Most recent papers:

• Housing and the tax system: how large are the distortions in the euro area?
  Serena Fatica, Doris Prammer.
  Fiscal Studies. October 17, 2017
  This paper presents new evidence on the impact of the preferential treatment of owner‐occupied housing in Europe. We find that tax benefits to homeowners reduce the user cost of housing capital by almost 40 percent compared to the efficient level under neutral taxation. On average, the tax subsidy translates into an excess consumption of housing services equivalent to 7.8 percent of the value of owner‐occupied housing, or about 30 percent of financial asset holdings in household portfolios. The bulk of the subsidies stems from under‐taxation of the return to home equity, while the average contribution of the tax rebate for mortgage interest payments is driven down by relatively low loan‐to‐value ratios in the data. However, at the margin, the tax–induced incentive to use mortgage debt to finance the purchase of the main residence is sizable. This article is protected by copyright. All rights reserved

  October 17, 2017   doi: 10.1111/1475-5890.12159   open full text
• Fighting Tax Evasion by Discouraging the Use of Cash?
  Giovanni Immordino, Francesco Flaviano Russo.
  Fiscal Studies. October 14, 2017
  We propose a bargaining model of tax evasion with a seller that offers a price discount to a buyer in exchange for a cash payment without a receipt, which allows tax evasion. We study the effect on evasion and government revenue of two policy instruments: a tax on cash withdrawals (TCW), that imposes a cost on the buyers who pay cash, and a tax rebate conditional on the receipt. The tax rebate reduces evasion but it is costly if tax evasion is low. The TCW reduces evasion only if it is set at a sufficiently high rate, that must be higher the larger is the mass of cash users. We also show that the implementation of the TCW, which poses several challenges, is easier if the cost of cash hoarding is high.

  October 14, 2017   doi: 10.1111/1475-5890.12160   open full text
• Survey under‐coverage of top incomes and estimation of inequality: what is the role of the UK's SPI adjustment?
  Richard V. Burkhauser, Nicolas Hérault, Stephen P. Jenkins, Roger Wilkins.
  Fiscal Studies. October 13, 2017
  Survey under‐coverage of top incomes leads to bias in survey‐based estimates of overall income inequality. Using income tax record data in combination with survey data is a potential approach to address the problem; we consider here the UK's pioneering ‘SPI adjustment’ method that implements this idea. Since 1992, the principal income distribution series (reported annually in Households Below Average Income) has been based on household survey data in which the incomes of a small number of ‘very rich’ individuals are adjusted using information from ‘very rich’ individuals in personal income tax return data. We explain what the procedure involves, reveal the extent to which it addresses survey under‐coverage of top incomes, and show how it affects estimates of overall income inequality. More generally, we assess whether the SPI adjustment is fit for purpose and consider whether variants of it could be employed by other countries. This article is protected by copyright. All rights reserved

  October 13, 2017   doi: 10.1111/1475-5890.12158   open full text
• Academies 2 – The New Batch: The Changing Nature of Academy Schools in England.
  Andrew Eyles, Stephen Machin, Olmo Silva.
  Fiscal Studies. October 05, 2017
  The English education system has undergone large‐scale restructuring through the introduction of academy schools. The most salient feature of these schools is that, despite remaining part of the state sector, they operate with more autonomy than the predecessors they replaced. Two distinct periods of academy school introduction have taken place, under the auspices of different governments. The first batch was initiated in the 2002–03 school year by the Labour government of the time, and was a school improvement programme directly aimed at turning around badly performing schools. The second batch involved a mass academisation process following the change of government in May 2010 and the Academies Act of that year, which resulted in increased heterogeneity of new academies. This paper compares the two batches of introduction with the aim of getting a better understanding of their similarities and differences, and their importance for education policy. To do so, we study what types of schools were more likely to change to academy status in the two programmes, and the impact of this change on the quality of new pupil enrolments into the new types of school. Whilst we do point out some similarities, these are the exception rather than the norm. For the most part, our analysis reveals a number of marked dissimilarities between the two programmes, in terms of both the characteristics of schools that became academies and the changes in pupil intakes that occurred post‐conversion.

  October 05, 2017   doi: 10.1111/j.1475-5890.2017.12146   open full text
• Income Shifting in the Spanish Dual Income Tax*.
  Julio López‐Laborda, Jaime Vallés‐Giménez, Anabel Zárate‐Marco.
  Fiscal Studies. September 28, 2017
  Based on a model of behavioural response to taxes, and using the Taxpayers Panel from the Instituto de Estudios Fiscales for the period 1999–2009, we analyse whether the dual nature of the Spanish personal income tax (PIT), reinforced by the 2007 reform, has influenced taxpayers’ behaviour, causing them to convert part of their ‘general income’ (from labour, real estate or economic activities) into ‘savings income’ (from movable capital or capital gains). We also extend the analysis of income shifting and study whether Spanish taxpayers also responded to the different tax treatments given to the two types of savings income (from movable capital and capital gains) until 2007, transforming savings income from one type to the other. The results of our study demonstrate three facts. First, Spanish taxpayers did respond to the different tax rates, shifting income from the general base to different forms of savings, especially capital gains. The highest‐income individuals and the self‐employed and business owners are the groups where this behaviour was most marked. Second, the self‐employed and business owners also turned income from movable assets into capital gains, guided by their different tax rates. And third, we find signs of ‘anticipation’ and ‘learning’ effects caused by the 2007 tax reform. We believe that the results obtained will enrich the growing literature on income shifting.

  September 28, 2017   doi: 10.1111/j.1475-5890.2017.12147   open full text
• Who Receives Medicaid in Old Age? Rules and Reality.
  Margherita Borella, Mariacristina Nardi, Eric French.
  Fiscal Studies. September 08, 2017
  Medicaid is a government programme that also provides health insurance to the elderly who have few assets and either low income or catastrophic health care expenses. We ask how the Medicaid rules map into the reality of Medicaid recipiency, and we ask what other observable characteristics are important to determine who ends up on Medicaid. The data show that both singles and couples with high retirement income can end up on Medicaid at very advanced ages. We find that, conditioning on a large number of observable characteristics, including those that directly relate to Medicaid eligibility criteria, single women are more likely to end up on Medicaid – so are non‐white people, but, surprisingly, their higher recipiency is concentrated in the higher income percentiles. We also find that people with low incomes who have a high‐school diploma or higher degree are much less likely to end up receiving Medicaid than their less‐educated counterparts. All of these effects are large and depend on retirement income in a very non‐linear way.

  September 08, 2017   doi: 10.1111/1475-5890.12145   open full text
• Delayed Discharges and Hospital Type: Evidence from the English NHS.
  James Gaughan, Hugh Gravelle, Luigi Siciliani.
  Fiscal Studies. September 08, 2017
  Delayed discharges of patients from hospital, commonly known as bed‐blocking, are a long‐standing policy concern. Delays can increase the overall cost of treatment and may worsen patient outcomes. We investigate how delayed discharges vary by hospital type (Acute, Specialist, Mental Health, Teaching) and the extent to which such differences can be explained by demography, case mix, hospital quality, the availability of long‐term care, and hospital governance as reflected in whether the hospital has Foundation Trust status, which gives greater autonomy and flexibility in staffing and pay. We use a new panel database of delays in all English NHS hospital Trusts from 2011–12 to 2013–14. Employing count data models, we find that a greater local supply of long‐term care (care‐home beds) is associated with fewer delays. Hospitals that are Foundation Trusts have fewer delayed discharges and might therefore be used as exemplars of good practice in managing delays. Mental Health Trusts have more delayed discharges than Acute Trusts, but a smaller proportion of them are attributed to the NHS, possibly indicating a relatively greater lack of adequate community care for mental health patients.

  September 08, 2017   doi: 10.1111/j.1475-5890.2017.12141   open full text
• How Home Health Agencies’ Ownership Affects Practice Patterns.
  Hyunjee Kim, Edward C. Norton.
  Fiscal Studies. September 08, 2017
  This study explores whether for‐profit home health agencies responded differently from non‐profit agencies to financial incentives embedded in the Medicare prospective payment system. Agencies were able to receive higher reimbursement per patient under the prospective payment system if they adjusted the number of therapy visits or the type of visits for a two‐month‐long episode. Agencies could also increase reimbursement by treating a patient for multiple episodes of care, because prospective payments were made on a per‐episode basis. Using the Medicare Claims and Provider of Services Files from 2001 to 2009, we examine differences between for‐profit and non‐profit agencies in these practice patterns during the first nine years of the prospective payment system. We find that for‐profit agencies were more likely to adopt most of these practice patterns than were non‐profit agencies. This finding suggests that for‐profit agencies were more responsive to financial incentives, and therefore disproportionately contributed to the increase in Medicare home health spending under the prospective payment system. Policymakers could consider revising the current prospective payment system that gives agencies incentives to distort practice patterns regardless of a patient's health care needs.

  September 08, 2017   doi: 10.1111/j.1475-5890.2017.12136   open full text
• Home Sweet Home? Public Financing and Inequalities in the Use of Home Care Services in Europe.
  Vincenzo Carrieri, Cinzia Di Novi, Cristina Elisa Orso.
  Fiscal Studies. September 08, 2017
  Income‐related inequalities in health care access have been found in several European countries, but little is known about the extent of needs‐adjusted inequalities (inequities) in the provision of long‐term care (LTC) services. This paper fills this gap: it addresses equity issues related to the provision of home care services across three macro areas in Europe that are highly heterogeneous in terms of the degree of public financing of LTC and the strength and social value of family ties. Using cross‐country comparative microdata from the Survey of Health, Ageing and Retirement in Europe (SHARE), we estimate and decompose an Erreygers concentration index of the use of both paid domestic help (‘unskilled’ care) and personal nursing care (‘skilled’ care), measuring the contribution of income, need and non‐need factors to overall inequality. We base the decomposition on a bivariate probit model that takes into account the interaction between formal and informal home care use. We find higher inequities in the use of unskilled home care in areas where public financing of LTC is relatively low (‘Southern Europe’) than in areas where the public–private mix of financing is more balanced (‘Continental Europe’). At the same time, we do not detect inequity in ‘Northern Europe’, which is characterised by high public spending on universal, equitable services, including LTC public coverage. In all areas, we find informal care is a substitute for paid unskilled care among the poor, and this contributes to further skewing of the distribution of the use of formal care services towards the rich.

  September 08, 2017   doi: 10.1111/j.1475-5890.2017.12138   open full text
• Does the Expansion of Public Long‐Term Care Funding Affect Saving Behaviour?
  Joan Costa‐Font, Cristina Vilaplana‐Prieto.
  Fiscal Studies. September 08, 2017
  We study the effect of further public caregiving subsidies (and expansions of insurance to cover long‐term care) on savings and saving behaviour. Specifically, we examine the unique progressive introduction of a universal public long‐term care subsidy (Sistema para la Autonomía y Atención a la Dependencia, SAAD) in Spain. We draw on a difference‐in‐difference (DID) strategy to show a contraction of savings after the policy intervention, but only among younger elders who receive primarily cash benefits (unconditional caregiving allowance) as opposed to home help (a contraction ranging between 13 per cent and 39 per cent of the subsidy amount). Reductions in savings by individuals in the second and third quintiles of the income distribution, those aged under 75, those without children and those residing in regions that implemented the reform earlier drive the effect.

  September 08, 2017   doi: 10.1111/j.1475-5890.2017.12139   open full text
• Indirect Fiscal Effects of Long‐Term Care Insurance*.
  Johannes Geyer, Peter Haan, Thorben Korfhage.
  Fiscal Studies. September 08, 2017
  Informal care by close family members is the main pillar of most long‐term care systems. However, due to demographic ageing, the need for long‐term care is expected to increase while the informal care potential is expected to decline. From a budgetary perspective, informal care is often viewed as a cost‐saving alternative to subsidised formal care. This view, however, neglects that many family carers are of working age and face the difficulty of reconciling care and paid work, which might entail sizeable indirect fiscal effects related to forgone tax revenues, lower social security contributions and higher transfer payments. In this paper, we use a structural model of labour supply and the choice of care arrangement to quantify these indirect fiscal effects of informal care. Moreover, based on the model, we discuss the fiscal effects related to non‐take‐up of formal care.

  September 08, 2017   doi: 10.1111/j.1475-5890.2017.12140   open full text
• How to Finance the Rising Costs of Long‐Term Care: Four Alternatives for the Netherlands.
  Bram Wouterse, Bert Smid.
  Fiscal Studies. September 08, 2017
  Long‐term care expenditures in the Netherlands have risen substantially over the last 40 years. Only a part of this growth can be attributed to the ageing of the population. Rising long‐term care costs threaten the sustainability of Dutch public finances: additional public revenues are needed to cover the additional spending. In this paper, we evaluate four alternative policies to finance the anticipated additional growth in long‐term care above the rate implied by projected demographic growth. We analyse these financing alternatives using a macro model, focusing on the long‐term effects on economic growth and on the redistribution of costs and benefits between birth cohorts. We find a relatively large intergenerational redistribution of lifetime net benefits for a pay‐as‐you‐go system and for an immediate one‐time increase of the premium rate, while a cohort‐specific savings system or a pensioner tax both have relatively small intergenerational effects. Labour supply and private consumption decline in all four financing alternatives, although the size and timing of these effects differ.

  September 08, 2017   doi: 10.1111/j.1475-5890.2017.12137   open full text
• Optimal Environmental Taxation with Capital Mobility*.
  Gregor Schwerhoff, Max Franks.
  Fiscal Studies. September 05, 2017
  Climate policy exemptions for energy‐intensive sectors are often justified with distributional concerns. One concern is that households employed in energy‐intensive sectors might be affected disproportionally because of (international) capital mobility. By assuming that workers cannot move freely between sectors, we can reproduce this concern: uniform climate policy causes more inequality between the sectors when capital is mobile than when it is not. However, we find that affected households can be relieved more effectively with sector‐specific labour taxes than with sector‐specific climate policy. The reason for this finding is that households benefit more directly from sector‐specific labour tax cuts than from climate policy exemptions. Keeping climate policy uniform across sectors has the added benefit of creating incentives for long‐term decarbonisation. In addition, we find that the differential effect of capital mobility depends on the government's degree of inequality aversion – redistribution is more expensive when capital is mobile.

  September 05, 2017   doi: 10.1111/1475-5890.12144   open full text
• Testing for a Debt‐Threshold Effect on Output Growth*.
  Sokbae Lee, Hyunmin Park, Myung Hwan Seo, Youngki Shin.
  Fiscal Studies. August 30, 2017
  Using the Reinhart–Rogoff dataset, we find a debt threshold not around 90 per cent but around 30 per cent, above which the median real gross domestic product (GDP) growth falls abruptly. Our work is the first to formally test for threshold effects in the relationship between public debt and median real GDP growth. The null hypothesis of no threshold effect is rejected at the 5 per cent significance level for most cases. While we find no evidence of a threshold around 90 per cent, our findings from the post‐war sample suggest that the debt threshold for economic growth may exist around a relatively small debt‐to‐GDP ratio of 30 per cent. Furthermore, countries with debt‐to‐GDP ratios above 30 per cent have GDP growth that is 1 percentage point lower at the median.

  August 30, 2017   doi: 10.1111/1475-5890.12134   open full text
• Strengthening Post‐Crisis Fiscal Credibility: Fiscal Councils on the Rise – A New Dataset.
  Xavier Debrun, Tidiane Kinda.
  Fiscal Studies. August 30, 2017
  Institutions that aim to constrain policy discretion in order to promote sound fiscal policies are once again at the forefront of the policy debate. Interest in fiscal councils – independent watchdogs active in the public debate – has grown rapidly in recent years. In this paper, we present the first cross‐country dataset summarising key characteristics of fiscal councils among International Monetary Fund members. The data document a surge in the number of fiscal councils since the 2008–09 economic and financial crisis, and also illustrate that well‐designed fiscal councils are associated with stronger fiscal performance and better macro‐economic and budgetary forecasts. Key features of effective fiscal councils include operational independence from politics, the provision or public assessment of budgetary forecasts, a strong presence in the public debate and the monitoring of compliance with fiscal policy rules.

  August 30, 2017   doi: 10.1111/1475-5890.12130   open full text
• Decline of Controlled Foreign Company Rules and Rise of Intellectual Property Boxes: How the European Court of Justice Affects Tax Competition and Economic Distortions in Europe.
  Rainer Bräutigam, Christoph Spengel, Frank Streif.
  Fiscal Studies. August 28, 2017
  The European Court of Justice (ECJ) has become an influential player in the field of direct taxation in the European Union (EU) in the past 20 years. However, it is unclear whether or not the ECJ's decisions and the corresponding reactions by the member states actually contribute to tax neutrality in economic terms and, therefore, to the achievement of the internal market. In 2006, the ECJ limited the applicability of specific tax rules in the EU that are intended to prohibit the excessive use of low‐tax countries by multinationals. Our counterfactual analysis shows that the court's restriction of so‐called controlled foreign company rules and the related second‐round reactions by some member states – i.e. the introduction of low‐tax regimes for income from acquired intellectual properties (IP boxes for acquired IP) – cast doubt on the seemingly positive effects the ECJ has on reducing tax distortions. In addition, we demonstrate that the restricted applicability of IP boxes as endorsed by the OECD and the European Commission would strengthen tax neutrality in Europe.

  August 28, 2017   doi: 10.1111/1475-5890.12135   open full text
• Participation in Workplace Pension Schemes and the Effect of Provision: Evidence From the United Kingdom.
  Bernardo Fonseca Nunes.
  Fiscal Studies. August 09, 2017
  This study investigates the effect of public policies enforcing workplace pension plan provision on participation rates. Using British data covering almost two decades (1992‐2009), I identify the potential opt‐in rate among private sector workers who haven't been offered a workplace pension plan if they had been offered the opportunity to join a saving scheme. I find that universal provision of workplace pension schemes alone could generate a major impact on pension coverage. This article is protected by copyright. All rights reserved

  August 09, 2017   doi: 10.1111/j.1475-5890.2017.12152   open full text
• Multi‐Factor Effective Corporate Taxation, firms’ mark‐ups and Tax Incidence: Evidence from OECD Countries.
  Salvador Barrios, Gaëtan Nicodème, A. Jesus Sanchez Fuentes.
  Fiscal Studies. August 07, 2017
  This paper provides novel evidence on the multi‐factor Effective Marginal Tax Rates (EMTRs) for a sample of 17 OECD countries and 11 manufacturing sectors. We use a single framework encompassing capital, labour and energy taxes. Our cross‐country/cross‐sector approach allows us analysing the contributions of these input factors to the effective tax borne by firms, taking explicitly into account their degree of substitution, their tax incidence and the role of mark‐ups. We find that the labour tax plays a particularly important role in the overall level of EMTR and that the presence of mark‐ups can significantly alter the levels of the multi‐factor EMTR, although without significantly altering the ranking of countries. We also find that the bulk of the variation in EMTRs is across countries, rather than across sectors (within countries). This article is protected by copyright. All rights reserved

  August 07, 2017   doi: 10.1111/j.1475-5890.2017.12153   open full text
• How taxes and welfare benefits affect work incentives: a lifecycle perspective.
  Mike Brewer, Jonathan Shaw.
  Fiscal Studies. July 07, 2017
  Personal taxes and benefits affect the incentive to work over the lifecycle by altering income‐age profiles, insuring against adverse shocks, and changing the returns to human capital. In this paper, show how a lifecycle perspective alters our impression of how the UK tax and benefit system affects women's work incentives. Given that actual longitudinal data conflates age effects, cohort effects and policy effects, and, in the UK, is not available covering the full lifecycle, we use simulated data produced by a rich, dynamic structural model of female labour supply and human capital that incorporates family formation and fertility. We find that individuals experience considerable variability in work incentives across life that outweighs the variability across individuals. Changes in the presence of children and a partner, as well as the level of any partner's earnings, are key to explaining these patterns: work incentives vary dramatically depending on family composition and the earnings of any partner, especially for the lower‐skilled – with women's own earnings explaining less than a seventh of the variation in work incentives – and most women experience a number of different family types during the course of their lives. This article is protected by copyright. All rights reserved

  July 07, 2017   doi: 10.1111/j.1475-5890.2017.12150   open full text
• Class Size at University.
  Gervas Huxley, Jennifer Mayo, Mike W. Peacey, Maddy Richardson.
  Fiscal Studies. July 07, 2017
  An effective higher education market should increase educational standards. For universities to fulfil this role students need reliable information about the teaching on offer at different universities, but no such data is currently available. We define a measure of teaching that weights contact hours by their intensity and collect a new dataset that allows comparison of teaching across universities and three departments. No two universities offer identical teaching. There is large variation in contact hours and even larger variation in teaching intensity ‐ both across universities and departments. We combine our data with existing data to investigate the relationship that teaching has with university and student characteristics. We find that how much teaching students receive is uncorrelated with tuition fee; that teach‐ in has little predictive power in explaining student satisfaction; and that Physics students consistently receive more teaching than either Economics or History students. This article is protected by copyright. All rights reserved

  July 07, 2017   doi: 10.1111/j.1475-5890.2017.12149   open full text
• Funding and School Accountability: The Importance of Private and Decentralised Public Funding for Pupil Attainment.
  Gilberto Turati, Daniel Montolio, Massimiliano Piacenza.
  Fiscal Studies. July 07, 2017
  We discuss the issue of how schools should be financed, concentrating on the role of private funding and public funding via subnational governments as accountability mechanisms in the provision of educational services. The historical evolution of school regulation in Italy and Spain has created differences in the percentage of pupils who attend private schools, the percentage of private school funding coming from public and private sources and the percentage of public school funding that comes from central or local government sources. We take advantage of these institutional diversities rooted in history to estimate the disciplining role of these different sources of funding in the context of an educational production function using Programme for International Student Assessment (PISA) data. Our results provide support to both accountability mechanisms and point to the presence of an important interplay between them.

  July 07, 2017   doi: 10.1111/1475-5890.12112   open full text
• When You Know Your Neighbour Pays Taxes: Information, Peer Effects and Tax Compliance*.
  James Alm, Kim M. Bloomquist, Michael McKee.
  Fiscal Studies. June 30, 2017
  In this paper, we suggest that individuals’ tax compliance behaviours are affected by the behaviour of their ‘neighbours’, or those about whom they may have information, whom they may know, or with whom they may interact on a regular basis. Individuals are more likely to file and to report their taxes when they believe that other individuals are also filing and reporting their taxes; conversely, when individuals believe that others are cheating on their taxes, they may well become cheaters themselves. We use experimental methods to test the role of such information about peer effects on compliance behaviour. In one treatment setting, we inform individuals about the frequency that their neighbours submit a tax return. In a second treatment setting, we inform them about the number of their neighbours who are audited, together with the penalties that they pay. In both cases, we examine the impact of information on filing behaviour and also on subsequent reporting behaviour. We find that providing information on whether one's neighbours are filing returns and/or reporting income has a statistically significant and economically large impact on individual filing and reporting decisions. However, this ‘neighbour’ information does not always improve compliance, depending on the exact content of the information.

  June 30, 2017   doi: 10.1111/1475-5890.12111   open full text
• The Political Economy of Fiscal Supervision and Budget Deficits: Evidence from Germany.
  Felix Rösel.
  Fiscal Studies. June 29, 2017
  In many federal countries, local governments run large deficits, even when fiscal supervision by state authorities is tight. I investigate the extent to which party alignment of governments and fiscal supervisors influences budget deficits. The data set includes 427 German local governments for the period 2000–2004. I exploit a period after a far‐reaching institutional reform that entirely re‐distributed political powers on both the government level and the fiscal supervisor level. The results do not show that party alignments of governments and supervisors (co‐partisanship) drive short‐term deficits. Instead, I find that the ideology of partisan governments and supervisors matters: left‐wing local governments run higher deficits than their right‐wing counterparts; left‐wing supervisors tolerate higher deficits than right‐wing supervisors. These findings imply that political independence for fiscal supervisors is recommended.

  June 29, 2017   doi: 10.1111/1475-5890.12131   open full text
• Removing Homeownership Bias in Taxation: The Distributional Effects of Including Net Imputed Rent in Taxable Income.
  Francesco Figari, Alari Paulus, Holly Sutherland, Panos Tsakloglou, Gerlinde Verbist, Francesca Zantomio.
  Fiscal Studies. June 29, 2017
  The income tax systems of most countries entail a favourable treatment of homeownership, compared to rental‐occupied housing. Such ‘homeownership bias’ and its consequences for a wide range of economic outcomes have long been recognised in the economic literature. Although a removal of the homeownership bias is generally advocated on efficiency grounds, its distributional implications are often neglected, especially in a cross‐country perspective. In this paper, we aim to fill this gap by investigating the first‐order effects, in terms of distribution of income and work incentives, of removing the income tax provisions favouring homeownership. We consider six European countries – Belgium, Germany, Greece, Italy, the Netherlands and the UK – that exhibit important variation in terms of income tax treatment of homeowners. Using the multi‐country tax benefit model EUROMOD, we analyse the distributional consequences of including net imputed rent in the taxable income definition that applies in each country, together with the removal of existing special tax treatments of incomes or expenses related to the main residence; thus, we provide a measure of the homeownership bias. We implement three tax policy scenarios. In the first, imputed rent is included in the taxable income of homeowners, while at the same time existing mortgage interest tax relief schemes and taxation of cadastral incomes are abolished. In the two further revenue‐neutral scenarios, the additional tax revenue raised through the taxation of imputed rent is redistributed to taxpayers, through either a tax rate reduction or a tax exemption increase. The results show how including net imputed rent in the tax base might affect inequality in each of the countries considered. Housing taxation appears to be a promising avenue for raising additional revenues, or lightening taxation of labour, with no inequality‐increasing side effects.

  June 29, 2017   doi: 10.1111/1475-5890.12105   open full text
• Changes in Income Distributions and the Role of Tax‐Benefit Policy During the Great Recession: An International Perspective.
  Olivier Bargain, Tim Callan, Karina Doorley, Claire Keane.
  Fiscal Studies. June 29, 2017
  In this paper, we examine the impact of the economic crisis and the policy reaction on inequality and relative poverty in four European countries: France, Germany, Ireland and the UK. The period examined, 2008–13, was one of great economic turmoil, yet it is unclear whether changes in inequality and poverty rates over this time period were mainly driven by changes in market income distributions or by tax‐benefit policy reforms. We disentangle these effects by producing counterfactual (‘no reform') scenarios using tax‐benefit microsimulation and representative household surveys for each country. For the first stage of the Great Recession, we find that the policy reaction contributed to stabilising or even decreasing inequality and relative poverty in the UK, France and, especially, Ireland. Market income changes nonetheless pushed up inequality and relative poverty in France. Relative poverty increased in Germany as a result of policy responses combined with market income changes. Subsequent policy reforms, in the later stage of the crisis, had markedly different cross‐country effects, decreasing overall poverty in France, increasing it in Ireland, and giving mixed effects for different subgroups in Germany and the UK.

  June 29, 2017   doi: 10.1111/1475-5890.12113   open full text
• Cross‐Country Spillovers from Fiscal Consolidations.
  Antoine Goujard.
  Fiscal Studies. May 29, 2017
  In the aftermath of the global financial crisis, many OECD countries adopted fiscal consolidation strategies to reduce their debt‐to‐GDP ratios. This paper investigates the effects of fiscal consolidation on trading partners’ growth through trade linkages. Using a measure of exogenous fiscal shocks in export markets, fiscal consolidation spillovers are found to slow down domestic growth and decrease employment. To the extent that fiscal consolidations are synchronised, fiscal policies have large spillover effects on output. Spillovers of fiscal consolidations on growth are found to be initially larger between countries belonging to currency unions, though this larger impact vanishes over the medium term. Larger spillovers of fiscal consolidation coincide with lower bilateral exports, higher bilateral imports and relative increases in unit labour costs in currency unions. Spillovers of fiscal consolidation are also found to be more detrimental to domestic growth during economic downturns in export markets.

  May 29, 2017   doi: 10.1111/1475-5890.12096   open full text
• The Puzzle of Persistently Negative Interest‐Rate–Growth Differentials: Financial Repression or Income Catch‐Up?
  Julio Escolano, Anna Shabunina, Jaejoon Woo.
  Fiscal Studies. May 29, 2017
  The interest‐rate–growth differential (IRGD) plays a critical role in determining the sustainability of government debt. Yet it is striking that IRGDs are correlated with income levels, and are generally negative in emerging and developing economies, which contradicts standard economic theory. Negative IRGDs constitute a powerful debt‐stabilising force, driving down debt ratios or keeping them stable even in the presence of persistent primary deficits. Motivated by the puzzling facts, this paper examines the IRGDs for a large panel of advanced and non‐advanced economies by utilising a newly assembled data set. The evidence shows that large negative IRGDs in emerging and developing economies are largely due to real interest rates well below market equilibrium – stemming from financial repression and captive and distorted markets – whereas the income catch‐up process plays a relatively modest role. Therefore, the IRGD in non‐advanced economies is likely to rise with financial market development and financial global integration, perhaps even before their GDP per capita converges to advanced‐economy levels.

  May 29, 2017   doi: 10.1111/1475-5890.12103   open full text
• Fiscal Decentralization and Local Economic Growth: Evidence from a Fiscal Reform in China.
  Guangrong Ma, Jie Mao.
  Fiscal Studies. May 27, 2017
  This paper uses a fiscal decentralization reform in China, namely the Province‐Managing‐County (PMC) reform, to examine the effects of fiscal decentralization on local economic growth. The PMC reform abolished the subordinate fiscal relationship between prefectures and counties and transferred much of the tax and spending authority from the prefecture to the county level. Exploiting a county‐level panel dataset over 2001–2011, we find that the reform has led to a significant increase in GDP growth rate. The effect is considerably more pronounced in regions with superior initial institutional quality. We also identify channels: the PMC reform induced county governments to exert lower tax burdens on firms and increase spending on infrastructure construction. This article is protected by copyright. All rights reserved

  May 27, 2017   doi: 10.1111/j.1475-5890.2017.12148   open full text
• Cheaper, Greener and More Efficient: Rationalising UK Carbon Prices.
  Arun Advani, George Stoye.
  Fiscal Studies. May 24, 2017
  Current UK energy use policies, which primarily aim to reduce carbon emissions, provide abatement incentives that vary by user and fuel, creating inefficiency. Distributional concerns are often given as a justification for the lower carbon price faced by households, but there is little rationale for carbon prices associated with the use of gas to be lower than those for electricity. We consider reforms that raise carbon prices faced by households and reduce the variation in carbon prices across gas and electricity use, improving the efficiency of emissions reduction. We show that the revenue raised from these reforms can be recycled in a way that ameliorates some of the distributional concerns. Whilst such recycling is not able to protect all poorer households, existing policy also makes distributional trade‐offs, but does so in an opaque and inefficient way.

  May 24, 2017   doi: 10.1111/1475-5890.12097   open full text
• Factors Associated with the Presence of Domestic Energy Efficiency Measures in England.
  Andrew Leicester, George Stoye.
  Fiscal Studies. May 24, 2017
  We use cross‐sectional household survey data in England between 2002–03 and 2010–11 to explore potential barriers to ownership of three common energy efficiency measures (loft insulation, cavity wall insulation and full double glazing) in residential properties. There is little compelling evidence that credit constraints, as proxied by income, education or means‐tested benefit receipt, inhibit ownership. Failures in landlord–tenant relationships, though, are a key issue: private renters are significantly less likely to have the measures in their homes than other tenure groups. More broadly, it is the characteristics of the dwelling rather than of the occupants which are most strongly related to the presence of the measures. However, relatively few factors are consistently associated with lower ownership rates over time and efficiency measures, suggesting that policies to encourage increased take‐up may need to be tailored to the specific measure.

  May 24, 2017   doi: 10.1111/1475-5890.12095   open full text
• Interaction of Government Tiers and Central Banks in a Federation: An Empirical Test.
  Peter Claeys, Raul Ramos, Jordi Suriñach.
  Fiscal Studies. May 24, 2017
  Fiscal rules are necessary to protect monetary policy from the consequences of unsustainable or active fiscal policy for inflation. Monetary unions, such as the Economic and Monetary Union (EMU), require even stronger fiscal rules to avoid free riding by regional fiscal authorities on the common monetary policy. By contrast, in a fiscal federation, the federal government internalises the effect of active regional policies on the overall price level. Federal fiscal policy contributes to price stability either by enforcing fiscal rules or by adjusting its own stance. Following Canzoneri, Cumby and Diba (2001), we test whether federal and regional governments in Germany behave in an active or passive way. We find evidence of a spillover effect of unsustainable policies on other regions. The German federal government offsets the effect on the price level by running passive policies. The Bundesbank's prime objective of price stability is therefore endorsed by fiscal policy. The results have implications for the regulation of fiscal policies in the EMU.

  May 24, 2017   doi: 10.1111/1475-5890.12104   open full text
• Childcare Assistance: Are Subsidies or Tax Credits Better?
  Xiaodong Gong, Robert Breunig.
  Fiscal Studies. February 23, 2017
  We evaluate price subsidies and tax credits for childcare. We focus on partnered women's labour supply, household income and welfare, demand for childcare and government expenditure. Using Australian data, we estimate a joint, discrete structural model of labour supply and childcare demand. We introduce two methodological innovations – a more flexible quantity constraint that total formal and informal childcare hours are at least as large as the mother's labour supply and the explicit inclusion of maternal childcare in the utility function as a proxy for child development. We find that tax credits are more effective than subsidies in terms of increasing average hours worked and household income. However, tax credits disproportionately benefit wealthier and more educated women. Price subsidies, while less efficient, have positive redistributional effects.

  February 23, 2017   doi: 10.1111/1475-5890.12085   open full text
• Allocating Grant to the UK's Devolved Territories by Needs Assessment: Lessons from School Funding Formulae in England and Scotland.
  David King, David Eiser.
  Fiscal Studies. February 23, 2017
  The UK's devolved governments (DGs) receive block grants to finance almost all their expenditure. The Barnett formula used to calculate these grants is often criticised because it does not consider the DGs’ spending needs. However, the feasibility of allocating block grants by needs assessment is often questioned, given the contestability of spending needs. This paper compares the formula used within England to assess the education spending needs of local authorities there with the equivalent Scottish formula, by using each formula in turn to calculate the relative spending needs of the UK territories. The rationale is to consider how similar the two formulae are in how they estimate the territories’ relative spending needs for education, a major responsibility of the DGs. The results show that the English and Scottish education allocation formulae produce similar estimates of the territories’ relative education spending needs. This suggests that it may be more feasible to allocate education resources to the UK's devolved territories based on needs assessment than some have suggested. The results also suggest some inequity in current patterns of education spending across the UK.

  February 23, 2017   doi: 10.1111/1475-5890.12088   open full text
• Intergovernmental Fiscal Transfers and Local Incentives and Responses: The Case of Indonesia.
  Blane D. Lewis, Paul Smoke.
  Fiscal Studies. February 14, 2017
  Indonesian policymakers are convinced that a number of perverse incentives are embedded in their system of intergovernmental transfers. Officials in countries throughout the developing world have similar views about their own intergovernmental frameworks. In Indonesia, perverse incentives are thought to negatively influence a wide range of local government fiscal behaviours, including as regards own‐source revenues, spending and savings. An empirical analysis of the local government response to transfers, however, offers only mixed support for the existence and strength of the presumed incentives. Overall, the findings in this paper highlight the benefits to central governments of rigorously examining assumed perverse incentives in their intergovernmental frameworks before embarking on attempts to expunge them.

  February 14, 2017   doi: 10.1111/1475-5890.12080   open full text
• The Fiscal Decentralisation and Economic Growth Nexus Revisited.
  Jenny E. Ligthart, Peter Oudheusden.
  Fiscal Studies. February 14, 2017
  This paper addresses two challenges that the fiscal decentralisation and economic growth nexus faces – namely, endogeneity problems and inaccurate measurement of fiscal decentralisation. We introduce novel instrumental variables based on common legal system origin, common federal system, geographical position and relative country size. The positive relationship between fiscal decentralisation and economic growth that we find remains valid when using these instrumental variables. Using fiscal decentralisation measures that better reflect the autonomy of subnational governments changes this relationship. This finding, however, is the result of the accompanying changes in the sample rather than the use of these alternative measures themselves.

  February 14, 2017   doi: 10.1111/1475-5890.12099   open full text
• The Link between Family Background and Later Lifetime Income: How Does the UK Compare with Other Countries?
  John Jerrim.
  Fiscal Studies. December 05, 2016
  The link between family background and labour market outcomes is an issue of great academic, social and political concern. It is frequently claimed that such intergenerational associations are stronger in Britain than in other countries. But is this really true? I investigate this issue by estimating the link between parental education and later lifetime income, using three cross‐nationally comparable data sets covering more than 30 countries. My results suggest that the UK is broadly in the middle of the cross‐country rankings, with intergenerational associations notably stronger than in Scandinavia but weaker than in eastern Europe. Overall, I find limited support for claims that family background is a greater barrier to economic success in Britain than in other parts of the developed world.

  December 05, 2016   doi: 10.1111/1475-5890.12081   open full text
• Out‐of‐Pocket Medical Expenditures in the United States: Evidence from the Health and Retirement Study.
  Sean Fahle, Kathleen McGarry, Jonathan Skinner.
  Fiscal Studies. November 21, 2016
  We use data from the Health and Retirement Study (HRS) to document the distribution of out‐of‐pocket medical spending among individuals aged 55 and over in the US. The HRS data permit us to examine out‐of‐pocket spending close to the end of life and to analyse the components of spending in more detail than has been done in previous studies. We find that spending risk rises sharply at older ages and near the end of life. While the median individual spent $6,328 out‐of‐pocket in the last year of life, 5 per cent were reported to have spent over $62,040. Our results also indicate that out‐of‐pocket spending is highly concentrated, with the top 10 per cent of spenders accounting for 42 per cent of all spending, and persistent, even over periods spanning many years. Finally, while certain categories of spending are very responsive to income and wealth, we do not find overall spending to be highly concentrated along these dimensions. Viewed within the international context, our results suggest that the fraction of households facing very high out‐of‐pocket spending is substantially greater in the US than in other developed countries.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12126   open full text
• Long‐Term Health Spending Persistence among the Privately Insured in the US.
  Richard A. Hirth, Sebastian Calónico, Teresa B. Gibson, Helen Levy, Jeffrey Smith, Anup Das.
  Fiscal Studies. November 21, 2016
  There is little current information regarding the long‐term persistence of health spending in the United States, in particular among the population aged under 65 (pre‐Medicare eligibility). We describe and model the extent of persistence over a six‐year period (2003–08) using medical and pharmacy claims for over 3 million employees, retirees and dependants derived from the Truven Health MarketScan database. Overall, substantial persistence in spending exists, particularly at the extremes of the distribution and for pharmaceutical spending. Error components models are estimated to separate transient from persistent variation in spending, and dynamic probit models are estimated to assess the predictive power of demographic and co‐morbid conditions and prior high spending in determining the likelihood of future high spending. A better understanding of the persistence of health spending can inform the selection and evaluation of appropriate interventions to address high costs, and can help forecast the likelihood and severity of adverse selection in public and private programmes.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12120   open full text
• Medical Spending of the US Elderly.
  Mariacristina Nardi, Eric French, John Bailey Jones, Jeremy McCauley.
  Fiscal Studies. November 21, 2016
  We use data from the Medicare Current Beneficiary Survey (MCBS) to document the medical spending of Americans aged 65 and older. We find that medical expenses more than double between ages 70 and 90 and that they are very concentrated: the top 10 per cent of all spenders are responsible for 52 per cent of medical spending in a given year. In addition, those currently experiencing either very low or very high medical expenses are likely to find themselves in the same position in the future. We also find that the poor consume more medical goods and services than the rich and have a much larger share of their expenses covered by the government. Overall, the government pays for over 65 per cent of the elderly's medical expenses. Despite this, the expenses that remain after government transfers are even more concentrated among a small group of people. Thus, government health insurance, while potentially very valuable, is far from complete. Finally, while medical expenses before death can be large, on average they constitute only a small fraction of total spending, both in the aggregate and over the life cycle. Hence, medical expenses before death do not appear to be an important driver of the high and increasing medical spending found in the US.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12106   open full text
• Medical Spending in the US: Facts from the Medical Expenditure Panel Survey Data Set.
  Svetlana Pashchenko, Ponpoje Porapakkarm.
  Fiscal Studies. November 21, 2016
  We document facts about the US population's medical spending using the Medical Expenditure Panel Survey data set. We find that for the entire population, around 44 per cent of total medical spending is paid by private insurance, but there is a substantial difference by age in terms of financing medical care: for working‐age adults (25 to 64 years old), private insurance covers around 57 per cent of total medical spending, whereas for the elderly (aged 65 or over), the largest payer is the government, which covers 65 per cent of the total. Inpatient hospital care accounts for a third of aggregate medical expenditures. Medical spending is highly concentrated: the top 5 per cent of spenders account for more than half of the total. An even higher concentration is observed with hospital spending, where the top 5 per cent of spenders contribute around 80 per cent. The concentration in medical spending decreases with age: the Gini coefficient of total medical spending is 0.75 for people between ages 25 and 64 and 0.63 for people aged 65 or over. We find that the average medical spending of people in the bottom income quintile is higher than that of people in the top income quintile for all age groups. In terms of persistence of medical spending, we find that the correlation of medical expenditure in two consecutive years is 0.36. When persistence is measured by quintile of the medical spending distribution, the medical spending of people in the bottom and top quintiles has higher persistence than that of other groups.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12100   open full text
• Recent Trends in Taiwanese Medical Spending.
  Stacey H. Chen, Hongwei Chuang.
  Fiscal Studies. November 21, 2016
  Since the creation of National Health Insurance (NHI) in 1995, Taiwan's medical spending has been increasing rapidly, as has been the case in most countries worldwide. This paper follows international standards in documenting recent trends in Taiwan's medical spending by category, relying on official statistics, Surveys of Family Income and Expenditure (SFIE) data and administrative reimbursement panel data from the NHI Universal Database (NHIUD). Two findings are noteworthy. First, we find a rapidly widening gap since 1996 between rich and poor in terms of out‐of‐pocket payments and those by private health insurance; meanwhile, the gap between them in terms of NHI expenditure has remained roughly constant. This trend can be attributed mainly to a positive income gradient in personal health care expenditure among elderly individuals (aged 65 or older). Second, end‐of‐life hospital spending is large in both magnitude and proportion. Average end‐of‐life hospital spending is more than 30 times average hospital spending by the total population, and it accounts for 15.9 per cent of total hospital care expenditure (or 5.0 per cent of overall medical spending), even though the population near death accounts for only 0.51 per cent of the overall population. Two‐thirds of end‐of‐life hospital spending is on the elderly, who also constitute two‐thirds of the population near death. For both the elderly and working‐age adults, the share of end‐of‐life hospital spending strikingly aligns with the share of deaths.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12116   open full text
• The Concentration of Hospital‐Based Medical Spending: Evidence from Canada.
  Aurélie Côté‐Sergent, Damien Échevin, Pierre‐Carl Michaud.
  Fiscal Studies. November 21, 2016
  In this paper, we present evidence on the concentration of hospital‐based medical spending in Canada. We use longitudinal administrative data from the province of Quebec to document how medical spending is concentrated cross‐sectionally, over time and near the end of life when death occurs in hospital. Average expenditures rise rapidly with age, starting around the age of 50, and are concentrated in a small fraction of high‐cost users. For example, the top 1 per cent of men and women in terms of hospital spending account for 52.9 per cent and 49.8 per cent of total spending respectively. Persistence among high users is quite low. Fewer than 19.7 per cent of those in the top quintile of hospital spending stay in the same quintile the following year. Finally, hospital spending among those in their last year of life and who die in hospital can account for 11.3 per cent of total hospital spending in the population.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12125   open full text
• Spending on Health Care in the Netherlands: Not Going So Dutch.
  Pieter Bakx, Owen O'Donnell, Eddy Doorslaer.
  Fiscal Studies. November 21, 2016
  The Netherlands is among the top spenders on health in the OECD. We document the life‐cycle profile, concentration and persistence of this expenditure using claims data covering both curative and long‐term care expenses for the full Dutch population. Spending on health care is strongly concentrated: the 1 per cent of individuals with the highest levels of expenditure account for one‐quarter of the aggregate in any one year. Averaged over three years, the top 1 per cent still account for more than a fifth of the total, indicating a very high degree of persistence in the largest expenses. Spending on long‐term care, which amounts to one‐third of all expenditure on health care, is even more concentrated: the top 1 per cent account for more than half of total spending on this type of care. Average expenditure rises steeply with age and even more so with proximity to death. Spending on individuals in their last year of life absorbs one‐tenth of aggregate health care expenditure. In a given year, spending on health care is highly skewed toward individuals with lower incomes. Average expenditure on the poorest fifth is more than three times that on the richest fifth.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12114   open full text
• Medical Spending in Japan: An Analysis Using Administrative Data from a Citizen's Health Insurance Plan.
  Yoko Ibuka, Stacey H. Chen, Yui Ohtsu, Nobuyuki Izumida.
  Fiscal Studies. November 21, 2016
  Health care spending growth in Japan has accelerated in recent years, unlike in most OECD countries. It is thus important to characterise the structure of recent medical spending using individual‐level data. We use medical claim bill data from a citizen's health insurance plan in Japan to examine the concentration in and persistence of medical spending. We find that medical spending is disproportionately distributed across individuals, with the top 10 per cent of spenders responsible for over 60 per cent of total expenditures. We also find a high correlation in spending over time: the top 20 per cent of spenders have a probability of over 60 per cent of remaining in the same rank in the following year. Further, medical spending is more concentrated among those aged 0–64 years than among the older age group. The results also show a difference in income gradient of health expenditures across age groups. Specifically, individuals aged 25–64 in low‐income families spend more on medical care than those in high‐income families, whereas there is no clear association between income and health expenditures among the elderly. Finally, consistent with previous studies, we find increased medical expenses in the year of death, accounting for 17 per cent of total expenditures among those aged 65 and over.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12110   open full text
• Skewed, Persistent and High before Death: Medical Spending in Germany.
  Martin Karlsson, Tobias J. Klein, Nicolas R. Ziebarth.
  Fiscal Studies. November 21, 2016
  We use claims panel data from a big German private health insurer to provide detailed individual‐level evidence on medical spending between 2005 and 2011. This includes evidence on the distribution of medical spending, the dependence of medical spending on age and other demographic characteristics, its persistence, and how medical spending evolves in the years before death. Our main findings are that health care spending more than doubles between ages 50 and 80 and that spending is very concentrated: the top 10 per cent of all spenders are responsible for 53 per cent of all medical spending in a given year. There is a 50 per cent probability that individual expenditures lie in the same quintile of the distribution after five years, for both very‐high‐ and very‐low‐cost individuals. Medical spending in the year of death is six times higher for the deceased than for everybody else in that year and accounts for 7.9 per cent of lifetime spending. Females use more office‐based care and have higher spending at younger ages, whereas males have higher spending at older ages, particularly for hospital care, and die younger. The presentation of these empirical facts is framed by an institutional discussion of the German health care system, a comparison between publicly‐ and privately‐insured individuals, and a discussion of medical spending trends in aggregate‐level data.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12108   open full text
• Medical Spending in France: Concentration, Persistence and Evolution before Death.
  Christelle Gastaldi‐Ménager, Pierre‐Yves Geoffard, Grégoire de Lagasnerie.
  Fiscal Studies. November 21, 2016
  This paper studies medical spending in France from three perspectives: concentration, persistence, and evolution before death. We use claims data from a representative sample of over 500,000 individuals covered by the National Health insurance scheme, from 2008 to 2013. These data contain individual‐level information (gender, age, date of death), some clinical information and detailed information on each medical treatment (inpatient, outpatient, drugs). Medical spending in France is highly concentrated. In 2013, 10 per cent of the population accounted for 62 per cent of all health care spending. In addition, the concentration of medical expenditure increased between 2008 and 2013. The concentration of insurance reimbursement, however, is even greater, indicating that French social health insurance redistributes income from the healthy to the unhealthy. The serial correlation of health care expenditures appears relatively high between adjacent years, but not surprisingly decreases over time. Decedents have high medical expenditures – on average, eight times those of survivors – and resources devoted to health care in the last three years of life represent, on average, 22 per cent of lifetime medical spending. Decedents’ expenditures decrease with age after 55 years old.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12107   open full text
• Medical Spending in Denmark.
  Bent Jesper Christensen, Mette Gørtz, Malene Kallestrup‐Lamb.
  Fiscal Studies. November 21, 2016
  Using full population longitudinal data from merged administrative registers for Denmark, we document that medical spending is highly concentrated in the population and is persistent through time at the individual level. In addition, we provide overviews of institutional details of the Danish health care system, aggregate trends in health care expenditures and the relevant register data. Nearly two‐thirds of expenditures are on hospitals and one‐fifth on long‐term care, with the remainder roughly equally split between primary care and prescription drugs. Health expenditures are higher for men than for women from ages 61 to 78, and otherwise higher for women. Between ages 50 and 80, hospital expenditures more than triple for men while more than doubling for women, and total health expenditures quadruple for men while tripling for women. The top 1 per cent of all spenders account for nearly one‐quarter of total spending in a given year, and averaging over three years only reduces this fraction to one‐fifth. The top 20 per cent of spenders in a given year are more likely to remain in that category two years later than not. The poorest fifth of the population aged 25 and above are responsible for more than twice as much spending on health as the richest, and this reverse social gradient is even stronger for long‐term care and is stronger among men than among women, especially in hospital expenses. Expenditures in the year (over the three years) before death are nearly 12 times (respectively nine times) higher than average, but nevertheless are only 11 per cent (respectively a quarter) of lifetime spending. Out‐of‐pocket expenses on prescription drugs only amount to 3 per cent of total health expenditures and are less concentrated than these.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12119   open full text
• Public Hospital Spending in England: Evidence from National Health Service Administrative Records.
  Elaine Kelly, George Stoye, Marcos Vera‐Hernández.
  Fiscal Studies. November 21, 2016
  Health spending per capita in England has almost doubled since 1997, yet relatively little is known about how that spending is distributed across the population. This paper uses administrative National Health Service (NHS) hospital records to examine key features of public hospital spending in England. We describe how costs vary across the life cycle, and the concentration of spending among people and over time. We find that costs per person start to increase after age 50 and escalate after age 70. Spending is highly concentrated in a small section of the population, but the degree of concentration is lower for older age groups. For those aged 25 and under, a third of all hospital spending is accounted for by 1 per cent of the population under 25 and a fifth of spending is accounted for by 1 per cent of patients under 25. For those aged 65 and over, these figures fall to 22 and 13 per cent, respectively. There is persistence in spending over time, with patients with high spending more likely to have spending in subsequent years and those with zero expenditures more likely to remain out of hospital.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12101   open full text
• Medical Spending and Hospital Inpatient Care in England: An Analysis over Time.
  María José Aragón, Martin Chalkley, Nigel Rice.
  Fiscal Studies. November 21, 2016
  Health care in England is predominantly provided free at the point of service through the publicly‐funded National Health Service (NHS). Total NHS expenditure, which has risen in real terms by an average of 3.7 per cent per annum since the inception of the NHS in 1948, constituted 7.9 per cent of GDP in 2012. This paper presents a summary of the trends in medical expenditure in England together with, using detailed administrative data, an analysis of the growth over 15 years of expenditure and activity in hospital inpatient health care, which represents around 20–25 per cent of all NHS expenditure. We document the coincidence of observed trends in expenditure with reported activity, morbidity and the proximity of individuals to death. We find that: (i) expenditure for both elective and emergency inpatient care broadly follows activity, so that expenditure is mostly driven by activity rather than unit costs; (ii) expenditure is concentrated in individuals with multiple diseases, so that the prevalence and identification of complex medical conditions are important drivers of expenditure; and (iii) health care activity rises substantially for individuals in the period before death, so that expenditure is driven substantially by mortality in the population. Taken together, these findings indicate that this element of health care expenditure in England has been substantially driven by the underlying morbidity and age of the population in conjunction with improving health care technology.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12102   open full text
• Socio‐Economic Inequalities in Health Care in England.
  Richard Cookson, Carol Propper, Miqdad Asaria, Rosalind Raine.
  Fiscal Studies. November 21, 2016
  This paper reviews what is known about socio‐economic inequalities in health care in England, with particular attention to inequalities relative to need that may be considered unfair (‘inequities’). We call inequalities of 5 per cent or less between the most and least deprived socio‐economic quintile groups ‘slight’, inequalities of 5–15 per cent ‘moderate’ and inequalities of more than 15 per cent ‘substantial’. Overall public health care expenditure is substantially concentrated on poorer people. At any given age, poorer people are more likely to see their family doctor, have a public outpatient appointment, visit accident and emergency, and stay in hospital for publicly‐funded inpatient treatment. After allowing for current self‐assessed health and morbidity, there is slight pro‐rich inequity in combined public and private medical specialist visits but not in family doctor visits. There are also slight pro‐rich inequities in overall indicators of clinical process quality and patient experience from public health care, substantial pro‐rich inequalities in bereaved people's experiences of health and social care for recently deceased relatives, and mostly slight but occasionally substantial pro‐rich inequities in the use of preventive care (for example, dental check‐ups, eye tests, screening and vaccination) and a few specific treatments (for example, hip and knee replacement). Studies of population health care outcomes (for example, avoidable emergency hospitalisation) find substantial pro‐rich inequality after adjusting for age and sex only. These findings are all consistent with a broad economic framework that sees health care as just one input into the production of health over the life course, alongside many other socio‐economically patterned inputs including environmental factors (for example, living and working conditions), consumption (for example, diet and smoking), self‐care (for example, seeking medical information) and informal care (for example, support from family and friends).

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12109   open full text
• Health, Disability and Mortality Differences at Older Ages between the US and England.
  James Banks, Soumaya Keynes, James P. Smith.
  Fiscal Studies. November 21, 2016
  This paper examines health status differences between England and the United States, with an emphasis on the implications of any health disparities for health care cost differences between the two countries. We first document health status differences in disease prevalence, disability, mortality and co‐morbidity. We find higher disease prevalence in the US than in England (confirming previous findings) but much smaller differences between the two countries in disability and mortality. We attribute the smaller differences in disability to the fact that disability measures rely primarily on subjective questions on experiencing disabilities, which are reported differently in the two countries. Smaller mortality differences are most likely due to a combination of earlier disease diagnosis and more effective disease treatment in the US. Co‐morbidity is a common and important dimension of disease in both countries that is often neglected in scientific papers, especially by economists. We find, however, that disease prevalence has little implication for out‐of‐pocket health care costs in the US except for relatively few individuals with particular diseases. Instead, costs are more associated with incidence than prevalence and with those who are going to die in the next year or two. Co‐morbidity is associated with higher costs but even this association is limited to a relatively small fraction of people who are co‐morbid.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12115   open full text
• Medical Spending around the Developed World.
  Eric French, Elaine Kelly.
  Fiscal Studies. November 21, 2016
  We bring together estimates of patterns of medical spending in all nine countries considered in this issue – Canada, Denmark, England, France, Germany, Japan, the Netherlands, Taiwan and the United States. Comparing estimates across countries reveals three principal findings. First, medical spending in the calendar year of death accounts for 5–10 per cent of aggregate medical spending for the whole population and 9–20 per cent for those aged 65 and over. Spending in Taiwan is a little higher, at 16 per cent for the whole population and 29 per cent for the over‐65s. Second, there is a mostly negative correlation between patient income and medical spending within all countries, except Japan and Taiwan for the over‐65s and Taiwan and the US for the under‐25s. Third, medical spending in all countries is concentrated in a small share of the population and is persistent over time, although the degree of concentration and persistence varies across countries.

  November 21, 2016   doi: 10.1111/j.1475-5890.2016.12127   open full text
• Heterogeneity in Economic Shocks and Household Spending in the US.
  Sebastian Devlin‐Foltz, John Sabelhaus.
  Fiscal Studies. March 31, 2016
  Large swings in aggregate household sector spending, especially for big‐ticket items such as cars and housing, have been a dominant feature of the macroeconomic landscape in the past two decades. Income and wealth inequality increased over the same period, leading some to suggest the two phenomena are interconnected. Indeed, there is supporting evidence for the idea that heterogeneity in economic shocks and spending are connected, most notably in studies using local‐area geography as the unit of analysis. The Survey of Consumer Finances (SCF) provides a household‐level perspective on changes in wealth, income and spending across different types of families. The SCF confirms that inequality is indeed increasing in recent decades, and the data provide support for the proposition that shocks to income and wealth are indeed related to large swings in spending across and within birth cohorts. However, the economic shocks associated with the Great Recession and changes in spending and debt to income ratios are widespread, and inconsistent with a narrow focus on the experiences and changes in behaviour of particular (especially low‐ and modest‐income) households.

  March 31, 2016   doi: 10.1111/j.1475-5890.2016.12082   open full text
• The Bank of England / NMG Survey of Household Finances.
  Gareth Anderson, Philip Bunn, Alice Pugh, Arzu Uluc.
  Fiscal Studies. March 31, 2016
  Every year since 2004, the Bank of England has commissioned NMG Consulting to carry out a survey on household finances. This paper describes the NMG Survey, its methodology, and its advantages and disadvantages relative to other surveys. The NMG Survey is useful in providing a timelier guide to developments in the distribution of household balance sheets than other surveys, it appears better at measuring financial distress, and it includes questions on topical policy issues that are often not available in other surveys. A drawback of the NMG Survey is that there may be a greater risk of selection into the survey based on unobservable characteristics than is the case for some other household surveys.

  March 31, 2016   doi: 10.1111/j.1475-5890.2016.12091   open full text
• Comparing Retirement Wealth Trajectories on Both Sides of the Pond.
  Richard Blundell, Rowena Crawford, Eric French, Gemma Tetlow.
  Fiscal Studies. March 31, 2016
  We use comparable data from the US and England to examine similarities and differences in the level and trajectories of assets among households aged 70 and over. We find that in the US assets on average decline gradually with age, while in England older households actually accumulate wealth. These differences appear to be driven largely, though not entirely, by housing wealth: over the period we consider, house price growth drove increases in housing wealth in England that more than offset the slow drawdown of non‐housing wealth. This suggests the illiquid nature of housing is likely to be an important factor in explaining wealth drawdown at older ages. We also consider the potential importance of bequest motives and savings to insure against the risk of medical and long‐term care expenses.

  March 31, 2016   doi: 10.1111/j.1475-5890.2016.12086   open full text
• Changes in the Distribution of After‐Tax Wealth in the US: Has Income Tax Policy Increased Wealth Inequality?
  Adam Looney, Kevin B. Moore.
  Fiscal Studies. March 31, 2016
  A substantial share of the wealth of Americans is held in tax‐deferred form such as in retirement accounts or as unrealised capital gains. Most data and statistics on assets and wealth are reported on a pre‐tax basis, but pre‐tax values include an implicit tax liability and may not provide as accurate a measure of the financial position or material well‐being of families. In this paper, we describe the distribution of tax‐deferred assets in the Survey of Consumer Finances (SCF) from 1989 to 2013, provide new estimates of the income tax liabilities implicit in those assets, and present new statistics on the level and distribution of after‐tax net worth. The results of our analysis suggest that, relative to published statistics on pre‐tax net worth, the distribution of after‐tax wealth is slightly less concentrated in the early years of our sample period, but the effectiveness of the income tax system in reducing wealth inequality has decreased during the last decade. We find the reduction in the long‐term capital gains rate is the primary reason for the muted effectiveness of the current income tax system in reducing wealth inequality.

  March 31, 2016   doi: 10.1111/j.1475-5890.2016.12089   open full text
• Lifetime Receipt of Inheritances and the Distribution of Wealth in England.
  Rowena Crawford, Andrew Hood.
  Fiscal Studies. March 31, 2016
  We investigate the impact of inheritances and gifts received on the distribution of wealth. Whereas previous work has looked only at marketable wealth, we consider broader measures of wealth including state and private pensions. We find that once pension wealth is included, inheritances and gifts no longer have an equalising impact on the distribution of wealth. Without pension wealth, including wealth transfers reduces the Gini coefficient for wealth from 0.57 to 0.52. With pension wealth, the impact is negligible. We argue that this latter effect gives a better indication of the impact of inheritances on the distribution of lifetime income.

  March 31, 2016   doi: 10.1111/j.1475-5890.2016.12087   open full text
• Household Wealth in Great Britain: Distribution, Composition and Changes 2006–12.
  Rowena Crawford, Dave Innes, Cormac O'Dea.
  Fiscal Studies. March 31, 2016
  For many years, survey data on household wealth have been somewhat limited, but the situation is improving in the UK and internationally. This paper uses the new Wealth and Assets Survey (WAS) to document some key features of the distribution of household wealth in Great Britain. We quantify the extent of inequality in total wealth and in its broad components (financial wealth, housing wealth and pension wealth). Exploiting the fact that WAS is a longitudinal survey, we show trajectories of wealth and its components over the period 2006 to 2012 for different birth cohorts. Total wealth on average increased in real terms over this period for working‐age households and fell for retirement‐age households. However, wealth held outside pensions fell on average over this period for all except the youngest cohort.

  March 31, 2016   doi: 10.1111/j.1475-5890.2016.12083   open full text
• The Challenge of Measuring UK Wealth Inequality in the 2000s.
  Facundo Alvaredo, Anthony B. Atkinson, Salvatore Morelli.
  Fiscal Studies. March 31, 2016
  The concentration of personal wealth is now receiving a great deal of attention – after having been neglected for many years. One reason is the growing recognition that, in seeking explanations for rising income inequality, we need to look not only at wages and earned income but also at income from capital, particularly at the top of the distribution. In this paper, we use evidence from existing data sources to attempt to answer three questions: (i) What is the share of total personal wealth that is owned by the top 1 per cent, or the top 0.1 per cent? (ii) Is wealth much more unequally distributed than income? (iii) Is the concentration of wealth at the top increasing over time? The main conclusion of the paper is that the evidence about the UK concentration of wealth post‐2000 is seriously incomplete and significant investment in a variety of sources is necessary if we are to provide satisfactory answers to the three questions.

  March 31, 2016   doi: 10.1111/j.1475-5890.2016.12084   open full text
• Household Wealth Data and Public Policy.
  Thomas F. Crossley, Cormac O'Dea.
  Fiscal Studies. March 31, 2016
  There is no abstract available for this paper.

  March 31, 2016   doi: 10.1111/j.1475-5890.2016.12090   open full text
• Reducing High Public Debt Ratios: Lessons from UK Experience*.
  Nicholas Crafts.
  Fiscal Studies. December 23, 2015
  This paper examines contrasting experiences of the United Kingdom in addressing high public debt to GDP ratios following major wars. A clear message is that interest rate / growth rate differentials were more important than primary budget surpluses for the different outcomes. The debt to GDP ratio fell very rapidly under financial repression following the Second World War but remained stubbornly high despite large budget surpluses with price deflation after the First World War. Implications for policymakers today are that averting price deflation is a high priority and that supply‐side policies that raise growth could play an important part in debt reduction.

  December 23, 2015   doi: 10.1111/j.1475-5890.2015.12064   open full text
• A One‐Off Wealth Levy? Assessing the Pros and Cons and the Importance of Credibility*.
  Gerhard Kempkes, Nikolai Stähler.
  Fiscal Studies. December 23, 2015
  From an economic perspective, imposing a credibly one‐off net wealth levy in times of crisis as a tool to ward off a national emergency appears to be advantageous as, in an ideal world, this would not distort market players’ allocation decisions. However, in practice, charging such a levy may give rise to distortions and unwanted effects on the real economy. Credibility that the levy will be imposed as a once‐only measure is key to ensuring that harmful distortions in the allocation of resources are kept to a minimum. This paper confirms this using an analysis based on a dynamic stochastic general equilibrium (DSGE) model. In practice, while a government cannot guarantee that such a measure will be taken once only, it can contribute to the credibility of this in a number of ways. First, the country's future ‘business model’ must become apparent; second, there has to be a basic level of confidence in the government and a firm belief that the budgetary imbalances were not actively caused by the state – at least not by the government currently in power; third, a verifiable outlook of sustainable public finances must be in place; and fourth, the political costs of a repeat levy must be high. This paper also discusses the potential impact of alternative model set‐ups as well as some practical implementation problems.

  December 23, 2015   doi: 10.1111/j.1475-5890.2015.12062   open full text
• Anti‐Smoking Policies and Smoker Well‐Being: Evidence from Britain.
  Andrew Leicester, Peter Levell.
  Fiscal Studies. October 12, 2015
  Anti‐smoking policies can in theory make smokers better off, by helping smokers with time‐inconsistent preferences commit to giving up or reducing the amount they smoke. We use almost 20 years of British individual‐level panel data to explore the impact on self‐reported psychological well‐being of two policy interventions: large increases in tobacco excise taxes and bans on smoking in public places. We use a difference‐in‐differences approach to compare the effects on well‐being for likely smokers and non‐smokers. We find robust evidence that increases in tobacco taxes raise the relative well‐being of likely smokers. Exploiting regional variation in the timing of the smoking ban across Britain, we find no evidence that it raised smoker well‐being. Our findings give some support to the view that tobacco taxes are at least partly justifiable because of the benefits they have for smokers themselves.

  October 12, 2015   doi: 10.1111/j.1475-5890.2015.12063   open full text
• Electoral Competition as a Determinant of Fiscal Decentralisation*.
  Mario Jametti, Marcelin Joanis.
  Fiscal Studies. October 08, 2015
  This paper estimates the effect of government electoral strength on fiscal decentralisation. Using a panel of democracies, we find that greater government electoral strength at the central level, measured by the share of seats held by the governing party in the legislature, reduces expenditure centralisation. Revenue centralisation is less affected by electoral strength.

  October 08, 2015   doi: 10.1111/j.1475-5890.2015.12061   open full text
• Impacts of Immigration on an Ageing Welfare State: An Applied General Equilibrium Model for France.
  Xavier Chojnicki, Lionel Ragot.
  Fiscal Studies. October 08, 2015
  Immigration is often seen as an instrument of adaptation for ageing countries. In this paper, we evaluate, using a dynamic general equilibrium model, the contribution of migration policy in reducing the tax burden associated with the ageing population in France. Four alternative scenarios, compared with a baseline scenario based on official projections, are simulated with the aim of quantifying the effects of immigration on French social protection finances. We show that the age and, to a lesser extent, the skill structure of immigrants are the key features that mainly determine the effects on social protection finances. Overall, these effects are all the more positive in the short to medium term if the migration policy is selective (in favour of more skilled workers). In the long term, the beneficial effects of a selective policy may disappear. But whatever the degree of selectivity of the migration policy, the financial gains from higher consequent migration flows are relatively moderate compared with the demographic changes implied by ageing.

  October 08, 2015   doi: 10.1111/j.1475-5890.2015.12059   open full text
• US Fiscal Sustainability and the Causality Relationship between Government Expenditures and Revenues: A New Approach Based on Quantile Cointegration.
  Pei‐Fen Chen.
  Fiscal Studies. October 08, 2015
  This paper first aims to reinvestigate the issue of US fiscal sustainability by using the quantile cointegration approach proposed by Xiao (2009 and 2012). Our empirical evidence indicates a quantile‐dependent cointegrating relationship between government expenditures and revenues. In addition, this paper examines the long‐run causality relationship between expenditures and revenues by using the vector error‐correction (VEC) model with coefficients based on the different quantiles. Findings from the long‐run Granger‐causality analyses support the spend‐and‐tax hypothesis. Our investigation suggests that the government should show more discretion in increasing expenditures in the long run. Moreover, budget deficit reduction can only be achieved through reductions in government expenditures.

  October 08, 2015   doi: 10.1111/j.1475-5890.2015.12053   open full text
• GST Compliance in the New Zealand Property Sector.
  Iris Claus.
  Fiscal Studies. June 02, 2014
  Different schemes used in property transactions raised concern in New Zealand that insufficient goods and services tax (GST) was being paid on the sale of property. To improve tax compliance in the property sector, various measures have been undertaken. Tax auditing of property transactions has been strengthened since 2007 and in 2009 the government issued a discussion document that proposed a legislative solution to some specific GST problems. Moreover, several court cases have ruled against abusive GST schemes. This paper estimates the impact on GST collection and compliance in the property sector following these actions. The findings suggest that GST compliance in the property sector has increased.

  June 02, 2014   doi: 10.1111/j.1475-5890.2014.12029.x   open full text
• Panel Data Evidence on the Effects of Fiscal Policy Shocks in the EU New Member States.
  Paweł Borys, Piotr Ciżkowicz, Andrzej Rzońca.
  Fiscal Studies. June 02, 2014
  We identify fiscal policy shocks in the EU new member states using four different methods. We use panel data techniques to estimate the output response to these shocks. We find that investment and export growth increase after fiscal consolidation and decelerate after fiscal stimulus when the shocks are expenditure‐based. In contrast, private consumption does not respond to fiscal policy shocks. Expenditure‐based fiscal consolidations reduce wages, supporting the view that fiscal consolidation of such composition enhances the competitiveness and profitability of domestic enterprises. In contrast, we do not find evidence of fiscal shocks affecting households' confidence.

  June 02, 2014   doi: 10.1111/j.1475-5890.2014.12028.x   open full text
• At What Age Do You Expect to Retire? Retirement Expectations and Increases in the Statutory Retirement Age.
  Michela Coppola, Christina Benita Wilke.
  Fiscal Studies. June 02, 2014
  We analyse the extent to which an increase in the statutory retirement age affects individuals' retirement expectations. Understanding how individuals adjust their expectations is crucial to the evaluation of this policy, since retirement expectations directly affect other important decisions such as labour supply, engagement in (further) education and, of course, savings and investments. We consider the 2007 German pension reform that legislated an increase in the statutory retirement age from 65 years to 67. Our analysis is based on a longitudinal study that directly asks respondents at what age they expect to retire. Using a difference‐in‐differences approach, we look at the changes in subjective retirement expectations over time and estimate the extent to which they can be attributed to the 2007 reform. We find that the reform shifted the retirement expectations of the younger cohorts, although there is some heterogeneity in the way individuals adjusted. While there are no significant differences between men and women, lower‐educated individuals failed to revise their expectations. As these individuals usually acquire both lower pension claims and lower private savings, the fact that they have been slower in updating their retirement expectations causes concern regarding their income security after retirement.

  June 02, 2014   doi: 10.1111/j.1475-5890.2014.12027.x   open full text
• The Capital Structure of Large Firms and the Use of Dutch Financing Entities.
  Francis Weyzig.
  Fiscal Studies. June 02, 2014
  Large firms may issue debt securities to obtain external financing or set up lowly‐taxed affiliates for internal debt‐shifting purposes. In addition, they may channel interest payments through Dutch special purpose entities (SPEs) to avoid withholding taxes, a widely‐used arbitrage strategy. Analysing the capital structure of large EU‐based multinationals, this paper provides evidence that the use of Dutch‐issuing SPEs is associated with higher debt financing relative to equity. Furthermore, it shows that EU subsidiaries of larger firms are more leveraged and that the use of Dutch on‐lending SPEs is also associated with higher subsidiary leverage. Thus, the paper provides evidence that Dutch SPEs facilitate higher external debt financing as well as internal debt shifting. The findings indicate that withholding taxes on interest payments to entities outside the EU, determined by individual EU member states, are not very effective. The national tax systems of EU countries such as the Netherlands, which does not impose interest withholding tax, allow large firms to avoid those taxes.

  June 02, 2014   doi: 10.1111/j.1475-5890.2014.12026.x   open full text
• Cyclically‐Neutral Generational Accounting.
  Holger Bonin, Concepció Patxot, Guadalupe Souto.
  Fiscal Studies. June 02, 2014
  This paper introduces a key methodological innovation into generational accounting. By incorporating cyclically‐adjusted balances into the forward‐looking budget projections underlying the concept, we isolate pure policy effects, which render comparisons of the fiscal sustainability indicators obtained across time and countries truly meaningful. We also show that a demographic effect and a debt effect may drive fiscal sustainability measures over time, and establish a routine to control for these effects in the generational accounting framework. An empirical application for Spain illustrates that our proposed decomposition of indicators is empirically relevant. Standard generational accounting suggests that fiscal sustainability in Spain improved substantially in preparing for EMU. However, calculation of the pure policy effects reveals that this has not been the case.

  June 02, 2014   doi: 10.1111/j.1475-5890.2014.12025.x   open full text
• The IFS Annual Lecture: Economics of Education Research and Its Role in the Making of Education Policy.
  Stephen Machin.
  Fiscal Studies. March 17, 2014
  This paper is based on my 2013 IFS Annual Lecture and it explores the reasons for the substantial interest that economists currently have in education research. To do so, it sets the economics of education field in its historical context, and explores a number of reasons why the research area has grown by so much in recent years. The role of economic research in the making of education policy has also increased through time, for some of the same reasons, and this has played a significant part in the use of evidence‐based policy in a range of areas of education.

  March 17, 2014   doi: 10.1111/j.1475-5890.2014.12020.x   open full text
• The Determinants of the Volatility of Fiscal Policy Discretion.
  Luca Agnello, Ricardo M. Sousa.
  Fiscal Studies. March 17, 2014
  This paper investigates the determinants of the volatility of fiscal policy discretion. Using a linear dynamic panel data model for 113 countries from 1980 to 2006 and a system‐GMM estimator, we find that an increase in the number of episodes of government crisis, less democracy and presidentialist systems raise the volatility of the discretionary component of fiscal policy. Additionally, we show that countries with larger populations and less flexible exchange rate systems are more insured against uncertainty about the conduct of fiscal policy. Our results are robust to various regional dummy variables, different subsets of countries and the presence of high inflation and crisis episodes.

  March 17, 2014   doi: 10.1111/j.1475-5890.2014.12024.x   open full text
• A Wealth Tax on the Rich to Bring Down Public Debt? Revenue and Distributional Effects of a Capital Levy in Germany.
  Stefan Bach, Martin Beznoska, Viktor Steiner.
  Fiscal Studies. March 17, 2014
  The idea of higher wealth taxes to finance the mounting public debt in the wake of the financial crisis is gaining ground in several OECD countries. We evaluate the revenue and distributional effects of a one‐time capital levy on personal net wealth that is currently on the political agenda in Germany. We use survey data from the German Socio‐Economic Panel (SOEP) and estimate the net wealth distribution at the very top, based on publicly‐available information about very rich Germans. Since net wealth is strongly concentrated, the capital levy could raise substantial revenue, even if relatively high personal allowances are granted. We also analyse the compliance and administrative costs of the capital levy.

  March 17, 2014   doi: 10.1111/j.1475-5890.2014.12023.x   open full text
• Response of Tax Credit Claims to Tax Enforcement: Evidence from a Quasi‐Experiment in Chile.
  Claudio A. Agostini, Claudia Martínez A.
  Fiscal Studies. March 17, 2014
  Diesel in Chile receives different tax treatments depending on its use. If diesel is used in industrial activities, the diesel taxes paid can be fully used as a credit against VAT, but if it is used in freight or public transportation – basically trucks and buses – only a fraction of diesel taxes paid can be claimed as a tax credit for VAT payments. As a result of this different tax treatment, firms have incentives to use ‘tax‐exempted’ diesel in activities requiring ‘non‐tax‐exempted’ diesel. This tax wedge therefore generates an opportunity for tax evasion, especially for firms with multiple economic activities, one of them being transport. In this paper, we analyse the impact of a tax enforcement programme implemented by the Chilean Internal Revenue Service (IRS), where letters requiring information about diesel purchases and use and vehicle ownership were sent to around 200 firms in 2003. Using different empirical strategies to consider the non‐randomness of the selection of firms, the empirical results show consistently that firms receiving a letter decreased their diesel tax credits by around 10 per cent.

  March 17, 2014   doi: 10.1111/j.1475-5890.2014.12022.x   open full text
• Free Immigration and Welfare Access: The Swedish Experience.
  Joakim Ruist.
  Fiscal Studies. March 17, 2014
  With the expansion of the European Union from 15 to 25 member countries in 2004, fears of migrants’ excessive welfare use led 14 of the 15 older member countries to impose restrictions on the access of citizens of the new member countries – the A10 countries – to their welfare systems. Sweden was the only exception. This paper evaluates the net contribution of post‐enlargement A10 immigrants to Swedish public finances in 2007. On average, A10 immigrants generate less public revenue than the population on average, but they also cost less. The net result is a zero or small positive net contribution. In particular, A10 immigrants do not benefit more from basic social welfare than the population on average. The discounted net contribution over the A10 immigrants’ lifetimes may be positive or negative depending, for example, on their income assimilation rates and on future real interest rates.

  March 17, 2014   doi: 10.1111/j.1475-5890.2014.12021.x   open full text
• Returning to Growth: Policy Lessons from History*.
  Nicholas Crafts.
  Fiscal Studies. June 12, 2013
  This paper considers ‘unconventional’ monetary stimulus and supply‐side reform as ways to speed up UK recovery in the context of fiscal consolidation, drawing on the experience of the 1930s and 1980s. To imitate the 1930s, the inflation‐targeting regime may need to be reformed to cut real interest rates, with land‐use planning liberalised to ‘crowd in’ residential investment. To emulate the 1980s, supply‐side reforms to improve productivity and to raise permanent income are required and possibilities in the areas of infrastructure, education and taxation are outlined. A problem common to all these options is that they are ‘politically challenging’.

  June 12, 2013   doi: 10.1111/j.1475-5890.2013.12005.x   open full text
• Financial Crisis Wealth Losses and Responses among Older Households in England*.
  James Banks, Rowena Crawford, Thomas F. Crossley, Carl Emmerson.
  Fiscal Studies. June 12, 2013
  Prices of real and financial assets fell substantially in the UK during 2008–09. The fourth wave of the English Longitudinal Study of Ageing (ELSA) was in the field throughout this ‘financial crisis’. We use these data, and earlier ELSA waves, to document the effect of the crisis on those aged 50 and over in England, importantly taking into account that a significant proportion of the wealth of these households is held in forms such as state pensions that will not be directly affected by movements in asset prices. We find that the median fall in wealth among individuals was 8 per cent of total household gross wealth with, on average, richer individuals having experienced a larger decline. We find some evidence that those who experienced greater wealth shocks were more likely to reduce their expected chance of leaving a large bequest and to reduce their spending on certain ‘semi‐luxury’ items such as clothing and food consumed out of the home.

  June 12, 2013   doi: 10.1111/j.1475-5890.2013.12004.x   open full text
• Household Consumption through Recent Recessions*.
  Thomas F. Crossley, Hamish Low, Cormac O'Dea.
  Fiscal Studies. June 12, 2013
  This paper examines trends in household consumption and saving behaviour in each of the last three recessions in the UK. The ‘Great Recession’ has been different from those that occurred in the 1980s and 1990s. It has been both deeper and longer, but also the composition of the cutbacks in consumption expenditures differs, with a greater reliance on cuts to nondurable expenditure than was seen in previous recessions, and the distributional pattern across individuals differs. The young have cut back expenditure more than the old, as have mortgage holders compared with renters. By contrast, the impact of the recession has been similar across education groups. We present evidence that suggests that two aspects of fiscal policy in the UK in 2008 and 2009 – the temporary reduction in the rate of VAT and a car scrappage scheme – had some success in encouraging households to increase durable purchases.

  June 12, 2013   doi: 10.1111/j.1475-5890.2013.12003.x   open full text
• Productivity, Investment and Profits during the Great Recession: Evidence from UK Firms and Workers*.
  Claire Crawford, Wenchao Jin, Helen Simpson.
  Fiscal Studies. June 12, 2013
  The UK has recently experienced its deepest recession since the Second World War. One feature has been the resilience of employment, which fell far less than GDP. This led to a substantial fall in labour productivity and has given rise to a so‐called ‘productivity puzzle’. In this paper, we use firm‐ and individual‐level data to shed new light on these aggregate patterns and we examine changes in firm investment in physical capital and profitability. We provide evidence that labour productivity, investment and firm profitability all fell, on average, within firms over the course of the recession and that many of these adjustments were more pronounced in small firms. We also provide indicative evidence on the extent to which different firms might have engaged in labour ‘hoarding’. Our results provide new insight into the potential determinants of the productivity puzzle and also indicate the types of firms that might be expected to be able to respond more quickly to a subsequent increase in demand.

  June 12, 2013   doi: 10.1111/j.1475-5890.2013.12002.x   open full text
• This Time Is Different: The Microeconomic Consequences of the Great Recession*.
  Paul Johnson.
  Fiscal Studies. June 12, 2013
  There is no abstract available for this paper.

  June 12, 2013   doi: 10.1111/j.1475-5890.2013.12001.x   open full text
• The Short‐ and Medium‐Term Impacts of the Recession on the UK Income Distribution*.
  Mike Brewer, James Browne, Andrew Hood, Robert Joyce, Luke Sibieta.
  Fiscal Studies. June 04, 2013
  We study the short‐ and medium‐term impacts of the recent recession on the distribution of net household income in the UK. We document trends in the distribution of income during and immediately after the economy's 6.3 per cent contraction between 2008Q1 and 2009Q2. We then use a tax and benefit microsimulation model combined with macroeconomic and demographic forecasts to project the distribution of income up to 2015–16. As in other countries, immediate impacts of the recession on net household incomes are remarkably hard to detect, but the pain was merely delayed until 2010–11 and beyond. We find that the major difference between income groups is in the timing of the reductions in income, rather than in their magnitude. For those in the middle and upper parts of the distribution, dependent mainly on labour market income, falls in real income happened largely between 2009–10 and 2011–12. For those towards the bottom, dependent more on benefit incomes, falls in real income will happen largely as a result of the post‐recession fiscal tightening between 2010–11 and 2015–16. We explore the sensitivity of the results to different scenarios for employment and earnings: the central and qualitative conclusions prove robust.

  June 04, 2013   doi: 10.1111/j.1475-5890.2013.12000.x   open full text