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on Public Economics |
| By: | Philippe Aghion; Ufuk Akcigit; Julia Cagé; William R. Kerr |
| Abstract: | We build an endogenous growth model to analyze the relationships between taxation, corruption, and economic growth. Entrepreneurs lie at the center of the model and face disincentive effects from taxation but acquire positive benefits from public infrastructure. Political corruption governs the efficiency with which tax revenues are translated into infrastructure. The model predicts an inverted-U relationship between taxation and growth, with corruption reducing the optimal taxation level. We find evidence consistent with these predictions and the entrepreneurial channel using data from the Longitudinal Business Database of the US Census Bureau. The marginal effect of taxation for growth for a state at the 10th or 25th percentile of corruption is significantly positive; on the other hand, the marginal effects of taxation for growth for a state at the 90th percentile of corruption are much lower across the board. We make progress towards causality through Granger-style tests and by considering periphery counties where effective tax policy is largely driven by bordering states. Finally, we calibrate our model and find that the calibrated taxation rate of 37% is fairly close to the model's estimated welfare maximizing taxation rate of 42%. Reducing corruption provides the largest potential impact for welfare gain through its impact on the uses of tax revenues. |
| JEL: | H11 H21 H25 H41 H71 H72 M13 O11 O12 O40 R11 R12 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21928&r=pbe |
| By: | Jean-Louis Combes (CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique); Rasmané Ouedraogo (CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Despite high economic growth in the last decades, many developing countries remain into poverty, income inequality and unemployment of young people, which have led some countries to adopt inclusive growth strategies. In this paper, we show how inclusive growth can boost tax revenue mobilization in developing countries. Effective public policies, improving social cohesion are fundamental to meet citizens’ aspirations and therefore incite them to comply with taxes. To this end, this study uses GMM techniques to deal with endogeneity issue and spans 55 developing countries over the period of 1995-2010. We find that inclusive growth has positive effect on tax revenue mobilization. This finding is robust to various aspects of inclusive growth measurements and additional controls. |
| Keywords: | Inclusive growth, Taxes revenue, Inequality, Employment |
| Date: | 2016–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01281914&r=pbe |
| By: | Egebark, Johan (IFAU - Institute for Evaluation of Labour Market and Education Policy) |
| Abstract: | I study the link between taxes and youth self-employment. I make use of a Swedish reform, implemented in 2007–09, which suddenly made the payroll tax and the self-employment tax vary by age. The results suggest that youth self-employment is insensitive to tax reductions, both in the short run and in the somewhat longer run. I also study the effect of the tax reductions on income. For those that are defined as self-employed, I find positive effects on income from self-employment, and negative effects on income from wage employment. This finding suggests that the lower taxes caused the self-employed to reallocate time from employment to self- employment. |
| Keywords: | youth unemployment; self-employment tax; tax subsidy; self-employment |
| JEL: | H25 H32 J23 J38 J68 |
| Date: | 2016–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2016_004&r=pbe |
| By: | Manasan, Rosario G. |
| Abstract: | Proposals to reform the personal income tax have gained prominence in recent months. To date, personal income tax reform is part and parcel of the platform of a number of the candidates in the 2016 presidential elections. This paper aims to evaluate the various proposals in both houses of Congress to amend the existing personal income legislation. Proposals to amend the personal income tax schedule appear to be well-justified from the perspective of (i) the need to eliminate the bracket creep and (ii) easing the tax burden on Filipino personal income taxpayers relative to their ASEAN neighbors. In terms of the progressivity of the personal income tax, all of the proposals to amend the personal income tax are progressive. However, two of the proposals, SB 2149 and HB 4829, are less progressive than the existing rate structure. In terms of revenue yield, all of the proposals are estimated to have a negative impact on government revenue. The projected revenue loss from proposals to restructure the personal income tax is best seen in the context of the government's overall revenue and tax effort. Fiscal prudence dictates that new revenue measures be found to compensate for the projected revenue loss that will arise as a result of the implementation of any one of the various proposals to restructure the personal income tax. Thus, the questions that beg to be asked is: What new revenue measure or combination of measures will allow government to recover the revenue loss from the new personal income tax structure? Possibilities include increasing the VAT rate, excise tax on petroleum products, and road user's tax. |
| Keywords: | Philippines, personal income tax, tax reform, value added tax (VAT), excise tax |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:phd:rpseri:dp_2015-48_(revised)&r=pbe |
| By: | Timothy J. Bartik (W.E. Upjohn Institute for Employment Research); George Erickcek (W.E. Upjohn Institute for Employment Research) |
| Keywords: | State and local economic development policy, tax incentives, fiscal impact analysis,labor market benefits, regional multipliers |
| JEL: | R11 R23 R28 R30 R58 H70 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:tjbge14&r=pbe |
| By: | Alisdair McKay; Ricardo Reis |
| Abstract: | Most countries have automatic rules in their tax-and-transfer systems that are partly intended to stabilize economic fluctuations. This paper measures their effect on the dynamics of the business cycle. We put forward a model that merges the standard incomplete-markets model of consumption and inequality with the new Keynesian model of nominal rigidities and business cycles, and that includes most of the main potential stabilizers in the U.S. data and the theoretical channels by which they may work. We find that the conventional argument that stabilizing disposable income will stabilize aggregate demand plays a negligible role in the dynamics of the business cycle, whereas tax-and-transfer programs that affect inequality and social insurance can have a larger effect on aggregate volatility. However, as currently designed, the set of stabilizers in place in the U.S. has had little effect on the volatility of aggregate output fluctuations or on their welfare costs despite stabilizing aggregate consumption. The stabilizers have a more important role when monetary policy is constrained by the zero lower bound, and they affect welfare significantly through the provision of social insurance. |
| Keywords: | Countercyclical �fiscal policy; Heterogeneous agents; Fiscal multipliers |
| JEL: | E32 E62 H30 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:64479&r=pbe |
| By: | Giorgia Maffini; Jing Xing; Michael P. Devereux |
| Abstract: | How do tax incentives affect firmsÕ investment? Using confidential UK corporation tax returns, we provide new evidence on the effects of incentives in the form of depreciation allowances. We exploit a 2004 exogenous change in the qualifying thresholds for the first-year depreciation allowances (FYAs) and conduct a difference-in-difference analysis. Results suggest that the investment rate increased between 2.1 and 2.6 percentage points when firms became qualified for FYAs, relative to firms that never qualified. This implies an increase in investment rate of 11 percent at the mean. We exploit exogenous variation in the timing of tax payments to show that this large effect is not due to an increase in available cash and hence, this is primarily a cost of capital effect. Firms respond rather quickly to FYAs, within 12 to 18 months. Firms also bunch just below notches in the cost of capital created by the qualifying thresholds, suggesting salience of the FYAs. Such behaviour does not drive our main results. |
| Keywords: | investment, corporate tax, depreciation allowances, SMEs. |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:don:donwpa:085&r=pbe |
| By: | Anastasios Dosis (ESSEC - ESSEC Business School - Essec Business School - Economics Department - Essec Business School, THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | I study a credit market with adverse selection as a signalling game. I show that in the least-costly separating equilibrium, entrepreneurs of high-quality projects may over-or under-invest compared to the social optimum to signal their type. I then examine a simple budget-balanced tax-subsidy scheme applied by the government. At a first sight, the tax-subsidy scheme seems to benefit entrepreneurs of low-quality projects and harm entrepreneurs of high-quality projects because the former are cross-subsidised by the latter. Nonetheless, this result does not necessarily hold if entrepreneurs can pledge the subsidy as collateral. In that case, taxes can improve social welfare by either decreasing or increasing aggregate investment depending on whether entrepreneurs of high-quality projects over-or under-invest in equilibrium. |
| Keywords: | Adverse selection,investment,taxes,welfare |
| Date: | 2016–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01285163&r=pbe |
| By: | Craig Brett (Mount Allison University); John A Weymark (Vanderbilt University) |
| Abstract: | When a government is unable to commit to its future tax policies, information about taxpayers' characteristics revealed by their behavior may be used to extract more taxes from them in the future. We examine the implications of this ratchet effect for the design of redistributive income and savings tax policies in a two-period model with two types of individuals who only differ in their skill levels. When commitment is not possible, it may be optimal to separate, pool, or partially pool different types in period one. The nature of the distortions to labor supplies and savings are investigated for each of these three regimes. Novel rationales for savings distortions are identified. |
| Keywords: | asymmetric information, commitment, optimal income taxation, ratchet effect, savings taxation |
| JEL: | H2 D8 |
| Date: | 2016–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-16-00007&r=pbe |
| By: | Antonescu, Mihail; Antonescu, Ligia |
| Abstract: | The excessive increase of the tax burden, the existance of a bad legislation, the lack of effective fiscal control and insufficient education of taxpayers are the main causes of tax evasion. While impossible to determine the exact size of the tax evasion, approximate measures and statistical data are used for its measurement. This is necessary to determine the effectiveness of prevention and combating evasion methods but also to estimate the negative consequences. |
| Keywords: | Tax evasion, control of fiscal evasion |
| JEL: | H26 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:69948&r=pbe |
| By: | Chen, Hung-Ju |
| Abstract: | This paper develops an overlapping generations (OLG) model with exogenous and endogenous retirement age to examine the effects of fertility on long-run pay-as-you-go (PAYG) pensions. We find that in both cases, pensions may not necessarily increase with the fertility rate. In the case with exogenous retirement age, an increase in the fertility rate (retirement age) may raise pensions when the output elasticity of capital is low. When the output elasticity of capital is high, an increase in the fertility rate (retirement age) will reduce (raise) pensions if the tax rate is sufficiently high. In the case with endogenous retirement age, a higher fertility rate will reduce pensions if the fertility rate is sufficiently high, but such a change will raise pensions if the output elasticity of capital and the tax rate are sufficiently low. Our results indicate that raising the fertility rate is more likely to reduce pensions in developing countries than in developed countries, while such a change tends to raise pensions for countries with sufficiently low output elasticity of capital and tax rate. |
| Keywords: | Fertility; Retirement; OLG, PAYG pensions. |
| JEL: | H55 J13 J26 |
| Date: | 2016–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:69819&r=pbe |
| By: | Ivo Bischoff (University of Kassel); Nataliya Kusa (University of Kassel) |
| Abstract: | We provide a comprehensive empirical study on the factors that drive citizens’ policy preferences regarding inheritance taxation. It builds on a representative survey among more than 1.000 German citizens in 2014 and 2015. Support for inheritance taxation is found to be driven by monetary self-interest and redistributive preferences. It is lower among females and among subjects who overestimate the tax burden. We look beyond the narrow scope of inheritances and account for other forms of transfers in the family, in particular the provision of longterm care. More than 75 percent of our respondents consider it fair that family members who provided long-term care receive higher inheritances in exchange. This fairness preference does not drive policy preferences, but acceptance for inheritance taxation is higher among subjects who expect the typical German family to reward intrafamilial care-giving through a higher inheritance. |
| Keywords: | inheritance taxation, intergenerational transfers, citizens’ preferences, longterm care, vignettes |
| JEL: | H27 D31 D72 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201531&r=pbe |
| By: | Roller, Marcus; Schmidheiny, Kurt |
| Abstract: | This paper proposes measures to quantify the effective level and the effective progressivity of taxation in a fiscally decentralized country taking income sorting into account. Using data on the universe of Swiss taxpayers, we find that rich households effectively face significantly lower average and marginal tax rates and lower progressivity than in the benchmark case that does not consider income sorting. This is because high-income households systematically avoid high taxation by locating in low-tax jurisdictions. The results are stronger for singles than for families, indicating that singles are more sensitive to spatial tax differentials than families. Although income tax schedules of the Swiss federation, the 26 cantons and the more than 2,600 municipalities are all strictly progressive, the effectively paid country-wide average tax rate is regressive for households with very high incomes and without children. The proposed measure of the effective average and marginal tax rates also allows us to adequately describe the evolution of the country-wide tax burden over time. We document that about half of the reduction in the tax burden on top incomes between 1975 and 2009 is due to reductions in statutory tax rates and about half to stronger income sorting of the population. Our results also hold when we account for the disutility from housing prices into which tax rates capitalize. |
| Keywords: | Effective Tax Rates; Fiscal Decentralization; Income Segregation; Progressive Taxation |
| JEL: | H71 H73 R23 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11152&r=pbe |
| By: | Cremer, Helmuth; Pestieau, Pierre |
| Abstract: | There exists a wide variety of tax treatments of pensions across the world. And the reasons for such a range of regimes are not clear. This note reviews the general principles of pension taxes and analyses the theoretical foundations of why pension incomes ought to be taxed specifically. To do this, one has to distinguish between public and private pensions. The design of public pensions cannot be separated from the one of taxation. Regarding private pensions, the key issue is whether or not pension saving ought to be treated differently from other forms of saving. |
| Keywords: | private pensions, deferred tax, social security, retirement |
| JEL: | H21 H55 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:30269&r=pbe |
| By: | Alexander Ljungqvist; Liandong Zhang; Luo Zuo |
| Abstract: | Using a natural experiment in the form of 113 staggered changes in corporate income tax rates across U.S. states, we provide causal evidence on how taxes affect corporate risk-taking decisions. Higher taxes are expected to reduce the expected profit per unit of risk, as the government shares in a firm’s upside but not in its downside. Consistent with this prediction, we find that firms respond to tax increases by reducing risk. We find no corresponding sensitivity to tax cuts, suggesting that firms find it easier to reduce risk than to increase it. Tax loss-offset rules moderate firms’ sensitivity to taxes by allowing firms to partly share downside risk with the government. |
| JEL: | G32 H32 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21834&r=pbe |
| By: | Maria EL KHDARI; Jean-François BRUN (Centre d'Etudes et de Recherches sur le Développement International(CERDI)) |
| Abstract: | The fiscal incentives literature emphasizes how the design of transfer systems has a significant implication on the behavior of local governments within decentralized systems. The empirical findings on the relationship between intergovernmental transfers and the incentives they create for local revenue generation are inconclusive and differ from country to country. Given the lack of data on local public finances, this type of study rarely involves developing countries. Using a unique and rich socio-economic and public finance data covering a large set of Moroccan municipalities over the period 2005 to 2009, this paper contributes to the new generation of fiscal federalism literature by assessing the fiscal incentive effects of two types of transfers: general purpose transfers (unconditional) defined by a formula and specific purpose transfers (conditional) allocated on an ad-hoc basis. After correcting for the endogeneity problem, our findings support the existence of a significant incentive effect of unconditional transfers and a less robust effect of conditional transfers. Suggesting that transfers from the central government complement local own revenues by encouraging Moroccan municipalities to collect more revenues. |
| Keywords: | Decentralization; Local public finance; Fiscal incentives; Intergovernmental transfers; Morocco; Pan |
| JEL: | O12 H77 H71 H30 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1790&r=pbe |
| By: | Giacomo Ricotti; Marco Burroni (Banca d'Italia); Vincenzo Cuciniello (Banca d'Italia); Elena Padovani (Banca d'Italia); Elena Pisano (Banca d'Italia); Stefania Zotteri (Banca d'Italia) |
| Abstract: | Following the establishment of the Single Supervisory Mechanism (SSM), concerns about having a level playing field become more important due to the heterogeneity in bank taxation rules across Europe: measuring the tax burden can provide a first rough measure of the extent of heterogeneity across countries. After a review of the main differences in banks taxation between Italy, France, Germany, Spain and the UK, the paper provides estimates for the tax burden and deferred tax assets in these countries over the years 2006-2014; the impact of differences in taxation on bank profitability is also examined. Moreover, the paper carries out a more in-depth analysis of Italian banks by considering both individual balance sheet data and aggregate tax return data. The impact of tax measures on financial stability and on profitability is further analysed. The comparative analysis points to a wide heterogeneity across countries in the tax treatment of the banking sector. This suggests that it would be advantageous to explore possible ways to make the tax systems of the countries participating in the SSM more homogeneous; a first step could be to harmonize tax bases. |
| Keywords: | banking, taxation |
| JEL: | G21 H25 H87 K34 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_314_16&r=pbe |
| By: | John Guyton; Dayanand S. Manoli; Brenda Schafer; Michael Sebastiani |
| Abstract: | This project examines how reminders affect tax filing among lower-income nonfilers (individuals who did not appear on a filed tax return but had income reported by third parties to the Internal Revenue Service). We present novel data on this population and results from two randomized controlled trials. The results demonstrate that one-time reminders increase tax filing, both to claim tax refunds based in part on withholdings and Earned Income Tax Credit benefits, as well as to voluntarily pay balances owed to the IRS. However, these effects do not persist. Consistent with recency effects, individuals who owe a balance due appear more likely to recidivate into nonfiling than those who receive refunds. Follow-up reminders continue to increase tax filing, particularly among individuals who previously had to pay balances to the IRS instead of receive refunds. |
| JEL: | D8 H2 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21904&r=pbe |
| By: | Jess Benhabib; Alberto Bisin |
| Abstract: | Invariably across a cross-section of countries and time periods, wealth distributions are skewed to the right displaying thick upper tails, that is, large and slowly declining top wealth shares. In this survey we categorize the theoretical studies on the distribution of wealth in terms of the underlying economic mechanism generating skewness and thick tails. Further, we show how these mechanisms can be micro-founded by the consumption-saving decisions of rational agents in specific economic and demographic environments. Finally we map the large empirical work on the wealth distribution to its theoretical underpinning. |
| JEL: | B16 E13 E21 E24 E25 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21924&r=pbe |
| By: | Adriaan Kalwij; Arie Kapteyn; Klaas de Vos |
| Abstract: | Over the last two decades policy reforms in the Netherlands have increased work incentives, resulting in rising employment rates at older ages. Over the same period health of the population has increased as well. A natural question is how much people could work taking into account their health status. As the other chapters in this volume, we use two approaches to answering this question. The first approach takes the relation between mortality and employment in 1981 as a base and then estimates what employment rates could be in 2010 if the relation between mortality and employment were the same in 1981 and 2010. The estimated additional work capacity based on this approach is about 50 percentage points for males at age 65. A second approach estimates the relation between health and employment in the age interval 50-54 and then predicts employment at later ages using health at these later ages. This leads to an estimated additional work capacity in 2010 of more than 75 percentage points for males aged 65-74. When including mortality as an additional health indicator to control for unobserved health differences in the latter approach, the estimated work capacities are more in line with those from the former approach: about 53 percentage points for males aged 65-69 and 44 percentage points for males aged 70-74. |
| JEL: | H55 I1 J26 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21976&r=pbe |
| By: | Eric Zwick; James Mahon |
| Abstract: | We estimate the effect of temporary tax incentives on equipment investment using shifts in accelerated depreciation. Analyzing data for over 120,000 firms, we present three findings. First, bonus depreciation raised investment in eligible capital relative to ineligible capital by 10.4% between 2001 and 2004 and 16.9% between 2008 and 2010. Second, small firms respond 95% more than big firms. Third, firms respond strongly when the policy generates immediate cash flows but not when cash flows only come in the future. This heterogeneity materially affects aggregate estimates and supports models in which financial frictions or fixed costs amplify investment responses. |
| JEL: | D21 D92 G31 H25 H32 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21876&r=pbe |
| By: | Antoine Dechezleprêtre; Elias Einiö; Ralf Martin; Kieu-Trang Nguyen; John Van Reenen |
| Abstract: | We present the first evidence showing causal impact of research and development (R&D) tax incentives on innovation outcomes. We exploit a change in the asset-based size thresholds for eligibility for R&D tax subsidies and implement a Regression Discontinuity Design using administrative tax data on the population of UK firms. There are statistically and economically significant effects of the tax change on both R&D and patenting, with no evidence of a decline in the quality of innovation. R&D tax price elasticities are large at about 2.6, probably because the treated group is from a sub-population subject to financial constraints. There does not appear to be pre-policy manipulation of assets around the thresholds that could undermine our design, but firms do adjust assets to take advantage of the subsidy post-policy. We estimate that over 2006-11 business R&D would be around 10% lower in the absence of the tax relief scheme. |
| Keywords: | R&D, patents, tax, innovation, Regression Discontinuity design |
| JEL: | O31 O32 H23 H25 H32 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1413&r=pbe |
| By: | Hendrik Jürges; Lars Thiel; Axel Börsch-Supan |
| Abstract: | After two decades of reforms that have tightened eligibility for early retirement and the generosity of social security payments, the German government has begun to turn back time and re-introduce more generous disability and early retirement benefits. Often, poor health is cited as the main reason why workers cannot work until the regular retirement age. In this chapter, we try to answer a seemingly simple question: what is the proportion of older individuals who could work in the labor market if they wanted to and if they were not limited by poor health? To answer this question, we follow two different empirical approaches with a similar logic: we estimate the link between health and labor force participation in a population whose employment patterns are or were hardly affected by the current (early) retirement incentives. Using these “pure health effects” on labor force participation to extrapolate to a population that is currently strongly affected by legislation informs us how many could not work for health reasons and how many could work. We find substantial capacity to work among the older population. We estimate that two thirds of the population would be capable of working in the labor market until they turn 70 if they wanted to. |
| JEL: | H31 H55 I19 J14 J26 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21972&r=pbe |
| By: | Maroto Sánchez, Andrés (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Rubalcaba Bermejo, Luis (World Bank. Trade and Competitiveness Practice. Washington DC.); Gallego Martinez, Jorge (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.) |
| Abstract: | Public sectors are under increasing pressure to improve their efficiency and to provide better services in order to boost economic growth and social welfare. One significant way in doing this is the promotion of innovation through research and development (R&D) policies. In this context, the aim of the paper is twofold. On the one hand, to briefly review the framework and state of the art on the relationships between R&D, general innovation systems and public sectors. On the other hand, to test the role of public R&D spending on public sector performance (using multivariate techniques and econometric analyses) and efficiency (using a non- parametric approach) in the European case. Results indicate that publicly funded R&D should be considered a dimension of public sector performance, but that it also plays a key role in its efficiency, mainly when the private and public develop complementarities among them. Managerial implications for R&D policy makers follow from these results. Both performance and efficiency of public sectors could be improved through effective R&D public spending. |
| Keywords: | R&D, Innovation, Public sector, Performance, Efficiency, Europe |
| JEL: | H11 H50 C61 O38 O52 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:uam:wpaper:201602&r=pbe |
| By: | Stangebye, Zachary |
| Abstract: | It is shown in a standard quantitative model of sovereign debt and default that sentiment shocks can alter the distribution of fundamental defaults. The channel through which this occurs is a new type of dynamic lender coordination problem in sovereign debt markets that I call a dynamic panic. During a dynamic panic of this kind, expectations of future negative investor sentiments dilute the price of long-term debt; the sovereign's optimal response to such a panic can be to borrow aggressively, which justifies investors' fears of dilution. Such panics generate naturally many of the unique features the recent Eurozone crisis, and so I explore policy implications in this environment. I find that rate ceilings are an ineffective policy tool but that liquidity provision, appropriately implemented, can eliminate such panics. |
| Keywords: | Sovereign Debt Crises, Confidence-Driven Crises, Long-Term Debt |
| JEL: | E44 F34 G01 H63 |
| Date: | 2015–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:69967&r=pbe |