nep-pbe New Economics Papers
on Public Economics
Issue of 2022‒08‒22
twelve papers chosen by
Thomas Andrén

  1. Tax Reforms and Political Feasibility By Felix Bierbrauer; Pierre Boyer; Andrew Lonsdale; Andreas Peichl
  2. Exploring Border Effects: Sensitivity of Cigarette Consumption to Excise Tax By Aisha Baisalova
  3. Dynamic Tax Evasion and Capital Misallocation in General Equilibrium By Francesco Menoncin; Andrea Modena; Luca Regis
  4. Welfare Effects of Fuel Tax and Feebate Policies in the Japanese New Car Market By Tatsuya Abe
  5. Analysis of the Effects of Changes in the Japanese R&D Tax Credit System in 2015: Impact of expansion of tax credits for open innovation and abolition of the tax credit carryover system (Japanese) By IKEUCHI Kenta
  6. Should Governments Tax Digital Financial Services? A Research Agenda to Understand Sector-specific Taxes on DFS By Abounabhan, Mary; Munoz, Laura; Mascagni, Giulia; Prichard, Wilson; Santoro, Fabrizio
  8. SWITCH: A tax-benefit model for Ireland linked to survey and register data By Keane, Claire; Doorley, Karina; Kakoulidou, Theano; O'Malley, Seamus
  9. There Are Ways to Improve Work Incentives Without Increasing Income Inequality By Puonti, Päivi; Kangasharju, Aki
  10. Elites and Health Infrastructure Improvements in Industrializing Regimes By Tommy Krieger
  11. COVID-19 Private Pension Withdrawals and Unemployment Tenures By Sainsbury, Tristram; Breunig, Robert; Watson, Timothy
  12. Covid-19 supply-side fiscal policies to escape the health-vs-economy dilemma By Emanuele Colombo Azimonti; Luca Portoghese; Patrizio Tirelli

  1. By: Felix Bierbrauer (University of 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 Maximilian University [Munich])
    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
  2. By: Aisha Baisalova
    Abstract: Border effects can have a considerable influence on the effectiveness of excise tax policy measures. The opportunity to buy taxable goods in the nearest lower-tax state redistributes the tax burden among consumers and determines the treatment intensity of how an increase in the tax rate may affect consumption decision. Using Nielsen Consumer Panel data, we estimate the bias arising from border effects and investigate how sensitivity to cigarette excise tax and the size of bias vary for different demographic groups. We find that border effects create a bias in the estimate of consumption sensitivity to an increase in the excise tax rate, which is present for all demographic groups. Tax sensitivity increases with the average distance to the lower tax state border, implying that border residence decreases the impact of excise tax policy interventions on consumer choice.
    Keywords: excise taxation; cigarettes; cross-state purchasing; tax avoidance; border effects;
    JEL: D12 H26 H71 L66
    Date: 2022–07
  3. By: Francesco Menoncin; Andrea Modena; Luca Regis
    Abstract: We study tax evasion in a tractable macroeconomic model with productive public expenditure financed by a fixed-rate income tax. Taxpayers are heterogeneous in their productivity and subject to borrowing constraints. They can lower their fiscal burden by evading taxes at the risk of being audited (and fined) by the government. We solve the model for its competitive equilibrium and characterize entrepreneurs’ optimal policies contingent on their individual productivity and the endogenous price levels. The model predicts that enforcing tax compliance stimulates the productivity of public expenditure, thus making less productive enterprises viable. At the same time, however, fewer evasion opportunities alleviate borrowing constraints by offsetting the advantage of low-productivity (and highly-evasive) entrepreneurs, thereby re-allocating capital to more productive users. On the demand side, decreasing tax evasion reduces consumption levels by curbing private capital accumulation. However, it fosters consumption rates by mitigating entrepreneurs’ precautionary motif against auditing risk.
    Keywords: Dynamic Tax Evasion; Financial Frictions; General Equilibrium; Misallocation
    Date: 2022
  4. By: Tatsuya Abe
    Abstract: This paper examines the efficiency and distributional effects of fuel tax and feebate policies in the automobile market. I employ a model in which households make two-stage decisions on car ownership and utilization, and I estimate model parameters by combining micro-level data from a household survey and macro-level aggregate data on the Japanese new car market from 2006 through 2013. Interestingly, several system changes in the Japanese feebate created rich variations in vehicle prices across vehicles and over time during the sample period. I use such exogenous variation to overcome the vehicle price endogeneity associated with demand estimation. Counterfactual analyses show that the Japanese feebate results in a significant increase in social welfare while augmenting environmental externalities. In particular, the rebound effect induced by the feebate cancels out approximately 7% of the reduction in CO2 emissions that would originally have been attained by the improvement in fuel economy. In addition, I find that the fuel tax at the current tax rate in Japan is 1.7 times less costly than the product tax, an alternative feebate scheme considered in the counterfactuals. I also find that there is no difference in regressivity between the two policies in reducing negative environmental externalities by the same amount.
    Date: 2022–07
  5. By: IKEUCHI Kenta
    Abstract: The purpose of this study is to empirically analyze the effect of changes in the Japanese R&D tax system implemented in 2015 on the quantity and quality of R&D investment. As a result of analysis using counter-factual simulation, it was found that the abolition of the tax credit carryover system and the expansion of tax credits for open innovation (OI) in 2015 contributed to the decrease in total R&D investment and the increase in external expenditure R&D investment, respectively. Regarding the tax revenue, the increase in tax revenue due to the abolition of the tax credit carryover system was almost equal to the decrease in R&D investment, and the decrease in tax revenue due to the expansion of tax credits for OI was smaller than the increase in external R&D investment. In addition, the negative effect of the abolition of the tax credit carryover system and the positive effect of the expansion of tax credits for OI almost offset each other, and it seems that there was no significant effect on the labor productivity as a whole. The expansion of tax credits for OI in 2015 had the effect of increasing the number of industry-academia joint application patents. As a conclusion, the system changes in the R&D tax system in 2015 had the effect of promoting open innovation such as joint research between industry and academia and boosting productivity, but at the same time, R&D investment was reduced by abolishing the tax credit carryover system.
    Date: 2022–07
  6. By: Abounabhan, Mary; Munoz, Laura; Mascagni, Giulia; Prichard, Wilson; Santoro, Fabrizio
    Abstract: Low-income countries are facing strong pressure to bring in more revenue at home. With digital financial services (DFS) rapidly expanding across Africa and other low-income countries a growing number are therefore considering new taxes on DFS. In light of the heated debate over DFS taxes, this paper explores the rationale for these taxes and their likely impacts in order to help governments and other stakeholders arrive at policies that best meet their competing needs.
    Keywords: Governance,
    Date: 2022
  7. By: Eddy Zanoutene
    Date: 2021
  8. By: Keane, Claire; Doorley, Karina; Kakoulidou, Theano; O'Malley, Seamus
    Date: 2022
  9. By: Puonti, Päivi; Kangasharju, Aki
    Abstract: Abstract The Finnish unemployment system is inefficient. The earnings-related unemployment allowance unnecessarily lengthens the duration of unemployment spells. Longer unemployment spells increase income differences compared to a situation where a larger share of the population earned their living at paid work. This is because the prolongation of the unemployment spell means lower income for a longer period. Longer unemployment spells are also likely to contribute negatively to the quality of post-unemployment jobs. In this Brief, we sketch a reform that improves the work incentives of the unemployed with low employment barriers. The reform consists of shortening the duration of the earnings-related unemployment allowance from the current 400 days to a maximum of 200–250 days (9–12 months) and using the savings to support the employment of the people with the highest employment barriers. As a result, the unemployed entitled to the earnings-related unemployment allowance return to work more quickly, while long term unemployment decreases, and so the reform does not increase income inequality.
    Keywords: Incentive trap, Earnings related unemployment benefit, Income inequality
    JEL: J20 H20 H55
    Date: 2022–08–09
  10. By: Tommy Krieger
    Abstract: We collect information about more than 5,000 Prussian politicians, digitize administrative data on the provision of health-promoting public goods, and gather local-level information on workers’ movements to study why elites in industrializing countries implement policies that improve the health of the poor. Exploiting county-level variation in elite structure, we present OLS and IV estimates, suggesting that elites improve access to health services due to pressure exerted by workers’ movements and that they voluntarily implement policies that prevent disease outbreaks. An analysis of two rollcall votes substantiates the findings of the county-level analysis.
    Keywords: distribution of power, elite structure, industrializing countries, political economy of health-promoting policies, Prussian history, redistribution, workers’ movements
    JEL: H11 H42 H75 I15 N33 O43 P16
    Date: 2022
  11. By: Sainsbury, Tristram (Australian National University); Breunig, Robert (Australian National University); Watson, Timothy (Australian National University)
    Abstract: This is the first study to evaluate the effects of early pension withdrawal policies on tenures on unemployment payments in the COVID-19 context. We use a novel set of linked whole-of-population administrative records to examine more than half-a-million Australians who found themselves newly on an unemployment payment in the initial months of the COVID-19 pandemic. We estimate that receiving a lump sum of up to A$10,000 from superannuation accounts at the most acute phase of the pandemic, between April and June 2020, resulted in a 32 per cent lower exit rate from unemployment benefits inside the first six months of a spell on benefits, and 14 per cent inside a year of spell. Receiving a lump sum during the second window of opportunity – mostly in July and August 2020 and as a labour market recovery was underway – resulted in a 34 per cent lower exit from unemployment benefits inside the first nine months of spell, and 14 per cent inside fifteen months of spell. The jobseeking deterrence is ultimately temporary but it took close to eighteen months for an estimated convergence between withdrawers and those that didn't withdraw. 162,000 withdrawers with completed spells on average spent an additional 7 weeks on unemployment payments, translating to 8 million additional days in aggregate, and implying A$580 million in additional pandemic fiscal expenditure.
    Keywords: unemployment, crisis management, fiscal policy, government expenditure, unemployment benefits, welfare programs, private pensions
    JEL: E24 H12 H30 H53 J32
    Date: 2022–06
  12. By: Emanuele Colombo Azimonti (University of Pavia); Luca Portoghese (University of Pavia); Patrizio Tirelli (University of Pavia)
    Abstract: We develop a model that allows for online retail trade and for endogenous Covid related health expenditures. The market equilibrium at best imperfectly internalises the infection risk from contact-intensive retail trade, and the anticipation of health costs has large contractionary effects. The Ramsey planner exploits a subsidy to online trade to limit lockdown policies. Relative to the market equilibrium, the optimal policy stimulates consumption and contains the surge in health expenditures, mitigating both the recession and the persistence of the Covid-19 shock.
    JEL: E62 H21 H30 H51 I18
    Date: 2022–07

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