Taxation and income shifting: Empirical evidence from a quasi-experiment in China

China's new Corporate Income Tax Law was passed in March 2007 and took effect on January 1, 2008. It terminated the dual corporate income tax regime by removing the preferential tax treatments offered to foreign investment enterprises (FIEs) and unifying the corporate income tax regime for FIEs and Chinese domestic enterprises (DEs). This article uses a difference-in-differences approach to determine whether FIEs responded to the law by shifting income out of China. Employing the Chinese Industrial Enterprises Database from 2002 to 2008 to implement the analysis, we find that FIEs have responded to the law by shifting income out of China; the treatment effect for Hong Kong-Macau-Taiwan (HMT) investment enterprises is less negative than that for other FIEs, which implies that HMT investment enterprises might be less capable of shifting income across countries than other FIEs. The treatment effect by restricting the control group to State-Owned Enterprises (SOEs) is less negative than that by restricting the control group to Private-Owned Enterprises (POEs), which is consistent with the perception that SOEs might enjoy more favorable treatment from the Chinese government than POEs. All three findings are consistent with tax-induced income shifting, and hence we conclude that taxation plays an important role in income shifting activities.     

Distribution of income and expenditures across nations

This paper outlines a premise that state social and economic planning in recent decades were the outgrowth of Marxist doctrine, even though Marxism as an economic system failed to materialize. The paper addresses the rise of the New Left with its doctrine of radical economics and its influence for state planning. For this purpose, the paper compares 126 countries grouped by income distribution and income inequality. The findings indicate that richer economies perform better than economies of lesser income in the distribution and equality of income.     

Monetary policy and stock prices in small open economies: Empirical evidence for the new EU member states

This study presents evidence on the effect of domestic and Euro Area monetary policy on stock prices in four new EU member states of Central Europe and the main determinants of stock price volatility, estimating structural vector autoregressive models identified with short-run restrictions. We find that stock prices in the considered new EU member states are more sensitive to changes in the Euro Area interest rate than to the domestic one. Moreover, the bulk of stock price volatility in these countries is due to shocks related to exchange rate and Euro Area monetary policy. Overall, we find that local stock markets are more sensitive to external shocks than to domestic ones.     

Real income convergence and the patterns of financial integration in the EU

We analyse real income convergence among the EU28 countries throughout 1995–2017 and the relationship with the convergence patterns of financial systems. We apply the nonlinear latent factor model of Phillips and Sul (2007, 2009) to real incomes and the IMF financial development indices for financial markets and financial institutions (Svirydzenka, 2016), and identify convergence clubs endogenously. We have several results. First, income disparities narrowed significantly over the last twenty years; yet, the growth convergence process lost momentum triggered by the global financial crisis and countries legacies shaped up asymmetries that have crystallised. Second, countries' financial systems exhibit high fragmentation, especially for financial markets, with the new EU member states at a lower financial development, confirming the existence of a two-tier Europe. Overall, the convergence patterns for real incomes and financial development are strongly correlated. Finally, the financial structure matters and market-oriented economies feature higher long-run growth, indicating the need to implement pan-European policy actions that increase the opportunities of risk diversification, enhance capital raising and channel large-scale financing to firms.     

Household borrowing and metropolitan housing price dynamics – Empirical evidence from Helsinki

This article argues that, especially in the absence of sufficient direct data on credit constraints, it is reasonable to add a household debt variable in an empirical model studying housing price dynamics. This is because household borrowing is likely to reveal information regarding the credit constraints faced by households. Moreover, debt may also give information on expected income growth and interest rate movements. The aim of this study is to examine empirically if household borrowing data, indeed, is of importance in a dynamic housing price model. In line with the prior expectations, it is found that housing appreciation in the Helsinki Metropolitan area is Granger caused by the household debt-to-GDP ratio both in the short and in the long run. Causality from the housing market to credit, in turn, seems to run only through a cointegrating long-run relation. While the estimated long-run relation between housing prices, income and debt-to-GDP ratio appears to have remained stable through the sample period (1975Q1-2006Q2), the short-run dynamics changed somewhat due to the financial liberalization in the late 1980s. The stability of the long-run relation implies that the loan data are able to cater, at least to a notable extent, for the effect of the changes in Finnish households’ liquidity constraints on housing demand. In line with previous literature, it is also found that housing price adjustment is sluggish and includes notable backward-looking features.     

Empirical evidence on home improvements

Because expenditures for home improvements amount to almost one-half of expenditures for new construction, it seems quite likely that alterations and repairs by homeowners are important components of housing supply activities. This article explores one of the few comprehensive data sets available to provide some empirical evidence on home improvements. A general model of home improvements is also developed to help interpret the results.     

Exponential structure of income inequality: evidence from 67 countries

Journal of Economic Interaction and Coordination - Economic competition between humans leads to income inequality, but, so far, there has been little understanding of underlying quantitative...     

Income distribution and income dynamics in the United Kingdom

In this paper, we propose a model of income dynamics which takes account of mobility both within and between jobs. The model is a hybrid of the mover‐stayer model of income dynamics and a geometric random walk. In any period, individuals face a discrete probability of ‘moving’, in which case their income is a random drawn from a stationary recurrent distribution. Otherwise, they ‘stay’ and incomes follow a geometric random walk. The model is estimated on income transition data for the United Kingdom from the British Household Panel Survey (BHPS) and provides a good explanation of observed non‐linearities in income dynamics. The steady‐state distribution of the model provides a good fit for the observed, cross‐sectional distribution of earnings. We also evaluate the impact of tertiary education on income transitions and on the long‐run distribution of incomes. Copyright © 2001 John Wiley & Sons, Ltd.     

Sequential city growth: Empirical evidence

Using two comprehensive datasets on populations of cities and metropolitan areas for a large set of countries, I present three new empirical facts about the evolution of city growth. First, the distribution of cities’ growth rates is skewed to the right in most countries and decades. Second, within a country, the average rank of each decade’s fastest-growing cities tends to rise over time. Finally, this rank increases faster in periods of rapid growth in urban population. These facts can be interpreted as evidence in favor of the hypothesis that historically, urban agglomerations have followed a sequential growth pattern: Within a country, the initially largest city is the first to grow rapidly for some years. At some point, the growth rate of this city slows down and the second-largest city then becomes the fastest-growing one. Eventually, the third-largest city starts growing fast as the two largest cities slow down, and so on.     

Phases and dynamics in the development of EU industrial relations regulation

In this article the authors discuss whether it is possible to identify the existence of a European IR-system. They try to identify important phases and dynamics in the emergence of what is termed the European IR-model. It is argued that traditional IR-theory should be combined with theories which allow more extensive consideration of politological and institutional phenomena when analysing IR developments at pan-European level.     

International transfer pricing and income shifting: evidence from the UK

The potential use of international transfer pricing (ITP) as an income-shifting mechanism by multinational enterprises (MNEs) has long been recognized. However, there is relatively little evidence to substantiate or discount this claim in relation to UK-based foreign-controlled enterprises (FCEs). This paper examines the possible use of ITP as an income-shifting mechanism by FCEs operating in the UK. The methodological approach involves the comparison of the profitability (performance) and dividend (post-performance) distributions of a sample of FCEs with those of UK-controlled enterprises (UKCEs) over a two-year period. The two samples are matched on the basis of their total assets (capability). Results reveal significant differences in the profitability and dividend distributions of the two groups. FCEs underperform UKCEs, but their level of dividend distribution outstrips those of UKCEs. Based on this sample of seventy-two companies, a firm is more likely to be an FCE, rather than a UKCE, if it reports a combination of lower performance and higher post-performance distribution. Evidence of significant income shifting by FCEs is confirmed and the claim that ITP is the key mechanism for such shifts cannot be dismissed.     

Optimal prediction under LINLIN loss: Empirical evidence

I compare the forecasts of returns from the mean predictor (optimal under MSE), with the pseudo-optimal and optimal predictor for an asymmetric loss function under the assumption that agents have an asymmetric LINLIN loss function. The results strongly suggest not using the conditional mean predictor under conditions of asymmetry. In general, forecasts can be improved by the use of optimal predictor rather than the pseudo-optimal predictor, suggesting that the loss reduction from using the optimal predictor can actually be important for practitioners as well.     

Vertical income tax externalities and fiscal interdependence: evidence from the US

Concurrent taxation is a feature of many federal systems. As a result, the tax policy of one level of government affects the tax base of the other. A way to check the empirical relevance of this hypothesis is to test for the existence of interdependencies in the tax setting behaviour of various layers of government. Following this approach, this paper estimates the reaction of US state personal income and general sales taxes to federal tax rates, taking into account the special features of the US tax system. We find that when the federal government increases taxes, there is a significant positive response of state taxes.     

Does neighborhood income mix affect earnings of adults? New evidence from Sweden

This paper contributes to the literature on obtaining unbiased estimates of neighborhood effects, explored in the context of a centralized social welfare state. We employ a longitudinal database comprised of all working age adults in metropolitan Sweden 1991–1999 to investigate the degree to which neighborhood income mix relates to subsequent labor incomes of adults and how this relationship varies by gender and employment status. We control for unobserved, time-invariant individual characteristics by estimating a first-difference equation of changes in average incomes between the 1991–1995 and 1996–1999 periods. We further control for unobserved time varying characteristics through an analysis of non-movers. These methods substantially reduce the magnitude of the apparent effect of neighborhood shares of low-, middle- and high-income males. Nevertheless, statistically and substantively significant neighborhood effects persist, though relationships are nonlinear and vary by gender and employment status. Males who are not fully employed appear most sensitive to neighborhood economic mix in all contexts.     

Work–life balance in the EU and leave arrangements across welfare regimes

Work–life balance has been a central theme of the EU gender equality framework and has been promoted through both ‘hard’ and ‘soft’ components. Although the EU concern in promoting work–life balance has been more to increase employment and economic productivity than to promote gender equality, all Member States have now established standards in accordance with the EU regulations. Statutory leave arrangements are a key component of work–life balance policies and they vary significantly across Member States with different welfare regime traditions. This study examines the transposition of EU Directives and the implications of the European Employment Strategy for leave arrangements across the UK, Denmark, France and Spain as exemplars of four welfare regimes.     

Further evidence on causality and feedback across international stocks

This study extends the previous research on interdependence of international stock markets by using Geweke's (1982) causality test on seventeen stock market indices. The impact of the stock market crash of October 1987 on other national stock markets is investigated by disaggregating the data into pre- and post-crash periods. Direction of causality and feedback is studied using standard causality tests. The results indicate very few stock markets (namely, the U.K. and the U.S.A.) influence other markets significantly. Almost all markets react to other markets' past and present movements. Traditional major markets (Japan, France, and Canada) do not seem to be influential at all.     

Permanent income,hedonic prices,and demand for housing: New evidence

Housing demand is examined by looking quite specifically at the income and price variables based on individual household data. Permanent and transitory incomes are computed through instrumental variables related to human and nonhuman wealth. A price is constructed by spatially varying hedonic techniques. Separation of measured income into permanent and transitory components substantially improves the predictive power of the housing demand estimation and leads to demand elasticities of +1 and ?1 with respect to permanent income and price. The permanent income elasticity is roughly twice the measured income elasticity.     

Empirical evidence on occupation and industry specific human capital

This paper presents instrumental variables estimates of the effects of firm tenure, occupation specific work experience, industry specific work experience, and general work experience on wages using data from the 1979 Cohort of the National Longitudinal Survey of Youth. The estimates indicate that both occupation and industry specific human capital are key determinants of wages, and the importance of various types of human capital varies widely across one-digit occupations. Human capital is primarily occupation specific in occupations such as craftsmen, where workers realize a 14% increase in wages after five years of occupation specific experience but do not realize wage gains from industry specific experience. In contrast, human capital is primarily industry specific in other occupations such as managerial employment where workers realize a 23% wage increase after five years of industry specific work experience. In other occupations, such as professional employment, both occupation and industry specific human capital are key determinants of wages.     

Corruption perceptions versus corruption incidence: Competition for rents across Russian regions

This paper examines the effects of different competitions for favors on the prevalence and perceptions of corruption across Russian regions. Results show that while greater general competition (measured by regional population size), increases both perceived and actual corruption, competition among enterprises only increases corruption perceptions, while competition among government employees increases actual, but not perceived, corruption. Privatization activity and unemployment fail to affect either measure of corruption. Finally, the effects of urbanization differ on perceived and actual corruption. Besides Russia, these findings are somewhat unique to the broader literature.