Backhaus / Wagner Handbook of Public Finance

1. Auflage 2006
ISBN: 978-1-4020-7864-4
Verlag: Springer US
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 554 Seiten

The Handbook of Public Finance provides a definitive source, reference, and text for the field of public finance. In 18 chapters it surveys the state of the art - the tradition and breadth of the field but also its current status and recent developments. The Handbook's intellectual foundation and orientation is truly multidisciplinary. Throughout its examination of the standard material of public finance, it explores the connections between that material and such neighboring fields as political science, sociology, law, and public administration. The editors and contributors to the Handbook are distinguished scholars who write clearly and accessibly about the political economy of government budgets and their policy implications. To address the needs and interests of international scholars, they place European issues next to the American agenda and give attention to the issues of transformation in Central Eastern Europe and elsewhere. General Editors: Jürgen G. Backhaus, University of Erfurt
Richard E. Wagner, George Mason University
Contributors: Andy H. Barnett, Charles B. Blankart, Thomas E. Borcherding, Rainald Borck, Geoffrey Brennan, Giuseppe Eusepi, J. Stephen Ferris, Fred E. Folvary, Andrea Garzoni, Heinz Grossekettaler, Walter Hettich, Scott Hinds, Randall G. Holcombe, Jean-Michel Josselin, Carla Marchese, Alain Marciano, William S. Peirce, Nicholas Sanchez, David Schap, A. Allan Schmid, Russell S. Sobel, Stanley L. Winer, Bruce Yandle.

Autoren/Hrsg.

Backhaus, Jürgen

Wagner, Richard E.

Inhaltsverzeichnis

1;Table of Contents;6
2;1 SOCIETY, STATE, AND PUBLIC FINANCE: SETTING THE ANALYTICAL STAGE;8
2.1;1. THE CAMERALIST ORIGINS OF PUBLIC FINANCE;10
2.2;2. FROM CAMERALIST ORIGINS TO CONTEMPORARY PUBLIC FINANCE;14
2.2.1;2.1. The Edgeworthian, Choice- Theoretic Tradition;15
2.2.2;2.2. The Wicksellian, Catallactical Tradition;16
2.3;3. THE PRESENT RELEVANCE OF PAST FORMULATIONS;18
2.4;4. THE ESSAYS TO FOLLOW;20
2.5;REFERENCES;25
3;2 WELFARE ECONOMICS AND PUBLIC FINANCE;26
3.1;1. INTRODUCTION;26
3.2;2. THE DIFFERENCE BETWEEN MARKET ACTION AND GOVERNMENT ACTION;28
3.3;3. THE CONCEPT OF ECONOMIC EFFICIENCY;29
3.4;4. THE CONCEPT OF EQUITY;31
3.5;5. PUBLIC GOODS;32
3.6;6. EXTERNALITIES;39
3.7;7. MONOPOLY AND ANTITRUST;44
3.8;8. INCOMPLETE INFORMATION;46
3.9;9. ECONOMIC STABILIZATION AND MONETARY STABILITY;48
3.10;10. REDISTRIBUTION;49
3.11;11. CONCLUSION;51
3.12;ACKNOWLEDGMENT;52
3.13;NOTES;52
3.14;REFERENCES;55
4;3 FISCAL CONTITUTIONALISM;59
4.1;1. THE CONSTITUTIONAL APPROACH;60
4.2;2. FISCAL CONSTITUTIONS;64
4.3;3. TAXES AS PRICES;65
4.3.1;3.1. The Wicksell- Lindahl Tradition;65
4.3.2;3.2. Majority Rule;66
4.4;4. PUBLIC FINANCE IN CONSTITUTIONAL PERSPECTIVE—ANALYSIS;67
4.4.1;4.1. Cost- share Determinacy;68
4.4.2;4.2. Cost- share Estimation — Margins versus Averages;69
4.4.3;4.3. Excess Burdens in Constitutional Perspective;70
4.4.4;4.4. Fiscal Illusion;72
4.4.5;4.5. Debt Financing;75
4.5;5. FISCAL CONSTITUTIONS—PROCESS;76
4.6;6. SUMMARY AND CONCLUSIONS;78
4.7;NOTES;79
4.8;REFERENCES;80
5;4 GROWTH IN THE REAL SIZE OF GOVERNMENT SINCE 1970*;83
5.1;1. INTRODUCTION;83
5.2;2. RECENT CHANGES IN THE SIZE OF GOVERNMENT;85
5.2.1;2.1. The Literature on Real Government Size;85
5.2.2;2.2. The Elasticity of Demand for Government Services and the Baumol Effect;86
5.2.3;2.3. The Income Effect and Wagner’s Law;87
5.2.4;2.4. Income Inequality between Mean and Median Voter;89
5.2.5;2.5. Other Factors Influencing Either the Demand and/or Supply of Government;91
5.2.6;2.6. Government Size within a Growth Equation;91
5.3;3. EVIDENCE FROM PANEL DATA ON TWENTY OECD COUNTRIES FROM 1970 TO 1997;92
5.3.1;3.1. Determinants of the Real Size of Government;92
5.3.2;3.2. The Effect of Public Sector Size on Growth;96
5.3.3;3.3. Simultaneity in the Growth of Government Size and Real Income;98
5.4;4. “QUIET SIDE” OF THE PUBLIC SECTOR: REGULATION AS SPENDING;102
5.5;5. CONCLUSION;105
5.6;DATA APPENDIX;106
5.7;NOTES;108
5.8;REFERENCES;110
6;5 RULES‚ POLITICS AND THE NORMATIVE ANALYSIS OF TAXATION;115
6.1;1. INTRODUCTION;115
6.2;2. BASIC ISSUES IN PUBLIC FINANCE;116
6.3;3. RULES OR NORMS IN RELATION TO THE BASIC ELEMENTS OF PUBLIC FINANCE;118
6.3.1;3.1. Outcome- oriented Rules;118
6.3.2;3.2. Process- oriented Rules;123
6.4;4. EVALUATION OF RULES OR NORMS;127
6.5;5. TAXATION, WELFARE ECONOMICS AND POLITICAL MARKET FAILURE;135
6.5.1;5.1. Three Steps to a More Comprehensive Analysis;135
6.5.2;5.2. Other Approaches to the Redefinition of Normative Analysis;137
6.6;6. CONCLUSION;138
6.7;NOTES;140
6.8;REFERENCES;141
7;6 TAXATION, PRODUCTION, AND REDISTRIBUTION;144
7.1;1. OPTIMAL TAXATION;146
7.2;2. REDUCING THE POLITICAL COSTS OF TAXATION;148
7.3;3. COMMODITY TAXES;149
7.4;4. INCOME TAXATION;151
7.5;5. THE BENEFIT PRINCIPLE;151
7.6;6. PRODUCTION;152
7.7;7. SELF-INTEREST AND PUBLIC PRODUCTION;153
7.8;8. PUBLIC PRODUCTION AND THE FISCAL CONSTITUTION;154
7.9;9. REDISTRIBUTION;155
7.10;10. THE POLITICS OF REDISTRIBUTION;156
7.11;11. REDISTRIBUTION AND THE FISCAL CONSTITUTION;158
7.12;12. THE POLITICAL MARKETPLACE;160
7.13;13. AGREEMENTS IN POLITICS AND IN MARKETS;161
7.14;14. COERCION;162
7.15;15. TAXATION, PRODUCTION, AND REDISTRIBUTION;163
7.16;NOTES;166
7.17;REFERENCES;167
8;7 PUBLIC REVENUE FROM LAND RENT;170
8.1;1. THE ECONOMICS OF RENT-BASED PUBLIC FINANCE;171
8.1.1;1.1. Land as a Factor of Production;171
8.1.2;1.2. The Capitalization of Externalities, Costs and Benefits;173
8.1.3;1.3. Speculation, the Margin of Production, and Land Use;175
8.1.4;1.4. The Marginal Analysis of Public Spending and Site Rentals;177
8.1.5;1.5. Free Trade and Land- value Taxation;179
8.1.6;1.6. Land Value Taxation in Practice;180
8.2;2. A BRIEF HISTORY OF RENT THEORISTS;181
8.2.1;2.1. Land Theorists prior to Henry George;181
8.2.2;2.2. Henry George;182
8.2.3;2.3. Land Theorists after Henry George;184
8.3;3. ECONOMIC EFFECTS AND ETHICAL CONSIDERATIONS;186
8.3.1;3.1. Excess Burdens;186
8.3.2;3.2. Urban Sprawl and Blight;186
8.3.3;3.3. Business Cycles;187
8.3.4;3.4. The Ethics of Taxation;188
8.4;4. TERRITORY, GOVERNANCE, AND PUBLIC CHOICES;189
8.4.1;4.1. Voting and Governance Structure;189
8.4.2;4.2. Public Choice and Transfer Seeking;190
8.4.3;4.3. Demand Revelation;192
8.5;5. CONTRACTUAL COMMUNITIES AND PUBLIC RENTS;193
8.6;6. CONCLUSION;193
8.7;REFERENCES;194
9;8 DEBT, MONEY, AND PUBLIC FINANCE;200
9.1;1. POSTWAR CONTROVERSY OVER THE BURDEN OF PUBLIC DEBT;202
9.2;2. AUTOCRACY AND THE PERSONALIZATION OF PUBLIC DEBT;206
9.3;3. DEMOCRACY AND THE INTERMEDIARY STATE;208
9.4;4. CONSENSUAL DEMOCRATIC DEBT;210
9.5;5. FACTIONAL DEMOCRATIC DEBT;212
9.6;6. MONEY, SEIGNIORAGE, AND PUBLIC DEBT;214
9.7;7. CONCLUDING REMARKS;217
9.8;NOTES;218
9.9;REFERENCES;218
10;9 REGULATION BY TAXATION*;221
10.1;1. INTRODUCTION;221
10.2;2. A THEORY OF REGULATORY TAXATION;222
10.2.1;2.1. Tax Relief as Regulation;225
10.2.2;2.2. Taxation in the Theory of Regulation;227
10.2.3;2.3. Summary;228
10.3;3. THE PIGOUVIAN DOCTRINE;228
10.3.1;3.1. Was Pigou Mugged by Reality?;229
10.3.2;3.2. Taxation for Revenue Only;230
10.3.3;3.3. Summary;231
10.4;4. AN EXAMINATION OF DATA;231
10.4.1;4.1. State Taxation of Alcoholic Beverages;231
10.4.2;4.2. A Focus on Differential Effects;233
10.4.3;4.3. Summary;234
10.4.4;4.4. Taxing Environmental Use in the OECD Countries;234
10.5;5. FINAL THOUGHTS;238
10.6;NOTES;239
10.7;REFERENCES;239
11;10 TAXATION, BLACK MARKETS, AND OTHER UNINTENDED CONSEQUENCES;241
11.1;1. INTRODUCTION;241
11.2;2. THE BASIC MODEL;243
11.3;3. TAX EVASION AND LABOR SUPPLY;246
11.4;4. TAX EVASION AND OCCUPATIONAL CHOICE;248
11.5;5. ENFORCEMENT;250
11.6;6. THE TAX COMPLIANCE GAME;254
11.7;7. PENALTY SETTING;257
11.8;8. MORAL PRINCIPLES AND SOCIAL FACTORS;259
11.9;9. KINKED INDIFFERENCE CURVES;262
11.10;10. OPTIMAL TAXATION;264
11.11;11. POLITICAL AND CONSTITUTIONAL IMPLICATIONS;266
11.12;12. EVASION OF INDIRECT TAXES;268
11.13;13. TAX AVOIDANCE;271
11.14;14. CONCLUSIONS;273
11.15;NOTES;274
11.16;REFERENCES;276
12;11 PUBLIC ENTERPRISE: RETROSPECTIVE REVIEW AND PROSPECTIVE THEORY;280
12.1;1. INTRODUCTION;280
12.2;2. WHAT IS PUBLIC ENTERPRISE?;281
12.3;3. NORMATIVE DISCUSSION OF PUBLIC ENTERPRISE;283
12.4;4. THE PROPERTY RIGHTS PARADIGM AND;287
12.5;EMPIRICAL STUDIES OF PUBLIC ENTERPRISE;287
12.6;5. PUBLIC CHOICE AND PUBLIC ENTERPRISE;290
12.7;6. RECENT DEVELOPMENTS RELATED TO PUBLIC ENTERPRISE;294
12.7.1;6.1. Quangos;294
12.7.2;6.2. Public Enterprise via Asset Seizure;296
12.8;7. SUMMARY;297
12.9;REFERENCES;297
13;12 PRIVATIZATION, NATIONALIZATION, AND ASPECTS OF TRANSITION;304
13.1;1. INTRODUCTION;304
13.2;2. NATIONALIZATION;305
13.2.1;2.1. Theoretical Justification;305
13.2.2;2.2. Nationalization in Practice;306
13.2.3;2.3. Form of Organization;309
13.3;3. PRIVATIZATION;311
13.3.1;3.1. Progress in Economic Theory;311
13.3.2;3.2. Reasons for Privatizing;314
13.3.3;3.3. Privatization of Governmental Functions;314
13.4;4. NATIONALIZATION—PRIVATIZATION CYCLES;316
13.4.1;4.1. The Cycle as a Political Process;317
13.4.2;4.2. The Chua Study;318
13.5;5. TRANSITION;320
13.6;6. CONCLUSION;322
13.7;REFERENCES;322
14;13 SOCIAL INSURANCE;326
14.1;1. DEFINITIONS AND HISTORY;326
14.1.1;1.1. Social Insurance, Social Security, and the Welfare State;326
14.1.2;1.2. Explanations for the emergence of social insurance systems: motives and functions;329
14.1.3;1.3. What experience shows: the views of natural scientists and historians;332
14.2;2. SOCIAL INSURANCE IN MODERN TIMES;338
14.2.1;2.1. The Growth Pattern and the Driving Forces behind it: The Public Choice View;338
14.2.2;2.2. A Comparative Study of Social Insurance Systems in OECD Member States: The Views of Political Scientists;348
14.2.3;2.3. Social insurance and the European Single Market;361
14.3;3. THE ECONOMIC EFFECTS OF SOCIAL INSURANCE: A GENERAL OVERVIEW;363
14.3.1;3.1. The Effects on Income Distribution and Economic Stability;363
14.3.2;3.2. Allocative effects: efficiency, labor market distortions, and capital market distortions;367
14.4;4. POPULATION AGING AND PROPOSALS FOR PENSION REFORM;372
14.5;5. CONCLUDING REMARKS;376
14.6;NOTES;377
14.7;REFERENCES;381
15;14 REDISTRIBUTION, POOR RELIEF, AND THE WELFARE STATE;387
15.1;1. UTILITARIAN JUSTIFICATIONS FOR WELFARE STATE REDISTRIBUTION;390
15.2;2. CONTRACTUAL ARGUMENTS FOR WELFARE STATE REDISTRIBUTION;396
15.2.1;2.1. Knowledge and State Competence;397
15.2.2;2.2. Incentive and State Competence;399
15.3;3. INTEREST GROUPS AND HORIZONTAL REDISTRIBUTION;400
15.4;REFERENCES;405
16;15 ECONOMIC ANALYSIS AND EFFICIENCY IN PUBLIC EXPENDITURE;408
16.1;1. INPUT AND OUTPUT CATEGORIES;411
16.2;2. ESTIMATING THE PRODUCTION FUNCTION;413
16.3;3. OPPORTUNITY COST ADJUSTMENTS;414
16.3.1;3.1. Taxation and Tariffs;414
16.3.2;3.2. Monopoly and Economies of Scale;415
16.3.3;3.3. Foreign Exchange;415
16.3.4;3.4. Unemployment, Labor and Wages;416
16.3.5;3.5. Intersectoral Interdependence;417
16.3.6;3.6. Regional unemployment;418
16.3.7;3.7. Summary;418
16.4;4. PRICING BENEFITS AND COSTS;419
16.4.1;4.1. Analogous Good Method;419
16.4.2;4.2. Intermediate Good Method;419
16.4.3;4.3. Cost Saving Method;420
16.4.4;4.4. Access Cost- Quantity Demanded Method;421
16.4.5;4.5. Rent and Hedonic Price Models;421
16.4.6;4.6. Contingent Valuation;422
16.4.7;4.7. Existence and Option Benefits;424
16.5;5. NON-MARGINAL PROJECTS;424
16.6;6. VALUATION OVER TIME;425
16.6.1;6.1. Differences Among Individuals;426
16.6.2;6.2. Cost of Capital Approach;426
16.6.3;6.3. Inter- generational Discounting;427
16.7;7. INVESTMENT CRITERIA;428
16.7.1;7.1. Net Present Value;428
16.7.2;7.2. Internal Rate of Return;428
16.7.3;7.3. Benefit- Cost Ratio;429
16.7.4;7.4. Criteria Comparisons;429
16.8;8. UNCERTAINTY;430
16.8.1;8.1. Expected Value and Expected Utility;430
16.9;9. SOCIAL WELFARE;432
16.10;10. CONCLUSION;435
16.11;NOTES;437
16.12;REFERENCES;438
17;16 LOCAL PUBLIC FINANCE;441
17.1;1. THE NORMATIVE THEORY OF LOCAL PUBLIC FINANCE;444
17.1.1;1.1. The Conceptual Point of View;444
17.1.2;1.2. Optimal City Size;445
17.1.3;1.3. Spillover Effects;448
17.1.4;1.4. Intergovernmental Grants;449
17.2;2. THE POSITIVE THEORY OF LOCAL GOVERNMENTS;450
17.2.1;2.1. The Tiebout Model;450
17.2.2;2.2. Critique of the Tiebout Model;454
17.2.3;2.3. Empirical Tests of Local Public Goods Models;462
17.3;3. THE CONSTITUTIONAL APPROACH TO LOCAL GOVERNMENT;464
17.3.1;3.1. Regulation of Destructive Competition among Local Governments;464
17.3.2;3.2. Regulation of Local Government Monopoly Power;466
17.4;4. CONCLUSION;468
17.5;NOTES;469
17.6;REFERENCES;471
18;17 FEDERALISM AND SUBSIDIARITY IN NATIONAL AND INTERNATIONAL CONTEXTS;477
18.1;1. A SHORT HISTORY OF FISCAL SOCIOLOGY;521
18.2;2. THE ECONOMIC APPROACH TO FEDERALISM;479
18.2.1;2.1. Why Federalism?;480
18.2.2;2.2. Which Federalism? Federalism and Subsidiarity;487
18.2.3;2.3. Conclusion of Section 2;494
18.3;3. FEDERATING A NATION: SUBSIDIARITY IN NATIONAL CONTEXT;495
18.3.1;3.1. Providing Public Goods through a Confederacy: The American Example;495
18.3.2;3.2. The Assignment of Prerogatives among Agents in the US Federation;499
18.3.3;3.3. Conclusion of Section 3;506
18.4;4. FEDERATING NATIONS: SUBSIDIARITY IN INTERNATIONAL CONTEXT;506
18.4.1;4.1. The Economics of an International Legal Order: The European example;507
18.4.2;4.2. The Assignment of Prerogatives in the European Constitutional Order;509
18.4.3;4.3. Conclusion of Section 4;515
18.5;5. CONCLUSION: FOUNDATIONAL CONCERNS;515
18.6;REFERENCES;516
19;18 FISCAL SOCIOLOGY: WHAT FOR?;521
19.1;1. A SHORT HISTORY OF FISCAL SOCIOLOGY;521
19.2;2. MAIN ISSUES;524
19.2.1;2.1. The Debate on the Crisis of the Tax State;524
19.2.2;2.2. Income Taxation;526
19.2.3;2.3. Applications and Issues;526
19.2.4;2.4. An Alphabet of Fiscal Sociology;528
19.3;3. FISCAL SOCIOLOGY AS A FIELD OF INSTRUCTION AND RESEARCH;536
19.3.1;3.1. Instruction;536
19.3.2;3.2. Research;537
19.4;4. CONCLUSION;538
19.5;NOTES;538
19.6;REFERENCES;540
20;INDEX;542

Leseproben

Chapter 6 TAXATION, PRODUCTION, AND REDISTRIBUTION (p. 139-140)

Randall G. Holcombe
Florida State University
[e-mail]

Abstract
In one sense the public choice revolution of the 20th century ocurred because economic and political analysis now routinely takes into account the incentives of political decision-makers, and recognizes that political decision-making can result in inefficiencies. In another sense, this public choice revolution is seriously incomplete, because while it has succeeded in producing a theory of government failure, it has not taken the next step to develop a framework for optimal public policy in light of the characteristics of collective decision-making. This chapter takes a step in that direction by sketching out optimal policies for taxation, production and redistribution, taking into account that these public policies are products of the political system. Public choice might be thought of as applying the tools of economics to analyze political decision-making. This chapter uses the results of public choice to redevelop the theory of public finance.

Keywords
Benefit principle, commodity taxes, income taxation, optimal taxation, public choice revolution

JEL classification: H00, H20

At the beginning of the 21 st century, few economists would take issue with the idea that to maximize the well-being of a nation’s citizens, market allocation of resources is superior to government planning.1 At the same time, most economists would also argue that some role for government is necessary in an economy to undertake those activities for which the market is not wellsuited. 2 Some of those activities might be fundamental requirements for the operation of a market economy. For example, market exchange is predicated on the clear definition and protection of property rights, and the protection of property rights is one of the roles that has traditionally been undertaken by government.3 Other government actions might be desirable if they could overcome problems that markets might have in allocating resources, such as may arise with externalities and public goods. The purpose of this chapter is not to debate the optimal role and scope of government, but rather to look at the methods by which economic analysis has dealt with those questions. The conventional method of public finance has been to identify problems that might arise in the market allocation of resources and then to determine some type of optimal policy that can be used to correct this problem. The typical analysis assumes that the government can costlessly identify and implement this optimal policy. One of the important insights of public choice, as Buchanan (1975) clearly explains, is that there may be inefficiencies in government allocation of resources too, and that methodologically, an analysis should treat public sector decision-makers in the same framework as private sector decision-makers. Government can fail to allocate resources efficiently for many reasons, ranging from having inadequate information to understand or solve the problem to being unable to implement or enforce the optimal solution. This chapter ignores many of these very real problems, and focuses solely on the problems that arise from the collective decision-making process.

The chapter unrealistically assumes that a benevolent dictator would be able to produce a government policy that would result in an optimal use of resources, in order to focus on the problems that arise solely as a result of having to decide on what policy to follow through democratic decision-making. For example, one might see that air pollution is caused by excessive use of an unpriced resource, which creates an externality. However, internalizing the externality might require more information than the government has regarding how much pollution is coming from various sources, and what regulations and/or pricing mechanisms would result in the optimal control of the externality. Even if the government could figure out the optimal course of action, it may not be able to force citizens to follow the optimal course of action it has calculated. These problems are assumed away, however, to focus on the problems that arise solely as a result of the government’s decision-making process. Public choice theory already has much to say about the inefficiencies of the collective decision-making process. The purpose of this chapter is to apply that body of public choice theory to the issues dealt with by standard public finance.

There is a well-established theory of optimal taxation, for example, but that theory does not take into account the fact that taxes are the product of a political decision-making process. This chapter looks at optimal taxation from a public choice perspective and concludes that an optimal tax system is significantly different if it is produced by a democratic decision-making process than if it is created by a benevolent dictator.