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on Public Economics |
| By: | Elinder, Mikael; Erixson, Oscar; Waldenström, Daniel |
| Abstract: | We use new population-wide register data on inheritances and wealth in Sweden to estimate the causal impact of inheritances on wealth inequality. We find that inheritances reduce relative wealth inequality (e.g., the Gini coefficient falls by 5-10 percent) but that absolute dispersion increases. Examining different parts of the wealth distribution, we find that the top decile's wealth share decreases substantially, whereas the wealth share of the bottom half increases from a negative to a positive share. In essence, wealthier heirs inherit larger amounts, but less wealthy heirs inherit more relative to their pre-inheritance wealth. We also find that post-inheritance behavioral adjustments mitigate the equalizing effect of inheritances because less wealthy heirs consume larger shares of their inheritances. Moreover, we find that the Swedish inheritance tax reduced the equalizing inheritance effect but that the redistribution of tax revenues could reverse this result. Finally, we show that inheritances increase wealth mobility. |
| Keywords: | bequests; estates; inheritance taxation; net worth; wealth distribution |
| JEL: | D63 E21 H24 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11191&r=pbe |
| By: | Feld, Lars P.; Ruf, Martin; Schreiber, Ulrich; Todtenhaupt, Maximilian; Voget, Johannes |
| Abstract: | Taxing capital gains is an important obstacle to the efficient allocation of resources because it imposes a transaction cost on the vendor which locks in appreciated assets by raising the vendor's reservation price in prospective transactions. For M&As, this effect has been intensively studied with regard to share-holder taxation, whereas empirical evidence on the effect of capital gains taxes paid by corporations is scarce. This paper analyzes how corporate level taxation of capital gains affects inter-corporate M&As. Studying several substantial tax reforms in a panel of 30 countries for the period of 2002-2013, we identify a significant lock-in effect. Results from estimating a Poisson pseudo-maximum-likelihood (PPML) model suggest that a one percentage point decrease in the corporate capital gains tax rate would raise both the number and the total deal value of acquisitions by about 1.1% per year. We use this result to estimate an efficiency loss resulting from corporate capital gains taxation of 3.06 bn USD per year in the United States. |
| Keywords: | corporate taxation,M&A,capital gains tax,lock-in effect |
| JEL: | H25 G34 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluord:1603&r=pbe |
| By: | Arthur Grimes (Motu Economic and Public Policy Research); Judd Ormsby (Motu Economic and Public Policy Research); Anna Robinson (Motu Economic and Public Policy Research); Siu Yuat Wong (University of Auckland) |
| Abstract: | We study the association between fiscal policy and subjective wellbeing using fiscal data on 35 countries and 130 country-years, combined with over 170,000 people’s subjective wellbeing scores. While past research has found that ‘distortionary taxes’ (e.g. income taxes) are associated with slow growth relative to ‘non-distortionary’ taxes (GST/VAT), we find that distortionary taxes are associated with higher levels of subjective wellbeing than non-distortionary taxes. This relationship holds when we control for macro-economic variables and country fixed effects. If this relationship is causal, it would offer an explanation as to why governments pursue these policies even when they harm economic growth. We find that richer people’s subjective wellbeing is less harmed by indirect taxes than for people with lower incomes, while “unproductive expenditure” is associated with higher wellbeing for the middle class relative to others, possibly reflecting middle class capture. We see little evidence for differential effects of fiscal policy on people living in different sized settlements. Devolving a portion of expenditure to subnational government is associated with higher subjective wellbeing but devolving tax collection to subnational government is associated with monotonically lower subjective wellbeing. |
| Keywords: | Subjective wellbeing; Fiscal policy; Decentralised government |
| JEL: | D60 E62 H50 H70 O57 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:16_05&r=pbe |
| By: | J.M. Dixon; J. Nassios |
| Abstract: | We investigate the impact of a cut to the company tax rate using a miniature version of the Vic-Uni computable general equilibrium model of the Australian economy with additional detail on ownership of physical capital. Because of Australia's system of dividend imputation, a change to the company tax rate only affects the final post-tax rate of return for foreign investors. Therefore a cut to the company tax rate would transfer government revenue to foreigners, and add to pressure on government to reduce spending or to raise personal taxes. We concur with the Treasury's finding that a cut to the company tax rate would attract more foreign investment to Australia, making workers more productive and increasing wages and output. However, there is a lag between new investment activity and capital growth, and a large share of future company profits will accrue to foreign investors. We also find that increased wages will reduce returns to domestically owned capital. While the impact on national production, as measured by GDP, will be positive, this is not a suitable measure of national benefit. The right indicator of national benefit is the impact of a company tax rate cut on national income and we find that this will fall. |
| Keywords: | Forecasting, CGE models, profit tax, labour markets |
| JEL: | C53 C58 D58 E27 J23 O41 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:cop:wpaper:g-260&r=pbe |
| By: | William Gbohoui (Sans nom); François Vaillancourt |
| Abstract: | To understand the role of subnational tax policies in explaining regional growth, we present stylized facts on U.S. state income and state-level tax policies. We use real Gross State Products (GSP) as the indicator of economic performance in contrast to the existing literature, which relies on Personal Income. The results reveal an increase in per capita income disparities, and time - persistent differences in human capital and physical capital between U.S. states. In addition, we find that subnational tax policies vary widely between states. Using augmented Barro regressions, we show that educational attainment, and state-level tax policies are the key determinants in explaining the differences between state-level economic growth. More precisely, higher corporate income or general sales taxes significantly retard economic growth, while human capital positively impacts state-level growth. |
| Keywords: | Regional growth, state and local taxation, |
| JEL: | H71 R11 |
| Date: | 2016–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2016s-13&r=pbe |
| By: | Eduardo Olaberria |
| Abstract: | The Chilean economy has had an extraordinary performance over the last decades with strong growth and declining poverty rates. However, the economy is now slowing at a time when inequality remains very high, making future social progress challenging. This paper discusses how to achieve greater social inclusiveness against the background of weaker medium-term growth. First, it argues that Chile needs to increase income redistribution through its tax and transfer system towards levels prevailing in other OECD increases. Although existing social transfers are effective in combatting poverty, their size remains small and many households at the bottom of the ladder are not reached by them. Second, the paper argues that labour earnings should be less disparate, as they explain around 70% of income inequality. This should be done by updating labour legislation, but also by empowering low-skill workers and enabling them to increase their productivity, through the acquisition of adequate skills. Finally, focus should be placed on closing wide gender gaps.This working paper relates to the 2015 OECD Economic Survey of Chile (http://www.oecd.org/eco/surveys/economic-survey-chile.htm). Amener tous les Chiliens à bord L'économie chilienne a eu une performance extraordinaire au cours des dernières décennies, avec une forte croissance et la baisse des taux de pauvreté. Cependant, l'économie se ralentit à un moment où l'inégalité reste très élevé, ce qui rend l'avenir du progrès social difficile. Ce chapitre traite de la façon d'atteindre une plus grande inclusion sociale dans le contexte de ralentissement de la croissance à moyen terme. Premièrement, elle soutient que le Chili a besoin d'augmenter la redistribution des revenus par le biais de son système fiscal et de transferts vers des niveaux qui prévalent dans d'autres augmentations de l'OCDE. Bien que les transferts sociaux existants soient efficaces dans la lutte contre la pauvreté, leur taille reste faible et de nombreux ménages au bas de l'échelle ne sont pas atteints par eux. Deuxièmement, le chapitre fait valoir que les revenus du travail devraient être moins disparate, car ils expliquent environ 70% de l'inégalité des revenus. Cela devrait être fait en mettant à jour la législation du travail, mais aussi en donnant aux travailleurs peu qualifiés et en leur permettant d'accroître leur productivité, grâce à l'acquisition de compétences adéquates. Enfin, l'accent devrait être mis sur la réduction des écarts entre les sexes larges. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de Chili 2015 (www.oecd.org/fr/eco/etudes/etude-econom ique-chili.htm). |
| Keywords: | income tax, income distribution, social mobility, social benefits, gender equity, impôt, équité entre les sexes, prestations sociales, mobilité sociale, répartition des revenus |
| JEL: | D31 D63 E24 H24 H53 |
| Date: | 2016–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1289-en&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 prepolicy 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. |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp230&r=pbe |
| By: | Salvador Barrios (European Commission); Serena Fatica (European Commission); Diego Martinez (Universidad Pablo de Olavide); Gilles Mourre (European Commission); Ferhan Salman (International Monetary Fund); Elva Bova (International Monetary Fund); Christina Kolerus (International Monetary Fund); Jules S. Tapsoba (International Monetary Fund); Gilles Mourre (European Commission); Nikola Altiparmakov (Fiscal Council - Republic of Serbia); Lukas Reiss (Oesterreische Nationalbank); Mariano Bosch (Inter-American Development Bank); Angel Melguizo Esteso (OECD); Carmen Pages-Serra (Inter-American Development Bank); Renee Philip (New Zealand Treasury); Boris Cournède (OECD); Antoine Goujard (OECD); Álvaro Pina (OECD); Wolfgang Merz (Federal Ministry of Finance – Berlin); Martin Larch (European Commission); Kristin Magnusson Bernard (European Commission); Balint Tatar (European Commission); Nicola Giammarioli (European Stability Mechanism); Cristina Checherita-Westphal (European Central Bank); Alexander Klemm (International Monetary Fund); Paul Viefers (Deutsches Institut für Wirtschaftsforschung - Berlin); Pedro Hinojo (Ministry of Economy and Competitiveness, Spain); Giovanni Ricco (London Business School); Giovanni Callegari (European Central Bank); Jacopo Cimadomo (European Central Bank); Enrico D’Elia (Ministero dell'Economia e delle Finanze); Filippo Pericoli (Ministero dell'Economia e delle Finanze); Reda Cherif (International Monetary Fund); Fuad Hasanov (International Monetary Fund); Ernesto Rezk (National University of Córdoba, Argentina); Diego Martínez López (Universidad Pablo de Olavide, Sevilla); Anna Kalbhenn (European Central Bank); Livio Stracca (European Central Bank); Luiz de Mello (OECD); George Hondroyiannis (Bank of Greece); Dimitrios Papaoikonomou (Bank of Greece); Jan Babecký (Czech National Bank); Richard Morris (ECB); Pietro Rizza (Banca d’Italia); Vladimir Borgy (Banque de France); Kirstine Eibye Brandt (Danmarks Nationalbank); Manuel Coutinho Pereira (Banco de Portugal); Anna Jablecka (Narodowy Bank Polski); Javier J. Pérez (Banco de España); Lukas Reiss (Oesterrichische Nationalbank); Morten Rasmussen (Danmarks Nationalbank); Karim Triki (Banque de France); Lara Wemens (Banco de Portugal); David Heald (University of Aberdeen); Ludovít Ódor (Council for Budget Responsibility, Bratislava); Tomasz Jedrzejowicz (Narodowy Bank Polski); Marcin Kitala (Narodowy Bank Polski); Xavier Debrun (International Monetary Fund); Tidiane Kinda (International Monetary Fund); Geert Langenus (National Bank of Belgium); Fabrizio Balassone (Banca d'Italia); Sandro Momigliano (Banca d'Italia); Marzia Romanelli (Banca d'Italia); Pietro Tommasino (Banca d'Italia); Teresa Ter-Minassian (Inter-American Development Bank); Marco Buti (European Commission); Daniele Franco (Ragioneria Generale dello Stato); Karsten Wendorff (Deutsche Bundesbank) |
| Abstract: | The volume collects the essays presented at the 16th Workshop on Public Finance organised by Banca d’Italia in Perugia from 3 to 5 April 2014. The workshop had two main objectives: (i) examining the changes that public policies should undertake in the coming years to adapt to the challenging new environment; (ii) assessing policy responses to the crisis. In many countries the recent crisis accelerated pre-existing trends and made even more urgent a rethinking of the tax and welfare systems. The workshop contributed to this reassessment offering insights on the consequences of specific reforms carried out in Europe and elsewhere. The reaction to the euro-area sovereign debt crisis included fiscal adjustments as well as institutional reforms. In the workshop, theoretical and empirical works examined timing, effectiveness and composition of the fiscal consolidations carried out, as well as the recent reform of EU governance. The first session focused on the effects of both tax and expenditure policies on tax rates, work related tax expenditures, labor markets, the overall economy and pension reforms. Budgetary adjustments were at the core of the second session. Factors conducive to a successful exit from IMF official assistance, impact of government’s payment delays, propagation of government spending shocks, debt dynamics, the effects on public opinion of fiscal policy and fiscal multipliers were all given space and attention. The third session concentrated on recent changes in fiscal rules, fiscal councils and the possible establishment of an euro-area fiscal union. The panel discussion focused on the progress made and the characteristics of existing fiscal rules. |
| Keywords: | arrears, accounts payable, caribbean, expenditure, fiscal policy, fiscal adjustment, financial crises, fiscal measures, fiscal policy uncertainty, fiscal reaction function, fiscal rules, fiscal transmission mechanism, government spending shock, imf lending, impact of public finance, informality, labor market, latin america, macroeconomic, national saving, public debt, public payment delays, impulse responses, payg vs. funded rates of return, pension privatization, pensions, revenue, var, unemployment gaps |
| JEL: | C32 E6 E31 E60 E61 E62 D80 F33 G01 H6 H8 H60 H61 H62 H55 H63 H81 J08 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:workpa:sec_19&r=pbe |
| By: | Ferrière, Axelle (European University Institute); Karantounias, Anastasios G. (Federal Reserve Bank of Atlanta) |
| Abstract: | How should public debt be managed when uncertainty about the business cycle is widespread and debt levels are high, as in the aftermath of the last financial crisis? This paper analyzes optimal fiscal policy with ambiguity aversion and endogenous government spending. We show that, without ambiguity, optimal surplus-to-output ratios are acyclical and that there is no rationale for either reduction or further accumulation of public debt. In contrast, ambiguity about the cycle can generate optimal policies that resemble "austerity" measures. Optimal policy prescribes front-loaded fiscal consolidations and convergence to a balanced primary budget in the long run. This is the case when interest rates are sufficiently responsive to cyclical shocks; that is, when the intertemporal elasticity of substitution is sufficiently low. |
| Keywords: | endogenous government expenditures; distortionary taxes; balanced budget; austerity; fiscal consolidation; martingale; ambiguity aversion; multiplier preferences |
| JEL: | D80 E62 H21 H63 |
| Date: | 2016–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2016-06&r=pbe |
| By: | Dhammika Dharmapala (Univrsity of Chicago) |
| Abstract: | The reform of corporate and business taxation is central to current tax policy debates in the United States. This paper provides a framework for analyzing reform proposals by describing the lessons from current economic research for business tax reform, addressing both international and domestic reforms within a unified perspective. The paper begins by identifying ten potential inefficiencies created by the current corporate tax regime. It then discusses three classes of reform proposals. The first involves a substantially lower corporate tax rate and a territorial regime. The second is a formula apportionment system. The third category includes a destination-based cash flow tax. The paper evaluates each of these proposals in the light of the framework introduced earlier. It concludes that the relatively modest reforms currently under discussion would address only a few of these margins. In contrast, more fundamental reforms would eliminate all or most of the inefficiencies of corporate taxation. |
| Keywords: | Corporate tax; Business taxation; International taxation; Tax reform; Territorial taxation; Formula apportionment; Cash flow tax |
| JEL: | H25 F23 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:btx:wpaper:1604&r=pbe |
| By: | Papaioannou, Sotiris |
| Abstract: | This study examines whether differences in monetary policy are associated with diverging effects of public spending on growth. At first stage, we estimate public spending multipliers for each country of the European Union (EU). Their size varies considerably across countries. Then we incorporate in the analysis the role of monetary policy and examine whether real interest rates affect the relationship between public spending and growth. The main result of the econometric analysis is that government spending can affect growth positively only when real interest rates become negative. This result remains robust to several changes in the econometric specification and measures of interest rate. |
| Keywords: | Public spending, Fiscal multipliers, Monetary policy, Economic growth. |
| JEL: | E43 E62 O40 |
| Date: | 2016–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:70331&r=pbe |
| By: | Scheuer, Florian; Werning, Iván |
| Abstract: | We show that the Diamond and Mirrlees (1971) linear tax model contains the Mirrlees (1971) nonlinear tax model as a special case. In this sense, the Mirrlees model is an application of Diamond-Mirrlees. We also derive the optimal tax formula in Mirrlees from the Diamond-Mirrlees formula. In the Mirrlees model, the relevant compensated cross-price elasticities are zero, providing a situation where an inverse elasticity rule holds. We provide four extensions that illustrate the power and ease of our approach, based on Diamond-Mirrlees, to study nonlinear taxation. First, we consider annual taxation in a lifecycle context. Second, we include human capital investments. Third, we incorporate more general forms of heterogeneity into the basic Mirrlees model. Fourth, we consider an extensive margin labor force participation decision, alongside the intensive margin choice. In all these cases, the relevant optimality condition is easily obtained as an application of the general Diamond-Mirrlees tax formula. |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11172&r=pbe |
| By: | Papaioannou, Sotiris |
| Abstract: | This study examines whether differences in public sector efficiency are associated with diverging effects of public investment on growth. At first stage, we estimate public investment multipliers for each country of the European Union (EU). Their size varies considerably across countries. Then we construct measures of public sector efficiency which are used in the econometric analysis to study the relationship between public investment and growth. The main result of the econometric analysis is that the efficiency of public sector indeed matters in raising the influence of public investment on growth. This result remains robust to several changes in the econometric specification and to various measures of government efficiency which used as explanatory variables in the econometric estimations. |
| Keywords: | Public investments, Fiscal multipliers, Public sector efficiency, Economic growth. |
| JEL: | E62 H30 O40 |
| Date: | 2016–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:70332&r=pbe |
| By: | Claude Giorno; Jacques Adda |
| Abstract: | Israel is a young country with still dynamic population growth, but it is already beginning to face the consequences of population ageing. The pension system relies largely on mandatory private retirement saving, which will moderate the long-term fiscal impact. Yet, there are questions about the fairness of the pension system, given the regressive nature of some of its tax provisions, its ability to effectively protect the most vulnerable elderly, whose poverty rate is high, as is the case for the rest of the population, and its efficiency in securing and valuing these retirement savings to guarantee pension adequacy. This review examines ways forward for policy to address these issues by reinforcing the protective role of basic pensions, by encouraging people to work longer and by improving the fairness and effectiveness of the system’s second pillar. This Working Paper relates to the 2016 OECD Economic Review of Israel (www.oecd.org/eco/surveys/economic-survey-israel.htm). Améliorer le système de retraite et le bien-être des retraités en Israël Fort d’une croissance démographique encore dynamique, Israël est un pays jeune, qui commence toutefois à faire face aux conséquences du vieillissement de sa population. Le système de retraite reposant largement sur l’épargne-retraite privée obligatoire, il pèsera moins lourd à long terme sur les finances publiques. Cela étant, des questions se posent quant à son équité compte tenu du caractère régressif de certaines de ses dispositions fiscales, à sa capacité à protéger efficacement les personnes âgées les plus vulnérables, parmi lesquelles le taux de pauvreté est élevé comme dans le reste de la population, et à son efficacité à protéger et à valoriser l’épargne-retraite ainsi constituée pour garantir des pensions suffisantes. Le présent chapitre examine la marche à suivre pour que les autorités puissent répondre à ces questions en renforçant le rôle protecteur des pensions de base, en encourageant les gens à travailler plus longtemps et en améliorant l’équité et l’efficacité du second pilier du système de retraite. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Israël 2016 (www.oecd.org/fr/eco/etudes/etude-econom ique-israel.htm). |
| Keywords: | ageing, pension system, defined contribution, retirement age, elderly poverty, âge du départ en retraite, régime de retraite à cotisations définies, vieillissement, système de retraite |
| JEL: | H55 H75 J14 J26 J32 |
| Date: | 2016–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1288-en&r=pbe |
| By: | Ryan Niladri Banerjee; Fabrizio Zampolli |
| Abstract: | In a panel of OECD countries, we investigate the short-term effects of fiscal consolidation on output and employment, and how these vary with the state of the business cycle, monetary policy, the level of public debt, the current account, and the strength of the financial cycle. The estimation makes use of local projection methods and fiscal consolidation shocks identified through the narrative approach. Our main finding is that short-term fiscal multipliers remain for the most part below unity, even in bad states, suggesting that important offsetting factors were at play in past consolidation episodes. In particular, we do not find evidence that fiscal multipliers are above unity when the output gap is negative or monetary policy is tight. Instead, we find evidence of lower than average multipliers when the current account is in deficit and public debt is high (although in the latter case employment costs tend to be larger). One factor found to raise the costs of fiscal consolidation is weak private credit growth. Even in this case, however, point estimates indicate that fiscal multipliers are not larger than one. Our results suggest that fiscal consolidation multipliers are not necessarily, or everywhere, larger than average in the aftermath of the global financial crisis. |
| Keywords: | fiscal consolidation, fiscal multipliers, narrative approach, panel data, local projections |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:553&r=pbe |
| By: | Luigi Brighi; Paolo Silvestri |
| Abstract: | The purpose of the paper is to study inefficiency in the production technology of the childcare service and to carry out a comparative analysis of public and private day-care centres. An empirical analysis on cross-section micro-data from a region of northern Italy has been conducted by using an input-distance function with a translog specification. Estimates of the multi-output production technology and input-oriented technical inefficiency are obtained in a stochastic frontier model with a half-normally distributed one-sided error. Heteroscedasticity has been modelled to investigate the determinants of inefficiency and estimate their marginal effects. We find that production exhibits increasing returns with an estimated elasticity of scale of 1.21. Separability between inputs and outputs is rejected at a 5% level of significance. The average estimate of technical inefficiency is 10% and public centres are more inefficient than private centres by 4.1 percentage points. The proportion of part-time children and the presence of mixed-age classrooms are significant determinants of inefficiency which equally affect both public and private centres. |
| Keywords: | Childcare, Day-Care Center, Technical Inefficiency, Stochastic Frontier, Analysis, Input-Distance Function |
| JEL: | D24 H44 J13 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:mod:cappmo:0135&r=pbe |
| By: | Raúl A. Ponce-Rodríguez; Charles R. Hankla; Jorge Martinez-Vazquez; Eunice Heredia-Ortiz |
| Abstract: | In this article, we investigate how differences in the political institutions necessary for implementing decentralization reform may affect the efficiency and welfare properties of decentralization itself. We incorporate insights from political science and economics into a rigorous and formal extension of the influential “decentralization theorem” first developed by Oates in 1972. In our analysis, we go beyond Oates by producing a strong decentralization theorem that identifies the political conditions under which democratic decentralization dominates centralization even in the presence of interjurisdictional spillovers. More specifically, we find that beneficial outcomes for public service delivery will obtain when democratic decentralization (i.e. the creation of popularly elected sub-national governments) is combined with party centralization (i.e. the power of national party leaders to nominate candidates for sub-national office). We also find that the participation rules of primaries, whether closed or open, have important implications for the expected gains from decentralization. Most notably, we find that, when primaries are closed, even Oates’ conventional decentralization theorem does not hold. In summary, our theory shows that political institutions matter considerably in determining the welfare gains of decentralization outcomes. |
| Keywords: | federalism, institutions, decentralization. |
| JEL: | D61 D72 D78 H73 H75 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:gov:wpaper:1604&r=pbe |
| By: | Alessio D'Amato (DEF and CEIS, Università di Roma "Tor Vergata" and University of Cambridge); Edilio Valentini (University G. D'Annunzio of Chieti Pescara); Mariangela Zoli (DEF and CEIS, Università di Roma "Tor Vergata" and SEEDS Interuniversity Research Centre.) |
| Abstract: | We show how corrective taxation can improve the efficiency properties of tradable quotas systems a¤ected by market power. Indeed, when only a subset of firms are price takers while the remaining firms enjoy market power, we show that, if the regulator sets an ad hoc taxation on firms' traded quotas, cost effectiveness can be restored without necessarily driving dominant firm(s) net demand to zero. Cost effectiveness with market power and quotas taxation implies some cost in terms of tax revenue that, however, can be justified from a social welfare perspective. Moreover, all firms may result to be better off when the corrective taxation is implemented. |
| Keywords: | tradable quotas markets, market power, tradable quotas taxation. |
| JEL: | Q58 H23 |
| Date: | 2016–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:371&r=pbe |
| By: | Antoine Bozio (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - Institut national de la recherche agronomique (INRA) - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics); Thomas Breda (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - Institut national de la recherche agronomique (INRA) - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics); Malka Guillot (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique) |
| Abstract: | This paper makes two simple points. First, labour demand depends on product wage or labour cost. Hence, demand-side explanations for the rise in inequalities such as skill-biased technical change and job polarization should be tested using data on labour cost and not net wage or posted wage. Contrary to previous studies, we find evidence of skill-biased technical change in France when we measure wage inequality in terms of labour cost. In that respect, France is no exception. Second, the French case provides a clear evidence that changes in taxation can have very significant effect in converting market inequalities into consumption or net wages inequalities. In France, net wage inequalities have decreased by about 10%, while labour cost inequalities have increased by 15% over the 1976-2010 period. This fact provides support both for the supporters of the skill-biased technical change explanations of the secular increase in wage inequalities, as well to those who believe that institutions could have significant impact on inequalities in disposable incomes. |
| Keywords: | Wage inequality,Labour cost,Social Security contributions,Tax incidence |
| Date: | 2016–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01294599&r=pbe |
| By: | Tine Hufkens; Gerlinde Verbist |
| Abstract: | An aspect that has only recently received attention in the study of policy measures aimed at supporting families with young children in their work-family life balance is its distributive impact. Are these measures used by poor and rich families alike, or is there a ‘Matthew effect’ at play, in the sense that poor families are underrepresented in using such measures? In order to perform such an evaluation one needs to have a measure of both cash and in-kind benefits related to policies that help families cope with the care of young children and job expectations. In-kind benefits are offered mainly in the form of subsidized early childhood education and care (ECEC), for which an appropriate cash equivalent has to be derived. As the value of in-kind benefits from publicly provided services is not included in the EU-SILC data, we derive them for this paper in line with earlier studies (e.g. Matsaganis and Verbist, 2009; Vaalavuo, 2011; Förster and Verbist, 2012; Van Lancker, 2014; Van Lancker and Ghysels, 2014). In comparison to these earlier studies, however, our analysis is much more fine-grained as we use the microsimulation model EUROMOD to include more precise estimates of parental fees and related tax-benefit policies; thus, we will have a better estimate of the net in-kind benefit households derive from ECEC services. We focus on policy measures going to children under compulsory schooling age for a selection of seven EU-countries. These improved estimates allow us to analyze the work-family polices from three perspectives: 1) how do the distributive characteristics of cash and in-kind benefits compare to one another in this domain?; 2) how do countries compare to one another in their policy perspective in terms of supporting outsourcing or home-based care for young children?; 3) what is the balance between private and public efforts for outsourced childcare across countries? Our results show that including net fees in the analysis attenuates the Matthew effect, in the sense that net fees are relatively more heavy for richer households than for the poor. There is, however, considerable cross-country variation. |
| Keywords: | Family policy, child care, in-kind benefits, income distribution, microsimulation |
| JEL: | H23 I38 J13 C53 |
| URL: | http://d.repec.org/n?u=RePEc:hdl:improv:1609&r=pbe |