Public infrastructure investment,output dynamics,and balanced budget fiscal rules

We study the dynamic macroeconomic effects of public infrastructure investment under a balanced budget fiscal rule, using an overlapping generations model of a small open economy. The government finances public investment by employing distortionary labor taxes. The balanced budget rule implies a negative short-run output multiplier that exceeds (in absolute terms) the positive long-run output multiplier. Larger public capital spillovers sharpen the intertemporal output tradeoff. In contrast to conventional results regarding public investment shocks, we obtain dampened cyclical responses for plausible parameter values. The cyclical dynamics arise from the interaction between the labor tax rate, the tax base, and the intergenerational spillover effects. We show that financing scenarios involving public debt creation can substantially reduce the short-run output contraction and the transitional macroeconomic fluctuations induced by public investment.     

Fiscal consolidation and its cross-country effects

We build a new Keynesian DSGE model consisting of two heterogeneous countries in a monetary union. We study how public debt consolidation in a country with high debt (like Italy) affects welfare in a country with solid public finances (like Germany). Our results show that debt consolidation in the high-debt country benefits the country with solid public finances over all time horizons, while, in Italy, debt consolidation is productive in the medium and long term. All this is with optimized feedback policy rules. On the other hand, fiscal consolidation hurts both countries and all the time, if it is implemented in an ad hoc way, like an increase in taxes. The least distorting fiscal mix from the point of view of both countries is the one which, during the early phase of pain, Italy cuts public consumption spending to address its debt problem and, at the same time, reduces income tax rates, while, once its debt has been reduced in the later phase, it uses the fiscal space to further cut income taxes.     

The Financing of Investment in Utility Assets

This article concerns appropriate ways to finance investment in quasi‐public assets, such as those of utilities. Pursuing the principle of charging the user, analogies are drawn with not‐for‐profit investment, dedicated to the service of users. Focusing on intergenerational equity, an arguably typical pattern of intergenerational investment transactions is identified and proposed as a financing norm. It is shown that, while an investing generation will always experience a real resource cost, the burden can be alleviated in welfare terms if all new investment is financed by borrowing. Charges or taxes levied for maintenance and replacement of assets offer scope for improving the intergenerational welfare balance.     

Finite lifetimes,long-term debt and the fiscal limit

The U.S. faces exponentially rising entitlement obligations. I introduce a fiscal limit—a point where higher taxes are no longer a feasible financing mechanism—into a Perpetual Youth model to examine how intergenerational redistributions of wealth, the average duration of government debt, and entitlement reform impact the consequences of explosive government transfers. Three key findings emerge: (1) Growing government transfers cause more severe and more persistent stagflation than in representative agent models that do not capture intergenerational transfers of wealth; (2) A longer average duration of government debt pushes the financing of government liabilities into the future and reduces the short-run impacts of explosive transfers; (3) The time it takes the economy to rebound from a period of growing transfers increases exponentially with the number of years it takes to pass entitlement reform.     

Tax Policy Coordination, Vertical Externalities, and Optimal Taxation in a System of Hierarchical Governments

Tax policies of two levels of government (state and federal) with overlapping tax bases are considered. This overlap leads to “vertical” fiscal externalities are considered when several different commodities are in the tax base and the tax bases of the two levels of government may not be identical. When the governments share a tax base, the mix of combined taxes is optimal. With different tax bases, combined taxes are no longer optimal as federal tax rates are adjusted to reflect state public service levels. When grants are available, a welfare-maximizing mix of taxes and public services is obtained.     

The Henry George Theorem in a second-best world

The Henry George Theorem (HGT) states that, in first-best economies, the fiscal surplus of a city government that finances the Pigouvian subsidies for agglomeration externalities and the costs of local public goods by a 100% tax on land is zero at optimal city sizes. We extend the HGT to distorted economies where product differentiation and increasing returns are the sources of agglomeration economies and city governments levy property taxes. Without relying on specific functional forms, we derive a second-best HGT that relates the fiscal surplus to the excess burden expressed as an extended Harberger formula.     

Growth, debt and public infrastructure

This paper presents a closed economy model of endogenous growth driven by capital externalities arising from both private capital and public infrastructure. The model is calibrated to fit data for India, an approximately closed economy. Simulations suggest that fiscal policy certainly matters and the choice of the income taxation rate, the mix of government spending between infrastructure and public consumption goods, and the long-run government debt/GDP ratio can all significantly affect the long-run growth rate. Intertemporal aspects of fiscal policy are also important and the precommitment (time-inconsistent) and non-precommitment policies differ substantially.     

Congestable local public goods in an urban setting

In this paper, we recognize two types of unpure local public goods (LPGs): congestable and pollutable. This paper and the forthcoming one (Clubs in an urban setting, mimeo, 1980) are devoted to congestable LPGs (CLPG). In Part I we define, classify, and characterize CLPGs. CLPGs may vary in their degree of congestability between zero, in the case of a pure LPG, and one, in the case of a private good. Spatially, we recognize two types of LPGs: the dispersed LPG (DiLPG) and the concentrated LPG (CoLPG). The first is distributed throughout the residential ring and the second is provided in specific locations to which households must travel. The second part of this paper is devoted to the investigation of the properties of a CDiLPG in an urban setting. The properties of CoLPG are investigated in (Clubs in an urban setting, mimeo, 1980). A version of Samuelson's rule as to the optimal allocation of pure public goods is extended on one hand to local dispersed public goods and on the other hand to CLPGs. Two corrective Pigouvian taxes are identified: congestion tolls levied on households, and a residential land tax. These two taxes cover total government expenditure on the LPG. The fraction of the expenses on the LPG covered by congestion tolls is α, and that covered by land taxes is (1 − α), where α is the degree of congestability. Efficiency can also be achieved by zoning the residential ring and regulating the housing density in it. This procedure may replace taxation and its advantage is that we can control a large number of externalities by a single set of zoning rules and regulations. An a posteriori rule to guide the local government as to the desirability of its actions is provided.     

Congestible public goods and local indeterminacy: A two-sector endogenous growth model

This paper shows that the congestible public goods can generate local indeterminacy in a two-sector, constant-return human capital enhanced growth model. While the productive public good exerts positive sector-specific externalities, the congestion effect generates negative aggregate externalities. The sector-specific externalities alone arising from productive public goods cannot establish local indeterminacy without the combination of negative externality in a model with social constant return technology. Congestible public good generates local indeterminacy if the degree of productive public good externality and the degree of congestion effect are large enough. The condition for indeterminacy is independent of the factor intensity rankings. The conditions are quantitatively assessed and the required parameter values for the degrees of public good externality and congestion are consistent with the estimated values in existing literature.     

企业所得税对债务融资影响分析——基于我国上市公司的实证研究

本文主要研究了企业所得税对企业债务融资决策产生的影响。研究结论支持了修正的MM理论关于税收对企业的债务融资决策有影响的观点。研究表明:在我国上市公司的债务融资决策中,企业所得税是考虑的因素之一,主要表现在其他条件相同的情况下,实际税率较高的企业债务融资的利用程度较高,享受税盾利益的动机相对较强。同时在我国上市公司中,债务性税盾与非债务性税盾的替代作用并不明显。     

Regulation of road accident externalities when insurance companies have market power

Accident externalities that individual drivers impose on one another via their presence on the road are among the most important external costs of road transport. We study the regulation of these externalities when insurance companies have market power. Some of the results we derive have close resemblance to the earlier literature on externality regulation with market power in aviation and private roads, but there are important differences, too. Using analytical models, we compare the first-best public welfare-maximizing outcome with a private profit-maximizing monopoly, and oligopoly. We find that insurance companies will internalize some of the externalities, depending on their degree of market power. We derive optimal insurance premiums, and regular parametric taxes as well as “manipulable” ones that make the companies set socially optimal premiums. The latter take into account that the firm tries to exploit knowledge of the tax rule applied by the government. Finally, we also study the taxation of road users rather than that of firms.     

Optimal fiscal policy under learning

This paper characterizes optimal fiscal policy when agents learn about future taxation. A benevolent and fully rational government chooses taxes on labor income and state-contingent bonds to finance public spending, considering that private agents form their expectations through a learning algorithm. Facing a trade-off between distortionary taxes and distorted expectations, the Ramsey planner chooses the policy that minimizes the total cost of distortions. The analysis produces two main results. First, the government will use fiscal variables to manipulate expectations, reducing taxes and issuing debt at times of pessimism and doing the opposite at times of optimism. This speeds up learning. Second, the expectation-dependent fiscal plan is also history-dependent, and it prescribes taxes that are not as smooth and more persistent than under rational expectations. These findings are robust to alternative learning algorithms.     

Myopic governments and welfare-enhancing debt limits

This paper studies welfare effects of a soft borrowing constraint on sovereign debt. The constraint is modeled as a proportional fine per unit of debt in excess of a specified reference value, resembling features of the Stability and Growth Pact. Sovereign debt is the result of myopic fiscal policy. It reduces welfare in the absence of lump-sum taxes. The paper shows that the borrowing constraint enhances welfare by reducing long run debt. In an economy calibrated to a generic OECD country, the maximum attainable welfare gain of debt consolidation, which is induced by imposing the optimally parameterized constraint, amounts to 0.5% in terms of consumption. The short run welfare costs of the constraint, which arise from restricting the use of debt to smooth taxes, are quantitatively negligible.     

Local Public Debt with Overlapping Generations

Discussions of Ricardian equivalence for local public debt have generally centered on the role of land within a particular generation. This paper examines the full neutrality of local public debt in determining whether local public debt is neutral in the resource allocation between (1) mobile and immobile individuals who belong to the same generation, and between (2) individuals belonging to different generations. We find that local debt neutrality continues to hold across generations under migration.     

Auto pollution and congestion in an urban model: An analysis of alternative strategies

Congestion and pollution externalities associated with automobile driving are examined for their effect on urban structure. A monocentric urban model which incorporates household preferences for both an unpolluted environment and for leisure time is presented, and used to evaluate alternative pricing and emissions policies on automobile use and their effects on city structure. Optimal tax gradients for driving are derived, and compared with second best cases of per mile taxes and no taxes. As externalities gradients become more nonlinear, the welfare gains from employing optimal taxes rather than a per mile tax are increased. The appropriate choices of an emission standard, highway capacity, and highway pricing policy must be made simultaneously and depend on household preferences.     

what Price Water Marketing?

A bstract . We can multiply the value of output from limited natural water supplies by allocating them to higher uses. To this end we need a market in raw water, but existing markets work badly, for several reasons. Sellers are undermotivated, absent taxes or debt. Free groundwater subverts the pricing of surface water. Loss of elevation, and damage from effluents, and instream uses are not charged for. Obsolete subsidies abound; obsolete entitlements dominate allocation. Some trades extinguish public rights. Rent-seeking distorts allocation. Needed public agencies have been subverted by organized land speculators. Recommendations are given.     

建立地方公债制度的探讨

地方公债是政府公债体系的重要组成部分 ,在中国逐步推行地方政府公债制度是完善分税制、全面落实地方政府应有财权的客观需要 ,是强化财政职能、缓解各级政府财政困境的必然选择 ,是统一政府债权、强化债务管理、防范政府债务危机的现实要求 ,有限度、有选择地发行地方公债的条件完全具备 ,并对地方政府公债发行的选择性和限定性及可控性作了探讨。     

地方政府债券违约风险形成机制及防范——基于委托代理问题的分析

就地方政府债券而言,在地方政府和居民之间涉及两类委托代理问题:债权债务的代理问题和公共政策的代理问题。地方政府依凭中央政府的"父爱心理",具有向上转移债务的动机,导致地方政府债券规模人为扩大;地方政府"经济人"特性促使其有意识地运用公共债务追求自身利益而罔顾公共财政风险。这些都隐藏着潜在风险无限增加的可能性。可以从建立相应的法律法规制度、居民退出机制、地方政府内在约束机制、事前制约机制、事后监督机制以及深化政务公开制度来防范信用风险。     

Locational efficiency in a federal system

A number of recent studies have concluded that differing local government tax and expenditure packages necessarily create incentives for households to locate in a non-optimal fashion. This paper shows, on the contrary, that the locational equilibrium may be optimal. For example, if migration produces no congestion costs, then as long as localities tax the locationally-fixed commodity, land, the equilibrium will be optimal. In fact, there are only two reasons why non-optimality may result: local taxes may be distortionary (by taxing the mobile rather than immobile factor), or there may be non-internalized externalities.     

Voluntary contributions to multiple public goods in a production economy with widespread externalities

In a production economy, multiple public goods are produced by firms in competitive markets, and provided by the government together with contributions from consumers. There are widespread externalities: all consumers’ consumption and contributions and all firms’ production enter into utility functions. Public goods can be imperfect substitutes or complements, and they can be local public goods or club goods. Zero bounds that require consumers to make nonnegative contributions complicate the differentiable approach. Applying the transversality theorem for smooth economies in a regular parameterization, we obtain the existence of equilibrium in such an economy, and generically equilibria are regular and locally unique.