nep-pbe New Economics Papers
on Public Economics
Issue of 2010‒08‒14
fifteen papers chosen by
Oliver Budzinski
University of Southern Denmark

  1. Common Agency and Public Good Provision under Asymmetric Information. By Martimort, David; Moreira, Humberto
  2. Still time to Reclaim The European Union Emissions Trading System for the European Tax Payer By Martin, Ralf; Muûls, Mirabelle; Wagner, Ulrich J.
  3. Comparing Regulatory Oversight Bodies Across the Atlantic: The Office of Information and Regulatory Affairs in the US and the Impact Assessment Board in the EU By Wiener, Jonathan B.; Alemanno, Alberto
  5. Misuse of Institutions: Lessons from Transition By Polishchuk, Leonid
  6. An Overview of Federal Support for Housing By Cove Delisle, Elizabeth
  7. The European Regulatory Response to the Volcanic Ash Crisis Between Fragmentation and Integration By Alemanno, Alberto
  8. Instrument Choice is Instrument Design By Weisbach, David
  9. Mandates, Tax Credits, and Tariffs: Does the U.S. Biofuels Industry Need Them All? By Babcock, Bruce A.
  10. Rebalancing the US Economy in a Postcrisis World By Bosworth, Barry; Collins, Susan M.
  11. Structural modeling of altruistic giving By Breitmoser, Yves
  12. "Did the 2008 Rebate Fail? A Response to Taylor and Feldstein " By Kenneth A. Lewis; Laurence S. Seidman
  13. Social rights and economic objectives: The importance of competition at supra national level By Ojo, Marianne
  14. Conditional Cooperation: Evidence for the Role of Self-Control By Martinsson, Peter; Myrseth, Kristian Ove R.; Wollbrant, Conny
  15. Love for Efficiency or Confusion? A QRE Analysis of Individual Contributions in a Public Good Game By Luca Corazzini, Marcelo Tyszler

  1. By: Martimort, David; Moreira, Humberto
    JEL: H41 D82
    Date: 2010–05
  2. By: Martin, Ralf; Muûls, Mirabelle; Wagner, Ulrich J.
    Abstract: The criteria proposed by the EU Commission to identify industries that will receive free emission permits in the third phase of the European Union Emissions Trading System (EU ETS) are not restrictive enough. Evidence from interviews with almost 800 managers in Europe shows that most of the sectors entitled to free emission permits are not facing an increased risk of closure or relocation outside of the EU as a consequence of permit auctioning. Free permit allocation is therefore just a transfer of tax payers' money to industry without any additional social benefit. We propose a simple modification of the Commission's criteria for free permit allocation which could save European tax payers at least €7 billion annually.
    Keywords: Environment
    Date: 2010–05
  3. By: Wiener, Jonathan B.; Alemanno, Alberto
    Abstract: ‘Quis custodiet ipsos custodes?’ asked the Roman poet Juvenal – ‘who will watch the watchers, who will guard the guardians?’1 As legislative and regulatory processes around the globe progressively put greater emphasis on impact assessment and accountability, (Verschuuren and van Gestel 2009, Hahn and Tetlock 2007), we ask: who oversees the regulators? Although regulation can often be necessary and beneficial, it can also impose its own costs. As a result, many governments have embraced, or are considering embracing, regulatory oversight--frequently relying on economic analysis as a tool of evaluation.We are especially interested in the emergence over the last four decades of a new set of institutional actors, the Regulatory Oversight Bodies (ROBs). These bodies tend to be located in the executive (or sometimes the legislative) branch of government. They review the flow of new regulations using impact assessment and benefit-cost analysis, and they sometimes also appraise existing regulations to measure and reduce regulatory burdens. Through these procedures of regulatory review, ROBs have become an integral aspect not only of regulatory reform programs in many countries, but also of their respective administrative systems. Although most academic attention focuses on the analytical tools used to improve the quality of legislation, such as regulatory impact assessment (RIA) or benefit-cost analysis, this chapter instead identifies the key concepts and issues surrounding the establishment and operation of ROBs across governance systems. It does so by examining and comparing the oversight mechanisms that have been established in the United States and in the EU and by critically looking into their origins, rationales, mandates, institutional designs and scope of oversight.
    Keywords: Regulatory Impact Analyses
    Date: 2010–03
  4. By: Mikk Medijainen
    Abstract: Generational accounting is a relatively recent methodology that measures the fiscal burden government policies impose on future generations. Comparing the fiscal burden of future generations to the burden levied on current newborns yields the generational imbalance. Micro data from the Household Budget Survey is combined with data from the national accounts to construct the generational accounts for current and future generations. The results show that as expected there was a relatively mild intergenerational imbalance (64%) in Estonia in 2009. The generational accounts are sensitive to growth forecasts, while population forecasts seem to be of less influence. To achieve intergenerational balance, an imminent and sustained tax rise to increase tax revenue by 9% should be enforced. Alternatively, the indexing of pensions could be made less generous or government net collective expenditures should be cut by approximately 23%.
    Keywords: generational accounting, fiscal sustainability, Estonia
    JEL: H61 H62 H63 H68
    Date: 2010
  5. By: Polishchuk, Leonid
    Abstract: The paper explores a phenomenon often observed in transition economies, when newly established institutions are misused, i.e., applied or resorted to for reasons which have little in common with their intended or anticipated purpose. In such incidences institutions become sources of private gains and lose their value-creation role and capacity. We offer a typology of institutional misuse (illustrated by examples from Russian transition), discuss its consequences, and explore reasons why governments and societies fail to serve as institutions’ guardians. Implications misused institutions for economic and political reforms are analysed.
    Keywords: institutions, transition, capture, club goods
    Date: 2010
  6. By: Cove Delisle, Elizabeth
    Abstract: The federal government commits substantial resources to support housing and mortgage markets through a combination of spending programs and tax expenditures (that is, subsidies conveyed through reductions in taxes). During the crisis of the past two years, the budgetary commitment expanded—to about $300 billion in fiscal year 2009—from the placement into conservatorship in September 2008 of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) and the creation of new housing programs. This Congressional Budget Office (CBO) brief describes, in broad terms, the array of federal activities that support housing and the recent expansion of particular programs.
    Date: 2009–11
  7. By: Alemanno, Alberto
    Abstract: More than twenty years after the EU eliminated its internal land borders, the Union still lacks an integrated airspace. This seems to be the most immediate regulatory lesson of the recent volcanic ash crisis. Yet more research is needed before establishing its net effects. In this brief report, I will provide a first-hand analysis of the regulatory answer developed across Europe in the aftermath of the eruption of the Icelandic volcano Eyjafjallajökull. While reconstructing the unfolding of the events and the procedures followed by the regulators, I will attempt to address some of the questions that I have repeatedly asked myself when stranded in Washington DC between 16 and 25 April 2010. Who did the assessment of the hazard posed by volcanic ash to jetliners? Who was competent to take risk management decisions, such as the controversial flight bans? Is it true that the safe level of volcanic ash was zero? How to explain the shift to a new safety threshold (of 2,000 mg/m3) only five days after the event? Did regulators overact? To what extent did they manage the perceived risk rather than the actual one? At a time when the impact of the volcanic ash cloud crisis is being closely scrutinised by both public authorities and the affected industries, it seems particularly timely to establish what happened during the worst aviation crisis in European history. This report was written one week after the event and relied on a limited number of sources available by 30 April 2010.
    Date: 2010–05
  8. By: Weisbach, David
    Abstract: This paper analyzes the choice between taxes and cap and trade systems (also referred to here as a permit system or a quantity restriction) as methods of controlling greenhouse gas emissions. It argues that in the domestic context, with proper design, the two instruments are essentially the same. Commonly discussed differences in the two instruments are due to unjustified assumptions about design. In the climate change context and within a single country there is sufficient design flexibility that these differences can be substantially eliminated. To the extent that there are remaining differences, there should be a modest preference for taxes, but the benefits of taxes are swamped by the benefits of good design; even though the very best tax might be better than the very best quantity restriction, the first order of business is getting the design right.
    Date: 2009–11
  9. By: Babcock, Bruce A.
    Abstract: Expanded mandates under the Renewable Fuel Standard provide ethanol and biodiesel producers a guaranteed future market at volumes that exceed what they have produced in the past. Despite having these mandates in place, biofuel producers continue to support tax credits and ethanol import tariffs. An examination of how the new mandates will be implemented shows that biofuel producers will receive little or no additional benefit from tax credits. Ethanol import tariffs will continue to provide U.S. corn ethanol producers a cost advantage over imported Brazilian sugarcane ethanol until at least 2013 when the demand for sugarcane ethanol to meet the noncellulosic advanced biofuel mandate starts to increase.
    Date: 2010–03
  10. By: Bosworth, Barry (Asian Development Bank Institute); Collins, Susan M. (Asian Development Bank Institute)
    Abstract: <p>The objective of this paper is to explore how the external balance of the United States (US) might evolve in future years as the economy emerges from the recession. We examine the issue from the domestic perspective of the saving and investment balance and from the external side in terms of the basic determinants of exports and imports and the role of the real exchange rate. Using these two respective perspectives, we highlight (1) causes and consequences of low private and public saving in the US, and (2) sensitivity of trade to variations in the real exchange rate. We highlight the need for sustained depreciation of the dollar to improve the competitiveness of US exports and argue that the current exchange rate is consistent with a significant reduction in the size of the trade deficit. <p>However, the favorable external outlook is very inconsistent with a projected domestic situation of low rates of private saving and a very large public sector budget deficit matched by a cyclically depressed rate of investment. Changes in US corporate tax structure, reconsideration of capital controls, and perhaps some further decline in the level of real exchange rates could help soften the impact of a potentially very hard postrecession landing for the United States.
    Keywords: saving investment balance; basic determinants export; american economy postcrisis
    JEL: F32 F41 F42
    Date: 2010–08–06
  11. By: Breitmoser, Yves
    Abstract: The paper analyzes econometric models of altruistic giving in dictator and public goods games. Using existing data sets, I evaluate internal and external validity of "atheoretic" regression models as well as structural models of random behavior, random coefficients, and random utility, controlling for subject heterogeneity by finite mixture modeling. In dictator games, atheoretic regression lacks external validity, while random coefficient models and random utility models offer high degrees of both internal and external validity. In public goods games, regression works comparably well, being bettered only by random utility models. Overall, the ordered GEV model of random utility is most appropriate to describe choices in the considered games.
    Keywords: structural modeling; altruism; dictator game; public goods; ordered choice sets
    JEL: C50 C44 D64 C72
    Date: 2010–08–05
  12. By: Kenneth A. Lewis (Department of Economics,University of Delaware); Laurence S. Seidman (Department of Economics,University of Delaware)
    Abstract: Did the 2008 rebate fail to stimulate consumer spending? In their recent influential AER articles, John Taylor and Martin Feldstein each claim that BEA aggregate time series data show that the 2008 rebate failed. Re-examining the BEA data, we find that the data instead show there is a high probability that the rebate stimulated consumption. Moreover, the hypothesis that a rebate has half the impact of ordinary disposable income cannot be rejected. Thus, we find that analysis of the BEA aggregate time series data is consistent with the conclusion from the micro-data studies that the 2008 rebate stimulated consumer spending.
    Keywords: fiscal policy, fiscal stimulus, tax rebates
    JEL: E62
    Date: 2010
  13. By: Ojo, Marianne
    Abstract: The need for a supra national model which embraces and provides for social rights of individual Member States is becoming more apparent amidst the ever intensifying integration process within the EU and its involvement in areas which have been undermined by an economic model. This paper considers why, despite such a need for a supra national model, the “ordo liberal European polity” is favoured. It partly does so, by way of reference to two judgements from the European Court of Justice (ECJ) – namely, Laval un Partneri Ltd , and the Viking Cases. Can competition rules (during and beyond periods of financial crises) be designed and implemented in such a way whereby the facilitation of the aims and objectives of the EU Internal Market are optimally realised? To what extent can such rules be reconciled with the all paramount and more highly prioritised goal of sustaining economic and financial stability? Further, to what extent should competition rules be given due prominence – particularly during chronic periods of financial crises? To what extent should competition be encouraged (where it would result in downward spiral and generate unproductive and detrimental results) : to what extent, therefore, should competition rules (within such a context) be respected? These also constitute further questions which this paper seeks to address.
    Keywords: European Court of Justice (ECJ); integration; competition; regulation; ordo-liberalism; economic objectives; social rights; internal market; bank rescues
    JEL: D53 K2 G38 G21
    Date: 2010–08–01
  14. By: Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Myrseth, Kristian Ove R. (ESMT European School of Management and Technology, Berlin, Germany); Wollbrant, Conny (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: When facing the opportunity to allocate resources between oneself and others, individuals may experience a self-control conflict between urges to act selfishly and preferences to act pro-socially. We explore the domain of conditional cooperation, and we test the hypothesis that increased expectations about others’ average contribution increases own contributions to public goods more when self-control is high than when it is low. We pair a subtle framing technique with a public goods experiment. Consistent with our hypothesis, we find that conditionally cooperative behavior is stronger (i.e., less imperfect) when expectations of high contributions are accompanied by high levels of self-control.<p>
    Keywords: Self-control; Pro-social behavior; Public good experiment; Conditional cooperation
    JEL: D01 D64 D70
    Date: 2010–08–05
  15. By: Luca Corazzini, Marcelo Tyszler
    Abstract: Does the hypothesis of 'love for (group) efficiency' account for subjects' over-contribution in public good games? By using data from a VCM experiment with heterogeneous endowments and asymmetric information, we estimate a quantal response equilibrium (QRE) extension of a model in which subjects have preferences for group efficiency. Under the hypothesis of homogeneous population, the estimated parameter of subjects' concerns for efficiency vanishes and most of the variability of contributions seems to be explained by noisy behaviors. A different picture emerges when we introduce cross-subject heterogeneity in concerns for group efficiency. In this case, the majority of the subjects makes contributions that are compatible with the hypothesis of 'love for (group) efficiency'. A formal likelihood-ratio test strongly rejects the models not allowing for noise in contributions and homogeneous subjects for the more general QRE extension with heterogeneous preferences for (group) efficiency coupled with noise in subjects' behavior.
    Keywords: Love for (Group) Efficiency; Voluntary Contribution Mechanism; Quantal Response Equilibrium; Laboratory Experiment.
    JEL: C92 D71
    Date: 2010–08

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