nep-pub New Economics Papers
on Public Finance
Issue of 2017‒05‒14
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Public Investment, Taxation and Transfer of Technology By Kollias, Iraklis; Marjit, Sugata; Michelacakis, Nickolas
  2. Using Kinked Budget Sets to Estimate Extensive Margin Responses: Method and Evidence from the Social Security Earnings Test By Damon Jones; Alexander M. Gelber; Daniel W. Sacks; Jae Song
  3. Effects of Individual Resident Tax on the Consumption of Near-Retired Households in Japan By Toshiyuki Uemura; Yoshimi Adachi; Tomoki Kitamura
  4. The Khaldun-Laffer Curve Revisited: A Personal Income Tax-Based Analysis for Turkey By Şen, Hüseyin; Bulut-Çevik, Zeynep Burcu; Kaya, Ayşe

  1. By: Kollias, Iraklis; Marjit, Sugata; Michelacakis, Nickolas
    Abstract: A low wage developing economy (South) is interested in accessing and attracting superior technology from a high wage developed economy (North) with firms having heterogeneous quality of technology. To improve upon the initial market equilibrium, which shows that relatively inefficient technologies will move to the South, the host government invests in infrastructure financed through taxing the foreign firms. We discuss the problem of existence of such a tax-transfer mechanism within a balanced budget framework. We argue that such a policy can increase tax revenue as well as instigate the transfer of better quality technology. It turns out that this policy is more likely to be successful when the production concerns high value, high price products in low wage economies. Our results improve upon the conventional strategy of a tax break.
    Keywords: public investment, tax, high-low wage economy, technology transfer, model
    JEL: D42 H21 O33
    Date: 2017–04
  2. By: Damon Jones (University of Chicago); Alexander M. Gelber (University of California, Berkeley); Daniel W. Sacks (Indiana University); Jae Song
    Abstract: We develop a method for estimating the effect of a kinked budget set on workers' employment decisions, and we use it to estimate the impact of the Social Security Old-Age and Survivors Insurance (OASI) Annual Earnings Test (AET). The AET reduces OASI claimants' current OASI benefits in proportion to their earnings in excess of an exempt amount. Using a Regression Kink Design and Social Security Administration data, we document that the discontinuous change in the benefit reduction rate at the exempt amount causes a corresponding change in the employment rate. We develop conditions in a general setting under which we can use such patterns to estimate the elasticity of the employment rate with respect to the effective average net-of-tax rate. Our resulting elasticity point estimate for the AET is at least 0.49, suggesting that the AET reduces employment by more than one percentage point in the group we study.
    Keywords: social security, elasticity of employment rate, Annual Earnings Test
    JEL: H24 H31 H55 J14 J22
    Date: 2017–05
  3. By: Toshiyuki Uemura (School of Economics, Kwansei Gakuin University); Yoshimi Adachi (Department of Economics, Konan University); Tomoki Kitamura (Finance Research Group, NLI-Research Institute)
    Abstract: We empirically investigate whether the Japanese individual resident tax causes a reduction in the consumption of near-retired households. In contrast to the income tax, the individual resident tax is levied on income from the previous year, and we found it has a negative effect on the consumption of three types of near-retired households: those who maintain regular employment, who move from regular to irregular employment, and who move from employment (regular, irregular, or self) to unemployment. Particularly, for the second type, the individual resident tax caused a larger reduction in household consumption
    Keywords: Individual resident tax, Consumption, Retirement, Life-Cycle model, Panel data
    JEL: D12 D91 E21 H24 H31
    Date: 2017–05
  4. By: Şen, Hüseyin; Bulut-Çevik, Zeynep Burcu; Kaya, Ayşe
    Abstract: The objective of this paper is to revisit as well as empirically examine an old but still discussed postulate, the Khaldun-Laffer curve, on the basis of personal income tax by making use annual time-series data for Turkey for the period 1970-2015. The findings of the paper confirm the validity of the Khaldun-Laffer curve hypothesis. In addition, we infer that the optimal tax rate that maximizes the tax revenue generated from personal income taxation in Turkey is 15.03 percent. This rate is well-below than the current rate which we estimate as 15.37 percent, implying that Turkey’s current tax rate for personal income tax takes place in the prohibitive range of the Khaldun-Laffer curve. These findings suggest that the current tax rate should be lowered and to its optimal level to collect more tax revenue. Getting down the current rate to its revenue-maximizing rate not only would it enable the Turkish authorities to collect more revenues with a relatively lower rate, but also would allow them to minimize the substitution effects of personal income tax while maximizing the income revenues from it.
    Keywords: Tax Policy, Khaldun-Laffer Curve, Laffer Curve, Optimal Tax Rate, Personal Income Tax, Turkey
    JEL: E62 H2 H20
    Date: 2017–04–10

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