Property Tax Circuit-breakers: Good Causes but Bad Economics

A bstract . Since 1965, 30 states and the District of Columbia have enacted programs designed to reduce the effective rate of property taxation for some low income households and for the elderly. Most often this relief is provided by so-called "circuit-breakers." It is contended that the economic arguments favoring circuit-breakers are empirically unproven and theoretically suspect. The tax may be progressive , not regressive , and the device may transfer income from low to high income households. Any short run redistribution of income to favor the poor or the elderly would, in the long run, merely shift the timing of their tax payments. Circuit-breakers encourage over-consumption of housing and misallocation of housing resources. Reducing the tax base, they produce higher rates and so increase the tax burden.     

Upcoming picture of ageing population: Pakistan

Ageing of population may have its implications at individual, family, community and economic level. This paper explains how ageing population will behave in the future based on projection assumptions. Future prospects and issues are identified and categorized alongwith relevance of ageing population trend examined in a survey. The findings demonstrate that ageing population of Pakistan will increase in the forthcoming years. Among several reasons for increase in ageing population, the most important is decline in death rate. The overall sex ratio indicates a better coverage of female in coming decades. For the next 50 years, the life expectancy may rise to 70.7 years. The old age dependency ratio may also increase in the times to come. Married elderly females may be less in number as compared to married elderly males. The high prevalence of other-than-married elderly females deserves special consideration in policy-making and planning. There exists much variation in the literacy rate of both elderly male and female. As the study reflects future pattern of ageing population, its findings may be of interest for researchers and practitioners.     

Assistance to poor households when income is not observed: targeted in-kind and in-cash transfers

Policymakers frequently design self-targeting programs or target poor areas to assist poor families when income is not observed. Self-targeting schemes take advantage of differences in participation costs in assistance programs across households. Geographic targeting assumes that transfers are solely determined by the region of residence: to receive the benefits, households not initially present in the targeted areas must relocate away from their original place of residence and live with the poor, which entails a cost that can also be interpreted as a participation cost in the assistance program. The paper shows that a combination of in-kind and in-cash transfers tied to the consumption of a publicly provided private good targeted to the poor becomes very useful when non-poor households have different participation costs. By distinguishing users and non-users of public facilities additional in-cash transfers can be directed to the poor more effectively. The paper demonstrates that the publicly provided good ends up being undersupplied, and the distortion becomes less important as participation costs rise. More importantly, it shows that this kind of redistributive program dominates a pure in-cash scheme.     

Renting vs buying a home: A matter of wealth accumulation or of geographic stability?

I study the housing tenure decision in the context of a spatial life cycle model with uninsurable individual income risk, plausibly calibrated to match key features of the US housing market. I find that the relatively low ownership rate of young households is mainly explained by their high geographic mobility. Downpayment constraints have minor quantitative implications on ownership rates, except for old households. I also find that idiosyncratic earnings uncertainty has a significant impact on homeownership rates. Based on these results, I argue that the long term increase in ownership rates observed over the period 1993–2009 was not necessarily due to mortgage market innovations and the relaxation of downpayment requirements, as is often argued. Instead, it was simply an implication of US demographic evolution, most notably the decline in interstate migration and, less importantly, population ageing. The model predicts that an increase in the income risk (i.e. higher income inequality) has a positive impact on geographical mobility of young households, which means that young homeowners are less affected by the labour market inefficiency associated with homeownership.     

Income redistribution versus accelerated economic growth: a comparison of demographic effects

An attempt is made to identify the effects on fertility and mean expectation of life of varying rates of growth in aggregate income and of changes in the income share of the poorer segments of the population. The extent to which these effects vary among developing countries with different levels of mean income is also considered. An econometric model is developed to estimate the direction and strength of the structural relationships among the key variables, and simulation methods are used to predict the final demographic effects of altering either the growth rate or the size distribution of income. The results suggest that there is no general justification for income redistribution as a means of slowing rates of population growth in a developing country. It may be relevant in the more advanced developing countries, but even in those, more direct means (such as family planning programs, education, and health services) may be more effective. This is a revised version of a paper originally presented at the 1983 Annual Meeting of the Population Association of America (see Population Index, Vol. 49, No. 3, Fall 1983, p. 356).     

The Revenue Adequacy of Site Value Taxation in a Ricardian System of Economic Growth

A bstract . The federal administration has sought to reduce the growth of federal expenditures by shifting some government costs to state and local governments. An increased expenditure burden for the latter governments would require increased tax rates for existing types of taxes that have adverse impacts on economic incentives. Land taxes are considered as a source of revenue because of their efficiency aspects. Unfortunately this idea is all too often dismissed because of alleged revenue inadequacy. Thus an analysis is called for of the revenue adequacy of site value taxation in a Ricardian model of economic growth. The model allows analysis of revenue adequacy over time in an economic growth context that is suited for the long range tax-expenditure planning horizon with which local governments are faced. When revenue needs are primarily dependent upon the population size, and the fisc is initially operating at a deficit, for a land tax to permit attainment of balance, per capita rents must be increasing over time. Also when the economy's public service demand is primarily dependent upon income, deficits will not occur if rental share exceeds the share of income devoted to public output. Not all income goes to fiscal output, so rent eventually exceeds expenditures.     

Probabilistic Population Projections for India with Explicit Consideration of the Education-Fertility Link

Among the different sources of uncertainty in population forecasting, uncertain changes in the structure of heterogeneous populations have received little attention so far, although they can have significant impacts. Here we focus on the effect of changes in the educational composition of the population on the overall fertility of the population in the presence of strong fertility differentials by education. With data from India we show that alternative paths of future female enrolment in education result in significantly different total fertility rates (TFR) for the country over the coming decades, even assuming identical fertility trends within each education group. These results from multi-state population projections by education are then translated into a fully probabilistic population projection for India in which the results of alternative education scenarios are assumed to expand the uncertainty range of the future TFR in the total population.
This first attempt to endogenize structural change with respect to education—which is the greatest measurable source of fertility heterogeneity in Asia—has resulted from a larger exercise of the Asian MetaCentre for Population and Sustainable Development Analysis to collect empirical information, scientific arguments as well as informed opinions about likely future population trends in Asia from a large number of population experts in the region. In this process, future changes in the educational composition of the population have been identified as a key driver of future fertility.
The actual probabilistic population projections for India show that with high certainty, the Indian population will continue to grow to about 1.3 billion over the next quarter of a century. After that the uncertainty will get much wider, ranging from a continued strong increase to the beginning of a population decline in India.     

Trends and prospects in state and local finance

This article reviews trends in the national total of the expenditures of state and local governments for the period of 1929–1982. The principle conclusions are that growth of federal grants has played a significant role in the growth of these expenditures, and that even after allowing for the effects of relative price, income, and federal grants, a relatively large unexplained positive residual remains. Part of this upward drift in expenditures, especially for the period of 1950–1970, can be accounted for by the growth in school-age population. The article ends with a brief discussion of future prospects for subnational governments.     

The Nominal Framework for Economic Policy

The next Budget will almost certainly be the last one before a General Election. Despite the temptations to make electorally attractive cuts in income tax or increases in public spending, we believe the opportunity should be taken to re-affirm the government's intention to move steadily towards price stability. This is particularly important at a time when our exceptionally high real interest rates may reflect fears about a future change in policy. We provide a nominal framework which extends the Medium Term Financial Strategy to 1992–3. Given the buoyancy of revenue and the likely growth of money GDP next year, we argue that the PSBR should be no higher than £6bn next year. There is a good case for keeping it at this year's expected level of £5bn.     

The homeownership decision of female-headed households

The homeownership rate of female heads of household is substantially lower than the rate for married women. A number of factors could account for this observation including differences in income and its sources, wealth, demographic characteristics, and the relative price of homeownership. We identify the impact of these factors and find income and the cost of owning relative to renting to be most important. Analysis of changes in female ownership rates over a 10-year period reveals the impact of the Equal Credit Opportunity Act which eased access to the mortgage market. We find evidence that ECOA raised the probability of homeownership for all women. However, much of the difference in ownership rates between married and unmarried women remains unexplained, especially for high income households.     

Can consumers continue to lean against the real wage squeeze?

This has been no ‘normal’ consumer recovery. The emphasis on rising employment levels, rather than wage growth, to drive the improvement in real incomes means that while the collective spending power of UK households has strengthened, many individual households continue to feel squeezed. A tightening labour market and emerging skills shortages will improve workers' wage bargaining power, but progress will be gradual and, for many workers, limited by the impact of further strong growth in the labour supply. Therefore, with little scope for households to further reduce the share of income saved, consumer spending growth is likely to remain relatively subdued, lagging well behind the growth rates achieved over the decade prior to the financial crisis.     

IMPACT OF RELATIVE POPULATION CHANGE ON REGIONAL INCOME CONVERGENCE: EVIDENCE FROM TURKEY

The aim of this paper is to show the impact of relative population change on regional income convergence. Using the panel data of 64 Turkish provinces from 1987 to 2000, the results from modified convergence analyses show that both income and per capita income between provinces in Turkey indicate converging patterns. The convergence rates for the provincial per capita income, however, turned out to be about 30 percent larger than that of income. In order to examine this difference, the impact of relative population change on the growth process is incorporated using a decomposition analysis. The findings suggest that 17 percent of the 100 percentage point growth of per capita income resulted from the change in population share in favour of the provinces with high per capita incomes. The existence and pace of regional income convergence, therefore, may well be related to the degree of relative population change.     

The allocation of household income to food consumption

Low-income households - those toward which various income supplement programs are aimed - not only spend a large share of their incomes on food, but exhibit a higher income elasticity of demand for food than does the rest of the population. Further, a greater proportion of the marginal income generated via welfare payments and food subsidy programs (e.g., food stamps) is devoted to food consumption than is true of wage income. These are among the major conclusions emerging from an extensive Engel Curve analysis applied to the data generated by a five-year (1968–1972) panel study of 5000 U.S. households.     

Wealth Accumulation and Factors Accounting for Success

We use detailed income, balance sheet, and cash flow statements constructed for households in a long monthly panel in an emerging market economy, and some recent contributions in economic theory, to document and better understand the factors underlying success in achieving upward mobility in the distribution of net worth. Wealth inequality is decreasing over time, and many households work their way out of poverty and lower wealth over the seven year period. The accounts establish that, mechanically, this is largely due to savings rather than incoming gifts and remittances. In turn, the growth of net worth can be decomposed household by household into the savings rate and how productively that savings is used, the return on assets (ROA). The latter plays the larger role. ROA is, in turn, positively correlated with higher education of household members, younger age of the head, and with a higher debt/asset ratio and lower initial wealth, so it seems from cross-sections that the financial system is imperfectly channeling resources to productive and poor households. Household fixed effects account for the larger part of ROA, and this success is largely persistent, undercutting the story that successful entrepreneurs are those that simply get lucky. Persistence does vary across households, and in at least one province with much change and increasing opportunities, ROA changes as households move over time to higher-return occupations. But for those households with high and persistent ROA, the savings rate is higher, consistent with some micro founded macro models with imperfect credit markets. Indeed, high ROA households save by investing in their own enterprises and adopt consistent financial strategies for smoothing fluctuations. More generally growth of wealth, savings levels and/or rates are correlated with TFP and the household fixed effects that are the larger part of ROA.     

The desegregating effect of school tracking

This paper makes the following point: “detracking” schools, that is preventing them from allocating students to classes according to their ability, may lead to an increase in income residential segregation. It does so in a simple model where households care about the school peer group of their children. If ability and income are positively correlated, tracking implies that some high income households face the choice of either living in the areas where most of the other high income households live and having their child assigned to the low track, or instead living in lower income neighbourhoods where their child would be in the high track. Under mild conditions, tracking leads to an equilibrium with partial income desegregation where perfect income segregation would be the only stable outcome without tracking.     

Effects of Future Demographic Changes on the US Economy: Evidence from a Long-term Simulation Model

Demographics, especially the size and the age composition of the population, contribute substantially to the growth and structure of any economy. Over the next 55 years, the age composition of the US population will change dramatically, as the post-World War II ‘baby boom’ ages into retirement. In this paper, we use a long-term interindustry macro model of the US economy to examine how the age composition of the US population affects overall economic growth as well as the output/employment structure of the economy. We find that the system of funding government commitments to pension and medical care for the elderly is a primary channel through which demographic effects translate into economic effects.     

The consequences of pandemic-driven inequality

• ▀ According to our analysis, the Covid-19 pandemic is likely to exaggerate global inequality, leading to more aggregate debt among lower earners and higher savings for those at the top. The surge in savings will raise demand for safe assets, which would put downward pressure on long-term government bond yields - already depressed from a chronic shortage of safe assets.
• ▀ Historically, pandemics can trigger a rise in inequality, even over medium-term periods. Pandemics damage confidence in using in-person services, which disproportionately exposes low-skilled work to displacement. A unique feature of this pandemic is that the ability to work from home is proving a key factor in determining job losses - those that can are typically in higher paid jobs.
• ▀ The poorest households spend more of their income on essentials such as housing and basic food. When their incomes fall, they still have to spend on these essentials and so are often forced to take on debt. Conversely, the richest often consume near maximum capacity, so any additional income goes into savings to support future consumption.
• ▀ Higher aggregate savings would, all else equal, drive up demand for safe assets and therefore lower interest rates. Other factors such as weak nominal GDP growth, demographics and a chronic shortage of safe assets will also contribute to keeping yields depressed over the next five years.

     

Income convergence prospects in Europe: Assessing the role of human capital dynamics

We employ income projection models based on human capital dynamics in order to assess quantitatively the role that educational improvements are expected to play as a driver of future income convergence in Europe. We concentrate on income convergence dynamics between emerging economies in Central and Eastern Europe and Western European countries during the next 50 years. Our results indicate that improvements in human capital contribute significantly to the income convergence potential of European emerging economies. Using realistic scenarios, we quantify the effect that future human capital investment paths are expected to have in terms of speeding up the income convergence process in the region. The income projection exercise shows that the returns to education in terms of income convergence in Europe could be sizeable, although it may take relatively long for the poorer economies of the region to rip the growth benefits.     

物价上涨对不同收入群体消费支出的影响分析——以广东省为例

为了考察物价上涨对居民生活的影响,本文以广东省为例,从短期和长期两个方面对不同收入层城镇居民的消费支出变动情况进行了实证分析。结果表明,从短期看,物价上涨使城镇不同收入层居民的消费支出出现不同程度的增加,但低收入层居民消费性支出的增长幅度最大,普遍高于其他收入层居民。从长期看,物价上涨对城镇不同收入层居民消费支出的影响方向和程度不尽相同,其中使低收入户、中低收入户和高收入户的支出增加,而使中等收入户和中高收入户的支出减少。但是,无论是从长期还是从短期看,物价上涨对低收入户的影响最大,其消费性支出的增长幅度均高于其他收入群体的支出增长幅度。     

The determinants of SMSA homeownership rates

Aggregate SMSA data are used to explain homeownership rates. It finds that income, house values, the size and age distribution of households, and the rate of population change in an SMSA were significant determinants of the tenure decision on an SMSA-wide basis in 1970. Over 56% of the variance in SMSA homeownership rates could be explained by these variables.