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on Public Economics |
| By: | Alvaro Forteza (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Cecilia Noboa (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República) |
| Abstract: | We present a formal model in which individuals want the government to tolerate tax evasion because, in the context of limited state capacity, evasion provides insurance. Preferred tolerance to tax evasion increases with income, because government programs are redistributive. We take the model to the data using the World Values Survey. We show that both in the model and in the WVS data justification of tax evasion is increasing in individuals’ income, presents an inverted-U shape in perceived risk and is decreasing in institutional quality. Our analysis suggests that strong tax enforcement might not be popular among many citizens, particularly so in weak institutional environments. |
| Keywords: | Informality, tax morale, tolerance to evasion. |
| JEL: | H20 H26 O17 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:ude:wpaper:1015&r=pbe |
| By: | Kim, Minseong |
| Abstract: | Unlike many analysis of tax effects on consolidated household/government debts in a monetary union, this paper builds up analysis from a consolidated budget constraint, instead of starting from a model. By a monetary union, it is assumed that all nations in the union share same currency. Also, if taxes are assumed to be in real values, or if one assumes that government targets real value of taxes $T/P$, then it is also possible to produce the size of fiscal multiplier on real value of consolidated debts, if relaxed version of classical dichotomy - that agents' decisions are only affected by real variables - is assumed. This paper argues that size is $db/dt_r = -1$ where $t_r$ is real value of taxes or ``real taxes'' and $b = B/(PR)$ where $B = -D$ with $D$ nominal debt, $P$ price and $R-1$ nominal interest rate , or in terms of real debts, $dd/dt_r = 1$. |
| Keywords: | fiscal multiplier; tax multiplier; debt analysis; monetary union; household debts; international macroeconomics |
| JEL: | E13 E62 F19 F41 F45 H30 H60 |
| Date: | 2016–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:71016&r=pbe |
| By: | Antoine Dechezlepretre; 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: | J24 M0 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:66428&r=pbe |
| By: | Sokolovskyi, Dmytro; Sokolovska, Olena |
| Abstract: | This paper aims to propose the approach to classify the industries in terms of easiness of tax evasion. Basing on assumptions of taxpayer’s behavior, our results allow defining the type of dependence of real tax rates on their nominal ones. We find that the graph, describing the taxpayer’s behavior, has two key points: maximum – the optimal tax rate (if this rate increase, the real tax revenues fall), and also the point of simple reproduction (after achieving this level, firms stop to pay taxes at all with appropriate shifting into informal sector or closing down). I.e. two key levels of tax burden: «optimal» and «zero» can be defined. The values of those parameters for taxpayers operating in different groups of industries were calculated. |
| Keywords: | tax burden, economic behavior, tax evasion, game theory |
| JEL: | C72 G38 H26 |
| Date: | 2016–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:71110&r=pbe |
| By: | Wiemer Salverda, AIAS and AMCIS, University of Amsterdam |
| Abstract: | The paper takes stock of important new developments in data sources on income inequality and wealth inequality and sketches long run changes for various inequality measures. It critically discusses limitations and gaps and extends for income inequality in two directions – by considering the distribution of income for the EU as a whole and comparing this to the USA on the one hand, and by scrutinising the effects of income redistribution as well as of equivalisation of incomes for the nature of the receiving household on the other hand. As a result of the former very high poverty rates are found in some countries, which demand a much stronger policy focus than general anti-poverty measures can offer. Increased redistribution and particularly the introduction of a European childbasic income is proposed, which also can offer children protection against undue effects of policy making. The latter shows an important role for equivalisation and a potential overestimation of the effects of redistributive policies. In addition, the paper considers the important contribution made to income inequality by households depending on labour earnings. In the light of these findings the paper discusses future trends in income inequality and evaluates the role of EU policies. These are found wanting because of their narrow focus on risk of poverty and the absence of a role for considering poverty and inequality in policy made at the European level. Instead it advocates mainstreaming inequality concerns in broad areas of policy making and suggests starting an annual Inequality Assessment of the Union. It concludes by stressing the need for improving the data situation, in particular regarding the distribution of wealth, by introducing a Billionaires Directive for obligatory reporting on top wealth and incomes. |
| JEL: | D31 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:euf:dispap:008&r=pbe |
| By: | Francis, Bill B.; Hasan, Iftekhar; Sun, Xian; Wu, Qiang |
| Abstract: | We show that firms led by politically partisan CEOs are associated with a higher level of corporate tax sheltering than firms led by nonpartisan CEOs. Specifically, Republican CEOs are associated with more corporate tax sheltering even when their wealth is not tied with that of shareholders and when corporate governance is weak, suggesting that their tax sheltering decisions could be driven by idiosyncratic factors such as their political ideology. We also show that Democratic CEOs are associated with more corporate tax sheltering only when their stock-based incentives are high, suggesting that their tax sheltering decisions are more likely to be driven by economic incentives. In sum, our results support the political connection hypothesis in general but highlight that the specific factors driving partisan CEOs’ tax sheltering behaviors differ. Our results imply that it may cost firms more to motivate Democratic CEOs to engage in more tax sheltering activities because such decisions go against their political beliefs regarding tax policies. |
| Keywords: | political preference, tax sheltering, CEO, Democrats, Republicans, incentives |
| JEL: | G21 H26 G32 P16 |
| Date: | 2016–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2016_005&r=pbe |
| By: | Buchanan, Bonnie; Cao, Xuying (Cathy); Liljeblom, Eva; Weihrich, Susan |
| Abstract: | We examine how firms respond to uncertainty around U.S. tax policy changes, namely the individual level tax rate increases set to take effect on January 1, 2011 and January 1, 2013. We provide evidence that firms time the uncertainty in the tax environment and revise their dividend policy to an expected tax increase. We find that firms are likely to initiate their dividends or intensively increase their existing dividend amount one year before the expected tax increase. In addition, in 2012 when there is much less uncertainty on dividend tax changes than in 2010, firms are less likely to initiate a regular dividend but are more likely to initiate special dividends. The results suggest that firms facing less tax uncertainty are less likely to make long-term commitments on regular dividend payments but are more likely to take advantage of the last-minute low tax benefits by issuing special dividends. Furthermore, the response to the possible elimination of a tax cut was strongest in firms with high levels of tax-affected ownership, supporting the argument that when facing policy uncertainty, firms behave to prepare for the worst scenarios, which in this case is a tax increase. |
| Keywords: | dividend taxes, uncertainty, payout policy, special dividends |
| JEL: | G35 G32 G38 H32 |
| Date: | 2016–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2016_011&r=pbe |
| By: | Kochanova,Anna; Hasnain,Zahid; Larson,Bradley Robert |
| Abstract: | Using a cross-country data set on e-government systems, this paper analyzes whether e-filing of taxes and e-procurement adoption improves the capacity of governments to raise and spend resources through the lowering of tax compliance costs, improvement of public procurement competitiveness, and reduction of corruption. The paper finds that information and communications technology can help improve government capacity, but the impact of e-government varies by type of government activity and is stronger in more developed countries. Implementation of e-filing systems reduces tax compliance costs as measured by the number of tax payments, time required to prepare and pay taxes, likelihood and frequency of firms being visited by a tax official, perception of tax administration as an obstacle, and incidence of bribery. The effects of e-procurement are weaker, with the number of firms securing or attempting to secure a government contract increasing with e-procurement implementation only in countries with higher levels of development and better quality institutions. The paper finds no systematic relationship between e-procurement and bureaucratic corruption. |
| Keywords: | Debt Markets,E-Business,Taxation&Subsidies,E-Government |
| Date: | 2016–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7657&r=pbe |
| By: | Lundberg, Jacob; Waldenström, Daniel |
| Abstract: | This paper presents new estimates of wealth inequality in Sweden during 2000-2012, linking wealth register data up to 2007 and individually capitalized wealth based on income and property tax registers for the period thereafter when a repeal of the wealth tax stopped the collection of individual wealth statistics. We find that wealth inequality increased after 2007 and that more unequal bank holdings and apartment ownership appear to be important drivers. We also evaluate the performance of the capitalization method by contrasting its estimates and their dispersion with observed stocks in register data up to 2007. The goodness-of-fit varies tremendously across assets and we conclude that although capitalized wealth estimates may well approximate overall inequality levels and trends, they are highly sensitive to assumptions and the quality of the underlying data sources. |
| Keywords: | Capitalization method; Gini coefficient; great recession; Investment income method; Top wealth shares; wealth distribution |
| JEL: | D31 H2 N32 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11246&r=pbe |
| By: | Douglas L. Campbell (New Economic School (NES)); Lester Lusher (UC Davis) |
| Abstract: | We study the impact of trade shocks on inequality using newly constructed micro and macro data. First, we use the Current Population Survey’s (CPS) Merged Outgoing Rotation Group (MORG) from 1979 to 2010 combined with new annual measures of imported inputs, a proxy for offshoring. We find that in periods when US relative prices are high, and imports surge relative to exports, workers in sectors with greater initial exposure to international trade were more likely to be unemployed a year later, but did not experience significant declines in wages conditional on being employed. Contrary to the usual narrative, we find negative wage effects for higher-wage, but not lower-wage workers, particularly for those who are less-educated. Second, sectors most exposed to trade shocks do not experience relative increases in inequality. Third, using aggregate international data for 31 countries, we find that various trade shocks, such as increases in trade with China, are not generally correlated with changes in the income distribution. Instead, using new historical data, we confirm a close connection between top marginal tax rates and top income shares, and find that the level of top marginal tax rates impacts changes in the top 1% share of income, implying that top income shares are a function of historical marginal tax rates. |
| Keywords: | Inequality, Globalization, Skill-Biased Technological Change, American Manufacturings |
| JEL: | F10 F16 F41 N60 L60 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0220&r=pbe |
| By: | Cheikbossian, Guillaume |
| Abstract: | This paper provides a political economy analysis of (de)centralization when local public goods -- with spillovers effects -- can be substitutes or complements. Depending on the degree of complementarity between local public goods, median voters strategically delegate policy to either `conservative' or to `liberal' representatives under decentralized decision-making. In the first case, it accentuates the free-rider problem in public good provision, while it mitigates it in the second case. Under centralized decision-making, the process of strategic delegation results in either too low or too much public spending, with the outcome crucially depending on the sharing of the costs of local public spending relative to the size of the spillover effects. Hence, with a common financing rule, centralization is welfare improving if and only if both public good externalities and the degree of complementarity between local public goods are both relatively large. |
| Keywords: | (De)centralization; Local Public Goods; Complements; Strategic Delegation; Spillovers |
| JEL: | D72 H41 H77 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:30433&r=pbe |
| By: | Roberta Distante (Maersk Line); Elena Verdolini (Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) and Fondazione Eni Enrico Mattei); Massimo Tavoni (Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC), Fondazione Eni Enrico Mattei and Politecnico di Milano) |
| Abstract: | We empirically assess the distributional impacts and welfare effects of policies to incentivize renewable electricity production for the case of Italy. We use data from the Household Budget Survey between 2000 and 2010 to estimate a demand system in which energy goods' shares of expenditure are modelled using different empirical approaches. We show that the general Exact Affine Stone Index (EASI) demand system provides more robust estimates of price elasticities of each composite good than the commonly used Almost Ideal Demand System (AIDS). The estimated coefficients are used to perform a welfare analysis of the Italian renewable electricity production incentive policy. We show that different empirical approaches give rise to significantly different estimates of price elasticities and that methodological choices are the reasons for the very high elasticities of substitutions estimated using similar data by previous contributions. We find no evidence of regressivity of the incidence of the Italian renewable incentive scheme in the period under consideration. The renewable subsidies act as a middle-class tax, with the higher welfare losses experienced by households in the second to fourth quintiles of the expenditure distribution. |
| Keywords: | Energy taxes, Consumer Demand System, Welfare Effects, Equity |
| JEL: | D12 H22 Q48 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2016.36&r=pbe |
| By: | Thompson, Jeffrey P. |
| Abstract: | One potential consequence of rising concentration of income at the top of the distribution is increased borrowing, as less affluent households attempt to maintain standards of living with less income. This paper explores the “keeping up with the Joneses” phenomenon using data from the Survey of Consumer Finances. Specifically, it examines the responsiveness of payment-to-income ratios for different debt types at different parts of the income distribution to changes in the income thresholds at the 95th and 99th percentiles. The analysis provides some evidence indicating that household debt payments are responsive to rising top incomes. Middle and upper-middle income households take on more housing-related debt and have higher housing debt payment to income ratios in places with higher top income levels. Among households at the bottom of the income distribution there is a decline in non-mortgage borrowing and debt payments in areas with rising top-income levels, consistent with restrictions in the supply of credit. The analysis also consistently shows that 95th percentile income has a greater influence on borrowing and debt payment across in the rest of the distribution than the more affluent 99th percentile level. |
| Keywords: | Inequality ; Debt ; Consumption |
| JEL: | D63 D14 |
| Date: | 2016–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2016-46&r=pbe |
| By: | Congressional Budget Office |
| Abstract: | CBO analyzes 36 policy options commonly proposed by policymakers and analysts. Most of them would improve Social Security’s long-term finances, but only a few would significantly postpone the combined trust funds’ exhaustion date. |
| JEL: | H55 H60 H68 J26 |
| Date: | 2015–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:cbo:report:510110&r=pbe |
| By: | Thibault, Emmanuel |
| Abstract: | The use of GDP as the main index of progress and welfare of a country has been the subject of a long debate amongst economists. Using and extending the saversspenders theory recently popularized by Mankiw (2000, AER), we analyze the theoretical relationships between GDP and the welfare of a society. This analysis is undertaken using several different overlapping generations models which all take into account the great heterogeneity of consumer behavior observed in the data (different labor supply choices, different degrees of altruism and/or different degrees of impatience to consume). The results indicate that GDP (per capita) is often a relevant index and is always a decent social welfare indicator. |
| Keywords: | Growth models, Heterogeneity of preferences, Welfare, Product accounts and wealth. |
| JEL: | D64 D91 J22 O41 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:30477&r=pbe |
| By: | Jakobsen, Vibeke (Danish National Centre for Social Research (SFI)); Pedersen, Peder J. (Aarhus University) |
| Abstract: | Focus in the paper is on poverty among immigrants and refugees 50 years and older coming to Denmark from countries outside the OECD, with main emphasis on immigrants coming as guest workers before 1974, as refugees and as family members and marriage partners – tied movers – relative to individuals coming as guest workers and as refugees. A major share of people in this group were fairly young at arrival to Denmark. Those arriving back in the 1970s and 1980s are now either close to or above the age of 60, with conditional eligibility to a labor market related early retirement program or the age 65 where you become eligible for State pension. Poverty rates by national background are described using alternative household concepts. Next, a number of background factors of relevance for poverty are summarized. We focus on age, gender, marital status, occupational status at age 55 and duration of residence. We find major differences between migrant groups and between migrants and natives regarding how income is composed at different ages on market income, pensions and benefits. Next, we present a number of regressions aiming at explaining differences in the poverty risk with differences in a number of background factors. |
| Keywords: | immigrants, old age poverty, family structure |
| JEL: | F22 H55 I32 J14 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9944&r=pbe |
| By: | Alexandre Kolev; Caroline Tassot |
| Abstract: | Subjective well-being has in recent years been recognised as a goal of development that captures non-monetary or subjective dimensions of well-being. The body of evidence on the individual and societal determinants of subjective well-being is growing, but the literature remains in its infancy as to the role of social protection despite important policy implications. The objective of this paper is to explore the relationship between investments in social protection (as a proxy for the level of social protection services received by the population) and individuals’ evaluative and experienced well-being. This paper thus provides new evidence on the relationship between social protection investments and subjective well-being based on a worldwide sample including 38 countries and covering low-, middle- and high-income countries. Furthermore, we study potential channels explaining this relationship by considering the effect on potential beneficiaries and non-beneficiaries as well as distributional effects. |
| Keywords: | social protection, government spending, social inclusion, subjective well-being |
| JEL: | H53 I30 I38 |
| Date: | 2016–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:oec:devaaa:332-en&r=pbe |