nep-pbe New Economics Papers
on Public Economics
Issue of 2016‒03‒10
twenty-two papers chosen by
Thomas Andrén

  1. Growth and Public Debt: What Are the Relevant Tradeoffs? By Kazuo Nishimura; Carine Nourry; Thomas Seegmuller; Alain Venditti
  2. Cash-cum-in-kind transfers and income tax function By MATTOS, Enlinson; TERRA, Rafael
  3. The competition analysis in the field of corporate income tax in the EU By Beáta Blechová
  4. When is the Laffer Curve for Consumption Tax Hump-Shaped? By Kengo Nutahara; Kazuki Hiraga
  5. Population Aging, Fiscal Sustainability and PAYG Pension Reform By Takaaki Morimoto; Yuta Nakabo; Ken Tabata
  6. Fiscal Consequences of Terrorism By Serhan Cevik; John Ricco
  7. Iceland: Technical Assistance Report-Optimal Reform and Distributional Analysis of the Personal Income Tax By International Monetary Fund
  8. Flexible Fiscal Rules and Countercyclical Fiscal Policy By Martine Guerguil; Pierre Mandon; Rene Tapsoba
  9. Fiscal Councils: Rationale and Effectiveness By Beetsma, Roel; Debrun, Xavier
  10. What do Germans think and know about income inequality? A survey experiment By Carina Engelhardt; Andreas Wagener
  11. Fiscal Stimulus and Firms: A Tale of Two Recessions By Dobridge, Christine L.
  12. Estimating Fiscal Multipliers with Correlated Heterogeneity By Emmanouil Kitsios; Manasa Patnam
  13. Mexico: Selected Issues By International Monetary Fund
  14. A Review of Critical Issues on Tax Design and Tax Administration in a Global Economy and Developing Countries By Godin, M.; Hindriks, J.
  15. The transfer paradox in welfare space By DEMUYNCK, T.; DE ROCK, B.; GINSBURGH, V.
  16. The Future of Welfare Services: How Worried Should We Be about Wagner, Baumol and Ageing? By Bergh, Andreas
  17. Macroeconomic Stability in Resource-Rich Countries; The Role of Fiscal Policy By Elva Bova; Paulo A. Medas; Tigran Poghosyan
  18. Combining time-variation and mixed-frequencies: an analysis of government spending multipliers in Italy By Antonello D'Agostino; Jacopo Cimadomo
  19. Functional Income Distribution and Its Role in Explaining Inequality By Maura Francese; Carlos Mulas-Granados
  20. Denmark: Technical Assistance Report-Revenue Administration Gap Analysis Program-The Value-Added Tax Gap By International Monetary Fund
  21. Which fiscal union for the euro area? By Agnès Bénassy-Quéré; Xavier Ragot; Guntram B. Wolff
  22. Differences in welfare take-up between immigrants and natives : a microsimulation study By Bruckmeier, Kerstin; Wiemers, Jürgen

  1. By: Kazuo Nishimura (RIEB, Kobe University & KIER, Kyoto University); Carine Nourry (Aix-Marseille University (Aix-Marseille School of Economics)-CNRS-EHESS); Thomas Seegmuller (Aix-Marseille University (Aix-Marseille School of Economics)-CNRS-EHESS); Alain Venditti (Aix-Marseille University (Aix-Marseille School of Economics)-CNRS-EHESS)
    Abstract: The interplay between growth and public debt is addressed considering a Barro-type [1] endogenous growth model where public spending is financed through taxes on income and public debt. Debt is assumed to be a fixed proportion of GDP which is used as a policy parameter by the government. We first show that when debt is a large enough proportion of GDP, two distinct BGPs may co-exist, one being indeterminate. Therefore, local and global indeterminacy may arise and self-fulfilling expectations appear as a crucial ingredient to understand the impact of debt on growth and on macroeconomic fluctuations. We then exhibit two types of important trade-off associated with self-fulfilling expectations. First, we show that the lowest BGP is always decreasing with respect to the ratio of debt/GDP while the highest one is increasing. As a result, depending on the BGP selected by agents’ expectations, the relationship between debt and growth is not always negative. Second, we show that the highest BGP, which provides the highest welfare, is always locally indeterminate while the lowest is always locally determinate. Therefore, depending on the expectations of agents, when debt is increasing, large fluctuations associated to self-fulfilling believes may occur and be associated at the same time with welfare losses if there is a coordination on the low steady-state. Finally, a simple calibration exercise allows to provide an understanding of the recent experiences of many OECD countries.
    Keywords: Endogenous growth, public spending, public debt, sunspot fluctuations
    JEL: C62 E32 H23
    Date: 2016–02
  2. By: MATTOS, Enlinson; TERRA, Rafael
    Abstract: This paper investigates income tax revenues response to tax rate changes taking into consideration that cash-cum-in-kind transfers are used as a redistributive package to the community. First, we show that when cash and in-kind transfers are not tied to be substitute instruments, a marginal income tax increase may unambiguously decrease the quantity supplied of labor (and tax revenues therein). Next, we show that whenever the government chooses the optimum provision for the publicly provided good the tax revenue function has a negatively-sloped part with respect to tax rates except for one case. Last, we consider Brazilian data - PNAD - from 1976 to 2008 to test our theoretical implications. Our estimations suggest a weak evidence in favor of the existence of a La er-type curve for Brazilian income tax revenues data. Moreover, wend that the actual average income tax rate seems to be below the estimated optimum level. In a shorter sample from 1996-1999, we nd evidence that labor supply decreases with tax rate when cash and in-kind transfers are in play. Using a pseudo-panel from the same shorter sample, we try to estimate the elasticity of taxable income, following Creedy and Gemmell (2012) and Saez et al. (2009). We explore a small tax reform between 1997 and 1998 that a ected only the higher income tax bracket, and evidence that Brazil is on the revenue reducing side of the La er Curve, at least for individuals in the higher income tax bracket.
    Date: 2016–02–25
  3. By: Beáta Blechová (Department of Finance and Accounting, School of Business Administration, Silesian University)
    Abstract: With the emergence of multinational corporations and globalization of their economic activities, the competition between these companies is being expanded also on the competition between individual states. This competition is also manifested in the tax area, when less economically developed countries are trying to attract the foreign investors from economically advanced countries to their country through a lower corporate tax burden, which is considered as harmful tax competition. This article contains a comparative analysis of developments in the corporate income tax burden in the EU, with the aim to assess the merits of the opinion on the harmful impact of tax policy in this area, used by thirteen new, economically less developed EU member countries. As an indicator of the size of the tax burden are used herein both the statutory and the effective corporate tax rates.
    Keywords: corporate income tax rates, global economy, tax competition, tax coordination and harmonization
    JEL: F21 H25 H26
    Date: 2016–02–29
  4. By: Kengo Nutahara; Kazuki Hiraga
    Abstract: This paper characterizes the shape of the Laffer curve for consumption tax. It is shown that the Laffer curve for consumption tax can be hump-shaped if the utility function is additively separable in consumption and labor supply. Conversely, it cannot be hump-shaped if the utility function is non-separable as reported by previous researchers. It is also shown that the difference in the utility functions has quantitatively significant effects on the peak tax rates of the Laffer curves for labor and capital income taxes.
    Date: 2016–02
  5. By: Takaaki Morimoto (Graduate School of Economics, Osaka University); Yuta Nakabo (Graduate School of Economics, Osaka University); Ken Tabata (School of Economics, Kwansei Gakuin University)
    Abstract: This paper examines how pay-as-you-go (PAYG) pension reform from a defined-benefit scheme to a defined-contribution scheme affects fiscal sustainability and economic growth in an overlapping generations model with endogenous growth. We show that in economies in which the old-age dependency ratio is high and the size of pension benefits under a defined-benefit scheme is large, such a pension reform mitigates the negative effect of population aging on fiscal sustainability and economic growth. However, we also show that this type of pension reform entails an intergenerational conflict of interest between current and future generations. Population aging might exacerbate the extent of this conflict.
    Keywords: Population aging, PAYG pensions, Defined-benefit schemes, Definedcontribution schemes, Fiscal sustainability
    JEL: D91 H55 O41
    Date: 2016–02
  6. By: Serhan Cevik; John Ricco
    Abstract: This paper provides an empirical analysis of how the frequency and severity of terrorism affect government revenue and expenditure during the period 1970–2013 using a panel dataset on 153 countries. We find that terrorism has only a marginal negative effect on tax revenue performance, after controlling for economic and institutional factors. This effect is also not robust to alternative specifications and empirical strategies. On the other hand, we find strong evidence that terrorism is associated with an increase in military spending as a percent of GDP (and a share of total government expenditure). Our estimations reveal that this impact is greater when terrorist attacks are frequent and result in a large number of fatalities. Empirical findings also support the view that public finances in developing and low-income countries are more vulnerable to terrorism than those in countries that are richer and diversified.
    Keywords: Terrorism;Tax revenue;Military spending;tax, revenue, attacks, share, General, National Security and War, All Countries,
    Date: 2015–10–23
  7. By: International Monetary Fund
    Abstract: This paper discusses key findings and recommendations of the Technical Assistance Report on Optimal Reform and Distributional Analysis of the Personal Income Tax (PIT). With regard to reforming the PIT schedule, it recommends that the basic credit be increased and made fully refundable to all taxpayers age 18 and older. To avoid paying this benefit to young singles, such as students, who generally have other means of support, it could be conditioned on a certain level of labor earnings. This credit should be rapidly phased out as labor income rises, and the initial PIT rate should be significantly reduced. The current top PIT rate does not need reform, although the threshold for that rate should ideally be raised.
    Keywords: Iceland;Europe;tax, income tax, taxes, tax rates, tax rate
    Date: 2015–11–17
  8. By: Martine Guerguil; Pierre Mandon; Rene Tapsoba
    Abstract: This paper assesses the impact of different types of flexible fiscal rules on the procyclicality of fiscal policy with propensity scores-matching techniques, thus mitigating traditional self-selection problems. It finds that not all fiscal rules have the same impact: the design matters. Specifically, investment-friendly rules reduce the procyclicality of both overall and investment spending. The effect appears stronger in bad times and when the rule is enacted at the national level. The introduction of escape clauses in fiscal rules does not seem to affect the cyclical stance of public spending. The inclusion of cyclical adjustment features in spending rules yields broadly similar results. The results are mixed for cyclically-adjusted budget balance rules: enacting the latter is associated with countercyclical movements in overall spending, but with procyclical changes in investment spending. Structural factors, such as past debt, the level of development, the volatility of terms of trade, natural resources endowment, government stability, and the legal enforcement and monitoring arrangements backing the rule also influence the link between fiscal rules and countercyclicality. The results are robust to a wide set of alternative specifications.
    Date: 2016–01–22
  9. By: Beetsma, Roel; Debrun, Xavier
    Abstract: The paper discusses the effectiveness of independent fiscal institutions - or fiscal councils - in taming the deficit bias that emerged in the 1970s. After a review of the main theoretical arguments and recent trends about fiscal councils, we develop a stylized model showing how a fiscal council can effectively mitigate the deficit bias even though it has no direct lever on the conduct of fiscal policy. We show that the capacity of the fiscal council to improve the public's understanding of the quality of fiscal policy contributes to better align voters and policymakers' incentives and to tame the deficit bias affecting well-intended governments. After mapping the model's key features into a broad set of criteria likely to contribute to the effectiveness of a fiscal council, we use the 2014 vintage of the IMF dataset on independent fiscal institutions to assess whether existing institutions have been built to work.
    Keywords: deficit bias; Fiscal policy; independent fiscal institutions
    JEL: E61 E62 H11 H62
    Date: 2016–02
  10. By: Carina Engelhardt (Leibniz University of Hannover, School of Economics and Management); Andreas Wagener (Leibniz University of Hannover, School of Economics and Management)
    Abstract: Germans are unable to assess their own position in the income distribution of their country and do not know much about income inequality and stratification. They are well aware of their ignorance. Germans would prefer society to be more egalitarian than they perceive it. Providing accurate information about the income distribution does not change this preference for more redistribution – except among those who learn that they are net contributors in the German tax-transfer system.
    Keywords: Biased perceptions, preferences for redistribution, Germany.
    JEL: H53 D72 D31
    Date: 2016–01
  11. By: Dobridge, Christine L. (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: In this paper, I examine the effects of a countercyclical fiscal policy that gave firms additional tax refunds--additional liquidity--at the end of the past two recessions. I take advantage of a discontinuity in the slope of the tax refund formula to estimate the policy's impact. I find that after passage of the policy in 2002, firms allocated $0.40 of every tax refund dollar to investment. After passage of the policy in 2009, in contrast, firms used the refunds to increase cash holdings ($0.96 of every refund dollar) before paying down debt in the following year. I provide evidence that differences in macroeconomic conditions across the two periods drove these differences in firm responses, illustrating how the effects of stimulus vary across recessionary states of the world. I also show that while the policy had no discernable effect on investment in the most recent recessionary period, it did reduce firms’ bankruptcy risk and the probability of a future credit- rating downgrade.
    Keywords: Financing policy; fiscal policy; fixed investment; taxation
    Date: 2016–02–22
  12. By: Emmanouil Kitsios; Manasa Patnam
    Abstract: We estimate the average fiscal multiplier, allowing multipliers to be heterogeneous across countries or over time and correlated with the size of government spending. We demonstrate that this form of nonseparable unobserved heterogeneity is empirically relevant and address it by estimating a correlated random coefficient model. Using a panel dataset of 127 countries over the period 1994-2011, we show that not accounting for omitted heterogeneity produces a significant downward bias in conventional multiplier estimates. We rely on both crosssectional and time-series variation in spending shocks, exploiting the differential effects of oil price shocks on fuel subsidies, to identify the average government spending multiplier. Our estimates of the average multiplier range between 1.4 and 1.6.
    Keywords: Government expenditures;Economic growth;Fiscal policy;Panel analysis;Economic theory;Fiscal Multipliers, Nonseparable Unobserved Heterogeneity, Oil Price
    Date: 2016–02–04
  13. By: International Monetary Fund
    Abstract: This Selected Issues paper analyzes fiscal multipliers in Mexico. Estimates of fiscal multipliers––obtained from state-level spending––fall within 0.6–0.7 after accounting for dynamic effects. However, the size of multipliers varies with the output gap. The planned fiscal consolidation—under the estimated multipliers—is projected to subtract on average 0.5 percentage points from growth over 2015–20. However, there are offsetting effects. The positive growth impulse of lower costs on manufactured goods production is estimated to reach 0.5 percentage point in 2015 and 2016, largely offsetting the impact of fiscal consolidation on growth in the near term.
    Keywords: Mexico;Western Hemisphere;fiscal, output, fiscal consolidation, output gap, fiscal multipliers
    Date: 2015–11–17
  14. By: Godin, M. (Université de Namur); Hindriks, J. (Université catholique de Louvain, CORE, Belgium)
    Abstract: The mobilization of domestic tax resource has become a key issue for developing countries. In this report, we provide some facts and figures on the levels and structures of taxation around the world with special attention to Low Income Countries, (LICs). We use the new ICTD database covering 203 countries with 40 tax items over the period 1980-2010. We discuss some principles of tax design in a global economy that are relevant for LICs. We also review some critical issues on corruption and compliance to see how they relate to growth and tax evasion. We then provide a benchmark framework to assess the overall performance of the government tax collection. We use the tax effort index that measures the gap between the potential tax and the actual tax. The novelty of this tax effort index is twofold. First it takes into account spatial variables to capture the geographic dependence. Second it breaks down the tax effort analysis tax item by tax item to capture the possible tax shift. We conclude with a full ranking of tax effort for all countries and some suggestions of tax reform for a subset of countries that are targeted by the Belgian Development Cooperation.
    Keywords: Corporate taxation, efficient tax administration, tax enforcement, source- based and destination based taxation, origin and destination principles, Tariffs
    JEL: C72 H23 H70
    Date: 2015–06–19
  15. By: DEMUYNCK, T. (Maastricht University, The Netherlands); DE ROCK, B. (Université Libre de Bruxelles, ECARES, Belgium); GINSBURGH, V. (Université Libre de Bruxelles, ECARES, Belgium)
    Abstract: The transfer paradox describes a situation in which a transfer of endowments between two agents results in a welfare decrease for the recipient and a welfare increase for the donor. It is known that in a two-agent regular exchange economy with an arbitrary number of goods, the transfer paradox occurs only if the price equilibrium is unstable. In this paper, we show that in the space of welfare weights, the set of stable equilibria and the set of no-transfer paradox equilibria coincide. As a corollary we also obtain that for two agents and an arbitrary number of goods, the index of an equilibrium in price space coincides with its index in welfare space.
    Keywords: welfare equilibrium, exchange economy, transfer paradox
    JEL: D51 D60
    Date: 2015–09–24
  16. By: Bergh, Andreas (Research Institute of Industrial Economics (IFN))
    Abstract: Welfare services are an important part of the Nordic welfare states both financially and for welfare state redistribution. Baumol’s cost disease, Wagner’s law, and population ageing are often said to bring challenges for the future provision of welfare services. While none of the three poses an immediate threat against the financial sustainability of the welfare state, they have important implications for distribution and for the political support for the welfare state. The combination demographic change, a higher relative price of welfare services and increasing demand for welfare services may force politicians to make a difficult choice between increasing taxes, allowing people to top up publicly financed services with additional private financing, or risk eroding support for the welfare state.
    Keywords: Welfare services; Redistribution; Baumol’s disease; Wagner’s law; Population aging
    JEL: H11 I38 J11 J18
    Date: 2016–02–12
  17. By: Elva Bova; Paulo A. Medas; Tigran Poghosyan
    Abstract: Resource-rich countries face large and persistent shocks, especially coming from volatile commodity prices. Given the severity of the shocks, it would be expected that these countries adopt countercyclical fiscal policies to help shield the domestic economy. Taking advantage of a new dataset covering 48 non-renewable commodity exporters for the period 1970-2014, we investigate whether fiscal policy does indeed play a stabilizing role. Our analysis shows that fiscal policy tends to have a procyclical bias (mainly via expenditures) and, contrary to others, we do not find evidence that this bias has declined in recent years. Adoption of fiscal rules does not seem to reduce procyclicality in a significant way, but the quality of political institutions does matter. Finally, non-commodity revenues tend to respond only to persistent changes in commodity prices.
    Date: 2016–02–23
  18. By: Antonello D'Agostino (European Stability Mechanism); Jacopo Cimadomo (European Central Bank)
    Abstract: In this paper, we propose a time-varying parameter vector autoregression (VAR) model with stochastic volatility which allows for estimation on data sampled at different frequencies. Our contribution is two-fold. First, we extend the methodology developed by Cogley and Sargent (2005), and Primiceri (2005), to a mixed-frequency setting. In particular, our approach allows for the inclusion of two different categories of variables (high-frequency and low-frequency) into the same time-varying model. Second, we use this model to study the macroeconomic effects of government spending shocks in Italy over the 1988Q4-2013Q3 period. Italy - as well as most other euro area economies - is characterised by short quarterly time series for fiscal variables, whereas annual data are generally available for a longer sample before 1999. Our results show that the proposed time-varying mixed-frequency model improves on the performance of a simple linear interpolation model in generating the true path of the missing observations. Third, our empirical analysis suggests that government spending shocks tend to have positive effects on output in Italy. The fiscal multiplier, which is maximized at the one year horizon, follows a U-shape over the sample considered: it peaks at around 1.5 at the beginning of the sample, it then stabilizes between 0.8 and 0.9 from the mid-1990s to the late 2000s, before rising again to above unity during the recent crisis.
    Keywords: Time variation, mixed-frequency data, government spending multiplier
    JEL: C32 E62 H30 H50
    Date: 2013–12
  19. By: Maura Francese; Carlos Mulas-Granados
    Abstract: This paper is motivated by two parallel trends: the declining labor share of income and increasing inequality. Micro and macroeconomic data, covering up to 93 countries between 1970 and 2013, are used to assess whether the declining labor share of income has been a key factor driving growing inequality. The major conclusion is that changes in income inequality across a wide range of countries have been driven significantly by changes in the inequality of wages, while the distribution of income between labor and capital has not been a major factor.
    Date: 2015–11–24
  20. By: International Monetary Fund
    Abstract: This report presents estimates of the tax gap for Denmark for the period 2008–12. There are two main components to the RA-GAP methodology for estimating the VAT gap: 1) estimate the potential VAT collections for a given period; and 2) determine the accrued VAT collections for that period. The difference between the two values is the VAT gap. The methodology employs a top-down approach for estimating the potential VAT base, using statistical data on value-added generated in each sector and constructs the accrued VAT collections value from tax record data. One of the main purposes of this report is to estimate the compliance gap. The compliance gap is the difference between the potential VAT that could have been collected given the current policy framework and actual accrued VAT collections. Other tax gap measures can be determined using different methods for determining potential VAT, and these other measures are important in understanding all the factors which are affecting current collections. This report will provide estimates for these other gap measures as well, and compare and contrast them with the compliance gap.
    Date: 2016–02–23
  21. By: Agnès Bénassy-Quéré; Xavier Ragot; Guntram B. Wolff
    Abstract: HIGHLIGHTS Fully-fledged federations assign fiscal policy stabilisation largely to the federal level, based on a relatively large budget. In the euro area, a large federal budget is unrealistic at the current level of political and societal integration, and fiscal stabilisation will continue to rely mainly on national policies. For aggregate fiscal policy to become more stabilising with respect to the economic cycle, while achieving long-term sustainability, it is necessary (i) to avoid imposing self-defeating fiscal adjustments on crisis countries by making sovereign debt restructuring a real possibility (which involves strengthening the banking sector and extending the remit of the European Stability Mechanism); (ii) to task the planned independent European Fiscal Board with delineating exceptional times during which fiscal coordination is needed on top of monetary policy; (iii) to make national fiscal policies more stabilising by allowing incremental investment and unemployment spending to be shifted from bad to good times based on national adjustment accounts. We also recommend a move towards a European unemployment (re-)insurance scheme targeted at ‘large’ shocks, with varying contributions from countries and a minimum set of labour-market harmonisation criteria, which in any case are desirable for the functioning of monetary union. For footnotes and references, please see the PDF version of this publication. Summary The construction of the euro area left aside the question of a fiscal union, but the crisis re-opened the debate. Of the three classical functions of fiscal policy – provision of public goods, redistribution and stabilisation – only the last provides a clear justification for fiscal policy at euro-area level. Unsustainable fiscal policies in one member state could destabilise the entire euro area, and national policies could also have direct and indirect demand effects with an impact on area-wide inflation. ‘Every man for himself’ is not an option. But coordination is difficult because it involves 19 national budgetary processes and a common central bank. Empirically, fiscal policy in the euro area and elsewhere often tends to accentuate rather than attenuate the economic cycle. The discretionary part of fiscal policy, as opposed to automatic stabilisers, is responsible for this unfortunate feature, while automatic stabilisers generally work well. Fully-fledged federations assign fiscal policy stabilisation largely to the federal level, based on a relatively large budget. In the euro area, a large federal budget is unrealistic at the current level of political and societal integration, and fiscal stabilisation will continue to rely mainly on national policies. We make three recommendations that would lead national fiscal policies to be more stabilising with respect to the economic cycle, while achieving long-term sustainability. First, the euro area should avoid imposing self-defeating fiscal adjustments on crisis countries. To achieve this, sovereign debt restructuring should be made possible by further strengthening the banking sector and extending the remit of the European Stability Mechanism. Second, fiscal policy in exceptionally good or bad times should be guided by the planned independent European fiscal board, while the Stability and Growth Pact (SGP) would apply strictly in ‘normal’ times. Of course, fiscal coordination is mostly needed in exceptional times, when the European Central Bank can no longer by itself stabilise the euro area. Third, the Stability and Growth Pact should be able to adapt in a more flexible way to the economic cycle by shifting incremental investment and unemployment spending from bad to good times based on national adjustment accounts, rather than through unclearly defined discretionary measures as is presently the case. This third proposal would strengthen automatic stabilisers that were in fact cut in some cases during the crisis. In addition, we recommend a move towards ‘federal’ insurance for very large shocks. This should be based on automatic stabilisers and should not involve conditionality when it is activated. The best option is likely to be a European unemployment (re-)insurance scheme for large shocks. All countries that comply with a minimum set of labour-market harmonisation criteria would be required to participate, with their payments into the scheme based on objective criteria. Labour market harmonisation is also desirable for the functioning of monetary union and could be incentivised by the re-insurance scheme. Introduction The idea to complement European Monetary Union with some form of fiscal federalism is not new. In 1977, the MacDougall report suggested the introduction of a small budget of around 5-7 percent of GDP as a first step, the long-term objective being “a Federation in Europe in which federal public expenditure is around 20-25 percent of gross product as in the USA and the Federal Republic of Germany” (Commission of the European Communities, 1977, pp10-11).
    Date: 2016–02
  22. By: Bruckmeier, Kerstin (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Wiemers, Jürgen (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Research on welfare participation often shows significant differences between immigrants and natives that are often attributed to immigrants' higher risk of welfare dependence. We study whether immigrants in Germany also differ from their German counterparts in their take-up behavior conditional on being eligible for welfare benefits. The empirical approach intends (i) to determine eligibility for welfare benefits for a representative sample of the whole population of Germany using a microsimulation model (IAB-STSM) based on data from the German Socio-Economic Panel (GSOEP) and then (ii) to estimate probit models of observed welfare benefit take-up for the sample of eligible households. Our simulation results show that non take-up rates do not differ significantly between several groups of immigrants and natives. Additionally, the probit estimations do not reveal a significant effect of being a migrant on the probability to take up entitlements. Hence, our findings suggest that after controlling for observed and unobserved household characteristics immigrants are not more prone to take up welfare benefits." (Author's abstract, IAB-Doku) ((en))
    JEL: I38 H31 C15
    Date: 2016–02–25

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