nep-pbe New Economics Papers
on Public Economics
Issue of 2017‒07‒02
twenty papers chosen by
Thomas Andrén

  1. Low incentives to work at the extensive and intensive margin in selected EU countries By Jara Tamayo, Holguer Xavier; Gasior, Katrin; Makovec, Mattia
  2. Analysis of tax harmonisation in the SADC By Michael Ade; Jannie Rossouw; Tendai Gwatidzo
  3. When the State Doesn't Play Dice: An Experimental Analysis of Cunning Fiscal Policies and Tax Compliance By Luigi Mittone; Matteo Ploner; Eugenio Verrina
  4. Survey Under-Coverage of Top Incomes and Estimation of Inequality: What Is the Role of the UK’s SPI Adjustment? By Richard V. Burkhauser; Nicolas Hérault; Stephen P. Jenkins; Roger Wilkins
  5. Transfer Taxes and Household Mobility: Distortion on the Housing or Labor Market? By Christian A. L. Hilber; Teemu Lyytikäinen
  6. The end of cheap talk about poverty reduction: the cost of closing the poverty gap while maintaining work incentives By Collado, Diego; Cantillon, Bea; Van den Bosch, Karel; Goedemé, Tim; Vandelannoote, Dieter
  7. Effects of Fiscal Policy Shocks in the Euro Area (Lessons Learned from Fiscal Consolidation) By Mirdala, Rajmund
  8. Innovation, patent location and tax planning by multinationals By Øystein Bieltvedt Skeie; Åsa Johansson; Carlo Menon; Stéphane Sorbe
  9. Estimating Taxable Income Responses with Elasticity Heterogeneity By Kumar, Anil; Liang, Che-Yuan
  10. The impact of in-work benefits on employment and poverty By Vandelannoote, Dieter; Verbist, Gerlinde
  11. Income shifting as income creation? The intensive vs. the extensive shifting margins By Selin, Håkan; Simula, Laurent
  12. Is high inequality an issue in Poland? By Michal Brzezinski
  13. Developing Inclusive Communities: Challenges and Opportunities for Mixed-Income Housing By Lewis Glover, Renée; Carpenter, Ann; Duckworth, Richard
  14. Social Security Contributions and the Business Cycle By Almosova, Anna; Burda, Michael C; Voigts, Simon
  15. Reducing poverty and inequality through tax-benefit reform and the minimum wage: the UK as a case-study By Atkinson, Anthony B.; Leventi, Chrysa; Nolan, Brian; Sutherland, Holly; Tasseva, Iva Valentinova
  16. Optimal Privatization Policy under Private Leadership in Mixed Oligopolies By Lin, Ming Hsin; Matsumura, Toshihiro
  17. Effects of Fiscal Policy Shocks in CE3 Countries (TVAR Approach) By Mirdala, Rajmund; Kameník, Martin
  18. U.S. Fiscal Policy and Asset Prices: The Role of Partisan Conflict By Rangan Gupta; Chi Keung Marco Lau; Stephen M. Miller; Mark E. Wohar
  19. Payroll Taxes and Firm Performance By Egebark, Johan; Kaunitz, Niklas
  20. Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle By Ekaterina Jardim; Mark C. Long; Robert Plotnick; Emma van Inwegen; Jacob Vigdor; Hilary Wething

  1. By: Jara Tamayo, Holguer Xavier; Gasior, Katrin; Makovec, Mattia
    Abstract: Tax and benefit systems play an important role in determining work incentives at both, the extensive and the intensive margin of labour supply. The aim of this research note is to provide a comparative analysis of work incentives in selected EU countries. Our analysis makes use of EUROMOD and representative household microdata from nine EU countries (Belgium, Bulgaria, Germany, Italy, Lithuania, Hungary, Austria, Finland and the UK) to provide a description of the distribution of short- and long-term participation tax rates and marginal effective tax rates in 2015, for people currently in work; and to characterise individuals facing low work incentives. Our results highlight the important variation in the distribution of work incentives across our selected countries. Unemployment insurance schemes play a significant role in short-term participation tax rates, although to different extents across countries. Our analysis further highlights differences across countries in terms of the population subgroups with low incentives to work and discusses the relevance of using a relative or an absolute threshold for such definition.
    Date: 2017–03–31
  2. By: Michael Ade; Jannie Rossouw; Tendai Gwatidzo
    Abstract: This paper analyses tax harmonisation in the SADC region. Results of first attempt to devise a tax policy harmonisation measure (TPHM) by the use of a cross-sectional and panel data are reported. New methodology of computing optimum tax rates (OTRs) are introduced and a robustness test (via a sensitivity analysis) on the impact of taxation (based on new tax dataset from the TPHM and OTRs computation) on FDI inflows to the SADC is conducted.The research shows a need for the SADC countries to develop policies aimed at collectively expanding their corporate tax base in order to accommodate the relatively low optimum CIT rates. It is also shown that the adoption of an optimum VAT rate by all SADC member countries will reduce the usage of different politically motivated VAT rates by individual member states as instruments to gain voters' confidence. The research shows that, some further policy considerations towards enhanced harmonisation and tax revenue could include developing a benchmarking process with other regional economic groupings such as the EU and the EAC.
    Keywords: SADC; Harmonisation; Tax Policy; Tax Rates; EBA; FDI
    JEL: E60 F15 H21 H25 H27
    Date: 2017–06
  3. By: Luigi Mittone; Matteo Ploner; Eugenio Verrina
    Abstract: We provide a test of the effect of aggressive fiscal policies on tax com- pliance in the lab. Our experimental setup allows tax agents to break a deontological rule concerning the implementation of audits on a group of tax payers. In one incentive condition, tax agents have a direct monetary benefit from higher compliance; in another, they have none. Tax payers, on the other hand, go through a phase of stringent controls under their tax agents and one where audit probabilities are fixed and implemented by a random device. We find that tax agents bend the rules to their advantage. Many either perform very frequent audits or place them in a strategic way, thus enforcing a norm of high compliance. Those following the rules have no success. Surprisingly, this is true for both incentive conditions. Tax payers exposed to these audit strategies display nearly full compliance and con- tinue to do so also when tax agents are inactive. We conclude that cunning fiscal policies can effectively be used by tax authorities, if it is transparent that they lead to higher overall compliance. This establishes a virtuous norm that can have positive spillovers even in domains where the state has less coercive power.
    Keywords: Tax evasion, die under the cup, taxpaying strategies, audit strategies, endogenous audits; Tax evasion, die under the cup, taxpaying strategies, audit strategies, endogenous audits
    JEL: C91 C92 H24 H26 H83
    Date: 2017
  4. By: Richard V. Burkhauser (Lyndon B. Johnson School of Public Affairs, University of Texas-Austin; Department of Policy Analysis and Management, Cornell University; Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Nicolas Hérault (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Stephen P. Jenkins (London School of Economics; Institute for Social and Economic Research, University of Essex; and Institute for the Study of Labor (IZA); Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Roger Wilkins (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Survey under-coverage of top incomes leads to bias in survey-based estimates of overall income inequality. Using income tax record data in combination with survey data is a potential approach to address the problem; we consider here the UK’s pioneering ‘SPI adjustment’ method that implements this idea. Since 1992, the principal income distribution series (reported annually in Households Below Average Income) has been based on household survey data in which the incomes of a small number of ‘very rich’ individuals are adjusted using information from ‘very rich’ individuals in personal income tax return data. We explain what the procedure involves, reveal the extent to which it addresses survey under-coverage of top incomes, and show how it affects estimates of overall income inequality. More generally, we assess whether the SPI adjustment is fit for purpose and consider whether variants of it could be employed by other countries.
    Keywords: Inequality, income inequality, survey under-coverage, SPI adjustment, top incomes, tax return data, survey data
    JEL: D31 C81
    Date: 2017–06
  5. By: Christian A. L. Hilber; Teemu Lyytikäinen
    Abstract: We estimate the effect of the UK Stamp Duty Land Tax (SDLT) - a transfer tax on the purchase price of property or land - on different types of household mobility using micro data. Exploiting a discontinuity in the tax schedule, we isolate the impact of the tax from other determinants of mobility. We compare homeowners with self-assessed house values on either sides of a cut-off value where the tax rate jumps from 1 to 3 percent. We find that a higher SDLT has a strong negative impact on housing-related and short distance moves but does not adversely affect job-induced or long distance mobility. Overall, our results suggest that transfer taxes may mainly distort housing rather than labor markets.
    Keywords: transfer taxes, stamp duty, transaction costs, homeownership, household mobility
    JEL: D23 H21 H27 J61 R21 R31 R38
    Date: 2017–06
  6. By: Collado, Diego; Cantillon, Bea; Van den Bosch, Karel; Goedemé, Tim; Vandelannoote, Dieter
    Abstract: How can poverty reduction be improved and at what cost? Available evidence suggests that social investment strategies and employment policies are important but not sufficient. In order to reduce the number of people below the relative at-risk-of-poverty threshold of the EU, countries must develop not only effective employment policies but also ensure adequate social protection. This implies increasing social transfers for working and nonworking households, while protecting work incentives. In this paper we show that this is not a cheap option. We calculate the hypothetical cost of closing the poverty gap while maintaining the existing average labour market participation incentives at the bottom of the income distribution. We do it in three of the most developed welfares states of the EU, representing different welfare regimes, namely Belgium, Denmark and the United Kingdom. Results show that this would require around two times the budget needed to just lift all disposable household incomes to the poverty threshold. The cost would obviously be lower in countries with smaller poverty gaps and with weaker participation incentives. Furthermore, the results suggest that for anti-poverty strategies to be effective other factors should be considered more carefully, including the drivers of rising inequalities in market incomes, and especially the downward pressures on low wages, as well as the most appropriate magnitude of financial work incentives.
    Date: 2017–03–31
  7. By: Mirdala, Rajmund
    Abstract: European Union member countries are currently exposed to negative implications of the economic and debt crisis. Questions associated with disputable implications of fiscal incentives seem to be contrary to the crucial need of the effective fiscal consolidation that is necessary to reduce excessive fiscal deficits and high sovereign debts. While challenges addressed to the fiscal policy and its anti-cyclical potential rose steadily but not desperately since the beginning of the economic crisis, the call for fiscal consolidation became urgent almost immediately and this need significantly strengthen after the debt crisis contagion flooded Europe. In the paper we provide an overview of main trends in public budgets and sovereign debts in the Euro Area member countries during last two decades. We identify episodes of successful and unsuccessful (cold showers versus gradual) fiscal (expenditure versus revenue based) consolidations by analyzing effects of improvements in cyclically adjusted primary balance on the sovereign debt ratio reduction. We also estimate VAR model to analyze effects of fiscal shocks (based on one standard deviation in total expenditure, direct and indirect taxes) to real output. It is expected that responses of real output to different types of (consolidating) fiscal shocks may vary and thus provide more precise ideas about a feasibility (i.e. side effects on the macroeconomic performance) of expenditure versus revenue based fiscal consolidation episodes. Economic effects of fiscal consolidating adjustments are evaluated for two periods (pre-crisis and extended) to reveal crisis effects on fiscal consolidation efforts.
    Keywords: fiscal adjustments, fiscal consolidation, cyclically adjusted primary balance, government expenditures, tax revenues, unrestricted VAR, Cholesky decomposition, SVAR, structural shocks, impulse-response function
    JEL: C32 E62 H20 H50 H60
    Date: 2016–12
  8. By: Øystein Bieltvedt Skeie; Åsa Johansson; Carlo Menon; Stéphane Sorbe
    Abstract: This paper assesses the effect of international differences in taxes on the choice of patent location by multinational enterprises (MNEs). The analysis is based on a large sample of patents and firms from the OECD-PATSTAT and OECD-ORBIS databases over 2004-10. The approach is to compare the number of patent applications of MNE entities with different links to other countries and thus different sets of location choices, while controlling for other factors affecting patenting behaviour. The results suggest that lower corporate taxes, either in the form of a lower statutory rate or a preferential intellectual property regime, are associated with more patent applications. Both the location of research activities, which is proxied by the location of patent inventors, and the legal ownership of patents are found to be sensitive to corporate taxes. For instance, a 5 percentage point cut in the preferential tax rate on patent income is associated with a 6% increase in patent applications. On average, about two-thirds of the increase comes from patents invented at home and one third from patents invented abroad, but the relative importance of these two effects is likely to vary with the design of the preferential regime and especially the existence of activity requirements. In addition, strong anti-avoidance measures against tax planning are found to reduce patent shifting by MNEs. Innovation, localisation des brevets et planification fiscale des multinationales Cet article évalue l'effet des différences internationales d’imposition sur le choix de l'emplacement des brevets par les entreprises multinationales. L'analyse est basée sur un large échantillon de brevets et d’entreprises des bases de données OCDE-PATSTAT et OCDE-ORBIS sur 2004-10. L'approche consiste à comparer le nombre de demandes de brevets d'entités de multinationales ayant différents liens vers d'autres pays et donc différents ensembles de choix de localisation, tout en contrôlant pour les autres facteurs qui influent sur le comportement en matière de brevets. Les résultats suggèrent qu’un niveau plus faible d’impôt sur les sociétés, soit sous la forme d'un taux légal inférieur soit d’un régime de propriété intellectuelle préférentiel, est associé à davantage de demandes de brevets. Tant la localisation des activités de recherche, qui est approchée par le lieu de résidence des inventeurs de brevets, que la propriété juridique des brevets seraient sensibles à l'impôt sur les sociétés. Par exemple, une baisse de 5 points de pourcentage du taux d'imposition préférentiel sur le revenu de brevet est associée à une augmentation de 6% des demandes de brevet. En moyenne, environ deux tiers de l'augmentation provient de brevets inventés dans le pays en question et un tiers des brevets inventés à l'étranger, mais l'importance relative de ces deux effets est susceptible de varier en fonction de la conception du régime préférentiel et plus particulièrement de l'existence d'exigences de localisation d’activité. En outre, de fortes mesures anti-évitement contre la planification fiscale réduiraient selon les estimations de l’article les transferts de brevets par les multinationales.
    Keywords: BEPS, corporate taxation, multinational enterprises, patents, research and development, tax planning
    JEL: F23 H26 O34
    Date: 2017–02–16
  9. By: Kumar, Anil (Research Department, Federal Reserve Bank of Dallas); Liang, Che-Yuan (Department of Economics)
    Abstract: We explore the implications of heterogeneity in the elasticity of taxable income (ETI) for tax-reform based estimation methods. We theoretically show that existing methods yield elasticities that are biased and lack policy relevance. We illustrate the empirical importance of our theoretical analysis using the NBER tax panel for 1979-1990. We show that elasticity heterogeneity is the main explanation for large differences between estimates in the previous literature. Our preferred, newly suggested method yields elasticity estimates of approximately 0.7 for taxable income and 0.2 for broad income.
    Keywords: elasticity of taxable income; elasticity heterogeneity; tax reforms; panel data; preference heterogeneity
    JEL: D11 H24 J22
    Date: 2017–03–29
  10. By: Vandelannoote, Dieter; Verbist, Gerlinde
    Abstract: This article studies the impact of design characteristics of in-work benefits on employment and poverty in an international comparative setting, taking account of both first and second order labour supply effects. We use the micro-simulation model EUROMOD, which has been enriched with a discrete labour supply model. The analysis is performed for four EU-member states: Belgium, Italy, Poland and Sweden. The results show that design characteristics matter substantially, though the specific effects differ in magnitude across countries, indicating there is no one-size-fits-all solution. Throughout the analysis, numerous trade-offs are uncovered: not only between employment and poverty goals, but also within employment incentives itself (extensive vs. intensive margin). Taking account of behavioural reactions attenuates the impact on poverty outcomes, signalling the importance of bringing these effects into the empirical analysis.
    Date: 2017–03–31
  11. By: Selin, Håkan (IFAU - Institute for Evaluation of Labour Market and Education Policy); Simula, Laurent (University Grenoble Alpes and Grenoble Applied Econ Lab)
    Abstract: The public finance literature has modeled income shifting as a decision along the intensive margin even though it involves significant fixed costs, giving rise to an important extensive margin. We show that accounting for this extensive margin has crucial policy implications: the classical distinction between income creation and income shifting breaks down. We make this point in a simple linear tax setting with a population of agents differing in terms of productivities, labor supply elasticities, and costs of income shifting. In the most empirically plausible scenario when people who shift easily are also more elastic in labor supply, giving them a lower tax rate is a good thing. This mechanism may be compared to third degree price discrimination in industrial organization. Numerical simulations suggest that fixed shifting costs have a large impact on optimal taxes. We further demonstrate that the conclusions derived for linear taxes carry over to non-linear tax schedules.
    Keywords: income shifting; optimal taxation; labor income tax
    JEL: H21 H24
    Date: 2017–06–05
  12. By: Michal Brzezinski
    Abstract: In recent years, growing economic inequality has become one of the most debated social and economic problems in the world. Over the last three decades, most OECD countries have recorded a pronounced rise in income inequality. A number of researchers, politicians and economic commentators have suggested that the level of inequality has passed the tipping point beyond which economic growth may be weakened, social mobility limited, the social divide exacerbated and political power permanently concentrated in the hands of the wealthy. This paper analyses the multiple dimensions of economic inequality in Poland. Subsequent parts of the paper focus on: wage dispersion, income inequality, the evolution of wage dispersion and income inequality in Poland since 1989, wealth inequality, inequality of opportunity, relative poverty.
    Keywords: income inequality, top income shares, wage dispersion, wealth inequality, inequality of opportunity, Poland
    JEL: D63 P36
    Date: 2017–06
  13. By: Lewis Glover, Renée (Federal Reserve Bank of Atlanta); Carpenter, Ann (Federal Reserve Bank of Atlanta); Duckworth, Richard (Federal Reserve Bank of Atlanta)
    Abstract: Over the past decade, housing costs have risen faster than incomes. The need for affordable rental housing has well outpaced the number of available units as well as funding allocations at the federal level. Local regulation and land use policies that increase the cost of subsidized, mixed-income housing construction and preservation have contributed to the affordability problem. {{p}} To meet the affordable housing needs in U.S. communities, innovation, creativity, and "out of the box" thinking may be required, particularly as it relates to reducing the rapidly increasing costs of development. Another consideration is pursuing mixed-income development, as it is more financially sustainable than low-income housing. Mixed-income neighborhoods are also desirable as they can lead to substantially better outcomes for families because the higher disposable incomes of a broader economic mix of families attract additional private investment, amenities, and opportunities. {{p}} This discussion paper explores new ideas about how affordable housing in an economically integrated, mixed-income community setting could be developed and operated in an environment of declining government subsidies. Based on interviews with housing stakeholders in Atlanta, Georgia, Jacksonville, Florida, and Nashville, Tennessee, we have compiled ideas that could be scalable and replicable and could result in substantial cost savings without compromising mission, integrity, performance, or accountability. Specific suggestions include standardizing qualifying income targets and other standards imposed by funders and reducing building and permitting barriers to development, such as limited zoning for multifamily housing and regulations limiting wood frame construction. More generally, participants thought existing stakeholders could better address the underlying political environment by creating a unified constituency to advocate for more mixed-income communities. These ideas and lessons learned from the mixed-use, mixed-income revitalization experience may inform and assist cities in rebuilding or enhancing their urban core.
    Keywords: affordable housing; mixed-income housing; housing policy; housing development
    JEL: H53 H75 I38 R21 R31 R38
    Date: 2017–06–01
  14. By: Almosova, Anna; Burda, Michael C; Voigts, Simon
    Abstract: This paper examines magnitudes and business cycle dynamics of social security contributions (SSC). In most OECD countries studied, we document a negative covariation of payroll tax burdens with GDP and GDP growth at business cycle and lower frequencies. We assess the overall magnitude of the distortion following Barro and Redlick (2011). For most countries, average marginal SSC tax rates exceed average rates, but the latter tracks the former tightly. Changes in average payroll tax burdens are mostly accounted for by changes in tax schedules rather than shifts in the earnings distribution over time. For many countries, SSC rates behave like estimated values of the "labor wedge" (Chari et al. 2007, Brinca et al., 2016).
    Keywords: Business cycle; labor wedge; payroll tax; social security contributions
    JEL: E24 E32 H55 J32
    Date: 2017–06
  15. By: Atkinson, Anthony B.; Leventi, Chrysa; Nolan, Brian; Sutherland, Holly; Tasseva, Iva Valentinova
    Abstract: Atkinson’s book Inequality: What Can Be Done? (Harvard University Press, 2015) sets out a range of concrete proposals aimed at reducing income inequality, which cover a very broad span but include major changes to the income tax and social transfers system and the minimum wage. These are framed with specific reference to the UK but have much broader relevance in demonstrating how substantial the impact on inequality of such measures could be. This paper assesses the first-round effects of these tax, transfer and minimum wage reforms on income inequality and poverty based on a microsimulation approach using EUROMOD. The reforms involve a significantly more progressive income tax structure, a major increase in the minimum wage to the level which is estimated to represent the ‘Living Wage’, and alternative routes to reforming social transfers – either to strengthen the social insurance element or to restructure the entire system as a Participation Income (a variant of Basic/Citizen’s Income). The results show how the first-round effects of either set of tax and transfer proposals would be to substantially reduce the extent of income inequality and relative income poverty and the paper draws out how the two approaches differ in their effects. The additional impact of raising the minimum wage to the Living Wage is modest, reflecting in particular the position of beneficiaries in the household income distribution and the offsetting effects on household income of the withdrawal of means-tested cash transfers.
    Date: 2017–06–26
  16. By: Lin, Ming Hsin; Matsumura, Toshihiro
    Abstract: We discuss optimal privatization policies in mixed oligopolies in which a public firm is the Stackelberg follower (private leadership). We find that under constant marginal cost, the optimal degree of privatization is zero. When the marginal cost is increasing, however, the optimal degree is never zero, and full privatization can be optimal. These results suggest that the optimal privatization policy depends on the cost conditions. We also find that the optimal degree of privatization is substantially lower under private leadership than in the simultaneous-move model when there is no cost difference between public and private firms.
    Keywords: private leadership; mixed oligopoly; mixed ownership in public firms
    JEL: H42 L13
    Date: 2017–06–27
  17. By: Mirdala, Rajmund; Kameník, Martin
    Abstract: The real output deterioration, high fiscal deficits and increased sovereign debt burden represents key phenomena that affected the maneuverability of fiscal authorities in the early crisis years. Controversy between fiscal sustainability and fiscally driven economic recovery fueled a large number of academic and policy discussions about the appropriate response of governments to the crisis challenges. Empirical literature provides mixed evidence about the effects of fiscal policy adjustments on the macroeconomic performance. Moreover, pro-cyclical patterns in fiscal policies of many countries during the pre-crisis period did not reveal clear lessons learned that would be beneficial for fiscal authorities during the crisis years. In the paper we examine effects of the fiscal policy shocks in CE3 (the Slovak Republic, the Czech Republic and Hungary) within different stages of the business cycle by employing threshold vector autoregression (TVAR) model. We calculate fiscal multipliers and generalized impulse-response functions to assess the responsiveness of the real output to the fiscal policy adjustments. The main objective is to determine whether effects of the fiscal policy shocks differ during expansion and recession. Our results indicate that the size of fiscal multipliers and responsiveness of the real output are generally higher for spending fiscal shocks while effects of revenue fiscal shocks are much less dynamic in all three countries. Moreover, results differs between upper (expansion) and lower (recession) regime as well as for the per-crisis and crisis periods.
    Keywords: fiscal policy, threshold VAR, structural shocks, fiscal multipliers, generalized impulse-response function
    JEL: C32 E62 H60
    Date: 2017–06–25
  18. By: Rangan Gupta (University of Pretoria); Chi Keung Marco Lau (University of Northumbria); Stephen M. Miller (University of Nevada, Las Vegas); Mark E. Wohar (University of Nebraska at Omaha)
    Abstract: Fiscal policy shocks exert wide-reaching effects, including movements in asset markets. U.S. politics have been characterized historically by a high degree of partisan conflict. The combination of increasing polarization and divided government leads not only to significant Congressional gridlock, but also to spells of high fiscal policy uncertainty. This paper adds to the literature on the relationships between fiscal policy and asset prices in the U.S. economy, conditional on the degree of partisan conflict. We analyze whether a higher degree of partisan conflict (legislative gridlock) reduces the efficacy of the effect and response of fiscal policy on and to asset price movements, respectively. We find that partisan conflict does not significantly affect the relationships between the fiscal surplus to GDP and housing and equity returns. Rather, if important, partisan conflict affects the actual implementation of fiscal policy actions.
    Keywords: Quantile structural VAR, fiscal policy, stock prices, house prices, partisan conflict
    JEL: C32 E62 G10 H30 R30
    Date: 2017–06
  19. By: Egebark, Johan (Research Institute of Industrial Economics (IFN)); Kaunitz, Niklas (Department of Economics, Stockholm University)
    Abstract: The Swedish employer paid payroll tax was reduced substantially for young workers in 2007, causing firms’ average social fees to depend on the age structure of their employees. Using pre-reform conditions to define treated and control firms, we show that the lower costs induced by the reduced taxes have no impact on exit rates or profitability. We find negligible effects on gross investments, and negative, but not statistically significant, effects on labor productivity.
    Keywords: Payroll taxes; Labor costs; Profitability; Labor productivity; Investments; Windfall gain; Tax subsidy; Firm survival
    JEL: D22 H22 J38 L25
    Date: 2017–06–20
  20. By: Ekaterina Jardim; Mark C. Long; Robert Plotnick; Emma van Inwegen; Jacob Vigdor; Hilary Wething
    Abstract: This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.
    JEL: H7 J2 J3
    Date: 2017–06

This nep-pbe issue is ©2017 by Thomas Andrén. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.