Search

Abstract Outside of direct fiscal policy effects, the rise in inequality may be attributed to the demand for highly skilled labor rising more rapidly than its supply, as well as [...]

Worldwide, dependency ratios are forecast to increase dramatically in the next 50 years. A great deal of attention has been devoted to understanding the changes in fiscal policies that 'must' take place to accommodate these changes and maintain desirable rates of economic growth. In contrast, less effort has been concentrated on studying the fiscal shifts that will endogenously result from demographic pressures. In particular, will a more elderly population support spending for those programs (e.g., education) that most directly augment the earnings of the young? If not, will this reduce economic growth? We investigate the effect of demographic transition on the endogenous determination of productive public spending. A demographic transition alters the identity of the median voter, leading to a preference for less spending. While this may reduce productive spending, it may also reduce tax rates and raise capital per worker. Simulations, calibrated to empirical estimates of the economic return to education, suggest that demographic transition will reduce output, despite a larger capital stock, unless education services become more productive in raising human capital. JEL classification: E62; H30; O40 Keywords: Demographic transition; Overlapping-generations model; Fiscal policy

Recent years have witnessed increased interest in issues of inequality and mobility in the labor market. Using data from the Panel Study of Income Dynamics and the German Socio-Economic Panel, we compare the labor earnings mobility of prime age men and women in the United States and Germany during the growth years of the 1980s. Despite major differences in labor market institutions we find very similar patterns in the two countries. Our formal models of labor earnings dynamics suggest a great deal of persistence in both countries. In the United States this may derive from permanent individual-specific differences among men, while in Germany random shocks are found to persist longer for men. Women in Germany and the United States have similar earnings dynamics.

Health insurance portability has no significant effects on transitions from wage-earning to entrepreneurship. Data from the Panel Study of Income Dynamics indicate that pensions and life insurance have no significant effects on the transitions of wage-earners with employee-provided health insurance to entrepreneurs compared to their counterparts without insurance. Analysis of the Survey of Income and Program Participation produced substantial errors in the estimates which indicates the negative and positive effects of health insurance on transitions to entrepreneurship.

An evaluation of industrial policies linked to the manufacturing of intermediate goods underscores the need for subsidy policies to be adopted based on other considerations rather than purely technological reasons. Policy design should incorporate both technological associations and market impact in the target industries. The interaction of external effects and market structure may result in an optimal policy incorporating lump-sum subsidies, output subsidies and taxes on the target industries.

A research study used panel data to present estimates on CO2 emissions and GDP relationships. The estimates, which are used to predict global emissions, reflect a declining marginal propensity to emit (MPE) carbon dioxide in line with an increase of GDP per capita. Global carbon dioxide emissions are expected to increase at a yearly rate of 1.8%. Emissions growth will likely continue due to rapid population and output growth in less-affluent countries with high MPEs.

State and local governments do not smooth their expenditures over time. While legal impediments to consumption smoothing do not exist and thus, allow these sub-federal governments to go around balanced budget regulations, this is not the usual practice. National Income and Product Accounts data from 1934 to 1991 is used to test this hypothesis against the theory that local governments tailor their spending patterns according to the availability of current resources. A sub-sample of the 1945-1991 period is also utilized to include the effects of the World War II and the Great Depression. The results indicate that growth in local and state government spending is primarily determined by resource availability in the present period. These findings suggest that the federal government may influence spending on the local and state levels by changing their resource endowments.

This paper examines tax-return-generated data on the labor force behavior of people before and after they receive inheritances. The results are consistent with Andrew Carnegie's century-old assertion that large inheritances decrease a person's labor force participation. For example, a single person who receives an inheritance of about $150,000 is roughly four times more likely to leave the labor force than a person with an inheritance below $25,000. Additional, albeit weaker, evidence suggests that large inheritances depress labor supply, even when participation is unaltered.

Abstract A large cloud of uncertainty hangs over the economic outlook, particularly the outlook for productivity growth and the long-term trend growth of output. This uncertainty stems from three sources: [...]

Statistics from a sample of municipal governments for the years 1976 to 1980 gathered from the Finance files of the Census Bureau's 1980 Census of Governments were analyzed to determine whether federal deductibility of local and state taxes has increased the proportion of property taxes and other taxes in local budgets. Research results reveal that deductibility does lead to higher local property taxes by increasing the rate of taxation for property taxes. Research specifically indicates that if deductibility were revoked, the mean property tax rate would be reduced by 21.1%. A model of property tax rate determination also is presented.

By Kimberley A. Strassel, Celeste Colgan, and John C. Goodman. 2006. Rowman and Littlefield Publishers. 232 pages, $21.95, cloth. Everyone who cares about public policy toward women should read Leaving [...]

We investigate the effect of entrepreneurs' personal taxes on their use of labor, analyze the tax returns of sole proprietors before and after the Tax Reform Act of 1986, and determine how the substantial reductions in marginal tax rates affected their hiring decisions and wage bills. Individual income taxes exert a statistically and quantitatively significant influence on the probability of hiring workers. Raising the entrepreneur's 'tax price' by 10% raises the mean probability of hiring by about 12%. Further, taxes influence total wage payments to workers. The tax-price elasticity of the median wage bill is about .37. It is not forgotten that a considerable number of persons mingle their own labor with capital-that is, they labor with their own hands and also buy or hire others to labor for them [ABRAHAM LINCOLN, Annual Message to Congress, December 3, 1861]

We use data from the National Longitudinal Surveys to investigate the relative importance of family financial and human capital in the transition into self-employment. Specifically, we estimate the impacts of individual's own wealth and human capital and parental wealth and self-employment experience on the probability that an individual transits from wage-and-salary to self-employment. We find young men's own financial assets exert a statistically significant but quantitatively modest effect on the transition. In contrast, parents' capital exerts a large influence. Parents' strongest effect runs, not through financial means, but rather through their own self-employment experience and business success.

We examine why some individuals survive as entrepreneurs and others do not. In addition, we analyze the growth of entrepreneurial enterprises, conditional on surviving. Our focus is on the role of access to capital: To what extent do liquidity constraints increase the likelihood of entrepreneurial failure? The empirical strategy is based on the following logic: If entrepreneurs cannot borrow to attain their profit-maximizing levels of capital, then those entrepreneurs who have substantial personal financial resources will be more successful than those who do not. The data consist of the 1981 and 1985 federal individual income tax returns of a group of people who received inheritances. These data allow us to identify those individuals who were sole proprietors in 1981 and to determine the extent to which the decision to remain a sole proprietor was influenced by the magnitude of the inheritance-induced increase in liquidity. The results are consistent with the notion that liquidity constraints exert a noticeable influence on the viability of entrepreneurial enterprises. For example, a $150,000 inheritance increases the probability that an individual will continue as a sole proprietor by 1.3 percentage points, and if the enterprise survives, its receipts increase by almost 20 percent. [ABSTRACT FROM AUTHOR]