Home About us Contact
|
Home About us Contact | ||
|
|
||
Tax Revenues (tax + revenue)
Selected AbstractsCities, Tax Revenues, and a State's Fiscal Future: The Value of Major Urban CentersPUBLIC BUDGETING AND FINANCE, Issue 1 2006WILLIAM M. BOWEN Competition among core cities or urban centers and suburban and rural areas besets numerous states. The competition often occurs amid a political environment in which suburban and rural areas enjoy a political majority in the state legislature, a majority that directs state investments to their areas. With Ohio as a case study, the issues that have created the urban,suburban,rural trichotomy are reviewed and an analysis of the tax returns, by area, to state investments is presented. The findings illustrate that urban centers produce more tax dollars per dollar of state investment than other areas, implying that state underinvestment in urban areas harms overall state tax revenues. [source] Revenue Mobilisation in Sub-Saharan Africa: Challenges from Globalisation I , Trade ReformDEVELOPMENT POLICY REVIEW, Issue 5 2010Michael Keen This is the first of two articles evaluating the nature and extent of, and possible responses to, two of the central challenges that globalisation poses for revenue mobilisation in sub-Saharan Africa: trade liberalisation, and corporate tax competition. Both articles use a new dataset with the features needed to address these issues meaningfully: a disentangling of tariff from commodity tax revenue, and a distinction between resource-related and other revenues. This first article describes that dataset, and provides a broad picture of revenue developments in the region between 1980 and 2005. Countries' experiences have varied, but the overall picture is of non-resource revenues having been essentially stagnant. Within this, however, and with exceptions, reductions in trade tax revenue have been largely offset by increased revenue from domestic sources. [source] Anticipating Tax Changes: Evidence from the Finnish Corporate Income Tax Reform of 2005,FISCAL STUDIES, Issue 2 2008Seppo Kari H25; H32 Abstract Using register-based panel data covering all Finnish firms from 1999 to 2004, we examine how corporations anticipated the 2005 dividend tax increase via changes in their dividend and investment policies. The Finnish capital and corporate income tax reform of 2005 creates a useful opportunity to measure this behaviour, since it involves exogenous variation in the tax treatment of different types of firms. The estimation results reveal that those firms that anticipated a dividend tax hike increased their dividend payouts in a statistically significant way. This increase was not accompanied by a reduction in investment activities, but rather was associated with increased indebtedness in non-listed firms. The results also suggest that the timing of dividend distributions probably offsets much of the potential for increased dividend tax revenue following the reform. [source] The income elasticity of tax revenue: estimates for income and consumption taxes in the United KingdomFISCAL STUDIES, Issue 1 2004John Creedy Abstract This paper provides estimates of individual and aggregate revenue elasticities of income and consumption taxes in the UK over the period 1989,2000. It shows how budgetary changes, including changes to income-related deductions, have substantially affected income elasticities. The estimates of consumption tax revenue elasticities show that changes in consumption patterns over time are important. A merit of the approach used here is that elasticity estimates can be calculated readily from official published sources. [source] Public Education Financing Trends and the Gray Peril HypothesisGROWTH AND CHANGE, Issue 4 2009DAYTON M. LAMBERT ABSTRACT The effects of migrating seniors on the provision of local public services in rural communities is growing in importance because of the large number of retiring baby boomers and the increasing rate at which these retirees are locating outside traditional retirement destinations. Some communities are optimistic about attracting and retaining retirees as an economic development strategy, but others are concerned that inmigrating seniors may be reluctant to support local public services, such as education, bringing with them "Gray Peril." This article attempts to clarify questions regarding the Gray Peril hypothesis and local ability and willingness to fund education in Tennessee, an increasingly popular retirement destination. To this end, county per pupil education expenditure growth is explained by growth trends in local property tax assessment and sales tax revenue, and migration patterns of the retirement-aged population from 1962 to 2002. [source] Land tax and economic growth under credit market imperfectionINTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 2 2007Masaya Sakuragawa H20; O40 We study the general equilibrium effects of land taxation on economic growth by extending the model developed by Kiyotaki and Moore (1997) to an endogenous growth model, where land is used not only as an input of production but also as collateral. Land taxation tends to hamper economic growth through the credit-contraction effect, but the overall direction on economic growth depends on the redistribution scheme of the tax revenue. Surprisingly, we show that if the tax revenue is fully refunded to entrepreneurs, the economy grows faster than a no-taxation economy. We calibrate our model and show that if taxation on land is raised by 1 percent, the land price initially falls by approximately 9.09 percent, while the economy grows faster by 0.6%. [source] FREE CASH FLOW AND PUBLIC GOVERNANCE: THE CASE OF ALASKAJOURNAL OF APPLIED CORPORATE FINANCE, Issue 3 2000Dwight R. Lee In a widely cited 1986 article in the American Economic Review, Michael Jensen gave the concept of free cash flow (FCF) a new twist by redefining it as cash flow in excess of that required to fund all projects with positive net present values. Put another way, FCF represents funds available in the firm that managers may choose to hold as idle cash, return to shareholders, or invest in projects with returns below the firm's cost of capital. In redefining FCF in this way, Jensen converted FCF from a measure of economic income and value into a measure of corporate assets available for discretionary, and potentially value-destroying, use by firm managers. And, as he argued in his important article, managers in mature businesses with substantial free cash flow have a tendency to destroy value by plowing too much capital back into those businesses or, often worse, making ill-advised acquisitions in unrelated businesses. Several methods have been developed in financial markets and internal corporate governance systems to discourage managers from wasting FCF. Better monitoring by boards of directors, large ownership blocks, and properly aligned management compensation contracts are all parts of the solution. And the extraordinary increase in stock repurchases in recent years, invariably applauded by investors, is another illustration of the market's success in encouraging companies to address their free cash flow problems. But if the "FCF problem" of the private sector has attracted considerable attention from finance scholars, the problem is even more acute in the public sector, where FCF can be thought of as tax revenue in excess of what is required to finance well-defined and generally accepted levels of public services. Unlike the private sector, in the public sector there are neither measures nor mechanisms by which to monitor and constrain wasteful spending by elected officials. In this article, the authors attempt to measure the costs to taxpayers of government FCF using the case of Alaska, which since 1969 has received a huge windfall of tax revenue from North Slope oil leases. After examining the state's public finances from 1968 through 1993, the authors offer $25 billion as a conservative estimate of the social losses from Alaska's waste of free cash flow during that 25-year period. [source] The Role of Philanthropy in Local Government FinancePUBLIC BUDGETING AND FINANCE, Issue 3 2005Renée A. Irvin Nonprofit organizations thrive on the altruism of citizens, and actively court donors for major gifts. Yet individual gifts to government agencies are often unexpected, sporadic, and initiated by the donor. This article introduces the phenomenon of private giving to local governments and tests hypotheses regarding the expected forms of giving to public agencies. Results indicate that philanthropy is and will likely remain a minor and highly variable source of revenue, making it an ill-suited replacement for broad-based tax revenue. However, deliberate government efforts to provide a suitable environment for private donations appear to succeed in attracting more gifts per capita. [source] The Flypaper Effect: Evidence from IndiaPUBLIC BUDGETING AND FINANCE, Issue 3 2002Mala Lalvani The flypaper effect refers to the phenomenon whereby expenditure stimulus from unconditional grants exceeds that from an equivalent increase in income. The flypaper effect has been described as "money sticks where it hits." The present study empirically tests the flypaper effect for the Indian economy. The study also tests the asymmetry hypothesis that looks at the impact of retrenchment in grants. Results obtained in the present study show the flypaper effect to be vindicated. We find that both capital and revenue expenditures receive a greater stimulus from grants than would an increase in income. Results show that in the prereform period both revenue and capital expenditures are maintained during periods of grant cuts. However, in the postreform period it is only expenditures on revenue accounts that are maintained in periods of grant reduction. We also find that during periods of grant reduction, state governments maintain their expenditure programs by raising their own tax revenue. This suggests that grants from the center have had a disincentive effect and could be a reason that state governments have not exploited their tax potential to the fullest. By bringing to the fore the disincentive effect of grants we wish to emphasize the urgency of taking a closer look at restructuring and redesigning our system of intergovernmental transfers. [source] GROWTH AND WELFARE EFFECTS OF AN ENVIRONMENTAL TAX-BASED PUBLIC PENSION REFORM,THE JAPANESE ECONOMIC REVIEW, Issue 3 2007TETSUO ONO This paper presents an overlapping generations model in which: (i) firms create emissions as by-products of production; and (ii) tax revenue from the working young is transferred to the retired elderly as pay-as-you-go pension benefits. The paper focuses on a replacement ratio, which measures the proportion of after tax work earnings replaced by the public pension, and considers a replacement ratio neutral reform in which the newly introduced environmental tax is devoted to cutting the social security tax, keeping the replacement ratio unchanged. It is shown that the reform may improve growth, environmental quality and the nonenvironmental utility of every generation. [source] ACCOUNTING FOR POPULATION AGEING IN TAX MICROSIMULATION MODELLING BY SURVEY REWEIGHTING,AUSTRALIAN ECONOMIC PAPERS, Issue 1 2006LIXIN CAI This paper investigates the use of sample reweighting, in a behavioural tax microsimulation model, to examine the implications for government taxes and expenditure of population ageing in Australia. First, a calibration approach to sample reweighting is described, producing new weights that achieve specified population totals for selected variables. Second, the performance of the Australian Bureau of Statistics' (ABS) weights provided with the 2000,2001 Survey of Income and Housing Cost (SIHC) was examined and it was found that reweighting does not improve the simulation outcomes for the 2001 situation, so the original ABS weights were retained for 2001. Third, the implications of changes in the age distribution of the population were examined, based on population projections to 2050. A ,pure' change in the age distribution was examined by keeping the aggregate population size fixed and changing only the relative frequencies in different age-gender groups. Finally, the effects of a policy change to benefit taper rates in Australia were compared for 2001 and 2050 population weights. It is suggested that this type of exercise provides an insight into the implications for government income tax revenue and social security expenditure of changes in the population, indicating likely pressures for policy changes. [source] Property Tax in Urban ChinaCHINA AND WORLD ECONOMY, Issue 4 2008Dan Li H20; R21; R31 Abstract This paper examines China's urban housing sector and proposes that property tax reform be undertaken. Specifically, China should significantly reduce taxes on transactions and introduce property taxes during the possession of houses. This will increase housing affordability as a result of lower transaction costs, reduce speculation because of the higher opportunity cost of holding vacant houses, stabilize the fiscal system by generating more sustainable tax revenue, and improve the efficiency and fairness of the property tax system according to the principles of "ability-to-pay" and "user pays". [source] Trade Liberalization and the Fiscal Squeeze: Implications for Public InvestmentDEVELOPMENT AND CHANGE, Issue 3 2003Barsha Khattry This article examines the impact of trade liberalization on the level and structure of government expenditures across countries, with particular emphasis on low income countries. It develops the argument that the policies employed during trade liberalization have resulted in a fiscal squeeze as a result of declining tax revenues and rising interest expenditures. To surmount this fiscal hurdle, expenditures on physical capital, which have negligible political ramifications, have been reduced. Other more politically sensitive expenditures, such as spending on social capital, have been financed by incurring additional debt. However, additional debt has exerted upward pressure on interest payments, further exacerbating the fiscal situation. The statistical analysis carried out to examine the evidence uses panel data for eighty developing and industrialized countries over the period 1970,98 and employs a fixed,effects regression framework to account for country,specific characteristics. The results indicate that trade liberalization has indeed resulted in declining revenues and higher interest expenditures and that these factors have contributed to the observed decline in infrastructure spending. [source] Revenue Mobilisation in Sub-Saharan Africa: Challenges from Globalisation II , Corporate TaxationDEVELOPMENT POLICY REVIEW, Issue 5 2010Michael Keen This second article evaluates and discusses the challenges to government revenue in sub-Saharan Africa posed by developments in corporate taxation. Using the dataset described in the first article, it shows that, in broad terms, corporate tax revenues in the region have held up, despite a reduction in rates and evidence of substantial base-narrowing (mainly through the provision of tax holidays in Investment Codes and Free Zones). This is something of a puzzle. Options for dealing with the continuation and intensification of the challenges to these revenues, including through regional co-operation, are discussed. [source] Unemployment clusters across Europe's regions and countriesECONOMIC POLICY, Issue 34 2002Henry G. Overman Summary High unemployment and regional inequalities are major concerns for European policy-makers, but so far connections between policies dealing with unemployment and regional inequalities have been few and weak. We think that this should change. This paper documents a regional and transnational dimension to unemployment , i.e., geographical unemployment clusters that do not respect national boundaries. Since the mid 1980s, regions with high or low initial unemployment rates saw little change, while regions with intermediate unemployment moved towards extreme values. During this polarization, nearby regions tended to share similar outcomes due, we argue, to spatially related changes in labour demand. These spatially correlated demand shifts were due in part to initial clustering of low-skilled regions and badly performing industries, but a significant neighbour effect remains even after controlling for these, and the effect is as strong within as it is between nations. We believe this reflects agglomeration effects of economic integration. The new economic geography literature shows how integration fosters employment clusters that need not respect national borders. If regional labour forces do not adjust, regional unemployment polarization with neighbour effects can result. To account for these ,neighbour effects' a cross-regional and transnational dimension should be added to national anti-unemployment policies. Nations should consider policies that encourage regional wage setting, and short distance mobility, and the EU should consider including transnational considerations in its regional policy, since neighbour effects on unemployment mean that an anti-unemployment policy paid for by one region will benefit neighbouring regions. Since local politicians gain no votes or tax revenues from these ,spillovers', they are likely to underestimate the true benefit of the policy and thus tend to undertake too little of it. [source] Prevalence and correlates of purchasing contraband cigarettes on First Nations reserves in Ontario, CanadaADDICTION, Issue 3 2009Rita Luk ABSTRACT Aims Non-First Nations people purchasing cigarettes on First Nations reserves do not pay applicable taxes. We estimated prevalence and identified correlates of purchasing contraband cigarettes on reserves; we also quantified the share of contraband purchased on reserves relative to reported total cigarette consumption and the associated financial impact on taxation revenue. Design Data from the Ontario Tobacco Survey, a regionally stratified representative population telephone survey that over-samples smokers. Setting Ontario, Canada. Participants A total of 1382 adult current smokers. Measurements Reported status of purchasing cigarettes on reserves and the quantity of cigarettes bought on reserves. The prevalence of purchasing cigarettes on reserves was assessed with descriptive statistics. A two-part model was used to analyse correlates of having recently purchased contraband. Findings A total of 25.8% reported recent purchasing and 11.5% reported usual purchasing. Heavy smoking, having no plans to quit and lower education were correlated with recent purchasing. Heavy smoking and not having plans to quit were also correlated with buying more packs of cigarettes on reserves. Contraband purchases on reserves accounted for 14.0% of the reported total cigarette consumption and resulted in an estimated tax loss of $122.2 million. Conclusions There was substantial purchasing of contraband cigarettes on reserves in Ontario, resulting in significant losses in tax revenues. The availability of these cheap cigarettes undermines the effectiveness of tobacco taxation to reduce smoking. Wherever indicated, governments should strengthen their contraband prevention and control measures, as recommended by the Framework Convention on Tobacco Control, to ensure that tobacco taxation achieves its intended health benefits and that tax revenues are protected. [source] Fiscal Transfers and Distributive Conflict in a Simple Endogenous Growth Model with UnemploymentGERMAN ECONOMIC REVIEW, Issue 1 2007Luigi Bonatti Capital,labor conflict; endogenous growth; politico-economic models; tax burden; welfare reforms Abstract. In the simplified formal treatment proposed in this paper, a decrease in a policy parameter , the ratio of total tax revenues to GDP , can monotonically increase long-term growth rate and may lead to a higher employment level. This notwithstanding, the paper shows that the redistributive implications of such a decrease may induce the wage earners to oppose it. As a consequence, policy-makers reflecting social preferences may undertake redistributive transfers generating persistent unemployment and lowering growth even if commitment technologies allowing them to follow preannounced tax policies were feasible. [source] Dealing with Tyranny: International Sanctions and the Survival of Authoritarian Rulers,INTERNATIONAL STUDIES QUARTERLY, Issue 2 2010Abel Escribà-Folch This paper examines whether economic sanctions destabilize authoritarian rulers. We argue that the effect of sanctions is mediated by the type of authoritarian regime against which sanctions are imposed. Because personalist regimes and monarchies are more sensitive to the loss of external sources of revenue (such as foreign aid and taxes on trade) to fund patronage, rulers in these regimes are more likely to be destabilized by sanctions than leaders in other types of regimes. In contrast, when dominant single-party and military regimes are subject to sanctions, they increase their tax revenues and reallocate their expenditures to increase their levels of cooptation and repression. Using data on sanction episodes and authoritarian regimes from 1960 to 1997 and selection-corrected survival models, we test whether sanctions destabilize authoritarian rulers in different types of regimes. We find that personalist dictators are more vulnerable to foreign pressure than other types of dictators. We also analyze the modes of authoritarian leader exit and find that sanctions increase the likelihood of a regular and an irregular change of ruler, such as a coup, in personalist regimes. In single-party and military regimes, however, sanctions have little effect on leadership stability. [source] Does School Finance Litigation Cause Taxpayer Revolt?LAW & SOCIETY REVIEW, Issue 3 2006Proposition 1, Serrano An influential theory argues that court-ordered school finance equalization undermines support for public schools. Residents of wealthy school districts who cannot keep their tax revenues for their own school districts may vote to limit school funding altogether. Proponents of this theory point to Serrano v. Priest, a 1977 decision of the California Supreme Court that mandated equalization of school financing and was followed almost immediately by Proposition 13, a ballot initiative to limit the local property tax. I test the theory that these two events were causally related by using hierarchical models to analyze voters within school districts. I find no evidence that opposition to school finance equalization contributed to the tax revolt. Claims about the perverse consequences of school finance litigation should be greeted with skepticism. [source] Federalism in an endogenous growth model with tax base sharing and heterogeneous education services,PAPERS IN REGIONAL SCIENCE, Issue 1 2005Thierry Madiès Federal system; provision of education; tax base sharing; endogenous growth and human capital; "predative" governments Abstract., We examine the effects of tax base sharing on the growth path of an economy in which central and regional governments provide heterogeneous educational services (general and specific training) which increase capital productivity. Our focus is the non co-operative game between two overlapping governments , central and regional , whose objective is to maximise their net tax revenues of educational spending (Leviathan hypothesis). We will show that the dispute between centralisation and decentralisation depends on two effects; the first is a tax effect, which supports centralisation in that tax base sharing leads to overtax the common tax base, and so has a negative effect on the growth path. Second is a public good effect, which defends decentralisation because the very diversity of central and regional educational services has a beneficial effect on the growth path (educational services are imperfect substitutes and "specific assets" of each level of government). We discuss the virtue of tax base sharing in a federation, as an incentive scheme within government's grasp. [source] Child Poverty in the American States: The Impact of Welfare Reform, Economics, and DemographicsPOLICY STUDIES JOURNAL, Issue 1 2007Harrell R. Rodgers Jr. This article identifies the predictors of child poverty rates at the state level before and after the adoption and implementation of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. The analysis shows that the most important state-level factors that influence child poverty rates are demographics, the health and viability of the state economy, and often the generosity, inclusiveness, and quality of state welfare programs. States with large numbers of black citizens, and those that score highest on infant mortality, teen births, births to unmarried women, children living with a parent without a high school degree, and children living with a single parent have the highest rates of child poverty. Child poverty rates are lowest in states that suffer less unemployment, and in wealthier states. States that score higher on per capita personal income, tax revenues, and taxable resources have lower child poverty rates. While specific "tough" welfare policies adopted by some states seem to have no impact on child poverty rates, we tested for the first time a sophisticated measure of the overall quality of state welfare programs. The analysis reveals that the global quality of a state's welfare programs is often an independent predictor of child poverty. States with the most generous, inclusive, and supportive welfare programs have done the best job of lowering and containing child poverty. [source] Cities, Tax Revenues, and a State's Fiscal Future: The Value of Major Urban CentersPUBLIC BUDGETING AND FINANCE, Issue 1 2006WILLIAM M. BOWEN Competition among core cities or urban centers and suburban and rural areas besets numerous states. The competition often occurs amid a political environment in which suburban and rural areas enjoy a political majority in the state legislature, a majority that directs state investments to their areas. With Ohio as a case study, the issues that have created the urban,suburban,rural trichotomy are reviewed and an analysis of the tax returns, by area, to state investments is presented. The findings illustrate that urban centers produce more tax dollars per dollar of state investment than other areas, implying that state underinvestment in urban areas harms overall state tax revenues. [source] Dynamic Revenue Curves for North Carolina TaxesPUBLIC BUDGETING AND FINANCE, Issue 4 2003Michael L. Walden Dynamic tax analysis allows a tax rate to affect the economic base being taxed. Consequently, the relationship between a tax rate and the taxed economic base is nonlinear and includes a region where a higher (lower) tax rate results in lower (higher) tax revenues. Relationships between the economic base and the tax rate are estimated for five major taxes in North Carolina. In all but one case, a statistically significant negative effect was found for the tax rate on the economic base. Dynamic relationships were strongest for the sales tax and weakest for the unemployment compensation tax. [source] Budgeting during a Recession Phase of the Business Cycle: The Georgia ExperiencePUBLIC BUDGETING AND FINANCE, Issue 2 2003Thomas P. Lauth This article describes the impact of the nation-wide recession on Georgia revenue and spending decisions in the 2002 and 2003 fiscal years. The state's strong economy and conservative revenue estimating practices historically provided a hedge against revenue shortfalls during a recession phase of the business cycle. However, when state revenue collections for FY 2002 were 5 percent less than collections for the prior fiscal year, several gap-closing measures became necessary, including state agency spending reductions and substitution of bond proceeds for tax revenues. These revenue and expenditure gap-closing measures were intended to enable the governor to achieve his policy initiatives while maintaining a balanced budget. The state's Rainy Day Fund remained full and was held in reserve for budget balancing in FY 2004, if necessary. Budget balancing during the current recession has been made possible by the state's practice of not overcommitting to program increases and tax cuts during the expansion phase of the business cycle, and by effectively framing the issue of fiscal restraint. [source] Designing a Property Tax Reform Strategy for Sub-Saharan Africa: An Analytical Framework Applied to KenyaPUBLIC BUDGETING AND FINANCE, Issue 4 2000Roy Kelly Countries throughout Sub-Saharan Africa are exploring options to improve local property taxation. Using the case of Kenya, this article provides an analytical framework for designing an effective property tax reform strategy. The first section presents a general conceptual model of property tax revenues, identifying four critical ratios that ultimately determine the effectiveness of any property tax system,namely, the coverage ratio, the valuation ratio, the tax ratio, and the collection ratio. The second section applies this conceptual framework to the property tax system in Kenya, focusing on the status of these four ratios and outlining possibilities for improving each ratio. The article concludes by summarizing five basic lessons from the Kenyan analysis that can assist in the development of appropriate property tax reforms in other developing countries in Sub-Saharan Africa. [source] Taxation, Human Capital Accumulation and Economic GrowthTHE JAPANESE ECONOMIC REVIEW, Issue 2 2001Shuanglin Lin Previous studies have shown that tax rates and the growth rate of output are negatively related under the assumption that government wastes tax revenues. This paper shows that, if tax revenues are used for human capital accumulation, tax rates and the growth rate can be positively related. An increase in the human capital tax rate will increase (decrease) the growth rate when the initial tax rate is small (large). An increase in the physical capital tax rate will increase the growth rate when savings are completely interest-inelastic. The effects of income taxes and lump-sum taxes on growth are also analysed. JEL Classification Numbers: E6, H2, O4. [source] Transaction tax and market quality of the Taiwan stock index futuresTHE JOURNAL OF FUTURES MARKETS, Issue 12 2006Robin K. Chou On May 1, 2000, the Taiwan government reduced the tax levied on futures transactions on the Taiwan Futures Exchange from 5 to 2.5 basis points. This event provides a unique opportunity to test empirically the impact of a tax rate reduction on trading volume, bid-ask spreads, and price volatility. Intraday and daily time series data from May 1, 1999, through April 30, 2001, are tested in a three-equation structural model. Findings show that transaction taxes have a negative impact on trading volume and bid-ask spreads, as trading volume increased and bid-ask spreads decreased in the period following the reduction in the transaction tax. This study's analysis is not consistent with the argument that the imposition of a transaction tax may reduce price volatility because there are no significant changes in price volatility after the tax reduction. Further, it was found that although the reduction in the transaction tax did reduce tax revenues, the proportional decrease in tax revenues is less than the 50% reduction in the tax rate. Finally, tax revenues in the second and third year after the tax reduction increased, as compared to the year before the tax reduction. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:1195,1216, 2006 [source] Testing For Government Intertemporal Solvency: A Smooth Transition Error Correction Model ApproachTHE MANCHESTER SCHOOL, Issue 6 2001Andrea Cipollini Applied macroeconomists have tested for the government intertemporal solvency condition by either testing for linear stationarity in the total government deficit series or testing for linear cointegration between total government spending and total tax revenues. A number of authors have focused, in particular, on structural breaks in the government deficit process. In this paper, we use a smooth transition error correction model to test and estimate a shift in the adjustment toward a linear cointegration relationship between the government spending to output ratio and the total tax revenues to output ratio. Estimation results show that government authorities react only to large (in absolute value) changes in the government spending to output ratio. Residual diagnostic tests are provided and they show that the model is not misspecified. [source] | ||||||||||||||||||||||||||||