nep-pub New Economics Papers
on Public Finance
Issue of 2017‒02‒12
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Tax Policy and Economic Growth: Does It Really Matter? By Donatella Baiardi; Paola Profeta; Riccardo Puglisi; Simona Scabrosetti
  2. Sugar Taxes and Changes in Total Calorie Consumption: A Simple Framework By John Creedy
  3. The deterrence effect of real-world operational tax audits By Gabriele, Mazzolini; Laura, Pagani; Alessandro, Santoro;
  4. The Economic Effects of Public Financing: Evidence from Municipal Bond Ratings Recalibration By Adelino, Manuel; Cunha, Igor; Ferreira, Miguel
  5. Delays in Public Goods By Santanu Chatterjee; Olaf Posch; Dennis Wesselbaum
  6. Healthcare Spending and Utilization in Public and Private Medicare By Vilsa Curto; Liran Einav; Amy Finkelstein; Jonathan D. Levin; Jay Bhattacharya
  7. Fiscal Policy, Income Redistribution and Poverty Reduction in Low and Middle Income Countries By Nora Lustig

  1. By: Donatella Baiardi (Università di Parma); Paola Profeta (Università Bocconi); Riccardo Puglisi (Università di Pavia); Simona Scabrosetti (Università di Pavia)
    Abstract: We challenge the "OECD view" (Arnold et al. 2011) according to which a shift from direct to indirect taxation is associated with higher long-run economic growth. We study the relationships between per capita GDP, overall tax revenue and tax composition (in particular direct vs. indirect taxation). We can replicate the findings in Arnold et al. when focusing on the same sample of countries and time period, but not when adopting more cautious estimates of the standard errors. The results are not robust to adding countries and/or extending the time period under consideration. They also differ in the short- and long-run.
    Keywords: economic growth, taxation, tax mix, OECD countries
    JEL: E62 H20 P50
  2. By: John Creedy (The Treasury)
    Abstract: This paper demonstrates the potential importance, when considering total calorie intake, of allowing for the substitution effects of imposing a selective tax on a commodity having a high sugar content, when non-taxed commodities exist and also have relatively high calorie content. A framework is presented which allows the elasticity of calorie consumption with respect to a price change to be derived. This brings out the role of relative budget shares, relative calorie content of goods and relative prices to be clearly seen, along with own- and cross-price elasticities. Their absolute values for each commodity group are not required. It is demonstrated that the focus of attention needs to be much wider than a simple concentration on the own-price elasticity of demand for the commodity group for which a sumptuary tax is envisaged.
    Keywords: Sugar-sweetened beverage; calorie intake; demand elasticity
    JEL: I10 H2 H31
    Date: 2016–12
  3. By: Gabriele, Mazzolini; Laura, Pagani; Alessandro, Santoro;
    Abstract: We use a large administrative tax-returns panel dataset merged with tax audit database to estimate the effect of real-world operational tax audits on subsequent tax behavior. Our identification strategy and the institutional setting that we consider enable us to address potential endogeneity related to non-random selection of taxpayers to be audited. We find a positive and lasting effect of audits on subsequent reported income. However, in line with theoretical predictions, taxpayers do not increase tax compliance when the tax authority does not assess a positive additional income. Our results are robust to a variety of specifications and samples.
    Keywords: Tax Compliance, Administrative Panel Data, Tax Audits
    JEL: H26 C23 C55
    Date: 2017–02–03
  4. By: Adelino, Manuel; Cunha, Igor; Ferreira, Miguel
    Abstract: We show that municipalities' financial constraints can have a significant impact on local employment and growth. We identify these effects by exploiting exogenous upgrades in U.S. municipal bond ratings caused by Moody's recalibration of its ratings scale in 2010. We find that local governments increase expenditures because their debt capacity expands following a rating upgrade. These expenditures have an estimated local income multiplier of 1.9 and a cost per job of $20,000 per year. Our findings suggest that debt-financed increases in government spending can improve economic conditions during recessions.
    Keywords: Credit ratings; Government Employment; Income; Local Economy; Municipal Bonds; Private Employment; Public Finance
    JEL: E24 G24 G28 H74
    Date: 2017–01
  5. By: Santanu Chatterjee (Department of Economics, University of Georgia, USA); Olaf Posch (Department of Economics, Universitat Hamburg, Germany); Dennis Wesselbaum (Department of Economics, University of Otago, New Zealand)
    Abstract: In this paper, we analyze the consequences of delays and cost overruns typically associated with the provision of public infrastructure in the context of a growing economy. Our results indicate that uncertainty about the arrival of public capital can more than offset its positive spillovers for private-sector productivity. In a decentralized economy, unanticipated delays in the provision of public capital generate too much consumption and too little private investment relative to the first-best optimum. The characterization of the first-best optimum is also affected: facing delays in the arrival of public goods, a social planner allocates more resources to private investment and less to consumption relative to the first-best outcome in the canonical model (without delays). The presence of delays also lowers equilibrium growth, and leads to a diverging growth path relative to that implied by the canonical model. This suggests that delays in public capital provision may be a potential determinant of cross-country differences in income and economic growth.
    Keywords: Public goods, delays, time overrun, cost overrun, implementation lags, fiscal policy, economic growth
    JEL: C61 E62 H41 O41
    Date: 2017–02
  6. By: Vilsa Curto; Liran Einav; Amy Finkelstein; Jonathan D. Levin; Jay Bhattacharya
    Abstract: We compare healthcare spending in public and private Medicare using newly available claims data from Medicare Advantage (MA) insurers. MA insurer revenues are 30 percent higher than their healthcare spending. Healthcare spending is 25 percent lower for MA enrollees than for enrollees in traditional Medicare (TM) in the same county with the same risk score. Spending differences between MA and TM are similar across sub-populations of enrollees and sub-categories of care, with similar reductions for "high value" and "low value" care. Spending differences primarily reflect differences in healthcare utilization; spending per encounter and hospital payments per admission are very similar in MA and TM. Geographic variation in MA spending is about 20 percent higher than in TM, but geographic variation in hospital prices is about 20 percent lower. We present evidence consistent with MA plans encouraging substitution to less expensive care, such as primary rather than specialist care, and outpatient rather than inpatient surgery, and with employing various types of utilization management. Some of the overall spending differences between MA and TM may be driven by selection on unobservables, and we report a range of estimates of this selection effect using mortality outcomes to proxy for selection.
    JEL: H11 H42 H51 I11 I13
    Date: 2017–01
  7. By: Nora Lustig (Department of Economics, Tulane University)
    Abstract: Current policy discussion focuses primarily on the power of fiscal policy to reduce inequality. Yet, comparable fiscal incidence analysis for twenty-eight low and middle income countries reveals that, although fiscal systems are always equalizing, that is not always true for poverty. In Ethiopia, Tanzania, Ghana, Nicaragua, and Guatemala the extreme poverty headcount ratio is higher after taxes and transfers (excluding in-kind transfers) than before. In addition, to varying degrees, in all countries a portion of the poor are net payers into the fiscal system and are thus impoverished by the fiscal system. Consumption taxes are the main culprits of fiscally-induced impoverishment. Net direct taxes are always equalizing and indirect taxes net of subsidies are equalizing in nineteen countries of the twenty-eight. While spending on pre-school and primary school is pro-poor (i.e., the per capita transfer declines with income) in almost all countries, pro-poor secondary school spending is less prevalent, and tertiary education spending tends to be progressive only in relative terms (i.e., equalizing but not pro-poor). Health spending is always equalizing but not always pro-poor. More unequal countries devote more resources to redistributive spending and appear to redistribute more. The latter, however, is not a robust result across specifications.
    Keywords: fiscal incidence, social spending, inequality, poverty, developing countries
    JEL: H22 H5 D31 I3
    Date: 2017–01

This nep-pub issue is ©2017 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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.