nep-pub New Economics Papers
on Public Finance
Issue of 2005‒02‒01
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Education, Redistributive Taxation and Confidence By Konrad, Kai A.; Spadaro, Amedeo
  2. Free to Move: Migration, Tax Competition and Redistribution By Woojin Lee
  3. Strategy-Proof Allocation of Multiple Public Goods By Svensson , Lars-Gunnar; Torstensson, Pär
  4. Relative performance of two simple incentive mechanisms in a public good experiment By Juergen Bracht; Charles Figuières; Marisa Ratto

  1. By: Konrad, Kai A. (Free University of Berlin, WZB Berlin and IZA Bonn); Spadaro, Amedeo (PSE Paris-Jourdan Sciences Economiques and Universitat de les Illes Balears)
    Abstract: We consider redistributional taxation between people with and without human capital if education is endogenous and if individuals differ in their perceptions about own ability. Those who see their ability as low like redistributive taxation because of the transfers it generates. Those who see their ability as high may also like redistributive taxation because it stops other people receiving education and increases the quasi rents on their own human capital. It is surprising that this rather indirect effect can overcompensate them for the income loss from taxation and make the overconfident want higher taxes than the less confident do. The results, however, turn out to be in line with empirical evidence on the desired amount of redistribution among young individuals.
    Keywords: education, redistribution, confidence
    JEL: D78 H23 I21
    Date: 2005–01
  2. By: Woojin Lee (University of Massachusetts Amherst)
    Abstract: We study a model of tax competition between two countries when both skilled and unskilled workers make their migration decisions simultaneously and wages are endogenously determined. If both factors of production are allowed to migrate freely and when the demand for skilled labor is not so elastic, the problem typically predicted in the literature of tax competition that increased mobility of production factors will pose a severe threat to redistribution possibility is less acute than it might first appear. The equilibrium tax rate can be not only positive but also increasing in the degree of mobility of unskilled workers. This is mainly because an initial change in migration flows induced by an increase in the tax rate brings about a higher wage for skilled workers and a lower wage for unskilled workers, which offsets the initial adverse effect. We also show that in contrast to the conventional wisdom in the literature of tax competition decreasing the tax rate invites not only skilled workers but also unskilled workers; unskilled workers always chase skilled workers at the equilibrium. JEL Categories: D50, F21, H30
    Keywords: globalization, mobility, tax competition, redistribution, fiscal externality, political economy
    Date: 2005–01
  3. By: Svensson , Lars-Gunnar (Department of Economics, Lund University); Torstensson, Pär (Department of Economics, Lund University)
    Abstract: We characterize the set of strategy-proof social choice functions (SCFs), the outcome of which are multiple public goods. The set of feasible alternatives is a subset of a product set with a finite number of elements. We do not require the SCFs to be ‘onto’, but instead impose the weaker requirement that every element in each category of public goods is attained at some preference profile. Admissible preferences are arbitrary rankings of the goods in the various categories, while a separability restriction concerning preferences among the various categories is assumed. We find that the range of the SCF is uniquely decomposed into a product set in general coarser than the original product set, and that the SCF must be dictatorial in each component of the range. If the range cannot be decomposed at all, the SCF is dictatorial in spite of the separability assumption on preferences, and a form of the Gibbard-Satterthwaite theorem with a restricted preference domain is obtained.
    Keywords: Strategy-proof; multiple public goods; decomposability; weakly onto; component-wise dictatorial.
    JEL: D71 D78 H41
    Date: 2005–01–19
  4. By: Juergen Bracht (Department of Economics, University of Aberdeen Business School); Charles Figuières (INRA, UMR LAMETA); Marisa Ratto (Leverhulme Centre for Market and Public Organisation, University of Bristol)
    Abstract: The paper reports on experiments designed to compare the performance of two incentive mechanisms in public goods problems. One mechanism rewards and penalizes deviations from the average contribution of the other agents to the public good (tax-subsidy mechanism). Another mechanism allows agents to subsidize the other agents’ contributions (compensation mechanism). It is found that both mechanisms lead to an increase in the level of contribution to the public good. The tax-subsidy mechanism allows for good point prediction of the average level of contribution. The compensation mechanism predicts the level of contributions less reliably.
    Keywords: public goods, voluntary provision, incentive mechanisms.
    JEL: H42 D62
    Date: 2004–11

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