nep-pbe New Economics Papers
on Public Economics
Issue of 2014‒07‒28
24 papers chosen by
Keunjae Lee
Pusan National University

  1. Redistributive Effects of Income Tax Rates and Tax Base 1984-2009: Evidence from Japanese Tax Reforms By Miyazaki, Takeshi; Kitamura, Yukinobu
  2. Environmental Policies under Debt Constraint By Mouez Fodha; Thomas Seegmuller; Hiroaki Yamagami
  3. Fiscal Policy Uncertainty and Its Macroeconomic Consequences By Murray, James
  4. The Impact of Place-Based Employment Tax Credits on Local Labor: Evidence from Tax Data By Tong, Patricia; Zhou, Li
  5. A Tax Revenue Dataset for Sub-Saharan Africa: 1980-2010 By Mario MANSOUR
  6. Financial Contracting with Tax Evaders By Philipp Meyer-Brauns
  7. A Negotiation-Based Model of Tax-Induced Transfer Pricing By Johannes Becker; Ronald B. Davies
  8. The Diesel Differential: Differences in the Tax Treatment of Gasoline and Diesel for Road Use By Michelle Harding
  9. Personal Tax Treatment of Company Cars and Commuting Expenses: Estimating the Fiscal and Environmental Costs By Michelle Harding
  10. Labor Tax Cuts and Employment: A General Equilibrium Approach for France By Raphael A. Espinoza; Esther Pérez Ruiz
  11. Small Business, Innovation, and Tax Policy: A Review By Gale, William; Brown, Samuel
  12. Monetary and Fiscal Policy with Sovereign Default By Joost Röttger
  13. The Cost of Pollution on Longevity, Welfare and Economic Stability By Natacha Raffin; Thomas Seegmuller
  14. Stimulus and Fiscal Consolidation: The Evidence and Implications By Dean Baker; David Rosnick
  15. Applying “Benford’s law” to the Crosswise Model: Findings from an online survey on tax evasion By Kundt, Thorben
  16. Net fiscal flows and interregional redistribution in Italy: a long run perspective (1951-2010) By Giannola, Adriano; Scalera, Domenico; Petraglia, Carmelo
  17. The Global Distribution of Income By Sudhir Anand; Paul Segal
  18. Economic Science: From the Ideal Gas Law Economy to Piketty and Beyond By Song, Edward
  19. Does the Calculation Hold? The Fiscal Balance of Migration to Denmark and Germany By Hinte, Holger; Zimmermann, Klaus F.
  20. The effect of decentralization on educational outcomes: real autonomy matters! By Paula Salinas
  21. Default Risk Premia on Government Bonds in a Quantitative Macroeconomic Model By Falko Juessen; Ludger Linnemann; Andreas Schabert
  22. Public Debt, Economic Growth, and Inflation in African Economies By Lopes da Veiga, José; Ferreira-Lopes, Alexandra; Sequeira, Tiago
  23. Letter Grading Government Efficiency By Chong, Alberto; La Porta, Rafael; Lopez-de-Silanes, Florencio; Shleifer, Andrei
  24. Entrepreneurship Capital and Regional Productivity Revisited By Massón-Guerra, José Luis; Ortín-Angel, Pedro

  1. By: Miyazaki, Takeshi; Kitamura, Yukinobu
    Abstract: The primary objective of this paper is to examine how and to what extent changes in income tax rates and income tax deductions affect income inequality from longitudinal perspectives, by using microdata from Japanese individuals and households. The findings of this paper could shed light on the effects of tax rates and tax deduction on tax progressivity. First, redistributive effects of the Japanese income tax are likely to decline for the period 1984-2009. Second, the income tax reforms, i.e., reduction in tax rates and increase in tax base, give rise to greater redistributive effects of income tax rates and lower redistributive effects of tax base. Third, progressivity measures show the same trends with respect to the redistributive effects of tax changes on pretax income over the period.
    Keywords: Income taxation, redistribution, tax deduction, tax rates
    JEL: D3 H2 H24
    Date: 2014–06
  2. By: Mouez Fodha (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Thomas Seegmuller (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)); Hiroaki Yamagami (Seikei University - Seikei University)
    Abstract: This article analyzes the consequences of environmental tax policies when the government imposes a constraint on stabilizing public debt. A public sector of pollution abatement is financed by taxation and by issuing public debt. Considering a simple overlapping-generations model, the tax reform stimulates steady-state investment. Then, the environmental quality and the aggregate consumption increase if and only if (i) pollution abatement is large enough and (ii) there is under-accumulation of the per capita capital stock. This arises if environmental taxation allows a decrease of either income taxation or debt-output ratio.
    Keywords: environmental tax reform; debt; public emission abatement; double dividend
    Date: 2014–06
  3. By: Murray, James
    Abstract: I examine fiscal policy uncertainty in a context where market participants learn about the conduct of fiscal policy with regression rules for dependent variables including tax revenue, net transfers, government spending, and government debt. The explanatory variables include lagged fiscal policy, lagged government debt, and macroeconomic outcomes including real GDP, consumption, investment, and the unemployment rate. They re-run these regressions each quarter as a new observation becomes available, updating their understanding of the conduct of fiscal policy. I use the root mean squared errors as measures for fiscal policy uncertainty. I use autoregressive distributed lag (ARDL) models to estimate the effect fiscal uncertainty has on macroeconomic outcomes including real GDP, consumption, investment and unemployment. I find that the common component for fiscal policy uncertainty has adverse effects on real GDP, consumption, and investment. I find the buildup of fiscal policy uncertainty from 2005 through 2009 leads to a decline in real GDP growth by about 2 percentage points. I demonstrate that these finding are robust to lag specifications for the ARDL models and parameter specifications for the learning process.
    Keywords: Fiscal policy, uncertainty, adaptive expectations, learning, autoregressive distributed lag model
    JEL: E32 E62
    Date: 2014–07–18
  4. By: Tong, Patricia (US Department of the Treasury); Zhou, Li (University of Alberta, Department of Economics)
    Abstract: Using administrative tax data that contain information on firm credit take-up and employee residence, we examine the impact of the Empowerment Zone and Renewal Community employment tax credits on local labor. We find modest evidence that zone designation improves labor market outcomes among residents. However, when we specifically estimate the impact of the place-based employment tax credit and disentangle the impact based on where workers live and work, we find strong evidence that the employment tax credits have significant and positive impacts on both zone and non-zone residents employed at firms that claim these credits. We determine that firms claiming the employment tax credit represent a small share of the overall labor demand of zone residents. As a result, utilizing data that include information on which firms receive place-based tax incentives is crucial to evaluate how these policies impact local labor, and evaluations looking at outcomes of broader populations may not be able to identify significant improvements in outcomes if a limited fraction of the population is directly affected.
    Keywords: employment tax credits; place-based programs; business incentives; empowerment zones; renewal communities
    JEL: H25 J38 R23 R58
    Date: 2014–07–01
  5. By: Mario MANSOUR (Fiscal Affairs Department - International Monetary Fund)
    Abstract: This paper presents a unique tax revenue dataset for Sub-Saharan Africa, which main innovation is the level of detail it provides about tax revenue sources for a large number of countries (41) and over a long time period (1980-2010). The paper describes how the dataset was constructed, identifying along the way problem areas in tax revenue statistics in Sub-Saharan Africa and possible improvements. A graphical analysis highlights revenue performance over time and across three dimensions: income levels, the relative importance of tax revenue from extractive industries, and trading groups (free-trade areas and customs unions). The dataset, available at, should be useful to a wide range of users and researchers, including academics, tax policy practitioners and advisers, and revenue and customs administrations.
    JEL: H20 O10
    Date: 2014–07
  6. By: Philipp Meyer-Brauns
    Abstract: This paper derives the optimal financial contract when an entrepreneur can evade taxes in a model of costly state verification. In contrast to the previous literature, we find that standard debt contracts are not optimal when tax evasion is possible. Instead, the optimal contract is debt-like only for very low and very high profit realizations, and features a constant repayment and verification of returns in an intermediate range. This occurs because the entrepreneur has to be given a positive rent even under verification in order to not abuse her limited liability protection for excessive tax evasion activities.
    Keywords: financial contracting, security design, corporate tax evasion, costly state verification
    JEL: D82 D86 G3 H25 H26
    Date: 2014–01
  7. By: Johannes Becker (University of M{\"u}nster); Ronald B. Davies (University College Dublin; Institute for International Integration Studies, Trinity College Dublin; CES-Ifo)
    Abstract: We present a new model of tax induced transfer pricing as an alternative to the oft-used concealment model. Inspired by interviews with practitioners, we consider a large multinational firm which is audited by the tax authority in the high-tax location. When this country adjusts the transfer prices proposed by the firm, the low-tax location may dispute this decision and initiate negotiations. Since negotiations are costly, the high-tax location sets a transfer price that prevents the low-tax location from entering negotiations. We compare this model's predictions to those of the concealment model. The negotiation model replicates the predictions on the tax rate effects on transfer pricing, while adding new predictions. Profit shifting is expected to fall in the high-tax country's bargaining power and to rise in firm profits and domestic firm ownership in both countries. Most importantly, profit shifting occurs even if tax enforcement is perfect. We analyze the effects of an introduction of a common consolidated corporate tax base with formula apportionment and conclude that the negotiation model may change the perspective on such a policy. Specifically, strong countries with large bargaining power may find this reform unappealing.
    Keywords: transfer pricing, Nash bargaining, tax avoidance, corporate taxation
    JEL: H25 H32 H87
    Date: 2014–07
  8. By: Michelle Harding
    Abstract: Diesel and gasoline account for around 95% of energy used for road transport in the OECD and for the largest share of revenue from taxes on energy. In 33 out of 34 OECD countries, diesel fuel is taxed at lower rates than gasoline both in terms of energy and carbon content. To assess whether this difference is warranted from an environmental perspective, this paper examines the rationales for taxing both fuels, considering the externalities (including local air pollution, carbon emissions and other social costs related to road transport) associated with the use of each fuel and the fuel efficiency advantage of diesel vehicles. The revenue, distributional and competitiveness consequences of increasing tax rates on diesel are also briefly considered and the revenue effects of the tax treatment of diesel are shown to be significant. We conclude that the externalities associated with each fuel show that the lower tax rates that currently apply to diesel fuel are not justifiable from an environmental perspective. Reduction of the diesel differential is warranted. A gradual approach to removing the differential would allow the adverse distributional and competitiveness impacts to be mitigated during the transitional phase. Avantage fiscal en faveur du gazole : différences de traitement fiscal de l'essence et du gazole à usage routier Le gazole et l’essence représentent environ 95 % de l’énergie consommée pour le transport routier dans la zone OCDE et génèrent l’essentiel des recettes issues des taxes sur l’énergie. Dans 33 des 34 pays de l’OCDE, le gazole est taxé à des taux inférieurs à ceux applicables à l’essence, tant du point de vue du contenu énergétique que de la teneur en carbone. Afin de déterminer si cette différence est justifiée d’un point de vue environnemental, ce document examine les raisons qui sous-tendent l’imposition de ces deux types de carburants, tenant compte des externalités (pollution atmosphérique locale, émissions de carbone et autres coûts sociaux induits par le transport routier, etc.) associées à l’utilisation de chacun de ces carburants et la moindre consommation des véhicules diesel. Les conséquences sur le plan des recettes, de la distribution et de la compétitivité d’un relèvement des taux d’imposition du gazole font également l’objet d’une analyse succincte et les répercussions de la taxation du gazole sur les recettes fiscale s’avèrent significatives. En conclusion, les externalités associées à chacun de ces carburants ne justifient pas, d’un point de vue environnemental, les taux d’imposition plus faibles actuellement réservés au gazole. Une réduction de l’avantage fiscal en faveur du gazole est justifiée. Une réduction progressive de cet avantage permettrait l'atténuation dans la phase transitoire des effets défavorables sur la distribution et la compétitivité.
    Date: 2014–07–11
  9. By: Michelle Harding
    Abstract: Company cars form a large proportion of the car fleet in many OECD countries and are also influential in determining the composition of the wider vehicle fleet. When employees provided with a company car use that car for personal purposes, personal income tax rules value the benefit in a number of different ways. How accurate these rules are in valuing the benefit has important implications for tax revenue, the environment and other social impacts such as congestion. This paper outlines the tax treatment of company cars and commuting expenses in 27 OECD countries and one partner country. It compares these tax settings with a stylised “benchmark” tax treatment that estimates the full value of the benefit received by employees with company vehicles. The paper demonstrates that the estimated tax expenditures associated with company car taxation in these countries in 2012 can be quite considerable. Significantly, from an environmental perspective, in most countries employees faced no additional increase in tax payable in response to an increase in the assumption of distance driven. Traitement des véhicules de société et des frais de transport au regard de l'impôt sur le revenu des personnes physiques : Estimation des coûts budgétaires et environnementaux Dans de nombreux pays de l’OCDE, les véhicules de société constituent une grande partie de la flotte automobile, et influent également sur la composition du parc de véhicules au sens large. Lorsque les salariés qui disposent d’un véhicule de société l’utilisent pour leur usage personnel, les dispositions relatives à l’impôt sur le revenu valorisent cet avantage de différentes manières. La capacité de ces dispositions à évaluer correctement cet avantage a d’importantes conséquences en matière de recettes fiscales, d’impact environnemental et d’autres coûts sociaux tels que les embouteillages. Ce document présente le régime fiscal des véhicules de société et des frais de transport dans 27 pays de l’OCDE et dans un pays partenaire. Il compare ce régime fiscal avec un régime « de référence » simplifié qui estime la valeur globale de l’avantage dont bénéficient les salariés disposant de véhicules de société. Ce document montre que les dépenses fiscales estimées qui sont associées à l’imposition des véhicules de société dans ces pays en 2012 peuvent être tout à fait considérables. D’un point de vue environnemental, on constate surtout que dans la plupart des pays, les salariés ne subissent pas de hausse d’impôt suite à une augmentation de l’hypothèse relative à la distance parcourue avec leur véhicule de société.
    Date: 2014–07–11
  10. By: Raphael A. Espinoza; Esther Pérez Ruiz
    Abstract: The paper presents a simple supply side, general equilibrium model to estimate the macroeconomic effects of labor tax cuts. The model assumes that output is produced using capital, unskilled and skilled workers, and public servants. Wage formation for skilled workers features a Blanchflower-Oswald wage curve, while the labor supply for unskilled workers is very elastic around the minimum wage for small changes in employment. The model is calibrated for France and used to estimate the output and employment effects induced by two recent tax reforms: the Crédit d’Impôt pour la Compétitivité et l’Emploi (CICE) and the Pacte de Solidarité Responsabilité (RSP). We find that the tax cuts, if not offset by other fiscal measures, would contribute overall to creating around 200,000 jobs in the short run (600,000 jobs in the long run). Since the model abstracts from demand side effects, the results should be interpreted as providing estimates of the effect of tax measures on potential output and potential employment.
    Date: 2014–07–01
  11. By: Gale, William; Brown, Samuel
    Abstract: Small businesses occupy an iconic place in American public policy debates. This paper discusses interactions between the federal tax code, small business, and the economy. We summarize the characteristics of small businesses, identify the tax provisions that most affect small businesses, and review evidence on the impact of tax and other policies on entrepreneurial activity. We also examine evidence suggesting that it is young firms, not small ones, where job growth and innovation tend to occur. Policies that aim to stimulate young and innovative firms are likely to prove different than policies that subsidize small businesses.
    Keywords: entrepreneurship, tax policy, innovation, small business
    JEL: H2
    Date: 2013–04–08
  12. By: Joost Röttger
    Abstract: How does the option to default on debt payments affect the conduct of public policy? To answer this question, this paper studies optimal monetary and fiscal policy without commitment in a model with nominal debt and endogenous sovereign default. When the government can default on its debt, public policy changes in the short and the long run relative to a setting without default option. The risk of default increases the volatility of interest rates, impeding the government's ability to smooth tax distortions across states. It also limits public debt accumulation and reduces the government's incentive to implement high inflation in the long run. The welfare costs associated with the short-run effects of sovereign default are found to be outweighed by the welfare gains due to lower average debt and inflation.
    Keywords: Monetary and Fiscal Policy, Lack of Commitment, Sovereign Default, Domestic Debt, Markov-Perfect Equilibrium
    JEL: E31 E63 H63
    Date: 2014–06–02
  13. By: Natacha Raffin (EconomiX - CNRS : UMR7166 - Université Paris X - Paris Ouest Nanterre La Défense, Climate Economics Chair - University Paris Dauphine); Thomas Seegmuller (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: This paper presents an overlapping generations model where pollution, private and public healths are all determinants of longevity. Public expenditure, financed through labour taxation, provide both public health and abatement. We study the complementarity between the three components of longevity on welfare and economic stability. At the steady state, we show that an appropriate fiscal policy may enhance welfare. However, when pollution is heavily harmful for longevity, the economy might experience aggregate instability or endogenous cycles. Nonetheless, a fiscal policy, which raises the share of public spending devoted to health, may display stabilizing virtues and rule out cycles. This allows us to recommend the design of the public policy that may comply with the dynamic and welfare objectives.
    Keywords: longevity; pollution; welfare; complex dynamics
    Date: 2014–07
  14. By: Dean Baker; David Rosnick
    Abstract: This paper examines the evidence on the impact of stimulus and fiscal consolidation in the context of a severe economic slump like the Great Recession. The first part reviews some of the major works on this topic in the last decade. It notes that the research clearly points in the direction of stimulus increasing growth during a prolonged slump. The second part examines the impact of changes in government consumption and investment on growth, using data from advanced countries since 1980. Consistent with most prior literature it finds that increases in government spending during downturns lead to increases in growth. It then constructs simulations for the period since the Great Recession showing multipliers in the neighborhood of 1.5. The third part notes new evidence suggesting that potential GDP appears to have fallensharply as a result of the downturn. A full model of the impact of stimulus would have to incorporate this effect which is likely to be large relative to the size of the stimulus.
    Date: 2014
  15. By: Kundt, Thorben (Helmut Schmidt University, Hamburg)
    Abstract: Many surveys on sensitive topics such as tax evasion suffer from the reluctance of respondents to provide truthful answers which can cause downward-biased estimates. This paper addresses this problem by making use of a recent survey method (Crosswise Model) designed to provide positive incentives for respondents to answer sensitive questions more truthful. We extend the Crosswise Model by applying the so-called “Benford Illusion” which allows us to increase the precision of the Crosswise Model that is less statistically efficient than other methods. To test the effectiveness of the model in providing privacy protection, we carried out an online survey in which the respondents were randomly allocated into two splits differing only by the questioning technique applied. Our results suggest that the Crosswise Model can help to increase privacy protection compared to a simple direct questioning approach. As a consequence, survey estimates of tax evasion using the Crosswise Model are likely to become more valid. At the same time, we show that were able to obtain an efficient estimator without substantially decreasing privacy protection, even for a relatively small sample size.
    Keywords: tax evasion; survey methodology; Crosswise Model; Benford’s law
    JEL: C83 H26
    Date: 2014–07–10
  16. By: Giannola, Adriano; Scalera, Domenico; Petraglia, Carmelo
    Abstract: By providing a long run reconstruction of regional Net Fiscal Flows (NFFs) in Italy throughout the last six decades (1951-2010), this paper documents the substantial rise of fiscal transfers to Mezzogiorno (i.e. Southern Italy) from the rest of the country. Besides, three further arguments are presented. First, we find that the prominent upsurge of NFFs in 1980s and 1990s has exerted a scarce impact on the North-South gap, mainly because it has not been connected to a stronger commitment in supply-side regional and development policies, and the needed rise of capital expenditure in Mezzogiorno. Second, we ascribe most of the increase in NFFs to the generalized escalation in current primary expenditure related to the “decentralization without accountability” design of fiscal reforms implemented in the 1970s. Third, we evaluate the size of interregional redistribution in the light of regional income differences and the burden imposed to contributing regions. By making use of several indexes and analytical procedures intensively used in the literature, we reach the conclusion that interregional redistribution in Italy has been moderate, considering the severity of initial differences in economic and social conditions.
    Keywords: Italian Mezzogiorno, net fiscal flows, regional redistribution, regional disparities
    JEL: H50 H70 H72 R10
    Date: 2014–07–11
  17. By: Sudhir Anand; Paul Segal
    Abstract: This paper investigates recent advances in our understanding of the global distribution of income, and produces the first estimates of global inequality that take into account data on the incomes of the top one percent within countries.� We discuss conceptual and methodological issues - including alternative definitions of the global distribution, the use of household surveys and national accounts data, the use of purchasing power parity exchange rates, and the incorporation of recently available data on top incomes from income tax records.� We also review recent attempts to estimate the global distribution of income.� Our own estimates combine household survey data with top income data, and we analyze various aspects of this disribution, including its within- and between-country components, and changes in relative versus absolute global inequality.� Finally, we examine global poverty, which is identified through the lower end of the global distribution.
    Keywords: global inequality, purchasing power parity exchange rates, household surveys, national accounts, top incomes, global poverty
    JEL: D63 E01 I32
    Date: 2014–07–18
  18. By: Song, Edward
    Abstract: I start with income and wealth inequality data from the Congressional Budget Office (CBO) and Thomas Piketty, and propose approaches taken from science (for example, behavioral evolution theory,) that might be useful in explaining the data and forecasting future economic events. Using a modified production function developed by Robert Solow, I also explore redistributive effects of income when biological restrictions lead to minimum expenditure requirements and satiation conditions. I conclude that redistributing income from the wealthy to the poor can have counter-cyclical effects in recessions. Moreover, redistribution in the form of human capital can have particularly large positive economic growth effects. Finally, I explain how financial crisis may lead to large economic downturns by proposing a model where productive capital formation is dependent on debt financing.
    Keywords: Macroeconomics, Behavioral Macroeconomics, Econophysics.
    JEL: E21 E22 E23 E27 E3 E32 Y90
    Date: 2014–07–16
  19. By: Hinte, Holger (IZA); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: Calculating the net fiscal effects of immigration not just for a fiscal year but over the lifespan of immigrant cohorts accentuates the assets and deficits in migration and integration policies and their long-term potential. The less national policies concentrate on a labor migrant selection process according to economic criteria, the higher the risk of generating economic losses or only a reduced surplus. A country comparison of net tax payments and generational accounts for migrants and natives reveals even more clearly that the right mix of migrants will give the best chance to maximize positive and sustainable net fiscal effects to the benefit of society. Similar socio-economic frameworks – as in the western welfare states of Denmark and Germany showcased in this paper – may still result in substantially different economic outcomes of migration. Traditional immigration countries with a long experience in selecting migrants are nonetheless confronted with the need to evaluate and adapt their policies. They may also learn from the results of net fiscal balancing.
    Keywords: socio-economic effects of migration, generational accounting, immigrant selection, integration
    JEL: F22 J61 E61 E62
    Date: 2014–07
  20. By: Paula Salinas (Universitat de Barcelona & IEB)
    Abstract: This paper uses cross-national data to examine the effects of different dimensions of decentralization on the efficiency of educational policies in OECD countries. The results show that the autonomy of subnational governments, both on the expenditure and revenue sides of their activities, is what really matters in determining the effect of decentralization on educational outcomes. The decision-making autonomy of subnational governments with regard to the regulation and management of the educational system has a significant and positive effect on educational attainment, though this varies with the degree to which subnational governments are held accountable for their taxing decisions. These results are robust to the different analyses conducted, thus corroborating that they are not driven by the potential endogeneity of decentralization policies.
    Keywords: Fiscal federalism, decentralization, education, OECD, PISA
    JEL: H11 H52 H75 H77 I28
    Date: 2014
  21. By: Falko Juessen; Ludger Linnemann; Andreas Schabert
    Abstract: We develop a macroeconomic model where the government does not guarantee to repay debt. We ask whether movements in the price of government bonds can be rationalized by lenders' unwillingness to fully roll over debt when the outstanding level of debt exceeds the government's repayment capacity. Investors do not support a Ponzi game and ration credit supply in this case, thus forcing default at an endogenously determined fractional repayment rate. Interest rates on government bonds re.ect expectations of this event. Numerical results show that default premia can emerge at moderately high debt-to-GDP ratios where even small changes in fundamentals lead to steeply rising interest rates. The behavior of risk premia broadly accords to recent observations for several European countries that experienced a worsening of fundamental fiscal conditions.
    Keywords: Sovereign default, fiscal policy, government debt
    JEL: E62 G12 H6
    Date: 2014–06–01
  22. By: Lopes da Veiga, José; Ferreira-Lopes, Alexandra; Sequeira, Tiago
    Abstract: We analyse the implications of public debt on economic growth and inflation in a group of 52 African economies between 1950 and 2012. The results indicate that the limits of public debt affect economic growth and exhibit negatively, from a given level of debt, an inverted U behaviour regarding the relationship between economic growth and public debt. The highest average rates of real and per capita growth are achieved when public debt reaches 60% of the real GDP and an average inflation rate of 8.2%. When this ratio falls between 60-90%, the average rate of economic growth drops by up to 1.32 p.p. and continues dropping by up to 1.64 p.p. when the ratio exceeds 90%. Briefly, the high levels of public debt are reflected in reduced rates of economic growth and rising levels of inflation. Our results for three specific geographical areas resemble those of the overall analysis, despite some differences. In North African countries, the growth rates of the GDP and inflation also show an inverted U behaviour as the ratio of public debt/GDP increases. The highest rate of economic growth is recorded when the ratio public debt/GDP is below 30% of GDP and corresponds to an average inflation rate of 5.33%. Identical behaviour of the GDP growth rates and inflation also appears in Sub-Saharan countries until the third interval (60-90%). However, the highest growth rate of the GDP and GDP per capita is registered when the public debt/GDP ratio is in the second interval (30-60%). For SADC countries, the highest average rate of economic growth (6.8%) is similar to North African countries, when the ratio public debt/GDP is below 30% of GDP, with an average inflation rate of 11%. The high level of public debt is reflected in reduced rates of economic Growth and increasing inflation rates.
    Keywords: Public Debt; Economic Growth; Inflation; African Countries
    JEL: E31 E62 H63 O40
    Date: 2014–07–17
  23. By: Chong, Alberto; La Porta, Rafael; Lopez-de-Silanes, Florencio; Shleifer, Andrei
    Abstract: We mailed letters to non-existent business addresses in 159 countries (10 per country), and measured whether they come back to the return address in the United States and how long it takes. About 60% of the letters were returned, taking over six months, on average. The results provide new objective indicators of government efficiency across countries, based on a simple and universal service, and allow us to shed light on its determinants. The evidence suggests that both technology and management quality influence government efficiency, just as they do that of the private sector.
    Date: 2014
  24. By: Massón-Guerra, José Luis; Ortín-Angel, Pedro
    Abstract: Entrepreneurship capital has been considered in the literature to be a public good, so it will positively affect a region’s total factor productivity. There is evidence confirming a positive relationship between entrepreneurship capital measures and regional production. This paper argues that the number of firms in a region will be positively related with the regional production in the presence of decreasing returns to scale in firms’ production technology. So if we do not control for the number of firms (and entrepreneurship capital is positively related with the stock of firms) we may be mixing both effects, returns to scale and public goods. This paper provides a methodological benchmark for distinguishing between both effects. The analysis conducted using a sample of 52 Spanish provinces for eleven years suggests major differences and conclusions between methodologies. In our data, previous methods overestimate the effect of regional entrepreneurship capital on the economy.
    Keywords: Entrepreneurship Capital, Regional Productivity, Scale Economies
    JEL: L26 O4 R11
    Date: 2014

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