nep-pbe New Economics Papers
on Public Economics
Issue of 2015‒08‒30
twenty-six papers chosen by
Thomas Andrén

  1. Tax Competition, Local Infrastructure, and Business Taxation: A Comparison of Different Tax Instruments By Gugle, Elisabeth; Zodrow, George R.
  2. The Taxation of Superstars By Scheuer, Florian; Werning, Iván
  3. Housing, Capital Taxation and Bequests in a Simple OLG Model By Gary-Bobo, Robert J.; Nur, Jamil
  4. Tax Competition and the Efficiency of "Benefit-Related" Business Taxes By Gugle, Elisabeth; Zodrow, George R.
  5. US Supreme Court Unanimously Chooses Substance over Form in Foreign Tax Credit Case: Implications of the PPL Decisions for the Creditability of Cash-Flow Taxes By McLure, Charles E.; Mintz, Jack; Zodrow, George R.
  6. Optimal Taxation with Behavioral Agents By Emmanuel Farhi; Xavier Gabaix
  7. Which Households Matter Most? Capturing Equity Considerations in Tax Reform via Generalised Social Marginal Welfare Weights By David (David Patrick) Madden; Michael Savage
  8. Effective Tax Levels Using the Devereux-Griffith Methodology: 2013 report By ZEW
  9. Income and Earnings Mobility in U.S. Tax Data By Larrimore, Jeff; Mortenson, Jacob; Splinter, David
  10. Whither the Marriage Tax? By James Alm; J. Sebastian Leguizamon
  11. Were we really all in it together? The distributional effects of the 2010-2015 UK Coalition government's tax-benefit policy changes: an end-of-term update By De Agostini, Paola; Hills, John; Sutherland, Holly
  12. Tax Compliance Under Different Institutional Settings in the EU: An Experimental Analysis By Stefania Ottone; Ferruccio Ponzano; Giulia Andrighetto
  13. Transfer pricing manipulation, tax penalty cost and the impact of foreign profit taxation By Rathke, Alex
  14. Cross-country Review of Taxes on Wealth and Transfers of Wealth By ZEW
  15. The Distributional Effects of U.S. Clean Energy Tax Credits By Severin Borenstein; Lucas W. Davis
  16. Reducing inequality and poverty in Portugal By Jens Arnold; Carlos Farinha Rodrigues
  17. Small Firms' Formalization The Stick Treatment By De Giorgi, Giacomo; Ploenzke, Matthew; Rahman, Aminur
  18. Does legality matter? The case of tax avoidance and evasion By Blaufus, Kay; Braune, Matthias; Hundsdoerfer, Jochen; Jacob, Martin
  19. Using Public Information to Estimate Self-Employment Earnings of Informal Suppliers By James Alm; Brian Erard
  20. Do financial advisors provide tangible benefits for investors? Evidence from tax-motivated mutual fund flows By Cici, Gjergji; Kempf, Alexander; Sorhage, Christoph
  21. Why Work More? The Impact of Taxes, and Culture of Leisure on Labor Supply in Europe By Mocan, Naci; Pogorelova, Luiza
  22. Inequality, mobility and the financial accumulation process: A computational economic analysis By Yuri Biondi; Simone Righi
  23. Tax cuts or social investment? Evaluating the opportunity cost of French employment strategy. By Bruno Palier; Clément Carbonnier; Michaël Zemmour
  24. Do smaller classes always improve students' long run outcomes? By Torberg Falch; Bjarne Strøm; Astrid Marie Jorde Sandsør
  25. Consumption Smoothing and the Welfare Cost of Uncertainty By Yonas Alem; Jonathan Colmer
  26. Welfare systems, governance and social innovation: case study country profiles of Austria, Belgium and Italy By Stijn Oosterlynck; Yuri Kazepov,; Andreas Novy; Pieter Cools; Tatiana Sarius; Florian Wukovitsch

  1. By: Gugle, Elisabeth (University of Victoria); Zodrow, George R. (Rice University and Centre for Business Taxation, Oxford University)
    Abstract: Most of the tax competition literature focuses on the provision of local public services to households. However, a number of papers, dating back to Zodrow and Mieszkowski (1986), analyze tax competition when capital taxes are used to finance local public services provided to businesses, examining the conditions under which such services are provided efficiently, under-provided, or overprovided. In addition, several prominent observers have noted that "benefit-related" business taxation is desirable on both efficiency and equity grounds and argued that such taxation should take the form of a tax based on production, such as an origin-based value-added tax. We evaluate this contention in this paper, comparing within the context of a standard model of interjurisdictional competition the relative efficiency properties of these alternative business taxes. Our simulation results suggest that under many circumstances it is more efficient to finance business public services with an origin-based production tax rather than a source-based capital tax. We also relate our results to others found in the existing literature on capital tax competition when public services are provided to businesses.
    JEL: H11 H21 H41 H42
    Date: 2014
  2. By: Scheuer, Florian; Werning, Iván
    Abstract: How are optimal taxes affected by the presence of superstar phenomena at the top of the earnings distribution? To answer this question, we extend the Mirrlees model to incorporate an assignment problem in the labor market that generates superstar effects. Perhaps surprisingly, rather than providing a rationale for higher taxes, we show that superstar effects provide a force for lower marginal taxes, conditional on the observed distribution of earnings. Superstar effects make the earnings schedule convex, which increases the responsiveness of individual earnings to tax changes. We show that various common elasticity measures are not sufficient statistics and must be adjusted upwards in optimal tax formulas. Finally, we study a comparative static that does not keep the observed earnings distribution fixed: when superstar technologies are introduced, inequality increases but we obtain a neutrality result, finding tax rates at the top unaltered.
    Keywords: Earnings Elasticities; Inequality; Optimal Taxation; Sufficient Statistics; Superstar Effects
    JEL: D3 D5 D6 D8 E6 H2 J2 J3
    Date: 2015–08
  3. By: Gary-Bobo, Robert J.; Nur, Jamil
    Abstract: We study the allocation of housing capital in an overlapping generations economy with competitive property and housing rental markets. In this economy, consumers inherit property from their parents when they retire. Agents have paternalistic bequest motives. All agents are identical and there is no redistribution problem. The stationary competitive equilibrium of such a model is inefficient, since old agents consume too much perishable goods and too much housing. We then show that the golden rule stationary optimum can be achieved by means of a simple system of proportional taxes. The optimal allocation is characterized by the fact that the young agents rent their homes and that the old agents own the entire stock of housing capital. An optimal tax system has the following features: the young agents' rents must be subsidized. Housing capital and rents are both taxed. But bequests must be subsidized. Bequest and rent subsidies are financed by labor income tax and property tax revenues. Rent subsidies are financed by the tax on rents. The government's budget is balanced. The negative tax on bequests can be interpreted as a pension benefit, paid out of a public pension fund, based on the market value of the housing-capital stock.
    Keywords: bequests; capital taxation; housing; overlapping generation; real estate; rents
    JEL: H2 H3 H6
    Date: 2015–08
  4. By: Gugle, Elisabeth (University of Victoria); Zodrow, George R. (Rice University and Centre for Business Taxation, Oxford University)
    Abstract: The conventional wisdom in public finance is that local governments should finance public services, including those provided to businesses, with user charges that function as benefit taxes, and should in particular avoid inefficient source-based taxes on highly mobile capital. However, if user charges are not available or infeasible, several public finance experts have recently suggested that taxes on local production, such as an origin-based VAT, are a desirable alternative in that they serve as relatively efficient "benefit-related" taxes. We examine this contention formally in a model in which business public services must be financed with either a source-based tax on mobile capital, such as a property tax, or a tax on production, such as an origin-based VAT. In general, both a capital tax and a production tax are inefficient. However, consistent with the "benefit-related" view, the production tax is efficient if the production function belongs to the knife-edge case between log sub- and log supermodularity with respect to capital and public services (e.g., a Cobb-Douglas production function), while the capital tax results in underprovision of public services in this case. Similarly, if the production function is log submodular with respect to capital and public services (e.g., a CES production function with substitution elasticity greater than one), a production tax is again less inefficient than a capital tax, although both taxes result in underprovision of the public service. Finally, if the production function is log supermodular (e.g., a CES production function with substitution elasticity smaller than one), a production tax results in overprovision of the public service, while the effects of a capital tax--and thus the relative efficiency properties of the two taxes--are theoretically ambiguous.
    JEL: H11 H21 H41 H42
    Date: 2014–04
  5. By: McLure, Charles E. (Stanford University); Mintz, Jack (University of Calgary); Zodrow, George R. (Rice University and Centre for Business Taxation, Oxford University)
    Abstract: In a recent unanimous decision in the PPL case, the US Supreme Court ruled that a one-time retroactive British "Windfall Tax" levied on 32 public utilities that were privatized between 1984 and 1996 was eligible for the US foreign tax credit (FTC). The Court rejected the contention of the US Internal Revenue Service that eligibility for the FTC should be governed by the legislative form of the tax rather than its economic substance. This decision could have far-reaching implications for the creditability of taxes that are not ordinarily thought to be income taxes, including various cash-flow business taxes that are key elements of several proposals recommending replacement of the income tax with a consumption-based tax. This article examines these issues, arguing that one and arguably both of the most common forms of cash flow consumption-based taxes should be creditable; it also discusses questions that remain about the interpretation of key regulatory requirements that govern creditability.
    JEL: H25 H80
    Date: 2014
  6. By: Emmanuel Farhi; Xavier Gabaix
    Abstract: This paper develops a theory of optimal taxation with behavioral agents. We use a general behavioral framework that encompasses a wide range of behavioral biases such as misperceptions, internalities and mental accounting. We revisit the three pillars of optimal taxation: Ramsey (linear commodity taxation to raise revenues and redistribute), Pigou (linear commodity taxation to correct externalities) and Mirrlees (nonlinear income taxation). We show how the canonical optimal tax formulas are modified and lead to a rich set of novel economic insights. We also show how to incorporate nudges in the optimal taxation frameworks, and jointly characterize optimal taxes and nudges. We explore the Diamond-Mirrlees productive efficiency result and the Atkinson-Stiglitz uniform commodity taxation proposition, and find that they are more likely to fail with behavioral agents.
    Date: 2015–01
  7. By: David (David Patrick) Madden; Michael Savage
    Abstract: Social marginal welfare weights play an important role in areas of applied public policy analysis such as tax reform. These weights reflect the values of the social planner, or equivalently the underlying social welfare function. A number of recent papers have questioned the "default" Utilitarian-based approach used to derive these weights, and have suggested potential alternatives. However, there are few examples applying these alternative weighting schemes to traditional, nationally representative, datasets, and in particular, few comparisons of how these alternative weighting schemes would affect the distribution of the welfare effects of a specific tax reform in comparison to the Utilitarian-based approach. This paper aims to fill that gap. Using the nationally representative 2009/10 Irish Household Budget Survey, we apply a range of alternatives to Utilitarianism in determining the distribution of social marginal welfare weights, and compare these distributions to that arising from the traditional Utilitarian approach. The alternative weighting schemes we analyse are based upon: the principles of Equal Sacrifice, poverty alleviation, government self-interest and the redistribution of "luck" income. The distribution of welfare weights arising from these approaches are found to differ appreciably from the distribution based upon Utilitarian weights. A simple indirect tax reform model is estimated and applied to the different distributions of welfare weights to investigate the sensitivity of tax reform recommendations to these distributions. Given the importance of social marginal welfare weights in areas of public policy analysis such as optimal labour and commodity tax design, and tax reform evaluation, we believe this detailed examination of the alternatives to Utilitarianism, and their application to a household budget survey dataset, is an important addition to the literature.
    Keywords: Generalised welfare weight; Tax reform; Inequality
    Date: 2015–02
  8. By: ZEW
    Abstract: The project 'Effective tax rates in an enlarged European Union' is based on the methodology used for the calculation of effective tax rates (ETRs) as set out by Devereux and Griffith (1999, 2003). It extends the scope of the calculation of ETRs conducted under the study on effective levels of company taxation within an enlarged EU (2008). The project includes a focus on the effects of tax reforms in the EU27 for the period 1998-2013 and their impact on the level of taxation for both domestic and cross-border investment.
    Keywords: European Union, taxation, effective tax, corporate tax, sector
    JEL: H25
    Date: 2014–02
  9. By: Larrimore, Jeff (Board of Governors of the Federal Reserve System (U.S.)); Mortenson, Jacob (Georgetown University); Splinter, David (Joint Committee on Taxation)
    Abstract: We use a large panel of federal income tax data to investigate intragenerational income mobility in the United States. We have two primary objectives. First, we explore the determinants of two-year changes in individual labor earnings and family incomes, such as job or industry changes, marriage, divorce, and geographic mobility. Second, we evaluate how federal income taxes stabilize or destabilize post-tax income changes relative to pre-tax changes. We find a relatively high degree of income mobility, with almost half of workers exhibiting earnings increases or decreases of at least 25 percent, and two-fifths of tax units experiencing income changes of this magnitude. Male and female labor income mobility patterns are remarkably similar, though marriage is associated with earnings gains among men, but is associated with modest earnings declines among women. We also observe that large income gains are most likely among families that add workers - either through marriage or through a second family member entering the workforce.
    Keywords: Administrative data; income mobility; post-tax income
    JEL: D31 H24
    Date: 2015–07–30
  10. By: James Alm (Department of Economics, Tulane University); J. Sebastian Leguizamon (Department of Economics, Vanderbilt University)
    Abstract: We use household data from the Current Population Survey to calculate how the real value of the so-called "marriage tax" or "marriage subsidy" in the federal individual income tax has changed over the period 1969 to 2009. We examine three issues: the magnitude of the marriage tax/subsidy and its evolution over time, its effects on the distribution of income (including the effects of different demographic characteristics on the magnitudes and trends), and the causal factors in its evolution (e.g., tax changes, demographic changes). We find that the tax treatment of the family has changed significantly over time, from a large average marriage bonus in 1969, to a large marriage tax in much of the 1990s and early 2000s, to a large marriage subsidy since 2003. We also find that the marriage tax varies significantly and systematically by income level, as well as by the number of children in the family, the earnings ratios of the spouses, the race of the family, and the age of the household held. Finally, we find that changes in income and family composition have influenced the magnitudes and trends of marriage taxes and subsidies but that adjustments in the federal income tax code account for most of the observed changes.
    Keywords: marriage, individual income tax, marriage tax, taxable unit
    JEL: H24 J12 J16
    Date: 2015–08
  11. By: De Agostini, Paola; Hills, John; Sutherland, Holly
    Abstract: This paper examines the distributional impacts of the changes to benefits, tax credits, pensions and direct taxes between the UK Elections in May 2010 and in May 2015. It also looks ahead to the longer-term effects of changes and plans that were announced by the 2010-2015 Coalition government, such as the complete introduction of Universal Credit and changes to the ways benefits, pensions and tax brackets are indexed from year to year, modelling what effects these would have after five more years. It shows that the changes 2010-15 did not have a common effect on all household incomes and nor did the direct tax-benefit changes contribute to deficit reduction. In effect reductions in benefits and tax credits financed part of the cuts in direct taxes. We find that the relative extent to which the changes most favoured the rich or the poor is sensitive to a wide range of analytical choices and assumptions, but under most sets of assumptions the main gains were in the upper middle of the income distribution and the main losers were at the bottom and those close to, but not at, the very top. Across most of the distribution the impact of the changes was regressive. Looking forward to the effects that Coalition policies would have had by 2020 we find a more strongly regressive picture but with open questions about the effect of Universal Credit on those not currently receiving their entitlements to means-tested payments, and so potentially increasing some of the lowest incomes.
    Date: 2015–08–19
  12. By: Stefania Ottone; Ferruccio Ponzano; Giulia Andrighetto
    Abstract: In this paper we study how people from different European countries would react, in terms of tax compliance, to institutional changes. We choose an experimental setting and we focus on two features of the tax system – efficiency and tax rate. We develop our analysis in three countries characterized by different systems: Italy, Sweden, UK. The main finding is that participants from different countries react with the same intensity to efficiency changes but not to increases in the tax rate. In all countries tax compliance decreases as tax rate increases, but the reaction is stronger in Italy and softer in UK. Policy implications – mostly focused on fiscal harmonization - follow.
    Keywords: tax compliance, fiscal harmonization, cross-country comparison, efficiency, tax rate
    JEL: C9 D31 H26
    Date: 2015–08
  13. By: Rathke, Alex
    Abstract: This paper analyzes the optimal level of transfer pricing manipulation when the expected tax penalty is a function of the tax enforcement and the market price parameter. The arm’s length principle implies the existence of a range of acceptable prices shaped by market, and firms can manipulate transfer prices more freely if market price range is wide, or if its delimitations are difficult to determine. Home taxation of foreign profits can reduce income shifting incentive, depending on the portion of repatriation for tax purposes. We find that the limited tax credit rule tends to be a less efficient measure, nonetheless it is the most widely adopted rule by countries, so to spark the perspective of more powerful approaches for taxation of foreign profits.
    Keywords: income shifting; transfer pricing manipulation; tax penalty cost; foreign profit taxation; tax enforcement; arm’s length principle.
    JEL: F23 H26
    Date: 2015–08–02
  14. By: ZEW
    Abstract: This is a comprehensive study of the existing wealth taxes and wealth tax provisions in the 28 Member States. As such, it offers an overview of the current use of wealth-related taxes in the EU, broken down in three main categories: inheritance and gift taxes, real estate and land taxation, and taxes on net wealth. The first part presents the information in a structured way, comparing the situation in the Member States with the help of summary tables and graphs. The second part contains extensive country material, including recent changes in legislation. The study also attempts to quantify the importance of the different taxes, in terms of revenues and by establishing scenarios for tax payers.
    Keywords: European Union, taxation, wealth, transfers of wealth
    Date: 2014–10
  15. By: Severin Borenstein; Lucas W. Davis
    Abstract: Since 2006, U.S. households have received more than $18 billion in federal income tax credits for weatherizing their homes, installing solar panels, buying hybrid and electric vehicles, and other "clean energy" investments. We use tax return data to examine the socioeconomic characteristics of program recipients. We find that these tax expenditures have gone predominantly to higher-income Americans. The bottom three income quintiles have received about 10% of all credits, while the top quintile has received about 60%. The most extreme is the program aimed at electric vehicles, where we find that the top income quintile has received about 90% of all credits. By comparing to previous work on the distributional consequences of pricing greenhouse gas emissions, we conclude that tax credits are likely to be much less attractive on distributional grounds than market mechanisms to reduce GHGs.
    JEL: D30 H23 H24 H50 Q41 Q48
    Date: 2015–07
  16. By: Jens Arnold; Carlos Farinha Rodrigues
    Abstract: Portugal has one of the most unequal income distributions in Europe and poverty levels are high. The economic crisis has halted a long-term gradual decline in both inequality and poverty and the number of poor households is rising, with children and youths being particularly affected. Unemployment is one of the principal reasons why household incomes declined. The tax and benefit system alleviates both inequality and poverty significantly. The tax system is markedly progressive, and recent tax reforms have likely increased this progressivity. Transfer payments, especially non-pension benefits, are reducing inequality and poverty in a fairly efficient way. Nonetheless, a number of adjustments could strengthen the equalising role of the benefit system, which is generally biased towards benefits for elderly people, while families with children should receive more support. The education system should provide more support to students at risk of falling behind to reduce grade-repetition and drop-out rates, while further increasing class sizes would be a reasonable way to generate savings without affecting learning progress much. Scaling up vocational courses and adult education, including in the context of active labour market policies, could improve the capacity of many households to generate income and lead to a more equitable income distribution.<P>Réduire les inégalités et la pauvreté au Portugal<BR>Le Portugal est l’un des pays d’Europe où la distribution des revenus est la plus inégalitaire, et les niveaux de pauvreté y sont élevés. La crise économique a mis fin à une baisse progressive de longue durée à la fois des inégalités et de la pauvreté, et le nombre de ménages pauvres s’accroît, les enfants et les jeunes étant particulièrement touchés. Le chômage est l’une des principales raisons du recul des revenus des ménages. Le système de prélèvements et de transferts contribue à soulager fortement les inégalités et la pauvreté. Le système fiscal est fortement progressif, et il est probable que les réformes récentes l’ont rendu encore plus progressif. Les transferts, en particulier les prestations autres que les pensions, réussissent assez bien à réduire les inégalités et la pauvreté. Le système éducatif devrait mieux soutenir les étudiants en risque de décrochage afin de réduire les taux de redoublement et d’abandon, tandis que l’augmentation des effectifs dans les classes serait un moyen raisonnable de générer des économies sans compromettre trop les apprentissages. En développant l’enseignement professionnel et la formation des adultes, notamment dans le contexte de politiques actives du marché du travail, on pourrait offrir à de nombreux ménages la possibilité d’accéder à de meilleurs revenus, ce qui aboutirait à une distribution des revenus plus équitable.
    Keywords: transfers, education, tax, pension, wages, distribution
    Date: 2015–08–21
  17. By: De Giorgi, Giacomo; Ploenzke, Matthew; Rahman, Aminur
    Abstract: Firm informality is pervasive throughout the developing world, Bangladesh being no exception. The informal status of many firms substantially reduces the tax basis and therefore impacts the provision of public goods. The literature on encouraging formalization has predominantly focused on reducing the direct costs of formalization and has found negligible impacts of such policies. In this paper, we focus on a stick intervention, which to the best of our knowledge is the first one in a developing country setting that deals with the most direct and dominant form of informality, i.e. registration with the tax authority with a direct link to the country's potential revenue base and thus public goods provision. We implement an experiment in which firms are visited by tax representatives who deliver an official letter from the Bangladesh National Tax Authority stating that the firm is not registered and the consequential punishment if the firm fails to register. We find that the intervention increases the rate of registration among treated firms, while firms located in the same market but not treated do not seem to respond significantly. We also find that only larger revenue firms at baseline respond to the threat and register. Our findings have at least two important policy implications: i. the enforcement angle, which could be an important tool to encourage formalization; and ii. targeting of government resources for formalization to the high-end informal firms. The effects are generally small in levels and this leaves open the question of why many firms still do not register.
    Keywords: development.; Firms; informality
    JEL: H25 H26 O1
    Date: 2015–08
  18. By: Blaufus, Kay; Braune, Matthias; Hundsdoerfer, Jochen; Jacob, Martin
    Abstract: Previous research argues that law expresses social values and could, therefore, influence individual behavior independently of enforcement and penalization. Using three laboratory experiments on tax avoidance and evasion, we study how legality affects individuals' decisions. We find that, without any risk of negative financial consequences, the qualification of tax minimization as illegal versus legal reduces tax minimization considerably. Legislators can thus, in principle, affect subjects' decisions by defining the borderline between legality and illegality. However, once we introduce potential negative financial consequences, legality does not affect tax minimization. Only if we use moral priming to increase subjects' moral cost do we again find a legality effect on tax minimization. Overall, this demonstrates the limitations of the expressive function of law. Legality appears to be an important determinant of behavior only if we consider activities with no or low risk of negative financial consequences or if subjects are morally primed.
    Keywords: Expressive Law,Legality,Moral Appeals,Tax Avoidance,Tax Evasion,Real Effort Experiment
    JEL: M41 M48 H20 H30 Z18
    Date: 2015
  19. By: James Alm (Department of Economics, Tulane University); Brian Erard (B. Erard & Associates)
    Abstract: An enduring problem in the analysis of tax evasion is the difficulty of its measurement. An especially troublesome component of tax evasion arises from informal suppliers, such as self- employed domestic workers, street-side vendors, and moonlighting tradesmen. We develop in this paper a new approach for estimating self-employment earnings of informal suppliers. Our methodology involves using national survey results on self-employment earnings within a carefully selected set of industry categories where informal activities are believed to be concentrated. Then, by comparing these national survey results on self-employment earnings to Internal Revenue Service statistics on the amounts actually reported for tax purposes, it is possible to estimate the extent of noncompliance within the selected industry categories. Our methodology relies on survey respondents being reasonably forthcoming about their earnings, which we are able to confirm through some validation exercises.
    Keywords: tax evasion, informal suppliers
    JEL: H26 C81
    Date: 2015–08
  20. By: Cici, Gjergji; Kempf, Alexander; Sorhage, Christoph
    Abstract: Rationality would suggest that advice-seeking investors receive benefits from costly financial advice. However, evidence documenting these benefits for U.S. investors has so far been lacking. This paper is the first to document that U.S. mutual fund investors indeed receive one of the many previously hypothesized benefits associated with financial advice. The documented benefit comes from valuable tax-management advice that helps investors avoid taxable fund distributions and becomes even more valuable when investors face distributions that can cause large and hard-to-predict tax liabilities. Additional evidence suggests that financial advice helps with other aspects of tax management such as tax-loss selling.
    Keywords: Mutual funds,Taxable fund distributions,Financial advisors
    JEL: D14 G11 G24 H24
    Date: 2015
  21. By: Mocan, Naci (Louisiana State University); Pogorelova, Luiza (Louisiana State University)
    Abstract: We use micro data from the European Social Survey to investigate the impact of “culture of leisure” and taxes on labor force participation and hours worked of second-generation immigrants who reside in 26 European countries. These individuals are born in Europe, and they have been exposed to institutional, legal and labor market structures of their countries, including the tax rates. Fathers of these individuals are first-generation immigrants who migrated from 81 different countries. We construct measures of "taste for leisure" in the country of origin of each immigrant father. We employ average and marginal taxes for each country of residence, and control for a large set of individual characteristics, in addition to attributes of the country of residence and country of ancestry. The results show that for women, both taxes and culture of leisure impact participation and hours worked. For men, taxes influence labor supply both at the intensive and the extensive margins, but culture of leisure has no impact.
    Keywords: tax, labor supply, leisure, immigrant, culture, origin
    JEL: J22 Z1
    Date: 2015–08
  22. By: Yuri Biondi; Simone Righi
    Abstract: Our computational economic analysis investigates the relationship between inequality, mobility and the financial accumulation process. Extending the baseline model by Levy et al., we characterise the economic process trough stylised return structures generating alternative evolutions of income and wealth through historical time. First we explore the limited heuristic contribution of one and two factors models comprising one single stock (capital wealth) and one single flow factor (labour) as pure drivers of income and wealth generation and allocation over time. Then we introduce heuristic modes of taxation in line with the baseline approach. Our computational economic analysis corroborates that the financial accumulation process featuring compound returns plays a significant role as source of inequality, while institutional configurations including taxation play a significant role in framing and shaping the aggregate economic process that evolves over socioeconomic space and time.
    Keywords: inequality, economic process, compound interest, simple interest, taxation, minimal insti- tution, computational economics, econophysics
    JEL: C46 C63 D31 E02 E21 E27 D63 H22
    Date: 2015–07
  23. By: Bruno Palier (CEE - Centre d'études européennes de Sciences Po - Sciences Po); Clément Carbonnier (THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS); Michaël Zemmour (CLERSE - Centre lillois d'études et de recherches sociologiques et économiques - CNRS - Université Lille 1 - Sciences et technologies)
    Abstract: Tax expenditures are widely used by French governments as em-ployment and social policies. Such programmes together amounted to more than 1.3 points of GDP in 2011. Thanks to a systematic review of academic policy evaluations, we assess the efficiency of the different parts of such policies, showing that at least €6 billion is used for policies whose cost is greater than €62,500 per year and job created, and €0.5 billion for policies whose cost is greater than €160,000 per year and job created. We examine the replacement of these tax expenditures by direct public funding for (publicly or pri-vately delivered) "quality" jobs addressing specific social needs. We discuss the conditions under which at least comparable employment performances could be achieved (factoring in the crowding out of privately funded jobs and the properties of created jobs in terms of the service provided or the characteristics of suppliers and consum-ers) as well as any positive economic and social externalities.
    Date: 2014–07
  24. By: Torberg Falch (Department of Economics, Norwegian University of Science and Technology); Bjarne Strøm (Department of Economics, Norwegian University of Science and Technology); Astrid Marie Jorde Sandsør (Department of Economics, University of Oslo)
    Abstract: We exploit the strict class size rule in Norway and matched individual and school register information for 1982?2011 to estimate long run causal effects on income and educational attainment. Contrary to recent evidence from the US and Sweden, we do not find any significant average effect on long run outcomes of reduced class size. We further use the large register data set and quasi-experimental strategy to estimate whether the class size effect depends on external conditions facing students and schools, such as teacher quality, extent of upper secondary school choice, school district size, local fiscal constraints and labor market conditions. Overall, we find that the class size effect does not depend on school district characteristics. The absence of class size effects on long run outcomes in Norway is consistent with earlier findings for short run outcomes using comparable data and empirical strategies.
    Keywords: class size, school district, quasi-experiment, educational attainment, income
    JEL: H7
    Date: 2015–07–02
  25. By: Yonas Alem; Jonathan Colmer
    Abstract: When agents are unable to smooth consumption and have distorted beliefs about the likelihood of future income realisations, uncertainty about future states of the world has a direct effect on individual welfare. However, separating the effects of uncertainty from realised events and identifying the welfare effects of uncertainty both present a number of empirical challenges. Combining individual-level panel data from rural and urban Ethiopia with high-resolution meteorological data, we estimate the empirical relevance of uncertainty on objective consumption and subjective well-being. While negative income shocks affect both objective consumption measures and subjective well-being, greater income uncertainty only has an effect on subjective well-being. A one standard deviation change in income uncertainty is equivalent to a one standard deviation change in realised consumption. These results indicate that the welfare gains from further consumption smoothing are substantially greater than estimates based solely on consumption fluctuations.
    Keywords: Uncertainty, Consumption Smoothing, Subjective Well-Being
    JEL: D8 O12 I3
    Date: 2015–08
  26. By: Stijn Oosterlynck; Yuri Kazepov,; Andreas Novy; Pieter Cools; Tatiana Sarius; Florian Wukovitsch
    Abstract: This paper presents stylized profiles of the welfare regimes of Austria, Italy and Belgium. It gives a brief overview of the demographic condition and socioeconomic dynamics (especially poverty) of the respective countries, its social policies and expenditures, the situation and policies with regard to labour market and activation, education and the position of ethnic minorities and housing. We combine this with descriptions of the vertical and horizontal governance system of its welfare regime. Finally, on the basis of the all this, we reflect on how a range of governance challenges for socially innovative initiatives, related to the need to coordinate a multiplicity of actors and instruments and work across various spatial scales, express themselves in each of these three welfare regimes. The main aim of this paper is to act as a background document to facilitate the comparison between case studies of socially innovative initiatives and assess how the type of welfare regime and its horizontal and vertical governance system shape the forms of social innovation that emerge in particular countries.
    Keywords: social innovation, welfare regime, governance, housing, labour market activation, education, ethnic minorities
    JEL: I H77 P16
    Date: 2015–07

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