nep-pub New Economics Papers
on Public Finance
Issue of 2018‒08‒27
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. On Public Education Spending under Nonlinear Income Taxation By Alan Krause
  2. Child care, parental labor supply and tax revenue By Martin Eckhoff Andresen; Tarjei Havnes
  3. Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence By Arik Levinson
  4. Taxing capital and labor when both factors are imperfectly mobile internationally By Hippolyte D'Albis; Agnès Bénassy-Quéré; Amélie Schurich-Rey
  5. Notching R&D Investment with Corporate Income Tax Cuts in China By Zhao Chen; Zhikuo Liu; Juan Carlos Suárez Serrato; Daniel Yi Xu

  1. By: Alan Krause
    Abstract: This paper examines a model in which public education spending is skill specific. It may be directed towards low-skill or high-skill individuals, increasing their respective skills and wages. Education spending is financed by nonlinear income taxation. We show that the tax and education-spending policy most preferred by low-skill individuals may include more education spending for high-skill individuals than for themselves. The tax and education-spending policy most preferred by high-skill individuals has no spending on education for low-skill individuals. Our results provide support for previous findings that education policy should favour the high-skilled, despite the government's redistributive goals.
    Keywords: Public education, nonlinear income, taxation
    JEL: H21 H42
    Date: 2018–08
  2. By: Martin Eckhoff Andresen; Tarjei Havnes (Statistics Norway)
    Abstract: We study the impact of child care for toddlers on the labor supply of mothers and fathers in Norway. For identification, we exploit the staggered expansion across municipalities following a large reform from 2002. Our IV-estimates indicate that child care use causes an increase in the labor supply of mothers. Results suggest that cohabiting mothers move towards full time employment, while single mothers move to part time. Meanwhile, we find no impact for fathers or grandparents. We also find an increase in the taxes paid from cohabiting mothers, lending some support to the argument that parts of the cost of child care is offset by increased taxes.
    Keywords: Child care; female labor supply; tax revenue; instrumental variables
    JEL: H24 H52 J13 J22
    Date: 2018–08
  3. By: Arik Levinson (Department of Economics, Georgetown University)
    Abstract: Economists endorse taxes as a cost-effective means of reducing pollution. But policymakers raise concerns about their regressivity, or disproportional burden on poorer families, preferring instead to regulate energy efficiency. I first show that in theory, energy efficiency standards are more regressive than energy taxes, not less. I then provide an example using data on automobiles in the United States. Taxing gas would be less regressive than regulating the fuel economy of cars if the two policies are compared on a revenue-equivalent basis.
    Keywords: Pigouvian tax, performance standards, pollution
    JEL: H23
    Date: 2018–08–15
  4. By: Hippolyte D'Albis (PSE - Paris School of Economics); Agnès Bénassy-Quéré (PSE - Paris School of Economics); Amélie Schurich-Rey (UP1 - Université Panthéon-Sorbonne)
    Abstract: We revisit the standard theoretical model of tax competition to consider imperfect mobility of both capital and labor. We show that the mobility of one factor affects the taxation of both factors, and that the race-to-the-bottom narrative (with burden shifting) applies essentially to capital exporting countries. We test our predictions for a panel of 28 OECD countries over 1997-2014. We find capital taxation to be less sensitive to capital mobility in net capital importing countries than for net capital exporters. We also show that labor mobility has a negative impact on labor taxation but a positive impact on capital taxation. Finally, we show evidence of a non-linear effect of labor mobility on capital taxation depending on the level of skills.
    Keywords: tax competition,globalization,imperfect factor mobility
    Date: 2018–07
  5. By: Zhao Chen; Zhikuo Liu; Juan Carlos Suárez Serrato; Daniel Yi Xu
    Abstract: We analyze the effects of a Chinese policy that awards substantial corporate tax cuts to firms that increase R&D investment over a given threshold, or notch. We exploit this quasi-experimental variation with administrative tax data in order to shed light on longstanding questions on the effects of fiscal incentives for R&D. We find large responses of reported R&D using a cross-sectional "bunching" estimator that is new to the R&D literature. We also find significant increases in firm-level productivity, even though about 30% of the increase in R&D is due to relabeling of administrative expenses. Anchored by these reduced-form effects, we estimate a structural model of R&D investment and relabeling that recovers a 9.8% return to R&D. We simulate alternative policies and show that firm selection into the program and the relabeling of R&D determine the cost-effectiveness of the policy, and the effects on productivity growth.
    JEL: H2 O3
    Date: 2018–06

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