nep-pbe New Economics Papers
on Public Economics
Issue of 2017‒03‒12
eleven papers chosen by
Thomas Andrén

  1. Household Bargaining, Spouses' Consumption Patterns and the Design of Commodity Taxes By Cremer, Helmuth; Lozachmeur, Jean-Marie; Roeder, Kerstin
  2. The Role of Fiscal Policy in Fighting Poverty and Reducing Inequality in Iran: An Application of the Commitment to Equity (CEQ) Framework By Ali Enami; Nora Lustig; Alireza Taqdiri
  3. Evolutionary Stability in Fiscal Competition By Wagener, Andreas
  4. Endogenous aging: How statutory retirement age drives human and social capital By Ann Barbara Bauer; Reiner Eichenberger
  5. Institutional quality, economic development and the performance of VAT. By Romain Houssa; Kelbesa Megersa
  6. Let's stay in touch - Evidence on the role of social learning in local tax interactions By Blesse, Sebastian; Martin, Thorsten
  7. Federalism, Fiscal Space, and Public Investment Spending: Do Fiscal Rules Impose Hard Budget Constraints? By Chakraborty, Pinaki
  8. Tax structures and economic growth: New evidence from the Government Revenue Dataset By Kyle McNabb
  9. Optimal Taxation with Private Insurance By Yongsung Chang; Yena Park
  10. Who is Eager to Save for Retirement – the Cross-Country Evidence By Anna Kaliciak; Radoslaw Kurach; Walid Merouani
  11. Local taxation, land use regulation, and land use: A survey of the evidence By Hansjörg Blöchliger; Christian Hilber; Olivier Schöni; Maximilian von Ehrlich

  1. By: Cremer, Helmuth (Toulouse School of Economics); Lozachmeur, Jean-Marie (Toulouse School of Economics); Roeder, Kerstin (University of Augsburg)
    Abstract: We study the role and structure of commodity taxes when consumption and labor supplies are determined through a bargaining procedure between spouses, and where an optimal income tax is also available. We focus on the question whether there should be differences in tax treatment between "female" and "male" products. When weights (as well as wages) differ across couples, the heterogeneity is multidimensional and the Atkinson and Stiglitz theorem does not apply. In addition, when the social welfare function is individual-based, spouses' social weights may differ from their weights within the couples. This brings about Pigouvian considerations which in themselves may justify commodity taxes. We show that the expressions for the tax rates include Pigouvian and incentive terms. Their roles are most apparent in the case where some goods are consumed exclusively by one of the spouses. Supposing, for instance, that the female spouse has the lower bargaining weight, we find conditions under which the Pigouvian term calls for a subsidization of the "female good", and a taxation of the "male good". The incentive term depends on the distribution of bargaining weights across couples. For instance, for the exclusive consumption case, when the weight of the female spouse increases with wages, the female good tends to be consumed in larger proportion by more productive couples. Consequently, the incentive term makes it a candidate for taxation. In this case the Pigouvian term is mitigated.
    Keywords: couples' taxation, optimal commodity taxation, household bargaining
    JEL: H21 H31 D10
    Date: 2017–02
  2. By: Ali Enami; Nora Lustig (Tulane University); Alireza Taqdiri
    Abstract: This paper evaluates the role of fiscal system in Iran in reducing poverty and inequality. We employ the marginal contribution approach in which the effect of each component of the system is evaluated by comparing the current system to the counter factual of removing that component from the system. Using the CEQ framework, we show that the fiscal system as a whole reduces inequality and poverty significantly by about 16% and 63% respectively. We find that the main driver of this effect is the Targeted Subsidy Program (implemented in 2010) that eliminated the energy subsidies and substituted them with a nominal cash transfer to every Iranian. We show that the effect of this program on reducing inequality and poverty is about 10% and 64% respectively. The main reduction in poverty comes from the rural areas where this program reduces the poverty headcount index from 37% to 17% comparing to the 5% reduction in the urban areas. Given the success of this program in reaching the bottom deciles of the income distribution and reducing inequality and poverty, we recommend that the current plans of Iranian government in eliminating the subsidy of the top deciles is combined with the allocation of some of the freed funds to the bottom deciles.
    Date: 2016–06
  3. By: Wagener, Andreas
    Abstract: In fiscal interaction, a policy is evolutionarily stable if, once adopted by all governments, jurisdictions that deviate from it fare worse than those that stick to it. Evolutionary stability is the appropriate solution concept for models of imitative learning (policy mimicking). We show that evolutionarily stable strategies implement identical allocations, regardless of whether jurisdictions use tax rates or expenditure levels as their strategy variable. This is in contrast to the observation that the allocations in the Nash equilibria of games played in tax rates or expenditure levels differ from one another. With evolutionary play, jurisdictions set taxes and expenditures competitively, i.e., they behave as if they were all negligibly small.
    JEL: H77 C73 H72
    Date: 2016
  4. By: Ann Barbara Bauer; Reiner Eichenberger
    Abstract: The return on investments in human and social capital increases in their economic lifetime. Thus, personal, parental, and societal investments in the capacities of individuals take place when these persons are young. Interestingly, the complementary thesis has been widely neglected; investments in the productive capacities of older workers—by the employees themselves, their employers, and their co-workers—should be expected to depend on the time left before retirement. In this paper, we analyze how an increase in the statutory retirement age affects investments in the productivity of older workers. We compare pre- and post-pension reform cohorts and estimate the treatment effect on training participation, job involvement, support from colleagues, and leisure activities. Using a Swiss natural experiment, we find strong support for higher human and social capital investments and the reallocation of time from leisure to work.
    Keywords: Pension reform; natural experiment; old-age productivity; human capital; social capital; allocation of time
    JEL: H55 J14 J24 J26
    Date: 2017–03
  5. By: Romain Houssa (CRED, University of Namur); Kelbesa Megersa (CRED, University of Namur)
    Abstract: In this paper we test, empirically, to which extend the Value- Added Tax (VAT) is a relevant-policy option for developing countries aiming to improve upon their domestic resources mobilization (DRM). First, we investigate the contribution of VAT to tax collection across developed and developing countries. We also provide a comparative analysis between Sub-Saharan Africa (SSA) and other developing countries. Second, we examine the role of institutional quality in enhancing domestic-tax mobilization in the presence of VAT adoption. For these purposes, we employ a panel data model that takes into account the standard determinants of the tax-effort function as well as the institutional and geographical characteristics of countries. Analysis of data from 149 countries over the 1970 - 2013 period indicates that VAT adoption improved tax-revenue collection in both developed and developing (SSA and non SSA) countries. Moreover, the marginal effect of VAT adoption is estimated to be strong for SSA and other developing countries as compared to their developed counterparts. The positive effect of VAT on tax collection in SSA is reassuring because some earlier studies were not able to identify an overall positive effect for the region. We show that analysis of data over the recent period is important to find a positive effect for SSA. As regards the role of institutional quality, we find that, tax-revenue collection is higher in countries with a betterinstitutional quality - even before VAT adoption. Interestingly, we show that the gain from adopting VAT is maximized in such countries. Given VAT is by now adopted in almost all countries across the world, our findings suggest the need to promote reforms to improve the quality of institutions that facilitate tax collection in developing countries.
    Keywords: Value-Added Tax (VAT), Domestic Resources Mobilization (DRM), Tax Reform, Institutional Quality, Economic development
    JEL: H20 H21 H25 H26 O17 O11
    Date: 2017–02
  6. By: Blesse, Sebastian; Martin, Thorsten
    Abstract: This paper exploits detailed information on local political and socioeconomic networks and a reform of local fiscal equalization in North Rhine-Westphalia (NRW) to identify the role of learning in local tax rate interactions. Using this policy change in spatial lag IV regressions, we find that institutions like counties and jointly used administrations yield significant positive tax interactions whereas geographical neighbors do not react to each other. Common local media trigger tax policy interactions as well. Short-lived reform effects support our findings that social learning within certain networks intensifies tax rate interactions via coordination of local decision makers.
    JEL: H20 H71 H77
    Date: 2016
  7. By: Chakraborty, Pinaki (Asian Development Bank Institute)
    Abstract: The core emphasis of rules-based fiscal legislation at the subnational level in India is to achieve debt sustainability through a numerical ceiling on borrowing and the use of borrowed resources for public capital investment by phasing out revenue deficits. Using the Arellano Bond Panel estimation, this paper examines whether the application of fiscal rules has resulted in an increase in the fiscal space for public capital investment spending in major Indian states. This analysis shows that by controlling other factors, there is a negative relationship between fiscal rules and public capital investment spending at the state level during the rules-based fiscal regime.
    Keywords: federalism; fiscal space; fiscal rules; public investment; public spending; fiscal rules; budget constraints; Arellano Bond Panel estimation; spending inertia
    JEL: H00 H60
    Date: 2017–01–13
  8. By: Kyle McNabb
    Abstract: Recent work on the relationship between tax structure and economic growth has offered little reliable evidence for developing countries. Yet it is in such countries where the greatest changes in tax structure not only have been seen over the past 30 years but will likely continue to be seen in the future. Thus, an understanding of what, if any, links exist between the tax mix and the long-run economic growth rate is of vital importance to policymakers. Using the Government Revenue Dataset (GRD) from the International Centre for Tax and Development (ICTD), this study considers the effects of revenue-neutral changes in tax structure on a panel of 100 developing and developed countries. The results suggest that the biggest shifts in tax structure seen over the past three decades—i.e. shifts away from trade toward domestic consumption taxes—have had modest positive effects only for those economies classed as lower-middle-income. Furthermore, revenue-neutral increases in personal income taxes or social contributions are found to be harmful for long-run per capita GDP growth rates. These findings call some existing results into question; specifically, this paper finds that the effects of different taxes on growth differ according to income level, calling into question the external validity of existing studies.
    Keywords: tax structure, economic growth, fiscal policy, developement
    Date: 2016
  9. By: Yongsung Chang (University of Rochester and Yonsei University); Yena Park (University of Rochester)
    Date: 2017–03
  10. By: Anna Kaliciak; Radoslaw Kurach; Walid Merouani
    Abstract: In this study we challenge the problem of inadequate voluntary pension saving looking for its behavioural determinants. By exploring the Luxembourg Wealth Study dataset for four countries (Greece, Italy, United Kingdom and United States) we argue that financial risk aversion and intertemporal choices significantly affect the individuals? propensity to save for retirement. Moreover, we verify the links between these two behavioural factors and sociodemographic characteristics of the investigated societies which should have practical implications for regulatory framework.
    Keywords: supplementary pension savings, risk aversion, intertemporal choices, sociodemographic factors, retirement, retired
    JEL: C25 H55 J32 C25 H55 J32
    Date: 2016–12
  11. By: Hansjörg Blöchliger (OECD); Christian Hilber (London School of Economics); Olivier Schöni (University of Bern); Maximilian von Ehrlich (University of Bern)
    Abstract: This paper surveys the theoretical and empirical research on the relationship between local taxation, land use regulation and land use patterns. The findings can be summarized as follows: 1) In more fiscally decentralized settings, sub-national land use regulation and fiscal policies encourage urban sprawl. In contrast, in more centralized settings, restrictive urban containment policies and a lack of local fiscal incentives for land development tend to generate housing shortages. 2) Certain fiscal instruments affect the type and composition of land development, e.g. the share of residential versus commercial development. Removing local fiscal incentives for certain property types reduces the amount of land allocated for that type and increases its price. 3) In more decentralized settings, local land use policies aimed at containing or modifying urban growth are ineffective since mobile individuals can circumvent local restrictions by sorting into nearby jurisdictions that offer the preferred combination of land consumption and public services. 4) Expanding transportation networks enables households and firms to move to suburban areas, prompting the central city population to shrink and encouraging sprawl, particularly near major highways. 5) In fiscally decentralized settings, sub-urbanization is associated with a growing political power of homeowners. Homeowners tend to get fiscal zoning policies enacted – mainly via minimum lot size restrictions – that selectively attract well-off local taxpayers. Fiscal zoning thus imposes barriers to local development and raises property values, while at the same time facilitating sprawl. Overall, fiscal policy and land use regulation strongly interact, and governments must align those policies carefully to achieve land-use objectives effectively. Fiscalité locale, réglementation d’urbanisme et occupation des sols : Étude empirique Ce document étudie les travaux de recherche théoriques et empiriques consacrés aux relations entre fiscalité locale, réglementation d’urbanisme et modes d’occupation des sols. Les résultats peuvent être résumés comme suit : 1) Dans les pays qui pratiquent la décentralisation budgétaire, la réglementation d’urbanisme et les politiques budgétaires au niveau infranational encouragent l’étalement urbain. À l’inverse, dans les pays plus centralisés, des politiques restrictives de maîtrise de l’étalement des villes et le manque d’incitations budgétaires locales en faveur de l’aménagement du territoire ont tendance à entraîner une pénurie de logements. 2) Certains instruments budgétaires influent sur le type et la composition de l’aménagement du territoire, par exemple l’importance de la construction de logements par rapport à celle de bâtiments à usage commercial. La suppression des incitations budgétaires locales en faveur de certains types de biens réduit la surface des sols qui leur sont affectés et augmente leurs prix. 3) Dans les pays à structure plus décentralisée, les politiques locales d’occupation des sols visant à limiter ou à modifier la croissance urbaine sont inefficaces car les individus mobiles peuvent contourner les restrictions locales en s’établissant dans les juridictions voisines qui offrent l’équilibre recherché entre occupation des sols et services publics. 4) Le développement des réseaux de transport permet aux ménages et aux entreprises de s’établir en zones périphériques, ce qui accélère la désertification des centres villes et favorise l’étalement urbain, surtout le long des routes à grande circulation. 5) Dans les pays où la gestion budgétaire est décentralisée, le développement des banlieues est associé au pouvoir politique croissant des propriétaires fonciers. Ceux-ci font généralement pression pour que des mesures d’urbanisme obéissant à des considérations budgétaires soient prises – essentiellement en fixant une taille minimale des lots – qui favorisent les contribuables plus aisés. Aussi, les décisions d’urbanisme qui répondent à des objectifs budgétaires freinent le développement local et augmentent la valeur des biens, tout en favorisant l’étalement urbain. Globalement, la politique budgétaire et la réglementation d’urbanisme sont étroitement liées, et les pouvoirs publics doivent harmoniser ces politiques pour atteindre efficacement les objectifs d’occupation des sols.
    Keywords: fiscal competition, fiscal instruments, land use patterns, land use regulations, sprawl, urban density
    JEL: H2 H3 H4 H7 R3 R4 R5
    Date: 2017–03–07

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