Strengthening the banking sector through higher equity capital is one of the key elements of policies aiming to reduce the probability of crises. However, the ‘corporate debt bias’ – the tendency of corporate tax systems to favour debt over equity – is at odds with this objective. This column estimates the benefits for financial stability of eliminating the corporate debt bias. Fully removing the debt bias is estimated to reduce potential public finance losses by between 25 and 55% for the six large EU countries sampled.
Sven Langedijk, Gaëtan Nicodème, Andrea Pagano, Alessandro Rossi, Saturday, July 4, 2015
Andrés Rodríguez-Pose, Yannis Psycharis, Vassilis Tselios, Tuesday, March 3, 2015
Electoral results and the geographical allocation of public investment in Greece have been intimately related. This column describes how incumbent Greek governments between 1975 and 2009 tended to reward those constituencies returning them to office. Increases in both the absolute and relative electoral returns for the party in government in a given Greek region were traditionally repaid with a greater level of per capita investment in that region. Single-member constituencies were the greatest beneficiaries of this type of pork-barrel politics.
Hans Holter, Dirk Krueger, Serhiy Stepanchuk, Friday, February 20, 2015
Since the Global Crisis, debt sustainability has received increasing attention. This column argues that the maximum sustainable debt level depends negatively on the progressivity of the tax system. The authors estimate that the US is still relatively far from the peak of its Laffer curve and from its maximally sustainable debt level. However, adopting a flat tax would raise the maximum sustainable debt from 330% to more than 350% of benchmark GDP, whereas adopting Danish-style progressivity would lower it to less than 250%.
Ameet Morjaria, Wednesday, February 5, 2014
Ethnic favouritism is a longstanding problem in Africa. This column presents new evidence of this phenomenon and how democracy affects it. Data on road building in Kenya confirms strong ethnic favouritism that disappears during periods of democracy.
Joakim Ruist, Saturday, January 18, 2014
The lifting of transitional access restrictions for Romanian and Bulgarian workers is a hotly debated topic in the EU with big implications for public finances in destination countries. This column presents analysis of immigrants in Sweden, which never imposed access restrictions when these two countries joined the EU. Romanian and Bulgarian migrants to Sweden under this unrestricted regime make a sizeable positive contribution to Swedish public finances. Contributions can be expected to be even larger in the UK and Ireland.
Joakim Ruist, Tuesday, September 17, 2013
This year the free movement of eastern European workers within the EU has been questioned. Fearing excessive use of their own welfare systems, governments have argued for continued access restrictions. This column presents research showing that eastern European migrants have been net contributors to public finances of the richer EU15 nations that received them.