nep-pbe New Economics Papers
on Public Economics
Issue of 2014‒04‒11
thirteen papers chosen by
Keunjae Lee
Pusan National University

  1. Fiscal Equalization, Tax Salience, and Tax Competition By Martin Altemeyer-Bartscher
  2. Are taxes beautiful? A survey experiment on information, tax choice and perceived adequacy of the tax burden By Abbiati, Lorenzo; Antinyan, Armenak; Corazzini, Luca
  3. Recent Trends in Income Redistribution in Australia: Can Changes in the Tax-Transfer System Account for the Decline in Redistribution?* By Nicolas Herault; Francisco Azpitarte
  4. Identifying Tax Implicit Equivalence Scales By Justin van de Ven; Nicolas Herault; Francisco Azpitarte
  5. Optimal dynamic nonlinear income taxes: facing an uncertain future with a sluggish government By Berliant, Marcus; Fujishima, Shota
  6. The Impact of Marginal Business Taxes on State Manufacturing By Richard Funderburg Author Workplace: University of Iowa; Timothy J. Bartik; Alan H. Peters
  7. Assessing future sustainability of french public finances By Jérôme Creel; Paul Hubert; Francesco Saraceno
  8. Demystifying a "shining example" : German public finances under the debt brake By Eicker-Wolf, Kai; Truger, Achim
  9. Security and Government Credibility By T. Randolph Beard; Richard Alan Seals Jr.; Michael L. Stern
  10. Efficient Scale of Local Government in China: Quantile Regression Approach to County-Level Data By Mototsugu Fukushige; Yingxin Shi
  11. The CCCTB option: An experimental study By Keser, Claudia; Kimpel, Gerrit; Oestreicher, Andreas
  12. Optimal College Tuition Subsidies By Nicholas Lawson
  13. Government Expenditure Determination on the Basis of Macroeconomics By durongkaveroj, wannaphong

  1. By: Martin Altemeyer-Bartscher
    Abstract: Jurisdictions that engage in inter-regional tax competition usually try to attenuate competitive pressures by substituting salient tax instruments with hidden ones. On this effect, we investigate the efficiency consequences of inter-regional tax competition and fiscal equalization in a federal system when taxpayers fail to optimally react on shrouded attributes of local tax policy. If the statuary tax rate is a relatively salient instrument and taxpayers pay low attention to the quality and the frequency of tax enforcement, the underlying substitution of tax instruments with the aim of reducing the perceived tax price may suppress the under-exploitation of tax bases that is typically triggered by fiscal equalization.
    Keywords: fiscal equalization, tax salience, tax competition, fiscal federalism, tax-cut-cum-base-broadening policy
    JEL: H77 H22 H30
    Date: 2014–03
  2. By: Abbiati, Lorenzo; Antinyan, Armenak; Corazzini, Luca
    Abstract: We report results from a survey experiment aimed at testing whether providing information on the national public expenditure to the taxpayers and whether involving them in the process of allocating tax revenues over public goods influence the level of the adequate tax rate - the fraction of income that individuals consider adequate to pay as taxes. We find that providing information on public expenditure does not influence the level of the adequate tax rate. On the contrary, the level of the adequate tax rate substantially increases when taxpayers can get to choose the public goods to finance through their taxation. --
    Keywords: Tax Choice,Adequate Tax Rate,Survey Experiment
    JEL: H24 H50 D31
    Date: 2014
  3. By: Nicolas Herault (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Francisco Azpitarte (Brotherhood of St Laurence; and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: We examine trends in the redistributive impact of the tax-transfer system in Australia between 1994 and 2009 using a framework that allows us to separate the contributions of taxes and benefits to overall income redistribution. Furthermore, we identify the effect of tax-transfer policy reforms on changes in income redistribution over the period by controlling for changes in the distribution of market incomes. We find that after reaching a peak value in the late 1990s, the redistributive impact of taxes and transfers steadily declined. Although reforms to the tax-transfer system contributed to the decline in redistribution, their contribution was limited.
    Keywords: Taxes and transfers, income inequality, progressivity, redistributive effect
    JEL: H23 J22 D31
    Date: 2014–01
  4. By: Justin van de Ven (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; National Institute of Economic and Social Research); Nicolas Herault (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Francisco Azpitarte (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Brotherhood of St Laurence)
    Abstract: This paper describes a simple and tractable method for identifying equivalence scales that reflect the value judgements implicit in a tax and benefits system. The approach depends upon two assumptions that are standard in the literature concerned with inequality and tax progressivity, in addition to a functional description for transfer payments that can be estimated using common micro-data sources. We use this approach to evaluate tax implicit equivalence scales for the UK transfer system that applied in April 2009. The tax implicit scales that we identify for the UK vary positively with tax unit size and are decreasing in gross earnings, reflecting recent econometric estimates based on consumption data. We conclude by discussing a range of potential applications for the proposed tax implicit scales.
    Keywords: Equivalence scale, taxation, base dependence
    JEL: D31 H23 I38
    Date: 2014–03
  5. By: Berliant, Marcus; Fujishima, Shota
    Abstract: We consider the optimal nonlinear income taxation problem in a dynamic, stochastic environment when the government is sluggish in the sense that it cannot change the tax rule as uncertainty resolves. We show that the sluggish government cannot allow saving or borrowing regardless of the utility function. Moreover, we argue that the zero top marginal tax rate result in static models is of little practical importance because it is actually relevant only when the top earner in the initial period receives the highest shock in every period.
    Keywords: Optimal income taxation; New dynamic public finance
    JEL: H21
    Date: 2014–04–04
  6. By: Richard Funderburg Author Workplace: University of Iowa; Timothy J. Bartik (W.E. Upjohn Institute for Employment Research); Alan H. Peters (University of New South Wales Author Name: Peter S. Fisher Author Workplace: University of Iowa)
    Keywords: REGIONAL ISSUES, Business incentives, Tax incentives, Regional and urban studies
    JEL: R1
  7. By: Jérôme Creel (OFCE); Paul Hubert; Francesco Saraceno (OFCE)
    Abstract: This paper contributes to the debate on the French public finances’ consolidation by investigating the long-term sustainability of France’s fiscal position. We trace the historical trends of government’s tax receipts and expenditures. We find that while the level of public expenditure in France is larger than in the rest of the Euro Area (mostly because of public wages and social benefits), its trend is comparable to its neighbours. Net lending is also under control, thanks to the high levels of taxation, so that we see no real risk of future unsustainability. However, the French tax system is unfair, is not sufficiently progressive, and is too complex. The paper then proceeds to assess the future of France’s public finances on the basis of the current debate on the Euro Area fiscal rules. We report two analyses – theoretical and empirical – that project the inflation rate and output gap paths for the next twenty years. We finally assess fiscal rules on this ground. The ‘fiscal compact’ fares rather poorly compared to the alternative rules that we assess.
    Keywords: deficits; dettes; dettes management; fiscales rule; fiscale compact; golden rule
    JEL: E62 E63 H61
    Date: 2013–07
  8. By: Eicker-Wolf, Kai; Truger, Achim
    Keywords: taxation, fiscal policy, public expenditure, investment, Germany, fiscalité, politique fiscale, dépenses publiques, investissement, Allemagne, tributación, política fiscal, gasto público, inversión, Alemania
    Date: 2014
  9. By: T. Randolph Beard; Richard Alan Seals Jr.; Michael L. Stern
    Abstract: The security necessary for investment and income growth is difficult to establish in areas where the government is weak. A prescriptive political objective for unstable countries is to strengthen the government’s ability to make credible commitments to establish security. We model the production of security in regions characterized by relatively weak central governments as a pseudo-public goods provision game in which both national and local authorities make contributions to jointly determine the level of public security. Strategic underinvestment in security by the government occurs whenever the government is able to credibly pre-commit to a minimum level of public safety. When the central government is unable to pre-commit, aggregate security (and economic output) is higher than under pre-commitment, and it increases as the locals become more efficient at security provision. We show free riding by central powers on local authorities potentially describes the security structure of inner-city neighborhoods and prisons in the United States, despite a strong central government with the capacity to make credible commitments.
    Keywords: Commitment; Gangs; Warlord; Security
    JEL: D7 H4
    Date: 2014–04
  10. By: Mototsugu Fukushige (Graduate School of Economics, Osaka University); Yingxin Shi (Department of Economics & Management, Dalian Nationalities University)
    Abstract: We investigate the effects of urban and rural populations and area sizes on the expenditures of the prefecture-level local government. We found the following three results. The first relates to the expenditure for urban populations. At around 220,000 people, per capita local government expenditure is minimized in our simulation. The second is that the expenditure for rural populations is proportional to the population size. The third finding is that the expenditure in accordance with the areas is also proportional to the area size. This cost structure is the reason why Chinafs recent rapid urbanization increases prefectural governmentfs fiscal distress.
    Keywords: Efficient scale, Local government, Quantile regression, China
    JEL: H40 H72 R51
    Date: 2014–04
  11. By: Keser, Claudia; Kimpel, Gerrit; Oestreicher, Andreas
    Abstract: The objective of this paper is to look into the probability that, given the choice, corporate groups would opt for taxation on a consolidated basis. Consolidation would allow them to offset losses crossborder but remove the opportunity to exploit international tax-rate differentials between entities via transfer pricing. We present a laboratory experiment in which we investigate to what extent a corporation would be inclined to take up the consolidation option and how this would impact on the corporation´s location of investment and its transfer pricing activities involving locations outside the consolidated group. We use a 2-by-2 treatment design with two levels of tax-rate differential between two investment locations, and two different remuneration functions allowing the participants to act as owners or managers of a company. --
    Keywords: international company taxation,separate accounting,formula apportionment,transfer pricing,experimental economics
    JEL: C91 H25 M41
    Date: 2014
  12. By: Nicholas Lawson (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM))
    Abstract: A large body of theoretical and empirical research focusses on two rationales for government subsidies to college students: positive fiscal externalities when subsidies lead to greater human capital accumulation and a larger income tax base, and liquidity constraints among students. In this paper, I calculate the optimal subsidy in a simple model that incorporates both fiscal externalities and liquidity constraints. I use two approaches in which outcomes of the model are matched to US data: calibration of a simple structural model, and a "sufficient statistics" approach in which I derive an equation for the welfare impact of tuition subsidies as a function of a few empirical statistics. Both approaches lead to the striking result that optimal subsidies should be increased to the point of completely offsetting average tuition at public universities. This finding is driven by fiscal externalities, and is not sensitive to the extent of liquidity constraints, indicating that we do not need to know their magnitude to make welfare statements about tuition subsidy policy.
    Keywords: college tuition subsidies; fiscal externality; liquidity constraints; sufficient statistics; free tuition
    Date: 2014–03
  13. By: durongkaveroj, wannaphong
    Abstract: Government expenditure is realized to be the exogenous variable and its change impacts national income through Aggregate Demand expression. The purpose of this study is to derive new macroeconomic expression based on Keynesian basis with SAM multiplier through mathematical approach. The study reveals that there are factors determined government spending including exogenous shock (government subsidy), taxation, and money supply.
    Keywords: macroeconomics, government expenditure
    JEL: C02 E12
    Date: 2014–04–04

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