nep-pbe New Economics Papers
on Public Economics
Issue of 2019‒09‒02
fifteen papers chosen by
Thomas Andrén

  1. Labour Taxation and Inclusive Growth By Athena Kalyva; Savina Prince; Alexander Leodolter; Caterina Astarita
  2. Do Local Governments Represent Voter Preferences? Evidence from Hospital Financing under the Affordable Care Act By Victoria Perez; Justin M. Ross; Kosali I. Simon
  3. Tax Farming – Pro ET Contra By Dmitry L. Komyagin
  4. What is the Optimal Immigration Policy? Migration, Jobs and Welfare By Guerreiro, Joao; Rebelo, Sérgio; Teles, Pedro
  5. Tax Pass-Through in the European Beer Market By Aria Ardalan; Sebastian G. Kessing
  6. Rules of Thumb and Attention Elasticities: Evidence from Under- and Overreaction to Taxes By William Morrison; Dmitry Taubinsky
  7. Who Bears the Burden of Real Estate Transfer Taxes? Evidence from the German Housing Market By h.c. Clemens Fuest; Mathias Dolls; Carla Krolage; Florian Neumeier
  8. Spatial Competition and Effectiveness of Soda Tax: Evidence from Berkeley and Philadelphia By Balagtas, Joseph V.; He, Xiaoyang
  9. The Impacts of Physician Payments on Patient Access, Use, and Health By Diane Alexander; Molly Schnell
  10. Who Bears the Burden of Universal Health Coverage? An Assessment of Alternative Financing Policies Using an Overlapping generations General Equilibrium Model By Sameera Awawda; Mohammad Abu-Zaineh; Bruno Ventelou
  11. Establishing the baseline: estimating the fiscal contribution of multinational enterprises By CASELLA, BRUNO; BOLWIJN, RICHARD; RIGO, DAVIDE
  12. (Macro) Prudential Taxation of Good News By Flemming, Jean; Lhuillier, Jean-Paul; Piguillem, Facundo
  13. How (Not) to Foster Innovations in Public Infrastructure Projects By Hoppe, Eva I.; Schmitz, Patrick W.
  14. Modern Democracy-Welfare State and Public Goods. A current consequence for Greece. By Mavrozacharakis, Emmanouil
  15. The potential of tax microdata for tax policy By Seán Kennedy

  1. By: Athena Kalyva; Savina Prince; Alexander Leodolter; Caterina Astarita
    Abstract: The importance of tackling income inequality has been stressed in the context of the European Pillar of Social Rights. In this context, the 2018 Annual Growth Survey underlined the relevance of labour taxes to pursue inclusive growth, as it has an important impact on economic growth but also on income inequality. Not all labour tax reforms, however, can simultaneously foster growth and reduce income inequality: some reforms imply a trade-off while others offer a win-win situation. This paper focusses on those labour tax reforms which offer complementarities between growth and income inequality objectives. It expands on work carried out for the Eurogroup (tax wedge, financing labour tax cuts) and the Economic Policy Committee (secondary earners, design of labour taxation) in supporting the EU political imperative of addressing income inequalities while fostering growth.
    JEL: D1 D2 D3 E6 H2 H21 J08 J2
    Date: 2018–07
  2. By: Victoria Perez; Justin M. Ross; Kosali I. Simon
    Abstract: A mainstream motivation for decentralized government is to enable public service investments to better align with political preferences that may differ by geographical region. This paper examines how political preferences determine local government provision of hospital services. We find that local governments in areas more supportive of public insurance expansion responded to such state action by increasing expenditures on hospitals, whereas those in areas that voted against such expansions used the savings to reduce property taxes. This finding suggests that local government financial responses indeed align with political preferences.
    JEL: H71 H72 I1 I11
    Date: 2019–07
  3. By: Dmitry L. Komyagin (National Research University Higher School of Economics)
    Abstract: This article investigates issues related to a unique experiment carried out in Russia in unifying the collection of all obligatory payments. It analyzes the legal aspects of this approach and presents the variety of methods for collecting such payments. Notions of budget revenue and sources of revenue are considered. Special attention is paid to the forms and practices of tax farming and other obligatory payments. The article concludes that the budget legislation actually specifies various fiscal charges as sources of budget revenue. The real source of public revenue are the assets and resources making up the national wealth. Historical examples show that despite the generally accepted denial, tax farming is a normal method and can be applied along with the state monopoly and tax administration. The cases when tax farming is transformed into a state monopoly or excise and vice versa are not rare. Tax farming, which has continued to this day, is also referred to as parafiscal charges or quasi taxes
    Keywords: taxes; obligatory payments; fiscal charges, tax farming; state regalia, state monopoly; budget; public revenue; sources of revenue
    JEL: Z
    Date: 2019
  4. By: Guerreiro, Joao; Rebelo, Sérgio; Teles, Pedro
    Abstract: We study the immigration policy that maximizes the welfare of the native population in an economy where the government designs an optimal redistributive welfare system and supplies public goods. We show that when immigrants can be excluded from the welfare system, free immigration is optimal. It is also optimal to use the tax system to encourage the immigration of high-skill workers and discourage that of low-skill workers. When immigrants and natives must be treated alike, it is optimal to ban low-skill immigration and have free immigration for high-skill workers. However, high-skill workers may choose not to immigrate when there are heavy taxes levied on all high-skill workers, natives and immi- grants alike. We use a calibrated version of the model to study how the optimal immigration policy responds to changes in the skill premia in the U.S. and abroad.
    Keywords: Immigration; optimal taxation; redistribution; Welfare state
    JEL: F22 H21
    Date: 2019–08
  5. By: Aria Ardalan; Sebastian G. Kessing
    Keywords: Tax incidence, Pass-through, VAT, Excise Taxes, EU, Beer
    JEL: H22 H23
    Date: 2019
  6. By: William Morrison; Dmitry Taubinsky
    Abstract: This paper develops a methodology for testing whether attention costs are a source of consumers' misreaction to opaque prices. We show that costly attention models make a series of predictions about how individual differences in misreaction respond to stakes. We then test and confirm these predictions in an experiment on consumers’ online shopping decisions in the presence of shrouded sales taxes that are exogenously varied within consumer over time. The empirical results point to a model in which consumers use heterogeneous rules of thumb to compute the opaque tax when the stakes are low, but use costly mental effort to increase their accuracy when the stakes increase. In particular, some consumers systematically underreact to sales taxes while others systematically overreact. But when the stakes increase, consumers who tend to underreact become more sensitive to sales taxes, while consumers who tend to overreact becomes less sensitive to sales taxes. We establish the results both by using simple reduced-form tests as well as by developing novel econometric techniques for quantifying individual differences. The results are inconsistent with models in which attention is exogenous and models in which all consumers are either fully attentive to the tax or ignore it completely.
    JEL: D9 H2
    Date: 2019–08
  7. By: h.c. Clemens Fuest; Mathias Dolls; Carla Krolage; Florian Neumeier
    Abstract: This paper examines the effects of real estate transfer taxes (RETT) on house prices using a rich micro dataset on German properties covering the period from 2005 to 2018. We exploit a 2006 constitutional reform that allowed states to set their own RETT rates, leading to frequent increases in states’ tax rates in subsequent years. Our monthly event study estimates indicate a price response that strongly exceeds the change in the tax burden for single transactions. I.e., twelve months after a reform, a one percentage point increase in the tax rate reduces property prices by on average 3.5%. Effects are stronger for apartments and apartment buildings than for single family houses. We interpret these results in the context of a theoretical model that accounts for the effects of RETT on a property’s resale value. If a property is expected to be traded more frequently in the future, the decline in its price can exceed the in crease in the tax burden. Moreover, larger price effects can be explained by higher bargaining power of sellers.
    Keywords: Real estate transfer taxes, property taxes, housing market
    JEL: H22 H71 R32 R38
    Date: 2019
  8. By: Balagtas, Joseph V.; He, Xiaoyang
    Keywords: Agricultural and Food Policy
    Date: 2019–06–25
  9. By: Diane Alexander; Molly Schnell
    Abstract: We examine how the amount a physician is paid influences who they are willing to see. Exploiting large, exogenous changes in Medicaid reimbursement rates, we find that increasing payments for new patient office visits reduces reports of providers turning away beneficiaries: closing the gap in payments between Medicaid and private insurers would reduce more than two-thirds of disparities in access among adults and would eliminate disparities among children. These improvements in access lead to more office visits, better self-reported health, and reduced school absenteeism. Our results demonstrate that financial incentives for physicians drive access to care and have important implications for patient health.
    JEL: H51 H75 I13 I14 I18 I24
    Date: 2019–07
  10. By: Sameera Awawda (Aix-Marseille University); Mohammad Abu-Zaineh (Aix-Marseille University); Bruno Ventelou (Aix-Marseille University)
    Abstract: In their quest for Universal Health Coverage (UHC), many developing countries use alternative financing strategies including general revenues and budget transfers to expand health coverage to the whole population. Unless a policy adjustment is undertaken, future generations may foot the bill of the UHC. This raises the important policy questions of who bears the burden of the UHC and whether the UHC-fiscal stance is sustainable in the long-term. These two questions are addressed using an overlapping generations model within a general equilibrium framework (OLG-CGE) applied to Palestine. We assessed and compare alternative ways of financing the deficit-ridden UHC (viz. deferred-debt-finance, current, and phased-manner finance) and their implications on intergenerational inequalities. Results show that in the absence of any policy adjustment, the implementation of UHC would explode the fiscal deficit and debt-GDP ratio. This indicates that the UHC-fiscal stance is rather unsustainable in the long-term, thus, calling for a policy adjustment to service the UHC-debt. Among the policies we examined, a current rather, than deferred, debt-finance through consumption taxation emerged to be preferred over other policies in terms of its implications for both fiscal sustainability and intergenerational inequality.
    Date: 2019–08–21
    Abstract: ax revenues from multinational enterprises (MNEs) are an important source of public finance in developing economies. The research and policy debate so far have mostly focused on the “missing” part, i.e. the government revenues lost due to the tax avoidance practices of MNEs (Bolwijn et al., 2018). In this study, we take a different, but complementary, approach, looking at the taxes and other revenues actually paid by foreign affiliates of MNEs to developing-country governments. We present two alternative methodologies to estimate foreign affiliates’ fiscal contribution – the contribution method and the foreign direct investment (FDI) income method – and show that they lead to the same order of magnitude. The findings allow us to set a baseline for an informed discussion on tax avoidance by MNEs.
    Keywords: multinational enterprise, fiscal contribution, BEPS, domestic revenues, developing countries
    JEL: F2 F21 F23
    Date: 2018–11–20
  12. By: Flemming, Jean; Lhuillier, Jean-Paul; Piguillem, Facundo
    Abstract: We analyze the optimal macroprudential policy under the presence of news shocks. News are shocks to the growth rate that convey information about future growth. In this context, crises are characterized by long periods with positive shocks (and good news) that eventually revert,rendering the collateral constraint binding and triggering deleveraging. In this environment it is optimal to tax borrowing during good times, and let agents act freely leaving the allocations undistorted, including borrowing and lending, when the economy reverts to a bad state. We contrast our findings to the case of standard, shocks to the level of income, where it is optimal to tax debt in bad times, when agents need to borrow the most for precautionary savings motives. Also, taxes are used much less often and are around one-tenth of those under level shocks.
    Keywords: financial crises; macroprudential policy; Pecuniary externality
    JEL: E32 E44 G18
    Date: 2019–06
  13. By: Hoppe, Eva I.; Schmitz, Patrick W.
    Abstract: The government wants an infrastructure-based public service to be provided. First, the infrastructure has to be built; subsequently, it has to be operated. Should the government bundle the building and operating tasks in a public-private partnership? Or should it choose traditional procurement, i.e. delegate the tasks to different firms? Each task entails unobservable investments to come up with innovations. It turns out that depending on the nature of the innovations, bundling may either stimulate or discourage investments. Moreover, we find that if renegotiation cannot be prevented, public-private partnerships may lead the government to deliberately opt for technologically inferior projects.
    Keywords: Contract theory; procurement; public-private partnerships; moral hazard; renegotiation
    JEL: D86 H11 H54 H57 L33
    Date: 2019
  14. By: Mavrozacharakis, Emmanouil
    Abstract: People expect the state to create jobs and provide them with a social security net. Whatever its defects, whatever the virtues of the private sector, no structure other than the state can today provide citizens with the basic public goods. Under the present right-wing government of Nea Dimokratia in Greece, which is not particularly at odds with neoliberalism, a very active role of the state is not expected. Also is nor expected the introduction of a serious program of public investment and demand boosting to stimulate the national economy and enter into a virtuous circle of recovery. Greece, which has undergone the economic crisis with drastic cuts in its traditionally deficient social state, has to respond directly to the marked underinvestment in public goods (in key areas such as education, health, natural disasters, dealing with decent living conditions).The most important tool for inputting resources is the tax system.
    Keywords: Welfare Stae , Public Goods , Public Policy , Greece
    JEL: H10 H11 H12 H19 H2 H40 H41 H42 H44 H50 I0 I3 I30 I31 I38 I39
    Date: 2019–06–04
  15. By: Seán Kennedy
    Abstract: This paper explores one distinctive form of the ‘big data’ of economics – individual tax record microdata – and its potential for tax policy analysis. The paper draws on OECD collaborations with Slovenia and Ireland in 2018 where tax microdata was used.Most empirical economics is based on survey data. However, the current trend of low and falling response rates has placed a question mark over the future value of survey practice generally. By contrast, this paper discusses the increasing use of tax microdata in economic research and the new types of policy analysis made possible by it. In the future, best-practice tax policy analysis is likely to combine tax microdata with survey and national account data. The advantages of these combined data will be important for policymakers to understand and address future policy challenges including protecting tax revenues in an era of population ageing and supporting fairness given the changing nature of economic mobility.
    Keywords: big data, economic mobility, income distributions, income inequality, tax administration data, tax policy analysis
    JEL: D31 H24
    Date: 2019–09–09

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