DECENTRALIZED INCOME REDISTRIBUTION RECONSIDERED

In theory, a state could redistribute income at a lower cost to its taxpayers than if the national government handled it. Part of the cost is exported out of state when federal tax revenues generated by the state fall as money incomes are reduced by additional redistribution. Simulations combining labor supply and migration responses show that for some reasonable parameter values enough of the cost is exported so that states do face lower costs of redistribution. Hence, the federal tax system provides at least a partial offset to the well-known externalities generated by local redistribution.     

IN-KIND VERSUS CASH TRANSFERS IN THE PRESENCE OF DISTORTIONARY TAXES

In-kind transfers can Pareto-dominate cash transfers as a means of income redistribution if in-kind transfers and leisure are Hicks substitutes and leisure is a normal good. The result holds when redistributive instruments also include a linear income tax. The paper proves that if the poor receive more in-kind transfers (and the rich less) than what they would choose for themselves then, compared to cash transfers, there will be a higher labor supply by the poor, a lower labor supply by the rich, and higher levels of aggregate pre-tax income and tax revenues.     

The possibilities for global inequality and poverty reduction using revenues from global carbon pricing

Global carbon pricing can yield revenues which are large enough to create significant global pro-poor redistributive opportunities. We analyze alternative multidecade growth trajectories from 2015 to 2105 for major global economies with carbon tax rates designed to stabilize emissions in the presence of both continued country growth and autonomous energy use efficiency improvement. In our central case analysis, revenues from globally internalizing carbon pricing rise to 8 % and then fall to 6 % of gross world product. High growth in India and China reduces global inequality and poverty strongly over time, but important incremental redistributive effects can be achieved using global carbon pricing revenues. Taking into account both between-country effects and previous literature estimates of within-country effects, a global carbon tax alone tends to be regressive in its global incidence. However, if its revenues are redistributed globally via equal per capita transfers, in our central case the Gini coefficient for world income falls by about 3 % and the share of the bottom decile rises by 81 % on average from 2015 to 2105. The population living in poverty falls by 16 % in 2015. Going further, global poverty could be eliminated entirely by 2015 according to our calculations if one third of global carbon tax revenues were redistributed directly to the poorest individuals.     

THE OPTIMAL TAXATION OF ASSET INCOME WHEN GOVERNMENT CONSUMPTION IS ENDOGENOUS: THEORY,ESTIMATION AND WELFARE

This paper derives the Ramsey optimal fiscal policy for taxing asset income in a model where government expenditure is a function of net output or the inputs that produce it. Extending work by Kenneth L. Judd, I demonstrate that the canonical result that the optimal tax on capital income is zero in the medium to long term is a special case of a more general model. Employing a vector error correction model to estimate the relationship between government consumption and net output or the factor inputs that generate it for the United States between 1948Q1 and 2015Q4, I demonstrate that this special case is empirically implausible, and show how a cointegrating vector can be used to determine the optimal tax schedule. I simulate a version of the model using the empirical estimates to measure the welfare implications of changing the tax rate on asset income, and contrast these results with those generated in a version of the model where government consumption is purely exogenous. The shifting pattern of welfare measurements confirms the theoretical results. I calculate that the prevailing effective tax rate on net asset income in the United States between 1970 and 2014 averaged 0.449. Hence abolishing the tax completely does generate welfare improvements, though only by the equivalent of between 1.103% and 1.616% permanent increase in consumption—well under half the implied welfare benefit when the endogeneity of the government consumption is ignored. The maximum welfare improvement from shifting part of the burden of tax from capital to labor is the equivalent of a permanent increase in consumption of between only 1.491% and 1.858%, and is attained when the tax rate on asset income is lowered to between 0.148 and 0.186. Allowing the tax rate to vary over time raises the maximum welfare benefit to 1.865%. All the results are very robust to a wide range of elasticities of labor supply. (JEL E62, H21, H50)     

A general equilibrium analysis of the Laffer argument

This paper examines the Laffer argument (i.e., the possibility that an increase in a tax rate may reduce tax revenues, and vice versa) in a general equilibrium model and using tax reform techniques. Our methodology allows us to examine the Laffer argument in a very general setting. Despite the high level of generality, we are able to reach some clear conclusions that happen to provide some support for the intuition that the Laffer effect requires: (1) a “ high” labour-income tax rate, and (2) a “ large” labour supply response to wage changes. However, the notions of “high” and “large” in our framework are quite different to the interpretations given them in conventional wisdom about the Laffer argument. The analysis also provides indirect support for the intuition that it is not optimal for a government to operate on the downward-sloping segment of the Laffer curve.     

IS THE BUDGET DEFICIT “TOO LARGE?”

Yes. Specifically, we find that recent spending and taxing policies of the government–if continued–violate the government's intertemporal budget constraint. As a result, government spending must be reduced and/or tax revenues must be increased. These conclusions are based on tests of whether government spending and revenue are cointegrated. In addition to examining real spending and revenue, we also normalize these variables by real GNP and population. For a growing economy, these normalized measures are perhaps more pertinent. We also test and find support for the hypothesis that deficits have become a problem only in recent years.     

The supply of volunteer labor: the case of hospitals

Little is known about the labor market for volunteers, but even less is known about the supply of volunteers to particular industries. This article examines the supply of volunteer labor to one industry, hospitals, and the choices that volunteers make among hospitals with different ownership attributes. Survey data of volunteers at four hospitals located in Madison, Wisconsin, are used to estimate the importance of a number of factors influencing people's willingness to volunteer at hospitals. We found that job opportunities in the labor market and tax rates affect the supply of volunteers. We also found that volunteers are not indifferent to the type of hospital at which they volunteer; a federal government hospital, a nonprofit state-owned teaching hospital, and other nonprofit hospitals were not perfect substitutes in the eyes of individual volunteers in our study.     

The effect of obesity,alcohol misuse and smoking on employment and hours worked: evidence from the Icelandic economic collapse

In this study the relationship between obesity, alcohol misuse, smoking and changes in quantity of labor supplied during an economic meltdown are examined. The data used stem from a health and lifestyle panel survey carried out by the Public Health Institute of Iceland in 2007 and 2009. Probit analysis was used to assess if pre-crisis body weight, alcohol misuse or smoking were related to subsequent job-loss or a reduction in hours worked following the 2008 economic collapse in Iceland. Results indicated that body weight, alcohol misuse and smoking are related to reductions in quantity of labor supplied for females only. Female body mass index was positively related to the probability of a reduction in quantity of labor supplied, while alcohol misuse and smoking were negatively related to the probability of decreasing hours worked for females.     

PRICE LEVEL UNCERTAINTY, SAVING, AND LABOR SUPPLY

This paper derives the implications, for individual saving and labor supply, of increased uncertainty about the future price level. The framework for the analysis is a two-period model in which saving and labor supply are alternative sources of both present disutility and future income. The individual is assumed to make simultaneously his saving and labor supply decisions prior to the resolution of the uncertainty about the future price level. We find that, under theoretically plausible and empirically relevant assumptions about attitudes toward risk, an increase in future price level uncertainty increases individual saving and labor supply. These results imply that, for the economy as a whole, increased uncertainty about the future price level increases output and employment, while decreasing the real rate of interest, the present price level, and economic welfare.     

Optimal income taxation with Kalai wage bargaining and endogenous participation

This paper characterizes the optimal redistributive tax schedule in a search–matching framework where (voluntary) nonparticipation and (involuntary) unemployment are endogenous and wages are determined by proportional bargaining à la Kalai. The optimal employment tax rate is given by an inverse elasticity rule. This rule depends on the global response of the employment rate, which depends not only on the participation (labor supply) responses, but also on the vacancy posting (labor demand) responses and on the product of these two responses. For plausible values of the parameters, our matching environment induces much lower employment tax rates than the usual competitive model with endogenous participation only. However, optimal employment tax rates are larger (in absolute value) when a given level of the global elasticity of employment is more due to search frictions and less due to participation responses.     

How can gender discrimination explain fertility behaviors and family-friendly policies?

This paper focuses on the interaction between gender discrimination and household decisions. It develops a model with endogenous fertility, endogenous labor supply and endogenous size of government spending. Family policies which concern childcare services are assumed to reduce the time that parents spend on their children. The model shows that gender discrimination may explain differences in household decisions between countries. The solution shows a U-shaped relationship between fertility and gender discrimination if the quality of childcare services is sufficiently high. In the decreasing part of this U-shaped curve, a decrease in the discrimination level implies a related increase in fertility, women’s participation in the labor force and in family-friendly policies.     

AN ANALYSIS OF THE LAFFER CURVE

The Laffer curve shows the relationship between tax revenue and the personal income tax rate, with tax revenue being a presumably concave function of the tax rate and equal to zero at tax rates of zero percent and 100 percent. If the personal income tax rate is reduced, then tax revenue will decrease (increase) if the economy is on the positively (negatively) sloped section of the Laffer curve. This paper derives a sufficient condition for the economy to be on the positively sloped section of the Laffer curve. In light of the current knowledge of the elasticities of supply of labor and supply of saving, it is difficult to escape the conclusion that a decrease in U.S. personal income tax rates will decrease tax revenue.     

Labor immigration in the Arab Gulf states: patterns,trends and problems

This is an overview of recent labor immigration in Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. Attention is given to factors contributing to the dependence of these countries on migrant labor, the impact of the decline in oil revenues, and future trends in the size and skill composition of the foreign labor supply.     

TAX RATES AND LABOR SUPPLY IN FISCAL EQUILIBRIUM

A central tenet of supply-side economics is that a balanced-budget reduction in the marginal tax rate on wage income increases aggregate labor supply. In contrast, the orthodox Keynesian analysis concludes that the relationship between tax rates and the economy-wide supply of labor is theoretically ambiguous. Our analysis of a general model reveals that these two propositions are associated, respectively, with the special assumptions of "compensated independence" and "ordinary independence" between leisure and public spending.     

Tax reform and endogenous gender bargaining power

The conventional studies with unitary representation of the household have been seeking for the condition in which tax systems achieve improvements of both fertility and female labor supply. Such analyses may not be enough to capture the important aspects of family behaviors since their common-preference assumption is frequently inconsistent with observed economies. By making use of a family bargaining framework, we argue that the heterogeneity in parental preferences among household members influences the result of existing studies on tax systems. Our results show that when women prefer larger family size than men, the tax reform towards individual taxation raises the fertility rate even more. In this case, female labor supply can be still increased in spite of enhanced fertility due to bargaining allocation.     

TAX EFFECTS VERSUS BUDGET EFFECTS ON LABOR SUPPLY

This paper analyzes the effects on labor supply of parallel changes in taxes and public spending of various types. A number of important recent developments in the labor supply behavior of households are highlighted by such a study of various types of "budget effects," rather than isolated "tax effects." This comes out in particular when considering cross substitution effects on labor supply of changes in public spending on goods and services or of the subsidization of goods and services provided by private markets. Moreover, the income effects of tax changes are often mitigated, or possibly even removed, by the income effects of the accompanying expenditure changes.     

STATE TAXES AND LEGISLATIVE TURNOVER IN THE UNITED STATES

Mounting empirical evidence suggests that term limits and, by extension, higher legislative turnover increase the overall size of government and change its spending composition. However, less is known about the turnover's impact on the composition of tax revenues. This study fills this void by exploiting exogenous variation in term limits and redistricting as instruments for legislative turnover, which is found to be positively associated with most state taxes except for the corporate income tax. We hypothesize that the negative association between legislative turnover and corporate income taxes might be influenced by a higher propensity of business owners to enter term-limited state legislatures. (JEL H7, H3)     

Tax incentives and family labor supply in Austria

The family policy reform 2009 introduced tax deductibles for children and child care expenditures in Austria. In this paper we evaluate this reform based on a structural labor supply model with unitary households which has been estimated on the European Statistics on Income and Living Conditions cross-sections 2004–2008. We find that the reform had only small employment effects, most of them being generated through the introduction of a child care deductible. However, to illustrate the employment potential of a shift from universal child transfers to tax deductibles we propose additional simulations showing that such a policy shift would yield an increase in full time equivalents of approximately .70 % of overall employment, with married females increasing their labor supply by up to 1.5 %. While the proposed policy shifts have regressive effects in terms of their distributional impact, we show that phasing-out the tax deductible at higher income allows for the compensation of lower-income households without jeopardizing positive employment effects.     

AUTOCRATIC, DEMOCRATIC, AND OPTIMAL GOVERNMENT

All types of government face two major fiscal decisions: the level of government services and the average tax rate. This paper develops models of autocratic, democratic, and optimal government. The effects of alternative government structures are estimated using a common set of parameters based on US. data. Output and government services are higher in u democracy than in an autocracy, but the tax rate is lower. Output is even higher with an optimal government and both government services and the tax rate are lower. The relative outcomes in any government depend strongly on the fiscal horizon of those who govern. (JEL H11)     

Taxation,Fiscal Decentralisation and Legitimacy: The Role of Semi‐Autonomous Tax Agencies in Peru

This article analyses the Servicios de Administración Tributaria (SAT), which currently operate in nine Peruvian cities, to show that semi‐autonomous tax agencies can play a significant role in strengthening the effectiveness, efficiency and legitimacy of decentralised tax systems. Its findings indicate that the SAT collect local taxes and non‐tax revenues more effectively than conventional tax administrations, and that, although the SAT model per se does not generate strong incentives for the promotion of efficiency, efficiency may become more important once the SAT are consolidated. Finally, there are hints that the Peruvian SAT contribute to the legitimacy of the tax system thanks to higher levels of transparency and client orientation.