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on Public Economics |
| By: | Alun H. Thomas; Juan P. Treviño |
| Abstract: | High natural resource prices in recent years have resulted in sizeable increases in fiscal revenue for many resource-exporting countries in sub-Saharan Africa. However, this revenue source is volatile, and arguably these countries should also rely on other forms of taxation to help fund public expenditure. This paper asks whether the availability of higher resource revenue in these countries has led to lower taxation effort of other revenue categories. The question is analyzed both in terms of the relationship between non-resource tax revenue and resource revenue, and between non-resource tax revenue and statutory tax rates. The paper finds evidence suggesting that nonresource revenue is negatively influenced by a higher resource revenue-to-GDP ratio. The lower take up of nonresource taxes in resource-rich countries is correlated with higher levels of corruption in these countries, suggesting weaker institutions affect nonresource revenue through incentives for tax evasion and/or large tax exemptions as argued in the literature. |
| Keywords: | Revenue sources;Sub-Saharan Africa;Natural resources;Tax revenues;Taxation;Tax law, taxation, exhaustible resources, resource rich, oil, resource booms |
| Date: | 2013–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/188&r=pbe |
| By: | Kuziemko, Ilyana; Norton, Michael I; Saez, Emmanuel; Stantcheva, Stefanie |
| Abstract: | This paper analyzes the effects of information about inequality and taxes on preferences for redistribution using randomized online surveys on Amazon Mechanical Turk (mTurk). About 5,000 respondents were randomized into treatments providing interactive information on U.S. income inequality, the link between top income tax rates and economic growth, and the estate tax. We find that the informational treatment has very large effects on whether respondents view inequality as an important problem. By contrast, we find quantitatively small effects of the treatment on views about policy and redistribution: support for taxing the rich increases slightly, support for transfers to the poor does not, especially among those with lower incomes and education. An exception is the estate tax---we find that informing respondents that it affects only the very richest families has an extremely large positive effect on estate tax support, even increasing respondents' willingness to write to their U.S. senator about the issue. We also find that the treatment substantially decreases trust in government, potentially mitigating respondents' willingness to translate concerns about inequality into government action. Methodologically, we explore different strategies to lower attrition in online survey platforms and show our main results are robust across methods. A small follow-up survey one month later reveals that our results persist over time. Finally, we compare mTurk with other survey vendors and provide suggestions to future researchers considering this platform. |
| Keywords: | Inequality; Online survey; Randomized experiment; Taxation |
| JEL: | D63 H2 I3 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9438&r=pbe |
| By: | Dirk Muir; Anke Weber |
| Abstract: | With fiscal adjustment proceeding quickly in Bulgaria and given the weak economic growth environment, there is keen interest in making the budget composition more growth friendly. This paper quantifies the short-term impact of fiscal policy on economic activity in Bulgaria using econometric and model-based approaches. While fiscal multipliers have been modest in the past, as can be expected in a small open emerging economy, the effect on output is not independent of the speed of adjustment and the specific consolidation measures used. The impact of fiscal policy on economic activity is larger in downturns than in expansions and capital spending and direct taxes are associated with the largest effects on output, while non-targeted government transfers and indirect taxes are associated with a smaller impact. The results suggest that increased capital spending financed by higher indirect tax revenue collections through base broadening has sizeable growth effects over the medium and long-term. |
| Keywords: | Fiscal policy;Bulgaria;Economic growth;Industrial production;Economic models;Fiscal policy, fiscal consolidation, business cycle, nonlinear analysis, fiscal multipliers, general equilibrium models |
| Date: | 2013–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/49&r=pbe |
| By: | Antonio David; Martin Petri |
| Abstract: | Using data from three household surveys, we review whether growth in Mauritius was inclusive and discuss the incidence of public expenditures and taxes. Generally, Mauritius enjoys an even income distribution and low rates of poverty. Nevertheless, over the 2000s, despite overall progress, the benefits of growth appear to have become more skewed. Employment income is the main contributor to inequality in Mauritius. Social protection expenditures reduce poverty and inequality, but could be better targeted, particularly for pensions. Income taxes are progressive, though given their small relative weight they have a negligible impact on income distribution. The VAT appears relatively progressive compared to other developing countries, although its impact on the overall distribution is also small. With better targeting of the sizable social spending, significant further progress in poverty alleviation could be achieved. |
| Keywords: | Economic growth;Mauritius;Fiscal policy;Government expenditures;Tax revenues;Tax structures;Income distribution;Income taxes;Inclusive Growth, Incidence of Public Expenditures, Incidence of Taxes |
| Date: | 2013–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/116&r=pbe |
| By: | Jean Gabszewicz (CORE, Universite catholique de Louvain, Belgique); Ornella Tarola (DAES, University of Rome, La Sapienza, Italy); Skerdilajda Zanaj (CREA, Universite de Luxembourg) |
| Abstract: | We analyze the effects of labor migration flows on income taxation between two countries (regions) differing by the size of their population and the level of productive efficiencies. Residents, otherwise identical, are heterogeneous because they incur different migration costs. Each resident compares the post-tax amount of money at home with the one obtained abroad, including the cost of migration. The government in each coun- try maximizes the tax receipt in order to provide the largest possible amount of public good. We prove the existence of an equilibrium for any configuration of wage and any different relative size of the countries (re- gions). Then, we compute and characterize the equilibrium for any set of parameters, size and wage differential. Finally, we show how equili- brium migration flows affect the level of income taxation in the origin and destination country. |
| Keywords: | migration, income tax, fiscal competition |
| JEL: | F22 H20 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:13-19&r=pbe |
| By: | Michele Bernini; Tania Treibich |
| Abstract: | In this paper we test whether policies that induce tangible asset growth among domestic companies are effective in increasing their entry into export markets. We solve the endogeneity problem inherent to the empirical investigation of the growth-export relationship by adopting an instrumental variable (IV) strategy that exploits an exogenous policy variation in corporate tax (CT) rate as an instrument for firm growth. A reduction of the CT rate in France is found increasing firm size and promoting through this channel export entry. Our result is robust to two alternative identification strategies: first we compare firms that enjoyed CT reduction against those that did not benefit from it, then we exploit the differential impact of statutory rate reduction on the firm-level effective marginal and average rates of taxation (EMTR and EATR) within the group of firms eligible for tax reduction. We conclude that the fiscal lever has a direct impact on firm size and an indirect impact on export participation. |
| Keywords: | Export, corporate tax, firm growth, SME |
| JEL: | C21 C26 F14 H25 D24 D92 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2013-30&r=pbe |
| By: | Balázs Égert |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2013-23&r=pbe |
| By: | Daxbek, Vincent; Estache, Antonio |
| Abstract: | The main purpose of this paper is to provide an assessment of the impact of the introduction of an alternative minimum tax (AMT) in Belgium with a focus on the impact on various distortions margins. In the process, we provide an up-to date account of the state of effective corporate taxation in the country. The current ETR is 15.7%. For a 1% of GDP increase in revenue, the ETR of an income based AMT would increase to 24.3% illustrating the potential payoff of a significant simplification of the current system. For a politically viable asset based AMT, it would roughly double the ETR. An income based AMT would somewhat reduce the distortions across sectors and firms sizes while an asset based AMT would increase it. As expected, an asset based AMT would penalize more large firms since they are more capital intensive. Small firms could actually be better off under an asset based AMT than under an income based AMT. But any decision on the AMT in Belgium is likely to be polarizing. Small firms currently represent 84% of the number of businesses, 35% of the jobs and 22.4% of the tax revenue. Large and very large firms represent less than 4% of the number of business but almost 50% of the jobs and over 60% of the tax revenue. |
| Keywords: | alternative minimum taxes; Belgium; corporate taxes; effective tax rates; presumptive taxation; tax avoidance |
| JEL: | H20 H25 H26 H32 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9481&r=pbe |
| By: | Michael Keen |
| Abstract: | This paper sets out some tools for understanding the performance of the value added tax (VAT). Applying a decomposition of VAT revenues (as a share of GDP) to the universe of VATs over the last twenty years, it emerges that developments have been driven much less by changes in standard rates than by changes in ‘C-efficiency’ (an indicator of the departure of the VAT from a perfectly enforced tax levied at a uniform rate on all consumption). Decomposing C-efficiency into a ‘policy gap’ (in turn divided into effects of rate differentiation and exemption) and a ‘compliance’ gap (reflecting imperfect implementation), results pieced together for EU members suggest that the former are in almost all cases far larger than the latter, with rate differentiation and exemptions playing roles that differ quite widely across countries. |
| Keywords: | Value added tax;Tax revenues;Tax rates;Value added tax, tax gaps, tax compliance |
| Date: | 2013–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/111&r=pbe |
| By: | Sinha, Pankaj; Bansal, Vishakha |
| Abstract: | The capital structure puzzle still remains unsolved. Every year there are many incidences of firms, reporting very high and risky levels of debt ratios. Since debt has tax advantages over other sources of capital, this paper employs simulated marginal tax rate (MTR) and its variants to study the tax effects on leverage ratios of profitable Indian companies. The paper analyses three different measures of leverage; debt to asset (DAR) ratio, incremental debt to total assets ratio (DINC) and debt to capital employed (DAR1) ratio. For each measure of leverage ratio, different specifications based on four variants of MTR have been considered. The results confirm significant tax effects on debt ratios of profitable Indian companies. It was found that DINC is highly autoregressive and independent variables considered in this paper explain around 55% of the variation in DAR1. The study suggests a new measure of retained earnings (ERTA). |
| Keywords: | Marginal tax Rate, debt, leverage, capital structure, tax, incremental debt, debt to equity ratio, capital employed, corporate finance, financial distress |
| JEL: | G32 G38 |
| Date: | 2013–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:49878&r=pbe |
| By: | Sohrab Rafiq |
| Abstract: | This paper examines the size of the fiscal multiplier values generated in Malaysia. The results show that a government spending shock leads to broad positive economic effects. Although, the effectiveness of fiscal policy alters across macroeconomic states. The estimates show that since the Asian financial crisis the medium- and long-run effect of fiscal policy spending has declined. Some of this is down to greater credit availability and less investment spending. |
| Keywords: | Fiscal policy;Malaysia;Government expenditures;External shocks;Economic models;Fiscal Policy, Economic Growth, Stabilization, Multipliers, Time-variation |
| Date: | 2013–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/149&r=pbe |
| By: | Ran Bi; Haonan Qu; James Roaf |
| Abstract: | This paper provides a general framework to assess the output and debt dynamics of an economy undertaking multi-year fiscal adjustment. The framework allows country-specific assumptions about the magnitude and persistence of fiscal multipliers, hysteresis effects, and endogenous financing costs. In addition to informing macro projections, the framework can also shed light on the appropriate phasing of fiscal consolidation—in particular, on whether it should be front- or back-loaded. The framework is applied to stylized advanced and emerging economy examples. It suggests that for a highly-indebted economy undertaking large multi-year fiscal consolidation, high multipliers do not always argue against frontloaded adjustment. The case for more gradual or back-loaded adjustment is strongest when hysteresis effects are in play, but it needs to be balanced against implications for debt sustainability. Application to actual country examples tends to cast doubt on claims that very large multipliers have been operating post-crisis. It seems that the GDP forecast errors for Greece may have been due more to over-optimism on potential growth estimates than to underestimating fiscal multipliers. |
| Keywords: | Fiscal consolidation;Economic recession;Public debt;Fiscal policy;Debt sustainability;Developed countries;Developing countries;Fiscal Multiplier, Hysteresis Effect, Phasing of Fiscal Consolidation |
| Date: | 2013–08–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/182&r=pbe |
| By: | Lorenzo E. Bernal-Verdugo; Davide Furceri; Dominique M. Guillaume |
| Abstract: | The aim of this paper is to analyze the dynamic effect of social and political instability on output. Using a panel of up to 183 countries from 1980 to 2010, the results of the paper suggest that social conflicts have a significant and negative impact on output in the short-term with the magnitude of the effect being a function of the intensity of political instability. The results also show that the recovery of output over the medium-term depends on the ability of the country to implement, in the aftermath of a social instability episode, reforms aimed at improving the level of governance. The results are robust to different checks and estimation strategies. |
| Keywords: | Political economy;Fiscal reforms;Economic growth;Economic models;social conflicts, reforms, crisis, growth |
| Date: | 2013–04–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/91&r=pbe |
| By: | Dulani Seneviratne; Yan Sun |
| Abstract: | Adequate infrastructure has long been viewed as an important factor in economic development. Based on regressions covering 76 advanced and emerging market economies, this paper estimates the impact of infrastructure and investment on income distribution. It finds that better infrastructure, both quality and quantity, promotes income equality, while the link between investment and income distribution is weak. |
| Keywords: | Infrastructure;Indonesia;Malaysia;Philippines;Thailand;Vietnam;Association of Southeast Asian Nations;Investment;Income distribution;Cross country analysis;Infrastructure, Income Distribution, Investment, ASEAN-5, GINI, Inclusive Growth |
| Date: | 2013–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/41&r=pbe |
| By: | Alonso-Ortiz, Jorge; Leal Ordonez, Julio |
| Abstract: | In this work we study the impact on the size of the informal sector of a tax levied on formal workers, and transfers that may be distributed to both formal and informal workers alike. We build a search model that features an informal sector and we calibrate it to data from Mex- ico. We investigate whether changes in size and distribution of transfers between formal and informal workers have a significant impact on the size of the informal sector. We find that changes in the distribution, for a given size, create a range of variation of 19.35pp. Analogously, changes in size create a range of variation of 5.7pp, resulting in a total range of variation of 51.2pp. This implies that it is possible to substantially increase formalization by rising extra tax resources as long as they accrue to formal workers. We illustrate the validity of our approach simulating the introduction of Seguro Popular. |
| Keywords: | Informal Sector, Search, Tax and Transfer Programs, Seguro Popular |
| JEL: | E24 E26 E62 J64 J65 |
| Date: | 2013–08–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:49568&r=pbe |
| By: | Alberto Behar; Junghwan Mok |
| Abstract: | We quantify the extent to which public-sector employment crowds out private-sector employment using specially assembled datasets for a large cross-section of developing and advanced countries, and discuss the implications for countries in the Middle East, North Africa, Caucasus and Central Asia. These countries simultaneously display high unemployment rates, low private-sector employment rates and high proportions of government-sector employment. Regressions of either private-sector employment rates or unemployment rates on two measures of public-sector employment point to full crowding out. This means that high rates of public employment, which incur substantial fiscal costs, have a large negative impact on private employment rates and do not reduce overall unemployment rates. |
| Keywords: | Employment;Middle East;Central Asia;North Africa;Public sector;Private sector;Developing countries;Developed countries;Employment, Crowding out, Middle East and Central Asia |
| Date: | 2013–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/146&r=pbe |
| By: | Ezcurra, Roberto; Rodríguez-Pose, Andrés |
| Abstract: | This paper investigates the relationship between economic globalization and regional inequality in a panel of 47 countries over the period 1990-2007, using a measure of globalization that distinguishes the different dimensions of economic integration. The results show that there is a positive and statistically significant association between economic globalization and the magnitude of regional disparities. Countries with a greater degree of economic integration with the rest of the world tend to register higher levels of regional inequality. This finding is robust to the inclusion of additional explanatory variables and to the choice of the specific measure used to quantify the relevance of spatial inequality within the sample countries. Our analysis also reveals that the spatial impact of economic globalization is greater in low- and middle-income countries, whose levels of regional disparities are on average significantly higher than in high-income countries. |
| Keywords: | Economic globalization; Regional inequality |
| JEL: | F15 R11 R12 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9557&r=pbe |