nep-pbe New Economics Papers
on Public Economics
Issue of 2014‒11‒28
28 papers chosen by
Keunjae Lee
Pusan National University

  1. The Tax-Rate Elasticity of Local Business Profits By Frank M. Fossen; Viktor Steiner
  2. Outside the corridor: fiscal multipliers and business cycles into an agent-based model with liquidity constraints By Mauro Napoletano; Jean-Luc Gaffard; Andrea Roventini
  3. The three hurdles of tax planning: How business context, aims of tax planning, and tax manager power affect tax By Feller, Anna; Schanz, Deborah
  4. Procyclical and Countercyclical Fiscal Multipliers: Evidence from OECD Countries By Daniel Riera-Crichton; Carlos A. Vegh; Guillermo Vuletin
  5. Indirect taxation, public pricing and price cap regulation: A synthesis By Valentini, Edilio
  6. Myths and Facts about Fiscal Discretion: A New Measure of Discretionary Expenditure By Fabrizio Coricelli; Riccardo Fiorito
  7. When are There Natural Limits on Inequality? By Scott S. Condie; Richard W. Evans; Kerk L. Phillips
  8. Optimal mechanisms for the control of fiscal deficits By Grüner, Hans Peter
  9. Who honor the rules of federalism? Party system nationalization and fiscal performance. By Santiago Lago-Peñas; Agnese Sacchi; Pablo Simon-Cosano
  10. Self-defeating austerity at the zero lower bound By Richard McManus; F. Gulcin Ozkan; Dawid Trzeciakiewicz
  11. Military Spending and Growth: An Empirical Exploration of Contingent Relationships By Musayev, Vusal
  12. Heterogeneous Preferences and In-Kind Redistribution By Luna Bellani; Francesco Scervini
  13. The Distribution of Lifetime Incomes in the United States By Jae Song; Greg Kaplan; Fatih Guvenen
  14. State taxation of interstate commerce and income flows: The economics of neutrality By Alan D. Viard; Ryan Lirette
  15. Tax Farming Redux: Experimental Evidence on Performance Pay for Tax Collectors By Adnan Q. Khan; Asim I. Khwaja; Benjamin A. Olken
  16. Sustainability of Public Debt in the United States and Japan By William R. Cline
  17. Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States By Viktor Slavtchev; S. Wiederhold
  18. Does Fiscal Consolidation Really Get You Down? Evidence from Suicide Mortality By Nikolaos Antonakakis; Nikolaos Antonakakis; Alan Collins
  19. Externalities in Military Spending and Growth: The Role of Natural Resources as a Channel through Conflict By Musayev, Vusal
  20. Public Incentives for Conservation on Private Land By Suter, Jordan; Sahan, Dissanayake; Lynne, Lewis
  21. Top Income Inequality, Aggregate Saving and the Gains from Trade By Lixin Tang
  22. Richer (and Holier) Than Thou? The Effect of Relative Income Improvements on Demand for Redistribution By Karadja, Mounir; Möllerström, Johanna; Seim, David
  23. Diversification and democracy By Ivar Kolstad; Arne Wiig
  24. Assessing public debt sustainability in Mauritania with a stochastic framework By Baghdassarian, William; Mele, Gianluca; Pradelli, Juan
  25. Growth and Inequality in Public Good Games By Gächter, Simon; Mengel, Friederike; Tsakas, Elias; Vostroknutov, Alexander
  26. Voting for burden sharing rules in public goods games By Gallier, Carlo; Kesternich, Martin; Sturm, Bodo
  27. Making economic growth and well-being compatible: the role of trust and income inequality By Mikucka, Malgorzata; Sarracino, Francesco
  28. Does local public ownership matter for the efficiency of water utilities? Evidence from Italy By Meryem Duygun; Silvia Pazzi; Emili Tortosa-Ausina; Simona Zambelli

  1. By: Frank M. Fossen; Viktor Steiner
    Abstract: Local business profits respond to local business tax (LBT) rates that vary across municipalities. We estimate that a one percent increase in the LBT rate decreases the LBT base by 0.45 percent, based on the universe of German LBT return files, which include corporations and unincorporated businesses. However, the fiscal equalization scheme largely compensates municipalities for the loss in the LBT base when they increase the LBT rate. Our estimates suggest that using taxrevenue data instead of tax return data, as commonly done in the literature, results in a significant bias of the elasticity away from zero.
    Keywords: Local business tax, corporate tax, tax responsiveness, tax-rate elasticity
    JEL: H25 H71
    Date: 2014
  2. By: Mauro Napoletano (OFCE); Jean-Luc Gaffard (OFCE); Andrea Roventini (Department of economics)
    Abstract: We build an agent-based model to study how fiscal multipliers can change over the business cycle. Our approach considers the economy as a complex evolving system. In that, fiscal state-dependent multipliers are emergent disequilibrium phenomenon stemming from the interaction among an ecology of heterogeneous agents. We study fiscal multipliers in response to dfferent microeconomic shocks hitting the economy. We show that defficit-spending fiscal policy dampens the effect of a shock and lowers its persistence. Moreover, we show that the size and dynamics of the fiscal multi- plier is inversely related to the evolution of credit rationing in the aftermath of the shock. We also investigate the effects of two different balanced budget rules. In the first type of such experiments, government expenditure is constrained to be equal to tax revenues of each period. In the second one the tax rate is eventually raised to balance a given level of government expenditure. We show that fiscal multipliers are very low with both balanced-budget rules. Finally, we show that fiscal multipliers are higher into more leveraged economies.
    Keywords: Keynesian economics, Fiscal Multipliers, Corridor E
    JEL: E21 E63 C63
    Date: 2014–09
  3. By: Feller, Anna; Schanz, Deborah
    Abstract: The question of why some companies pay more taxes than others is a widely investigated topic of interest. One of the famous suspect explanations is a phenomenon called tax avoidance. We develop a holistic theoretical concept of influences on corporate tax planning through a series of 19 in-depth German tax expert interviews. Our findings show that three distinct hurdles in the tax planning process can explain different levels of tax expense across companies. Those three hurdles are which tax planning methods are. available (defined by business context), desirable (given via aims of tax planning), and implementable (determined by tax manager power). A large part of previous research has estimated the influence of firm characteristics, which we define as part of the business context, on the tax expense, while the other influences that we identify have largely been left "out of the equation". In order to apply and operationalize the identified three-hurdle concept, we construct five short, real-world company case studies. In these case studies, we show how variation in two key constructs across companies leads to different levels of tax expense. First, companies vary widely in the aggressiveness of their aims of tax planning. Second, tax managers can assume very different levels of power in their organization, determining the ability to implement tax planning methods. In conclusion, we provide generalizable insights into the tax planning process of companies which help to explain the observed variation in tax expenses across firms.
    Keywords: tax planning,tax avoidance,manager power,qualitative research
    JEL: D22 H25 M12 M41
    Date: 2014
  4. By: Daniel Riera-Crichton; Carlos A. Vegh; Guillermo Vuletin
    Abstract: Using non-linear methods, we argue that existing estimates of government spending multipliers in expansion and recession may yield biased results by ignoring whether government spending is increasing or decreasing. In the case of OECD countries, the problem originates in the fact that, contrary to one's priors, it is not always the case that government spending is going up in recessions (i.e., acting countercyclically). In almost as many cases, government spending is actually going down (i.e., acting procyclically). Since the economy does not respond symmetrically to government spending increases or decreases, the "true" long-run multiplier for bad times (and government spending going up) turns out to be 2.3 compared to 1.3 if we just distinguish between recession and expansion. In extreme recessions, the long-run multiplier reaches 3.1.
    JEL: E62 F41
    Date: 2014–09
  5. By: Valentini, Edilio
    Abstract: This paper provides a unified vision of a number of results that appeared in three separate streams of literature. The author emphasizes the strong parallelism between the results obtained in a number of papers that analyzed the relationships between price cap regulation, welfare maximization, welfare improvements, distributional preferences and poverty reduction and those originating from the well-established theories of optimal indirect taxation and tax reforms, as well as public pricing.
    Keywords: Price cap regulation,indirect taxation,public pricing
    JEL: D6 L5
    Date: 2014
  6. By: Fabrizio Coricelli (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CEPR - Centre for Economic Policy Research); Riccardo Fiorito (Università degli Studi di Siena - Facoltà di Economia "Richard M. Goodwin")
    Abstract: In this paper we suggest a new measure of discretionary government spending for OECD countries over the period 1980-2011. To identify the components of discretionary expenditure, we use the volatility and persistence properties of the expenditure series. Discretionary policy cannot be inertial and should be free from prior obligations. Commonly used measures of discretionary fiscal policy do not satisfy these two criteria. We find that discretionary expenditure accounts on average for about 30 per cent of total primary expenditure, suggesting that most government spending is driven by inertial and automatic components. These features help explain why government expenditure is generally not counter-cyclical even is advanced economies. Furthermore, the small share of discretionary expenditure over total expenditure significantly reduces the room of manoeuvre for counter-cyclical fiscal policy during recessions.
    Keywords: Discretion; government spending; volatility
    Date: 2013–04
  7. By: Scott S. Condie (Department of Economics, Brigham Young University); Richard W. Evans (Department of Economics, Brigham Young University); Kerk L. Phillips (Department of Economics, Brigham Young University)
    Abstract: This paper examines Thomas Piketty's thesis that there are no natural limits on accumulation of wealth. We undertake our examination in the context of a simple general equilibrium model with infintely-lived dynasties. We show that extreme wealth accumulation does not happen in general equilibrium unless capital and labor are substitutes, an assumption which also leads to unbalanced growth. We also show that even with unbalanced growth, differences in rates of return and effective labor are not sufficient to cause unbounded inequality. Only savings rate differences can lead to extreme wealth concentration. Finally, we show that while a flat wealth tax will not eliminate extreme wealth concentration, both a graduated wealth tax and a flat income tax will.
    Keywords: Piketty, inequality, wealth tax, welfare
    JEL: D51 H21 H23 H30 P16
    Date: 2014–10
  8. By: Grüner, Hans Peter
    Abstract: This paper shows that a simple two-stage voting mechanism may implement a constrained optimal state dependent decision about a fiscal deficit. I consider a setup with strategic fiscal deficits à la Tabellini and Alesina (1990). Three groups of voters are informed about the productivity of current public spending. Voters differ in their preferences for public goods and swing voters’ preferences may change over time. The current government decides on the current spending mix and it has an incentive to strategically overspend. Under certain conditions, a simple two-stage mechanism in which a deficit requires the approval by a supermajority in parliament implements a constrained optimal decision. When the current majority is small, bargaining between political parties may further increase social welfare. However, when the current majority is large, a supermajority mechanism with bargaining leads to a biased spending mix and reduces welfare whereas the laissez faire mechanism may yield the first best. An appropriately adjusted majority threshold can deal with this problem. JEL Classification: D82, H62
    Keywords: constitutional choice, fiscal policy rules, mechanism design
    Date: 2014–08
  9. By: Santiago Lago-Peñas; Agnese Sacchi; Pablo Simon-Cosano
    Abstract: This paper explores the impact of decentralization on countries’ fiscal outcomes paying attention to one aspect usually neglected in the literature: the relevance of self-interested local politics. Relevance that can be proxied by the nationalization of political party systems, namely the extent to which parties compete nationally oriented. Based on a sample of developed and developing countries over the period 1970-2011, our findings are twofold. First, fiscal decentralization has a positive effect on general governments' primary balance. Second, primary balance is negatively affected by the nationalization of party systems only when the latter is extremely weak.
    Keywords: Government primary balance, fiscal decentralization, regional authority, party system nationalization.
    JEL: H62 H74 H77
    Date: 2014–11
  10. By: Richard McManus; F. Gulcin Ozkan; Dawid Trzeciakiewicz
    Abstract: Fiscal consolidation programmes have been adopted almost uni-versally in the developed world since 2011 in an effort to reverse the substantially worsened fiscal outlook in the aftermath of the global financial crisis. Prolonged stagnation combined with increasing debt levels over this period led many to question whether fiscal austerity can be self-defeating. This paper attempts to answer this question by presenting a comprehensive examination of fiscal policy when the nom-inal interest rates are at the zero lower bound (ZLB). In doing so, we propose an alternative measure of fiscal policy effectiveness in the form of bond multipliers that are based on the evolution of debt to GDP ratios. We show that, in contrast to the normal times, when interest rates are at their ZLB paths of government debt arising from different fiscal instruments could be very different, leading to self-defeating austerity in certain combinations of fiscal adjustment programs. Our findings, therefore suggest that self-defeating austerity, while a likely outcome with some instruments, can be avoided by judicious choice of the composition of fiscal action.
    Keywords: fiscal austerity, zero lower bound, composition of fiscal adjustment
    JEL: E65 H2 H3
    Date: 2014–10
  11. By: Musayev, Vusal
    Abstract: This analysis clarifies the ambiguous results from military spending and economic growth literature where the impact of military expenditure is frequently found to be non-significant or negative. Investigation re-examines effects of military spending on growth by analysing this relationship contingent on initial income per capita using recent advances in panel estimation methods and unique dataset on military expenditure. The findings reveal that while growth falls with higher levels of military spending, the marginal impact of military spending is increasing in initial income levels. In contrast to previous findings from the literature, this increase is consistent across different income groups and type of economies, and monotonic in direction going towards zero for sufficiently higher income level countries.
    Keywords: Military expenditure; Economic Growth; Contingency
    JEL: H56 O11
    Date: 2013–04
  12. By: Luna Bellani (Department of Economics, University of Konstanz, Germany); Francesco Scervini (ESOMAS, University of Turin, Italy)
    Abstract: This paper examines the impact of social heterogeneity on in-kind redistribution. We contribute to the previous literature in two ways: we consider i) the provision of several public goods and ii) agents different not only in income, but also in their preferences over the various goods provided by the public sector. In this setting, both the distribution and size of goods provision depend on the heterogeneity of preferences. Our main result is that preference heterogeneity tends to decrease in-kind redistribution, while income inequality tends to increase it. An empirical investigation based on United States Census Bureau data confirms these theoretical findings.
    Keywords: Heterogeneous preferences, in-kind redistribution, voting, social distance, local public budgets
    JEL: D31 D72 H42 H70
    Date: 2014–11–13
  13. By: Jae Song (Social Security Administration); Greg Kaplan (Princeton University); Fatih Guvenen (University of Minnesota)
    Abstract: Our investigation reveals four sets of results. First, we find substantial inequality in lifetime earnings, more than double what has been reported in earlier work that relied on much shorter panels and made parametric assumptions. The inequality in lifetime earnings above the median of the distribution alone is comparable to or larger than the total inequality found in earlier work. Second, contrary to some previous papers, we find that most of the rise in cross-sectional income inequality did not get translated into a rise in lifetime inequality. Third we also characterize the gender lifetime inequality gap and racial income gap for lifetime incomes. We find remarkable similarities across the lifetime inequality among men and among women, especially for cohorts that entered the economy in the last 40 years. Fourth, we quantify the lifetime burden of taxes and compare it to the burden of tax distribution estimated from cross-sectional distribution of income (as commonly done in the literature).
    Date: 2014
  14. By: Alan D. Viard (American Enterprise Institute); Ryan Lirette (American Enterprise Institute)
    Abstract: In this paper, we provide an economic analysis that distinguishes neutral and discriminatory state taxation of interstate commerce.
    Keywords: taxes, Interstate commerce, dormant commerce clause
    JEL: A
    Date: 2014–09
  15. By: Adnan Q. Khan; Asim I. Khwaja; Benjamin A. Olken
    Abstract: Performance pay for tax collectors has the potential to raise revenues, but might come at a cost if taxpayers face undue pressure from collectors. We report the first large-scale field experiment on these issues, where we experimentally allocated 482 property tax units in Punjab, Pakistan into one of three performance-pay schemes or a control. After two years, incentivized units had 9.3 log points higher revenue than controls, which translates to a 46 percent higher growth rate. The scheme that rewarded purely on revenue did best, increasing revenue by 12.8 log points (62 percent higher growth rate), with little penalty for customer satisfaction and assessment accuracy compared to the two other schemes that explicitly also rewarded these dimensions. Further analysis reveals that these revenue gains accrue from a small number of properties becoming taxed at their true value, which is substantially more than they had been taxed at previously. The majority of properties in incentivized areas in fact pay no more taxes, but do report higher bribes. The results are consistent with a collusive setting in which performance pay increases collector's bargaining power over taxpayers, who either have to pay higher bribes to avoid being reassessed, or pay substantially higher taxes if collusion breaks down.
    JEL: D73 H26
    Date: 2014–10
  16. By: William R. Cline (Peterson Institute for International Economics)
    Abstract: This paper applies the probabilistic debt sustainability model developed for the euro area in Cline (2012, 2014) to sovereign debt in the United States and Japan. The results indicate that to avoid further increases in the expected ratio of public debt to GDP over the next decade, average annual primary deficits will need to be reduced by about 0.75 percent of GDP in the United States and by about 3 percent of GDP in Japan from the likely baselines as of mid-2014.
    Keywords: Public Debt, United States, Japan, Debt Sustainability, Deficits
    JEL: E62 H63 H68
    Date: 2014–10
  17. By: Viktor Slavtchev; S. Wiederhold
    Abstract: Governments purchase everything from airplanes to zucchini. This paper investigates the role of the technological content of government procurement in innovation. We theoretically show that a shift in the composition of public purchases toward high-tech products translates into higher economy-wide returns to innovation, leading to an increase in the aggregate level of private research and development (R&D). Collecting unique panel data on federal procurement in US states, we find that reshuffling procurement toward high-tech industries has an economically and statistically significant positive effect on private R&D, even after extensively controlling for other R&D determinants. Instrumental-variable estimations support a causal interpretation of our findings.
    Keywords: government demand, private R&D, endogenous growth, innovation policy
    JEL: E60 H57 O31 O33 O38
    Date: 2014–09
  18. By: Nikolaos Antonakakis (Department of Economics, Vienna University of Economics and Business); Nikolaos Antonakakis (Economics and Finance Subject Group, Portsmouth Business School, University of Portsmouth); Alan Collins (Economics and Finance Subject Group, Portsmouth Business School, University of Portsmouth)
    Abstract: While linkages between some macroeconomic phenomena (e.g. unemployment, GDP growth) and suicide rates in some countries have been explored, only one study, hitherto, has established a causal relationship between fiscal consolidation and suicide, albeit in a single country. This study examines the impact of budget consolidation on suicide mortality across all Eurozone peripheral economies, while controlling for various economic and sociodemographic differences. The impact of fiscal adjustments is found to be gender, age and time specific. In particular, fiscal consolidation has short-, medium- and long-run suicide increasing effects on the male population between 65 and 89 years of age. A one percentage point reduction in government spending is associated with an 1.39%, 2.35% and 2.64% increase in the short-, medium- and long-run, respectively, of male suicides rates between 65 and 89 years of age in the Eurozone periphery. These results are highly robust to alternative measures of fiscal consolidation. Unemployment benefits and substantial employment protection legislation seem to mitigate some of the negative effects of fiscal consolidation on suicide mortality. Plausible explanations for these impacts are provided and policy implications drawn.
    Keywords: Fiscal consolidation, Suicide, Eurozone periphery, Government policy, Labour market institutions
    JEL: H30 H51 H55 H62 I18 I31 J18 C33
    Date: 2014–09
  19. By: Musayev, Vusal
    Abstract: This analysis re-examines the relationship between military spending and economic growth using recent advances in panel estimation methods and a large panel dataset. The investigation is able to reproduce many of results of the existing literature and to provide a new analysis on the relationship between conflict, corruption, natural resources and military expenditure and their direct and indirect effects on economic growth. The analysis finds that the impact of military expenditure on growth is generally negative as in the literature, but that it is not significantly detrimental for countries facing either higher internal or external threats and for countries with large natural resource wealth once corruption levels are accounted for.
    Keywords: Military expenditure; Economic Growth; Conflict; Natural Resources, Corruption
    JEL: H56 O11 Q34
    Date: 2013–04
  20. By: Suter, Jordan; Sahan, Dissanayake; Lynne, Lewis
    Abstract: Habitat destruction and fragmentation resulting from land development has motivated considerable public and private expenditures on land conservation initiatives. In addition to direct expenditures related to the procurement of conservation land, legislators have also put in place incentives aimed at encouraging private landowners to voluntarily donate conservation easements. Many landowners have taken advantage of these incentives, as private land held under conservation easement increased nearly five-fold between 2000 and 2010 (Land Trust Alliance 2010). This research seeks to inform the design and implementation of public incentives for conservation easements by analyzing how the tax incentives already in place have influenced the distribution of conservation easements and behavior of land trusts throughout the United States.
    Keywords: Land Economics/Use,
    Date: 2014
  21. By: Lixin Tang
    Abstract: I study the implications of top income inequality for the gains from trade in a dynamic model. I argue that higher top income inequality among entrepreneurs can increase the gains from trade for workers. In the model, entrepreneurs face uninsurable idiosyncratic productivity risk, and thus save. Since the most productive entrepreneurs have the highest saving rate and are the ones that export, a reduction in trade costs increases their share of total prots and their savings, which leads to a large increase in the aggregate supply of capital. The welfare gains from trade for workers in the model are 6.4%, which are larger than in comparable benchmarks without top income inequality or capital accumulation. While the typical entrepreneur loses in consumption because of higher labor costs, aggregate consumption by entrepreneurs increases by 3.6%. Empirically, I find a strong relationship between trade openness and the national saving rate in a large sample of countries, consistent with the model. I find a much weaker relationship between trade openness and the investment rate.
    JEL: F1 F4 O1 O4
    Date: 2014–11–06
  22. By: Karadja, Mounir (IIES); Möllerström, Johanna (George Mason University); Seim, David (University of Toronto)
    Abstract: We study the extent to which people are misinformed about their relative position in the income distribution and the effects on preferences for redistribution of correcting faulty beliefs. We implement a tailor-made survey in Sweden and document that a vast majority of Swedes believe that they are poorer, relative to others, than they actually are. This is true across groups, but younger, poorer, less cognitively able and less educated individuals have perceptions that are further from reality. Using a second survey, we conduct an experiment by randomly informing a subsample about their true relative income position. Respondents who learn that they are richer than they thought demand less redistribution and increase their support for the Conservative party. This result is entirely driven by prior right-of-center political preferences and not by altruism or moral values about redistribution. Moreover, the effect can be reconciled by people with political preferences to the right-of-center being more likely to view taxes as distortive and to believe that it is personal effort rather than luck that is most influential for individual economic success.
    Keywords: Redistribution; Political preferences; Inequality
    JEL: D72 H23
    Date: 2014–09–26
  23. By: Ivar Kolstad; Arne Wiig
    Abstract: Does diversification of an economy improve the chances of democracy? This paper estimates the effect of export diversification on democracy levels, using data from 143 countries. The endogeneity of diversification is addressed by using variability within countries in fertile soil as an instrumental variable, controlling for country size. The results show that diversification has a significant, positive effect on levels of democracy. This suggests that less concentrated economic power in a society leads to more widely distributed political power. The results are robust to alternative measures of diversification and democracy, and to additional covariates. Results are also similar for diversification indices excluding oil, suggesting that the uncovered relationship is not entirely about oil.
    Keywords: Diversification, concentration, democracy, political economy
    Date: 2014
  24. By: Baghdassarian, William; Mele, Gianluca; Pradelli, Juan
    Abstract: This work presents a stochastic framework for assessing public debt sustainability and applies it to the case of Mauritania. The sustainability assessment projects solvency and liquidity indicators -- public debt stock and gross financing needs relative to GDP -- for 2014-23. The analysis uses deterministic scenarios and stochastic simulations to analyze policy options and fiscal risks. The study relies on simple econometric models to generate forecasts of key macroeconomic variables driving the public debt dynamics and to compute debt-distress probabilities and debt thresholds. The study builds on basic techniques to determine optimal portfolios suitable as benchmarks for public debt management. A main result is that, if Mauritania maintains a strong growth performance and pursues sound policies to balance the budget and take advantage of concessional financing opportunities, it could reduce the public debt from 74 percent of GDP in 2013 to 30 percent by 2023, and the gross financing needs from 12 percent of GDP to 4 percent. Further scaling up capital spending is likely to deteriorate public debt sustainability because the estimated (marginal) growth-dividend is small. A more promising avenue would be to improve the quality of public investment and institutions, as opposed to the volume of capital expenditure. Different debt strategies can significantly affect the liquidity needs and the on-budget interest bill. But it is the fiscal policy geared toward balanced budgets that ultimately would permit Mauritania to improve the solvency indicators, and thus the public debt sustainability.
    Keywords: Debt Markets,Public Sector Expenditure Policy,Access to Finance,External Debt,Economic Theory&Research
    Date: 2014–11–01
  25. By: Gächter, Simon (University of Nottingham); Mengel, Friederike (University of Essex); Tsakas, Elias (Maastricht University); Vostroknutov, Alexander (Maastricht University)
    Abstract: In a novel experimental design we study public good games with dynamic interdependencies. Each agent's income at the end of a period serves as her endowment in the following period. In this setting growth and inequality arise endogenously allowing us to address new questions regarding their interplay and effect on cooperation levels. In stark contrast to standard public good experiments, we find that contributions are increasing over time even in the absence of punishment possibilities. Inequality and group income are positively correlated for poor groups, but negatively correlated for rich groups. There is very strong path dependence: inequality in early periods is strongly negatively correlated with group income in later periods. These results give new insights into why people cooperate and should make us rethink previous results from the literature on repeated public good games regarding the decay of cooperation in the absence of punishment.
    Keywords: public goods, inequality, growth
    JEL: C92 H41 D63
    Date: 2014–09
  26. By: Gallier, Carlo; Kesternich, Martin; Sturm, Bodo
    Abstract: In this experiment, we endogenize the choice of which contribution scheme is implemented in a public goods game. We investigate three rule-based contribution schemes. In a first step, players agree on a common group provision level using the principle of the smallest common denominator. Subsequently, this group investment is allocated according to a specific rule to individual minimum contributions. The game is implemented either as a Single- or a Multi-Phase Game. In the Single-Phase Game, the contribution schemes are exogenously implemented. In the Multi-Phase Game, we let subjects vote on the rule-based contribution schemes. If a scheme obtains a sufficient majority it is implemented. In case no sufficient majority is reached, subjects have to make their contributions to the public good using the voluntary contribution mechanism (VCM). Our results suggest that the endogenous choice of a contribution scheme has an impact on the level of contributions. In case of a rule-based contribution scheme which equalizes payoffs, contributions are higher if subjects choose the scheme than in case the scheme is implemented exogenously. In contrast, contributions are higher if the VCM is implemented exogenously than in case a sufficient majority cannot be obtained and, therefore, subjects have to play the VCM.
    Keywords: public goods,endogenous institutions,minimum contribution rules,cooperation
    JEL: C72 C92 H41
    Date: 2014
  27. By: Mikucka, Malgorzata; Sarracino, Francesco
    Abstract: To what extent is economic growth liable to improve people’s subjective well-being in the long run? Recent studies identified three possible answers: economic growth matters a great deal; economic growth does not matter at all; economic growth matters, but other things matter more. Each of these conclusions has different policy implications to promote people’s well-being. Despite the progress of social science research, the disagreement persists for at least two reasons: first, current policy conclusions hinge on weak methodological grounds; second, the literature missed to identify the conditions shaping the relationship between economic growth and well-being. Our paper addresses these issues overcoming some of the methodological shortcomings of previous literature. Additionally, we test the hypotheses that economic growth has a positive effect on subjective well-being in presence of increasing social trust and decreasing income inequality. To this aim we use multilevel regression analysis and the integrated World Values Survey - European Values Study data-set. We confirm previous evidence showing that in the long run economic growth does not increase people’s well-being. We also document that decreasing income inequality and non decreasing social trust allow a long-term positive relationship between economic growth and subjective well-being.
    Keywords: economic growth, subjective well-being, social trust, income inequality, Easterlin paradox, sustainability
    JEL: D60 I0 I1 I31
    Date: 2014–11–04
  28. By: Meryem Duygun (Business School, Hull University, UK); Silvia Pazzi (School of Management, University of Leicester, UK); Emili Tortosa-Ausina (IVIE, Valencia and Department of Economics, Universidad Jaume I, Castellón, Spain); Simona Zambelli (Dipartimento di Scienze Aziendali, Università di Bologna, Italy)
    Abstract: This study explores the impact of ownership types on efficiency of Italian water utilities. Theories and evidence have shown a puzzling relationship between ownership and performance. Moreover, a recent study argues that this relationship can be further complicated by the effect of organisational and environmental variables. The current study aims to contribute to the debate about the impact of ownership structure on efficiency by including the effect of size and geographical location combining efficiency (obtained via nonparametric methods) with cluster analysis. The results show that ownership does not have a significant effect on efficiency per se; however the combination of size and geographical location provides interesting insights on the difference observed in the efficiency. Therefore, the paper argues that administrative reforms for institutional settings should consider a set of variables that characterise each organisation.
    Keywords: efficiency, water utilities, ownership, size, geographical location
    JEL: H4 H7 H83
    Date: 2014

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