nep-pbe New Economics Papers
on Public Economics
Issue of 2023‒08‒28
twelve papers chosen by
Thomas Andrén, Konjunkturinstitutet

  1. Minimum Tax Rates and Tax Competition: Evidence from Property Tax Limits in Finland By Teemu Lyytikäinen
  2. Hidden Havens: State and Local Governments as Tax Havens? By David R. Agrawal
  3. Taxing the Gender Gap: Labor Market Effects of A Payroll Tax Cut for Women in Italy By Enrico Rubolino
  4. Taxes and Gender Equality: The Incidence of the ‘Tampon Tax’ By Thiess Büttner; Frank Hechtner; Boryana Madzharova
  5. A Non-Parametric Estimation of Productivity with Idiosyncratic and Aggregate Shocks: The Role of Research and Development (R&D) and Corporate Tax By Bournakis, Ioannis; Tsionas, Mike G.
  6. Mortality Regressivity and Pension Design By Pashchenko, Svetlana; Porapakkarm, Ponpoje; Jang, Youngsoo
  7. Effects of E-commerce on Local Labor Markets By Bauer, Anahid; Fernández Guerrico, Sofía
  8. Behavioural Responses to Unfair Institutions: Experimental Evidence on Rule Compliance, Norm Polarisation, and Trust By Columbus, Simon; Feld, Lars P.; Kasper, Matthias; Rablen, Matthew D.
  9. Public Policy: A science and/or a Field? By Rouhani, Omid
  10. The (Lack of) Anticipatory Effects of the Social Safety Net on Human Capital Investment By Manasi Deshpande; Rebecca Dizon-Ross
  11. GOVERNANCE QUALITY AT THE REGIONAL LEVEL: METHODIC APPROACH TO EVALUATION By Dobrolyubova, Elena (Добролюбова, Елена); Starostina, Aleksandra (Старостина, Александра)
  12. Why Are Unemployment Insurance Claims So Low? By Christopher J. O'Leary; Kenneth J. Kline; Thomas A. Stengle; Stephen A. Wandner

  1. By: Teemu Lyytikäinen
    Abstract: This paper analyzes how minimum local property tax rates affect local tax policy choice. In Finland, central government has raised the limits on property tax rates several times in the past 30 years. I construct a measure of forced tax rate increases caused by these reforms and examine how municipalities respond to forced increases in nearby municipalities. Results for the property tax on business properties indicate that neighbors' forced tax rate increases lead to higher tax rates, after a reform of the tax base equalization system which increased incentives to compete for the tax base. Before the equalization reform, the tax rates on business properties were unaffected by neighbors' forced tax rate increases. I find some indications that forced increases in the residential property tax rate lead to lower tax rates in neighboring municipalities four years later. Analysis of government bills shows that the introduction of minimum tax rates was partly motivated by concerns regarding horizontal and vertical tax competition. Forced property tax rate increases have a clear and lasting effect on tax revenue in affected municipalities, implying that the tax capacity of central government as regards other tax bases likely increased.
    JEL: H70 H71 H77
    Date: 2023–07
  2. By: David R. Agrawal
    Abstract: An international tax haven is usually a low-tax jurisdiction that seeks to attract investment by foreign investors. But, there are many state and local jurisdictions within federal systems that set zero tax rates on personal or corporate income, consumption, property, and wealth in an effort to attract activity from other high-tax jurisdictions. I discuss whether subnational tax havens are distinct from intense tax competition. I conclude that in a federal system, the economic implications of the two may be similar, but the policy responses differ subtly. A survey of the empirical evidence on the effect of zero or very low tax rates indicates that the lowest tax jurisdiction may disproportionately benefit from non-real base shifting, but real and avoidance responses also arise in response to smaller tax differentials between non-havens. Turning to the corporate income tax, I discuss how legal rules such as formula apportionment, economic nexus, and incorporation rules influence tax competition and the avoidance behaviors of multistate companies.
    Keywords: tax haven, tax competition, state and local public finance, regulatory competition, corporate charters
    JEL: H71 H73 H77 K22 K34 R51
    Date: 2023
  3. By: Enrico Rubolino (University of Lausanne, Department of Business and Economics)
    Abstract: This paper studies the labor market effects of a large payroll tax cut for female hires in Italy. Starting in January 2013, the payroll tax rate paid by the employer for female hires was reduced by 50 percent for a period of 12 months for temporary jobs and 18 months for permanent jobs. Eligibility for the tax cut depends on the time elapsed in nonemployment status and varies discontinuously by the worker’s municipality of residence, age, and occupation. Combining social security data on the universe of Italian private-sector workers with several empirical approaches, I find that the tax cut increases female employment and spurs business performance, especially where gender biases are more severe. By contrast, the tax cut does not raise workers’ net wages. A cost-benefit analysis implies that the net cost of the policy is around one-fourth of the budgetary cost. These findings provide the first empirical evidence that differentiating payroll taxes by gender helps to reduce the gender employment gap, but not the gender pay gap.
    Keywords: Local gender gaps; female employment; payroll tax; tax incidence
    JEL: H22 J21 J31
    Date: 2023–07
  4. By: Thiess Büttner; Frank Hechtner; Boryana Madzharova
    Abstract: Many countries are currently debating whether to reduce or eliminate taxes on feminine hygiene products as a measure to address “period poverty” and promote gender equality. Legislators often reject proposals involving reforms of “tampon taxes” as the pass-through of sales taxes into consumer prices cannot be guaranteed. This paper uses a permanent reduction of the tax on tampons & pads in Germany in 2020 as a natural experiment to study the price and unit-sales effects of the tax. Exploiting an extensive data set on the unit sales and scanner prices of feminine hygiene products in Germany and Italy, our results indicate that the incidence of tampon taxes is fully on consumers, while demand for these products is price-inelastic. We do not find cross-price effects for a closely related product group, which remained taxed at the standard tax rate. Both the pass-through and demand effects are found to be homogenous along the pre-reform market-share and price distributions.
    Keywords: tax incidence, pass-through, gender equality, feminine hygiene products, period poverty
    JEL: H22 H23 I38 J16
    Date: 2023
  5. By: Bournakis, Ioannis; Tsionas, Mike G.
    Abstract: We developed a non-parametric technique to measure Total Factor Productivity (TFP). Our paper has two major novelties in estimating the production function. First, we propose a productivity modelling with both idiosyncratic firm factors and aggregate shocks within the same framework. Second, we apply Bayesian Markov Chain Monte Carlo (MCMC) estimation techniques to overcome restrictions associated with monotonicity between productivity and variable inputs and moment conditions in identifying input parameters. We implemented our methodology in a group of 4286 manufacturing firms from France, Germany, Italy, and the United Kingdom (2001-2014). The results show that: (i) aggregate shocks matter for firm TFP evolution. The global financial crisis of 2008 caused severe adverse effects on TFP albeit short in duration; (ii) there is substantial heterogeneity across countries in the way firms react to changes in R&D and taxation. German and U.K. firms are more sensitive to fiscal changes than R\&D, while Italian firms are the opposite. R\&D and taxation effects are symmetrical for French firms; (iii) the U.K. productivity handicap continued for years after the financial crisis; (iv) industrial clusters promote knowledge diffusion among German and Italian firms.
    Keywords: Total Factor Productivity (TFP), Control Function, Non-parametric Bayesian Estimation, Markov Chain Monte Carlo(MCMC), Research and Development (R\&D), Taxation, European firms
    JEL: C11 D24 H21 H25 Q55
    Date: 2023–07–21
  6. By: Pashchenko, Svetlana; Porapakkarm, Ponpoje; Jang, Youngsoo
    Abstract: How should we compare welfare across pension systems in presence of differential mortality? A commonly used standard utilitarian criterion implicitly favors the long-lived over the short-lived. We investigate under what conditions this ranking is reversed. We clearly distinguish between the redistribution along mortality and income dimensions, and thus between mortality and income progressivity. We show that when mortality is independent of income, mortality progressivity can be optimal only when (i) there is more aversion to inequality in lifetime utilities compared to aversion to consumption inequality, (ii) life is valuable. When the short-lived tend to have lower income, mortality progressivity can be also optimal when income redistribution tools are limited. In this case, mortality progressivity is used to substitute for income progressivity.
    Keywords: Mortality-related redistribution, Pensions, Social Security, Annuities, Life-Cycle Model
    JEL: G22 H21 H55 I38
    Date: 2023–07–14
  7. By: Bauer, Anahid (MINES ParisTech); Fernández Guerrico, Sofía (Université Libre de Bruxelles)
    Abstract: This paper studies the effect of e-commerce on local labor markets. We exploit cross-market variation in e-commerce price advantage stemming from the enactment of the Amazon Tax-state-level legislation that mandates state sales taxes collection to out-of-state online retailers. Introducing out-of-state sales taxes lowered employment and reduced wages in transportation and warehousing, industries complementary to e-commerce. Within the in-state retail sector, the decline in brick-and-mortar employment is somewhat offset by an increase in employment in warehouse clubs and supercenters. Our results are consistent with a general equilibrium model in which consumers substitute e-commerce for big-box purchases, crowding out brick-and-mortar retail.
    Keywords: e-commerce, retail, employment, Amazon Tax
    JEL: H71 J2 L81 O33
    Date: 2023–07
  8. By: Columbus, Simon (University of Copenhagen); Feld, Lars P. (University of Freiburg); Kasper, Matthias (Walter Eucken Institute, Freiburg); Rablen, Matthew D. (University of Sheffield)
    Abstract: This study investigates the effects of unfair enforcement of institutional rules on public good contributions, personal and social norms, and trust. In a preregistered online experiment (n = 1, 038), we find that biased institutions reduce rule compliance compared to fair institutions. However, rule enforcement – fair and unfair – reduces norm polarisation compared to no enforcement. We also find that social heterogeneity lowers average trust and induces ingroup favouritism in trust. Finally, we find consistent evidence of peer effects: higher levels of peer compliance raise future compliance and spillover positively into norms and trust. Our study contributes to the literature on behavioural responses to institutional design and strengthens the case for unbiased rule enforcement.
    Keywords: public goods, compliance, social norms, trust, audits, biased rule enforcement, polarisation
    JEL: H41 C72 C91 C92
    Date: 2023–07
  9. By: Rouhani, Omid
    Abstract: “The Public Policy Theory Primer” book, by Ken Smith and Chris Larimer, investigates public policy theories and examines a key question: Does this scientific field really exists? The book's answer is yes, but in a plural format. The book’s conclusion is that public policy is more art/craft rather than science, at least not yet. Overall, the book is informative, especially for a person with limited knowledge regarding fundamental public policy theories.
    Keywords: Public Policy; Political Science; Policy Analysis; Policy Process
    JEL: H0 H1 H3 H30 H75
    Date: 2023–07–27
  10. By: Manasi Deshpande; Rebecca Dizon-Ross
    Abstract: How does the expectation that a child will receive government benefits in adulthood affect parental investments in the child's human capital? Most parents whose children receive Supplemental Security Income (SSI) benefits overestimate the likelihood that their child will receive SSI benefits in adulthood. We present randomly-selected families with the predicted likelihood that their child will receive SSI benefits in adulthood. Reducing parents' expectations that children will receive benefits in adulthood does not increase investments in children's human capital. This zero effect is precisely estimated. Likely explanations include parents working more themselves, non-financial goals influencing investment, and families facing investment constraints.
    JEL: H20 I20 I3
    Date: 2023–07
  11. By: Dobrolyubova, Elena (Добролюбова, Елена) (The Russian Presidential Academy of National Economy and Public Administration); Starostina, Aleksandra (Старостина, Александра) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The need for systemic efforts to improve governance quality at the regional level makes the subject of the study highly relevant to the policy agenda. The goal of the study is to develop and test a methodological approach to measuring the quality of governance at the regional level. The subject of the study includes governance performance at the regional level in Russia. The authors apply general analytical scientific methods such as quantitative, qualitative, and comparative analysis. The study is based on a review of statistical, administrative data, as well as regulatory documents, regional strategic documents, and related implementation performance reports. The study results include a review of existing approaches to measuring governance quality at the regional level, a methodological approach to evaluating the quality of governance and the results of its application. The study concludes that there is significant variation in terms of governance quality both within one region (i.e., over various quality parameters) and among regions. The dynamics of governance quality indicators also varies among regions, with some territories demonstrating improvements and others deterioration. The interregional variation cannot be explained exclusively by difference in the resources available. The regions with better governance quality demonstrate better social and economic performance. Improving quality of public governance would call for adapting reform approaches to specific regional needs. The novelty of the paper is related, first of all, to adaptation of governance performance indicators and testing the system based on the regional data, undertaking a comprehensive evaluation of the justification, effectiveness, and efficiency of the governance in Russian regions. It is recommended to use the methodology proposed in the paper for preparing and implementing governance improvement programs at the regional level.
    Keywords: Governance, public services, governance justification, evaluation of effectiveness, evaluation of efficiency, subject of the Russian Federation
    JEL: H11 H43 H83
    Date: 2022–09
  12. By: Christopher J. O'Leary (W.E. Upjohn Institute for Employment Research); Kenneth J. Kline (W.E. Upjohn Institute for Employment Research); Thomas A. Stengle (Retired); Stephen A. Wandner (National Academy of Social Insurance)
    Abstract: In this paper, we examine the reasons why unemployment insurance (UI) claims have declined so dramatically over the past three decades. The fall in the UI claims rate is concerning because it suggests a reduced countercyclical effectiveness of the UI program. Additionally, weekly initial UI claims are regarded as an important leading indicator of aggregate economic activity, so their meaning has changed. We use a Oaxaca (1973) decomposition approach to identify the main factors for the decline in claims. The procedure suggests what the level of claims would have been later in the period, had values of variables or parameters of the system been at levels observed earlier in the period. Our analysis of state-year data over the past three decades suggests that the decline in UI claims stems from changes in the industrial and occupational mix of employment interacting with changes in UI program features set by individual states. Employment declines in manufacturing and increases in the health-care and education workforce, along with lower potential UI duration and lower wage replacement rates, contribute to the decline in claims. This decline could be offset by federal rules for states to improve benefit access, replacement rates, and durations. Such changes could improve the relevance of UI to the labor market and help restore UI as meaningful social insurance against job loss and as an automatic stabilizer of the macroeconomy.
    Keywords: unemployment insurance (UI), applications for benefits, first claims, wage replacement rate, potential duration of benefits, industrial mix of employment, occupational mix of employment
    JEL: J65 J68 H76
    Date: 2023–04

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