Do the catholic and protestant countries differ by their tax morale?

Does the tax morale differ between various countries? The paper introduces a model of tax evasion. The equilibrium shadow production is determined by consumers’ and entrepreneurs’ tax morale, affected by the inherited culture or religion. The model suggests that in the conditions of the prisoners’ dilemma, shadow economies tend to be large once a moral code is violated. The implications of the model are tested in the OECD data on groups of countries with different religious denominations in two regimes, 1979–1992 and 1992–2003. We find evidence on a link between tax morale and shadow market activities, but none to support the view that tax morale differs between the catholic south and protestant north in Europe.     

Which country uses public social expenditure efficiently among OECD countries?

In this study, we estimate the efficiency of public social expenditure and examine what exogenous factors affect the efficiency for OECD countries. In doing so, we use the Stochastic Frontier Model. Our findings suggest the following. First, public social expenditure related to unemployment and family as well as tax burden ratio significantly reduce income inequality. Second, corruption affects the efficiency of public social expenditure. This implies that even though two countries incur the same public social expenditure, a country with a low corruption index has higher efficiency of public social expenditure than that with a high corruption index.     

Will a special tax on tobacco reduce lung cancer mortality? Evidence for EU countries

This article carrys out a quantitative evaluation of the effects on the health of smokers of increasing a special tobacco tax, using the mortality rate from lung cancer as an indicator. To that end, it estimates two models that relate tobacco consumption, the mortality rate and this special tax, employing data drawn from a sample made-up of 12 EU countries and covering the years 1983–1993. The results show that increasing the special tax is a useful tool for reducing lung cancer mortality. Specifically, it finds that a 10% increase will reduce the lung cancer mortality rate by 1.21% in the first year, with such a reduction implying the avoidance of 1707 deaths in the sample countries.     

How elastic are national corporate income tax bases in OECD countries? The role of domestic and foreign tax rates

Abstract To what extent do reductions in corporate income tax (CIT) rates attract foreign tax bases? What are the revenue implications of a unilateral tax reduction when tax bases are internationally mobile? These questions are explored using annual data from 17 OECD countries spanning the period 1982 to 2005. Controlling for fixed country effects, year effects, and country time trends, and subjecting our results to an extensive robustness analysis, we find (i) a country’s aggregate reported corporate profits are negatively and significantly affected by CIT rate reductions in neighbouring countries; (ii) a unilateral reduction in the domestic CIT rate results in lower domestic CIT revenues.     

Which countries show favour towards negative,zero or positive population growth?

This article develops an overlapping generations model with eldercare by migrants and children in the context of the ageing problem and examines what conditions cause people to prefer a negative, zero or positive population growth rate. We find that a wage ratio of around 0.7 for eldercare by migrants can explain well the coexistence of negative, zero and positive population growth rates in the European Union. A country that does not need eldercare and has an optimistic view of the future will have a positive population growth rate. Other countries will have zero or negative population growth rates.     

Which commercial partners are important for the most recently admitted EU countries?

This paper describes the degree of trade integration inside the European Union (EU) after the fifth enlargement in 2004. To achieve this goal, we build a database of information on trade flows between the new EU countries (EU‐10) and 180 commercial partners in six different sectors from 1999 to 2011. Using the standard gravity model and estimating a difference‐in‐differences specification, we analyze how joining the EU affected the intensity and direction of the EU‐10's trade flows. Our results show that though trade exchanges between the EU‐10 and EU‐15 intensified after 2004, the impact of integration was much more significant to the EU‐10 group.     

Voting over selfishly optimal tax schedules: Can Pigouvian tax redistribute income?

This paper studies pairwise majority voting over selfishly optimal nonlinear income tax schedules proposed by a continuum of individuals who differ in privately observable skills and make consumption comparisons, which creates a negative positional externality. It shows that the tax schedule preferred by the median skill type will win the voting contest. Given a reference consumption defined as the average consumption in the population, all skills face the same Pigouvian tax rate in the utilitarian optimum, whereas in selfish optima high skills face a Pigouvian tax rate larger than that facing low skills, generating a novel income redistributive effect. Under a constant elasticity of labor supply, two more results are obtained. First, for Pareto, Champernowne, Weibull, and lognormal skill distributions, the selfishly optimal tax schedule facing high (low) skills tends to be more progressive when the bottom‐skill's (top‐skill's) status concern intensifies. Second, it identifies the conditions under which, in the voting equilibrium, high skills face higher marginal tax rates while low skills face lower ones than what they face in the utilitarian optimum.     

Did FIN 48 increase companies’ tax payments? Trade-off between disclosure and tax burdens

This article examines the effects of implementing FIN 48 on companies’ tax burdens. While the literature examines how FIN 48 impacts companies’ financial reporting, its effect on tax payments has not yet been explored. We find that FIN 48 likely increased larger companies’ tax burdens. Prior to the adoption of FIN 48, larger companies may have used their asymmetric information advantage over the tax authorities to maintain relatively aggressive tax positions. To the extent that such tax-saving strategies were possible only for larger companies, FIN 48 appears to have reduced the appeal of these more aggressive tax minimization strategies.     

Why aren't developed countries saving?

National saving rates differ enormously across developed countries. But these differences obscure a common trend, namely a dramatic decline over time. France and Italy, for example, saved over 23% and 19% of national income in 1970, but only 9% and 4% respectively in 2008. Japan saved almost 33% in 1970, but only 7% in 2008. And the U.S. saved around 11% in 1970, but only 1% in 2008. What explains these international and intertemporal differences? Is it demographics, government spending, productivity growth or preferences?For the U.S. and France, whose saving behavior we study, preferences appear to be an important factor. American and French societies are placing increasing weight on the welfare of those currently alive, particularly contemporaneous older generations. Government spending also appears to be one of the reasons why France is saving at much lower rates. These conclusions emerge from estimating two models in which society makes consumption and labor supply decisions in light of uncertainty over future government spending, productivity, and social preferences. The two models differ in terms of the nature of preference uncertainty and the extent to which current society can control future societies' spending and labor supply decisions.     

Do all countries grow alike?

This paper investigates the driving forces of output change in 77 countries during the period 1970–2000. A flexible modeling strategy is adopted that accounts for (i) the inefficient use of resources, and (ii) different production technologies across countries. The proposed model can identify technical, efficiency, and input change for each of three endogenously determined regimes. Membership in these regimes is estimated, rather than determined ex ante. This framework enables explorations into the determinants of output growth and convergence issues in each regime.     

Do oil producing countries offer international diversification benefits? Evidence from GCC countries

This paper provides evidence of the existence of diversification benefits in international stock markets when oil producing countries are included in a global portfolio. Moreover, it examines whether recent oil shocks and financial events have significant impact on the conditional correlations and diversification benefits. Using stock returns from developed, emerging, GCC countries and a global portfolio, the empirical findings show that while developed and emerging stock markets have experienced increased correlations over relatively long periods of time, the correlation in GCC stock markets remained low and constant offering high diversification benefits. Interestingly, the paper also finds that, during 2012–2014, the rising conditional correlation levels have reversed trends in developed and emerging markets alike offering more potential for international diversification. Our results are robust to model selection, data frequency, and innovations distribution.     

Does tax competition make mobile firms more footloose?

We examine a two‐period regional model with evolving economic geography, potentially creating incentives for firm relocation between periods. We argue that tax competition makes firms more footloose, but that this increases efficiency relative to the laissez‐faire outcome. We establish that: (i) tax competition leads to efficient investment outcomes and (ii) firm mobility is greater with tax competition than with a laissez‐faire regime. When relocation is costly, there can be too little mobility over time, as firms do not take into account the impact of FDI on social welfare in each country. With lump‐sum taxes or transfers, firms capture these benefits and internalize them, such that tax competition leads to the efficient outcomes. When more time periods are examined, tax competition induces firm relocation sooner than in its absence.     

State investment tax incentives: A zero-sum game?

Over the past four decades, state investment tax incentives have proliferated. This emergence of state investment tax credits (ITC) and other investment tax incentives raises two important questions: 1) Are these tax incentives effective in achieving their stated objective, to increase investment within the state?; 2) To the extent these incentives raise investment within the state, how much of this increase is due to investment drawn away from other states?To begin to answer these questions, we construct a detailed panel dataset for 48 states for 20+ years. The dataset contains series on output and capital, their relative prices, and establishment counts. The effects of tax variables on capital formation and establishments are measured by the Jorgensonian user cost of capital that depends in a nonlinear manner on federal and state tax variables. Cross-jurisdictional differences in state investment tax credits and state corporate tax rates entering the user cost, combined with a panel that is long in the time dimension, are key to identifying the effectiveness of state investment incentives.Two models are estimated. The Capital Demand Model is motivated by the first-order condition for a profit-maximizing firm and relates at the state level the capital/output ratio to the relative user cost of capital. The Twin-Counties Model exploits both the spatial breaks (“discontinuities”) in tax policy at state borders and our panel dataset to relate at the county level the relative user cost to the location of manufacturing establishments. Using the Capital Demand Model, we find that own-state capital formation is substantially increased by tax-induced reductions in the own-state price of capital and, more interestingly, substantially decreased by tax-induced reductions in the price of capital in competitive-states. Similarly, using our Twin-Counties Model, we find that county manufacturing establishment counts around state borders are higher on the side of the border with the lower price of capital, but the difference is economically small, suggesting that establishments are much less mobile than overall capital. Extensions of the Capital Demand Model also reveal that state capital tax policy appears to be a zero-sum game among the states in that an equiproportionate increase in own-state and competitive-states user costs tends to have no effect on own-state capital formation.     

What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement

We study the stock price reaction to news about corporate tax aggressiveness. We find that, on average, a company's stock price declines when there is news about its involvement in tax shelters. We find some limited evidence for cross-sectional variation in the reaction. For example, the reaction is more negative for firms in the retail sector, suggesting that part of the reaction may be a consumer/taxpayer backlash. In addition, the reaction is less negative for firms that are viewed to be generally less tax aggressive, as proxied by the firm's cash effective tax rate. We interpret this as being consistent with the market reacting positively to evidence that a firm is trying to reduce taxes when their financial reports would lead one to believe the firm is not tax aggressive.     

Does tax competition increase infrastructural disparity among jurisdictions?

This paper investigates whether an economy that lags behind in infrastructure compared with other countries can make up its shortfall when it competes for foreign direct investments. The main message of the paper is that jurisdictional competition can enable the lagging country to reduce the infrastructural gap if capital mobility is sufficiently high and the gap is not too large. Further, we show that size asymmetry reinforces (weakens) the effect in reducing the infrastructural disparity resulting from interjurisdictional competition when the lagging economy is small (large).