nep-pbe New Economics Papers
on Public Economics
Issue of 2013‒05‒05
23 papers chosen by
Keunjae Lee
Pusan National University

  1. Non-linear effects of taxation on growth By Nir Jaimovich; Sergio Rebelo
  2. Female Labour Supply, Human Capital and Welfare Reform By Richard Blundell; Monica Costa Dias; Costas Meghir; Jonathan Shaw
  3. Government Solvency, Austerity and Fiscal Consolidation in the OECD: A Keynesian Appraisal of Transversality and No Ponzi Game Conditions By Karim Azizi; Nicolas Canry; Jean-Bernard Chatelain; Bruno Tinel
  4. How to make the metropolitan area work ? Neither big government, nor laissez-faire By Carl Gaigné; Stéphane Riou; Jacques-François Thisse
  5. Optimal Taxation in Life-Cycle Economies in the Presence of Commitment and Temptation Problems By Cagri Seda Kumru; Saran Sarntisart
  6. What Gives? Household Consumption Patterns and the 'Big Trade Off' with Public Consumption By Francesca Bastagli; John Hills
  7. How safe is it, to Confuse Defense with Care? By Konstantin Yanovsky; Ilia Zatcovetzky; Georgy Syunyaev
  8. Taxation of human capital and wage inequality: a cross-country analysis By Fatih Guvenen; Burhanettin Kuruscu; Serdar Ozkan
  9. Intergenerational policy and the measurement of tax incidence By Juan Carlos Conesa; Carlos Garriga
  10. The impact of the French Tobin tax By Leonardo Becchetti; Massimo Ferrari
  11. The Effects of the Property Tax Break for Newly-Built Houses on Housing Investments in Tokyo By Norifumi Yukutake
  12. EVA Performance Measurement is Faulty: So You May Be Persuaded to Switch to a Robust OEVA-TEVA Alternative By Rauf Ibragimov, Ignacio Velez-Pareja, Joseph Tham; Ignacio Vélez-Pareja; Joseph Tham
  13. Publicness of goods and violent conflict: Evidence from Colombia By Darwin Cortes; Daniel Montolio
  14. Is the Capital Cost Allowance System in Canada Unnecessarily Complex? By Odette Pinto; Rock Lefebvre
  15. Housing subsidy or parental support: Crowding-out effect of mortgage tax deduction By Iwata, Shinichiro; Yukutake, Norifumi
  16. Stochastic public debt projections using the historical variance-covariance matrix approach for EU countries By Katia Berti
  17. The Effects of Debt Intolerance and Public Debt Sustainability on Credit Ratings: Evidence From European Economies By Ata Ozkaya
  18. The effect of remittances prior to an election By Jean-Louis COMBES; Christian EBEKE; Mathilde MAUREL
  19. The Role of Automatic Stabilizers in the U.S. Business Cycle By Alisdair McKay; Ricardo Reis
  20. Public-private wage differentials in euro area countries: evidence from quantile decomposition analysis By Domenico Depalo; Raffaela Giordano; Evangelia Papapetrou
  21. Spatial Income Inequality in Chile and the Rol of Spatial Labor Sorting By Susana Katherine Chacón Espejo; Dusan Paredes Araya
  22. Wagner’s Law in Saudi Arabia 1970 - 2012: An Econometric Analysis By Ageli, Mohammed Moosa
  23. Economic Conditions and Child Abuse By Jason M. Lindo; Jessamyn Schaller; Benjamin Hansen

  1. By: Nir Jaimovich; Sergio Rebelo
    Abstract: We study a model in which the effects of taxation on growth are highly non-linear. Marginal increases in tax rates have a small growth impact when tax rates are low or moderate. When tax rates are high, further tax hikes have a large, negative impact on growth performance. We argue that this non-linearity is consistent with the empirical evidence on the effect of taxation and other disincentives to investment and innovation on economic growth.
    Date: 2013
  2. By: Richard Blundell (University College London); Monica Costa Dias (Institute for Fiscal Studies and CEF-UP at the University of Porto); Costas Meghir (Cowles Foundation, Yale University); Jonathan Shaw (Institute for Fiscal Studies and University College London)
    Abstract: We consider the impact of Tax credits and income support programs on female education choice, employment, hours and human capital accumulation over the life-cycle. We thus analyze both the short run incentive effects and the longer run implications of such programs. By allowing for risk aversion and savings we are also able to quantify the insurance value of alternative programs. We find important incentive effects on education choice, and labor supply, with single mothers having the most elastic labor supply. Returns to labour market experience are found to be substantial but only for full-time employment, and especially for women with more than basic formal education. For those with lower education the welfare programs are shown to have substantial insurance value. Based on the model marginal increases to tax credits are preferred to equally costly increases in income support and to tax cuts, except by those in the highest education group.
    Keywords: Female labor supply, Welfare reform, Tax credits, Education choice, Dynamic discrete choice models, Life cycle models
    JEL: H2 H3 J22 J24
    Date: 2013–04
  3. By: Karim Azizi (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Nicolas Canry (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Jean-Bernard Chatelain (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Bruno Tinel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth rate has to be lower than the real interest rate). First, on the unbalanced panel of 21 countries from 1961 to 2010 available in OECD database, those two conditions were simultaneously validated only for 29% of the cases under examination. Second, those two conditions were more frequent in the 1980s and the 1990s when monetary policies were more restrictive. Third, in tune with the Keynesian view, when the real interest rate is higher than the GDP growth, it corresponds to 75% of the cases of the increases of the debt/GDP ratio but to only 43% of the cases of the decreases of the debt/GDP ratio (fiscal consolidations).
    Keywords: Government solvency, Austerity, Fiscal Consolidation, No-Ponzi Game condition, transversality condition, Keynesian countercyclical budgetary policy, monetary policy, economic growth.
    Date: 2013–04–24
  4. By: Carl Gaigné (INRA Rennes - INRA Rennes - Institut national de la recherche agronomique (INRA) : RENNE); Stéphane Riou (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Jacques-François Thisse (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique, CREA - Center for Research in Economic Analysis - Université du Luxembourg, CEPR - Center for Economic Policy Research - CEPR)
    Abstract: We study how political boundaries and fiscal competition interact with the labor and land markets to determine the economic structure and performance of metropolitan areas. Contrary to general belief, institutional fragmentation need not be welfare-decreasing, and commuting from the suburbs to the central city is not wasteful. Thus, the institutional and economic limits of the central city are not the same. With tax competition, the central business district is too small. The dispersion of jobs is increased when suburbanite workers are allowed to consume the public services supplied by the central city. This indicates the need for some metropolitan governance.
    Keywords: metropolitan area; fiscal competition; local labor markets; suburbanization; administrative boundary; economic boundary
    Date: 2013–04–22
  5. By: Cagri Seda Kumru; Saran Sarntisart
    Abstract: Self-control problem is an important determinant of individuals. economic decisions. The decision maker’s future utility is affected by unwanted temptation. This implies that implications of various government policies would differ if one incorporates these behavioural aspects. Public finance instruments could, however, be used to correct anomalies created by temptation. The purpose of this paper is to examine the question of optimal taxation when individuals have self-control problems. In order to capture our agents’ temptation towards current consumption, our model make use of the preference structure pioneered by Gul and Pesendorfer and further elaborated by Krusell et al. in the context of optimal taxation. We extend by adding labor choice and besides savings tax, we also analyze capital income tax, consumption tax and labor income tax. Results show that when the analysis is restricted to logarithmic preferences separable in consumption and labor supply, the government should subsidize either capital income or investment as it maximizes both an individual’s commitment utility for consumption and labor supply at the same time. Because individuals consume and supply labor more than their commitment utility, subsidizing improves welfare as it makes temptation less attractive.
    Keywords: Temptation; self-control; consumption-savings; optimal taxation
    JEL: E21 E62 H21
    Date: 2013–04
  6. 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
  7. By: Konstantin Yanovsky (Gaidar Institute for Economic Policy); Ilia Zatcovetzky (Samuel Neaman Institute for Advanced Studies in Science and Technology, Technion (Israel)); Georgy Syunyaev (National Research University – Higher School of Economics)
    Abstract: The correlation of state spending on pure and mixed public goods reflects the making of fundamental choices about state functions.
    Keywords: Budget Spending structure, pure public goods, mixed public goods, universal suffrage, military justice, military spending
    JEL: D72 D74 H11 H41 N40
    Date: 2013
  8. By: Fatih Guvenen; Burhanettin Kuruscu; Serdar Ozkan
    Abstract: Wage inequality has been significantly higher in the United States than in continental European countries (CEU) since the 1970s. Moreover, this inequality gap has further widened during this period as the US has experienced a large increase in wage inequality, whereas the CEU has seen only modest changes. This paper studies the role of labor income tax policies for understanding these facts, focusing on male workers. We construct a life cycle model in which individuals decide each period whether to go to school, work, or stay non-employed. Individuals can accumulate skills either in school or while working. Wage inequality arises from differences across individuals in their ability to learn new skills as well as from idiosyncratic shocks. Progressive taxation compresses the (after-tax) wage structure, thereby distorting the incentives to accumulate human capital, in turn reducing the cross-sectional dispersion of (before-tax) wages. Consistent with the model, we empirically document that countries with more progressive labor income tax schedules have (i) significantly lower before-tax wage inequality at different points in time and (ii) experienced a smaller rise in wage inequality since the early 1980s. We then study the calibrated model and find that these policies can account for half of the difference between the US and the CEU in overall wage inequality and 84% of the difference in inequality at the upper end (log 90-50 differential). In a two-country comparison between the US and Germany, the combination of skill-biased technical change and changing progressivity of tax schedules explains all the difference between the evolution of inequality in these two countries since the early 1980s.
    Date: 2013
  9. By: Juan Carlos Conesa; Carlos Garriga
    Abstract: Policymakers often use measures of tax incidence (generational accounts) as criteria for policy selection. We use a quantitative model of optimal intergenerational policy to evaluate the ability of the tax incidence metric to capture the identity of recipients and contributors and the magnitudes transferred. The analysis suggests that when the reform implies a substantial change in economic efficiency, the tax metric fails to identify the magnitude of the welfare changes and those who benefit from those who pay. In contrast, when the policies evaluated imply only intergenerational redistribution, the metric correctly identifies winners and losers and provides reasonable estimates of the magnitude of welfare changes.
    Keywords: Taxation ; Fiscal policy
    Date: 2013
  10. By: Leonardo Becchetti (University of Rome "Tor Vergata"); Massimo Ferrari (University of Rome "Tor Vergata"; Poste Italiane)
    Abstract: We analyse the impact of the introduction of the French Tobin tax on volumes, liquidity and volatility of affected stocks with parametric and non parametric tests on individual stocks, difference in difference tests and other robustness checks controlling for simultaneous month-of-the-year and size effects. Our findings document that the tax has a significant impact in terms of reduction in transaction volumes and intraday volatility. The reduction in volumes traded occurs in similar proportion in non taxed small cap stocks.
    Keywords: Financial Transaction Tax; intraday volatility; liquidity, transaction volumes
    JEL: G18 G12 G14
    Date: 2013–03
  11. By: Norifumi Yukutake
    Date: 2013–03
  12. By: Rauf Ibragimov, Ignacio Velez-Pareja, Joseph Tham; Ignacio Vélez-Pareja; Joseph Tham
    Abstract: We argue that the Economic Value Added (EVA) is biased by design and will generally yield distorted assessment of both the operating and overall performance. Fundamentally, the scale of measurement bias depends on the interest tax shield actually obtained in a measurement period and on a book to value ratio, however, there are also other potentially significant sources of distortions induced by the metric design. A robust alternative we propose is a concurrent evaluation of operating and total performance with the two nested metrics, Operating EVA (OEVA) and Total EVA (TEVA). OEVA applies the risk of assets (rather than WACC) to calculates the full capital charge and is unaffected by financing activities. TEVA incorporates financing side effects by explicitly adding interest tax shields to OEVA, but can be calculated as simply as a sum of interest expenses and net income less the full capital charge. The OEVA-TEVA approach is computationally simpler than EVA, the corresponding valuation model is consistent with the cash flow discounting and can be utilized as a self-sufficient instrument for investment project appraisal and business valuation.
    Date: 2013–02–15
  13. By: Darwin Cortes; Daniel Montolio
    Abstract: Abstract How the degree of publicness of goods affect violent conflict? Based on the theoretical model in Esteban and Ray (2001) we find that the effect of the degree of publicness depends on the group size. When the group is small (large), the degree of publicness increases (decreases) the likelihood of conflict. This opens an empirical question that we tackle using microdata from the Colombian conflict at the municipality level. We use three goods with different publicness degree to identify the sign of the effect of publicness on conict. These goods are coca crops (private good), road density (public good subject to congestion) and average education quality (a purer public good). After dealing with endogeneity issues using an IV approach, we find that the degree of publicness reduces the likelihood of both paramilitary and guerrilla attacks. Moreover, coca production exacerbates conflict and the provision of both public goods mitigates conflict. These results are robust to size, geographical, and welfare controls. Policies that improve public goods provision will help to fight the onset of conflict.
    Date: 2013–04–24
  14. By: Odette Pinto (Grant MacEwan University); Rock Lefebvre (Certified General Accountants Association of Canada)
    Abstract: The purpose of this paper is to investigate whether recurrent changes to Canada’s Capital Cost Allowance (CCA) system have significantly increased its complexity leading to incremental costs and inefficiencies for businesses. The study examines the extent to which the CCA system meets the principles of simplicity, equity and neutrality, assesses the efficiency of using the system as the vehicle for introducing economic incentives, and gauges how the CCA system affects the international competitiveness of Canadian businesses. Informed by views of accounting professionals and industry representatives, the results of the analysis provide evidence of the increased complexity of the CCA system. The system falls short on several key principles of a sound tax system and does not properly represent economic reality of the underlying assets. Moreover, the use of the system for economic incentives is generally not effective; however, representatives from certain industries emphasize the importance of such incentives for retaining international competitiveness.
    Keywords: Captial Cost Allowance system, tax simplification, international competitiveness, accelerated capital cost allowance, tax policy,
    JEL: H21 H25 H11 H71
    Date: 2013–04
  15. By: Iwata, Shinichiro; Yukutake, Norifumi
    Abstract: Children may receive monetary transfers from their parents to realize the dream of homeownership. This raises the question of whether transfers received decrease if governments also provide a homeownership-related subsidy. The purpose of this paper is to empirically examine this question, using a sample of the Japanese home-buying households that are subsidized by a mortgage tax deduction (MTD) as a model case. In the empirical stage, we offer a test of the effect of the MTD on both the extensive (the probability of receiving transfers) and the intensive (the amount of transfers received) margins using the overall sample as well as subsample groups. The empirical results, which use the full sample, appear to indicate that the MTD has a tendency to crowd out transfers on both the extensive and the intensive margins. Subsample analysis demonstrates that the crowding-out effect is strengthened when parents' behavior is influenced by a relatively strong altruistic motive and a relatively weak exchange motive.
    Keywords: intergenerational transfer, crowding out, mortgage tax deduction
    JEL: D12 R21
    Date: 2013–03
  16. By: Katia Berti
    Abstract: Stochastic projections are a powerful tool to feature uncertainty in macroeconomic conditions into the analysis of public debt dynamics. They allow simulating a very large number of debt paths, corresponding to as many shock constellations to the non-fiscal determinants of debt evolution (short- and long-term interest rates, growth rate and exchange rate). Furthermore, random shocks are simulated in a way to reflect the size and the correlation of historical shocks. The specific approach for stochastic projections used here, based on the variance-covariance matrix of historical shocks, further allows defining a "central scenario" (for which we use ECFIN's Autumn 2012 forecasts), around which shocks apply. The paper applies this methodology to 24 EU countries over 2013-17. Cross-country differences in the variance of the debt-to-GDP ratio distributions (reflecting differences in historical volatility of macroeconomic conditions) emerge clearly from the simulations. This shows the importance of allowing for a more comprehensive and country-tailored assessment of downward and upward risks to debt dynamics. This stochastic framework also has the distinctive advantage of allowing for an explicit probabilistic assessment of debt projection results. A closer scrutiny of three EU countries in the case with temporary shocks reveals, for instance, that the most likely outcome for IT over 2013-17 is a decreasing path for the debt ratio (though this is projected to be still higher than 116% with a 50% probability in 2017). For ES, simulations show an increasing path over the projection horizon for all shock constellations, with an 80% probability of a debt ratio greater than 100% in 2017. Finally, for HU, we obtain a 60% probability that the debt ratio stabilises or reaches higher values from 2013 onwards, with a 40% probability of a debt ratio greater than 80% in 2017.
    JEL: E62 H63 C15
    Date: 2013–04
  17. By: Ata Ozkaya (Galatasaray University Faculty of Economics and Administrative Sciences)
    Abstract: The question whether a government’s fiscal policy is consistent with an intertemporal budget constraint has been motivated a number of empirical studies. The econometric approach focuses on the circumstances under which a government is able to sustain its budget deficits without defaulting on its debt. In this contribution, by linking the different motives on long-run sustainability of public debt, we develop a compact step-wise test algorithm and apply that to the PIIGS countries and United Kingdom. Secondly, we introduce phase-space reconstruction methodology in order to locate the path for debt dynamics, which enables us to observe fiscal policy implications in short and medium-term. We conclude that Greece, Ireland, Portugal are characterized by unsustainable debt policies. For Italy, Spain and United Kingdom, we could not reach clear cut results. For those economies while the outcome of test algorithm indicates the sustainability of debt policy, phase-space examination shows that the reaction of the governments to diverging debt stock GDP ratio cannot be sufficient to stabilize the path for debt dynamics. Last, we measure relative credit ratings of 25 OECD countries, including Turkey and eurozone economies. Our measurement method is based on the fundamentals used for measuring public debt sustainability: GDP per capita, change in Consumer prices (CPI), and GDP ratios of; General government budget balance, General government primary balance, General government gross debt stock, Current account balance, Public foreign currency debt stock. For each country, these seven inter-related criteria are examined during three non-overlapping periods: 2005-2010, 2011 and 2012-2013. We conclude that the countries that have trouble with debt sustainability have overestimated sovereign credit ratings and hence they will eventually be revised.
    Date: 2013–04
  18. By: Jean-Louis COMBES; Christian EBEKE; Mathilde MAUREL
    Abstract: This paper focuses on the relationships between remittances, elections, and government consumption as a percentage of GDP. We combine data from the National Elections across Democracy and Autocracy (NELDA) dataset compiled and discussed in Hyde and Marinov (2012) and the World Development Indicators dataset. We focus on 70 young democracies in the developing world. The period under investigation is 1990-2010. The main objective of the paper is to assess whether remittances have an influence on the political manipulation, which may occur prior to an election, through in increase in the government consumption-to-GDP-ratio. It appears that remittances dampen the political business cycle (PBC). Furthermore, the PBC is reduced up to the point where it is fully cancelled out at a remittance threshold of 10.7 percent of GDP. Those findings are robust to different econometric strategies and robustness checks.
    Keywords: Political Business Cycles, Remittances
    JEL: F2 F22 O15
    Date: 2013
  19. By: Alisdair McKay; Ricardo Reis
    Abstract: Most countries have automatic rules in their tax-and-transfer systems that are partly intended to stabilize economic fluctuations. This paper measures how effective they are. We put forward a model that merges the standard incomplete-markets model of consumption and inequality with the new Keynesian model of nominal rigidities and business cycles, and that includes most of the main potential stabilizers in the U.S. data, as well as the theoretical channels by which they may work. We find that the conventional argument that stabilizing disposable income will stabilize aggregate demand plays a negligible role on the effectiveness of the stabilizers, whereas tax-and-transfer programs that affect inequality and social insurance can have a large effect on aggregate volatility. However, as currently designed, the set of stabilizers in place in the United States has barely had any effect on volatility. According to our model, expanding safety-net programs, like food stamps, has the largest potential to enhance the effectiveness of the stabilizers.
    JEL: E32 E62 H30
    Date: 2013–04
  20. By: Domenico Depalo (Bank of Italy); Raffaela Giordano (Bank of Italy); Evangelia Papapetrou (Bank of Greece)
    Abstract: We evaluate the public-private wage differential in ten euro area countries for men in the period 2004-2007. Using the most recent methodologies on a Mincerian equation, we assess how much of the pay differential between public and private sector workers depends on differences in endowments and how much on differences in the remuneration of such skills. For the first time, we look at the contribution of specific covariates at different quantiles of the wage distribution and decompose the variance into an explained and an unexplained component. We find that the pay gap is often decreasing over the distribution, and it is mostly determined by higher endowments in the upper tail of the wage distribution and by higher returns of such endowments at the low tail, with considerable heterogeneity across countries. We further find that the wage distribution in the public sector is more compressed than in the private sector in some countries but not in all countries. This is the results, for all countries, of more dispersed distributions of endowments in the public sector and of returns in the private sector.
    Keywords: public employment, wage differentials, wage determination.
    JEL: H50 J31 J45 J50
    Date: 2013–04
  21. By: Susana Katherine Chacón Espejo (Master in Regional Sciences - Department of Economics, Universidad Católica del Norte - Chile); Dusan Paredes Araya (IDEAR - Department of Economics, Universidad Católica del Norte - Chile)
    Abstract: The spatial income inequality in Latin American countries is a recent academic affair. Particularly, the case of Chile highlights around the world because it has one of the highest individual and spatial inequality rates. This article analyzes the spatial income inequality in Chile during 1992 2011 evaluating the role of the spatial labor sorting through multilevel models. The findings show that human capital doesn't allocate randomly across the space but its spatial concentration at the biggest urban centers impacts significantly the income inequality between counties. These findings motivate the discussion about spatial dimension of the inequality and suggest that policymakers should consider ways to spread human capital throughout the nation as an alternative to reduce spatial inequality.
    Keywords: Spatial income inequality, spatial labor sorting, human capital, multilevel regression.
    JEL: O15 O18 R12 R23
    Date: 2013–04
  22. By: Ageli, Mohammed Moosa
    Abstract: Our goal in this paper is to explore the validity of Wagner’s Law in Saudi Arabia during the period (1970-2012) for real oil GDP and Non-oil GDP. Wagner’s Law investigated that fundamental economic growth is validity to the public sector growth. In the previous studies have been tested the six versions of Wagner’s law to support the existence of long-run relationship between government expenditure and economic growth. We used a method as a time series econometrics techniques to examine how far Wagner’s Law validity can be applied in Saudi economy. The results obtained from the analyses find that the Wagnerian proposition can explain the growth of government in Saudi Arabia, which holds for both the oil and non-oil income cases. The findings also note that the existence of strong causality for all of Wagner’s law versions in the long run.
    Keywords: Wagner’s Law, Co-integration, Error Correction Model (ECM), Augmented Dickey Fuller (ADF), Government Expenditure, Economic Growth, Saudi Arabia
    JEL: C32 H50 O53
    Date: 2013–01–12
  23. By: Jason M. Lindo; Jessamyn Schaller; Benjamin Hansen
    Abstract: Although a huge literature spanning several disciplines documents an association between poverty and child abuse, researchers have not found persuasive evidence that economic downturns increase abuse, despite their impacts on family income. In this paper, we address this seeming contradiction. Using county-level child abuse data spanning 1996 to 2009 from the California Department of Justice, we estimate the extent to which a county's reported abuse rate diverges from its trend when its economic conditions diverge from trend, controlling for statewide annual shocks. The results of this analysis indicate that overall measures of economic conditions are not strongly related to rates of abuse. However, focusing on overall measures of economic conditions masks strong opposing effects of economic conditions facing males and females: male layoffs increase rates of abuse whereas female layoffs reduce rates of abuse. These results are consistent with a theoretical framework that builds on family-time-use models and emphasizes differential risks of abuse associated with a child's time spent with different caregivers.
    JEL: I10 J13 J16 J63 K42
    Date: 2013–04

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