nep-pbe New Economics Papers
on Public Economics
Issue of 2019‒07‒22
nine papers chosen by
Thomas Andrén

  1. Implications of Increasing College Attainment for Aging in General Equilibrium By Conesa, Juan Carlos; Kehoe, Timothy J.; Nygard, Vegard; Raveendranathan, Gajendran
  2. Maldives; Technical Assistance Report-Reform Options to Strengthen Tax Policy By International Monetary Fund
  3. Private vs. Public Provision of Social Insurance: Evidence from Medicaid By Timothy J. Layton; Nicole Maestas; Daniel Prinz; Boris Vabson
  4. How political systems and social welfare policies affect well-being: A literature review By MacCulloch, Robert
  5. On Financing Retirement, Health Care, and Long-Term Care in Japan By McGrattan, Ellen R.; Miyachi, Kazuaki; Peralta-Alva, Adrian
  6. Business Tax Policy under Default Risk By Comincioli, Nicola; Vergalli, Sergio; Panteghini, Paolo M.
  7. The New Politics of Global Tax Governance: Taking Stock a Decade After the Financial Crisis By Corlin Christensen, Rasmus; Hearson, Martin
  8. The Political Economy of Social Security Reform By Michael J. Boskin; Diego J. Perez; Daniel S. Bennett
  9. Long Term Health Efect of Earned Income Tax Credit By Ze Sogn

  1. By: Conesa, Juan Carlos (Stony Brook University); Kehoe, Timothy J. (Federal Reserve Bank of Minneapolis); Nygard, Vegard (Federal Reserve Bank of Minneapolis); Raveendranathan, Gajendran (McMaster University)
    Abstract: We develop and calibrate an overlapping generations general equilibrium model of the U.S. economy with heterogeneous consumers who face idiosyncratic earnings and health risk to study the implications of exogenous trends in increasing college attainment, decreasing fertility, and increasing longevity between 2005 and 2100. While all three trends contribute to a higher old age dependency ratio, increasing college attainment has different macroeconomic implications because it increases labor productivity. Decreasing fertility and increasing longevity require the government to increase the average labor tax rate from 32.0 to 44.4 percent. Increasing college attainment lowers the required tax increase by 10.1 percentage points. The required tax increase is higher under general equilibrium than in a small open economy with a constant interest rate because the reduction in the interest rate lowers capital income tax revenues.
    Keywords: College attainment; Aging; Health care; Taxation; General equilibrium
    JEL: H20 H51 H55 I13 J11
    Date: 2019–05–08
  2. By: International Monetary Fund
    Abstract: This report reviews tax policy in the Maldives and identifies reform options to support efficiency, equity, and revenue. The absence of a broad-based personal income tax (PIT) generates revenue leakages and significantly diminishes the role of tax policy in income redistribution. A modern tax design requires a holistic view of the taxation of different sources of income and different legal forms of taxpayers to maintain tax neutrality, to the extent possible, while preserving some degrees of progressivity, simplicity, and administrability. Moreover, updating the tax system to cope with recent international developments is vital to safeguard revenues. While strengthening the goods and services tax (GST) can raise revenues in the short- to medium-term, a property tax is an important option for the long-term. The diagram below demonstrates reform priorities, as identified in this report, to modernize tax policy in the Maldives.
    Date: 2019–07–01
  3. By: Timothy J. Layton; Nicole Maestas; Daniel Prinz; Boris Vabson
    Abstract: Public health insurance benefits in the U.S. are increasingly provided by private firms, despite mixed evidence on welfare effects. We investigate the impact of privatization in Medicaid by exploiting the staggered introduction of county-level mandates in Texas that required disabled beneficiaries to switch from public to private plans. Compared to the public program, which used blunt rationing to control costs, we find privatization led to improvements in healthcare—including increased consumption of high-value drug treatments and fewer avoidable hospitalizations—but also higher Medicaid spending. We conclude that private provision can be beneficial when constraints in the public setting limit efficiency.
    JEL: H51 H53 H75 I13 I18
    Date: 2019–07
  4. By: MacCulloch, Robert
    Abstract: This chapter focusses on the question of how formal institutions, like those governing the level of freedom, the regulatory state, political parties and the generosity of the welfare state, affect self-reported well-being. The evidence suggests, for example, that more freedom, as well as government structures which encourage civic engagement, participation and trust, have positive effects. Many studies, however, use cross-sectional data with small sample sizes, often due to institutions being measured at the country level with limited variation over time. As a consequence, further work is needed to test robustness. Stronger results hold with respect to particular types of welfare state institutions, like unemployment benefits, which are subject to quite frequent changes within nations. Increases in unemployment benefits are associated with higher levels of well-being for all workers, probably due to greater income security. However, doubt still persists as to their overall impact, due to the extent to which well-being is adversely affected by the higher taxes needed to support a more generous welfare state.
    Keywords: Public Economics
    Date: 2017–09
  5. By: McGrattan, Ellen R. (Federal Reserve Bank of Minneapolis); Miyachi, Kazuaki (Asia Pacific Department, International Monetary Fund); Peralta-Alva, Adrian (International Monetary Fund)
    Abstract: Japan is facing the problem of how to finance retirement, health care, and long-term care expenditures as the population ages. This paper analyzes the impact of policy options intended to address this problem by employing a dynamic general equilibrium overlapping generations model, specifically parameterized to match both the macro- and microeconomic level data of Japan. We find that financing the costs of aging through gradual increases in the consumption tax rate delivers better macroeconomic performance and higher welfare for most individuals relative to other financing options, including raising social security contributions, debt financing, and a uniform increase in health care and long-term care copayments.
    Keywords: Retirement; Health care; Taxation; Aging; Japan
    JEL: E62 H51 H55 I13
    Date: 2019–06–07
  6. By: Comincioli, Nicola; Vergalli, Sergio; Panteghini, Paolo M.
    Abstract: In this article we use a stochastic model with one representative firm to study business tax policy under default risk. We will show that, for a given tax rate, the government has an incentive to reduce (increase) financial instability and default costs if its objective function is welfare (tax revenue).
    Keywords: Research Methods/ Statistical Methods
    Date: 2019–07–18
  7. By: Corlin Christensen, Rasmus; Hearson, Martin
    Abstract: The financial crisis of 2007–2009 is now broadly recognised as a once-in-a-generation inflection point in the history of global economic governance. It has also prompted a reconsideration of established paradigms in international political economy (IPE) scholarship. Developments in global tax governance open a window onto these ongoing changes, and in this essay we discuss four recent volumes on the topic drawn from IPE and beyond, arguing against an emphasis on institutional stability and analyses that consider taxation in isolation. In contrast, we identify unprecedented changes in tax cooperation that reflect a significant contemporary reconfiguration of the politics of global economic governance writ large. To develop these arguments, we discuss the links between global tax governance and four fundamental changes underway in IPE: the return of the state through more activist policies; the global power shift towards large emerging markets; the politics of austerity and populism; and the digitalisation of the economy.
    Keywords: Economic Development, Finance, Governance,
    Date: 2019
  8. By: Michael J. Boskin; Diego J. Perez; Daniel S. Bennett
    Abstract: We identify which types of Social Security reforms are supported when people vote in their financial self-interest, under alternative economic and demographic projections and voting proclivity assumptions. While 40% of voters have negative lifetime net transfers, less than 10% have negative future transfers under the un- sustainable status quo. Framing the problem as a choice between reforms is necessary for any to receive majority support. Delayed reforms are often preferred, but immediate tax hikes or slower benefit growth win in some circumstances. Inter-generational AND intragenerational heterogeneity of economic interests combine to affect which reforms are blocked and which are feasible.
    JEL: H55 H62 H68
    Date: 2019–06
  9. By: Ze Sogn (Rutgers University)
    Abstract: Using decades of variation in the federal and state Earned Income Tax Credit (EITC) and the Panel Study of Income Dynamics (PSID) dataset, I examine the impact of exposure to EITC expansions in utero and during childhood on health outcomes in adulthood. In order to overcome the confounding relationship between family income and health outcomes, this study uses the maximum EITC benefit as the key variable. Reduced-form estimates show that EITC expansions had a positive impact on self-reported health status. Specific ally, a $1000 increase in the maximum EITC exposure from ages 13 to 18 corresponds with a 0.01 point increase in the reported health status during adulthood. In addition, being exposed to EITC expansions in utero increases reported health status by 0.05 point. Relative to the range of reported health of 1 to 5 and the standard deviation of 0.94, these are very small effects. Nonetheless, these health effects are consequential, associating with increases in both family income and maternal labor supply.
    Keywords: eitc, health
    JEL: I1 H2
    Date: 2019–06–28

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