In particular, we analyze how the context influences on ethic decisions such as the predisposition to pay taxes. Our data source is the survey carried out in 2005 by Latinobarometro. In particular, our objective is to analyze how country performance is determining tax morale. To do so, we estimated four probit models including Gini index, Transparency International Corruption Perception Index and Gross Domestic Product per capita (GDPpc). As expected we found that some socio-demographic variables play a relevant role. Interestingly, we also found that, in this attitude, LAC countries do not register a gender bias. However, those are not our main contributions to the literature on the field. The most important results are linked with: 1) the level matters, GDPpc increases the probability that people have tax morale, 2) moreover, income distribution also influence on tax morale but in opposite direction and 3) corruption perception also reduces tax morale. Those results show that the quality of institutions matters and therefore, the way that democracy works play a relevant role.
    Keywords: Tax morale, corruption, inequality, democracy, microeconomic behaviour.
    JEL: H26 H73
    Date: 2009
  5. By: César Octavio Vargas-Téllez (Universidad Autónoma Metropolitana)
    Abstract: This paper presents a tax-benefit incidence analysis for a large time period. The objective is to know if has been income redistribution across Mexican households during the last twenty years, since during this period the Mexican economy has suffered important structural changes and as well its public policies. The analysis is based on four National Income Surveys, thus combining microdata, and inequality and redistributive indexes was possible to distinguish the progressivity degree for every kind of taxes and transfers, and once calculated the tax and transfers vectors was possible to have a redistributive net vector by decil. Thus, were calculated the net transfers across the Mexican families after fiscal policies and its inequality improvements.
    Keywords: Mexico, tax, benefit, incidence, inequality, redistribution.
    JEL: H22 H23 H24 H53 I38
    Date: 2009
  6. By: Sébastien ROUILLON (GREThA UMR CNRS 5113)
    Abstract: This paper presents a new economic mechanism, such that the associated game form implements Lindahl equilibria as Nash equilibria. Each player sends a 2-dimensional message, in order to tell his marginal propensity to pay and his demand for the public good. At a Nash equilibrium, the players directly and honestly reveal data defining a Lindahl equilibrium and the mechanism implements the corresponding allocation. In a quasi-linear economy, formalizing out-of-equilibrium behaviours of the players as a gradient process, the unique stationary point of this process is a Nash equilibrium of the game and it is shown to be globally stable.
    Keywords: Public good; Lindalh equilibrium; Economic mechanism
    JEL: D70 H41
    Date: 2009
  7. By: Paula Salinas (Universitat de Barcelona); Albert Solé-Ollé (Universitat de Barcelona)
    Abstract: Several arguments derived from fiscal federalism theory suggest that decentralization may lead to improved levels of efficiency in the provision of public goods and services. The aim of this study is to examine this hypothesis by evaluating the effects of decentralization on educational outcomes in Spain. These are measured using a survival rate, defined as the ratio between the number of students who enrolled in upper-secondary (non-compulsory) education and the number of students enrolled in the final year of lower-secondary (compulsory) education during the previous academic year. We use a panel data set comprising the 50 provinces of Spain for the years 1978 to 2005, a period that covers the entire process of decentralization. Since education competences were devolved to the regions at different points in time, we can estimate the effects of these reforms by applying the differences-in-differences method and by using the non-decentralized autonomous regions as the comparison group. We find that decentralization in Spain had a positive impact on educational outcomes when pupils on vocational training programmes are not taken into account, and that the richer the region is the more marked the effect becomes. However, this improvement in educational outcomes is achieved at the expense of enrolment in vocational training programmes. These effects might reflect a better match between population preferences and educational policies consequent upon decentralization.
    Keywords: Decentralization, Policy Evaluation, Education
    JEL: H11 H43 H52 I28
    Date: 2009
  8. By: Alberto F. Alesina; Silvia Ardagna
    Abstract: We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments, those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions. We confirm these results with simple regression analysis.
    JEL: H2 H3
    Date: 2009–10
  9. By: Kocher, Martin (Department of Economics, University of Munich,); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Visser, Martine (School of Economics, University of Cape Town)
    Abstract: Studies have shown that there are differences in cooperative behavior across countries. Furthermore, differences in the use and the reaction on the introduction of a norm enforcement mechansism have been documented in cross-cultural studies, recently. We present data which prove that stark differences in both dimensions can exist even within the same town. For this end, a unique data set was created, based on public goods experiments conducted in South Africa. Most of the group differences can, however, be explained by variables accounting for social capital and social environment, such as trust or household violence.<p>
    Keywords: Cooperation; public goods; punishment; experiment; social capital; South Africa
    JEL: C72 C91 H41 Z13
    Date: 2009–10–19
  10. By: David de la CROIX (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and CORE); FrŽdŽric DOCQUIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and National Fund for Scientific Research (Belgium))
    Abstract: Although movements of capital, goods and services are growing in importance, workers movements are impeded by restrictive policies in rich countries. Such regulations carry substantial economic costs for developing countries, and prevent global inequality from declining. Even if rich countries are averse to global inequality, a single country lacks incentives to welcome additional migrants as it would bear the costs alone while the benefits accrue to all rich states. Aversion to global inequality confers a public good nature to the South-North migration of low-skill workers. We propose an alternative allocation of labor maximizing global welfare subject to the constraints that the rich countries are at least as well off as in the current ÒnationalistÓ (or ÒNashionalistÓ) situation. This Òno regretÓ allocation can be decentralized by a tax-subsidy scheme which makes people internalize the fact that as soon as a rich country welcomes an additional migrant, global inequalities are reduced, and everybody in the rich world is better off too. Our model is calibrated using statistics on immigration, working-age population and output. We simulate the proposed scheme on different sets of rich countries.
    Keywords: Public Good, Inequality Aversion, Immigration policy
    JEL: F22 D58 D6 D7
    Date: 2009–08–01
  11. By: Lawson, Colin; Hudson, John
    Abstract: The term “anti-Americanism” has become common coinage in public and academic debate, the more so since the election of President G. W. Bush, and especially since 9/11. Yet little is known of its causes and impact. Defining it as opposition to US policy, and using 2003 and 2005 Eurobarometer data we examine individuals` attitudes to the US in five policy dimensions for EU members. We find that over a third of EU voters either approved or disapproved of the US in all five dimensions. We also find there are differences in attitude to US policy related to age, policy preferences and nationality. And, although anti-Americanism is associated with a preference for greater European independence, perhaps surprisingly it is also linked to a desire for a less federal and hence less powerful Europe.
    Keywords: Federalism; anti-Americanism; European Union
    Date: 2009
  12. By: Carlos Garriga; Fernando Sánchez-Losada
    Abstract: This paper analyzes the welfare effects of altruism on the optimal fiscal policy. The existence of positive bequests links present and future generations in the economy. We show that these altruistic links provide a new role for indirect taxation (consumption and estate taxes) with important welfare implications. We use three different altruistic approaches (warm-glow, dynastic, and family) to illustrate how the presence of bequests in the budget constraint of the donee gives the government the ability to use indirect taxation to mimic lump-sum taxation and to implement the first-best outcome in the long-run. This channel is not present in economies without altruism, such as the infinite-lived consumer economy or the overlapping generations economy, where long-run welfare is suboptimal and indirect taxation is irrelevant.
    Keywords: Taxation ; Fiscal policy
    Date: 2009

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