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on Public Finance |
| By: | Andrea Colciago (Department of Economics, University of Milan-Bicocca) |
| Abstract: | We consider a standard growth model augmented with a share of rule of thumb con- sumers. A Government ?nances a preset level of public expenditure through ?at tax rates on labor and capital income and also makes lump sum transfers to non ricardian consumers. It has been shown in representative agents models with perfect competition that balanced budget rules with endogenous tax rates are likely to generate indetermi- nacy of the perfect foresight equilibrium. We show that the presence of rule of thumb consumers reduces this possibility. Further, we show that a ?scal reform which features a reduction in the capital income tax rate and leads to the steady state where the welfare of non ricardian agents is maximized could be Pareto improving. This is obtained via a direct redistribution of resources to rule of thumb consumers along the transition path. |
| Keywords: | Non Ricardian Agents, Fiscal Policy, Capital Income Tax Rate |
| JEL: | E62 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:113&r=pub |
| By: | Wolfram F. Richter |
| Abstract: | Assuming isoelastic returns to education and an endogenous supply of qualified and nonqualified labour, it is shown to be second-best efficient not to distort the choice of education. Furthermore, taxation should set incentives so that qualified labour is substituted for nonqualified labour. As a result, it is efficient to tax labour income regressively with respect to qualification and to tax the monetary cost of education at a level that restores efficiency in education. Atax on capital income alleviates the distortion that progressive taxation of labour income exerts on human-capital investment. |
| Keywords: | Endogenous choice of education and labour, efficient taxation of human and nonhuman capital, double-dividend hypothesis |
| JEL: | H21 I28 J24 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0012&r=pub |
| By: | Richard Bird; Jorge Martinez-Vazquez; Benno Torgler |
| Abstract: | In this paper we argue that a more legitimate and responsive state is an essential factor for a more adequate level of tax effort in developing countries. While at first glance giving such advice to poor countries seeking to increase their tax ratios may not seem more helpful than telling them to find oil, it is presumably more feasible for people to improve their governing institutions than to rearrange nature’s bounty. Improving corruption, voice and accountability may not take longer nor be necessarily more difficult than changing the opportunities for tax handles and economic structure. The key contribution of this paper is to extend the conventional model of tax effort by showing that not only do supply factors matter, but that demand factors such as corruption, voice and accountability also determine tax effort to a significant extent. |
| Keywords: | Tax effort, tax reforms, developing countries, Latin America, corruption, voice and accountability. |
| JEL: | H11 H20 O17 |
| Date: | 2007–08–14 |
| URL: | http://d.repec.org/n?u=RePEc:qut:dpaper:223&r=pub |
| By: | Jörg Plewka |
| Abstract: | In this paper it is analysed, how, under price discrimination, the tax burden is shared between the distinct consumer groups. Unit and ad valorem taxes are compared, revealing an impossibility of fiscal discrimination with regard to price changes. Contrary to conventional tax incidence analysis, it is shown that quantities traded do matter. Relative market shares are decisive for the distribution of tax burdens thereby opening up an opportunity for fiscal discrimination in choosing tax types. This discriminatory potential is limited and not caused by price discrimination per se but rather due to monopolistic supply. |
| Keywords: | Tax incidence, unit tax, ad valorem tax, price discrimination |
| JEL: | H22 L11 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0019&r=pub |
| By: | Jorge Martinez-Vazquez; Benno Torgler |
| Abstract: | This paper studies the evolution of tax morale in Spain in the post-Franco era. In contrast to the previous tax compliance literature, the current paper investigates tax morale as the dependent variable and attempts to answer what actually shapes tax morale. The analysis uses survey data from two sources: the World Values Survey and the European Values Survey, allowing us to observe tax morale in Spain for the years 1981, 1990, 1995, and 1999/2000. The study of the evolution of tax morale in Spain over nearly a 20-year span is particularly interesting because the political and fiscal system evolved very rapidly during that period. |
| Keywords: | Spain, Tax morale, Tax compliance, Constitutional and political changes, fiscal system, endogenous preferences. |
| JEL: | H26 H73 K42 O17 Z13 |
| Date: | 2007–08–14 |
| URL: | http://d.repec.org/n?u=RePEc:qut:dpaper:224&r=pub |
| By: | Baroni, Elisa (Institute for Futures Studies) |
| Abstract: | Traditionally, pension systems aim to fulfill a number of functions which include income security and consumption smoothing in old age, as well as income redistribution. The main rationale for pension reform lies in the interaction between current demographic trends (e.g. increasing old age dependency ratios) and the design of existing pension systems (particularly, the so called Pay-As-You-Go public systems). Under certain conditions, population aging can in fact undermine the ability of a pension system to fulfill those very aims for which it was created, putting pensioners at risks of higher poverty and inequality, besides creating large fiscal pressures on governments and threaten economic growth. <p> In the literature, we find two main approaches to this debate. On the one hand, economic theory helps us formalize the mechanisms through which aging affects a pension system, given its possible features (e.g. type of benefit offered, degree of actuarial fairness or type of financing); it also helps us quantify costs or returns associated to different pension designs and, consequently, to different pension reform options. On the other hand, the policy debate is centered on models of reform which take from concrete country experiences; overall, it focuses mostly on whether funding pensions (i.e. privatizing and individualizing retirement savings, away from Pay-As-You-Go systems) is the best option for reducing many of the negative economic impacts associated to population aging. <p> After having illustrated both sides of the debate – the theoretical and the empirical - our paper makes two main claims. Firstly, the debate should be re-framed away from whether funding is the best option for pension reform in the face of population aging, towards a redefinition of the problem which rather focus on the type of benefit offered, its coverage, its eligibility conditions and actuarial design (as this controls important behavioral and efficiency implications). Secondly, and relatedly, the final impact of a given pension system or reform on future economic variables (i.e. growth, poverty, inequality, financial sustainability) cannot be inferred only by using the tools of economic theory, or the lessons of policy experience. Rather, it requires the ability to quantify the net effects of several interacting explanatory levels, such as country-specific demographic, economic and institutional trends. To this end, we propose the adoption of micro simulation modeling as a well-suited methodology for shedding more light on this important policy debate. |
| Keywords: | pension systems; micro simulation modeling |
| JEL: | H50 H55 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifswps:2007_006&r=pub |
| By: | William Scarth |
| Abstract: | Many analysts expect the aging population to lead to a reduction in the growth of living standards. Income inequality – a problem that has been accentuated by the payroll tax hikes that were necessary to fund the public pension as the population ages – is becoming an increasing challenge at the same time. As a result, policy-makers need to pursue initiatives that can simultaneously address both our efficiency and our equity objectives. With the challenge of the aging population, it is all the more important that we not rely on fiscal policies that involve a trade-off between growth and equality. This paper identifies a strategy for tax policy that meets these objectives. |
| Keywords: | fiscal policy, endogenous growth, efficiency and equity |
| JEL: | E10 E60 H30 O40 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:qseprr:421&r=pub |