Paolo Surico, Riccardo Trezzi, 22 August 2015

Not much is known about the impact of housing tax hikes on consumer spending for different groups of society. This column shows that in Italy, households with mortgage debt responded to a property tax increase with a decrease in their expenditures, mostly of net vehicles purchases. The short-run direct cost (in the form of forgone consumer spending) of the tax change was small relative to the amount of extra taxes raised, but the overall negative consequences for the car industry were significant.

Ravi Kanbur, Joseph Stiglitz, 18 August 2015

Growth theories traditionally focus on the Kaldor-Kuznets stylised facts. Ravi Kanbur and Nobelist Joe Stiglitz argue that these no longer hold; new theory is needed. The new models need to drop competitive marginal productivity theories of factor returns in favour of rent-generating mechanism and wealth inequality by focusing on the ‘rules of the game.’ They also must model interactions among physical, financial, and human capital that influence the level and evolution of inequality. A third key component will be to capture mechanisms that transmit inequality from generation to generation.

Bernardin Akitoby, Sanjeev Gupta, Abdelhak Senhadji, 18 July 2015

There has been a heated debate about the effectiveness of fiscal policy as a countercyclical tool but little evidence on how it can support growth. This column shows that fiscal policy can lift medium- and long-term growth in both advanced and developing economies. But all fiscal reforms are not equal in their growth dividend. Successful reforms are often part of a broader reform package and can balance the growth-equity trade-off.

Joan Paredes, Javier J. Pérez, Gabriel Pérez-Quirós, 12 July 2015

Uncertainty about fiscal policies can be damaging for economic performance, as it affects decisions about consumption, investment, and savings. This column argues that it is possible to reduce such uncertainty. Even if governments’ fiscal plans turn out to be (purposely) wrong ex post, they can convey useful information. It is just a matter of using the appropriate learning device whereby government promises are confronted every quarter with reality (i.e. what the government is actually doing).

Li Liu, Ben Lockwood , 09 July 2015

Most countries have a threshold below which businesses do not need to register for value added tax (VAT). This column looks at the costs and efficiency of VAT by analysing behavioural responses of firms to the registration threshold. Voluntary registration appears more likely when the cost of inputs is high or when the proportion of business-to-consumer sales is low. There is bunching around the threshold, and this is more likely when the cost of inputs relative to sales is low or the proportion of business-to-consumer sales is high.

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