1,721,204 research outputs found
Should Green Governments Give Priority to Environmental Policies over Growth-Enhancing Policies?
Get PDFThis paper studies the properties of second-best optimal policy in a standard general equilibrium model of growth augmented with renewable natural resources. The government chooses its policy instruments (the income tax rate and the allocation of collected tax revenues between public investment and environmental policy) to solve a Ramsey-type policy problem. The main result is that, the more the citizens care about the environment, the more growth-enhancing policies the government finds it optimal to choose in the long run. This is because when citizens care about the environment, this requires tax revenues for environmental policy and can be only achieved by large tax bases and high growth. Thus, only growing economies can afford to care about the environment. This is the case even if pollution occurs as a by-product of output produced.second-best policy, natural resources, economic growth
Rent-Seeking Competition from State Coffers: A Calibrated DSGE Model of the Euro Area
Get PDFThis paper incorporates an uncoordinated struggle for extra fiscal favors into an otherwise standard Dynamic Stochastic General Equilibrium model. This reflects the popular belief that interest groups compete for privileged transfers and tax treatment at the expense of the general public interest, and so the aggregate economy stagnates. The model is calibrated to the euro area over the period 1980-2003. Our results show that rent-seeking competition can contribute to explaining the European macroeconomic experience. We also get quantitative evidence of the fraction of collected tax revenues grabbed by rent seekers.rent seeking, fiscal policy, real business cycles
The Role of Government in Anti-Social Redistributive Activities
Get PDFIt is known that anti-social redistributive activities (rent seeking, tax evasion, corruption, violation of property rights, delay of socially beneficial reforms, etc) hurt the macroeconomy. But it is less known what is the role of government size as a determinant of such activities. We use data from 64 counties (both developed and developing) in 5-year periods over 1980-2000. As a measure of anti-social activities, we use the ICRG index; as a measure of government size, we use the government share in GDP; and as a measure of government efficiency, we construct an index by following the methodology of Afonso, Schuknecht and Tanzi (2003). Our regressions show that what really matters to social incentives is the relation between size and efficiency. Specifically, while a larger size of government is bad for incentives when one ignores efficiency, the results change drastically when government efficiency is also taken into account. Only when our measure of size exceeds our measure of efficiency, larger public sectors are bad for incentives. By contrast, when efficiency exceeds size, larger public sectors are not bad; actually, in the case where efficiency is measured by government performance in the policy areas of administration, stabilization and infrastructure, larger public sectors significantly improve incentives.government and behaviour of agents, collective decision-making
What is the Best Environmental Policy? Taxes, Permits and Rules under Economic and Environmental Uncertainty
Get PDFWe study the importance of uncertainty and public finance to the welfare ranking of three environmental policy instruments: pollution taxes, pollution permits and Kyoto-like numerical rules for emissions. The setup is the basic stochastic neoclassical growth model augmented with the assumptions that pollution occurs as a by-product of output produced and environmental quality is treated as a public good. To compare alternative policies, we compute welfare-maximizing values for the second-best policy instruments. We find that, in all cases studied, pollution permits are the worst policy choice, even when their revenues finance public abatement. When the main source of uncertainty is economic, the most efficient recipe is to levy pollution taxes and use the collected tax revenues to finance public abatement. However, when environmental uncertainty is the dominant source of extrinsic uncertainty, numerical rules, being combined with tax-financed public abatement, are better than pollution taxes.general equilibrium, uncertainty, environmental policy
What are their Words Worth? Political Plans and Economic Pains of Fiscal Consolidations in New EU Member States
Get PDFIn this paper, we track fiscal authority behaviour in the ten new EU member states (NSM) in the period which immediately preceded their EU accession. We first present basic stylized facts about public budgets of those countries. The paper then analyses reasons which led to periods of fiscal consolidation in the NMS. Secondly, we also present evidence from Pre-Accession Economic and Convergence programmes of NMSs concerning planned steps of the fiscal authorities and try to contrast them with reality. Throughout the paper, we identify two different groups of countries which significantly differ in their fiscal behaviour. On the one side is the group of Baltic countries, displaying strong reform effort and responsible fiscal policy usually supported by strong economic growth. On the second extreme, we identify fiscally irresponsible central European countries and two Mediterranean islands displaying lax fiscal policies and little political will to implement costly reforms. Somewhere between stand Slovenia and Slovakia, first without a strong reform performance yet with budget deficits in compliance with the Stability and Growth Pact and later with recent reform efforts.Our key finding concerning the behaviour of the fiscally irresponsible group of countries is that their current problems with high budget deficits originate in their lax approach and inability to implement politically costly expenditure cuts which is apparent from their revision of budget plans and endeavour to shift envisioned deficit reductions into the future. Yet, this strategy has led those countries to an uncomfortable position vis-à-vis European fiscal rules.fiscal policy, new member states, consolidations, Stability and Growth Pact, excessive deficit procedure, convergence programmes
The Role of International Public Goods in Tax Cooperation
Get PDFWe provide a quantitative assessment of the welfare cost of tax competition or, equivalently, the welfare benefit of international tax policy cooperation. We use a simple multi-country general equilibrium model of a world economy, in which there are two types of cross-country spillovers: the first one generated by the international capital mobility and, the second one, by the presence of international public goods. In the absence of international public goods, although welfare in the non-cooperative case is typically lower than in the cooperative case, the welfare difference is negligible quantitatively. Things change drastically, both quantitatively and qualitatively, once we introduce international public goods. Now, there can be big benefits from cooperation and welfare effects cease to be monotonic. (JEL classification codes: F02, H2, H4) Copyright The Author 2009. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: [email protected], Oxford University Press.
Structural Vector Autoregressions with Nonnormal Residuals
Get PDFIn structural vector autoregressive (SVAR) models identifying restrictions for shocks and impulse responses are usually derived from economic theory or institutional constraints. Sometimes the restrictions are insufficient for identifying all shocks and impulse responses. In this paper it is pointed out that specific distributional assumptions can also help in identifying the structural shocks. In particular, a mixture of normal distributions is considered as a plausible model that can be used in this context. Our model setup makes it possible to test restrictions which are just-identifying in a standard SVAR framework. In particular, we can test for the number of transitory and permanent shocks in a cointegrated SVAR model. The results are illustrated using a data set from King, Plosser, Stock and Watson (1991) and a system of US and European interest rates.mixture normal distribution, cointegration, vector autoregressive process, vector error correction model, impulse responses
On Human Capital Formation with Exit Options: Comment and New Results
Get PDFKatz and Rapoport (2005) conclude that with linear production technology and the possibility of unilateral migration, region-specific shocks may increase the average level of education. Previously, Poutvaara (2000) derived a corresponding result with Cobb-Douglas technology and migration which may go in both directions. This paper shows that the exit option may reduce human capital formation with a quadratic production technology.human capital formation, migration, economic volatility
- …
