the impact of divided government on legislative production it seems obvious that divided governments should produce less legislation than unified governments yet studies have consistently failed to find such an effect because almost all existing studies focus on the experience of the u s national government the data have limited analysis to a consideration of executive legislative division and ignore the impact of division between bicameral chambers the state level data set employed in this study is not so limited the results show that divided legislatures decrease the production of laws by almost 30 nonetheless consistent with previous studies using national level data executive legislative divisions have no impact of legislative production the reason for this asymmetry is theoretically motivated additional hypotheses of interest are also tested including whether republican controlled legislative chambers are more conservative than democratic chambers in the sense of producing fewer laws than their democratic counterparts

benefit incidence with incentive effects measurement errors and latent heterogeneity a case study for china abstract in what is probably the largest cash transfer program in the world today china s dibao program aims to fill all poverty gaps in theory the program creates a poverty trap with 100 benefit withdrawal rate bwr but is that what we see in practice the paper proposes an econometric method of estimating the mean bwr allowing for incentive effects measurement errors and correlated latent heterogeneity under the method s identifying assumptions a feasible instrumental variables estimator corrects for incentive effects and measurement errors and provides a bound for the true value when there is correlated incidence heterogeneity the results suggest that past methods of assessing benefit incidence using either nominal official rates or raw tabulations from survey data are deceptive the actual bwr appears to be much lower than the formal rate and is likely to be too low in the light of the literature on optimal income taxation the paper discusses likely reasons based on qualitative observations from field work the program s local implementation appears to matter far more than incentives implied by its formal rules

semi autonomous revenue authorities in sub saharan africa silver bullet or white elephant a major component of tax administration reform in sub saharan africa for the last 30 years has been the creation of semi autonomous revenue authorities saras the effects of their creation on rev

how robust is the kearney foreign policy globalisation index we argue that the kearney foreign policy kfp index of globalisation is constructed by making some problematic assumptions about the measurement normalisation and weighting of the variables included in the index we propose alternative measurement normalisation and weighting rules and using these rules recalculate the ranking of the fifty countries using the original kfp data specifically we use in various combinations i variables adjusted for geographical characteristics of countries ii statistically optimal weights obtained by principal components analysis iii a normalisation rule that treats different years of observations separately we find that the country rankings change significantly when adjusted variables are used indicating that the original kfp index is partially measuring geographical differences between countries

structural change in an open economy we study the importance of international trade in structural change our framework has both productivity and trade cost shocks and allows for non unitary income and substitution elasticities we calibrate our model to investigate south korea s structural change between 1971 and 2005 we nd that the shock processes propagated through the model s two main transmission mechanisms non homothetic preferences and the open economy explain virtually all of the evolution of agriculture and services labor shares and the rising part of the hump shape in manufacturing counterfactual exercises show that the role of the open economy is quantitatively important for explaining south korea s structural change

designing taxes with migration the phenomenon of rural urban migration in less developed countries has been a source of great concern over the last few years for both economists and policy makers it is widely regarded as a major cause of urban unemployment and underemployment and thus of the severe urban poverty that is observed in latin america and sub saharan africa this paper looks at tax policies that can be used to alleviate the problem of migration at the same time as raising government revenue and promoting economic efficiency the existence of unemployed and underemployed urban residents raises issues of both equity and efficiency these people are extremely poor and are contributing very little if at all to national output at first sight it would appear that both of these problems could be alleviated by employment creation schemes in urban areas however harris and todaro 1970 argue that such schemes would simply make rural urban migration more attractive thus increasing still further the number of urban unemployed therefore in the context of the harris todaro model the problem is to devise policies that alleviate urban unemployment and underemployment without encouraging rural urban migration the present paper analyses which policies are best suited to the solution of this problem in addition the paper responds to recent criticism of the harris todaro model by analysing the sensitivity of the optimal policies to a change in the specification of the migration process proposed by bhattacharya 1 985

fiscal policy outcomes and electoral accountability in american states clear fiscal policy effects appear in american state gubernatorial and legislative elections between 1968 and 1992 independent of the effects of incumbency coattails term limits and macroeconomic conditions the results show that accountability is generally stronger following a period of unified party control than under divided government voter reactions to taxes and spending relative to the state economy are conditional on expectations which differ for each party net of these expectations republican gubernatorial candidates lose votes if their party is responsible for unanticipated increases in the size of the state budget democrats do not and indeed may be rewarded for small increases independent of this the incumbent governor s party is punished in legislative elections for failing to maintain fiscal balance taken together these results show how electoral accountability for fiscal policy outcomes is strong but highly contingent on a complex configuration of party labels partisan control expectations and institutions

coordination moderation and institutional balancing in american presidential and house elections outcome in the theoretical equilibrium the proportion of voters who split their ticket in order to balance the house with the president has been small but large enough to affect election outcomes moderation has usually been based on voters expectations that the president will be at least an equal of the house in determining postelection policy d o americans coordinate their votes for president and for congress suppose a voter knows that policy outcomes are compromises between the positions taken by the president and congress and believes the two political parties push for distinct policy alternatives then the voter believes that different combinations of party control of the presidency and congress will produce different policy outcomes if the voter cares about the policy outcomes then the voter s choices among candidates should depend on the combination of party control the choices will help bring

perceptions of inevitability and demand for redistribution evidence from a survey experiment abstract believing that inequality is inevitable may limit demand for redistribution we explore this idea with a survey experiment in south africa one of the most unequal countries in the world inevitability beliefs can be influenced by learning about lower inequality elsewhere we find that the demand for redistributive policies reacts to this information while it is insensitive to other types of information messages our analysis suggests a promising and heretofore unexplored avenue of research for refining our understanding of the determinants of demand for redistribution

voters as fiscal conservatives voters penalize federal and state spending growth this is the central result of my analysis of voting behavior in presidential senatorial and gubernatorial elections from 1950 1988 the composition of federal spending growth seems irrelevant the vote loss to the president s party from an extra dollar of defense or nondefense spending is the same however in gubernatorial elections expansion of state welfare spending exacts a disproportionate political price deficit financing of federal or state spending does not appear to matter politically i conclude by discussing the obvious question of why government budgets have grown in the face of this voter hostility

fiscal redistribution and income inequality in latin america income inequality in latin america ranks among the highest in the world it can be traced back to the unequal distribution of assets especially land and education in the region but the extent to which asset inequality translates into income inequality depends on the redistributive capacity of the state this paper documents the performance of latin american fiscal systems from the perspective of income redistribution using newly available information on the incidence of taxes and transfers across the region the findings indicate that i the differences in income inequality before taxes and transfers between latin america and western europe are much more modest than those after taxes and transfers ii the key reason is that in contrast with industrial countries in most latin american countries the fiscal system is of little help in reducing income inequality and iii in countries where fiscal redistribution is significant it is achieved mostly through transfers rather than taxes these facts stress the need for fiscal reforms across the region to further the goal of social equity however different countries need to place different relative emphasis on raising tax collection restructuring the tax system and improving the targeting of expenditures

political regimes and the extractive capacity of governments taxation in democracies and dictatorships recent political and economic transformations in latin america africa asia and eastern europe have brought about a renewed interest in the incentives and capabilities of different types of political regimes to implement policies that are deemed necessary for economic development in particular policies aimed at increasing tax revenue one central question is whether democracies can collect as much in taxes as dictatorships this article addresses this question by examining whether regime type classified as democracy or dictatorship has a causal impact on a government s capacity to mobilize resources through taxation on the basis of data gathered for 108 countries for the period between 1970 and 1990 the article concludes that observed differences across countries regarding the level of taxes collected by the government are not due to the fact that some are under a democracy and others under a dictatorship concerns about the inability of democratic regimes to collect taxes are therefore unfounded

income distribution political instability and investment abstract this paper successfully tests on a sample of 71 countries for the period 1960 85 the following hypotheses income inequality by fuelling social discontent increases sociopolitical instability the latter by creating uncertainty in the politico economic environment reduces investment as a consequence income inequality and investment are inversely related since investment is a primary engine of growth this paper identifies a channel for an inverse relationship between income inequality and growth we measure socio political instability with indices which capture the occurrence of more or less violent phenomena of political unrest and we test our hypotheses by estimating a two equation model in which the endogenous variables are investment and an index of socio political instability our results are robust to sensitivity analysis on the specification of the model and the measure of political instability and are unchanged when the model is estimated using robust regression techniques

the theory of taxation for developing countries tax policy has far reaching implications for economic development and public administration this book which presents a modern theory of public finance brings together many of the most distinguished economists who have written on the subject they provide coherent principles for tax design and a systematic framework for the analysis of practical questions of tax reform and pricing policy in developing countries the book is especially timely as countries experience increasing shortages of government revenue and the distortions brought about by poorly designed tax systems it pays particular attention to the special problems of developing countries such as the taxation of agriculture the aim throughout is to develop techniques that can be quantitatively applied given the data available and empirical case studies illustrate the methods in action the authors analyze the links between tax theory social cost benefit analysis and the pricing of publicly supplied goods and services they also explore the empirical and econometric problems of identifying the tradeoffs between equity and efficiency other topics treated include the analysis of labor markets the taxation of foreign private investment and of fuel and the pricing of education although the models used concentrate on developing countries most of the methods and discussion apply as well to the problems of more affluent countries

does balance among areas of institutional quality matter for economic growth countries with better institutions as measured by the economic freedom of the world index have greater prosperity growth and well being however the previous literature has ignored interrelationships among the subareas instead implicitly assuming substitutability and independence we hypothesize that when some areas are weak better scores in other areas are not a simple substitute we find that including a simple measure of the within country standard deviation among coexisting area scores results in a meaningfully significant improvement in the empirical growth specifications based on our findings this should become routine practice in future empirical work we also explore interactions among areas and find ones with legal system and property rights most important to include these findings suggest a need to reconsider the implicit assumption of independence among area scores as well as a balanced approach to institutional reform in practice improving the worst areas is more beneficial to growth

tax incidence analysis of developing countries an alternative view misleading conclusions can be drawn from studies of tax incidence that ignore the special features of developing countries incorporating these features can sometimes reverse the incidence pattern of taxes relative to what is often taken to be conventional wisdom even where patterns are not reversed quantitative differences can be substantial the newer views of incidence have implications for tax restructuring options being considered in several developing countries the proposed restructuring may appear to lead only to a more regressive tax system because of improper incidence analysis copyright 1991 by oxford university press

fiscal contracting in latin america summary latin america has long been characterized as a region of high income inequality in recent years however many latin american countries have seen a decrease in income inequality and poverty levels and an increase in economic mobility fiscal policies have played a role in achieving these results one important explanation for changing fiscal policies is the increasing economic and political role played by the growing middle class in shaping the level and quality of collective goods and services and the types of taxes and relative tax burdens to fund these expenditures through a process we call fiscal contracting less unequal societies may be willing to pay more in taxes for expanded relatively universal public services

the redistribution of income in canada this original study challenges the widely held belief that government policies to redistribute income have made canada a more egalitarian state the author bases his conclusions on extensive documentation of the real effect of changes in taxes transfers and government expenditures

does globalization affect growth evidence from a new index of globalization the study develops an index of globalization covering its three main dimensions economic integration social integration and political integration using panel data for 123 countries in 1970 2000 it is analysed empirically whether the overall index of globalization as well as sub indexes constructed to measure the single dimensions affect economic growth as the results show globalization indeed promotes growth the dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries although less robustly information flows also promote growth whereas political integration has no effect

divided we vote divided government is known to correlate with limited government but less is understood about the empirical conditions that lead to divided government this paper estimates the determinants of continuous and categorical measures of divided government in an empirical macro political economy model using 30 years of data from the american states voters support more divided government after increased government spending per dollar of tax revenues but more unified government after worsening incomes and unemployment rates only conditional support is found for the strategic moderating theory alesina and rosenthal in econometrica 64 6 1311 1341 1996 that focuses purely on midterm cycles and split ticket voting absent economic conditions

the combined incidence of taxes and public expenditures in the philippines incidence studies of fiscal policy in developing countries typically examine either the distribution of tax burdens or the incidence of public expenditures but the central issue for policymakers is the combined or net incidence of fiscal activities one reason that combined incidence studies are so rare is that they require detailed data on both taxation and public spending the authors show that the net incidence of fiscal policy in a country with average data the philippines can be estimated using a variety of data sources and tools using simplifying assumptions for 20 years the philippine economy has experienced a series of balance of payments crises triggered by fiscal crises it has had an unsatisfactory record of poverty alleviation the authors examine net fiscal incidence to find out how poverty will be affected by the rise in taxes and the cut in spending they found that 1 the incidence pattern of taxes is basically neutral contrary to expectations indirect taxes are only slightly regressive and 2 it is the pattern of expenditures that drives the combined incidence which is progressive

household welfare and co2 emission impacts of energy and carbon taxes in mexico abstract we analyse the effects of environmental taxes on welfare and carbon emissions at the household level for the case of mexico the integrated welfare environmental analysis which is based on a censored energy consumer demand system extends previous work in two ways first the estimation of a full matrix of substitution elasticities allows us to test the necessity of incorporating second order effects into the welfare analysis second the substitution elasticities derived from the demand system are used to estimate the shortrun co2 emission reduction potential we find that first order approximations of welfare effects provide reasonable estimates particularly for carbon taxes analog to evidence in other low and middle income countries the taxation of all energy items is found to be regressive with the exception of motor fuels the analysis of the emission implications of different tax scenarios indicates that short run emission reductions at the household level can be substantial though the effects depend on how revenue is recycled this effectiveness combined with moderate and manageable adverse distributional impacts renders the carbon tax a preferred mitigation instrument considering the large effect of food price increases on poverty and the limited additional emission saving potential the inclusion of ch4 and n2o in a carbon tax regime is not advisable

divided government fiscal institutions and budget deficits evidence from the states does partisan control of american state government have systematic effects on state spending and taxing levels does divided control affect the government s ability to make hard decisions do institutional rules like legal deficit carryover restrictions matter using a formal model of fiscal policy to guide empirical analysis of data covering the american states from 1968 to 1987 we conclude that 1 aggregate state budget totals are driven by different factors under democrats and republicans the net result being that democrats target spending and taxes to higher shares of state level personal income 2 divided government is less able to react to revenue shocks that lead to budget deficits particularly where different parties control each chamber of the legislature and 3 unified party governments with restricted ability to carry deficits into the next fiscal year outside the south have sharper reactions to negative revenue shocks than those without restrictions

a capitalization approach to fiscal incidence at the local level this paper argues that an analysis of the capitalized burdens and benefits of the local public sector offers a simple straightforward and objective computational methodology to fiscal incidence at the local level this capitalization approach represents a major departure from the highly discretionary and imprecise computational environment of the reasonable assumptions and aaron and mcguire approaches it is initially discussed both from conceptual and operational points of view and then implemented using alternate procedures major limitations of the approach are then noted a comparative perspective on fiscal incidence results based on the capitalization approach and of earlier studies on this subject is provided in the concluding section of the paper during the past two decades several important studies have been published which investigate the redistributive implications of federal provincial and local government finances in canada all the canadian studies on the subject in general follow the methodology used for similar studies in the united states these studies differ as to the shifting of tax burden assumptions and the concept of income employed and understandably their results also vary accordingly a common criticism of these approaches is that their distribution conclusions depend crucially on what incidence hypothesis is chosen musgrave and musgrave 1976 394 all these studies merely illustrate what the distribution of fiscal incidence would be if the incidence assumptions were true the numerical es

incidence analysis of a sector specific minimum wage in a two sector harris todaro model in this paper we explore the incidence of a sector specific minimum wage in a two sector harris todaro model with intersectorally mobile capital in addition to the output and substitution effects in harberger s tax incidence analysis an additional effect reflecting the endogenously generated unemployment arises in the harris todaro case we also explore the functional incidence issue numerically for mexico by using general equilibrium computational techniques in a number of the calculations reported capital more than bears the income loss from unemployment caused by the sector specific minimum wage

the future of the income tax the federal income tax has been under attack by the economics profession for more than a decade the attack comes from two directions supply siders who believe that progressive income taxation impairs economic incentives and more traditional economists who would substitute a progressive expenditure tax for the income tax 2 at one time support for the expenditure tax was confined to a few members of our profession including such distinguished names as john stuart mill irving fisher nicholas kaldor and james meade today it is fair to say that many if not most economists favor the expenditure tax or a flat rate income tax this group has joined the opponents of progressive taxation in the attack on the income tax despite an incessant barrage from both groups no country in the world is planning to abandon the income tax or is even considering a personal expenditure tax a wave of tax reform beginning with the u s reform in 1986 has been sweeping the world aimed at improving the income tax not at eliminating it tax preferences formerly regarded as sacrosanct are being removed and there is a distinct movement toward comprehensive income taxation 3 however individual income tax rates are being cut tax progressivity has been declining almost everywhere and reliance on the income tax has been diminishing it will come as no surprise to this audience that i approve of the base broadening feature of the current tax reform movement but i believe that the reduction in the redistributive effect of the income tax has gone too far in this paper i shall show that the progressivity of the u s tax system never very pronounced except during and immediately after the two world wars has been declining for more than two decades and that the tax reform act of 1986 reversed this decline but only slightly consequently we have a long way to go to improve the equity of the tax system i believe this can be done without punitive tax rates that will hurt economic incentives i begin with a brief review of recent changes in the u s distribution of income and follow this with an analysis of the effect of taxes on the income distribution i next examine arguments for and against the income tax with particular emphasis on its effects on economic incentives and its merits when compared with the expenditure tax i then evaluate the income tax as it emerged from the 1986 tax reform and conclude with tjoseph pechman passed away on august 19 1989 his presidential address was delivered at the onehundred second meeting of the american economic association december 29 1989 atlanta georgia joseph a pechman economic studies program the brookings institution 1775 massachusetts avenue nw washington dc 20036 i have benefited from the comments and suggestions on an earlier draft of this paper by henry j aaron richard goode jane g gravelle robert w hartman donald w kiefer herbert e klarman robert d reischauer clifford m winston and h peyton young but they should not be held responsible for the views expressed in this paper i am indebted to richard kasten for various simulations i am also grateful to stephen j kastenberg for research assistance and to diane a shugart valerie m owens and sara c hufham for secretarial assistance some of the more extreme supply siders argued that large tax cuts pay for themselves see for example laffer 1981 but i believe it is fair to say that this view has been totally discredited for a more reasonable supply side view see the economic report of the president 1982 2see for example michael j boskin 1978 david e bradford 1980 charles l ballard don fullerton john shoven and john whalley 1985 paul courant and edward gramlich 1982 martin feldstein 1978 robert hall and alvin rabushka 1985 john kay and mervyn king 1983 charles mclure 1987 mieszkowski 1980 and lawrence summers 1981 it is interesting that the recent popularity of the expenditure tax among economists was stimulated by a tax lawyer william d andrews 1974 3see pechman 1988

democrats republicans and taxes evidence that political parties matter i estimate the influence of political parties on state tax burdens over a forty year period 1960 2000 holding constant a large number of state and voter characteristic variables i find that i tax burdens are higher when democrats control the state legislature compared to when republicans are in control ii the political party of the governor has little effect after controlling for partisan influences in the state legislature i explain how both findings are consistent with median voter theory my results suggest that after five years of democratic control of the legislature state government would be approximately 3 to 5 percent larger than if republicans controlled the legislature during that same period with the better specifications producing estimates in the higher end of this range

shadow economies size causes and consequences using various methods the size of the shadow economy in 76 developing transition and oecd countries is estimated average size varies from 12 percent of gdp for oecd countries to 23 percent for transition countries and 39 percent for developing countries increasing taxation and social security contributions combined with rising state regulations are driving forces for the increase of the shadow economy especially in oecd countries according to some findings corruption has a positive impact on the size of the shadow economy and a growing shadow economy has a negative effect on official gdp growth

the role of transportation in u s economic development 1840 1860 we return to two questions concerning the 19th century u s transportation revolution first to what extent were transportation improvements responsible for the large changes in the regional distribution of population in the united states and within regions for the changes in industry structure second how important were transportation improvements for welfare gains we find that transport improvements were the key factor driving where people lived and what industry they worked in we also find that transport improvements were important for welfare gains gains over 1840 1860 would have been only half as large if there had been no transportation improvements

civil conflict and human capital accumulation the long term effects of political violence in peru this paper provides empirical evidence of the persistent effect of exposure to political violence on human capital accumulation i exploit the variation in conflict location and birth cohorts to identify the long and short term effects of the civil war on educational attainment conditional on being exposed to violence the average person accumulates 0 31 less years of education as an adult in the short term the effects are stronger than in the long run these results hold when comparing children within the same household further exposure to violence during early childhood leads to permanent losses i also explore the potential causal mechanisms

a theory of divided government this paper extends the spatial theory of voting to an institutional structure in which policy choices depend upon not only the executive but also the composition of the legislature voters have incentives to be strategic since policy reflects the outcome of a simultaneous election of the legislature and the executive and since the legislature s impact on policy depends upon relative plurality to analyze equilibrium in this game between voters we apply coalition proof type refinements the model has several testable implications which are consistent with voting behavior in the united states for instance the model predicts a split tickets where some voters vote for one party for president and the other for congress b for some parameter values a divided government with different parties controlling the executive and the majority of the legislature and c the midterm electoral cycle with the party holding the presidency always losing votes in midterm congressional elections

does aid affect inequality we show that there was a negative correlation between pro poor aid and inequality in the period before the mid 2000s this article provides an explanation for this observed relationship using pane

productivity transport costs and subsistence agriculture abstract a defining feature of many poor economies is the large fraction of workers engaged in subsistence agriculture we develop a multi sector multi region model of a poor economy in which it is costly to transport goods across regions in order to study this outcome a key finding is that higher transport costs drive up the size of the agricultural workforce and the fraction in subsistence in a calibrated version of our model we show that the effect of transport productivity is quantitatively important in terms of both allocations and welfare

comparative politics and public finance we propose a model with micropolitical foundations to contrast different political regimes compared to a parliamentary regime the institutions of a presidential congressional regime produce fewer incentives for legislative cohesion but more separation of powers these differences are reflected in the size and composition of government spending a parliamentary regime has redistribution toward a majority less underprovision of public goods and more rents to politicians a presidential congressional regime has redistribution toward powerful minorities more underprovision of public goods but less rents to politicians the size of government is smaller under a presidential regime this last prediction is consistent with cross country data

taxes and income distribution in chile some unpleasant redistributive arithmetic abstract this paper quantifies the direct impact of taxes on income distribution at the household level in chile and estimates the distributional effect of several changes in the tax structure we find that income distributions before and after taxes are very similar gini coefficients of 0 488 and 0 496 respectively moreover radical modifications of the tax structure such as raising the value added tax from 18 to 25 or substituting a 20 flat tax for the present progressive income tax affect the after tax distribution only slightly we present some arithmetic showing that the scope for direct income redistribution through progressivity of the tax system is rather limited by contrast for parameter values observed in chile and possibly in most developing countries the targeting of expenditures and the level of the average tax rate are far more important determinants of income distribution after government transfers thus a high yield proportional tax can have a far bigger equalizing impact than a low yield progressive tax moreover a simple model shows that the optimal tax system is biased against progressive taxes and towards proportional taxes with a bias that grows with the degree of inequality of pre tax incomes our results suggest that to reduce income inequality the focus of discussion should be on the amount to be redistributed the targeting of public spending and the relative efficiency of alternative taxes and not on the progressivity of the tax system

controls and the intersectoral terms of trade the indian case sectors the indian economy is substantially insulated from outside market forces and the direction of movement of the intersectoral terms of trade has therefore been regarded as having special policy importance industry is equated with the urban modern sector agriculture with the rural traditional sector while the debate on the north south terms of trade following singer i 950 and prebisch i 964 has prompted discussion of international trade arrangements between developing and developed economies the debate on the intersectoral trade seems to have played a comparable role in india 2 if growth as with singerprebisch causes a deterioration in the terms of trade of the traditional sector then policy measures to offset the associated redistributive effects are seen in india as justified these can take the form of subsidies to agriculture maintenance of the current tax free status of agriculture and other measures equally since extensive redistribution through tax transfer schemes is administratively infeasible an improvement in the agricultural industrial terms of trade in favour of agriculture is often seen as a substitute for other redistributive measures poverty is concentrated in rural areas and manipulating the terms of trade in favour of agriculture through price controls subsidies and the like is a widely supported policy stance in this paper we argue that existing statistical studies of the intersectoral terms of trade in india are misleading since they typically focus on the terms of trade at controlled prices price and other controls in india are so extensive that black market rather than controlled prices should clearly enter any assessment of changes in the intersectoral terms of trade we also argue that the problem with these studies is analytically deeper than simply whether black market or controlled drices should be used because of

democracy war and wealth lessons from two centuries of inheritance taxation in this article we use an original data set to provide the first empirical analysis of the political economy of inherited wealth taxation that covers a significant number of countries and a long time frame 1816 2000 our goal is to understand why if inheritance taxes are often very old taxes the implementation of inheritance tax rates significant enough to affect wealth inequality is a much more recent phenomenon we hypothesize alternatively that significant taxation of inherited wealth depended on 1 the extension of the suffrage and 2 political conditions created by mass mobilization for war using a difference in differences framework for identification we find little evidence for the suffrage hypothesis but very strong evidence for the mass mobilization hypothesis our study has implications for understanding the evolution of wealth inequality and the political conditions under which countries are likely to implement policies that significantly redistribute wealth and income

history lessons institutions factor endowments and paths of development in the new world the explanations offered for the contrasting records of long run growth and development among the societies of north and south america most often focus on institutions the traditional explanations for the sources of these differences in institutions typically highlight the significance of national heritage or religion we in contrast argue that a hemispheric perspective across the wide range of colonies established in the new world by the europeans suggests that although there were many influences factor endowments or initial conditions had profound and enduring effects on the long run paths of institutional and economic development followed by the respective economies

business organisations party systems and tax composition in developing countries a comparison between colombia and peru abstractthis paper explores the relationship between socio political institutions and tax composition in developing countries it argues that strong business organisations and stable political party systems reduce the uncertainty of fiscal contracts for economic elites the decrease in uncertainty leads elites to accept a larger share of the tax burden which governments then collect using progressive tax types more intensively to illustrate this claim i provide evidence from a comparative analysis of the peruvian and the colombian tax history between 1970 and 2010

divided government in the american states a byproduct of legislative professionalism s since world war ii divided government has become increasingly common in the american states a significant component of the increase is the deterioration of republican fortunes in state legislatures after the 1990 and 1992 elections for example only five state legislatures were controlled by the republicans i shall examine the hypothesis that the professionalization of state legislatures makes legislative service more attractive to democratic candidates and less attractive to republican candidates because full time legislative service is incompatible with another career and democrats on average have less lucrative career opportunities than republicans statistical analysis of post world war ii legislative elections outside the south is consistent with the argument other things being equal every ten thousand dollar increase in real biennial legislative compensation is associated with approximately a 1 increase in democratic legislators

economic growth lessons from two centuries of american agriculture this paper reviews the growth experience of u s agriculture over the past two centuries in consonance with the view that growth is determined by the economic environment which consists of the available technology incentives constraints and institutions within this framework the implemented technology is determined jointly with the resource allocation the review covers the role played by resource endowment resource flow technical change and its factor bias and product demand it highlights the importance of the income elasticity of demand and the labor augmentation of the technical change the total factor productivity tfp was almost nil at the beginning of the nineteenth century increasing gradually to the point where it exhausted output growth in the latter part of the twentieth century this pattern is consistent with the postulate emerging from this framework where the tfp is endogenous and determined jointly with growth rather than determining it the more recent performance of u s agriculture is placed within a global perspective in order to generalize the discussion

beyond balanced growth balanced growth models are commonly used in macroeconomics because they are consistent with the well known kaldor facts regarding economic growth these models however are inconsistent with one of the most striking regularities of the growth process the massive reallocation of labour from agriculture into manufacturing and services this paper presents a simple model consistent with both the kaldor facts and the dynamics of sectoral labour reallocation

the flypaper effect and other anomalies abstract i develop a model in which income both in its own right and as a proxy for other socioeconomic characteristics is an input in the production function for local public services the most obvious example is education though there are other applications as well the comparative statics results from this model yield the following results 1 the observed flypaper effect the tendency for local government to spend a higher fraction of unrestricted grants than income of residents may be due at least in part to the fact that own income but not grants is a substitute for purchased inputs in the technology hence the propensity to spend on purchased inputs out of own income is lower than out of grants 2 the income elasticity of demand for public sector output may be higher than the observed income elasticity of demand for purchased inputs 3 equalization of educational opportunity via wealth neutrality as suggested by feldstein requires major changes in education finance once we recognice the distinction between purchased inputs and output

hunting the whale more evidence on state government leviathans caplan holds that governments are leviathans seeking to extend their power by increasing government expenditures beyond the level preferred by voters we extend caplan s model by examining the real percentage growth rates of government we also examine whether government size increases at an increasing rate as the minority party weakens we find evidence that supports and fails to support the original leviathan hypothesis we also fail to support our extensions of caplan s hypothesis furthermore our significant and contrary results have intuitively appealing interpretations from these results we conclude that the impact of political party power on government spending is ambiguous

a paradox of redistribution in international aid the determinants of poverty oriented development assistance summary donors differ in the amount of official development assistance dedicated to poverty reduction we investigate the causes of variation over time and donors by employing both a regression approach with aggregate data on bilateral aid and two short country studies on germany and the united kingdom we find that there is a trade off between the total amount of money given and the amount of money given to poor countries the trade off is similar to the paradox of redistribution of targeting vs redistribution in rich welfare states case study evidence illustrates how countries have managed this tradeoff

redistribution under the right in latin america electoral competition and organized actors in policymaking unexpected social policy expansion and progressive tax reforms initiated by right wing governments in latin america highlight the need for further theory development on the politics of redistributi

the strugglers the new poor in latin america summary we identify a group of people in latin america that are not poor but not middle class either namely strugglers in households with daily income per capita between 4 and 10 at constant 2005 ppp this group will account for about a third of the region s population over the next decades as the size and income of the middle class rises they could become increasingly marginalized the cash transfers they receive are largely offset by indirect taxes the benefit of schooling and other in kind transfers they receive is questionable after adjusting for quality we discuss implications for the social contract

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

international financial integration and economic growth abstract this paper uses new data and new econometric techniques to investigate the impact of international financial integration on economic growth and also to assess whether this relationship depends on the level of economic development financial development legal system development government corruption and macroeconomic policies using a wide array of measures of international financial integration for 57 countries and an assortment of statistical methodologies we are unable to reject the null hypothesis that international financial integration does not accelerate economic growth even when controlling for particular economic financial institutional and policy characteristics

tax revenue and or trade liberalization abstract with the public finances of many developing and emerging market countries still heavily dependent on trade tax revenues further trade liberalization may be hindered unless they are able to develop alternative sources of revenue against a background of and to inform heightened theoretical controversy as to the appropriate balance between trade and other taxes not least the vat this paper uses panel data for 117 countries over 32 years cleaned for a variety of problems in standard data sources to address a central question of fact have countries recovered from domestic taxes the revenues they have lost from past episodes of trade liberalization for high income countries the answer is clearly yes for middle income countries there are robust signs of strong replacement both concurrently with the revenue loss and essentially dollar for dollar in the long run signs of significant recovery by low income countries are flimsier however and their experiences appear to have varied widely the picture that emerges for low income countries is thus that replacement has been and become higher than previous studies have suggested but sufficiently incomplete in many cases to give cause for concern

partisan cycles in congressional elections and the macroeconomy in the postwar united states the president s party has always done worse in the midterm congressional elections than in the previous congressional election republican administrations exhibit below average and democratic administrations above average economic growth in the first half of each term whereas in the latter halves the two see equal growth our rational expectations model is consistent with these two regularities in presidential elections voters choose between two polarized candidates they then use midterm elections to counterbalance the president s policies by strengthening the opposition in congress since presidents of different parties are associated with different policies our model predicts a spurious correlation between the state of the economy and elections our predictions contrast with those of retrospective voting models in which voters reward the incumbent if the economy is doing well before the election our model performs empirically at least as well as and often better than alternative models

structural change in an interdependent world a global view of manufacturing decline this paper presents a simple model of the world economy in which productivity gains in manufacturing are responsible for the global trend of manufacturing decline and yet in a cross section of countries faster productivity gains in manufacturing do not necessarily imply faster declines in manufacturing in doing so it aims to draw attention to the common pitfall of using the cross country evidence to test a closed economy model and argues for a global perspective in order to understand cross country patterns of structural change one needs a world economy model in which the interdependence across countries is explicitly spelled out jel f43 o11 o14 o19

the u s demographic transition between 1800 and 1940 the u s went through a dramatic demographic transition in 1800 the average woman had 7 children and 94 percent of the population lived in rural areas by 1940 the average woman birthed just 2 kids and only 43 percent of populace lived in the country the question is what accounted for this shift in the demographic landscape the answer given here is that technological progress in agriculture and manufacturing explains these facts

does government spending affect income inequality a meta regression analysis in this paper findings of a meta regression analysis are presented exploring the effects of government spending on income inequality with a particular focus on low and middle income countries we identify a total of 84 separate studies containing over 900 estimates of the effect of one or more measures of spending on one or more measures of income inequality the results show some evidence of a moderate negative relationship between government spending and income inequality which is strongest for social welfare and other social spending and when using the gini coefficient or the top income share as the measure of inequality however both the size and direction of the estimated relationship between government spending and income inequality is affected by a range of other factors including the control variables and estimation method used we also find evidence of publication bias in that negative estimates of the relationship appear to be under reported in the literature

does government spending affect income poverty a meta regression analysis summary this paper presents the results of a meta regression analysis of the relationship between government spending and income poverty with a focus on low and middle income countries through a comprehensive search and screening process we identify a total of 19 cross country econometric studies containing 169 estimates of this relationship we find that the size and direction of the estimated relationship are affected by a range of factors most notably the composition of the sample used for estimation the control variables included in the regression model and the type of government spending overall we find no clear evidence that higher government spending has played a significant role in reducing income poverty in low and middle income countries this is consistent with the view that fiscal policy plays a much more limited redistributive role in developing countries in comparison with oecd countries in addition we find that the relationship between government spending and poverty is on average less negative for countries in sub saharan africa and more negative for countries in eastern europe and central asia compared to other regions we also find that the relationship is less negative for government consumption spending in comparison with other sectors finally we find some evidence indicating the possibility of publication bias

the conscription of wealth mass warfare and the demand for progressive taxation the dominant narrative of the politics of redistribution in political sci ence and economics highlights the signature role of the rise of electoral democracy and the development of political parties that mobilize working class groups we argue in this article that this narrative ignores the critical role played by mass warfare in the development of redistributive public policies focusing attention on the determi nants of progressive taxation we argue that mobilization for mass warfare led to demands for increased taxation of the wealthy to more fairly distribute the burden for the war effort we then show empirically that during the past century mass mobi lization for war has been associated with a notable increase in tax progressivity in the absence of war neither the establishment of universal suffrage nor the arrival of political control by parties of the left is systematically associated with large increases in tax progressivity in making these arguments we devote particular attention to a difference in differences comparison of participants and nonparticipants in world war i those who have made fortunes out of the war must pay for the war and labour will insist upon heavily graduated direct taxation with a raising of the exemption limit that is what labour means by the conscription of wealth

the u s westward expansion the u s economic development in the 19th century was characterized by the westward movement of population and the accumulation of productive land in the west this article presents a model of migration and land improvement to identify the quantitatively important forces driving these phenomena the conclusion is that the decrease in transportation costs induced the westward migration whereas population growth was responsible for the investment in productive land

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

inequality the politics of redistribution and the tax mix political economy literature generally predicts a positive relationship between income inequality and redistribution however there is no clear empirical evidence supporting such a relationship by incorporating an informal sector that evades income taxes we account for the tax base effect that along with the political channel determines the equilibrium redistribution and tax mix we find a non monotonic relationship between inequality and redistribution and explore under which conditions an unequal society relies more heavily on indirect taxes to finance redistribution ultimately this paper shows the limitations of the income tax to finance redistribution in developing countries even when taxes are democratically chosen

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

interactions between trade policies and domestic distortions in a small open developing country abstract this paper reports results from a price taking open economy numerical general equilibrium model of the philippines whose purpose is to explore the ways in which trade policies and other domestic distortions interact in a small open developing economy the trade policies featured in the model include tariffs export taxes and import quotas while the domestic distortions considered are rent seeking and harris todaro labour market dualism results clearly indicate that interactions between trade policies and other domestic distortions are significant and need to be more fully considered in numerical economic policy analyses for developing countries

globalization and developing countries a shrinking tax base abstract this paper evaluates the impact of globalisation on tax bases of countries at varying stages of development we see globalisation as a process that induces countries to embrace greater trade and financial integration this in turn should shift their tax revenue from easy to collect taxes tariffs and seigniorage towards hard to collect taxes value added and income taxes we find that trade and financial openness have a positive association with the hard to collect taxes and a negative association with the easy to collect taxes