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on Public Finance |
| By: | Akay, Alpaslan (IZA); Bargain, Olivier (University of Aix-Marseille II); Dolls, Mathias (IZA); Neumann, Dirk (IZA); Peichl, Andreas (IZA); Siegloch, Sebastian (IZA) |
| Abstract: | This paper offers a first empirical investigation of how labor taxation (income and payroll taxes) affects individuals' well-being. For identification, we exploit exogenous variation in tax rules over time and across demographic groups using 26 years of German panel data. We find that the tax effect on subjective well-being is significant and positive when controlling for income net of taxes. This interesting result is robust to numerous specification checks. It is consistent with several possible channels through which taxes affect welfare including public goods, insurance, redistributive taste and tax morale. |
| Keywords: | subjective well-being, taxation, public goods |
| JEL: | H21 H41 I38 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6999&r=pub |
| By: | Uwe Dulleck (QUT); Jonas Fooken (QUT); Cameron Newton (QUT); Andrea Ristl; Markus Schaffner (QUT); Benno Torgler (QUT) |
| Abstract: | Although paying taxes is a key element in a well-functioning civilized society, the understanding of why people pay taxes is still limited. What current evidence shows is that, given relatively low audit probabilities and penalties in case of tax evasion, compliance levels are higher than would be predicted by traditional economics-of-crime models. Models emphasizing that taxpayers make strategic, financially motivated compliance decisions, seemingly assume an overly restrictive view of human nature. Law abidance may be more accurately explained by social norms, a concept that has gained growing importance as a facet in better understanding the tax compliance puzzle. This study analyzes the relation between psychic cost arising from breaking social norms and tax compliance using a heart rate variability (HRV) measure that captures the psychobiological or neural equivalents of psychic costs (e.g., feelings of guilt or shame) that may arise from the contemplation of real or imagined actions and produce immediate consequential physiologic discomfort. Specifically, this nonintrusive HRV measurement method obtains information on activity in two branches of the autonomous nervous system (ANS), the excitatory sympathetic nervous system and the inhibitory parasympathetic system. Using time-frequency analysis of the (interpolated) heart rate signal, it identifies the level of activity (power) at different velocities of change (frequencies), whose LF (low frequency) to HF (high frequency band) ratio can be used as an index of sympathovagal balance or psychic stress. Our results, based on a large set of observations in a laboratory setting, provide empirical evidence of a positive correlation between psychic stress and tax compliance and thus underscore the importance of moral sentiment in the tax compliance context. |
| Keywords: | tax compliance, psychic costs, stress, tax morale, cooperation, heart rate variability, biomarkers, experiment |
| JEL: | H26 H41 K42 D31 D63 C91 |
| Date: | 2012–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:qut:qubewp:001&r=pub |
| By: | Bruno de Borger (University of Antwerp); Jan Rouwendal (VU University Amsterdam) |
| Abstract: | We study the impact of fuel taxes and kilometer taxes on households' choices of vehicle quality, on their demand for kilometers driven, and on fuel consumption. Moreover, embedding this information in a model of the car market, we analyze the implications of these taxes for the opportunity costs of owning cars of different quality. Higher quality raises the fixed cost of car ownership, but it may raise (engine size, acceleration speed, etc.) or reduce (fuel technology, etc.) the variable user cost. Our results show that kilometer charges and fuel taxes have very different implications. For example, a higher fuel tax raises household demand for more fuel efficient cars, provided that the demand for car use is inelastic; it reduces the demand for characteristics that raise variable user costs. Surprisingly, however, a kilometer tax unambiguously reduces the demand for more fuel efficient cars. Incorporating price adjustments at the market level, we find th at fuel taxes raise the <I>marginal</I> fixed opportunity cost of better fuel efficiency at all quality levels. <I>Total</I> annual opportunity costs of owning highly fuel efficient cars increase, while they decline for cars of low fuel efficiency. We further find that both a fuel tax and a kilometer charge reduce the <I>total</I> annual fixed ownership cost for car attributes that raise the variable cost of driving (engine power, acceleration speed, etc.). There is thus in general a trade-off between fixed and variable car costs: if the latter increase - due to higher fuel prices or a kilometer charge - total demand for cars decreases and a return to equilibrium is only possible by a decrease in fixed costs. All theoretical results are illustrated using a numerical version of the model. The analysis shows that modeling the effect of tax changes on household behavior alone can produce highly misleading results. |
| Keywords: | car market; car quality; fuel tax; kilometer charge; market equilibrium |
| JEL: | H22 L62 |
| Date: | 2012–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20120122&r=pub |
| By: | Bartels, Charlotte |
| Abstract: | Generous income support programs as provided by European welfare states have often been blamed to reduce work incentives for lower income classes and to increase durations of unemployment. Standard studies measure work incentives based on annual income concepts. This paper analyzes how work incentives inherent in the German tax-benefit system evolve when extending the time horizon to three years (long-term). Participation tax rates are computed for 3-year periods 1995-1997 and 2005-2007 to reveal potential effects of the labor market reforms between 2003 and 2005. Results show that long-term work incentives increased even more than short-term work incentives. Particularly for middle-income individuals, this is largely explained by the abolition of earnings-related unemployment assistance. -- |
| Keywords: | welfare,work incentives,unemployment,unemployment insurance |
| JEL: | H31 J65 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:201220&r=pub |
| By: | Ben-Gad, M. |
| Abstract: | How much can governments shift the cost of government expenditure from today’s voters to tomorrow’s generations of immigrants, without resorting to taxation that is explicitly discriminatory? I demonstrate that if their societies are absorbing continuous flows of new immigrants, we should expect governments that represent the interests of today’s population, even if that population is altruistically linked to future generations, to choose policies that shift some portion of the tax burden to the future. This bias in favor of deficit finance is not infinite. Today’s population or their descendents, together with future immigrants, ultimately pay the higher taxes necessary to finance the accumulated debt, and live with the additional excess burdens these higher taxes generate. For a given rate of immigration and policy horizon, governments balance the deadweight losses associated with fluctuating tax rates against the benefits that accrue to the initial resident population from shifting part of the burden of financing government expenditure to future immigrant families. To measure the deficit bias, I analyse the dynamic behavior of an optimal growth model with overlapping dynasties and factor taxation, calibrated for the US economy. Models with overlapping infinite-lived dynasties allow for a very clear distinction between natural population growth (an increase in the size of existing dynasties) and immigration (the addition of new dynasties). They also provide an alternative to the strict dichotomy between models with overlapping generations, where agents disregard the impact of their choices on future generations, and the quasi-Ricardian world of infinite-lived dynasties with representative agents that fully participate in both the economy and the political system in every period. The trajectory of the debt burden predicted by the model is a good match for the rise in US Federal government debt since the early 1980’s, as well as the increases in debt projected by the Congressional Budget Office over the next few decades. |
| Keywords: | immigration; fiscal policy; public debt |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:cty:dpaper:12/09&r=pub |
| By: | Lucas, Pablo; de Oliveira, Angela C.M.; Banuri, Sheheryar |
| Abstract: | Behavioural economics highlights the role of social preferences in economic decisions. Further, populations are heterogeneous; suggesting that group composition may impact the ability to sustain voluntary public goods contributions. This parallels researc |
| Keywords: | social preferences, agent-based simulation, group composition, beliefs |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2012-59&r=pub |
| By: | Rida Laraki (Ecole Polytechnique - Ecole Polytechnique, IMJ - Institut de Mathématiques de Jussieu - CNRS : UMR7586 - Université Paris VI - Pierre et Marie Curie - Université Paris VII - Paris Diderot); Michel Balinski (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X) |
| Abstract: | Classifying and ranking wines has been a favorite activity of men and women since timeimmemorial. The intent of this article is to explain how and why the traditional methods for amalgamating the grades fail and how and why a new approach - majority judgment - does the job best. |
| Date: | 2012–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00753483&r=pub |