nep-pbe New Economics Papers
on Public Economics
Issue of 2023‒05‒29
ten papers chosen by
Thomas Andrén

  1. Fiscal Consequences of Corporate Tax Avoidance By Katarzyna Bilicka; Evgeniya Dubinina; Petr Jansky
  2. Optimal Taxation with Multiple Incomes and Types By Kevin Spiritus; Etienne Lehmann; Sander Renes; Floris T Zoutman
  3. The Gender (Tax) Gap in Parental Transfers. Evidence from Administrative Inheritance and Gift Tax Data By Tisch, Daria; Schechtl, Manuel
  4. Robot tax and endogenous fertility in an Overlapping Generations Model By Minoru Watanabe
  5. Tax policies, informality, and real wage rigidities By Andres García-Suaza; Fernando Jaramillo; Marlon Salazar
  6. Government Spending and Tax Revenue Decentralization and Public Sector Efficiency: Do Natural Disasters matter? By António Afonso; João Tovar Jalles; Ana Venâncio
  7. Understanding the Resistance to Carbon Taxes: A Case Study of Sweden By Ewald, Jens; Sterner, Thomas; Sterner, Erik
  8. Nonlinear Budget Set Regressions for the Random Utility Model By Sören Blomquist; Anil Kumar; Che-Yuan Liang; Whitney Newey
  9. Do Fiscal Rules Undermine Public Investments? A Review of Empirical Evidence By Sebastian Blesse; Florian Dorn; Max Lay
  10. Fiscal Behaviour and Climate Change Commitments in India: Analysing the Budget Credibility. By Chakraborty, Lekha; Jha, Ajay Narayan; Yadav, Jitesh; Kaur, Amandeep

  1. By: Katarzyna Bilicka (Utah State University, NBER, CEPR & Oxford Centre for Business Taxation; Jon M Huntsman School of Business, UT.); Evgeniya Dubinina (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czechia); Petr Jansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czechia)
    Abstract: We study the consequences of multinational tax avoidance on the structure of government tax revenues. To motivate our analysis, we show that countries with high revenue losses due to profit shifting have lower corporate tax revenues and rates and higher indirect tax revenues and rates. To establish causality, we use German municipal data and analyse how changes in municipal trade tax rates levied on corporate profits affect local tax revenue structure. Following a trade tax rate increase, we find that municipalities with high exposure to aggressive multinationals experience a significant decline in trade tax revenue levels and shares.
    Keywords: Corporate Tax Avoidance, Profit Shifting, Multinational Corporations, Government Tax Revenue Structure
    JEL: E62 H26 H71
    Date: 2023–05
  2. By: Kevin Spiritus (Erasmus School of Economics - Erasmus University Rotterdam); Etienne Lehmann (CRED - Centre de Recherche en Economie et Droit - Université Paris-Panthéon-Assas, TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR, CESifo - Center for Economic Studies - Ifo Institute - CESifo GmbH, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics); Sander Renes (Erasmus School of Economics - Erasmus University Rotterdam); Floris T Zoutman (NHH - Norwegian School of Economy)
    Keywords: Nonlinear Optimal Taxation, Multidimensional Screening, Household Income Taxation
    Date: 2023–04–12
  3. By: Tisch, Daria (Humboldt-Universität zu Berlin); Schechtl, Manuel
    Abstract: This study examines how inheritance and gift tax systems in combination with gendered parental transfer behavior strengthen gender wealth inequalities. Gender differences in transfers can be reproduced if men benefit differently than women from tax exemptions. This might happen when men and women receive different types of assets where only some are tax-exempted. To investigate gendered parental transfer behavior and gender differences in tax rates, we draw on German administrative inheritance and gift tax data. Women were less likely than men to receive tax-relevant parental transfers, the value of the transfers were lower, and women and men differed in the asset types they received. Moreover, we identify a gender tax gap of 2% for inheritances and 22% for gifts. Our analyses suggest that men benefit more from tax exemptions on business assets. This study adds the tax system as yet another factor implicated in the reproduction of gender wealth inequalities. (Stone Center on Socio-Economic Inequality Working Paper)
    Date: 2023–04–25
  4. By: Minoru Watanabe (Hokusei Gakuen University)
    Abstract: This brief study constructs a simple Overlapping Generations Model incorporating endogenous fertility and automation capital, which can be used as a replacement for labor inputs Further more, this study introduces a robot tax on automation capital.In the long run, robot tax promote s not only fertility but also per capita income.
    Keywords: Automation capital, Robot tax, Endogenous fertility, Income growth
    JEL: E10 H50 J11
    Date: 2023–04
  5. By: Andres García-Suaza; Fernando Jaramillo; Marlon Salazar
    Abstract: Developing countries have a vast informal sector generally associated with low productivity levels. The response of informal employment to tax policies might depend on labor market rigidities. This paper proposes a theoretical framework consisting of a search and matching model with segmentation in the labor market to understand how tax policies and enforcement interact to determine the size of the formal sector. The analytical results show that decreasing payroll taxes increases formal employment demand, and enforcement expenditure decreases informal employment offers. The model suggests that a tax policy combination leads to a significant impact on informality reduction. Moreover, the magnitude of the effect of tax policies depends on real wage rigidities, i.e., when the economy faces high real wage rigidities, the tax policies have a higher effect on informality reduction
    Keywords: Informality, payroll taxes, fiscal policy, enforcement, search frictions, shirking, developing countries.
    JEL: E26 E62 J21 J46 J31 O17 K42
    Date: 2023–04–28
  6. By: António Afonso; João Tovar Jalles; Ana Venâncio
    Abstract: We assess notably how do extreme events affect the public sector efficiency of decentralized governance. Hence, we empirically link the public sector efficiency scores, to tax revenue and spending decentralization. First, we compute government spending efficiency scores via data envelopment analysis. Second, relying on panel data and impulse response approaches, we estimate the effect of decentralization on public sector efficiency and how extreme natural disasters mediate this relationship. The sample covers 36 OECD countries between 2006 and 2019. Our results show that tax revenue decentralization decreases public sector efficiency, while spending decentralization and a regional authority index are positively related to public sector efficiency, both for local projections and panel analysis. For instance, efficiency rises by 10 percent following a spending decentralization shock (reaching over 20 percent after 4 years). Nevertheless, in cases of natural disasters, spending decentralization reduces public sector efficiency. Specifically, in the presence of most extreme natural disasters, the improvement in public sector efficiency after a spending decentralization shock is smaller than in their absence. Moreover, extreme natural disasters also deteriorate the negative effect of tax revenue decentralization on public sector efficiency. These results suggest that sub-national discretionary spending and tax revenue responses might be less fruitful when such extreme events occur.
    Keywords: public sector efficiency; data envelopment analysis; local projections; revenue decentralization; spending decentralization; natural disasters; OECD
    JEL: C14 C23 E62 H11 H50
    Date: 2023–05
  7. By: Ewald, Jens; Sterner, Thomas (Resources for the Future); Sterner, Erik
    Abstract: Although carbon taxes are generally well accepted in the countries where they have been implemented to lower carbon emissions, there is still public resistance to raising them. We study attitudes toward carbon taxation and other environmental policy instruments in Sweden. We survey a national sample of the population as well as members of a large organization that protests against fuel taxes. Our results show that educational level, rural versus urban domicile, political orientation, and especially trust in government affect opinions on carbon taxes; household income does not appear to matter. Lack of trust in government and lack of belief in the Pigouvian mechanism are especially important motivations for protesters’ opposition. When asked about the use of carbon tax revenue, some respondents support revenue refunding (uniform or progressive), but more people support using it for climate mitigation investments.
    Date: 2021–07–12
  8. By: Sören Blomquist; Anil Kumar; Che-Yuan Liang; Whitney Newey
    Abstract: This paper is about the nonparametric regression of a choice variable on a nonlinear budget set under utility maximization with general heterogeneity, i.e. in the random utility model (RUM). We show that utility maximization and convex budget sets make this regression three dimensional with a more parsimonious specification than previously derived. We show that nonconvexities in the budget set will have little effect on these results in important cases. We characterize all the restrictions of utility maximization on the budget set regression and show how to check these restrictions in applications. We formulate budget set effects that can be identified by this regression and give automatic debiased machine learners of these effects. We consider use of control functions to allow for endogeneity. Throughout we take as the main example the effect of taxes on taxable income including accounting for productivity growth. In an application to Swedish data we find the taxable income elasticity of a change in the slope of each segment to be .52, that the regression satisfies the restrictions of utility maximization at the values chosen for over 95% of observations, and that a productivity growth rate we estimate is close to other estimates.
    JEL: C14 C24 H31 J22
    Date: 2023–04
  9. By: Sebastian Blesse; Florian Dorn; Max Lay
    Abstract: Fiscal rules are a frequent policy measure to restrict deficit-taking among incumbent politicians. In times of increased and sustained investment needs to mitigate the consequences of climate change, and to promote the digital and structural transformation, fiscal rules have become subject to criticism for undermining public investments. We review 20 existing empirical studies examining the impact of numerical fiscal rules on public investments. We also discuss whether more public investments typically come at the cost of higher deficits and whether the effect on public investments differs between rigid and more flexible fiscal rules. Overall, we do not find systematic evidence for a negative effect of fiscal rules on overall public investments. Rigid fiscal rules seem to deter public investments as compared to more flexible and investment-friendly rules which, by contrast, rather increase public investments. Existing evidence does not suggest that public investments systematically come at the cost of higher public deficits (except for more flexible fiscal rules). The design of fiscal rules appears to be crucial for higher public investments.
    Keywords: Fiscal rules, public investment, fiscal sustainability, golden rule, literature review
    JEL: H50 H54 H60 H63
    Date: 2023
  10. By: Chakraborty, Lekha (National Institute of Public Finance and Policy); Jha, Ajay Narayan (National Institute of Public Finance and Policy); Yadav, Jitesh (National Institute of Public Finance and Policy); Kaur, Amandeep (National Institute of Public Finance and Policy)
    Abstract: Against the backdrop of fiscal rules - legally mandated fiscal responsibility and budget management (FRBM) Act - our paper explores the budgetary forecast errors of climate change related public spending in India. The fiscal rules stipulate that fiscal deficit to GDP ratio should be maintained at 3 per cent. However, in the post-covid fiscal strategy, a medium term fiscal consolidation path of 4.5 percent fiscal deficit-GDP is envisioned by 2025-26. Within this fiscal consolidation framework, we analysed the budget credibility of fiscal commitments for climate change in India. We analysed the fiscal behavioural variables in terms of bias, variation and randomness, and captured the systemic variations in budgetary forecast related to climate change for a period 2017-18 to 2020-21 across sectors. We identified the sectors where systematic components of forecasting errors are relatively higher than random components, where minimising errors through altering the fiscal behavioural models are done by revising the assumptions and by applying better forecasting methods. A State level decomposition of the public spending revealed that disaggregated fiscal space available for developmental spending constitute around 60 per cent of total. However, identifying the specifically targeted public spending related to climate change across all States and analysing its fiscal markmanship can further the subnational inferences.
    Keywords: Fiscal marksmanship ; budget forecast errors ; climate change ; state finances
    JEL: H30 H50 H70 Q58
    Date: 2023–05

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