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on Public Economics |
| By: | Liutang Gong (Guanghua School of Management, Peking University; Institute for Advanced Study, Wuhan University); Heng-fu Zou (Guanghua School of Management, Peking University; Institute for Advanced Study, Wuhan University; Development Research Group, The World Bank) |
| Abstract: | This paper extends the Barro (1990) growth model with one aggregate government spending and one flat income tax to include federal and local public consumption, federal and local public capital formation, federal and local taxes, and federal transfers to locality. It derives the rate of endogenous growth and examines how the growth rate and welfare respond to changes in federal taxes, local taxes, and federal transfers. |
| Keywords: | Fiscal federalism, Public expenditures, Public capital, Taxes, Federal transfers, Endogenous growth |
| JEL: | E0 G1 H0 O0 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:488&r=pbe |
| By: | Qian Wang (School of Public & Environmental Affairs (SPEA) Indiana University Bloomington); Chunli Shen (Central University of Finance and Economics); Heng-fu Zou (Shenzhen University, Wuhan University and Central University of Finance and Economics) |
| Abstract: | This paper aims to enhance the understanding of provincial tax performance in China, paying special attention to the recent fiscal reforms in the 1980s and in 1994. Using provincial panel data for the period 1986-2004, our analysis consists of two steps. First, a combined fixed time effects and random provincial effects model is used to analyze the statistical relationship between the tax share in GDP and economic and demographic variables. Results indicate that the decentralized fiscal system over the period 1986¨C1993 has had a positive impact on the tax share in GDP, whereas the recentralized fiscal system in the period 1994-2004 has had a negative impact. Second, provincial tax effort indices are calculated to estimate potential room for additional taxation. The findings from the analysis have important policy implications on the redistribution of fiscal resources as well as on the effectiveness of the tax administration. |
| Keywords: | Tax effort, Tax capacity, Fiscal reforms, Fiscal decentralization |
| JEL: | H20 H71 C23 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:483&r=pbe |
| By: | Bargain, Olivier (University College Dublin); Dolls, Mathias (University of Cologne); Immervoll, Herwig (World Bank); Neumann, Dirk (University of Cologne); Peichl, Andreas (IZA); Pestel, Nico (IZA); Siegloch, Sebastian (IZA) |
| Abstract: | We assess the effects of U.S. tax policy reforms on inequality by applying a new decomposition method that allows us to disentangle mechanical effects due to changes in pre-tax incomes from direct effects of policy reforms. While tax reforms implemented under Democrat administrations, in particular the EITC reforms in the 1990s and the ARRA in 2009, had an equalizing effect at the lower half of the distribution, the disequalizing effects of Republican reforms are due to tax cuts for high-income families. As a consequence of partisan politics, overall policy effects almost cancel out over the whole time period. |
| Keywords: | tax policy, inequality, redistribution, political economy, Great Recession |
| JEL: | H23 H31 H53 P16 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5910&r=pbe |
| By: | Jacob, Martin (Uppsala Center for Fiscal Studies) |
| Abstract: | This paper analyzes the effects of progressive versus proportional taxation on capital gains realization behavior. Using a comprehensive panel of over 230,000 individuals in Sweden for 1973-1996, this paper shows after progressive capital gains taxes were cut from over 80% in the 1980s to a proportional tax rate of 30% in 1991, especially high-income taxpayers increased capital gains realizations. The reaction to the introduction of the proportional capital gains tax rate is more pronounced among younger individuals. This paper also shows that under a progressive (proportional) tax regime, investors with excess income are less (more) likely to realize capital gains than individuals with liquidity constraints. Hence, proportional versus progressive taxation plays an important role in capital gains realizations of private investors. |
| Keywords: | Capital Gains Tax; Proportional Tax; Progressive Tax; Top Incomes; Life-Cycle |
| JEL: | D14 D31 H20 H24 |
| Date: | 2011–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2011_009&r=pbe |
| By: | Nese Erbil |
| Abstract: | This paper examines the cyclicality of fiscal behavior in 28 developing oil-producing countries (OPCs) during 1990-2009. After testing five fiscal measures - government expenditure, consumption, investment, non-oil revenue, and non-oil primary balance - and correcting for reverse causality between non-oil output and fiscal variables, the results suggest that all of the five fiscal variables are strongly procyclical in the full sample. Also, the results are not uniform across income groups: expenditure is procyclical in the low and middle-income countries, while it is countercyclical in the high-income countries. Fiscal policy tends to be affected by the external financing constraints in the middle- and high-income groups. However, the quality of institutions and political structure appear to be more significant for the low-income group. |
| Keywords: | Business cycles , Cross country analysis , Developing countries , Economic models , Fiscal policy , Government expenditures , Nonoil sector , Oil producing countries , Oil revenues , |
| Date: | 2011–07–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/171&r=pbe |
| By: | Victor Duarte Lledo; Marcos Poplawski-Ribeiro |
| Abstract: | This paper investigates economic, political, and institutional constraints to fiscal policy implementation in sub-saharan Africa. We find that planned fiscal adjustments or expansions are less likely to be implemented the larger they are, the more inaccurate the growth forecasts they are based on, the more fragile the regulatory system in the country, and the weaker the institutions framing the design, approval, and execution of the budget. The findings support ongoing efforts in the region to improve the quality and timeliness of economic data; enhance forecasting capacity; adopt realistic fiscal plans; and strengthen governance, budgetary institutions, and public financial management procedures. |
| Keywords: | Budgets , Cross country analysis , Economic models , Fiscal policy , Government expenditures , Revenues , Sub-Saharan Africa , |
| Date: | 2011–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/172&r=pbe |
| By: | Verónica Amarante (Instituto de Economía, Facultad de Ciencias Económicas y de Administración, Universidad de la República); Marisa Bucheli (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Cecilia Olivieri (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Ivone Perazzo (Instituto de Economía, Facultad de Ciencias Económicas y de Administración, Universidad de la República) |
| Abstract: | This article considers the distributional impact of different changes in Uruguayan tax system, using a static micro-simulation framework based on the combination of data from household and expenditure surveys. On the indirect taxes side, we consider two alternatives that imply the same reduction in tax revenue: a general reduction of 2 points in the VAT basic rate, and a selective reduction in the VAT rate applied to specific goods that make up a large share of consumption of low income population. In relation to direct taxes, we consider the effects of increasing the upper limit of the tax free zone of the labor component of the dual income tax. We analyze separately the impact of each of these changes, and we also simulate a joint scenario including changes in direct and indirect taxes. Our results indicate that redistribution through the analyzed modifications in direct and indirect taxes in Uruguay is limited. |
| Keywords: | Retail; fiscal redistribution, income inequality, taxes |
| JEL: | D31 H23 H20 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:ude:wpaper:0911&r=pbe |
| By: | Loayza, Norman V.; Rigolini, Jamele; Calvo-Gonzalez, Oscar |
| Abstract: | In the past three decades, emerging countries have gone through extensive decentralization reforms. Yet, there are no studies assessing quantitatively the relative importance of various factors known to affect the success of decentralization. This paper builds on a comprehensive dataset the authors constructed for Peru, which merges municipal fiscal accounts with information about municipalities'characteristics such as population, poverty, education, and local politics. The paper then analyzes the leading factors affecting the ability of municipalities to execute the allocated budget using complementary methodologies, from least squares to quantile regression analyses. According to the existing literature and the Peruvian context, the analysis divides these factors into four categories: the budget size and allocation process; local capacity; local needs; and political economy constraints. Although all four factors affect decentralization, the largest determinant of spending ability is the adequacy of the budget with respect to local capacity. The results confirm the need for decentralization to be implemented gradually over time in parallel with strong capacity building efforts. |
| Keywords: | Public Sector Expenditure Policy,Subnational Economic Development,Debt Markets,Political Economy,Municipal Financial Management |
| Date: | 2011–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5763&r=pbe |
| By: | Bossi, Luca (University of Pennsylvania); Gumus, Gulcin (Florida Atlantic University) |
| Abstract: | In this paper, we set up a three-period stochastic overlapping generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility. |
| Keywords: | redistribution, mobility, inequality, structure induced equilibrium |
| JEL: | D72 H53 H55 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5909&r=pbe |