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on Public Finance |
| By: | Charles Brendon |
| Abstract: | This paper shows how to derive a complete set of optimality conditions characterising the solution to a dynamic optimal income tax problem in the spirit of Mirrlees (1971), under the assumption that a ‘first-order’ approach to incentive compatibility is valid. The method relies on constructing perturbations to the consumption-output allocations of agents in a manner that preserves incentive compatibility for movements in both directions along the specified dimension. We are able to use it to generalise the ‘inverse Euler condition’ to cases in which preferences are non-separable between consumption and labour supply, and to prove a number of novel results about optimal income and savings tax wedges. |
| Keywords: | New Dynamic Public Finance, First-order approach, Non-separable preferences, Inverse Euler condition |
| JEL: | D82 E61 H21 H24 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:581&r=pub |
| By: | Adam, Antonis; Kammas, Pantelis |
| Abstract: | Using a simple model of income redistribution, we show that the government may use tax evasion as a way to redistribute income from the non- evaders to evaders. This will result then to a negative association between income inequality and per capita transfers and inefficiently high taxes. |
| Keywords: | redistribution; inequality; tax evasion |
| JEL: | H10 H23 H26 |
| Date: | 2011–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34803&r=pub |
| By: | Manzo Marco; Monteduro Maria Teresa |
| JEL: | E32 E62 H25 H32 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:ter:wpaper:0084&r=pub |
| By: | Cremer, Helmuth; Gahvari, Firouz; Ladoux, Norbert |
| Abstract: | This paper examines if an energy price shock should be compensated by a reduction in energy taxes to mitigate its impact on consumer prices. Such an adjustment is often debated and advocated for redistributive reasons. Our investigation is based on a model that characterizes second-best optimal taxes in the presence of an externality generated by energy consumption. Energy is used by households as a consumption good and by the productive sector as an input. We calibrate this model on US data and proceed to simulations of this empirical model. We assume that energy prices are subject to an exogenous shock. For different levels of this shock, we calculate the optimal tax mix including income, commodity and energy taxes. We show that optimal energy taxes are affected by redistributive consideration and that optimal energy tax is less than the Pigouvian tax (marginal social damage). The difference is an implicit subsidy representing roughly 10% of the Pigouvian price. Interestingly, the simulations show that an variation in the energy price only has an almost negligible effect on this percentage. In other words, even a very large oil price increase will only have a small effect on the optimal tax on energy. Nevertheless, it appears that the energy tax is used to mitigate the impact of the energy shock. However, this result is not explained by redistributive consideration but by the fact that the Pigouvian tax (rate) decreases as the price of energy increases. This is a purely arithmetic adjustment due to the fact that the marginal social dammage does not change. Consequently, the marginal dammage as a percentage of the energy price (which defines the Pigouvian tax rate) decreases as the price increases. |
| JEL: | H21 H23 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:24979&r=pub |
| By: | Lehmann, Etienne (CREST-INSEE); Marical, François (INSEE); Rioux, Laurence (CREST-INSEE) |
| Abstract: | We estimate the responses of gross labor earnings with respect to marginal and average net-of-tax rates in France over the period 2003-2006. We exploit a series of reforms to the income-tax and the payroll-tax schedules that affect individuals who earn less than twice the minimum wage. Our estimate for the elasticity of gross labor earnings with respect to the marginal net-of-income-tax rate is around 0.2, while we find no response to the marginal net-of-payroll-tax rate. The elasticity with respect to the average net-of-tax rates is not significant for the income-tax schedule, while it is close to -1 for the payroll-tax schedule. A plausible explanation is the existence of significant labor supply responses to the income-tax schedule, combined with a short-term rigidity of the hourly taxable wage (i.e. the gross wage minus payroll taxes), casting doubts about public finance analysis that assumes perfect competition on the labor market. Finally, the effect of the net-of-income-tax rate seems to be driven by labor supply participation decisions, in particular those of females. |
| Keywords: | labor earnings, payroll tax, income tax |
| JEL: | H24 H31 J22 J38 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6108&r=pub |
| By: | Danuše Nerudová (Department of Accounting and Taxes, FBE MENDELU in Brno) |
| Abstract: | The recent financial crises has revealed the need to improve and ensure the stability of the financial sector to reduce negative externalities, to ensure fair and substantial contribution of the financial sector to the public finances and the need to consolidate public finance. The aim of the paper is to discuss the possibility of the financial sector taxation and to suggest the possible candidate suitable for the implementation on the EU level. Financial transaction tax represents the tool suitable mainly on global level, for only in that case enables to generate sufficient financial resources. From EU point of view is considered as less suitable, for it bears the risk of reallocation. Therefore the introduction of financial activities tax on EU level is considered as a better solution for the financial sector taxation in the EU, for financial sector is exempted from value added tax. However, the approval of directive in the area of taxation requires unanimity of all EU member states, which means that final solution will be also political question. |
| Keywords: | financial transaction tax, financial activities tax, tax base, crises, financial sector |
| JEL: | H25 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:men:wpaper:16_2011&r=pub |
| By: | Hokamp, Sascha; Pickhardt, Michael |
| Abstract: | We derive a generalized method for calculating the total number of Paretooptimal allocations (NOPA) in typical linear public goods games. Among other things, the method allows researchers to develop new experimental designs for testing the relevance of Pareto-optimality in experimental settings, for investigating alternative causes of the decline of voluntary contributions, or for analyzing the contribution behavior of the rich and poor in heterogeneous income settings. Further findings include that the NOPA is related to the marginal per capita return (MPCR) of a contribution to the public good and that the maximum number of free-riders tolerated by the Paretooptimality concept is independent from the group size and income distribution. Finally, we apply our findings to a number of published linear public goods games, suggest an agenda for future research and provide a MATLAB code. -- |
| Keywords: | linear public goods games,Pareto-optimality,public goods experiments,behavioral economics,free-rider,heterogeneous incomes,heterogeneous MPCRs |
| JEL: | C70 C90 H41 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cawmdp:45&r=pub |
| By: | P. Bönisch; Peter Haug; A. Illy; L. Schreier |
| Abstract: | Similarly to western Germany in the 1960s and 1970s, the eastern part of Germany has experienced a still ongoing process of numerous amalgamations among counties, towns and municipalities since the mid-1990s. The evidence in the economic literature is mixed with regard to the claimed expenditure reductions and efficiency gains from municipal mergers. We therefore analyze the global efficiency of the municipalities in Saxony-Anhalt, for the first time in this context, using a double-bootstrap procedure combining DEA and truncated regression. This allows including environmental variables to control for exogenous determinants of municipal efficiency. Our focus thereby is on institutional and fiscal variables. Moreover, the scale efficiency is estimated to find out whether large units are necessary to benefit from scale economies. In contrast to previous studies, we chose the aggregate budget of municipal associations (“Verwaltungsgemeinschaften”) as the object of our analysis since important competences of the member municipalities are settled on a joint administrative level. Furthermore, we use a data set that has been carefully adjusted for bookkeeping items and transfers within the communal level. On the “eve” of a mayor municipal reform the majority of the municipalities were found to have an approximately scale-efficient size and centralized organizational forms (“Einheitsgemeinden”) showed no efficiency advantage over municipal associations. |
| Keywords: | efficiency, local government, DEA, bootstrap, demographic change, local institutions |
| JEL: | H11 H72 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:18-11&r=pub |
| By: | Bonnet, Céline; Réquillart, Vincent |
| Abstract: | Healthier food diet is likely to prevent numerous non communicable diseases. Then there is a growing interest in evaluating the impact of food price taxation on food consumption. However, strategic reactions of both manufacturers and retailers are missing in empirical analysis. Rather, passive pricing is assumed. We develop a structural econometric model, to analyze vertical relationships between the food industry and the retail industry. We apply this model to the beverage industry and consider taxation of sugar. After selecting the ’best’ model of vertical relationships, we simulate different taxation scenarios. We consider excise tax as well as ad valorem tax. We find that firms behave differently when facing an ad valorem tax or an excise tax. Excise tax is overshifted to consumer prices while ad valorem tax is undershifted to consumer prices. We find that an excise tax based on sugar content is the most efficient at reducing soft drink consumption. Our results also indicate that ignoring strategic pricing by firms leads to misestimate the impact of taxation by 15% to 40% depending on the products and the tax implemented. |
| Keywords: | excise tax, ad valorem tax, vertical contracts, strategic pricing, differentiated products, soft drinks |
| JEL: | H32 L13 I18 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:24382&r=pub |