Simulating the Impact of Sectorial Productivity Gains on Two Regional Economies: Key Sectors from a Supply Side Perspective

In this paper we simulate and analyse the economic impact that sectorial productivity gains have on two regional Spanish economies (Catalonia and Extremadura). In particular we study the quantitative effect that each sector’s productivity gain has on household welfare (real disposable income and equivalent variation), on the consumption price indices and factor relative prices, on real production (GDP) and on the government’s net income (net taxation revenues of social transfers to households). The analytical approach consists of a computable general equilibrium model, in which we assume perfect competition and cleared markets, including factor markets. All the parameters and exogenous variables of the model are calibrated by means of two social accounting matrices, one for each region under study. The results allow us to identify those sectors with the greatest impact on consumer welfare as the key sectors in the regional economies. Keywords: Productivity gains, key sectors, computable general equilibrium

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%.

Effects of differential taxation on factor accumulation and growth

In this paper we try to analyze the role of fiscal policy in fostering a higher participation of the different production factors in the human capital production sector in the long-run. Introducing a tax on physical capital and differentiating both a tax on raw labor wage and a tax on skills or human capital we also attempt to present a way to influence inequality as measured by the skill premium, thus trying to relate the increase in human capital with the decrease in income inequality. We will do that in the context of a non-scale growth model.The model here is capable to alter the shares of private factors devoted to each of the two production sectors, final output and human capital, and affect inequality in a different way according to the different tax changes. The simulation results derived in the paper show how a human capital (skills) tax cut, which could be interpreted as a reduction in progressivity, ends up increasing both the shares of labor and physical capital devoted to the production of knowledge and decreasing inequality. Moreover, a raw labor wage tax decrease, which could also be interpreted as an increase in the progressivity of the system, increases the share of labor devoted to the production of final output and increases inequality. Finally, a physical capital tax decrease reduces the share of physical capital devoted to the production of knowledge and allows for a lower inequality value. Nevertheless, none of the various types of taxes ends up changing the share of human capital in the knowledge production, which will deserve our future attention

Effects of differential taxation on factor accumulation and growth

In this paper we try to analyze the role of fiscal policy in fostering a higher participation of the different production factors in the human capital production sector in the long-run. Introducing a tax on physical capital and differentiating both a tax on raw labor wage and a tax on skills or human capital we also attempt to present a way to influence inequality as measured by the skill premium, thus trying to relate the increase in human capital with the decrease in income inequality. We will do that in the context of a non-scale growth model.The model here is capable to alter the shares of private factors devoted to each of the two production sectors, final output and human capital, and affect inequality in a different way according to the different tax changes. The simulation results derived in the paper show how a human capital (skills) tax cut, which could be interpreted as a reduction in progressivity, ends up increasing both the shares of labor and physical capital devoted to the production of knowledge and decreasing inequality. Moreover, a raw labor wage tax decrease, which could also be interpreted as an increase in the progressivity of the system, increases the share of labor devoted to the production of final output and increases inequality. Finally, a physical capital tax decrease reduces the share of physical capital devoted to the production of knowledge and allows for a lower inequality value. Nevertheless, none of the various types of taxes ends up changing the share of human capital in the knowledge production, which will deserve our future attention

The accumulation of financial and social capital as a means to achieve a sustained competitive advantage for consumer co-operatives

By so far, scholars have discussed how the characteristics of consumer co-operatives (cooperative principles, values and the dual role of members as the users and owners) can potentially give them a competitive advantage over investor-owned firms (IOFs). In addition, concern for the community (as partly derived from locality and regionality) has been seen as a potential source of success for consumer co-operatives. On the other hand, the geographicbound purpose of consumer co-operation causes that consumer co-operative can be regarded as a challenging company form to manage. This is because, according to the purpose of consumer co-operation, co-operatives are obligated to 1) provide the owners with services and goods that are needed and do so at more affordable prices than their competitors do and/or 2) to operate in areas in which competitors do not want to operate (for example, because of the low profitability in certain area of business or region). Thus, consumer co-operatives have to operate very efficiently in order to execute this geographic-bound corporate purpose (e.g. they cannot withdraw from the competition during the declining stages of business). However, this efficiency cannot be achieved by any means; as the acceptance from the important regional stakeholders is the basic operational precondition and lifeline in the long run. Thereby, the central question for the survival and success of consumer co-operatives is; how should the consumer co-operatives execute its corporate purpose so it can be the best alternative to its members in the long run? This question has remained unanswered and lack empirical evidence in the previous studies on the strategic management of consumer cooperation. In more detail, scholars have not yet empirically investigated the question: How can consumer co-operatives use financial and social capital to achieve a sustained competitive advantage? It is this research gap that this doctoral dissertation aims to fulfil. This doctoral dissertation aims to answer the above questions by combining and utilizing interview data from S Group co-operatives and the central organizations in S Group´s network (overall, 33 interviews were gathered), archival material and 56 published media articles/reports. The study is based on a qualitative case study approach that is aimed at theory development, not theory verification (as the theory is considered as nascent in this field of study). Firstly, the findings of this study indicate that consumer co-operatives accumulate financial capital; 1) by making profit (to invest and grow) and 2) by utilizing a network-based organizational structure (local supply chain economies). As a result of financial capital accumulation, consumer co-operatives are able to achieve efficiency gains but also remain local. In addition, a strong financial capital base increases consumer co-operatives´ independence, competitiveness and their ability to participate in regional development (which is in accordance with their geographically bound corporate purpose). Secondly, consumer cooperatives accumulate social capital through informal networking (with important regional stakeholders), corporate social responsibility (CSR) behaviour and CSR reporting, pursuing common good, and interacting and identity sharing. As a result of social capital accumulation, consumer co-operatives are able to obtain the resources for managing; 1) institutional dependencies and 2) customer relations. By accumulating both social and financial capital through the above presented actions, consumer co-operatives are able to achieve sustained competitive advantage. Finally, this thesis provides useful ideas and new knowledge for cooperative managers concerning why and how consumer co-operatives should accumulate financial and social capital (to achieve sustained competitive advantage), while aligning with their corporate purpose.

Distortionary Taxation and Labor Supply: Evidence from Canada.

This paper examines empirically the effects of distortionary taxation on labor supply using a general equilibrium framework. The long-term relations predicted by the model are derived and tested using Canadian data between 1966 and 1993. While the cointegrating predictions of the model without taxation are rejected, the ones of the model with labor taxation are not. Persistent labor tax rate increases appear to play an important role in the observed downward trend in hours worked.

The Taxation of Nonrenewable Natural Resources

We provide an analytical overview of the distortionary eff ects of some common forms of taxes faced by the nonrenewable resources sector of the economy. In the category of taxes meant speci fically to capture the resource rent, we look at a speci c severance tax, an 'ad valorem' severance tax, a profi t tax and a 'lump-sum' tax, with emphasis on their e ffects on the extraction decisions over time and on the initial reserves to be developed. In the category of taxes meant for all sectors of the economy, we look at the corporate income tax and its special provision for the resource sector in the form of a depletion allowance, with emphasis on the eff ects on the intra-industry resource extraction decisions and on the inter-industry allocation of investment.

Cambios en el régimen de pensiones en Colombia y su efecto en el margen intensivo de la oferta laboral

En Colombia, como en muchos países de América Latina, en los años 80 y 90 se hicieron cambios importantes en los regímenes de pensiones. Este trabajo hace un análisis de uno de esos cambios en Colombia. El cambio consistió en aumentar el tiempo de cotización necesario para reclamar los beneficios pensionales y la inclusión del salario dentro de la fórmula del monto de pensiones. Para este propósito se estudia el impacto sobre la oferta laboral de un cambio exógeno en estas condiciones usando un diseño de regresión discontinua. Se encuentra un efecto positivo sobre las horas promedio trabajadas en la semana.

Resiliencia organizacional y capital psicológico

Desde la noción universal sobre la empresa como un sistema de interacción con un entorno determinado para alcanzar un objetivo, de manera planificada y en función de satisfacer las demandas de un mercado mediante la actividad económica, su viabilidad, sostenibilidad y crecimiento dependerán, por supuesto, de una serie de estrategias adecuadas no solo para tales fines, sino también para enfrentar diversidad de agentes endógenos y exógenos que puedan afectar el normal desempeño de su gestión. Estamos hablando de la importancia de la resiliencia organizacional y del Capital Psicológico. En un escenario tan impredecible como el de la economía mundial, donde la constante son los cambios en su comportamiento —unos propios de su dinámica e interdependencia, naturales de fenómenos como la globalización, y otros derivados de eventos disruptivos— hoy más que nunca es necesario implementar el modelo de la empresa resiliente, que es aquella entidad capaz de adaptarse y recuperarse frente a una perturbación. Al mismo tiempo, más allá de su tamaño, naturaleza u objeto social, es indispensable reconocer básicamente que toda organización está constituida por personas, lo cual implica la trascendencia que para su funcionamiento tiene el factor humano-dependiente, y por lo tanto se crea la necesidad de promover el Capital Psicológico y la resiliencia a nivel de las organizaciones a través de una cultura empresarial.

The risk-properties of human capital and the design of government policies

Whether human capital increases or decreases wage uncertainty is an open question from an empirical standpoint. Yet, most policy prescriptions regarding human capital formation are based on models that impose riskiness on this type of investment. In a two period and finite type optimal income taxation problem we derive prescriptions that are robust to the risk characteristics of human capital: savings should be discouraged, human capital investments encouraged and both types of investment driven to an efficient level from an aggregate perspective. These prescriptions are also robust to the assumptions regarding what choices are observed, despite policy instruments being not.

Impactos de Bem-estar da Privatização de Infra-estrutura

Rio de Janeiro

Public expenditures taxation and welfare measurement

this article addresses the welfare and macroeconomics effects of fiscal policy in a frarnework where govemment chooses tax rates and the distribution of revenues between consumption and investment. We construct and simulate a model where public consumption affects individuaIs' utility and public capital is an argument of the production function. The simulations suggest that by simply reallocating expenditures from consumption to investment, the govemment can increase the equilibrium leveIs of capital stock, hours worked, output and labor productivity. Funhennore, we 'show that the magnitude and direction of the long run impact of fiscal policy depends on the size of the elasticity of output to public capital. If this parameter is high enough, it may be the case that capital stock, within limits, increases with tax rates.

The costs of education, longevity and the poverty of nations

This paper explores the distortions on the cost of education, associated with government policies and institutional factors, as an additional determinant of cross-country income differences. Agents are finitely lived and the model takes into account life-cycle features of human capital accumulation. There are two sectors, one producing goods and the other providing educational services. The model is calibrated and simulated for 89 economies. We find that human capital taxation has a relevant impact on incomes, which is amplified by its indirect effect on returns to physical capital. Life expectancy plays an important role in determining long-run output: the expansion of the population working life increases the present value of the flow of wages, which induces further human capital investment and raises incomes. Although in our simulations the largest gains are observed when productivity is equated across countries, changes in longevity and in the incentives to educational investment are too relevant to ignore.

Public versus private provision of infrastructure in a neoclassical growth model

This article studies the welfare and long run allocation impacts of privatization. There are two types of capital in this model economy, one private and the other initially public (“infrastructure”). A positive externality due to infrastructure capital is assumed, so that the government could improve upon decentralized allocations internalizing the externality, but public investmentis …nanced through distortionary taxation. It is shown that privatization is welfare-improving for a large set of economies and that after privatization under-investment is optimal. When operation inefficiency in the public sectoror subsidy to infrastructure accumulation are introduced, gains from privatization are higherand positive for most reasonable combinations of parameters.