nep-pbe New Economics Papers
on Public Economics
Issue of 2013‒08‒31
27 papers chosen by
Keunjae Lee
Pusan National University

  1. Tax Competition and Double Tax Treaties with Mergers and Acquisitions By Siggelkow, Benjamin Florian
  2. State and local spending: Do tax and expenditure limits work? By Benjamin Zycher
  3. Capital income taxation: Reframing the debate By Alan D. Viard
  4. Capital mobility, imperfect labour markets, and the provision of public goods By Pauser, Johannes
  5. Intergovernmental Fiscal Relationships in China: A Simple Model Based on the Nonsymmetric Nash Solution By Mototsugu Fukushige; Yingxin Shi
  6. Effects of supervision on tax compliance: Evidence from a field experiment in Austria By Katharina Gangl; Benno Torgler; Erich Kirchler; Eva Hofmann
  7. Beyond the Labour Income Tax Wedge: The Unemployment-Reducing Effect of Tax Progressivity By Etienne LEHMANN; Claudio LUCIFORA; Simone MORICONI; Bruno VAN DER LINDEN
  8. The distributional effects of taxes and transfers under alternative income concepts: the importance of three ‘I’s By Figari, Francesco; Paulus, Alari
  9. Austerity undone By John H. Makin
  10. Discretionary tax measures: pattern and impact on tax elasticities By Savina Princen; Gilles Mourre; Dario Paternoster; George-Marian Isbasoiu
  11. Effective Personal Tax Rates on Marginal Skills Investments in OECD Countries: A New Methodology By Bert Brys; Carolina Torres
  12. The effect of state and local sales taxes on employment at state borders By Jeffrey P. Thompson; Shawn M. Rohlin
  13. Balanced-Budget Rules and Aggregate Instability: The Role of Consumption Taxes in a Monetary Economy By Jianpo Xue; Chong K. Yip
  14. Israeli corporate tax policy: A pro-growth system at risk By Alex Brill
  15. The tax treatment of the family By Aspen Gorry; Sita Nataraj Slavov
  16. Fiscal Adjustments and the Probability of Sovereign Default By Christoph A. Schaltegger; Martin Weder
  17. Fiscal sustainability in Burundi : baseline projections, stochastic simulations, and policy scenarios By Kida, Mizuho
  18. The Effects of a Financial Transaction Tax in an Artificial Financial Market By Daniel Fricke; Thomas Lux
  19. Downward Accountability in Response to Collective Actions: The Political Economy of Public Goods Provision in China By Li, Yuan
  20. Long-term Issues for Fiscal Sustainability in Emerging Asia By Kawai, Masahiro; Morgan, Peter J.
  21. Distributional Implications of the Crisis in Greece in 2009-2012 By Matsaganis, Manos; Leventi, Chrysa
  22. Analyzing Fiscal Sustainability By Huixin Bi; Eric M. Leeper
  23. Public pension reform By Kent Smetters; Andrew G. Biggs; Amy Monahan; Paul Angelo
  24. Religious Identity, Public Goods and Centralization: Evidence from Russian and Israeli Cities By Theocharis Grigoriadis; Benno Torgler
  25. Religiosity and income: A panel cointegration and causality analysis By Herzer, Dierk; Strulik, Holger
  27. Conspicuous Consumption, Conspicuous Health, and Optimal Taxation By Redzo Mujcic; Paul Frijters

  1. By: Siggelkow, Benjamin Florian
    Abstract: In a two-period tax competition model with provision of local public goods, we analyze efficiency properties of double taxation reliefs incorporating either the exemption method, the tax credit system or the full taxation after deduction system. Foreign direct investments are presumed to be one-way and characterized by long-term mergers and acquisitions. We find that in case of (i) tax revenue maximization the exemption method implies inefficiently low tax rates, whereas the full taxation after deduction system leads to inefficiently low / efficient / inefficiently high tax rates. In case of (ii) welfare maximization each of these tax rules can be efficient. The (limited) tax credit system, however, is shown to always result in inefficiently low / inefficiently high tax rates. A numerical example reveals that no tax regime per se entails efficiency. In case of (i), a ranking of tax systems subject to the Pareto criterion is shown to depend on the parameters of the production function. Regarding (ii) the exemption method is preferable as it is proven to be the least inefficient tax regime.
    Keywords: tax competition, double taxation relief, tax rules, profit taxation, mergers and acquisitions
    JEL: H21 H73 H87
    Date: 2013
  2. By: Benjamin Zycher
    Abstract: In the past several decades, 30 states have introduced tax and expenditure limits to maintain fiscal discipline, but all evidence suggests that these laws are ineffective.
    Keywords: Tax expenditures,state budgets,fiscal discipline
    JEL: A H
    Date: 2013–05
  3. By: Alan D. Viard (American Enterprise Institute)
    Abstract: Opponents of capital income taxation must reframe the policy debate by explaining the economic disadvantages of capital income taxes and proposing alternative budgetary measures that maintain tax fairness.
    Keywords: corporate taxation,capital income taxes,AEI on Campus,taxation
    JEL: A H
    Date: 2013–07
  4. By: Pauser, Johannes (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "This paper examines equilibrium tax rates and provision levels of public goods in an international tax competition setting with imperfect labour markets. While earlier research mainly reexamined the result of underprovision of public consumption goods in the decentralised equilibrium, this paper focuses also on the provision of public intermediate goods with different sets of policy instruments available for governments, including a labour tax. In the tax game assuming symmetric jurisdictions, public inputs may also be overprovided if unemployment is caused by a fixed wage above the competitive wage rate. In detail, overprovision of public inputs may occur if governments have a head tax only, or head and capital taxes at disposal. Using comparative static analysis, the paper investigates further the sources of the differences between governmental provision of public consumption goods and public inputs." (Author's abstract, IAB-Doku) ((en))
    Keywords: Kapitalmobilität, öffentliches Gut, Steuerpolitik, internationaler Wettbewerb, Auslandsinvestitionen, Marktunvollkommenheit, Arbeitsmarkt, Gebietskörperschaften, Lohnsteuer, Einkommensteuer, Arbeitslosigkeit, Besteuerung, Steuerbelastung, Lohnhöhe, Beschäftigungseffekte
    JEL: H21 H71 J51
    Date: 2013–08–13
  5. By: Mototsugu Fukushige (Graduate School of Economics, Osaka University); Yingxin Shi (Department of Economics & Management, Dalian Nationalities University)
    Abstract: We propose a new empirical approach to analyzing fiscal decentralization and apply it to Chinese intergovernmental fiscal relationships between the central government and provincial governments. In calculating budgetary revenue and expenditure shares, we include extra budgetary revenue and expenditure. We find that although an increase in either income inequality or real per capita GDP lowers local governmentsf bargaining power within the budgetary system, local governments can offset this by obtaining more bargaining power over extra budgetary expenditures. Another finding is that although urbanization increases provincial governmentsf budgetary revenues, it also restricts the scope for further budgetary expenditure.
    Keywords: nonsymmetric Nash bargaining, intergovernmental fiscal relationships, China
    JEL: H77 D72 P35
    Date: 2013–08
  6. By: Katharina Gangl; Benno Torgler; Erich Kirchler; Eva Hofmann
    Abstract: The tax compliance literature has mainly focused on individual tax evasion rather than firm tax evasion. In general, there is a lack of field experiments on the topic, and measuring tax compliance is challenging. To address this shortcoming in the literature, we conduct a field experiment on firm tax compliance looking at newly founded firms. As a novelty we explore how firms react to closer supervision by the tax administration, looking at timely paying which has no measurement biases. Interestingly, we observe a crowding-out effect of supervision on timely paying of taxes. On the other hand, for those who were non-compliant, supervision reduced the tax amount that was due.
    Keywords: tax compliance; tax evasion; field experiment; deterrence; tax enforcement; supervision
    JEL: H26 C93 K42
    Date: 2013–08
  7. By: Etienne LEHMANN (CRED (TEPP) University Panth eon-Assas Paris 2 and CREST, UCL-IRES, IDEP, IZA and CESifo); Claudio LUCIFORA (Università Cattolica del Sacro Cuore, Milano and IZA); Simone MORICONI (Università Cattolica del Sacro Cuore, Milano and Univerity of Luxembourg, CREA); Bruno VAN DER LINDEN (FNRS and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper argues that, for a given overall level of labour income taxation, a more progressive tax schedule reduces the unemployment rate and increases the employment rate. From a theoretical point of view, higher progressivity induces a wage-moderation effect and increases overall employment since employment of low-paid workers is more responsive. We test these theoretical predictions on a panel of 21 OECD countries over 1998-2008. Controlling for the burden of taxation at the average wage, we show that a more progressive taxation reduces the unemployment rate and increases the employment rate. These findings are confirmed when we account for the potential endogeneity of both average taxation and progressivity. Overall our results suggest that policy-makers should not only focus on the detrimental effects of tax progressivity on in-work effort.
    Keywords: Wage moderation, Employment, Taxation
    JEL: E24 H22 J68
    Date: 2013–07–15
  8. By: Figari, Francesco; Paulus, Alari
    Abstract: This paper investigates how the distribution of income changes when the standard definition of disposable income is replaced by an extended income concept which takes into account the three Is: indirect taxes, imputed rent, and in-kind benefits. Second, it assesses how sensitive the distributional effects of each tax-benefit instrument are to the choice of income concept. The analysis covers three European countries (Belgium, Greece and the UK) characterised by substantially different tax-benefit systems, giving a stronger base for generalising the results. The main findings are that the overall redistributive effect of the tax-benefit systems depends heavily on the income concept considered and the differences across countries are smaller when considering the extended income distribution. Moreover, the common use of a narrower income concept, such as the disposable income, can lead to the overestimation of the redistributive effect of the cash tax-benefit instruments (in relative terms), the extent of this varying across countries, due to the size and distribution of three Is and the adoption of the needs-adjusted equivalence scale.
    Date: 2013–08–22
  9. By: John H. Makin (American Enterprise Institute)
    Abstract: Despite periodic slowdowns, the US economy is on a sustainable fiscal path. Instead of pursuing short-term fiscal reform, as suggested in the president's recently released budget, Congress should focus on working toward long-term tax and entitlement reform.
    Keywords: GreeceÂ’s crisis,fiscal stimulus,Fiscal austerity,Austerity,Economic outlook,stimulus
    JEL: A H
    Date: 2013–04
  10. By: Savina Princen; Gilles Mourre; Dario Paternoster; George-Marian Isbasoiu
    Abstract: This paper provides evidence on the size, composition and cyclicality of discretionary tax measures (DTM), using a new database developed by the Output Gap Working Group. While their average magnitude is fairly limited over a long period with discretionary tax cuts being offset by discretionary tax hikes, they can be non-negligible at any given point in time. The cyclical pattern of DTM appears irregular and depends on the policy regime. While small pro-cyclical discretionary tax cuts were seen during the pre-crisis period, larger counter-cyclical tax breaks were adopted at the start of the crisis period, followed by pro-cyclical tax hikes in a context of substantial public finance consolidation. The paper also examines the impact of DTM on tax elasticities in the EU for broad tax categories over the period 2001-12: DTM do not seem to explain the bulk of the large short-term fluctuation in gross elasticities of tax receipts to GDP. The availability of DTM also allows for an analytical illustrative exercise, computing variants of the cyclically adjusted balance (CAB) based on time-varying elasticities (net of discretionary measures) instead of on constant elasticities. However, the indicators turn out to be extremely erratic and plagued by statistical 'noise', which makes them difficult to interpret in practice. The fact that elasticities change sign frequently and that their strong movements offset each other over a number of years also suggests that the short-term variations may largely be driven by time lags between revenue collection and revenue bases. Therefore, the CAB variants cannot be seen as an adequate solution for addressing the issues faced by the CAB.
    JEL: E32 H2 H3 H6
    Date: 2013–06
  11. By: Bert Brys; Carolina Torres
    Abstract: This paper presents a new methodology to calculate effective tax rates on the marginal return on an investment in skills within a discounted cash-flow investment framework. This approach takes into account costs including forgone labour earnings and the direct costs of skills formation, as well as the earnings premium and the return of an alternative investment in capital income. The earnings premium necessary to pursue a skills investment is calculated endogenously. This framework can be used to analyse the financial incentives to invest in skills and the impact of different policies for financing post-secondary education and/or professional training. The paper looks in particular at the effects of personal taxes (possibly net of benefits received) on incentives to acquire skills by estimating the effective tax rate on the return on a marginal skill investment – that is, one where the resulting increase in earnings is just enough to make the investment financially worthwhile; this “margin” can span multiple years. This approach may be helpful to policymakers in assessing the impact of tax progressivity and/ or the withdrawal of benefits and the case for tax breaks for postsecondary education and training, and could be extended to compare the impact of tax breaks relative to other policy instruments to stimulate skills investments. The paper includes some illustrative calculations in order to demonstrate how to apply the methodology within the OECD's Taxing Wages framework for all OECD countries, which is left for follow-up work.<P>Calcul des taux effectifs de l'impôt sur le revenu des personnes physiques applicables aux investissements marginaux dans les compétences dans les pays de l'OCDE : Nouvelle méthodologie<BR>Ce document présente une nouvelle méthodologie pour calculer les taux effectifs de l'impôt sur le rendement marginal d'un investissement dans les compétences en utilisant une méthode d'actualisation des flux financiers. Cette approche prend en compte les coûts, y compris le manque à gagner en termes de revenu du travail et les coûts directs d’acquisition des compétences, ainsi que l’avantage salarial et le rendement d’un investissement alternatif dans un revenu du capital. L'avantage salarial nécessaire pour justifier un investissement dans les compétences est calculé de façon endogène. Ce cadre peut être utilisé pour analyser les incitations financières à investir dans les compétences et l’incidence de différentes stratégies de financement de l'enseignement postsecondaire et/ou de la formation professionnelle. Ce document examine en particulier les effets des impôts sur les personnes physiques (si possible nets des prestations reçues) sur les incitations à acquérir des compétences, en estimant le taux effectif d'imposition du rendement généré par un investissement marginal dans les compétences : l'augmentation de salaire générée par cet investissement est juste suffisante pour rendre l’investissement financièrement attractif ; cette « marge » peut s’étaler sur plusieurs années. Cette approche peut aider les responsables publics à estimer l'impact de la progressivité de l’impôt et/ou de la suppression de prestations, ainsi que l'opportunité d’allégements fiscaux en faveur de l'enseignement et de la formation postsecondaires ; elle peut également servir à comparer l'impact d'allégements fiscaux par rapport à d’autres instruments d’action visant à encourager les investissements dans les compétences. Ce document présente des exemples de calcul afin d’illustrer comment appliquer cette méthodologie dans le cadre de la publication de l’OCDE Les impôts sur les salaires pour l'ensemble des pays de l'OCDE, ce qui fera l'objet de travaux de suivi.
    Keywords: human capital, skills, personal income tax, social security contributions, effective tax rate, capital humain, cotisations de sécurité sociale, taux effectifs d’imposition, impôt sur le revenu des personnes physiques, compétences
    JEL: H21 H24
    Date: 2013–08–01
  12. By: Jeffrey P. Thompson; Shawn M. Rohlin
    Abstract: This paper estimates the effect of sales taxes on employment at state borders using county-level quarterly data and a newly developed data set of local tax rates. Sales tax increases, relative to cross-border neighbors, lead to losses of employment, as well as payroll and hiring, but these effects are only found in counties with large shares of residents working in another state. The effects also represent an upper-bound, largely driven by employment shifting across the state border. We also find that employment in food and beverage stores is negatively affected when cross-border neighbors adopt low sales tax rates on food.
    Date: 2013
  13. By: Jianpo Xue (Renmin University of China); Chong K. Yip (The Chinese University of Hong Kong and Hong Kong Institute for Monetary Research)
    Abstract: This paper examines the stabilizing property of consumption taxation in a balanced-budget setting of a neoclassical one-sector cash-in-advance economy. We find that saddle-path stability is not a necessary outcome even though the utility function is additively separable between consumption and leisure. Both the existence of a Laffer curve and the indeterminacy outcome of consumption taxation depend on the elasticities of intertemporal substitution in consumption and of labor supply. Numerical examples show that consumption tax may lead to aggregate instability for the OECD countries under the current over-easy monetary policies.
    Keywords: Balanced-Budget Rules, Consumption Tax, CIA Constraint, Indeterminacy
    JEL: E32 E63
    Date: 2013–08
  14. By: Alex Brill (American Enterprise Institute)
    Abstract: A troubling tax policy trend is emerging in Israel, where once-aggressive efforts toward a competitive corporate tax rate are being reversed. The consequences in a small and open economy like Israel's are potentially dire and could extend to investors in the Israeli economy from the United States and other foreign countries.
    Keywords: israel,foreign direct investment,Corporate tax rates
    JEL: A H
    Date: 2013–06
  15. By: Aspen Gorry; Sita Nataraj Slavov (American Enterprise Institute)
    Abstract: Should the US tax code treat people as families, as it currently does, or as individuals? This paper considers the costs and benefits of switching to a tax system based on individual, rather than family, income.
    Keywords: U.S. tax code,same-sex marriage,proposition 8,Income inequality,defense of marriage act
    JEL: A H
    Date: 2013–05
  16. By: Christoph A. Schaltegger; Martin Weder
    Abstract: Based on probit estimates, this paper analyzes the effects of fiscal consolidation on the prob- ability of sovereign defaults in the short run. Using a panel of 104 developing countries from 1980 to 2009 and controlling for various economic, fiscal and political fa ctors, we find that fiscal adjustments in general do not significantly reduce the probability of default even if they are large. Instead, the composition of budget consolidation is decisive in reducing default risk. In contrast to industrialized countries, expenditure based adjustments are not successful while revenue based adjustments lower the probability of default in the following year by 33 to 56 percent. This finding also holds when economic growth is low or government debt is high as well as when IMF lending is taken into account.
    Keywords: sovereign default; fiscal policy; fiscal adjustment; bailout
    JEL: E62 H62 H63
    Date: 2013–04
  17. By: Kida, Mizuho
    Abstract: This paper analyzes Burundi's medium-term fiscal sustainability in the light of the country's vulnerability to various shocks. Earlier studies have highlighted the country's vulnerability to exogenous shocks related to commodity exports, rain-fed agriculture, and volatile foreign aid. Internally, uncertainty about the implementation of the government's fiscal reforms is a key risk. The earlier studies, however, did not quantify the size and impact of the risks on the country's fiscal sustainability. Drawing initially on the standard inter-temporal sustainability framework, the baseline analysis shows that Burundi's ongoing fiscal policy strategy is not sustainable, even with a gradually improving external environment and relatively strong growth. Stochastic simulations show that adverse shocks to rainfall or coffee prices could increase the country's debt-to-gross domestic product ratio by 5 to 7 percentage points above the projected baseline ratio. Aid shocks could have an even larger impact but the estimates are less statistically reliable because of the short time series and because historical volatility in part reflects endogenous shocks (such as reform implementation) as well as exogenous shocks (donors'behavior). The policy scenario analysis shows that future fiscal sustainability will hinge on the government's ability to stick to its plans to broaden the tax base, streamline generous tax incentives and exemptions, and control civil service wages and short-run expenditure pressures -- risks that need to be monitored closely over the political cycle in the country.
    Keywords: Debt Markets,Public Sector Expenditure Policy,Economic Theory&Research,Access to Finance,Public Sector Economics
    Date: 2013–08–01
  18. By: Daniel Fricke; Thomas Lux
    Abstract: We investigate the effects of a Financial Transaction Tax (FTT) in an order-driven artificial financial market. FTTs are meant to limit short-term speculative behavior by reducing the amount of excess liquidity in the system. To quantify these effects, adjustments in trading strategies and their effects on liquidity need to be taken into account. We model an agent-based continuous double-auction, allowing for a continuum of investment strategies within the chartist/fundamentalist framework. For certain parameter combinations, our model is able to reproduce certain stylized facts of financial time-series. We find largely positive effects of the FTT for small tax rates. Additionally, for large tax rates we find the effects not to be as negative as previously found
    Keywords: Transaction Tax, Tobin Tax, Market Microstructure, Agent-Based Models, Speculative Bubbles
    JEL: H20 C63 D44
    Date: 2013–08
  19. By: Li, Yuan (Stockholm China Economic Research Institute)
    Abstract: Will autocratic governments implement policies to satisfy the people’s demands in order to prevent large scale social unrest? This paper explores this question through quantitatively analysis of the political economy of public goods provision in Chinese provinces. I collected data on the number of labor disputes to measure collective actions. My sample includes provincial leaders whose incentives to deliver public goods can either be explained as a result of upward accountability towards the Center or downward accountability towards the citizens. The confounding factor of upward accountability is ruled out by using two-step estimation; and the reverse causality between public goods provision and collective actions is controlled by using instrumental variables. Result suggests that provincial leaders will implement policies more in favor of the citizens in response to intensified labor disputes.
    Keywords: Accountability; Collective Actions; Public Goods
    JEL: D74 H11 H40 P26
    Date: 2013–08–27
  20. By: Kawai, Masahiro (Asian Development Bank Institute); Morgan, Peter J. (Asian Development Bank Institute)
    Abstract: The aftermath of the global financial crisis of 2007–08 underlined the importance of maintaining fiscal space and fiscal sustainability. Even though many Asian economies implemented fiscal stimulus policies during the crisis period, their fiscal conditions generally improved rapidly thereafter, and their overall government debt positions, aside from that of Japan, appear strong. Nonetheless, there are a number of reasons to believe that conditions in emerging Asian economies will not always be so supportive. The first objective of this paper is to identify long-term issues of fiscal sustainability risk for emerging Asian economies. The second objective is to recommend policies to reduce these risks to sustainability.
    Keywords: fiscal space; fiscal sustainability; emerging asia; emerging asian economies; global financial crisis; fiscal stimulus policies; government debt
    JEL: H20 H51 H54 H55 H62 H63 J11
    Date: 2013–08–20
  21. By: Matsaganis, Manos; Leventi, Chrysa
    Abstract: The severe economic crisis affecting Greece since 2009 is having an unprecedented impact in terms of job and income losses, and is widely perceived to have a comparably significant effect in terms of greater inequality and increased poverty. We provide an assessment of whether (and to what extent) the latter is the case. More specifically, we use the European tax-benefit microsimulation model EUROMOD in order to quantify the impact of the austerity (i.e. fiscal consolidation policies) and the recession (i.e. negative developments in the wider economy) on the distribution of incomes in 2009-2012, and estimate how the burden of the crisis has been shared across income groups. We conclude by discussing the policy implications of our research.
    Date: 2013–08–22
  22. By: Huixin Bi; Eric M. Leeper
    Abstract: The authors study the implications of fiscal policy behaviour for sovereign risk in a framework that determines a country’s fiscal limit, the point at which, for economic or political reasons, taxes and spending can no longer adjust to stabilize debt. A real business cycle model maps the economic environment - expected fiscal policy, the distribution of exogenous disturbances and private agents’ behaviour - into a distribution for the maximum sustainable debt-to-GDP ratio. Default is possible at any point on this fiscal limit distribution. Calibrations of the model to Greek and Swedish data illustrate how the framework can be used to study actual fiscal reforms undertaken by developed economies facing sovereign risk pressures.
    Keywords: Economic models; Fiscal Policy
    JEL: E62 E65 H63
    Date: 2013
  23. By: Kent Smetters; Andrew G. Biggs (American Enterprise Institute); Amy Monahan; Paul Angelo
    Abstract: Pension underfunding has dominated the media and created significant concerns for state lawmakers as they struggle to bring their fiscal houses in order.
    Keywords: Public Pensions,public pension reform,Public pension
    JEL: A H
    Date: 2013–07
  24. By: Theocharis Grigoriadis; Benno Torgler
    Abstract: In this paper, we analyze the effects of religious identity – defined both as personal identification with a religious tradition and institutional ideas on the provision of public goods – on attitudes toward central government. We explore whether citizens belonging to collectivist rather than individualist religious denominations are more likely to evaluate their central government positively. Moreover, we explore whether adherence to collectivist norms of economic and political organization leads to a positive evaluation of central government. Surveys were conducted in Russia and Israel as these countries provide a mosaic of three major world religions – Judaism, Eastern Orthodoxy and Sunni Islam. The information gathered also allows us to study whether attitudes towards religious institutions such as the Russian Orthodox Church, the Chief Rabbinate in Jerusalem, the Jerusalem Islamic Waqf, and the Greek-Orthodox Patriarchate of Jerusalem in Israel are able to predict positive attitudes toward centralized forms of governance. We find strong support for the proposition that collectivist norms and an institutional religious identity enhance positive attitudes towards central government.
    Keywords: Religious identity; public goods; collectivism; individualism; local government; centralization; Russia; Israel
    JEL: P16 P17 P21 P35 P51 P52 Z12
    Date: 2013–08
  25. By: Herzer, Dierk; Strulik, Holger
    Abstract: In this paper we examine the long-run relationship between religiosity and income using retrospective data on church attendance rates for a panel of countries from 1925 to 1990. We employ panel cointegration and causality techniques to control for omitted variable and endogeneity bias and test for the direction of causality. We show that there exists a negative long-run relationship between the level of religiosity, measured by church attendance, and the level of income, measured by the log of GDP per capita. The result is robust to alternative estimation methods, potential outliers, sample selection, different measures of church attendance, and alternative specifications of the income variable. Long-run causality runs in both directions, higher income leads to declining religiosity and declining religiosity leads to higher income. --
    Keywords: religiosity,church attendance,income,panel cointegration,causality
    JEL: N30 O11 C23
    Date: 2013
  26. By: Korpi, Martin (Ratio & EHFF); Clark, William (California Center for Population Research, UCLA)
    Abstract: Empirical studies on internal labor migration are usually based on observed patterns of net flows into local labor markets with relatively lower unemployment and relatively higher real wages. Evidence here suggests that internal migrants move to enhance returns to their labor. In contrast, major surveys in the USA, the UK and Australia show that less than a third of internal migrants are motivated primarily by employment reasons. A possible explanation for this disconnect revolves around average and individual outcomes from migration. Using a sample of 39 000 Swedish regional migrants, this paper addresses this disconnect by examining the distribution of short and long term migrant income changes, and the factors that predict their placement within this distribution. We show that returns to migration do matter, especially for the more educated migrants. Overall, however, about a third of all migrants had negative short term returns to migration and about 40 percent make below median gains even in the long run. The data support a view that average outcomes are an insufficient way to measure the role of human capital motivated migration.
    Keywords: migration; human capital; labor mobility; urban rural
    JEL: J24 J31 J61 R12
    Date: 2013–08–19
  27. By: Redzo Mujcic (School of Economics, The University of Queensland); Paul Frijters (School of Economics, The University of Queensland)
    Abstract: We present a simple model of status-seeking over multiple socioeco- nomic domains by introducing the concept of conspicuous health as an argument in the utility function, in addition to the well-established conspicuous consumption term. We explore the implications of such a utility function for optimal income taxation, where we show an in- crease in concerns for conspicuous health to have an opposite effect on the marginal tax rate, compared to an increase in concerns for conspic- uous consumption. Using life satisfaction panel data from Australia, along with an improved measure of exogenous reference groups (that accounts for the ‘time era’ of respondents), we find evidence of a com- parison health effect.
    Date: 2013–08–20

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