|
on Public Economics |
| By: | Virginie Piguet; Sonia Paty; Sylvie Charlot |
| Abstract: | The main purpose of this paper is to assess the effects of fiscal cooperation on local taxation in a decentralized country, using the French experience. We estimate a model of tax setting for local business tax using spatial and dynamic econometric techniques, for the period 1993-2003. We find first that reducing the number of municipalities is likely to limit tax competition and increase local business tax rates as a consequence. Second, we find that tax rates are higher when groups of localities set a single business tax rate rather than applying an additional rate of business tax, suggesting that horizontal tax competition constrains the level of tax rate increase generated by tax-base sharing. |
| Keywords: | Consolidation, Tax competition, Vertical externalities, Local business tax |
| JEL: | H2 H3 H7 |
| Date: | 2010–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:ceo:wpaper:2&r=pbe |
| By: | Ryo Arawatari (Faculty of Economics, Shinshu University); Tetsuo Ono (Graduate School of Economics, Osaka University) |
| Abstract: | This paper introduces an overlapping-generations model with earnings hetero- geneity and borrowing constraints. The labor income tax and the allocation of tax revenue across social security and forward intergenerational public goods are determined in a bidimensional majoritarian voting game played by successive gen- erations. The political equilibrium is characterized by an ends-against-the-middle equilibrium where low- and high-income individuals form a coalition in favor of a low tax rate and less social security while middle-income individuals favor a high tax rate and greater social security. Government spending then shifts from social security to public goods provision if higher wage inequality is associated with the borrowing constraint and a low interest-rate elasticity of consumption. |
| Keywords: | Borrowing constraint; Social security; Public goods provision; Ends- against-the-middle equilibrium; Wage inequality |
| JEL: | H41 H55 D72 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0938r&r=pbe |
| By: | Aronsson, Thomas (Department of Economics, Umeå University); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Almost all previous studies on public policy under relative consumption concerns have ignored the role of leisure for status comparisons. Inspired by Veblen (1899), this paper considers a two-type optimal income tax model, where people care about their relative consumption, and where the importance of relative consumption increases with the use of leisure due to increased consumption visibility. We show that increased consumption positionality typically implies higher marginal income tax rates for both ability-types. Using a leisure-weighted measure of reference consumption, rather than a measure where leisure plays no role as in the previous literature, increases the marginal income tax rate implemented for the low-ability type and decreases the marginal income tax rate implemented for the high-ability type, i.e., it gives rise to a regressive tax component.<p> |
| Keywords: | optimal taxation; redistribution; public goods; relative consumption; status; positional goods |
| JEL: | D62 H21 H23 H41 |
| Date: | 2010–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0466&r=pbe |
| By: | Salvador Barrios; Raffaele Fargnoli |
| Abstract: | Summary for non-specialistsThis paper examines the influence of governments' discretionary measures on tax revenues and tax elasticity in the European Union during the run-up to the 2008/2009 global financial crisis which was characterised by large swings in tax revenues.Using data collected in the context of the Output Gap Working Group of the Economic Policy Committee we show that while discretionary measures have had a limited impact on tax yields, they have in some cases significantly affected tax elasticities and thereby altered the relationship between tax revenues and the business cycle which plays a key role in the EU fiscal surveillance framework. Furthermore we provide evidence on the pro-cyclical nature of discretionary measures affecting tax revenues whereby governments tend to implement tax cuts during expansionary phases while resorting to tax increases during slowdowns. More generally our results suggest that the availability of detailed projections on the impact of discretionary measures by broad tax category would be instrumental to a better monitoring of tax revenues developments in the EU in order to better identify the role played by non-policy factors (such as asset prices) in driving tax revenues. Given that the time span covered by this database is in most cases still relatively short (covering on average 7 to 8 years) future updates of the data would allow to further dig into the issue of the influence of discretionary measures on tax elasticities as well as to provide elements for a backward assessment of fiscal plans vs. outcome. |
| Keywords: | financial crisis barrios Taxation discretionary measures fiscal policy financial crisis fiscal stance business cycle Fargnoli |
| JEL: | H2 E6 H6 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0419&r=pbe |
| By: | Bartosz Przywara |
| Abstract: | Summary for non-specialistsTo correctly assess the demography-related risks facing public finances in the EU over the next couple of decades and establish adequate policy responses to the demographic, social and economic developments, it is essential to devise a reliable method to estimate future health care expenditure. To tackle this issue, the European Commission and the Economic Policy Committee projected future public health care expenditure in all EU Member States over the period 2007-2060. A unique internationally comparable database has been established and a model built allowing to project health care spending in a common, coherent framework of macroeconomic variables. The model incorporates the most recent developments in demography and epidemiology and draws on new insights from health economics, allowing the comparison of the challenges facing both individual countries' health care systems and European society in its entirety. |
| Keywords: | Healths Ageing Demography Budgetary projection Public finances Health care expenditure |
| JEL: | H51 I18 J11 J14 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0417&r=pbe |
| By: | Strulik, Holger; Trimborn, Timo |
| Abstract: | We set up a neoclassical growth model extended by a corporate sector, an investment and finance decision of firms, and a set of taxes on capital income. We provide analytical dynamic scoring of taxes on corporate income, dividends, capital gains, other private capital income, and depreciation allowances and identify the intricate ways through which capital taxation affects tax revenue in general equilibrium. We then calibrate the model for the US and explore quantitatively the revenue effects from capital taxation. We take adjustment dynamics after a tax change explicitly into account and compare with steady-state effects. We find, among other results, a self-financing degree of corporate tax cuts of about 70-90 percent and a very flat Laffer curve for all capital taxes as well as for tax depreciation allowances. Results are strongest for the tax on capital gains. The model predicts for the US that total tax revenue increases by about 0.3 to 1.2 percent after abolishment of the tax. |
| Keywords: | corporate taxation, capital gains, tax allowances, revenue estimation, Laffer curve, dynamic scoring |
| JEL: | E60 H20 O40 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-454&r=pbe |
| By: | Engström, Per (Department of Economics) |
| Abstract: | The paper extends Ng’s (1987) model of optimal taxation of diamond goods — goods that are valued solely for their costliness. We extend his findings by analyzing how other goods should be taxed in the presence of pure diamond goods; modified Ramsey rules are derived in a basic single-type model as well as in a two-type model with redistribution. One key finding, that may be surprising and rather provoking, is that close complements (hip hop music) to diamond goods (bling bling) should be heavily subsidized. |
| Keywords: | optimal taxation; status; luxury taxation |
| JEL: | H20 H21 |
| Date: | 2010–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uunewp:2010_012&r=pbe |
| By: | Oded Hochman (Department of Economics, Ben-Gurion University of the Negev, Israel) |
| Abstract: | We investigate here the agglomeration of spatial clubs in an efficient allocation of a club economy. The literature on agglomeration has focused largely on a primary agglomeration caused by direct attraction forces. We concentrate mainly on secondary and tertiary agglomerations caused by a primary agglomeration. Initially, scale economies in the provision of club goods (CGs) lead each CG to agglomerate in facilities of its club. This primary agglomeration causes a secondary concentration of population around these facilities, which in turn brings about a tertiary agglomeration of facilities of different clubs into centers in the midst of population concentration. The agglomeration of facilities occurs only if a secondary concentration of population takes place. We analyze in detail two specific patterns of agglomeration. One is the central location pattern in which the facilities of all clubs agglomerate perfectly in the middle of the complex. The second is a triple-centered complex in which the center in the middle of the complex consists of perfectly agglomerated facilities of different clubs, each with a single facility per complex. The remaining two centers also consist of facilities of different clubs, but cubs in these centers each have two facilities per complex, one in each center. Each of these two centers is located between a boundary and the middle of the complex closer to the middle of the complex than to the boundary. The facilities in these two centers form condensed clusters of facilities that may contain residential land in between the facilities. We then show that these agglomeration patterns also characterize agglomerations in general. The literature maintains that an efficiently behaving municipality increases its tax-base. This implies that it is in the municipality’s interest to achieve efficiency. The best way for a local government to achieve this desired efficiency is by partially intervening in market operations in order to internalize local externalities. We argue that it suffices for such an intervention to be limited to providing the city’s infrastructure, to taxing only residential land rents and clubs’ profits, to subsidizing the basic industry of the city, and to partially regulating land uses. Consequently, if the local governments of all complexes behave properly the decentralization of the efficient allocation of the club economy should be attained. |
| Keywords: | effective or ineffective agglomeration, spatial clubs, complex, configuration, collective goods, local public goods, facilities, direct and indirect attraction, primary and tertiary agglomerations, secondary population concentration. |
| JEL: | R1 H4 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:bgu:wpaper:1005&r=pbe |
| By: | Roel Beetsma; Massimo Giuliodori; Mark Walschot; Peter Wierts |
| Abstract: | Using real-time data from the annual budget over the period 1958-2009, we explore the planning and realization of fiscal policy in the Netherlands . Our key findings are the following. First, planned surpluses are on average unbiased, although they are overoptimistic during the first half of the sample and too pessimistic during the second half of the sample. The latter is the result of cautious real-time revenue estimates by the Dutch Ministry of Finance during this period. Second, real growth projections by the official Dutch forecasting agency are unbiased. This contrasts with the experience of the EU as a whole where biased growth projections represent an important source of fiscal slippage. Third, general economic conditions and the state of the public finances are important determinants of both fiscal plans and their implementation. Fourth, this is also the case for political and institutional factors. Expenditure overruns are partly related to political factors , whereas cautious revenue forecasts relate to the institutional setting. In particular, the most recent regime of the “trendbased budget policy” has worked well for fiscal discipline in the Netherlands |
| JEL: | E6 H6 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:260&r=pbe |
| By: | Wong, Sulan; Altman, Eitan; Rojas-Mora, Julio |
| Abstract: | Internet growth has allowed unprecedented widespread access to cultural creation including music and films, to knowledge, and to a wide range of consumer information. At the same time, it has become a huge source of business opportunities. Along with great benefits that this access to the Internet provides, the open and free access to the Internet has encountered large opposition based on political, economical and ethical reasons. An ongoing battle over the control on Internet access has been escalating on all these fronts. In this paper we describe first some of the ideological roots of free access to the Internet along with its main opponents. We then focus on the problem of “Internet piracy” and analyze the efficiency of efforts to reduce the availability of copyrighted creations that are available for non-authorized free download. |
| Keywords: | Internet access; fundamental rights; copyrights; public goods; commons |
| JEL: | O34 H41 K00 |
| Date: | 2010–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24455&r=pbe |
| By: | Salvador Barrios; Sven Langedijk; Lucio Pench |
| Abstract: | Summary for non-specialistsThe global financial crisis has led to a sharp deterioration of EU countries' public finances. Views are split regarding the most appropriate consolidation strategy to follow, in particular considering: the timing of fiscal consolidation in relation to the path of economic recovery reflecting (a) the trade-off between consolidation and stabilisation; (b) fiscal consolidation in the context of a distressed banking system where the credit channel is hampered and without which economic recovery can hardly take place, (c) the absence of exchange rate adjustment in the euro area which could make it more difficult for countries with competitiveness problems to achieve successful fiscal consolidation. The existing literature on fiscal consolidations provides only partial evidence on these issues.In this paper our objective is to focus on the above points of discussion drawing on EU (and non-EU OECD) experiences during the period 1970-2008. We estimate econometrically the determinants of successful fiscal consolidations and show that: (i) in presence of a systemic financial crisis, the repair of the banking sector is a pre-condition for a fiscal consolidation to succeed in reducing debt levels (ii) even after the banking sector is repaired, fiscal consolidations are usually less successful than in absence of financial crises, although more vigorous fiscal consolidations (i.e. cold shower) tend to yield higher results (iii) current debt dynamics in the EU are very unfavourable and in some cases, coupled with rising debt servicing costs and much deteriorated growth outlook warranting differentiated consolidation strategies across EU countries (iv) We do not find conclusive evidence in support of exchange rates (including real exchange rate) depreciation/devaluation as enhancing the success of fiscal consolidation as their effect appear to be low and insignificant. |
| Keywords: | Fiscal consolidation financial crisis debt barrios langedijk pench |
| JEL: | H3 H6 E44 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0418&r=pbe |
| By: | Martin Larch |
| Abstract: | Summary for non-specialistsA bias towards running deficits is an entrenched feature of fiscal policy making in most developed economies.Our paper examines whether this tendency is in any way associated with the personal distribution of income of a country. It takes inspiration from theoretical work according to which distributional conflicts may give rise to deficit spending or to delayed fiscal adjustment. Although these theories have been around for years the empirical literature on the determinants of fiscal performance has so far paid little or no attention to the possible role played by different degrees of income inequality.Our results suggest that this neglect was not justified. Using cross-country data we find evidence that a more unequal distribution of income can weigh on a country's fiscal performance. These findings can be relevant in the aftermath of the post-2007 global financial and economic crisis in particular when designing fiscal exist strategies. The success and sustainability of such strategies may inter alia depend on their distributional implications. |
| Keywords: | Income distribution fiscal performance Gini coefficient panel regression Larch BEPA |
| JEL: | D31 E62 E6 G23 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0414&r=pbe |
| By: | Singh, Nirvikar |
| Abstract: | This paper considers the status of economic reform in India, to understand which further reforms might be desirable, and why they have not been successfully introduced or implemented. Rather than provide a list of reforms that “should” be undertaken, the paper attempts to understand the political economy of the process of economic reform in India, and how that process plays out with respect to different sectors of the economy, or different areas of potential economic reform. The discussion includes the roles of institutions, interest groups and ideas in driving reform. |
| Keywords: | India; economic reform; political economy; interest groups; rent-seeking; institutions |
| JEL: | O53 P26 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24479&r=pbe |
| By: | Jon D. Wisman; Barton Baker |
| Abstract: | Inequality increased dramatically in the decades leading up to the financial crises of both 1929 and 2008. Yet students of both crises have largely ignored any role that rising inequality might have played in rendering the financial sector more vulnerable to systemic dysfunction. This study draws upon the work of Thorstein Veblen, Michal Kalecki, and Karl Marx to clarify the manner in which growing inequality prior to both crises made U.S. financial markets more prone to systemic dysfunction. Greater inequality generated three dynamics that heightened conditions in which these financial crises might occur. The first is that greater inequality meant that individuals were forced to struggle harder to find ways to consume more to maintain their relative social status, thereby reducing their savings and increasing their indebtedness. The second is that holding ever greater income and wealth, the elite flooded financial markets with credit, helping keep interest rates low and encouraging the creation of new credit instruments. The third dynamic is that, as the rich took larger shares of income and wealth, they gained more command over ideology and hence politics. Reducing the size of government, tax cuts for the rich, deregulating the economy, and failing to regulate newly evolving credit instruments flowed out of this ideology. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2010-10&r=pbe |