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on Public Finance |
| By: | Laurence J. Kotlikoff; Felix Kubler; Andrey Polbin; Simon Scheidegger |
| Abstract: | Anthropogenic climate change produces two conceptually distinct negative economic externalities. The first is an expected path of climate damage. The second, which is this paper's focus, is an expected path of economic risk. To isolate the climate-risk problem, we consider mean-zero, symmetric shocks in our 12-period, overlapping generations model. These shocks impact dirty energy usage (carbon emissions), the relationship between carbon concentration and temperature, and the connection between temperature and damages. Our model exhibits a de minimis climate problem absent its shocks. But due to non-linearities, symmetric shocks deliver negatively skewed impacts, including the potential for climate disasters. As we show, Pareto-improving carbon taxation can dramatically lower climate risk, in general, and disaster risk, in particular. The associated climate-risk tax, which is focused exclusively on limiting climate risk, can be as large or larger than the carbon average-damage tax, which is focused exclusively on limiting average damage. |
| JEL: | F0 F20 H0 H2 H3 J20 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26919&r=all |
| By: | Seyed Mohammadreza Davoodalhosseini |
| Abstract: | Constrained efficiency is characterized in an asset market, subject to search frictions, where sellers are privately informed about the type of their asset. The type determines the opportunity cost of the asset for sellers and the quality of the asset for buyers. The constrained efficient allocation can be implemented using a sales tax schedule. The role of these taxes is to redistribute resources between different types of sellers to relax incentive constraints. The optimal tax schedule strictly increases welfare compared with the laissez-faire equilibrium, can sometimes lead to an allocation that Pareto dominates the equilibrium, and can sometimes lead to the first-best allocation (i.e., taxation can correct all inefficiencies caused by adverse selection). The shape of the optimal tax schedule is also investigated. If the quality of assets for buyers is a monotonic function of the sellers' opportunity cost (e.g., more distressed sellers have lower-quality assets), the schedule requires that the trading of low-quality assets be subsidized and trading of high-quality assets be taxed, although the schedule is not necessarily monotone in the quality or price of the assets. Otherwise, trading of some low-quality assets may be taxed and trading of some high-quality assets may be subsidized. |
| Keywords: | Economic models; Financial markets; Financial system regulation and policies; Market structure and pricing |
| JEL: | D83 E24 G10 J64 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:20-11&r=all |
| By: | Bardt, Hubertus; Dullien, Sebastian; Hüther, Michael; Rietzler, Katja |
| Abstract: | Public investment has been badly neglected in Germany over the past two decades, with the result that the public capital stock no longer meets the standards of a modern economy and is inadequate for the challenges that will be posed by demographic change and Germany's international decarbonisation commitments. In total, the areas of education, transport, communication networks and decarbonisation will require at least an additional €450 billion of public investment or public investment subsidies over the next 10 years, equivalent to approximately €45 billion a year. While this amount is manageable in overall economic terms, it is unrealistic to suggest that the required investment can be financed entirely through the reallocation of existing funds within the budget. Consequently, the German Constitution's debt rules should be supplemented by a Golden Rule allowing for borrowing equivalent to the value of the net investment. The leeway offered by mechanisms such as off-budget entities should be utilised until such a rule has been implemented. A sustained reduction in local government debt will also be important in view of the key role played by the municipalities in public investment, especially in transport infrastructure. |
| JEL: | H54 H60 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwkpps:62020&r=all |
| By: | James S. Cloyne; Òscar Jordà; Alan M. Taylor |
| Abstract: | Unusual circumstances often coincide with unusual fiscal policy actions. Much attention has been paid to estimates of how fiscal policy affects the macroeconomy, but these are typically average treatment effects. In practice, the fiscal “multiplier” at any point in time depends on the monetary policy response. Using the IMF fiscal consolidations dataset for identification and a new decomposition-based approach, we show how to evaluate these monetary-fiscal effects. In the data, the fiscal multiplier varies considerably with monetary policy: it can be zero, or as large as 2 depending on the monetary offset. We show how to decompose the typical macro impulse response function into (1) the direct effect of the intervention on the outcome; (2) the indirect effect due to changes in how other covariates affect the outcome when there is an intervention; and (3) a composition effect due to differences in covariates between treated and control subpopulations. This Blinder-Oaxaca-type decomposition provides convenient way to eva |
| JEL: | C54 C99 E32 E62 H20 H5 N10 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26939&r=all |
| By: | Tatyana Deryugina (Center for Business and Public Policy, College of Business, University of Illinois at Urbana-Champaign); Frances C. Moore (Environmental Science and Policy, University of California Davis); Richard S.J. Tol (Department of Economics, University of Sussex, Falmer, United Kingdom) |
| Abstract: | The Coase Theorem has a central place in the theory of environmental economics and regulation. But its applicability for solving real-world externality problems remains debated. In this paper, we first place this seminal contribution in its historical context. We then survey the experimental literature that has tested the importance of the many, often tacit assumptions in the Coase Theorem in the laboratory. We discuss a selection of applications of the Coase Theorem to actual environmental problems, distinguishing between situations in which the polluter or the pollutee pays. While limited in scope, Coasian bargaining over externalities offers a pragmatic solution to problems that are difficult to solve in any other way. |
| Keywords: | Coase Theorem, externalities, property rights, bargaining |
| JEL: | C78 H23 Q50 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:0820&r=all |
| By: | Thomas R. Tørsløv; Ludvig S. Wier; Gabriel Zucman |
| Abstract: | We show that the fiscal authorities of high-tax countries can lack the incentives to combat profit shifting to tax havens. Instead, they have incentives to focus their enforcement efforts on relocating profits booked by multinationals in other high-tax countries, crowding out the enforcement on transactions that shift profits to tax havens, and reducing the global tax payments of multinational companies. This incentive problem can help explain why profit shifting to low-tax countries persists despite its tax revenue cost for high-tax countries. The predictions of our model are motivated and supported by the analysis of two new datasets: the universe of transfer price corrections conducted by the Danish tax authority, and new cross-country data on international tax enforcement. Both of these datasets shows that that tax authorities in high-tax countries focus their transfer pricing enforcement effort on correcting transactions with other high-tax countries rather than transactions involving tax havens. |
| JEL: | H25 H26 H87 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26899&r=all |
| By: | Saptorshee Kanto Chakraborty (University of Ferrara, Italy); Massimiliano Mazzanti (University of Ferrara; SEEDS, Italy) |
| Abstract: | Carbon taxation has been suggested among the market based policies to tackle climate change since the early 90’s, often associated to ecological tax reforms rationales. Before the advent of emission trading in the EU, some countries introduced forms of carbon taxation, which is still used to deal with non EU ETS sectors. Due to this historical evolution of environmental policies over the last decades, in presence of a ‘federal system’ that assigns to EU countries the governance of energy and fiscal issues, an heterogeneous set of country driven carbon/energy policy settings is present, which can determine effects on growth and trade. We investigate the possible existence of asymmetries among the European Carbon area countries reaction to the policy adoption responsible to combat climate change via carbon usage reduction. |
| Keywords: | carbon taxation, spillovers, trade |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:srt:wpaper:0420&r=all |