nep-pbe New Economics Papers
on Public Economics
Issue of 2012‒01‒18
six papers chosen by
Keunjae Lee
Pusan National University

  1. Assessing the impact of local taxation on property prices: a spatial matching contribution By Charlot, S.; Paty, S.; Visalli, M.
  2. A Tale of Tax Policies in Open Economies By Stéphane Auray; Aurélien Eyquem; Paul Gomme
  3. Heterogeneous Convergence By Andrew T. Young; Matthew J. Higgins; Daniel Levy
  4. Fiscal consolidation, institutions and institutional reform: a multivariate analysis of public debt dynamics By F. HEYLEN; A. HOEBEECK; T. BUYSE
  5. The distributional consequences of tax reforms under market distortions By Konstantinos Angelopoulos; James R. Malley; Wei Jiang
  6. Full agreement and the provision of threshold public goods By Federica Alberti; Edward J. Cartwright

  1. By: Charlot, S.; Paty, S.; Visalli, M.
    Abstract: This article provides empirical evidence on the impact of local taxation on property prices, controlling for the local public spending, using data on property taxation and real estate transactions, over the period 1994–2004. Our empirical methodology pairs transactions in the same spatial environments. Spatial differencing and Instrumental Variables (IV) methodology allow us to compare sales across municipality boundaries and to control for the potential endogeneity of local taxation and public spending. Our results suggest that the local Property Tax (PT) rate has no impact on property prices, while the amount of taxes paid appears to have a negative effect on property price.
    JEL: H30 R20
    Date: 2011
  2. By: Stéphane Auray (CREST (Ensai), Université du Littoral Côte d’Opale (EQUIPPE), Université de Shebrooke (GREDI) and CIRPEE); Aurélien Eyquem (Université de Lyon, Lyon, F-69007, France ; Ecole Normale Supérieure de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne, Ecully, F-69130, France ; and GREDI, Canada); Paul Gomme (Concordia University and CIREQ)
    Abstract: Recent financial crises in Europe as well as the periodic battles in the U.S. over the debt ceiling point to the importance of fiscal discipline among developed countries. This paper develops an open economy model, calibrated to the U.S. and a subset of the EMU, to evaluate the impact of various permanent tax changes. The first set of experiments considers a targeted one percentage point reduction in the government deficit-to-GDP ratio through raising one of : the consumption tax, the labor income tax, or the capital income tax. In terms of welfare, the consumption tax is found to be the least costly of the tax increases. A second set of experiments looks at deficit-neutral tax changes : partially replacing the capital income tax with either a higher labor income tax or higher consumption tax ; and partially replacing the labor income tax with an increased consumption tax. Reducing reliance on capital income taxation is welfare-enhancing, although it leads to short term losses. Reducing labor income taxation improves international competitiveness and is welfare-improving.
    Keywords: Fiscal policies, open economies, public deficits, tax reforms
    JEL: E31 E62 F41
    Date: 2011
  3. By: Andrew T. Young; Matthew J. Higgins; Daniel Levy
    Abstract: We use U.S. county-level data containing 3,058 cross-sectional observations and 41 conditioning variables to study economic growth and explore possible heterogeneity in growth determination across 32 individual states. Using a 3SLS-IV estimation method, we find that all statistically significant convergence rates (for 32 individual states) are above 2 percent, with an average of 8.1 percent. For 7 states the convergence rate can be rejected as identical to at least one other state's convergence rate with 95 percent confidence. Convergence rates are negatively correlated with initial income. The size of government at all levels of decentralization is either unproductive or negatively correlated with growth. Educational attainment has a non-linear relationship with growth. The size of the finance, insurance and real estate, and entertainment industries are positively correlated with growth, while the size of the education industry is negatively correlated with growth. Heterogeneity in the effects of balanced growth path determinants across individual states is harder to detect than in convergence rates.
    Date: 2011–03
    Abstract: We study the evolution of the public debt to GDP ratio during 40 fiscal consolidation episodes in 21 OECD countries in 1980-2008. We test within a multivariate regression framework seven hypotheses put forward in the literature on the success or failure of consolidation programmes. These hypotheses concern (i) the composition of the consolidation programme, (ii) its size and persistence, (iii) the gravity of the debt situation, (iv) the influence of the international macroeconomic environment, (v) the role of labour and product market institutions and institutional reform, (vi) the ideological orientation of the government, and (vii) the role of strict fiscal rules. We add a new hypothesis emphasizing the influence of public sector efficiency. We also improve on the literature methodologically by controlling for one-off budgetary measures. Consolidation programmes imply a stronger reduction of the public debt ratio when they mainly rely on spending cuts (except public investment), are large but of short duration, take place when growth in the international economy is high and interest rates are low, are accompanied by product market deregulation, are adopted by left-wing governments, are embedded in a regime of strict and wide fiscal rules, and are executed by highly efficient administrations. Public sector efficiency is important also for the composition hypothesis. Government wage bill cuts do not contribute to lower public debt ratios when public sector efficiency is high. On the hypothesis that consolidation is more likely to succeed in a situation of fiscal emergency, our evidence is mixed. Finally, we find no evidence that labour market deregulation contributes to a reduction of the public debt ratio during consolidation periods.
    Keywords: public debt, fiscal consolidation, fiscal policy composition, fiscal rules, labour and product market institutions, government efficiency
    JEL: E62 H62 H63
    Date: 2011–12
  5. By: Konstantinos Angelopoulos; James R. Malley; Wei Jiang
    Abstract: In this paper we examine the importance of imperfect competition in product and labour markets in determining the long-run welfare e¤ects of tax reforms assuming agent heterogeneneity in capital hold- ings. Each of these market failures, independently, results in welfare losses for at least a segment of the population, after a capital tax cut and a concurrent labour tax increase. However, when combined in a realistic calibration to the UK economy, they imply that a capital tax cut will be Pareto improving in the long run. Consistent with the the- ory of second-best, the two distortions in this context work to correct the negative distributional e¤ects of a capital tax cut that each one, on its own, creates.
    Keywords: market imperfections, heterogeneous agents, unemployment, tax reform.
    JEL: E24 E62
    Date: 2011–09
  6. By: Federica Alberti (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Edward J. Cartwright (School of Economics, University of Kent, Canterbury)
    Abstract: We report threshold public good experiments in which group members not only need to be individually willing to contribute enough to provide the public good but also have to agree with each other on what every group members should contribute. We find strong support to the hypothesis that full agreement increases successful provision, although it takes a few repetitions before group members can successfully coordinate. This is consistent with our theoretical results that full agreement works because it increases criticality of each individual decision. The existence of a focal point makes it possible for the group members to successfully coordinate.
    Keywords: Public good, threshold, full agreement, focal point, experiment, coordination
    JEL: C72 H41
    Date: 2012–01–06

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