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on Public Economics |
| By: | Alessandro Innocenti; Chiara Rapallini |
| Abstract: | This paper provides laboratory evidence on the efficiency-enhancing properties of the Tiebout model as a decentralized system of public goods provision. Tiebout (1956) shows that if a sufficient number of local communities exist to accommodate different types of preferences, individuals sort themselves in a way that provides an efficient allocation of public goods and taxes. Our experiment aims to disentangle the effect of voting participation and is composed of two treatments. In the non-participation treatment, local public good provision is chosen by only one subject, while the other members of the community can only stay in or move to another community. In the participation treatment, all the community members have the right to vote as well as to move to another community and collective decisions are taken by majority rule. Our findings show that social welfare is greater in the participation than in the non-participation treatment. We conclude that voting with one’s feet increases efficiency if all the community members vote and that the influence of voting participation on the allocation of local public goods should be taken into account to assess the viability of the Tiebout model. |
| Keywords: | Tiebout model, local public goods, voting participation, federalism, experiment. |
| JEL: | C91 H41 C92 D23 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:usi:labsit:036&r=pbe |
| By: | Kirill Borissov; Alexander Surkov |
| Abstract: | We consider a Barro-type endogenous growth model in which the government's purchases of goods and services enter into the production function. The provision of government services is financed by flat-rate (linear) income or lump-sum taxes. It is assumed that individuals differing in their discount factors vote on the tax rates. We propose a concept of voting equilibrium leading to some versions of the median voter theorem for steady-state equilibria, fully characterize steady-state equilibria and show that if the median voter discount factor is sufficiently low, the long-run rate of growth in the case of flat-rate income taxation is higher than that in the case of lump-sum taxation. |
| Keywords: | economic growth, taxation, voting |
| JEL: | O40 D91 H21 H24 H31 P16 |
| Date: | 2010–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:eus:wpaper:ec0110&r=pbe |
| By: | Jacob Goldin (Princeton University); Tatiana Homonoff (Princeton University) |
| Abstract: | Recent work suggests that consumers respond differently to taxes that are included in a good’s posted price and taxes that are added upon checking out at the register. This paper investigates how the government’s choice between these posted and register taxes affects the distribution of a tax’s burden. We show that when high- and low-income consumers differ in their attentiveness to register taxes, policymakers can lessen a tax’s regressivity by manipulating the fraction of a tax that is added at the register. We then turn to the case of cigarettes, and investigate whether high- and low-income consumers do in fact differ in their attentiveness to register taxes on that good. To answer that question, we link state and time variation in cigarette excise and sales tax rates to survey data about cigarette consumption from the Behavioral Risk Factor Surveillance System. Whereas both high- and low-income consumers respond to cigarette excise taxes (which appear in the posted price), we find that only low-income consumers respond to sales taxes on cigarettes (which are added at the register). Our results suggest that policymakers can ease the financial burden of cigarette taxes on the poor by levying such taxes at the register instead of including them in the cigarette’s posted price. |
| Keywords: | cigarette taxes, tax burden, smokers, consumer habits |
| JEL: | D12 D19 H25 I18 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:pri:indrel:1278&r=pbe |
| By: | Markus Brückner (School of Economics, University of Adelaide) |
| Abstract: | Consistent estimation of the tax revenue elasticity is complicated by the endogenous response of GDP to changes in tax rates and measurement error in national accounts statistics. This paper exploits the significant response of real GDP growth of Sub-Saharan African countries to exogenous international commodity price and rainfall shocks to construct instrumental variables estimates of the tax revenue elasticity parameter. IV estimates yield that a 1 percent increase in GDP increases tax revenues by up to 2.5 percent. IV estimates therefore point to large responses in the tax revenues collected by Sub-Saharan African governments. |
| Keywords: | tax revenues, growth, instrumental variables |
| JEL: | E62 H20 H60 O55 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:adl:wpaper:2011-09&r=pbe |
| By: | Claudine Desrieux; Eshien Chong; Stéphane Saussier |
| Abstract: | The provision of local public services is increasingly being contracted out to private companies. We observe that local governments regularly choose the same private operator for a range of different services, and develop a model of relational contracts that shows how this strategy may lead to better performance at lower cost for public authorities. We test the implication of our model using an original database of the contractual choices made by 5000 French local public authorities in the years 1998, 2001 and 2004. |
| Keywords: | bundling; contract; public-private partnerships; local public services |
| Date: | 2010–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/86&r=pbe |
| By: | Karin Mayr |
| Abstract: | This paper develops a model to analyze the effects of immigration by skill on the outcome of a majority vote among natives on both the size as well as the composition of public spending. Public spending can be of two types, spending on rival goods (transfers) and on non-rival goods (public goods). I find that relative preferences for the different types of public spending are crucial for the effects of immigration. In particular, immigrants of either skill can increase (decrease) the size of total public spending, if natives have a relative preference for spendingon public goods (spending on transfers). I provide some illustration of potential relative spending preferences in OECD countries using panel data for 1980 - 2010. |
| JEL: | F2 H4 H5 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:1101&r=pbe |
| By: | Manos Matsaganis (Athens University of Economics and Business) |
| Abstract: | This paper attempts to contribute to the analysis of mortgage interest tax relief from the perspective of the economics of social policy. It begins with a brief discussion of �fiscal welfare�, highlighting key contributions within this particular intellectual tradition. It then contrasts this largely critical approach to the standard, more neutral, treatment of mortgage interest tax relief in the housing literature. Finally, the paper draws on both approaches to present on-going research on the distributional effects of mortgage interest tax relief in Europe. |
| Date: | 2011–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:aue:wpaper:1105&r=pbe |
| By: | Dreßler, Daniel; Overesch, Michael |
| Abstract: | We analyze the impact of tax loss treatment on the size and structure of multinational investments. Basically, two effects of tax loss treatment can be expected. First, firms make their investment decisions in the face of potential future losses. Then, the various types of conceivable loss offset provisions affect investment decisions. Secondly, existing loss carryforwards resulting from losses in the past affect the tax rate-elasticity of current investment decisions. The empirical analysis is based on data of German multinationals. The data is taken from the MiDi database provided by the German Central Bank (Deutsche Bundesbank). Regarding the tax loss treatment of potential future losses, our regression results suggest that a short carryforward time limit lowers investments in industries having a high probability to make losses. Moreover, we find significant positive effects of group loss offsetting provisions on the size of investments and on the number of subsidiaries they are structured across. Concerning the effects of existing losses carried forward, we find a reduced tax rate elasticity of investments for companies shielded by existing losses. -- |
| Keywords: | Corporate Taxation,Loss Treatment,Group Taxation,Multinational Firms,Empirical Analysis |
| JEL: | F23 H25 H32 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:10097&r=pbe |
| By: | Daniel Albalate (Department of Economic Policy, Universitat de Barcelona, Avinguda Diagonal 690, 08034 Barcelona, Spain.); Germà Bel (Department of Economic Policy, Universitat de Barcelona, Avinguda Diagonal 690, 08034 Barcelona, Spain.); Xavier Fageda (Department of Economic Policy, Universitat de Barcelona, Avinguda Diagonal 690, 08034 Barcelona, Spain.) |
| Abstract: | The dilemma efficiency versus equity, together with political partisan interests, has received increasing attention to explain the territorial allocation of investments. However, centralization intended to introduce or reinforce hierarchization in the political system has not been object as of now of empirical analysis. Our main contribution to the literature is providing evidence that meta-political objectives related to the ordering of political power and administration influence regional investment. In this way, we find evidence that network mode’s (roads and railways) investment programs are influenced by the centralization strategy of investing near to the political capital, while investment effort in no-network modes (airports and ports) appears to be positively related to distance. Since investment in surface transportation infrastructures is much higher than that in airports and ports, and taken into account that regions surrounding the political capital are poorer than the average, we suggest that centralization rather than redistribution has been the driver for the concentration of public investment on these regions. |
| Keywords: | Investment, infrastructures, centralization, redistribution |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:xrp:wpaper:xreap2010-15&r=pbe |
| By: | Nikolaj A. Harmon (Princeton University) |
| Abstract: | Over the last several decades global migration ows have increased rapidly, resulting in corresponding increases in the number and sizes of ethnic minorities in many places - Western Europe in particular. Given the existing theory and evidence of a negative relationship between ethnic diversity and public goods, a simple extrapolation thus suggests that the large public sectors in Western Europe will shrink. However, stark differences in the histories of ethnic confl ict, quality of institutions and timing between the European case and the settings studied in the existing literature raises concerns that such an extrapolation might be misguided. Using data on municipal elections and budgetary outcomes in Danish municipalities 1981-2001 this paper attempts to address these concerns. Employing a rich set of controls and an IV strategy based on historical housing data, the main results of the paper show that ethnic diversity has impacted outcomes of municipal elections in a way consistent with lower public good demand. Using a simple theoretical model to disentangle ethnic diversity effects from other budgetary effects, the paper further shows that the same holds true for budgetary outcomes, although an untestable but plausible auxiliary assumption is required on the budgetary process. The findings have important implications for immigration and refugee policy both in Europe and more broadly. |
| Keywords: | migration, Denmark, elections, ethnic relations |
| JEL: | J18 J15 O15 N94 N34 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:pri:indrel:1277&r=pbe |
| By: | Céline Ferré (World Bank); Francisco H.G. Ferreira (World Bank); Peter Lanjouw (World Bank) |
| Abstract: | This paper provides evidence from eight developing countries of an inverse relationship between poverty and city size. Poverty is both more widespread and deeper in very small and small towns than in large or very large cities. This basic pattern is generally robust to choice of poverty line. The paper shows, further, that for all eight countries, a majority of the urban poor live in medium, small, or very small towns. Moreover, it is shown that the greater incidence and severity of consumption poverty in smaller towns is generally compounded by similarly greater deprivation in terms of access to basic infrastructure services, such as electricity, heating gas, sewerage, and solid waste disposal. The authors illustrate for one country—Morocco—that inequality within large cities is not driven by a severe dichotomy between slum dwellers and others. The notion of a single cleavage between slum residents and well-to-do burghers as the driver of urban inequality in the developing world thus appears to be unsubstantiated—at least in this case. Robustness checks are performed to assess whether the findings in the paper are driven by price variation across city-size categories, by the reliance on an income-based concept of well-being, and by the application of small area estimation techniques for estimating poverty rates at the town and city level. |
| Keywords: | poverty and city size, urban poverty, slums. |
| JEL: | I32 O18 R20 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2011-192&r=pbe |
| By: | Arzu Yavuz |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:1103&r=pbe |
| By: | SARRACINO Francesco |
| Abstract: | The worrying decline of social capital (Putnam, 2000) and the disappointing trends of subjective well-being (Easterlin, 1974) raise urgent questions for modern societies: is the erosion of social capital a general feature of western societies or is it rather a characteristic aspect of the American one? Is there a relationship between the trends of social capital and subjective well-being? The available evidence suggests that two of the richest countries in the world, US and Great Britain, are following negative and considerably different trends of social capital and subjective well-being than other western societies. Present work provides further evidence focusing on Luxembourg. This country is characterized by peculiar economic and social conditions: it is the country with the highest GDP per capita in the world, more than 40% of its population is composed by immigrants and about 50% of its labor force is composed by cross-borders. All these elements raise strives and tensions which are common to many European countries making Luxembourg an interesting case of study. Main results of the present research are the following: 1. the erosion of social capital is not a legacy of the richest countries in the world; 2. between 1999 and 2008, people in Luxembourg experienced a substantial increase in almost every proxy of social capital; 3. both endowments and trends of social capital and subjective well-being differ significantly within the population. Migrants participate less in social relationships and report lower levels of well-being; 4. the positive relationship between trends of subjective well-being and social capital found in previous literature is confirmed. |
| Keywords: | subjective well-being; social capital; relational goods; Easterlin paradox; time-series; economic development; EVS; WVS |
| JEL: | D60 I31 O10 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:irs:cepswp:2011-01&r=pbe |