Automatic Stabilizers, Economic Crisis and Income Distribution in Europe This paper investigates to what extent the tax and transfer systems in Europe protect households at different income levels against losses in current income caused by economic downturns like the present financial crisis. We use a multi country micro simulation model to analyse how shocks on market income and employment are...

This paper provides a critique of the global crusade recently launched by the World Bank and World Health Organization against tobacco, by providing some welfare estimates of the net costs associated from the rise in taxes that is proposed for India, S.Africa, S.Korea, Japan and the European Union. It critically examines conventional studies of the costs-benefits of smoking which besides ignori...

Choosing the Joneses: Endogenous Goals and Reference Standards A growing economic literature stresses the importance of relative comparisons, e.g., for savings and consumption or happiness. In this literature it is usually assumed that reference standards against which people compare themselves are exogenously given. In contrast findings from social psychology suggest that people play an active...

To understand the effect of fiscal policy on the private sector we have to comprehend how expectations about fiscal variables are formed. However, little is known about the way people form expectations about fiscal variables: no undercutting theory exists, not to say empirical evidence. The problem is that “expectations are unobservable” (Bertola and Drazen [BD93, p.16]). We generate observable...

In view of rising wage inequality and increasing poverty, the introduction of a legal minimum wage has recently become an important policy issue in Germany. We analyze the distributional effects of the introduction of a nationwide legal minimum wage of € 7.5 per hour on the basis of a microsimulation model which accounts for the complex interactions between individual wages, the tax-benefit sys...

Social Protection as an Automatic Stabilizer This paper analyzes the effectiveness of social protection systems in Europe and the US to provide (income) insurance against macro level shocks in terms of automatic stabilizers. We find that automatic stabilizers absorb 38% of a proportional income shock and 47% of an idiosyncratic unemployment shock in Europe, compared to 32% and 34% in the US. Th...

We estimate the importance of household liquidity for the effect of the Car Allowance Rebate System (CARS) on vehicle transactions. We measure the average program impact by comparing households with “clunkers” eligible for CARS to households with similar vehicles that are ineligible. The liquidity provided by CARS contributed to its larger than anticipated take-up. Clunkers with existing loans,...

This paper explores how bequests affect redistributive fiscal policies. The main premise underlying our approach is that bequests act as a signal of parental affection. It is shown that private transfers in the form of bequests may not offset public transfers to a significant extent, even though such private transfers are altruistically motivated and are strictly positive for all but a negligib...

Theory predicts that unit taxes increase the quality in a market since unit taxes reduce the relative price of high quality goods. Ad valorem taxes, on the other hand, have no effect on relative prices and should not affect product quality. The hypothesis is tested empirically in the US wine market. I find that the market share of high quality wine is significantly increased by unit taxes and t...

Ranking Up by Moving Out: The Effect of the Texas Top 10% Plan on Property Values Texas engaged in a large-scale policy experiment when it instituted the Top 10% Plan. This policy guarantees automatic admission to their state university of choice for all high school seniors who graduate in the top decile of their high school class. We find evidence that households reacted strategically to this ...