nep-pub New Economics Papers
on Public Finance
Issue of 2010‒01‒30
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The 2008 Financial Crisis and Taxation Policy By Thomas Hemmelgarn; Gaëtan Nicodème
  2. What Level of Public Debt Could India Target? By Petia Topalova; Dan Nyberg
  3. Poverty and Vulnerability in rural China: Effects of Taxation By Katsushi S Imai
  4. Assessing the relationship between democracy and domestic taxes in developing countries By Hélène EHRHART
  5. Endogenous Choice on Tax Instruments in a Tax Competition Model: Unit Tax versus Ad Valorem Tax By Nobuo Akai; Hikaru Ogawa; Yoshitomo Ogawa
  6. Voting over piece-wise linear tax methods By Juan D. Moreno-Ternero

  1. By: Thomas Hemmelgarn (European Commission.); Gaëtan Nicodème (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, ECARES, Université Libre de Bruxelles, Brussels, European Commission, CEPR and CESifo.)
    Abstract: The 2008 financial crisis is the worst economic crisis since the Great Depression of 1929. It has been characterised by a housing bubble in a context of rapid credit expansion, high risk-taking and exacerbated financial leverage, leading to deleveraging and credit crunch when the bubble burst. This paper discusses the interactions between tax policy and the financial crisis. In particular, it reviews the existing evidence on the links between taxes and many characteristics of the crisis. Finally, it examines some possible future tax options to prevent such crises.
    Keywords: financial crisis, tax policy, taxation, fiscal stimulus, financial transaction tax, property tax.
    JEL: E62 F21 F30 G10 H20 H30 H50 H60
    Date: 2010–01
  2. By: Petia Topalova; Dan Nyberg
    Abstract: This paper discusses possible medium-term public debt targets for India, based on evidence from the economic literature on prudent levels of public debt and the feasibility for the country to meet a particular target over the next 5-6 years. While recognizing the challenges in determining an appropriate debt target, cross-country analysis and simulations suggest that a debt ratio in the range of 60-65 percent of GDP by 2015/16 might be suitable for India. Such a debt ceiling, while still above the average debt level for emerging markets, is within the range of debt ratios that would provide room for countercyclical fiscal policy and contingent liabilities. It would also send a strong signal of the government's commitment to fiscal consolidation by making a clear break with the past.
    Keywords: Cross country analysis , Debt management , Debt sustainability , Fiscal consolidation , Fiscal policy , India , Public debt , Risk management ,
    Date: 2010–01–11
  3. By: Katsushi S Imai
    Abstract: This paper studies the impact of taxation on poverty and ex ante vulnerability of households in rural China based on national household survey data in 1988, 1995 and 2002. [CPRC working paper 156].
    Keywords: poverty, vulnerability, taxation, rural China, inequality, household, survey data,
    Date: 2010
  4. By: Hélène EHRHART
    Abstract: To what extent differences across developing countries in their domestic tax mobilization can be explained, in addition to the traditional determinants, by political economy factors and particularly by the political regime? Using a panel of 66 developing countries over the period 1990-2005, this paper provides econometric evidence that democracy matters for achieving higher domestic tax revenues which are much needed to finance public goods. It is especially the level of constraints on the executive which is of importance to counter the government's propensity to cave in for special interests and to be insufficiently welfare minded. We found that high levels of democracy are specifically needed in natural resource rich countries to make natural resource rents contribute to higher domestic tax revenues and no longer be an impediment to a sustained tax system.
    Keywords: Tax Revenues, democracy, developing countries
    Date: 2009
  5. By: Nobuo Akai (Osaka School of International Public Policy, Osaka University); Hikaru Ogawa (School of Economics, Nagoya University); Yoshitomo Ogawa (Faculty of Economics, Kinki University)
    Abstract: This paper analyzes an endogenous choice problem with regard to tax instruments in a capital tax competition model. Considering a symmetric and two-region model of tax competition, where each region is allowed to choose either unit or ad valorem tax, we show that selecting unit tax as a policy instrument is the dominant strategy of governments. An interpretation of this result is clearly explained by the properties of the best response curves.
    Keywords: Tax competition, Unit tax, Ad valorem tax
    JEL: H20 H21 H77
    Date: 2010–01
  6. By: Juan D. Moreno-Ternero (U. de Málaga, U. Pablo de Olavide y CORE, Universit´e catholique de Louvain)
    Abstract: We analyze the problem of choosing the most appropriate method for apportioning taxes in a democracy. We consider a simple model of taxation and restrict our attention to piece-wise linear tax methods, which are almost ubiquitous in advanced democracies worldwide. In spite of facing an impossibility result saying that if we allow agents to vote for any piece-wise linear tax method no equilibrium exists, we show that if we limit the domain of admissible methods in a meaningful way, albeit not restrictive, an equilibrium does exist. We also show that, for such a domain, a wide variety of methods can be supported in equilibrium. This last result provides rationale for some activities of special interest groups.
    Keywords: voting, taxes, majority, single crossing, special interest politics.
    JEL: D72 H24
    Date: 2010–01

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