Handbook of Public Economics 

About: Handbook of Public Economics is an academic journal. The journal publishes majorly in the area(s): Public good & Public finance. It has an ISSN identifier of 1573-4420. Over the lifetime, 43 publications have been published receiving 4962 citations.

Chapter 14 The theory of cost-benefit analysis

Abstract: Publisher Summary The theory of cost-benefit analysis is widely used. It contributes to the understanding by giving a formal description of the subject and examining the theoretical basis for some of the techniques that have become the accepted tools of decision-making around the world. The aim of cost-benefit analysis is to provide a consistent procedure for evaluating decisions in terms of their consequences. This might appear as an obvious and sensible way to proceed, but it is by no means the only one. Cost-benefit analysis clearly embraces an enormous field. It offers clear guidelines for the evaluation of government decisions in such varied fields as tax, trade, or incomes policies; the provision of public goods; the distribution of rationed commodities; or the licensing of private investment. The chapter discusses the way cost-benefit analysis should proceed, a fairly unified account of the most salient results of the theoretical literature, and the way the framework encompasses a number of approaches to the definition and formulation of cost-benefit problems and describes the implications for a number of practical issues.

Chapter 11 The economics of the local public sector

Abstract: Publisher Summary This chapter discusses the demand side of the public sector and focuses on normative rather than positive models. The political economy of the local public sector has been studied by both political scientists and economists, but efforts to combine the two have had limited success. The addition of supply-side-political assumptions to Tiebout models has led largely to negative conclusions about the existence and efficiency of the local public competitive analogy. The Tiebout model has provided one useful, albeit somewhat artificial, model of a more or less competitive local public sector. However, the value and usefulness of the Tiebout model is likely to diminish in the future, and an alternative or alternatives are needed. Several monopoly models of local government have been suggested to provide a useful counterpart to the Tiebout approach. Public goods are viewed as brands that differ in one or more of the attributes. The extent to which local governments compete among themselves in the supply of the public good becomes issues that are studied using modern techniques of industrial organization. Local public economics is a subject area that is rich with empirical work, but a good deal of high quality work remains to be undertaken. The relationship between the mobility of households and the provision of local public services is one area that typifies work in local public finance. A well-specified and correctly estimated model helps to evaluate the correct method by which the demands for local public goods are determined.

Tax Policy and Business Investment

Abstract: In this survey, we review research on tax policy and business investment with four objectives. First, we use a simple prototypical dynamic neoclassical investment model to derive and explain effects of taxation on business investment in the long run and short run. Second, we describe and evaluate empirical tests of neoclassical channels, and we conclude that recent empirical evidence is consistent with neoclassical intuition. Third, we explore qualifications to basic theoretical models and their empirical tests raised by recent research on irreversibility and capital-market imperfections. Finally, we evaluate arguments for and against using tax policy to influence the level or timing of investment. While there is a consensus about the nature and magnitude of tax policy on investment demand considerable uncertainty remains regarding the structure of adjustment costs and the short-run dynamic effects of tax reforms. Consistent with our analysis of equilibrium investment outcomes, ascertaining the effects of tax policy on equilibrium investment requires additional research to examine responsiveness of interest rates, output, and the stock market to tax policy changes.

Chapter 6 Tax policy in open economies

Abstract: Publisher Summary This chapter discusses tax policy in open economies. The chapter discusses the theory of optimum taxation in an economy open to international trade. Most formal models of optimum taxation assume away international trade. Its presence does not alter any basic issues or methods. The economic objectives of the policy remain the same, and can be broadly classified as (i) correcting externalities and distortions, (ii) raising revenue for government expenditure, and (iii) redistributing income. There may also be other “non-economic” objectives or constraints. The policy instruments to pursue these aims are taxes or subsidies on the activities and transactions in the economy, within limitations imposed by observability of the actions and enforceability of the policies. International trade introduces a new set of possible externalities and distortions, and a new set of transactions to tax or subsidize.

Chapter 23 – Environmental Taxation and Regulation*

Abstract: This chapter examines government policy alternatives for protecting the environment. We compare environmentally motivated taxes and various non-tax environmental policy instruments in terms of their efficiency and distributional impacts. Much of the analysis is performed in a second-best setting where the government relies on distortionary taxes to finance some of its budget. The chapter indicates that in this setting, general-equilibrium considerations have first-order importance in the evaluation of environmental policies. Indeed, some of the most important impacts of environmental policies take place outside of the market that is targeted for regulation. Section 2 examines the optimal level of environmental taxes, both in the absence of other taxes and in the second-best setting. Section 3 analyzes the impacts of environmental tax reforms, concentrating on revenue-neutral policies in which revenues from environmental taxes are used to finance cuts in ordinary, distortionary taxes. Here we explore in particular the circumstances under which the “recycling” of revenues from environmental taxes through cuts in distortionary taxes can eliminate the non-environmental costs of such reforms – an issue that has sparked considerable interest in recent years. Section 4 compares environmental taxes with other policy instruments – including emissions quotas, performance standards, and subsidies to abatement – in economies with pre-existing distortionary taxes. We first compare these instruments assuming that policymakers face no uncertainties as to firms’ abatement costs or the benefits of environmental improvement, and then expand the analysis to explore how uncertainty on the part of regulators and the associated monitoring and enforcement costs affect the choice among alternative policy instruments. Section 5 concentrates on the trade-offs between efficiency and distribution in a second-best setting. Section 6 offers conclusions.