nep-pbe New Economics Papers
on Public Economics
Issue of 2011‒10‒01
five papers chosen by
Keunjae Lee
Pusan National University

  1. Income inequality, decentralisation and regional development in Western Europe By Vassilis Tselios; Andrés Rodríguez-Pose; Andy Pike; John Tomaney; Gianpiero Torrisi
  2. Global Tax Governance: Work in Progress? By Jan Wouters and Katrien Meuwissen
  3. The inequality effects of a dual income tax system By Peter J. Lambert and Thor O. Thoresen
  4. Effect of R&D Tax Credits for Small and Medium-sized Enterprises in Japan: Evidence from firm-level data By KOBAYASHI Yohei
  5. Macroeconomic Shocks and the Fiscal Stance within the EU: A Panel Regression Analysis By Dybczak, Kamil; Melecky, Martin

  1. By: Vassilis Tselios (University of Groningen); Andrés Rodríguez-Pose (IMDEA Social Sciences Institute); Andy Pike (Newcastle University); John Tomaney (Newcastle University); Gianpiero Torrisi (Newcastle University)
    Abstract: This paper deals with the relationship between decentralisation, regional economic development, and income inequality within regions. Using multiplicative interaction models and regionally aggregated microeconomic data for more than 100,000 individuals in the European Union (EU), it addresses two main questions. First, whether fiscal and political decentralisation in Western Europe has an effect on within regional interpersonal inequality. Second, whether this potential relationship is mediated by the level of economic development of the region. The results of the analysis show that greater fiscal decentralisation is associated with lower interpersonal income inequality, but as regional income rises, further decentralisation is connected to a lower decrease in inequality. This finding is robust to the measurement and definition of income inequality, as well as to the weighting of the spatial units by their population size.
    Keywords: Income inequality; income per capita; fiscal and political decentralization; interaction; regions; Europe
    Date: 2011–09–16
  2. By: Jan Wouters and Katrien Meuwissen
    Abstract: The international financial crisis which broke out in 2008 has had a major impact on fiscal sustainability of countries all over the world. Countries have responded with varying measures. Moreover, in the aftermath of the global financial crisis, international initiatives regarding tax governance have gained political momentum; various initiatives regarding fiscal policy have been taken at the global level, and several policies with implications for national tax policy and law are conducted at that level . Therefore, this paper will give an overview of the international tax initiatives at the level of the Group of Twenty (G-20), the Organization for Economic Cooperation and Development (OECD), the United Nations (UN), the International Monetary Fund (IMF) and the World Trade Organization (WTO). These international tax initiatives cannot be referred to as 'international tax law'. It would be more appropriate to see them as a hesitant beginning of a form of global tax governance''. This contribution will show that the unequivocal fiscal principle of ‘no taxation without representation’ poses an important challenge for the emergence of legitimate global tax governance, as most of the international initiatives lack an inclusive process. Whereas multiple international tax initiatives exist, we cannot yet discern the existence of globally effective tax governance.
    Date: 2011–05–15
  3. By: Peter J. Lambert and Thor O. Thoresen (Statistics Norway)
    Abstract: The overall inequality effects of a dual income tax (DIT) system, combining progressive taxation of labor income with proportional taxation of income from capital, are investigated. Simple examples show that correlations between distributions of wage and capital income, the degree of tax rate differentiation in the DIT, and reranking of tax-payers can be expected to complicate the analysis. We trace out what can be said definitively, obtaining sufficient conditions for unambiguous inequality reduction and identifying the nature of the implicit redistribution between labor and capital income which is involved, with the help of Norwegian income tax data.
    Keywords: Personal income tax; dual income tax; redistributive effect
    JEL: D31 D63 H31
    Date: 2011–09
  4. By: KOBAYASHI Yohei
    Abstract: Although numerous studies have evaluated the effect of tax credits on R&D, many have neglected the problem of selection bias. Furthermore, empirical studies have found that Japan's total factor productivity (TFP) growth has slowed since the 1990s, and Kim et al. (2010) have attributed this slowdown partly to low R&D expenditures among small and medium-sized enterprises (SME). Evidence suggests that enhancing R&D among small firms is essential for Japan's economic growth. This paper estimates the effect of R&D tax credits for SMEs using firm-level micro data from "The 2009 Basic Survey of Small and Medium Enterprises." We use the propensity score method introduced by Rubin (1974), in which recipients of tax credits are matched with the most similar non-recipients. Empirical results show that R&D tax credits induce an increase in SMEs' R&D expenditures. Moreover, we find that the effect of R&D tax credits on liquidity-constrained firms is much greater than on firms without liquidity constraints.
    Date: 2011–09
  5. By: Dybczak, Kamil; Melecky, Martin
    Abstract: The recent global financial crisis has had a diverse effect on countries’ fiscal stance, especially throughout the EU. This paper examines the impact of macroeconomic shocks, including those to government revenues and expenditures, on EU countries’ fiscal stance, on aggregate, and within the EU’s sub-regions as defined by the length of countries’ membership in the EU and their level of indebtedness. The fiscal stance is measured by means of the government deficit, and the impact of macroeconomic shocks is examined using impulse responses from a structural vector autoregression (SVAR) model estimated on annual panel data. The analyzed system of macroeconomic variables includes, government revenues and expenditures, GDP growth, CPI inflation, the interest rate, the terms of trade, and the real effective exchange rate. The paper discusses the policy implications and the challenges for the EU and its sub-regions concerning the fiscal policy setting and balanced fiscal stance.
    Keywords: Macroeconomic shocks; Fiscal Stance; European Union; Panel Data Analysis; Structural Vector Autoregression Models
    JEL: E62 H68 E37
    Date: 2011–09

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