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on Public Economics |
| By: | Patrice Pieretti; Skerdilajda Zanaj (CREA, University of Luxembourg) |
| Abstract: | In this paper, we analyse competition among jurisdictions to attract firms through low taxes on capital and/or high level of public goods, which enhance firms' productivity. We assume that the competing jurisdictions are different in (population) size and that the mobility of capital is costly. We nd that for moderate mobility costs, small economies can attract foreign capital if they supply higher levels of public goods than larger jurisdictions, without being tax havens. If mobility costs are high, we recover the classical result that small jurisdictions are attractive to foreign capital if they engage in tax dumping. Finally, we show that there exists a subset of mobility costs for which the dierentiation in public goods across jurisdictions is not able to relax tax competition. |
| JEL: | H25 H73 F13 F15 F22 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:09-14&r=pbe |
| By: | Rosella Levaggi; Francesco Menoncin |
| Abstract: | In some countries reforms of public service provision have been accompanied by a parallel process of devolution. However, the application of fiscal federalism has not always produced the desired effects. We argue that this result may depend on two factors: a) a lack of coordination causing a non-optimal allocation of resources at aggregate level; b) a lack of incentive to coordination. In our model we assume that goods to be provided at local level are impure public goods. This assumption allows us to consider a more realistic scenario where the production and consumption of the local public good do not necessarily coincide. In an environment with full information and no restriction on the quantities to be provided as the one we propose, fiscal federalism is always suboptimal for the whole community, as it may be expected. However, we show that this does not necessarily mean that in fiscal federalism each local authority is worse off. This implies that coordination is never the outcome of the strategic interaction between the actors and that when the assumption of symmetric information is removed, Central Government will have to expect some local authorities to play strategically against such intervention. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ubs:wpaper:0909&r=pbe |
| By: | Llanto, Gilberto M. |
| Abstract: | The paper examines the progress being made in local finance reforms and indicates pathways to advance those reforms. A summary of the effects of decentralization is given as a contextual background for the discussion of local finance reforms. The inefficient tax assignment has constrained the mobilization of local tax revenues even as local government units have become very dependent on the intergovernmental fiscal transfer, called the “internal revenue allotment.” The paper raises the importance of revisiting the internal revenue allotment formula. It identifies the local finance reforms currently being undertaken and reports the progress being made at the local and national level. The final section comments on the outstanding issues in local finance reform and gives some recommendations. |
| Keywords: | internal revenue allotment, fiscal decentralization, local government code, intergovernmental fiscal transfers, tax-expenditure assignment |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:phd:dpaper:dp_2009-10&r=pbe |
| By: | John Creedy; Shuyun May Li; Solmaz Moslehi |
| Abstract: | This paper examines the choice of government expenditure on public goods and transfer payments (in the form of pension) under majority voting in an overlapping generations model, in which government expenditure is tax-?nanced on a pay-as-you-go (PAYG) basis. The condition required for majority support of the social contract involved in the PAYG scheme is established and shown to be independent of gov- ernment expenditure, so that the choice of expenditure composition can be made conditional on acceptance of this social contract. The model yields a closed-form solu-tion for the majority choice of the ratio of transfer payment to public goods, which depends negatively on the ratio of median to mean income, given parameters regarding preferences, tax, growth and interest rates. Informed by this result, a dataset for demo-cratic countries is examined, suggesting that income inequalities play a minor role in accounting for the substantial variations in the compostion of government expenditure across democratic countries, while di¤erent preferences for public goods resulting from cultural di¤erences may be an important determinant. Finally an alternative decision mechanism is also considered, in which a utilitarian government chooses expenditures to maximize a social welfare function. The solution is found to take a similar form to that of the majority voting context, except that a welfare-weighted average income replaces the median income. |
| Keywords: | Overlapping Generations; Majority Voting; Balanced Growth; Public Goods; Transfer Payments; Utilitarian Government |
| JEL: | D72 H41 H53 H11 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:1064&r=pbe |
| By: | Douadia Bougherara; Sandrine Costa; Gilles Grolleau; Lisette Ibanez |
| Abstract: | A usual explanation to low levels of contribution to public goods is the fear of getting the sucker’s payoff (cooperation by the participant and defection by the other players). In order to disentangle the effect of this fear from other motives, we design a public good game where people have an insurance against getting the sucker’s payoff. We show that contributions to the public good under this ‘protective’ design are significantly higher and interact with expectations on other individuals' contribution to the public good. Some policy implications and extensions are suggested. |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:09-27&r=pbe |
| By: | Richard Woodbury |
| Abstract: | Tax reform has been among the most prominent topics of public policy discussion in Maine in recent history. The current tax system has been described as antiquated, imbalanced, burdensome, unfair, uncompetitive, archaic, and volatile. Over the 2003-2009 period, many reform proposals were advanced; and some reforms were enacted, including a significant restructuring of the income tax system in 2009. This paper lays out the issues motivating tax reform efforts in Maine, provides a historical review of the tax reform struggle as it has unfolded, and offers a descriptive summary of the major initiatives advanced or enacted. Considerable attention is paid to the 2009 tax reform package, in the context of understanding tax reform issues more broadly. |
| Keywords: | Taxation - Maine |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbce:09-2&r=pbe |
| By: | Sabrina Teyssier |
| Abstract: | This paper analyzes which type of intrinsic preferences drive an agent’s behavior in a sequential public good game depending on whether the agent is first or second mover. Theoretical predictions are based on heterogeneity of individuals in terms of social and risk preferences. We modelize preferences according to the inequity aversion model of Fehr and Schmidt (1999) and to the assumption of constant relative risk aversion. Risk aversion is significantly and negatively correlated with the contribution decision of first movers. Second movers with sufficiently high advantageous inequity aversion free-ride less and reciprocate more than others. Both results are predicted by our model. Nevertheless, no effect of disadvantageous inequity aversion of first movers is found in the data while theory predicted it. Our results underline the importance of taking into account the order of agents’ play to correctly understand which type of preferences influences cooperation in voluntary contribution mechanisms. They suggest that individuals’ behavior can be consistent between different experimental games. |
| Keywords: | inequity aversion, risk aversion, public good game, conditional contribution |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0047&r=pbe |
| By: | Nunez Matias (THEMA, Université de Cergy Pontoise) |
| Abstract: | Political parties compete over income tax functions, and voters vote and decide whether to pay full taxes or to make an e®ort to modify their tax bur- den. We show that political parties only propose e±cient income tax func- tions, in a similar manner to the probabilistic voting theory. Regarding the shape of income tax functions, it need not be the case that the majority of vot- ers prefer progressive taxation to regressive taxation as a consequence of the distortions. Nevertheless, we prove that the political appeal for progressivity is restored under mild conditions. |
| Keywords: | Income taxation, Distortions, Efficiency, Progressivity, Political competition |
| JEL: | H23 H31 D72 D78 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2009-09&r=pbe |
| By: | Jennifer Weiner |
| Abstract: | State governments commonly use business tax credits to promote economic development. Whether these incentives are successful at generating new economic activity - and whether they do so in a cost-effective manner - are important concerns, particularly in times of fiscal and economic stress. This paper explores the use and effectiveness of a selected group of incentives, namely tax credits geared toward capital investment, research and development, job creation, and film production. The paper examines the various credits offered by New England states and their structural features, and reviews and analyzes the available evidence on the effectiveness and cost-effectiveness of these types of incentives. The analysis reveals the challenges entailed in measuring the impact of business tax credits and the need for both analysts and policymakers to consider those challenges carefully when using existing studies to inform the tax credit debate. |
| Keywords: | Tax incentives ; Business tax ; Tax incentives - New England ; Business tax - New England |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbce:09-3&r=pbe |
| By: | Birkelöf, Lena (Department of Economics, Umeå University) |
| Abstract: | The thesis consists of an introductory part and three self-contained papers. <p> Paper [I] studies the determinants of the differences in expenditure on services for functionally impaired individuals among municipalities in Sweden. A spatial autoregressive model is used in order to test whether the decisions on the expenditure level in a neighboring municipality affect the municipality’s own expenditure. The results show of spatial interaction among neighbors, possible due to mimicking. However, when controlling for differences among counties there is no evidence of spatial interaction. Therefore, the positive interaction first found can be interpreted either as a result of differences in the way county councils diagnose individuals or due to interaction among the neighbors in the same county. <p> Paper [II] takes advantage of a new intergovernmental grant in two ways. First, the grant is used to study the effect on municipal spending related to the grant. Second, the grant is used to test a hypothesis of spatial interaction among municipalities due to mimicking behavior. The data used pertains to the periods before and after the introduction of the grant. A fixed-effects spatial lag model is used to study the spatial interactions among municipalities. The results show that before the grant, municipalities interact with their neighbors when setting the expenditure level, while there is no evidence of interaction in the second period. This would support the hypothesis that the grants provide information to the municipalities and the need for mimicking diminishes with the grant. <p> Paper [III] examines whether local public expenditures on services to functionally impaired individuals crowd out other local public expenditures in Sweden. The hypothesis is tested on five different spending areas using a two-stage least squares (2SLS) fixed-effects model. While the results give no support for crowding out in the areas of social assistance, culture & leisure, and childcare & preschool, a negative relationship on spending for elderly & disabled care and on spending for education is found, suggesting that crowding out indeed occurs within the municipal sector. The negative relationships are significant both in a statistical and an economic sense. |
| Keywords: | Local public expenditures; Spatial econometrics; Intergovernmental grants; Spatial interaction; Intergovernmental grants; Expenditure crowding out; Functionally impaired |
| JEL: | H72 H77 I18 J14 R12 R50 |
| Date: | 2009–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0798&r=pbe |
| By: | Aronsson, Thomas (Department of Economics, Umeå University); Koskela, Erkki (Department of Economics) |
| Abstract: | This paper concerns public input provision as an instrument for redistribution under international outsourcing by using a model-economy comprising two countries, North and South, where firms in the North may outsource part of their low-skilled labor intensive production to the South. We consider two interrelated issues: (i) the incentives for each country to modify the provision of public input goods in response to international outsourcing, and (ii) whether international outsourcing justifies policy cooperation. If the public input good is substitutable for (complementary with) outsourcing in terms of the production function faced by northern firms, then outsourcing contributes to increase (decrease) the public input provision in the North. For the South, the optimal policy response depends on the level of outsourcing. We also show how policy cooperation with respect to public input provision can be designed to increase the overall social welfare. |
| Keywords: | Outsourcing; redistribution; public input goods; asymmetric information |
| JEL: | H21 H25 J31 J62 |
| Date: | 2009–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0799&r=pbe |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:19/09&r=pbe |
| By: | Clausen, Bianca; Kraay, Aart; Nyiri, Zsolt |
| Abstract: | Well-functioning institutions matter for economic development. In order to operate effectively, public institutions must also inspire confidence in those they serve. The authors use data from the Gallup World Poll, a unique and very large global household survey, to document a quantitatively large and statistically significant negative correlation between corruption and confidence in public institutions. This suggests an important channel through which corruption can inhibit development by eroding confidence in public institutions. This correlation is robust to the inclusion of a large set of controls for country and respondent-level characteristics, and they show how it can plausibly be interpreted as reflecting at least in part a causal effect from corruption to confidence. The authors also show that individuals with low confidence in institutions exhibit low levels of political participation, show increased tolerance for violent means to achieve political ends, and have a greater desire to"vote with their feet"through emigration. |
| Date: | 2009–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5157&r=pbe |
| By: | Richard Morris (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Claudia Rodrigues Braz (Banco de Portugal, 148, Rua do Comercio, P-1101 Lisbon Codex, Portugal.); Francisco de Castro (Banco de España, Alcalá 50, E-28014 Madrid, Spain.); Steven Jonk (De Nederlandsche Bank, Westeinde 1, NL-1017 ZN Amsterdam, NL.); Jana Kremer (Deutsche Bundesbank, Wilhelm-Epstein-Str. 14, D-60431 Frankfurt am Main, Germany.); Suzanne Linehan (Central Bank and Financial Services Authority of Ireland,Dame Street, Dublin 2, Ireland.); Maria Rosaria Marino (Banca d’Italia,Via Nazionale 91, I-00184 Rome, Italy.); Christophe Schalck (Banque de France, 39, rue Croix-des-Petits-Champs, F-75049 Paris Cedex 01, France.); Olegs Tkacevs (Latvijas Banka, K. Valdemara iela 2a, LV-1050 Riga, Latvia.) |
| Abstract: | In recent years, government revenues in many EU countries experienced significant and erratic changes, which, a priori, could not be fully explained by macroeconomic developments or by discretionary fiscal policy measures. We investigate this issue by estimating “unexplained” changes in tax and social contribution revenues, based on proxies for tax revenue bases and elasticities commonly used for forecasting or cyclically adjusting government revenues and taking into account estimates of the impact of legislation changes. This is done for a selection of EU countries, including the “big five” euro area countries (Germany, Spain, France, Italy and the Netherlands) together with Ireland, Latvia and Portugal. We also undertake the same exercise using alternative tax base proxies, either taken from forecasting models or on the basis of our knowledge of the tax system in each country. The results show that, in the aggregate, revenue windfalls and shortfalls have exhibited a broadly cyclical pattern, driven mainly by developments in profit-related taxes and, to a somewhat lesser extent, VAT. Other, more structural factors also play a role, such as declining consumption of fuel and tobacco, as well as factors specific to individual countries, such as developments in property markets. The estimated revenue windfalls and shortfalls can explain a substantial proportion of changes in the euro area cyclically adjusted budget balance over the period 1999-2007. Since these unexplained revenue changes have exhibited a largely cyclical character and might therefore be viewed as partly temporary, this highlights the importance of a careful interpretation of fiscal indicators adjusted for the economic cycle. Except in a small number of cases, the results do not change significantly when alternative tax base proxies are used, suggesting that the potential for improving existing indicators by a better matching of taxes to their bases is likely to be limited. JEL Classification: H20, H68, E62. |
| Keywords: | Tax revenues, fiscal forecasting, cyclical adjustment. |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091114&r=pbe |
| By: | Orapan Nabangchang (Sukhothai Thammatirat Open University) |
| Abstract: | This paper looks at why people in Bangkok give money to wildlife charities, estimates how much people would be willing to pay for the conservation of some of Thailand's endangered animals and assesses what would be the best way to collect money for wildlife protection. The study used the Contingent Valuation Method (CVM) to determine the economic value of a group of Thailand's endangered animal species. Information was gathered through 955 face-to-face interviews conducted in Bangkok. The study finds that the majority of the respondents would vote to pass a referendum to impose a 250 Baht income tax surcharge to generate funds for conservation of a selected group of Thailand's endangered species. If this surcharge were imposed on the whole of Bangkok's population, it would raise significantly more money than is allocated to the current budget of Thailand's National Park, Wildlife and Plant Conservation Department. This potential income would allow the implementation of a comprehensive, integrated conservation programme across the country. The study therefore recommends that all policy-makers and organizations involved in wildlife conservation in Thailand seriously consider its findings and incorporate them in future plans to raise funds to save the country's endangered wildlife. |
| Keywords: | Endangered species, Thailand |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:eep:report:rr2009051&r=pbe |
| By: | Nikos Ebel; Benteng Zou (CREA, University of Luxembourg) |
| Abstract: | In this paper we determine and analyze open loop and Markovian perfect equilibrium of a standard capital accumulation differential games, which is extended by a state depended cost function. As an application of the model we do consider knowledge accumulation or lobbying of firms with connected objectives. By using Pontryagin maximum principle and Hamilton-Jacob-Bellman equation, we find that the feedback strategies could be worse than open loop strategy, which is neither only due to ‘linearity’ as inWirl (1996, European Journal of Political Economy) nor only due to ’feedback information’ as Fershtman and Nitzan (1991, European Economic Review). Rather it is a mixed effect of these two. |
| JEL: | C71 C72 H41 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:09-07&r=pbe |
| By: | Bauman, Yoram (University of Washington); Rose, Elaina (University of Washington) |
| Abstract: | A substantial body of research suggests that economists are less generous than other professionals and that economics students are less generous than other students. We address this question using administrative data on donations to social programs by students at the University of Washington. Our data set allows us to track student donations and economics training over time in order to distinguish selection effects from indoctrination effects. We find that economics majors are less likely to donate than other students and that there is an indoctrination effect for non-majors but not for majors. Women majors and non-majors are less likely to contribute than comparable men. |
| Keywords: | altruism, public goods |
| JEL: | A13 D64 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4625&r=pbe |