nep-pbe New Economics Papers
on Public Economics
Issue of 2012‒03‒21
eight papers chosen by
Keunjae Lee
Pusan National University

  1. Fiscal Zoning, Sales Taxes, and Employment: Do Higher Sales Taxes Lead to More Jobs in Retailing and Fewer Jobs in Manufacturing? By Burnes, Daria; Neumark, David; White, Michelle J.
  2. Aid and Government Fiscal Behaviour: What Does the Evidence Say? By Morrissey, Oliver
  3. Tax and the city: A theory of local tax competition and evidence for Germany By Janeba, Eckhard; Osterloh, Steffen
  4. Quantifying the role of federal and state taxes in mitigating wage inequality By Daniel H. Cooper; Byron F. Lutz; Michael G. Palumbo
  5. Government expenditure and economic development: empirical evidence from Nigeria By Muritala, Taiwo; Taiwo, Abayomi
  6. Labour Supply and Taxes: New Estimates of the Responses of Wives to Husbands’ Wages By Benoit Dostie
  7. Fiscal multipliers over the growth cycle : evidence from Malaysia By Rafiq, Sohrab; Zeufack, Albert
  8. The Global Financial Crisis : Countercyclical Fiscal Policy Issues and Challenges in Malaysia, Indonesia, the Philippines, and Singapore By Anita Doraisami

  1. By: Burnes, Daria (University of California, Irvine); Neumark, David (University of California, Irvine); White, Michelle J. (University of California, San Diego)
    Abstract: We test the hypothesis that local government officials in jurisdictions that have higher local sales taxes are more likely to use fiscal zoning to attract retailing. We find that total retail employment is not significantly affected by local sales tax rates, but employment in big box and anchor stores is higher significantly in jurisdictions with higher sales tax rates. This suggests that local officials in jurisdictions with higher sales tax rates concentrate on attracting large stores and shopping centers. We also find that the effect of local sales taxes on big box and anchor store retail employment is larger in county interiors, where residents tend to be captive to local retailers. Finally, fiscal zoning has the opposite effect on manufacturing employment, suggesting that local officials' efforts to attract shopping centers and large stores crowd out manufacturing.
    Keywords: fiscal zoning, sales taxes, retail employment, manufacturing employment
    JEL: R3 R5 J2 H2
    Date: 2012–02
  2. By: Morrissey, Oliver
    Abstract: Donors are concerned about how their aid is used, especially how it affects fiscal behaviour by recipient governments. This study reviews the recent evidence on the effects of aid on government spending and tax effort in recipient countries, concluding with a discussion of when (general) budget support is a fiscally efficient aid modality. Severe data limitations restrict inferences on the relationship between aid and spending, especially as the government is not aware of all the aid available to finance the provision of public goods. Three generalizations are permitted by the evidence: aid finances government spending; the extent to which aid is fungible is over-stated and even where it is fungible this does not appear to make the aid less effective; and there is no systematic effect of aid on tax effort. Beyond these conclusions the fiscal effects of aid are country-specific.
    Keywords: Aid, fiscal effects, fungibility, government spending, taxation
    Date: 2012
  3. By: Janeba, Eckhard; Osterloh, Steffen
    Abstract: Despite the well-developed empirical literature on local tax competition, little is known about the actual spatial structure of inter-municipal competition. Assuming that competition takes place only among neighbours (as in the empirical literature) is at odds with the theoretical approaches where all jurisdictions compete simultaneously. In this paper we use a survey conducted among mayors in the German state of Baden-Württemberg to show that the perceived intensity of competition for firms varies considerably between jurisdictions and can mainly be explained by the size and location of the jurisdiction. Based on these findings, we develop a sequential tax competition model in which urban centres compete with other urban centres and rural jurisdictions in their own neighbourhood. This model predicts that larger jurisdictions do not necessarily rely more on capital taxes; in case they face strong competition with more distant competitors, larger cities even have lower capital taxes. In addition, we discuss how the model compares to a standard simultaneous approach and show that results from our sequential model are in line with trends in local taxation in Baden-Württemberg. --
    Keywords: Local tax competition,survey,intensity of competition,asymmetric tax competition
    JEL: H71 H73 H77
    Date: 2012
  4. By: Daniel H. Cooper; Byron F. Lutz; Michael G. Palumbo
    Abstract: Wage inequality has risen dramatically in the United States since at least 1980. This paper quantifies the role that the tax policies of the federal and state governments have played in mitigating wage inequality. The analysis, which isolates the contribution of federal taxes and state taxes separately, employs two approaches. First, cross-sectional estimates compare before-tax and after-tax inequality across the 50 states and the District of Columbia. Second, inequality estimates across time are calculated to assess the evolution of the effects of tax policies. The results from the first approach indicate that the tax code reduces wage inequality substantially in all states. On average, taxes reverse approximately the last two decades of growth in wage inequality. Most of this compression of the income distribution is attributable to federal taxes. Nevertheless, there is substantial cross-state variation in the extent to which state tax policies compress the income distribution. Cross-state differences in gasoline taxes have a surprisingly large impact on income compression, as do sales tax exemptions for food and clothing. The results of the second approach indicate that the mitigating influence of tax policy on wage inequality has increased very modestly since the early 1980s. The increase is due to the widening of the pre-tax wage distribution interacting with a progressive tax structure. In contrast, legislated tax changes over this period decreased income compression somewhat.
    Date: 2012
  5. By: Muritala, Taiwo; Taiwo, Abayomi
    Abstract: This study attempts to empirically examine the trends as well as effects of government spending on the growth rates of real GDP in Nigeria over the last decades (1970-2008) using econometrics model with Ordinary Least Square (OLS) technique. The paper test for presence of stationary between the variables using Durbin Watson unit root test. The result reveals absence of serial correlation and that all variables incorporated in the model were non-stationary at their levels. In an attempt to establish long-run relationship between public expenditure and economic growth, the result reveals that the variables are co integrated at 5% and 10% critical level. The findings show that there that there is a positive relationship between real GDP as against the recurrent and capital expenditure. It could therefore be recommended that government should promote efficiency in the allocation of development resources through emphasis on private sector participation and privatization\commercialization.
    Keywords: Current expenditure; capital expenditure; macroeconomics; economic development
    JEL: E62 B22 O16
    Date: 2011
  6. By: Benoit Dostie (IEA, HEC Montréal)
    Abstract: In this paper, we estimate income- and substitution- labour supply and participation elasticities for Canadian married women using data from the Survey of Labour and Income Dynamics 1996-2005. We use the Canadian Tax and Credit Simulator (CTaCS) and detailed information on the structure of income at the household level to compute the marginal tax rates faced by each individual. We then use these marginal tax rates to compute net own-wage, spouse-wage, and non-labour income. We show how the magnitude of the estimated elasticities varies depending on whether net or gross wages and income are used in the estimation procedure, and quantify biases caused by using average instead of marginal tax rates. Finally, because marginal tax rates vary significantly over the sample, we use quantile regressions to compare elasticities at different points of the hours distribution. Overall, our results show that public policies now have, on average, less scope for influencing hours of work than 10 years ago. However, the quantile results show that wives working fewer hours per week are more sensitive to changes in their own or spouses’ wages.
    Date: 2012–02
  7. By: Rafiq, Sohrab; Zeufack, Albert
    Abstract: This paper explores the stabilisation properties of fiscal policy in Malaysia using a model incorporating nonlinearities into the dynamic relationship between fiscal policy and real economic activity over the growth cycle. The paper also investigates how output multipliers for government purchases may alter for different components of government spending. The authors find that fiscal policy in Malaysia has become increasingly pro-cyclical over the last 25 years and establish that the size of fiscal multipliers tend to change over the growth cycle. A 1 Malaysian Ringgit rise in government (investment) spending leads to a maximum output multiplier of around 2.7 during growth recessions, and around 2 in normal times. The returns to government spending in Malaysia are greater when the focus is on public investment, as opposed to consumption. Changes in tax policy are less effective in stimulating economic activity than direct government spending. These results provide empirical backing to conjectures in the recent literature implying that procyclicality in fiscal policy reduces the effectiveness of fiscal actions in emerging markets.
    Keywords: Debt Markets,Consumption,Public Sector Expenditure Policy,Economic Theory&Research,Public Sector Economics
    Date: 2012–03–01
  8. By: Anita Doraisami (Asian Development Bank Institute (ADBI))
    Abstract: Several countries have employed countercyclical fiscal policy to ameliorate the impact of the global financial crisis. This study identifies some of the issues and policy implications associated with this policy response in developing countries. Included are case studies of four developing countries in the Asian region—Malaysia, Indonesia, the Philippines, and Singapore. The findings point to a rich diversity in both the size and composition of fiscal stimulus and the challenges which are confronted. This study suggests several steps that countries might take to improve the impact of expansionary fiscal policy in response to future downturns. These include (i) embedding automatic stabilizing impulses through the provision of social safety nets; (ii) increasing tax revenues collected from personal and corporate taxes, by reducing labor market informality through improvements in the business environment; (iii) safeguarding fiscal sustainability; (iv) rebalancing growth by strengthening other sectors of the economy; (v) reducing expenditures on subsidies; and (vi) ensuring smooth and efficient budget execution.
    Keywords: global financial crisis, Countercyclical Fiscal Policy, Malaysia, the the Philippines, and Singapore
    JEL: E60 E61 E62 E63
    Date: 2011–06

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