nep-pbe New Economics Papers
on Public Economics
Issue of 2011‒12‒13
twenty papers chosen by
Keunjae Lee
Pusan National University

  1. Alleged Tax Competition: The Mysterious Death of Bequest Taxes in Switzerland By Brülhart, Marius; Parchet, Raphaël
  2. Income inequality, regional disparities and fiscal decentralization in industrialized countries By Agnese Sacchi; Simone Salotti
  3. Tax decentralization and public deficits in OECD countries By Baskaran, Thushyanthan
  4. Capital Income Taxation and Progressivity in a Global Economy By Rosanne Altshuler; Benjamin Harris; Eric Toder
  5. The Marginal Cost of Public Funds and Tax Reform in Africa. By Auriol, Emmanuelle; Warlters, Michael
  6. Fiscal Prospects and Reforms in India By Richard Herd; Sam Hill; Vincent Koen
  7. Earmarked Taxation for Financing Public Investments Projects By Lisa Grazzini; Alessandro Petretto
  8. Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities By Thomas Piketty; Emmanuel Saez; Stefanie Stantcheva
  9. Getting Back on Track: Restoring Fiscal Sustainability in Ireland By David Haugh
  10. Tax Evasion and Presumptive Taxation Methods. A Case Study in Italy: Sector Studies By Giuseppe Pulina
  11. Desperately Seeking Revenue By Rosanne Altshuler; Katherine Lim; Roberton Williams
  12. Institutions and Public Sector Performance: Empirical Analyses of Revenue Forecasting and Spatial Administrative Structures By Kauder, Björn
  13. Quality of tax administration : how relevant is country size ? By Amin, Mohammad
  14. Understanding U.S. Corporate Tax Losses By Rosanne Altshuler; Alan Auerbach; Michael Cooper; Matthew Knittel
  15. Sacrifice and Efficiency of the Income Tax Schedule By E. da Costa, Carlos; N. Pereira, Thiago
  16. A Political Economy Theory of Government Debt and Social Security By Ryo Arawatari; Tetsuo Ono
  17. Fiscal Consolidation in America: The Policy Options By Rosanne Altshuler; Barry Bosworth
  18. Economic performance and government size By António Afonso; João Tovar Jalles
  19. How does income inequality affect cooperation and punishment in public good settings? By Sebastian Prediger
  20. Decentralization, happiness and the perception of institutions By Díaz Serrano, Lluís; Rodríguez Pose, Andrés

  1. By: Brülhart, Marius; Parchet, Raphaël
    Abstract: Interjurisdictional competition over mobile tax bases is an easily understood mechanism, but actual tax-base elasticities are difficult to estimate. Political pressure for reducing tax rates could therefore be based on erroneous estimates of the mobility of tax bases. We show that tax competition provided the most prominent argument in the policy debates leading to a succession of reforms of bequest taxation by Swiss cantons. Yet, we find only very weak statistical evidence of a relationship between tax burdens on bequests and the concerned tax base of wealthy elderly individuals. Moreover, bequest tax revenues are found to increase in bequest tax rates even in the long run, and we cannot reject the hypothesis that the elasticity of bequest tax revenue with respect to the average bequest tax rate is equal to one. The alleged pressures of tax competition did not seem in reality to exist.
    Keywords: bequest taxation; fiscal federalism; tax competition
    JEL: H3 H7
    Date: 2011–11
  2. By: Agnese Sacchi; Simone Salotti
    Abstract: In this paper we investigate the interactions among fiscal decentralization, income inequality and regional disparities, using a sample of 23 OECD countries over the period 1971-2000. We first explore the effects of fiscal decentralization on overall income inequality. We then test whether regional economic disparities influence the fiscal decentralization process. We use novel and robust measures of fiscal decentralization based on differences in the degree of both expenditure and tax autonomy. We also conduct several robustness checks to tackle the potential endogeneity and reverse causality issues. Our results highlight the importance both of the nature of fiscal decentralization – expenditure versus taxation – and of the extent to which responsibility and decision powers are really left to subcentral governaments. While a higher degree of tax decentralization is associated with higher overall income inequality within a country, high regional disparities seem to be correlated with lower expenditure decentralization.
    Keywords: tax decentralization, expenditure decentralization,regional economic disparities
    JEL: H70 H77 D31 R12
    Date: 2011–12
  3. By: Baskaran, Thushyanthan
    Abstract: This article explores the effect of sub-national tax autonomy and sub-national control over shared taxes on primary deficits with panel data for 23 OECD countries over the 1975-2000 period. The results suggest that sub-national tax autonomy has a U-shaped effect on primary deficits. We find that the “average” country in the sample could increase the fiscal stability of its public sector by reducing sub-national tax autonomy. There is also some indication that subnational control over shared taxes increases fiscal stability, but we obtain this result only if Belgium and Spain are included in the sample.
    Keywords: Tax decentralization; Public deficits; Fiscal instability
    JEL: H77 H72 H74
    Date: 2011
  4. By: Rosanne Altshuler (Rutgers University, Department of Economics); Benjamin Harris (Brookings Institution); Eric Toder (Urban-Brookings Tax Policy Center)
    Abstract: The increase in international capital mobility over the past two decades has put pressure on the tax treatment of corporate equity income. Corporate-level taxes distort investment flows across locations and create opportunities for tax avoidance by shifting income across jurisdictions. Outward flows of capital shift part of the burden of the corporate-level tax on equity income from capital to labor, thereby making its incidence less progressive. Individual-level taxes on corporate equity income lower the after-tax return to savings but have less distorting effects on investment location and are more likely to fall on owners of capital than workers. This logic suggests there may be both efficiency gains and increases in progressivity from shifting taxes on corporate equity income from the corporate to the shareholder level. We estimate the distributional effects of a tax reform that raises shareholder-level taxes on corporate equity income and uses the revenue to cut the corporate tax rate. We find that taxing capital gains and dividends as ordinary income (subject to a maximum 28% rate on long-term capital gains) would finance a cut in the corporate tax rate from 35% to about 26%, assuming no behavioral response. While the distributional effect depends on what one assumes about the incidence of the corporate income tax, our results suggest that even if the corporate income tax were paid entirely by capital income, the reform would make the tax system more progressive.
    Keywords: corporate taxation, individual taxation
    JEL: H20 H24 H25
    Date: 2011–05–18
  5. By: Auriol, Emmanuelle; Warlters, Michael
    JEL: D43 H25 H26 H60
    Date: 2012–01
  6. By: Richard Herd; Sam Hill; Vincent Koen
    Abstract: Substantial fiscal consolidation was achieved under the aegis of the 2003 Fiscal Responsibility and Budget Management Act. While deficits widened anew in 2008 and 2009, against the backdrop of the global financial and economic crisis, efforts to reduce them have resumed since. To ensure continued progress, as well as stronger government finances in the longer term, the medium-term fiscal framework needs to be improved, notably by embedding the annual budget in a detailed three-year rolling programme. Expenditure needs to be controlled better, in particular as regards subsidies, which the central government has indeed been trying to rein in, though with difficulty in the face of rising world oil prices. Expenditure also needs to become more effective, in particular in the areas of health care, education and social assistance. On the revenue side, tax reforms have been tabled, both for direct taxes and for the complex and inefficient system of indirect taxes. Corporate income tax rates are being cut, though the headline rate remains high. Lower taxation for large special economic zones deserves to be maintained for some time. For the personal income tax, which only a fairly small proportion of the population pays, thresholds are set to be raised considerably. A goods and services tax is to be introduced, which should help reduce the segmentation of the national market for goods and services. Customs duties have been reduced on average but remain high for some categories of imports, implying scope for further reduction over time.<p>This Working Paper relates to the 2011 OECD Economic Survey of India (<P>Perspectives et réformes budgétaires en Inde<BR>La loi de 2003 sur la responsabilité et la gestion budgétaires a permis d’avancer sur la voie de l’assainissement des finances publiques. Certes, le déficit s’est de nouveau aggravé en 2008-2009, du fait de la crise financière et économique mondiale, mais de nouvelles mesures ont été prises ensuite pour le réduire. Afin d’assurer la poursuite des progrès en ce domaine et de consolider la situation à plus longue échéance, il faut améliorer le cadre budgétaire à moyen terme, notamment en intégrant la loi de finances annuelle à un programme glissant, détaillé, étalé sur trois exercices. Il faut aussi mieux maîtriser les dépenses, en particulier les subventions, que l'administration centrale a d’ailleurs tenté de freiner, quoique non sans difficultés face à la montée des cours mondiaux du pétrole. Enfin, il est nécessaire de renforcer l'efficience des dépenses, surtout dans les domaines de la santé, de l’éducation et de l’aide sociale. En matière de recettes, des réformes ont été présentées ; elles portent à la fois sur la fiscalité directe et sur le système, complexe et inefficient, des impôts indirects. Les autorités sont en train d’alléger l'impôt sur les sociétés, bien que son taux nominal demeure élevé. Il convient de conserver pendant un certain temps les allégements en faveur des grandes zones économiques spéciales. S’agissant de l’impôt sur le revenu des personnes physiques, qui n'est acquitté que par une faible proportion de la population, les seuils d’imposition devraient être sensiblement relevés. Une taxe sur les biens et les services doit être mise en place, ce qui devrait réduire la segmentation du marché national. Les droits de douane ont été abaissés en moyenne, mais restent élevés pour certaines catégories d’importations, ce qui laisse des marges de réduction à l'avenir.<p>Ce Document de travail se rapporte à l'Etude économique de l'OCDE de l’Inde 2011 (
    Keywords: taxation, transfers, fiscal policy, tariffs, subsidies, India, poverty, debt, saving, fiscal institution, expenditure, government budgets, transferts, politique budgétaire, pauvreté, subventions, dette, dépenses, Inde, taxation, épargne, institution budgétaire, budgets des gouvernements, tarifs
    JEL: E60 E61 E62 E65 E66 E69 H2 H50 H51 H53 H54 H55 H6 H70 H71 H72 H74 H81 H83 I18 I32 I38 O23 O53
    Date: 2011–12–02
  7. By: Lisa Grazzini (Università degli Studi di Firenze, Dipartimento di Scienze Economiche); Alessandro Petretto (Università degli Studi di Firenze, Dipartimento di Scienze Economiche)
    Abstract: This paper deals with the earmarked taxation employed by local governments for fi…nancing public investments projects carried on with some Public-Private Partnerships con…figurations. First, we analyse the theoretical pro…files of earmarked taxation by using the tax-benefi…t approach, and the theory of political competition and accountability. Second, on the ground of the P-P-P literature, we examine the trade-off between fi…nancing mechanisms based on public subsidies to the concessionaire fi…rm, fi…nanced by a earmarked tax, and mechanisms based on users-fees. Then, we discuss cases where the …rst solution turns out to be, even partially, preferred. Finally, we consider the potential role of earmarked taxation on the Italian institutional context, emerging from the recent legislation on fi…scal federalism and municipalities taxation.
    Keywords: Earmarked taxes, cost of public funds, subsidies, public investments
    JEL: H23 H54 H71 R42
    Date: 2011
  8. By: Thomas Piketty; Emmanuel Saez; Stefanie Stantcheva
    Abstract: This paper analyzes the problem of optimal taxation of top labor incomes. We develop a model where top incomes respond to marginal tax rates through three channels: (1) the standard supply-side channel through reduced economic activity, (2) the tax avoidance channel, (3) the compensation bargaining channel through efforts in influencing own pay setting. We derive the optimal top tax rate formula as a function of the three elasticities corresponding to those three channels of responses. The first elasticity (supply side) is the sole real factor limiting optimal top tax rates. The optimal tax system should be designed to minimize the second elasticity (avoidance) through tax enforcement and tax neutrality across income forms, in which case the second elasticity becomes irrelevant. The optimal top tax rate increases with the third elasticity (bargaining) as bargaining efforts are zero-sum in aggregate. We then analyze top income and top tax rate data in 18 OECD countries. There is a strong correlation between cuts in top tax rates and increases in top 1% income shares since 1975, implyingthat the overall elasticity is large. But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model. This suggests that the first elasticity is modest in size and that the overall effect comes mostly from the third elasticity. Consequently, socially optimal top tax rates might possibly be much higher than what is commonly assumed.
    JEL: H21
    Date: 2011–11
  9. By: David Haugh
    Abstract: Ireland’s banking crisis, one of the most severe in the OECD area, and the associated economic recession have taken a heavy toll on public finances. Large public deficits have accumulated since 2008 and net public debt, which had been eliminated, has soared once again. The rapid deterioration of the fiscal accounts, together with the government guarantee of banks’ liabilities, has led to Ireland losing the confidence of the sovereign bond market and requiring financial assistance from the international community. With one of the highest levels of gross public debt relative to GDP in the OECD, high bond spreads and weak nominal GDP growth, returning to a healthy fiscal position poses a significant challenge. A sustained effort will be needed to eliminate the budget deficit, regain the confidence of financial markets and to seek to increase trend growth through appropriate structural reforms. The economic adjustment programme supported by the IMF and the EU foresees a gradual consolidation of the public finances to stabilise and reduce the debt to GDP ratio and restore fiscal sustainability. The programme builds on significant progress that has already been made to contain the deterioration of fiscal accounts and the government plans to introduce further fiscal adjustment in 2012 and later years in line with the programme. The programme also foresees a strengthening of the fiscal framework, with large institutional changes intended to secure a path of fiscal sustainability in the medium-term. The consolidation effort is also underpinned by efforts to increase public sector efficiency, which provides a growth-friendly avenue for reducing the deficit in a durable way.<p> This Working Paper relates to the 2011 OECD Economic Survey of Ireland (<P>Rétablir la viabilité budgétaire en Irlande<BR>La crise bancaire irlandaise, l’une des plus graves de la zone OCDE, et la récession qui l’a accompagnée ont lourdement pesé sur les finances publiques. Le pays connaît d’importants déficits depuis 2008 et la dette publique nette, qui avait été éliminée, est en forte résurgence. Á cause de la dégradation rapide des comptes budgétaires et de la garantie donnée par l’État aux engagements des banques, l’Irlande a perdu la confiance du marché des obligations souveraines et a dû recourir à l’aide de la communauté internationale. Sachant que le ratio dette brute/PIB est l’un des plus élevés de l’OCDE, que la prime sur les taux obligataires est importante et que la croissance du PIB nominal est faible, le retour à une situation budgétaire saine représente un sérieux défi. Un effort soutenu sera nécessaire pour résorber le déficit, regagner la confiance des marchés financiers et augmenter la croissance tendancielle par des réformes structurelles appropriées. Le programme d’ajustement économique soutenu par le FMI et l’UE prévoit un redressement graduel des finances publiques afin de stabiliser, puis de réduire, le ratio dette/PIB et de rétablir la viabilité budgétaire. Il s’appuie sur les progrès significatifs déjà réalisés, qui ont permis de contenir la dégradation des comptes budgétaires, et le gouvernement envisage de procéder en 2012 années suivants à un ajustement supplémentaire conforme au programme. Celui-ci prévoit aussi un renforcement du cadre de la gestion budgétaire comportant de grands changements institutionnels destinés à assurer la viabilité à moyen terme. L’effort de redressement bénéficie aussi des mesures prises pour rendre le secteur public plus efficace, ce qui est un moyen favorable à la croissance de réduire durablement le déficit. <p> Ce Document de travail se rapporte à l'Étude économique de l'OCDE de l’Irlande 2011 (
    Keywords: public debt, fiscal policy, public sector efficiency, public expenditure, fiscal rules, fiscal consolidation, debt sustainability, potential output, Ireland, fiscal frameworks, fiscal council, contestability, performance indicators, public sector agencies, dette publique, politique fiscale, dépenses publiques, efficience du secteur public, Irlande, consolidation budgétaire, règles fiscales, viabilité de la dette, conseil fiscal, cadre fiscal, contestabilité, indicateurs de performance, organismes du secteur public, croissance de production potentielle
    JEL: E62 E65 H11 H50 H61 H62 H63 H68
    Date: 2011–12–02
  10. By: Giuseppe Pulina
    Abstract: In this paper we analyze a fiscal mechanism used in Italy, which in Italian is called “Studi di Settore” (Sector Studies). This mechanism relies on information gathered on taxpayers to both partition the population into fairly homogeneous clusters and to determine the presumed income they should declare. When this estimated income is announced, before taxpayers fill out their tax returns, their optimal declaration strategies lead the tax- payer population to be naturally split into three homogeneous groups, one of which pays more taxes than are due, the second group comply but bears the audit cost, while the third evades and it is not audited. This result is close to the Italian situation where the greatest number of taxpayers make a tax declaration according to the announced cluster income, but there are always those who declare less and so are audited.
    Keywords: Tax Evasion; "cut-off" policy; Noncooperative games; Asymmetric Information
    JEL: H26 H32 D82 C72
    Date: 2011
  11. By: Rosanne Altshuler (Rutgers University, Department of Economics); Katherine Lim (Urban-Brookings Tax Policy Center); Roberton Williams (Urban-Brookings Tax Policy Center)
    Abstract: In August 2009 the Congressional Budget Office warned that the budget was on an unsustainable path. Preventing federal debt from growing faster than the economy over the long-run requires large increases in revenues and/or decreases in spending. We explore, using the Urban-Brookings Tax Policy Center Model, whether incremental reforms of the current tax system could raise enough revenue to reduce the deficit to a sustainable level over the last five years of the current 10-year budget window. We conclude that feasible tax increases within the current tax structure cannot generate sufficient revenues to bring federal budget deficits under control.
    Keywords: budget deficit, tax reform, individual taxation
    JEL: H20 H60
    Date: 2011–05–18
  12. By: Kauder, Björn
    Abstract: This book analyzes the role of institutions in public finance, focusing on the issues of revenue forecasting and the spatial administrative structure of municipalities. Chapter 2 analyzes the international differences in forecasting practices and shows that forecasting performance depends on the institutional arrangement. The performance turns out to improve with the degree of independence, but also hinges on the timing of the forecast. Chapter 3 looks into revenue forecasting in Germany and widely confirms the unbiasedness and efficiency of the forecasts. Only with regard to tax law changes and the term of office there appears to be some room to improve the forecasts. In Chapter 4 we turn to local policies and provide evidence how the design of borders impacts on local tax policy. Both the number of competitors and the size of a core city in its agglomeration prove important. Chapter 5 analyzes the effects of reforms of spatial administrative structures. Considering the reforms in Germany in the 1960s and 1970s, we show that incorporated surrounding municipalities of core cities perform better in terms of population growth than comparable municipalities that have remained independent.
    Keywords: Revenue Forecasting; International Comparison; Spatial Administrative Structure; Local Tax Competition; Population Growth
    Date: 2011–11–04
  13. By: Amin, Mohammad
    Abstract: Repeated attempts at uncovering the relevance of country size for various economic factors have produced discouraging results. The present paper sheds new light on the relevance of country size using micro or firm-level data on firms'experience with the quality of tax administration, an important but neglected element of the business climate. The analysis finds that the quality of tax administration is significantly better for small compared with large countries. The instrumental variables regression method confirms that this finding is robust to various endogeneity concerns. The paper also finds some evidence that the country size and tax administration relationship is non-linear, and much stronger for small than large countries. Implications of these findings for the broader literature on country size are discussed.
    Keywords: Taxation&Subsidies,Emerging Markets,Debt Markets,E-Business,Fiscal Adjustment
    Date: 2011–12–01
  14. By: Rosanne Altshuler (Rutgers University, Department of Economics); Alan Auerbach (University of California, Berkeley); Michael Cooper (Department of Treasury, Office of Tax Analysis); Matthew Knittel (Department of Treasury, Office of Tax Analysis)
    Abstract: Recent data on corporate tax losses presents a puzzle this paper attempts to explain: the ratio of losses to positive income was much higher around the recession of 2001 than in earlier recessions, even those of greater severity. Using a comprehensive sample of U.S. corporation tax returns for the period 1982-2005, we explore a variety of potential explanations for this surge in tax losses, taking account of the significant use of executive compensation stock options beginning in the 1990s and recent temporary tax provisions that might have had important effects on taxable income. We find that losses rose because the average rate of return of C corporations fell, rather than because of an increase in the dispersion of returns or an increase in the gap between corporate profits subject to tax and corporate profits as measured by the national income accounts. Our analysis also suggests that the increasing importance of S corporations may help explain the recent experience within the C corporate sector, as S corporations have exhibited adifferent pattern of losses in recent years. However, we can identify no simple explanation for the differing experience of C and S corporations. Our investigation concludes with some new puzzles: why did rates of return of C corporations fall so much early in the decade and why has the incidence of losses among C and S corporations diverged?
    Keywords: corporate taxation, tax losses
    JEL: H25
    Date: 2011–05–18
  15. By: E. da Costa, Carlos; N. Pereira, Thiago
    Abstract: We investigate the efficiency of equal sacrifice tax schedules in an economywhich primitives are exactly those in Mirrlees (1971): a continuum of individualswith identical preferences defined over consumption and leisure who differ withrespect to their labor market productivity. Using a separable specification forpreferences we derive the minimum equal sacrifice allocation and recover thetax schedule that implements it. The separable specification allows us to usethe methodology developed by Werning (2007b) to check whether the scheduleis efficient, that is, whether there is no alternative tax schedule that raises morerevenue while delivering less utility to no one. We find that inefficiency does notarise for most parametrizations we use to approximate the US economy. For thefew cases for which inefficiency does arise, it does so only for very high levels ofincome and marginal tax rates.
    Date: 2011–12–01
  16. By: Ryo Arawatari (Graduate School of Economics, Nagoya University); Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This paper analyzes the determinants of government debt and social security for the old in a closed-economy, overlapping-generation model. Under the probabilistic voting, the model presents (i) an intergenerational link of resource allocation via debt and social security; (ii) multiple political equilibria; and (iii) a negative cor- relation between tax and debt. These three results are robust to the introduction of public goods as an alternative government expenditure or to the introduction of income heterogeneity within a generation.
    Keywords: Government debt; Social security; Overlapping generations; Proba- bilistic voting
    JEL: D72 H55 H63
    Date: 2011–11
  17. By: Rosanne Altshuler (Rutgers University, Department of Economics); Barry Bosworth (Brookings Institution)
    Abstract: This paper is focused on the options for reducing the U.S. fiscal deficit in the aftermath of the financial crisis. The first part of the paper is devoted to an assessment of the economic outlook and the impact of the financial crisis on the medium-term fiscal balance of the federal government. Is there a short-term trade-off between the need for further fiscal stimulus and deficit reduction and how should it be managed? The second part of the paper examines the options for fiscal consolidation on both the expenditure and revenue sides of the budget.
    Keywords: budget, deficit, fiscal consolidation
    JEL: H60 H61 H62
    Date: 2011–05–18
  18. By: António Afonso (ISEG/UTL – Technical University of Lisbon, Department of Economics; UECE – Research Unit on Complexity and Economics; European Central Bank, Directorate General Economics, Kaiserstraße 29, D-60311 Frankfurt am Main, Germany.); João Tovar Jalles (University of Aberdeen, Business School, Edward Wright Building, Dunbar Street, AB24 3QY, Aberdeen, UK and European Central Bank, Directorate General Economics, Kaiserstraße 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: We construct a growth model with an explicit government role, where more government resources reduce the optimal level of private consumption and of output per worker. In the empirical analysis, for a panel of 108 countries from 1970-2008, we use different proxies for government size and institutional quality. Our results, consistent with the presented growth model, show a negative effect of the size of government on growth. Similarly, institutional quality has a positive impact on real growth, and government consumption is consistently detrimental to growth. Moreover, the negative effect of government size on growth is stronger the lower institutional quality, and the positive effect of institutional quality on growth increases with smaller governments. The negative effect on growth of the government size variables is more mitigated for Scandinavian legal origins, and stronger at lower levels of civil liberties and political rights. Finally, for the EU, better overall fiscal and expenditure rules improve growth. JEL Classification: C10, C23, H11, H30, O40.
    Keywords: Growth, institutions, fiscal rules, pooled mean group, common correlated effects.
    Date: 2011–11
  19. By: Sebastian Prediger (GIGA)
    Abstract: In the frame of decentralization reforms in Namibia, local water point associations evolved that have to collect water fees from community members to cover maintenance costs. Enforcement, however, is weak and water point associations have to rely on moral pleas. As a consequence, several users refuse to pay. I test the impact of informal sanction mechanisms on cooperation among water point users in groups with equal and unequal incomes. Interestingly, and in contrast to the vast majority of related studies, cooperation does not increase under the threat of punishment, though the punishment option was frequently used. At individual level I show that while punishments do not affect cooperative behaviour, they provoke counter-punishment. This suggests that peer-sanctioning mechanisms as a means to enforce norm-compliance are not accepted among water point association members. Contribution levels were higher in heterogeneous groups compared with homogenous ones, and both pro-social and anti-social punishments occurred more frequently in homogenous groups. A comparison between different income types further reveals that the poor contribute larger shares of their income than those endowed with higher incomes and that they use punishment as frequently and as vehemently as the better-off, despite higher opportunity costs.
    Keywords: Income heterogeneity, public goods experiment, peer punishment, anti-social punishment, Namibia
    Date: 2011
  20. By: Díaz Serrano, Lluís; Rodríguez Pose, Andrés
    Abstract: This paper analyses whether the different powers and resources at the disposal of local and regional governments across Europe deliver greater satisfaction with political institutions and lead to greater personal happiness. The analysis uses microdata from the four available waves of the European social survey (2002, 2004, 2006 and 2008), including more than 160,000 observations of individuals living in 29 European countries. Our results reveal that political and fiscal decentralization have a positive and significant effect on individuals’ overall happiness. Fiscal decentralization also exerts a significant effect on the level of satisfaction with political and economic institutions and with the education and health systems, whereas the effect of political decentralization on these variables is more limited. The results show that citizens seem to be happier with the actual capacity of their local governments to deliver than with the general principle that they can have a say on their daily politics and policies. Keywords: Happiness, well-being, satisfaction, fiscal and political decentralization, Europe. JEL codes: H11, H77
    Keywords: Felicitat, Benestar, Satisfacció, Descentralització administrativa, 32 - Política,
    Date: 2011

This nep-pbe issue is ©2011 by Keunjae Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.