nep-pbe New Economics Papers
on Public Economics
Issue of 2022‒03‒21
ten papers chosen by
Thomas Andrén

  1. Do corporate tax cuts boost economic growth? By Sebastian Gechert; Philipp Heimberger
  2. Land is back, it should be taxed, it can be taxed By Odran Bonnet; Guillaume Chapelle; Alain Trannoy; Etienne Wasmer
  3. Labor Market and Fiscal Policy During and After the Coronavirus By Paul Gomme
  4. Strategic Formal Layoffs: Unemployment Insurance and Informal Labor Markets By Bernardus Van Doornik; David Schoenherr; Janis Skrastins
  5. Taxing Africa for Inclusive Human Development: The Mediating Role of Governance Quality By Alex Adegboye; Olayinka Erin; Simplice A. Asongu
  6. Is There a VA Advantage? Evidence from Dually Eligible Veterans By David C. Chan Jr; David Card; Lowell Taylor
  7. The Great Gatsby Curve By Steven N. Durlauf; Andros Kourtellos; Chih Ming Tan
  8. Forbidden Fruits: The Political Economy of Science, Religion, and Growth By Roland Roland Bénabou; Davide Ticchi; Andrea Vindigni
  9. Lifecycle Earnings Risk and Insurance: New Evidence from Australia By Darapheak Tin; Chung Tran
  10. Rural Pension System and Farmers' Participation in Residents' Social Insurance By Xu, Tao

  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: Odran Bonnet (CREST-INSEE - Centre de Recherche en Economie et en Statistique - Institut national de la statistique et des études économiques (INSEE)); Guillaume Chapelle (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université); Alain Trannoy (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); Etienne Wasmer (Department of Economics, Social Science Div. NYU-Abu Dhabi)
    Abstract: Land is back. The increase in wealth in the second half of 20th century arose from housing and land. It should be taxed. We introduce land and housing structures in Judd's standard setup: first best optimal taxation is achieved with a property tax on land and requires no tax on capital. With positive taxes on housing rents, a first best is still possible but with subsidies to rental housing investments, and either with differential land tax rates or with a tax on imputed rents. It can be taxed. Even absent land taxes, one can tax it indirectly and reach a Ramsey-second best still with no tax on capital and positive housing rent taxes in the steady-state. This result extends to the dynamics under restrictions on parameters.
    Keywords: Capital,Wealth,Housing,Land,Optimal tax,First best,Second best
    Date: 2021–05
  3. By: Paul Gomme (Concordia University, CIREQ and CIRANO)
    Abstract: COVID-related government outlays will increase the level of government debt. A macroeconomic model, calibrated to the U.S., quantitatively assesses potential responses to this higher debt. In terms of economic welfare, reducing debt through capital incomes tax hikes is the least desirable option considered: the associated tax base is small, and anticipating such a tax increase reduces capital accumulation. There is little to choose between fiscal austerity through government spending cuts versus raising labor income tax rates. Accommodating higher government debt is welfare-improving, but still requires substantial fiscal austerity owing to higher debt servicing costs.
    Keywords: COVID-19, fiscal policy, government debt
    JEL: E62 H31 E24 H63 H62
    Date: 2021–05–05
  4. By: Bernardus Van Doornik (Banco Central do Brasil); David Schoenherr (Princeton University); Janis Skrastins (Washington University in St. Louis)
    Abstract: Exploiting an unemployment insurance (UI) reform in Brazil, we study incentive effects of UI in the presence of informal labor markets. We find that eligibility for UI benefits increases formal layoffs by twelve percent. Most of the additional formal layoffs are related to workers transitioning to informal employment. We further document formal layoff and recall patterns consistent with rent extraction from the UI system. Workers are laid off as they become eligible for UI benefits and recalled just when benefits cease. Salary patterns around the reform are consistent with firms and workers sharing rents through lower equilibrium salaries.
    Keywords: unemployment insurance, informality, labor supply, rent-seeking
    JEL: J21 J22 J46 J65 K31
    Date: 2020–11
  5. By: Alex Adegboye (Covenant University, Ogun State, Ota, Nigeria); Olayinka Erin (Covenant University, Ogun State, Ota, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: Given that the literature on the links between taxation and inclusive human development is ambiguous, it is important to investigate whether the mediating influence of governance in taxation for inclusive development exists. Thus, this study explores the linkages between the governance quality, taxation and inclusive human development (i.e., inequality-adjusted human development index) using the generalized method of moments (GMM) technique to establish the empirical findings on 52 African countries for the period 2010-2018. The following findings are established. First, there is an unconditional positive effect of taxation on inclusive human development. Second, the net effects of taxation on inclusive human development, associated with the interaction of the government revenue with governance quality variables, are positive for the most part. It is then evident that when taxation policies are combined with good governance initiatives, the ultimate impact of inclusive human development is likely to be enhanced.
    Keywords: Government revenue, taxation, governance quality, Africa
    Date: 2021–01
  6. By: David C. Chan Jr; David Card; Lowell Taylor
    Abstract: We study public vs. private provision of health care for veterans aged 65 and older who may receive care provided by the US Department of Veterans Affairs (VA) and in private hospitals financed by Medicare. Utilizing the ambulance design of Doyle et al. (2015), we find that the VA reduces 28-day mortality by 46% (4.5 percentage points) and that these survival gains are persistent. The VA also reduces 28-day spending by 21% and delivers strikingly different reported services relative to private hospitals. We find suggestive evidence of complementarities between continuity of care, health IT, and integrated care.
    JEL: H4 H51 I10 I18
    Date: 2022–02
  7. By: Steven N. Durlauf; Andros Kourtellos; Chih Ming Tan
    Abstract: This paper provides a synthesis of theoretical and empirical work on the Great Gatsby Curve, the positive empirical relationship between cross-section income inequality and persistence of income across generations. We present statistical models of income dynamics that mechanically give rise to the relationship between inequality and mobility. Five distinct classes of theories, including models on family investments, skills, social influences, political economy, and aspirations are developed, each providing a behavioral mechanism to explain the relationship. Finally, we review empirical studies that provide evidence of the curve for a range of contexts and socioeconomic outcomes as well as explore evidence on mechanisms.
    JEL: D3 H0 J0 R0
    Date: 2022–02
  8. By: Roland Roland Bénabou (Princeton University); Davide Ticchi (Marche Polytechnic University); Andrea Vindigni (University of Genova)
    Abstract: We study the coevolution of religion, science and politics. We first uncover, in international and U.S. data, a robust negative relationship between religiosity and patents per capita. The model then combines: (i) scientific discoveries that raise productivity but sometimes erode religious beliefs; (ii) a government that allows innovations to diffuse, or blocks them; (iii) religious institutions that can invest in doctrinal reform. Three long-term outcomes emerge. The Western-European Secularization regime has declining religiosity, unimpeded science, and high taxes and transfers. The Theocratic regime involves knowledge stagnation, unquestioned dogma, and high religious-public-goods spending. The American regime combines scientific progress and stable religiosity through doctrinal adaptations, with low taxes and some fiscal-legal advantages for religious activities. Rising income inequality can, however, empower a Religious-Right alliance that starts blocking belief-eroding ideas.
    Keywords: science, discovery, innovation, progress, knowledge, religion, secularization, tolerance, religious right, theocracy, politics, populism, denialism, inequality, redistribution
    JEL: E02 H11 H41 O3 O43 P16 Z12
    Date: 2020–07
  9. By: Darapheak Tin; Chung Tran
    Abstract: We study the nature of lifecycle earnings dynamics by documenting higher-order moments of earnings shocks over the lifecycle, using the Household, Income and Labour Dynamics in Australia (HILDA) Survey 2001-2020. Similar to other countries (e.g. see Guvenen et al. (2021) and De Nardi et al. (2021)), the distribution of earnings shocks in Australia displays negative skewness and excess kurtosis, deviating from the conventional linearity and normality assumptions. However, the sources of fluctuations and the role of family and government insurance are quite different. Wages account more for the dispersion of earnings shocks (second-order risk), while hours drive the negative skewness and excess kurtosis (third- and fourth-order risks, respectively). Wage changes are strongly associated with earnings changes, whereas hour changes are largely absent in upward movement and relatively small in downward movement of earnings changes. Family insurance via pooling income of family members and adjusting labor market activities of secondary earners, and government insurance embedded in the progressive tax and transfer system play distinct roles in reducing risks over age and by income group. Government insurance is more important in mitigating the dispersion of earnings shocks; meanwhile, family insurance is more dominant in mitigating the magnitude and likelihood of extreme and rare shocks. Family insurance interacts with government insurance; however, their joint forces fail to eliminate the non-Gaussian and non-linear features. Furthermore, comparison between groups reveals: (i) the risk equalizing effect of government insurance, and (ii) the persistent nature of risks for certain demographics such as female heads of household and non-parents. Hence, our findings shed new insights into the complexity of earnings dynamics and the importance of family and government insurance.
    Keywords: Income dynamics; Earnings risk; Higher-order moments; Non-Gaussian shocks; Family insurance; Government insurance; Inequality
    JEL: E24 H24 H31 J31
    Date: 2022–03
  10. By: Xu, Tao
    Abstract: As the ageing population and childlessness are increasing in rural China, social pensions will become the mainstream choice for farmers, and the level of social pensions must be supported by better social insurance. The paper compares the history of rural pension insurance system, outlines the current situation and problems, analyses China Family Panel Studies data and explores the key factors influencing farmers' participation through an empirical approach. The paper shows that residents' social pension insurance is facing problems in the rural areas such as low level of protection and weak management capacity, which have contributed to the under-insured rate, and finds that there is a significant impact on farmers' participation in insurance from personal characteristics factors such as gender, age, health and (family) financial factors such as savings, personal income, intergenerational mobility of funds. And use of the Internet can help farmers enroll in pension insurance. The paper argues for the need to continue to implement the rural revitalisation strategy, with the government as the lead and the market as the support, in a concerted effort to improve the protection and popularity of rural pension insurance.
    Keywords: Countryside; Rural pension system; Residents' social insurance; Rural revitalization; Family panel studies
    JEL: H5 H53 H55 J1 J2 J6 P2
    Date: 2021–11–20

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