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on Public Economics |
| By: | Kappeler , Andreas (European Investment Bank); Solé-Ollé, Albert (University of Barcelona); Stephan, Andreas (Jönköping International Business School); Välilä, Timo (European Investment Bank) |
| Abstract: | The aim of this paper is to analyze the effect of revenue decentralization on the provision of infrastructure at the sub-national level. We estimate the effects of revenue decentralization and earmarked grant financing on the level of sub-national infrastructure investment in 20 European countries over the period 1990-2009. The results are interpreted in light of the predictions of the theory on fiscal federalism. We find that it is sub-national infrastructure investment that increases after revenue decentralization and not investment in redistribution. However, the effect of revenue decentralization is lower the higher the use of earmarked grants to fund infrastructure investment. |
| Keywords: | Regional investment; fiscal federalism; dynamic panel data |
| JEL: | C23 H54 H76 H77 |
| Date: | 2012–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0273&r=pbe |
| By: | Shun-ichiro Bessho (Faculty of Economics, Keio University); Masayoshi Hayashi (Faculty of Economics, University of Tokyo) |
| Abstract: | This paper evaluates the 1999 national income tax reform in Japan by comparing the social marginal costs of public funds (SMCFs) for changing the marginal tax rates in different income brackets before the reform occurred. To do so, we estimate the discrete choice model of labor supply using a data set of Japanese households in 1997 derived from the Employment Status Survey. We obtain an analog of the SMCF that allows for labor supply responses along both the intensive and the extensive margins on an individual basis. We generate such SMCFs using a micro-simulation method that utilizes the discrete choice model estimates for household preferences. Based on the simulated SMCFs evaluated using various distributional weights, we find that the value of the SMCF for a 1% increase in the marginal tax rate in any given income bracket decreases as the bracket moves from the bottom to the top. This finding suggests that the national government should have made the Japanese income tax system more progressive rather than less progressive as carried out in the 1999 reform. </table> |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2012cf848&r=pbe |
| By: | José María Durán-Cabré (Universitat de Barcelona & IEB); Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Luca Salvadori (Universitat de Barcelona & IEB) |
| Abstract: | Tax auditing parameters have been largely overlooked by the literature as policy-making instruments of any relevance; however, enforcement strategies are critical elements of the tax burden. In this paper we show that, in a federal framework, tax auditing policies can serve as additional tools for regional interaction. We examine the presence of this interaction by adopting a spatial econometric approach. We employ a time-space recursive model that accounts for sluggish adjustment in auditing policies and obtain results that are congruent with standard theory, corroborating the presence of horizontal competition between regions in their tax auditing policies. We also find that once regional governments acquire legal power, the opaque competition in enforcement policies disappears apparently switching to a more transparent competition in statutory tax parameters. |
| Keywords: | Tax administration and auditing, fiscal competition, fiscal federalism |
| JEL: | H71 H77 H83 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2012/3/doc2012-5&r=pbe |
| By: | Nadia Fiorino (Dipartimento di Sistemi e Istituzioni per l’Economia, Università de l’Aquila); Emma Galli (Dipartimento di Scienze Sociali, Università di Roma “La Sapienza”); Fabio Padovano (CREM-CNRS, Université de Rennes 1 and DIPES, Università Roma Tre) |
| Abstract: | Are countries characterized by more decentralized fiscal and spending powers less corrupt? Or is a higher degree of government fragmentation a more effective way to deter corruption? Is there any evidence that these alternative ways to enhance government accountability reinforce each other? This paper tries to answer these questions by using several indicators of government fragmentation and fiscal decentralization for a panel of 23 countries in the 1995-2007 time interval. Taken separately, while various measures of government fragmentation do not seem to affect corruption in any significant way, fiscal decentralization measured as fiscal and spending autonomy does seem to reduce corruption. This latter effect is reinforced if fiscal decentralization is combined with a high degree of government fragmentation at the local level. The results appear robust to different specifications of the empirical model. |
| Keywords: | decentralization, common pool, fiscal autonomy, government fragmentation, corruption |
| Date: | 2012–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1217&r=pbe |
| By: | d'Agostino, Giorgio; Dunne, Paul J.; Pieroni, Luca |
| Abstract: | This paper considers the effects of corruption and government spending on economic growth. It starts from an endogenous growth model and extends it to account for the detrimental effects of corruption on the potentially productive components of government spending, namely military and investment spending. The resulting model is estimated on a sample of African countries and the results show, first, that the growth rate is strongly influenced by the interaction between corruption and military burden, with the interaction between corruption and government investment expenditure having a weaker effect. Second, allowing for the cyclical economic fluctuations in specific countries leaves the estimated elasticities close to those of the full sample. Third, there are significant conditioning variables that need to be taken into account, namely the form of government, political instability and natural resource endowment. These illustrate the cross country heterogeneity when accounting for quantitative direct and indirect effects of key variables on economic growth. Overall, these findings suggest important policy implications. |
| Keywords: | corruption; military spending; development economics; panel data; Africa |
| JEL: | D73 H5 O57 |
| Date: | 2012–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:38109&r=pbe |
| By: | E. C. Hwa; Heng-fu Zou |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:547&r=pbe |
| By: | Andrew C. Pickering (University of York); James Rockey (University of Leicester) |
| Abstract: | This paper analyzes the impact of ideology on the size of US state governments. Following Pickering and Rockey (2011) this impact is hypothesized to increase with mean state income. This idea is tested using state-level ideology data derived from the voting behavior of state congressional representatives. Empirically the interaction of ideology and mean income is a key determinant of state government size. At 1960s levels of income the impact of ideology is negligible. At 1997 levels of income a one standard-deviation move towards the left of the ideology spectrum increases state government size by about half a standard deviation. Estimated income elasticities differentiated by state and time are found to be increasing with ideology and diminishing with income, as predicted by the theory. |
| Keywords: | Ideology, Wagner's law, size of government |
| JEL: | D72 H10 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2012/3/doc2012-6&r=pbe |
| By: | Fujita, Yasuo |
| Abstract: | This paper discusses policy issues pertaining to infrastructure development in low income countries (LICs) in Asia. Infrastructure challenges in Asian LICs have not been adequately highlighted to date mainly because the international focus has often been on African LICs and because large countries such as China, India, and Indonesia attracted more interest among the developing Asian countries. While Asian LICs have sought to improve their infrastructure over the years, the quality and quantity is generally insufficient although significant variations exist between countries and sectors. Since their fiscal space and governmental capacities are limited despite large investment needs, each possible infrastructure investment must be placed in order of priority. In Asian LICs, spatially connective infrastructure (including logistics, telecommunications, and electricity) should be given priority to generate benefits from economies of agglomeration, fragmentation of production activities, and better connectivity to fast-growing large markets, although the trade-off between economic efficiency and spatially balanced growth is a difficult issue. Particularly, some large Asian LICs have great potential to become part of sophisticated regional production networks through effective infrastructure. Climate change, both the adaptation of infrastructure and mitigation through green development, also needs to be sufficiently taken into account or mainstreamed. The fact that the investment in public private partnerships (PPP) projects in infrastructure has recently been increasing in Asian LICs is encouraging. To scale up PPP, Asian LIC governments should clarify the contributions of the private sector (in such aspects as capital investment and operational efficiency), continue to improve the investment climate, policies, and regulations, and prepare bankable projects in which the roles of the public and private sectors are defined. The public sector will continue to be the main provider and regulator of infrastructure in Asian LICs. Although public sector performance should improve, there has been no single blueprint for it, and therefore country-specific approaches are called for. Donors should continue to support Asian LICs in scaling up infrastructure investment through project-financing, technical assistance, and capacity development. Keywords: Infrastructure, low income country, economic integration. |
| Keywords: | Infrastructure, low income country , economic integration , public private partnership , climate change |
| Date: | 2012–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:jic:wpaper:40&r=pbe |
| By: | Ruud A. de Mooij; Michael Keen |
| Abstract: | This paper focuses on two core tax design issues that arise in addressing current fiscal challenges. It first explores the idea, prominent in troubled Eurozone countries, of a "fiscal devaluation": shifting from social contributions to the VAT as a way to mimic a nominal devaluation. Empirical evidence is presented which suggests that in Eurozone countries this may indeed improve the trade balance in the short-run, though, as theory predicts, the effects eventually disappear. The paper then assesses the wider scope for VAT reform in meeting fiscal consolidation needs, developing and beginning to apply a methodology for finding additional VAT revenue in ways less distortionary and fairer than further raising the standard rate. |
| Keywords: | Europe , Fiscal consolidation , Taxation , Value added tax , |
| Date: | 2012–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:12/85&r=pbe |
| By: | Hamaguchi, Nobuaki |
| Abstract: | Using the district-level data, we found that even in a relatively poor country like Kenya, ethnic diversity is associated with better economic outcomes at local level. However, we found that income spillovers depend on ethnic similarity. This suggests the influence of ethnic bias through which ethnic diversity may undermine economic efficiency at the national-level, as many crosscountry regressions have pointed out. This result implies, for policy making, that the question of interregional transaction costs cannot be narrowly focused on problems of transportation infrastructure but it is also related with ethnic divisions in African context. |
| Keywords: | ethnic bias , spatial correlation , regional economy |
| Date: | 2011–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:jic:wpaper:35&r=pbe |
| By: | James C. Cox |
| Abstract: | null |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2012-06&r=pbe |
| By: | Kessing, Sebastian G. (University of Siegen); Strozzi, Chiara (University of Modena and Reggio Emilia) |
| Abstract: | We analyze the optimal regional pattern of public employment in an information-constrained second-best redistribution policy showing that regionally differentiated public employment can serve as an expenditure side tagging device, bypassing or relaxing the equity-efficiency trade-off. The optimal pattern exhibits higher levels of public employment in low productivity regions and is more pronounced the higher is the degree of regional inequality within the country. Empirically, using a panel of European regions from 1995-2007, we find evidence that public employment is systematically higher in low productivity regions. The latter effect is stronger in countries with higher levels of regional inequality. |
| Keywords: | public employment, redistribution, regional inequality, European regions |
| JEL: | H11 J45 R12 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6449&r=pbe |
| By: | Noritaka Maebayashi (Graduate School of Economics, Osaka University); Takeo Hori (College of Economics, Aoyama Gakuin University); Koichi Futagami (Graduate School of Economics, Osaka University) |
| Abstract: | We construct an endogenous growth model with productive public capital and government debt when government debt is adjusted to the target level. We examine how reducing public debt in an economy with a large public debt affects the transition of the economy and welfare. We find that the government faces the following trade off when reducing its debt. In the short run, public investment is reduced to decrease the debt and this has a negative effect on welfare. However, as the interest payments on the debt decrease, public investment begins to increase. Eventually, the government can increase the amount of public investment by more than before. This has a positive effect on welfare, implying that reducing the debt is welfare improving. Furthermore, we find that the adjustment speed of reductions in debt affects welfare crucially. The relationships between the welfare gains and the adjustment speed are U-shaped in many cases. However, they are decreasing monotonically when the tax rate is low and the initial debt?GDP ratio is sufficiently large. |
| Keywords: | Reductions in public debt, Debt policy rule, Public capital, Endogenous Growth |
| JEL: | E62 H54 H63 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1207&r=pbe |
| By: | Jing Jin; Chunli Shen; Qian Wang; Heng-fu Zou |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:546&r=pbe |