Topics in public finance: social security and taxation

Summary The field of public finance focuses on the spending and taxing activities of governments and their influence on the allocation of resources and distribution of income. This work covers in three parts different topics related to public finance which are currently widely discussed in media and politics. The first two parts deal with issues on social security, which is in general one of the biggest spending shares of governments. The third part looks at the main income source of governments by analyzing the perceived value of tax competition. Part one deals with the current problem of increased early retirement by focusing on Switzerland as a special case. Early retirement is predominantly considered to be the result of incentives set by social security and the tax system. But the Swiss example demonstrates that the incidence of early retirement has dramatically increased even in the absence of institutional changes. We argue that the wealth effect also plays an important role in the retirement decision for middle and high income earners. An actuarially fair, but mandatory funded system with a relatively high replacement rate may thus contribute to a low labor market participation rate of elderly workers. We provide evidence using a unique dataset on individual retirement decisions in Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is a key determinant in the retirement decisions. The higher the accumulated pension capital, the earlier men, and to a smaller extent women, tend to leave the workforce. The fact that early retirement has become much more prevalent in the last 15 years is a further indicator of the importance of a wealth effect, as the maturing of the Swiss mandatory funded pension system over that period has led to an increase in the effective replacement rates for middle and high income earners. Part two covers the theoretical side of social security. Theories analyzing optimal social security benefits provide important qualitative results, by mainly using one general type of an economy. Economies are however very diverse concerning numerous aspects, one of the most important being the wealth level. This can lead to significant quantitative benefit differences that imply differences in replacement rates and levels of labor supply. We focus on several aspects related to this fact. In a within cohort social security model, we introduce disability insurance with an imperfect screening mechanism. We then vary the wealth level of the model economy and analyze how the optimal social security benefit structure or equivalently, the optimal replacement rates, changes depending on the wealth level of the economy, and if the introduction of disability insurance into a social security system is preferable for all economies. Second, the screening mechanism of disability insurance and the threshold level at which people are defined as disabled can differ. For economies with different wealth levels, we determine for different thresholds the screening level that maximizes social welfare. Finally, part three turns to the income of governments, by adding an element to the controversy on tax competition versus tax harmonization.2 Inter-jurisdictional tax competition can generate at least two potential benefits or costs: On a public level, tax competition may result in a lower or higher efficiency in the production of public services. But there is also a more private benefit in the form of an option for individuals to move to a community with a lower tax rate in the future. To explore the value citizens attach to tax competition we analyze a unique popular vote for a complete tax harmonization between communities in the third largest Swiss canton, Vaud. Although a majority of voters would have seemingly benefited from replacing the current tax rate by a revenue-neutral average tax rate, the proposal was rejected by a large margin. Our estimates suggest that the estimated combined perceived benefit from tax competition is in the range of 10%.

Depletion of CD25+ cells during acute toxoplasmosis does not significantly increase mortality in Swiss OF1 mice

The interleukin (IL)-2R alpha chain (CD25) is expressed on regulatory T cells (Treg), which constitute more than 85% of the CD25+ T cell population in a naïve mouse. CD25 is also expressed on effector T cells in mice suffering from an acute infection by the obligate intracellular protozoan parasite, Toxoplasma gondii. Lethal toxoplasmosis is accompanied by a significant loss of Treg in mice naturally susceptible to toxoplasmosis. The present study was done to explore the role of Treg cells using an anti-CD25 antibody-mediated depletion in mice naturally resistant to toxoplasmosis. Although a significant decrease in the percentage of Treg cells was observed following anti-CD25 monoclonal antibody injections, the depletion of CD25+ cells during acute toxoplasmosis did not significantly increase the mortality of Swiss OF1 mice and no significant difference was observed in the brain parasitic load between the mice in the depleted-infected and isotype-infected groups. We found no significant difference between the titres of total IgG in the sera of the mice from the two groups in the chronic phase. However, CD25+ cells depletion was followed by significantly higher levels of IL-12 in the serum of depleted mice than in that of mice injected with the isotype control antibody.

Extracellular matrix molecules enhance the neurotrophic effect of schwann cell-like differentiated adipose-derived stem cells and increase cell survival under stress conditions.

Since the first reports of induction of adipose-derived stem cells (ASC) into neuronal and glial cell phenotypes, expectations have increased regarding their use in tissue engineering applications for nerve repair. Cell adhesion to extracellular matrix (ECM) is a basic feature of survival, differentiation, and migration of Schwann cells (SC) during nerve regeneration, and fibronectin and laminin are two key molecules of this process. Interaction between ECM and SC-like differentiated ASC (dASC) could potentially improve the neurotrophic potential of the stem cells. We have investigated the effect of ECM molecules on SC-like dASC in terms of proliferation, adhesion, and cell viability. Fibronectin and laminin did not affect the proliferation of dASC when compared with cell adherent tissue culture plastic, but significantly improved viability and cell attachment when dASC were exposed to apoptotic conditions. To assess the influence of the ECM molecules on dASC neurotrophic activity, dASC were seeded onto ECM-coated culture inserts suspended above dorsal root ganglia (DRG) sensory neurons. Neurite outgrowth of DRG neurons was enhanced when dASC were seeded on fibronectin and laminin when compared with controls. When DRG neurons and dASC were in direct contact on the various surfaces there was significantly enhanced neurite outgrowth and coculture with laminin-conditioned dASC produced the longest neurites. Compared with primary SCs, dASC grown on laminin produced similar levels of neurite outgrowth in the culture insert experiments but neurite length was shorter in the direct contact groups. Anti β1 integrin blocking antibody could inhibit baseline and dASC evoked neurite elongation but had no effect on outgrowth mediated by laminin-conditioned dASC. ECM molecules had no effect on the levels of nerve growth factor and brain-derived neurotrophic factor secretion from dASC. The results of the study suggest that ECM molecules can significantly improve the potential of dASC for nerve regeneration.

Measuring and Explaining the Increase of Travel Distance : A Multilevel Analysis Using Repeated Cross Sectional Travel Surveys

We want to shed some light on the development of person mobility by analysing the repeated cross-sectional data of the four National Travel Surveys (NTS) that were conducted in Germany since the mid seventies. The above mentioned driving forces operate on different levels of the system that generates the spatial behaviour we observe: Travel demand is derived from the needs and desires of individuals to participate in spatially separated activities. Individuals organise their lives in an interactive process within the context they live in, using given infrastructure. Essential determinants of their demand are the individual's socio-demographic characteristics, but also the opportunities and constraints defined by the household and the environment are relevant for the behaviour which ultimately can be realised. In order to fully capture the context which determines individual behaviour, the (nested) hierarchy of persons within households within spatial settings has to be considered. The data we will use for our analysis contains information on these three levels. With the analysis of this micro-data we attempt to improve our understanding of the afore subsumed macro developments. In addition we will investigate the prediction power of a few classic sociodemographic variables for the daily travel distance of individuals in the four NTS data sets, with a focus on the evolution of this predictive power. The additional task to correctly measure distances travelled by means of the NTS is threatened by the fact that although these surveys measure the same variables, different sampling designs and data collection procedures were used. So the aim of the analysis is also to detect variables whose control corrects for the known measurement error, as a prerequisite to apply appropriate models in order to better understand the development of individual travel behaviour in a multilevel context. This task is complicated by the fact that variables that inform on survey procedures and outcomes are only provided with the data set for 2002 (see Infas and DIW Berlin, 2003).

Prevalence of methylphenidate prescription among school-aged children in a Swiss population: increase in the number of prescriptions in the Swiss Canton of Vaud, from 2002 to 2005, and changes in patient demographics.

OBJECTIVE: Methylphenidate is prescribed for children and adolescents to treat ADHD. As in many Western countries, the increase in methylphenidate consumption is a public concern in Switzerland. The article discusses the authors' assessment of prescription prevalence in 2002 and 2005 for school-aged children in the canton of Vaud. METHOD: Pharmacy prescription information is available from the regional public health authority. Descriptive analyses are conducted on an anonymized database of the years 2002 and 2005. Data for each year are compared to assess trends in methylphenidate prescription prevalence. RESULTS: The findings show an increase from 0.74% to 1.02% in the number of prescriptions for 5- to 14-year-old children, particularly in prescriptions for girls. Data also show important geographical differences in prescription. CONCLUSION: The prevalence of methylphenidate prescription is lower in Switzerland than other Western countries, particularly the United States. However, some aspects of prevalence are similar, including the increase per year, demographics, and geographic characteristics.

Economic and environmental effects of the CO2 taxation: an input-output analysis for Spain

CO2 emissions induced by human activities are the major cause of climate change; hence, strong environmental policy that limits the growing dependence on fossil fuel is indispensable. Tradable permits and environmental taxes are the usual tools used in CO2 reduction strategies. Such economic tools provide incentives to polluting industries to reduce their emissions through market signals. The aim of this work is to investigate the direct and indirect effects of an environmental tax on Spanish products and services. We apply an environmentally extended input-output (EIO) model to identify CO2 emission intensities of products and services and, accordingly, we estimate the tax proportional to these intensities. The short-term price effects are analyzed using an input-output price model. The effect of tax introduction on consumption prices and its influence on consumers’ welfare are determined. We also quantify the environmental impacts of such taxation in terms of the reduction in CO2 emissions. The results, based on the Spanish economy for the year 2007, show that sectors with relatively poor environmental profile are subjected to high environmental tax rates. And consequently, applying a CO2 tax on these sectors, increases production prices and induces a slight increase in consumer price index and a decrease in private welfare. The revenue from the tax could be used to counter balance the negative effects on social welfare and also to stimulate the increase of renewable energy shares in the most impacting sectors. Finally, our analysis highlights that the environmental and economic goals cannot be met at the same time with the environmental taxation and this shows the necessity of finding other (complementary or alternative) measures to ensure both the economic and ecological efficiencies. Keywords: CO2 emissions; environmental tax; input-output model, effects of environmental taxation.

Net increase of lactate and glutamate concentration in activated human visual cortex detected with magnetic resonance spectroscopy at 7 tesla.

After the landmark studies reporting changes in the cerebral metabolic rate of glucose (CMRGlc ) in excess of those in oxygen (CMRO2 ) during physiological stimulation, several studies have examined the fate of the extra carbon taken up by the brain, reporting a wide range of changes in brain lactate from 20% to 250%. The present study reports functional magnetic resonance spectroscopy measurements at 7 Tesla using the enhanced sensitivity to study a small cohort (n = 6). Small increases in lactate (19% ± 4%, P < 0.05) and glutamate (4% ± 1%, P < 0.001) were seen within the first 2 min of activation. With the exception of glucose (12% ± 5%, P < 0.001), no other metabolite concentration changes beyond experimental error were significantly observed. Therefore, the present study confirms that lactate and glutamate changes during physiological stimulation are small (i.e. below 20%) and shows that the increased sensitivity allows reproduction of previous results with fewer subjects. In addition, the initial rate of glutamate and lactate concentration increases implies an increase in CMRO2 that is slightly below that of CMRGlc during the first 1-2 min of activation.

The Rise of The Swiss Tax Haven in the Interwar Period: An International Comparison

The history of tax havens is still little known for the decades before World War II. Up to now the studies that have focused on the 1920s and 30s have presented either a very general perspective on the development of tax havens or a narrow national point of view. Based on unpublished historical archives of four countries, this paper offers therefore a new comparative look on international tax competition during this period in order to answer the following question: was the Swiss case - already considered as a quintessential tax haven at the time - specific in comparison to other banking centres? This research has two results. On the one hand, the 1920s and 30s appear as something of a golden age of opportunity for avoiding taxation through the relocation of assets. Actually, most of the financial centres granted consistent tax benefits for imported capital, while the extremely limited degree of international cooperation and the usual guarantee of banking secrecy in European countries prevented the taxation of exported assets. On the other hand, within this general balance sheet, the fiscal strategies of a tax haven like Switzerland differed from those of a great financial power like Great Britain. Whereas the Swiss administration readily placed itself at the service of the bankers, the British policy was more balanced between the contradictory interests of the Board of Inland Revenue, the Treasury and the English business circles.

The administration of atomoxetine during alcohol deprivation induces a time-limited increase in alcohol consumption after relapse.

The administration of selective serotonin reuptake inhibitors (SSRIs) typically used as antidepressants increases alcohol consumption after an alcohol deprivation period in rats. However, the appearance of this effect after the treatment with selective noradrenaline reuptake inhibitors (SNRIs) has not been studied. In the present work we examined the effects of a 15-d treatment with the SNRI atomoxetine (1, 3 and 10 mg/kg, i.p.) in male rats trained to drink alcohol solutions in a 4-bottle choice test. The treatment with atomoxetine (10 mg/kg, i.p.) during an alcohol deprivation period increased alcohol consumption after relapse. This effect only lasted one week, disappearing thereafter. Treatment with atomoxetine did not cause a behavioral sensitized response to a challenge dose of amphetamine (1.5 mg/kg, i.p.), indicating the absence of a supersensitive dopaminergic transmission. This effect is markedly different from that of SSRI antidepressants that produced both long-lasting increases in alcohol consumption and behavioral sensitization. Clinical implications are discussed.

MAR elements as tools to increase protein production by CHO cells

One of the major hurdles of isolating stable, inducible or constitutive high-level producer cell lines is the time-consuming selection, analysis and characterization of the numerous clones required to identify one with the desired characteristics. Various boundary elements, matrix attachment regions, and locus control regions were screened for for their ability to augment the expression of heterologous genes in CHO and other cells. The 5'-matrix-attachment region (MAR) of the chicken lysozyme gene was found to significantly increase stable gene expression, in culture dishes and in bioreactors. These MAR elements can be easily combined with various existing expression systems, as they can be added in trans (i.e. on a separate plasmid) in co-transfections with previously constructed expression vectors. Using cell population analysis, we found that the use of the MAR increases the proportion of high-producing CHO cell clones, thus reducing the number of cell lines that need to be screened while increasing maximal productivity. Random cDNA cloning and sequencing indicated that over 12% of the ESTs correspond to the transgene. Thus, productivity is no longer limited by transcriptional events in such MAR-containing cell lines. The identification of small and more convenient active MAR portions will also be summarized. Finally, we will show examples of how MAR elements can be combined with short term expression to increase the simultaneous synthesis of many proteins in parallel by CHO cells. Overall, we conclude that the MAR sequence is a versatile tool to increase protein expression in short and long term production processes.

CREB-2, a cellular CRE-dependent transcription repressor, functions in association with Tax as an activator of the human T-cell leukemia virus type 1 promoter.

The Tax protein of the human T-cell leukemia virus type 1 (HTLV-1) has been implicated in human T-cell immortalization. The primary function of Tax is to transcriptionally activate the HTLV-1 promoter, but Tax is also known to stimulate expression of cellular genes. It has been reported to associate with several transcription factors, as well as proteins not involved in transcription. To better characterize potential cellular targets of Tax present in infected cells, a Saccharomyces cerevisiae two-hybrid screening was performed with a cDNA library constructed from the HTLV-1-infected MT2 cell line. From this study, we found 158 positive clones representing seven different cDNAs. We focused our attention on the cDNA encoding the transcription factor CREB-2. CREB-2 is an unconventional member of the ATF/CREB family in that it lacks a protein kinase A (PKA) phosphorylation site and has been reported to negatively regulate transcription from the cyclic AMP response element of the human enkephalin promoter. In this study, we demonstrate that CREB-2 cooperates with Tax to enhance viral transcription and that its basic-leucine zipper C-terminal domain is required for both in vitro and in vivo interactions with Tax. Our results confirm that the activation of the HTLV-1 promoter through Tax and factors of the ATF/CREB family is PKA independent.

Tax incentives and direct support for R&D: What do firms use and why?

This paper studies whether firms' use of R&D subsidies and R&D tax incentives is correlated to two sources of underinvestment in R&D, financing constraints and appropriability. We find that financially constrained SMEs are less likely to use R&D tax credits and more likely to obtain subsidies. SMEs using legal methods to protect their intellectual property are more likely to use tax incentives. Results are ambiguous for large firms. For both having previous experience in R&D increases the likelihood of using tax incentives, while it reduces the likelihood of using exclusively subsidies, suggesting that the latter induce entry into R&D. Results imply that direct funding and tax credits do not have the same ability to address each source of R&D underinvestment, and that on average subsidies may be better suited than tax credits at least for SMEs. From a policy perspective these tools may be complements rather than substitutes.

Unstable shoes increase energy expenditure of obese patients.

BACKGROUND: Ergonomic unstable shoes, which are widely available to the general population, could increase daily non-exercise activity thermogenesis as the result of increased muscular involvement. We compared the energy expenditure of obese patients during standing and walking with conventional flat-bottomed shoes versus unstable shoes. METHODS: Twenty-nine obese patients were asked to stand quietly and to walk at their preferred walking speed while wearing unstable or conventional shoes. The main outcome measures were metabolic rate of standing and gross and net energy cost of walking, as assessed with indirect calorimetry. RESULTS: Metabolic rate of standing was higher while wearing unstable shoes compared with conventional shoes (1.11 ± 0.20 W/kg(-1) vs 1.06 ± 0.23 W/kg(-1), P=.0098). Gross and net energy cost of walking were higher while wearing unstable shoes compared with conventional shoes (gross: 4.20 ± 0.42 J/kg(-1)/m(-1)vs 4.01 ± 0.39 J/kg(-1)/m(-1), P=.0035; net: 3.37 ± 0.41 J/kg(-1)/m(-1) vs 3.21 ± 0.37 J/kg(-1)/m(-1); P=.032). CONCLUSION: In obese patients, it is possible to increase energy expenditure of standing and walking by means of ergonomic unstable footwear. Long-term use of unstable shoes may eventually prevent a positive energy balance.