Local Distributional Effects of Government Cash Transfers in Chile

Despite rapid economic growth and poverty reduction, inequality in Chile has remained high and remarkably constant over the last 20 years, prompting academic and public interest in the subject. Due to data limitations, however, research on inequality in Chile has concentrated on the national and regional levels. The impact of cash subsidies to poor households on local inequality is thus not well understood. Using poverty mapping methods to asses this impact, we find heterogeneity in the effectiveness of regional and municipal governments in reducing inequality via poverty-reduction transfers, suggesting that alternative targeting regimes may complement current practice in aiding the poor.http://deepblue.lib.umich.edu/bitstream/2027.42/57252/1/wp872 .pd

Local Distributional Effects of Government Cash Transfers in Chile

Despite rapid economic growth and poverty reduction, inequality in Chile has remained high and remarkably constant over the last 20 years, prompting academic and public interest in the subject. Due to data limitations, however, research on inequality in Chile has concentrated on the national and regional levels. The impact of cash subsidies to poor households on local inequality is thus not well understood. Using povertymapping methods to asses this impact, we find heterogeneity in the effectiveness of regional and municipal governments in reducing inequality via poverty-reduction transfers, suggesting that alternative targeting regimes may complement current practice in aiding the poor.Inequality; Poverty Mapping; Subsidies; Targeting; Chile

The Impact of State Corporate Taxes on FDI Location

This paper examines the effects of state corporate income taxes on the location of foreign direct investment in the U.S., taking into account the endogeneity of taxes and the outside options of investors. States have a set of characteristics that influence investors' decisions, some of them are not observable by a researcher but states take them into account when they set taxes. States can also act strategically with respect to other states when setting taxes. The former behavior bias the estimated tax effects because it creates correlation between the error term and the tax rate. The latter behavior directly implies an endogenous tax rate. I adapt a discrete choice model of differentiated products to estimate the tax effects. This approach allows me at the same time to control for the outside options of investors and to use instrumental variables to solve the problem of tax endogeneity. I find the tax elasticity to be consistently around -1.Foreign Direct Investment, State Corporate Income Taxes, Tax Endogeneity.

Tax Interdependence in the U.S. States

State governments finance their expenditures with multiple tax instruments, so when collections from one source decline, they are typically compensated by greater revenues from other sources. This paper addresses the important question of the extent to which personal and corporate income taxes are used to compensate for sales tax fluctuations within the U.S. states. The results show that a one percent decrease in the sales tax revenue per capita is associated with a 3 percent or a 0.9 percent increase in the corporate and personal income tax revenue per capita respectively. On average then, an exogenous reduction of $4.5 in the sales tax revenue per capita is compensated, ceteris paribus, with an increase of either$3.4 in the collections per capita from corporate taxes or $3.6 in the ones from personal income taxes.Tax Mix, State Taxes,Instrumental Variables.

Estimating Poverty for Indigenous Groups in Chile by Matching Census and Survey Data

It is widely held that indigenous Chileans experience greater rates of poverty and indigence than non-indigenous Chileans, yet the evidence to date has been based on surveys that are not representative by ethnicity. In this paper, we use poverty mapping methodologies that are typically applied to geography to develop statistically precise estimates of poverty, indigence, poverty gaps, and indigence gaps for each of the eight indigenous groups recognized by Chilean law. We find that indigenous people experience higher rates of poverty and indigence and greater depth of poverty and indigence than non-indigenous people. These results hold within individual regions, suggesting that the differential access to economic opportunities in different parts of the country cannot fully explain the results. We also find that the burden of poverty is not shared equally across indigenous groups. Instead, the Mapuche and Aymar· experience disproportionately high poverty rates. We argue that including ethnicity in criteria for identifying poor households may help policy-makers to improve antipoverty targeting.http://deepblue.lib.umich.edu/bitstream/2027.42/64360/1/wp932.pd

Tax Interdependence in American States

State governments finance their expenditures with multiple tax instruments, so when collections from one source decline, they are typically compensated by greater revenues from other sources. This paper addresses the important question of the extent to which personal and corporate income taxes are used to compensate for sales tax fluctuations within the US states. The results show that a one percent increase in the sales tax rate is associated with a half and a third percent decrease in the personal and corporate income tax rates respectively. In terms of tax revenues per capita, the results show that a one percent increase in the sales tax revenue per capita is associated with a 3 percent and a 0.9 percent decrease in the corporate and personal tax revenue per capita respectivelyTax Mix, State Taxes, Tax Interdependence

Neighbor effects in the provision of public goods in a young democracy: Evidence from China

Fiscal mimicking and yardstick competition among neighboring jurisdictions have been widely documented in developed countries with long histories of democracy. However, there is very little empirical evidence concerning these practices in developing countries with young democracies. Using a primary panel of 86 rural Chinese administrative villages that have undergone transitions to democracy over the last two decades, we show that the neighborhood effect also exists in a young democracy, albeit at a lower magnitude than in a mature democracy. Elected chairs of village committees who have served more than one term respond positively to the provision of public projects in neighboring villages by increasing both the number of public projects and the funding allocated to undertake them. In contrast, appointed party secretaries with more than one year of service are insensitive to neighbors' performance. In addition, village leaders are strategic in timing the arrival of public projects to increase the probability of re-election: In the year preceding elections, both the number and budget of public projects increase significantly. In this sense, politicians in young and old democracies behave alike.neighbors, Public goods,

Estimating Poverty for Indigenous Groups in Chile by Matching Census and Survey Data

It is widely held that indigenous Chileans experience greater rates of poverty and indigence than non-indigenous Chileans, yet the evidence to date has been based on surveys that are not representative by ethnicity. In this paper, we use poverty mapping methodologies that are typically applied to geography to develop statistically precise estimates of poverty, indigence, poverty gaps, and indigence gaps for each of the eight indigenous groups recognized by Chilean law. We find that indigenous people experience higher rates of poverty and indigence and greater depth of poverty and indigence than non-indigenous people. These results hold within individual regions, suggesting that the differential access to economic opportunities in different parts of the country cannot fully explain the results. We also find that the burden of poverty is not shared equally across indigenous groups. Instead, the Mapuche and Aymará experience disproportionately high poverty rates. We argue that including ethnicity in criteria for identifying poor households may help policy-makers to improve antipoverty targeting.Poverty; Indigence; Ethnicity; Poverty Mapping; Chile

Tax Credits Response to Tax Enforcement: Evidence from a Quasi-Experiment in Chile

Diesel in Chile receives a different tax treatment depending on its use. If diesel is used in industrial activities the diesel tax paid can be used as a credit against VAT and if diesel is used in freight or public transportation (basically trucks and buses) a fraction of gasoline taxes paid can be used as a credit against VAT. As a result of this different tax treatment firms have incentives to use “tax exempted” diesel in activities requiring “non tax exempted” diesel. This price wedge generates and opportunity for tax evasion. In this paper we analyze the impact of a tax enforcement program implemented by the Chilean IRS, where letters requiring information about diesel tax credits were sent to around 200 firms in 2003. Using different empirical strategies to consider the non-randomness of the selection of firms, we find that firms receiving a letter decreased their diesel tax credits by 16%.Chile. Fondo Nacional de Desarrollo Científico y Tecnológico 111054

Efectos de la Exención Tributaria a las Ganancias de Capital en el Precio de las Acciones en Chile

La Reforma al Mercado de Capitales de 2001 en Chile (MK I), estableció la exención del impuesto a la renta para las ganancias de capital provenientes de la enajenación de acciones con presencia bursátil mayor al 25%. Los objetivos de la reforma eran aumentar la participación, la profundidad y la liquidez en el mercado local de acciones. Sin embargo, no es evidente cuál es el efecto que tiene una rebaja tributaria en el precio de las acciones ya que hay dos efectos que actúan en sentido contrario. Por un lado, hay un efecto de capitalización que lleva a un aumento en los precios. Por otro lado, hay un efecto lock-in que lleva a una reducción en los precios. Determinar cuál efecto domina es, por lo tanto, una pregunta que debe responderse empíricamente. Este trabajo contribuye a responder esa pregunta, determinando empíricamente los efectos que tuvo la exención tributaria introducida en 2001 en el precio de las acciones en Chile. Utilizando un estimador de diferencias en diferencias, los resultados muestran un impacto anticipado promedio de alrededor de -14% en el precio de las acciones que se cotizan en la Bolsa de Santiago frente a la futura exención tributaria. La elasticidad del precio respecto a la tasa de impuesto, entre 0.006 y 0.01, es mucho menor a la estimada en la literatura económica para otros países a partir de reformas similares, donde la elasticidad fluctúa entre 0.20 y 0.27. Sin embargo, es de magnitud similar a la elasticidad estimada para períodos de tiempo donde el efecto lock-in domina.Ganancias de Capital, Incidencia Tributaria, Mercado de Capitales, Precio de Acciones.