This paper examines the tax policy adjustments required to maintain a constant ratio of social security contributions to GDP within a pay-as-you-go system, depending on the degree of automation. We explore three alternative approaches to taxing autonomous capital, defined as a combination of robots and artificial intelligence: i) an income tax on autonomous capital, ii) an ad-valorem tax on investment in autonomous capital, and iii) a social security tax on robots, paid by employers. The analysis is conducted under two technological scenarios: one in which autonomous capital substitutes for both traditional capital and labor, and another in which it substitutes for labor while complementing traditional capital. For each scenario and tax scheme, we calculate the tax rates necessary to preserve the relative size of social security contributions. Our results indicate that, in the long run, the most efficient approach to taxing autonomous capital is a social security tax on autonomous robots paid by employers using such technology. Finally, we examine how these specific taxation schemes affect the functional distribution of income.
This paper examines the effects of tax competition and foreign direct investment (FDI) on GDP growth across 22 European OECD economies from 1998 to 2021. Using the Dynamic Common Correlated Effects (DCCE) framework and CS-ARLD method of estimation, findings show that a lower effective average tax rate (EATR) and FDI increase positively impacts GDP growth, with stronger long-run effects. Emerging economies rely more on tax competition, whereas in developed ones, its effects weaken over time. If EATR is reduced to 15%, tax competition may not harm GDP growth, highlighting the need for policymakers to assess future threshold adjustment carefully.
This study aims to examine the impact of corruption and public spending on sustainable development. We use data from 38 developing countries for the period 2000-2022, employing the method of moments quantile regression (MMQR) estimation recently developed by Machado and Santos Silva (2019), and test robustness with S-GMM. Research results show that corruption has a major impact on sustainable development at all levels, indicating that corruption hinders efforts to achieve sustainability in developing countries. Interestingly, we find public spending to have an asymmetric impact on sustainable development: a negative impact is found at low quantiles, but the impact becomes positive at high quantiles as management efficiency increases. From the research results, we propose some policy implications to control corruption and increase the efficiency of public spending to promote sustainable development in developing countries.
This paper focuses on the achievements of fiscal decentralization over the past decades and the remaining challenges and unfinished agenda, with emphasis on what we still do not know and where the theory and practice of fiscal decentralization would need to go in the coming decades. Going forward, there is a need for a “third generation” model that better integrates the insights of administrative and political decentralization with fiscal decentralization. Decentralized governance will continue to be challenged in the future by external shocks like climate change and information technology, but from the experience it should adapt and succeed.
Based on the criticism that estimates of the fiscal and economic effects of Base Erosion and Profit Shifting (BEPS) derived from firm-level data are not sufficiently accurate, this paper surveys the literature on BEPS (2003-2024) that analyzes country-level data. The findings indicate possible gaps in current tax policies to address BEPS and emphasize the need for improved international coordination and tailored policies to effectively tackle profit shifting, ensuring fair tax competition and robust public revenues. Directions for future research concern the effects of effective tax rates on real vs. “phantom” foreign direct investment (FDI) and the distinctions between immediate vs. ultimate FDI.
The main goal of this paper is to evaluate, from an economics perspective, the growing literature on the possible tax-induced residential mobility of high-income and high-net-worth individuals. This literature is dominated by the estimation of one parameter: migration elasticity in response to changes in net-of-tax income. The considerable heterogeneity of estimations of this elasticity warns against drawing any overall conclusions without considering and evaluating the institutional and economic conditions and methodological options influencing each specific estimation. While keeping this caveat in mind, we offer some final recommendations for public decision-makers who hope to offer differentiating tax policies targeting taxpayers in the top wealth and income bracket or favouring specific professional profiles.
The Spanish tax system currently includes two taxes on the net wealth of individuals: the traditional Net Wealth tax, transferred to the autonomous communities, and the new Solidarity Tax on Large Fortunes, a state-level tax introduced at the end of 2022. This paper proposes three reforms aimed at integrating wealth taxation into the personal income tax, with the objective of simplifying the tax system and ensuring effective taxation of large fortunes. Using data from the 2021 Household Panel and microsimulation techniques, the revenue and redistributive impacts of these reforms are estimated. The estimation of the proposed reforms shows a considerable increase in public revenue and an improvement in the redistribution and progressivity of personal income tax, as it has a greater effect on high-net-worth individuals.
This article examines the future of corporate income taxation amid globalization, digitalization, and the rise of artificial intelligence. It highlights the challenges of profit shifting, tax competition, and domestic distortions, which jointly push the system in the direction of a neutral destination-based cash-flow tax. Such a tax could be complemented by a personal tax on either all capital income or the normal return to capital. This combined system has the potential to enhance equity and revenue, while addressing current inefficiencies. International cooperation would smooth the transition toward such a system, yet even in its absence global forces can drive tax systems in this direction
This paper analyzes international experiences in the design and implementation of successful tax reforms. Specifically, it focuses on insights from two dimensions: the political-economy requirements to generate public support for reform, and the technical factors that must be present to further the potential objectives of increased revenues, greater efficiency and equity, and enhanced simplicity. The general topics reviewed include the political economy preconditions that facilitate tax reform, how and by whom tax reform should be implemented, the timing of reform efforts, general determinants of tax effort, tax policy choice options, tax administration options, and the enhancement of tax morale and compliance norms. The paper concludes with lessons from both the literature and countries' experiences, empowering reform-minded politicians and administrators to design policy reform strategies for sustained increased tax revenue effort and more efficient, equitable and simple tax systems.
Tax reform and tax administration are closely linked. However, these links are not always fully discussed, fully analyzed, or even fully appreciated. In this paper, I discuss the links between tax administration reform and tax reform. I begin by discussing some basic aspects of tax administration, which suggest three "paradigms" for tax administration that emerge from the theoretical and empirical literature on what motivates individuals to pay -or not to pay- their taxes. I then summarize the main reasons why countries reform their tax systems and when these reforms are most likely to be successful and even to occur. This then leads to a detailed discussion of the central role of tax administration reform in tax reform, including an examination of the role of new technologies in tax administration. My main conclusions are twofold. First, a successful reform of a country's tax system requires also a concomitant and concurrent successful reform of a country's tax administration. Second, successful tax administration reform needs to go well beyond changes in enforcement policies alone.
Based on the stability programs and the economic outlook of the OECD, this study analyses the sources of fiscal forecast errors in eleven eurozone countries over the period 1999 to 2020. For this purpose, through a panel data model with country and time fixed effects, we use economic, political, and institutional variables. One of the main innovations of this paper is the inclusion of shadow rates, an economic variable that reflects the monetary policies taken by the European Central Bank (ECB). We are not aware that this monetary variable has been included in previous work on fiscal forecast errors. This approach is more realistic since fiscal and monetary policy are closely connected. Particular attention will also be paid to the influence of Independent Fiscal Institutions (IFIs), given their importance in the recent process of reforming fiscal governance in eurozone countries. The results suggest that monetary policy has been a key element in increasing prudence in fiscal projections, but not in the case of the IFIs. Moreover, the inclusion of monetary policy does not change the direction of the relationship with the main economic variables identified in the literature. However, in several cases, the sign and the statistical significance of the political and institutional variables vary.
This paper discusses the seemingly contradicting implications of the carbon dividend concept and the double dividend idea for the use of revenue from carbon pricing. We provide an introduction to a number of key contributions to this debate in the literature and explain how their findings and results can be reconciled. Some existing studies on the effects of revenue recycling through the carbon tax may be too optimistic regarding the impact because they neglect the interaction between the carbon dividend, labour supply, and the rest of the tax system.
We offer a reflection on the measurement of segregation, gathering methodological contributions from both sociology and economics, and we use some of them to explore occupational segregation by gender and nativity in Spain. Our goal is to offer a guide to the tools that can be used in empirical analysis, connecting them with theoretical discussions. Our empirical analysis shows that the occupational segregation of immigrant women is a more intense phenomenon than that of native-born women or immigrant men, although it decreased significantly over the period 2006-2024. Despite this decline, immigrant women still tend to cluster in low-paying occupations to a much greater extent than immigrant men and native-born women. Moreover, their occupational sorting places them at a great disadvantage even after controlling for basic attributes. Unlike them, most of the segregation of immigrant men that we observe is a consequence of their lower educational attainments. Once we control for basic attributes, the concentration of immigrant men in low-paying occupations is substantially reduced, although their hourly wages remain lower than those of their native peers. As opposed to immigrant women and men, native-born women tend to cluster in occupations with wages slightly above the national average, although this wage advantage vanishes once we control for characteristics. Native-born women earn lower hourly wages than their male peers (especially after removing the composition effect) due to both differences in their occupational distributions and wage disparities within occupations. The gender gap is larger among natives than among immigrants.
This study evaluates how the pandemic affected non-durable household spending in 2020. Using panel data from the Spanish Survey of Household Finances, we compare actual expenditures with predicted values from a consumption model. Results reveal smaller individual-level income and spending declines than National Accounts data suggests. The estimated reduction in non-durable consumption is positively related to wealth but negatively to income. Additionally, we regress each individual estimated decline in non-durable spending on a set of indicators for different COVID-19 policy measures. Results indicate that these interventions did not significantly support non-durable expenditure, potentially explaining increased savings during the pandemic.
Real healthcare expenditure in Colombia is projected to rise 49% over the next eight years due to population aging, rising costs, and domestic policies, adding significant pressure to public finances. Using a dynamic general equilibrium model with heterogeneous households, we analyze the macroeconomic impact of financing higher healthcare expenditure through different taxes in a context of high informality. While consumption taxes are the best option in terms of output, financing with taxes on high-skilled labor improves income distribution with similar effects on production. Population aging adds pressure on aggregate dynamics by reducing labor supply, savings, and capital accumulation.
This research constructs a two-region dynamic general equilibrium (DGE) model. Utilizing numerical simulations, it thoroughly reveals the mechanisms through which public infrastructure investment affects the integration of domestic trade and further examines the determining factors of the effects of public infrastructure investment on domestic trade integration. The research indicates that public infrastructure investment has a significant inverted U-shaped impact on domestic trade integration, meaning there exists an optimal scale of public infrastructure investment to maximize domestic trade integration. This is due to the linkage mechanism of public infrastructure investment affecting transaction efficiency in production trade, specialization of production, trade home bias, and thereby influencing inter-regional economic and trade relations as well as domestic market integration. The substitutability of products, congestion of public infrastructure services, and labor friction (overhead labor) significantly affect the effects of public infrastructure investment on domestic trade integration, with notable regional disparities. The findings have important implications for public infrastructure investment policies aimed at promoting the development of domestic trade integration.
Government outsourcing has emerged as a significant strategy for managing government organizations in the delivery of public goods and services, attracting considerable attention in the fields of public administration and policy studies. This study investigates the relationship between government outsourcing and fiscal balance while examining the moderating role of left- and right-wing political ideologies. Employing panel analysis of data from 31 OECD countries over the period of 2009–2019, the findings indicate that government outsourcing negatively affects fiscal balance, resulting in an increase in the primary balance deficit. However, the impact varies based on political ideology. Specifically, conservative ideology is associated with enhanced fiscal soundness through outsourcing, while progressive ideology is found to worsen fiscal balance. To infer the underlying mechanisms driving these outcomes, the study reveals that outsourcing, in conjunction with conservative ideology, is linked to reduced government expenditure and public employment. Conversely, progressive ideology is associated with increased government expenditure and public employment.
Social exclusion prevents certain groups and individuals from fully participating in the economic, social, cultural, and political life of their communities. This exclusion can stem from various factors, including poverty, lack of education, discrimination, unemployment, limited access to basic services, and a lack of opportunities. To address this issue, governments and organizations implement policies and programs aimed at reducing poverty and improving household well-being. Measuring household poverty is crucial for designing and evaluating effective policies. This paper introduces a multidimensional poverty family index based on the AROPE index, which considers income, material deprivation, energy access, and employment status. Then, a household is classified as poor if it experiences deprivation in any of these four dimensions. Additionally, the framework allows for decomposition into these four sources of poverty, enabling more targeted policy interventions. Finally, we apply this measure to European countries to analyze the changes of multidimensional poverty in 2018, 2020, and 2022.
Within the behavioral framework of Chinese local government officials, the establishment and pursuit of ambitious fiscal revenue targets emerge as both a potent instrument and a prerequisite for realizing political aspirations. This study investigates the influence of fiscal revenue targets on corporate carbon emissions. Our findings indicate that elevating the threshold of fiscal revenue targets significantly curtails enterprise carbon emissions. This effect is manifested through heightened corporate expenditure on pollution charges and increased levels of green innovation. Our research furnishes valuable insights for carbon governance by fiscal revenue target management in developing nations.
Inequality of Opportunity in Achievement (IOpE) measures the importance of factors beyond the student’s control in explaining differences in academic performance. Using PISA 2018, we estimate the IOpE for Spanish regions using conditional inference tree (CIT) and forest (CIF). Using CIFs, IOpE is twice as high as those obtained using traditional approaches (on average, 43% compared to 20%). Murcia and Extremadura are among those with the highest IOpE, while Castilla-La Mancha and the Pais Vasco have the lowest IOpE. The circumstances that contribute most to IOpE are the cultural environment at home (number of books) and parental occupation.
