nep-pbe New Economics Papers
on Public Economics
Issue of 2015‒01‒19
25 papers chosen by
Thomas Andrén

  1. The Underground Economy in the U.S.A: Preliminary New Evidence on the Impact of Income Tax Rates (and Other Factors)on Aggregate Tax Evasion, 1975-2008 By Cebula, Richard
  2. Income taxation and equity: New dominance criteria and an application to Romania By Paolo Brunori; Flaviana Palmisano; Vito Peragine
  3. Tax Reforms in Search-and-Matching Models with Heterogeneous Agents By Wei Jiang
  4. Effective tax rates under IP tax planning By Evers, Lisa; Spengel, Christoph
  5. Vertical Fiscal Imbalances and the Accumulation of Government Debt By Inaki Aldasoro; Mike Seiferling
  6. Local Taxation, Private-Public Consumption Complementarity, and the Optimal Number of Jurisdictions By Soldatos, Gerasimos T.
  7. Fiscal Multipliers in the 21st Century By Pedro Brinca; Hans Holter; Per Krusell; Laurence Malafry
  8. A Fiscal Job? An Analysis of Fiscal Policy and the Labor Market By Elva Bova; Christina Kolerus; Sampawende J.-A. Tapsoba
  9. Knocking on Tax Haven's Door: Multinational Firms and Transfer Pricing By Ronald B. Davies; Julien Martin; Mathieu Parenti; Farid Toubal
  10. The Welfare State and Migration: A Dynamic Analysis of Political Coalitions By Assaf Razin; Efraim Sadka; Benjarong Suwankiri
  11. Impact of research tax credit on R&D and innovation: evidence from the 2008 French reform. By A. Bozio; D. Irac; L. Py
  12. Optimal Taxation with Endogenous Default under Incomplete Markets By Ignacio Presno; Demian Pouzo
  13. The Direct and Indirect Effects of Small Business Administration Lending on Growth: Evidence from U.S. County-Level Data By Andrew T. Young; Matthew J. Higgins; Donald J. Lacombe; Briana Sell
  14. Income and policy choices: Evidence from parliamentary decisions and referenda By David Stadelmann; Marco Portmann; Reiner Eichenberger
  15. Austerity By Harris Dellas; Dirk Niepelt
  16. Why do Budgets Received by State Prosecutors Vary Across Districts in the United States? By Manu Raghav
  17. Human Capital Accumulation in a Federation By Daniele Coen-Pirani
  18. Discretion Rather than Simple Rules: the Case of Social Protection By Alvaro Forteza; Cecilia Noboa
  19. Exclusive Solidarity? Radical Right Parties and the Welfare State By Elie Michel
  20. Mandatory minimum contributions, heterogenous endowments and voluntary public-good provision By Keser, Claudia; Markstädter, Andreas; Schmidt, Martin
  21. Can political inequalities be educated away? Evidence from a Swedish school reform By Lindgren, Karl-Oskar; Oskarsson, Sven; T Dawes, Christopher
  22. Mandatory minimum contributions, heterogeneous endowments and voluntary public-good provision By Claudia Keser; Andreas Markstädter; Martin Schmidt
  23. Welfare Benefits of Agglomeration and Worker Heterogeneity By Ioulia Ossokina; Coen N. Teulings; Henri L.F. de Groot
  24. Long-term Care Insurance and Carers’ Labor Supply - A Structural Model By Johannes Geyer; Thorben Korfhage
  25. Puzzles of public opinion: Why Soviet population supports the transition to capitalism since the 1980S By Popov, Vladimir

  1. By: Cebula, Richard
    Abstract: This empirical study seeks to identify determinants of the underground economy in the U.S. in the form of aggregate federal personal income tax evasion over the period 1975-2008, with a specific focus upon the net impact of higher federal income tax rates on personal income tax evasion. In this study, we use the most recent data available on aggregate personal income tax evasion, data that are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI to reported AGI. Most other studies of federal income tax evasion for the U.S. do not use data this current. It is found that the impact of increases in the federal income tax rate on aggregate personal income tax evasion may, on balance, be ambiguous, possibly suggesting that the income effect is negative and outweighs the positive substitution effect for the representative taxpayer. It is also found that the degree of aggregate federal personal income tax evasion may be an increasing function of the percentage of federal personal income tax returns characterized by itemized deductions and a decreasing function of the Tax Reform Act of 1986 (during the first two years of implementation), the ratio of the tax free interest rate yield on high grade municipals to the interest rate yield on ten year Treasury notes, and higher audit rates of filed federal income tax returns (as a measure of risk from tax evasion) by IRS personnel. Finally, unpopular wars may provide a secondary benefit for and therefore act as an inducement for greater tax evasion.
    Keywords: income tax evasion; income tax rates; income effect; substitution effect
    JEL: D12 H24 H26 H31
    Date: 2013–10–27
  2. By: Paolo Brunori (University of Bari, Italy); Flaviana Palmisano (University of Luxembourg); Vito Peragine (University of Bari, Italy)
    Abstract: This paper addresses the problem of the normative evaluation of income tax systems and income tax reforms. While most of the existing criteria, framed in the utilitarian tradition, are uniquely based on information about individual incomes, this paper, building upon the opportunity egalitarian theory, proposes new equity criteria which take into account also the socio-economic characteristics of individuals. Suitable dominance conditions that can be used to rank alternative tax systems are derived by means of an axiomatic approach. Moreover, the theoretical results are used to assess the redistributive effects of an hypothetical tax reform in Romania through a microsimulation analysis.
    Keywords: Income inequality, inequality of opportunity, tax reforms, microsimulation, progressivity, horizontal equity.
    JEL: D63 E24 O15 O40
    Date: 2014–11
  3. By: Wei Jiang
    Abstract: Using a Mortensen-Pissarides search-and-matching framework, this paper investigates the importance of search frictions in determining the welfare and distributional effects of tax reforms that re-allocate the tax burden from capital to labour income. Calibrating the model to the UK economy, we find that the tax reforms are Pareto improving but increase inequality in the long run, despite welfare losses for at least one segment of the population in the short run. The results are robust to the variations in the relative bargaining power of workers and different specifications of unemployment benefit. But the welfare gains are higher for all agents if the relative bargaining power of workers is reduced or we assume that unemployment benefit depends on past wages.
    Keywords: search frictions; agent heterogeneity; unemployment benefits; tax reforms
    JEL: E21 E24 E62
    Date: 2014–12
  4. By: Evers, Lisa; Spengel, Christoph
    Abstract: Tax planning with intangibles has become one of the most popular and most vividly debated topics in international taxation. We incorporate various intellectual property (IP) tax planning models into forward-looking measures of effective tax rates, namely the disposal of intangibles to low-tax subsidiaries, intra-group licensing arrangements, and intra-group contract R&D. In doing so, we draw upon the methodology put forward by Devereux and Griffith and amend this model by considering a research & development (R&D) investment which is carried out by a parent company, whereby the resulting intangible is exploited by a foreign subsidiary. We point out analytically under which conditions IP tax planning achieves the objective of reducing the effective average tax rate of the group. We find that the disposal of intangibles to low-tax subsidiaries does not achieve this tax planning objective, if the true value of the asset is subject to tax upon the disposal. We show to what extent the parent must understate the value of the intangible in order to reduce the group's tax burden. We furthermore point out that contract R&D may generally achieve a significant lower effective tax burden. We present cost of capital and effect average tax rates to illustrate these findings.
    Keywords: corporate taxation,effective tax rate,tax planning,profit shifting,transfer pricing,intellectual property,intangible assets,contract R&D
    JEL: F23 H25 H32 H87 K34
    Date: 2014
  5. By: Inaki Aldasoro; Mike Seiferling
    Abstract: Delegating fiscal decision making power to sub-national governments has been an area of interest for both academics and policymakers given the expectation that it may lead to better and more efficient provision of public goods and services. Decentralization has, however, often occurred on the expenditure and less on the revenue side, creating “vertical fiscal imbalances” where sub-national governments’ expenditures are not financed through their own revenues. The mismatch between own revenues and expenditures may have consequences for public finance performance. This study constructs a large sample of general and subnational level fiscal data beginning in 1980 from the IMF’s Government Finance Statistics Yearbook. Extending the literature to the balance sheet approach, this paper examines the effects of vertical fiscal imbalances on government debt. The results indicate that vertical fiscal imbalances are relevant in explaining government debt accumulation suggesting a degree of caution when promoting fiscal decentralization. This paper also underlines the role of data covering the general government and its subectors for comprehensive analysis of fiscal performance.
    Keywords: Fiscal decentralization;Vertical fiscal imbalances;Public debt;Fiscal performance;Government expenditures;Revenues;Panel analysis;fiscal decentralization, vertical fiscal imbalances, panel data, public debt, GFSY
    Date: 2014–11–20
  6. By: Soldatos, Gerasimos T.
    Abstract: Viewing local finances under the approach to private-public consumption complementarity, we conclude that foot voting and tax competition become extinct when the (capital) tax structure across jurisdictions is the one forging close ties between the burgher and his/her jurisdiction. Feeling the burgher attached to the local public goods offered and to the local business activity, prevents labor and capital relocation. The optimal number of jurisdictions is that which is conducive to the adoption of that local taxation that fosters such an attachment; taxation made possible by capitalizing upon private-public consumption complementarity. The intuitive appeal of this result is then contemplated within the broader framework of fiscal policymaking accommodative of citizen heterogeneity. In view of complementarity, there appears to be scope for decentralized treatment of citizen preferences via the localities, leaving the treatment of endowment differences to the central government
    Keywords: Local taxation, Private-public consumption complementarity, Citizen heterogeneity, Burgher-community attachment
    JEL: H71 H73 H79
    Date: 2014
  7. By: Pedro Brinca; Hans Holter; Per Krusell; Laurence Malafry
    Abstract: The recent experience of a Great Recession has brought the effectiveness of fiscal policy back into focus. Fiscal multipliers do, however, vary greatly over time and place. Running VARs for a large number of countries, we document a strong correlation between wealth inequality and the magnitude of fiscal multipliers. To explain this finding, we develop a life-cycle, overlapping generations economy with uninsurable labor market risk. We calibrate our model to match key characteristics of a number of OECD economies, including the distribution of wages and wealth, social security, taxes and debt and study the effects of changing policies and various forms of inequality on the fiscal multiplier. We find that the fiscal multiplier is highly sensitive to the fraction of the population who face binding credit constraints and also negatively related to the average wealth level in the economy. This explains the correlation between wealth inequality and fiscal multipliers.
    JEL: E21 E62 H50
    Date: 2014–12–23
  8. By: Elva Bova; Christina Kolerus; Sampawende J.-A. Tapsoba
    Abstract: This paper examines the impact of fiscal policy on employment through the lenses of Okun’s Law. Looking at the panel of OECD countries over the past three decades, we find that fiscal policy can affect employment beyond the impact it is traditionally assumed to exert through the output multiplier. In particular, this impact is found to be effective for most items of current discretionary expenditure and for corporate income taxes and social security contributions. Okun’s Law is found to be stable under almost all model specifications, but higher spending on subsidies and lower social security contributions can amplify the impact of the output gap on employment gaps.
    Keywords: Fiscal policy;Tax rates;Labor markets;Employment;OECD;fiscal policy, labor market, employment gaps
    Date: 2014–12–12
  9. By: Ronald B. Davies (University College Dublin; Institute for International Integration Studies, Trinity College Dublin; CES-Ifo); Julien Martin (Department of Economics, Universit\'e du Qu\'ebec \`a Montr\'eal, Canada); Mathieu Parenti (CORE-UCLouvain and IRES UCLouvain (Belgium), NRU-Higher School of Economics (Russia)); Farid Toubal (Ecole Normale Supérieure de Cachan, Paris School of Economics and CEPII, France)
    Abstract: This paper analyzes the transfer pricing of multinational firms. We propose a simple framework in which intra-firm prices may systematically deviate from arm's length prices for two motives: i) pricing to market, and ii) tax avoidance. Multinational firms may decide not to avoid taxes if the risk to be sanctioned is high compared to the tax gap. Using detailed French firm-level data on arm's length and intra-firm export prices, we find that both mechanisms are at work. The sensitivity of intra-firm prices to foreign taxes is reinforced once we control for pricing-to-market determinants. Most importantly, we find almost no evidence of tax avoidance if we disregard exports to tax havens. Back-of-the-envelope calculations suggest that tax avoidance through transfer pricing amounts to about 1\% of the total corporate taxes collected by tax authorities in France. The lion's share of this loss is driven by the exports of 450 firms to ten tax havens. As such, it may be possible to achieve significant revenue increases with minimal cost by targeting enforcement.
    Keywords: Transfer pricing, Tax haven, Pricing to market
    JEL: F23 H25 H25 H32
    Date: 2014–12
  10. By: Assaf Razin; Efraim Sadka; Benjarong Suwankiri
    Abstract: We develop a dynamic political-economic theory of welfare state and immigration policies, featuring three distinct voting groups: skilled workers, unskilled workers, and old retirees. The essence of inter- and intra-generational redistribution of a typical welfare system is captured with a proportional tax on labor income to finance a transfer in a balanced-budget manner. We characterize political-economic equilibrium policy rules consisting of the tax rate, the skill composition of migrants, and the total number of migrants. When none of these groups enjoy a majority (50 percent of the voters or more), political coalitions will form. With overlapping generations and policy-determined influx of immigrants, the formation of the political coalitions changes over time. These future changes are taken into account when policies are shaped. The paper characterizes the evolution of the political coalitions that implement welfare state and migration policies.
    JEL: F22 H0
    Date: 2014–12
  11. By: A. Bozio; D. Irac; L. Py
    Abstract: This paper presents an ex post evaluation of the 2008 reform of the French research tax credit. The tax scheme was massively overhauled, with a switch to a pure volume-based design, leading to a large increase in the number of firms applying and an important increase in the cost of the scheme. Given the timing and the characteristics of the reform, measuring its causal impact is challenging. We have relied on four unique sources of data – R&D surveys, administrative tax data, firm characteristics and patent datasets – to assess how French firms have reacted to these changes in incentives. Our empirical strategies rest on combining difference in differences with matching methods and taking advantage of the particular way the 2008 reform has affected incentives to invest in R&D. Our results suggest a positive effect of the 2008 reform on R&D at both the intensive margin and extensive margin, but a possible lower impact on innovation than could have been expected.
    Keywords: tax credit, evaluation, R&D, innovation.
    JEL: C23 H25 O32
    Date: 2014
  12. By: Ignacio Presno (Federal Reserve Bank of Boston); Demian Pouzo (UC Berkeley)
    Abstract: In a dynamic economy, we characterize the fiscal policy of the government when it levies distortionary taxes and issues defaultable bonds to finance its stochastic expenditure. Households predict the possibility of default, generating endogenous debt limits that hinder the government's ability to smooth shocks using debt. Default is followed by temporary financial autarky. The government can only exit this state by paying a fraction of the defaulted debt. Since this payment may not occur immediately, in the meantime, households trade the defaulted debt in secondary markets; this device allows us to price the government debt before and during the default.
    Date: 2014
  13. By: Andrew T. Young (West Virginia University, College of Business and Economics); Matthew J. Higgins (Georgia Institute of Technology & NBER); Donald J. Lacombe (West Virginia University, College of Business and Economics); Briana Sell (Georgia Institute of Technology)
    Abstract: Conventional wisdom suggests that small businesses are innovative engines of Schumpetarian growth. However, as small businesses, they are likely to face credit rationing in financial markets. If true then policies that promote lending to small businesses may yield substantial economy-wide returns. We examine the relationship between Small Business Administration (SBA) lending and local economic growth using a spatial econometric framework and a sample of 3,035 U.S. counties for the years 1980 to 2009. We find evidence that a county’s SBA lending per capita is associated with direct negative effects on its income growth. We also find evidence of indirect negative effects on the growth rates of neighboring counties. Overall, a 10% increase in SBA loans per capita is associated with a cumulative decrease in income growth rates of about 2%.
    Keywords: Small Business Administration, guaranteed loans, economic growth, income growth, entrepreneurship, US counties, spatial econometrics, spillovers
    JEL: O47 E65 R11 H25 C23
    Date: 2014–12
  14. By: David Stadelmann; Marco Portmann; Reiner Eichenberger
    Abstract: We analyze political representation of preferences of different income groups by matching referendum outcomes for low, middle, and high-income voters with individual legislators' decisions on identical policy proposals. Results indicate that legislators more closely represent preferences of rich voters than preferences of middle-income and poor voters, and legislators are more responsive towards the rich. Preferences of low, middle, and high-income voters are, however, correlated. Representation of income groups varies according to legislators' party affiliations.
    Keywords: Income; policy decisions; representation; voting; referenda; political behavior
    JEL: D72 H70
    Date: 2014–12
  15. By: Harris Dellas (University of Bern, CEPR); Dirk Niepelt (Study Center Gerzensee, University of Bern, IIES Stockholm University)
    Abstract: We shed light on the function, properties and optimal size of austerity using the standard sovereign debt model augmented to include incomplete information about credit risk. Austerity is defined as the shortfall of consumption from the level desired by a country and supported by its repayment capacity. We find that austerity serves as a tool for securing a more favourable loan package; that it is associated with over-investment even when investment does not create collateral; and that low risk borrowers may favour more to less severe austerity. These findings imply that the amount of fresh funds obtained by a sovereign is not a reliable measure of austerity suffered; and that austerity may actually be associated with higher growth. Our analysis accommodates costly signalling for gaining credibility and also assigns a novel role to spending multipliers in the determination of optimal austerity.
    Date: 2014–12
  16. By: Manu Raghav (Department of Economics and Management, DePauw University)
    Abstract: This paper analyzes how the budget allocated to state prosecutors' offices vary across prosecutorial districts and the reasons for such variation by empirical methods, using data from Census of Prosecutors and other sources. The main results of this paper are as follows. Other factors being equal, the state prosecutor's budget increases with the crime rate in the prosecutorial district and the per-capita income of the district. State prosecutors in more politically conservative prosecutorial districts, as measured by the percentage of votes that President Bush won in 2000 presidential election, get smaller budgets and this decrease in the prosecutorial budget of a district with political conservatism is larger in more affluent and in more populous districts.
    Keywords: Prosecuting Attorneys, District Attorneys, State Courts, Crime, Prosecution, Litigation Process, Budget.
    JEL: K40 K41 K42 H72 H76
    Date: 2014–11
  17. By: Daniele Coen-Pirani (University of Pittsburgh)
    Abstract: More than half of the variation across U.S. school districts in real K-12 education expenditures per student is due to differences between, rather than within, states. I study the welfare implications of redistribution of education expenditures by the Federal government, using an analytically tractable model of human capital accumulation with heterogeneous agents and endogenous state policies. The net welfare effect of Federal redistribution depends on a trade-off between the positive effect of redistributing resources toward poorer states and the negative effect resulting from misallocation of population across states. Federal redistribution increases welfare in a calibrated version of the model.
    Keywords: human capital, education expenditures, redistribution, federal, local, state governments, geographic mobility
    JEL: E24 H70 I20 J60
    Date: 2014–12
  18. By: Alvaro Forteza (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Cecilia Noboa (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: We present a simple model of a benevolent government that provides insurance to risk averse individuals. As in macroeconomics, commitment to fully contingent rules is better than discretion, but when the government can only commit to simple rules, discretion may be the best available option. The model provides a simple albeit precise characterization of discretion and commitment to a simple rule in the context of social protection, showing when and why discretion may be better than commitment. We argue that the forces highlighted in our model can provide a rationale for several highly distortive policies often observed in the real world in weak institutional environments.
    Keywords: Discretion, Commitment, Simple Rules, Informality
    JEL: E61 H20 H30 H50 O17
    Date: 2014–08
  19. By: Elie Michel
    Abstract: Radical right parties in Western Europe have traditionally shown little support for redistributive policies and have thus been typically classified as economically right wing. Yet, they are contesting the votes of a (formerly) key electorate of the social democratic parties: the working class, who supports welfare redistribution. In this study, we argue and empirically demonstrate that radical right parties have adapted their programmatic preferences to this key segment of electorate by progressively promoting redistributive policies. For our analyses we use mixed methods and rely on a combination of data sources. Firstly, we assess the salience of welfare issues in the manifestos of major West European radical right parties over the last three decades based on CMP data. Secondly, we examine their positions on welfare issues based on recent euandi data. Thirdly, we analyse the most recent manifestos of two successful radical right parties (Austrian FPÖ and French FN) qualitatively. Our findings show that for a majority of radical right parties welfare state expansion has become a salient issue, and that they do not position themselves anymore on the right regarding redistributive issues; however, these parties promote a specific kind of solidarity: exclusive solidarity.
    Keywords: political parties
    Date: 2014–12–16
  20. By: Keser, Claudia; Markstädter, Andreas; Schmidt, Martin
    Abstract: In a public-good experiment with heterogeneous endowments, we investigate if and how the contribution level as well as the previously observed "fair-share" rule of equal contributions relative to one´s endowment (Hofmeyr et al., 2007; Keser et al., 2014) may be influenced by minimum-contribution requirements. We consider three different schedules: FixMin, requiring the same absolute contributions, RelMin, requiring the same relative contributions, and ProgMin, requiring minimum contributions that progressively increase with the endowment. We find that minimum contributions exert norm-giving character and may lead to an increase in average group contributions. This is especially true for the progressive schedule. On the individual level, this schedule leads to higher relative contributions by the wealthier players and thus violates the "fair-share" norm. On the group level, it leads to highest contribution level and the lowest inequality in total profits as measured by the Gini index.
    Keywords: experimental economics,public goods,heterogeneous endowments,mandatory minimum contributions,norms
    JEL: C92 D63 H41
    Date: 2014
  21. By: Lindgren, Karl-Oskar (IFAU - Institute for Evaluation of Labour Market and Education Policy); Oskarsson, Sven (Department of Government, Uppsala University); T Dawes, Christopher (Department of Politics, New York University)
    Abstract: Over the years, many suggestions have been made on how to reduce the importance of family background in political recruitment. In this study, we examine the effectiveness of one such proposal: the expansion of mass education. More precisely, we utilize a difference-in-difference strategy to analyze how a large school reform launched in Sweden in the 1950s, which lengthened compulsory schooling and postponed tracking, affected the likelihood of individuals with different family backgrounds to run for public office. The data comes from public registers and pertains to the entire Swedish population born between 1943 and 1955. Overall, the empirical analysis provides strong support for the view that improved educational opportunities for individuals from disadvantaged backgrounds can be an effective means to reduce the importance of family background in political recruitment. According to our estimates, the Swedish comprehensive school reform served to reduce the effect of family background on the likelihood of running for public office by up to 40 percent.
    Keywords: Political inequality; political participation; political candidacy; inequality; education
    JEL: H70 I24
    Date: 2014–12–19
  22. By: Claudia Keser; Andreas Markstädter; Martin Schmidt
    Abstract: In a public-good experiment with heterogeneous endowments, we investigate if and how the contribution level as well as the previously observed “fair-share” rule of equal contributions relative to one’s endowment (Hofmeyr et al., 2007; Keser et al., 2014) may be influenced by minimum-contribution requirements. We consider three different schedules: FixMin, requiring the same absolute contributions, RelMin, requiring the same relative contributions, and ProgMin, requiring minimum contributions that progressively increase with the endowment. We find that minimum contributions exert norm-giving character and may lead to an increase in average group contributions. This is especially true for the progressive schedule. On the individual level, this schedule leads to higher relative contributions by the wealthier players and thus violates the “fair-share” norm. On the group level, it leads to the highest contribution level and the lowest inequality in total profits as measured by the Gini index. <P>
    Keywords: Experimental economics, public goods, heterogeneous endowments, mandatory minimum contributions, norms,
    JEL: C92 D63 H41
    Date: 2014–12–01
  23. By: Ioulia Ossokina; Coen N. Teulings; Henri L.F. de Groot
    Abstract: The direct impact of local public goods on welfare is relatively easy to measure from land rents. However, the indirect effects on home and job location, on land use, and on agglomeration benefits are hard to pin down. We develop a spatial general equilibrium model for the valuation of these effects. Read also <a href="">CPB Policy Brief 2014/10</a> (Publication in Dutch). The model is estimated using data on transport infrastructure, commuting behavior, wages, land use and land rents for 3000 ZIP-codes in the Netherlands and for three levels of education. Welfare benefiÂ…ts are shown to differ sharply by workersÂ’educational attainment.
    JEL: H4 H54 R13 R23 R4
    Date: 2014–12
  24. By: Johannes Geyer; Thorben Korfhage
    Abstract: In Germany, individuals in need of long-term care receive support through benefits of the long-term care insurance. A central goal of the insurance is to support informal care provided by family members. Care recipients can choose between benefits in kind (formal home care services) and benefits in cash. From a budgetary perspective family care is a cost-saving alternative to formal home care and to stationary nursing care. However, the opportunity costs resulting from reduced labor supply of the carer are often overlooked. We focus on the labor supply decision of family carers and the incentives set by the long-term care insurance. We estimate a structural model of labor supply and the choice of benefits of family carers. We find that benefits in kind have small positive effects on labor supply. Labor supply elasticities of cash benefits are larger and negative. If both types of benefits increase, negative labor supply effects are offset to a large extent.
    Keywords: Labor supply; long-term care; long-term care insurance; structural model
    JEL: J22 H31 I13
    Date: 2014–11
  25. By: Popov, Vladimir
    Abstract: Why even after the dramatic increase in inequality in the 1990s and after the emergence and enrichment of “oligarchs”, the alternative (leftist, social democratic) economic policies that could have improved material and social wellbeing of the majority of the population is not supported by this majority? It is argued that in immature democracies (without efficient restrictions for the participation of private capital in politics) mass media and electoral campaigns are controlled by the rich, so there is vicious circle: market reforms and private property create the class of the wealthy “oligarchs” that are not only interested in these reforms, but also have power to maintain their political and economic might through mass media and democratic elections. The return of public opinion to the “norm” so that it reflects interests of the majority is possible only if mass media and political process are separated from private capital and private financing.
    Keywords: Public opinion, transition from socialism to capitalism, inequalities, elections, mass media
    JEL: H00 P26 P3
    Date: 2014–12–24

This nep-pbe issue is ©2015 by Thomas Andrén. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.