Economic Efficiency and Distortions to Incentives in Production of Cotton and Rice Crops in Punjab

The study based on crop budgets, for 2010-12 crops, was, inter alia, designed to examine economic efficiency and distortions in incentives to production of cotton and basmati rice, long grain aromatic rice, crops in Punjab. The analysis has confirmed the competitiveness of their production in Punjab as farmers’ gross revenues from these crops exceeded their total costs, enabling farmers make some profit. The competitiveness, nevertheless, is sensitive to changes in prices of the produce and those of the inputs. The analysis conducted at economic prices have indicated economic efficiency and comparative advantage of Punjab in producing both basmati rice and cotton. The domestic resource cost coefficients for basmati as well as cotton were consistently less than one, confirming Punjab’s comparative advantage and economic efficiency in their farming. The estimation and analysis of nominal projection coefficients and effective protection coefficients for basmati and cotton crops have indicated implicit taxation as well as some protection to domestic producers. The results of economic efficiency and comparative advantage, of both basmati and cotton, are quite sensitive to the fluctuations and developments in world markets with spill over to the domestic market, impacting their competitiveness.

The Multiple Effects of Capital Controls

Capital controls are seen as a means to promote financial stability or improve macroeconomic adjustment in economies with nominal rigidities and suboptimal monetary policy. Such controls may take various forms, including explicit or implicit taxation of cross‑border financial flows and dual or multiple exchange rate systems. Using a quarter dataset on capital controls actions in 27 emerging economies from 2010 to 2018, the study analyzes the effectiveness of capital controls (CCs) along different angles. Since the 2008 financial crisis, strengthening capital controls has allowed more monetary policy autonomy and exchange rate stability, verifying the Mundell‑Fleming trilemma model. Following CCs, the results show that accumulating international reserves may compensate for the loss of inflows and lead to more effective policies. Tighter CCs on inflows cause significant spillovers, specifically in the conditions of liquidity abundance. These spillovers originate from the problem of policy coordination of emerging economies and are mainly caused by capital controls being used as an instrument to manage capital flows. For governments that have to manage the risks associated with inflow surges or disruptive outflows, capital controls need to play a key role.

Government Old-Age Support and Labor Supply: Evidence from the Old Age Assistance Program

Many government programs transfer resources to older people and implicitly or explicitly tax their labor. We shed new light on the labor supply and welfare effects of such programs by investigating the Old Age Assistance Program (OAA). Exploiting the large differences in OAA programs across states and Census data on the entire US population in 1940, we find that OAA reduced the labor force participation rate among men aged 65–74 by 8.5 percentage points, more than one-half of its 1930–1940 decline, but that OAA’s implicit taxation of earnings imposed only small welfare costs on recipients. (JEL H24, H55, H75, J14, J22)

Was sind die richtigen Rentenabschläge? – neue Perspektiven

SummaryThe correct adjustment of pension benefits when postponing retirement is calculated by three „income-oriented“ approaches: the incentive-neutral approach, the budget-neutral approach and as an innovation the return-neutral approach. It turns out, that the three approaches differ just in their underlying discount rate but not in their method of calculation. In addition it can be shown, that the incentive-neutral approach leads to incentive neutrality when the implicit taxation of contributions is equal to the implicit taxation of the early retirement pension. The correct adjustment factors were also calculated for those cases, where the relevant alternative for early retirement is unemployment or not to continue work.As an alternative to the income-oriented approaches the utility-based approach is presented. In this case the results strongly depend on the underlying utility function and the parametric values. Overall, the statutory adjustment factor of 3,6 % per year tends to be too low applying the income-oriented approaches. Using the utility-based approach, the calculated adjustment rates can be seen as too high or too low, depending on the assumptions on the utility function and the parameter constellation.

Age-Dependent Taxation and the Optimal Retirement Benefit Formula

This paper presents a comprehensive view of lifetime taxation including both explicit taxation through the general tax system and implicit taxation via the retirement benefit formula. Differences in productivity between individuals are unobservable, which provides a rationale for the use of distortionary taxes. It is shown that the optimal structure of age-dependent taxation can be characterized by a generalized Ramsey formula. Furthermore, the paper derives the optimal retirement benefit formula in the presence of the general tax system and examines the compatibility with the financial stability of the pension system.

When Working Harder Does Not Pay: Low-Income Working Families, Tax Liabilities, and Benefit Reductions

Under some circumstances, recent reforms to policies that affect the working poor create a barrier to workers who try to increase their families' financial well-being through greater earnings. As earnings rise, benefits are reduced and taxes increase. Together these two factors may mean that accepting a raise or working more hours may not make a worker's family better off financially. This article presents an analysis of the extent of implicit taxation and describes how low-wage workers experience this phenomenon. We address three areas: how benefit programs and the tax system together create high combined tax rates, the implications of this system for low-income families' well-being, and finally, suggestions for practice and reform.

Market Power and the Taxation of Domestic and International Tourism

Tourism services around the world are subject to general and specific taxes. There is evidence that tourism is relatively heavily taxed and that rates of taxation are increasing, although the implicit taxation of aviation is lessening. Leaving aside issues of international rent extraction, or the passing of taxes on to foreign visitors, there do not seem to be strong reasons for taxing tourism differently from other goods and services, although specific levies to correct for related unpriced services or externalities may be called for. There has been a growth in specific tourism taxes, many of which are earmarked for spending on tourism-related projects or promotion. While this may appear efficient, it can lead to the squandering of revenues through the funding of inefficient projects. This is especially the case when different jurisdictions fund promotion to attract the same group of tourists. International tourism poses specific problems that make it difficult to tax it on a comparable basis to other goods and services. However, the most serious problem arises from the market power that countries possess over their tourism services; countries can, and do, impose taxes on tourism services and pass them on to foreign tourists. The scope for doing this is substantial and it is individually rational for countries to tax tourism services. However, this constitutes a barrier to trade in tourism services, and what is rational for an individual country is inefficient for the world as a whole. Excessive taxation of international tourism will be the result, and this taxation will be very difficult to negotiate away. Since this market power is unevenly distributed across countries, and there is some gain from tourism taxation, even after the taxation of their own travellers is taken into account, it would not be feasible to obtain agreement to reduce or eliminate such taxation if negotiations are confined to tourism and aviation issues. Agreement is more likely if there are broader negotiations, but even these may well not be enough. In the absence of side payments to bribe countries not to use their market power, the globally efficient solution of low tourism taxes is unlikely to come about. Ultimately, tourism growth is likely to suffer relative to other sectors in the global economy.