nep-pbe New Economics Papers
on Public Economics
Issue of 2013‒06‒04
25 papers chosen by
Keunjae Lee
Pusan National University

  1. Top Marginal Taxation and Economic growth By Santo Milasi
  2. Tax competition and determination of the quality of public goods By Abdessalam, A. H. Ould; Kamwa, Eric
  3. Has German Business Income Taxation Raised too Little Revenue over the Last Decades? By Stefan Bach
  4. Local taxation of global corporation: a simple solution By HINDRIKS, Jean; PERALTA, Susana; WEBER, Shlomo
  5. Fiscal consolidation strategy By Cogan, John F.; Taylor, John B.; Wieland, Volker; Wolters, Maik H.
  6. Optimal Capital Versus Labor Taxation with Innovation-Led Growth By Philippe Aghion; Ufuk Akcigit; Jesús Fernández-Villaverde
  7. Analysing Job Creation Effects of Scaling Up Infrastructure Spending in South Africa By Hélène Maisonnave; Ramos Mabugu; Margaret Chitiga; Véronique Robichaud
  8. Optimal Growth under Flow-Based Collaterals By Daria Onori
  9. The Top 1 Percent in International and Historical Perspective By Facundo Alvaredo; Anthony B. Atkinson; Thomas Piketty; Emmanuel Saez
  10. The Power to Pass on Taxes - A Test for Tax Shifting based on Observables By Mario Jametti; Agustin Redonda; Anindya Sen
  11. Tax Shelters or Efficient Tax Planning? A Theory of The Firm Perspective On the Economic Substance Doctrine By T. Christopher Borek; Angelo Frattarelli; Oliver Hart
  12. An Exploratory Evaluation of State Road Provision to Commuters and Shippers using Data Envelopment Analysis and Tobit Regression By Min, Hokey; Lambert, Thomas
  13. Fairness and Redistribution, a comment By Rafael Di Tella; Juan Dubra
  14. Reform of the mortgage interest tax relief system, policy uncertainty and precautionary savings in the Netherlands By Mauro Mastrogiacomo
  15. Making Reform Happen in Colombia: The Process of Regional Transfer Reform By Sebastián Nieto Parra; Mauricio Olivera
  16. The R&D Tax Credit in France: Assessment and Ex-Ante Evaluation of the 2008 Reform By Benoît Mulkay; Jacques Mairesse
  17. Austerity versus Stimulus: A DSGE Political Economy Explanation By Richard McManus
  18. Income Comparisons, Income Adaptation, and Life Satisfaction: How Robust Are Estimates from Survey Data? By Tobias Pfaff
  19. Do Incentives Programs Cause Growth? The Case of The Oklahoma Quality Jobs Program and Community-level Economic Growth By Whitacre, Brian E.; Shideler, David W.; Williams, Randi
  20. The Productive Government Spending Multiplier, In and Out of The Zero Lower Bound By Jordan Roulleau-Pasdeloup
  21. Folk Theorems, Second Version By Olivier Compte; Andrew Postlewaite
  22. Innovative public procurement and R&D Subsidies: hidden treatment and new empirical evidence on the technology policy mix in a quasi-experimental setting By Guerzoni, Marco; Raiteri, Emilio
  23. If Technology Has Arrived Everywhere, Why Has Income Diverged? By Comin, Diego; Mestieri, Marti
  24. Deunionization and Pay Inequality in OECD Countries: A Panel Granger Causality Approach By Unal Tongur; Adem Yavuz Elveren
  25. State-Dependent Effects of Fiscal Policy By Steven M. Fazzari; James Morley; Irina Panovska

  1. By: Santo Milasi (University of Rome "Tor Vergata")
    Abstract: The paper explores the relationship between statutory top marginal tax rates on personal income and long-run economic growth. While theoretical models of endogenous growth explicitly allow for nonlinear effects of taxation on economic growth, the majority of existing empirical studies assume a linear association. By contrast, this paper investigates both a linear and a non-monotonic relationship between top tax rates and GDP growth. Using a panel of 18 OECD countries over the period 1960-2009, this paper finds support in favor of a quadratic top tax-growth relationship. Results are robust to different model specifications and estimation techniques. The point estimates of the regressions suggest that the marginal effect of higher top tax rates becomes negative above a growth maximizing tax rate on the order of 70 percent. The quadratic relationship found for the whole sample period does not hold over the period 1975-2009. Instead, the link between top tax rates and GDP growth after 1975 is well summarized by a linear and positive top tax-growth relationship. Since top marginal tax rates after 1975 are well below the estimated growth maximizing level, such a result suggest that the top tax-growth relationship after 1975 might be placed on the upward-sloping side of the “growth-hill”. There is an even stronger positive top tax-growth relationship after 1985, when average top tax rates across OECD are lower than 50%.
    Date: 2013–05–21
  2. By: Abdessalam, A. H. Ould; Kamwa, Eric
    Abstract: In this paper, the authors analyze the behavior of local governments on capital taxation when the financial choices in terms of a public good quality are done by a central planner. More specifically, they ask the question whether a local government has an interest to tax the mobile factor in addition to the tax on representative households or not. The authors show, through a comparison of social welfare given the strategies chosen by the locals governments, that whatever the quality of the public good and its cost is, a local government always has an interest to tax the mobile factor. This leads to a Nash-equilibrium in dominant strategy in their model. --
    Keywords: tax competition,public goods,taxation,quality,welfare
    JEL: D00 H20 H41 H70 H71
    Date: 2013
  3. By: Stefan Bach
    Abstract: This study presents comprehensive macroeconomic measures on the revenue from business taxation in Germany. A comparison of the tax base reported in tax statistics with the corporate income derived from national accounts gives hints to considerable tax base erosion. The high weight of reported tax losses underlines this result. The average implicit tax rate on corporate income was around 21 percent since 2001, and thus falling considerably short of statutory tax rates and effective tax rates discussed in the literature. For lack of detailed accounting data it is hard to give precise reasons for the presumptive tax base erosion.
    Keywords: Business income taxation, implicit tax rates, tax base erosion
    JEL: H25 H26 H22
    Date: 2013
  4. By: HINDRIKS, Jean (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); PERALTA, Susana (Nova School of Business and Economics, Lisboa); WEBER, Shlomo (Southern Methodist University, Texas)
    Abstract: The explosion of globalization has increased firms incentives to exploit international tax differentials to their benefit. In this paper we consider a simple world with two countries with different market sizes and two multinationals with a division in each country. Both countries use a source-based profit tax on multinationals, who compete a la Cournot in each local market and use profit shifting based on the tax differential. We assess policies aimed to mitigate inefficient tax choices and show that tax harmonization cannot benefit the small country which adopts a lower tax rate to channel a tax revenue from the large country. We propose a simple revenue sharing mechanism in which countries share equal proportion of their own revenue with each other. It is shown that revenue sharing increases equilibrium tax rates in each country, reduces the tax differential, and benefits both countries despite of reallocation of resources from the high tax to the low tax country
    Keywords: Heterogeneous countries, Profit Shifting, Tax Competition Revenue Sharing
    JEL: F23 H25 H70
    Date: 2013–05–06
  5. By: Cogan, John F.; Taylor, John B.; Wieland, Volker; Wolters, Maik H.
    Abstract: In the aftermath of the global financial crisis and great recession, many countries face substantial deficits and growing debts. In the United States, federal government outlays as a ratio to GDP rose substantially from about 19.5 percent before the crisis to over 24 percent after the crisis. In this paper we consider a fiscal consolidation strategy that brings the budget to balance by gradually reducing this spending ratio over time to the level that prevailed prior to the crisis. A crucial issue is the impact of such a consolidation strategy on the economy. We use structural macroeconomic models to estimate this impact focussing primarily on a dynamic stochastic general equilibrium model with price and wage rigidities and adjustment costs. We separate out the impact of reductions in government purchases and transfers, and we allow for a reduction in both distortionary taxes and government debt relative to the baseline of no consolidation. According to the model simulations GDP rises in the short run upon announcement and implementation of this fiscal consolidation strategy and remains higher than the baseline in the long run. We explore the role of the mix of expenditure cuts and tax reductions as well as gradualism in achieving this policy outcome. Finally, we conduct sensitivity studies regarding the type of model used and its parameterization. --
    Keywords: Fiscal Policy,Fiscal Consolidation,Government Debt,Government Deficit,DSGE Model
    JEL: E27 E62 H62 H63 H68
    Date: 2012
  6. By: Philippe Aghion; Ufuk Akcigit; Jesús Fernández-Villaverde
    Abstract: Chamley (1986) and Judd (1985) showed that, in a standard neoclassical growth model with capital accumulation and infinitely lived agents, either taxing or subsidizing capital cannot be optimal in the steady state. In this paper, we introduce innovation-led growth into the Chamley-Judd framework, using a Schumpeterian growth model where productivity-enhancing innovations result from profit-motivated R&D investment. Our main result is that, for a given required trend of public expenditure, a zero tax/subsidy on capital becomes suboptimal. In particular, the higher the level of public expenditure and the income elasticity of labor supply, the less should capital income be subsidized and the more it should be taxed. Not taxing capital implies that labor must be taxed at a higher rate. This in turn has a detrimental effect on labor supply and therefore on the market size for innovation. At the same time, for a given labor supply, taxing capital also reduces innovation incentives, so that for low levels of public expenditure and/or labor supply elasticity it becomes optimal to subsidize capital income.
    JEL: H2 O3 O4
    Date: 2013–05
  7. By: Hélène Maisonnave; Ramos Mabugu; Margaret Chitiga; Véronique Robichaud
    Abstract: In a first for South Africa, we draw on literature on infrastructure productivity to model dynamic economywide employment impacts of infrastructure investment funded with different fiscal tools. According to the South African investment plan, the policy will affect the stock of infrastructure as well as the stock of capital of some private and public sectors. Increased government deficit financed infrastructure spending improves GDP and reduces unemployment. However, in the long term, the policy reduces investment and it is not sustainable for South Africa to let its deficit grow unabated. Increased investment spending financed by tax increases has contrasting implications on unemployment. In the long run, unemployment decreases for all types of workers under one of the scenarios. In the short run, only elementary occupation workers benefit from a decrease in unemployment; for the rest, unemployment rises. Findings have immediate policy implications in various policy modelling areas.
    Keywords: Employment, dynamic CGE model, infrastructure scale up, externalities, South Africa
    JEL: D58 D92 H54 H59
    Date: 2013
  8. By: Daria Onori (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS; Université catholique de Louvain, IRES; University of Rome “La Sapienza”, Departement of Economics and Law, Faculty of Economics.)
    Abstract: Some recent evidence on government finance statistics of European countries suggests that countries with public debt issues also show a low tax revenue-GDP ratio. In this paper we develop a small open economy model of endogenous growth in which the engine of growth is public spending. We assume that government can finance public expenditures by borrowing on imperfect international financial markets where her borrowing capacity is limited. In contrast to the existing literature, where debt is constrained by the stock of capital, the collaterals are based on GDP. The balanced growth path and the transitional dynamics are studied. First, we show that the economy may converge in a finite time to the regime with binding collateral constraint. Second, in such regime the steady state public expenditures-GDP ratio is greater than that of the models without collateral constraints and of the stock-based collaterals literature. Third, the model predictions are consistent with recent empirical literature: there exists a certain threshold of financial and institutional development and economic features that an economy needs to attain in order to benefit from financial liberalization. Finally, if the degree of financial markets imperfections is weak, technologically developed countries experience a higher long-run growth rate than that of the stock-based collaterals literature, otherwise the world interest rate need to be high enough.
    Keywords: open economy; two-stage growth; public debt; flow collaterals; imperfect financial markets; multi-stage optimal control.
    JEL: C61 F34 F43 H63 O4 O16
    Date: 2013–05–21
  9. By: Facundo Alvaredo; Anthony B. Atkinson; Thomas Piketty; Emmanuel Saez
    Abstract: The top 1 percent income share has more than doubled in the United States over the last thirty years, drawing much public attention in recent years. While other English speaking countries have also experienced sharp increases in the top 1 percent income share, many high-income countries such as Japan, France, or Germany have seen much less increase in top income shares. Hence, the explanation cannot rely solely on forces common to advanced countries, such as the impact of new technologies and globalization on the supply and demand for skills. Moreover, the explanations have to accommodate the falls in top income shares earlier in the twentieth century experienced in virtually all high-income countries. We highlight four main factors. The first is the impact of tax policy, which has varied over time and differs across countries. Top tax rates have moved in the opposite direction from top income shares. The effects of top rate cuts can operate in conjunction with other mechanisms. The second factor is indeed a richer view of the labor market, where we contrast the standard supply-side model with one where pay is determined by bargaining and the reactions to top rate cuts may lead simply to a redistribution of surplus. Indeed, top rate cuts may lead managerial energies to be diverted to increasing their remuneration at the expense of enterprise growth and employment. The third factor is capital income. Overall, private wealth (relative to income) has followed a U-shaped path over time, particularly in Europe, where inherited wealth is, in Europe if not in the United States, making a return. The fourth, little investigated, element is the correlation between earned income and capital income, which has substantially increased in recent decades in the United States.
    JEL: H2
    Date: 2013–05
  10. By: Mario Jametti (Istituto di Economia Politica (IdEP), Facoltà di Scienze Economiche, Università della Svizzera italiana, Svizzera); Agustin Redonda (Istituto di Economia Politica (IdEP), Facoltà di Scienze Economiche, Università della Svizzera italiana, Svizzera); Anindya Sen (Department of Economics, University of Waterloo, Canada)
    Abstract: Since gasoline has a relatively inelastic demand, raising government revenue via gasoline taxes could appear appropriate as it entails a relatively small deadweight loss. However, gasoline retail is generally a highly concentrated market, hence the assumption of perfect competition when considering tax incidence might be misleading. Theoretically, in oligopolistic markets taxes can be shifted forward less (more) than proportionally to retail prices; a possibility usually denoted by undershifting (overshifting). Generally, this depends on unobservable parameters of the demand and cost functions. In this paper we device a novel empirical test, based on observables, to assess whether taxes are under- or overshifted in an oligopolistic market. The test depends on the interaction between market structure and taxes. We apply our test to the Canadian retail gasoline market using a panel data set of 10 cities, finding that gasoline taxes are undershifted.
    Keywords: Tax Incidence, Pass-through, Market Structure
    JEL: H22 D43 L13
    Date: 2013
  11. By: T. Christopher Borek; Angelo Frattarelli; Oliver Hart
    Abstract: Courts have articulated a number of legal tests to distinguish corporate transactions that have a legitimate business or economic purpose from those carried out largely, if not solely, for favorable tax treatment. We outline an approach to analyzing the economic substance of corporate transactions based on the property rights theory of the firm, and describe its application in two recent tax cases.
    JEL: C24 D02 D23 G34 H25 K34
    Date: 2013–05
  12. By: Min, Hokey; Lambert, Thomas
    Abstract: Abstract Due to mounting fiscal pressures over the last few years, the federal government as well as many state and municipal governments in the United States (U.S.) have had to re-examine their transportation policies and programs. Tax increases and/or spending cuts which aim to trim budget deficits are major preoccupations of most policy makers and legislative bodies nowadays. With regard to the task of building new or rehabilitating bridges, highways, and toll gates, cost-benefit analysis and economic impact studies are often undertaken by various government entities to rank and prioritize spending in the hopes of maximizing fiscal efficiency and road usage benefits. Since most highway construction and maintenance expenditures are absorbed by state governments, it is mostly up to state policy makers to decide transportation priorities. However, no research to date has been conducted to evaluate the comparative efficiency of state road provision to commuters and shippers. Such research would be useful to a state government’s budgetary allocation and spending plans. This paper is one of the first to assess and rank the comparative efficiency of all 50 states in the U.S. by using data envelopment analysis and then to explain variations in efficiency ratings by using Tobit regression analysis.
    Keywords: Keywords: data envelopment analysis, Tobit regression, road provisions, toll pricing, mass transit
    JEL: R4 R52
    Date: 2013–04–24
  13. By: Rafael Di Tella; Juan Dubra
    Abstract: We provide an example that shows that in the Alesina and Angeletos (2005) model one can obtain multiplicity even if luck plays no role in the economy. Thus, it is not critical that the noise to signal ratio be increasing in taxes, or that desired taxes are increasing in the noise to signal ratio.
    Keywords: Inequality, taxation, redistribution, political economy
    JEL: D31 E62 H2 P16
    Date: 2013
  14. By: Mauro Mastrogiacomo
    Abstract: We examined the mortgage interest tax relief (MIR) system in the Netherlands and reforms to this system, based on answers to direct questions in survey data for the period 2010-2012. As well as tracking individuals over time and at strategic moments in the process of the policy reform, this unique data set allowed us to isolate the effect of policy uncertainty on precautionary savings and, therefore, on consumption. We found that policy uncertainty alone could increase household buffers in the form of net worth. We estimate that this uncertainty ex ante induces households to increase their net worth by around 6% (EUR 8,000 on average). Although a MIR reform could mitigate this effect on accumulated savings, we also show that reforms that are not credible ex post could exacerbate rather than mitigate the effect on precautionary savings.
    Keywords: precautionary savings; income uncertainty; mortgage interest policy reform
    JEL: D12 D91 E21
    Date: 2013–05
  15. By: Sebastián Nieto Parra; Mauricio Olivera
    Abstract: This paper studies the interaction between different actors in the policy-making process of fiscal transfer reform in Colombia. To analyse this reform, we use the “life cycle of reform” framework. In that context, we follow critical phases in the reform process: planning, dialogue and adoption, and implementation and sustainability stages. This paper shows that the economic context and institutional factors, such as the new political structure for interactions between agents after the 1991 Constitution, were fundamental in achieving the reform. Moreover, it confirms previous studies showing that communication and compensation strategies play a key role in the approval of reforms. When the “sustainability” of the reform is analysed, this study shows that there is a need to improve the co-ordination of public policies at different levels of government.<BR>Ce document étudie les interactions entre les différents acteurs dans le processus de formulation de la réforme des transferts budgétaires en Colombie. Dans le but d’analyser cette réforme, nous utilisons la structure conceptuelle du «cycle de vie » de la réforme. Dans ce contexte, nous suivons les cinq étapes critiques d'une réforme: la Planification, le Dialogue, l'Adoption, l'Exécution et la Soutenabilité. Ce document souligne que le contexte économique et les facteurs institutionnels, comme la nouvelle structure politique qui régit les interactions entre les agents suite à la Constitution de 1991, ont été fondamentaux dans le succès de cette réforme. Par ailleurs, cette recherche corrobore les résultats d’études antérieures mettant en avant le rôle essentiel des stratégies de communication et de compensation dans l’approbation des réformes. L’analyse de l’étape de «soutenabilité » de cette réforme révèle qu’il est nécessaire d’améliorer la coordination des politiques publiques aux différents niveaux de gouvernement.
    Keywords: political economy, policy making process, reform, regional transfer, économie politique, processus de formulation des politiques, réforme, transfert régional
    JEL: D72 D78 H11 H71 P16
    Date: 2012–01–31
  16. By: Benoît Mulkay; Jacques Mairesse
    Abstract: This article presents an econometric analysis of the direct effects of the R&D tax credit (RTC) on private R&D in France and proposes an ex ante evaluation of the major reform implemented in 2008. We first estimate an error correction model of a dynamic R&D demand function on a large panel data of R&D doing firms, obtaining a preferred estimate of -0.4 for the long run elasticity of the user cost of R&D capital. We then perform a micro-simulation of the effects of the 2008 RTC reform that shows that the implicit long run budget multiplier would be about 0.7.
    JEL: H25 H32 O32
    Date: 2013–05
  17. By: Richard McManus
    Abstract: The 2008 financial crisis and subsequent global economic downturn has brought fiscal policy back onto the political and academic agenda. Despite the vast literature, the discussion is primarily focused upon the fiscal policy multiplier. This positive analysis omits normative consequences from policy and moreover, fails to consider political frictions to policy: something frequently observed in fiscal debates. By constructing a small scale New Keynesian DSGE model with a proportion of credit constrained (non-Ricardian) agents, this paper address these omissions. The results show that there is a normative justification of fiscal policy, in the presence of modest multipliers and the absence of progressive taxes, but on redistributive rather than aggregate grounds. Shocks impact the two agents differently and in polarising ways: countercyclical fiscal policy can be used to alleviate this divergence. However, aggregate improvements from policy are minimal as the gains of one agent are matched by the losses of another, thus giving rise to political frictions and moreover, predicting the current austerity versus stimulus debate.
    Keywords: Fiscal policy; heterogeneity; welfare; zero lower bound; liquidity rule-of-thumb; fiscal cyclicality
    JEL: E30 E62 H30
    Date: 2013–05
  18. By: Tobias Pfaff
    Abstract: Theory suggests that subjective well-being is affected by income comparisons and adaptation to income. Empirical tests of the effects often rely on self-constructed measures from survey data. This paper shows that results can be highly sensitive to simple parameter changes. Using large-scale panel data from Germany and the UK, I report cases where plausible variations in the underlying income type substantially affect tests of the relationship between life satisfaction, income rank, reference income, and income adaptation. Models simultaneously controlling for income and income rank as well as models with a number of income lags are prone to imperfect multicollinearity with consequences for the precision and robustness of estimates. When testing relative-income effects, researchers should be aware that reference income constructed as average of a rather arbitrarily defined reference group and reference income predicted from Mincer-type earnings equations are two approaches that can produce inconsistent results, and that are probably not as reliable and valid as previously assumed. The analysis underlines the importance of robustness checks and regression diagnostics, two routines that are often not carried out diligently in empirical research.
    Keywords: Subjective well-being, life satisfaction, relative income, income rank, adaptation
    JEL: C23 D0 I31
    Date: 2013
  19. By: Whitacre, Brian E.; Shideler, David W.; Williams, Randi
    Abstract: This paper adds to the recent literature on state-level incentive programs by evaluating the Quality Jobs Program in Oklahoma, which provides cash payments to businesses relocating to or expanding in the state. 70 communities across the state had a business that received QJ funding between 1994 and 2004, and we use multivariate regressions and matching techniques to compare their growth rates between 1990 and the 2005-09 ACS. The results provide no evidence that the QJ program contributed to growth among Oklahoma communities, but do provide limited evidence that, in comparison to otherwise similar Kansas communities, the program may have resulted in higher levels of income growth.
    Keywords: Incentive program, Matching, Oklahoma Quality Jobs, Community/Rural/Urban Development, Public Economics, H25, R00,
    Date: 2013–05
  20. By: Jordan Roulleau-Pasdeloup (CREST and Paris School of Economics)
    Abstract: Recently, a series of papers have argued that output multipliers of government spending can be potentially large during times when the Zero Lower Bound on nominal interest rates is binding (Christiano et al. (2011)). This literature generally considers "excess-savings" liquidity traps and identifies the reaction of real interest rates —that follows the effect of government purchases on marginal cost and, hence, inflation —as the main channel of propagation. Here, I show that taking explicitly into account the fact that government spending is productive can mitigate this result. The higher the share of productive government spending in total stimulus spending, the lower the gap between the government spending multipliers in and out of the Zero Lower Bound. Furthermore, a sufficient share of productive government spending in total stimulus spending will imply a higher multiplier when the Zero Lower Bound is not binding. It follows that the government spending multiplier need not be unusually large when the economy is in an "excess-savings" liquidity trap. In a "expectationsdriven" liquidity trap (Mertens & Ravn (2010)) however, the government spending multiplier will be larger than in normal times for a sufficient share of productive government spending. But for this to happen, a rise in inflation is still needed. While the predictions of the model with an "expectations-driven" liquidity trap are difficult to compare with the data, I show that the model with an "excess-savings" liquidity trap is at odds with recent empirical evidence on the behavior of key macroeconomic variables in a recession. In contrast, the simple New-keynesian model augmented with a sufficient share of productive government spending is qualitatively consistent with aforementioned evidence.
    Date: 2013–02
  21. By: Olivier Compte (Paris School of Economics); Andrew Postlewaite (Department of Economics, University of Pennsylvania)
    Abstract: Much of the repeated game literature is concerned with proving Folk Theorems. The logic of the exercise is to specify a particular game, and to explore for that game specification whether any given feasible (and individually rational) value vector can be an equilibrium outcome for some strategies when agents are sufficiently patient. A game specification includes a description of what agents observe at each stage. This is done by defining a monitoring structure, that is, a collection of probability distributions over the signals players receive (one distribution for each action profile players may play). Although this is simply meant to capture the fact that players don’t directly observe the actions chosen by others, constructed equilibria often depend on players precisely knowing these distributions, somewhat unrealistic in most problems of interest. We revisit the classic Folk Theorem for games with imperfect public monitoring, asking that incentive conditions hold not only for a precisely defined monitoring structure, but also for a ball of monitoring structures containing it. We show that efficiency and incentives are no longer compatible.
    Keywords: Repeated games, folk theorem, robustness
    JEL: C72 C73
    Date: 2013–01–03
  22. By: Guerzoni, Marco; Raiteri, Emilio (University of Turin)
    Abstract: This paper provides new empirical evidence about the impact of technological policies upon firms’ innovative behavior. We take into consideration the role of R&D subsidies and innovative public procurement. While the former policy tool has been both extensively discussed in the literature and empirically investigated, the latter is a growing trend, which still lacks robust empirical evidence. In this paper, we replicate existing results on R&D subsidies, we surmise fresh empirical evidence on the outcome of innovative public procurement, and we address the issue of a possible interaction among the two tools. When controlling for this interaction of public procurement, R&D subsidies cease to be as effective as reported in previous studies. Innovative public procurement seems to be more effective than R&D subsidies. Evidence suggests that the two policies provide the highest impact when they interact and that they have to be simultaneously considered. Failure in doing so might lead to biased results.
    Date: 2012–09
  23. By: Comin, Diego; Mestieri, Marti
    Abstract: If Technology Has Arrived Everywhere, Why Has Income Diverged? We study the lags with which new technologies are adopted across countries, and their long-run penetration rates once they are adopted. Using data from the last two centuries, we document two new facts: there has been convergence in adoption lags between rich and poor countries, while there has been divergence in penetration rates. Using a model of adoption and growth, we show that these changes in the pattern of technology diffusion account for 80% of the Great Income Divergence between rich and poor countries since 1820.
    Keywords: Technology Diffusion, Transitional Dynamics, Great Divergence
    JEL: E13 O14 O33 O41
    Date: 2013–05
  24. By: Unal Tongur (Department of Economics, METU); Adem Yavuz Elveren (Department of Economics, METU and Sutcu Imam University)
    Abstract: The impact of unionization on wage inequality has been examined by a vast literature. Focusing mostly on the US and the UK in time series analyses or on OECD countries in panel data analyses, a bulk of these studies have found a negative impact of deunionization (i.e. decline in the union density rate) on distribution of wages. By utilizing two inequality data sets both provided by the University of Texas Inequality Project this paper contributes to the literature, analyzing the causality relationship between deunionization and pay inequality for 24 OECD countries for the 1963-2000 period within a panel Granger structure. Our findings show not only that there is causality from union density to income inequality but also, perhaps more importantly, point out that there is causality running from income inequality to union density for various set of countries and time periods.
    Keywords: Union membership, Pay Inequality, Income Inequality, Panel Granger
    JEL: C33 J31 J51
    Date: 2013–05
  25. By: Steven M. Fazzari; James Morley; Irina Panovska
    Abstract: We investigate the effects of government spending on U.S. economic activity using a threshold version of a structural vector autoregressive model. Our empirical findings support state-dependent effects of fiscal policy. In particular, the effects of a government spending shock on out- put are significantly larger and more persistent when the economy has a high degree of underutilized resources than when the economy is close to capacity. This evidence is consistent with an underlying structure of the economy in which insufficient aggregate demand often constrains the level of economic activity.
    Keywords: Government Spending, Threshold Model, Vector Autoregression, Nonlinear Dynamics
    JEL: C32 E32 E62
    Date: 2012–05–15

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