Tax Design in the OECD: A test of the Hines-Summers Hypothesis

This paper investigates the effects of economic size and trade openness on tax design in the OECD. Using data for thirty OECD countries over the 1965-2007 period, we test the recently proposed Hines-Summers [2009] Hypothesis, according to which the smaller the size and the greater the openness of the economy, the more it will rely on expenditure taxes and the less on income taxes. Our findings show that the Hines-Summers Hypothesis can claim broad, statistically significant, and robust empirical support in the OECD data sets we examined.Income tax; Consumption tax; Country size; Trade openness

Average tax rate cyclicality in OECD countries: A test of three fiscal policy theories

This paper investigates the cyclical properties of the average effective tax rate in 26 OECD countries over 1965-2003 in order to test the validity of three theories of fiscal policy: (i) the standard Keynesian theory which recommends that tax policy should be counter-cyclical, (ii) the Tax Smoothing hypothesis, which implies that changes in GDP should be uncorrelated with tax rates, and (iii) the positive theory of Battaglini and Coate (2008) which predicts that the average tax rate should be negatively correlated with GDP. Our main finding is that the correlations of tax rates with cyclical GDP are generally quite small and statistically indistinguishable from zero. This finding is quite robust and is more consistent with the implications of the Tax Smoothing hypothesis than either the recommendations of the standard Keynesian model or the predictions of Battaglini and Coate’s theory.Fiscal Policy; Tax Rates; Business Cycle

Business cycle volatility and country zize :evidence for a sample of OECD countries

The main purpose of this paper is to investigate the relationship between business cycle volatility and country size using quarterly data for a sample of OECD countries over 1960-2000. The results suggest very strongly that the relationship between country size and business cycle volatility is negative and statistically significant. This finding is very robust, suggesting that country size does matter, at least for the severity of cyclical fluctuations.Country Size

Inflation and the Great Moderation: Evidence from a Large Panel Data Set

This paper investigates the relationship between the Great Moderation and two measures of inflation performance: trend inflation and inflation volatility. Using annual data from 1970 to\ud 2011 for a large panel of 180 developed and developing economies, the results show that, as expected, both measures are positively correlated with output volatility. When the two measures are jointly considered, however, and there is sufficient information to identify their effects separately, our empirical findings show that the effect of inflation volatility is positive, while the effect of trend inflation is negative. The implication is that reduced inflation volatility (holding trend inflation constant) helps stabilize the business cycle, whereas lower inflation (holding\ud inflation volatility constant) exacerbates output volatility

Volatility and the current account : extending the evidence

Consistent with standard theoretical priors, generally based on the precautionary saving motive, the empirical literature has documented that increased macroeconomic volatility is associated with improvements in the current account balance in advanced economies. Using an updated and extended data set, we first confirm this relationship, but also show that it does not hold in developing economies, where macroeconomic volatility is not systematically associated with changes in the current account balance. When we explore potential mechanisms for this asymmetry, we find evidence in favor of precautionary saving in both groups of countries, which allows us to rule this out as the reason behind the observed difference in the currentaccount/ volatility relationship.info:eu-repo/semantics/publishedVersio

Tax progressivity and output : evidence from OECD countries

Compared to the economic effects of tax rates, those of tax progressivity have been much less studied. In this paper, we estimate the output effects of changes in tax progressivity using a data set of 33 OECD economies since 1980. Our results show that tax progressivity affects the economy in a way that is broadly consistent with the predictions of a standard neoclassical growth model. In particular, increasing tax progressivity reduces the economy’s growth rate temporarily and the level of income per capita permanently. Both effects are sizable, statistically significant, and robust. Our findings also emphasize the importance of including both the tax rate and tax progressivity in the estimation: omitting either can lead to biased results.info:eu-repo/semantics/publishedVersio

The trade effects of pandemics

Early evidence suggests that COVID-19 caused a sharp decrease in international trade and a widening of current account imbalances. This paper shows that (qualitatively) similar responses have characterized the effects of previous pandemics. Using data from a sample of 170 countries, we find that a pandemic shock is typically followed by a sizable decrease in output and trade volumes, but an uneven current account response: balances improve in developed (or surplus) economies but deteriorate in developing (or deficit) ones. We also explore potential mechanisms for this asymmetry, and our evidence is pointing to national saving and the business cycle phase as the main reasons behind the divergent current account dynamic responses.info:eu-repo/semantics/publishedVersio

Can Higher Inflation Be More Stable? Evidence from Japan and the US

This paper investigates the relationship between trend inflation and inflation volatility. Using annual data from 1922 to 2013, the results show that Japanese and US inflation and its volatility have been positively correlated when inflation exceeds a certain value, but negatively correlated when inflation is below this threshold. The evidence suggests that the break in the relationship occurs at annual inflation rates around 2.5% in the US and between 0% and 2% in Japan. This implies that inflation exceeding 2.5% in the US or 2% in Japan is likely to be associated with higher inflation volatility

Hybrid neighborhoods: From sandlots to social media

The rapid development of Information and Communication Technologies (ICT) along with the mass urbanization phenomenon have led to dramatic changes in the ways people create social bonds, form and understand communities and act collectively towards common goals. One important change is that locality and distance is no longer perceived as a key prerequisite for the development of social bonds. Local communities, traditionally based on social grouping by physical proximity, have been seriously affected by technological media (social media and applications). Socio-psychological research shows that the major impact of technology-based communication is the transformation of social bonds between members of local communities and the social capital they accumulate. Within this framework, the research project “GEITONIA” has a dual scope. On a theoretical level, to shed more light on the different ways and degrees local communities use social media and applications in everyday life. On an empirical level, to examine if and in what ways a local social medium mobile application, developed for neighborhoods, can help the understanding of the sense of community and re-strengthen the social cohesion among its members. The article is an attempt to provide a quick glance on the key concepts and theoretical background on which the research project is based