A note on an anniversary

ASSA Paper. ASA Session on Schumpeter     

Do dictatorships redistribute more?

This paper examines the effect of political institutions on fiscal redistribution for a country-level panel from 1960–2010. Using data on Gini coefficients before and after government intervention, we apply a measure of effective fiscal redistribution that reflects the effect of taxes and transfers on income inequality. Our findings clearly indicate that non-democratic regimes demonstrate significantly greater direct fiscal redistribution. Subsequently, we employ fiscal data in an attempt to enlighten this puzzling empirical finding. We find that dictatorial regimes rely more heavily on cash transfers that exhibit a direct impact on net inequality and consequently on the difference between market and net inequality (i.e., effective fiscal redistribution), whereas democratic regimes devote a larger amount of resources to public inputs (health and education) that may influence market inequality but not the difference between market and net inequality per se. We argue that the driving force behind the observed differences within the pattern on government spending and effective fiscal redistribution is that democratic institutions lead survival-oriented leaders to care more for the private market, and thus to follow policies that enhance the productivity of the whole economy.     

Income shifting, investment, and tax competition: theory and evidence from provincial taxation in Canada

We study corporate income taxation when firms operating in multiple jurisdictions can shift income using tax planning strategies. Because income of corporate groups is not consolidated for tax purposes in Canada, firms may use financial techniques, such as lending among affiliates, to reduce subnational corporate taxes. A simple theoretical model shows how income shifting affects real investment, government revenues, and tax base elasticities, depending on whether firms must allocate income to provinces or not. We then analyze data from administrative tax records to compare the behavior of corporate subsidiaries that may engage in income shifting to comparable firms that must use the statutory allocation formula to determine their taxable income in each province. The evidence suggests that income shifting has pronounced effects on provincial tax bases. According to our preferred estimate, the elasticity of taxable income with respect to tax rates for “income shifting” firms is 4.9, compared with 2.3 for other, comparable firms.     

Minimum wage or negative income tax: why skilled workers may favor wage rigidities

In this article, we analyze the political choice of the extent and means of income redistribution between high and low-skilled workers. Redistributive tools encompass both fiscal transfers (a negative income tax) and a minimum wage requirement. We assume the use of fiscal instruments alone to be the first-best means of redistribution. We show that high-skilled workers may favor a second-best, minimum wage requirement because it increases unemployment, hence raising the marginal cost of redistribution, and creates a justification for them to moderate low-skilled workers’ claim for redistribution.      

Political Competition, Rent Seeking and the Choice of Environmental Policy Instruments

This paper investigates the impact of political lobbying on the choice of environmental policy instruments. It is argued that the prevalence of pollution emission standards over more efficient policy instruments may result from rent seeking behaviour. The model further predicts that when an emission standard is used to control pollution, rival political parties have an incentive to set the same standard. There is therefore a convergence of policies. Moreover, it is shown that emission taxes are more likely to be supported and proposed by political parties which represent environmental interest groups. This feature appears to accord with the observed support for environmental taxes by Green parties in Europe, Australia, New Zealand and elsewhere.     

市场环境变迁和政府政策冲击对民营企业创新绩效的影响——考虑企业竞争战略和政治关联的调节作用

在文献梳理和理论分析的基础上,以中国制造业的655家民营企业为研究样本,构建回归模型,对市场环境变迁和政府政策冲击对企业创新绩效的影响进行实证分析,并进一步检验了企业竞争战略和政治关联在其中的调节作用。结果显示:市场竞争程度对民营企业的创新行为不具有显著影响;政府制定的创新激励政策会显著影响企业的创新绩效,而税收等行业政策及创新抑制政策对民营企业的创新绩效没有显著影响;在当前中国经济进入软着陆时期,自主创新战略比成本领先战略更适合于中国民营企业;与政府保持良好关系有助于民营企业降低市场竞争压力、获取额外资源,从而提升创新绩效。     

不完全竞争市场中的电信普遍服务运行体系

随着我国电信行业引入竞争机制,使得我国电信市场打破垄断,形成了力量相对均衡的竞争新格局.各类电信业务资费向成本靠拢,电信企业无法再实行企业内部不同业务间的不合理交叉补贴.因此,电信普遍服务问题已成为政府和学术界关注的重点.本文基于不完全竞争市场的普遍服务机制,通过对电信普遍服务的运行体系的分析,针对电信普遍服务运行体系中的核心问题,提出电信普遍服务项目的制定步骤和竞标程序规则设计方案,为更好地制定适应市场环境的普遍服务政策提供理论依据.     

What Drives Corporate Tax Rates Down? A Reassessment of Globalization,Tax Competition,and Dynamic Adjustment to Shocks*

We reassess the driving forces behind the recent decline of corporate tax rates in Europe. Using data for up to 32 countries from 1983 to 2006, we analyze the roles of economic and financial openness as well as tax competition, while allowing for dynamic adjustment to shocks and period‐specific and country‐specific effects. While there is no evidence that countries that have become more open have reduced their tax rates more, our findings suggest that countries strongly compete over statutory tax rates. A simulation of tax rates in a scenario with no cross‐sectional dependence in tax setting suggests that, in the absence of tax competition, the mean statutory tax rate of Western European countries in 2006 would have been about 12.5 percentage points above its actual level. We conclude that the recent downward trend in corporate taxes is mainly a result of tax competition.