Microsimulation as a tool for evaluating redistribution policies

During the last 20 years, microsimulation models have been increasingly applied in qualitative and quantitative analysis of public policies. This paper discusses microsimulation techniques and their theoretical background as a tool for the analysis of public policies. It next analyses basic principles for using microsimulation models and interpreting their results, with emphasis on tax incidence, redistribution and poverty analysis. It then discusses social welfare analysis permitted by microsimulation techniques and points to the limits of present approaches and some directions for future developments.     

Political–economic equilibrium when parties represent constituents: The unidimensional case

 A political–economic environment is studied in which two parties, representing different constituencies of citizens, compete over a proportional tax rate to be levied on private endowments, to finance a public good. Although parties know the distribution of citizen traits (preferences and endowments), they are uncertain about the distribution of traits among the citizens who will turn up at the polls. This uncertainty engenders an endogenously derived function π(t ₁, t ₂) giving the probability that any one tax policy t ₁ will defeat another t ₂ in the election. Equilibrium existence theorems are proved, and the nature of equilibrium is compared with the equilibrium that exists when Downsian parties (ones whose objective is to maximize the probability of victory) face uncertainty. Both constituency-representing parties and uncertainty are needed to generate equilibria in which parties propose different policies. Received: 4 April 1995/Accepted: 2 April 1996     

Factory women,redundancy and the search for work: toward a reconceptualisation of employment and unemployment

A number of social scientists (see for example, Allen et al., 1986; Brown, 1984; Purcell, 1985; Purcell et al., 1986; Roberts et al., 1985) have drawn attention to the way in which patterns of working have changed radically in recent years suggesting that we need to rethink and reconceptualise with regard to work, employment and unemployment. This paper examines these issues in Sweden where recession in the early eighties and economic restructuring, similar to the experience in other Western countries, have affected individuals’relation to the labour market. It is our view that the effects of these developments (have) affect(ed) women and immigrants differently. It is furthermore our contention that welfare state policies related to the functioning of the labour market (inadvertently) play a role in the maintenance of inequality.     

Tax–benefit revealed social preferences

This paper inverts the usual logic of applied optimal income taxation. It starts from the observed distribution of income before and after redistribution and corresponding marginal tax rates. Under a set of simplifying assumptions, it is then possible to recover the social welfare function that would make the observed marginal tax rate schedule optimal. In this framework, the issue of the optimality of an existing tax–benefit system is transformed into the issue of the shape of the social welfare function associated with that system and whether it satisfies elementary properties. This method is applied to the French redistribution system with the interesting implication that the French redistribution authority may appear, under some plausible scenario concerning the size of the labor supply behavioral reactions, non Paretian (e.g. giving negative marginal social weights to the richest class of tax payers).     

Income distribution in discrete hours behavioural microsimulation models: An illustration

In tax microsimulation models which predict labour supply using a probabilistic discrete hours approach, the analysis of the distribution of income is difficult because, even for a small sample with a modest range of labour supply points, the range of possible combinations over the sample is extremely large. This paper demonstrates the use of a pseudo income distribution, where the probability of a particular labour supply value occurring (standardised by the population size) is used to refer to a particular position in the pseudo income distribution. The superior performance of the pseudo approach compared to using the expected income or taking few draws from the possible set of distributions is illustrated by a simulation example for sole parents in Australia, in which the whole social security system is abolished. The example shows further that even if sole parents could move freely into the labour force, they do not manage to compensate fully or even close to fully for their loss of income when no benefit payments are available.     

HOW DOES GLOBALIZATION AFFECT THE IMPLICIT TAX RATES ON LABOR INCOME,CAPITAL INCOME,AND CONSUMPTION IN THE EUROPEAN UNION?

This article analyzes the effects of globalization on implicit tax rates (ITRs) on labor income, capital income, and consumption in the EU15 and Central and Eastern European New Member States (CEE NMS). We find supportive evidence for an increase in the ITR on labor income in the EU15, but no effect on the ITR on capital income. There is evidence of convergence in terms of the ITR on consumption, as countries with higher than average ITR on consumption respond to globalization by decreasing their tax rates. There are important differences among the welfare regimes within the EU15. Social‐democratic countries have decreased the tax burden on capital, but increased that on labor due to globalization. Globalization exerts a pressure to increase taxes on labor income in the conservative and liberal regimes as well. Taxes on consumption decrease in response to globalization in the conservative and social‐democratic regimes. In the CEE NMS, there is no effect of globalization on the ITR on labor and capital income, but we find a negative impact on the ITR on consumption in the CEE NMS with higher than average ITR on consumption. (JEL H23, H24, H25, F19, F21)     

Book Reviews

Books reviewed: Charles Antaki and Sue Widdicombe (eds.)., Identities in Talk Tove Skutnab‐Kangas, Linguistic Genocide in Education–or Worldwide Diversity and Human Rights? Marnie Holborow, The Politics of English: A Marxist View of Language Clare Mar‐Molinero, The Spanish Speaking World: A Practical Introduction to Sociolinguistic Issues Gail E. Hawisher and Cynthia L. Selfe (eds.), Global Literacies and the World‐Wide‐Web Justine Coupland (ed.), Small Talk Francesca Bargiela‐Chiappini and Catherine Nickerson (eds.)., Writing Business: Genres, Media and Discourses Geoffrey Lewis, The Turkish Language Reform: A Catastrophic Success Kenneth J. Gergen, An Invitation to Social Construction James Milroy and Lesley Milroy, Authority in Language: Investigating Standard English Linda Thomas and Sha¨n Wareing, Language, Society and Power: An Introduction     

Book Reviews/Comptes rendus

Book reviewed in this article: Helen c. Abell, Rural Families and Their Homes. Carle C. Zimmerman and Garry W. Moneo, The Prairie Community System Anthony H. Richmond, Research Report: Ethnic Residential Segregation in Metropolitan Toronto. Carle C. Zimmerman and Richard E. Duwors (eds.), Sociology of Underdevelopment. D. I. Davies and Kathleen Herman (eds.), Social Space: Canadian Perspectives. Thomas A. Hockin (ed.), Apex of Power: The Prime Minister and Political Leadership in Canada Harold Kalant and Oriana Josseau Kalant, Drugs, Society and Personal Choice. C. F. Grindstaff, C. L. Boydell, and P. C. Whitehead (eds.), Population Issues in Canada. W. E. Mann (ed.), Social Deviance in Canada. Jean Leonard Elliott (ed.), Minority Canadians, volume 1. Native Peoples. Jean Leonard elliott (ed.), Minority Canadians, volume 2. Immigrant Groups. John R. Hofley and Paul N. Geisel, Men on Relief. A Study of 440 Unemployed Men Receiving Social Assistance in Edmonton, Winnipeg, and Ottawa. Michael Bliss, ed., The Wretched of Canada. Letters to R. B. Bennett 1930–1935.     

Consequences, opportunities, and procedures

This paper reflects on consequentialism which underlies the traditional normative economics. It asserts that the informational basis of normative economics should be expanded so that the intrinsic value of social choice procedures should be properly taken into account along with the value of their consequences. Three examples – the problem of fair cake division, the role of competition in the promotion of economic welfare, and bilateral trade restrictions – are invoked to pinpoint the services rendered by procedural considerations in making social welfare judgements. The Pareto libertarian paradox is also re-examined within the extended framework incorporating procedural considerations along with consequential considerations. Received: 25 March 1997 / Accepted: 8 July 1997     

Book Reviews/Comptes rendus

Book reviewed in this article: FRANCIS A. BEER, Peace Against War: The Ecology of International Violence. GEERT P. BRAAM, Influence of Business Firms on the Government. MICHAEL LAMBEK, Human Spirits: A Cultural Account of Trance in Mayotte. ROBERT J. BRYM, Intellectuals and Politics. FERNAND DUMONT, JEAN HAMELIN and JEAN-PAUL MONTMINY (eds.), Idéologies au Canada Francois: 1940–1976 Tomes I, II and III. VIVIAN DARROCH and RONALD J. SILVER (eds.), Interpretive Human Studies: an Introduction to Phenomenological Research. NIKLAS LUHMANN, The Differentiation of Society (trans. Stephen Holmes and Charles Larmore). KLAUS MÄKELÄ, et al., Alcohol, Society, and the State (vol. 1): A Comparative Study of Alcohol Control. ERIC SINGLE, et al. (eds.), Alcohol, Society, and the State (vol. 2): The Social History of Control Policy in Seven Countries. FRANK J. MIFFLEN and SYDNEY C. MIFFLEN, The Sociology of Education: Canada and Beyond. FERNAND OUELLET, Lower Canada, 1791–1840: Social Change and Nationalism. RON PARSLER (ed.), Capitalism, Class and Politics in Scotland. RON PARSLER and DAN SHAPIRO (eds.), The Social Impact of Oil in Scotland: A Contribution to the Sociology of Oil. R. COOPERSTOCK and J. HILL, The Effects of Tranquilization: Benzodiazepine Use in Canada. Papers, Revista de Sociologia     

CYCLICAL TAX ENFORCEMENT

We wonder whether tax enforcement varies along the economic cycle and aim at answering that question from a positive perspective by means of survey data for the Spanish case (1994–2015). According to a fiscal capacity argument, tax enforcement might be stronger in times of crisis (counter-cyclical), but if the tax administration prioritizes taxpayers' welfare over public revenue, enforcement might be slacker (procyclical). We find tax enforcement is not immune to the state of the economy. In particular, it presents a prevailing counter-cyclical trend, but in presence of a severe economic crisis it turns out to be procyclical. (JEL D78, H12, H26, H83)     

Book Reviews

Yujiro Hayami, Development Economics: From the Poverty to the Wealth of Nations John Dixon and David Macarov (eds.), Poverty: A Persistent Global Reality Santosh Mehrotra and Richard Jolly (eds.), Development with a Human Face: Experiences in Social Achievement and Economic Growth Neil Middleton and Phil O’Keefe, Disaster andDevelopment: The Politics of Humanitarian Aid Nancy Birdsall and Frederick Jaspersen (eds.), Pathwaysto Growth: Comparing East Asia and Latin America Jan Joost Teunissen (ed.), Regional Integration andMultilateral Co-operation in the Global Economy Jan Joost Teunissen (ed.), The Policy Challenges ofGlobal Financial Integration Dirk Messner, The Network Society. Economic Development andInternational Competitiveness as Problems of Social Governance A.K.B. Asante, Regionalism and Africa’s Development:Expectations, Reality and Challenges Gunmar M. Sørbø and Peter Vale (eds.), Out of Conflict.From War to Peace in Africa Sarath Rajapatirana, Trade Policies in Latin Americaand the Caribbean: Priorities, Progress and Prospects Terje Tvedt, Angels of Mercy or Development Diplomats? NGOs and Foreign Aid Richard Grant and Jan Nijman (eds.), The Global Crisisin Foreign Aid Patricia Feeney, Accountable Aid. Local Participationin Major Projects Peter Strachan with Chris Peters, Empowering Communities. A Casebook from West Sudan Jacques B. Gelinas, Freedom from Debt: The Reeappropriation of Development through Financial Self-Reliance Aili Mari Tripp, Changing the Rules. The Politics of Liberalizationand the Urban Informal Economy in Tanzania Michael Kaufman and Haroldo Dilla Alfonso (eds.), Community Power and Grassroots Democracy: The Transformation of Social Life J.E. Michael Arnold and Peter A. Dewees (eds.), Farms, Trees and Farmers Diana Carney and John Farrington, Natural Resources Management and Institutional Change A. Dorward, J. Kydd and C. Poulton, (eds.), SmallholderCash Crop Production Under Market Liberalisation Donald Q. Innis, Intercropping and the Scientific Basis ofTraditional Agriculture Keith Tribe (ed.), Economic Careers: Economics and Economists in Britain 1930-70     

Evaluating the Move to a Linear Tax System in Germany and Other European Countries

This paper proposes a comparison of the results of tax policy analysis obtained on the basis of unitary and collective representations of the household. We first generate labour supplies consistent with the collective rationality, by use of a model calibrated on microdata as described in Vermeulen et al. [Collective Models of Household Labor Supply with Nonconvex Budget Sets and Nonparticipation: A Calibration Approach (2006)]. A unitary model is then estimated on these collective data and unitary and collective responses to a tax reform are compared. We focus on the introduction of linear taxation in Germany. The exercise is replicated for other European countries and other topical reforms. Distortions due to the use of a unitary model turn out to be important in predicting labour supply adjustments, in the design of tax revenue neutral reforms, and in predicting a reform’s welfare implications.

Tax differentiation,lobbying, and welfare

To what extent a taxing authority should be granted the power to impose different tax schedules to different groups of taxpayers? Although the policy maker aims at maximizing social welfare, her tax policy may be distorted by the lobbying activity of taxpayers. In this political environment we characterize the conditions under which social welfare can be increased by restricting the set of tax instruments available to the policy maker; i.e., the scope of tax differentiation. We show that full differentiation is more costly, in terms of welfare distortions, when the lobbies are asymmetric in size, while minimal differentiation is more costly when the tax bases are asymmetric across different groups.     

Book Reviews

David L. Collinson and Jeff Hearn (eds.), Men as Managers, Managers as Men: Critical Perspectives on Men, Masculinities and Managements Leslie J. Moran, The Homosexual(ity) of Law Duncan Gallie, Roger Penn and Michael Rose (eds.), Trade Unionism in Recession Patricia Arredondo, Successful Diversity Management Initiatives: A Blueprint for Planning and Implementation Maria Dolors Garcia-Ramon and Janice Monk (eds.), Women of the European Union: the politics of work and daily life     

THE WELFARE EFFECTS OF TEMPORARY TAX CUTS AND SUBSIDIES: THEORY,ESTIMATION, AND APPLICATIONS

This article presents a tractable and intuitive theory on the welfare effects of temporary tax cuts and subsidies, fiscal policies that I generically term “holidays.” The Kaldor–Hicks efficiency effects are theoretically ambiguous, with competing pro‐ and anti‐efficiency effects on newly incentivized versus time‐shifted purchases. To rectify this ambiguity I derive expressions for the welfare effects that are consistent with constant elasticity assumptions and depend only upon readily and reliably observed information. To demonstrate the framework's broad applicability, I analyze two different policies: the 2009 Cash for Clunkers program and states' sales tax holidays. I estimate that both policies generated substantial deadweight loss. (JEL H21, H30, D91)     

Book Reviews

Books reviewed in this article: Megnad Desai, Marx's Revenge: The Resurgence of Capitalism and the Death of Statist Socialism Boel Berner and Per Trulsson (eds.), Manoeuvring in an Environment of Uncertainty: Structural Change and Social Action in Sub‐Saharan Africa Maria H. Brons, Society, Security, Sovereignty and the State in Somalia: From Statelessness to Statelessness? Oliver Morrissey and Michael Tribe (eds.), Economic Policy and Manufacturing Performance in Developing Countries Naila Kabeer, The Power to Choose: Bangladeshi Women and Labour Market Decisions in London and Dhaka Michael Edwards and Alan Fowler (eds.), The Earthscan Reader on NGO Management Theodore H. Moran, Parental Supervision: The New Paradigm for Foreign Direct Investment and Development Michael T. Rock, Pollution Control in East Asia: Lessons from Newly Industrializing Economies Holger Bernt Hansen and Michael Twaddle (eds.), Christian Missionaries and the State in the Third World Jeffrey James, Technology, Globalization and Poverty Derek Byerlee and Ruben G. Echeverria (eds.), Agricultural Policy in an Era of Privatization B. Mak Arvin (ed.), New Perspectives on Foreign Aid and Economic Development Stephen J.H. Dearden (ed.), The European Union and the Commonwealth Caribbean Samir Rihani, Complex System Theory and Development Practice: Understanding Non‐Linear Realities Douglas S. Massey, Jorge Durand and Nolan J. Malone, Beyond Smoke and Mirrors: Mexican Immigration in an Era of Economic Integration Sylvia Chan, Liberalism, Democracy and Development Sherry Stephenson, Christopher Findlay and Soonhwa Yi (eds.), Services Trade Liberalisation and Facilitation Janelle Plummer, Focusing Partnerships: A Sourcebook for Municipal Capacity Building in Public‐Private Partnerships The Panos Institute, Reducing Poverty: Is the World Bank's Strategy Working?     

Book Reviews

Books reviewed in this article: Peter Kenen, The International Financial Architecture: What's New? What's Missing? Servaas Storm and C. W. M. Naastepad (eds.), Globalization and Economic Development: Essays in Honour of J. George Waardenburg Alain Durand–Lasserve and Lauren Royston (eds.), Holding Their Ground: Secure Land Tenure for the Urban Poor in Developing Countries The United Nations Centre for Human Settlements (Habitat), Cities in a Globalizing World: Global Report on Human Settlements 2001 Christian Grootaert and Thierry van Bastelaer (eds.), The Role of Social Capital in Development: An Empirical Assessment Tony Hodges, Angola from Afro–Stalinism to Petro–Diamond Capitalism Minu Hemmati (ed.), Multi–Stakeholder Processes for Governance and Sustainability: Beyond Deadlock and Conflict Dirk Hansohm, Christian Peters–Berries, Willie Breytenbach and Peter Meyns (eds.), Monitoring Regional Integration in Southern Africa Yearbook, Vol. 1 (2001) Bertin Martens, Uwe Mummert, Peter Murrell, Paul Seabright and Elinor Ostrom, The Institutional Economics of Foreign Aid Melanie Gow (ed.),A Safe World for Children: Ending Abuse, Violence and Exploitation Moses Dombo, Joe Muwonge and Don Brandt, HIV/AIDS and Human Development in Africa Dele Olowu, Decentralization Policies and Practices under Structural Adjustment and Democratization in Africa     

Book Reviews/Comptes rendus

Book reviewed in this article: PAUL ANISEF and MICHAEL LANPHIER (eds.), The World in a City. REGINALD BYRON (ed.), Retrenchment and Regeneration in Rural Newfoundland. ROBERT CASTEL, l'insécurité sociale. Qu'est‐ce qu'être protégé? HELEN GREMILLION, Feeding Anorexia: Gender and Power at a Treatment Center. YVONNE M. HÉBERT (ed.), Citizenship in Transformation in Canada. STEVE HEWITT, Spying 101: The RCMP's Secret Activities at Canadian Universities, 1917–1997. WINSTON JACKSON, Methods: Doing Social Research. KARIM H. KARIM, Islamic Peril: Media and Global Violence. BERT KLANDERMANS and SUZANNE STAGGENBORG (eds.), Methods of Social Movement Research. MURRAY KNUTTILA, Introducing Sociology: A Critical Perspective. JULIA KRISTEVA and SYLVERE LOTRINGER (eds.), Revolt, She Said. JANE LEWIS, Should We Worry about Family Change? JEANNETTE MARIE MAGEO (ed.), Dreaming and the Self: New Perspectives on Subjectivity, Identity, and Emotion. ROD MICHALKO, The Difference That Disability Makes. OBIORA CHINEDU OKAFOR and OBIJIOFOR AGINAM (eds.), Humanizing Our Global Order: Essays in Honour of Ivan Head. CHARLES RAGIN, Fuzzy‐Set Social Science. ANA Y. RAMOS‐ZAYAS, National Performances: The Politics of Class, Race, and Space in Puerto Rican Chicago. RICHARD SANDELL (ed.), Museums, Society, Inequality. AYSAN SEVER, Fleeing the House of Horrors: Women Who Have Left Abusive Partners. HEATHER STRANG and JOHN BRAITHWAITE (eds.), Restorative Justice and Family Violence. TANYA TITCHKOSKY, Disability, Self, and Society.     

Book Reviews

Books reviewed: John Mukum Mbaku, Corruption and the Crisis of Institutional Reforms in Africa Mark Robinson (ed.), Corruption and Development Jean-François Bayart, Stephen Ellis and Beatrice Hibou, The Criminalization of the State in Africa Sacha Pichler (ed.), Taking Stock of Debt: Creditor Policy in the Face of Debtor Poverty Theodore Panayotou, Instruments of Change: Motivating and Financing Sustainable Development Herbert H. Werlin, The Mysteries of Development: Studies Using Political Elasticity Theory Frances Moore Lappé, Joseph Collins, and Peter Rosset, World Hunger 12 Myths David Simon, South Africa in Southern Africa: Reconfiguring the Region Daniel C. Bach, Regionalisation in Africa: Integration and Disintegration Yilmaz Akyüz, East Asian Development: New Perspectives Ronaldo Munck and Denis O’Hearn (eds.), Critical Development Theory: Contributions to a New Paradigm D. Mosse, J. Farrington and A. Rew (eds.), Development as Process. Concepts and Methods for Working with Complexity Geoffrey Heal, Valuing the Future: Economic Theory and Sustainability Eberhard Reusse, Interventionist Paradigms and the Ills of Aid