International Trade and Cultural Identity

Economists emphasize the benefits from free trade due to international specialization, but typically have a narrow measure of what matters to individuals. Critics of free trade, by contrast, focus on the pattern of consumption in society and the nature of goods being consumed, but often fail to take into account the gains from specialization. This paper develops a new framework to study the effects of trade liberalization on cultural identity, which emerges as the result of the interaction of individual consumption choices, similar to a network externality. In a Ricardian model of international trade the paper shows that (i) trade is not Pareto inferior to autarky if the free trade equilibrium is unique, (ii) trade is not Pareto superior to autarky if the world is culturally diverse under free trade, but can be if the world is culturally homogenous, (iii) and when multiple free trade equilibria exist everybody in a country can lose from free trade if that country is culturally homogenous under autarky. Consumers of imported cultural goods tend to gain, while consumers of exported cultural goods tend to lose from trade liberalization.

Moral Federalism

Many political issues like abortion, gay marriage or assisted suicide are strongly contested because individuals have preferences not only over their own choice but also about other individuals' actions. How should society decide these issues? This paper compares three regimes (centralization, decentralization and federalism) in an economy where individuals choose their residence and vote over a single-dimensional regulatory policy at the regional and national level. The main results are: (i) A move from decentralization to federalism, called moral federalism, is welfare improving behind the veil of ignorance if and only if centralization dominates decentralization, and (ii) for the group that favors a restrictive policy moral federalism is the more attractive the smaller its group size (subject to being the majority group), the larger the suffering from a given policy, and the smaller the regions' weight in determining the federal policy limit. The results are consistent with the Bush administration's attempt to restrict liberal policy choices at the state level after its narrow election victory in 2000.federalism, decentralization, Tiebout equilibrium, consumption externality, morals.

Viewing tax policy through party-colored glasses: What German politicians believe

Abstract: The process of globalization has an important impact on national tax policies. Most of the literature does not focus directly on the political decision making process and assumes that the desired tax policy is responding to objective underlying tradeoffs. Based on an original survey of members of German national parliament (Bundestag) in 2006/7 we document a strong ideological bias among policy makers with respect to the perceived mobility of international tax bases (real capital and paper profits). Ideology influences also directly and indirectly the perceived national autonomy in tax setting and preferences for a EU minimum tax for companies. There seems little consensus as to what the efficiency costs of capital taxation in open economies are, even though our survey falls in a period of extensive debate about and actual adoption of a company tax reform bill in Germany

Is Targeted Tax Competition Less Harmful than its Remedies?

Some governments have recently called for international accords restricting the use of preferential taxes targeted to attract mobile tax bases from abroad. Are such agreements likely to discourage tax competition or conversely cause it to spread? We study a general model of competition for multiple tax bases and establish conditions for a restriction on preferential regimes to increase or decrease tax revenues. Our results show that restrictions are most likely to be desirable when tax bases are on average highly responsive to a coordinated increase in tax rates by all governments, and when tax bases with large domestic elasticities are also more mobile internationally. Our analysis allows us to reconcile the apparently contradictory results, derived from analyzing special cases, of the previous literature.preferential taxation, tax competition, multiple tax bases

Why Europe Should Love Tax Competition - and the U.S. Even More So

Is global competition for mobile capital harmful (less public goods) or beneficial (less government waste)? This paper combines both aspects within a generalized version of the comparative public finance model (Persson, Roland and Tabellini, 2000) by introducing multiple countries and endogenous tax bases. We consider the role of political institutions and compare parliamentary democracies (Europe) and presidential-congressional systems (USA) to show that increasing tax competition is likely to improve voter welfare, even if public good supply decreases because rents to politicians also fall. The conditions for voter welfare to improve are less stringent under the presidential-congressional system than under parliamentary democracies. Increasing tax competition lowers voter welfare if the only benefit to politicians is to divert resources from the government budget and the future is valued highly.

Regulatory Chill and the Effect of Investor State Dispute Settlements

Legal conflicts between multinational firms and host governments are often decided by international arbitration panels - as opposed to courts in the host country - due to provisions in international investment agreements known as Investor State Dispute Settlements (ISDS). Critics fear that ISDS panels favor multinational firms, and thus make governments reluctant to adopt appropriate policies (regulatory chill). In this paper I develop an economic model to define regulatory chill and to analyze the effects of ISDS. Regulatory chill occurs when losses from regulatory mismatch are intermediate rather than very high. Moreover, if national courts are more likely to decide in favor of the host government than an international court, a unilateral shift to ISDS by one country is welfare worsening for the country. The net welfare change is more favorable, and sometimes - but not always - positive, when i) (symmetric) countries switch together to an ISDS based system, and when ii) foreign investment responds elastically to profit conditions

The Welfare Effects of Tax Competition Reconsidered: Politicians and Political Institutions

The views on the welfare effects of tax competition differ widely. Some see the fiscal externalities as the cause for underprovision of public goods, while others see tax competition as means to reduce government inefficiencies. Using a comparative politics approach we show that tax competition among presidential-congressional democracies is typically welfare improving, while harmful among parliamentary democracies if under the latter the marginal benefit of the public good is sufficiently high. The results hold when politicians seek re-election because of exogenous benefits of holding office. By contrast, when politicians hold office only to extract rents, tax competition is harmful if politicians are sufficiently patient.Tax competition; welfare effects; comparative politics approach

Viewing tax policy through party-colored glasses: What German politicians believe

Abstract: The process of globalization has an important impact on national tax policies. Most of the literature does not focus directly on the political decision making process and assumes that the desired tax policy is responding to objective underlying tradeoffs. Based on an original survey of members of German national parliament (Bundestag) in 2006/7 we document a strong ideological bias among policy makers with respect to the perceived mobility of international tax bases (real capital and paper profits). Ideology influences also directly and indirectly the perceived national autonomy in tax setting and preferences for a EU minimum tax for companies. There seems little consensus as to what the efficiency costs of capital taxation in open economies are, even though our survey falls in a period of extensive debate about and actual adoption of a company tax reform bill in Germany.Globalization; business taxation; beliefs; member of parliament; profit shifting; party discipline; yardstick competition

Öffentliche Finanzen : Kontrolle und Einhaltung der Schuldenbremse als Herausforderung

Die öffentlichen Haushalte befinden sich gegenwärtig in einem guten Zustand, der finanzielle Spielräume eröffnet. Finanzpolitik darf sich jedoch nicht nur an kurzfristig positiven Indikatoren orientieren, sondern muss dauerhaft stabile Finanzen garantieren, insbesondere in einem föderalen Staat wie Deutschland. Dabei spielen fiskalische Regeln wie die deutsche Schuldenbremse und die aus dem europäischen Kontext entstandenen Verpflichtungen aus dem Stabilitäts- und Wachstumspakt sowie dem Fiskalvertrag eine wichtige Rolle. Die deutsche Finanzpolitik sollte die institutionellen Strukturen der Finanzpolitik weiterentwickeln. Diese Aussage mag vor dem Hintergrund der gerade erfolgten Neuordnung des Bund-Länder-Finanzausgleichs vom Sommer 2017 zunächst überraschen. Dennoch ist sie berechtigt, denn der fiskalpolitische Gestaltungsspielraum der Länder wird trotz vermehrter Transfers durch den Bund ab 2020 zusammen mit dem Wirken der Schuldenbremse bei weiterhin geringer Steuerautonomie eingeschränkt

Moral federalism

Many political issues like abortion, gay marriage or assisted suicide are strongly contested because individuals have preferences not only over their own choice but also about other individuals? actions. How should society decide these issues? This paper compares three regimes (centralization, decentralization and federalism) in an economy where individuals choose their residence and vote over a single-dimensional regulatory policy at the regional and national level. The main results are: (i) A move from decentralization to federalism, called moral federalism, is welfare improving behind the veil of ignorance if and only if centralization dominates decentralization, and (ii) for the group that favors a restrictive policy moral federalism is the more attractive the smaller its group size (subject to being the majority group), the larger the suffering from a given policy, and the smaller the regions? weight in determining the federal policy limit. The results are consistent with the Bush administration's attempt to restrict liberal policy choices at the state level after its narrow election victory in 2000