nep-pbe New Economics Papers
on Public Economics
Issue of 2021‒11‒01
nine papers chosen by
Thomas Andrén

  1. Who Pays Sin Taxes? Understanding the Overlapping Burdens of Corrective Taxes By Christopher Conlon; Nirupama L. Rao; Yinan Wang
  2. Internal Digitalization and Tax-efficient Decision Making By Klein, Daniel; Ludwig, Christopher; Nicolay, Katharina
  3. A note on capital income taxation with involuntary unemployment By Minoru Watanabe
  4. Tax Reforms and Political Feasibility By Felix Bierbrauer; Pierre Boyer; Andrew Lonsdale; Andreas Peichl
  5. The Tax Side of the Pandemic: Compliance Shifts and Funding for Recovery in Rwanda By Mascagni, Giulia; Santoro, Fabrizio
  6. The Economic Burden of Pension Shortfalls: Evidence from House Prices By Darren Aiello; Asaf Bernstein; Mahyar Kargar; Ryan Lewis; Michael Schwert
  7. The Effect of Unemployment Benefit Pay Frequency on UI Claimants' Job Search Behaviors By Zhang, Guangli
  8. Effects of the Expanded Child Tax Credit on Employment Outcomes: Evidence from Real-World Data By Elizabeth Ananat; Benjamin Glasner; Christal Hamilton; Zachary Parolin
  9. The Lock-In Effects of Part-Time Unemployment Benefits By Hélène Benghalem; Pierre Cahuc; Pierre Villedieu

  1. By: Christopher Conlon; Nirupama L. Rao; Yinan Wang
    Abstract: We find that sin good purchases are highly concentrated with 10% of households paying more than 80% of taxes on alcohol and cigarettes. Total sin tax burdens are poorly explained by demographics (including income), but are well explained by eight household clusters defined by purchasing patterns. The two most taxed clusters comprise 8% of households, pay 68% of sin taxes, are older, less educated, and lower income. Taxes on sugary beverages broaden the tax base but add to the burdens of heavily taxed households. Efforts to increase sin taxes should consider the heavy burdens borne by few households.
    JEL: H22 H23 H25 L66
    Date: 2021–10
  2. By: Klein, Daniel; Ludwig, Christopher; Nicolay, Katharina
    JEL: O33 L25 H25 H26 K34
    Date: 2021
  3. By: Minoru Watanabe (Research Fellow, Graduate School of Economics, Kobe University/Hokusei Gakuen University)
    Abstract: This study develops a standard overlapping generations model with imperfect labor markets. The results indicate that a higher capital income tax promotes not only economic growth but also employment if pension benefits exist.
    Date: 2021–10
  4. By: Felix Bierbrauer (Université de Cologne); Pierre Boyer (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, IPP - Institut des politiques publiques); Andrew Lonsdale (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique); Andreas Peichl (LMU - Ludwig-Maximilians-Universität München)
    Abstract: Questions linked to the design and implementation of redistributive tax policies have occupied a growing position on the public agenda over recent years. Moreover, the fiscal pressures brought upon by the current coronavirus crisis will ensure that these issues maintain considerable political significance for years to come. In light of this importance, we present novel research on reforms of income tax systems. Our approach shows that tax reforms wherein the changes in individual tax burdens are larger for taxpayers with higher incomes are of particular interest. We denote such reforms as "monotonic" and show that, under this condition, it is possible to determine the "winners" and "losers" of a given tax reform. One can then conclude whether the monotonic reform is politically feasible, depending on whether a majority of individuals will benefit financially from the policy. An empirical analysis of tax reforms with a focus on the United States and France reveals that past reforms have, by and large, been monotonic. Our approach therefore enables us to test whether a given tax system admits a politically feasible reform and has direct policy relevance for the common types of taxation reforms undertaken by government authorities.
    Date: 2021–09
  5. By: Mascagni, Giulia; Santoro, Fabrizio
    Abstract: While much knowledge is being generated on the impact of the pandemic, we still know very little on its implications on taxation in low-income countries. Yet, tax is crucial to fund crisis response and recovery, in addition to broader development plans and expanded government expenditure. This paper starts addressing this gap using a unique dataset of survey and administrative data from Rwanda. We document two significant shifts in taxpayers’ views: perceptions about the fairness of the tax system improve by 40 per cent, and their attitudes to compliance become more conditional on the provision of public services of sufficiently good quality. Importantly, these shifts are accompanied by improvements in actual compliance behaviour: using data from tax returns, we show that firms that declare after the onset of the crisis are substantially more compliant than others. We then investigate public support for increasing various tax options to fund crisis response and recovery. Taxing large companies and the richest enjoy the greatest support, which, however, declines as income increases. These results allow us to make some recommendations and considerations on tax policy responses to the crisis.
    Keywords: Finance,
    Date: 2021
  6. By: Darren Aiello; Asaf Bernstein; Mahyar Kargar; Ryan Lewis; Michael Schwert
    Abstract: U.S. state pensions are underfunded by trillions of dollars, but their economic burden is unclear. In a model of inefficient taxation, real estate fully reflects the cost of pension shortfalls when it is the only form of immobile capital. We study the effect of pension shortfalls on real estate values at state borders, where labor and physical capital could more easily relocate to a state with a smaller shortfall. Using plausibly exogenous variation driven by pension asset returns, we find that one dollar of pension underfunding reduces house prices near state borders by approximately two dollars. Our estimates imply a deadweight loss associated with addressing pension shortfalls that is consistent with prior research in settings with high returns to public spending and costs of taxation.
    JEL: H41 H55 H74 R30
    Date: 2021–10
  7. By: Zhang, Guangli (Sinquefield Center for Applied Economic Research, Saint Louis University)
    Abstract: This paper presents new evidence on how UI (Unemployment Insurance) benefit pay frequencies affect the job search behaviors of UI claimants in the United States. By exploiting quasi-experimental variations in states' benefit pay schedules, I find that switching from biweekly to weekly pay significantly increases UI claimants' unemployment durations. This observed effect can be partly rationalized by the more frequent end-of-the-month positive benefit shocks under weekly pay schedules. I conclude that the previously overlooked policy parameter, benefit pay frequency, has important effects on the job search behaviors of UI claimants.
    Keywords: unemployment insurance; natural experiment; benefit pay frequency
    JEL: H55 J65
    Date: 2021–10–20
  8. By: Elizabeth Ananat (Columbia University); Benjamin Glasner (Columbia University); Christal Hamilton (Columbia University); Zachary Parolin (Columbia University)
    Abstract: Early studies have established that the expanded Child Tax Credit (CTC), which provides monthly cash payments to most families with children in the United States, has substantially reduced poverty and food hardship since its introduction in July 2021. Some researchers posit, however, that the CTC payments may generate negative employment effects that could offset its potential poverty-reduction effects. Scholars have simulated various employment scenarios using different assumed labor supply elasticities, but no study to date has empirically assessed how the CTC payments to date have affected employment outcomes using real-world data. To evaluate actual employment effects, we follow previously-established methodology used to estimate other actual CTC impacts, applying a series of difference-in-differences analyses using data from the monthly Current Population Survey files from April 2021 through August 2021 and the Census Household Pulse Survey microdata collected from April 14 through September 13, 2021. Across both samples and several model specifications, we find very small, inconsistently signed, and statistically insignificant impacts of the CTC both on employment in the prior week and on active participation in the labor force among adults living in households with children. Further, labor supply responses to the change in CTC do not differ for households previously earning within the phase-in range of the prior CTC, in striking contrast to the predictions of the simulation work. Thus, our analyses of real-world data do not support claims that the CTC has negative employment effects that offset its documented reductions in poverty and hardship.
    Keywords: poverty, COVID-19, social policy
    Date: 2021–10
  9. By: Hélène Benghalem (UNIL - Université de Lausanne); Pierre Cahuc (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Pierre Villedieu (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We ran a large randomized controlled experiment among about 150,000 recipients of unemployment benefits insurance in France in order to evaluate the impact of part-time unemployment benefits. We took advantage of the lack of knowledge of job seekers regarding this program and sent emails presenting the program. The information provision had a significant positive impact on the propensity to work while on claim, but reduced the unemployment exit rate, showing important lock-in effects into unemployment associated with part-time unemployment benefits. The importance of these lock-in effects implies that increasing the marginal tax rate on earnings from work while on claim in the neighborhood of its current level would not decrease labor supply and would decrease the expenditure net of taxes of the unemployment insurance agency.
    Keywords: Unemployment insurance,Part-time unemployment benefits,Lock-in effects,Unemployment duration
    Date: 2021–05–01

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