nep-pub New Economics Papers
on Public Finance
Issue of 2020‒06‒29
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The impact of effective corporate tax rates on investment By Thomas Goda; Sebastián Ballesteros,
  2. Corrective Tax Design and Market Power By O'Connell, Martin; Smith, Kate
  3. Forecasting Consumption Spending Using Credit Bureau Data By Dean Croushore; Stephanie M. Wilshusen
  4. How do the Tax Burden and the Fiscal Space in Latin America look like? Evidence through Laffer Curves By Ignacio Lozano-Espitia; Fernando Arias-Rodríguez

  1. By: Thomas Goda; Sebastián Ballesteros,
    JEL: F21 F32 O11
    Date: 2020–06–25
  2. By: O'Connell, Martin; Smith, Kate
    Abstract: We study the design of taxes aimed at limiting externalities in markets characterized by differentiated products and imperfect competition. In such settings policy must balance distortions from externalities with those associated with the exercise of market power; the optimal tax rate depends on the nature of external harms, how the degree of market power among externality generating products compares with non-taxed alternatives, and how consumers switch across these products. We apply the framework to taxation of sugar sweetened beverages. We use detailed data on the UK market for drinks to estimate consumer demand and oligopoly pricing for the differentiated products in the market. We show the welfare maximizing tax rate leads to welfare improvements over 2.5 times as large as that associated with policy that ignores distortions associated with the exercise of market power.
    Keywords: corrective tax; externality; market power; oligopoly
    JEL: D12 D43 D62 H21 H23 L13
    Date: 2020–04
  3. By: Dean Croushore; Stephanie M. Wilshusen
    Abstract: This paper considers whether the inclusion of information contained in consumer credit reports might improve the predictive accuracy of forecasting models for consumption spending. To investigate the usefulness of aggregate consumer credit information in forecasting consumption spending, this paper sets up a baseline forecasting model. Based on this model, a simulated real-time, out-of-sample exercise is conducted to forecast one-quarter ahead consumption spending. The exercise is run again after the addition of credit bureau variables to the model. Finally, a comparison is made to test whether the model using credit bureau data produces lower or higher root-mean-squared-forecast errors than the baseline model. Key features of the analysis include the use of real-time data, out-of-sample forecast tests, a strong parsimonious benchmark model, and data that span more than two business cycles. Our analysis reveals evidence that some credit bureau variables may be useful in improving forecasts of consumption spending in certain subperiods and for some categories of consumption spending, especially for services. Also, the use of credit bureau variables sometimes makes the forecasts significantly worse by adding noise into the forecasting models.
    Keywords: consumption spending; real-time data; consumer credit information; forecasting
    JEL: C53 C55 D12 D14 E27
    Date: 2020–06–04
  4. By: Ignacio Lozano-Espitia (Banco de la República de Colombia); Fernando Arias-Rodríguez (Banco de la República de Colombia)
    Abstract: How much fiscal space do Latin American countries have to increase their tax burdens in the long term? This paper provides an answer through Laffer curves estimates for taxes on labor, capital, and consumption for the six largest emerging economies of the region: Argentina, Brazil, Chile, Colombia, Mexico, and Peru. Estimates are made using a neoclassical growth model with second-generation human capital and employing data from the national accounts system for the period from 1994 to 2017. Our findings allow us to compare the recent effective tax rates on factor returns against those which would maximize the government's revenues, and therefore to derive the potential tax-related fiscal space. Results suggest that joint fiscal space on labor and capital taxes would reach 6.5% of GDP for the region, on average, and that there are important differences among the countries. **** RESUMEN: ¿Cuánto espacio fiscal tienen los países de América Latina para incrementar su carga tributaria en el largo plazo? Este documento ofrece una respuesta mediante la estimación de las Curvas de Laffer para los impuestos al trabajo, al capital y al consumo de las economías más grandes de la región: Argentina, Brasil, Chile, Colombia, México y Perú. Los cálculos se realizan empleando un modelo de crecimiento con capital humano de 2da generación, que es calibrado para cada país con información de las cuentas nacionales para el período 1994 a 2017. Los resultados nos permiten comparar las tarifas efectivas recientes con aquellas que maximizarían los recaudos del gobierno, para así derivar el espacio fiscal de largo plazo. Nuestros hallazgos sugieren que el espacio fiscal conjunto sobre los impuestos al trabajo y al capital alcanzaría el 6.5% del PIB de la región, en promedio, y que existen diferencias importantes entre los países.
    Keywords: Laffer curves; fiscal policy; taxes on consumption, taxes on labor and capital incomes.Curvas de Laffer, política fiscal, impuestos sobre el consumo, las rentas laborales y los rendimientos del capital.
    JEL: E13 E62 H20 H30 H60
    Date: 2020–05

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