nep-pbe New Economics Papers
on Public Economics
Issue of 2014‒08‒02
eighteen papers chosen by
Keunjae Lee
Pusan National University

  1. The Empirical Evidences on the Link between China's Public Land Leasing and Local Fiscal Revenues By Wu, Wen-Chieh
  2. The determinants of vat revenue efficiency: recent evidence from Greece By Athanasios O. Tagkalakis
  3. Environmental Policies under Debt Constraint By Mouez Fodha; Thomas Seegmuller; Hiroaki Yamagami
  4. Property Tax and the Fiscal Independence of local government in Poland By Gluszak, Michal; Marona, Bartlomiej
  5. Does fairness matter for the success of fiscal consolidation? By Georgia Kaplanoglou; Vassilis T. Rapanos; loanna C. Bardakas
  6. Shake me the money! By Francesco Porcelli; Riccardo Trezzi
  7. Spillover effects of infrastructure spending By Nanda, Anupam; Yeh, Jia-Huey
  8. Tax Revenues and Intelligence: A Cross-Sectional Evidence By Kodila-Tedika, Oasis; Mutascu, Mihai
  9. Heterogeneous responses to effective tax enforcement: evidence from Spanish firms By Miguel Almunia; David López-Rodríguez
  10. Land Taxation: An Idea Whose Time Has Gone By Evans, Alan W.
  11. The Social Aversion to Intergenerational Inequality and the Recycling of a Carbon Tax By Frederic Gonand
  12. Multiple Pollutants, Uncovered Sectors, and Suboptimal Environmental Policies By Don Fullerton; Daniel H. Karney
  13. The dynamics of centralized procurement reform in a decentralized state : evidence and lessons from Indonesia By Sacks, Audrey; Rahman, Erman; Turkewitz, Joel; Buehler, Michael; Saleh, Imad
  14. Do balanced-budget rules increase growth? By Stone, Joe
  15. The Influence of Taxes and Rent Yields on Tenure Choice: New Evidence from Germany By Schier, Michael; Voigtländer, Michael
  16. Green Jobs and Growth in the United States: Green Shoots or False Dawn? By Robert J R Elliott; Joanne K Lindley
  17. Economic and financial performance of real estate transactions under accounting rules and specific taxes By Sobolevschi, David Maria Iuli; Robu, Vasile; Petcu, Monica Aureliana; Ciora, Costin
  18. The Underpricing of Infrastructure IPOs: Evidence from China By Tan, Qile; Dimovski, Bill

  1. By: Wu, Wen-Chieh
    Abstract: The public land leasing has been increasingly used as the instrument of generating revenues for local governments as well as the tool of regional competition for manufacturing investment. The local government can generate two revenue streams from leasing public land: land conveyance fees and future formal tax revenues. These formal taxes include value-added tax (VAT) from enterprises, business tax from services, and income tax from profits. In order to raise sustainable tax revenues from manufacturing capital in the future, the local government usually sacrifices conveyance fees and reduces the public land leasing price through one-on-one negotiation. Using the provincial-level data, this paper empirically examines the impacts of public land leasing on the lagged revenues from major local taxes. Our dependent variable is either total fiscal revenue or specific tax revenue. The candidate variables of public land leasing include the number of land sites leased, the total area of land sites leased, the leasing revenues, and the leasing price. The empirical analysis provides the evidence that the public land leasing has a clear effect on the future revenues from both VAT and enterprise income tax.
    Date: 2013
  2. By: Athanasios O. Tagkalakis (Bank of Greece)
    Abstract: This paper examines the relationship between VAT revenue and economic activity in Greece by estimating the relationship between tax revenue efficiency and real GDP growth rate. We find a positive and significant relationship between these variables, and show that the responsiveness of tax revenue efficiency to economic activity fluctuations has increased in the recent years. Tax efficiency is affected by changes in the ability to curb tax evasion.
    Keywords: VAT; GDP; tax evasion; Greece.
    JEL: C32 E32 H20 O52
    Date: 2014–05
  3. By: Mouez Fodha (University Paris 1 and Paris School of Economics. Maison des Sciences Economiques); Thomas Seegmuller (Aix-Marseille University (Aix-Marseille School of Economics), CNRS-GREQAM & EHESS); Hiroaki Yamagami (Seikei University, Tokyo)
    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
    JEL: Q5 H23 H63
    Date: 2014–06
  4. By: Gluszak, Michal; Marona, Bartlomiej
    Abstract: In order to provide a sufficient level of public services, a municipality - as a basic unit of local government in Poland - must be supplied with an adequate level of regular revenues. In a long run the level should rise proportionally to the development of the region. The main purpose of this article is to describe a role of recurrent taxes on immovable property in local government revenues in Poland. In the first part of the paper, we address the problem from international perspective, and examine revenues from recurrent taxes on immovable property in OECD countries. In the second part of the paper, we:(i) explore differences in property tax policy at local level, (ii) analyze similarities between local municipality in Poland with the use of cluster analysis,(iii) analyze relations between tax policy and tax revenues.
    Date: 2014
  5. By: Georgia Kaplanoglou (University of Athens); Vassilis T. Rapanos (University of Athens); loanna C. Bardakas (Bank of Greece)
    Abstract: Does it matter for the success of fiscal consolidation programmes that they are fair? This question has never been empirically addressed despite its profound importance especially since many developed countries have embarked on fiscal consolidation programmes, which in many cases have led to sizeable increases in unemployment and poverty, and are met with public dissatisfaction. Using a data set for 29 OECD countries over the period 1971-2009, we argue that fairness matters, namely that improving the targeting of social transfers and their effectiveness in terms of poverty alleviation, higher public expenditure on training and active labor market policies and programmes like social housing directed to the poor, even decreasing the VAT rate on necessities, improve the success probabilities of consolidation attempts. Introducing such concerns sheds new light on the prevailing view that the successful fiscal adjustments are those that rely on spending-cuts rather than on tax increases. The results of this paper provide empirical evidence that ameliorating the effects of adjustment, by supporting the weaker parts of society, is crucial for the success of fiscal consolidations and argues that "fair fiscal adjustments" may provide the double dividend of enhancing the probability of success of the adjustment and of promoting social cohesion.
    Keywords: fiscal consolidation; success; fairness; expenditure; social transfers
    JEL: D63 E62 H23 H53 H50 H62 I38
    Date: 2014–05
  6. By: Francesco Porcelli (University of Exeter, Business School); Riccardo Trezzi (University of Cambridge, Faculty of Economics)
    Abstract: During a natural disaster, the negative supply shock due to the destruction of productive capacity is counteracted by a positive demand shock due to public grants for assistance and reconstruction, positing an identification issue in empirical work. Focusing on the 2009 ’Aquilano’ earthquake in Italy as a case study, we take advantage of quantified measure of damages for 75,424 buildings to estimate the negative supply shock and of a law issued to allocate reconstruction grants, which resulted in a sharp, exogenous discontinuity in transfers and output behavior across neighboring municipalities to estimate the positive demand shock. Diff-in-diff analysis suggests that local output multipliers of reconstruction grants (net of marginal tax rebates) are below unity. Yet the size of the grants act as a public insurance scheme, preventing a fall in output.
    Keywords: Natural disasters, Fiscal multipliers, Mercalli scale
    JEL: C36 E62 H70
    Date: 2014–07
  7. By: Nanda, Anupam; Yeh, Jia-Huey
    Abstract: This paper examines the impact of local public expenditure on the built environment. The empirical framework is designed to address the endogenous feedback effects. Various types of expenditures are considered across 29 local areas in Taipei. Using panel data modelling that controls for unobserved heterogeneity, we find some significant effects of infrastructure investment on land values across many areas and, also, some evidence of a social expenditure effect. The local area differences are further explored to examine spillover effects. Spillover effect is not significant when rest of the region is taken into account. However, considerable spillover effects emerge when we focus on neighbouring areas. Also, results show interesting distinctions among various types of public expenditure. Overall, the results are reasonably robust across several model specifications and samples. The results do indicate that public expenditure have some impact and show interesting spatial patterns. These findings highlight important implications for local government policy, spatial planning and the role of public expenditure in local area economic development.
    Date: 2014
  8. By: Kodila-Tedika, Oasis; Mutascu, Mihai
    Abstract: The paper investigates and tests the hypothesis that the intelligent and educated people are honest taxpayer citizens. In order to validate this hypothesis, the empirical part follows a cross-sectional approach, with OLS and robust estimations, across 55 countries. Considering the IQ as main proxy for human intelligence, the obtained results do not allow us to validate this hypothesis.
    Keywords: intelligence, tax revenues,
    JEL: C21 H11 H20 I2
    Date: 2014–08–26
  9. By: Miguel Almunia (University of Warwick); David López-Rodríguez (Banco de España)
    Abstract: This paper investigates the effects of monitoring the information trails generated by firms’ activities in order to improve tax compliance. We use quasi-experimental variation provided by a Large Taxpayers Unit (LTU) in Spain to empirically test the theoretical predictions on firms’ responses to an increase in monitoring effort. Firms with more than €6 million in reported revenue are monitored by the LTU, which devotes more resources to verifying the transactions reported by those firms. Using financial statements from practically the entire universe of Spanish firms for the period 1999-2007, we find substantial bunching of firms just below the LTU threshold. On average, we estimate that bunchers reduce their reported revenue by €101,000 (1.7% of total revenue) to avoid falling in the high enforcement regime. Adjusting for resource costs of evasion faced by firms, we estimate that the marginal bunching firm reduces its reported revenue by up to €593,000 (9.9%). The response is weak in sectors where most sales are made to final consumers (retail, restaurants) and strong in sectors where firms sell intermediate goods to other businesses (wholesale, manufacturing). This result suggests that the monitoring effort by the tax authorities and the traceability of the information reported by firms are complements, and both are necessary for effective tax enforcement. Finally, we provide suggestive evidence that firms under low monitoring effort also misreport their material and labour expenditures to evade taxes, even in the presence of third-party reporting.
    Keywords: tax enforcement, firms, bunching, Spain, Large Taxpayers Unit (LTU).
    JEL: H26 H32
    Date: 2014–07
  10. By: Evans, Alan W.
    Abstract: The idea of tax on the value of land was put forward by Henry George in his book Progress and Poverty. Its influence was great. Political parties were formed on the basis of the ideas it put forward and pressure groups still exist to promote those ideas. But despite this quasi-religious belief in the efficacy of land value taxation it has never been widely adopted. Only two countries in western Europe have any kind of land tax, most have some form of tax on the value of the whole property. The reasons for this would seem to lie in problems of practicality and politics.As regards practicality one country which does whole heartedly apply land taxation is Taiwan. The problem there is that in Taipeh at least very little undeveloped land comes onto the market. Therefore in order to value the land on which a building sits, two valuations have to be carried out. First the value of the entire property has to be estimated. Second, the cost of construction of the building has to be estimated. Deducting one estimate from the other the valuer arrives at an estimate of the value of the underlying land. It is evident that the cost of the valuation is twice as great as if a tax were being levied on the value of the property and the result is less certain.In New Zealand municipalities can choose which form of land or property taxation to use to raise money. This problem of practicality is, one would expect, the main reason why none of the major cities use land taxation. Land taxes are used only in the rural areas, where, it is evident, there is land being sold on the market so that valuations can be made both easily and reliably.The political problem is that levying a tax on land might have been politically popular in the nineteenth century when most of the population rented their homes. A land tax would then have been a form of wealth tax - a tax borne by the rich. But in countries where most of the population now own their own homes a land tax is not going to be popular if it is levied at anything other than a low rate. But if it is levied at a low rate then it will not achieve the economic effects that its supporters believe that it could. Its time has passed.
    Date: 2013
  11. By: Frederic Gonand
    Abstract: Redistributing the income of a carbon tax impacts the economic activity and the intergenerational inequality, which both influence the intertemporal social welfare. Thus the way a social planner recycles a carbon tax is influenced by its degree of aversion to intergenerational inequality. This article analyses the effect of social aversion to intergenerational inequality on the social choice as concerns implementing and redistributing a carbon tax. It relies on a detailed computable general equilibrium model with overlapping generations and an energy module, with a parameterisation on empirical data. We use two types of social welfare functionals which both incorporate a variable parameter measuring the degree of aversion of the social planner to intergenerational inequality. Results suggest that the social planner recycles a carbon tax through higher public expenditures if its aversion to intergenerational inequity is relatively high. This holds even if recycling through lower income taxes increases activity.
    Keywords: Energy transition, intergenerational redistribution, social choice, overlapping generations, carbon tax, general equilibrium.
    JEL: D58 D63 E62 L7 Q28 Q43
    Date: 2014
  12. By: Don Fullerton; Daniel H. Karney
    Abstract: In our analytical general equilibrium model where two polluting inputs can be substitutes or complements in production, we study the effects of a tax on one pollutant in two cases: one where both pollutants face taxes and the second where the other pollutant is subject to a permit policy. In each case, we solve for closed-form solutions that highlight important parameters. We demonstrate two important ways that environmental taxes and permits are not equivalent. First, the change in the pollutant facing a tax increase depends on whether the other pollutant is subject to a tax or permit policy. Second, if that other pollutant is subject to a tax, then general equilibrium effects can increase or decrease its quantity (affecting overall welfare). However, when the second pollutant is subject to a permit policy that binds, then welfare is not affected by this spillover effect. Finally, a numerical exercise helps demonstrate these two ways that taxes and permits differ. Using the example of coal-fired power plants, our numerical exercise examines the impacts of increasing a hypothetical carbon tax on the quantity of sulfur dioxide emissions.
    JEL: H23 Q48 Q53
    Date: 2014–07
  13. By: Sacks, Audrey; Rahman, Erman; Turkewitz, Joel; Buehler, Michael; Saleh, Imad
    Abstract: A central policy of the Government of Indonesia's strategy for enhancing its country's economic and social development is to develop infrastructure and expand service delivery. Public procurement reform is a key component of this policy. Despite the decentralization of financial responsibility and authority to relatively autonomous local level governments, procurement reform in Indonesia is a centrally-driven effort. In this paper, we examine the extent to which procurement reform is translating into improvements in sub-national performance. Data on local government procurement expenditures point to an overall decline in the volume of procurement, especially in poorer districts. This paper uses qualitative case studies of procurement reform in six local governments and finds that local government leadership is associated with the uptake of reform. There is little evidence to suggest that procurement reform has been"demand''-led, since neither the private sector nor Civil Society Organizations (CSOs) have been active in advocating for procurement reform.
    Keywords: E-Business,Public Sector Corruption&Anticorruption Measures,Government Procurement,Competitiveness and Competition Policy,Business Environment
    Date: 2014–07–01
  14. By: Stone, Joe
    Abstract: This study tests the hypothesis that balanced-budget rules (BBRs) that restrict public borrowing to investments in public infrastructure increase growth by increasing the productivity of debt, either because investments in public infrastructure are more productive than other uses for which states borrow funds or because BBRs lower borrowing costs. Results are based on data at 5-year intervals for 49 US states over the period 1957-2007. The tests strongly support the hypothesis that BBRs increase growth by increasing the productivity of debt and withstand a variety of robustness checks, including alternative lags, exogeneity tests, GMM estimation, a placebo test, and the influence of outliers.
    Keywords: balanced budget rule, infrastructure, fiscal policy, regional growth
    JEL: A1 E6 H2 R1
    Date: 2014–07–20
  15. By: Schier, Michael; Voigtländer, Michael
    Abstract: Home ownership rates in Germany have increased substantially in recent years. However, the rate still remains on a very low level and shows significant differences across regions. The reasons for these differences and the last developments are not clear. Generally, the decision between renting and buying a house or a flat depends on multiple individual factors like income or risk awareness. Additionally, heterogeneous developments in the real estate markets, indicated by prices, rents or taxes, cause differences in the profitability and the costs of homeownership and renting. The following study analyzes the tenure choice in 402 administrative districts in Germany between 2008 and 2012 with the help of an indicator measuring the relative profitability of letting and buying. The indicator is calculated by taking into account the average rental price and the different tax treatment of tenure choice, the property prices for different administrative districts in Germany, the interest and maintenance costs (user costs of housing). Since tax benefits of landlords are passed through to tenants when competition is severe, the indicator can be used to measure the relative profitability of renting and buying. By using a panel model, we investigate whether the demand for buying or renting – measured by search profiles in ImmobilienScout 24, the leading internet platform for private real estate transactions in Germany – is shifted by changing profitability of letting and buying. Control variables like vacancy rates, demographics or employment validate the robustness of the model as well as accounting for spatial autocorrelation. Results show, that households react on changing profitability and adjust their tenure choice partially to economic factors.
    Date: 2014
  16. By: Robert J R Elliott; Joanne K Lindley
    Abstract: Green growth is increasingly being seen as a means of simultaneously meeting current and future climate change obligations and reducing unemployment. This paper uses detailed industry-level data from the Bureau of Labor Statistic's Green Goods and Services survey to examine how the provision of green goods and services has affected various aspects of the US economy. Our descriptive results reveal that those states and industries that were relatively green in 2010 became even greener in 2011. To investigate further we include green goods and services in a production function. The results show that between 2010 and 2011 industries that have increased their share of green employment have reduced their productivity although this negative correlation with productivity was only for the production of green goods and not for the supply of green services. In further analysis we investigate skill-technology complementarities in the production of green goods and services and show that industries that increased their provision of green goods and services grew more slowly, reduced their expenditure on technology inputs and increased their demand for medium educated workers, whilst simultaneously reducing their demand for low skilled workers.
    Keywords: Green Goods and Services; Productivity; Employment
    JEL: Q4 Q3
    Date: 2014–07
  17. By: Sobolevschi, David Maria Iuli; Robu, Vasile; Petcu, Monica Aureliana; Ciora, Costin
    Abstract: Characterization of the economic and financial performance of real estate transactions involves the processing of accounting information under the regulations specific tax. In this sense, information with a high degree of concentration is provided by accounting mechanisms using the balance sheet, profit and loss account, statement of equity and explanatory notes. Tha accounting and taxation referential influences the performance of financial accounting statements highlighted. Performance evaluation of real estate transactions is considering complex issues regarding on the one hand economic and financial principles that circumscribe the capital allocation decision based on risk-return specific arbitrage and on the other hand the impact of accounting and tax provisions in the field. The concatenation of these issues is the foundation of reasoning investment, which in real estate, on the globalized markets, incumbent multiplier effects.
    Date: 2014
  18. By: Tan, Qile; Dimovski, Bill
    Abstract: This study investigates the underpricing of 154 infrastructure IPOs in China from 1993 to 2012. It follows infrastructure IPO studies in Australia and India which report average underpricing returns to subscribers of 3.5% and 25.4% respectively. The average underpricing return for Chinese infrastructure IPOs is substantially higher at 91.1% but interestingly substantially lower than the underpricing of Chinese IPOs generally. The issue size, the offer price, the time delay to listing and the broad market return from the date of the prospectus to the date of listing are helpful in explaining the underpricing of Chinese infrastructure IPOs. Government ownership retention and underwriter reputation do not appear to have much explanatory power.
    Date: 2013

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