nep-pub New Economics Papers
on Public Finance
Issue of 2014‒01‒24
23 papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Taxes, Wedges and Aggregate Uncertainty: A Mirrleesian Approach. By Carlos da Costa
  2. Optimal Nonlinear Income Taxation with Multidimensional Types: The Case with Heterogeneous Behavioral Responses By Laurence JACQUET; Etienne LEHMANN
  3. Do Payroll Tax Cuts Raise Youth Employment? By Egebark, Johan; Kaunitz, Niklas
  4. Tax Benefits to Housing and Inefficiencies in Location and Consumption By David Albouy; Andrew Hanson
  5. Tax Enforcement Policy and the Provision of Public Goods with the Presence of Tax Havens By Chu, Hsun
  6. Tobin tax and trading volume tightening: a reassessment By Olivier Damette; Stéphane Goutte
  7. The Profit-maximizing Non-profit By Amihai Glazer
  8. Fair and efficent taxation under partial control By Ooghe, Erwin; Peichl, Andreas
  9. The effect of direct democracy on the level and structure of local taxes By Asatryan, Zareh; Baskaran, Thushyanthan; Heinemann, Friedrich
  10. The Efficiency of Unfunded Pension Schemes By Homburg, Stefan
  11. Public Goods, Hidden Income, and Tax Evasion: Some Nonstandard Results from the Warm-Glow Model By Daniel M. Hungerman
  12. Tax policy and income inequality in the US, 1979-2007 By Bargain, Olivier; Dolls, Mathias; Immervoll, Herwig; Neumann, Dirk; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian
  13. Austerity plans and tax evasion : theory and evidence from Greece By Francesco Pappadà; Yanos Zylberberg
  14. Dividing the Pie in Brazil: Income Distribution, Social Policies and the New Middle Class By Jens Arnold; João Jalles
  15. Environmental Tax Reforms in Switzerland A Computable General Equilibrium Impact Analysis By Christoph Böhringer; André Müller
  16. Lessons Learned from Tax vs. Expenditure Based Fiscal Consolidation in the European Transition Economies By Rajmund Mirdala
  17. Tax and the city: A theory of local tax competition and evidence for Germany By Janeba, Eckhard; Osterloh, Steffen
  18. Budgeting and Reporting for Public-Private Partnerships By Katja Funke; Tim Irwin; Isabel Rial
  19. The Portuguese Experience with Public-Private Partnerships By Miranda Sarmento, J.; Renneboog, L.D.R.
  20. Public Private Partnership in National Highways: Indian Perspective By Gajendra Haldea
  21. The impact of fiscal and political decentralization on local public investments in Indonesia By Krisztina Kis-Katos; Bambang Suharnoko Sjahrir
  22. The Fiscal Effects of Immigration to the UK By Christian Dustmann; Tommaso Frattini
  23. The Fiscal Consequences of Unrestricted Immigration from Romania and Bulgaria By Ruist, Joakim

  1. By: Carlos da Costa (Fundação Getulio Vargas)
    Abstract: We study optimal taxation in a dynamic Mirrlees' incentive structure where both aggregate and idiosyncratic risks are present. When aggregate shocks are i.i.d., we characterize the steady-state of our economy and prove the existence of an invariant distribution of expected utilities, which is non-degenerate thanks to the perpetual youth we assume. We show that consumption and income shares of each cohort are invariant to the aggregate state. In contrast, when aggregate shocks are persistent, efficient allocations display history dependence, and no invariant distribution needs to exist. We provide a particular example in which it does not exist and one in which it does. In the latter case, the particular distribution at which a society settles depends on the whole history of aggregate shocks.
    Date: 2013
  2. By: Laurence JACQUET; Etienne LEHMANN (Université de Cergy-Pontoise, THEMA; University Panth´eon Assas and CREST)
    Abstract: This paper develops a general method to solve the optimal nonlinear income tax model with one action (individual pre-tax income) and multidimensional characteristics. Individuals differ in terms of skills and belong to different groups. A group is a subset of individuals with the same vector of characteristics but distinct skill levels. Assuming the Spence-Mirrlees single-crossing condition (with respect to the level of skill) in each group,we first derive the optimal second-best allocation. We then show how this optimality condition leads to a tax formula in terms of behavioral responses, social welfare weights and income density in the vein of Saez (2001). However, our multidimensional context implies that all these terms are averaged across individuals who earn the same income. We also show how our method can be used to solve a large set of policy relevant problems for which it is crucial to introduce multidimensional heterogeneity, e.g., joint taxation of households,nonlinear pricing of a monopoly.
    Date: 2014
  3. By: Egebark, Johan (Research Institute of Industrial Economics (IFN)); Kaunitz, Niklas (Department of Economics, Stockholm University)
    Abstract: In 2007, the Swedish employer-paid payroll tax was cut on a large scale for young workers, substantially reducing labor costs for this group. Using Difference-in-Differences paired with exact matching, we estimate a small impact, both on employment and on wages, implying a labor demand elasticity for young workers at around –0.31. Since the tax reduction applied also to existing employments, the cost of the reform was sizable, and the estimated cost per created job is at more than four times that of directly hiring workers at the average wage. Hence, we conclude that payroll tax cuts are an inefficient way to boost employment for young individuals.
    Keywords: Youth unemployment; Payroll tax; Tax subsidy; Labor costs; Exact matching
    JEL: H25 H32 J23 J38 J68
    Date: 2014–01–03
  4. By: David Albouy; Andrew Hanson
    Abstract: Tax benefits to owner-occupied housing provide incentives for housing consumption, offsetting weaker disincentives of the property tax. These benefits also help counter the penalty federal taxes impose on households who work in productive high-wage areas, but reinforce incentives to consume local amenities. We simulate the effects of these benefits in a parameterized model, and determine the consequences of various tax reforms. Reductions in housing tax benefits generally reduce inefficiency in consumption, but increase inefficiency in location decisions, unless they are accompanied by tax-rate reductions. The most efficient policy would eliminate most tax benefits to housing and index taxes to local wage levels.
    JEL: H24 H77 R13 R21 R31
    Date: 2014–01
  5. By: Chu, Hsun
    Abstract: A tax competition model is presented to investigate the effects of tax havens on the public good provision. We show that when countries facing a rise in tax havens change their tax enforcement strategies in response, the existence of tax havens may result in a higher level of equilibrium public good provision as compared to the case with no tax havens. Accordingly, tax havens could be welfare-enhancing for non-haven countries. This result offers a possible explanation for the recent empirical evidence that the corporate tax revenues in high-tax countries have actually increased with the growth in the flow of FDI to tax havens.
    Keywords: tax havens; enforcement policy; tax competition
    JEL: F23 H26 H41
    Date: 2013–04
  6. By: Olivier Damette (BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II); Stéphane Goutte (LED - Laboratoire d'Economie Dionysien - Université Paris VIII - Vincennes Saint-Denis : EA3391)
    Abstract: This article extends the previous literature on the Tobin tax and financial transaction tax. We investigate the linkages between trading volumes and transaction costs using both a linear and a nonlinear methodology. In stark contrast with previous studies, we consider the possibility that our model may exhibit threshold effects or regime dependency by estimating a Markov Switching (MS) model. This paper is the first contribution to specify the trading volume of the Forex through different (low and high volatility) regimes. Our empirical investigation looks at the EUR/USD currency market. Our results show evidence of nonlinear patterns for trading volumes and transaction costs on the Forex. The Tobin tax would not have a monotonic impact on trading activity across market conditions. However, the change in elasticity between low and high volatility regimes is slight (-0.17 versus -0.21). We may suggest that the low-variance regime might be the fundamentalist regime and the high- variance regime (lower Tobin tax elasticity) might be the chartist regime. This study is a first step towards understanding which categories of agents dominate the market under the various market regimes and how they would react to the introduction of a tax. This means our results are consistent with Tobin's underlying thinking (1974, 1978, 1996). Since a tax would penalize chartists more than fundamentalists, it could reduce exchange rate volatility.
    Keywords: Tobin tax, trading volume, Forex, transaction costs, global financial crisis, Markov switching.
    Date: 2014–01–09
  7. By: Amihai Glazer (Department of Economics, University of California-Irvine)
    Abstract: Consider an organization that solicits private contributions, which will partly be used to provide a public good. The organization's goals is to maximize its profits, namely the difference between aggregate contributions and the amount it spends on providing the public good. An equilibrium exists in which many persons contribute, each contributor enjoys zero consumer surplus from contributing, and the organization takes as a profit the contributions of all but one donor. Such behavior by the organization is consistent with incomplete crowding out of governmental grants. Furthermore, when the organization is constrained to spend at least fraction of all contributions on the public good, it can have an incentive to produce inefficiently.
    Keywords: Non-profit; Public good; Private provision; Philanthropy
    JEL: D64 H41
    Date: 2014–01
  8. By: Ooghe, Erwin; Peichl, Andreas
    Abstract: We study fair and efficient tax-benefit schemes based on income and non-income factors under partial control. Partial control means that each factor is a specific mixture of unobserved ability (randomly drawn by nature) and effort (chosen by individuals who differ in tastes). Factors differ in the degree of control, ranging from no control (if only ability matters) to full control (if only effort matters). Fairness requires to compensate individuals for differences in well-being caused by differences in abilities, while at the same time preserving well-being differences caused by taste differences. We discuss first the general properties of fair and efficient tax-benefit schemes. Next, we study two special cases income taxation and tagging in detail. Finally, we derive testable conditions for the general case and discuss the empirical implementation. --
    Keywords: fairness,redistribution,taxation,tagging,equality of opportunity
    JEL: D6 H2 I3
    Date: 2014
  9. By: Asatryan, Zareh; Baskaran, Thushyanthan; Heinemann, Friedrich
    Abstract: We study the effect of direct democracy on local taxation. Our setting is the German federal state of Bavaria, where in 1995 a state-wide referendum introduced the possibility to initiate direct democratic legislation into the local government code. Relying on a sample of all Bavarian municipalities over the period 1980-2011, we hypothesize that complementing a representative form of government with direct democratic elements leads to (i) higher local tax rates and (ii) a shift of the local tax mix from taxes with broader (property taxes) to taxes with narrower bases (business taxes). For identification, we implement selection on observables and difference-in-discontinuity designs. Our results show that both actual direct democratic activity measured by the number of initiatives and the ease with which direct democratic legislation can be implemented measured by signature and quorum requirements increase local tax rates and shift the tax mix toward taxes with narrower bases. --
    Keywords: direct democracy,taxation,regression discontinuity,Bavaria
    JEL: D72 D78 H71
    Date: 2014
  10. By: Homburg, Stefan
    Abstract: This is a postprint of a paper that was published in the Journal of Institutional and Theoretical Economics 146, 1990, pp. 640-647
    Keywords: Public Pensions, Overlapping Generations
    JEL: H21 H55
    Date: 2014–01
  11. By: Daniel M. Hungerman
    Abstract: A large literature explores crowd out in situations where public goods are jointly provided; work in this area typically depicts a tax system where individuals take taxes as given. But in some settings, such as those in developing economies, efforts to evade or avoid taxes may be widespread. Using the canonical warm-glow model, this paper considers joint pubic-good provision in a setting where individuals can evade taxes by hiding their income. The model's implications change significantly in this setting: with hidden income, stronger warm glow will lead to greater crowd out, not less. Using research on crowd out and inter-family transfers, I present suggestive evidence that the model's results may help to reconcile divergent estimates of crowd out in the literature.
    JEL: H26 H41 O17
    Date: 2014–01
  12. By: Bargain, Olivier; Dolls, Mathias; Immervoll, Herwig; Neumann, Dirk; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian
    Abstract: We assess the effects of U.S. tax policy reforms on inequality by applying a new decomposition method allowing us to disentangle the policy effect from changing market incomes. Over the period 1979-2007, the cumulative policy effect aggravated inequality by increasing the income share of the top 20% in contrast to the middle class' share. The tax policy effect accounts for up to 29% of the total change in inequality; its contribution increases up to 41% if we take into account behavioral responses. While Republican policymakers increased inequality especially at the top, Democrats increased the income share of the bottom 80%. --
    Keywords: Tax policy,Inequality,Redistribution,Partisan Politics,Political Economy
    JEL: H23 H31 H53 P16
    Date: 2014
  13. By: Francesco Pappadà; Yanos Zylberberg
    Abstract: The austerity plans implemented in Greece in 2010 have yielded lower than expected increases in tax receipts. We argue that this has been the result of the arbitrage that firms face when choosing to declare their activity. A tax hike has a direct effect on the degree of tax evasion, and an indirect one through credit markets. A tax increase tightens the credit constraints of firms and depresses even further their incentives to be transparent. Using a dataset of about 30'000 Greek firms per year over the period 2002-2011, we provide evidence that firms adjust their declared profitability, and this adjustment depends on the tax burden and their need for credit. We then calibrate our model and show that leakages due to tax evasion are quite high : a 21% increase in tax rates only delivers a 7% increase in tax receipts. The response of transparency generates an additional investment slack which is the result of a contracting demand for credit by small and medium size firms induced by tax evasion.
    Keywords: tax evasion; austerity plans; credit frictions
    JEL: E44 O17 H26
    Date: 2014–01
  14. By: Jens Arnold; João Jalles
    Abstract: Brazil has made remarkable progress in reducing poverty and inequality. This reduction is explained by strong growth but also by effective social policies. Besides growth, public services and cash transfers have played the biggest role, the latter notably through the successful “Bolsa Familia” programme. Among public services, improved access to education has played a major role, allowing more Brazilians to move into better-paid jobs. However, shortages in physical school infrastructure are limiting the hours of instruction that students receive. The high drop-out rate needs to be reduced through early interventions such as expanding early-childhood education, by reducing grade-repetition and through more tailored support for those at risk. The quality of teaching could also be raised through more in-service teacher training and stronger performance incentives for teachers. Performance of public services devoted to health and transports has been mixed. Public health services are widely available but suffer from underfunding and training places for medical staff need to be expanded. The public urban transport system suffers from a shortage of investment which is urgently needed to upgrade capacity. Regarding cash transfers, the success of “Bolsa Familia” and new programmes put in place under the umbrella of the “Brasil sem Miseria” programme is remarkable but transfer payments remain too heavily focused on pension benefits. Giving more priority to “Bolsa Familia” and “Brasil sem Miseria” while limiting the real growth of pension expenditures in the future would improve the effectiveness of social expenditures for reducing poverty and inequality. This Working Paper relates to the 2013 OECD Economic Survey of Brazil ( Partager la richesse nationale au Brésil : la distribution des revenus, les politiques sociales et la nouvelle classe moyenne Le Brésil a accompli des progrès remarquables en termes de réduction de la pauvreté et des inégalités. Cela tient au dynamisme de la croissance mais aussi à l'efficacité des politiques sociales. En dehors de la croissance, ce sont les services publics et les transferts monétaires qui ont été les facteurs les plus importants, notamment les seconds dans le cadre du programme Bolsa Familia, qui a été couronné de succès. S'agissant des services publics, l'amélioration de l'accès à l'éducation a joué un rôle majeur, en permettant à davantage de Brésiliens d'obtenir des emplois mieux payés. Néanmoins, les problèmes de pénurie d'infrastructures scolaires limitent le nombre d'heures d'enseignement dont bénéficient les élèves. Il faut abaisser les taux élevés d'abandon des études par le biais d'interventions précoces consistant par exemple à développer l'éducation préscolaire, ainsi qu'en réduisant les taux de redoublement et en apportant un soutien plus individualisé aux élèves à risque. On pourrait également rehausser la qualité de l'enseignement en développant la formation en cours d'emploi des enseignants et en renforçant les mesures d'incitation qui récompensent leurs bons résultats. Le bilan des services publics est mitigé dans les domaines de la santé et des transports. Les services de santé publique sont largement accessibles mais ils pâtissent d'un financement insuffisant, et le nombre de places offertes pour la formation du personnel médical doit être accru. Le système public de transports urbains souffre d'un manque d'investissements, alors qu'il est urgent de consacrer des ressources à la modernisation des capacités. S'agissant des transferts monétaires, la réussite de Bolsa Familia et des nouveaux dispositifs mis en place dans le cadre global du programme Brasil sem Miseria est remarquable, mais les prestations de retraite représentent toujours une proportion excessive des transferts sociaux. En accordant une plus grande importance au programme Brasil sem Miseria en général et à Bolsa Familia en particulier, tout en limitant la croissance réelle des dépenses de retraite à l'avenir, les autorités renforceraient l'efficacité des dépenses sociales en termes de réduction de la pauvreté et des inégalités. Ce Document de travail se rapporte à l’Étude économique de l’OCDE du Brésil, 2013 (
    Keywords: health, education, tax, pensions, wages, distribution, transfers, santé, transferts, impôt, éducation, pensions, salaires, distribution des revenus
    JEL: D3 H2 H4 I1 I2 I3 J3
    Date: 2014–01–09
  15. By: Christoph Böhringer (University of Oldenburg, Department of Economics); André Müller (Ecoplan, Bern, Switzerland)
    Abstract: The Swiss energy strategy until 2050 envisages ambitious CO2 emission reduction targets along with substantial cutbacks in electricity consumption to establish a low-carbon economy without nuclear energy. Our computable general equilibrium analysis find that compliance with stringent CO2 constraints requires high CO2 taxes on economic activities which are not eligible for international emissions trading; likewise, electricity consumers are burdened with substantial electricity taxes. Environmental tax reforms are not likely to generate welfare gains without accounting for the benefits of improved environmental quality . However, economic adjustment costs to a low carbon economy without nuclear energy remain modest and can be markedly reduced through revenue-neutral cuts of initial distortionary taxes. On the other hand, alternative recycling strategies pose a trade-off between efficiency anddistributional justice which has to be resolved on normative grounds.
    Keywords: environmental tax reforms, computable general equilibrium
    JEL: H21 D58 Q48
    Date: 2014–01
  16. By: Rajmund Mirdala
    Abstract: European Union member countries are currently exposed to negative implications of the economic and debt crisis. Questions associated with disputable implications of fiscal incentives seem to be contrary to the crucial need of the effective fiscal consolidation that is necessary to reduce excessive fiscal deficits and high sovereign debts. While challenges addressed to the fiscal policy and its anti-cyclical potential rose steadily but not desperately since the beginning of the economic crisis, the call for fiscal consolidation became urgent almost immediately and this need significantly strengthen after the debt crisis contagion flooded Europe. In the paper we provide an overview of main trends in public budgets and sovereign debts in ten European transition economies during last two decades. We identify episodes of successful and unsuccessful (cold showers versus gradual) fiscal (expenditure versus revenue based) consolidations by analyzing effects of improvements in cyclically adjusted primary balance on the sovereign debt ratio reduction. We also estimate VAR model to analyze effects of fiscal shocks (based on one standard deviation in total expenditure, direct and indirect taxes) to real output. It is expected that responses of real output to different types of (consolidating) fiscal shocks may vary and thus provide more precise ideas about a feasibility (i.e. side effects on the macroeconomic performance) of expenditure versus revenue based fiscal consolidation episodes. Economic effects of fiscal consolidating adjustments are evaluated for two periods (pre-crisis and extended) to reveal crisis effects on fiscal consolidation efforts.
    Keywords: fiscal policy adjustments, fiscal consolidation, cyclically adjusted primary balance, government expenditures, tax revenues, unrestricted VAR, Cholesky decomposition, SVAR, structural shocks, impulse-response function
    JEL: C32 E62 H20 H50 H60
    Date: 2013–09–15
  17. By: Janeba, Eckhard; Osterloh, Steffen
    Abstract: Despite the well-developed empirical literature on local tax competition, little is known about the actual spatial structure of inter-municipal competition. Assuming that competition takes place only among neighbours (as in the empirical literature) is at odds with the theoretical approaches where all jurisdictions compete simultaneously. In this paper we use a survey conducted among mayors in the German state of Baden-Württemberg to show that the perceived intensity of competition for firms varies considerably between jurisdictions and can mainly be explained by the size and location of the jurisdiction. Based on these findings, we develop a sequential tax competition model in which urban centres compete with other urban centres and rural jurisdictions in their own neighbourhood. This model predicts that larger jurisdictions do not necessarily rely more on capital taxes; in case they face strong competition with more distant competitors, larger cities even have lower capital taxes. In addition, we discuss how the model compares to a standard simultaneous approach and show that results from our sequential model are in line with trends in local taxation in Baden-Württemberg. --
    Keywords: local tax competition,survey,intensity of competition,asymmetric tax competition
    JEL: H71 H73 H77
    Date: 2013
  18. By: Katja Funke; Tim Irwin; Isabel Rial
    Abstract: Public-private partnerships (PPPs) can appeal to governments because they offer a new way of providing public services that is possibly more efficient than traditional public finance. But they can also appeal to governments because they allow new investments to be undertaken without any immediate increase in reported government spending or debt. This second motive for using PPPs rests largely on an illusion, because in the absence of efficiency gains (which are probably small relative to the total cost of the project), PPPs and publicly financed projects have a similar long-run effect on public finances. In some PPPs, the government defers payment, but ultimately must still pay the full cost of the project. In others, it concedes the right to collect user fees, and thus loses revenue it would have collected if the project had been financed traditionally.
    Date: 2013–04–01
  19. By: Miranda Sarmento, J.; Renneboog, L.D.R. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: This paper documents the Portuguese experience in Public-Private Partnerships (PPPs). Since 1993, Portugal has been using PPPs intensively, mainly for highway construction and in the health sector. This has enabled the country to close the infrastructure gap and avoid the budget constraints at the moment of the investment. Doubts about whether PPPs represent value-for-money have emerged. There are several reasons why PPP were unsuccessful: (i) the concentration PPP projects was very high over a limited time span and the public sector was not prepared nor had the ability to manage and control the contracts, (ii) the incentive to resort to PPPs was mainly to avoid budget constraints, but not to use of public resources better by taking advantage of private sector efficiency, (iii) the risk allocation between the private and public sector was flawed because the private sector bore too little risk and payments from the public to the private sector were considerably above the investment cost. The current and future annual payments from the state to the private sector are a substantial burden in the current times of austerity and budget consolidation. As the country had to ask the troika (IMF, ECB, and European Commission) for a financial rescue from, PPP renegotiations are ongoing to reduce public payments.
    Keywords: Public-Private Partnerships;Procurement;Project finance;Road construction;Portugal
    JEL: H54 H57
    Date: 2014
  20. By: Gajendra Haldea
    Abstract: India’s road network of over 4.1 million km is second largest in the world consisting of expressways, national highways, state highways, major district roads and other roads. These roads carry about 65 per cent of freight and 80 per cent of passenger traffic. National highways constitute only 1.7 per cent of the road network, but carry about 40 per cent of the total road traffic. Road Transport has emerged as the dominant segment in India’s transportation sector with a share of 4.7% in India’s GDP in 2009-10. The number of vehicles on Indian roads has been growing at an average pace of 10.16% per annum over the last five years. Hence, development of road network assumes paramount importance in the context of a rapidly growing economy.
    Date: 2013–04–01
  21. By: Krisztina Kis-Katos; Bambang Suharnoko Sjahrir (Department of International Economic Policy, University of Freiburg)
    Abstract: We investigate the effects of the Indonesian decentralization and democratization process on budget allocation at the sub-national level. Based on panel data for 271 Indonesian districts for the years of 1994 to 2009, we address the determinants of local investment expenditures in public infrastructure in the sectors of education, health, and physical infrastructure. We find that after the dramatic expenditure decentralization of 2001, districts with relatively lower levels of public infrastructure started to invest more in these sectors. In contrast to the marked budgeting changes following the fiscal and administrative decentralization, we find no consistent effects of the democratization process on local public investments. Our results reflect initial improvements in local targeting but show no evidence of increasing electoral accountability.
    Keywords: Decentralization, democratic elections, budget allocation, Indonesia
    JEL: H72 H75
    Date: 2014–01
  22. By: Christian Dustmann (University College London, CrEAM and CEPR); Tommaso Frattini (University of Milan, CrEAM, IZA and Centro Studi Luca d’Agliano)
    Abstract: In this paper, we investigate the fiscal impact of immigration on the UK economy, with a focus on the period since 1995. We provide estimates for the overall immigrant population for the period between 1995 and 2012, and for more recent immigrants who arrived since 2000, distinguishing between immigrants from European versus non-European countries. Overall, our findings indicate that EEA immigrants have made a positive fiscal contribution, even during periods when the UK was running budget deficits. This positive contribution is particularly noticeable for more recent immigrants that arrived since 2000 in particular from EEA countries.
    Keywords: Immigration, Fiscal Impact, Welfare State
    JEL: J61 J68 H20
  23. By: Ruist, Joakim (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: When Romania and Bulgaria joined the EU in 2007 Sweden was one of two EU15 countries that did not restrict access to its labor market and welfare systems for Romanian and Bulgarian citizens. This article evaluates the net fiscal contribution in 2011 of Romanian and Bulgarian migrants who arrived in Sweden under this migration regime in 2007-2010. The average net contribution is found to be substantially positive: around 30,000 kronor, or onesixth of public sector turnover per capita. This result is used to discuss expected corresponding net contributions in other EU15 countries, several of which lifted their restrictions on January 1st, 2014. The United Kingdom and Ireland stand out as two countries that unambiguously have reason to expect even more positive contributions.
    Keywords: immigration; welfare benefits; public finances; Romania; Bulgaria; EU
    JEL: H20 H50 J61
    Date: 2014–01

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