nep-pbe New Economics Papers
on Public Economics
Issue of 2022‒03‒14
twelve papers chosen by
Thomas Andrén

  1. Do corporate tax cuts boost economic growth? By Sebastian Gechert; Philipp Heimberger
  2. The tax burden on mobile network operators in Africa By Grégoire Rota-Graziosi; Fayçal Sawadogo
  3. Are incomes and property taxes effective instruments for tax transition? By Kodjo Adandohoin; Jean-Francois Brun
  4. Problems of Tax Administration and its Impact on Budget Revenues By Marika Ormotsadze
  5. How Accurate is the Kakwani Index in Predicting Whether a Tax or a Transfer is Equalizing? An Empirical Analysis By Ali Enami; Patricio Larroulet; Nora Lustig
  6. Rethinking How We Score Capital Gains Tax Reform By Natasha Sarin; Lawrence Summers; Owen Zidar; Eric Zwick
  7. The inter-cohort distributional effects of Japan's indirect tax reforms By Kogawa, Takeshi
  8. Taming Private Leviathans : Regulation versus Taxation By Grégoire Rota-Graziosi; Islam Asif; Rabah Arezki
  9. Dividend Taxes and the Allocation of Capital By Charles Boissel; Adrien Matray
  10. Universal Basic Income: Inspecting the Mechanisms By Jaimovich, Nir; Saporta-Eksten, Itay; Setty, Ofer; Yedid-Levi, Yaniv
  11. The Rise of Pass-Throughs and the Decline of the Labor Share By Matthew Smith; Danny Yagan; Owen Zidar; Eric Zwick
  12. To Work or Not to Work? Effects of Temporary Public Employment on Future Employment and Benefits By Mörk, Eva; Ottosson, Lillit; Vikman, Ulrika

  1. By: Sebastian Gechert (Macroeconomic Policy Institute (IMK)); Philipp Heimberger (Vienna Institute for International Economic Studies (wiiw))
    Abstract: The empirical literature on the impact of corporate taxes on economic growth reaches ambiguous conclusions: corporate tax cuts increase, reduce, or do not significantly affect growth. We apply meta-regression methods to a novel dataset with 441 estimates from 42 primary studies. There is evidence for publication selectivity in favour of reporting growth-enhancing effects of corporate tax cuts. Correcting for this bias, we cannot reject the hypothesis of a zero effect of corporate taxes on growth. Several factors influence reported estimates, including researcher choices concerning the measurement of growth and corporate taxes, and controlling for other budgetary components.
    Keywords: Corporate income taxes, economic growth, meta-analysis
    JEL: E60 H25 O40
    Date: 2021
  2. By: Grégoire Rota-Graziosi (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Fayçal Sawadogo (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: We estimate the tax burden on the mobile telecommunication sector in twenty-five African countries. This tax burden encompasses not only standard and particular taxes under the control of the Ministry of Finance (MoF), but also fees raised by national telecommunication Regulatory Agency (RA). Given the lack of financial data at the country level, we build a representative mobile network operator, named TELCO, using the GSMA Intelligence database. We compute the Average Effective Tax Rate (AETR) for this firm considering general and special taxes and fees levied only on the telecommunication sector. We develop a web application (, which allows the reader to replicate our analysis or to modify TELCO and tax parameters. The AETR varies significantly across countries, ranging from 33 percent in Ethiopia to 118 percent in Niger. Special taxes and fees represent a large share of the AETR illustrating some taxation by regulation and a potential tax competition (a race to the top) between the MoF and the RA. We compare the AETR of TELCO to this of a representative gold mining plant and a standard firm with similar gross return. The tax burden of the telecommunication sector is higher than this of the mining sector in 15 countries out of the 19 countries for which we have data on the gold mining sector.
    Keywords: Taxation,Telecommunication sector,Project analysis,Developing countries
    Date: 2021–01
  3. By: Kodjo Adandohoin (CERDI - Centre d'Études et de Recherches sur le Développement International - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique); Jean-Francois Brun (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This paper investigates second wave tax transition (transfer of tax pressure from border taxation towards domestic taxation) concerns in developing countries. It essentially focuses on the compensation effects of incomes and property taxes over international trade tax revenue losses in developing countries. Using a generalized method of moment estimator, we come to the evidence that, incomes and property taxes are poor instruments to balance trade tax revenue losses of trade liberalization in these countries. However, a mediating effect of financial development in the compensation nexus driven by corporate income taxes was found. We explain this result by the fact that the use of financial sector generates paper trails to government in order to enforce and raise corporate income taxes. Financial development may progressively crowd‐out informal sector and leads to business formalization. Surprising, we do not find any mediating effect of financial development in the compensation patterns with personal income taxes. Nevertheless, some heterogeneities were discovered. Financial development mediates the compensation patterns of personal income taxes in Latin American countries, while the effect holds on corporate income taxes in African countries. We conclude the paper by highlighting the important role of financial development in second generation tax transition concerns over developing countries.
    Keywords: Income taxes,Property tax,Developing countries
    Date: 2020–12
  4. By: Marika Ormotsadze
    Abstract: The topic under study is of crucial importance, especially for developing countries. The aim of the present paper is to study the problems in revenue administration in terms of tax revenue in Georgia and analyze foreign experience in that respect. The main question arises here - What kind of tax rates should be implemented to be able to perform both functions of the fiscal and stimulating one. Liberal method of revenue seems an attractive one for taxpayers. According to the economic situation in Georgia, the best solution is to use the liberal method. This will help business to develop and people to find jobs. Taxation system will also benefit from that. Tax rate in Georgia amounts to 15% and is the same for everyone, regardless the size of the business. The taxation system is regarded to be proportional. As for the American and European countries, taxes there are progressive. I think the same practice should be implemented in Georgia, and not only in case of taxation.
    Date: 2022–01
  5. By: Ali Enami (The University of Akron, United States); Patricio Larroulet (Center for the Study of the State and Society (CEDES), Argentina.); Nora Lustig (Tulane University)
    Abstract: The Kakwani index of progressivity is commonly used to establish whether the effect of a specific tax or transfer is equalizing. However, in the presence of reranking or the Lambert conundrum, a progressive tax could be unequalizing. While it is mathematically possible for counterintuitive results to occur, how common are they in actual fiscal systems? Using a novel dataset that includes fiscal incidence results for 39 countries, we find that the likelihood of the Kakwani index to be progressive (regressive) while the tax or transfer is unequalizing (equalizing) is minimal, except in the case of indirect taxes: in roughly 25 percent of our sample, regressive indirect taxes are equalizing (sign-inconsistent cases). Additionally, the likelihood that the index ranks the magnitude of the impact of a tax or a transfer wrongly exists but is also small. Finally, using regression analysis, we find that increasing the size or progressivity of a progressive tax (transfer) is equalizing and statistically robust for sign- consistent cases. For sign-inconsistent cases, the coefficient for the Kakwani index is not statistically significant. In sum, although the Kakwani index could yield interpretations that are inaccurate in actual fiscal systems, the risk seems small except for indirect taxes.
    Keywords: Kakwani index, fiscal redistribution, reranking, progressivity, marginal contribution, taxes, transfers, Lambert
    JEL: D31 D63 H22 H23
    Date: 2022–01
  6. By: Natasha Sarin (University of Pennsylvania); Lawrence Summers (Harvard University and NBER); Owen Zidar (Princeton University and NBER); Eric Zwick (University of Chicago and NBER)
    Abstract: We argue the revenue potential from increasing tax rates on capital gains may be substantially greater than previously understood. First, many prior studies focus primarily on short-run taxpayer responses, and so miss revenue from gains that are deferred when rates change. Second, the rise of pass-throughs and index funds has shifted the composition of capital gains in recent years, such that the share of gains that are highly elastic to the tax rate has likely declined. If some components are less elastic, then their elasticity should get more weight when scoring big changes because they will comprise more of the remaining tax base. Third, closer parity to income rates would provide a backstop to rest of tax system. Fourth, additional base-broadening reforms, like eliminating stepped-up basis, making charitable giving a realization event, reforming donor advised funds, and limiting opportunity zones to places with the highest poverty rates, will decrease the elasticity of the tax base to rate changes. Overall, we do not think the prevailing assumption of many in the scorekeeping community—that raising rates to top ordinary income levels would raise little revenue—is warranted. A crude calculation illustrates that raising capital gains rates to ordinary income levels could raise hundreds of billions more revenue over a decade than other leading estimates suggest.
    Keywords: tax rates, capital gains, revenue
    JEL: H00 H20 H30
    Date: 2021–08
  7. By: Kogawa, Takeshi (University of Warwick)
    Abstract: This study attempts to estimate how Japan’s consumption tax reforms affected the welfare of different cohorts of households, using long-term household level panel data including age of head, income and expenditure of each household in Japan. In order to evaluate distributional effects of tax reform, this study compares lifetime Equivalent Variations, which are calculated from estimated value of lifetime share of expenditure on food. As a result, it is shown that, the consumption tax reform in 2019, in which tax rates on non-food items was hiked from 8% to 10%, reduced utility by 1.29% to 1.55% in terms of the EVs in the income ratio, with relatively large effects on the younger, higher-income groups. Furthermore, a simulation analysis of the effect of a tax reduction when the consumption tax rate on food products is set at 0% in 2025 was conducted suggests that the reduced tax rate system could have a certain positive economic effect on the lower-income groups but that the older, higher-income groups could be disproportionately affected.
    Keywords: Value Added Tax ; Tax reform ; Distributional effects ; Equivalent Variations ; Japan JEL Classification: D12 ; H24 ; H31
    Date: 2021
  8. By: Grégoire Rota-Graziosi (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Islam Asif; Rabah Arezki
    Abstract: This paper explores the interplay between top wealth and policies namely regulation and taxation exploiting variation in exposure to international commodity prices. Using a global panel dataset of billionaire's net worth, results point to a positive relationship between commodity prices and the concentration of wealth at the top. Regulation especially pertaining to competition is found to limit the effects of commodity price shocks on top wealth concentration while taxation has little effect. Moreover, commodity price shocks crowd out non-resource tax revenue hence limiting the scope for income transfers and redistribution. Results are consistent with the primacy of ex ante interventions over ex post ones to address top wealth inequality.
    Keywords: Inequality,Wealth concentration,Competition,Tax,Natural resources,Development
    Date: 2021–01
  9. By: Charles Boissel (HEC Paris); Adrien Matray (Princeton University and CEPR)
    Abstract: This paper investigates the 2013 three-fold increase in the French dividend tax rate. Using administrative data covering the universe of firms from 2008–2018 and a quasi-experimental setting, we find that firms swiftly cut dividend payments and used this tax-induced increase in liquidity to invest more. Heterogeneity analyses show that firms with high demand and returns on capital responded most while no group of firms cut their investment. Our results reject models in which higher dividend taxes increase the cost of capital and show that the tax-induced increase in liquidity relaxes credit constraints, which can reduce capital misallocation.
    Keywords: Financing Policy; Business Taxes; Capital and Ownership Structure
    JEL: G11 G32 H25 O16
    Date: 2021–07
  10. By: Jaimovich, Nir (University of Zurich); Saporta-Eksten, Itay (Tel Aviv University); Setty, Ofer (Tel Aviv University); Yedid-Levi, Yaniv (Interdisciplinary Center (IDC) Herzliya)
    Abstract: We consider the aggregate and distributional impact of Universal Basic Income (UBI). We develop a model to study a wide range of UBI programs and financing schemes and to highlight the key mechanisms behind their impact. The most crucial channel is the rise in distortionary taxation (required to fund UBI) on labor force participation. Second in importance is the decline in self-insurance due to the insurance UBI provides, resulting in lower aggregate capital. Third, UBI creates a positive income effect lowering labor force participation. Alternative tax-transfer schemes mitigate the impact on labor force participation and the cost of UBI.
    Keywords: universal basic income, labor force participation, inequality
    JEL: E2 E6 J08
    Date: 2022–02
  11. By: Matthew Smith (US Treasury Department); Danny Yagan (UC Berkeley and NBER); Owen Zidar (Princeton University and NBER); Eric Zwick (Chicago Booth and NBER)
    Abstract: We study the coevolution of the fall in the U.S. corporate-sector labor share and the rise of business activity in tax-preferred pass-throughs. We find that reallocating activity to the form it would have taken prior to the Tax Reform Act of 1986 accounts for one third of the decline in the corporate-sector labor share between 1978 and 2017. Our adjustments are concentrated among mid-market firms in services, magnifying the role of the manufacturing sector and superstar firms in driving the remaining decline in the labor share. Our findings highlight the importance of tax policy when measuring factor shares.
    Keywords: business, taxes
    JEL: H25 M20
    Date: 2021–09
  12. By: Mörk, Eva (Uppsala University); Ottosson, Lillit (Uppsala University); Vikman, Ulrika (IFAU)
    Abstract: We evaluate a temporary public sector employment program targeted at individuals with weak labor market attachment, applying dynamic inverse probability weighting to account for dynamic selection. We show that the program is successful in increasing employment and reducing social assistance. However, being at a regular workplace seems crucial: we find negative employment effects for participants employed at a workplace created especially for the purpose. The decrease in social assistance is to some extent countered by an increase in the share receiving unemployment insurance benefits, indicating that municipalities are able to shift costs from the local to the central budget.
    Keywords: public sector employment programs, social assistance, cost-shifting, dynamic inverse probability weighting
    JEL: H75 I38 J45
    Date: 2022–02

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