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on Public Finance |
| By: | Kai Zhao (University of Western Ontario) |
| Abstract: | Economists and demographers have long argued that fertility differs by income (differential fertility), and that social security creates incentives for people to rear fewer children. Does the effect of social security on fertility differ by income? How does social security change the cross-sectional relationship between fertility and income? Does social security further affect the dynamics of the earnings distribution by changing differential fertility? We answer these questions in a three-period OLG model with heterogeneous agents and endogenous fertility. We argue that given its redistributional property, social security affects people's fertility behavior differentially by income. In the model, earning ability is transmitted from parents to children. Hence, social security can have a significant impact on the dynamics of the earnings distribution through its effects on differential fertility. The mechanism used in the model to generate differential fertility is novel. We follow the line of the "old-age security" hypothesis and assume that children are an investment good in parents' old-age consumption. Thus,the optimal fertility choice depends on how much transfer is expected from children in relation to the cost of rearing these children to adult life. Since the intergenerational earnings process is mean-reverting, poor (rich) parents tend to have more (fewer) children because they have lower (higher) child-rearing cost and expect their children will have higher (lower) earnings than themselves and give back relatively more (less) in transfers. Social security reduces fertility by substituting children out of parents' old-age portfolio. It reduces fertility of the poor proportionally more than it reduces fertility of the rich because social security payments are a larger portion of old-age savings for poor people. These results are consistent with features of the U.S. fertility data. We calibrate the model to the U.S. data and find that social security can explain 32% of the decline in poor-rich fertility differential between the cohort of women born during 1891-1895 and the cohort of women born during 1946-1950. |
| Keywords: | Social Security; Differential Fertility; Earnings Distribution; Growth |
| JEL: | E60 H31 J13 O15 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:uwowop:20091&r=pub |
| By: | Lund, Diderik (Dept. of Economics, University of Oslo) |
| Abstract: | The literature on taxation of rents from nonrenewable resources uses different theoretical assumptions and methods and a variety of empirical observations to arrive at widely diverging conclusions. Many studies use models and methods which disregard uncertainty, investigating distortionary effects of different taxes on whether, when, and how to explore for, develop and operate resource deposits. Introducing uncertainty into the analysis opens a range of challenges, and leads to results which cast doubt upon the relevance of studies which neglect uncertainty. There are, however, several ways to analyze uncertainty, regarding companies' behavior, resource price processes, and diversification opportunities, all with different implications for taxation. Methods developed in financial economics since the 1980's are promising, but still not in widespread use. Some more specific topics covered in this review are optimal risk sharing between companies and gov- ernments, time consistency and scal stability, the relationship between taxes and discount rates, and transfer pricing. |
| Keywords: | Natural resources; rent tax; royalty; oil; minerals; energy |
| JEL: | B20 H20 H25 L71 O13 Q38 |
| Date: | 2009–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2009_001&r=pub |
| By: | Immervoll, Herwig (OECD); Kleven, Henrik Jacobsen (University of Copenhagen); Kreiner, Claus Thustrup (University of Copenhagen); Verdelin, Nicolaj (University of Copenhagen) |
| Abstract: | This paper presents an evaluation of the tax-transfer treatment of married couples in 15 EU countries using the EUROMOD microsimulation model. First, we show that many tax-transfer schemes in Europe feature negative jointness defined as a situation where the tax rate on one person depends negatively on the earnings of the spouse. This stands in contrast to the previous literature on this question, which has focused on a specific form of positive jointness. The presence of negative jointness is driven by family-based and means-tested transfer programs combined with tax systems that usually feature very little jointness. Second, we consider the labour supply distortion on secondary earners relative to primary earners implied by the current tax-transfer systems, and study the welfare effects of small reforms that change the relative taxation of spouses. By adopting a small-reform methodology, it is possible to set out a simple analysis based on more realistic labour supply models than those considered in the existing literature. We present microsimulations showing that simple revenue-neutral reforms that lower the tax burden on secondary earners are associated with substantial welfare gains in most countries. Finally, we consider the tax-transfer implications of marriage and estimate the so-called marriage penalty. For most countries, we find large marriage penalties at the bottom of the distribution driven primarily by features of the transfer system. |
| Keywords: | labour supply, redistribution, optimal tax, couples, marriage tax, joint taxation |
| JEL: | H20 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3965&r=pub |
| By: | Holmlund, Bertil (Department of Economics, Uppsala University); Söderström, Martin (Ministry of Finance) |
| Abstract: | We study income responses to income tax changes by using a large panel of Swedish tax payers over the period 1991–2002. Changes in statutory tax rates as well as discretionary changes in tax bracket thresholds provide exogenous variations in tax rates that can be used to identify income responses. We estimate dynamic income models which allow us to distinguish between short-run and long-run effects in a straightforward fashion. For men, the estimates of the long-run elasticity of income with respect to the net-of-tax rate hover in a range between 0.10 and 0.30. The estimates for women are imprecise and statistically insignificant. We simulate the fiscal consequences of a tax reform that reduces the top marginal tax rate by five percentage points. Such a reform may have negligible effects on tax revenues even for relatively small elasticities when the interactions between income taxes and other taxes are taken into account. |
| Keywords: | Marginal tax rates; progressive taxes; earned income; tax reform |
| JEL: | H24 H31 J22 |
| Date: | 2008–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2008_028&r=pub |
| By: | Maria Rosaria Marino (Banca d'Italia); Sandro Momigliano (Banca d'Italia); Pietro Rizza (Banca d'Italia) |
| Abstract: | The paper examines the development of Italy’s public finances after the consolidation period 1992-97, which secured participation in the European Monetary Union from the outset. The “structural” developments in the main budgetary components are assessed, excluding the effects of the economic cycle and of temporary measures. The analysis shows a rapid deterioration in the years 1998-2003, whose roots can be traced back to the consolidation of the early 1990s, achieved primarily by means of tax increases and cuts in capital expenditure. Since 2004 there has been a structural improvement, initially modest but substantial in 2006 and 2007. Sustaining this adjustment and making further progress may again prove difficult, as the fiscal correction is similar in nature to the previous consolidation effort. Looking at the whole period 1998-2007, the deterioration of the public finances seems attributable to the difficulty to restrain the growth of current primary expenditure. |
| Keywords: | structural budget, business cycle, temporary measures, public finances |
| JEL: | H62 H20 H50 E69 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_15_08&r=pub |