nep-pbe New Economics Papers
on Public Economics
Issue of 2017‒01‒15
27 papers chosen by
Thomas Andrén

  1. When You Know Your Neighbour Pays Taxes: Information, Peer Effects, and Tax Compliance By James Alm; Kim M. Bloomquist; Michael McKee
  2. What Drives State Tax Reforms? By James Alm; Trey Dronyk-Trosper; Steven M. Sheffrin
  3. Corruption and Firm Tax Evasion By James Alm; Jorge Martinez-Vazquez; Chandler McClellan
  4. Impacts of Universal Health Coverage: Financing, Income Inequality, and Social Welfare By Huang, Xianguo; Yoshino, Naoyuki
  5. State Taxation and the Reallocation of Business Activity: Evidence from Establishment-Level Data By Xavier Giroud; Joshua Rauh
  6. Capitalization of Local Taxes and Expenditures - The case of Bavarian Municipalities By Benjamin Wirth; Davidt Hardt; Isabella Lehmann
  7. Consumer spending and fiscal consolidation: evidence from a housing tax experiment By Surico, Paolo; Trezzi, Riccardo
  8. Evaluating the Economic Effects of Flat Tax Reforms Using Synthetic Control Methods By Bibek Adhikari; James Alm
  9. Maybe "honor thy father and thy mother": uncertain family aid and the design of social long term care insurance By Canta, Chiara; Cremer, Helmuth; Gahvari, Firouz
  10. Regional payroll tax cuts and individual wages: Heterogeneous effects across education groups By Hildegunn Stokke
  11. Key Issues of Central and Local Government Finance in the People’s Republic of China By Qichun, Zhang; Shufang, Li
  12. Honesty or Dishonesty of Taxpayer Communications in an Enforcement Regime By James Alm; David M. Bruner; Michael McKee
  13. Frameworks for Central–Local Government Relations and Fiscal Sustainability By Morgan, Peter; Trinh, Long Q.
  14. "Ad Valorem Capital Tax Competition" By Hikaru Ogawa; Atsushi Yamagishi
  15. Intergenerational Mobility and Preferences for Redistribution By Alesina, Alberto; Stantcheva, Stefanie; Teso, Edoardo
  16. Looking Beyond Conventional Intergovernmental Fiscal Frameworks: Principles, Realities, and Neglected Issues By Smoke, Paul
  17. Capitalization, Decentralization, and Intergenerational Spillovers in a Tiebout Economy with a Durable Public Good By John P. Conley; Robert Driskill; Ping Wang
  18. Household Incomes in Tax Data : Using Addresses to Move from Tax Unit to Household Income Distributions By Jeff Larrimore; Jacob Mortenson; David Splinter
  19. The Historical Evolution of the Wealth Distribution: A Quantitative-Theoretic Investigation By Hubmer, Joachim; Krusell, Per; Smith Jr, Anthony A.
  20. Ethno-Racial Poverty and Income Inequality in Brazil. By Claudiney Pereira
  21. W(h)ither the Tax Gap? By James Alm; Jay A. Soled
  22. "Leadership in Tax Ccompetition with Fiscal Equalization Transfers " By Junichi Haraguchi; Hikaru Ogawa
  23. Using Behavioral Economics in Public Economics By James Alm; Steven M. Sheffrin
  24. Top Wealth Shares in the UK over more than a Century By Facundo Alvaredo; Anthony B. Atkinson; Salvatore Morelli
  26. Does income inequality affect aggregate consumption? Revisiting the evidence By Crespo Cuaresma, Jesus; Kubala, Jozef; Petrikova, Kristina
  27. The Problem of inequality By S. Mahendra Dev

  1. By: James Alm (Department of Economics, Tulane University); Kim M. Bloomquist (Taxpayer Advocate Service, U.S. Internal Revenue Service); Michael McKee (Department of Economics, Appalachian State University)
    Abstract: In this paper, we suggest that individuals' tax compliance behaviours are affected by the behaviour of their "neighbours", or those about whom they may have information, whom they may know, or with whom they may interact on a regular basis. Individuals are more likely to file and to report their taxes when they believe that other individuals are also filing and reporting their taxes; conversely, when individuals believe that others are cheating on their taxes, they may well become cheaters themselves. We use experimental methods to test the role of such information about peer effects on compliance behaviour. In one treatment setting, we inform individuals about the frequency that their neighbours submit a tax return. In a second treatment setting, we inform them about the number of their neighbours who are audited, together with the penalties that they pay. In both cases, we examine the impact of information on filing behaviour and also on subsequent reporting behaviour. We find that providing information on whether one's neighbours are filing returns and/or reporting income has a statistically significant and economically large impact on individual filing and reporting decisions. However, this "neighbour" information does not always improve compliance, depending on the exact content of the information.
    Keywords: Tax evasion, Tax compliance, Behavioural economics, Experimental economics.
    JEL: H26 C91
    Date: 2016–12
  2. By: James Alm (Department of Economics, Tulane University); Trey Dronyk-Trosper (Department of Economics, Tulane University); Steven M. Sheffrin (Department of Economics, Tulane University)
    Abstract: This paper discusses recent trends in state (and local) taxation, examines the prospects for reform of state tax systems, and analyzes a wide range of issues that relate to ongoing state efforts to reform their tax systems.
    Keywords: Tax reform, Schanz-Haig-Simons taxation.
    JEL: H2 H7
    Date: 2016–12
  3. By: James Alm (Department of Economics, Tulane University); Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University); Chandler McClellan (National Bureau of Economic Research)
    Abstract: Although corruption and tax evasion are distinct and separate problems, they can easily become intertwined and reinforcing. A society that is more corrupt may enable more tax evasion as corrupt officials seek more income via bribes; conversely, higher levels of tax evasion may drive corruption by offering more opportunities for bribes. While a large body of work on each subject separately has emerged, the relationship between the two problems has remained a largely unexplored area. This paper focuses on how the potential for bribery of tax officials affects a firm's tax evasion decisions. To test how the potential for bribery affects a firm's tax reporting decisions, we use firm-level information on reporting obtained from the World Enterprise Survey and the Business Environment and Enterprise Performance Survey. Our basic estimation approach uses instrumental variables methods to control for the potential endogeneity of evasion and corruption. We also use propensity score matching methods as a robustness check. Our results show that it is corruption that largely drives higher levels of evasion; that is, corruption of tax officials is a statistically and economically significant determinant of tax evasion. The presence of tax inspectors who request bribes results in a reduction of sales reported for taxes of between 4 and 10 percentage points. Additionally, larger bribes result in higher levels of evasion. Overall these results indicate that governments seeking to decrease tax evasion - and so increase tax revenues - must work first to ensure an honest tax administration.
    Keywords: Tax compliance, corruption.
    JEL: H26 H32 D7
    Date: 2016–12
  4. By: Huang, Xianguo (Asian Development Bank Institute); Yoshino, Naoyuki (Asian Development Bank Institute)
    Abstract: This paper studies the impact of tax-financed universal health coverage schemes on macroeconomic aspects of labor supply, asset holding, inequality, and welfare, while taking into account features common to developing economies, such as informal employment and tax avoidance, by constructing a dynamic stochastic general equilibrium model with heterogeneous agents. Agents have different education levels, employment statuses, and idiosyncratic shocks. Given three tax financing options, calibration results based on the Thai economy suggest that the financing options matter for outcomes both at the aggregate and disaggregate levels. Universal health coverage, financed by labor income tax revenue, could reduce inequality due to its large redistributive role. Social welfare cannot be improved when labor decisions are endogenous and distortions are higher than the redistributive gains for all tax financing options. In the absence of labor supply choice, mild welfare gains are found. In a broader sense, the paper aims to provide a frame for policy evaluation of socioeconomic policies from both macro and micro perspectives, taking different social groups into consideration.
    Keywords: universal health insurance; dynamic stochastic general equilibrium model; tax finance; social welfare; labor supply
    JEL: E24 E26 E62 H23 H51 J11
    Date: 2016–12–31
  5. By: Xavier Giroud; Joshua Rauh
    Abstract: Using Census microdata on multi-state firms, we estimate the impact of state taxes on business activity. For C corporations, employment and the number of establishments have corporate tax elasticities of -0.4, and do not vary with changes in personal tax rates. Pass-through entity activities show tax elasticities of -0.2 to -0.3 with respect to personal tax rates, and are invariant with respect to corporate tax rates. Reallocation of productive resources to other states drives around half the effect. Capital shows similar patterns but is 36% less elastic than labor. The responses are strongest for firms in tradable and footloose industries.
    Date: 2017–01
  6. By: Benjamin Wirth; Davidt Hardt; Isabella Lehmann
    Abstract: This paper examines capitalization effects of fiscal variables such as taxes and public expenditure into land prices in Bavaria. Based on panel data analyses on municipality level we discuss the potential existence of capitalization as well as the changes over time possibly related to supply reactions. Especially, we check the persistence of these effects using the approach in Stadelmann and Billon (2015). So far, we conclude that capitalization of fiscal variables seems to occur in case of property taxes and for categories of public expenditures. Persistent capitalization seems to hold for taxes but not for expenditure. Furthermore, the effect of tax capitalization is only robust for less relevant property tax A. Our results are contradictory to international studies (Sirmans, Gatzla?, & Macpherson, 2008) and findings for German wages in case of the local corporate taxes in Fuest, Peichl, and Siegloch (2016). The missing capitalization of the German local corporate tax is surprising and may be explained by the observed tax harmonization. Our further research will focus on either confirming or invalidating these results and address the remaining lack of clarity.
    Keywords: Capitalization; Fiscal variables; Tax incidence
    JEL: R21 R31
    Date: 2016–12
  7. By: Surico, Paolo; Trezzi, Riccardo
    Abstract: The introduction of a temporary housing tax as prominent part of the 2011 fiscal consolidation plan generated a sizable quasi-experiment across Italian municipalities and households, which we exploit to study the effects of this policy on consumer spending. The tax hike on the main dwelling led to large expenditure cuts (especially on vehicle purchases) among mortgagors, who hold low liquid wealth relative to income despite owning sizable illiquid assets. In contrast, higher tax rates on other residential properties mostly affected affluent home-owners, thereby having only a negligible impact on consumer spending.
    Keywords: fiscal consolidation; housing taxes; marginal propensity to consume; mortgage debt.; tax hike
    JEL: E21 E62
    Date: 2016–12
  8. By: Bibek Adhikari (Department of Economics, Tulane University); James Alm (Department of Economics, Tulane University)
    Abstract: Tax reforms are often motivated by their potential to improve economic performance. However, their actual impacts are difficult to quantify. We analyze the impact of flat tax reform on incomes using "synthetic control" methods. We identify the 8 Eastern and Central European countries that adopted flat tax systems between 1994 and 2005, and then compare post-reform GDP per capita of "treated" countries with a convex combination of similar but "untreated" countries, while accounting for the time-varying impact of unobservable heterogeneity. We find positive impacts in all 8 countries, with 7 out of 8 cases significant at the conventional level.
    Keywords: Flat tax, tax reform, synthetic control methods.
    JEL: H20 H25 H31
    Date: 2016–12
  9. By: Canta, Chiara; Cremer, Helmuth; Gahvari, Firouz
    Abstract: We study the role and design of private and public insurance programs when informal care is uncertain. Children's degree of altruism is randomly distributed over some interval. Social insurance helps parents who receive a low level of care, but it comes at the cost of crowding out informal care. Crowding out occurs both at the intensive and the extensive margins. We consider three types of LTC policies: (i) a topping up (TU) scheme providing a transfer which is non exclusive and can be supplemented; (ii) an opting out (OO) scheme which is exclusive and cannot be topped up and (iii), a mixed policy combining these two schemes. TU will involve crowding out both at the intensive and the extensive margins, whereas OO will crowd out informal care solely at the extensive margin. However, OO is not necessarily the dominant policy as it may exacerbate crowding out at the extensive margin. The distortions of both policies can be mitigated by using an appropriately designed mixed policy.
    Keywords: long term care; opting out.; private insurance; public insurance; topping up; uncertain altruism
    JEL: H2 H5
    Date: 2017–01
  10. By: Hildegunn Stokke
    Abstract: The empirical evidence on the incidence of payroll taxation is primarily based on the wage bill of firms. This paper applies matched employer-employee register data on individual wages for all private sector workers in Norway. Exploiting a payroll tax reform and using the difference-in-difference approach, I find that 1% reduction in labor costs generates 0.5% wage increase. Among low educated workers the degree of tax shifting equals 50%, while the wage response for highly educated is insignificant. Lower payroll taxes have limited effects on employment. The findings imply that the absolute value of the labor demand elasticity decreases with the level of education.
    Keywords: Payroll tax cut; individual wages; heterogeneous effects; education
    JEL: H22 J23 J31 J38
    Date: 2016–12
  11. By: Qichun, Zhang (Asian Development Bank Institute); Shufang, Li (Asian Development Bank Institute)
    Abstract: Fiscal decentralization has been established in the People’s Republic of China (PRC), but crises emerge at the local government level due to remaining problems of the fiscal administration system of tax allocation and the impact of replacing the business tax with a value added tax. The PRC taxation system requires readjustment and local governments have begun to focus on innovative financing models. The main path to stable and sustainable government finances is to maintain the general public budget and the government fund budget. We show that the use of innovative fundraising and financing channels will lead to the upgrading of local government infrastructure and public service. Suggestions for enhancing local government fiscal stability and sustainability include: reducing the fiscal burden at the local level by standardizing and legalizing outlay responsibilities at all government levels; forming a long-term fiscal growth mechanism by establishing a modern taxation system; establishing a standardized and predictable transfer payment system by introducing block transfer payments and prioritized transfer payments as a basis for a stable growth mechanism for general transfer payments; promoting public-private partnership legislation to encourage participation of social capital and maximize the multiplier effect of public expenditure; improving the mid-term budget and debt-annexed budget; and establishing a government planning mechanism for investment and debt financing of major infrastructure construction projects.
    Keywords: Local government; fiscal stability; fiscal sustainability; fiscal administration; China’s “new normal”
    JEL: E62
    Date: 2016–12–31
  12. By: James Alm (Department of Economics, Tulane University); David M. Bruner (Department of Economics, Appalachian State University); Michael McKee (Department of Economics, Appalachian State University)
    Abstract: In many settings the true likelihood of capture when engaging in an illegal activity, such as tax evasion, is not well known to an individual. "Official" statements from the tax administration regarding enforcement effort provide some information. In addition, "informal", or "unofficial", communication among taxpayers can supplement these official announcements, but individuals do not know with certainty whether such unofficial information is honest (or accurate) versus dishonest (or inaccurate). We examine the truthfulness of an individual's revelation of unofficial information to other individuals, along with the factors that affect any revelation, focusing on the intrinsic motivations for revelations. Our experimental design allows us to examine the type and the honesty of messages that an individual chooses to send to other individuals regarding their own audit outcome and their own compliance behavior. Our results indicate that most individuals send accurate messages about their own audit outcomes and their own compliance behaviors. Nevertheless, many individuals are also systematically dishonest about being audited; that is, we observe a significant tendency for individuals to claim that they were audited when they were not. We also observe a strong interaction between individuals' audit outcomes and their compliance behaviors, so that individuals who engaged in tax evasion and who were audited were more truthful in their communications than those whose tax evasion went undetected.
    Keywords: Tax compliance, Tax audits, Information, Honesty, Experimental economics.
    JEL: H2 H26 C91
    Date: 2016–12
  13. By: Morgan, Peter (Asian Development Bank Institute); Trinh, Long Q. (Asian Development Bank Institute)
    Abstract: Sustainable and inclusive growth in emerging Asian economies requires continued high levels of public sector investment in areas such as infrastructure, education, health, and social services. These responsibilities, especially with regard to infrastructure investment, need to be devolved increasingly to the regional government level. However, growth of sources of revenue and financing for local governments has not necessarily kept pace, forcing them, in some cases, to increase borrowing or cut spending below needed levels. This paper reviews alternative models of the relationship between central and local governments, and provides an overview and assessment of different financing mechanisms for local governments, including tax revenues, central government transfers, bank loans, and bond issuance, with a focus on the context of emerging Asian economies. The paper also reviews financing mechanisms for local governments and mechanisms for maintaining fiscal stability and sustainability at both the central and local government levels. Based upon the evidence on the decentralization process in Asia, it proposes some policy implications for improving central-local government relations and fiscal sustainability.
    Keywords: Government decentralization; government fiscal balance; intra-government transfers; expenditure assignment; revenue assignment; local government borrowing; mechanisms for fiscal stability
    JEL: H70 H71 H72 H74 H77
    Date: 2016–12–31
  14. By: Hikaru Ogawa (Faculty of Economics, The University of Tokyo); Atsushi Yamagishi (Graduate School of Economics, The University of Tokyo)
    Abstract: Studies of tax competition have found that using a unit tax is commitment-robust for governments, while we observe ad valorem taxes on capital in practice. This study presents a model that explains the emergence of ad valorem capital tax competition, incorporating an elastic supply of capital in the standard tax competition model. Specifically, it shows that if the elasticity of capital supply is positive, governments adopt the ad valorem tax method and thereby ad valorem tax competition prevails. On the other hand, under a fixed capital supply (i.e., zero elasticity of capital supply), countries compete in unit taxes.
    Date: 2016–11
  15. By: Alesina, Alberto; Stantcheva, Stefanie; Teso, Edoardo
    Abstract: Using newly collected cross-country survey and experimental data, we investigate how beliefs about intergenerational mobility affect preferences for redistribution in five countries: France, Italy, Sweden, U.K., and U.S.. Americans are more optimistic than Europeans about intergenerational mobility, and too optimistic relative to actual mobility. Our randomized treatment that shows respondents pessimistic information about mobility increases support for redistribution, mostly for equality of opportunity policies. A strong political polarization exists: Left-wing respondents are more pessimistic about intergenerational mobility, their preferences for redistribution are correlated with their mobility perceptions, and they respond to pessimistic information by increasing support for redistribution. None of these apply to right-wing respondents, possibly because of their extremely negative views of government.
    Keywords: Fairness; intergenerational mobility; Online Experiment; redistribution; taxation
    JEL: D31 D72 H21 H23 H24
    Date: 2017–01
  16. By: Smoke, Paul (Asian Development Bank Institute)
    Abstract: Fiscal decentralization and intergovernmental fiscal relations reform have become nearly ubiquitous in developing countries. Performance, however, has often been disappointing in terms of both policy formulation and outcomes. The dynamics underlying these results have been poorly researched. Available literature focuses heavily on policy and institutional design concerns framed by public finance, fiscal federalism, and public management principles. The literature tends to explain unsatisfactory outcomes largely as a result of some combination of flawed design and management of intergovernmental fiscal systems, insufficient capacity, and lack of political will. These factors are important, but there is room to broaden the analysis in at least two potentially valuable ways. First, much can be learned by more robustly examining how national and local political and bureaucratic forces shape the policy space, providing opportunities for and placing constraints on effective and sustainable reform. Second, the analysis would benefit from moving beyond design to considering how to implement reform more strategically.
    Keywords: fiscal decentralization; intergovernmental relations; political economy; strategic implementation; Asia
    JEL: H70 H71 H72 H73 H77
    Date: 2016–12–31
  17. By: John P. Conley (Vanderbilt University); Robert Driskill (Vanderbilt University); Ping Wang (Washington University)
    Abstract: We consider an overlapping generations model with a Durable Local Public Good (DLPG). We establish a Tiebout Theorem (equilibrium exists and is first best) as well as a Second Welfare Theorem in this dynamic DLPG economy. We conditions under which local provision of durable public goods results in the full internalization of the intergenerational spillovers that durability entails. In contrast, when durable public goods are provided by the national government, internalization does not take place and underprovision of public goods results. This sets up an institutional tradeoff between national and local provision of public goods that balances the relative strength of intergenerational and interjurisdictional spillovers.
    Keywords: Durable Local Public Goods, Capitalization and Intergenerational Spillover E¤ects, Dynamic Tiebout Equilibrium, Welfare Analysis.
    JEL: H4 D9
    Date: 2017–01–10
  18. By: Jeff Larrimore; Jacob Mortenson; David Splinter
    Abstract: Tax return data are increasingly the standard for tracking income statistics in the United States. However, these data have traditionally been limited by their inability to capture non-filers and to identify members of separate tax units living in the same household. We overcome these obstacles and create household records directly in the tax data using mailing address information included on tax forms. We then present the first set of tax-based household income and inequality measures for the entire income distribution. When comparing household income inequality results in the tax data to those using the March CPS, we confirm previous findings that the March CPS understates the inequality of household income. However, we also find that the previous approach of using tax units in the IRS data to proxy for households leads to an overstatement of household income inequality. Finally, using households in the IRS tax records, we illustrate how focusing on tax units rather than households alters the observed distribution of tax programs such as the Earned Income Tax Credit.
    Keywords: EITC ; Household Income ; IRS Data ; Income Inequality ; Tax Unit Income
    JEL: D31 H24
    Date: 2017–01–03
  19. By: Hubmer, Joachim; Krusell, Per; Smith Jr, Anthony A.
    Abstract: This paper employs the benchmark heterogeneous-agent model used in macroeconomics to examine drivers of the rise in wealth inequality in the U.S. over the last thirty years. Several plausible candidates are formulated, calibrated to data, and examined through the lens of the model. There is one main finding: by far the most important driver is the significant drop in tax progressivity that started in the late 1970s, intensified during the Reagan years, and then subsequently flattened out, with only a minor bounce back. The sharp observed increases in earnings inequality, the falling labor share over the recent decades, and potential mechanisms underlying changes in the gap between the interest rate and the growth rate (Piketty's r - g story) all fall far short of accounting for the data.
    Date: 2017–01
  20. By: Claudiney Pereira (Arizona State University)
    Abstract: Fiscal policy played an important role in reducing poverty and inequality in Brazil (Higgins and Pereira, 2014) over the last fifteen years, but how much redistribution and poverty reduction is being accomplished across ethnic groups? How was the ethno-racial divide affected by fiscal policy? We estimate the effects of taxes and social spending on inequality and poverty among ethnic groups using household survey. We find that direct transfers have similar effects on inequality across ethnic groups, but the reduction is larger for pardos after adding the monetized in-kind benefits (health and education). However, the income ratio between whites and non-whites is virtually unchanged. Poverty is reduced after direct transfers, but the reduction is higher for whites despite the prevalence of poverty is at least twice as high among pardos, blacks, and indigineous. The positive effects on poverty is tempered by a deleterious effect from indirect taxes. In addition, per capita transfers are on average higher for whites and benefits can twice as large as those for non-whites. Fiscal interventions did not have a significant impact in reducing the divide between whites and non-whites in Brazil.
    Keywords: Fiscal policy, great divide, Brazil, inequality, ethno-racial
    JEL: D31 H22 I32 O54
    Date: 2016–11
  21. By: James Alm (Department of Economics, Tulane University); Jay A. Soled (Rutgers Business University)
    Abstract: For decades, policy makers and politicians have railed against the "tax gap", or the difference between what taxpayers are legally obligated to pay in taxes and what they actually pay in taxes. To close the gap, Congress has instituted numerous reforms, with varying degrees of success. Notwithstanding these efforts, the tax gap has largely remained intact, and, if anything, its size has gradually grown over the last several decades. However, the tax gap may well begin to diminish in size (or "wither" away), if not immediately then over time. Three developments will help narrow the tax gap's size. First, the ubiquity of credit cards, debit cards, and smartphone payment apps has purged cash - the erstwhile driving engine of the tax gap - from its use in many economic transactions. Second, the availability of third-party sources of information, combined with the universal use of computerization to store, access, and analyze information, has significantly curtailed a taxpayer's ability to hide income here in the United States or overseas. Third, broad economic trends such as concentration and globalization have generated a workforce dynamic in which taxpayers generally are employed by large business enterprises (where individual tax compliance is fairly high) rather than in traditional mom-and-pop businesses (where individual tax compliance is typically low). The implications associated with a lower tax gap are vast. Even beyond the usual considerations associated with greater tax compliance (e.g., increased revenues, reduced noncompliance-induced inefficiencies, and improved horizontal and vertical equity of tax burdens), taxpayers would experience a shift in the labor market and an adjustment in the prices paid for consumer goods and services. Also, rather than conducting audits and deterring noncompliance, the Internal Revenue Service (IRS) would be able to dedicate a greater share of its limited resources to other pressing agenda items, such as assisting taxpayers in their compliance endeavors. There are, of course, other countervailing economic trends that may subvert the forces that will act to reduce the tax gap, so its future path remains highly uncertain (and hence the alternative use of "whither"). Also, for a whole host of reasons, especially reductions in IRS funding, the tax gap will not be closed anytime soon. Nevertheless, the tide against tax noncompliance may finally be turning.
    Keywords: Tax gap, tax compliance.
    JEL: H2 H26
    Date: 2016–12
  22. By: Junichi Haraguchi (Graduate School of Economics, The University of Tokyo); Hikaru Ogawa (Faculty of Economics, The University of Tokyo)
    Abstract: We propose a timing game of asymmetric tax competition with fiscal equalization scheme. The study finds that governments tend to play a sequential-move game as the scale of equalization transfer increases, which explains the emergence of tax leaders in tax competition. The presence of a tax leader is likely to exacerbate capital misallocation among countries, suggesting that equalization transfers aimed at narrowing the interregional fiscal gap might cause a problem of efficient capital allocation.
    Date: 2016–11
  23. By: James Alm (Department of Economics, Tulane University); Steven M. Sheffrin (Department of Economics, Tulane University)
    Abstract: This paper reviews the methodology of “behavioral economics†, and relates these methods to some specific and recent applications.
    Keywords: Behavioral economics, public economics.
    JEL: H3 D03
    Date: 2016–12
  24. By: Facundo Alvaredo (Paris School of Economics, INET at the Oxford Martin School, and Conicet); Anthony B. Atkinson (Nuffield College, London School of Economics, and INET at the Oxford Martin School); Salvatore Morelli (CSEF, University of Naples and Institute for Economic Modelling at the INET Oxford)
    Abstract: Recent research highlighted controversy about the evolution of concentration of personal wealth. In this paper we provide new evidence about the long-run evolution of top wealth shares for the United Kingdom. The new series covers a long period – from 1895 to the present – and has a different point of departure from the previous literature: the distribution of estates left at death. We find that the application to the estate data of mortality multipliers to yield estimates of wealth among the living does not substantially change the degree of concentration over much of the period both, in the UK and US, allowing inferences to be made for years when this method cannot be applied. The results show that wealth concentration in the UK remained relatively constant during the first wave of globalization, but then decreased dramatically in the period from 1914 to 1979. The UK went from being more unequal in terms of wealth than the US to being less unequal. However, the decline in UK wealth concentration came to an end around 1980, and since then there is evidence of an increase in top shares, notably in the distribution of wealth excluding housing in recent years. We investigate the triangulating evidence provided by data on capital income concentration and on reported super fortunes.
    Keywords: wealth inequality, estates, mortality multipliers, United Kingdom, United States
    JEL: D3 H2 N3
    Date: 2017–01–09
  25. By: Amit Nigam
    Abstract: The objective of this paper is to review the factors from a viewpoint of social marketing that control taxpayer compliance. To conduct study, 20 years data from across the globe availablebetween 1984 and 2014 was collected. There were too many findings revealed during the study. First, many of the literature applied varied nature of factors, which in turn make the comparison too difficult across numerous studies. Second, numerous researchers lacked in explaining the choice of independent variable as they have carried out the research in the absence of a theoretical framework. Since the presence of a theoretical context increases understanding of the important variables that affect a scenario, hence this paucity creates the gap in the tax literature and did not provide any significant solution on the key determinants of income tax compliance. Third, collective investigation of the literature displayed that the three key determinants of income tax compliance that can be considered as good predictors were normative, attitudinal and subjective control. Further, the outcomes of the study recommend few policy actions that need to be addressed in future research. First, it is suggested that the future research focuses on to develop theory centered number of appropriate determining factor of tax compliance which can measure precise forecasts. Second, it is recommended to tax policy makers todiscontinue from limited practice of the orthodox forced approaches (subjective control variables) usually used to coerce tax compliance. Further, the policy makers are advised to use a controlled method in implementation of tax that can encourage intended compliance through variation of norms and attitudes. Key words: Conceptual, Factorial Review, Determinants, Income Tax Compliance Policy
    Date: 2016–09
  26. By: Crespo Cuaresma, Jesus; Kubala, Jozef; Petrikova, Kristina
    Abstract: The standard Keynesian view predicts that equalization of the income distribution leads to an increase in aggregate consumption. We revisit the analysis carried out by the seminal empirical contributions which test such a hypothesis using modern econometric methods and the most comprehensive dataset existing on income distribution measures. Our results indicate that there is no substantive empirical evidence of an effect of income inequality on aggregate consumption. (authors' abstract)
    Keywords: Inequality; aggregate consumption; average propensity to consume
    Date: 2016–01
  27. By: S. Mahendra Dev (Indira Gandhi Institute of Development Research)
    Abstract: Inquality is the most discussed development problem all over the world. Development can't be discussed without talking about inequality. The paper addresses two questions: (a) What are the dimensions and trends in inequality at global level and India? ; (b) How do we tackle rising inequalities at policy level? The paper examines consumption, income, regional, social and gender inequalities in India. Income inequalities are much higher that of consumption. It also looks at inequalities in opportunities like education. The paper discusses policies such as redistributive measures, agriculture, social protection, employment, education, gender disparities and eradication of corruption.
    Keywords: Inequality, social, gender, consumption, income, inequality of opportunity, agriculture, employment, education, corruption
    Date: 2016–12

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