Economics Commons^™

The Elasticity Of Taxable Income: Influences On Economic Efficiency And Tax Revenues, And Implications For Tax Policy, Seth H. Giertz

Department of Economics: Faculty Publications

While research into the elasticity of taxable income (ETr), which measures the responsiveness of reported taxable income to changes in tax rates, dates back to at least Lindsey (1987), recognition of its importance as a central parameter for tax policy design did not begin to take hold until the second half of the 1990s. In fact, a 1998 survey to determine public and labor economists' views on key policy parameters (Fuchs, Krueger, and Poterba 1998) included no questions on the ETI. I suspect that a 2008 survey would include such questions, just as I suspect that a 1998 conference entitled …

A Response To Seth H. Giertz, Daniel Feenberg

Department of Economics: Faculty Publications

There are two aspects of Seth Giertz's excellent chapter that I want to talk about. One is slightly technical; I want to try to provide some explanation for why estimating elasticity of taxable income (ETI) is so difficult. I think this difficulty is unappreciated by nonspecialists, who are quick to latch onto a favorite estimate without understanding the weaknesses in the estimation. The other aspect is a bit more philosophical and addresses the different functions of the partial equilibrium analysis done here and the general equilibrium work done a few years back in the macro group at the Congressional Budget …

Unauthorized Immigration, Örn  B. Bodvarsson, Hendrik F. Van Den Berg

Department of Economics: Faculty Publications

One of the results of the clash between immigration policies and economic incentives is unauthorized immigration. There is no accurate data on unauthorized immigration, but estimates permit some empirical work. The motives for immigrants to enter the destination country without formal authorization are the same as those that lead immigrants to seek legal entry, and the static labor market model of immigration can be used to explain the flows of unauthorized immigrants. There are additional factors to consider, however. Unauthorized immigrants do not normally enjoy the same civil rights as legal immigrants, so the potential rewards from immigrating are …

Hispanic Immigration To The United States, Örn B. Bodvarsson, Hendrik F. Van Den Berg

Department of Economics: Faculty Publications

This chapter presents some of the exceptional characteristics of recent Hispanic immigration to the United States. In 2005, there were nearly 40 million Hispanic immigrants and descendants of Hispanic immigrants living in the U.S. The assimilation experience of this large cultural group does not seem to be following the path past immigrants to the U.S. followed. Most third generation Hispanics in the U.S. still find themselves with income and education levels below the U.S. averages. Most forecasts predict that about 60 million Hispanics and Hispanic-Americans will be living in the U.S. by 2030.

The Elasticity Of Taxable Income With Respect To Marginal Tax Rates: A Critical Review, Emmanuel Saez, Joel B. Slemrod, Seth H. Giertz

Department of Economics: Faculty Publications

This paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates (ETI) using tax return data. First, we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis. We discuss what other parameters should be estimated when the elasticity is not a sufficient statistic. Second, we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the …

Gender And The Political Economy Of Knowledge, Ann Mari May

Department of Economics: Faculty Publications

The importance of increased levels of education in improving the status of women throughout the world is well established. Higher levels of education are associated with lower birth rates, higher incomes, and greater autonomy for women. In fact, it has been argued that education is a fundamental prerequisite for empowering women in all spheres of society (Lopez-Claros and Zahidi 2005: 5).

In the last third of the twentieth century, women have made particularly significant strides in many countries. For example, UNESCO reports that women’s share of enrollment in higher education in Switzerland rose from 3 per cent in 1985 to …

Measuring Immigration’S Effects On Labor Demand: A Reexamination Of The Mariel Boatlift, Örn B. Bodvarsson, Hendrik F. Van Den Berg, Joshua J. Lewer

Department of Economics: Faculty Publications

Why do immigration shocks tend to have benign effects on native wages? One reason is that immigrants as consumers contribute to the demand for their services. We model an economy where workers spend their wages on a locally produced good, then test it via a reexamination of the 1980 “Mariel Boatlift” using Wacziarg’s Channel Transmission methodology. Current Population Survey data on workers in 9 different retail labor markets and Survey of Buying Power data on retail spending by consumers in Miami and four comparison cities are used. We find strong evidence that the Mariel Boatlift augmented labor demand.

Smoke-Free Laws And Employee Turnover, Eric C. Thompson, Ellen J. Hahn, Glenn Blomquist, John Garen, Don Mullineaux, Nola Ogunro, Mary K. Rayens

Department of Economics: Faculty Publications

This study examines how smoke-free laws influence turnover among restaurant workers. The study uses a unique data set of payroll records of a franchisee of a national full-service restaurant chain operating 23 restaurants in the state of Arizona, a state where several communities have adopted smoke-free laws. Municipal smoke-free laws did not, on average, have a statistically significant effect on the probability of employee separation in the years after implementation. These results suggest that training costs associated with employee turnover would not rise for full-service restaurants in municipalities that adopt smoke-free laws.

Determinants Of Income Growth In Metropolitan And Nonmetropolitan Labor Markets, George W. Hammond, Eric C. Thompson

Department of Economics: Faculty Publications

This article analyzes determinants of growth across labor markets in the United States, using a production function approach based on four inputs: labor, manufacturing investment, human capital investment, and public capital investment. We find little role for public capital investment in growth, but that manufacturing investment spurred growth in nonmetropolitan areas, in contrast to metropolitan areas. We also find that human capital investment mattered more for metropolitan areas than for nonmetropolitan areas. Further, the presence of more colleges and universities, more household amenities, and lower tax rates are all found to have encouraged human capital accumulation in U.S. labor markets.

Panel Data Techniques And The Elasticity Of Taxable Income, Seth H. Giertz

Department of Economics: Faculty Publications

This paper examines the elasticity of taxable income with a focus on income controls designed to control for divergence in the income distribution and mean reversion. Additional emphasis is placed on the difference between short-run and longer-run responses to tax rate changes. Several panel techniques are applied to tax return data for years 1991 to 1997, followed by a cross-section analysis covering the same period. For each panel regression, an innovative inverted panel regression framework is employed to test the efficacy of the controls for mean reversion apart from controls for divergence in the income distribution. Finally, cross-section (and repeated …

A Sensitivity Analysis Of The Elasticity Of Taxable Income, Seth H. Giertz

Department of Economics: Faculty Publications

This paper applies the methods of Gruber and Saez (2002) to a panel of tax returns spanning years 1979 through 2001 in order to examine the sensitivity of the elasticities of taxable and broad income to an array of factors. The paper finds that Gruber and Saez’s approach yields an estimated elasticity of taxable income (ETI) for the 1990s that is about half the size of my corresponding estimate for the 1980s. The paper finds that weighting regression results by income not only has a substantial impact on the estimates, but also results in overall estimates that are influenced by …

Taxable Income Responses To 1990s Tax Acts: Further Explorations, Seth H. Giertz

Department of Economics: Faculty Publications

This paper presents applications of variants of a differencing methodology to Internal Revenue Service tax records in order to estimate taxable income elasticities for the 1990s. Estimates are systematically examined by applying a number of sensitivity tests. Estimates are produced after altering the: (1) time interval over which observational-level behavior is measured; (2) income restrictions on the sample; (3) choice of control variables; and (4) weighting scheme used in the regressions. In general, estimates are quite sensitive to a number of different factors. In contrast to some of the literature, estimates are larger when behavior is measured over 3-year intervals …

Tax Reform And Charitable Giving, Seth H. Giertz

Department of Economics: Faculty Publications

Of the $240.7 billion donated to U.S. charities in 2003, 75 percent was from individuals. Of that total, $145.7 billion was taken as itemized deductions on federal income tax returns. In addition, non-itemizers and non-filers contributed $33.0 billion – contributions that received no special tax treatment. Under current law, only taxpayers who itemize may deduct from Adjusted Gross Income (AGI) their charitable donations in determining taxable income. In recent years, a number of different proposals have been put forth that would alter the tax treatment of giving by individuals. Some plans would extend a variant of the charitable deduction to …

The Elasticity Of Taxable Income Over The 1980s And 1990s, Seth H. Giertz

Department of Economics: Faculty Publications

Taxable (and broad) income elasticities are estimated using tax return data from 1979 to 2001. Data from the Continuous Work History Survey (CWHS) yield an estimated taxable income elasticity for the 1990s that is about half the corresponding 1980s estimate. Estimates from the full Statistics of Income, which heavily over-samples high–income filers, generally confirm the CWHS results. More sophisticated income control brings the estimates for the two decades closer together—to 0.40 for the 1980s and 0.26 for the 1990s. Work by Kopczuk (2005) implies that the narrowing of the tax base since 1986 could account for 14 to 29 percent …

“Sweeping The Heavens For A Comet”: Women, The Language Of Political Economy, And Higher Education In The United States, Ann Mari May

Department of Economics: Faculty Publications

The importance of increased levels of education in improving the status of women throughout the world is well established. Higher levels of education are associated with lower birth rates, higher incomes, and greater autonomy for women. Yet, women’s struggle to have a voice in higher education has been fraught with difficulties in the US and worldwide, particularly in overcoming widely held perceptions that limit their entrance into certain academic fields, tenured positions, and elite universities. This essay examines the role political economy has played in providing narratives that rationalize women’s limited participation in higher education. By examining the representation of …

Assessing The Forecasting Accuracy Of Alternative Nominal Exchange Rate Models: The Case Of Long Memory, David Karemera, Benjamin J. C. Kim

Department of Economics: Faculty Publications

This paper presents an autoregressive fractionally integrated moving-average (ARFIMA) model of nominal exchange rates and compares its forecasting capability with the monetary structural models and the random walk model. Monthly observations are used for Canada, France, Germany, Italy, Japan, and the United Kingdom for the period of April 1973 through December 1998. The estimation method is Sowell’s (1992) exact maximum likelihood estimation. The forecasting accuracy of the long-memory model is formally compared to the random walk and the monetary models, using the recently developed Harvey, Leybourne, and Newbold (1997) test statistics. The results show that the long memory model is …

The U.S. Tax System In International Perspective, John E. Anderson, Council Of Economic Advisers

Department of Economics: Faculty Publications

All governments face two important decisions. They must choose the scope and scale of public goods and services to provide for their citizens, and they must also decide how to collect the funds to finance those public services. Chapter 5, The U.S. Tax System in International Perspective, examines U.S. choices in the context of other countries. It makes three key points:

• Fundamental choices about tax systems matter because they affect the living standards of citizens.

• The United States has made different choices from other countries. The United States has a relatively low tax burden compared to the rest …

Working Hours In Japan: Who Is Time-Privileged?, Scott M. Fuess Jr.

Department of Economics: Faculty Publications

In the U.S. the relationship between hours worked and employee earnings has been reversed. Whereas the highest earners used to work the shortest hours, now they work the longest hours. This study examines whether such a reversal has occurred elsewhere, namely, Japan. Since the early 1990s the Japanese government has sought to transform the country into a “lifestyle superpower” by trying to encourage more daily time for leisure and less time on the job. Analyzing data for 1976-2003, it is clear that scheduled and actual working hours did indeed fall after 1990. During the early years of the sample, 1976-89, …

Foreign Direct Investment And Economic Growth: A Time-Series Approach, Atrayee Ghosh Roy, Hendrik F. Van Den Berg

Department of Economics: Faculty Publications

Research has often focused on how foreign direct investment (FDI) transfers technology from developed economies to less developed economies. Most FDI occurs between developed economies, however, and the country receiving the greatest inflow of FDI is the United States. This paper examines whether such FDI inflows have stimulated growth of the U.S. economy. We apply time-series data to a simultaneous-equation model (SEM) that explicitly captures the bi-directional relationship between FDI and U.S. economic growth. FDI is found to have a significant, positive, and economically important impact on U.S. growth. Also, our SEM estimates reveal that FDI growth is income inelastic. …

Leisure Time In Japan: How Much And For Whom?, Scott M. Fuess Jr.

Department of Economics: Faculty Publications

Japan is famous for long working hours. For decades the Japanese government has tried to influence how people spend their free time. In 5-yearly surveys since 1986, the government has surveyed “quality of life” by gauging how much time people spend daily in various “noneconomic” activities. Using results from the 1986, 1991, 1996, and 2001 surveys, this study determines whether time spent daily on leisure activities has actually changed. Controlling for labor market forces, in recent years Japanese adults have not experienced more leisure time overall. They have increased time spent, one hour per week, in media-oriented leisure; this increase, …

The Elasticity Of Taxable Income During The 1990s: A Sensitivity Analysis, Seth H. Giertz

Department of Economics: Faculty Publications

This paper examines alternative methodologies for measuring responses to the 1990 and 1993 federal tax increases. The methodologies build on those employed by Gruber and Saez (2002), Carroll (1998), and Auten and Carroll (1999). Internal Revenue Service tax return data for the project are from the Statistics of Income, which heavily oversamples high-income filers. Special attention is paid to the importance of sample income restrictions and methodology. Estimates are broken down by income group to measure how responses to tax changes vary by income. In general, estimates are quite sensitive to a number of different factors. Using an approach similar …

Trends In High Incomes And Behavioral Responses To Taxation: Evidence From Executive Compensation And Statistics Of Income Data, Nada O. Eissa, Seth H. Giertz

Department of Economics: Faculty Publications

This paper examines income trends from 1992 to 2004 and the responsiveness of different income measures to tax changes for corporate executives and for the very highest income U.S. taxpayers. We detail the growth in executive compensation and break down the components of that growth by sources, such as the value of options and stock grants, as well as bonus income. We then examine income trends at various points in the income distribution for executives and for all taxpayers. An empirical strategy similar to that employed by Goolsbee (2000) is then used to examine the responsiveness to tax rates of …

Economic Importance Of Irrigated Agriculture 2003, Charles Lamphear

Department of Economics: Faculty Publications

Just how important is irrigated agriculture to the Nebraska economy? This question was first addressed nearly forty years ago in a study conducted by Drs. Theodore W. Roesler and F. Charles Lamphear, University of Nebraska Department of Economics. This initial study was updated in 1972 and, again, in 1991. The latest update study for 2003 was recently completed by Dr. Charles Lamphear, emeritus professor, University of Nebraska-Lincoln (UN-L). He was assisted by emeritus professors Dr. Roy Frederick, UN-L Department of Agriculture Economics and Dr. Dale Flowerday, UN-L Department of Agronomy and Horticulture, along with several UN-L extension specialists. The results …

Do Higher Tipped Minimum Wages Boost Server Pay?, John E. Anderson, Orn B. Bodvarsson

Department of Economics: Faculty Publications

Do tipped servers in states with higher tipped minimum wages earn more, ceteris paribus, than servers elsewhere? Using 1999 data on waitpersons and bartenders, little evidence is found of a premium to servers in states with more generous minimum wages.

Information And Communication Technologies And The Effects Of Globalization: Twenty-First Century “Digital Slavery” For Developing Countries—Myth Or Reality?, L. A. Ogunsola

E-JASL: Electronic Journal of Academic and Special Librarianship (1999-2009, Volumes 1-10)

Abstract

The main goal of this paper is to examine the ICT (Information and Communication Technology) revolution and the concept of globalization as they effect developing countries. Globalization as one of the reasons for possible widening of the gap between the poor and the rich nations was examined and the emerging concept of “digital slavery” was carefully evaluated. The wide gap in availability and use of ICTs across the world and the influences ICTs exert on globalization at the expense of developing countries were carefully examined and suggestions and necessary policies were offered for developing countries to leap-frog the industrialization …

University Library Partnerships: Promoting Economic Development, J. Cory Tucker

E-JASL: Electronic Journal of Academic and Special Librarianship (1999-2009, Volumes 1-10)

Abstract

The article discusses an innovative partnership at the University of Nevada, Las Vegas (UNLV). The collaborative project involves the UNLV Libraries and the Nevada Small Business Development Center, which is affiliated with the College of Business. The partnership was created to assist the University's goal of promoting economic development in the Las Vegas and Southern Nevada region.

Sample Selection In Models Of Academic Performance, Matthew Cushing, Mary Mcgarvey

Department of Economics: Faculty Publications

This article shows how admission and enrollment processes affect the interpretation of simple validation studies of academic performance. In a competitive market for students, optimal behavior of admissions committees and applicants drives the simple correlation between test scores and performance toward zero, regardless of the relationship in the population of prospective students. Data from our university’s MBA program support the prediction that applicants exhibit a higher correlation between test scores and undergraduate GPAs than do current students. This suggests that standard validation studies will understate the importance of GMAT scores in predicting performance of potential MBA students.

The Doha Round - 2004 Version, Clayton K. Yeutter

Clayton K. Yeutter, United States Secretary of Agriculture: Papers

Thank you, Sherman Katz. It is a pleasure always to participate in this CSIS Seminar, which is becoming an annual reunion for former USTRs. Trade is always on the front burner of world affairs, but that burner is especially hot at the moment! And it is as hot here in the U.S. as it is anywhere. So let's turn to the Doha Round of World Trade Organization (WTO) negotiations, and see where we stand.

The 2002 Downturn In State Revenues: A Comparative Review And Analysis, J. Fred Giertz, Seth H. Giertz

Department of Economics: Faculty Publications

We analyze the behavior of state revenues since the early 1950s to determine the severity of the revenue declines experienced by states after the 2001 recession. Both total state revenues for the nation and state–level data for each state are studied. We conclude that the states were indeed hit with an unprecedented downturn in revenues—unlike anything that had been experienced in the preceding half–century. Further and contrary to general perceptions, revenue increases in the years preceding the downturn were not particularly strong compared to revenue increases in the years leading up to previous recessions. We further conclude that most proposed …

The Doha Round: Comin' Allve?, Clayton K. Yeutter

Clayton K. Yeutter, United States Secretary of Agriculture: Papers

May I first pay compliments to the leadership of the Asian Development Bank for hosting this seminar. Asia has a huge stake in the success of the WTO generally, and the Doha Round specifically, but not everyone realizes that. So seminars of this _ nature are terribly important in providing focus to the Doha Round, encouragement to the negotiators, and in building public support for this endeavor. Let's hope we can accomplish those objectives here in Osaka.