Essays on fiscal policy and the macroeconomy

Defence date: 14 June 2018Examining Board : Prof. Árpád Ábrahám, EUI, Supervisor ; Prof. Dominik Sachs, EUI and University of Munich ; Prof. Nicola Pavoni, Bocconi University ; Prof. Ali Shourideh, Carnegie Mellon UniversityThe three chapters of this thesis provide a theoretical and quantitative analysis of three elements of the tax-transfer system which recently received increased attention in both the academic and the public policy debate in the United States and Europe. In the first chapter, I show theoretically that optimal taxes on business owners are not entirely characterized by the usual, well established, equity-eficiency trade-off but that additional \trickle down" effects reduce optimal tax rates. As taxes on business income reduce investment, the demand for labor declines, which results in lower wages. I show quantitatively, on the basis of a dynamic general equilibrium model calibrated to US data, that these effects substantially reduce the optimal progressivity of the income tax code. In the second chapter, joint with Fabian Kindermann and Dominik Sachs, we argue that the taxation of bequests can have a positive impact on the labor supply of heirs through wealth effects. On the basis of a life-cycle model calibrated to the German economy we show that for each Euro of bequest tax revenue that the government mechanically generates, it can expect another 7.6 Cent through higher labor income taxes of heirs. We show theoretically and quantitatively that a proper modeling of - empirically hard to identify - anticipation effects is crucial to obtain this result. Finally, in the third chapter, joint with Arpad Abraham, Joao Brogueira de Sousa and Ramon Marimon, we assess the beneffts of a potential European Unemployment Insurance System using a multi-country dynamic general equilibrium model with search frictions. In spite of substantial heterogeneity of labor market institutions across Europe, we find that a harmonized benefft system with a low replacement rate but an unlimited duration of eligibility is welfare improving in all countries as long as country specific contribution payments eliminate persistent transfers.--1. Taxing Entrepreneurial Income in the Presence of Trickle Down E ects --2. Inheritance Taxation and Wealth E ects on the Labor Supply of Heirs --3. On the Design of a European Unemployment Insurance Syste

Applications and Challenges of Task Mining: A Literature Review

Task mining is a technological innovation that combines current developments in process mining and data mining. Using task mining, the interactions of workers with their workstations can be recorded, processed, and linked with the business data of the organization. The approach can provide a holistic picture of the business processes and related tasks. Currently, there is no overview of application scenarios and the challenges of task mining. In our work, we reflect application scenarios as well as technological, legal, and organizational challenges of task mining using a structured literature review. The application areas include discovery of automation potentials, monitoring, as well as optimization of business processes. The challenges include the cleansing, collection, data protection, explainability, merging, organization, processing, and segmentation of task mining data

Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs

The taxation of bequests can have a positive impact on the labor supply of heirs through wealth effects. This leads to an increase in future labor income tax revenue on top of direct bequest tax revenue. We first show in a theoretical model that a simple back-of-the-envelope calculation, based on existing estimates for the reduction in earnings after wealth transfers, fails: the marginal propensity to earn out of unearned income is not a sufficient statistic for the calculation of this effect because (i) heirs anticipate the reduction in net bequests and adjust their labor supply already prior to inheriting, and (ii) when bequest receipt is stochastic, even those who ex post end up not inheriting anything respond ex ante to a change in the distribution of net bequests. We quantitatively elaborate the size of the overall revenue effect due to labor supply changes of heirs by using a state of the art life-cycle model that we calibrate to the German economy. Besides the joint distribution of income and inheritances, quasi-experimental evidence regarding the size of wealth effects on labor supply is a key target for this calibration. We find that for each Euro of bequest tax revenue the government mechanically generates, it obtains an additional 9 Cents of labor income tax revenue (in net present value) through higher labor supply of (non-)heirs

Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs

The taxation of bequests can have a positive impact on the labor supply of heirs through wealth effects. This leads to an increase in future labor income tax revenue on top of direct bequest tax revenue. We first show in a theoretical model that a simple back-of-the envelope calculation, based on existing estimates for the reduction in earnings after wealth transfers, fails: the marginal propensity to earn out of unearned income is not a sufficient statistic for the calculation of this effect because (i) heirs anticipate the reduction in net bequests and adjust their labor supply already prior to inheriting, and (ii) when bequest receipt is stochastic, even those who ex post end up not inheriting anything respond ex ante to the implied change in their distribution of net bequests. We quantitatively elaborate the size of the overall revenue effect due to labor supply changes of heirs by using a state of the art life-cycle model that we calibrate to the German economy. Besides the joint distribution of income and inheritances, quasi-experimental evidence regarding the size of wealth effects on labor supply is a key target for this calibration. We find that for each Euro of bequest tax revenue the government mechanically generates, it obtains an additional 9 Cents of labor income tax revenue (in net present value) through higher labor supply of (non-)heirs

Tax Wedges, Financial Frictions and Misallocation

We revisit the classical result that in a closed economy the incidence of corporate taxes on labor is approximately zero. We consider a rich general equilibrium framework, where agents differ in the level of wealth as well as in their managerial and working ability. Potential entrepreneurs go through all the key decisions affected by corporate tax changes: the choice of (i) occupation, (ii) organizational form, (iii) investment, and (iv) financing structure. We allow both for the presence of financial frictions and the traditional tax advantage of debt over corporate equity, which jointly generate misallocation of capital and talent. In this environment we characterize the effects of increasing corporate taxes both analytically and for a calibrated version of the model. We show that this tax increase reallocates production from C corporation to pass-through businesses. Since, due to distorted prices, the latter have higher capital-labor ratios, this reallocation generates a reduction in labor productivity and wages. Furthermore, the corporate tax increase induces some C corporations to reorganize as pass-throughs, which implies more restricted acess to external funds and thus a socially inefficient downsizing of production in these firms. Finally, the tax increase causes further misallocation of talent by inducing agents with low wealth relative to their managerial talent to switch from entrepreneurship to being workers, while the reverse happens for agents with higher wealth and lower managerial skills. Overall, we find that both labor and capital bear a large share of the corporate tax incidence, while entrepreneurs are net beneficiaries of the tax change

Atmospheric controls on hydrogen and oxygen isotope composition of meteoric and surface waters in Patagonia

The southern tip of South America, commonly referred to as Patagonia, is a key area to understand SouthernHemisphere Westerlies (SHW) dynamics and orographic isotope effects in precipitation. However, only few studies haveaddressed these topics. We evaluated the stable isotope (2H, 18O) compositions of precipitation, lentic waters, and lotic waters in that area to characterize and understand isotope fractionation processes associated with orographic rainout, moisture 20 recycling and moisture sources. Observational data were interpreted with the help of backward trajectory modelling of moisturesources using reanalysis climate data. While the Pacific serves as the exclusive moisture source for sites upwind of the Andes and on the immediate downwind area of the Andes, recycled moisture from the continent seems to be the main humidity source at the Patagonian Atlantic coast. In contrast, the Pampean Atlantic coast north of Patagonia obtains moisture from the Atlantic Ocean. In the core zone of the SHW at a latitude of 50° S, a depletion in the heavy isotopes of 10 ? and 85 ?, for 18O and 25 2H, respectively, occurs due to orographic rainout corresponding to a drying ratio of 0.45.Fil: Mayr, Christoph. Universitat Erlangen-Nuremberg; Alemania. Universitat Technical Zu Munich; AlemaniaFil: Langhamer, Lukas. Universidad de Innsbruck; AustriaFil: Wissel, Holger. Universitat Erlangen-Nuremberg; AlemaniaFil: Meier, Wolfgang. Universitat Erlangen-Nuremberg; AlemaniaFil: Sauter, Tobias. Universitat Erlangen-Nuremberg; AlemaniaFil: Laprida, Cecilia. Consejo Nacional de Investigaciones Científicas y Técnicas. Oficina de Coordinación Administrativa Ciudad Universitaria. Instituto de Estudios Andinos "Don Pablo Groeber". Universidad de Buenos Aires. Facultad de Ciencias Exactas y Naturales. Instituto de Estudios Andinos "Don Pablo Groeber"; ArgentinaFil: Massaferro, Julieta. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Patagonia Norte; Argentina. Administración de Parques Nacionales. Delegación Regional Patagonia; ArgentinaFil: Försterra, Günter. Pontificia Universidad Católica de Valparaíso; ChileFil: Lücke, Andreas. Universitat Erlangen-Nuremberg; Alemani

On the design of a European Unemployment Insurance System

We study the welfare effects of both existing and counter-factual European unemployment insurance (UI) policies using a rich multi-country dynamic general equilibrium model with labour market frictions. The model successfully replicates several salient features of European labour markets, in particular the cross-country differences in the flows between employment, unemployment and inactivity, as a result of labour market and UI policy differences across euro area countries. We find that mechanisms like the recently introduced instrument for temporary support to mitigate unemployment risks in an emergency (SURE), which allows national governments to borrow at low interest rates to cover expenditures on unemployment risk, yield sizeable welfare gains. Furthermore, we find that, in spite of the calibrated heterogeneity across euro area countries, there is a common direction in which they can improve their UI policies; in particular, a harmonized benefit system that features a one-time payment of around three quarters of income upon separation is welfare improving in all euro area countries relative to the status quo