nep-pub New Economics Papers
on Public Finance
Issue of 2007‒06‒02
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Tax Structure, Size of Government, and the Extension of the Voting Franchise in Western Europe, 1860-1938 By Aidt, T.S.; Jense , P.S.
  2. Fiscal Policy in Real Time By Jacopo Cimadomo
  3. Public Pension Reform: A Primer By Alain Jousten
  4. Young and old competing for public welfare services By Lars-Erik Borge; Jørn Rattsø
  5. Public Expenditure in Latin America: Trends and Key Policy Issues By Christopher Faircloth; Benedict J. Clements; Marijn Verhoeven

  1. By: Aidt, T.S.; Jense , P.S.
    Abstract: We study the consequences of the extension of the voting franchise for the size of (central) government and for the tax structure in 10 Western European countries, 1860-1938. We show, .rstly, that the gradual relaxation of income and wealth restrictions on the right to vote contributed to growth in government spending and taxation. Secondly, we show that the impact of the franchise extension on the tax structure is conditional on tax collection costs. We find that the share of direct taxes (including the personal income tax) is positively affected by the franchise extension, but only if relative collection costs are below a given threshold. We use literacy as a proxy for the cost of levying a broad-based income tax.
    Keywords: Voting franchise, democracy, public finance, taxation.
    JEL: D7 H11
    Date: 2007–04
  2. By: Jacopo Cimadomo
    Abstract: Most of the empirical literature on fiscal policy has found that, over the post-World War II period, governments in developing and industrialized countries have reacted “pro-cyclically” to fluctuations in the economic activity (see e.g. Lane (2003) and Kaminsky, Reinhart and Vegh (2004)). Otherwise stated, budgetary decisions such as tax increases and cuts in public spending implemented in “bad times” would have tended to aggravate the length and the severity of economic recessions. On the other side, expansive policies put in place during “good times” would have led economic booms to be more prolonged and vigorous. This empirical evidence has been mainly drawn from the estimation of fiscal policy reaction functions, relating a policy indicator to the output gap and other explanatory variables, based on the use of revised data, i.e. data available in an “updated” form to the econometrician at the time the study is carried out. Since many economic variable are seriously contaminated by revision errors, however, revised data may be substantially different from the ones available in “real-time” to policymakers at the time of budgeting. In other words, as shown by Orphanides (2001) in the framework of monetary policy analysis, unrealistic assumptions about the timeliness of data availability may induce misleading assessments on the historical policy stance. Nevertheless, although informational problems clearly matter also for the evaluation of the fiscal policy stance, little has been done in this field.
    Keywords: Fiscal policy; real-time data; revision errors; endogenous threshold models
    JEL: C23 E30 E62 H30
    Date: 2007–05
  3. By: Alain Jousten
    Abstract: The present paper reviews key issues in pension design and pension reform encountered all across the world. The paper heavily refers to the recent U.S. Social Security reform debate in general and to the Personal Retirement Accounts proposal in particular. A particular emphasis is put on annuitization and risk-taking in the economy. Our discussion signals some inadequacy of the proposed measures with respect to the goals of viability of the system and individual financial security during retirement.
    Keywords: Pensions , Social security , Aging , Financial safety nets , Public sector ,
    Date: 2007–02–08
  4. By: Lars-Erik Borge (Department of Economics, Norwegian University of Science and Technology); Jørn Rattsø (Department of Economics, Norwegian University of Science and Technology)
    Abstract: Generational conflict affects the supply of public welfare services, and the rising share of elderly is seen as a threat to educational spending. We offer an analysis of spending in child care, primary and lower secondary education, and care for the elderly related to the size of young and old voters. The age groups face possible disadvantages of being part of a large cohort, but also can gain political strength to crowd out services for the other groups. The decentralization of public services in Scandinavia allows for the simultaneous analysis of age related services. Using panel data from Denmark for the period 1989-1996, we find that the elderly are reducing spending in child care and education, but the young do not threaten services for the elderly. It is a disadvantage for both the elderly and the young to be part of a large cohort. The possible Tiebout-bias is handled with instrument variables predicting the relevant age composition variables.
    Keywords: Public welfare services; group size; age composition of the population; generational conflict
    JEL: H42 H72
    Date: 2007–05–24
  5. By: Christopher Faircloth; Benedict J. Clements; Marijn Verhoeven
    Abstract: This paper examines trends in government spending in Latin America from the mid-1990s to 2006. It also examines key policy issues, including the cyclicality of spending, public investment, public employment, and social expenditures. It finds that primary expenditures have trended upward for the past ten years as a share of GDP, driven by increases in current spending, in particular for social expenditures. Fluctuations in real spending have continued to follow a procyclical pattern. The paper finds that there is substantial scope to improve the efficiency of public investment, public employment, and social spending.
    Keywords: Government expenditures , Latin America , Fiscal policy ,
    Date: 2007–02–02

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