Abstract. The last three decades have witnessed a great deal of research effort devoted to measuring the private output elasticity of public capital. The wide range of available estimates have precluded any consensus so far, however. This paper reconciles the empirical findings of the literature by quantitatively analyzing a sample of 578 estimates collected from 68 studies for the 1983-2008 period. Using meta-regression analysis, we show how study design characteristics and publication bias can explain a large fraction of the variation across estimates. We find a short-run output elasticity of public capital supplied at the central government level of 0.083, which increases to 0.122 in the long run. If, in addition, only core infrastructure at a regional/local level of government is considered, these estimates are almost doubled. The average output elasticity of public capital amounts to 0.106. Our results suggest that public capital is undersupplied in OECD economies.
A major constraint on trade liberalization in many countries is the prospective loss of government revenue. Recent results, however, have established a simple and appealing strategy for overcoming this difficulty, whilst still realizing the efficiency gains from liberalization, in small, competitive economies: combining tariff cuts with point-for-point increases in destination-based consumption taxes unambiguously increases both national welfare and total government revenue. This note explores the implications of imperfect competition for this strategy. Examples are easily found in which this strategy unambiguously reduces domestic welfare.
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A key obstacle to fundamental tariff reform in many developing countries is the revenue loss that it ultimately implies. This paper establishes a simple and practicable strategy for realizing the efficiency gains from tariff reform without reducing public revenues, showing that for a small open economy, a cut in tariffs combined with a point-for-point increase in domestic consumption taxes increases both welfare and public revenues. Increasingly stringent conditions are required, however, to ensure unambiguously beneficial outcomes from this reform strategy when allowance is made for such important features as nontradeable goods, intermediate inputs, and imperfect competition.
The exchange of taxpayer-specific information between national tax authorities has recently emerged as a key and controversial topic in international tax policy discussions, most notably with the OECD's harmful tax practices project and the EU's savings tax initiative. This paper analyses the effects of information exchange and withholding taxes, recognizing that countries which agree to exchange information do not forfeit the ability to levy withholding taxes, and also focusing in particular on the effects of innovative revenuesharing arrangements. Amongst the findings are that: (i) the transfer of withholding tax receipts to the residence country, as planned in the EU, has no effect on equilibrium tax rates, but acts purely as a lump sum transfer; (ii) in contrast, allocating some of the revenue from information exchange to the source country-counter to usual practice (though no less so than the EU agreement)-would have adverse strategic effects on total revenue; (iii) nevertheless, any withholding tax regime is Pareto dominated by information exchange combined with appropriate revenue sharing; and, in particular, (iv) sharing of the additional revenues raised from information provided, while efficiency-reducing, could be in the interests of large (high-tax) countries as a means of persuading small (low-tax) countries to provide that information voluntarily.
JEL codes:H77; H87; F42
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