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on Public Finance |
| By: | Mike Brewer (Institute for Fiscal Studies and ISER, Essex University); Monica Costa Dias (Institute for Fiscal Studies and Institute for Fiscal Studies); Jonathan Shaw (Institute for Fiscal Studies) |
| Abstract: | Personal taxes and benefits affect the incentive to work over the lifecycle by altering income-age profiles, insuring against adverse shocks, and changing the returns to human capital. Previous work investigating the impact of taxes and benefits on work incentives has tended to ignore these dynamic considerations. In this paper, we use a dynamic model to show how a lifecycle perspective alters our impression of the effect of the tax and benefit system on female work incentives. We describe how work incentives change over the life and show how they depend on lifecycle circumstances. We also devise a forward-looking measure of work incentives that incorporates all the dynamic considerations likely to affect work decisions at any given age. We find that individuals experience considerable variability in work incentives across life that outweighs the variability across individuals. Changes pattern of family types across life is key to explaining these patterns: work incentives vary dramatically depending on family composition, and most women experience a number of different family types during the course of their lives. We also find that differences in family type are an important explanation for why static and forwardlooking PTRs diverge, though this is more to do with differences in how women in families with different compositions behave. |
| Keywords: | female labour supply, lifecycle, work incentives, taxes |
| JEL: | H24 I24 I38 J22 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:13/01&r=pub |
| By: | Etienne Lehmann (CREST); François Marical (INSEE); Laurence Rioux (CREST(INSEE)) |
| Abstract: | We estimate the responses of gross labor income 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 payroll-tax schedules affecting individuals who earn less than twice the minimum wage. Our estimate for the elasticity of gross labor income 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 rate 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 sticky posted wages (i.e., the gross labor income minus payroll taxes divided by hours worked). Finally, the effect of the net-of-income-tax rate seems to be driven by participation decisions, in particular those of married women. |
| Keywords: | Labor income, Payroll tax, Income tax |
| JEL: | H24 H31 J22 J38 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2012-24&r=pub |
| By: | Timothy Besley; Torsten Persson |
| JEL: | H11 H20 O17 O43 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stieop:41&r=pub |
| By: | Ebeke, C.; Ehrhart, H. |
| Abstract: | This paper focuses on the sources and consequences of the instability of tax revenue in Sub-Saharan African countries. We took advantage of a unique and extraordinarily rich dataset on the composition of tax revenues for a large number of countries. Using panel data for 37 countries observed over the period 1980-2005, our results are twofold. First, the instability of government tax revenue leads to the instability of both public investment and government consumption, and also reduces the level of public investment. Second, the reliance on domestic indirect taxation-based systems appears to have a robust stabilising effect. |
| Keywords: | Tax instability; tax composition; public spending; Sub-Saharan Africa. |
| JEL: | H20 E32 O11 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:418&r=pub |
| By: | Randjelovic, Sasa |
| Abstract: | Due to limited access to foreign savings after the 2008 crisis, transition economies are forced to rely more on domestic savings in financing their growth. In that respect, it is often argued that the government should use tax policy to encourage domestic savings. Since the personal income tax reform is a burning issue in Serbia, the aim of this paper is to provide empirical evidence on the expected effects of each of the three income tax reform scenarios (flat, dual and comprehensive income tax scheme) on personal savings in Serbia, by taking into account both capital income tax effects and labour income tax effects. Taylors theoretical model suggests that the personal saving is a function of personal income and the rate of return to savings. This is one of the seminal papers, in which the savings effects of tax policy reform are empirically estimated for a transition economy by taking into account both transmission channels. By combining Engle-Granger cointegration methods based on monthly macro data from 2004 to 2009, with the tax-benefit microsimulation model based on cross section micro data for 2007, it has been estimated that changes of capital income tax rate effects prevail over the effects of labour income tax changes, in terms of savings response. The results suggest that introduction of dual income tax in Serbia would boost personal savings in the long run, by 0.20%, while the flat tax and comprehensive income tax would lead to its decline by 2.15% and 3.64% respectively. |
| Date: | 2013–01–22 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em1-13&r=pub |
| By: | Ehrhart, H. |
| Abstract: | This article analyses the impact of the electoral calendar on the composition of tax revenue (direct versus indirect taxes). It thus represents an extension of traditional political budget-cycle analyses assessing the impact of elections on overall revenue. Panel data from 56 developing countries over the 1980-2006 period reveals a clear pattern of electorally-related policy interventions. Taking the potential endogeneity of election timing into account, we find robust evidence of lower indirect taxes being applied by incumbent governments in the period just prior to an election. Indirect tax revenue in election years is estimated to be 0.3 GDP percentage points lower than in other years, corresponding to a fall of about 3.4% of the average figure in the sample countries, while there is no such relationship with direct tax revenue. |
| Keywords: | Political budget cycles, Elections, Taxation, Developing countries. |
| JEL: | D72 E62 O10 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:419&r=pub |
| By: | Mike Brewer (Institute for Fiscal Studies and ISER, Essex University); Monica Costa Dias (Institute for Fiscal Studies and Institute for Fiscal Studies); Jonathan Shaw (Institute for Fiscal Studies) |
| Abstract: | In this paper we look at lifetime inequality to address two main questions: How well does a modern tax system, based on annual information, target lifetime inequality? What aspects of the tranfser system are most progressive from a lifetime perspective? To answer to these questions it is crucial to relate lifetime and annual inequality and determine the main building blocks of lifetime disparities. We look at lifetime inequality and the redistribution properties of taxes and benefits using a dynamic life-cycle model of women's education, labour supply and savings with family dynamics and rich individual heterogeneity in preferences and productivity. The model is coupled with a detailed description of the UK personal tax and benefit system and is estimated on UK longitudinal data covering the 1990s and early 2000s. We show that the tax and benefits system is more redistributive from an annual than from a lifetime perspective, and it most progressive at the bottom of the income distribution in both cases. We then establish that heterogeneity in family experiences throughout adult life is the main vehicle through which the tax and benefits system moderates lifetime inequality. Although transitory, family conditions under which working is especially costly, such as lone-motherhood, are escpecially prevalent among the lifetime poor. By targeting this group, particularly using policies specifically designed to improve the work incentives of those with the lowest earnings capacity, the tax and benefits system does achieve life-cycle redistribution. Other policies like universal benefits towards family with children are less well targeted towards the lifetime poor but are more progressive and improve the work incentives in the middle 60% of the distribution of lifetime income. |
| Keywords: | female laboursupply, life-cycle, inequality, redistribution, taxes |
| JEL: | H23 H24 I24 I38 J22 J24 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:12/23&r=pub |
| By: | David Heres; Steffen Kallbekken; Ibon Galarraga |
| Abstract: | The potential of taxation to correcting environmental externalities has been long recognized among economists. Yet, this welfare-enhancing policy commonly faces strong opposition by citizens. Conversely, externality-correcting subsidies frequently enjoy high levels of public acceptance. We conduct a lab experiment to explore public support for Pigouvian taxes and subsidies. In an experimental market with a negative externality, participants vote on the introduction of Pigouvian taxes and subsidies under full or partial information concerning how the tax revenues will be spent and the subsidy paid for. Theoretically the two instruments should produce identical outcomes. We find substantially greater support for subsidies than taxes. This can partially be explained by the expectation that the subsidy will increase payoffs more than a tax, but not because it could be more effective in changing behavior. Furthermore, we find that under partial information, the preference for subsidies is even stronger. |
| Keywords: | Pigouvian taxes; subsidies; lab experiment; public policy; revenues; effectiveness |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:bcc:wpaper:2013-04&r=pub |
| By: | Ugo Panizza (UNCTAD and The Graduate Institute, Geneva); Andrea Filippo Presbitero (Universit… Politecnica delle Marche, MoFiR) |
| Abstract: | This paper surveys the recent literature on the links between public debt and economic growth in advanced economies. We find that theoretical models yield ambiguous results. Whether high levels of public debt have a negative effect on long-run growth is thus an empirical question. While many papers have found a negative correlation between debt and growth, our reading of the empirical literature is that there is no paper that can make a strong case for a causal relationship going from debt to economic growth. We also find that the presence of thresholds and, more in general, of a non-monotone relationship between debt and growth is not robust to small changes in data coverage and empirical techniques. We conclude with a discussion of the challenges involved in measuring and defining public debt and some suggestions for future research which, in our view, should emphasize cross-country heterogeneity. |
| Keywords: | Government Debt, Growth, OECD countries |
| JEL: | F33 F34 F35 O11 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:78&r=pub |
| By: | Stephen Coate |
| Abstract: | Recent empirical work in public finance uses the housing price response to public investments to assess the efficiency of local durable public good provision. This paper investigates the theoretical foundations for this technique. In the context of a novel theoretical model developed to study the issue, it shows that there is little justification for the technique if citizens have rational expectations concerning future investment in their communities. An example in which investment is chosen by a budget-maximizing bureaucrat is developed to show why the technique can falsely predict under-provision. The technique is valid, however, when citizens have adaptive expectations, believing that whatever provision level that currently prevails will be maintained indefinitely. |
| JEL: | H41 H43 H75 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18767&r=pub |
| By: | Engin Kara; Jasmin Sin |
| Abstract: | Using a dynamic stochastic general equilibrium (DSGE) model that accounts for credit constraints, we study the effects of fiscal stimulus on the macroeconomy. We show that the presence of credit constraints results in larger fiscal multipliers than indicated by the standard DSGE models. If credit-crunch conditions persist, the multipliers become large enough for fiscal policy to be highly effective. |
| Keywords: | DSGE models, Monetary Policy, Fiscal Policy, Liquidity Trap, Credit constraints |
| JEL: | E32 E52 E58 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:bri:uobdis:12/634&r=pub |