HOW SHOULD WE MEASURE THE “ECONOMIC” ASPECTS OF WELL‐BEING?

The Human Development Index (HDI) uses GDP per capita to measure “command over resources,” which implicitly makes the strong value judgment that inequality and insecurity do not matter. This paper presents revised estimates of the Index of Economic Well‐Being (IEWB) for the United States, the U.K., Canada, Australia, Germany, Norway and Sweden for the period 1980 to 2001 and demonstrates that replacing an index of the log per capita incomes with our IEWB as the “command over resources” component in the Human Development Index (HDI) affects the level and trend of the HDI, even among affluent nations. Because the IEWB recognizes four dimensions of command over resources (Current effective per capita Consumption flows, Net societal Accumulation of stocks of productive resources, Income Distribution and Economic Security), its use has a particularly large impact where underlying trends in these components diverge (e.g. the U.K. or the United States).     

AN OPTIMAL TAX TREATMENT OF LEVIATHAN*

This paper constructs a model in which taxation and public expenditure decisions are made by two decision makers: a “benevolent planner,” who treats all consumers equally in the measurement of welfare; and a “Leviathan planner,” who places more weight on the utilities of “favored consumers.” The benevolent planner can restrict the Leviathan planner's power to tax, but cannot control the allocation of expenditures between desirable public goods and income transfers to favored consumers. Several types of tax restrictions are shown to be welfare-improving from the benevolent planner's viewpoint. These restrictions include a reduction in the size of the tax base, although administrative costs already prevent the Leviathan planner from taxing all commodities.     

Subjective well‐being,consumption comparisons,and optimal income taxation

We introduce reference consumption into the standard utility function from optimal tax analysis. Individuals compare their consumption “narrowly” with those of the same productivity, or “broadly” with the average consumption across society. In both narrow and broad equilibria reference consumption is an increasing function of the tax parameters, so generating new theoretical results. Individual well‐being decreases with the net wage (net‐of‐tax) rate for low productivity workers under narrow (broad) comparisons, thus adjusting redistributive taxation considerations. Further, in both cases reference consumption distorts labor supply away from the social optimum level, giving a distortion‐correcting role for taxation.     

Income taxes and entrepreneurial choice: empirical evidence from two German natural experiments

Does tax policy affect entrepreneurial choice? We use two tax reforms in Germany as “natural experiments”. These reforms reduced the marginal income tax rate for entrepreneurs with income above a certain threshold, with the exception of freelance professionals. The two conditions for belonging to the treatment group allow us to apply a “difference-in-difference-in-difference” identification strategy to estimate the effects of the tax rate reductions. We base our analysis on the microcensus, the official representative continuous household survey in Germany. The results indicate that the tax rate reductions increased the probability of choosing self-employment.     

POTENTIAL STATE‐LEVEL CARBON REVENUE UNDER THE CLEAN POWER PLAN

In 2015, the U.S. Environmental Protection Agency issued the Clean Power Plan under which each state can set a mass‐based target to meet its assigned electric power sector carbon dioxide emission reductions. If it proceeds, states can design policies to meet those requirements and also raise revenue via a carbon tax or cap‐and‐trade program with auctioned permits. We calculate each state's potential revenue and demonstrate its significance. In 13 states, carbon revenue could replace all of corporate tax revenue. In addition, we collect budget projections from six key states to determine if and how carbon revenue can substantially reduce deficits. While such revenue is not free money, we discuss its advantages over use of distortionary taxation. Finally, we consider distributional aspects and potential external fiscal effects on federal revenue. (JEL H2, H3, H7, Q5)     

Land,men and taxation: an application to pre-modern China and Europe Erik Jones’ European Miracle revisited

Eric Jones has found that excessive taxes were detrimental for pre-modern China’s economic growth whereas moderate taxes were conducive for Europe’s economic growth. This paper provides a political-economic answer to the question why these two tax systems came about. Taxation is only feasible when men and land can be linked as a single bundle. Taxation of land is not feasible without men, and taxation of men is not feasible without land. A tax maximizing bureaucrat has to combine the two variables in such a way that tax revenues are maximized given the constraints of land and men in his country. China’s contiguous geography allows bureaucrats to establish an autocratic tax system whereas Europe’s split geography enforces a competitive tax system. Therefore often contiguous states reveal to be stable states whereas split states turn out to be unstable and prone to collapse.     

Competing Para-Sovereignties in the Borderlands of Europe

This article is broadly concerned with how we conceptualise the geography of the tensions between the nominally stable orders of the modern state system against the turbulence of the past few decades in relation to that order, especially in the realm of border controls. Specifically, it considers the rescaling and relocation of border enforcement in the European Union in relation to state sovereignty. The article argues that existing “soft” conceptualisations of the EU’s relationship to sovereignty and bordering—“shared,” “joint,” “multi-level,” “consociational”—are inadequate to understand the transformations of exercises of sovereign power in European borderlands. Instead, we are witnessing the emergence of competing para-sovereignties acting within the same spaces, with both traditional states and the incipient state-like EU fulfilling particular bit roles in realms that were traditionally viewed as the exclusive responsibilities of modern, sovereign, territorial states. This dynamic is made visible in recent years in observing individual humans negotiate and subvert the fluid political geographies of European border space. Examples are taken from the activities of the EU border agency Frontex in southeastern Europe.     

Robert Brenner on political accumulation and the transition to capitalism

This paper is an immanent critique of Robert Brenner’s writings on the transition from feudalism to capitalism. The concept “immanent” is defined as a logic of implication, according to which a text or theory is evaluated within the terms that it sets for itself, to determine whether its objectives and assumptions are true in the way they are said to be true. Using this method of critique, the paper shows how Brenner’s concept of “political accumulation” undermines his own initial claim that the balance of class forces between lords and peasants determined the long-term trends of preindustrial Europe, in that this concept points toward intralord struggles dominated by military interests. The paper also discusses why Brenner’s account of France’s tax/office state seriously weakens his postulate that “surplus extracting relations” were the “fundamental” relation of fuedalism, on the grounds that office-holding reflected an unequal distribution of property based upon status. Finally, the paper draws out the theoretical implications of these contradictory instances, to delineate ways in which Brenner’s basic theory may be sublated within a more comprehensive account.     

The “Business Climate” and Economic Inequality

“Business climate indexes” characterize state economic policies, and are often used to try to influence economic policy debate. However, they are also useful in research as summaries of a large number of state policies that cannot be studied simultaneously. Prior research found that business climate indexes focused on productivity and quality of life do not predict economic growth, while indexes emphasizing taxes and costs of doing business indicate that low‐tax, low‐cost states have faster growth of employment, wages, and output. In this paper, we study the relationship between these two categories of business climate indexes and the promotion of equality or inequality. We do not find that the productivity/quality‐of‐life indexes predict more equitable outcomes, although some of the policies underlying them suggest they might. We do find, however, that the same tax‐and‐cost‐related indexes that are associated with higher economic growth are also associated with increases in inequality.     

间接税对供需失衡的影响分析

从20世纪90年代后期开始到现在,我国同时出现了两个重要的经济现象,一是间接税高速增长,二是宏观经济供需失衡。本文通过建立一般均衡模型和实证分析,研究了这两种经济现象的内在联系,本文的结论是,征收生产型增值税同时抑制投资和消费,整体上对供需失衡的影响不显著;营业税由于税收容易转嫁、存在双重征税的原因,其增长严重强化了供需失衡局面;以消费为税基的税种全部是间接税,消费平均税率的提高强化了供需失衡局面。     

LOOKING AT THE “POPULATION PROBLEM” THROUGH THE PRISM OF HETEROGENEITY: WELFARE AND POLICY ANALYSES*

Upon introducing heterogeneity and dynamics into a model of the demand for children, a problem of optimal population is defined and analyzed. It is shown that from the perspective of social welfare, better‐educated individuals produce too few children while less‐educated individuals produce too many children and all individuals invest too little in the education of their children. The impact of several policy tools geared at addressing the “population problem” is investigated, in particular how child allowances and other tax‐subsidy policies can be harnessed to enhance welfare, and how and why early childhood education programs can mitigate the “population problem.”     

Does Inter‐jurisdictional Competition Engender a “Race to the Bottom”? A Meta‐Regression Analysis

A growing literature documents the existence of strategic political reactions to public expenditure between rival jurisdictions. These interactions can potentially create a downward expenditure spiral (“race to the bottom”) or a rising expenditure spiral (“race to the top”). However, in the course of identifying the existence of such interactions and ascertaining their underlying triggers, the empirical evidence has produced markedly heterogeneous findings. Most of this heterogeneity can be traced back to study design and institutional differences. This article contributes to the literature by applying meta‐regression analysis to quantify the magnitude of strategic inter‐jurisdictional expenditure interactions, controlling for study, and institutional characteristics. We find several robust results beyond confirming that jurisdictions do engage in strategic expenditure interactions, namely that strategic interactions: (i) are weakening over time, (ii) are stronger among municipalities than among higher levels of government, and (iii) appear to be more influenced from tax competition than yardstick competition, with capital controls and fiscal decentralization shaping the magnitude of fiscal interactions.     

The Economics of Taxation in Casino Tourism with Cross‐border Market Power

This paper provides a theoretical proof that casino taxation may have great potential as a contributor to tourism efficiency under sufficient market power. We also examine empirical evidence for the economic efficiency of casino tourism in Macao even with a “high” tax owing to geographic market power. Both theory and evidence point to such power as a key factor that affects the ability of a tourism resort to pass along local taxes to gambling visitors. This ability makes all the difference between the good or bad effect of casino taxes on tourism development. The policy implication is that a gaming tax should be lowered to support casino businesses if it is inefficient, but can be raised to extract public revenues if it is efficient.     

Economic growth,corruption and tax evasion

In this paper, we explore tax revenues in a regime of widespread corruption in a growth model. We develop a Ramsey model of economic growth with a rival but non-excludable public good which is financed by taxes which can be evaded via corrupt tax inspectors. We prove that the relationship between the tax rate and tax collection, in a dynamic framework, is not unique, but is different depending on the relevance of the “shame effect”. We show that in all three cases — “low, middle and high shame” countries, the growth rate increases as the tax rate increases up to a threshold value, after which the growth rate begins to decrease as the tax rate increases. But, for intermediate tax rates, the rate of growth for “low shame” countries is lower than that of “uniform shame” countries which is, in turn, lower than that of “high shame” countries. This happens because the growth rate is more sensitive to variations of t in an honest country rather than in a corrupt country.     

Democracy,regulation and competition in emerging banking systems

This paper develops a political economy framework to analyse the relations among democracy, financial regulation and banking competition in the emerging banking systems of Central and Eastern Europe. We develop extensive new yearly non-structural indices of bank competition instead of concentration indices as in the previous literature that show its evolution over time with the level of democracy. In addition, we directly test for linkages between democracy, financial regulation and banking competition. Using an unbalanced panel data set over the period 1994–2016 for 617 banks, we show that more democratic countries with better regulatory framework lead to the enhancement of competition. We also find significant support for the core hypothesis that financial regulatory framework in a “partially” democratic environment is inadequate. Given that financial regulatory framework in a “partially” democratic environment can be inadequate we find a U-shaped relation in the sense that there is a threshold level of democracy beyond which banking systems in those countries are more competitive.     

Sustainability-oriented future EU funding: a financial transaction tax

Although responsibility for realizing the Europe 2020 strategy is shared between the EU and its 28 member states, the main criticism of the current EU budget relates to the lack of a link between the budget and the Europe 2020 strategy. Therefore the paper focuses on a new budget design as well as alternative revenue sources. One of the possible candidates is a financial transaction tax (FTT). To research FTT revenue potential, a model based on a remittance system was designed. We analyse full or partial replacement of VAT- and GNI-based own resources by the transfer of tax revenues from a FTT raised on the national level to the EU budget. The research reveals that FTT-based own resource would be able to fully replace GNI-based own resource only for some EU member states; however, VAT-based own resource can be fully replaced by a FTT-based own resource for the entire EU. Further, results also show that from the EU11 (28) perspective, the tax is sufficient to fully replace VAT- or GNI-contributions if levied on the EU11 (28) level (not on the national level) as a direct payment to the EU budget without tracking the source member State.     

Tax cuts and enterprises’ R&D intensity: Evidence from a natural experiment in China

This paper studies the impact of tax cuts on enterprises’ R&D intensity. We use a natural experiment involving China’s business tax changing to value-added tax (“BT to VAT”) to identify any causality. The results reveal that this tax reform has prompted enterprises to increase their research and development (R&D) investment. Specifically, a stronger ability to transfer tax, results in this change having a more significant promotional effect on enterprises’ R&D intensity. Further analysis demonstrates that firms with different ownership types and in different industries respond differently to the “BT to VAT” policy. Our findings are only significant for non-state-owned and other modern service enterprises. This paper provides a theoretical and empirical basis for detailed analyses of the effects of “BT to VAT” policy, particularly the government’s subsequent improvement to the tax reform policy, to further stimulate enterprise investments in R&D as well as industrial upgrading.     

Regional bank efficiency and its effect on regional growth in “normal” and “bad” times

The financial crisis affected regions in Europe in a different magnitude. This is why we examine whether regions which incorporate banks with a higher intermediation quality grow faster in “normal” times and are more resilient in “bad” ones. For this purpose, we measure the intermediation quality of a bank by estimating its profit and cost efficiency while taking the changing banking environment after the financial crisis into account. Next, we aggregate the efficiencies of all banks within a NUTS 2 region to obtain a regional proxy for financial quality in twelve European countries. Our results show that relatively more profit efficient banks foster growth in their region. The link between financial quality and growth is valid in “normal” and in “bad” times. These results provide evidence to the importance of swiftly restoring bank profitability in euro area crisis countries through addressing high non-performing loans ratios and decisive actions on bank recapitalization.     

“丝绸之路经济带”沿线国国家风险评级与对策研究

为了使中国企业在“走出去”的过程中合理识别和评估东道国的国家风险,提高国家间投资合作的效率,本文以中资企业对外投资中面临的国家风险为主要研究对象,构建了中国对外直接投资国家风险评价体系。从投入产出角度,运用超效率DEA模型与Malmquist指数相结合的分析方法,从静态与动态的时间角度对2014—2018年“丝绸之路经济带”沿线国家风险进行实证分析。研究发现：从静态层面看,中南亚区域呈现较高的国家风险,我国应加强与东道国联系,重点关注东道国投资环境的变化;欧洲地区特别是中东欧国家更适合中国企业对外投资,合作规模有待进一步扩大;西亚地区投资风险两极分化,我国应密切关注高风险国家投资风险的隐患,并建立相应的补偿机制。从动态层面看,通过Malmquist指数分析可知,研究年份间“丝绸之路经济带”沿线国家风险在逐步改善,国家管理的整体趋势向着良好的方向发展。基于分析结果,本文提出了相关的政策建议。     

Income Tax, Property Tax, and Tariff in a Small Open Economy

Why do some countries enjoy high economic growth rates while some suffer in “low-growth traps”? Why are tax policies in different countries so different? Some suggest that it is exactly these differences in government policies which contribute to the difference in economic growth rates. This paper considers a small open economy which sustains its economic growth by adopting new technologies. When the value of initial wealth is “relatively small,” policies which promote growth most result in the highest welfare. In other cases, policies that discourage growth most may be welfare-maximizing.