nep-pub New Economics Papers
on Public Finance
Issue of 2018‒02‒05
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. International Tax Reforms with Flexible Prices By Assaf Razin; Efraim Sadka
  2. Crime, Human Capital, and the Impact of Different Taxation By King Yoong Lim; Pengfei Jia; Ali Raza
  3. Do Corporate Income Tax Rates Cuts Create Jobs? The European Experience By Antonio Estache; Brigitta Gersey

  1. By: Assaf Razin; Efraim Sadka
    Abstract: The growing spread of globalization creates a genuine need for international tax reforms. In this we establish the neutrality of border-tax adjustments of the income tax; the welfare dominance of residence-based over source-based income taxation, albeit at the cost of a larger trade deficit; and the ineffectiveness of non-transitory border taxes as a means for reducing the trade deficit.
    JEL: F0 G20 H2
    Date: 2018–01
  2. By: King Yoong Lim; Pengfei Jia; Ali Raza
    Abstract: This paper presents a macroeconomic model with crime, human capital, and three taxation policies (consumption, labour, and capital income taxes). In an extension, we endogenize the probability of escaping punishment to depend on government expenditure on public security/police. The model is solved analytically and numerically to derive propositions, which are then verified empirically using cross-country data. Compared to the literature, we find a much higher threshold probability. Above the threshold, the equilibrium crime rate is positively related to the escape probability. In addition, above this threshold level, a rise in capital income tax or a decline in labour income tax would lead to a higher equilibrium crime rate, if the taxes are modelled using marginal tax rates. There also appears to be empirical supports where the equilibrium human capital level depends positively on consumption tax. Lastly, when the probability is endogenized, there also exists a threshold level for the spending on public security/police, above which consumption tax and capital income tax have positive e¤ects on the equilibrium level of human capital.
    Keywords: Apprehension risk, Crime, Human Capital, Police Spending, Taxation
    JEL: H20 H59 K42 O41
    Date: 2018
  3. By: Antonio Estache; Brigitta Gersey
    Abstract: The paper assesses the impact of changes in the effective corporate tax rate on the unemployment rate in Europe between 1999 and 2014. The results suggest, for this sample, that a 1% decrease in the effective tax rate was associated with a 0.34% increase in the unemployment rate on average. This means that, in the region, lower corporate income taxes were linked to the replacement of labor by capital. This this substitution effect has been stronger than the output effect conservative administrations tend to focus on in their motivation for the rates cut. The substitution may be needed to achieved longer run growth payoffs, but these results suggest that transition cost are likely to be paid by workers and these should be addressed jointly with the corporate tax cut decisions.
    Keywords: corporate taxation, unemployment rate, fixed effects, EU panel data
    Date: 2018–01

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