piecewise linear tax functions progressivity and the principle of equal sacrifice abstract in this paper we discuss and criticise the conclusion asserted by mitra and ok mitra t ok e 1996 personal income taxation and the principle of equal sacrifice revisited international economic review 37 925 948 that when we restrict our attention to piecewise linear tax functions the principle of equal sacrifice implies progressivity

welfare dominance an application to commodity taxation in this paper the authors propose a method to identify commodity tax changes that will be favored by all individuals who can agree on certain weak assumptions with regard to the social welfare function the method is based on an extension of the criterion of second degree stochastic dominance and is illustrated using data from israel copyright 1991 by american economic association

growth effects of public expenditure on the state and local level evidence from a sample of rich governments there is a vast empirical literature investigating the relationship between government size and economic growth but the empirical evidence of growth effects of public expenditure using cross country regressions is still inconclusive according to a number of authors this is not surprising since the negative relationship only applies for rich countries with a large public sector restricting their analysis on rich countries only they can show the predicted negative impact naturally a selection of a sub sample of rich countries is always somewhat arbitrary another possibility is to concentrate on governments within a rich country however only few studies investigate the effect of state and local spending on economic growth this study concentrates on the relationship between public expenditure and economic growth within a rich country using the full sample of state and local governments from switzerland over the 1981 2001 period the general finding is a fairly robust negative relationship between gov

lorenz domination and global tax progressivity a reply the concept of tax progressivity at a point local progressivity is well defined and accepted but the concept of overall progressivity of a tax schedule global progressivity is not as precise and clearly defined even though it is an important concept and is widely used in evaluating the redistributive impact of tax policies public finance economists have been comparing tax schedules and making statements on one as more progressive than another without being very precise about the basis of comparison in my earlier paper in the may 1985 issue of this journal liu 1985 i attempted to unify the two concepts of local and global progressivity two requirements are imposed when a tax schedule is characterized as globally progressive one of which is structural and the other redistributive and hence normative in nature drawing on the earlier work of jakobsson 1976 musgrave thin s measure was shown to satisfy both requirements two recently proposed measures by suits 1977 and kakwani 1976 were shown to be unappealing from both a positive and a normative viewpoint in their comment on my paper formby smith and sykes pointed out an error in a proposition by jakobsson thereby showing that the link between the pointwise concept of residual progression and the global concept of lorenz domination is weaker than indicated by jakobsson and me this reduces the appeal of musgrave thin s global measure as structurally consistent with pointwise progressivity everywhere in the tax schedule the implication is that if we insist on this structural consistency the basis for comparison of tax schedules will be too restrictive since comparison will require one post tax income distribution to lorenz dominate another for all instead of for any pre tax income distributions hence despite my earlier effort the device of a global measure of tax progressivity that is consistent with pointwise

on the principle of equal sacrifice in income taxation abstract in an influential article by young journal of economic theory 1988 44 321 335 it is shown that the traditional equal sacrifice principles in taxation can be justified from a non utilitarian perspective by proving that equal sacrifice is in fact a consequence of more primitive concepts of distributive justice this result is obtained in a distribution theoretic setting where total revenue to be raised is fixed the present paper studies the same question in a setting where the basic problem is to determine a tax function without any reference to the total tax revenue a setting which is familiar from the theory of progressive taxation and shows that i there exists a utility function which is continuous and strictly increasing relative to which all agents sacrifice equally if and only if the tax function is incentive preserving and ii any convex hence progressive and incentive preserving tax function equalizes sacrifice relative to a utility function which is continuous strictly increasing and concave

representative democracy and marginal rate progressive income taxation abstract this paper develops a political economy model that is consistent with the fact that democracies have a preference for increasing marginal tax rates on income we present a model in which there is an exogenous set of political parties with preferences over the set of admissible tax schedules this set contains virtually any increasing and piecewise linear continuous function each party decides whether or not to present a candidate for election there is a fixed cost of running the elected candidate implements one of her preferred tax policies our main results provide conditions under which a strong nash equilibrium exists and a tax schedule with increasing marginal tax rates is implemented in some nash equilibria and in any strong nash equilibrium

the long run relationship between openness and government size evidence from bounds test the bounds test is applied to determine the existence of a level relationship between government size openness terms of trade volatility and external risk using time series data from australia canada england norway sweden and the usa bounds test results show that the existence of a long run relationship in the usa and canada but not in any of the other countries long run parameters are estimated using both autoregressive distributed lag and fm ols procedures results vary from country to country with some evidence that government size is significantly affected by openness and terms of trade volatility however contrary to argument and evidence developed using cross section data empirical evidence presented in this paper show that the size of the government has not changed to mitigate the effect of increased income risks associated with greater openness

on the equitability of progressive taxation abstract we propose the principle of equal sacrifice to determine the class of vertically inequitable progressive taxes a necessary condition for an income tax function to be equal sacrifice is formulated and hence a subclass of progressive taxes which cannot inflict the same sacrifice upon all individuals relative toanystrictly increasing and concave utility function is determined conversely it is shown in a general framework that any convex thus progressive tax function satisfies the principle of equal sacrifice our findings point to the fact that equal sacrifice under progressive income taxation depends heavily upon the degree of marginal rate as opposed to average rate progressivity journal of economic literatureclassification numbers d63 h20

why don t poor countries catch up a cross national test of an institutional explanation early neoclassical analyses predicted that poor countries would grow faster than wealthy countries because of technological advances and diminishing returns to capital in the latter the reverse has occurred poor countries are falling back rather than catching up we suggest here that deficient institutions underlie this divergence employing various indicators of institutional quality including the rule of law the pervasiveness of corruption and the risk of expropriation and contract repudiation we show that the ability of poor countries to catch up is determined in large part by the institutional environment in which economic activity in these countries takes place jel o00 o10

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

the impossibility of a progressive tax structure abstract when households are identical in all respects other than income a non decreasing average tax rate is both necessary and sufficient for post tax incomes to be always at least as equal as pre tax incomes this paper investigates whether this well known result can be extended to households with different needs a tax structure which never increases inequality in the lorenz sense is shown to be unable to discriminate between household types if in addition the tax structure never reduces the relative income of the poorest member of the neediest group of households then the same proportional tax must be applied to all households and redistribution is impossible either within or between groups of households with differing needs a similar conclusion is reached using conventional equivalence scale arguments and also applies when the parameters of the tax schedules are determined endogenously we discuss the significance of this impossibility result and its implications for tax design

progressive taxation and the equal sacrifice principle abstract a classical problem in public finance is when does equal sacrifice imply progressive taxation suppose that a tax schedule imposes equal sacrifice on all taxpayers in loss of utility and that this property is preserved under re indexing of the schedule then the utility function must exhibit constant relative risk aversion i e it must be logarithmic or a power function if equal sacrifice relative to such a utility function holds for all taxable incomes and if tax rates do not exceed 100 percent then the degree of relative risk aversion must be at least unity and the tax must be nonregressive

the intragenerationally redistributive effects of the retirement insurance scheme in turkey before and after the 1999 reform the paper analyses the intragenerational redistribution generated by the retirement insurance scheme in turkey before and after the 1999 reform previous research shows that when a pension scheme s contribution and benefit schedules are proportional the existence of an intergenerational redistribution is a precondition for the existence of an intragenerational redistribution but that otherwise redistribution within a generation is possible without intergenerational redistribution the main finding of this work is that the existence of the intergenerational redistribution is still a precondition for the old pension scheme despite its disproportional benefit schedule under the assumptions used both of the schemes redistribute from high wage earners to low wage earners among women but redistribute differently among men among men the old scheme generates indeterminable transfers although the new scheme redistributes from low wage earners to high wage earners the analysis takes into account a hypoth

an econometric test of wagner s law for six countries based on cointegration and error correction modelling techniques the present study empirically examined five different versions of wagner s law by employing annual time series data on six countries over the period 1951 1996 three countries are part of the emerging industrialized countries of asia south korea taiwan thailand and three are industrialized countries japan usa and the united kingdom the analysis is an advance over previous work in two ways first the stationarity propertities of the data and the order of integration of the data are empirically investigated using the augmented dickey fuller adf and the kwiatkowski et al journal of econometrics 1 1992 kpss tests and second the hypothesis of a long run relationship between income and government spending is tested using bivariate cointegrated systems and employing the methodology of cointegration analysis as suggested by johansen journal of economic dynamics and control 12 1988 and johansen and juselius oxford bulletin of economics and statistics 52 1990 the results indicate that

single crossing conditions in comparisons of tax progressivity statements to the effect that one tax is more progressive than another are frequently made but seldom explained starting from a criterion of lorenz domination this paper shows how an intuitively appealing single crossing condition on appropriately normalized tax schedules may be used in progressivity comparisons this condition is closely related to and illuminates the necessary and sufficient condition derived by jakobsson 1976 for the distributional implications of alternative taxes to be inferred from their schedules alone

on the ineffectiveness of tax policy in altering long run growth harberger s superneutrality conjecture abstract in 1964 harberger conjectured that although theory predicts that changes in tax rates affect investment and growth in the long run in practice tax policy is an ineffective instrument to influence growth this paper provides theoretical and empirical evidence in favor of this view the growth effects of tax policy in the class of endogenous growth models driven by human capital accumulation are examined and numerical simulations of these models confirm the results harberger predicted cross country panel regressions estimated using a new method for measuring effective tax rates produce significant investment effects from taxes that are consistent with negligible growth effects these results are robust to the introduction of other growth determinants

majority voting with single crossing preferences we clarify and extend a number of sufficient conditions for the existence of a majority voting equilibrium on one dimensional choice domains these conditions variously stated in the previous literature all impose order restrictions on voter preferences for instance monotone marginal rates of substitution which we show to imply or be equivalent to a general ordinal version of the single crossing condition this simple property is economically intuitive and easily checked in applications this ease of application is demonstrated through an examination of voting models of redistributive income taxation and trade union bargaining behaviour

does less inequality among households mean less inequality among individuals abstract consider an income distribution among households of the same size in which individuals equally needy from the point of view of an ethical observer are treated unfairly individuals are split into two types those who receive more than one half of the family budget and those who receive less than one half we look for conditions under which welfare and inequality quasi orders established at the household level still hold at the individual one a necessary and sufficient condition for the generalized lorenz test is that the income of dominated individuals is a concave function of the household income individuals of poor households have to stand more together than individuals of rich households this property also proves to be crucial for the preservation of the relative and absolute lorenz criteria when the more egalitarian distribution is the poorest extensions to individuals heterogeneous in needs and more than two types are also provided

loan price modelling for local governments using risk premium analysis previous studies have highlighted the question of government loan interest as one of great current importance government borrowing levels are high and reducing interest payments would generate savings to meet other spending needs and or to lower taxation thus supporting the sustainability of public finances however no previous study has presented a method for a local government to calculate its own credit risk and thus be in a position to negotiate lower interest rates on its borrowing this article defines a financial model that enables local governments to estimate the interest rate payable on a bank loan based on their credit risk premium in accordance with the basel ii rules and the findings of our empirical study of large local governments

the equal absolute sacrifice principle revisited abstract we summarize the literature on equal absolute sacrifice income taxes and make some extensions we adapt the utilitarian equal sacrifice criterion to a wide class of rank dependent social welfare functions and find that liabilities depend on both income and position in the distribution we investigate whether such taxes need be progressive using a combination of analytics and simulation and in the process uncover tax functions not previously recognized as equating sacrifices finally out of horizontal equity considerations a new concept of the equal treatment of equals by an income tax emerges with implications for future work whose significance is discussed

income redistribution and local tax progressivity a reconsideration this paper investigates and clarifies the relation between global tax progressivity as measured by musgrave and thin s effective progression and pointwise local progression as measured by the elasticity of after tax income with respect to pre tax income residual progression liu s 1985 vigorous defence of the global measure of effective progression is shown to rest upon an erroneous proposition of jakobsson 1976 a counter example is presented demonstrating that the link between residual progression and lorenz domination is much weaker than the work of liu and jakobsson suggests redistribution des revenus et mesure ponctuelle de la progressivite de l imp6t un re examen ce memoire examine et clarifie les rapports entre la progressivite globale de l impot telle que mesuree par l indice de progression effective de musgrave et thin et la progressivite ponctuelle de l imp6t telle que mesuree par l elasticite du revenu apres impot par rapport au revenu avant impot la progression residuelle on montre que la vigoureuse defense de liu 1985 de la mesure globale de progression effective est batie sur une proposition erronnee de jakobsson 1976 un exemple montre bien que le lien entre la progression residuelle et la domination au sens de lorenz est bien plus faible que ne le suggerent les travaux de liu et jakobsson

inequality reducing and inequality preserving transformations of incomes symmetric and individualistic transformations abstract this paper analyzes the redistributive effect of transformations of incomes when the same transformation is applied to all incomes following marshall and olkin lnequalities a theory of majorization and its applications academic press new york 1979 we consider two competing families of nested inequality criteria all of which are consistent with the lorenz ordering looking at the transformations that reduce the inequality of incomes we show that within each family all the criteria generate exactly the same class of transformations we next identify those transformations that preserve or convert a given inequality ranking into a finer ranking we finally find necessary and sufficient conditions to be imposed on a pair of transformations for the inequality ranking of distributions to be preserved journal of economic literature classification number d31 d63 h24

lorenz dominating income tax functions this paper examines the rest rictions imposed upon income tax functions by the criterion of lorenz domination under alternative tax revenue raising regimes both neces sary and sufficient conditions are derived the necessary conditions are weaker than those already existing in the literature while the a nalysis uncovers the multitude of sufficient conditions that are poss ible copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

government expenditure and economic growth evidence from g7 countries this paper examines wagner s law of public expenditure which emphasizes economic growth as the fundamental determinant of public sector growth using time series data drawn from the g7 industrialized countries over the sample period 1960 1993 it presents evidence on both the short and long run effects of growth in national income on government expenditure by resorting to recent developments in the theory of cointegrated processes an attempt is also made in this study to examine if wagner s law holds between certain key components of government expenditure and income

the abrams curve of government size and unemployment evidence from panel data this study investigates the long run relationship between government size and unemployment rate the abrams curve using ten european countries over the period 1961 1999 to this end panel cointegration analysis and estimation techniques appropriate for heterogeneous panels are made use of the results support the idea that there is an abrams curve and the relation between government size and the unemployment rate is positive

the articulation of price earnings ratios and market to book ratios and the evaluation of growth this paper interprets the price earnings ratio pie and the marketto book ratio pib and describes how they articulate it also describes the role of book rate of return on equity the ratio of their denominators in the determination of the ratios and the relation between them although both are reported regularly there is not a common understanding of these issues for example the pie ratio has been interpreted as an earnings growth indicator cragg and malkiel 1982 and litzenberger and rao 1971 a risk measure ball 1978 and an earnings capitalization rate graham dodd and cottle 1962 boatsman and baskin 1981 and alford 1992 derivations based on the gordon 1962 model describe it as determined by return on equity beaver and morse 1978 show that this ratio indicates transitory earnings the molodovsky effect from molodovsky 1953 it has also been interpreted as an indicator of mispriced stocks basu 1977 and jaffee keim and westerfield 1989 and as a product of accounting principles craig johnson and joy 1987 the p b ratio received less academic attention until fama and french 1992 traditionally it was interpreted as indicating expected return on equity see for example graham dodd and cottle 1962 this interpretation is given expression in the standard formula reconciling price to book value in preinreich 1938 edwards and bell 1961 and peasnell 1982 for example like pie p b has been modeled as a growth

the value of tax progressivity evidence from survey experiments abstract the aim of this paper is to investigate how people value tax progressivity more precisely i study the potential trade off between any improvement in the final income distribution and the progressivity of the tax schedule to do this i designed survey experiments in which respondents were asked to rank or to choose between different taxation redistribution schemes with different treatments varying in terms of information availability 1 when only information about final incomes is provided and 2 when information about average tax rates is also available using a within subject design the instability of rankings between 1 and 2 indicates whether or not respondents value tax progressivity i find that information about tax rates significantly affects respondents judgments about tax schemes they exhibit a strong preference for tax progressivity i e they accept a fall in the quality of the final income distribution in exchange for progressive taxation the results of an additional treatment suggest that the mere fact of providing new information cannot account for this finding

inequality reducing properties of composite taxation abstract on the one hand we know that the more progressive a tax schedule the more equally distributed the after tax incomes u jakobsson j public econ 5 1976 161 168 on the other hand most tax systems involve a complex procedure where individual incomes are successively subjected to different rounds of taxation we study in the paper the inequality reducing properties of the composition of different taxation schemes and we identify necessary and sufficient conditions for after tax inequality to decrease when the degree of progressivity of one element or more of the tax system is increased for the sake of generality we assimilate the set of income distributions with the space of probability measures over an interval of the real line and any function that associates after tax incomes to before tax incomes is viewed as a taxation scheme this general approach proves to be particularly powerful when investigating the restrictions the egalitarian principle imposes on the set of admissible taxation schemes journal of economic literature classification numbers d31 d63 h24

a necessary and sufficient condition for greater conditional progressivity conditional progressivity is defined in terms of a weakly lorenz dominating posttax income distribution conditional upon a given pretax income distribution this paper derives a condition that is both necessary and sufficient for one income tax to be conditionally more progressive than another it involves the odd number crossing of normalized posttax income functions together with certain integral or summation conditions single crossing as a special case is sufficient if the posttax income functions are at least piecewise differentiable an average rate progressivity condition is sufficient for the residual progressivity condition which in turn is sufficient for single crossing

flat rate taxes and inequality measurement abstract tax flattening exercises which include an increase in personal allowances have been pervasive over the past two decades such changes which typically benefit both the poor and the rich at the expense of the middle class have complex redistributive effects which are not obviously equalizing or disequalizing we develop a systematic approach to comparing the relative inequality of flat rate tax schemes to conventional graduated rate taxes we provide an illustrative example using 1993 u s taxfiler data

equal sacrifice and incentive compatible income taxation abstract the concepts of equal sacrifice and incentive compatibility in income taxation have been of interest to economists for some time here we attempt to integrate the two literatures in a model that offers a labor leisure choice to consumers while imposing an equal relative or absolute sacrifice tax system the main result is that equal sacrifice incentive compatible income tax systems generally exist and are locally unique examples are presented where this tax system is easy to compute comparative statics are calculated finally some remarks about the welfare properties of these tax systems are made

personal income taxation and the principle of equal sacrifice revisited this paper shows that in the domain of piecewise linear statutory income tax functions the principle of equal sacrifice implies tax progressivity the progressivity implication of the doctrine is in fact stronger the equal sacrifice principle in essence characterizes marginal rate progressivity a result which is in sharp contrast with the standard literature on public finance the authors also apply their findings to the personal statutory income taxation practices of the oecd countries and observe that the united states and turkey were the only ones violating the principle of equal sacrifice in the time period 1988 to 1991 copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

economic growth and government expenditure evidence from a new test specification a new test specification of wagner s law of public expenditure has been formulated the aim is to disentangle the effects of accelerating and decelerating economic growth on growth in government expenditure two alternative proxies for the state of the economy are experimented with the first defines the current state of the economy by relating it to its historical mean growth rate while the second defines it relative to a pooled time series cross sectional mean growth rate this distinction is then explicitly incorporated into an error correction model that parameterizes the bivariate relation between government expenditure and economic growth for alternative oecd country groupings the results suggest that government expenditure increases less than proportionately with accelerating economic growth and decreases more than proportionately with decelerating economic growth there is only a limited support for wagner s law

tax progressivity income distribution and tax non compliance this article examines the determinants of tax non compliance when we recognise the existence of an imperfectly competitive tax advice industry supplying schemes which help taxpayers reduce their tax liability we apply a traditional industrial organisation framework to model the behaviour of this industry this tells us that an important factor determining the equilibrium price and hence the level of noncompliance is the convexity of the demand schedule we show that in this context this convexity is affected by the distribution of pre tax income the progressivity of the tax schedule and the way in which monitoring and penalties vary with income it is shown that lower pre tax income inequality as well as a less progressive tax code may cause more tax minimisation activities therefore the frequently advocated policy of reducing the highest tax rate may fail as a policy directed at improving tax discipline one way of offsetting the possible harm to tax compliance from a less progressive tax could be an adjustment of the penalty and monitoring functions

distributive justice in taxation abstract a classical criterion for apportioning taxes is that all should sacrifice equally in loss of utility suppose that a method of apportioning taxes is continuous and has the following four properties i the way that taxpayers split a given tax total depends only on their own taxable incomes ii an increase in the tax total implies that everyone pays more iii every incremental increase in tax is apportioned according to taxpayers current after tax incomes iv the ordering of taxpayers by pre tax income and after tax income is the same then there exists a utility function relative to which all sacrifice equally

on the relative unimportance of a balanced budget this paper explores the reasoning underlying milton friedman s preference for a small unbalanced budget over a large balanced one because the marginal return from government spending is less than the marginal cost measured in terms of the amount of income private individuals remain free to spend government expenditures have more of an adverse impact on the economy in his view than does the method of financing that spending using a panel data set comprising the 50 states plus the district of columbia we report evidence from the years 1967 through 1992 that growth rates in income per capita tend to be higher in states with smaller public sectors moreover we find that while both deficits and taxes reduce the rate of income growth in a state the negative impact of government spending is considerably larger at the margin

tax reform and progressivity the established theory of tax progressivity cannot handle basic tax reform questions such as whether an increase in personal allowances makes the tau system more progressive because the core results assume that tax liability is never zero this paper generalises the core theory to allow for zero tax payments and applies the new framework to the analysis of allowances income related deductions and tau credits log concavity of the tax schedule a property quite distinct from any existing notion of progressivity emerges as the critical determinant of whether the distribution of die tau burden becomes more progressive as allowances are increased

measuring the financial sustainability and its influential factors in local governments abstractthe economic crisis has led international organizations and previous research to point out the need for measuring and controlling financial sustainability in governments based on the main international pronouncements this article seeks to contribute to the measurement and management of the financial sustainability analysing the income statement evolution and identifying its influential factors an empirical study of spanish municipalities is then undertaken to test the relationship between the measure of the financial sustainability and three dimensions proposed by international federation of accountants ifac revenues debt and services our findings indicate that the income statement is a good approach for the financial sustainability assessment because it reveals relevant information about its three dimensions allowing to identify the specific factors which could provoke sustainability problems on public services

perceptional inequality and preferential judgements an empirical examination of distributional axioms there are two categories of income distribution evaluations first the more or less value free perception of income inequality as a statistical dispersion and second the valuation of income distributions according to an explicit social welfare function which is meant to capture all of society s value judgements these societal value judgements can be expressed in the form of preferences whereas the inequality perception of income distributions appeals to an observer s sober judgement the revelation of preferences with respect to specific income distributions appeals to his or her sentiments

discussion of who is my peer a valuation based approach to the selection of comparable firms bhojraj and lee present a new approach to deriving warranted valuation multiples and selecting comparable firms conference participants comments centered on two key issues first participants questioned the motivation for deriving warranted valuation multiples and selecting comparable firms second participants questioned the procedure through which valuation theory was incorporated in the valuation multiple forecasting process

fiscal policy profits and investment this paper evaluates the effects of fiscal policy on investment using a panel of oecd countries we find a sizeable negative effect of public spending and in particular of its wage component on profits and on business investment this result is consistent with different theoretical models in which government employment creates wage pressure for the private sector various types of taxes also have negative effects on profits but interestingly the effects of government spending on investment are larger than those of taxes our results can explain the so called non keynesian i e expansionary effects of fiscal adjustments jel e22 e62

p e p b and the present value of future dividends 1994 p e p b and the present value of future dividends financial analysts journal vol 50 no 4 pp 23 31

uniform progressivity residual progression and single crossing abstract the relationship between lower residual progression and single crossing conditions as necessary and sufficient conditions for one tax system to be conditionally more progressive or uniformly more progressive than another are clarified

the promise of positive optimal taxation normative diversity and a role for equal sacrifice abstract a prominent assumption in modern optimal tax research is that the objective of taxation is utilitarian i present new survey evidence that most people reject this assumption s implications for several prominent features of tax policy instead preferring tax policies based at least in part on a classic alternative objective the principle of equal sacrifice i generalize the standard model to accommodate this preference for a mixed objective proposing a method by which to make disparate criteria commensurable while respecting pareto efficiency then i show that optimal policy in this generalized model calibrated to the survey evidence and u s microdata is capable of quantitatively matching several features of existing tax policy that are incompatible in the conventional model but widely endorsed in the survey and reality including the coexistence of substantial redistribution and limited tagging together these findings demonstrate the potential of a positive theory of optimal taxation

government size decentralization and growth empirical evidence from italian regions abstractthe aim of this study is to empirically assess the relationship among government size decentralization and economic growth in italian ordinary regions the empirical analysis based on a panel dataset on italian regions provides evidence in support of the existence of an inverted u shaped relationship between public expenditure and economic growth that depends on the degree of fiscal decentralization in particular according to our estimates on the specific italian case the optimal degree of decentralization is around 32 while the optimal government size value is approximately 52

personal income tax progressivity and output volatility evidence from oecd countries this paper investigates empirically the effect of personal income tax progressivity on output volatility using macro data from a sample of oecd countries over the period 1982 2009 our measure of progressivity is based on the difference between the marginal and the average personal income tax rate for the average production worker we find supportive empirical evidence for the hypothesis that higher personal income tax progressivity leads to lower output volatility this effect comes in addition to the stabilizing impact of government size and it is equally important in economic terms all other factors constant countries with more progressive personal income tax systems seem to benefit from stronger automatic stabilizers

lorenz domination and global tax progressivity the paper clarifies the concept of global progressivity as opposed to pointwise progressivity and proposes a summary measure for global progressivity on the basis of lorenz domination as a ranking criterion for income distributions by extending the work of musgrave and thin 1948 and jakobsson 1976 other ad hoc summary measures for global progressivity are evaluated from both a positive and a normative viewpoint domination selon le critere de lorenz et progressivite globale de la fiscalite ce memoire clarifie le concept de progressivite globale par opposition au concept de progressivite ponctuelle et propose une mesure sommaire de progressivite globale fondee sur la domination selon le critere de lorenz ce critere pour la comparaison de distributions de revenus est developpe en prolongeant certains travaux de musgrave et thin 1948 et de jakobsson 1976 l auteur examine aussi de fa on critique d autres mesures sommaires de progressivite globale dans une optique normative et positive

redistributive effects of minimal equal sacrifice taxation we examine the circumstances under which minimal equal sacrifice taxation reduces income inequality focusing on absolute sacrifice and relative inequality we show that after tax incomes are more equally distributed than before tax incomes and that after tax inequality decreases with the revenue to be raised if and only if the elasticity of the marginal utility of income is decreasing however other things equal after tax inequality is shown to decline as the utility function becomes more concave we investigate next how these conclusions extend when one takes the absolute inequality view and considers that it is the relative loss in utility that has to be equalized across individuals

does too much government spending depress the economic development of transition economies evidences from dynamic panel threshold analysis abstractthis paper investigates the relationship between government size and economic growth and determines the optimal level of government spending to maximize economic growth the paper applies a

the effect of government size on the unemployment rate recent empirical studies have revealed that the size of government is inversely related to economic growth and technical efficiency evidence is presented linking the size of government to reported unemployment rates for the industrial countries during recent years this finding helps to explain the empirical link between government size and poor macroeconomic performance

evidence on economic growth and government size the purpose of this article is to explore the effect of government size on economic growth in the united states using time series data over the period 1950 to 1998 a multi equation model is developed to examine the relationship between economic growth and government size the results indicate that government size has a significant and negative effect on economic growth

optimal non linear income taxation for reduction of envy abstract this paper examines the optimal non linear income taxation problem based on equitability an allocation is equitable if no agent envies a proportion of the bundle of any other agent we examine the properties of pareto undominated allocations for various equitability requirements when there is one output the marginal income tax rate can increase only if leisure is a luxury in a multi commodity model with commodity taxes the goods preferred by the low skilled agent and or those with high hicksian elasticities are taxed more heavily when preferences exhibit quasi linearity we can show that the introduction of the equitability constraint increases the marginal income tax rates of the entire population

the effect of state and local taxes on economic growth a time series cross section approach results based on pooled time series and cross section data are presented which indicate that state and local tax increases significantly retard economic growth when the revenue is used to fund transfer payments however when the revenue is used instead to finance improved public services such as education highways and public health and safety the favorable impact on location and production decisions provided by the enhanced services may more than counterbalance the disincentive effects of the associated taxes these findings underscore the importance of considering the incentives provided by a state s expenditures as well as by its taxes i n the past several years a number of states have implemented limitations on taxes or expenditures while others have raised tax rates in response to the revenue shortfalls of the early 1980s although much of the ongoing debate over state fiscal structures revolves around expressed preferences over tax expenditure combinations per se the question of how state and local taxes may affect economic growth is often central to the discussion nonetheless the empirical evidence remains sparse previous studies can be divided into two broad categories assessments of the magnitudes of tax costs and statistical analyses of the relationship between tax rates and growth cost studies have tended to minimize the role of taxes in business location decisions either because state and local taxes are a relatively small component of total costs for most businesses or because interstate tax differences are small relative to other cost differences between states although these results suggest that the role played by taxes is a minor one describing how large the tax disparities may be is not the same as ascertaining their economic effect of the statistical studies many including bloom 1955 thompson and mattila 1959 and carlton 1979 1983 find no relationship between taxes and growth however kleine 1977 grieson 1980 and generally grieson et al 1977 report negative correlations romans and subrahmanyam 1979 find growth to be negatively related to the fraction of revenues devoted to transfer payments and a variable which they claim measures personal tax progressivity but positively related to business taxes with the exception of carlton who estimates models of the birth and size of firms within metropolitan areas and the grieson et al 1977 and grieson 1980 studies which consider taxes in new york city and philadelphia these authors use data from a single cross section of states more recently newman 1983 and plaut and pluta 1983 both use cross sectional data from two time periods the former finding negative effects of corporate tax rates and the latter yielding mixed results in this study we utilize a time series from 1965 through 1979 of cross sections of 48 states exploiting the richness of this data set we are able to allow for otherwise unexplained differences between states which could be expected to bias results based on a single cross section moreover this much larger sample provides the statistical power necessary to disentangle the separate effects of different categories of taxes public expenditures and transfer payments a distinguishing feature of this paper is that we explicitly recognize the government budget constraint linking these fiscal variables and the deficit or surplus in addition we have taken account of the effects of labor force characteristics by including variables for wage rates unionization and population density our results indicate that tax increases significantly retard economic growth when the revenue is used to fund transfer payments as a result programs of income redistribution are more effectively undertaken at the federal than at the state and local level on the other hand when the revenue is received for publication april 30 1984 revision accepted for publication january 22 1985 university of california davis i am indebted to the institute of governmental affairs at the university of california davis for financial support to adrienne kandel for invaluable research assistance and to two referees for their helpful comments 1 see williams 1967 morgan and brownlee 1974 vasquez and deseve 1977 and the advisory commission on intergovernmental relations 1981 see also due 1961 for a survey of the early literature including a discussion of the findings and limitations of survey results on this topic 574 1 copyright 1985 this content downloaded from 157 55 39 35 on mon 29 aug 2016 04 45 38 utc all use subject to http about jstor org terms state and local taxes and economic growth 575 used instead to finance enhanced public services such as highways education and public health and safety the favorable impact on location and production decisions provided by the improved services may more than counterbalance the disincentive effects of the concomitant taxes these findings underscore the importance of considering the incentives provided by a state s expenditures as well as by its taxes we begin by sketching a model which provides the basis for the analysis and discussing appropriate estimation techniques then in section ii we describe the data used and our hypotheses the econometric results are presented in section iii followed by brief concluding remarks in the final

some calculations of lifetime tax incidence this paper reports a set of lifetime tax incidence calculations using a life cycle simulation model for canada due to davies 1979a 1982 a repeatedly stated qualification to annual calculations in the empirical tax incidence literature is that it would be more satisfactory to make calculations on a lifetime basis even though it is acknowledged that lifetime tax incidence could well differ from annual it is widely believed that data and other difficulties make such calculations next to impossible indeed the widespread acceptance of the data problems of lifetime calculations seems also to have inhibited speculation about how lifetime tax incidence might differ from annual as a result redistributive tax policy judgments continue to be based on annual incidence calculations in spite of the reservations many have about their usefulness our paper is intended to reorient discussion towards lifetime tax incidence by providing some initial null hypotheses about the shape of lifetime tax profiles our main finding is that under the standard competitive assumptions common in the incidence literature lifetime and annual incidence calculations both produce mild progression in tax rates across household deciles ignoring the bottom decile in the annual calculation while the income tax is less progressive in lifetime than in annual calculations other taxes are for the most part less regressive also lifetime incidence calculations are much more robust to alternative shifting assumptions than annual calculations in the lifetime context key distributions such as earnings transfer payments and consumption are less heavily concentrated in particular percentiles of the population than is true in annual data as a result changing the allocative series for any particular tax does not have the large effect on incidence results found in annual calculations each component of the tax system is allocated to households grouped by lifetime income using particular distributive series following a procedure similar to that employed in annual incidence calculations for example richard musgrave et al 1974 joseph pechman and benjamin okner 1974 edgar browning and william johnson 1979 w irwin gillespie 1980 in the process we are able to compare lifetime and annual incidence calculations using the same data set in both lifetime and annual calculations we allocate five groups of taxes among households using distributive series which come partly from the 1971 statistics canada survey of consumer finances scf and partly from our life cycle simulation model the scf data are used to construct synthetic longitudinal lifetime profiles of earnings and transfer payments for a sample of 500 households the latter are assigned inheritances by simulating patterns of mortality and bequest these data are then used in the life cycle model to generate lifetime consumption profiles and bequests the earnings transfer and inheritance data plus the model output provide the distributive series on which alternative incidence calculations are based while the incidence calculations presented in this paper use canadian data results would likely be similar for the united states

o princ opio do sacrif ocio equitativo no sistema tributario brasileiro this article investigates by means of the model developed for young 1990 if the direct indirect and total tributes in brazil respect the principle of the equal sacrifice in all the scenes originated in the present analysis as much the observed indirect tributes how much the total tributes present aliquot higher of the one than the estimates on the low income families to the step that the aliquot ones observed of such categories of tributes are below of that they would have for the families richest when taken in consideration the principle of the equal sacrifice this confirmation is valid in such a way for the tax structure current how much for the effective one in middle of the decade of 1970 the results show that the brazilian tax system does not respect the capacity of payment of the families fact that contributes for the maintenance of the indices of concentration of income in landings elevated

nontaxable income and necessary consumption the rousseau s paradox of fiscal egalitarianism this article compares a tax method featuring flat rates and fixed allowances equal for all taxpayers surplus income tax method sitm procedure with a tax method featuring also flat rates and increasing personal allowances ipas to meet the amounts of necessary consumption required by the different living standards discretionary income tax method ditm procedure our results show that the ditm procedure generates an after tax income distribution less unequal and superior in terms of social welfare moreover the assumption for comparison purposes of identical total tax revenues leads to the corollary that the flat tax rate under the ditm is necessarily larger than the one under the sitm being thus the former taxmethod is more progressive than the latter these results imply an obvious paradox considering the commonly accepted principle that basic necessities are the same for everyone rousseau 1755 based on the results obtained in this article we have labelled this paradox as the rousseau s

measurement of income inequality experimental test by questionnaire abstract we reconsider some of the basic assumptions of the literature on inequality analysis students views on the meaning of inequality comparisons were elicited by means of a questionnaire involving both numerical and verbal questions the responses suggest that two important axioms the principle of transfers and decomposability are not universally accepted

measuring income tax discrimination we propose a procedure for measuring the effect of systematic discrimination in the income tax different socioeconomic groups are assumed to face different tax schedules we show that a welfare loss is caused by the group specificity of schedules the dollar value of which is our measure of discrimination defining vertical equity as the dollar value of the tax system s welfare superiority over an equal yield flat tax discrimination equates to a loss in vertical equity the australian income tax is found to discriminate against wage and salary earners causing a roughly 1 loss of social welfare in 1984

distributional effects of growth and public expenditures in africa estimates for tanzania and rwanda summary in this paper we explore the effects of fiscal policies and growth on measures of household welfare across the distribution of expenditures for two african countries rwanda and tanzania we explore the effect of government expenditures on expenditure growth in each quintile of the expenditure distribution and the effect of growth for each group we find that the benefits of growth are concentrated among the better off sectors of the population in these two countries perhaps to the detriment of the poorer sectors by looking at the effects within a country and across different groups of households and administrative entities we exploit variation in expenditures and growth across and within regions of each country to estimate the elasticities of expenditure with respect to fiscal expenditure and mean expenditure growth at different points of the expenditure distribution using household survey data and government expenditure data at the district level we find that overall mean expenditure growth benefits the top expenditure groups the welfare spillovers are mostly present for top 20 of the expenditure distribution with the middle of the distribution in tanzania responding slightly to these spillovers public social expenditures do not appear to affect inequality considerably but do tend to work toward decreasing inequality however mean expenditure growth is related to increases in inequality in the sense that the richest sectors of the population benefit the most from growth we find that the growth elasticity of expenditure is only above one for the top quintile in both countries in tanzania a 1 increase in average household expenditure is related to a 1 96 expenditure growth in the top quintile and 0 43 in the third quintile in rwanda a 1 increase in average household expenditure is related to a 1 93 increase in household expenditure in the top 20 of the distribution

some classes of functions that preserve the inequality and welfare orderings of income distributions abstract we identify in the paper those classes of functions that preserve the ranking of distributions according to three welfare criteria introduced recently by a f shorrocks economica 50 1983 3 17 we prove that a necessary and sufficient condition for a function to preserve the generalized lorenz ordering of distributions is that it be increasing and concave requiring welfare improvements to be compatible with more equality we obtain linear resp affine functions when emphasis is placed on relative resp absolute income differentials

progressive taxation redistribution and labor supply the analysis of the effect of progression on labor supply is extended to a model with many consumers the condition for progression to increase labor supply given constant aggregate tax revenue is derived and shown to depend on the income effects resulting from redistribution it is then shown that the optimal linear income tax schedule involves a degree of progression which on the margin does reduce labor supply