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on Public Economics |
| By: | Fanghui Li (Center for Economic Research, Shandong University); Gaowang Wang (Center for Economic Research, Shandong University); Heng-fu Zou (China Economics and Management Academy, Central University of Finance and Economics) |
| Abstract: | The paper reexamines the famous Chamley-Judd zero capital tax theorem in model economies where the agents are endowed with the spirit of capitalism. It is shown that the limiting capital income tax is not zero in general and depends on the utility speciffications rather than the production technology. The similar formulas of optimal capital taxes are derived in more general settings with multiple physical capitals or heterogeneous agents (capitalists and workers). |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:614&r=all |
| By: | Matthias Rodemeier; Andreas Löschel |
| Abstract: | How much information should governments reveal to consumers if consumption choices have uninternalized consequences to society? How does an alternative tax policy compare to information disclosure? We develop a price theoretic model of information design that allows empiricists to identify the welfare effects of any arbitrary information policy. Based on this model, we run a natural field experiment in cooperation with a large European appliance retailer and randomize information regarding the financial benefits of energy-efficient household lighting among more than 640,000 subjects. We find that full information disclosure strongly decreases demand for energy efficiency, while partial information disclosure increases demand. More information reduces social welfare because the increase in consumer surplus is outweighed by the rise in environmental externalities. By randomizing product prices, we identify the optimal tax vector as an alternative policy and show that sizable taxes on energy-inefficient products yield larger welfare gains than any information policy. We also document an important policy interaction: information provision dramatically reduces attention to pecuniary incentives and thereby limits the effectiveness of taxes. |
| Keywords: | persuasion, optimal taxation, internality, taxes, field experiments, energy efficiency, behavioral public economics |
| JEL: | D61 D83 H21 Q41 Q48 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8259&r=all |
| By: | John Sabelhaus; Alice Henriques Volz |
| Abstract: | Wealth inequality in the US is high and rising, but Social Security is generally not considered in those wealth measures. Social Security Wealth (SSW) is the present value of future benefits that an individual will receive less the present value of future taxes they will pay. When an individual enters the labor force, they generally face a lifetime of taxes to pay before they will receive any benefits, and thus their initial SSW is generally low or negative. As an individual works and pays into the system their SSW grows and generally peaks somewhere around typical Social Security benefit claim ages. The accrual of SSW over the working life is most important for lower-income workers because the progressive Social Security benefit formula means that taxes paid while working are associated with proportionally higher benefits in retirement. We estimate SSW for individuals in the Survey of Consumer Finances (SCF) for 1995 through 2016 and use a pseudo-panel approach to empirically demonstrate those lifecycle patterns. We also show that including SSW in a comprehensive wealth measure generally reduces estimated levels of wealth inequality but does not reverse the upward trend in top wealth shares. |
| JEL: | G11 J26 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27110&r=all |
| By: | Alexander Bick; Nicola Fuchs-Schündeln; David Lagakos; Hitoshi Tsujiyama |
| Abstract: | Why are average hours worked per adult lower in rich countries than in poor countries? We consider two natural explanations: income effects in preferences, in which leisure becomes more valuable when income rises, and distortionary tax systems, which are more prevalent in richer countries. To assess the importance of these two forces, we build a simple model of labor supply by heterogeneous individuals and calibrate it to match international data on labor income taxation, government transfers relative to GDP, and hours worked per adult. The model predicts that income effects are the main driving force behind the decline of average hours worked with GDP per capita. We reach a similar conclusion in an extended model that matches cross-country patterns of labor supply along the extensive and intensive margins and of the prevalence of subsistence self-employment. |
| Keywords: | hours worked, income effects, taxation |
| JEL: | E24 J22 O11 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8251&r=all |
| By: | Hérault, Nicolas; Kalb, Guyonne |
| Abstract: | Female labour force participation has increased tremendously since World War II in developed countries. Prior research provides piecemeal evidence identifying some drivers of change but largely fails to present a consistent story. Using a rare combination of data and modelling capacity available in Australia, we develop a new decomposition approach to explain rising female labour force participation since the mid-1990s. The approach allows us to identify, for the first time, the role of tax and transfer policy reforms as well as three other factors that have been shown to matter by earlier studies. These are (i) changes in real wages, (ii) population composition changes, and (iii) changes in labour supply preference parameters. A key result is that –despite the ongoing emphasis of public policy on improved work incentives for women in Australia and elsewhere– changes in financial incentives due to tax and transfer policy reforms have contributed relatively little to achieve these large increases in participation. Instead, the other three factors drive the increased female labour force participation. |
| Keywords: | female labour force participation,employment rate,tax-transfer policy,behavioural microsimulation,decomposition |
| JEL: | H31 J22 J31 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:543&r=all |
| By: | Nicolas Jacquemet (PSE - Paris School of Economics); Stéphane Luchini (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Antoine Malezieux; Jason Shogren (UW - University of Wyoming) |
| Abstract: | Why do people pay taxes? Rational choice theory has fallen short in answering this question. Another explanation, called "tax morale", has been promoted. Tax morale captures the behavioral idea that non-monetary preferences (like norm-submission, moral emotions and moral judgments) might be better determinants of tax compliance than monetary trade-offs. Herein we report on two lab experiments designed to assess whether norm-submission, moral emotions (e.g. affective empathy, cognitive empathy, propensity to feel guilt and shame) or moral judgments (e.g. ethics principles, integrity, and moralization of everyday life) can help explain compliance behavior. Although we find statistically significant correlations of tax compliance behavior with empathy and shame, the economic significance of these correlations are low–—more than 80% of the variability in compliance remains unexplained. These results suggest that tax authorities should focus on the institutional context, rather than individual preference characteristics, to handle tax evasion. |
| Keywords: | tax evasion,tax morale,morality,personality traits,psychometrics |
| Date: | 2019–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:hal-02290402&r=all |
| By: | Congressional Budget Office |
| Abstract: | CBO estimates that real (adjusted for inflation) gross domestic product (GDP) will contract by 11 percent in the second quarter of this year, which is equivalent to a decline of 38 percent at an annual rate. In the second quarter, the number of people employed will be almost 26 million lower than the number in the fourth quarter of 2019. |
| JEL: | E20 E23 E60 E62 E66 H20 H50 H60 |
| Date: | 2020–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:cbo:report:56351&r=all |
| By: | Jorge Gallego; Mounu Prem; Juan F. Vargas |
| Abstract: | The public health crisis caused by the COVID-19 pandemic, coupled with the subsequent economic emergency and social turmoil, has pushed governments to substantially and swiftly increase spending. Because of the pressing nature of the crisis, public procurement rules and procedures have been relaxed in many places in order to expedite transactions. However, this may also create opportunities for corruption. Using contract-level information on public spending from Colombia’s e-procurement platform, and a difference-in-differences identification strategy, we find that municipalities classified by a machine learning algorithm as traditionally more prone to corruption react to the pandemic-led spending surge by using a larger proportion of discretionary non-competitive contracts and increasing their average value. This is especially so in the case of contracts to procure crisis-related goods and services. Our evidence suggests that large negative shocks that require fast and massive spending may increase corruption, thus at least partially offsetting the mitigating effects of this fiscal instrument. |
| Keywords: | Corruption, COVID-19, Public procurement, Machine learning |
| JEL: | H57 H75 D73 I18 |
| Date: | 2020–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:col:000518:018164&r=all |
| By: | Laurent Bach (ESSEC Business School - Essec Business School, IPP - Institut des politiques publiques); Antoine Bozio (IPP - Institut des politiques publiques, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Brice Fabre (PSE - Paris School of Economics, IPP - Institut des politiques publiques, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Arthur Guillouzouic (IPP - Institut des politiques publiques); Claire Leroy (IPP - Institut des politiques publiques); Clément Malgouyres (IPP - Institut des politiques publiques) |
| Abstract: | The abolition of the flat-rate withholding tax (prélèvement forfaitaire libératoire – PFL) in 2013 and the introduction of the unique flat tax (prélèvement forfaitaire unique – PFU) in 2018 are two important – and contrary – capital income tax reforms. The first aimed to "restore tax justice" while the second aimed to "promote private investment". Using the tax data of households and companies, we evaluate the impact of the 2013 reform and present preliminary findings regarding the impact of the 2018 reform. We find raising capital income taxes to have a strong negative impact on dividends received by households, and no impact on other types of income (pay, capital gains and other capital income). Using company data, we identify the mechanism explaining this decrease in dividends received: companies directly controlled by natural persons residing in France reduced or stopped the distribution of dividends between 2013 and 2017. We observe an increase in the financial assets held by these companies, an increase in equity capital and a decrease in net result, but not effect on investment. The implications of these findings are major: the 2013 reform led to a net loss in tax receipts but had no negative impact on investment. Based on data from commercial court registries, there was a 15.3% increase in dividends paid in 2018, attributable to the unique flat tax reform. This increase in the distribution of dividends, parallel to the decrease in 2013, will lead to greater tax receipts than initially anticipated. However, in light of the effects of the 2013 reform, it appears unlikely that this reform will have a positive effect on private investment. |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:halshs-02515994&r=all |
| By: | George J. Hall; Thomas J. Sargent |
| Abstract: | From decompositions of U.S. federal fiscal accounts from 1790 to 1988, we describe differences and patterns in how expenditure surges were financed during 8 wars between 1812 and 1975. We also study two insurrections. We use two benchmark theories of optimal taxation and borrowing to frame a narrative of how government decision makers reasoned and learned about how to manage a common set of forces that bedeviled them during all of the wars, forces that included interest rate risks, unknown durations of expenditure surges, government creditors' debt dilution fears, and temptations to use changes in units of account and inflation to restructure debts. Ex post real rates of return on government securities are a big part of our story. |
| JEL: | E52 E62 H56 N41 N42 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27115&r=all |
| By: | Mahdi Ben Jelloul; Antoine Bozio (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, IPP - Institut des politiques publiques); Thomas Douenne (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, IPP - Institut des politiques publiques); Brice Fabre (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, IPP - Institut des politiques publiques); Claire Leroy (IPP - Institut des politiques publiques) |
| Abstract: | This brief studies the tax and social security reforms affecting households, introduced by the 2019 French budget, including the most recent measures announced in response to the "gilets jaunes" movement. The results reveal a mean increase in disposable income of nearly 1 % for a large share of households, mainly those receiving the in-work benefit (prime d'activité) and households affected by the reduction in the housing tax (taxe d'habitation). We also analyse the effects of the reforms implemented since the start of the current five-year presidential term, i.e. the cumulative effects of the 2018 and 2019 budgets. The mean gains across the whole population are qualitatively similar but hide large variations. The working population gains on average, regardless of living standard percentile (with a mean increase in disposable income of 2.4 %). In contrast, retired people in the most affluent 20 % of households are contributors, with a mean loss of disposable income of 3 %. The disposable income of the most affluent 1 % of households, regardless of whether they are working or not, rises by 6.4 % on average due to the replacement of total wealth tax (impôt de solidarité sur la fortune or ISF) with real estate wealth tax (impôt sur la fortune immobilière or IFI). The original budgetary measures proposed by the government in September 2018 have largely been amended by the emergency economic and social measures. These play a major role in the final redistributive effects. All income categories benefit from these new measures, with a mean increase in disposable income of 0.8 %. These eects are greatest between the 15th and 49th living standard percentiles, with a mean gain of 1.2 %. |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:halshs-02520775&r=all |
| By: | Dhaval M. Dave; Andrew I. Friedson; Kyutaro Matsuzawa; Joseph J. Sabia |
| Abstract: | Shelter in place orders (SIPOs) require residents to remain home for all but essential activities such as purchasing food or medicine, caring for others, exercise, or traveling for employment deemed essential. Between March 19 and April 20, 2020, 40 states and the District of Columbia adopted SIPOs. This study explores the impact of SIPOs on health, with particular attention to heterogeneity in their impacts. First, using daily state-level social distancing data from SafeGraph and a difference-in-differences approach, we document that adoption of a SIPO was associated with a 5 to 10 percent increase in the rate at which state residents remained in their homes full-time. Then, using daily state-level coronavirus case data collected by the Centers for Disease Control and Prevention, we find that approximately three weeks following the adoption of a SIPO, cumulative COVID-19 cases fell by 44 percent. Event-study analyses confirm common COVID-19 case trends in the week prior to SIPO adoption and show that SIPO-induced case reductions grew larger over time. However, this average effect masks important heterogeneity across states — early adopters and high population density states appear to reap larger benefits from their SIPOs. Finally, we find that statewide SIPOs were associated with a reduction in coronavirus-related deaths, but estimated mortality effects were imprecisely estimated. |
| JEL: | H75 I18 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27091&r=all |