nep-pub New Economics Papers
on Public Finance
Issue of 2014‒03‒22
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. World welfare is rising: estimation using nonparametric bounds on welfare measures By Pinkovskiy, Maxim L.
  2. Tax Principles and Tariff-Tax Reforms under International Oligopoly By Kenji Fujiwara
  3. Optimal Redistributive Pensions and the Cost of Self-Control By Pier-André Bouchard St-Amant; Jean-Denis Garon
  4. Social security and economic integration By ARTIGE, Lionel; DEDRY, Antoine; PESTIEAU, Pierre
  5. Fiscal rules and government size in the European Union By Suari Andreu, Eduard; Mierau, Jochen O.
  6. The laffer curve and the debt-growth link in low-income Sub-Saharan African economies By Megersa, kelbesa

  1. By: Pinkovskiy, Maxim L. (Federal Reserve Bank of New York)
    Abstract: I take a new approach to measuring world inequality and welfare over time by constructing robust bounds for these series instead of imposing parametric assumptions to compute point estimates. I derive sharp bounds on the Atkinson inequality index that are valid for any underlying distribution of income conditional on given fractile shares and the Gini coefficient. While the bounds are too wide to reject the hypothesis that world inequality may have risen, I show that world welfare rose unambiguously between 1970 and 2006. This conclusion is valid for alternative methods of dealing with countries and years with missing surveys, alternative survey harmonization procedures, and alternative GDP series, or if the inequality surveys used systematically underreport the income of the very rich or suffer from nonresponse bias.
    Keywords: world income distribution; inequality and welfare measures; nonparametric bounds
    JEL: C02 I31
    Date: 2014–12–01
  2. By: Kenji Fujiwara (School of Economics, Kwansei Gakuin University)
    Abstract: This paper, in a two-country duopoly model, compares destination- and origin-based commodity taxes in a context of a unilateral tariff-tax reform that fixes the world price and foreign welfare. We find that the proposed reform reduces domestic welfare, and hence is strictly Pareto-deteriorating under the destination principle while the opposite holds under the origin principle. Moreover, it is shown that this ranking is reversed if exports are taxed. In short, which is preferable between destination and origin taxation depends on the tax principle and which between imports and exports are taxed.
    Keywords: tax principles, tariff-tax reform, destination-based consumption tax, origin-based production tax
    JEL: F12 F13 H2
    Date: 2014–03
  3. By: Pier-André Bouchard St-Amant; Jean-Denis Garon
    Abstract: We examine how the introduction of self-control preferences influence the trade-off between two fundamental components of a public pension system: the contribution rate and its degree of redistribution. The pension regime affects individuals’ welfare by altering how yielding to temptation (i.e. not saving, or saving less) is attractive. We show that proportional taxation increases the cost of self-control, and that this adverse effect is more acute when public pensions become more redistributive.
    Keywords: Taxation, Redistribution, Pensions, Self-control
    JEL: H55 H21 D03
    Date: 2014
  4. By: ARTIGE, Lionel (HEC, Université de Liège, Belgium); DEDRY, Antoine (HEC, Université de Liège, Belgium); PESTIEAU, Pierre (CREPP, HEC, Université de Liège, Belgium; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; Toulouse School of Economics, France)
    Abstract: The purpose of this letter is to analyze the impact of economic integration on capital accumulation and capital flows when countries differ in their social security systems, especially as regards the degree of funding of pensions and the regulation of the retirement age. Funding and early retirement both foster capital accumulation relative to pay-as-you-go pensions with flexible retirement. In the case of economic integration, both imply capital outflow possibly resulting in utility losses.
    Keywords: economic union, pension, retirement age, social security
    JEL: H2 F42 J26
    Date: 2014–03–12
  5. By: Suari Andreu, Eduard; Mierau, Jochen O. (Groningen University)
    Abstract: This paper studies the impact of national fiscal rules on government size as measured by the ratio of government expenditures to gross domestic product. We develop a model of the budgetary process and show that a common pool problem may arise which can be mitigated through fiscal rules. We test the model?s predictions using a novel time-series cross-section dataset of 27 European Union members for the period between 1990 and 2011. Corroborating the model, we find that fiscal rules have a negative impact on government size. Contrasting the model, their impact becomes smaller as the number of ministers increases.
    Date: 2014
  6. By: Megersa, kelbesa
    Abstract: The study of the link between debt and growth has been full of debates, both in theory and empirics. However, there is a growing consensus that the relationship is sensitive to the level of debt. Our paper tries to address the question of non linearity in the long term relationship between public debt and economic growth. Specifically, we set out to test if there exists an established ‘laffer curve’ type relationship, where debt contributes to economic growth up to a certain point (maximal threshold) and then starts to have a negative effect on growth afterwards. To carry out our tests, we have used a methodology that delivers a superior test of bell shapes, in addition to the traditional test based on a regression with a quadratic specification. The results show evidence of a bell-shaped relationship between economic growth and total public debt in a panel of low income Sub-Saharan African economies. This supports the hypothesis that debt has some positive contribution to economic growth in low-income countries, albeit up to a point. If debt goes on increasing beyond the level where it would be sustainable, it may start to be a drag on economic growth.
    Keywords: public debt, economic growth, laffer curve, low-income countries, Sub-Saharan Africa
    JEL: C1 C12 C14 C4 E62 G01 H5 H61 H63 H68 N17 O1 O11 O55 P52
    Date: 2014–03–12

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