nep-pbe New Economics Papers
on Public Economics
Issue of 2011‒06‒25
four papers chosen by
Keunjae Lee
Pusan National University

  1. The optimal decentralization of public input provision for private producation By Clément Carbonnier
  2. Fiscal Decentralization, Redistribution and Growth By Bilin Neyapti; Zeynep Burcu Bulut-Cevik
  3. Fiscal capacity and government accountability in sub-Saharan Africa By Baskaran, Thushyanthan; Bigsten, Arne
  4. Inequality and Public Policy: A Country Study for Bulgaria By Silviya Nikolova; Nikolay Markov; Boyko Nikolov; Nasko Dochev

  1. By: Clément Carbonnier (THEMA, Universite de Cergy-Pontoise)
    Abstract: This article presents a model of optimal decentralization of economic governance. It focuses on the provision of public input for private production. It considers that the decision power is given to a local government if it has the full right to decide new investments and new taxes to finance it. Three economic forces act on this optimal decentralization of the decision. First is the centripetal force which consists in the increasing accuracy and relevance of public investments when decided more locally. The second and third are the centrifugal forces of the administrative costs on the one hand and of the fiscal competition among decentralized jurisdictions on the other. Formal proofs of the existence and uniqueness of solutions are given under special hypotheses and in general. Numerical analysis is also done to understand the impact on the optimal decentralization level of the different model parameters.
    Keywords: Decentralization, Corporate taxes, Tax competition, Public input, Firm location
    JEL: H25 H72 R12 R51 R53
    Date: 2011
  2. By: Bilin Neyapti (Bilkent University); Zeynep Burcu Bulut-Cevik (METU)
    Abstract: This paper analyzes the welfare implications of a transfer mechanism in a fiscally decentralized economy where local governments select their tax collection effort to maximize their lifetime utility. We consider a transfer rule that both punishes for the lack of efficiency in tax-collection and compensates for the deviation of pre-tax or transfer income from a target level; in addition, a portion of transfers is considered to be directed towards investment. Simulations of the model’s optimal solution reveal that increasing punishment always results in increased steady state effort, despite the disincentives that increasing income compensation or directed investment may generate. Increasing punishment also improves capital accumulation the lower the rate of directed investments and the lower the tax rate. Further, efficiency in tax collection is achieved the lower the rate of directed investment and the higher the punishment rate.
    Keywords: Fiscal decentralization, redistribution
    JEL: E62 H71 O23
    Date: 2011–06
  3. By: Baskaran, Thushyanthan (Department of Economics, School of Business, Economics and Law, Göteborg University); Bigsten, Arne (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Historical evidence from the developed world suggests that the expansion of the mod- ern states’ fiscal capacity (i. e. its ability to tax citizens) eventually led to more democratic and less corrupt governments. Since sub-Saharan African countries are currently in a pro- cess of state building, we study whether a positive effect of fiscal capacity on government accountability prevails in contemporaneous sub-Saharan Africa, too. We conduct the em- pirical analysis with data covering 23 African countries over the 1960-2008 period. The results suggest that fiscal capacity increases government accountability in sub-Saharan Africa.
    Keywords: Fiscal capacity; taxation; government accountability; democracy
    JEL: H20 O23 P14
    Date: 2011–06–15
  4. By: Silviya Nikolova; Nikolay Markov; Boyko Nikolov; Nasko Dochev
    Abstract: This paper is an attempt for measuring the impact of public policy on the inequality in Bulgaria. An analysis based on the Bulgarian Household Budget Surveys shows that the tax burden in Bulgaria, nevertheless increasing in the upper quintiles, declined between the beginning of the transition period and the year before the EU accession. Using different inequality measures we have found that despite the limited possibilities of the data, taxation policies also contribute to some extend to inequality reduction in Bulgaria. As regards the social transfers, unemployment benefits and child allowances are found to be the main social payments reducing the inequality among Bulgarian households. Using quantile regression is found that the coefficients of the effective tax rates increase across the quintiles for the entire period. The coefficients associated with the share of VAT expenditures in the total income decrease as one moves from the lowest to the highest quintile of the consumption distribution.
    Date: 2011–05

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