Redistribution and Provision of Public Goods in an Economic Federation

This paper concerns redistribution and public good provision in an economic federation with two levels of government: a local government in each locality and a (first mover) central government. Each locality is characterized by two ability‐types, and the ability‐distribution differs across localities. The central government redistributes via a nonlinear income tax and a lump‐sum transfer to each local government, while the local governments use proportional income taxes and provide local public goods. We show how the redistributive role of taxation is combined with a corrective role, and how the central government can implement the second best resource allocation.     

Banks as Continuous Reinvention

Of the several debates that revolve around the work of the economic historian and political economist Karl Polanyi, one that continues to exercise minds concerns his analysis of, and political attitudes toward, post-war capitalism and the welfare state. Simplified a little, it is a debate with two sides. To borrow Iván Szelényi's terms, one side constructs a ‘hard’ Karl Polanyi, the other a ‘soft’ one. The former advocated a socialist mixed economy dominated by redistributive mechanisms. He was a radical socialist for whom the market should never be the dominant mechanism of economic coordination. His ‘soft’ alter ego insisted that the market system remain essentially intact but be complemented by redistributive mechanisms. The ‘double movement’ – the central thesis of his ‘Great Transformation’ – acts, in this reading, as a self-correcting mechanism that moderates the excesses of market fundamentalism; its author was positioned within the social-democratic mainstream for which the only realistic desirable goal is a regulated form of capitalism. In terms of textual evidence there is much to be said for both interpretations. In this article I suggest a different approach, one that focuses upon the meaning of Polanyi's concepts in relation to their socio-political and intellectual environment.     

Redistributive taxation,wealth distribution,and economic growth

This paper examines the relationship between wealth distribution and economic growth in an endogenous growth model with heterogeneous households and redistributive taxation. In this paper, we incorporate an endogenous determination of redistributive policy into the model, focusing on the relation between pre- and post-tax inequality. Endogenous redistributive policy affects wealth distribution and economic growth. Therefore, the relation between post-tax inequality and economic growth is different from that between pre-tax inequality and economic growth. Results show that there exists a negative correlation between pre-tax inequality and economic growth, whereas there exists an inverted-U relationship between post-tax inequality and economic growth in a voting equilibrium.     

Unemployment insurance and redistributive taxation

This paper studies the simultaneous determination of the socially optimal levels of unemployment insurance, income taxation and experience rating. It argues that there is a normative justification for state unemployment insurance. When the government wishes to use redistributive taxes, but cannot enforce lump-sum transfers, it is not socially optimal for there to be full experience rating of unemployment insurance schemes: one distortion should be used to off-set another. The state must then intervene in the provision of insurance for those without jobs.     

非自愿移民弱势群体安全保护网的设计

为弱势群体设置一道“安全网”是构建和谐社会的必然选择。本文通过对非自愿移民弱势群体的特征及范围的分析,针对非自愿移民弱势群体需要安全保护网络的建立与健全的迫切性,提出了依赖政府、社会、个人各方面的统筹规划,相互配合,设计全方位的移民弱势群体的安全保护网络。     

Environmental taxes with heterogeneous consumers: an application to energy consumption in France

This paper constructs a model with four groups of households who have preferences over labor supply, consumption of polluting (energy related) and non-polluting (non-energy) goods, and emissions. It quantifies the model for the French economy and computes its optimal tax equilibria under nine second-best tax regimes. We find that the redistributive role of environmental taxes requires the polluting goods to be taxed at a rate much below their marginal social damage. These goods may even require an outright subsidy if the society values equality ‘a lot’. Secondly, if environmental taxes that have an exclusively externality-correcting role, they benefit all types—although the gains are rather modest. The gains and losses become more substantial when environmental taxes have a redistributive role as well. Third, setting the environmental tax at its Pigouvian level, rather than its optimal externality-correcting-cum-redistributive level, benefits the high-income group at the expense of the low-income groups. Fourth, nonlinear taxation of polluting goods, and nonlinear commodity taxation in general, is a powerful redistributive mechanism. Fifth, introducing environmental taxes in the current French tax system, with its suboptimal income taxes, results in substantial welfare gains for the highest income group and a sizable loss for the least well-off persons.     

REDISTRIBUTIVE POLITICS AND GOVERNMENT DEBT IN A BORROWING‐CONSTRAINED ECONOMY

We develop a two‐period, three‐class of income model where low‐income agents are borrowing constrained because of capital market imperfections, and where redistributive expenditure is financed by tax and government debt. When the degree of capital market imperfection is high, there is an ends‐against‐the‐middle equilibrium where the constrained low‐income and the unconstrained high‐income agents favour low levels of government debt and redistributive expenditure; these agents form a coalition against the middle. In this equilibrium, the levels of government debt and expenditure might be below the efficient levels, and the spread of income distribution results in a lower debt‐to‐GDP ratio.     

The Nature and Avoidance of the ＂Middle Income Trap＂

The ＂middle income trap＂ is a significant theoretical and practical issue closely related to the economic and social transition and sustainable development of a country. This paper explores the essence of the ＂middle income trap＂ and ways to avoid it. It reveals that the inner nature of the ＂middle income trap＂ lies in the institutional transition dilemma, which results essentially from a lack of reasonable and clear definitions of governance boundaries between government and market as well as government and society. This lack of boundaries causes coexistent and interrelated government inefficiency, market distortion/failure and social anomie, leading to a stagnant transition from a factor-driven to an efficiency-driven and further innovation-driven economy. Moreover, this paper proposes that the proper way to avoid the ＂trap＂ can be found in the reconstruction of the state governance mode, that is, to transition from a development-oriented and omnipotent government to a public service-oriented and limited government, from factor-driven to efficiency-driven and further innovation-driven development, and from a traditional society to a modem civil society through defining reasonable and clear boundaries between government and market as well as government and society. Thus, reconstruction can establish a state public governance mode featuring the interactive role of government, market and society, and achieve the modernization of state governance systems and capacity.     

Land rents,optimal taxation and local fiscal independence in an economy with local public goods

A general equilibrium model of an economy with cities, farms and free migration of population is constructed. The cities produce internationally traded goods via production functions subject to economies of scale. They also produce housing and a local public good. Two areas are defined to be disjoint if households performing an economic activity in one area are not operating in the other. An area is exclusive if it is disjoint to its complement. The economic surplus of an area is then defined to be the value of the area's net export of goods and resources. Local efficiency of an area is defined to be a state in which its economic surplus attains its maximum value. This state is proved to be a necessary condition for Pareto optimality of the economy. It is then proved that beside Piguvian corrective taxes the only taxes necessary and sufficient to finance local government activities efficiently, are taxes on land rents. Furthermore, if jurisdiction of a local government is over an exclusive area no intervention of central government is necessary, and local authorities can be fully autonomous. If the economy can be divided into pairwise disjointed exclusive areas, those areas are optimal jurisdictions in the sense that efficiency in the economy can be achieved with local authorities only.     

Markets as beneficial constraints on the government

We study the role of anonymous markets in which trades cannot be monitored by the government. We adopt a Mirrlees approach to analyze economies in which agents have private information and a benevolent government controls optimal redistributive tax policy. While unrestricted access to anonymous markets reduces the set of policy instruments available to the government, it also limits the scope of inefficient redistributive policies when the government lacks commitment. Indeed, the restrictions that anonymous markets impose on the optimal fiscal policy, especially on capital taxation and the history-dependence of income taxation, can have positive welfare effects in this case.     

Electoral goals and center-state transfers: A theoretical model and empirical evidence from India

We construct a model of redistributive politics where the central government is opportunistic and uses its discretion to make transfers to state governments on the basis of political considerations. These considerations are the alignment between the incumbent parties at the central and state levels and whether a state is a swing state or not. A testable prediction from the model is that a state that is both swing and aligned with the central government is especially likely to receive higher transfers. We test this prediction using Indian data for 14 states from 1974–75 to 1996–97. We find that a state which is both aligned and swing in the last state election is estimated to receive 16% higher transfers than a state which is unaligned and non-swing.     

我国省域视角下经济增长方式的实证分析与对策——基于 1990-2012 年数据

经济发展方式转变是我国现阶段经济发展的必然选择,也是经济增长与自然、社会、人的全面发展相协调的客观要求。我国28个省（市、自治区）1990---2012年数据显示：我国经济增长呈粗放型发展;投资拉动和工业化是经济发展主要依靠,第三产业带动作用不强,人力资本的外溢效应不明显,技术具有正向作用,但科技资本存量的产出弹性较小．,外资和出口具有拉动作用;东部经济增长受出口拉动最为显著但受外资企业出口影响而削弱,合适的政府规模才有利于经济发展和增长。因此,未来我国应在人力资本、新型工业化、转变政府职能、均衡发挥内外生因素等方面转变和加强。     

What do Russians think about transition?1

We use data from the 2006 round of the Russian Longitudinal Monitoring Survey to describe perceptions of the Russian population about the transition process and the role of the state compared with that of free markets. We find that about one‐half of the Russian population is disappointed with transition and a large majority is in favour of high state regulation and state provision of goods and services. High demand for government regulation and increased state intervention coexists with a low level of trust in government institutions and recognition of high and rising levels of corruption. The findings are consistent with the theory developed by Aghion et al. (2009) . In an environment with poor social capital, private business imposes negative externalities on the society and society chooses to demand more state regulation and tolerate corruption to reduce these externalities. We also find that individual perceptions of social capital and corruption co‐vary with the demand for regulation, as predicted by the theory.     

The political economy of income comparisons and economic growth

The literature on income inequality has provided various explanations as to how income inequality can affect growth, with the emphasis on ideas such as investments in human capital, issues of occupational choice, or the redistributive policies of governments. Inequality not only has a direct effect on the distribution of consumption in an economy, but it also has a powerful effect on people's subjective sense of well being. This paper takes a novel approach by focusing on the way in which a government's choice of economic policy can be influenced by how individuals perceive themselves relative to other individuals, both within the country and in foreign countries. The chosen policy affects economic growth, with the assumption being that policies that promote growth also tend to result in more switching of individuals between income groups. We show that the government's optimal policy depends on the importance of both inside country and outside country income comparisons, the fraction of national income earned by the different income groups, the potential magnitude of economic growth, the probability of switching between income groups in the presence of growth, and the relative importance of the various income groups. The model predicts that a greater degree of inside country income comparison is bad for growth whereas more outside country comparison is good for growth.     

Vested Interests and the Common People in Developing Countries: Understanding Oppressive Societies and Their Effects

The standard economic model of how economies work is that activities are essentially productive. This is not a correct view of reality. The principal difficulty is that there is economic activity that is unproductive and harmful (from the point of view of those being harmed). This is a central feature of the economic organization of these societies, and creates poverty. The first section of the article discusses the concept of harm. The second section describes how societies are run on this basic set of principles: Take and maintain control of the government and other aspects of society, and use the power of government to obtain income. The third section of the article describes how this system harms the common people. Topics include corruption, misappropriation of natural resources, conflict and other harm engendered by the struggle for control, the influence on present society of the past operation of harmful economic systems, and discrimination as well as other “barriers to entry.”     

Government intervention in Malaysian manufacturing industries: a suggested methodology of measurement

The whole issue of the appropriate balance in dividing economic activities between the state and the market has, in recent years, received considerable attention. The proponents of ‘goverment intervention’ argue that government have to take a leading role in accelerating the structural change with is perceived as necessary towards achieving an efficient allocation of resources leading to a higher economic growth. Consequently, government have to rely on various policy measures which aim at reducing, if not completely erasing,the malfunctioning of the market. Here it is not the number of policies or regulations that matters. What is more important is the potential of each policy towards eliminating market imperfections. In this context, the crucial issue is the need for a direct measure to gauge the impact of each policy on selected problems which tend to contribute to the malfunctioning of the market. The objective of this paper is to suggest a method to measure the effect of government policies on reducing market concentration which is perceived as one of the sources of market failure. The applicability of the suggested methodology has been examined with a data set from the Malaysian Manufacturing Industries.     

论宏观调控与市场机制作用的科学定位

中国的社会主义市场经济体制已初步建立,正在进一步完善和健全的过程中,因此,如何充分发挥市场在社会经济活动中的基础性作用,实现政府对经济的有效调控并达到政府作用与市场机制的有机结合,是进一步完善中国社会主义市场经济体制,促进社会经济全面发展的内在要求。论证了在现代经济中,市场作用与政府作用都有缺陷但又缺一不可。进而提出,能由市场调节的应交给市场去发挥作用,政府干预只能做那些市场解决不了或解决不好的问题,政府干预和调节应以市场为基础。     

Separation of the redistributive and allocative functions of government: A public choice perspective

The implications of not separating the redistributive and allocative functions of government are examined from a public choice perspective. Many democratic governments lump transfers and public services into a single unified budget. This can distort voter perceptions of the marginal cost of public services relative to the marginal tax price embodied in the taxing institutions employed to generate public revenue. If the median voter's perception of marginal cost is affected, the majority rule outcome with respect to public goods spending will be altered correspondingly.     

Can regional policy in a federation improve economic efficiency?

In the European Union and in many federal and non-federal countries, the central government pays subsidies to poor regions. These subsidies are often seen as a redistributive measure which comes at the cost of an efficiency loss. This paper develops an economic rationale for regional policy based on economic efficiency. We consider a model of a federation consisting of a rich and a poor region. The economy is characterized by imperfect competition in goods markets and unemployment. Firms initially produce in the rich region but may relocate their production to the poor region. We show that a subsidy on investment in the poor region unambiguously increases welfare if labour markets are competitive. If there is unemployment in both regions, the case for regional subsidies is weaker.     

The company you keep: Satisfaction with life,economic freedom,and preference-policy mismatch

We examine the interaction between individual preferences for markets and state-level economic freedom as it relates to Satisfaction with Life (SWL). Fundamental tenets of economic freedom assert that societies free of excessive government involvement are wealthier and, ultimately, happier; individuals who are allowed to pursue self-interest are argued to be more motivated and more productive, and so society as a whole is better off. Though there is substantial empirical evidence that freer societies are wealthier, the evidence connecting economic freedom and happiness is less clear. We explore the relationship between economic freedom and SWL at the individual level. We examine differences between personal preferences for free markets and state policy and how this ‘preference-policy mismatch’ is related to SWL. We then briefly examine the relationship between preference-policy mismatches and individual self-reported voting behavior, including implications for Tiebout sorting. This study is the first to focus on individual economic ideology, i.e. individual level of support for free markets, and SWL in the United States. Combining individual and state level data we offer improvements to prior studies in a number of areas including an enhanced measure of life satisfaction, a richer basis for examining left-right differences than simple political identification, and an examination of the effect of preference-policy mismatches on satisfaction with life. We find significant relationships between SWL and individual support for markets, state-level economic freedom, and preference-policy mismatch. Further, preference-policy mismatch is positively associated with self-reported voting frequency. We find little support for Tiebout sorting.