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on Public Economics |
| By: | Pia Rattenhuber |
| Abstract: | Empirical evidence so far found ambiguous results for the direction of effect of marginal income tax rates on employee remuneration. Based on the GSOEP data from 2002 through 2008 this study analyzes the impact of the marginal tax load on the employee side on the wage rate also allowing average tax rates and employer payroll taxes to play a role. Instrumental variable estimation based on counterfactual tax rates simulated in a highly detailed microsimulation model (STSM) heals the endogeneity problem of the tax variables with regard to wages. Estimations in first differences show that marginal taxes overall have a negative impact on wages. But this effect is not uniform along the wage distribution; while the negative effect of marginal tax rates prevails in the lower part of the distribution, observations beyond the median benefit from higher tax rates at the margin. |
| Keywords: | Marginal tax rates, tax structure, simulated instrumental variables |
| JEL: | H22 H24 C26 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1193&r=pbe |
| By: | Giampaolo Arachi (Deparment of Economics and Mathematical Statistics, University of Salento); Valeria Bucci (Deparment of Economics and Mathematical Statistics, University of Salento); Ernesto Longobardi (Department of Economics and Quantitative Methods, University of Bari); Paolo Panteghini (Department of Economics, University of Brescia); Maria Laura Parisi (Department of Economics, University of Brescia); Simone Pellegrino (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy); Alberto Zanardi (Department of Economics, University of Bologna) |
| Abstract: | In this paper we aim to discuss the strengths and weaknesses of the fiscal consolidation package adopted recently by the Italian Government in order to achieve a balanced budget by 2013. Revenues are forecasted to increase by more than 3.3 GDP percentage points; these stem mostly from indirect and property taxation. The analysis of the Italian case is interesting since it seems to be consistent with a recent strand of the literature which, in order to foster both short and long-term economic growth, advocated a shift of the tax burden from capital and labour income to consumption and property. Through a set of micro simulation models, this paper evaluates the effects of the Italian fiscal package on households and firms. We show that, in respect of households’ income, indirect and property tax reforms are highly regressive, whilst the reform makes limited resources available for growth enhancing policies (reduction in the effective corporate tax burden). Then, we propose an alternative fiscal package. We show that a less regressive reform on households can be obtained by shifting taxation from personal and corporate income tax to indirect taxation. Our proposal allows the tax burden on firms to be reduced substantially and, in the meantime, offers lower personal income tax rates on households in the lowest deciles of income distribution since they are penalized most by the increase in indirect taxation. |
| Keywords: | Tax reforms, Fiscal consolidation, Micro simulation models, Italy |
| JEL: | H2 D22 D31 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:tur:wpapnw:2&r=pbe |
| By: | Estrada, Fernando |
| Abstract: | The paper aims to describe the evolution part of the economy and power to tax in Colombia. It also explains the failure of the government and the problems that have expanded public sector expenditures. Furthermore, we identify the aspects of political economy have influenced the evolution of the state. Describes why fiscal conditions in Colombia have affected distributive justice and social rights. |
| Keywords: | Power tax; fiscal policy; Colombia; state; Justice Fairness |
| JEL: | E62 D63 D6 H2 E63 E6 H23 E64 D71 D61 D72 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37080&r=pbe |
| By: | Yutao Han (CREA, Université du Luxembourg); Patrice Pieretti (CREA, Université du Luxembourg); Skerdilajda Zanaj (CREA, Université du Luxembourg); Benteng Zou (CREA, Université du Luxembourg) |
| Abstract: | This paper analyzes the impact of foreign investments on a small country's economy in the context of international competition. To that end, we model tax and infrastructure competition within a differential game framework between two unequally sized countries. The model accounts for the widely recognized characteristic that small states are more flexible in their political decision making than larger countries. However, we also acknowledge that small size is associated with limited institutional capacity in the provision of public goods. The model shows that the long-term outcome of international competition crucially depends on the degree of capital mobility. In particular, we show that flexibility mitigates against - but does not eliminate - the likelihood of collapse in a small economy. Finally, we note that the beneficial effect of flexibility in a small state increases with its inefficiency in providing public infrastructure and with the degree of international openness. |
| Keywords: | Tax/Infrastructure competition, Open-loop/Markovian strategies, Differential games |
| JEL: | H25 H73 O30 O43 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:460&r=pbe |
| By: | Sonja Brangewitz (Institute of Mathematical Economics, Bielefeld University); Sarah Brockhoff (Department of Business Administration and Economics, Bielefeld University) |
| Abstract: | This paper analyzes the stability of capital tax harmonization agreements in a stylized model where countries have formed coalitions which set a common tax rate in order to avoid the inefficient fully non-cooperative Nash equilibrium. In particular, for a given coalition structure we study to what extend the stability of tax agreements is affected by the coalitions that have formed. In our set-up, countries are symmetric, but coalitions can be of arbitrary size. We analyze stability by means of a repeated game setting employing simple trigger strategies and we allow a sub-coalition to deviate from the coalitional equilibrium. For a given form of punishment we are able to rank the stability of different coalition structures as long as the size of the largest coalition does not change. Our main results are: (1) singleton regions have the largest incentives to deviate, (2) the stability of cooperation depends on the degree of cooperative behavior ex-ante. |
| Keywords: | capital tax competition, tax coordination, coalitional equilibria, repeated game |
| JEL: | C71 C72 H71 H77 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:461&r=pbe |
| By: | Jappelli, T.; Padula, M.; Pica, G. |
| Abstract: | This study surveys the existing debate on the taxation of the intergenerational transfers. Understanding the effect of transfer taxes on the intergenerational transmission of wealth requires answering the difficult question of what is the effect of taxes on bequest. On the one hand, the economic literature is far from sharing a unanimous view on the exact nature of the motive to leave bequests. On the other, data problems, and in particular lack of data on donors, makes it hard to provide conclusive evidence on the matter. To put the debate in context, we review the legislation on the taxation of intergenerational transfers in several OECD countries. Institutional arrangements on estate taxations vary widely between countries. Despite such heterogeneity, the revenues from taxing intergenerational transfers are generally low, and decreasing from 1% in the mid-sixties to 0.4% after 1980. We take this trend as broadly indicative that little redistribution takes place through taxation of intergenerational transfers. The available evidence and the related theoretical issues make it hard to establish a causal link between the increase in wealth and income inequality and the vanishing transfer tax. |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:aia:ginidp:dp21&r=pbe |