nep-pub New Economics Papers
on Public Finance
Issue of 2008‒08‒06
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Quantifying the Laffer Curve on the Continued Activity Tax in a Dynastic Framework By Jean-Olivier Hairault; François Langot; Thepthida Sopraseuth
  2. Simulating the impact of inflation on the progressivity of personal income tax in Brazil By Horacio Levy; José Ricardo Nogueira; Rozane Bezerra de Siqueira; Herwig Immervoll; Cathal O’Donoghue
  3. TAX POLICY AND SOCIAL OUTPUT: THE U.E. CASE By Talpos, Ioan; Dima, Bogdan; Mutascu, Mihai; Enache, Cosmin
  4. A Note on Social Security and Public Debt By Luciano Greco
  5. A model of public and private partnership through concession contracts By Pasquale L. Scandizzo; Marco Ventura
  6. A Review of Capital Budgeting Practices By Davina F. Jacobs

  1. By: Jean-Olivier Hairault (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); François Langot (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Normale Supérieure de Paris); Thepthida Sopraseuth (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Normale Supérieure de Paris)
    Abstract: It is argued that the tax on continued activity should be removed by implementing actuariallyfair schemes. However, these schemes cannot fund the expected Social Security deficit. This paper proposes to give individuals a fraction of the actuarially-fair incentives in the case of postponed retirement. Social Security faces a trade-off between giving enough incentives to make individualselay retirement and giving little increase in pensions in order to help finance its expected deficit. This trade-off is captured by a Laffer curve. Finally, when the Social Security system aims to maximize welfare, the optimal tax on postponed retirement is still strictly positive.
    Keywords: retirement behavior and wealth, actuarially-fair benefits.
    Date: 2008–07
  2. By: Horacio Levy (ISER University of Essex, Colchester and ECV, Vienna); José Ricardo Nogueira (Universidade Federal de Pernambuco, Recife); Rozane Bezerra de Siqueira (Universidade Federal de Pernambuco, Recife); Herwig Immervoll (OECD, Paris, ECV, Vienna, ISER University of Essex, Colchester and IZA, Bonn); Cathal O’Donoghue (National University of Ireland, Galway and IZA, Bonn)
    Abstract: Income tax reform proposals in Brazil have focused almost exclusively on changes in rates, aiming at increasing its progressivity. One important aspect that has been overlooked is the fact that, in the absence of a mechanism that adjusts the tax rules to price movements, the effects of inflation on the level and distribution of the income tax burden can be substantial, even in periods of low inflation (“bracket creep”, fiscal drag). Moreover, how inflation affects the progressivity of the income tax depends on the specifics of the tax structure. Making use of a tax-benefit microsimulation model for Brazil (BRAHMS), we simulate different scenarios regarding the level of inflation and the adjustment of the income tax rules in order to assess the potential revenue and distributive effects of inflation on the income tax in Brazil. Our findings suggest that the Brazilian income tax is quite sensitive to fiscal drag. If the income tax is not adjusted for inflation, progressivity would decrease but redistribution would increase due to a larger tax burden. However, as income tax revenue and redistribution are quite low, even after relatively high levels of inflation, the tax burden and income inequality would not substantially change.
    Keywords: income tax, inflation, Brazil, fiscal drag
    Date: 2008–03
  3. By: Talpos, Ioan; Dima, Bogdan; Mutascu, Mihai; Enache, Cosmin
    Abstract: The aim of this paper is to emphasize how the correlations between fiscal policy and economic growth are manifesting in the U.E. case. After theoretical framework, the paper is organized as follows: Section 2 tries to provide a model at micro economic level for the interconnections between fiscal policy and economic growth and Section 3 looks for same empirical evidences for the EU 25 case. Finally, some conclusions are drawn and some limits of the proposed analysis are derived in Section 4.
    Keywords: fiscal policy; economic growth; effects; European Union
    JEL: H11 H30 I00
    Date: 2008–05
  4. By: Luciano Greco (University of Padua)
    Abstract: In a simple stochastic overlapping generation model, individuals work when young and retire when old, generations’ productivity is affected by a serially uncorrelated random shock, and fiat money and nominal public debt are the only storable assets. In this setting, we show that social security programs featured by a constant contribution rate and budget-balance in each period, as common in the literature, are Pareto-dominated by programs allowing for budget unbalance, compensated by variations of the outstanding nominal public debt.
    Keywords: Intergenerational risk sharing, social security, public debt, inflation
    JEL: E24 E63 H55 H63
    Date: 2008–07
  5. By: Pasquale L. Scandizzo (University of Rome Tor Vergata); Marco Ventura (ISAE - Institute for Studies and Economic Analyses)
    Abstract: In this paper, we investigate the economics of concession under dynamic uncertainty using real option theory. We analyze the properties of concession as an instrument to privatize investment and management of public resources. In this context, we explore, in particular, three issues: (1) the conditions under which the contract is acceptable to both a public and a private party, (2) the conditions under which it is efficient, i.e. it is preferable to direct development and operation by the public sector, and (3) two different possible equilibrium solutions. Finally, we apply the theoretical results obtained to the case of a major public highway concessionaire in Italy.
    Keywords: concession contract, real option, license, Autostrade per l’Italia, private and public partnership
    JEL: D45 H44 H54
    Date: 2008–07
  6. By: Davina F. Jacobs
    Abstract: A key challenge in government budgeting is to define an appropriate balance between current and capital expenditures. Budgeting for government capital investment also remains not well-integrated into the formal budget preparation process in many countries. This paper aims to provide an overview of past and current budgeting practices for public investment. The study will also provide a comparison between the budget practices between low-income countries and developed countries and make a series of recommendations for how to ensure efficient integration of capital planning and budget management in low-income countries.
    Keywords: Government expenditures , Budgetary policy , National budgets , Public investment , Low-income developing countries ,
    Date: 2008–07–02

This nep-pub issue is ©2008 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.