nep-pbe New Economics Papers
on Public Economics
Issue of 2013‒08‒23
twenty-six papers chosen by
Keunjae Lee
Pusan National University

  1. Improving Fiscal Federal Relations for a Stronger Mexico By Aida Caldera Sánchez
  2. Fiscal composition and long-term growth By Afonso, António; Jalles, João Tovar
  3. Revisiting the link between growth and federalism: A Bayesian model averaging approach By Asatryan, Zareh; Feld, Lars P.
  4. Tax evasion, tax corruption and stochastic growth By Fred Célimène; Gilles Dufrénot; Gisèle Mophou; Gaston N’Guérékata
  5. The Efficiency and Equity of the Tax and Transfer System in France By Balazs Egert
  6. The 8 Percent Solution: A Sensible Tax Compromise for Albertans By Colin Busby; Alex Laurin
  7. Keeping up with the Joneses, the Smiths and the Tanakas: Optimal Taxation with Social Comparisons in a Multi-Country Economy By Aronsson, Thomas; Johansson-Stenman, Olof
  8. Multinationals' profit response to tax differentials: Effect size and shifting channels By Heckemeyer, Jost H.; Overesch, Michael
  9. Public debt, economic growth and nonlinear effects: Myth or reality? By Balázs Égert
  10. Uncertain Fiscal Consolidations By Huixin Bi; Eric M. Leeper; Campbell Leith
  11. Taxation and the Allocation of Talent By Eric Weyl; Charles Nathanson; Ben Lockwood
  12. Profit shifting and 'aggressive' tax planning by multinational firms: Issues and options for reform By Fuest, Clemens; Spengel, Christoph; Finke, Katharina; Heckemeyer, Jost; Nusser, Hannah
  13. Benefit incidence with incentive effects, measurement errors and latent heterogeneity By Ravallion, Martin; Chen, Shaohua
  14. The 90% Public Debt Threshold: The Rise & Fall of a Stylised Fact By Balazs Egert
  15. Fiscal stimulus in times of high debt: reconsidering multipliers and twin deficits By Nickel, Christiane; Tudyka, Andreas
  16. Preferences for Redistribution and Perception of Fairness: An Experimental Study By Ruben Durante; Louis Putterman; Joël van der Weele
  17. Re-assessing the merits of measuring tax evasions through surveys: Evidence from Serbian firms By Kundt, Thorben C.; Misch, Florian; Nerré, Birger
  18. Domestic public debt in low-income countries: trends and structure By Giovanna Bua; Juan Pradelli; Andrea Filippo Presbitero
  19. Is There Convergence of Russia's Regions?: Exploring the Empirical Evidence: 1995–2010 By Hartmut Lehmann; Maria Giulia Silvagni
  20. Forecasting fiscal time series using mixed frequency data By Asimakopoulos, Stylianos; Paredes, Joan; Warmedinger, Thomas
  21. Austria's Well-being Goes Beyond GDP By Oliver Röhn; Rauf Gönenç; Christian Beer; Romina Boarini
  22. Research Policy and U.S. Economic Growth By Richard M. H. Suen
  23. Growth still is good for the poor By Dollar, David; Kleineberg, Tatjana; Kraay, Aart
  24. Responding to Key Well-being Challenges in Austria By Rauf Gönenç; Oliver Röhn; Christian Beer; Andreas Wörgötter
  25. Fiscal regimes in the EU By Afonso, António; Toffano, Priscilla
  26. Corruption, Pricing of Public Services and Entrepreneurship in Economies with Leakage By Mukherjee, Vivekananda; Mitra, Siddhartha; Banerjee, Swapnendu

  1. By: Aida Caldera Sánchez
    Abstract: Mexico has achieved a high degree of decentralisation in public services, but the Mexican fiscal federal system has important shortcomings. States and municipalities have become heavily dependent on federal transfers to finance a growing share of public spending. This leaves the burden of raising tax revenues falling almost exclusively on the federal government and reduces incentives for efficient spending and active tax collection at the subnational level. It can also lead to moral hazard and fiscal slippages. The federal government should harden the budget constraint on sub-national governments by limiting further increases in transfers and avoiding extraordinary transfers. Promoting the implementation of stronger fiscal rules, such as rules on deficits and debt ceilings, could also help to harden budget constraints and to ensure greater fiscal discipline. States should be given more taxing powers, if they are to collect a larger share of total revenues. Greater accountability and clarification of spending responsibilities could also contribute to improve the efficiency of spending among states and municipalities.<P>Améliorer les relations budgétaires fédérales pour renforcer l'économie Mexicaine<BR>Le Mexique a poussé très loin la décentralisation des services publics, mais le système budgétaire fédéral présente des déficiences importantes. Les États et les communes sont désormais très tributaires des transferts fédéraux pour financer une part croissante des dépenses publiques. De ce fait, c’est sur l’État fédéral que repose presque exclusivement la tâche de lever l'impôt et l'échelon infranational est peu incité à dépenser efficacement et à recouvrer activement des recettes fiscales. Cette situation peut aussi générer un aléa moral et des dérapages budgétaires. L'État fédéral devrait exercer une plus forte pression budgétaire sur les entités infranationales en limitant les nouvelles hausses des transferts et en s'abstenant de consentir des transferts exceptionnels. L'application de règles budgétaires plus strictes, comme des règles en matière de déficits et le plafonnement de la dette, pourrait aussi accentuer les contraintes et assurer une plus grande discipline dans ce domaine. Pour être en mesure de recouvrer une plus grande partie des recettes publiques totales, les États doivent se voir accorder plus de pouvoirs en matière fiscale. Davantage de responsabilisation et une clarification des attributions sur le plan des dépenses seraient aussi de nature à améliorer l'efficience de ces dernières au niveau des États et des communes.
    Keywords: Mexico, decentralisation, federalism, local governments, Mexique, gouvernement local, décentralisation, fédéralisme
    JEL: H11 H30 H77 O54
    Date: 2013–08–05
  2. By: Afonso, António; Jalles, João Tovar
    Abstract: We assess the fiscal composition-growth nexus, using a large country panel, accounting for the usually encountered econometric pitfalls. Our results show that revenues have no significant impact on growth whereas expenditures have negative effects. The same is true for the OECD with the addition that government revenue has a negative impact on growth. From our results, taxes on income are not growth enhancing, as well as public wages, interest payments, subsidies and government consumption. Spending on education and health boosts growth; and there is weak evidence supporting causality running from expenditures and revenues to output. JEL Classification: C23, E62, H50
    Keywords: budget decomposition, budget deficit, panel analysis, panel causality
    Date: 2013–03
  3. By: Asatryan, Zareh; Feld, Lars P.
    Abstract: Following the ambiguous results in the literature aimed at understanding the empirical link between fiscal federalism and economic growth, this paper revisits the question using a Bayesian Model Averaging approach. The analysis suggests that the failure to appropriately account for model uncertainty may have previously led to biased estimates. The results from a sample of 23 OECD countries over 1975-2000 indicate that after controlling for unobserved country heterogeneity, there is no robust link, neither positive, nor negative, between output growth and fiscal federalism (measured as sub-national governments' share of own source tax revenue). --
    Keywords: Fiscal Federalism,Economic Growth,Bayesian Model Averaging
    JEL: C11 H70 O43
    Date: 2013
  4. By: Fred Célimène; Gilles Dufrénot; Gisèle Mophou; Gaston N’Guérékata
    Abstract: This paper presents a continuous time stochastic growth model to study the e¤ects of tax evasion and tax corruption on the level and volatil- ity of private investment and public spending. Our results suggest that there do exist several regimes of mean growth and growth volatility, de- pending upon the consumers degree of risk aversion, the tax income yield, the risk-adjusted return of the agents portfolio, the productivity of public spending. We …nd that public spending is described asymptotically by an incomplete upper Gamma distribution, while private capital is described by a power law distribution. Depending upon the values of the parame- ters of these distributions, growth can be characterized by extreme values (high volatility) when the return to taxation lies under a certain threshold and/or when the risk-adjusted return of investing the proceeds of illegal activities evolves above a given threshold. We provide an empirical illus- tration of the model.
    Keywords: Stochastic growth; tax evasion; tax corruption
    JEL: H26 D91 O41
    Date: 2013–02–15
  5. By: Balazs Egert
    Abstract: Taxes and cash transfers reduce income inequality more in France than elsewhere in the OECD, because of the large size of the flows involved. But the system is complex overall. Its effectiveness could be enhanced in many ways, for example so as to achieve the same amount of redistribution at lower cost. The French tax code should be simplified and changed less frequently. High statutory rates are coupled with a wide range of effective tax rates resulting from a multitude of tax expenditures. There is a need for base broadening combined with lower rates throughout the system, including VAT. The tax wedge on labour is high, except at the bottom of the wage distribution, which can reduce worker participation and job offers. Greater neutrality both across different capital asset classes but also within specific taxes, and shifting taxes from labour and capital inputs to environmental and property taxes would improve economic outcomes. Likewise, the system of social and family benefits should be simplified to enhance transparency and consistency. Eliminating schemes that let people leave the labour market early, abolishing the pension privileges of specific occupational groups and internalising the costs of survivors’ pension benefits would increase fairness while at the same time generating savings. Better labour-market performance would result from increasing job-search incentives and shortening the parental leave allowance. This Working Paper relates to the 2013 OECD Economic Review of France (
    Keywords: taxation; cash transfers; income inequality; redistribution
    JEL: D30 H20 H30 H50 H55 H70 J20 J30
    Date: 2013–04–15
  6. By: Colin Busby (C.D. Howe Institute); Alex Laurin (C.D. Howe Institute)
    Abstract: A revenue-neutral tax swap would improve Alberta’s fiscal prospects, according to a report released today by the C.D. Howe Institute. In “The 8 Percent Solution: A Sensible Tax Compromise for Albertans,” authors Colin Busby and Alexandre Laurin propose a change that would better equip Alberta’s government to meet its longer-term fiscal challenges, which include plunging resource revenues and growing budget deficits.
    Keywords: Fiscal Policy and Tax Competitiveness
    JEL: H20 H21 H30 H61 H62 H71
  7. By: Aronsson, Thomas (Department of Economics, Umeå School of Business and Economics); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law)
    Abstract: Recent empirical evidence suggests that between-country social comparisons have become more important over time. This paper analyzes optimal income taxation in a multi-country economy, where consumers derive utility from their relative consumption compared with both other domestic residents and people in other countries. The optimal tax policy in our framework reflects both correction for positional externalities and redistributive aspects of such correction due to the incentive constraint facing each government. If the national governments behave as Nash competitors to one another, the resulting tax policy only internalizes the externalities that are due to within-country comparisons, whereas the tax policy chosen by the leader country in a Stackelberg game also reflects between-country comparisons. We also derive a globally efficient tax structure in a cooperative framework. Nash competition typically implies lower marginal income tax rates than chosen by the leader country in a Stackelberg game, and cooperation typically leads to higher marginal income tax rates than the non-cooperative regimes.
    Keywords: Optimal taxation; relative consumption; inter-jurisdictional comparison; asymmetric information; status; positional goods
    JEL: D03 D62 D82 H21
    Date: 2013–08–13
  8. By: Heckemeyer, Jost H.; Overesch, Michael
    Abstract: This paper provides a quantitative review of the empirical literature on profit-shifting behavior of multinational firms. We synthesize the evidence from 25 studies and find a substantial response of profit measures to international tax rate differentials. Accounting for misspecification biases by means of meta-regressions, we predict a tax semi-elasticity of subsidiary pre-tax profits of about 0.8. Moreover, we disentangle the tax response by means of financial planning from the transfer pricing and licensing channel. Our results suggest that transfer pricing and licensing are the dominant profit-shifting channel. --
    Keywords: Profit Shifting,Multinational Firm,Corporate Income Tax,Meta-Analysis
    JEL: H25 H26 H32
    Date: 2013
  9. By: Balázs Égert
    Abstract: This paper puts the Reinhart-Rogoff dataset to a formal econometric testing to see whether public debt has a negative nonlinear effect on growth if public debt exceeds 90% of GDP. Using nonlinear threshold models, we show that the negative nonlinear relationship between debt and growth is very sensitive to modelling choices. We also show that when nonlinearity is detected, the negative nonlinear effect kicks in at much lower levels of public debt (between 20% and 60% of GDP). These results, based on bivariate regressions on secular time series, are confirmed on a shorter dataset (1960-2010) using a multivariate growth framework.
    Keywords: public debt; economic growth; nonlinearity; threshold effects
    JEL: E6 F3 F4 N4
    Date: 2013–02–15
  10. By: Huixin Bi; Eric M. Leeper; Campbell Leith
    Abstract: The paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition - either tax- or spending-based - are uncertain. We find that the composition of the fiscal consolidation, its duration, the monetary policy stance, the level of government debt, and expectations over the likelihood and composition of fiscal consolidations all matter in determining the extent to which a given consolidation is expansionary or successful in stabilizing government debt. We argue that the conditions that could render fiscal consolidation efforts expansionary are unlikely to apply in the current economic environment.
    Keywords: Economic models; Fiscal Policy; Uncertainty and monetary policy
    JEL: H60 E62 E63 H30
    Date: 2013
  11. By: Eric Weyl (University of Chicago); Charles Nathanson (Harvard University); Ben Lockwood (Harvard University)
    Abstract: Taxation affects the allocation of talented individuals across industries by blunting material incentives and thus relatively magnifying the non-pecuniary benefits of pursuing a "calling". If higher-paying industries (e.g. finance and management) generate less positive net externalities than lower-paying professions (e.g. public service and education) this may enhance efficiency. We develop a theory of income taxation as implicit Pigouvian taxation of these externalities and calibrate it using data on the distribution of income and talent across industries. Even without any redistributive motive, tax rates are highly sensitive to the externalities assumed within a spectrum many would consider reasonable: they range from extremely regressive to highly progressive at high incomes. Our theory thus offers an alternative, pure efficiency rationale for non-linear income taxation, challenging the connection between high long-run labor supply elasticities and low optimal tax rates and motivating further study of the externalities generated by professions.
    Date: 2013
  12. By: Fuest, Clemens; Spengel, Christoph; Finke, Katharina; Heckemeyer, Jost; Nusser, Hannah
    Abstract: This paper discusses the issue of profit shifting and 'aggressive' tax planning by multinational firms. The paper makes two contributions. Firstly, we provide some background information to the debate by giving a brief overview over existing empirical studies on profit shifting and by describing arrangements for IP-based profit shifting which are used by the companies currently accused of avoiding taxes. We then show that preventing this type of tax avoidance is, in principle, straightforward. Secondly, we argue that, in the short term, policy makers should focus on extending withholding taxes in an internationally coordinated way. Other measures which are currently being discussed, in particular unilateral measures like limitations on interest and license deduction, fundamental reforms of the international tax system and country-by-country reporting, are either economically harmful or need to be elaborated much further before their introduction can be considered. --
    Keywords: tax avoidance,profit shifting,multinational firms,intellectual property,tax policy,tax reform
    JEL: H20 H25 F23 K34
    Date: 2013
  13. By: Ravallion, Martin; Chen, Shaohua
    Abstract: Empirical studies of tax and benefit incidence routinely ignore behavioral responses and measurement errors. This paper offers an econometric method of estimating the mean benefit withdrawal rate (marginal tax rate) allowing for incentive effects, measurement errors, and correlated latent heterogeneity in incidence. Under the method's identifying assumptions, a feasible instrumental variables estimator corrects for incentive effects and measurement errors, and provides a bound for the true value when there is correlated incidence heterogeneity. A case study for a large cash transfer program in China indicates that past methods of assessing benefit incidence using either nominal official rates or raw tabulations from survey data are deceptive. The program entails a nominal 100 percent benefit withdrawal rate -- a poverty trap. However, the paper finds that the actual rate is much lower, and clearly too low in the light of the literature on optimal income taxation. The paper discusses likely reasons based on the qualitative observations.
    Keywords: Rural Poverty Reduction,Labor Policies,Services&Transfers to Poor,Inequality,Economic Theory&Research
    Date: 2013–08–01
  14. By: Balazs Egert
    Abstract: This paper analyses the original Reinhart-Rogoff dataset, made public by Herndon et al. (2013), on the basis of descriptive statistics and formal econometric testing. First, based on the public debt thresholds (30%, 60% and 90%) proposed by Reinhart and Rogoff (2010), descriptive statistics reveal that real GDP growth slows considerably as the central government debt-to-GDP ratio goes beyond the 30% threshold and that no further slowdown can be observed in the data as the debt-to-GDP ratio rises above 60% and 90% during the periods 1790-2009 and 1946-2009. For the United States (1946-2009), the negative nonlinear finding completely disappears for any level of public debt, once reverse causality and influential outliers are accounted for. Looking at general (and central) government debt during the more recent period of 1960-2009 suggests that economic slowdown occurs when public debt moves above 60% or 90% of GDP. But it seems more appropriate to determine nonlinearity and the associated debt threshold endogenously. Therefore, in a second stage, we put the Reinhart-Rogoff dataset to a formal econometric test by employing nonlinear threshold models. Overall, our estimation results indicate that the nonlinear relation from debt to growth is not very robust. Taken with a pinch of salt, our results suggest, however, that there may be a tipping point at around 20% of GDP, beyond which central government debt has a negative influence on growth. Further (and greater) thresholds may exist but their magnitude is highly uncertain. For general government debt (1960-2009), the threshold beyond which negative growth effects kick in is considerably higher at about 50%. Finally, individual country estimates reveal a large amount of cross-country heterogeneity. For some countries including the United States, a nonlinear negative link can be detected at about 30% of GDP. For others, the thresholds are surrounded by a great amount of uncertainty or no nonlinearities can be established. This instability may be a result of threshold effects changing over time within countries and depending on economic conditions, not captured in our estimations. Overall, our results can be seen as a formal econometric confirmation that the 90% public debt threshold is not in the data. But our results also seem to suggest that public debt might have a negative effect on economic performance kicking in at already fairly moderate public debt levels. Furthermore, the absence of threshold effects or low estimated thresholds may not preclude the emergence of further threshold effects, especially as public debt levels are rising to unprecedentedly high levels.
    Keywords: public debt; economic growth; nonlinearity; threshold effects
    JEL: E6 F3 F4 N4
    Date: 2013–05–15
  15. By: Nickel, Christiane; Tudyka, Andreas
    Abstract: We investigate the impact of fiscal stimuli at different levels of the government debt-to-GDP-ratio for a sample of 17 European countries from 1970 to 2010. This is implemented in an interacted panel VAR framework in which all coefficient parameters are allowed to change continuously with the debt-to-GDP ratio. We find that responses to government spending shocks exhibit strong non-linear behaviour. While the overall cumulative effect of a spending shock on real GDP is positive and significant at moderate debt-to-GDP ratios, this effect turns negative as the ratio increases. The total cumulative effect on the trade balance is negative at first but switches sign at higher levels of debt. Consequently, depending on the degree of public indebtedness, our results accommodate long-run fiscal multipliers which are greater and smaller than one or even negative as well as twin deficit and twin divergence behaviour within one sample and time period. From a policy perspective, these results lend additional support to increased prudence at high public debt ratios because the effectiveness of fiscal stimuli to boost economic activity or resolve external imbalances may not be guaranteed. JEL Classification: E62, F32, F41, C32, C11
    Keywords: Bayesian estimation, debt dynamics, Fiscal Policy, non-linearities, panel-VAR, trade account
    Date: 2013–02
  16. By: Ruben Durante; Louis Putterman; Joël van der Weele
    Abstract: We conduct a laboratory experiment to study how demand for redistribution of income depends on self-interest, insurance motives, and social concerns relating to inequality and efficiency. Our choice environments feature large groups of subjects and real world framing, and differ with respect to the source of inequality (earned or arbitrary), the cost of taxation to the decision maker, the dead-weight loss of taxation, uncertainty about own pre-tax income, and whether the decisionmaker is affected by redistribution. We estimate utility weights for the different sources of demand for redistribution, with the potential to inform modeling in macroeconomics and political economy.
    Keywords: income distribution, political economy, redistribution, social preferences.
    Date: 2013
  17. By: Kundt, Thorben C.; Misch, Florian; Nerré, Birger
    Abstract: This paper addresses the major weakness of measuring tax evasion through business and household surveys, namely the reluctance of respondents to answer truthfully due to the threat of disclosure. First, we assess the merits of a novel questioning method to gather information about tax evasion by means of business surveys. This approach allows estimating the prevalence of tax evasion, but it does not allow identifying whether the individual firm engages in tax evasion or not, therefore providing incentives for survey participants to answer truthfully. Second and contrary to most other business surveys, we differentiate between two common modes of tax evasion, namely underreporting of sales and informal supplements to official wages ('envelope wages'). Using evidence from Serbia, we show that the estimated share of firms which underreport sales and wages, respectively, by at least 10% is higher under the crosswise model compared to the case when conventional questioning methods applied in business surveys such as the World Bank Enterprise Surveys are used. However, the difference is only significant with respect to sales. These results appear to be robust to a number of modifications, and we explore various potential causes that lead to these results. --
    Keywords: tax evasion,shadow economy,measurement,developing countries
    JEL: H20 E62
    Date: 2013
  18. By: Giovanna Bua (The World Bank, Universit… Statale di Milano); Juan Pradelli (The World Bank); Andrea Filippo Presbitero (Universit… Politecnica delle Marche, MoFiR)
    Abstract: This paper introduces a new dataset on the stock and structure of domestic debt in 36 Low-Income Countries over the period 1971-2011. We characterize the recent trends regarding LICs domestic public debt and explore the relevance of different arguments put forward on the benefits and costs of government borrowing in local public debt markets. The main stylized fact emerging from the data is the increase in domestic government debt since 1996. We also observe that poor countries have been able to increase the share of long-term instruments over time and that the maturity lengthening went together with a decrease in borrowing costs. However, the concentration of the investor base, mainly dominated by commercial banks and the Central Bank, may crowd out lending to the private sector.
    Keywords: Debt structure, Domestic debt, HIPCs, Low-income countries
    JEL: E62 H63 O23
    Date: 2013–08
  19. By: Hartmut Lehmann; Maria Giulia Silvagni
    Abstract: This paper analyses convergence in per capita gross regional product of Russia’s regions during the period 1995-2010, when regional data are available. Using a panel regression framework we find no evidence for beta-convergence. Instead we find divergence, which is, however, attenuated over time. Robustness checks that use regional real income instead of gross regional product confirm this outcome as do non-parametric estimates of convergence, namely estimates using Markov transition probability matrices and stochastic kernel plots of regional relative income. Decompositions of regional income and gross regional product also find no sigma-convergence of Russian regions. These decompositions point to the geographical concentration of extractive activities in the Urals and of business services and of the public administration in the Moscow area as the main culprit for this lack of convergence. They also establish that despite reforms to equalize provisions of public goods across Russia, the social services sector of the public administration, education and health still do not have the expected equalizing impact on regional income.<P>Y a-t-il convergence entre régions de Russie ? : Exploration des preuves empiriques: 1995-2010<BR>Cet article analyse la convergence du produit régional brut per capita entre régions de Russie au cours de la période 1995-2010, lorsque les données régionales sont disponibles. En utilisant une régression de panel, nous ne trouvons aucune preuve de bêta-convergence. Nous trouvons au contraire une divergence qui s’atténue toutefois au fil du temps. Nous confirmons ces résultats avec deux tests de robustesse : un qui utilise le revenu régional réel au lieu du produit régional brut, un autre basé sur des estimations non paramétriques de convergence, à savoir des estimations des matrices de probabilité de transition de Markov et une représentation de kernel stochastiques du revenu régional relatif. Des décompositions du revenu régional et du produit régional brut ne montrent pas non plus de sigma-convergence entre régions russes. Ces décompositions soulignent la concentration géographique des activités extractives dans l'Oural et de services aux entreprises et de l'administration publique dans la région de Moscou comme les principaux responsables de ce manque de convergence. Elles établissent également que malgré les réformes pour égaliser les provisions de biens publics à travers la Russie, le secteur des services sociaux de l'administration publique, l'éducation et la santé n'ont toujours pas l'impact attendu sur l'égalisation des revenus régionaux.
    Keywords: convergence, Russian regions, regional inequality decomposition, regional distribution dynamics, convergence, régions russes, décomposition inter-régionale de l'inégalité, dynamique de distribution régionale
    JEL: O47 P25 R11 R12
    Date: 2013–08–06
  20. By: Asimakopoulos, Stylianos; Paredes, Joan; Warmedinger, Thomas
    Abstract: Given the increased importance of …fiscal monitoring, this study amends the existing literature in the …field of intra-annual fi…scal data in two main dimensions. First, we use quarterly fi…scal data to forecast a very disaggregated set of …fiscal series at annual frequency. This makes the analysis useful in the typical forecasting environment of large institutions, which employ a "bottom-up" or disaggregated framework. Aside from this practical type of consideration, we fi…nd that forecasts for total revenues and expenditures via their subcomponents can actually result more accurate than a direct forecast of the aggregate. Second, we employ a Mixed Data Sampling (MiDaS) approach to analyze mixed frequency …fiscal data, which is a methodological novelty. It is shown that MiDaS is the best approach for the analysis of mixed frequency fi…scal data compared to two alternative approaches. The results regarding the information content of quarterly …fiscal data con…rm previous work that such data should be taken into account as it becomes available throughout the year for improving the end-year forecast. For instance, once data for the third quarter is incorporated, the annual forecast becomes very accurate (very close to actual data). We also benchmark against the European Commission’s forecast and fi…nd the results fare favorably, particularly when considering that they stem from a simple univariate framework. JEL Classification: C22, C53, E62, H68
    Keywords: aggregated vs disaggregated forecast, Fiscal Policy, Mixed frequency data, short-term forecasting
    Date: 2013–05
  21. By: Oliver Röhn; Rauf Gönenç; Christian Beer; Romina Boarini
    Abstract: Austria enjoys strong material well-being and high quality of life. Steady convergence with top GDP per capita levels translated into decisive improvements in household disposable incomes while significant redistribution has ensured low income inequality and poverty. This has been combined with gains in leisure time, especially time spent in retirement, low unemployment, high environmental standards, rising life expectancy, a well-functioning social support network and high subjective well-being. This performance was achieved with a unique combination of supportive conditions for a dynamic business sector, priority for family based care, a wide supply of public services, and a well-functioning social partnership. Particularly remarkable for a small open economy has been the degree of stability, which may have contributed to Austria’s high quality of life. However, a number of weaknesses also exist. Older, unskilled and in particular people with migrant background, have lower labour market attachments. Outcomes in education and health care are subject to inequalities. Family services are still mainly carried out by women, who have closed the gap in education attainment with men but face tensions between work and family responsibilities and a high wage gap. The gaps experienced by people with migrant background are in several dimensions larger than in the average OECD country. This Working Paper relates to the 2013 OECD Economic Survey of Austria (<P>En Autriche, le bien-être ne se limite pas au PIB<BR>En Autriche, le bien-être matériel et la qualité de vie sont élevés. Un mouvement constant de convergence vers un PIB par habitant élevé a permis une nette amélioration du revenu disponible des ménages. Parallèlement, une redistribution importante a permis que les inégalités de revenu et le taux de pauvreté soient faibles. À cela s’ajoutent une augmentation du temps disponible pour les loisirs, en particulier du temps passé à la retraite, un faible taux de chômage, une bonne qualité de l’environnement, un allongement de l’espérance de vie et un bien-être subjectif élevé. L’Autriche doit ces résultats à un modèle unique en son genre, qui associe des conditions favorables au dynamisme du secteur privé, une priorité accordée à la prise en charge familiale, une offre développée de services publics et un système de partenariat social efficace. Un certain nombre de faiblesses existent cependant. Ainsi, les travailleurs âgés et non qualifiés et, surtout, les personnes issues de l’immigration, sont plus éloignés du marché du travail. On observe des inégalités dans les résultats en matière d’éducation et de santé. Les services aux familles restent dans une large mesure l’apanage des femmes, qui, malgré la résorption de l’écart de niveau d’instruction avec les hommes, rencontrent des difficultés à concilier vie professionnelle et familiale et sont confrontées à un gros écart de rémunération. Pour plusieurs dimensions du bien-être, les différences entre les personnes issues de l’immigration et le reste de la population sont supérieures à celles observées dans le pays moyen de l’OCDE. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Autriche, 2013 ( -2013.htm).
    Keywords: productivity, Austria, well-being, quality of life, family, social partnership, productivité, Autriche, bien-être, qualité de vie, famille, partenariat social
    JEL: D31 D60 H40 I31 O52
    Date: 2013–08–05
  22. By: Richard M. H. Suen (University of Connecticut)
    Abstract: This paper examines quantitatively the effects of R&D subsidy and government-financed basic research on U.S. economic growth and consumer welfare. To achieve this, we develop an endogenous growth model which takes into account both public and private research investment, and the differences between basic and non-basic research. A calibrated version of the model is able to replicate some important features of the U.S. economy over the period 1953-2009. Our model suggests that government spending on basic research is an effective policy instrument to promote economic growth. Subsidizing private R&D, on the other hand, has no effect on economic growth.
    Keywords: Research Policy, Basic and Applied Research, R&D Spending, Endogenous Growth
    JEL: O31 O38 O41
    Date: 2013–08
  23. By: Dollar, David; Kleineberg, Tatjana; Kraay, Aart
    Abstract: Incomes in the poorest two quintiles on average increase at the same rate as overall average incomes. This is because, in a global dataset spanning 118 countries over the past four decades, changes in the share of income of the poorest quintiles are generally small and uncorrelated with changes in average income. The variation in changes in quintile shares is also small relative to the variation in growth in average incomes, implying that the latter accounts for most of the variation in income growth in the poorest quintiles. These findings hold across most regions and time periods and when conditioning on a variety of country-level factors that may matter for growth and inequality changes. This evidence confirms the central importance of economic growth for poverty reduction and illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the relative growth rates of those in the poorest quintiles.
    Keywords: Achieving Shared Growth,Inequality,Emerging Markets,Economic Theory&Research,Economic Growth
    Date: 2013–08–01
  24. By: Rauf Gönenç; Oliver Röhn; Christian Beer; Andreas Wörgötter
    Abstract: Important challenges for the future of Austrian well-being arise from demographic and environmental trends. The ageing of the population calls for a fair balance between life-time pension contributions and entitlements, drawing on the recent pension reform. Such progress will allow Austrians to make more informed choices between the length of their work and contribution periods and retirement length and income according to their preferences, without threatening fiscal sustainability. With female labour force participation rising, family policies should help reconcile equality of opportunity within families by promoting the availability, affordability and quality of support services. A growing share of immigrant groups with low human capital calls for remedial policies to preserve social cohesion. Environmental pressures arise from urban sprawl and the strong expansion of road transport. Turning around these trends will require more appropriate pricing of the externalities and better regional development policies to foster denser settlements that are well connected to public transport. This entails a need to strengthen coordination between different government layers and better integration of regional development with transport and housing policies. This Working Paper relates to the 2013 OECD Economic Survey of Austria (<P>Bien-être en Autriche : les grands défis<BR>Le bien-être des Autrichiens va se heurter à l’avenir à des défis importants liés aux tendances démographiques et environnementales. Le vieillissement de la population nécessite un juste équilibre entre les cotisations et les droits à pension, sur la base de la réforme récente du régime de retraite. Ces progrès vont permettre aux Autrichiens de faire des choix plus éclairés entre la durée de leur vie active et de leurs cotisations et celle de leur retraite ainsi que leurs revenus en fonction de leurs préférences, sans pour autant peser sur la viabilité des finances publiques. Face à l’augmentation du taux d’activité des femmes, les politiques familiales devraient contribuer à l’égalité des chances au sein des familles et favoriser des services de soutien accessibles, abordables et efficaces. La proportion grandissante des groupes immigrés ayant un faible niveau de capital humain exige la mise en place de mesures correctives afin de préserver la cohésion sociale. Les pressions pesant sur l’environnement sont causées par l’étalement urbain et l’expansion rapide du transport routier. Pour contrer ces évolutions, il faudra mettre en place une tarification plus appropriée des externalités et de meilleures politiques de développement régional afin de promouvoir des habitats plus denses et bien desservis par les transports publics. Il faut pour cela renforcer la coordination entre les différents niveaux d’administration et mieux intégrer les politiques de développement régional, de transport et de logement. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Autriche, 2013 ( -2013.htm).
    Keywords: ageing, environment, transport, Austria, immigration, well-being, urban sprawl, family, environnement, transport, vieillissement, Autriche, immigration, démographie, bien-être, étalement urbain, famille
    JEL: D60 J10 O52 Q50
    Date: 2013–08–05
  25. By: Afonso, António; Toffano, Priscilla
    Abstract: We assess the existence of fiscal regime shifts in the U.K., Germany, and Italy, using Markov switching fiscal rules. On the basis of a newly built quarterly data set, our results show the existence of fiscal regimes shifts, sometimes coupled with regime switches also regarding monetary developments. While in the UK “active” and “passive” (Leeper, 1991) fiscal regimes are somewhat clearer cut, in Germany fiscal regimes have been overall less active, supporting more fiscal sustainability. For Italy, a more passive fiscal behaviour is uncovered in the run-up to EMU. JEL Classification: C22, E62, H62
    Keywords: EU, fiscal regimes, Markov-switiching
    Date: 2013–04
  26. By: Mukherjee, Vivekananda; Mitra, Siddhartha; Banerjee, Swapnendu
    Abstract: The paper presents a theoretical model with bureaucratic corruption where bribe income can leak out of an economy. In such an economy given its perception about the extent of leakage the government sets the price of public services required for entrepreneurship by maximizing the welfare of the economy. We show that the corruption persists at the equilibrium. The government prices its services at a level higher than their unit cost of provision in high leakage economies. However, the price falls to unit cost level in more prosperous economies. We also find that the number of entrepreneurs starting business and the total income received as bribe are non-increasing functions of the prosperity level and the extent of leakage from the economy. The predictions of the model generate interesting policy implications: for example it clearly shows that in low prosperity economies the control of leakage may induce higher level of corruption, while the opposite is true in the high prosperity economies.
    Keywords: Corruption, Leakage, Entrepreneurship, Pricing of Public Services
    JEL: C72 D73 H57 O17
    Date: 2013–06

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