nep-pub New Economics Papers
on Public Finance
Issue of 2017‒01‒22
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Tax Capacity and Growth; Is there a Tipping Point? By Vitor Gaspar; Laura Jaramillo; Philippe Wingender
  2. Child-Related Transfers, Household Labor Supply and Welfare By Guner, Nezih; Kaygusuz, Remzi; Ventura, Gustavo
  3. Does Uncertainty Deter Provision of Public Goods? By Béatrice Boulu-Reshef; Samuel H. Brott; Adam Zylbersztejn
  4. Habit Formation and the Pareto-Efficient Provision of Public Goods By Aronsson, Thomas; Schöb, Ronnie
  5. Behavioural types in public goods games: A re-analysis by hierarchical clutering By Francesco Fallucchi; R. Andrew Luccasen; Theodore L. Turocy
  6. Lessons for US Business Tax Reform from International Tax Rates By Gary Clyde Hufbauer; Zhiyao (Lucy) Lu
  7. Redistribution through taxes and deductions. A decomposition analysis with administrative tax data from Switzerland By Oliver Hümbelin; Rudolf Farys
  8. The efficiency of Italian pension funds: costs, membership, assets By Di Gialleonardo, Luca; Mare, Mauro

  1. By: Vitor Gaspar; Laura Jaramillo; Philippe Wingender
    Abstract: Is there a minimum tax to GDP ratio associated with a significant acceleration in the process of growth and development? We give an empirical answer to this question by investigating the existence of a tipping point in tax-to-GDP levels. We use two separate databases: a novel contemporary database covering 139 countries from 1965 to 2011 and a historical database for 30 advanced economies from 1800 to 1980. We find that the answer to the question is yes. Estimated tipping points are similar at about 12¾ percent of GDP. For the contemporary dataset we find that a country just above the threshold will have GDP per capita 7.5 percent larger, after 10 years. The effect is tightly estimated and economically large.
    Keywords: Taxation;Development;Tax revenues;Economic growth;Time series;Databases;income per capita, taxation, development, multiple equilibria
    Date: 2016–12–02
  2. By: Guner, Nezih; Kaygusuz, Remzi; Ventura, Gustavo
    Abstract: What are the macroeconomic and welfare effects of expanding transfers to households with children in the United States? How do childcare subsidies compare to alternative policies? We answer these questions in a life-cycle equilibrium model with household labor-supply decisions, skill losses of females associated to non participation, and heterogeneity in terms of fertility, childcare expenditures and access to informal care. We consider the expansion of transfers that are contingent on market work -- childcare subsidies and Child and Dependent Care Tax Credits (CDCTC) -- versus those that are not -- Child Tax Credits (CTC). We find that expansions of transfers of the first group have substantial positive effects on female labor supply, that are largest at the bottom of the skill distribution. Universal childcare subsidies at a 75% rate lead to long-run increases in the participation of married females of 8.8%, while an equivalent expansion of the CTC program leads to the opposite -- a reduction of about 2.4%.We find that welfare gains of newborn households are substantial and up to 2.3% under the CDCTC expansion. The expansion of none of the existing programs, however, receives majority support at the time of its implementation. Our findings show substantial heterogeneity in welfare effects, with a small fraction of households —young and poorer households with children — who gain significantly while many others lose.
    Keywords: Child-Related Transfers; childcare; Household Labor Supply
    JEL: E62 H24 H31
    Date: 2017–01
  3. By: Béatrice Boulu-Reshef (Centre d'Economie de la Sorbonne); Samuel H. Brott (Berkeley Research Group, LLC, Washington); Adam Zylbersztejn (GATE L-SE, Université Lumière Lyon 2)
    Abstract: We study a finitely repeated public goods game (based on the voluntary contribution mechanism) played under complete uncertainty about the marginal benefit of the public good relative to the private consumption (commonly known as the marginal per capita return: neither one's marginal per capita return nor other players' marginal per capita returns are known at the time of decision-making. We show that contributions are equivalent when the rate of return is predetermined and when it is uncertain, and display a similar decay over time. Combined with the previous experimental findings, our results suggest that the cooperation in public goods games is sensitive to the source of uncertainty about marginal per capita return
    Keywords: Cooperation; uncertainty; voluntary contribution mechanism; public good; expected return
    JEL: H41 D81 C91 C92
    Date: 2017–01
  4. By: Aronsson, Thomas (Department of Economics, Umeå University); Schöb, Ronnie (Freie Universität Berlin)
    Abstract: This paper examines the implications of habit formation in private and public consumption for the Pareto-efficient provision of public goods, based on a two-period model with nonlinear taxation. If the public good supply is time-invariant, the presence of habit formation generally alters the standard rules for public good provision. In contrast, if the public good is a flow-variable such that the government directly decides on the level of the public good in each period, habit formation leads to a modification of the first best Samuelson condition only if the degrees of habituation differ for private and public consumption. Since habit formation affects the incentives to relax the self-selection constraint through public good provision, however, habituation alters the second-best analogue to the Samuelson condition also when the degrees of habituation in private and public consumption coincide.
    Keywords: Public good provision; Samuelson condition; habit formation; optimal taxation
    JEL: D60 H21 H41
    Date: 2017–01–16
  5. By: Francesco Fallucchi (University of East Anglia); R. Andrew Luccasen (Mississippi University for Women); Theodore L. Turocy (University of East Anglia)
    Abstract: We re-analyse participant behaviour in standard economics experiments studying voluntary contributions to a public good. Previous approaches were based in part on a priori models of decision-making, such as maximising personal earnings, or reciprocating the behaviour of others. Many participants however do not conform to one of these models exactly, requiring ad hoc adjustments to the theoretical baselines to identify them as belonging to a given behavioural type. We construct a typology of behaviour based on a similarity measure between strategies using hierarchical clustering analysis. We identify four clearly distinct behavioural types which together account for over 90% of participants in six experimental studies. The resulting type classification distinguishes behaviour across groups more consistently than previous approaches.
    JEL: C65 C71 H41
    Date: 2017–01–12
  6. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); Zhiyao (Lucy) Lu (Peterson Institute for International Economics)
    Abstract: With the election of Donald Trump and a Republican Congress, business tax reform seems a likely bet for 2017. International tax rate comparisons using a new dataset from Thomson Reuters highlight the unfavorable disparity between US corporate tax rates and practices in other advanced economies: The US actual average tax rate, calculated from the dataset at 31.1 percent—even after taking various credits, deductions, and “loopholes” into consideration—is higher than the simple average of foreign groups at 28.1 percent. Comprehensive corporate tax reform, headlined by a cut in the corporate tax rate, should be a priority for the incoming administration and Congress to spur investment and make the United States a more attractive location both for domestic and foreign investment. However, fiscal deficits associated with business tax reform, together with the stimulus to investment, will likely drive up the dollar exchange rate and increase the US trade deficit unless strong offsetting measures are part of the reform package.
    Date: 2017–01
  7. By: Oliver Hümbelin; Rudolf Farys
    Abstract: This empirical analysis of administrative tax data from the Swiss Canton of Aargau (2001 to 2011), shows the potential that this type of data has to grant us a more complete picture of the redistributive effects of visible (tax rates) and hidden (tax deductions) instruments of the welfare state. In terms of methodology, Gini-based redistributive effects are decomposed into effects of mean tax rate, progression and reranking effects. The study's findings show a declined impact of direct taxes, which is attributable to reduced taxation on the community and cantonal but not the state level. At the same time, tax deductions drastically hamper the redistributive effect of taxes, primarily through deductions of wealth expenses, interest and extra-mandatory payments to the pension scheme, each of which leads to a substantial tax relief for high income earners.
    Keywords: redistribution effects, direct taxes, tax deductions, tax competition, Switzerland
    JEL: D31 D6 H23 H24
    Date: 2017–01–15
  8. By: Di Gialleonardo, Luca; Mare, Mauro
    Abstract: The scope of the supplementary pension funds is to provide workers with a satisfactory standard of living at retirement. An efficient and affordable system of pension funds is therefore an important factor to realize the workers’ aims of maximizing the value of their pension wealth. A rationalization of the industry structure, leading to the creation of bigger pension funds, that should be better able to take advantage of economies of scale, might contain the costs sustained by participants. In this paper, and for the first time (to the best of our knowledge), we attempt to carry out an econometric study of the principal factors which determine the costs level and the efficiency of Italian pension funds. Based on an original dataset of Italian closed pension funds in the 2007-2013 period, this work runs a panel estimate of the impact of dimension (the number of participants) on administrative costs. Our results highlight the existence of important overall economies of scale and that in those funds characterized by the outsourcing of some activities, the administrative costs result smaller. We adopt the same dataset also for the open pension funds, in order to evaluate the link between financial costs and the sum of resources under management. The estimates do not confirm the existence of particular economies of scale, probably due to the distinctive traits of the complementary pension funds industry in Italy. The commission fees of the financial management of pension funds, in particular of closed type, are much lower than those relative to other financial services and also to other types of foreign pension funds. This situation, fuelled by competition among financial managers, has gone on for some time, thus further limiting the ways in which savings can be made through an increase in the volume of the assets managed.
    Keywords: social security, pension funds, efficiency
    JEL: G23 H55
    Date: 2016–06

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