nep-pbe New Economics Papers
on Public Economics
Issue of 2018‒04‒16
ten papers chosen by
Thomas Andrén

  1. The stimulative effect of an unconditional block grant on the decentralized provision of care By Kattenberg, Mark; Vermeulen, Wouter
  2. Optimal Fiscal Policy – Factors for the Formation of the Optimal Economic and Social Models By George Abuselidze
  3. Optimal Taxation in a Unionised Economy By Vidar Christiansen; Ray Rees
  4. The Optimal Graduated Minimum Wage and Social Welfare By Eliav Danziger; Leif Danziger
  5. Who Bears the Corporate Tax Incidence? Empirical Evidence from India By Agarwal, Samiksha; Chakraborty, Lekha
  6. 'Optimal Fiscal Policy with Consumption Taxation' By Giorgio Motta; Raffaele Rossi
  7. The Dynamic Effects of Computerized VAT Invoices on Chinese Manufacturing Firms By Haichao Fan; Yu Liu; Nancy Qian; Jaya Wen
  8. Tax Incentives in Cambodia By Manuk Ghazanchyan; Alexander D Klemm; Yong Sarah Zhou
  9. Marriage, Labor Supply and the Dynamics of the Social Safety Net By Hamish Low; Costas Meghir; Luigi Pistaferri; Alessandra Voena
  10. Investigating the Relationship between Work-Life-Balance and Motivation of the Employees: Evidences from the Local Government of Jakarta By Oktosatrio, Suhendro

  1. By: Kattenberg, Mark; Vermeulen, Wouter
    Abstract: Understanding the impact of central government grants on decentralized healthcare provision is of crucial importance for the design of grant systems, yet empirical evidence on the prevalence of flypaper effects in this domain is rare. We study the decentralization of home care in the Netherlands and exploit the gradual introduction of formula-based equalization to identify the effect of exogenous changes in an unconditional block grant on local expenditure and utilization. A one euro increase in central government grants raises local expenditure by twenty to fifty cents. Adjustments occur through the number of hours as well as through substitution between basic and more advanced types of assistance. These findings suggest that conditioning of grants is not required for the central government to retain a moderate degree of control over the decentralized provision of care.
    Keywords: Intergovernmental transfers; Flypaper effect; Decentralization of health care
    JEL: H42 H51 H71 H75
    Date: 2018–02
  2. By: George Abuselidze (Faculty of Economics and Business, Batumi Shota Rustaveli State University)
    Abstract: Objective – The purpose of this paper is to develop the optimal economic and social model for the modern stage and analyze the Social Progress Index in Georgia. The research is based on the paradigm that "what we analyze, this determines the decisions we make". Consequently, emphasis is placed on issues that significantly affect human wellbeing. Methodology/Technique – In this top-down study, the empirical material is collected from official documents and public statements made by centrally placed politicians and administrators in Georgia as well as research conducted by international organizations in Georgia. The research database used is the legislative and normative acts adopted by the government of Georgia in the modern day, in particular: the National Statistics Office of Georgia, the Economic Development and Finance Ministries, the Georgian National Statistics Office, the Parliamentary Finance and Budget Committee and other related departments. Findings – This study shows that the formation of the optimal economic and social organization model of a country is particularly dependent on the selection and implementation of the most appropriate fiscal policy. The philosophy of social security is one of the greatest achievements of modern civilization. The present work is dedicated to the progress of human development – specifically, welfare issues. This provides the model for creating the optimal social security system of a population, with the following social system parameters: distribution of national income to the population and their families and addressing the issues of financing social security needs. Based on the study of the social experiences of social reform and the social indicators of the European Union, the alternate concept of prosperity and perfection is developed. These topics are the focus of the present work. Novelty – The empirical material contained within focuses on the period after 2005, when some important changes in political leadership took place. In 2003, Saakashvili became President of Georgia, Ivanishvili was elected as Prime Minister in 2012 and Kvirikashvili took over this position in 2015. During this time, there was also a shift in government social policy at a central level. The collection of empirical data for this study ends in 2017, giving a total study period of 12 years.
    Keywords: Fiscal Policy; Welfare; Social Security; Social Innovation; Household; Employment.
    JEL: E24 E62 H31 H55 H61 R2 R51
    Date: 2018–02–26
  3. By: Vidar Christiansen; Ray Rees
    Abstract: Unions appear to have an aversion to wage disparities among their members, leading to wage compression. This paper analyses the consequences of this for income tax policy. In a two-sector general equilibrium model we highlight the tradeoff between correcting the resource misallocation created by wage compression and the government’s distributional objectives. Where the union’s aversion to wage dispersion is strong, tax policy can do little to correct the distortion in the supply of trained labour, though it can come closer to achieving distributional aims. Where wage compression is less pronounced, tax policy can have significant effects on resource misallocation, at the expense of its distributional goals.
    Keywords: income taxation, optimal taxation, unionized economy, wage compression
    JEL: H21 H24
    Date: 2018
  4. By: Eliav Danziger; Leif Danziger
    Abstract: This paper analyzes the effects of introducing a graduated minimum wage in a model with optimal income taxation in which a government seeks to maximize social welfare. It shows that the optimal graduated minimum wage increases social welfare by increasing the low-productivity workers’ consumption and bringing it closer to the first-best. The paper also describes how the graduated minimum wage in a social welfare optimum depends on important economy characteristics such as the government’s revenue needs, the social-welfare weight of low-productivity workers, and the numbers and productivities of the different types of workers.
    Keywords: graduated minimum wage, optimal income taxation, social welfare
    JEL: D60 H21 J30
    Date: 2018
  5. By: Agarwal, Samiksha; Chakraborty, Lekha
    Abstract: Against the backdrop of corporate tax policy changes in India, the paper attempts to measure the incidence of corporate income tax in India under a general equilibrium setting. Using seemingly uncorrelated regression coefficients and dynamic panel estimates, we tried to analyze both the relative burden of corporate tax borne by capital and labor and the efficiency effects of corporate income tax. The data for the study is compiled from corporate firms listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) for the period 2000–15. Our empirical estimates suggest that in India capital bears more of the burden of corporate taxes than labor. However, the results vary with different proxies of capital used in the models. Though it is contrary to the Harberger (1962) hypothesis that the burden of corporate tax is shifted to labor rather than capital, it confirms the existing empirical results in the context of India.
    Keywords: Corporate Tax; Tax Incidence; Capital; Labor
    JEL: C33 H22 H25
    Date: 2018–03–14
  6. By: Giorgio Motta; Raffaele Rossi
    Abstract: We characterise optimal fiscal policies in a tractable Dynamic General Equilibrium model with monopolistic competition and endogenous public spending. The government has access to consumption taxation, as alternative to labour income taxes. Consumption taxation acts as indirect taxation of profits (intratemporal gains of taxing consumption) and enables the policy-maker to manage the burden of public debt more efficiently (intertemporal gains of taxing consumption). We show analytically that these two gains imply that the optimal share of government spending is higher under consumption taxation than with labour income taxation. Then, we quantify numerically each of these gains on households’ welfare by calibrating the model on the US economy.
    Date: 2018
  7. By: Haichao Fan; Yu Liu; Nancy Qian; Jaya Wen
    Abstract: This paper uses a balanced panel of large manufacturing firms to provide novel evidence on the dynamic effects of computerizing VAT invoices on tax revenues and firm behavior in China, 1998-2007. We find that computerization explains 14.38% of cumulative VAT revenues and increases the effective average tax rate by approximately 4.7-14% in the seven subsequent years. The evidence suggests that the effects of computerization change over time: tax revenue gains are likely to be smaller in the long run. Meanwhile, firms reduce output and input, and increase productivity monotonically over time.
    JEL: H26 H32 O10
    Date: 2018–03
  8. By: Manuk Ghazanchyan; Alexander D Klemm; Yong Sarah Zhou
    Abstract: Cambodia, like its regional peers, offers a number of tax incentives to investors. This paper reviews these incentives to assess their costs and benefits, including their likely effectiveness in attracting capital and in supporting the diversification strategy. It finds that an important incentive, the tax holiday, differs materially from practice elsewhere in offering a deferral rather than exempting from tax and may not be very effective. Moreover, other features of the tax system, such as the high withholding rate on dividends, imply relatively high effective tax rates for foreign investors. The paper discusses potential reforms that weigh revenue and other costs of tax incentives against the need for a competitive tax system, including a shift from tax holidays toward investment allowances.
    Date: 2018–03–29
  9. By: Hamish Low (University Cambridge); Costas Meghir (Cowles Foundation, Yale University); Luigi Pistaferri (Stanford University, NBER, CEPR and SIEPR); Alessandra Voena (University of Chicago, NBER, CEPR and BREAD)
    Abstract: The 1996 PRWORA reform introduced time limits on the receipt of welfare in the United States. We use variation by state and across demographic groups to provide reduced form evidence showing that such limits led to a fall in welfare claims (partly due to \banking” benefits for future use), a rise in employment, and a decline in divorce rates. We then specify and estimate a life-cycle model of marriage, labor supply and divorce under limited commitment to better understand the mechanisms behind these behavioral responses, carry out counterfactual analysis with longer run impacts and evaluate the welfare effects of the program. Based on the model, which reproduces the reduced form estimates, we show that among low educated women, instead of relying on TANF, single mothers work more, more mothers remain married, some move to relying only on food stamps and, in ex-ante welfare terms, women are worse off.
    Keywords: Time limits, Welfare reform, Life-cycle, Marriage and divorce
    JEL: D91 H53 J12 J21
    Date: 2018–02
  10. By: Oktosatrio, Suhendro
    Abstract: This paper examines the relationship between work-life-balance and employees' motivation in the public sector of Jakarta, Indonesia. Through motivational theories and work-life-balance theories, the conceptual framework is developed to explore research variables. This is a descriptive research following qualitative inductive method. The total sample size for this research is 86 respondents working in the local government of Jakarta. Data was gathered through self-administered survey questionnaire. Findings revealed that personal life significantly affect the work. Majority of the respondents prefer flexible work and operating from home. Interestingly, females are more eager to work from home in comparison to males. Furthermore, the findings revealed that females in contrast to males are much more organized in managing professional commitment and personal life agendas. Additionally, all employees seek taking holiday in contrast to extra money or bonus. Lastly, working for longer hours is the most de-motivating job attribute.
    Keywords: Motivation, Job Satisfaction, Public Sector, Qualitative Research, Work-Life-balance
    JEL: H70 H79 J24 M19 O15 Y1
    Date: 2018–01–11

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