Pub Date : 2023-02-24DOI: 10.1332/251569121x16740293882620
John A. Dove, Laura Dove
This study assesses how perceptions about the quality of legal institutions affect entrepreneurial activity across US states. We employ survey data from the US Chamber of Commerce’s Institute for Legal Reform regarding both the overall perceived institutional quality within a state and a multitude of subcategories. With a panel data set covering 2002–08, we find that along with overall legal quality, entrepreneurial activity across states is positively correlated with better perceptions about punitive damages, summary judgment, rules of discovery and admission of scientific and technical evidence at trial. Interestingly, interacting these variables with economic freedom typically generates non-results, though this is not the case when considering only opportunity entrepreneurship. Implications are discussed.
{"title":"Legal institutions, perceptions and entrepreneurship: an empirical investigation","authors":"John A. Dove, Laura Dove","doi":"10.1332/251569121x16740293882620","DOIUrl":"https://doi.org/10.1332/251569121x16740293882620","url":null,"abstract":"This study assesses how perceptions about the quality of legal institutions affect entrepreneurial activity across US states. We employ survey data from the US Chamber of Commerce’s Institute for Legal Reform regarding both the overall perceived institutional quality within a state and a multitude of subcategories. With a panel data set covering 2002–08, we find that along with overall legal quality, entrepreneurial activity across states is positively correlated with better perceptions about punitive damages, summary judgment, rules of discovery and admission of scientific and technical evidence at trial. Interestingly, interacting these variables with economic freedom typically generates non-results, though this is not the case when considering only opportunity entrepreneurship. Implications are discussed.","PeriodicalId":53126,"journal":{"name":"Journal of Public Finance and Public Choice","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2023-02-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46395196","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-02-03DOI: 10.1332/251569121x16730414164047
Christopher Mann, Paul Pecorino
This article investigates the implications of Baumol’s cost disease for a publicly provided good in the presence of distortionary taxation. A model is presented in which the publicly provided good experiences low labour productivity growth relative to the private good. The public sector will grow monotonically with the productivity differential between sectors and the tax rate will be pushed to the top of the Laffer curve over time. This article also finds that the desire for redistribution will be crowded out by the impact of unbalanced growth and Baumol’s cost disease.
{"title":"The impact of Baumol’s disease on government size, taxation and redistribution","authors":"Christopher Mann, Paul Pecorino","doi":"10.1332/251569121x16730414164047","DOIUrl":"https://doi.org/10.1332/251569121x16730414164047","url":null,"abstract":"This article investigates the implications of Baumol’s cost disease for a publicly provided good in the presence of distortionary taxation. A model is presented in which the publicly provided good experiences low labour productivity growth relative to the private good. The public sector will grow monotonically with the productivity differential between sectors and the tax rate will be pushed to the top of the Laffer curve over time. This article also finds that the desire for redistribution will be crowded out by the impact of unbalanced growth and Baumol’s cost disease.","PeriodicalId":53126,"journal":{"name":"Journal of Public Finance and Public Choice","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2023-02-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44389473","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-02-01DOI: 10.1332/251569121x16730281636465
Marianne Johnson
We recently marked the 60th anniversary of the book that established the field of public choice – The Calculus of Consent by James M. Buchanan and Gordon Tullock. It was also the 30th anniversary of Elinor Ostrom et al’s ‘Covenants with and without a sword’, in which she demonstrated the capacity of individuals for self-governance without submission to an external authority. This article considers these two foundational works as a starting point from which to explore the intellectual tradition of ‘democratic optimism’ in public choice. The Buchanan/Ostrom legacy is an unshakable faith in the capacity of individuals for self-governance, a significant departure from more orthodox thinking that presumed the necessity of a social planner to oversee, coordinate and enforce collective actions. Their work also illustrates the importance of questioning the assumptions of economic models and modes of thought. Examination of antecedent assumptions is useful not only for understanding the depth and complexity of economic and political choices, but also for thinking about the history of the economics discipline, the viability of research programmes and the ‘danger of self-evident truths’.
{"title":"On classical liberalism and democratic optimism: James M. Buchanan and Elinor Ostrom","authors":"Marianne Johnson","doi":"10.1332/251569121x16730281636465","DOIUrl":"https://doi.org/10.1332/251569121x16730281636465","url":null,"abstract":"We recently marked the 60th anniversary of the book that established the field of public choice – The Calculus of Consent by James M. Buchanan and Gordon Tullock. It was also the 30th anniversary of Elinor Ostrom et al’s ‘Covenants with and without a sword’, in which she demonstrated the capacity of individuals for self-governance without submission to an external authority. This article considers these two foundational works as a starting point from which to explore the intellectual tradition of ‘democratic optimism’ in public choice. The Buchanan/Ostrom legacy is an unshakable faith in the capacity of individuals for self-governance, a significant departure from more orthodox thinking that presumed the necessity of a social planner to oversee, coordinate and enforce collective actions. Their work also illustrates the importance of questioning the assumptions of economic models and modes of thought. Examination of antecedent assumptions is useful not only for understanding the depth and complexity of economic and political choices, but also for thinking about the history of the economics discipline, the viability of research programmes and the ‘danger of self-evident truths’.","PeriodicalId":53126,"journal":{"name":"Journal of Public Finance and Public Choice","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2023-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44276774","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-01-06DOI: 10.1332/251569121x16690538730983
Paola Brens, Theresa Fenech, Domenica Romeo
Ageing demographics have prompted widespread pension reforms across Latin America. This has left several countries with a significant financial burden related to the transition from one system to another. In this article, we evaluate two alternative methods of financing the recent pension reform in the Dominican Republic. We build on a simple real business cycle model with perfect competition and add a fiscal block that allows us to simulate shocks to the tax rates on capital and labour, based on the present value of the pension reform cost. We find that increasing the tax rate on returns to capital would not only fill the pension deficit, but also have a significantly smaller adverse effect on the macroeconomy, when compared with an increase to the tax on labour.
{"title":"Confronting increases to labour and capital taxes to finance the pension deficit in the Dominican Republic: a real business cycle approach","authors":"Paola Brens, Theresa Fenech, Domenica Romeo","doi":"10.1332/251569121x16690538730983","DOIUrl":"https://doi.org/10.1332/251569121x16690538730983","url":null,"abstract":"Ageing demographics have prompted widespread pension reforms across Latin America. This has left several countries with a significant financial burden related to the transition from one system to another. In this article, we evaluate two alternative methods of financing the recent pension reform in the Dominican Republic. We build on a simple real business cycle model with perfect competition and add a fiscal block that allows us to simulate shocks to the tax rates on capital and labour, based on the present value of the pension reform cost. We find that increasing the tax rate on returns to capital would not only fill the pension deficit, but also have a significantly smaller adverse effect on the macroeconomy, when compared with an increase to the tax on labour.","PeriodicalId":53126,"journal":{"name":"Journal of Public Finance and Public Choice","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2023-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48578811","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-08-25DOI: 10.1332/251569121x16592093941801
Aris Trantidis, Peter J. Boettke
Macroeconomic theories picture the economy as a phenomenon tractable by their analysis and thus manageable by macroeconomic policies guided by this analysis. This approach has withstood recurrent policy failures, competing theories and several changes of policy paradigms, from Keynesianism to monetarism, because the development of economics as a discipline has been entangled with the demand from policymakers to receive clear macroeconomic policy prescriptions from the expert community. The idea that policymakers can steer the economy in a desired direction relies upon the development of theories with prescriptive and predictive claims, which, in turn, rely on a great deal of analytic reductionism. As a result, reductionist theories continue to offer misrepresentations of the macro phenomenon, particularly by overlooking how policy interventions generate diverse and intractable micro-adaptations that develop into undesired, unforeseen and unintended system-level consequences. This trend continues to cause trouble: reductionist macroeconomic theories foster overconfident interventionist policies that contribute to macroeconomic instability.
{"title":"Macroeconomic policy as an epistemic problem","authors":"Aris Trantidis, Peter J. Boettke","doi":"10.1332/251569121x16592093941801","DOIUrl":"https://doi.org/10.1332/251569121x16592093941801","url":null,"abstract":"Macroeconomic theories picture the economy as a phenomenon tractable by their analysis and thus manageable by macroeconomic policies guided by this analysis. This approach has withstood recurrent policy failures, competing theories and several changes of policy paradigms, from Keynesianism to monetarism, because the development of economics as a discipline has been entangled with the demand from policymakers to receive clear macroeconomic policy prescriptions from the expert community. The idea that policymakers can steer the economy in a desired direction relies upon the development of theories with prescriptive and predictive claims, which, in turn, rely on a great deal of analytic reductionism. As a result, reductionist theories continue to offer misrepresentations of the macro phenomenon, particularly by overlooking how policy interventions generate diverse and intractable micro-adaptations that develop into undesired, unforeseen and unintended system-level consequences. This trend continues to cause trouble: reductionist macroeconomic theories foster overconfident interventionist policies that contribute to macroeconomic instability.","PeriodicalId":53126,"journal":{"name":"Journal of Public Finance and Public Choice","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2022-08-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49508205","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-08-02DOI: 10.1332/251569121x16571984676251
M. Antonelli, A. Castaldo, Valeria De Bonis, A. Gandolfo
We present an analytical literature review on optimal sin taxes. After identifying the distinctive features of sin goods, we develop a simple, encompassing model of the taxation of sin goods that allows for treating the main models found in the literature as subcases. We derive the optimal sin tax rates, while also considering the subsidisation of healthy goods. We then discuss the Pareto-improvement result obtained in the theoretical literature, confronting it with the debate on the regressivity of this kind of taxation. We highlight the crucial role of the interaction of tastes, self-control problems and poverty when deriving policy conclusions from theoretical models.
{"title":"Optimal taxation of sin goods: an analytical review","authors":"M. Antonelli, A. Castaldo, Valeria De Bonis, A. Gandolfo","doi":"10.1332/251569121x16571984676251","DOIUrl":"https://doi.org/10.1332/251569121x16571984676251","url":null,"abstract":"We present an analytical literature review on optimal sin taxes. After identifying the distinctive features of sin goods, we develop a simple, encompassing model of the taxation of sin goods that allows for treating the main models found in the literature as subcases. We derive the optimal sin tax rates, while also considering the subsidisation of healthy goods. We then discuss the Pareto-improvement result obtained in the theoretical literature, confronting it with the debate on the regressivity of this kind of taxation. We highlight the crucial role of the interaction of tastes, self-control problems and poverty when deriving policy conclusions from theoretical models.","PeriodicalId":53126,"journal":{"name":"Journal of Public Finance and Public Choice","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2022-08-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44290892","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-26DOI: 10.1332/251569121x16553680060701
Zachary Kessler, R. Wagner
This article is concerned with the way economists conceptualise the relationship between state and market within their theories of public finance. It is customary for them to treat polity and economy as comprising separate domains of human activity. In contrast, the recently developing notion of entangled political economy treats the state–market dichotomy as an abstraction, whereas political and economic organisations are deeply entangled with one another. While property and its distinction between mine and thine is a universal quality of the human species, specific and particular rights of property are always contestable through entanglement among political and commercial entities. Entanglement calls attention to the processes through which rights of action are established and challenged within an entangled system of political economy. What results from our exploration of entanglement and public finance is recognition of the high analytical potential of reviving Antonio de Viti’s initial interest in transforming the focus of public finance from the practice of public finance into a scientific theory, thereby joining public finance and public choice to form political economy.
{"title":"State–market entanglement: some implications for the theory of public finance","authors":"Zachary Kessler, R. Wagner","doi":"10.1332/251569121x16553680060701","DOIUrl":"https://doi.org/10.1332/251569121x16553680060701","url":null,"abstract":"This article is concerned with the way economists conceptualise the relationship between state and market within their theories of public finance. It is customary for them to treat polity and economy as comprising separate domains of human activity. In contrast, the recently developing notion of entangled political economy treats the state–market dichotomy as an abstraction, whereas political and economic organisations are deeply entangled with one another. While property and its distinction between mine and thine is a universal quality of the human species, specific and particular rights of property are always contestable through entanglement among political and commercial entities. Entanglement calls attention to the processes through which rights of action are established and challenged within an entangled system of political economy. What results from our exploration of entanglement and public finance is recognition of the high analytical potential of reviving Antonio de Viti’s initial interest in transforming the focus of public finance from the practice of public finance into a scientific theory, thereby joining public finance and public choice to form political economy.","PeriodicalId":53126,"journal":{"name":"Journal of Public Finance and Public Choice","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2022-07-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45382274","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-01-01DOI: 10.1332/251569121x16397576745954
Amadou Bobbo, Adalbert Abraham Ghislain Melingui Bate
This article re-examines political budget cycles in sub-Saharan Africa. It first examines the effect of elections on fiscal policy according to the rational opportunistic hypothesis. The study then analyses the strength of these effects. Ordinary least squares, fixed effects, random effects and generalised method of moment in system are applied on a sample of 41 countries from 1990 to 2015. Our results suggest that the lead-up to and holding of elections in sub-Saharan Africa lead to increasing government spending, declining tax revenues and worsening fiscal deficits. We also find that democracy and fighting corruption significantly reduce the strength of political budget cycles, while ethnic fragmentation has reverse effects. We recommend improving the quality of institutions that control public action in order to tame political budget cycles in sub-Saharan Africa.
{"title":"Political budget cycles in sub-Saharan Africa: new empirical evidence","authors":"Amadou Bobbo, Adalbert Abraham Ghislain Melingui Bate","doi":"10.1332/251569121x16397576745954","DOIUrl":"https://doi.org/10.1332/251569121x16397576745954","url":null,"abstract":"This article re-examines political budget cycles in sub-Saharan Africa. It first examines the effect of elections on fiscal policy according to the rational opportunistic hypothesis. The study then analyses the strength of these effects. Ordinary least squares, fixed effects, random effects and generalised method of moment in system are applied on a sample of 41 countries from 1990 to 2015. Our results suggest that the lead-up to and holding of elections in sub-Saharan Africa lead to increasing government spending, declining tax revenues and worsening fiscal deficits. We also find that democracy and fighting corruption significantly reduce the strength of political budget cycles, while ethnic fragmentation has reverse effects. We recommend improving the quality of institutions that control public action in order to tame political budget cycles in sub-Saharan Africa.","PeriodicalId":53126,"journal":{"name":"Journal of Public Finance and Public Choice","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66317330","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-01-01DOI: 10.1332/251569121x16406994884298
Elena D’Agostino, Marco Alberto De Benedetto, G. Sobbrio
We analyse the impact of public spending on tax evasion using a two-period model in which the government and taxpayers make their decisions in terms of level and quality of expenditures to set and taxes to pay. Results predict that tax evasion increases with government inefficiency.
{"title":"A model of tax evasion and taxpayers' perception about public goods provision","authors":"Elena D’Agostino, Marco Alberto De Benedetto, G. Sobbrio","doi":"10.1332/251569121x16406994884298","DOIUrl":"https://doi.org/10.1332/251569121x16406994884298","url":null,"abstract":"We analyse the impact of public spending on tax evasion using a two-period model in which the government and taxpayers make their decisions in terms of level and quality of expenditures to set and taxes to pay. Results predict that tax evasion increases with government inefficiency.","PeriodicalId":53126,"journal":{"name":"Journal of Public Finance and Public Choice","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66317449","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-01DOI: 10.1332/251569121x16224867507370
A. Craig, V. Storr
Is social capital likely to be underproduced without state action? Where previous analysts have typically argued that social capital is a public good and, therefore, needs government action to be produced at an optimal level, we argue that social capital is not a public good because though often non-rivalrous, it is almost always excludable. As such, social capital is more appropriately conceived of as a club good. Further, we argue that governments are not likely to be in a position to improve a society’s social capital due to epistemic limits and the complexity of social capital. Finally, we argue that rather than a state solution, solutions to social capital-related problems are best solved through a bottom-up process. As we demonstrate throughout, this has implications for how we understand community resilience in the wake of disasters. The key role that social capital plays in facilitating community rebound after disasters has been widely acknowledged. If social capital is a public good, then policymakers could be justified in focusing on cultivating social capital as a strategy for promoting community resilience. If social capital is a club good and there are limits to top-down strategies for creating social capital, however, then social capital creation is not an available policy lever.
{"title":"Is social capital underproduced?","authors":"A. Craig, V. Storr","doi":"10.1332/251569121x16224867507370","DOIUrl":"https://doi.org/10.1332/251569121x16224867507370","url":null,"abstract":"Is social capital likely to be underproduced without state action? Where previous analysts have typically argued that social capital is a public good and, therefore, needs government action to be produced at an optimal level, we argue that social capital is not a public good because though often non-rivalrous, it is almost always excludable. As such, social capital is more appropriately conceived of as a club good. Further, we argue that governments are not likely to be in a position to improve a society’s social capital due to epistemic limits and the complexity of social capital. Finally, we argue that rather than a state solution, solutions to social capital-related problems are best solved through a bottom-up process. As we demonstrate throughout, this has implications for how we understand community resilience in the wake of disasters. The key role that social capital plays in facilitating community rebound after disasters has been widely acknowledged. If social capital is a public good, then policymakers could be justified in focusing on cultivating social capital as a strategy for promoting community resilience. If social capital is a club good and there are limits to top-down strategies for creating social capital, however, then social capital creation is not an available policy lever.","PeriodicalId":53126,"journal":{"name":"Journal of Public Finance and Public Choice","volume":null,"pages":null},"PeriodicalIF":0.3,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66317008","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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