nep-pub New Economics Papers
on Public Finance
Issue of 2006‒07‒21
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Pigou’s Dividend versus Ramsey’s Dividend in the Double Dividend Literature By Miguel Rodríguez; Eduardo L. Giménez
  2. Giving Gifts to Groups: How Congestible is Altruism? By James Andreoni
  3. Public Goods and Budget Deficit By Abraham Neyman; Tim Russo
  4. Income Taxes and the Composition of Pay By Giorgio Brunello; Simona Comi; Daniela Sonedda
  5. Personal Income Tax Elasticity in Turkey: 1975-2005 By Yesim Kustepeli; Onur Sapci

  1. By: Miguel Rodríguez (Universidade de Vigo); Eduardo L. Giménez (Universidade de Vigo)
    Abstract: This paper deals with the welfare analysis of green tax reforms. The aims of this paper are to highlight misinterpretations of policy assessments in the double dividend literature, to specify which of the efficiency costs and benefits should be ascribed to each dividend, and then, to propose a definition for the first dividend and the second dividend. We found the Pigou’s dividend more appropriate for policy guidance, in contrast to the Ramsey’s dividend usually found in mainstream literature. Therefore, we take up some authors’ recent claims about the need of unambiguous and operative definitions of these dividends both for empirical purposes, and political advice. Finally, the paper analyzes a green tax reform for the US economy to illustrate the advantages of our definitions for policy assessment. The new definitions proposed in this paper i) overcome some shortcoming of the mainstream current definitions in the literature regarding overestimation of the efficiency costs; and, ii) provide information by themselves and not as a partial view of the whole picture.
    Keywords: Double Dividend, Green Tax Reforms, Ramsey’s Dividend, Pigou’s Dividend
    JEL: H23 Q58
    Date: 2006–06
  2. By: James Andreoni
    Date: 2006–07–15
  3. By: Abraham Neyman; Tim Russo
    Date: 2006–07–15
  4. By: Giorgio Brunello (University of Padova, CESifo and IZA Bonn); Simona Comi (University of Milano Bicocca); Daniela Sonedda (University of Piemonte Orientale and CRENoS)
    Abstract: According to the standard principal-agent model, the optimal composition of pay should balance the provision of incentives with the individual demand for insurance. Do income taxes alter this balance? We show that the relative share of PRP on total pay is reduced by higher average taxes, and is affected in a complex way by higher marginal tax rates. Empirical evidence based on the British Household Panel Survey, which exploits the UK 1999 Tax Reform, supports the theoretical predictions of the tax-augmented principal-agent model.
    Keywords: performance related pay, income taxes
    JEL: J33 H24
    Date: 2006–07
  5. By: Yesim Kustepeli (Department of Economics, Faculty of Business, Dokuz Eylül University); Onur Sapci (Department of Economics, Faculty of Business, Dokuz Eylül University)
    Abstract: The estimation of tax elasticity; the response of tax revenues to changes in income, is important for at least three reasons: i) formulating government budgets and monitoring tax collections (Sen, 2002), ii) the specification of tax functions, iii) the automatic stabilizing properties of the tax system and the public sector deficit (Hutton, Lambert; 1980, 1982). Among the various approaches to tax elasticity calculation in literature (Tanzi, 1969, 1976; Greytak and McHugh, 1978; Hutton and Lambert, 1980; Ehdaie, 1990), the most famous approach is Tanzi’s Method due to its simplicity and the consensus about its correctness of elasticity estimates. Johansen cointegration tests for the period 1975 - 2005 show that personal income tax elasticity in Turkey is around 0.95, indicating almost unit elasticity. Increasing income can be considered as insurance to maintain an equivalent increase in tax revenue; however it doesn’t seem to be the way to obtain higher tax revenues.
    Keywords: Personal income tax, tax elasticity, Tanzi method
    JEL: E62 H24
    Date: 2006–07–11

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