Does Work Always Pay in Germany?

Abstract. Income redistribution in Germany is the result of a combination of several redistribution instruments: there is a complex income tax law, different obligatory social insurances and supplementary benefits. This paper estimates income redistribution by quantile regression, using German EVS data. Two results are obtained: income after redistribution does not always increase in line with income before redistribution, i.e. for people with a low income before redistribution, it does not make sense to increase their efforts, since more work means less earnings. Further, an increasing redistribution rate for higher incomes is not always observable from the data.     

Shifting Taxes from Labor to Consumption: More Employment and more Inequality?

This paper investigates the effect of shifting taxes from labor income to consumption on labor supply and the distribution of income in Germany. We simulate stepwise increases in the value‐added tax (VAT) rate, which are compensated by revenue‐neutral reductions in income‐related taxes. We differentiate between the personal income tax (PIT) and social security contributions (SSC). Based on a dual data base and a microsimulation model of household labor supply behavior, we find a regressive impact of such a tax shift in the short run. When accounting for labor supply adjustments, the adverse distributional impact persists for PIT reductions, while the overall effects on inequality and progressivity become lower when payroll taxes are reduced. This is partly due to increases in aggregate labor supply, resulting from higher work incentives.     

Ownership,Access, and Sequential Investment

We extend the property‐rights framework to allow for a separation of the ownership rights of access and veto and for sequential investment. Parties investing first do so before contracting is feasible. It is possible, however, that parties investing second can share (at least some of) their investment costs. Along with this cost‐sharing effect, the incentive to invest is affected by a strategic effect generated by sequential investment. Together these effects can overturn some of the predictions of the property‐rights literature. For example, the most inclusive ownership structure might not be optimal, even if all investments are complementary.     

Market thickness,sunk costs,productivity, and the outsourcing decision: an empirical analysis of manufacturing firms in France

Abstract This paper presents an empirical analysis of outsourcing behaviour by French manufacturing industries. It focuses on the effects of market thickness, sunk costs, and the productivity of firms on the outsourcing decision. I estimate a dynamic probit model where outsourcing decision is linked to past outsourcing behaviour. The results show that outsourcing is a persistent strategy adopted by large firms and suggest the presence of significant sunk costs associated with outsourcing. The results also show that market thickness reduces search costs and enhances the establishment of outsourcing relationships.     

Teach a man to fish? Education vs. optimal taxation

Abstract In models of redistribution, differences in human capital are often the relevant source of heterogeneity among individuals. Presumably, the distribution of human capital can be manipulated through education spending. This paper examines the use of education as a redistributive tool when there is a non‐linear tax system in place. The results show that taxation, whether under full or asymmetric information, substantially reduces the redistributive role of education spending in maximizing social welfare. This points to a conflict between the equalization of utility and human capital outcomes.     

Who benefits most from property assessment taxes? Evidence from Los Angeles County

Assessment caps on property taxes are often assumed to benefit affluent homeowners the most with little gains for low-income households. Quantile regression results for Los Angeles County show that on average effective property tax rates decrease by $1994 per year due to length of ownership in the 50th percentile because of California’s Proposition 13 assessment cap. There is evidence of both horizontal and vertical inequity across the entire sample. Low-income households do benefit from California’s assessment cap as they are typically infrequent movers but their effective tax rates decrease over time. However, the most affluent households by market value do not gain the most and there is no evidence of horizontal inequity for these homeowners. There is also no evidence of horizontal inequity for middle-income households. Property tax savings vary between $18,000 and $40,000, depending on the assessed value decile and percentage quantile.     

Taxation and the asymmetric adjustment of selected retail energy prices in the UK

This paper investigates the adjustment of the prices of four key petroleum products in the UK following changes in the price of crude oil. We find significant evidence that the pre-tax prices of diesel, kerosene, and gas oil adjust more rapidly in an upward than a downward direction, but that the pre-tax price of unleaded petrol adjusts symmetrically. However, these patterns are obscured at the pump once one accounts for fuel duty and value-added tax, raising the possibility that firms can use the tax system to conceal rent-seeking behaviour.     

Switching the lights off: The impact of energy tariff increases on households in the Kyrgyz Republic

This paper describes an analysis of the impact that higher energy tariffs would have on households in the Kyrgyz Republic using micro-data from the 2009 Kyrgyz Integrated Household Survey. This analysis was conducted to determine which households would be most affected by higher energy tariffs and to what extent mitigation measures, such as lifeline tariffs or direct cash transfers, might lessen the impact for poor and vulnerable households. The analysis focused on first-order effects and used benefit incidence analysis and static micro-simulation to estimate the expected costs and benefits of higher energy prices and the corresponding mitigation measures. The results suggest that both the type of energy and the level of connectedness matter. Increasing tariffs for thermal power used for central heating and hot water mainly affects richer households in urban areas. Reducing implicit electricity subsidies affects the entire population due to nearly complete country coverage with electricity connections. Both lifeline tariffs and direct cash transfers could mitigate the effect of higher electricity tariffs at lower costs than universal subsidies.     

THE ESTIMATION OF THE INCIDENCE OF EMPLOYER CONTRIBUTIONS TO SOCIAL SECURITY IN JAPAN*

The present paper estimates the incidence of the employer portion of social security contributions in Japan. One of the purposes of the paper is to examine whether the employer portion is shifted entirely or partly in many industrialized countries. The paper concludes, based on our estimation method, that there is very little apparent backwards shifting on to employees and, therefore, employers bear nearly all of their portion of social security contributions. Firms in Japan could use their contributions to social security for other purposes to reduce the financial burden on firms.