nep-pub New Economics Papers
on Public Finance
Issue of 2015‒06‒13
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. More R&D with tax incentives? A meta-analysis By Elina Ladinska; Marielle Non; Bas Straathof
  2. Management compensation, monitoring and aggressive corporate tax planning By Steinhoff, Melanie
  3. Majority Choice of Tax Systems in Single- and Multi-Jurisdictional Economies By Stephen Calabrese; Dennis Epple; Richard Romano
  4. Pareto-improving social security reform with public goods By Mark Roberts
  5. Fiscal Archetypes in the European Union By Anton Gerunov

  1. By: Elina Ladinska; Marielle Non; Bas Straathof
    Abstract: R&D tax incentives are widely used to stimulate private R&D. We review their effectiveness using meta regression analysis. The literature mainly consists of two families of micro-econometric studies. Read the accompanying <a href="">press release</a>. The first family (16 studies with 82 estimates by the end of 2014) estimates the elasticity between the user cost of R&D capital and private R&D expenditure (stock or flow). Correlations between R&D expenditure and the presence of an R&D tax incentive scheme are provided by the second family (9 studies with 95 estimates). For both types of studies we find strong evidence of publication bias. After correcting for this, we find that a reduction in the user cost of capital of ten percent raises stock of R&D capital by 1.3 percent and flow of R&D expenditure by 2.1 percent. For the second family we find that presence of a scheme is associated with seven percent more R&D expenditure.
    JEL: H25 H32 O32 O38
    Date: 2015–06
  2. By: Steinhoff, Melanie
    Abstract: The empirical literature shows that management incentives often reduce corporate tax aggressiveness. Focussing on the riskiness of tax aggressiveness this paper offers one explanation for the observed negative relation. Using an agency framework, I analyze the manager's choice of effort dedication in other tasks and her explicit choice of the firm's tax risk. I show that corporate tax aggressiveness may decrease with compensation incentives. By choosing the tax risk, the manager (partly) determines her compensation risk. When the manager is assumed to be risk averse, an increase in compensation incentives motivates her to reduce her compensation risk through a less aggressive tax planning strategy. Further, a good governance structure may mitigate this effect of incentive compensation when marginal returns for tax planning are sufficiently ciently low. I also demonstrate that the tax deductibility of performance-based pay yields less aggressive tax planning.
    Keywords: management incentives,hidden action,corporate tax planning
    JEL: H25 D82 D21
    Date: 2015
  3. By: Stephen Calabrese; Dennis Epple; Richard Romano
    Abstract: We examine majority choice of tax instruments in single- and multi-jurisdictional economies with heterogeneous households. In our framework majority voting equilibrium exists despite the multidimensional policy choice set. We identify five competing incentives that influence choice of tax instruments. Equilibria generally entail a mixture of tax types. With multiple jurisdictions, strong reliance on head taxation in rich communities arises to deter poorer households from immigrating. Mobility fundamentally affects the equilibrium tax system with redistribution incentives dominating choice of instruments when mobility is limited. Limiting or eliminating head taxation fundamentally alters stratification, public good provision levels, and tax systems.
    JEL: H2 H71
    Date: 2015–06
  4. By: Mark Roberts
    Abstract: A social security reform may be Pareto-improving by releasing finance to provide more public goods, either directly if the two budgets are consolidated or indirectly through increasing the demand for public debt.
    Keywords: Social security, Pareto-improving, consolidated budgets, public debt
    Date: 2015
  5. By: Anton Gerunov (St Kliment Ohridski University of Sofia, Faculty of Economics and Business Administration)
    Abstract: A novel statistical approach is used to discern main types of public finance management (or fiscal archetypes) among countries in the European Union. Data, spanning 2002 to 2014, reveals four main archetypes across the dimensions of fiscal policy. Two of them are fiscally sustainable – one comprises big but responsible spenders, and the other – lean governments. Two of the archetypes are not sustainable, with expenditures exceeding revenue. Fiscal archetypes can be fruitfully used to prescribe tailored public policy interventions for countries, taking into account their specific economic and institutional circumstances and thus increasing the efficiency of policy.
    Keywords: Public finance, fiscal aggregates, archetypes, clustering
    JEL: H20 P16
    Date: 2015–03

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