nep-pub New Economics Papers
on Public Finance
Issue of 2022‒10‒17
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Public finance in the era of the COVID-19 crisis By Agrawal, David R.; Bütikofer, Aline
  2. Aid, taxes, and government spending: A heterogeneous co-integrated panel analysis By Abrams M.E. Tagem
  3. Public Finances Solvency in the Euro Area: True or False? By António Afonso; José Carlos Coelho
  4. Labour supply responses to income tax changes in Spain. By Antonio Cutanda; Juan A. Sanchis
  5. Tax incentives for high skilled migrants: evidence from a preferential tax scheme in the Netherlands By Lisa Marie Timm; Massimo Giuliodori; Paul Muller
  6. Revealing 21 per cent of GDP in hidden assets: Evidence from Argentina's tax amnesties By Juliana Londoño-Vélez; Dario Tortarolo

  1. By: Agrawal, David R.; Bütikofer, Aline
    Abstract: The COVID-19 crisis poses new policy challenges and has spurred new research agendas in public economics. In this article, we selectively reflect on how the field of public economics has been shaped by the COVID-19 pandemic and discuss several areas where more research is necessary. We highlight major changes and inequalities in the labor market and K-12 education, in addition to discussing how technological change creates new challenges for the taxation of income and consumption. We discuss various policy responses to these challenges and the role of fiscal federalism in the context of worldwide crises. Finally, we summarize the key issues discussed at the 2021 International Institute of Public Finance Congress and the papers published in this special issue.
    Keywords: public economics,labor economics,education,tax,expenditure,COVID-19,inequality,fiscal federalism
    JEL: H0 J0
    Date: 2022
  2. By: Abrams M.E. Tagem
    Abstract: A substantial amount of aid to developing countries is given to the government, or goes through the budget, meaning it should have an impact on government fiscal behaviour (particularly on government spending). The few existing empirical studies on the effects of aid on government spending neglect variable time-series properties, cross-country (recipient) heterogeneity, and the potential for cross-country correlation.
    Keywords: Aid, Cross-section dependence, Heterogeneity, Tax revenue, Foreign aid
    Date: 2022
  3. By: António Afonso; José Carlos Coelho
    Abstract: We assess public finances solvency for Euro Area countries using quarterly data between 1999Q1 and 2020Q4. Through a country-by-country analysis, the answer to the title question is true. For most countries, (i) the primary budget balance reacts positively to the lagged public debt ratio and past primary government balances contribute to the reduction of the public debt ratio, indicating a Ricardian fiscal regime. Furthermore, in a panel framework: (ii) the response of revenues to government expenditures is higher from 2010 onwards, and, for higher average public debt ratios, the response is lower, while (iii) the response of the primary government balance to the lagged public debt ratio is lower from 2010 onwards and is higher for higher average public debt ratios; (iv) past primary budget balances allow the public debt ratio to be reduced, especially before 2010 and in countries whose average public debt ratio is between 60 and 90% of GDP. Using a rolling window method, we find that (v) fiscal sustainability coefficients are higher the higher the lagged public debt ratios, fiscal rule indexes and sovereign ratings. Conversely, after 2010 and in periods of legislative elections, those coefficients are lower.
    Keywords: fiscal sustainability, primary budget balance, public debt, panel data, rolling windows, Euro Area, quarterly fiscal data
    JEL: C23 H61 H63 E62
    Date: 2022
  4. By: Antonio Cutanda (Universidad de Valencia, Valencia, Spain. ORCID number: 0000-0003-2066-4632); Juan A. Sanchis (Universidad de Valencia and ERICES, Valencia, Spain. ORCID number: 0000-0001-9664-4668)
    Abstract: This paper simulates the response of the Spanish labour supply to income tax changes using estimates for the intertemporal elasticity of substitution of leisure. These elasticities are calculated using a pseudo-panel built combining information of the EPA and of the ECPF, from 1987 to 1997. Our findings suggest that income tax changes can have an impact on Spanish labour supply, though the effects would be minor. We also uncover that this labour response differs across men and women, as well as between permanent and fixed-term contract workers. And that the responses differ depending on the age of the worker.
    Keywords: Labour Supply; Labour Income Tax; Intertemporal Elasticity of Substitution of Leisure; Simulations
    JEL: E62 H24 H31 J22
    Date: 2022–09
  5. By: Lisa Marie Timm (University of Amsterdam); Massimo Giuliodori (University of Amsterdam); Paul Muller (Vrije Universiteit Amsterdam)
    Abstract: This paper examines to what extent an income tax exemption affects international mobility and wages of skilled immigrants. We study a preferential tax scheme for foreigners in the Netherlands, which introduced an income threshold for eligibility in 2012 and covers a large share of the migrant income distribution. By using detailed administrative data ina difference-in-differences setup, we find that the number of migrants in the income range closely above the threshold more than doubles, whereas there is little empirical support for a decrease of migration below the threshold. Our results indicate that these effects are driven mainly by additional migration, while wage bargaining responses are fairly limited. We conclude that the preferential tax scheme is highly effective in attracting more skilled migrants
    Keywords: international migration, income tax benefits, wage bargaining, bunching.
    JEL: F22 J61 H24 H31
    Date: 2022–09–27
  6. By: Juliana Londoño-Vélez; Dario Tortarolo
    Abstract: This paper studies the effectiveness of tax amnesties and their impacts on capital taxation and public spending. We leverage rich policy variation from Argentina, where left- and right-wing governments implemented multiple programmes and achieved varying success. After numerous failed enforcement efforts, its 2016 scheme reportedly revealed assets worth 21 per cent of GDP—the world's most successful tax amnesty. We use detailed data from fiscal tabulations spanning two decades and obtain three key results.
    Keywords: Tax evasion, Argentina, Taxation
    Date: 2022

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