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on Public Economics |
| By: | Stephen Calabrese; Dennis N. Epple; Richard Romano |
| Abstract: | We examine the welfare effects of provision of local public goods in an empirically relevant setting using a multi-community model with mobile and heterogeneous households, and with flexible housing supplies. We characterize the first-best allocation and show efficiency can be implemented with decentralization using head taxes. We calibrate the model and compare welfare in property-tax equilibria, both decentralized and centralized, to the efficient allocation. Inefficiencies with decentralization and property taxation are large, dissipating most if not all the potential welfare gains that efficient decentralization could achieve. In property tax equilibrium centralization is frequently more efficient! An externality in community choice underlies the failure to achieve efficiency with decentralization and property taxes: Poorer households crowd richer communities and free ride by consuming relatively little housing thereby avoiding taxes. |
| JEL: | H1 H4 H7 H73 R1 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17251&r=pbe |
| By: | Castanheira, Micael; Nicodème, Gaëtan; Profeta, Paola |
| Abstract: | There is often a gap between the prescriptions of an “optimal” tax system and actual tax systems, some of which can be neither efficient economically nor efficient at redistributing income. With a focus on personal income taxes, this paper reviews the political economics literature on tax systems and reforms to see whether political mechanisms allow us to better understand why tax systems look the way they look. Finally, we exploit a database of reforms in labour taxation in the European Union to check the determinants of all reforms, on the one hand, and of targeted reforms, on the other hand. The results fit well with political economy theories and show that political variables carry more weight in triggering reforms than economic variables. This shed light on whether and how tax reforms are achievable. It also explains why many reforms that seem economically optimal fail to be implemented. |
| Keywords: | personal income tax; political economy; taxation |
| JEL: | H11 H21 H24 P16 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8507&r=pbe |
| By: | Bönke, Timm; Jochimsen, Beate; Schröder, Carsten |
| Abstract: | Under cooperative federalism, when an identical tax tariff applies to all regions of a federation, usually redistribution rules are implemented to smooth fiscal differences. The administration of tax collection, however, is sometimes delegated to the regional level, leaving the regional administrations some discretion concerning the auditing of tax returns. Building on a stylized model, we show that under such conditions granted discretionary tax deductions at the level of tax units is positively related to state-specific marginal rates of loss (MRL), i.e., the fraction of an additional tax Euro raised in a region that the fiscal-equalization system redistributes to other jurisdictions. We empirically test the model's presumption using administrative income-tax micro data from Germany. Regression estimates comply with the implications of our model. -- |
| Keywords: | Fiscal federalism,rate of loss,income tax returns |
| JEL: | C21 H21 H77 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cauewp:201106&r=pbe |
| By: | Libman, Alexander; Schultz, André; Graeber, Thomas |
| Abstract: | The accuracy of a tax return is usually interpreted as an outcome of the tax evasion decision by an individual. However, in non-democratic regimes with predatory blackmail tax systems it is possible that large sums voluntarily reported by influential politicians or businessmen may be used as political statements. By openly acknowledging one's personal income an individual can signal the strength of one's position, or, on the contrary, the submissiveness to the political leadership. In this paper we explore the idea of the tax return as a political statement and test it using a unique dataset of the tax returns filed by the Russian regional governors and the members of their families for the year 2009. Our results conjecture that Russian governors may deliberately file their tax return as a political statement to signal their strength vis-à-vis the central government. -- |
| Keywords: | tax compliance,communication in non-democracies,Russian regions |
| JEL: | D73 D78 H26 P26 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fsfmwp:169&r=pbe |
| By: | Bargain, Olivier; Dolls, Mathias; Neumann, Dirk; Peichl, Andreas; Siegloch, Sebastian |
| Abstract: | Whether observed differences in redistributive policies across countries are the result of differences in social preferences or efficiency constraints is an important question that paves the debate about the optimality of welfare regimes. To shed new light on this question, we estimate labor supply elasticities on microdata and adopt an inverted optimal tax approach to characterize the redistributive preferences embodied in the welfare systems of 17 EU countries and the US. Implicit social welfare functions are broadly compatible with the fiction of an optimizing Paretian social planner. Some exceptions due to generous demogrant transfers are consistent with the ignorance of behavioral responses by some European governments and are partly corrected by recent policy developments. Heterogeneity in leisure-consumption preferences somewhat affect the international comparison in degrees of revealed inequality aversion, but differences in social preferences are significant only between broad groups of countries. |
| Date: | 2011–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em2-11&r=pbe |
| By: | Grigoli, Francesco |
| Abstract: | This paper investigates the impact of institutional quality on public investment levels over the period 1984-2008. Moreover, it studies how the volatility of public investment and the quality of infrastructure are affected by institutional quality, and explores the contribution of other critical factors. The findings suggest an inverse relationship between public investment levels and institutional quality, supporting the idea that governments use public investment as a vehicle for rent-seeking or to compensate for the fall in private investment due to the poor business environment. In addition, aid flows, revenues and abundance of natural resources contribute positively to the level of capital spending. The author also finds that high volatility of public investment is associated with a lower quality of governance. An increase in revenues is associated with a reduction in the volatility of capital spending, suggesting that proper macroeconomic management smoothes the investment cycle. Finally, the paper provides some tentative evidence of a positive relationship between institutional quality and the quality of infrastructure. |
| Keywords: | Investment and Investment Climate,Debt Markets,Non Bank Financial Institutions,Public Sector Economics,Emerging Markets |
| Date: | 2011–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5735&r=pbe |
| By: | Duha T. Altindag; Junyue Xu |
| Abstract: | This paper demonstrates that institutional factors influence the subjective well-being of individuals differently in rich versus poor countries. A lower level of corruption, a more democratic government and better civil rights increase the well-being of individuals in rich countries, whereas an increase in per capita income has no impact. On the contrary, in poor countries the extent of corruption, democracy and civil rights has no influence on happiness, but an increase in per capita income impacts happiness positively. This stark contrast may be due to the difference of preferences over income and institutional factors. |
| Keywords: | Economic Development; Happiness; Subjective Well-Being; Institutions |
| JEL: | I31 D60 D73 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2011-08&r=pbe |