efficiency and equalization payments in a federal system of government a synthesis and extensions of recent results this paper investigates the rationale for a system of equalization transfers in a federal system of government the existing sources of inefficiency of resource allocation in economies with more than one level of government are synthesized in the framework of a simple decentralized multiprovince model with mobile factors of production the sources of inefficiency arise first because migrants respond at the margin to incorrect signals owing to the phenomena of rent sharing and fiscal exterality and second because of global rather than local inefficiencies the model is then extended to consider the role of the federal government in providing intergovernmental transfers in the face of such inefficiencies in addition to synthesizing the sources of inefficiency in federal models the equity arguments for equalization are briefly recounted efficacite et paiements de perequation dans un systeme federal de gouvernement synthese et extensions de certains resultats recents ce memoire examine la logique qui soustend un systeme de paiements de perequation dans un systeme fdderal de gouverement les auteurs utilisent un modele simple d un systeme multi provincial decentralise avec des facteurs de production mobiles pour definir les sources d inefficacite dans l allocation des ressources dans les dconomies qui possedent plus d un niveau de gouvernement ces inefficacites proviennent de ce que d abord ceux qui se deplacent le font en reponse a la marge a des signaux incorrects engendres par le partage de la rente sur la base de la residence et par les phenomenes d exteralites fiscales elles sont aussi le resultat d inefficacites globales plutot que locales dans le cadre de ce modele les auteurs analysent le role du gouvernement federal effectuant des transferts inter gouverementaux pour corriger ces inefficacites en plus de presenter une synthese des sources d inefficacite dans les regimes federaux les auteurs font un bref rappel en passant a l ensemble des arguments fondes sur l equite qu on utilise pour rationaliser les paiements de perequation this paper is a linear combination of two papers presented at the may 1982 meetings of the canadian economics association in halifax entitled the case for equalization payments by the authors and recent developments in the theory of regional economic policy in canada by boadway the authors are grateful for comments by the discussants jim johnson and baxter macdonald and by jack mintz brian scarfe gerard belanger david sewell tom courchene and the referees we are especially heavily indebted to dan usher for many stimulating comments and suggestions while the work was in progress some of the above persons will undoubtedly disagree with the emphasis we have chosen to put on various aspects of the analysis for policy purposes support for some of this work has been provided by the economic council of canada and is gratefully acknowledged canadian journal of economics revue canadienne d economique xv no 4 november novembre 1982 printed in canada imprimd au canada 0008 4085 82 0000 0613 01 50 1982 canadian economics association this content downloaded from 207 46 13 127 on wed 12 oct 2016 04 27 47 utc all use subject to http about jstor org terms 614 robin boadway and frank flatters

intergovernmental transfers and fiscal behavior insurance versus aggregate discipline abstract this paper evaluates the trade off between the advantages of risk sharing and the perils of common pool problems in federal fiscal arrangements under the assumption of asymmetric information we evaluate two alternative regimes of intergovernmental transfers in one regime the central government pre commits to a certain level of transfers that compensate vertical fiscal imbalances and provide some limited ex ante insurance in the other regime it accommodates ex post the fiscal needs of the different provinces in this second case full insurance results but the economy is subject to a tragedy of the fiscal commons with excessive subnational spending insufficient local taxation and reduced production of federal public goods we find the range of parameters for which one or the other institutional regime will be preferable the result is a fiscal federalism version of the usual trade off between rules and discretion

the impact of wind power generation on the electricity price in germany abstract this paper investigates the relationship between intermittent wind power generation and electricity price behaviour in germany using a garch model i evaluate the effect of wind electricity generation on the level and the volatility of the electricity price in an integrated approach the results show that variable wind power reduces the price level but increases its volatility this paper s results also indicate that regulatory change has stabilised the wholesale price the electricity price volatility has decreased in germany after a modification of the marketing mechanism of renewable electricity this gives confidence that further adjustments to regulation and policy may foster a better integration of renewables into the power system

the potential of decentralized power to heat as a flexibility option for the german electricity system a microeconomic perspective abstract one fundamental challenge of the german energy transition for the electricity market is the growing imbalance between inflexible generation and generally inelastic load against this background we investigate the future potential of decentralized power to heat p2h as an additional demand side flexibility option for the german electricity system precisely we analyze the case of hybrid systems where conventional gas and oil condensing boiler systems are equipped with an electric heating rod in contrast to previous approaches we set our focus on the economic incentives at household level only if the switch to a p2h hybrid system can reduce individual heating expenses significantly a considerable number of these systems will be installed for this purpose we implemented an integrated approach combining three distinct simulation modules first a stochastic simulation of the electricity spot market prices in 2020 was conducted second average heat load profiles were generated based on a standard bottom up analysis both results were then fed into an optimization model calculating the cost minimizing paths of heat generation at household level during the year 2020 the simulated annual savings prove modest as long as household electricity prices are not heavily reduced through political influence

fiscal federalism and redistributive politics abstract we consider the interaction between redistributive politics at central and local levels in a federal system and characterize the factors influencing success in redistributive politics in both federal and unitary systems we examine how the political characteristics of different states and groups give them better or worse outcomes in a federal system as opposed to a unitary system we examine possibilities of multiple equilibria with divided government between the two layers we analyze the choice between block grants and matching grants we also examine the impact of federalism on the incentives for geographic mobility

taxation with costly administration the concept of a tax technology is used here as providing a unified framework for analyzing both administrative activity by tax authorities and tax resisting activity by taxpayers this framework provides a simple formalization of adam smith s four components of tax costs administration substitution active noncompliance and passive compliance the model is used to derive policy implications concerning the proper measurement of the cost of public funds and concerning the criterion for optimal administration

reducing evasion through self reporting evidence from charitable contributions abstract in absence of third party reporting taxpayers are required to self report information with various degrees of detail ranging from uncorroborated claims to comprehensive records with receipts using a quasi experimental design applied to noncash charitable contribution deductions i show that even basic self reporting requirements are effective at reducing evasion but impose large compliance costs on taxpayers i find that simplified reporting requirements reduce reporting costs by 55 per person and substantially increase claimed donations however half of the new donations are due to evasion thus information reporting should only be imposed on total reported donations above a pre specified threshold

no taxation without information deterrence and self enforcement in the value added tax abstract claims that the vat facilitates tax enforcement by generating paper trails on transactions between firms contributed to widespread vat adoption worldwide but there is surprisingly little evidence this paper analyzes the role of third party information for vat enforcement through two randomized experiments among over 400 000 chilean firms announcing additional monitoring has less impact on transactions that are subject to a paper trail indicating the paper trail s preventive deterrence effect this leads to strong enforcement spillovers up the vat chain these findings confirm that when taking evasion into account significant differences emerge between otherwise equivalent forms of taxation jel d83 h25 h26 k34 o17

bailouts budget constraints and leviathans comparative federalism and lessons from the early united states recent research on federations particularly in the developing world emphasizes the importance of hard budget constraints and a strong central government to attenuate intergovernmental economic conflicts such research fails on two counts first it does not explain how hard budget constraints emerge or become self enforcing second it does not take into account the insight of the market preserving federalism literature that central governments strong enough to impose restraint on regions are likely too powerful to be checked in a manner consistent with the longterm health of markets unfortunately the market preserving federalism literature itself provides little insight into how to move from a market distorting to a market preserving equilibrium this article answers these theoretical shortcomings with reference to the evolution of political competition at the regional level and the representation of those regions at the national level more specifically whereas regional competition determines the s

comparison of extended mean reversion and time series models for electricity spot price simulation considering negative prices abstract this paper evaluates different financial price and time series models such as mean reversion autoregressive moving average arma integrated arma arima and general autoregressive conditional heteroscedasticity garch process usually applied for electricity price simulations however as these models are developed to describe the stochastic behaviour of electricity prices they are extended by a separate data treatment for the deterministic components trend daily weekly and annual cycles of electricity spot prices furthermore price jumps are considered and implemented within a regime switching model since 2008 market design allows for negative prices at the european energy exchange which also occurred for several hours in the last years up to now only a few financial and time series approaches exist which are able to capture negative prices this paper presents a new approach incorporating negative prices the evaluation of the different approaches presented points out that the mean reversion and the arma models deliver the lowest mean root square error between simulated and historical electricity spot prices gained from the european energy exchange these models posses also lower mean average errors than garch models hence they are more suitable to simulate well fitting price paths furthermore it is shown that the daily structure of historical price curves is better captured applying arma or arima processes instead of mean reversion or garch models another important outcome of the paper is that the regime switching approach and the consideration of negative prices via the new proposed approach lead to a significant improvement of the electricity price simulation

spot and derivative pricing in the eex power market using spot and futures price data from the german eex power market we test the adequacy of various one factor and two factor models for electricity spot prices the models are compared along two different dimensions 1 we assess their ability to explain the major data characteristics and 2 the forecasting accuracy for expected future spot prices is analyzed we find that the regime switching models clearly outperform its competitors in almost all respects the best results are obtained using a two regime model with a gaussian distribution in the spike regime furthermore for short and medium term periods our results underpin the frequently stated hypothesis that electricity futures quotes are consistently greater than the expected future spot a situation which is denoted as contango

why can modern governments tax so much an agency model of firms as fiscal intermediaries we develop an agency model explaining why third party information reporting by firms makes tax enforcement successful while third party reporting would be ineffective with frictionless collusion between firms and employees collusive evasion is impossible to sustain in firms with many employees and accurate business records as any single employee may reveal evasion we embed our agency model into a macro model where the number of employees grows with development showing that the tax take evolves as an s shape driven by changes in third party information we show that our model is consistent with a set of stylized facts on taxation and development

federalism equalization and risk aversion abstract what causes a group of countries to agree to form a federation other alternative arrangements which often are chosen instead are to form a unitary state or to remain autonomous federations usually allow for considerable freedom of movement among constituent regions they also provide a fairly limited redistribution of any rents earned in these regions these two features together imply that residents of poor regions can share in the rents in rich regions by migration this fiscal migration may waste resources why not simply share the rents equally among residents of all regions such a unitary arrangement although efficient would not appeal to residents of a country which is likely to be the best off region in a federation complete autonomy may expose residents of the separate countries to considerable idiosyncratic risk here i demonstrate that federation may be chosen by a group of countries even though it is a more wasteful arrangement than either other alternative if asymmetries among countries and the degree of risk aversion are large federal states also often implement transfers among the regions these transfers can be viewed as substitutes for fiscal migration i also show that the possibility of transfers even without any commitment to specifics makes federalism a more attractive option a federal constitution which requires transfers in excess of what would be made voluntarily may make federalism more attractive still

understanding the soft budget constraint we propose a clarification of the notion of a soft budget constraint a concept widely used in the analysis of socialist transitional and market economies our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences in light of this interpretation we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics

federal fiscal constitutions risk sharing and redistribution the paper studies the political and economic determinants of regional public transfers specifically it focuses on how such transfers are shaped by alternative fiscal constitutions where a constitution is an allocation of fiscal instruments across different levels of governments plus a procedure for the collective choice of these instruments realistic restrictions on fiscal instruments introduce a tradeoff between risk sharing and redistribution different constitutions produce very different results in particular a federal social insurance scheme chosen by voting provides overinsurance whereas an intergovernmental transfer scheme chosen by bargaining provides underinsurance

curtailment of renewable generation economic optimality and incentives the loss from curtailing generation based on renewable energy sources is generally seen as an unacceptable solution by the public the main argument is that it is a loss of green energy and an economic loss to curtail generation with near zero marginal costs however this view could lead to overinvestment in grid infrastructure and underinvestment in renewable energy sources this article argues that some curtailment of fluctuating variable generation is optimal we address the possible contributions to total curtailment from involuntary and voluntary curtailment the costs of curtailment in terms of lost generation are discussed based on market price and support levels including the rationale for compensating generators for losses the extent of actual curtailment is illustrated by examples from different global markets in general both the value of the curtailed energy and the amount of curtailed energy relative to total fluctuating generation is low but rising single generators may be affected considerably if insufficient compensation measures are in place in the future optimal curtailment will increase along with an increased share of fluctuating renewable generation extending renewable generation comparatively cheaply can be achieved by the installation of additional capacity at offshore locations until optimal curtailment levels are reached

firm types price setting strategies and consumption tax incidence abstract we analyze price responses to large restaurant vat rate reductions in two different european countries our results show that responses in the short and medium run were clustered around two focal points of zero pass through and full pass through differences between independent restaurants and chains is the key explanation for this pattern while nearly all independent restaurants effectively ignored the tax reductions and left consumer prices unchanged a substantial fraction of restaurants belonging to chains chose a rapid and complete pass through in the longer run prices converged but primarily through a price reversion among chain restaurants the stark difference in price responses does not appear to arise because of different market characteristics such as location initial price levels meal types and restaurant segment

federalism and the soft budget constraint the government s incentives to bail out inefficient projects are determined by the trade off between political benefits and economic costs the latter depending on the decentralization of government two effects of federalism are derived first fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device the competition effect second monetary centralization together with fiscal decentralization induces a conflict of interests and thus may harden budget constraints and reduce inflation the checks and balance effect the authors analysis is used to interpret china s recent experience of transition to a market economy copyright 1998 by american economic association

putting firms into optimal tax theory firms are for the most part absent from the modern theory of optimal taxation their disappearance dates from the foundational models developed by peter a diamond and james a mirrlees 1971 in which firms are simply mechanical vehicles for combining productive inputs into output in cost minimizing proportions in contrast firms play a central role in all modern tax systems mostly for a reason stated by richard m bird 1996 the key to effective taxation is information and the key to information in the modern economy is the corporation in most countries firms remit the majority of tax revenues to the government either with regard to taxes legally owed by businesses or through withholding of taxes legally owed by employees or other businesses even when businesses are not required to remit taxes they are often required to file information reports that can facilitate monitoring of tax liabilities the lack of a theoretical framework that features firms impedes rigorous welfare analysis of a number of important policy issues one such example is the comparative evaluation of a uniform retail sales tax rst versus a value added tax vat in the standard model these two taxes both remitted entirely by businesses are equivalent consumption taxes but most experts consider the vat to be clearly superior on administrative grounds a view echoed in the recent report of the president s advisory panel on federal tax reform 2005 we propose a simple framework in which these and other issues can be analyzed the new framework recognizes that a tax code must be backed up by an administrative and enforcement structure

cheating ourselves the economics of tax evasion no government can announce a tax system and then rely on taxpayers sense of duty to remit what is owed some dutiful people will undoubtedly pay what they owe but many others will not over time the ranks of the dutiful will shrink as they see how they are being taken advantage of by the others thus paying taxes must be made a legal responsibility of citizens with penalties attendant on noncompliance but even in the face of those penalties substantial tax evasion exists and always has the history of taxation is replete with episodes of evasion often notable for their inventiveness during the third century many wealthy romans buried their jewelry or stocks of gold coin to evade the luxury tax and homeowners in eighteenth century england temporarily bricked up their fireplaces to escape notice of the hearth tax collector webber and wildavsky 1986 p 141 this essay reviews what is known about the magnitude nature and determinants of tax evasion with an emphasis on the u s income tax alm 1999 andreoni erard and feinstein 1998 and slemrod and yitzhaki 2002 offer more comprehensive recent reviews of the literature it then places this information into a conceptual and policy context

optimal environmental taxation in the presence of other taxes general equilibrium analyses this paper examines the optimal setting of environmental taxes in economies where other distortionary taxes are present we employ analytical and numerical models to explore the degree to which in a second best economy optimal environmental tax rates differ from the rates implied by the pigovian principle according to which the optimal tax rate equals the marginal environmental damages both models indicate contrary to what several analysts have suggested that the optimal tax rate on emissions of a given pollutant is generally less than the rate supported by the pigovian principle moreover the optimal rate is lower the larger are the distortions posed by ordinary taxes numerical results indicate that previous studies may have seriously overstated the size of the optimal carbon tax by disregarding pre existing taxes this abstract was borrowed from another version of this item

potentials and economics of residential thermal loads providing regulation reserve residential thermostatically controlled load tcls such as air conditioners acs heat pumps water heaters and refrigerators have an enormous thermal storage potential for providing regulation reserve to the grid in this paper we study the potential resource and economic analysis of tcls providing frequency regulation service in particular we show that the potential resource of tcls in california is more than enough for both current and predicted near future regulation requirements for the california power system moreover we estimate the cost and revenue of tcls discuss the qualification requirements recommended policy changes and participation incentive methods and compare tcls with other energy storage technologies we show that tcls are potentially more cost effective than other energy storage technologies such as flywheels li ion advanced lead acid and zinc bromide batteries

spatial dependencies of wind power and interrelations with spot price dynamics abstract wind power has seen strong growth over the last decade and increasingly affects electricity spot prices in particular prices are more volatile due to the stochastic nature of wind such that more generation of wind energy yields lower prices therefore it is important to assess the value of wind power at different locations not only for an investor but for the electricity system as a whole in this paper we develop a stochastic simulation model that captures the full spatial dependence structure of wind power by using copulas incorporated into a supply and demand based model for the electricity spot price this model is calibrated with german data we find that the specific location of a turbine i e its spatial dependence with respect to the aggregated wind power in the system is of high relevance for its value many of the locations analyzed show an upper tail dependence that adversely impacts the market value therefore a model that assumes a linear dependence structure would systematically overestimate the market value of wind power in many cases this effect becomes more important for increasing levels of wind power penetration and may render the large scale integration into markets more difficult

will destination based taxes be fully exploited when available an application to the u s commodity tax system abstract we develop a tax competition model that allows for the setting of both an origin based and a destination based commodity tax rate in the presence of avoidance and evasion in the presence of evasion jurisdictions will give cross border shoppers tax preferential treatment thus not fully exploiting the potential of destination based taxation moreover the divergence between origin based and destination based taxes is stronger when the incentives for consumers tax arbitrage opportunities increase the united states is one example of many such systems while sales taxes are due at the point of sale use taxes are due on goods purchased out of state we document that when able to set both rates a majority of jurisdictions levy destination based use taxes at a lower rate than origin based sales taxes in response to changes in state level policies that increase tax avoidance opportunities the results of the empirical model broadly confirm our theory

assessment of the required share for a stable eu electricity supply until 2050 power system balancing will become increasingly important to secure a reliable european energy supply as the share of intermittent supply increases e g variable generation from wind and solar pv this paper shows in a quantitative way the limitations of relying exclusively on flexibility in generation as the future shares of intermittent supply increase literature and data on intermittent supply and existing scenarios are reviewed costs related to increasing shares of intermittent supply are assessed quantifiable indicators relevant for electricity systems with a high share of intermittent supply are developed namely a flexible supply generation units that can quickly change output b balancing need which measures the needed flexibility of the power system as the difference between peak and off peak residual demand net of intermittent supply there is an externality of increasing the share of intermittent supply by increasing the power system balancing costs if the cost of integrating intermittent generation was to be limited to about 25 billion eur per year which is an addition of 24 per unit intermittent generation cost the intermittent supply share cannot reach more than 40 in the european power market the final choice of an acceptable cost increase will be a political choice

production versus revenue efficiency with limited tax capacity theory and evidence from pakistan to fight evasion many developing countries use production inefficient tax policies this includes minimum tax schemes whereby firms are taxed on either profits or turnover depending on which tax liability is larger such schemes create nonstandard kink points which allow for eliciting evasion responses to switches between profit and turnover taxes using a bunching approach using administrative data on corporations in pakistan we estimate that turnover taxes reduce evasion by up to 60 70 percent of corporate income incorporating this in a calibrated optimal tax model we find that switching from profit to turnover taxation increases revenue by 74 percent without reducing aggregate profits

optimal self employment income tax enforcement abstract most models of optimal income tax enforcement assume that income is either random or solely remunerates labor neglecting that auditing strategies may depend on observable inputs this paper outlines a model to optimally monitor self employed entrepreneurs when in addition to reported profits the tax collection agency also observes the number of workers employed or any other input variable at each firm we show that by conditioning the monitoring strategy only on labor input it is optimal for the irs to audit firms in a way that generates some empirical regularities like the missing middle we also show that the optimal direct mechanism can be implemented by an indirect monitoring strategy that is consistent with actual irs practices in particular the irs calculates inputted income as function of labor whenever an entrepreneur reports profits that are lower than inputted income she is randomly monitored finally we formalize a model of optimal presumption taxation in which inputted income is the tax base to compare revenue collection across tax systems

debt bailouts and constitutions a demand based theory of sub national debt bailouts is presented it is shown that revenue sharing rs arrangements alter the demand for bailouts among politicians with regional constituencies as a bailout usually implies a shift of taxation to the federal tier automatic rs may lead to the formation of pro bailout coalitions formed by indebted states and states that are net recipients of the rs arrangement also rs can act as a commitment device for compensating payments among state representatives making a bailout politically rational the model shows that the state debt bailouts approved by the brazilian senate prior to the enactment of the fiscal responsibility act were fully consistent with politicians that maximize the proceeds accruing to their constituencies