nep-pbe New Economics Papers
on Public Economics
Issue of 2010‒12‒18
33 papers chosen by
Keunjae Lee
Pusan National University

  1. Group size effects in public goods provision: The voluntary contribution mechanism By R. M. Isaac; J. M. Walker
  2. IMF programs and tax effort What role for institutions in Africa? By Jean-François BRUN; Gérard CHAMBAS; Bertrand LAPORTE
  3. The Behavioural Consequences of Unfair Punishment By Michalis Drouvelis
  5. Fiscal Decentralization and Macroeconomic Stability: Theory and Evidence from Pakistan By Iqbal, Nasir; Nawaz, Saima
  6. Measuring Accuracy of Projections of Central Taxes by the Finance Commission By D K Srivastava; C Bhujanga Rao
  7. Determinants of government size: Evidence from China By Wu, Alfred M.; Lin, Mi
  8. Group Size and the Voluntary Provision of Public Goods: Experimental Evidence Utilizing Very Large Groups By R. M Isaac; J. Walker; A. Williams
  9. Reforming Indirect Taxes in India: Role of Environmental Taxes By D K Srivastava; C Bhujanga Rao
  10. Partial Harmonization of Corporate Taxes in an Asymmetric Repeated Game Setting By Itaya, Jun-ichi; Okamura, Makoto; Yamaguchi, Chikara
  11. Using a microeconometric model of household labour supply to design opimal income taxes By Aaberge Rolf; Colombino Ugo
  12. Determinants of government consumption expenditure in developing countries : a panel data analysis By Shonchoy, Abu S
  13. Public expenditure and revenue in Italy, 1862-1993 By Magazzino, Cosimo
  14. Anomalous Behavior in Public Goods Experiments: How Much and Why? By Thomas R. Palfrey; Jeffrey Prisbrey
  15. Fiscal Policy from a Public Choice Perspective By J. Stephen Ferris
  16. Public-Private Partnerships and Investment in Infrastructure By Sónia Araújo; Douglas Sutherland
  17. Public Spending, Public Deficits, and Government Coalitions By André Blais; Jiyoon Kim; Martial Foucault
  18. Social Income Transfers and Poverty Alleviation in OECD Countries. By Caminada, Koen; Goudswaard, Kees; Koster, Ferry
  19. Redistribution, work incentives and thirty years of UK tax and benefit reform By Stuart Adam; James Browne
  20. When Does Government Debt Crowd Out Investment? By Nora Traum; Shu-Chun Yang
  21. Inequality and Education Funding: Theory and Evidence from the U.S. School Districts By Calin Arcalean; Ioana Schiopu
  22. Sectoral Effects of Tax Reforms in an Open Economy By Olivier Cardi; Romain Restout
  23. Lobbying, political competition, and local land supply: recent evidence from Spain By Albert Sole-Olle; Elisabet Viladecans-Marsal
  24. Less Than a state, more than an international organization: The Sui generis nature of the European Union By Hlavac, Marek
  25. Contracting out, an Empirical Study on Motives By Mattheus Wassenaar; Tom Groot; Raymond Gradus
  26. Tax differentials and inflow of foreign direct investments : evidence from foreign operations of U.S. multinational companies By Watanabe, Yuichi
  27. The making of a state-centered "public sphere" in Turkey : a discourse analysis By Hazama, Yasushi
  28. Capital Taxation During the U.S. Great Depression By Ellen R. McGrattan
  29. Cronyism By Martins, Pedro S.
  30. Five Years of NRHM 2005-2010 By Ministry of Health and Family Welfare
  31. Game theory models for exchange Networks: experimental results By E. J. Bienenstock; P. Bonacich
  32. The 2008-09 Crisis in Turkey: Performance, Policy Responses and Challenges for Sustaining the Recovery By Lukasz Rawdanowicz
  33. Smuggling and import duties in Myanmar By Kubo, Koji; Nu Nu Lwin

  1. By: R. M. Isaac; J. M. Walker
    Date: 2010–12–08
  2. By: Jean-François BRUN (Centre d'Etudes et de Recherches sur le Développement International); Gérard CHAMBAS (Centre d'Etudes et de Recherches sur le Développement International); Bertrand LAPORTE (Centre d'Etudes et de Recherches sur le Développement International)
    Abstract: When compared to other developing countries, most Sub-Saharan African countries are characterized by a disappointing level of development. Among the factors explaining this poor performance, the inadequate supply of public goods is often advocated. This inadequate supply is due either to poor efficiency of public expenditure, or to an insufficient tax effort. This paper is focused on this last factor. One of the reasons for the low level of public revenues could be the weak impact of the IMF programs on the tax effort. In the agreements that developing countries reach with the IMF, they commit to reduce their macro-economic imbalances, notably fiscal deficit, to a sustainable level. The measures necessary to achieve the overall budgetary objectives apply mainly to public expenditures as they are easy to reduce in the short term. However, the hypothesis of a positive effect of IMF programs must be considered: one objective of the African governments could be to maintain public expenditures at their previous level. To this end, African governments could choose to mobilize additional public revenues. Thus, most of IMF programs promote tax reforms leading to a more effective policy of public revenue mobilization. This last scenario of an increase of the level of public revenue is corroborated by the econometric analysis. The level of public revenue depends, among other factors, on the quality of institutions. However, the institutional quality of custom and tax administrations is weaker in Africa than elsewhere. This poor quality reduces the efficiency of IMF programs which may have a lower impact on the level of public revenue in African countries. These results point up two main lessons for the IMF (and more generally for lenders) and for recipient countries: 1) The role of technical assistance associated with the IMF programs is crucial, since it enables capacity reinforcement of the technical administrations in charge of the definition and implementation of the reform; 2) The technical assistance for tax and custom administrations must be strengthened for those countries which initially have a poor quality of bureaucracy.
    Date: 2010
  3. By: Michalis Drouvelis
    Abstract: Experimental evidence from public good games with punishment suggests that punishment works when subjects assign it fairly by sanctioning non-cooperators. This paper reports an experiment in which punishment is assigned unfairly in the sense that it is not linked to individual behaviour and is melted out to all group members (irrespective of their prior behaviour). We test whether unfair punishment generates different contribution and punishment behaviour relative to the standard punishment game. Our findings suggest different dynamics of average contributions in the presence of unfair punishment relative to the standard punishment game. Contribution levels are significantly different only when subjects have obtained experience from both games. We also find that, although the assignment of punishment is unaffected after the experience of an environment with unfair punishment, a history of unfair punishment makes a difference regarding reactions to alleviation, reward and punishment received.
    Keywords: Recriprocity, Unfair punishment, Public good experiments
    JEL: C92 H41
    Date: 2010–11
  4. By: Janno Reiljan; Aivo Ülper
    Abstract: The goal of this paper is to analyze the theoretical, political and organizational bases of the territorial division of the country into municipalities and offer a research direction for identifying conceptual solutions to the development problems in Estonian municipalities. The paper focuses on the territorial organization of administrative issues, looking at the remaining administrative aspects only insofar as they relate to the territorial organization of public administration and services. In order to accomplish the goal we tackle the following research tasks: systematize theories concerning the territorial division of the country into municipalities and analyze the possibilities and limitations for their application; discuss administrative-territorial reforms in Nordic countries, their causes and consequences; describe the development, nature and indicators of the administrative-territorial division of Estonia; empirically analyze the relationship between municipal size and capability and development indicators. The analysis of the theoretical approaches to municipal size pointed out that they are fragmented and incompatible. Some authors support small municipalities, and others large. The theoretical reasoning of both those directions is often strongly simplified and biased and a unified meta-theoretical approach has not been established. The empirical analysis revealed that there is no empirical evidence to confirm either the presence of significant size related advantages among municipalities or the existence of an optimal municipal size considering current municipal functions and financing. The lack of theoretical and empirical evidence on the necessity for administrative-territorial reform means that merging municipalities alone cannot significantly improve the public service delivery capacities and economic and democratic development of Estonian municipalities. This means that future studies should focus on analyzing public services from the perspective of their economic efficiency, quality and accessibility, and in doing so, determine the optimal size of regions for providing the various public services.
    Keywords: optimal size of municipalities, local governments’ financial potential, local political development, amalgamation, local government reform, local government efficiency
    JEL: H11 H70
    Date: 2010
  5. By: Iqbal, Nasir; Nawaz, Saima
    Abstract: The research on the relationship between macroeconomic stability and fiscal decentralization has been rather inconclusive about the benefits of fiscal decentralization. The current paper is the first to investigate the effect of fiscal decentralization on macroeconomic stability by using Misery Index at country level especially for Pakistan. The evidence that has been presented reveals a significant positive impact of fiscal decentralization on macroeconomic stability of Pakistan, although the results are much weaker for expenditure decentralization. Effectiveness of expenditure decentralization in curtailing macroeconomic instability is depending upon the level of revenue decentralization. The current study clearly indicates that process of fiscal decentralization is beneficial for the economy of Pakistan. The present developments under taken by the government of Pakistan in term of 7th NFC award and 18th Constitutional Amendment will have clear implications for the Pakistan’s long term economic prosperity and macroeconomic stability. However, outcome of these reforms crucially depends upon the will of the political government.
    Keywords: Fiscal Decentralization; Macroeconomic Stability; Pakistan
    JEL: O11 E62 H77 E31 E24
    Date: 2010–12–02
  6. By: D K Srivastava; C Bhujanga Rao (Madras School of Economics)
    Abstract: This paper looks at the quality of forecasts/assessments made by some of the recent Finance Commissions for the shareable central taxes and own tax revenues of selected states. The Commissions covered under this analysis are Ninth to Twelfth Finance Commissions. It is observed that while direct taxes are underestimated in general, revenues from indirect taxes partially Union excise duties and custom duties have been over estimated. In respect of states, four selected states viz., Andhra Pradesh, Gujarat, Orissa and Assam are examined. While there is similarity between the approaches of Ninth, Tenth and Twelfth Finance Commissions in regard to middle and high income states, the Eleventh Finance Commission required that they raise tax revenues higher than what they were able to achieve.
    Keywords: Central Taxes, Own Tax Revenues, Finance Commission
    JEL: H2 H5 H7
    Date: 2010
  7. By: Wu, Alfred M.; Lin, Mi
    Abstract: This paper investigates the determinants of government size at the provincial level in China. We employ the panel data model as a platform for empirical analysis and control for endogeneity in the study. Our study shows that openness to trade and foreign direct investment (FDI) may curtail government expansion, and that the provincial-level public sector is characterized by economies of scale. This study also documents that Wagner’s law does not hold true for China. Moreover, both expenditure decentralization and revenue decentralization contribute to the expansion of China’s government.
    Keywords: Government size - Wagner’s law - Scale effects - Openness to trade - Fiscal decentralization
    JEL: H11 H61
    Date: 2010–11–23
  8. By: R. M Isaac; J. Walker; A. Williams
    Date: 2010–12–10
  9. By: D K Srivastava; C Bhujanga Rao (Madras School of Economics)
    Abstract: Extensive reforms of India‟s indirect taxes at the central and the state levels has prepared the necessary ground for the implementation of a comprehensive goods and services tax (GST). The Empowered Committee of the State Finance Ministers in their First Discussion Paper and the Thirteenth Finance Commission in their recently submitted report have suggested GST models which are quite different in many respects. This paper identifies these differences and argues that within the regime of taxation of goods and services in India environmental tax reform should also be incorporated to make the tax regime play a significant role in managing environment. The environment tax reforms will yield both a fiscal double dividend and an economic double dividend making the Indian economy pursue a path of sustainable development.
    Keywords: Taxes, environment
    JEL: H6 H11 H20 H23
    Date: 2010
  10. By: Itaya, Jun-ichi; Okamura, Makoto; Yamaguchi, Chikara
    Abstract: This paper investigates the conditions under which partial harmonization for capital taxation is sustained in a repeated interactions model of tax competition when there are three heterogenous countries with respect to their capital endowments. We show that regardless of the structure of the coalition (i.e., any group of countries), whether partial tax harmonization is sustainable or not crucially depends on the capital endowment of the median country relative to those of the large and small countries. The most noteworthy finding is that the closer the capital endowment of the median country to the average capital endowment of the large and small countries, the less likely is the tax harmonization including the median country to prevail and the more likely is the partial tax harmonization excluding the median country to prevail.
    Keywords: Tax coordination, Asymmetric countries, Repeated game, Tax competition,
    JEL: H73 F59 F21
    Date: 2010–11
  11. By: Aaberge Rolf; Colombino Ugo (University of Turin)
    Abstract: The purpose of this paper is to present an exercise where we identify optimal income tax rules according to various social welfare criteria, keeping fixed the total net tax revenue. Empirical applications of optimal taxation theory have typically adopted analytical expressions for the optimal taxes and then imputed numerical values to their parameters by using “calibration” procedures or previous econometric estimates. Besides the restrictiveness of the assumptions needed to obtain analytical solutions to the optimal taxation problem, a shortcoming of that procedure is the possible inconsistency between the theoretical assumptions and the assumptions implicit in the empirical evidence. In this paper we follow a different procedure, based on a computational approach to the optimal taxation problem. To this end, we estimate a microeconomic model with 78 parameters that capture heterogeneity in consumption-leisure preferences for singles and couples as well as in job opportunities across individuals based on detailed Norwegian household data for 1994. For any given tax rule, the estimated model can be used to simulate the labour supply choices made by single individuals and couples. Those choices are therefore generated by preferences and opportunities that vary across the decision units. We then identify optimal tax rules – within a class of 9-parameter piece-wise linear rules - by iteratively running the model until a given social welfare function attains its maximum under the constraint of keeping constant the total net tax revenue. The parameters to be determined are an exemption level, four marginal tax rates, three “kink points” and a lump sum transfer that can be positive (benefit) or negative (tax). We explore a variety of social welfare functions with differing degree of inequality aversion. All the social welfare functions imply monotonically increasing marginal tax rates. When compared with the current (1994) tax systems, the optimal rules imply a lower average tax rate. Moreover, all the optimal rules imply – with respect to the current rule – lower marginal rates on low and/or average income levels and higher marginal rates on relatively high income levels. These results are partially at odds with the tax reforms that took place in many countries during the last decades. While those reforms embodied the idea of lowering average tax rates, the way to implement it has typically consisted in reducing the top marginal rates. Our results instead suggest to lower average tax rates by reducing marginal rates on low and average income levels and increasing marginal rates on very high income levels.
    Date: 2010–10
  12. By: Shonchoy, Abu S
    Abstract: The paper focuses on the recent pattern of government consumption expenditure in developing countries and estimates the determinants which have influenced government expenditure. Using a panel data set for 111 developing countries from 1984 to 2004, this study finds evidence that political and institutional variables as well as governance variables significantly influence government expenditure. Among other results, the paper finds new evidence of Wagner's law which states that peoples' demand for service and willingness to pay is income-elastic hence the expansion of public economy is influenced by the greater economic affluence of a nation (Cameron1978). Corruption is found to be influential in explaining the public expenditure of developing countries. On the contrary, size of the economy and fractionalization are found to have significant negative association with government expenditure. In addition, the study finds evidence that public expenditure significantly shrinks under military dictatorship compared with other form of governance.
    Keywords: Developing countries, Public expenditures, Corruption, Government expenditure, Fractionalization, Governance, Political institutions and Extreme bound analysis
    JEL: E01 E2 E61 E62 H50 H60 O11 O5 H2 H4 H5 H6
    Date: 2010–12
  13. By: Magazzino, Cosimo
    Abstract: This study examines the long-run equilibrium relationship between government expenditure and revenue in Italy from 1862 to 1993, using cointegration techniques and the direction of causality relationship in the long and short runs between the variables through integrating the Error Correction Model (ECM) into the traditional Granger causality test. A Granger non-causality test (due to Toda and Yamamoto) is also performed. Unit root tests have been applied in order to investigate the stationarity properties of the series. Moreover, three more homogeneous sub-period (1862-1913; 1914-1946; 1947-1993) have been analyzed. The nexus between public expenditure and revenue has been discussed also by Impulse Response Functions (IRFs) and Forecast Error Variance Decompositions (FEVDs). Empirical findings show how, for each sub-period, the policy adopted reflect the prevailing paradigm of public finance (neutral or orthodox finance, Keynesian finance and discretionary or compensatory finance, respectively).
    Keywords: Government expenditure; government revenue; stationarity; cointegration; causality; spend and tax; tax and spend; Italy.
    JEL: E62 C50 H20 B22 C22
    Date: 2010–12–08
  14. By: Thomas R. Palfrey; Jeffrey Prisbrey
    Date: 2010–12–08
  15. By: J. Stephen Ferris (Department of Economics, Carleton University)
    Date: 2010–11–09
  16. By: Sónia Araújo; Douglas Sutherland
    Abstract: How can governments reap the potential benefits of public-private partnerships (PPPs) in the provision of infrastructure? Private sector involvement in the provision of public goods is long-standing, often relying on franchises or concessions. More recently, PPPs have risen in prominence, promising innovative solutions and a better allocation of inputs than traditional procurement with separate concessions. However PPPs are not without risks with the outcome depending on the identification of the most efficient bidder, the risk sharing between the public and private sector and the design of the contractual relationship. Furthermore, PPPs, particularly when they are used to circumvent budgetary constraints, present risks to government budgets by creating large contingent liabilities. Drawing on a discussion of the economics of PPPs in relation to infrastructure and questionnaire responses, synthetic indicators are used to assess how well-suited policy frameworks in the OECD are to benefit from PPPs. The results show marked heterogeneity across countries, suggesting there is scope to improve performance and gain expertise by considering other countries? experiences.<P>Partenariats public-privé et investissement en infrastructures<BR>Comment le secteur public peut-il tirer parti des avantages éventuels des partenariats public-privé (PPP), s?agissant de la mise à disposition d?infrastructures ? Le secteur privé intervient de longue date dans l?offre de biens publics, souvent dans le cadre de concessions. Plus récemment, les PPP ont gagné en importance, présageant de solutions novatrices et d?une affectation des ressources plus efficace que celle de la passation de marchés classique basée sur des concessions distinctes. Mais les PPP ne sont pas dénués de risques, leur résultat étant tributaire de la sélection du soumissionnaire le plus efficient, du partage des risques entre secteurs public et privé, ainsi que du montage contractuel retenu. De plus, surtout si l?on y fait appel pour échapper à des contraintes budgétaires, ils entraînent des risques pour les budgets publics parce qu?ils génèrent d?importants passifs éventuels. Des indicateurs synthétiques, établis à partir d?une analyse des aspects économiques des PPP dans le domaine des infrastructures et des réponses à un questionnaire, sont utilisés pour évaluer dans quelle mesure les cadres d?action des pays de l?OCDE sont adaptés pour exploiter les avantages des PPP. Il en ressort une forte hétérogénéité internationale, qui laisse entrevoir des possibilités d?améliorer les résultats et d?acquérir des connaissances en étudiant les expériences des autres pays.
    Keywords: public private partnerships, public goods, incomplete contracts, investment incentives, partenariats public-privé, biens publics, contrats incomplets, incitations à l'investissement
    JEL: D23 H41 L33
    Date: 2010–09–23
  17. By: André Blais; Jiyoon Kim; Martial Foucault
    Abstract: The study examines the relationship between types of government and level of public spending. There are two competing perspectives about the consequences of coalition governments on the size of public expenditures. The most common argument is that government spending increases under coalition governments, compared with one-party governments. Another line of thought contends that coalition governments often are stalled in the status quo due to the veto power of each member. Our analysis of public spending in 33 parliamentary democracies between 1972 and 2000 confirms the latter argument that coalition governments have a status quo bias. Particularly, we find that single-party governments are apt to modify the budget according to the current fiscal condition, which enables them to increase or decrease spending more flexibly. On the contrary, coalition governments find it difficult not only to decrease spending under difficult fiscal conditions but also to increase it even under a more favourable context, because each member of the coalition has a veto power. <P>L'étude examine la relation entre les types de gouvernement et le niveau des dépenses publiques. Il existe dans la littérature deux points de vue divergents sur les conséquences des gouvernements de coalition sur la taille des dépenses publiques. L'argument le plus commun est que les augmentations de dépenses publiques des gouvernements de coalition augmentent davantage que les gouvernements à parti unique. Une autre ligne de pensée soutient que les gouvernements de coalition sont souvent installés dans le statu quo en raison du droit de veto de chaque parti de la coalition. Notre analyse des dépenses publiques dans 33 démocraties parlementaires entre 1972 et 2000 confirme que les gouvernements de la coalition ont un biais de statu quo. En particulier, nous constatons que les gouvernements à parti unique sont plus enclins à modifier le budget en fonction de leur solde budgétaire, ce qui leur permet d'augmenter ou de diminuer les dépenses de manière plus souple. Au contraire, les gouvernements de coalition ont non seulement du mal à diminuer les dépenses fiscales dans des conditions difficiles, mais aussi de l'augmenter, même dans un contexte plus favorable, parce que chaque membre de la coalition peut menacer d’utiliser son droit de veto.
    Keywords: publics spending, coalition government, single-party, electoral systems, fiscal deficit, panel data, dépenses publiques, gouvernement de coalition, parti unique, systèmes électoraux, solde budgétaire, données de panel
    Date: 2010–12–01
  18. By: Caminada, Koen; Goudswaard, Kees; Koster, Ferry
    Abstract: Poverty alleviation is an important policy objective in developed welfare states. This paper analyzes the effect of social transfer policies on poverty. A vast literature claims that high social effort goes along with low poverty levels across countries. This paper systematically analyzes this claim. We employ several social expenditure ratios (as a proxy for social effort) and correct for the impact of the tax system and for private social arrangements, using OECD methodology. Also, we control for demographic and macro-economic differences across countries. We performed several tests with the most recent data (LIS, OECD, and SOCX) for the period 1985-2005. Our results are less clear-cut than earlier findings. We still find quite a strong negative relationship between the level of public social expenditure and poverty among 28 OECD countries. However, for non-EU15 countries this relationship is stronger than for the EU15. The results alter considerably if private social expenditures are included as well. For non-EU15 countries in our sample, we do not find evidence for a negative correlation between the level of total social spending and the incidence of poverty. In contrast, for the group of EU15 countries private social arrangements do matter as far as poverty alleviation is concerned. Demographic and macro-economic (control) variables are important as well. We developed and employed multiple linear regression models to control for these complex interrelationships. Our results point at one direction: gross social spending is the driving force as far as differences in poverty levels across countries are concerned, although the ageing of the population and unemployment rates have some explanatory power, both for non-EU15 countries and for EU15 countries. Our analyses captures another effect as well. It is essential to control for the impact of taxes on the social expenditure ratios used. By doing so, the linkage between social effort and poverty levels across countries becomes insignificant. In view of the fact that with these corrections on expenditure statistics, we have a much better – although still not perfect - measure of what governments really devote to social spending, the familiar claim that higher social expenditure goes along with lower poverty levels does not hold across the 28 examined countries examined. We believe that our comparison of the impact of several social expenditure ratios on poverty levels has emphasized that taking into account both the public/private-mix and the impact of the tax system on social expenditure ratios really matters for comparative welfare state research and for policy makers who want to reduce poverty.
    Keywords: poverty; welfare states; social transfers
    JEL: H55 H53 I32
    Date: 2010
  19. By: Stuart Adam (Institute for Fiscal Studies and IFS); James Browne (Institute for Fiscal Studies)
    Abstract: <p><p>Governments wishing to reduce inequality by redistributing money from the rich to the poor face the dilemma that in doing so (by increasing tax rates and means-tested benefits, for example) they reduce the incentive for individuals to increase their incomes. Policy-makers have tried to balance these objectives in different ways and, partly as a result of this, the tax and benefit system today is very different from the one that existed thirty years ago. In this paper we look at how the tax and benefit system redistributed income and affected incentives to work in 2009-10, and at the effect of tax and benefit reforms between 1978-79 and 2009-10 on the level of inequality and work incentives.</p></p>
    Date: 2010–12
  20. By: Nora Traum (Indiana University - Bloomington); Shu-Chun Yang (Congressional Budget Office)
    Abstract: We investigate the relationship between inequality and education funding in a model of probabilistic voting over public education spending where the private option is available. A change in inequality can have opposite effects at different income levels: higher inequality decreases public spending per student and increases enrollment in public schools in poor economies, while the opposite holds in the rich ones. A change in the tax base can also have non-monotonic effects. We also study the implications of different voting participation across income groups. The predictions of the model are supported by U.S. school district-level data.
    Date: 2010–05
  21. By: Calin Arcalean (ESADE Ramon Llull University); Ioana Schiopu (ESADE Ramon Llull University)
    Abstract: We investigate the relationship between inequality and education funding in a model of probabilistic voting over public education spending where the private option is available. A change in inequality can have opposite effects at different income levels: higher inequality decreases public spending per student and increases enrollment in public schools in poor economies, while the opposite holds in the rich ones. A change in the tax base can also have non-monotonic e¤ects. We also study the implications of different voting participation across income groups. The predictions of the model are supported by U.S. school district-level data.
    Date: 2010–09
  22. By: Olivier Cardi (ERMES - Equipe de recherche sur les marches, l'emploi et la simulation - CNRS : UMR7017 - Université Panthéon-Assas - Paris II, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Romain Restout (Université Catholique de Louvain, IRES - UCL)
    Abstract: We use a neoclassical open economy model with traded and non traded goods to investigate the sectoral effects of three tax reforms: i) two revenue-neutral shifting the tax burden from labor to consumption taxes and ii) one labor tax restructuring keeping the marginal tax wedge constant. Regardless of its type, a tax reform crowds-in both consumption and investment and raises employment. Whereas tax reforms have a small impact on GDP, they exert substantial effects on sectoral outputs which move in opposite direction in the short-run. The sensitivity analysis reveals that raising the elasticity of labor supply or reducing the tradable content in consumption expenditure amplifies the heterogeneity in sectoral output responses. Finally, allowing for the markup to depend on the number of competitors, we find that a substantial share of sectoral output variations can be attributed to the change in the markup triggered by firm entry.
    Keywords: Non Traded Goods; Employment; Current Account; Tax Reform.
    Date: 2010–12–08
  23. By: Albert Sole-Olle; Elisabet Viladecans-Marsal (Universitat de Barcelona)
    Abstract: We analyze whether local land supply is influenced by the degree of political competition, and interpret the findings as being indicative of the influence wielded by land development lobbies. We use a new database including both political and land supply data for more than 2,000 Spanish municipalities for the period 2003-2007. In Spain, land use policies are largely a local responsibility with municipalities having periodically to pass compre- hensive land use plans. The main policy variable in these plans, and the one analyzed here, is the amount of land classified for potential development. We measure local political competition as the margin of victory of the incumbent government. We instrument this variable using the number of votes obtained by parties represented in local government when standing at the first national legislative elections following the re-establishment of democracy, and the number of votes they actually obtained regionally at the national legislative elections. The results indicate that stiffer political competition does indeed reduce the amount of new land designated for development. This effect is found to be most marked in suburbs, in towns with a high percent of commuters and homeowners, and in municipalities governed by the left.
    Keywords: urban growth controls, political economy, land use regulations
    JEL: Q15 R52 H7
    Date: 2010
  24. By: Hlavac, Marek
    Abstract: In this paper, I show that the European Union (EU) is less than a state, but more than an international organization. Although it possesses some characteristics of both, the European Union is, I argue, a sui generis project: Although the EU wields extensive influence in some policy areas (such as competition policy or international trade regulation), its institutions’ powers are quite limited in many areas that remain firmly within the grasp of its Member States’ governments (such as security, justice, tax or redistribution policies). The European Union’s supranational elements – especially the EU laws’ supremacy over the laws of individual Member States – distinguish it, furthermore, from international organizations, such as the United Nations or the World Trade Organization. I conclude that the European Union is really a sui generis project that has not been attempted anywhere else: As such, it could be regarded as a useful case study, or perhaps even a “pilot project,” for regional integration projects elsewhere.
    Keywords: European Union; regional integration; international organization; multilevel governance; security policy; tax policy; redistribution policy; European Union law; supranational institutions
    JEL: F15 F13 F53
    Date: 2010–12
  25. By: Mattheus Wassenaar (Ministry of Social Affairs and Employment, and VU University Amsterdam); Tom Groot (VU University Amsterdam); Raymond Gradus (VU University Amsterdam)
    Abstract: Municipalities may have various motives for decisions on the mode of their task execution. Empirical studies – based on both public choice and transaction costs theory - have not yet provided a fully comprehensive explanation for municipal contracting out decisions. Therefore, we held interviews with Dutch municipal managers about the motives for the actual mode of service provision. This study provided the opportunity to investigate the relevance of motives on contracting out, to explore of additional motives and to test these statistically. As we find, municipalities do not regularly evaluate the service provision of their activities. Only in case of structural underperformance, municipalities consider a change of service provider, and then, the efficiency motive is most relevant. However, we conclude that institutional motives – as the stability of service provision - are relevant for contracting out decisions as well.
    Keywords: Contracting out; municipalities; institutional theory; motives
    JEL: L24
    Date: 2010–12–06
  26. By: Watanabe, Yuichi
    Abstract: This paper concerns the measurement of the impact of tax differentials across countries on inflow of Foreign Direct Investment (FDI) by using comprehensive data on the foreign operations of U.S. multinational corporations that has been collected by the Bureau of Economic Analysis (BEA), the U.S. Department of Commerce. In particular, this research focuses on examining: (1) how responsive FDI locations are to tax differentials across countries, (2) how different the tax effect on FDI inflow is between developed and developing countries, and (3) whether investment location decisions have become more or less sensitive to tax differences between countries over time ranging from the late 1990s to the early 2000s. Estimation results suggest that high rates of corporate income taxation are associated with reduced foreign assets of U.S. multinational firms in all industries by decreasing the return to foreign asset investment. Further, foreign assets of U.S. multinationals in all industries have become more responsive to non-income tax differentials across countries than to income tax differences from 1999 to 2004. Empirical estimates also indicate that foreign investment by American firms is associated with higher tax sensitivity more in developed countries than in those that are developing.
    Keywords: Developing countries, United States, Foreign investments, International business enterprises, Taxation, Tax differentials, FDI inflow, Developed/Developing countries, Income/Non-income taxation, Developed countries
    JEL: F21 F23 H25
    Date: 2010–12
  27. By: Hazama, Yasushi
    Abstract: Why is it that state-centered recognition of the public sphere has prevailed in Turkey during the last decade? The frame analysis of the “public sphere†discourse during the 2002-2009 period revealed that the contingency of the discourse on the Islamic headscarf issue discouraged an essential understanding of the authentic public sphere. Secularists framed the public sphere as a politically neutral arena that must be protected by the state. By contrast, pro-Islamists initially counter-framed the public sphere positively, in line with the Habermasian definition. Yet, in the face of stiff opposition from the secularists, the pro-Islamists came to adopt a negative counter-frame implying that the public sphere impinged on the freedom of wearing a headscarf. As a result, both the secularists’ and pro-Islamists’ frames entrenched the general recognition of the state-centered public sphere in Turkish society.
    Keywords: Turkey, Social problems, Social conditions, Public administration, Urban societies, Community, Public sphere, Discourse analysis
    Date: 2010
  28. By: Ellen R. McGrattan
    Abstract: Previous studies of the U.S. Great Depression find that increased taxation contributed little to either the dramatic downturn or the slow recovery. These studies include only one type of capital taxation: a business profits tax. The contribution is much greater when the analysis includes other types of capital taxes. A general equilibrium model extended to include taxes on dividends, property, capital stock, and excess and undistributed profits predicts patterns of output, investment, and hours worked more like those in the 1930s than found in earlier studies. The greatest effects come from the increased tax on corporate dividends.
    JEL: E13 E32 H25
    Date: 2010–12
  29. By: Martins, Pedro S. (Queen Mary, University of London)
    Abstract: Politicians can use the public sector to give jobs to cronies, at the expense of the efficiency of those organisations and general welfare. Motivated by a simple model of cronyism that predicts spikes in appointments to state-owned firms near elections, we regress 1980-2008 monthly hirings across all state-owned Portuguese firms on the country’s political cycle. In most specifications, we also consider private-sector firms as a control group. Consistent with the model, we find that public-sector appointments increase significantly over the months just before a new government takes office. Hirings also increase considerably just after elections but only if the new government is of a different political colour than its predecessor. These results also hold when conducting the analysis separately at different industries and most job levels, including less skilled positions. We find our evidence to be consistent with cronyism and politically-induced misallocation of public resources.
    Keywords: corruption, matched employer-employee panel data, public-sector employment
    JEL: J45 H11 J23
    Date: 2010–11
  30. By: Ministry of Health and Family Welfare
    Abstract: Health is a State subject and the Government of India has always tried to work in partnership with states to meet people's needs. As the report will indicate, it is through this partnership with constant monitoring and support that they have provided for increasing the out-patient cases, in-patient cases, institutional deliveries availability of drugs, diagnostic services, and full immunization through public health system.
    Keywords: state, monitoring, public health system, drugs, diagnostic services, immunzation, Health, Government, India, partnership, monitoring, institutional, people, patient,
    Date: 2010
  31. By: E. J. Bienenstock; P. Bonacich
    Date: 2010–12–10
  32. By: Lukasz Rawdanowicz
    Abstract: Turkey is recovering from its most severe recession in several decades. The massive contraction in GDP is largely explained by the unprecedented collapse in foreign demand, which was aggravated in Turkey by negative confidence effects and structural problems with competitiveness prior to the crisis. In contrast to previous recessions, Turkey could afford counter–cyclical polices and the financial markets proved resilient. During the crisis, the authorities cut interest rates significantly and promptly and implemented fiscal stimulus. This truly novel experience was possible thanks to a better macroeconomic position, a sounder monetary and fiscal policy framework, and better financial market regulations. The immediate policy challenge is to gradually remove policy stimulus and address medium–term stability considerations in a way that does not jeopardise the recovery. This paper relates to the 2010 OECD Economic Review of Turkey (<P>La crise 2008-09 dans la Turquie : La performance, les réponses politiques et défis pour le maintien de récupération<BR>La Turquie se remet de sa récession la plus grave depuis plusieurs décennies. La contraction massive du PIB s'explique en grande partie par l'effondrement sans précédent de la demande étrangère, qui a été aggravée par des effets de confiance négatives et des problèmes structurels de compétitivité avant la crise. Contrairement aux récessions précédentes, la Turquie a pu se permettre des politiques contra-cycliques et des marchés financiers ont bien résisté. Pendant la crise, les autorités ont pu rapidement et sensiblement réduit les taux d'intérêt et mis en oeuvre des mesures de relance budgétaire. Cette expérience a été vraiment nouvelle et elle a été possible grâce à une meilleure position macroéconomique, un cadre monétaire et budgétaire plus sain, et une meilleure réglementation des marchés financiers. Le défi immédiat de politique économique est de supprimer progressivement la politique de relance et de prendre en compte les considérations de stabilité à moyen terme de manière à ne pas compromettre la reprise. Ce document se rapporte à l’Étude économique de Turquie de l’OCDE, 2010, (
    Keywords: public finances, fiscal consolidation, Turkey, recession, counter-cyclical, outlook, finances publiques, perspectives, Turquie, assainissement budgétaire, récession, politique contre cyclique
    JEL: C11 C32 E5 E6
    Date: 2010–12–06
  33. By: Kubo, Koji; Nu Nu Lwin
    Abstract: This paper examines the effects of import duties on smuggling in Myanmar. Following Fisman and Wei (2004), the reporting discrepancies between Myanmar’s imports records and corresponding exports recorded by trading partners are regarded as indicative of smuggling. The paper studies whether reporting discrepancies differ across trading partners as well as across time. Our main findings are first, that the hike in import duties in June 2004 helped to widen the reporting discrepancies, which suggests smuggling for tax evasion purposes and second, that reporting discrepancies differ considerably across trading partners: land borders appear to be particularly attractive venues for smugglers.
    Keywords: Myanmar, Imports, Tariff, Smuggling, Myanmar (Burma), Tax evasion, Border trade
    JEL: F14 H26 K42 O17
    Date: 2010–10

This nep-pbe issue is ©2010 by Keunjae Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.