nep-pub New Economics Papers
on Public Finance
Issue of 2008‒06‒21
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Political Economy of Ramsey Taxation By Daron Acemoglu; Michael Golosov; Aleh Tsyvinski
  2. The Timing of Redistribution By Juergen Jung
  3. Sound taxation? On the use of self-declared value By Haan, M. A.; Heijnen, P.; Schoonbeek, L.; Toolsema, L. A.
  4. Globalizing Tax Evasion: How Competition Affects the Size of the Underground Economy By Liliane Karlinger

  1. By: Daron Acemoglu; Michael Golosov; Aleh Tsyvinski
    Date: 2008–06–09
  2. By: Juergen Jung (Indiana University Bloomington)
    Abstract: We investigate whether late redistribution programs that can be targeted towards low income families can “dominate” early redistribution programs that cannot be targeted due to information constraints. We use simple two- period OLG models with heterogenous agents under six policy regimes: A model calibrated to the U.S. economy (benchmark), two early redistribution (lump sum) regimes, two (targeted) late redistribution regimes, and finally a model without taxes and redistribution. Redistribution programs are financed by a labor tax on the young and a capital tax on the old generation. We argue that late redistribution, if the programs are small in size, can dominate early redistribution in terms of welfare but not in terms of real output. Better targeting of low income households cannot offset savings distortions. In addition we find that optimal tax policy includes a positive capital tax rate.
    Keywords: Taxation Timing, Transfer Timing, Redistribution, Capital Accumulation, Optimal Taxation, Capital Taxation
    JEL: H20 H22
    Date: 2008–06
  3. By: Haan, M. A.; Heijnen, P. (Universiteit van Amsterdam); Schoonbeek, L.; Toolsema, L. A.
    Abstract: In the 16th century, foreign ships passing through the Sound had to pay ad valorem taxes, known as the Sound Dues. To give skippers an incentive to declare the true value of their cargo, the Danish Crown reserved the right to purchase it at the declared value. We show that it is an equilibrium for the authorities to confiscate the cargo with some fixed probability independent of the declared value. This does not induce truth-telling, but does generate the desired tax revenue. Other applications of this framework include the dissolution of partnerships, and the auditing of income tax returns.
    Date: 2008
  4. By: Liliane Karlinger
    Abstract: The underground economy expanded substantially during the late 1990s, both in the industrialized and the developing world. I argue that this development is a response to the sharp increase in market competition worldwide. I develop a parsimonious oligopoly model of free entry and free sector choice, where the intensity of competition is captured by the degree of (exogenous) product differentiation. Operating in the underground economy reduces variable costs, but comes at the risk of being detected and fined. The keener is competition, the higher is the pressure to reduce costs, and the more pervasive is the underground economy.
    JEL: H26 L11
    Date: 2008–05

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