nep-pbe New Economics Papers
on Public Economics
Issue of 2011‒12‒19
eight papers chosen by
Keunjae Lee
Pusan National University

  1. What Has Happened to Marginal Tax Rates? By Callan, Tim; Crilly, Niamh; Keane, Claire; Walsh, John R.
  2. Taxation and economic sustainability By Kalendiene, Jone; Pukeliene, Violeta
  3. From transfers to tax "co-occupation": the Italian reform of intergovernmental finance By Ernesto Longobardi
  4. Assessing the Variability of Tax Elasticities in Lithuania By Tigran Poghosyan
  5. The Macroeconomics of Fiscal Policy and Public Capital. By Duarte Bom, P.R.
  6. Fiscal spending for economic growth in the presence of imperfect markets By Islam, Asif; López, Ramón
  7. Does Fiscal Decentralization Promote Fiscal Discipline? By Bilin Neyapti; Zafer Akin; Zeynep B. Cevik
  8. Why Don’t We Tax the Rich? Inequality, Legislative Malapportionment, and Personal Income Taxation around the World By Martin Ardanaz; Carlos Scartascini

  1. By: Callan, Tim; Crilly, Niamh; Keane, Claire; Walsh, John R.
    Keywords: taxes
    Date: 2011–11
  2. By: Kalendiene, Jone (Vytautas Magnus University,Kaunas,Lithuania); Pukeliene, Violeta (Vytautas Magnus University,Kaunas,Lithuania)
    Abstract: Macroeconomic theory says that taxes play a repressing role in the economy. Introduction of new forms of taxation, the increase of tax rates and augmentation of tax income of the Government puts a downturn risk on consumption and therefore on economic growth. Knowing that, Governments start to compete with other countries by lowering corporate tax rates and trying to boost economic growth by using foreign investments. On the other hand Governments are pushed to lower personal tax rates in order to satisfy their electorate. It was highly believed that countries with lower tax rates have better prospects for future growth. However, small tax income boundaries government spending and might cause serious imbalances in economy. As the Irish example shows smaller taxes cannot guarantee sustainable growth of the economy. So the taxation and economic development relationship needs rethinking. This paper aims to test the efficiency of taxation in sustainable economic development terms and to discuss the factors that are the most important. The comparative analysis of EU countries is used for the research.
    Keywords: Taxation; Economic Sustainability
    JEL: E60
    Date: 2011–05–30
  3. By: Ernesto Longobardi (Università di Bari)
    Abstract: The paper provides some insights into the current reform of the system of intergovernmental relations in Italy. A most relevant change is the abolition of transfers from a higher level of government as an ordinary means of finance for sub-central governments, with the exception of grants having an explicit equalisation purpose. Since the room for autonomous local taxes is quite narrow, transfers are going to be substituted, to a large extent, by different forms of "co-occupation" of central taxes. Using the OECD taxonomy about tax autonomy, it is shown that the effective increase in "infra-marginal" tax autonomy of sub-central governments brought about by the reform will be quite modest. At the margin, however, where autonomy really matters, there could be enough room for the exercise of effective discretion. The main problem is that both the central and the sub-central governments fear the decentralisation of tax power. The former because it feels that, at least in the transitional period, the electorate might not properly distinguish the different fiscal responsibilities; the latter because they would prefer not to tax their electorate, notwithstanding their preferences for more stable and predictable sources of finance with respect to the current system.
    Keywords: Intergovernmental finance, decentralisation, tax assignment, tax autonomy
    JEL: H71 H77
    Date: 2011–12
  4. By: Tigran Poghosyan
    Abstract: This paper quantifies the variability of tax elasticities in Lithuania using two alternative methods: rolling regressions and pooled mean group estimator. The analysis is motivated by the systematic variation of tax revenues observed over the economic cycle in the recent past. Both methods confirm that tax elasticities moved with the cycle, which can be attributed to the procyclical tax compliance tendencies and structural composition effects across tax bases. Comparison of VAT revenue gaps across Baltic countries during the recent recovery suggests that tax revenues rebounded fastest in Estonia, followed by Lithuania and Latvia. Overall, the results of the study emphasize the importance of accounting for cyclical variation in tax elasticities when making short-term tax revenue projections.
    Keywords: Baltics , Business cycles , Cross country analysis , Direct taxation , Estonia , Indirect taxation , Latvia , Tax revenues , Tax systems , Value added tax ,
    Date: 2011–11–17
  5. By: Duarte Bom, P.R. (Universiteit van Tilburg)
    Date: 2011
  6. By: Islam, Asif; López, Ramón
    Abstract: Political economy factors tend to induce many governments to spend on private goods (non-social subsidies) to the detriment of spending on social and public goods. We show that this bias in spending patterns is particularly costly for economic growth when capital markets are imperfect. We thus provide a simple taxonomy of government spending: spending in goods that mitigate market failures versus spending in non-social subsidies which frequently have the sole purpose of benefiting special interest groups. We develop a theoretical model and link it quite closely to an empirical model. The empirical results fully corroborate the hypothesis that spending biases in favor of non-social subsidies reduce the rate of economic growth over the long run. The empirical findings are exceptionally robust.
    Keywords: economic growth investment; government spending; market imperfections; non-social subsidies
    JEL: H42 H44 H5
    Date: 2011–12
  7. By: Bilin Neyapti; Zafer Akin; Zeynep B. Cevik
    Date: 2011
  8. By: Martin Ardanaz; Carlos Scartascini
    Abstract: Personal income taxation remains relatively low in many developing countries despite recent democratic advancement and rapid economic growth; this is hard to reconcile with standard political economy models of taxation. This paper argues that the details of political institutions help to explain these low levels of personal income taxation. In particular, legislative malapportionment enables rich elites to have disproportionate political influence. Because over-represented districts tend to be dominated by parties aligned with the elite, these groups can block legislative attempts to introduce progressive taxes. Using a sample of more than 50 countries (including 17 across Latin America) between 1990 and 2007, this paper finds that i) countries with historically more unequal distributions of wealth and income systematically present higher levels of legislative malapportionment, and ii) higher levels of malapportionment are associated with lower shares of personal income taxes in GDP.
    JEL: D70 D78 H24
    Date: 2011–11

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.