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on Public Economics |
| By: | Aronsson, Thomas (Department of Economics, Umeå University); Persson, Lars (Department of Economics, Umeå University) |
| Abstract: | This paper concerns optimal taxation and public goods in an economic federation with decentralized leadership, where one lower level government is first mover also in the horizontal dimension. Under plausible assumptions, horizontal leadership reinforces the incentives created by decentralized leadership. |
| Keywords: | Optimal taxation; redistribution; public goods; fiscal federalism; decentralized leadership; horizontal leadership |
| JEL: | D31 D60 D82 H21 |
| Date: | 2012–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0839&r=pbe |
| By: | Teemu Lyytikäinen |
| Abstract: | This paper uses a Finnish policy intervention to study tax competition among local governments. Changes in the statutory lower limits to the property tax rates are used as a source of exogenous variation to estimate the responses of municipalities to tax rates in their neighbouring municipalities. I do not find evidence of interdependence in property tax rates among Finnish municipalities. The results are in contrast to the earlier empirical literature, using data from other countries, that has mainly found positive interdependence in tax rates. I compare the causal estimates based on the policy change to the commonly used Spatial Lag estimates and Spatial Instrumental Variables estimates, which are based on highly restrictive assumptions. The comparisons suggest that the standard spatial econometrics methods may have a tendency to overestimate the degree of interdependence in tax rates. |
| Keywords: | Property tax, tax competition, fiscal interaction, instrumental variables, spatial econometrics |
| JEL: | H71 H20 H77 |
| Date: | 2011–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:26&r=pbe |
| By: | Hang XIONG |
| Abstract: | China's actual fiscal decentralization is one-sided: while public expenditures are largely decentralized, fiscal revenues are recentralized after 1994. One critical consequence of the actual system is the creation of significant fiscal imbalances at sub-national level. This paper investigates empirically effects of fiscal imbalances on environmental performance of Chinese provinces. First, environmental efficiency scores of Chinese provinces are calculated with SFA for the period from 2005 to 2010. Then, these scores are regressed against two fiscal imbalance indicators in a second stage model. Finally, conditional EE scores are calculated. This paper finds that effects of fiscal imbalances on EE are nonlinear and conditional on economic development level. Fiscal imbalances are more detrimental to environment in less developed provinces. These results suggest that the one-sided fiscal decentralization in China may have regressive environmental effects and contribute to regional disparity in terms of sustainable development. |
| Keywords: | Chinese provinces, Decentralization; Environmental efficiency; SFA |
| JEL: | R51 H70 Q56 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1328&r=pbe |
| By: | Giovanni Andrea Cornia (Università degli Studi di Firenze, Dipartimento di Scienze Economiche); Juan Carlos Gómez-Sabaini; Bruno Martorano |
| Abstract: | The paper analyses the changes in tax policy, tax/GDP ratios, tax incidence and income inequality which have taken place in Latin America during the last decade against the background of the changes observed in these variables during the liberal years of the 1980s and 1990s. The paper argues that the recent tax policy changes and a favourable external environment led to an increase of about three points in the regional tax/GDP ratio, that such increase in taxation took place in a slightly or substantially more progressive way than in the past, that the Gini coefficient of the distribution of household income improved on average by 0.4-0.8 points, and that, as a result, redistribution via taxation improved (especially in the Southern Cone) in relation to the 1990s thanks to greater reliance on direct taxes and a reduction in excises. However, in the mid-late 2000s taxation remains unequalizing in about a third of the countries of the region, especially in Central America. The paper concludes by offering recommendations on how the new fiscal pact evolving in the region can be strengthened to improve the redistributive effect of taxation in the years ahead. |
| Keywords: | tax policy, tax incidence, income inequality, redistribution, fiscal exchange, Latin America |
| JEL: | D31 D70 H20 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2012_03.rdf&r=pbe |
| By: | Diego d'Andria (LUISS Guido Carli University, Rome); Giuseppe Mastromatteo (Università Cattolica del Sacro Cuore, Milan) |
| Abstract: | A growing body of literature tests the effects of different tax structures on long-run economic growth. We argue that these tests do not properly account for endogeneity between supposedly independent variables. We run several cross-country ordinary least squares tests with special attention to human capital, and show how education choice behaviors are affected by different tax mixes. The results obtained by microeconomic theory are validated, and they imply that accumulation rates of human capital cannot be deemed independent from savings taxation. Our results also show that more progressive labor taxation does not appear to be correlated with lower investments in education, contrary to what one would expect from microeconomic theory. We discuss possible implications, and suggest that a likely explanation lies in the outcome of redistribution policies reducing credit constraints of poorer households, thus allowing them easier access to education and, consequently, higher aggregate human capital accumulation. |
| Keywords: | tax mix, human capital, growth, cross-country |
| JEL: | H21 E24 O4 C23 |
| Date: | 2012–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:217&r=pbe |
| By: | Ray Barrell; Dawn Holland; Ian Hurst |
| Abstract: | This paper looks at various aspects of fiscal consolidation in 18 OECD economies. The prospects for fiscal consolidation depend upon the problems the country may face with its debt stock, the political will to deal with these problems and on the costs of consolidation. The analysis is based on a series of simulations using the National Institute Global Econometric Model, NiGEM. The properties of the NiGEM model are discussed first. Although the model is estimated it has a strong role for expectations and can be run under different modes of expectations formation. This allows a decomposition of the factors that might affect the results. Temporary and permanent shifts in fiscal policy are assessed as well as the potential impact of fiscal consolidation plans under different monetary and fiscal feedback rules and different modes of expectations formation. If fiscal policy is expected to be tightened in the future, then long rates will fall now, and perhaps even induce a short-term expansion of output. Expansionary fiscal contractions of this sort are rare, however, and none are anticipated with the programmes that are investigated.<P>Consolidation budgétaire : Partie 2. Multiplicateurs budgétaires et assainissement des finances publiques<BR>Ce document examine divers aspects de l’assainissement des finances publiques dans 18 pays de l’OCDE. Le potentiel de consolidation budgétaire dépend du montant de la dette d’un pays et des problèmes qui peuvent en résulter, de la volonté politique de traiter ces problèmes et des coûts du redressement. L’analyse s’appuie sur un ensemble de simulations fondées sur le modèle économétrique mondial de l'Institut de recherche économique et sociale du Royaume-Uni (NiGEM). Les auteurs examinent en premier lieu les caractéristiques du modèle NiGEM. Même si ce modèle procède par estimation, il conditionne fortement les anticipations et peut être appliqué à différents modes de formation des anticipations. Cela permet de décomposer les facteurs susceptibles d’influer sur les résultats. Les auteurs évaluent ensuite les modifications temporaires et permanentes de la politique budgétaire, ainsi que l’impact potentiel des plans de redressement budgétaire selon différentes règles de rétroaction budgétaire et monétaire et différents modes de formation des anticipations. Si l’on s’attend à un durcissement de la politique budgétaire à l’avenir, les taux longs baisseront immédiatement, ce qui pourrait même induire une expansion à court terme de la production. Néanmoins, les contractions budgétaires expansionnistes de ce type sont exceptionnellement rares, et les programmes étudiés n’en prévoient aucune. |
| JEL: | E17 E37 E62 |
| Date: | 2012–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:933-en&r=pbe |
| By: | Augustin Kwasi Fosu; Yoseph Yilma Getachew; Thomas Ziesemer |
| Abstract: | How much does public capital matter for economic growth? How large should it be? This paper attempts to answer these questions, taking the case of SSA countries. It develops and estimates a model that posits a nonlinear relationship between public investment and growth, to determine the growth-maximizing public investment GDP share. It empirically also accounts for the crowding-in and crowding-out effects between public and private investment, with equations estimated separately and simultaneously, using System GMM. The paper further runs simulation and examines the public investment GDP share that maximizes consumption. This is estimated to be between 8.4 percent and 11.0 percent. The results from estimating the growth model are in the middle of this range, which is larger than the observed value of 7.2 percent at the end of the sample period. These outcomes suggest that, on average, there has been public under-investment in Africa, contrary to previous findings. |
| Keywords: | Public investment; Economic Growth; Nonlinearity |
| JEL: | O4 H4 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2011-22&r=pbe |
| By: | Raza, Syed Ali; Ali, Syed Adeel; Abassi, Zia |
| Abstract: | This study investigates to explore the effect of Corporate Income Tax and Firms’ Size on Capital Investment made in tangible assets by the Manufacturing firms belongs to nine non-financial sectors listed in Karachi Stock Exchange. To examine the study Panel financial Data on annual basis has been gathered for the period of six years from 65 sample manufacturing companies. To determine the effect of two predictors as Corporate income tax and Firms’ Size on Fixed investment the results are generated by using multiple regression analysis as a statistical technique with the help of multiple Statistical tools for high accuracy of outcomes. The results conclude that there is a negative relationship exists between corporate income tax and investment while firm size and investment reveals a positive relationship with each other. Therefore, it has been cleared in the light of above results that excess tax obligations in a firm specific sector will discourage corporate investor for investment in it. On the other hand enhancement in firm size as total sales revenue will increase the level of investment in a KSE listed firm and vice versa for developed hypothesis. |
| Keywords: | Corporate income tax; Firms’ size; Capital investment; Statistical analysis system |
| JEL: | E62 J21 |
| Date: | 2011–09–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36800&r=pbe |
| By: | Augustin Kwasi Fosu (UNU-WIDER); Yoseph Yilma Getachew (Durham Business School); Thomas Ziesemer (Maastricht University) |
| Abstract: | How much does public capital matter for economic growth? How large should it be? This paper attempts to answer these questions, taking the case of SSA countries. It develops and estimates a model that posits a nonlinear relationship between public investment and growth, to determine the growth-maximizing public investment GDP share. It empirically also accounts for the crowding-in and crowding-out effects between public and private investment, with equations estimated separately and simultaneously, using System GMM. The paper further runs simulation and examines the public investment GDP share that maximizes consumption. This is estimated to be between 8.4 percent and 11.0 percent. The results from estimating the growth model are in the middle of this range, which is larger than the observed value of 7.2 percent at the end of the sample period. These outcomes suggest that, on average, there has been public under-investment in Africa, contrary to previous findings |
| Keywords: | Public investment; Economic Growth; Nonlinearity |
| JEL: | H4 |
| Date: | 2012–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:dur:durham:2012_03&r=pbe |
| By: | Lory Barile |
| Abstract: | The aim of this work is to analyze tax evasion as a factor that potentially affects internal control of firms as an application of the Chen and Chu’s model (2005). For this purpose an experimental approach was employed. Treatments varied depending on whether agents were assumed to be risk-neutral or risk-averse. According to the gift-exchange game (Fehr et al., 1993), results show a positive relationship between wages offered by principal and efforts provided by agents. In general, higher wages lead to more costly effort provision. However, when evasion and risk aversion are introduced in the analysis individuals show opportunistic behaviors and they seem to be less willing to cooperate for the wealth of the firm. |
| Keywords: | tax evasion, firms, reciprocity, labor market. |
| JEL: | C90 C91 H26 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:usi:labsit:039&r=pbe |
| By: | Huixin Bi; Eric M. Leeper; Campbell B. Leith |
| Abstract: | The paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition are uncertain. Drawing on the evidence in Alesina and Ardagna (2010), we emphasize whether or not the fiscal consolidation is driven by tax rises or expenditure cuts. We find that the composition of the fiscal consolidation, its duration, the monetary policy stance, the level of government debt and expectations over the likelihood and composition of fiscal consolidations all matter in determining the extent to which a given consolidation is expansionary and/or successful in stabilizing government debt. |
| JEL: | E3 E31 E52 E62 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17844&r=pbe |