nep-pub New Economics Papers
on Public Finance
Issue of 2009‒09‒11
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Incidence of an outsourcing tax on intermediate inputs By Subhayu Bandyopadhyay
  2. Informal Sector and Taxation By Jellal, Mohamed
  3. Comparative Statics of Optimal Nonlinear Income Taxation in the Presence of a Publicly Provided Input By Craig Brett; John A. Weymark

  1. By: Subhayu Bandyopadhyay
    Abstract: The paper uses a Hecksher-Ohlin-Samuelson type general equilibrium framework to consider the incidence of an outsourcing tax on an economy in which the production of a specific intermediate input has been fragmented and outsourced. When the input is ?non-traded?, the outsourcing tax can reduce domestic wages even if the intermediate input producing sector is the most capital-intensive sector of the economy. This implies that contrary to received wisdom, a tax on a capital-intensive sector may actually hurt labor. On the other hand, if the intermediate input is traded, the outsourcing tax must close down the final good producing sector that uses it specifically in its production. In turn, this may force the government to look for additional policy instruments to help sustain this domestic industry.
    Keywords: Contracting out ; Taxation
    Date: 2009
  2. By: Jellal, Mohamed
    Abstract: In this paper, we present a model of tax evasion in the presence of imperfect auditing. We show that there is a clear link between the degree of observability associated with a given taxpayer or activity and that taxpayer’s optimal declaration strategy with respect to fiscal agency. We also show that the degree of observability is critical in determining the optimal policies to be followed by the fiscal authorities. Our imperfect monitoring approach provides a new strategy for understanding the informal sector in LDCs, which can be interpreted as that group of economic activities characterized by low observability.
    Keywords: Informal sector;information and observability;tax evasion;taxation
    JEL: D21 O17 H26 O12
    Date: 2009–08–02
  3. By: Craig Brett (Department of Economics, Mount Allison University); John A. Weymark (Department of Economics, Vanderbilt University)
    Abstract: Comparative static properties of the solution to an optimal nonlinear income tax problem are provided for a model in which the government both designs a redistributive income tax schedule and provides a public input into a nonlinear production process. These assumptions imply that wage rates are endogenous. The endogeneity of the wages necessitates taking account of general equilibrium effects of changes in the parameters of the model that are not present when the technology is linear.
    Keywords: Asymmetric information, comparative statics, optimal income taxation, publicly provided inputs
    JEL: D82 H21
    Date: 2009–08

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