nep-pub New Economics Papers
on Public Finance
Issue of 2016‒09‒04
five papers chosen by

  1. Democracy, redistribution and optimal tax structures By Santanu Gupta; Raghbendra Jha
  2. Dividend taxation of non-listed companies, resource allocation and productivity By Määttänen, Niku; Ropponen, Olli
  3. Relative Tax Rates, Proximity and Cigarette Tax Noncompliance: Evidence from a National Sample of Littered Cigarette Packs By Shu Wang; David Merriman; Frank J. Chaloupka
  4. Estimating the Value of Public Insurance Using Complementary Private Insurance By Marika Cabral; Mark R. Cullen
  5. Development of Public Spending Structures in the EU Member States By Sebastian Leitner; Robert Stehrer

  1. By: Santanu Gupta; Raghbendra Jha
    Abstract: In a probabilistic voting model with three jurisdictions and residents with different incomes, we analyze inefficiencies in local public good allocation that emerge from trying to satisfy the median voter. The median voter and the rich may gain but the poor lose out. We analyze a uniform tax rate and progressive two and three bracket tax structures. If the government extracts part of tax revenues as political rents and maximizes expected payoff there is a possibility of taxing away all private income with no allocation of public good, if electoral uncertainty is high, especially when the government is risk neutral.
    Keywords: median voter, local public good, income redistribution
    JEL: H11 H50
    Date: 2016
  2. By: Määttänen, Niku; Ropponen, Olli
    Abstract: Abstract We consider the taxation of non-listed companies and their owners in Finland. We analyse how the current highly non-linear dividend taxation influences the allocation of labour and capital across different firms, average labour productivity and the equilibrium wage level. To this end, we use a general equilibrium model of firm investment where firms may have different production technologies. We find that the current tax system is likely to distort resource allocation compared to linear dividend taxation. This works to lower the average labour productivity as well as the general wage level.
    Keywords: Dividend taxation, non-listed companies, productivity
    JEL: D92 G35 H24
    Date: 2016–08–26
  3. By: Shu Wang; David Merriman; Frank J. Chaloupka
    Abstract: We analyze data about cigarette tax compliance from the first national scale littered cigarette packs collection. We code each pack based on whether an appropriate tax had been paid at the location where it was found. Noncompliance across our 132 sample communities ranges from zero to one hundred percent with an appropriately weighted mean of 21 percent. We provide evidence that noncompliance is due to both cross-border shopping and cigarette trafficking. OLS and binomial logit regressions demonstrate that the financial incentive for non-compliance is the most important explanatory variable and has a statistically and quantitatively significant impact on noncompliance.
    JEL: H26 I12
    Date: 2016–08
  4. By: Marika Cabral; Mark R. Cullen
    Abstract: The welfare associated with public insurance is often difficult to quantify. Relative to private insurance, a fundamental difficulty is that public insurance is typically compulsory, so the demand for coverage is unobserved and thus cannot be used to analyze welfare. However, in many public insurance settings, individuals can purchase private insurance to supplement their public coverage. In this paper, we outline an approach to use data and variation from private complementary insurance to quantify welfare associated with several counterfactuals related to compulsory public insurance. Using administrative data from one large firm on employee long-term disability insurance, we then apply this approach empirically to quantify the value of disability insurance among this population. We use premium variation among the employer-provided disability policies to quantify the surplus that would be generated by increasing the replacement rate of disability insurance for our sample population---a counterfactual that is within the set of insurance contracts observed in this setting. In addition, we estimate a lower bound on the surplus generated by public disability insurance in this context. Our findings suggest that public disability insurance generates substantial surplus for this population, and there may be gains to increasing the generosity of coverage in this context.
    JEL: H0 H53 I38 J68
    Date: 2016–08
  5. By: Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Abstract This paper analyses the changes in public spending structures in the EU Member States over the period 1995 to 2013 based on data on government expenditures by function (COFOG) with a focus on social expenditure categories (health, education and social protection spending) expressed in per capita terms in PPPs at constant prices. Expenditures generally increased in real terms, while large differences in spending levels are observed across countries. In EU countries which have been hit hard by the economic crisis cuts have been enacted. The paper also analyses the levels of and changes in individual expenditures on health and education based on COICOP data (Classification of Individual Consumption by Purpose) across EU Member States. In an econometric analysis the effects of public and private expenditures on public health and other social outcomes are examined. Higher levels of public expenditures and lower levels of economic poverty are significantly correlated with superior population health and public welfare.
    Keywords: government sector, public social spending, social outcomes and inequality
    JEL: H11 H41 H51 H52 H53
    Date: 2016–08

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.