nep-pub New Economics Papers
on Public Finance
Issue of 2009‒01‒03
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. On Capital Gain Taxation By Miglo, A.
  2. Taxation, Labour Supply and Saving By Patricia Apps; Ray Rees
  3. Hourly Wage Rate and Taxable Labor Income Responsiveness to Changes in Marginal Tax Rates By Blomquist, Sören; Selin, Håkan
  4. Tax Policy and Returns to Education By Alison L. Booth; Melvyn B. Coles
  5. How do Taxes Affect Investment and Productivity?: An Industry-Level Analysis of OECD Countries By Laura Vartia
  6. Tax challenges facing developing countries. By Bird, Richard M.
  7. A Golden Rule of Public Finance or a Fixed Deficit Regime? Growth and Welfare Effects of Budget Rules By Groneck, Max
  8. Competition for status acquisition in public good games By Felix Munoz-Garcia

  1. By: Miglo, A.
    Abstract: This note provides an explanation for why tax rates on capital gains are usually lower than ordinary income tax rates based on manager's agency problem related to "empire-building" or the underinvestment problem.
    Date: 2008
  2. By: Patricia Apps; Ray Rees
    Abstract: In recent years, the US, UK and Australia have lowered tax rates on high incomes and expanded tax credits and family transfer payments that are withdrawn on the joint income of a couple. These reforms result in significant changes in the structure of marginal and average income tax rates. In this paper we present a case study that examines the impact of reforms of this kind on the structure of tax rates on incomes in Australia. We find that the reforms have led to high effective marginal rates across a wide middle band of earnings and to a shift towards joint taxation. As is well known, joint taxation results in high tax rates on secondary earners, with in consequence undesirable effects on both work incentive and fairness of the income distribution. A lifecycle analysis of time use and saving decisions indicates strong negative effects on female labour supply and household saving.
    Keywords: Income taxation; family benefits; time allocation; labour supply; lifecycle saving; household production
    JEL: D91 H24 H31 I38 J16 J22
    Date: 2008–12
  3. By: Blomquist, Sören (Department of Economics); Selin, Håkan (Department of Economics)
    Abstract: Recently, a voluminous literature estimating the taxable income elasticity has emerged as an important field in empirical public economics. However, to a large extent it is still unknown how the hourly wage rate, an important component of taxable income, reacts to changes in marginal tax rates. In this study we use a rich panel data set and a sequence of tax reforms that took place in Sweden during the 1980’s to estimate the elasticity of the hourly wage rate with respect to the net-of-tax rate. While carefully accounting for the endogeneity of marginal tax rates as well as other factors that determine wage rates we do find a statistically significant response both among married men and married women. The hourly wage rate elasticity with respect to the net-of-tax rate is estimated to 0.14-0.16 for males and 0.41-0.57 for females. In addition, we obtain uncompensated taxable labor income elasticities of around 0.21 for men and 0.96-1.44 for women. In contrast to earlier studies, we also find significant income effects for males. Accordingly, for males the compensated taxable labor income elasticity is about 4 percentage points higher than the uncompensated one.
    Keywords: Income taxation; hourly wage rates; work effort; taxable income
    JEL: H24 J22 J31
    Date: 2008–11–19
  4. By: Alison L. Booth; Melvyn B. Coles
    Abstract: This paper considers how asymmetric tax treatment, where labour market earnings are taxed but household production is untaxed, aspects educational choice and labour supply. We show that taxes on labour market earnings can generate a large (non-marginal) switch to home production and the ensuing deadweight losses are large. Using a cross-country panel, we find that gender differences in labour supply responses to tax policy can explain differences in aggregate labour supply and years of education across countries.
    Keywords: Increasing returns; tax policy; gender; labour supply; education
    JEL: H24 H3 J22 J24 J31
    Date: 2008–12
  5. By: Laura Vartia
    Abstract: This paper analyses how different tax policies can affect investment and productivity. To address this question the paper uses industry-level data from a set of OECD countries and examines whether different industries are affected differently by taxation. Investment is shown to respond negatively to an increase in the corporate tax rate and a decrease in capital depreciation allowances through changes in the user cost of capital. The analysis of potential links between taxes and productivity tests the hypothesis that taxes affect productivity through different channels and that due to some salient industry characteristics some industries are inherently more affected than others by certain taxes. The paper finds evidence that corporate and top personal income taxes have a negative effect on productivity. In contrast, tax incentives for research and development (R&D) are found to have a positive effect on productivity. These effects are stronger in those industries that are inherently more profitable, have more entrepreneurial activity and are more R&D intensive, respectively. <P>L’effet des politiques de taxation sur les investissements and la productivité dans les pays de l'OCDE : Une analyse sectorielle <BR>Cette étude vise à étudier l’effet des politiques de taxation sur les investissements et la productivité des entreprises. Nous utilisons des données sectorielles pour un ensemble de pays de l’OCDE et analysons dans quelle mesure l’impact de la taxation diffère selon les secteurs. Selon nos résultats, une hausse de l’impôt sur les sociétés ou une baisse des provisions pour amortissement du capital provenant de variations du coût d’usage du capital induisent une baisse de l’investissement des entreprises. Nous analysons les mécanismes de l’impact de la taxation des entreprises sur leur productivité et nous testons si certains secteurs y sont plus sensibles que d’autres. Selon nos estimations, l’impôt sur les sociétés, mais aussi les dernières tranches de l’impôt sur le revenu, ont un impact négatif sur la productivité. En revanche, les avantages fiscaux visant à promouvoir la recherche et développement semblent avoir un effet bénéfique sur la productivité. Ces effets sont plus forts dans les secteurs plus rentables, dans les secteurs caractérisés par un niveau plus élevé d’activité entrepreneuriale, et dans les secteurs caractérisés par un niveau plus élevé de recherche et développement.
    Keywords: investment, investissement, impôt sur le revenu, user cost, coût d'usage, corporate and personal income taxation, total factor productivity, impôt sur les sociétés, productivité globale des facteurs
    JEL: C23 E22 H24 H25 H30
    Date: 2008–12–19
  6. By: Bird, Richard M. (National Institute of Public Finance and Policy)
    Date: 2008–03
  7. By: Groneck, Max
    Abstract: In this paper, we compare growth and welfare e¤ects of various budget rules within an endogenous growth model with productive public capital, utility enhancing public consumption and public debt. We find that a fixed deficit regime does not affect the long run growth rate compared to a balanced budget while the growth rate is increased by a golden rule. Welfare effects are ambiguous. Simulations indicate that economies populated by households who have a strong tendency to smooth consumption should adhere to a balanced budget rather than a golden rule or a fixed deficit rule from a welfare point of view.
    Keywords: Budget rules, golden rule of public finance, fiscal policy, endogenous growth, welfare
    JEL: E62 H50 H62 H63 O40
    Date: 2008
  8. By: Felix Munoz-Garcia (School of Economic Sciences, Washington State University)
    Abstract: This paper examines the role of status acquisition as a motive for giving in voluntary contri- butions to public goods. In particular, every donor?s status is given by the di¤erence between his contribution and that of the other donor. Speci?cally, I show that contributors give more than in standard models where status is not considered, and their donation is increasing in the value they assign to status. In addition, players?contributions are increasing in the value that their opponents assign to status, re?ecting donors? intense competition to gain social status. Furthermore, I consider contributors?equilibrium strategies both in simultaneous and sequen- tial contribution mechanisms. Then, I compare total contributions in both of these mechanisms. I ?nd that the simultaneous contribution order generates higher total contributions than the sequential mechanism only when donors are su¢ ciently homogeneous in the value they assign to status. Otherwise, the sequential mechanism generates the highest contributions.
    Keywords: Public goods games, Status acquisition, Competition.
    JEL: C7 H41
    Date: 2008–07

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