nep-pub New Economics Papers
on Public Finance
Issue of 2015‒12‒28
eight papers chosen by

  1. Tax shifts By Milena Mathé; Gaetan Nicodeme; Savino Rua
  2. Tax Morale and Trust in Public Institutions By Wilfried Anicet Kouamé
  3. State Taxes and Spatial Misallocation By Pablo D. Fajgelbaum; Eduardo Morales; Juan Carlos Suárez Serrato; Owen M. Zidar
  4. Optimal Taxation Rule Reversal in the Presence of Gentle Polluters and Greedy Cleaners By Damien Sans
  5. Tax reforms in EU Member States - 2015 Report By European Commission
  6. Welfare Spending in the Long Run By Divounguy Nding, Orphe
  7. Public debt and economic growth: Economic systems matter By Ahlborn, Markus; Schweickert, Rainer
  8. Insiders and Outsiders: Local Ethnic Politics and Public Goods Provision By Kaivan Munshi; Mark Rosenzweig

  1. By: Milena Mathé (European Commission); Gaetan Nicodeme (European Commmission, ULB, CESifo, CEPR); Savino Rua (European Commission)
    Abstract: Shifting taxes away from labour to tax bases which are considered least detrimental to growth remains a common policy recommendation from the European Commission and other international institutions. This paper reviews the theoretical and empirical literature on the growth effects of tax shifts. It then takes stock of tax shifts in the EU Member States over the last years, giving a few examples of their implementation and of the hurdles Member tates have faced. Finally, it concludes on recent developments that may impact on the nature of future tax shifts
    Keywords: European Union, Taxation, Growth, Tax shift, labour taxation, VAT, redistribution
    JEL: H20 H30 N14 P35
    Date: 2015–10
  2. By: Wilfried Anicet Kouamé (GREDI, Universite de Sherbrooke)
    Abstract:  One significant puzzle in economics is to explain why people pay their taxes and why there are so many differences in tax compliance across countries. Tax morale literature try to tackle this puzzle with a sparse evidence from the relationship between taxpayers and public authorities (vertical relationship). As a novelty, this paper highlights both theoretically and empirically trust in public institutions as a new explanation to taxpayer’ willingness to comply. The theoretical framework goes beyond the standard model of tax evasion by allowing social norms and interactions with public institutions. For empirical evidence, I use the World Values Survey 2010-2014 to estimate the causal impact of trust in public institutions on tax morale. The findings suggest that in emerging and developing countries, social norms play a great role on tax morale, whereas in advanced countries institutional environment seems to be one of the most important factors. The results remain robust after exploiting and conducting several sensitivity analysis.
    Keywords: public institutions, signal effects, tax morale, tax evasion, trust
    JEL: D70 H26 H31 K42
    Date: 2015–12
  3. By: Pablo D. Fajgelbaum; Eduardo Morales; Juan Carlos Suárez Serrato; Owen M. Zidar
    Abstract: We study state taxes as a potential source of spatial misallocation in the United States. We build a spatial general-equilibrium model in which the distribution of workers, firms, and trade flows across states responds to state taxes and public-service provision. We estimate firm and worker mobility elasticities and preferences for public services using data on the distribution of economic activity and state taxes from 1980 to 2010. A revenue-neutral tax harmonization leads to aggregate real-GDP and welfare gains of 0.7%. Tax cuts by individual states lower own-state tax revenues and economic activity, and generate cross-state spillovers depending on trade linkages.
    JEL: E6 F12 H71 R13
    Date: 2015–11
  4. By: Damien Sans (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS)
    Abstract: The literature on the micro-economics of the eco-industry often assumed interiority of pollutant net emissions. In a perfectly competitive final good market vertically integrated with an upstream monopoly supply this assumption implies that an optimal tax is always greater than its associated marginal social damage. In this short note we will relax this assumption and challenge that result. The market structure generates a unique threshold on the scale of the marginal social damage, whereby for any value above the threshold an optimal tax is strictly lower and net emissions are zero.
    Keywords: Microeconomics, eco-industry, Imperfect Competition, Optimal Taxation
    JEL: D42 D62 H23 L11 Q58
    Date: 2015–12–14
  5. By: European Commission (European Commission)
    Abstract: The 2015 report on Tax Reforms in EU Member States presents an overview of the reforms recently introduced by Member States in the main areas of tax policy and provides up-to-date analysis of the main challenges in each area. It also includes an indicator-based assessment, which gives an initial indication of Member States’ performance in each area
    Keywords: European Union, Taxation, European Semester, VAT, Coporpotate income tax, tax administration, tax reform
    JEL: H21 H22 H23 H25 H27 H62
    Date: 2015–09
  6. By: Divounguy Nding, Orphe
    Abstract: In this paper,we construct an equilibrium search model of the labor market augmented to include lump sum taxes that finance government expenditures. Using the model, we can decompose the decline in labor force participation (LFP) into the policy effect and that of other factors such as declining economic output. Using census data for the state of Ohio, we learn that declining LFP and the increase in public assistance spending were caused by weaker economic output that led to an increase in the claimant count. Our results indicate that if the economy resembled the pre-crisis period, the Kasich administration would have led to an increase in LFP of approximately 0.6 percentage points. This effect goes up to 2% if all inactive workers are assumed to claim welfare income.
    Keywords: Government Spending, Taxation, Unemployment Insurance, Search Theory
    JEL: H2 H30 J0 J01
    Date: 2015–12–18
  7. By: Ahlborn, Markus; Schweickert, Rainer
    Abstract: Most studies on the relationship between public debt and economic growth implicity assume homegenous debt effects across their samples. We - in accordance with recent literature - challenge this view and state that there likely is a great deal of cross-country heterogeneity in that relationship. However, other than scholars assuming that all countries are different, we expect that clusters of countries differ. We identify three country clusters with distinct economic systems: Liberal (Anglo Saxon), Continental (Core EU members) and Nordic (Scandinacian). We argue that different degrees of fiscal uncertainty at comparable levels of public debt between those economic systems constitute a major source of hetergeneity in the debt-growth relationship. Our empirical evidence supports this assumption. Continental countries face more growth reducing public debt effects than especially Liberal countries. There, public debt apparently exerts neutral or even positive growth effects, whil for Nordic countries a non-linear relationship is discovered, with negative debt effects kicking in at public debt values of around 60% of GDP.
    Keywords: Public Debt,Economic Growth,Economic Systems,Fiscal Policy,Welfare State
    JEL: E62 P10 P51 H10
    Date: 2015
  8. By: Kaivan Munshi; Mark Rosenzweig
    Abstract: We examine the role of ethnic politics at the local level in supplying public goods within a framework that incorporates two sides to ethnic groups: an inclusionary side associated with internal cooperation and an exclusionary side associated with the disregard for others. The inclusionary aspect of ethnic politics results in the selection of more able political representatives who exert more effort, resulting in an increased supply of non-excludable public goods. The exclusionary aspect of ethnic politics results in the capture of targetable public resources by insiders; i.e. the representative's own group, at the expense of outsiders. Using newly available Indian data, covering all the major states over three election terms at the most local (ward) level, we provide empirical evidence that is consistent with both sides of ethnic politics. Counterfactual simulations using structural estimates of the model are used to quantify the impact of alternative policies that, based on our theory and the empirical results, are expected to increase the supply of public goods.
    JEL: H11 H4 H41 H42 O1
    Date: 2015–11

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