Taxing and spending
The Effect of Income on Subjective Well-Being: Evidence from the 2008 Economic Stimulus Tax Rebates
Marta Lachowska
Journal of Human Resources, Spring 2017, Pages 374-417
Abstract:
This paper uses tax rebate payments from the 2008 economic stimulus to estimate the effect of a one-time change in income on three measures of subjective well-being: life satisfaction, health satisfaction, and affect. The income effect is identified by exploiting the plausibly exogenous variation in the payment schedule of the rebates. Using both ordinary least squares and two-stage least squares estimators, I find that the rebates had a large and positive impact on affect, which is explained by a reduction in feelings of stress and worry. For life satisfaction and health satisfaction, there is weaker evidence of a positive impact.
The Impact of State Taxes on Pass-Through Businesses: Evidence from the 2012 Kansas Income Tax Reform
Jason DeBacker et al.
Indiana University Working Paper, July 2016
Abstract:
In 2012, Kansas undertook a large-scale tax reform that excluded certain forms of business income from individual taxation. In theory, these changes enhance the incentives to undertake more real economic activity such as new business formation or increases in employment or investment. But, the reform also shifted the incentives to avoid taxation by recharacterizing income sources. This paper provides evidence of these effects using federal administrative taxpayer data. Drawing on these data from 2010 to 2014, we find evidence suggesting that, at both extensive and intensive margins, the behavioral responses were overwhelmingly tax avoidance rather than real supply side responses.
A Taste for Taxes: Minimizing Distortions Using Political Preferences
Emiliano Huet-Vaughn, Andrea Robbett & Matthew Spitzer
Middlebury College Working Paper, March 2017
Abstract:
We conduct an experiment with online workers to assess whether the distortionary effect of a tax is sensitive to the ideological match between taxpayer and tax expenditures. We find that, among self-identified political moderates, the labor supply elasticity with respect to the net of tax wage is significantly smaller when individuals pay taxes to a favored government agency as compared to an unfavored one. While the tax has a significant distortionary effect in the latter case, with a point estimate for the labor supply elasticity of approximately 0.75, the elasticity point estimate is virtually zero when taxes go to a favored agency. There is also an increase in total output for the matched population. There is no evidence of a similar effect for those on the ends of the ideological spectrum.
Income Taxes and Team Performance: Do They Matter?
Erik Hembre
University of Illinois Working Paper, April 2017
Abstract:
State- and local-income tax rates differ across locations, giving low-tax teams a competitive advantage when bidding for players. I investigate the effect of income tax rates on professional team performance between 1977 and 2014 using data from professional baseball, basketball, football, and hockey in the United States. Regressing income tax rates on winning percentage, I find little evidence of income tax effects prior to 1994, but since then a ten percent increase in income taxes is associated with a three percent decline in winning percentage. A robustness check using within state variation in income taxes affirms this result. The income tax rate effect varies by league, with the largest effect in professional basketball, where teams in states without income tax win 4.5 more games each year relative to high-tax states. The income tax effect is smallest in major league baseball, which could be explained by greater team payroll disparity. Placebo tests using college team performance find no evidence of an income tax effect.
Political Representation and Governance: Evidence from the Investment Decisions of Public Pension Funds
Aleksandar Andonov, Yael Hochberg & Joshua Rauh
Stanford Working Paper, April 2017
Abstract:
We examine how political representatives affect the governance of organizations. Our laboratory is public pension funds and their investments in the private equity asset class. Representation on pension fund boards by state officials or those appointed by them - often determined by statute decades past - is strongly and negatively related to the performance of private equity investments made by the fund. Funds whose boards have high fractions of government officials choose poorly within investment categories potentially related to economic development, such as real estate and venture capital. They overweight investments in in-state funds, as well as in funds that are small, have inexperienced GPs, and have few other investors. Lack of financial experience contributes to poor performance of boards dominated by plan participants, but does not explain the underperformance of boards heavily populated by state officials. Political contributions from the finance industry to elected state officials on pension fund boards are strongly and negatively related to performance, but do not fully explain the performance differential.
Do nonprofits manipulate investment returns?
Douglas Almond & Xing Xia
Economics Letters, June 2017, Pages 62-66
Abstract:
We provide evidence that nonprofit organizations manipulate reported investment returns to avoid investment losses. We find a sharp discontinuity around zero in cross-sectional distribution of the rates of return on investments for tax-exempt organizations: rates of return are significantly more likely to be slightly positive than slightly negative. This pattern is found for a wide range of nonprofit missions, including religious related charities and community improvement organizations.
Public Corruption in the U.S. States and Its Impact on Public Debt Pricing
Tima Moldogaziev, Cheol Liu & Martin Luby
Kyklos, May 2017, Pages 306-329
Abstract:
This study evaluates the levels of public corruption in the American states and their impact on the prices of public debt sold by underwriting banks to retail investors. Results suggest that the markups paid by retail investors to underwriters decrease significantly with the incidence of public corruption. The relationship remains significant even when existing anti-corruption enforcement efforts are taken into consideration. Extant literature shows that the issuers of public debt from relatively more corrupt jurisdictions receive lower prices from underwriting banks in wholesale transactions. We develop and empirically show the mechanism through which this can occur. We offer the first evidence that the public debt market exerts disciplining pressures on the American states with greater levels of public corruption. When purchasing state-issued public debt, retail buyers appear to demand narrower markups by factoring in public corruption. This, we argue, is an important reason why underwriting banks offer lower prices when dealing with less disciplined fiscal sovereigns.
The economics of universal service: An analysis of entry subsidies for high speed broadband
Andre Boik
Information Economics and Policy, forthcoming
Abstract:
Universal service is a policy objective that all individuals or households have access to some service. Subsidy policies to accomplish universal service may arise when private provision is non-universal. In the context of rural high speed wired broadband subsidies, this paper examines novel household-level cable and satellite broadband subscription data from North Carolina to examine household adoption and substitution patterns across broadband types to evaluate how many currently unserved regions warrant an entry subsidy. This paper has three main findings: (i) fewer than 43% of households adopt high speed broadband in areas currently served by a single broadband provider, (ii) there exists evidence of a significant elasticity of substitution between high speed wired broadband and the lower speed options of satellite broadband and DSL, and (iii) a generous upper bound on the number of regions that warrant an entry subsidy is 64%. These results suggest a policy of universal high speed wired broadband service in North Carolina would be unlikely to achieve universal adoption, would connect many households already with internet access and who would not substitute, and in many regions would be prohibitively costly even assuming very generous estimates of the consumer surplus generated. From the perspective of social welfare, to justify connecting the 5% least dense areas of North Carolina would require each adopting household value high speed wired broadband access at more than $1519 per month.
Growth in the Shadows: Effect of the Shadow Economy on U.S. Economic Growth Over More than a Century
Rajeev Goel, James Saunoris & Friedrich Schneider
Illinois State University Working Paper, April 2017
Abstract:
This paper provides a long-term view by studying the effect of the underground or shadow economy on economic growth in the Unites States over the period 1870 to 2014. Shadow activities might spur or retard economic growth depending on their interactions with the formal sector and impacts on the provision of public goods. Nesting the analysis in a standard neo-classical growth model, we use a relatively new time-series technique to estimate the short-run dynamics and long-run relationship between economic growth and its determinants. Results suggest that prior to WWII the shadow economy had a negative effect on economic growth; however, post-WWII the shadow economy was beneficial for growth. This ambiguity regarding the overall growth impact of the shadow economy is consistent with underlying theoretical arguments.
Impact of a light rail extension on residential property values
Jacob Camins-Esakov & Donald Vandegrift
Research in Transportation Economics, forthcoming
Abstract:
Previous work has examined a new light-rail line or upgrades to existing rail infrastructure. However, the following is the first examination of the value of an extension of a light-rail line. The analysis relies on repeat sales of houses in Bayonne, New Jersey, where the first sale occurred before the 2008 announcement of a southern extension to the Hudson-Bergen Light Rail to 8th Street in Bayonne, and the second sale occurred after the opening of the station in 2011. Our results show that the 8th Street Station had no statistically significant impact on annual house price appreciation. That is, we find no evidence that properties closer to the station showed more price appreciation than properties further from the station.
Is the Light Rail "Tide" Lifting Property Values? Evidence from Hampton Roads, VA
Gary Wagner, Timothy Komarek & Julia Martin
Regional Science and Urban Economics, July 2017, Pages 25-37
Abstract:
In this paper we examine the effect of light rail transit on the residential real estate market in Hampton Roads, Virginia. Norfolk's Tide light rail began operations in August of 2011 and has experienced disappointing levels of ridership compared to other light rail systems. We estimate the effect of the Tide using a difference-in-differences model and consider several outcome variables for the residential housing market, including sale price, sale-list price spread and the time-on-market. Our identification strategy exploits a proposed rail line in neighboring Virginia Beach, Virginia that was rejected by a referendum in 1999. Overall, the results show negative consequences from the constructed light rail line. Properties within 1,500 meters experienced a decline in sale price of nearly 8%, while the sale-list price spread declined by approximately 2%. Our results highlight the potential negative effects of light rail when potential accessibility benefits do not out weigh apparent local costs.
Does the Strength of Incentives Matter for Elected Officials? A Look at Tax Collectors
Sutirtha Bagchi
Villanova University Working Paper, March 2017
Abstract:
In Pennsylvania local property taxes are collected by elected officials, known as tax collectors, whose compensation varies widely in both structure and level across municipalities. This paper analyses the existence of a pay-performance relationship for these officials. Using data on the percentage of real estate taxes that are actually collected at the municipal level, the paper finds that as the compensation tax collectors receive goes up, they collect more in taxes. This relationship is however true only for collectors who are compensated on a commission basis and not for collectors compensated on the basis of a flat salary. The paper also finds no relationship between the share of votes received by the tax collector and the percentage of property taxes collected during the previous term. This observation may account for the lack of a positive relationship between pay and performance for collectors compensated on the basis of a salary.
Multiplier Effects of Federal Disaster-Relief Spending: Evidence from U.S. States and Households
Xiaoqing Zhou
University of Michigan Working Paper, March 2017
Abstract:
Can government spending have a large effect on private consumption and income? This paper uses a novel dataset on federal government disaster-relief spending, combined with both household and state-level consumption, income and employment data, to answer this question. My estimates show that the demand shock created by government disaster-relief spending can have a large multiplier effect, and that this effect comes from the government's influence on the labor market. Based on the occupational information in the household survey data, I show that households who are most likely to work for disaster-relief related jobs have the largest consumption growth in states receiving disaster-relief spending from the federal government. When a state receives such spending, the industries in this state that provide most disaster-relief related jobs experience the largest employment growth. My findings are supportive of the job-creation channel emphasized in Keynesian models of the effects of higher government spending.
Disasters and Social Capital: Exploring the Impact of Hurricane Katrina on Gulf Coast Counties
Lili Wang & Nazife Emel Ganapati
Social Science Quarterly, forthcoming
Method: One hundred eighty-two counties affected by Hurricane Katrina are included in the study. Disaster-related data, social capital, and community characteristics of these counties three years before and three years after the disaster are analyzed using a longitudinal fixed-effect model.
Results: Hurricane Katrina slowed down the growth of social capital, but growth gradually recovered following the disaster. After controlling for community characteristics, areas that received more federal government assistance experienced stronger growth in social capital post-Katrina. Additionally, metropolitan areas with a higher percentage of senior population, higher ethnic diversity, more per capita housing units, and lower population density appear to have had higher levels of social capital.