Bureaucracy and the flypaper effect : Evidence from intercommunal fiscal equalisation in the canton of Vaud

Unlike classical theoretical expectations, our empirical study shows that financial transfers to decentralised governments increase local public expenditures much more than would be triggered by an equivalent rise in local income. This empirical evidence of the presence of a flypaper effect is achieved using panel data from 375 municipalities located in the Swiss canton of Vaud covering the period 1994 to 2005. During that time there was a major change in the financial equalisation scheme. Furthermore, our study confirms the analysis of the public choice theory: the effect depends partly on the degree of complexity of the municipal bureaucracy. These results show that local bureaucratic behaviour may impede the effectiveness of a financial equalisation scheme that aims to reduce disparities in local tax.

Healthy, wealthy, wise, and happy? An exploratory analysis of the interplay between aging and subjective well-being in low and middle income countries

In this paper, we address the relationship between age and several dimension of subjective well-being. Whilst literature generally finds a U-shaped age-profile in subjective well-being, this age-pattern might only hold after controlling for objective life circumstances. The observed U-shaped age-profile might further not generalize to other dimensions of well-being and might vary across countries and cultures. Our study examines the relationship between age and several dimensions of well-being as well as the effect of objective life circumstances using the WHO Study on Global AGEing and Adult Health (SAGE). Our results suggest a decreasing age profile in the raw data associated with evaluative well-being, while experienced well-being shows a rather flat or slightly increasing pattern. However, age per se is not a cause of a decline in evaluative well-being. The negative age-profile in evaluative well-being is mainly explained by changes in life circumstances associated with aging. Controlling for socio-demographic factors, we find higher levels of well-being for older persons relative to their middle-aged counterparts. In contrast, we find that changes in life circumstances have a much smaller effect on experienced well-being.

On the distribution of income and worker assignment under intra-firm spillovers, with an application to ideas and networks

We study the earnings structure and the equilibrium assignment of workers when workers exert intra-firm spillovers on each other.We allow for arbitrary spillovers provided output depends on some aggregate index of workers' skill. Despite the possibility of increasing returns to skills, equilibrium typically exists. We show that equilibrium will typically be segregated; that the skill space can be partitioned into a set of segments and any firm hires from only one segment. Next, we apply the model to analyze the effect of information technology on segmentation and the distribution of income. There are two types of human capital, productivity and creativity, i.e. the ability to produce ideas that may be duplicated over a network. Under plausible assumptions, inequality rises and then falls when network size increases, and the poorest workers cannot lose. We also analyze the impact of an improvement in worker quality and of an increased international mobility of ideas.

Estimating the effect of transitory economic shocks on civil conflict

This note tries to clarify some remaining issues in the debate on the effect of income shocks oncivil conflict. Section 1 discusses the discrepant findings on the effect of rainfall shocks oncivil conflict in Miguel and Satyanath (2010, 2011) and Ciccone (2011). Section 2 develops aninstrumental variables approach to estimate the effect of transitory (rainfall-driven) incomeshocks on civil conflict and contrasts the conclusions with those of Miguel, Satyanath, andSergenti (2004) and Miguel and Satyanath (2010, 2011). Throughout, the note uses the data ofMiguel, Satyanath, and Sergenti to focus on the methodological issues at the core of the debate(for results using the latest data see Ciccone, 2011).

Oil price shocks, income and democracy

We examine the effect of oil price fluctuations ondemocratic institutions over the 1960-2007 period. We also exploitthe very persistent response of income to oil price fluctuations tostudy the effect of persistent (oil price-driven) income shocks ondemocracy. Our results indicate that countries with greater net oilexports over GDP see improvements in democratic institutionsfollowing upturns in international oil prices. We estimate that a 1percentage point increase in per capita GDP growth due to apositive oil price shock increases the Polity democracy score byaround 0.2 percentage points on impact and by around 2 percentagepoints in the long run. The effect on the probability of a democratictransition is around 0.4 percentage points.

Targeting fertility and female participation through the income tax

We evaluate the effect of a 2003 reform in the Spanish income tax on fertility and the employment of mothers with small children. The reform introduced a tax credit for working mothers with children under the age of three, while also increasing child deductions for all households with children. Theoretically, given the interplay of these two components, the expected effect of the reform is ambiguous on both outcomes. We find that the combined reforms significantly increased both fertility (by almost five percent) and the employment rate of mothers with children under three (by two percent). These effects were more pronounced among less-educated women. In addition, to disentangle the impact of the two reform components, we use an earlier reform that increased child deductions in 1999. We find that the child deductions affect mothers employment negatively, which implies that the 2003 tax credit would have increased employment even more (up to five percent) in the absence of the change in child deductions.

Education, growth and income inequality

Estimates of the e¤ect of education on GDP (the social return to education)have been hard to reconcile with micro evidence on the private return. We present a simple explanation that combines two ideas: imperfect substitution between worker types and endogenous skill biased technological progress. When types of workers are imperfect substitutes, the supply of human capital is negatively related to its return, and a higher education level compresses wage di¤erentials. We use cross-country panel data on income inequality to estimate the private return and GDP data to estimate the social return. The results show that the private return falls by 2 percentage points when the average education level increases by a year, which is consistent with Katz and Murphy's [1992] estimate of the elasticity of substitution between worker types. We find no evidence for dynamics in the private return, and certainly not for a reversal of the negative e¤ect as described in Acemoglu [2002]. The short run social return equals the private return.

Income taxation in a frictional labor market

A new model of wage dispersion is used to examine welfare aspects of income taxation. The model retains the dynamics of wage posting modelswhile exogenizing search e¤ort, therefore allowing more insight into policy issues. The results highlight effects that standard analyses do not take into account. The optimal income tax should depend on an incidenceeffect between workers and firms. This incidence effect arises from firmstrying to lower wages as much as possible. An employment tax proves, incertain cases, to be the best method to encourage labor force participation.

Low income, community poverty and risk of end stage renal disease

BACKGROUND: The risk of end stage renal disease (ESRD) is increased among individuals with low income and in low income communities. However, few studies have examined the relation of both individual and community socioeconomic status (SES) with incident ESRD. METHODS: Among 23,314 U.S. adults in the population-based Reasons for Geographic and Racial Differences in Stroke study, we assessed participant differences across geospatially-linked categories of county poverty [outlier poverty, extremely high poverty, very high poverty, high poverty, neither (reference), high affluence and outlier affluence]. Multivariable Cox proportional hazards models were used to examine associations of annual household income and geospatially-linked county poverty measures with incident ESRD, while accounting for death as a competing event using the Fine and Gray method. RESULTS: There were 158 ESRD cases during follow-up. Incident ESRD rates were 178.8 per 100,000 person-years (105 py) in high poverty outlier counties and were 76.3 /105 py in affluent outlier counties, p trend = 0.06. In unadjusted competing risk models, persons residing in high poverty outlier counties had higher incidence of ESRD (which was not statistically significant) when compared to those persons residing in counties with neither high poverty nor affluence [hazard ratio (HR) 1.54, 95% Confidence Interval (CI) 0.75-3.20]. This association was markedly attenuated following adjustment for socio-demographic factors (age, sex, race, education, and income); HR 0.96, 95% CI 0.46-2.00. However, in the same adjusted model, income was independently associated with risk of ESRD [HR 3.75, 95% CI 1.62-8.64, comparing the < $20,000 income group to the > $75,000 group]. There were no statistically significant associations of county measures of poverty with incident ESRD, and no evidence of effect modification. CONCLUSIONS: In contrast to annual family income, geospatially-linked measures of county poverty have little relation with risk of ESRD. Efforts to mitigate socioeconomic disparities in kidney disease may be best appropriated at the individual level.

The effect of tax enforcement on tax elasticities: Evidence from charitable contributions in France

Optimal tax formulas expressed in "sufficient statistics" are usually calibrated under the assumptionthat the relevant tax elasticities are unaffected by other available policy instruments.In practice though, tax authorities have many more instruments than the mere tax rates andtax elasticities are functions of all these policy instruments. In this paper we provide evidencethat tax elasticities are extremely sensitive to a particular policy instrument: the level of taxenforcement. We exploit a natural experiment that took place in France in 1983, when the taxadministration tightened the requirements to claim charitable deductions. The reform led to asubstantial drop in the amount of contributions reported to the administration, which can becredibly attributed to overreporting of charitable contributions before the reform, rather thanto a real change in giving behaviours. We show that the reform was also associated with asubstantial decline in the absolute value of the elasticity of reported contributions. This findingallows us to partially identify the elasticity of overreporting contributions, which is shown tobe large and inferior to -2 in the lax enforcement regime. We further show using bunching oftaxpayers at kink-points of the tax schedule that the elasticity of taxable income also experienceda significant decline after the reform. Our results suggest that optimizing the tax rate fora given tax elasticity when other policy instruments are not optimized can lead to misleadingconclusions when tax authorities have another instrument that could set the tax elasticity itselfat its optimal level as in Kopczuk and Slemrod [2002].

Interrelation among Economic Growth, Income Inequality, and Fiscal Performance: Evidence from Anglo-Saxon Countries

The interrelation among economic growth, income inequality, and fiscal performance is very complex. The paper provides the analysis of the interrelations among these variables jointly by the structural VAR methodology, examining also transmission channels among them. This approach allows exploring dynamic interactions among them and feedback effects on each other. The empirical analysis is implemented for the Anglo-Saxon countries, the UK, the USA, and Canada. We find that income inequality has negative effect on economic growth in the case of the UK. The effect is positive in the cases of the USA and Canada. The increase in income inequality worsens fiscal performance for all the countries

Effect of light intensity and growth substratum on plant development and production of secondary metabolites in Cordia curassavica (Jacq.) Roem. & Schult

Cordia curassavica (Jacq.) Roem. & Schult. (Boraginaceae), also referred to as Cordia verbenacea DC, has been traditionally used for medicinal purposes. This study was driven to verify the behavior of the species in similar conditions to its natural environment, such as high light intensity and sandbank soil, and in conditions of low light intensity and fertilized substratum (dystroferric red nitosoil plus earthworm humus). The growth of the plant, the income of leaf crude extracts and, in the alcoholic extract, the number of substances found in thin layer cromatography and the toxicity of the substratum was observed. The results indicated that the growth of the root biomass, stem and leaves in discharge or lower light intensity was similar, but smaller in sandbank soil than in fertilized soil. The relative income of extracts in ether of petroleum and alcohol was larger in high light intensity and fertilized substratum. The light intensity and the substratum type didn't affect the number of substances detected in the alcoholic extract or the toxicity of this extract. Stains corresponding to the rosmarinic acid were only evidenced in some samples of the alcoholic extract, not allowing the verification of the effect of the treatments about its production.

Effect of a Brazilian regional basic diet on the prevalence of caries in rats

The aim of the present study was to determine the effect of a regional basic diet (RBD) on the prevalence of caries in the molar teeth of rats of both sexes aged 23 days. The animals were divided into six groups of 10 rats each receiving the following diets for 30 and 60 days after weaning: RBD, a cariogenic diet, and a commercial diet. The prevalence and penetration of caries in the molar teeth of the rats was then analyzed. The RBD produced caries in 37.5% of the teeth of animals fed 30 days, and in 83.4% of animals fed 60 days, while the cariogenic diet produced caries in 72.5% and 77.5% of the teeth of animals fed 30 and 60 days, respectively. Rats fed the RBD for 30 days had caries in the enamel in 38% of their teeth, 48% had superficial dentin caries, and 7.5% moderate dentin caries. The effect of the RBD did not differ significantly from that of the cariogenic diet in terms of the presence of caries in rats fed 60 days. The penetration depth of the caries produced by the RBD was the same as that produced by the cariogenic diet. Our results show that the RBD has the same cariogenic potential as the cariogenic diet. Since the RBD is the only option for the low-income population, there should be a study of how to compensate for the cariogenicity of this diet.

The effect of Ponzi schemes on crime: Evidence from the colombian case

This paper estimates the impact of a massive negative income shock led by the simultaneous crash down of several Ponzi schemes (also known as financial ``pyramids"") in Colombia on crime rates at the municipal level. Using novel data on the spatial incidence of the latest wave of Colombian pyramids and their crash down date, I estimate difference-in-differences models with both monthly and yearly frequency. I find that the negative income shock of the pyramids" crash down differentially exacerbates crime in affected municipalities compared to those with no presence of Ponzi schemes. This is true for minor offenses like commercial theft or residential burglary, but not for major crimes as murder or terrorism.

Why labor income shares seem to be constant?

The common assumptions that labor income share does not change over time or across countries and that factor income shares are equal to the elasticity of output with respect to factors have had important implications for economic theory. However, there are various theoretical reasons why the elasticity of output with respect to reproducible factors should be correlated with the stage of development. In particular, the behavior of international trade and capital flows and the existence of factor saving innovations imply such a correlation. If this correlation exists and if factor income shares are equal to the elasticity of output with respect to factors then the labor income share must be negatively correlated with the stage of development. We propose an explanation for why labor income share has no correlation with income per capita: the existence of a labor intensive sector which produces non tradable goods.