nep-pbe New Economics Papers
on Public Economics
Issue of 2013‒04‒20
27 papers chosen by
Keunjae Lee
Pusan National University

  1. The Growth Effects of Tax Rates in the OECD By Gemmell, Norman; Kneller, Richard; Sanz, Ismael
  2. A Reality Check for BC: The Impact of Behavioural Responses on the 2013 Budget's Proposed Income Tax Increases By Alex Laurin
  3. On the desirability of tax coordination when countries compete in taxes and infrastructure By Yutao Han; Patrice Pieretti; Benteng Zou
  4. Income inequality and the tax structure: Evidence from developed and developing countries By Adam, Antonis; Kammas, Pantelis; Lapatinas, Athanasios
  5. The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An Overview By Nora Lustig; Carola Pessino; John Scott
  6. Tax Competition Leading to Strict Environmental Policy By Cees Withagen; Alex Halsema
  7. The Geography of Inequality: Difference and Determinants of Wage and Income Inequality across US Metros By Florida , Richard; Mellander , Charlotta
  8. Fiscal Reforms, Fiscal Rule and Development Spending: How Indian States have Performed? By Chakraborty, Pinaki; Dash, Bharatee Bhusana
  9. Asymmetric international transport costs and tax competition: the influence of a third country By Kyoko Hirose; Kazuhiro Yamamoto
  10. Fair inheritance taxation in the presence of tax planning By Wrede, Matthias
  11. Fiscal Policy and Regional Business Cycle Fluctuations in Japan By Miyazaki, Tomomi
  12. Subnational fiscal policy in large developing countries : some lessons from the 2008-09 crisis for Brazil, China and India By Fardoust, Shahrokh; Ravishankar, V.J.
  13. Endogenous altruism, redistribution, and long term care By Cremer, Helmuth; Gahvari, Firouz; Pestieau, Pierre
  14. Measuring Impoverishment: An Overlooked Dimension of Fiscal Incidence By Sean Higgins; Nora Lustig
  15. Corporate Taxation and US MNCs: Ensuring a Competitive Economy By Gary Clyde Hufbauer; Martin Vieiro
  16. Fiscal Policies and Asset Prices By Thien Nguyen; Lukas Schmid; Howard Kung; Mariano Croce
  17. What Gives? Household Consumption Patterns and the 'Big Trade Off' with Public Consumption By Francesca Bastagli; John Hills
  18. Corporate Taxation and Productivity Catch-Up: Evidence from European firms By Gemmell, Norman; Kneller, Richard; McGowan, Danny; Sanz, Ismael; Sanz-Sanz, José F.
  19. Unexpected Consequences of Ricardian Expectations By Schlicht, Ekkehart
  20. Does the economic integration of China affect growth and inflation in industrial countries? By Christian Dreger; Yanqun Zhang
  21. Fiscal sustainability in South Africa: Will history repeat itself? By Estian Calitz; Stan du Plessis; Krige Siebrits
  22. Municipal Capitalism: from State to Mixed Ownership in Local Public Services Provision By Boggio, Margherita
  23. Redistributive Taxation in a Partial Insurance Economy By Kjetil Storesletten; Gianluca Violante; Jonathan Heathcote
  24. Decreasing returns, patent licensing and price-reducing taxes By Sen, Debapriya; Stamatopoulos, Giorgos
  25. US Government Spending Allocation Database by State (SADS) By Islam, Asif M.
  26. Inequality and happiness: When perceived social mobility and economic reality do not match By Bjørnskov, Christian; Dreher, Axel; Fischer, Justina A. V.; Schnellenbach, Jan; Gehring, Kai
  27. Inequality and Crime Rates in China By Tsun Se Cheong; Yanrui Wu

  1. By: Gemmell, Norman; Kneller, Richard; Sanz, Ismael
    Abstract: The literature testing for aggregate impacts of taxes on long-run growth rates in the OECD has generally used tax rate measures constructed from macroeconomic aggregates such as tax revenues. These have a number of advantages but two major disadvantages: they are typically average, rather than marginal, rates, and are constructed from endogenous tax revenues. Theory predicts a number of responses to both average and marginal tax rates, but empirical analogues of the latter tend to be at the micro level. In addition though most OECD economies are best regarded as small open economies, previous macroeconomic tests of OECD tax-growth relationships have implicitly been based on closed-economy models, focusing on domestic tax rates. This paper explores the relevance of these two aspects – "macro average‟ versus "micro marginal‟ tax rates, and open economy dimensions – for test of tax-growth effects in OECD countries. We use annual panel data on a number of average and marginal tax rate measures and find: (i) statistically small and/or non-robust effects of macro-based average tax rates on capital income and consumption but more evidence for average labor income tax effects; (ii) statistically robust GDP growth effects of modest size from changes in marginal income tax rates at both the personal and corporate levels; (iii) international tax competition, in which both domestic and foreign corporate tax rates play a role, is consistent with the data; (iv) tax effects on GDP growth appear to operate largely via impacts on factor productivity rather than factor accumulation.
    Keywords: marginal tax rates, average tax rates, personal tax, corporate tax, GDP growth,
    Date: 2013–04–11
  2. By: Alex Laurin (C.D. Howe Institute)
    Abstract: The 2013 British Columbia budget proposes a temporary 2.1 percentage point tax-rate increase on individual taxpayers earning more than $150,000, and a permanent 1 percentage point hike in the corporate income tax rate. Individual and corporate taxpayers will adjust their behaviour in response to the tax hikes, imposing economic costs and leading to tax revenues falling short of expectations. In the near term, personal tax revenues could disappoint by as much as 40 percent. In the long term, BC’s corporate income tax revenues may fall below the level they would have been without the tax increases. Less economically damaging tax reforms – such as the recently rejected Harmonized Sales Tax (HST), progressive property taxation, carbon tax increases, or lower tax expenditures – should be considered. As a matter of course, governments should disclose the extent to which their estimates for tax revenues after policy changes incorporate potential behavioural responses – if any.
    Keywords: Fiscal Policy and Tax Competitiveness
    JEL: H2 H21
  3. By: Yutao Han (CREA, Université du Luxembourg); Patrice Pieretti (CREA, Université du Luxembourg); Benteng Zou (CREA, Université du Luxembourg)
    Abstract: In our paper, we demonstrate that when countries compete in taxes and infrastructure, coordination through a uniform tax rate or a minimum rate does not necessarily create the welfare effects observed under pure tax competition. The divergence is even worse when the competing jurisdictions differ in institutional quality. If tax revenues are used to gauge the desirability of coordination, our model demonstrates that imposing a uniform tax rate is Pareto-inferior to the non-cooperative equilibrium when countries compete in taxes and infrastructure. This result is completely reversed under pure tax competition if the countries are sufficiently similar in size. If a minimum tax rate is set within the range of those resulting from the non-cooperative equilibrium, the low tax country will never be better off. Finally, the paper demonstrates that the potential social welfare gains from tax harmonization crucially depend on the degree of heterogeneity among the competing countries.
    Keywords: Tax competition, infrastructure, tax coordination, tax revenue, social welfare
    JEL: H21 H87 H73 F21 C72
    Date: 2013–03
  4. By: Adam, Antonis; Kammas, Pantelis; Lapatinas, Athanasios
    Abstract: This paper seeks to examine the effect of income inequality on the structure of tax policies. We first use a simplified theoretical framework which allows us to formalize the testable implications of the relevant literature. Subsequently, our analysis indicates that more unequal economies rely heavier on capital relative to labor income taxation. This relationship remains robust across various alternative measures of income inequality and most importantly through alternative political regimes. In addition, our analysis places the spotlight on the potential reverse causality between income inequality and structure of the tax policies and seeks to address it by making use of the most appropriate data and techniques.
    Keywords: inequality, tax structure, redistribution
    JEL: H10 H23
    Date: 2013–04–12
  5. By: Nora Lustig (Department of Economics, Tulane University); Carola Pessino (School of Government and Executive Director, Centro de Investigaciones y Evaluación en Economía Social para el Alivio de la Pobreza, Universidad Torcuato Di Tella, Buenos Aires, Argentina); John Scott (CIDE (Centro de Investigación y Docencia Económicas), Mexico and,Consejero Académico, CONEVAL (Consejo Nacional de Evaluación de la Política de Desarrollo Social), Mexico)
    Abstract: How much redistribution and poverty reduction is being accomplished in Latin America through social spending and taxes? Standard fiscal incidence analyses applied to Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay yield the following results. Direct taxes and cash transfers reduce inequality and poverty by nontrivial amounts in Argentina, Brazil, and Uruguay, less so in Mexico and relatively little in Bolivia and Peru. While direct taxes are progressive, the redistributive impact is small because direct taxes as a share of GDP are low. Cash transfers are quite progressive in absolute terms except in Bolivia where programs are not targeted to the poor. In Bolivia and Brazil, indirect taxes almost completely offset the poverty-reducing impact of cash transfers. In-kind transfers in education and health reduce inequality in all countries by considerably more than cash transfers.
    Keywords: fiscal incidence, inequality, poverty, taxes, social spending, Latin America
    JEL: H22 I3 O1
    Date: 2013–04
  6. By: Cees Withagen; Alex Halsema
    Abstract: We study tax competition when pollution matters. Most notably we present a dynamic setting, where the supply of capital is endogenous. It is shown that tax competition may involve stricter environmental policy than the cooperative outcome.
    Keywords: environmental policy, race to the bottom, pollution taxation
    JEL: O13 O11 Q33
    Date: 2012
  7. By: Florida , Richard (University of Toronto); Mellander , Charlotta (Jönköping International Business School)
    Abstract: This paper examines the geographic variation in inequality, and it distinguishes between wage and income inequality. Wage inequality is associated with skills, human capital, technology and metro size - in line with the literature on skill-biased technical change. Income inequality is instead more closely associated with race, poverty, lower levels of unionization and lower taxes. This suggests that income inequality is a product not only of skill-biased technical change, but also of the enduring legacy of race and poverty at the bottom of the socio-economic order, as well as the unraveling of the post-war social compact between capital and labor.
    Keywords: inequality; income; wage; high-tech; skills
    JEL: J24 O10 O33 R00
    Date: 2013–04–12
  8. By: Chakraborty, Pinaki (National Institute of Public Finance and Policy); Dash, Bharatee Bhusana (National Institute of Public Finance and Policy)
    Date: 2013–04
  9. By: Kyoko Hirose (Faculty of Economics, Kyushu Sangyo University); Kazuhiro Yamamoto (Graduate school of Economics, Osaka University)
    Abstract: The purpose of this paper is to investigate the influence of a third country on the location of foreign direct investment (FDI). We focus on two determinants of FDI location. The first is the number of firms located in the third country. The second is the magnitude of demand for the good that the investing firm produces. We construct a three-country model, where two of the three countries are potential host countries and one has a geographic advantage in exports to the third country. Using this framework, we show that when the number of firms in the third country is sufficiently large, the farther (more distant) country is always the location of the plant. Furthermore, when the market size of the third country is large, it is possible for the nearer country to be the host country. In addition, we find that when the governments of the potential host countries use taxes or subsidies to attract FDI, the location of the firm investing is qualitatively the same as that without tax competition. However, the range over which the nearer country can attract the investing firm when tax competition is introduced is wider than otherwise. Finally, we reveal that when two potential host countries form a union that imposes a coordinated tax, the aggregate welfare of the union under the coordinated tax policy is higher than that under tax competition. However, conflict between the two countries may occur when the number of rival firms in the third country is neither too small nor too large.
    Keywords: transport costs, tax competition, regional coordination.
    JEL: F15 F23 H25
    Date: 2013–03
  10. By: Wrede, Matthias
    Abstract: This paper presents an analysis of the extent to which tax planning affects the level of the inheritance tax rate that is perceived to be fair. In a factorial survey conducted in Germany, tax planning was found to increase the fair tax rate by approximately 4 percentage points. The fair tax rate is determined by not only the size of the bequest, the relationship of the heir to the bequeather, and the type of bequest, but also by the perceived intentions of the bequeather. Families with pro-social motives should be taxed less than those without pro-social motives. The analysis described in this paper finds support in optimal tax theory. To this end, a simple model was developed that shows that taxation should not prevent individuals with warm-glow-of-giving motives from contributing substantially more to the social good than individuals who do not share these motives. --
    Keywords: tax planning,inheritance tax,fair taxation,warm glow of giving
    JEL: H21 H24 H26
    Date: 2013
  11. By: Miyazaki, Tomomi
    Abstract: This paper examines the relationship between fiscal policy and regional business cycle fluctuations in Japan. In particular, we focus on the effects of “discretionary” changes in public investment, a portion of investment unrelated to the current state of macroeconomic circumstances. The empirical results show that such types of public investment amplify regional business cycle fluctuations.
    Keywords: Public investment in Japan, Business cycle fluctuation, Volatility in the regional economy
    JEL: E32 E62 H30 H54 R53
    Date: 2013–03
  12. By: Fardoust, Shahrokh; Ravishankar, V.J.
    Abstract: In response to the Great Recession of 2008, many national governments implemented fiscal stimuli packages in 2009 and 2010 to prevent further declines in aggregate demand and to jump start their economic recovery. Where subnational governments responded with fiscal contraction, as in the United States, the impact was muted; where states/provinces also expanded expenditures, as in China and India, the impact was magnified. Increases in recurrent expenditure, which were made in Brazil and India, acted as short-term stimulants; additional public investment, as in China, appears to have had a more lasting impact on growth. Large developing countries typically exhibit high interregional inequality in levels of development and global integration, resulting in differential magnitude and timing of the crisis impact. For example, coastal states in India were affected more severely and quickly than landlocked states; revenue moved in opposite directions in the two types of state in 2009. Where fiscal stress varies widely across subnational entities, central transfers alone cannot prevent pro-cyclicality of subnational fiscal response to a recession. There is need for flexibility in subnational borrowing within a sustainable fiscal framework. Many Indian states were able to maintain or accelerate their spending thanks to the additional borrowing permitted in 2009 and 2010. In comparison, limited borrowing capacity and lack of flexibility in federal grants restricted the contribution of Brazilian states to fiscal stimulus. Legal prohibition of subnational borrowing induced China's provinces to finance additional investments through extra-budgetary borrowing by nongovernment entities, with significant fiscal risks on account of contingent liabilities.
    Keywords: Subnational Economic Development,Debt Markets,Banks&Banking Reform,Access to Finance,Public Sector Economics
    Date: 2013–04–01
  13. By: Cremer, Helmuth (IDEI,TSE); Gahvari, Firouz (University Urbana); Pestieau, Pierre (CREPP, TSE, University of Liege)
    Abstract: This paper studies public provision of long term care insurance in a world in which family assistance is (i) uncertain and (ii) endogenous depending on the time parents spend raising their children. Public benefits will be paid in case of disability but cannot be combined with self-insurance or family aid. The benefits are provided equally to all recipients and financed by a proportional payroll tax. The paper shows that tax distortions imply that full insurance is undesirable. It characterizes the optimal tax and identifies the elements that determine its size. Of crucial importance are the extent of under-insurance, the effect of the tax on the probability of altruism, the distortionary effect of the tax, and, with wage heterogeneity, the covariance between the social mar- ginal utility of lifetime income and (i) earnings (positive effect) and (ii) the probability of altruism default (negative effect).
    Keywords: Long term care, uncertain altruism, endogenous probability, opting out,public insurance.
    JEL: H2 H5
    Date: 2013–03
  14. By: Sean Higgins (Department of Economics, Tulane University); Nora Lustig (Department of Economics, Tulane University)
    Abstract: The effect of taxes and benefits on the poor is usually measured using standard poverty and inequality indicators, stochastic dominance tests, and measures of progressivity and horizontal inequity. However, these measures can fail to capture an important aspect: that some of the poor are made poorer (or some of the non-poor made poor) by the tax-benefit system. We call this impoverishment and formally establish the relationships between impoverishment, stochastic dominance tests, horizontal inequity, and progressivity measures. The directional mobility literature provides a useful framework to measure impoverishment. We propose using a transition matrix and income loss matrix, and establish a mobility dominance criterion to compare alternate tax-benefit systems. We illustrate with data from Brazil.
    Keywords: stochastic dominance, poverty, fiscal incidence, mobility
    JEL: I32 H22
    Date: 2013–04
  15. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); Martin Vieiro (Peterson Institute for International Economics)
    Abstract: The debate about "tax reform," during the 2012 presidential race and congressional budget battles this year has centered on closing loopholes, creating new incentives for growth, and raising revenue through higher personal taxation of wealthy Americans. But the debate overlooks an important priority for future US economic growth: the urgent need to reform the corporate tax. US-based multinational corporations (MNCs) are hobbled by an outmoded tax structure as they compete in the age of globalization. Reform would make American MNCs stronger competitors in markets abroad and enable them to expand and invest more at home. Tax rates should be lowered, both on profits earned in the United States and profits earned abroad.
    Date: 2013–04
  16. By: Thien Nguyen (Wharton, UPenn); Lukas Schmid (Duke University); Howard Kung (Duke University); Mariano Croce (University of North Carolina at Chapel H)
    Abstract: The surge in public debt triggered by the financial crisis has raised uncertainty about future tax pressure and economic activity. We contribute to the current fiscal debate by examining the asset pricing effects of fiscal policies in a production-based general equilibrium model in which taxation affects corporate decisions by: i) distorting profits and investment; ii) reducing the cost of debt through a tax shield; and iii) weakening productivity growth. In settings with recursive preferences, these three tax-based channels generate sizable risk premia making tax uncertainty a first order concern. We document further that corporate tax smoothing significantly affects the cost of equity by altering the intertemporal distribution of consumption. While common tax smoothing increases the annual cost of equity by almost 1%, public financing policies aimed at stabilizing capital accumulation reduce both long-run consumption risk and the cost of capital, producing relevant welfare benefits.
    Date: 2012
  17. By: Francesca Bastagli; John Hills
    Abstract: At the centre of politics in Britain and other countries is what is sometimes called 'the big trade-off'- where to strike the balance between private consumption and collective goods and social spending - and hence the sacrifices that would be entailed by the higher taxation required to fund otherwise desirable forms of social provision. In this paper we use aggregate national accounts data to compare the composition of household consumption between otherwise similar countries with higher and lower levels of public consumption. We concentrate in particular on spending patterns in ten countries where 'total potential consumption' (the sum of public and household consumption and household saving) is similar to that in the UK, using data from 2005. While the strengths of the inferences that can be drawn from a small number of countries are limited, overall these results suggest that there is a hierarchy in the forms of consumption that citizens of different countries sacrifice when they have greater government consumption (and so higher taxes). The trade-off at the margin is not with all kinds of consumption equally, but particularly with consumption of particular kinds - such as spending on restaurants and hotels, vehicle purchase, household furnishings, or clothing and footwear. But there are also items, such as education, where government spending may act as a substitute for what private households would have to spend. Such findings could colour our views of what the 'big trade-off' between public and private consumption really entails.
    Keywords: Household consumption, Government spending, Government consumption, international comparisons
    JEL: D12 H50
    Date: 2013–03
  18. By: Gemmell, Norman; Kneller, Richard; McGowan, Danny; Sanz, Ismael; Sanz-Sanz, José F.
    Abstract: Firms that lie far behind the technological frontier have the most to gain from imitating the technology or management practices of others. That some firms converge relatively slowly to the productivity frontier suggests the existence of factors that cause them to underinvest in their productivity. In this paper we explore how far higher rates of corporate taxation affect firm productivity convergence by reducing the after tax returns to productivity enhancing investments for small firms. Using data for 11 European countries we find evidence for such an effect; productivity growth in small firms is slower the higher are corporate tax rates. Our results are robust to the use of instrumental variable and panel data techniques with quantitatively similar effects found from a natural experiment following the German tax reforms in 2001.
    Keywords: Productivity, taxation, convergence,
    Date: 2013–04–11
  19. By: Schlicht, Ekkehart
    Abstract: Economists are widely familiar with the Ricardian equivalence thesis. It maintains that, given the time-path of government spending, a change in taxation does not alter the set of feasible life-time consumption plans of the households and affects neither the demand for commodities and services nor the rate of interest, provided the households act rationally. In this note a surprising finding is established. Assuming that the agents in a standard infinite horizon growth model hold the very expectations the thesis proposes (“Ricardian expectations”), it is shown that these expectations are invalidated. This divergence from the Ricardian equivalence thesis is traced to the omission of interest payments on public debt as part of the households' disposable income. The non-equivalence is valid in a wide class of models.
    Keywords: Barro-Ricardo equivalence; Ricardian equivalence; fiscal policy; debt; taxation; rational expectations; Ricardian expectations; Barro expectations; tax neutrality
    JEL: E2 E12 E6 H6
    Date: 2013–04
  20. By: Christian Dreger; Yanqun Zhang
    Abstract: The Chinese economic development affects GDP growth and inflation in the advanced countries. A GVAR approach is used to model the interdependencies between the business cycles in China and industrial countries, including the US, the euro area and Japan. For robustness, the results are compared to those obtained by leading structural econometric models, such as NiGEM and OEF. Evidence is based on the responses to a Chinese shock stemming from the recent fiscal stimulus package. The results indicate that the impact on GDP growth in the advanced economies is substantial for the Asian region. The expansionary effects to the US and the euro area responses are much lower and decrease due to rising inflation pressure. The analysis also reveals that China is still highly vulnerable to shocks in industrial countries, including the government debt crisis in the euro area.
    Keywords: GVAR, Chinese integration, shock transmission, euro area debt crisis
    JEL: E32 F15 C51
    Date: 2013–04
  21. By: Estian Calitz (Department of Economics, University of Stellenbosch); Stan du Plessis (Department of Economics, University of Stellenbosch); Krige Siebrits (Department of Economics, University of Stellenbosch)
    Abstract: Several empirical studies have found that fiscal policy has been sustainable in South Africa since 1960. This paper complements these studies by providing perspective on the manner in which fiscal sustainability was maintained. It discusses two episodes of significant increases and one period of substantial reduction in the public debt burden to show that periods of rising deficits and government debt in South Africa were followed by returns to sustainable levels, thereby preventing major domestic economic crises and external interventions. The paper also provides a projection of the fiscal outlook for South Africa based on a structural VAR model. The results suggest that the discretionary fiscal decisions of 2007 to 2010 might pose a serious threat to the sustainability of fiscal policy unless the authorities respond as they did in the past by checking large budget deficits and concomitant rapid increases in the public debt burden promptly.
    Keywords: fiscal policy, fiscal sustainability, South Africa
    JEL: H62 H63
    Date: 2013
  22. By: Boggio, Margherita
    Abstract: Which are the determinants of the choice of ownership structure for a firm providing local public services? What are the consequences of this choice on the performance of these firms? To answer these questions we will use a unique database providing economic and financial data on 321 Italian firms born in the 2000-2008 period. These data are merged with economic, political, financial and territorial data on the first municipality (for the number of shares owned) participating them. To perform the analysis and control for endogeneity, a two-stage multinomial selection model is employed, in order to identify the causal effects in the case of more than two treatments. The empirical evidence indicates that the municipality political orientation and budgetary conditions matter in the choice of ownership structure. Moreover, while for operating efficiency the computed Average Treatment Effects seems to indicate mixed ownership as a good solution, the ‘canonical’ performance and employment indicators provide evidence in the opposite direction.
    Keywords: political economy, public finance, public and mixed firm performance, municipal capitalism.
    JEL: D72 G32 G38 H72 L33
    Date: 2012
  23. By: Kjetil Storesletten (FRB Minneapolis); Gianluca Violante (NYU); Jonathan Heathcote (Federal Reserve Bank of Minneapolis)
    Abstract: We explore the optimal progressivity of the income tax system in an incomplete-markets model. Agents value private and public consumption and leisure, and are heterogeneous with respect to innate ability, idiosyncratic shock histories, and preferences. This heterogeneity generates a potential role for public insurance. Agents make education and labor supply choices, save in a risk-free bond, and are able to insure a subset of idiosyncratic risks privately. Equilibrium allocations and social welfare are characterized in closed form, which illuminates the various trade-offs in favor of more or less progressive taxation. In a calibration to the United States, we find that the actual US tax and transfer system is more progressive than the one that maximizes social welfare for a utilitarian planner.
    Date: 2012
  24. By: Sen, Debapriya; Stamatopoulos, Giorgos
    Abstract: Patent licensing agreements among competing firms usually involve royalties which are often considered to be anticompetitive as they raise market prices. In this paper we propose simple tax policies than can alleviate the effect of royalties. Considering a Cournot duopoly where firms produce under decreasing returns and trade a patented technology, we show that the interaction of royalties with decreasing returns may generate the counter-intuitive result that market prices decrease in the magnitude of diseconomies of scale. In such cases there exist progressive quantity taxes on firms that weaken the effect of royalties and lower the market prices. These taxes collect sufficient revenue to compensate firms for their losses. As a result, it is possible to design deficit neutral tax-transfer schemes that strictly Pareto improve the welfare of consumers as well as firms.
    Keywords: Decreasing returns; patent licensing; royalty; progressive quantity tax; deficit neutrality
    JEL: D43 D45 H21 L24
    Date: 2013–04–16
  25. By: Islam, Asif M.
    Abstract: The US government spending allocation database provides new data on a set of disaggregated government spending categories covering all the states in the US for the period 1983-2008. The data allows for the comparison of federal versus state and local government spending over time on various spending items including health, education, social security and welfare among many others distributed over all states. This is achieved by categorizing and aggregating expenditures for over 1,500 federal programs and combining data on state and local government spending. The key challenge in separating federal and state and local government spending is the issue of double counting since part of state and local spending is from the federal government. This new data set is mostly free of double counting. The dataset presented will aid researchers in separately accounting for both state and local, as well as federal spending in future research.
    Keywords: Political Economy, Public Economics, Research Methods/ Statistical Methods,
    Date: 2013–04
  26. By: Bjørnskov, Christian; Dreher, Axel; Fischer, Justina A. V.; Schnellenbach, Jan; Gehring, Kai
    Abstract: We argue that perceived fairness of the income generation process affects the association between income inequality and subjective well-being, and that there are systematic differences in this regard between countries that are characterized by a high or, respectively, low level of actual fairness. Using a simple model of individual labor market participation under uncertainty, we predict that high levels of perceived fairness cause higher levels of individual welfare, and lower support for income redistribution. Income inequality is predicted to have a more favorable impact on subjective well-being for individuals with high fairness perceptions. This relationship is predicted to be stronger in societies that are characterized by low actual fairness. Using data on subjective well-being and a broad set of fairness measures from a pseudo micro-panel from the WVS over the 1990-2008 period, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the predicted differences in individual tolerance for income inequality, and the predicted influence of actual fairness. --
    Keywords: happiness,life satisfaction,subjective well-being,inequality,income distribution,redistribution,political ideology,justice,fairness,World Values Survey
    JEL: I31 H40 D31 J62 Z13
    Date: 2013
  27. By: Tsun Se Cheong (Business School, University of Western Australia); Yanrui Wu (Business School, University of Western Australia)
    Abstract: This paper examines the impact of intra-provincial regional inequality on crime rates in China. The results show that intra-provincial regional inequality is positively correlated with the crime rate in the regions. However, education is found to be negatively correlated with the crime rate. In addition, it is also observed in this study that regional crime rates are positively linked with the level of inflation, unemployment rate, and inequalities in consumption and employment between the rural and urban sectors.
    Date: 2013

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